I. Background II. Public Comments on Proposed Rule III. Discussion A. General B. Relaxing of Orders C. Implementation Plans IV. Paragraph-by-Paragraph Analysis V. Availability of Documents VI. Criminal Penalties VII. Agreement State Compatibility VIII. Plain Writing IX. Voluntary Consensus Standards X. Finding of No Significant Environmental Impact: Availability XI. Paperwork Reduction Act Statement XII. Public Protection Notification XIII. Regulatory Analysis: Availability XIV. Regulatory Flexibility Certification XV. Backfit Analysis XVI. Congressional Review Act I. Background

Before the terrorist actions of September 11, 2001, the NRC regulations in Title 10 of the Code of Federal Regulations (10 CFR), Section 73.60, and 10 CFR 73.67 imposed physical protection requirements on NPRs  1 that included measures for storing and using special nuclear material (SNM) in controlled access areas, monitoring the controlled access areas for unauthorized activities, and ensuring a response to all unauthorized activities to protect SNM from theft or diversion. Subsequent to September 11, 2001, the NRC evaluated the adequacy of security at NPRs and considered whether additional actions should be taken to help ensure the trustworthiness and reliability of individuals with unescorted access to licensees' facilities. The NPRs were advised to consider taking immediate additional precautions, including observation of activities within their facility. Several NPRs have implemented additional security measures. The NRC evaluated these additional measures at each facility during the remainder of 2001.

From 2002 through 2004, the NPRs voluntarily implemented compensatory measures that included site-specific background investigations for individuals granted unescorted access to their facility. Depending on local restrictions, such as university rules, some of these background investigations included provisions for FBI fingerprint-based criminal history records checks, while checks at other NPRs include provisions for local or State law enforcement fingerprint-based criminal history records checks. Investigations at some NPRs did not include any fingerprinting. The NRC has also conducted security assessments at certain NPRs, which helped to identify risk-significant areas and materials.

Section 652 of the EPAct, enacted on August 8, 2005, amended Section 149 of the AEA to require fingerprinting and FBI identification and criminal history records checks for individuals “permitted unescorted access to a utilization facility.” The NPRs are included within the definition of what constitutes a utilization facility. Therefore, consistent with the requirement set forth in Section 149 of the AEA, any person granted unescorted access to an NPR must be fingerprinted and have those fingerprints submitted to the Attorney General of the United States through the Commission for identification and a criminal history records check.

In SECY-05-0201, “Implementation of the Energy Policy Act of 2005,” dated October 31, 2005, the NRC staff informed the Commission of its plan for implementing the NRC's responsibilities under the EPAct. The Commission approved the staff's recommendations in a Staff Requirements Memorandum (SRM) dated January 5, 2006, and directed the staff to recommend appropriate interim regulatory actions that the NRC should implement while it developed the generic requirements for granting unescorted access, including the provisions in Section 652 of the EPAct pertaining to fingerprinting.

In SECY-07-0011, “Interim Implementation of Fingerprinting Requirements in Section 652 of the Energy Policy Act of 2005,” dated January 12, 2007, the NRC staff provided information and recommendations to the Commission on its EPAct interim implementation plan. In an SRM dated March 12, 2007, the Commission directed the NRC staff to expeditiously develop a definition of “unescorted access” that would apply to NPR licensees and issue orders to NPR licensees requiring fingerprinting for individuals that fall within this definition. In order to ensure compliance with Section 104c of the AEA, the NRC staff was directed to impose only the minimum amount of regulation needed for NPR licensees. The Commission also directed the NRC staff to proceed with a rulemaking to determine if additional personnel should be fingerprinted.

In response to the Commission's March 12, 2007, directive, the NRC imposed fingerprinting requirements for unescorted access to special nuclear material on the applicable NPR licensees by order (Order EA-07-074, “Issuance of Order Imposing Fingerprinting and Criminal History Records Check Requirements for Unescorted Access to Research and Test Reactors” (72 FR 25337; May 4, 2007), and Order EA-07-098, “Issuance of Order Imposing Fingerprinting and Criminal History Records Check Requirements for Unescorted Access to the General Atomics' Research and Test Reactors” (72 FR 44590; August 8, 2007)). Specifically, the orders state that:

In implementing the requirement of the EPAct on an interim basis, the orders were issued requiring fingerprinting only for individuals with unescorted access to risk-significant materials (e.g., fuel), within the research and test reactor facilities. Licensees were required to submit fingerprints of individuals who were seeking or currently had unescorted access. Individuals who had previously been subjected to fingerprinting that would satisfy the requirements for unescorted access (e.g., access to safeguards information (SGI)) did not need to be fingerprinted again. These orders required that a reviewing official consider the information received from the FBI in conjunction with the other requirements for unescorted access to determine whether an individual may be granted or allowed continued unescorted access. The reviewing official was allowed to be the same official previously approved by the NRC for the SGI order (Order EA-06-203, “Issuance of Order Imposing Fingerprinting and Criminal History Records Check Requirements for Access to Safeguards Information,” dated September 29, 2006; ADAMS Accession No. ML061510049) that implemented the EPAct fingerprinting and criminal history records check requirements for individuals who seek access to SGI. 2 The unescorted access order provided that an NRC-approved reviewing official was the only individual who could make the unescorted access determination.

On April 14, 2009 (74 FR 17115), the NRC published an ANPR to obtain stakeholder views on the issues associated with the proposal to require fingerprinting for criminal history records checks of individuals permitted unescorted access to NPRs. The ANPR indicated that the NRC was beginning the process of establishing generic requirements for NPR licensees to obtain fingerprints for criminal history records checks of individuals granted unescorted access to their facilities. The ANPR was intended to inform external stakeholders of the options the NRC was considering for implementing the fingerprinting requirements for NPR licensees as a proposed rule. The ANPR provided interested stakeholders an opportunity to comment on the options under consideration by the NRC. The NRC developed a proposed rule based on the feedback received on the ANPR and published the proposed rule on July 20, 2010 (75 FR 42000).

The public comment period for the proposed rule closed on October 4, 2010. In response to a stakeholder's request, the Commission directed the staff to reopen the public comment period. On December 20, 2010, the public comment period reopened (75 FR 79312) and subsequently closed on January 31, 2011. The NRC received six comment letters in response to its solicitation during the initial comment period and eleven comment letters during the reopened comment period. Many of the comments in these letters raised similar issues. A total of seventeen issues were identified, the majority of which were regarding differences from the 2007 NRC-issued orders, material criteria requirements, and area criteria requirements. The following is a summary of the public comments received and the NRC responses.

Comment: Several commenters expressed the view that existing NRC security orders as implemented and inspected at their facilities are workable and acceptable to codify. They stated that the wording of the proposed rule meets the principle of codifying the existing orders. However, these commenters further stated that the proposed wording goes beyond the scope of the existing orders without adequate justification. According to the commenters, “The proposed rule does not adequately justify the expansion of requirements based on risk (risk informed) or performance issues (performance based) and, therefore, does not meet the staff's publicly stated basis for expanding regulatory requirements.”

The commenters further stated the expansion of the requirements in the proposed rule is counter to previously issued NRC documents assessing the risk and security of NPRs operated under the existing security orders and the cited Section 104c of the AEA provision on minimum regulation. “By stated policy and statute the NRC seeks, wherever possible, to establish `risk-informed regulation' and to `impose only such minimum amount of regulation.' This new regulation does not seem in keeping with those goals.”

Of particular concern to the commenters is the removal of “public health and safety” and “common defense and security” significance from the requirements for protection of SNM. They stated that the original orders implemented security enhancements (fingerprinting and background checks) to protect SNM of “significance to the common defense and security” or that would “adversely affect the health and safety of the public.” The comments reiterated a previous comment made in response to the NRC's ANPR (74 FR 17115; April 14, 2009), that the existing security orders as implemented and inspected at NPR facilities were adequate and acceptable. Any codification should reflect the existing orders and should not impose new requirements or definitions.

NRC Response: The NRC agrees that the wording of the proposed rule does not capture the wording of the NRC security orders verbatim. However, the NRC does not agree that failure to capture the wording of the orders verbatim constitutes an expansion of the orders' requirements. The NRC believes that the language of the final rule captures both the intent and the requirements of the security orders and does not constitute an expansion of the requirements with respect to SNM. The term, “SNM,” as used in the final rule language, maintains the same functional effect of the existing security orders' language and should be understood to be of such quantity and/or enrichment to be significant to the public health and safety and to the common defense and security.

Furthermore, the NRC does not agree that the requirements imposed by the final rule are inconsistent with previously issued NRC documents assessing the risk and security of NPRs or with Section 104c of the AEA. The NRC recognizes that the radiological risk posed by NPRs is relatively low and that this low risk informs the physical security requirements at NPRs. The NRC believes that the final rule presents a framework that minimizes the impact on NPR licensees, consistent with the “minimal regulation” requirement of the AEA by identifying specific, risk-significant areas within NPR facilities that satisfy the statutory requirement to fingerprint all persons seeking unescorted access to utilization facilities. The final rule fingerprints as few people as possible while still fulfilling the statutory requirement set forth in Section 149 of the AEA. No changes to the rule language were made as a result of this comment.

Comment: Several commenters stated that the original orders implemented security enhancements (fingerprinting and background checks) to prevent unauthorized use or removal of significant SNM “without detection, assessment, or response by systems or persons.” The proposed rule would remove this detection and response concept and require fingerprinting and background checks for individuals who are granted access to an “area,” regardless of whether such access would allow unauthorized use or removal without detection, assessment, or response. The removal of the “detection, assessment, or response” language is not consistent with the background discussion of the issue in the proposed rule (75 FR 42003), which states the rule would make use of this clause and flexibility.

NRC Response: The NRC agrees that the “detection, assessment, or response” language is not in the final rule. The purpose of this rulemaking is to establish requirements for fingerprinting those individuals seeking unescorted access to NPRs. The NRC believes that any individuals with unescorted access to SNM of such quantity and/or enrichment to be significant to the public health and safety and to the common defense and security or with unescorted access to vital areas at an NPR should be fingerprinted. The NRC believes this requirement to fingerprint for unescorted access to NPRs should be independent from the licensees' ability to “detect, assess, or respond” to an unauthorized removal of SNM. Furthermore, the NRC notes that there are existing detection, assessment, and response requirements set forth in §§ 73.60 and 73.67. Elimination of the “detection, assess, and respond” language in the final rule does not mean that licensees are no longer required to comply with existing detection, assessment, or response requirement. No changes to the rule language were made as a result of this comment.

Comment: Another commenter observed that the statements of consideration for the proposed rule states, “* * * the provisions in this proposed rule are constructed to provide flexibility, providing both an `area' criterion (unescorted access to vital areas) and a `material' criterion (unescorted access to SNM).” However, the proposed rule could be interpreted such that licensees would have to satisfy fingerprinting requirements for any personnel that would have access to vital areas or to materials. This could have the unintended result that licensees would have to meet both area and material criteria, which is at odds with the stated intention of providing flexibility. The commenter believes that the original 2007 NRC-issued security order wording should be used in § 73.57(g)(2)(ii).

NRC Response: The NRC agrees that the final rule will require licensees to comply with both vital area and SNM criteria when determining who needs to be fingerprinted when granted unescorted access to an NPR. The intent of the 2007 NRC-issued security orders was to enhance security at NPRs. The 2007 security orders limited fingerprinting for unescorted access at NPRs to a material criterion, with the understanding that the rulemaking process would evaluate additional fingerprinting requirements, including consideration of risk-significant areas. The NRC believes that inclusion of a vital area criterion in the final rule language is necessary to ensure adequate protection at NPRs.

However, the NRC believes that few NPRs will be affected by the vital area criterion because few NPR facilities have vital equipment besides SNM (unescorted access to which already requires fingerprinting due to the material criterion of this rule). Additionally, the NRC believes the impact of the vital area criterion will be minimal because those licensee personnel requiring unescorted access to vital areas will also likely require unescorted access to SNM or access to SGI (both of which already require fingerprinting).

The NRC believes that licensees will have flexibility in implementing the vital area criterion of this rule. Licensees are responsible for determining which equipment and areas within their facilities, if any, are vital, provided that licensees clearly document how they arrive at that determination, using the definitions of vital area and vital equipment in § 73.2. No changes to the rule language were made in response to this comment.

Comment: Several commenters were concerned with the addition of the term vital area. They stated that § 73.57(g)(2)(i) of the proposed rule, “adds a new requirement to establish, define and control unescorted access to vital areas defined per Section 73.2. The need for this additional regulation was not adequately justified in the proposed rule basis when it stated the new rule uses definitions that already apply to all provisions within 10 CFR Part 73 and accordingly apply to RTR [NPR] licensees whose security requirements are governed by 10 CFR Part 73 * * *.”

The commenters assert that just because Section 149 of the AEA provides the Commission authority to establish regulations (for fingerprinting and criminal history checks), that does not in itself justify the need for specific regulatory expansion. The recommendation is to remove the requirement for NPRs to evaluate for vital areas as currently defined in § 73.2 for power reactors. The commenters stated that current definitions for unescorted access placed by the NRC security order and defended by the staff as acceptable should be maintained or adequate justification through analysis should be provided supporting the need for additional regulation of vital areas.

NRC Response: The NRC agrees that the term “vital area” did not appear in the 2007 NRC-issued orders. However, the NRC disagrees that the inclusion of the vital area in the final rule language is a new requirement in itself. The term “vital area” is defined in § 73.2 as “any area which contains vital equipment.” “Vital equipment,” in turn, is defined in § 73.2 as “any equipment, system, device, or material, the failure, destruction, or release of which could directly or indirectly endanger the public health and safety by exposure to radiation. Equipment or systems which would be required to protect public health and safety following such failure, destruction, or releases are also considered to be vital.”

The vital area concept is applicable to all utilization facilities, including NPRs. The NPRs that have a vital area are required to protect them in accordance with the requirements set forth in 10 CFR part 73. The only new requirement that the final rule imposes on NPR licensees that have a vital area is to fingerprint those individuals seeking unescorted access to these areas. This is consistent with the statutory requirement set forth in Section 149 of the AEA to fingerprint those individual granted unescorted access to a utilization facility.

The NRC disagrees with the comment that the amended Section 149 of the AEA does not in itself justify the need for specific regulatory expansion. However, the NRC believes that the impact of the vital area criterion will be minimal because few NPR facilities have vital equipment besides SNM (unescorted access to which already requires fingerprinting due to the material criterion of this rule). Additionally, the NRC believes the impact of the vital area criterion will be minimal because few licensee personnel will require unescorted access to vital areas that do not require unescorted access to SNM or to SGI. In the development of this rulemaking, the NRC re-evaluated whether an area criterion, as applied to the requirements of fingerprinting individuals seeking unescorted access to the facility, is required to ensure that the fingerprinting requirements in Section 149 of the AEA are properly and completely implemented for NPRs. The rule bifurcates the fingerprint requirement for “access to a utilization facility” into two criteria, which the rule terms “SNM” and “vital area”—both of which licensees must comply with by the implementation date of this rule. The NRC made an affirmative determination that both a material criterion and an area criterion are required to implement the statutory requirements of Section 149 of the AEA for NPR facilities.

Comment: One commenter stated, “* * * the [statements of consideration] for the section [73.57(g)(2)(i)] indicates a significant burden for licensees when it states, `* * * implementation of this proposed revision may involve a significant amount of interpretation on the part of [NPR] licensees, the NRC expects that [NPR] licensees would have clear documentation to support their decisions. (75 FR 42008)’ ”

NRC Response: The NRC disagrees with the comment that a significant burden will be placed on licensees. The NRC believes that the final rule language is clear and will not require significant interpretation beyond that provided in the statements of consideration. The purpose of including well-defined area and material criteria is to lessen the need for licensees to interpret when fingerprinting is required. Furthermore, the NRC does not believe that requiring licensees to document their access authorization determinations poses an undue burden.

Comment: Another commenter referenced the NRC's assertion in the proposed rule, which stated, “The equipment, systems, devices, and material that fall within Section 73.2 vital equipment definition meet the utilization facility definition in Section 11.cc of the AEA. Hence, fingerprinting individuals who wish to have unescorted access to vital areas is ensuring that individuals permitted access to the `utilization facility,' as defined in the AEA, is properly implemented in the NRC's regulations.” The commenter expressed the view that this statement implies every piece of equipment and all materials within a “utilization facility” (i.e. a 10 CFR Part 50 licensed nuclear reactor facility) are considered vital rather than specific areas or equipment. The commenter stated that this statement is “grossly incorrect;” therefore, any subsequent conclusions that this statement intended to support should be considered questionable. The § 73.2 definition of vital equipment applied at the National Institute of Standards and Technology Center of Neutron Research bounds the limiting Maximum Hypothetical Accident (MHA) to protect the health and safety of the general public and the protection of SNM in quantities significant to the common defense and security. Vital equipment or areas have been defined and explained in the NRC-approved Physical Security Plan and reviewed for adequacy and correctness within NRC-sponsored Physical Security Assessments for the National Bureau of Standards Reactor. The definition of vital area and vital equipment as applied has been reviewed under the current threat environment by the NRC so there should be no requirement or expectation for NPR licensees to provide additional “clear documentation to support their decisions” under the proposed rule.

NRC Response: The NRC agrees that not every piece of equipment within an NPR meets the definition of vital equipment contained within a vital area. As noted above, the terms “vital equipment” and “vital area” have specific definitions within 10 CFR part 73. The NRC established the vital area and SNM criteria for this rule as a means to define the specific areas for which individuals must be fingerprinted when seeking unescorted access to an NPR. Many NPR facilities are located within classroom or laboratory buildings with no clear demarcation between the reactor facility and unrelated areas. Therefore, many persons pass through the buildings housing NPR facilities who are not affiliated with the reactor itself. Instead of requiring fingerprinting for every person entering the building that houses the reactor facility, the NRC believes that the use of the vital area and SNM criteria to determine which personnel must get fingerprinted fulfills the statutory requirement of Section 149 of the AEA. No changes to the rule language were made as a result of this comment.

Comment: Another commenter expressed the view that the phrasing of the proposed language in § 73.57(g)(1) that states: “No person shall be permitted unescorted access to a non-power reactor facility unless that person has been determined by an NRC-approved reviewing official to be trustworthy and reliable based on * * *” could result in the misinterpretation that fingerprinting requirements must be met for access to any part of a non-power reactor facility, which is not the stated intention of the proposed rule. Such a misinterpretation might be avoided by stating that: “No person shall be permitted unescorted access at a non-power reactor facility unless that person has been determined by an NRC-approved reviewing official to be trustworthy and reliable based on * * *”

NRC Response: The NRC disagrees with this comment. Paragraph g(2) of the rule identifies specific areas within the NPR facility, unescorted access to which requires an FBI fingerprint-based criminal history records check. The NRC believes that the inclusion of area and material criteria makes it clear when licensees must fingerprint individuals seeking unescorted access to the NPR. No changes to the rule language were made as a result of this comment.

Comment: One commenter recommended that in addition to specifying the requirements in accordance with NRC order EA-07-074, the rule could state: “* * * licensees may specify vital areas for which fingerprinting requirements must be met to ensure that those without unescorted access could not exercise physical control over materials.”

NRC Response: The NRC disagrees with this comment. The NRC believes requiring fingerprint-based criminal history records checks for those seeking unescorted access to vital areas, as defined in § 73.2, is critical in fulfilling the statutory requirements of Section 149 of the AEA. Use of the phrase recommended by the commenter does not convey the appropriate obligation of licensees to implement the requirements of the final rule. No changes to the rule language were made as a result of this comment.

Comment: Several commenters expressed the view that § 73.57(b)(2)(i) appears subordinate and redundant to § 73.61. They believe that § 73.61 should be updated and referenced as opposed to adding new exceptions in § 73.57.

NRC Response: The NRC disagrees with the comment. The Commission previously addressed this topic on February 2, 2007 (72 FR 4948), in the § 73.61 rulemaking, “Relief from Fingerprinting and Criminal History Records Checks.” Although similar, § 73.61 provides relief from fingerprinting requirements for certain categories of individuals considered trustworthy and reliable to permit unescorted access to radioactive material or other property. Paragraph (b)(2)(i) of § 73.57 offers similar relief for unescorted access to utilization facilities or SGI. This rule is specific to non-power reactors and is best contained in a single section of 10 CFR part 73 (i.e., § 73.57). No changes to the rule language were made as a result of this comment.

Comment: Several commenters stated that in public meetings, stakeholders have requested relief from the requirement that the only basis for unescorted access is fingerprints submitted through the NRC to the Attorney General; instead of allowing for other mechanisms to achieve the same end of providing criminal history records check from the FBI. The NRC has previously stated that this is required by Section 149 of the AEA. While Section 149a does mandate this mechanism, Section 149b states: “The Commission, by rule, may relieve persons from the obligations imposed by this section, under specified terms, conditions, and periods, if the Commission finds that such action is consistent with its obligations to promote the common defense and security and to protect the health and safety of the public.” The NRC has made use of this exception in the proposed § 73.57(b)(2)(i) and in existing § 73.61. Therefore, the mechanism for relief is within the statute, with the basis that the action (fingerprint and criminal history records checks by other mechanisms) is equivalent to Section 149a and therefore “consistent with its (the NRC's) obligations to promote the common defense and security and to protect the health and safety of the public.”

NRC Response: The NRC disagrees with the comment suggestion to the extent that it is asking for alternative methods to those that are set forth in Section 149 of the AEA. The NRC notes that Section 149 requires the Commission to fingerprint any person granted unescorted access to a utilization facility. Section 149.a.(2) of the AEA requires that these fingerprints be submitted to the Attorney General of the United States through the Commission for identification and a criminal history records check. The Commission does not have discretion to deviate from this statutory requirement.

The commenter correctly notes that Section 149.b of the AEA allows the Commission, by rule, to relieve persons from the obligations imposed by Section 149.a of the AEA. The exemptions listed in § 73.57(b)(2)(i) and in existing § 73.61 include persons who are considered trustworthy and reliable by virtue of their occupational status and have either already undergone a background or criminal history records checks as a condition of their employment, or are subject to direct oversight by government authorities in their day-to-day job functions. No changes to the rule language were made as a result of this comment.

Comment: Several commenters expressed the view that the NRC has the authority to waive the fees it charges to process fingerprints and criminal history records checks. They disagreed with a previous NRC response that Section 149 of the AEA “explicitly requires” fees be collected and “the NRC does not have authority to waive the fee” (75 FR 42003). The commenters assert that Section 149.e of the AEA states, “The Commission may establish and collect fees to process fingerprints and criminal history records under this section,” but it does not require it. The commenters conclude by stating, “The AEA Chapter 4 also directs the Commission `to exercise its powers in a manner to * * * insure the continued conduct of * * * activities at support research facilities * * *' Therefore, waiver of any additional NRC administrative cost in 10 CFR 57(d)(3)(ii) for NPR institutions will promote both the implementation of the proposed rule and the intent of AEA Chapter 4.”

NRC Response: The NRC is sensitive to the costs involved in regulation. The fees charged to NPR facilities for fingerprinting are the direct costs incurred from the U.S. Department of Justice for fingerprint processing. No changes to the rule language were made as a result of this comment.

Comment: Several commenters stated that the readability of 10 CFR part 73 is problematic and gave various suggestions. They stated that 10 CFR part 73 is a complicated part with many facets that dictate stringent requirements on nuclear power plants. Portions of the regulation are applicable to NPRs. It is a difficult part to navigate and determine applicability. Adding more sections to this rule, using the definitions section of the part and using legalistic language does not meet the intent of Presidential Direction on “Plain Language in Government Writing” or assist the Commission in meeting the AEA direction on minimal regulation of NPRs. Some improvements that could easily be incorporated include: (1) A clear applicability statement (§ 73.57(a)(1)) (this section currently says (in essence) that § 73.57 is applicable to all licensees engaged in any activity subject to Commission regulation; this does not seem correct and does not promote ease of use of the regulation); (2) clear applicability for each paragraph section; (3) shorter sentences and/or bulleted lists to simplify paragraphs; and (4) less use of references to other sections and/or short description of the section (example § 73.2 (Definitions) or § 73.61 (Relief from Fingerprinting)).

NRC Response: The NRC agrees with the comment that 10 CFR part 73 is complicated, and acknowledges that those unfamiliar with the regulations may have some difficulty understanding them. The NRC is willing to provide outreach and education to assist licensees in understanding the final rule. The NRC decided to use § 73.57 for processing fingerprints so that NPR licensees and future non-power reactor licensees will have their fingerprints taken, handled, and processed in a manner consistent with other fingerprinting requirements including the NPR fingerprinting orders and the SGI fingerprinting regulations.

From a regulatory standpoint, putting another set of fingerprinting requirements somewhere else in the regulations would be redundant and would further complicate the readability of 10 CFR part 73. No changes to the rule language were made as a result of this comment.

Comment: One commenter supported the rulemaking as written, but expressed that any further regulations in regard to any additional background investigation requirements above and beyond fingerprinting should be left to the individual NPR licensees. The commenter felt that the NPR licensee is in the best position to decide what additional, if any, information is necessary to determine the trustworthiness and reliability of an individual seeking unescorted access and that this is consistent with the NRC's obligation under Section 104c of the AEA to put in place the minimum requirements for NPR licensees.

NRC Response: The NRC agrees with this comment. Licensees are responsible for determining the trustworthiness and reliability of persons granted unescorted access to their facilities in accordance with the requirements set forth in the NRC regulations. The NRC does not anticipate adding any additional requirements beyond the fingerprinting requirement to NPR licensees at this time. Licensees may decide to review additional information beyond that required by NRC regulations, consistent with applicable Federal and State laws, if the licensee determines that such information is necessary to make an adequate trustworthiness and reliability determination. No changes to the rule language were made as a result of this comment.

Comment: One commenter stated that the NPR facilities did not have a clear understanding of the consequences of the rule and requested that the NRC extend the comment period to coincide with the expiration of the proposed rule for 10 CFR part 37 on January 31, 2011.

NRC Response: The NRC understands the comment and reopened the public comment period on December 20, 2010 (75 FR 79312). The extended comment period remained open until January 31, 2011.

Comment: Several commenters expressed the view that employees who are not NRC employees but are employed by State or Federal Governments are subject to fingerprint/background checks as a condition of employment and for obtaining security clearances. Equivalence needs to be established to reduce the burden and expense associated with clearing the same individual multiple times.

NRC Response: The NRC agrees with this comment. The final rule language is modified to include State and Federal non-NRC employees to those exempt from additional fingerprinting in § 73.57(b)(2)(i).

Comment: One commenter stated that the use of fingerprints to perform domestic criminal history records checks does not provide sufficient background information on foreign individuals seeking unescorted access and gives the illusion of a thorough check, when only a fraction of the individual's criminal history may be covered by U.S. records. The commenter recommended the criminal history records check include a foreign individuals' home country or international police cooperation to perform a criminal history records check in their previous nation of residence, and to include a check against the terrorist watch list.

NRC Response: The NRC agrees that FBI fingerprint checks are likely only to give information about domestic criminal history. Fingerprinting has long been a trusted method of verifying an applicant's identity, and it serves as an accepted method of searching existing U.S. records for domestic criminal history. The scope of this proposed rulemaking is to develop regulations implementing the fingerprint requirements set forth in Section 149 of the AEA. Section 149.a.(2) of the AEA requires that, “All fingerprints obtained by an individual or entity * * * be submitted to the Attorney General of the United States through the Commission for identification and a criminal history records check,” for those seeking or permitted unescorted access to utilization facilities. The NRC recognizes that an FBI criminal history records check may be only one aspect of a licensee's determination to grant an individual unescorted access to an NPR. Many licensees undertake more extensive background investigations as they deem necessary. No changes to the rule language were made as a result of this comment.

All eleven comments received during the reopened public comment period referred to the proposed rule and previously submitted public comments provided by other facilities and the National Organization of Test, Research, and Training Reactors (TRTR). All eleven comments supported TRTR's comments submitted on October 3, 2010 (NRC-2008-0619-0019), which are addressed previously in this document under, “General Comments Received During Initial Public Comment Period.” The sentiments stated that the proposed rule adds additional requirements for security at NPR facilities that will further limit student, faculty, and research access and divert additional resources from educational and research missions. Some of the eleven comments provided views that were in addition to those supporting TRTR's comments. The following are those additional comments received during the reopened public comment period.

Comment: Several commenters expressed the view that there is no clear evidence these additional requirements will provide a commensurate improvement in the protection of public health and safety. They stated that after the events of September 11, 2001, the NRC required compensatory measures that were implemented by all NPR facilities via the Confirmatory Action Letter process. Several years later, the NRC issued order EA-07-074, requiring fingerprinting and criminal history records checks for individuals with unescorted access as defined by the order. In the decade since September 11, 2001, there have been no credible threats to security at NPRs. The measures and order implemented since then have provided more than adequate additional protections given the implications of that historic occurrence. With no indications of an increased probability of threat against NPRs, there can be no justification for further prescribed additional security requirements which heretofore have been adequate.

NRC Response: The NRC agrees that there is no current, specific, credible threat to the security of NPRs. Furthermore, the NRC agrees that NPR security requirements, including regulations, NRC-issued security orders, and compensatory measures have provided adequate protection at NPRs to date. However, the NRC is required under Section 149 of the AEA to implement the requirement to fingerprint all persons seeking unescorted access to utilization facilities, including NPRs. Since 2007, the NRC has relied on security orders to fulfill this statutory requirement, but the NRC prefers to regulate by rulemaking vice regulating by orders. The rulemaking process allows deliberate processes and extensive stakeholder involvement that orders do not. The 2007 NRC-issued security orders have provided adequate protection and allowed a shorter implementation time, but this final rule has been shaped by lessons learned from the orders, rulemaking process best practices, and engagement from the NPR community.

Comment: Two commenters stated similarly that they believed the proposed rule would begin limiting the educational opportunities at many facilities without further advancing the security of these facilities. The proposed rule adds additional requirements for security at NPR facilities that will very likely limit student, faculty, and researcher access and divert additional resources from their educational and research missions. They note that in difficult budget times, resources are very tight and funding support at the State level is already limited. Additional requirements would likely further reduce the educational and research capabilities of some facilities to the point where they may be closed and cease to contribute to these missions and the nuclear education in our country. They have no problem with the need to provide a secure and safe environment, but feel that current procedures are more than adequate so that the proposed additional requirements add extremely little to that environment (if anything) while diverting both attention and resources from more important matters.

NRC Response: The NRC is sensitive to the costs of regulation. The only requirement in this final rule that is additional to the 2007 NRC-issued security orders is to fingerprint those persons seeking unescorted access to vital areas. As stated above, the NRC believes the impact of the vital area criterion will be minimal because few NPR facilities have vital equipment besides SNM (unescorted access to which already requires fingerprinting due to the material criterion of this rule). Additionally, the NRC believes the impact of the vital area criterion will be minimal because few licensee personnel will require unescorted access to vital areas that do not require unescorted access to SNM or to SGI. In the development of this rulemaking, the NRC re-evaluated whether an area criterion, as applied to the requirements of fingerprinting individuals seeking unescorted access to the facility, is required to ensure that the fingerprinting requirements in Section 149 of the AEA—the regulatory basis by which this rulemaking was initiated—are properly and completely implemented for NPRs. The rule bifurcates the fingerprint requirement for “access to a utilization facility” into two criteria which the rule terms “SNM” and “vital area”—both of which licensees must comply with by the implementation date of this rule. The NRC made an affirmative determination that both a material criterion and an area criterion are required to implement the statutory requirements in Section 149 of the AEA for NPR facilities.

Comment: Another commenter was concerned that the proposed rule would further discourage utilization of research reactor facilities by individuals who pose essentially no security risk. The commenter stated that many reactors today already face the prospect of diminished utilization and anything that would further discourage potential users will have a detrimental impact on the viability of these facilities. The commenter concluded that any regulations proposed by the NRC should have an adequately demonstrated basis in terms of information available in the public record. The commenter was unaware of any serious security incidents, such as attempted theft of SNM or sabotage of reactor facilities, by persons without fingerprinting checks. The commenter recommended that cognizant Federal agencies should use caution in broadly applying new rules, particularly without taking into account the added paperwork burdens and costs associated with such rulemaking. This impact can be particularly devastating for smaller research reactor facilities that are already under considerable budgetary pressure from their host institutions.

NRC Response: The NRC does not intend to discourage utilization of research reactor facilities in any way. However, the principle focus of this rule is to implement Section 149 of the AEA as amended, which requires fingerprinting of all individuals given unescorted access to an NPR. The NRC believes that this requirement presents a minimal burden to NPRs as the differences between this final rule and the 2007 NRC-issued security orders are minimal. In order to ensure complete and proper implementation of the statute's requirements for both current NPR licensees and future NPRs, this rulemaking incorporates an additional area criterion beyond the SNM criterion invoked by the order. The area criterion is to ensure that individuals seeking unescorted access to areas that contain vital equipment are fingerprinted and thereby receive FBI fingerprint-based criminal history records checks.

In the proposed rule Federal Register notice dated July 20, 2010 (75 FR 42008), the NRC requested stakeholder feedback on additional topics. The three questions presented were:

1. Is 120 days sufficient time to implement the new provisions, including revising or developing fingerprinting programs or procedures?

2. Are there any other newly issued NRC requirements or impositions (aggregate impacts) that you expect could adversely impact your ability to implement the proposed provisions?

3. If there are other potential aggregate impacts, is there a time when you expect that these impacts will become insignificant in terms of your capability to implement the new proposed revisions?

Comment: The NRC received 3 total responses to the question concerning the implementation of § 73.57. Two commenters stated that the 120 days for implementation is sufficient time provided that individual licensees may request an extension based on other activities and limited staff resources. One of the commenters stated that this time period was sufficient only if the rule was amended as they had requested.

NRC Response: The NRC understands the concern regarding the implementation period. Accordingly, the NRC held a Category 3 public meeting on June 23, 2011, to better understand concerns associated with implementation. The effective date of the rule was extended to 180 days in response to these concerns to enable implementation planning meetings with all affected stakeholders. Given the NRC security orders already in place, the NRC will allow 180 days for full implementation of this rule to provide for a smooth transition in adoption of this regulation.

Comment: In response to the NRC question whether there are other newly issued NRC regulations that have an aggregate impact to implementing § 73.57, several commenters stated that the proposed rule for 10 CFR Part 37, “Physical Protection of Byproduct Material” (75 FR 33902; June 15, 2010), will impact their ability to implement § 73.57 as the same process and procedures are impacted by both rules. The actual impact of 10 CFR Part 37 (as with the final § 73.57) is unknown as the rule is in draft.

One commenter continued by stating that they identified no specific aggregate impact, but if the proposed rule were implemented as worded, multiple areas will be declared vital areas, facility access will be further restricted, SNM of no significance will be removed from temporary storage areas and moved into the vital controlled access areas, research/education activities using these materials will be halted if necessary to comply with the regulation until suitable protections can be evaluated, and clear documentation established. This commenter requested that NRC ensures regulatory discretion remains for individual licensees when implementing the new rule.

Another commenter continued by stating that individual licensees may have aggregate impacts (such as ongoing licensing actions or relicensing) and also recommended that the NRC ensure regulatory discretion remains when implementing the new rule.

NRC Response: The NRC disagrees with the comments with regard to the implementation challenges. As noted in response to the previous comments, the NRC extended the effective date of the rule to 180 days and NRC staff will meet with NPR licensees to support implementation. Regarding the relationship of proposed 10 CFR part 37, “Physical Protection of Byproduct Material” (75 FR 33902; June 15, 2010), and this rulemaking, 10 CFR part 37 would deal specifically with the use and transport of Category 1 and Category 2 quantities of radioactive material as defined in proposed 10 CFR part 37. The changes to § 73.57 presented in this final rule are written specifically to ensure proper fingerprinting for unescorted access to SNM and vital areas at NPRs. As such, this amendment to § 73.57 is separate and distinct from the provisions that the NRC may incorporate into 10 CFR part 37 to address radioactive material.

The use of the vital area criterion expands a requirement to fingerprint individuals who wish to have unescorted access to areas in NPRs that may not contain SNM, but instead may contain vital equipment that is important from a radiological sabotage standpoint (i.e., if it is a vital area that is established to contain only SNM, then that is already captured in the SNM criterion). The term vital area is used in its definition found in § 73.2. As such, only those NPR licensees who have vital areas as defined in 10 CFR part 73 are likely subject to this added requirement. This vital equipment would likely exist only at the higher power NPRs, and the vital areas where they are contained can be identified by reference to the current security plans and informed by the security assessments. For most NPR facilities, the SNM criterion adequately ensures that individuals who wish to have unescorted access are fingerprinted. No regulatory discretion is allowed for this rule; however, the NRC staff will work with NPR licensees to support proper interpretation and implementation of these criteria.

These amendments establish generically applicable fingerprinting requirements for non-power reactor licensees similar to those previously imposed by the Commission's orders pertaining to the granting of unescorted access. The amendments implement the requirement in Section 149.a.(1)(B)(i)(I) of the AEA that the Commission require to be fingerprinted any individual who is permitted unescorted access to a utilization facility.

As previously noted, Section 149 of the AEA requires that the Commission fingerprint and conduct a criminal history records check of individuals seeking unescorted access at a broader range of NRC licensees and regulated facilities. Utilization facilities, including NPRs, which were not previously subject to these requirements, are now subject to these fingerprint requirements. It is this specific expansion in regulatory authority that is the subject of this proposed rule (i.e., extension of these fingerprint-based FBI criminal history records check requirements to NPRs).

Section 149 of the AEA now requires fingerprinting for individuals seeking unescorted access to a “utilization facility.” “Utilization facility” is a term that is defined in Section 11.cc. of the AEA as: “any equipment or device, except an atomic weapon, determined by rule of the Commission to be capable of making use of special nuclear material in such quantity as to be of significance to the common defense and security, or in such manner as to affect the health and safety of the public, or peculiarly adapted for making use of atomic energy in such quantity as to be of significance to the common defense and security, or in such manner as to affect the health and safety of the public; or any important component part especially designed for such equipment or device as determined by the Commission.”

The Commission has defined “utilization facility” in § 50.2 as any nuclear reactor other than one designed or used primarily for the formation of plutonium or uranium-233.

In developing these provisions, the NRC recognized that when constructing requirements for NPR licensees, it should be cognizant of the direction in Section 104.c of the AEA which states, in part, that the Commission is directed to impose only such minimum amount of regulation of the licensee as the Commission finds will permit the Commission to fulfill its obligations under the Act to promote common defense and security and to protect the health and safety of the public and will permit the conduct of widespread and diverse research and development.

The revisions discussed in this document are constructed in accordance with the requirements of Section 149 of the AEA and within the constraints of Section 104.c of the AEA.

Section 73.57 as amended replaces, in whole, the interim requirements imposed by Order EA-07-074, “Issuance of Order Imposing Fingerprinting and Criminal History Records Check Requirements for Unescorted Access to Research and Test Reactors” (72 FR 25337; May 4, 2007); and Order EA-07-098, “Issuance of Order Imposing Fingerprinting and Criminal History Records Check Requirements for Unescorted Access to the General Atomics' Research and Test Reactors” (72 FR 44590; August 8, 2007). The final rule amends § 73.57 with similar requirements that ensure proper implementation of the requirements in Section 149 of the AEA. Accordingly, once current NPR licensees have implemented the requirements in § 73.57, the NRC will relax Order EA-07-074 and Order EA-07-098 after compliance with the requirements of the final rule has been documented. However, all orders will remain in effect until the NRC notifies the current NPR licensee, in writing, that the orders are relaxed with respect to its facility.

The effective date of this rule is November 7, 2012 which will allow 180 days for implementation. This is 60 days more than the 120 originally proposed time period in response to public comments. The NRC believes that the majority of procedure and plan changes are currently in place as a result of the previously issued unescorted access order. But, some licensees stated that they would need additional time. The extended effective date of this final rule will provide time for those licensees to develop or revise procedures and programs associated with the granting of unescorted access at their facilities to comply with the final § 73.57(g) provisions. There are no safety or security issues associated with this additional time because the security orders have already been in place for a number of years. Additionally, the NRC believes this provides sufficient time for additional individuals to be fingerprinted and approved by the reviewing official.

The NRC held a Category 3 public meeting on June 23, 2011 (ADAMS Accession Nos. ML111460100 and ML111821113). The principal objective of this Category 3 public meeting was to continue outreach in support of openness and transparency and to facilitate communication that would enhance better understanding, interpretation, and implementation of this regulation. The NRC staff intends to offer an informed series of site-specific implementation meetings for each licensee. The intent of these meetings is to facilitate communication and provide the licensees an opportunity to discuss how they will ensure compliance with this rule.

Paragraphs (a)(1) and (a)(2) are simplified because the first portion of the current regulations, which includes current power reactors licensed under 10 CFR Part 50 and applicants for power reactor licenses, is encompassed by the second portion of the provision that requires licensees that engage, or intend to engage in any regulated activity, be subject to the provisions of § 73.57.

Paragraph (a)(3) is revised to add NPRs into the scope of licensees subject to § 73.57 fingerprint provisions. Non-power reactor licensees will be added to § 73.57 to make use of the current fingerprint requirement provisions that are being successfully used for other licensees subject to FBI fingerprint-based criminal history records checks. This will ensure that NPR licensee fingerprints are handled in a manner that is both consistent with the process used for other licensees, and that ensures the NRC meets it obligations under the AEA for the handling and processing of fingerprints with the FBI.

Paragraph (b)(1) is revised to include non-power reactor licensees in the scope of the general performance and objective requirements of § 73.57. The paragraph points to new paragraph (g) where the specific unescorted access provisions for NPR licensees are described.

Paragraph (b)(2)(i) is revised to add non-power reactor facilities. Paragraph (b)(2)(i) is further revised to list “offsite response organizations responding to a non-power reactor facility” as one of the categories that does not require fingerprinting under the revised § 73.57 provisions. Based on comments received in response to the proposed rule, paragraph (b)(2)(i) is further revised to add “Federal” (non-NRC) employees who have had equivalent reviews of FBI criminal history data to the list of individuals that licensees need not fingerprint in accordance with the requirements of this section.

Paragraph (b)(2)(v) is added to enable individuals who have a valid unescorted access authorization to a non-power reactor facility on the effective date of the rule (granted in response to NRC Orders EA-07-074 and EA-07-098) to retain their access authorization and not be required to have a new fingerprint-based FBI criminal history records check under § 73.57(g) until such time that the individual's existing authorization either expires, is terminated, or is otherwise required to be renewed.

Paragraph (b)(4) is revised to relieve NPR licensees from being required to fingerprint an individual if the licensee is reinstating the unescorted access to a granted individual when that individual returns to the same reactor facility, and the unescorted access has not been interrupted for a continuous period of more than 365 days.

Paragraph (b)(5) is revised to provide non-power reactor licensees the discretion not to fingerprint individuals for which fingerprint-based criminal history records checks have been conducted, and for which the criminal history records checks can be transferred to the gaining licensee in accordance with § 73.57(f)(3). This revision allows for reciprocity of fingerprint-based criminal history records checks and grants NPR licensees the same discretion that is currently granted to power reactor licensees.

Paragraph (b)(8) is revised to include NPR licensees to ensure that NPR licensees use the information obtained as part of the criminal history records check solely for the purpose of determining an individual's suitability for unescorted access.

Paragraph (c)(1) is revised to include NPR licensees so that the associated prohibitions are provided to individuals seeking unescorted access at non-power reactors.

Paragraph (d)(1) is revised to include non-power reactor facilities so that the established fingerprint provisions and forms that the NRC currently uses for other licensees can be used by NPR licensees.

Paragraph (d)(3)(ii) is revised to apply the application fee provisions to all licensees (including NPR licensees) subject to the § 73.57 fingerprinting requirements.

Paragraph (f)(2) is revised to add non-power reactor licensees to ensure that the personal information disclosure restrictions are applied to NPR licensees.

Paragraph (f)(5) is revised to add non-power reactors and thereby provide records retention requirements for the fingerprints and criminal history records checks generated through compliance with revised § 73.57.

Paragraph (g) is added to provide the new fingerprint-based criminal history records checks requirements required by Section 149 of the AEA. The scope of the proposed requirements is consistent with orders on unescorted access issued by the NRC on April 30, 2007, and August 1, 2007 (EA-07-074 and EA-07-098, respectively). These orders require NPR licensees to conduct FBI identification and fingerprint-based criminal history records checks based on fingerprints for individuals granted unescorted access to SNM at these facilities (i.e., an individual who is granted unescorted access could exercise physical control over the special nuclear material possessed by the licensee, which would be of significance to the common defense and security or would adversely affect the health and safety of the public, such that the special nuclear material could be used or removed in an unauthorized manner without detection, assessment, or response by systems or persons designated to detect, assess or respond to such unauthorized use or removal. At NPRs, such individuals include those with the capability and knowledge to use the special nuclear material in the utilization facility or remove the special nuclear material from the utilization facility in an unauthorized manner without detection, assessment, and response by the physical protection system or related provisions or persons). The orders were issued as interim measures until the NRC could formulate generically applicable requirements for incorporation into NRC regulations.

Paragraph 73.57(g)(1) establishes requirements that prohibit any person from having unescorted access to a non-power reactor facility unless that person has been determined by the licensee to be trustworthy and reliable. This determination is made by an NRC-approved reviewing official who may undertake more extensive background investigations as they deem necessary in order to determine trustworthiness and reliability. The reviewing official is required to have unescorted access in accordance with the requirements of § 73.57, or access to SGI. The licensee's NRC-approved reviewing official evaluates the criminal history records check information to determine whether the individual has a record of criminal activity that indicates that the individual should be denied unescorted access. For each determination of unescorted access, which includes a review of criminal history information, the NRC expects NPR licensees to document the basis for the decision. When negative information is discovered that was not provided by the individual, or which is different in any material respect from the information provided by the individual, this information would be considered, and actions taken based on these findings. The NRC expects these findings to be documented. A criminal history record containing a pattern of behaviors which could be expected to recur or continue, or recent behaviors which cast questions on whether an individual should have unescorted access in accordance with § 73.57(g) should be carefully evaluated before unescorted access is granted to the individual.

Paragraph 73.57(g)(2)(i) establishes requirements for NPR licensees to obtain fingerprints for criminal history records checks for each individual who is seeking or permitted unescorted access to “vital areas” of the non-power reactor facility. “Vital area” is defined in § 73.2 as “any area which contains vital equipment,” and “vital equipment” is in turn defined in § 73.2 as “any equipment, system, device, or material, the failure, destruction, or release of which could directly or indirectly endanger the public health and safety by exposure to radiation. Equipment or systems which would be required to protect public health and safety following such failure, destruction, or releases are also considered to be vital.” For a small number of licensees, the vital area criterion may increase the scope of personnel required to obtain fingerprinting beyond the SNM criterion proposed in § 73.57(g)(2)(ii). A “vital area” at a particular NPR will vary as a function of the facility design. Security assessments have been performed by the NRC for a number of licensees that can provide the licensees insight into what constitutes a “vital area.”

In response to unescorted access orders issued by the NRC on April 30, 2007, and August 1, 2007 (EA-07-074 and EA-07-098, respectively), licensees developed procedures for granting unescorted access to their facilities. These procedures included conducting FBI identification and fingerprint-based criminal history records checks for individuals who requested, or were already granted, unescorted access to special nuclear material (SNM) at these facilities. The orders defined an individual who is granted unescorted access as one who could exercise physical control over the SNM possessed by the licensee, which would be of significance to the common defense and security or would adversely affect the health and safety of the public, such that the SNM could be used or removed in an unauthorized manner without detection, assessment, or response by systems or persons designated to detect, assess or respond to such unauthorized use or removal.

While the rule still requires those requesting access to SNM undergo FBI fingerprint-based criminal history records checks, it also establishes requirements for NPR licensees to obtain fingerprints for criminal history records checks for each individual who is seeking or permitted unescorted access to “vital areas” of the NPR facility. The addition of the vital area criterion only affects licensees that have a vital area, as described in § 73.2, at their facility. For the majority of licensees, implementing this rule will not require any actions in addition to their current security plans and procedures, thereby making this a seamless implementation for those licensees.

Paragraph (g)(2)(ii) establishes requirements for NPR licensees to obtain fingerprints for criminal history records checks for each individual who is seeking or granted unescorted access to SNM in the non-power reactor facility. This provision is consistent with the criteria used in the unescorted access order. The Commission notes that there may be significant overlap between the two criteria (i.e., SNM and vital area) of proposed § 73.57(g)(2). As an example, SNM can be considered to be vital equipment under the material portion of the § 73.2 vital equipment definition. The NRC expects that the SNM criterion would, in most situations, determine whether an individual is required to be fingerprinted in accordance with the proposed provisions.

It is not the intent of the SNM criterion to cause individuals to be fingerprinted without the consideration of the potential safety significance of the material. Instead, fingerprinting individuals for unescorted access to SNM should be limited to SNM which would be of significance to the common defense and security or could adversely affect the health and safety of the public. When determining what SNM meets this criterion, NPR licensees should consult their security plans and procedures and inform this decision with existing security assessments. Typically, SNM that meets this criterion would be strategic SNM, SNM of moderate strategic significance, or SNM of low strategic significance, as defined in § 73.2. It is not the NRC's intent to fingerprint individuals who wish to have unescorted access to minute amounts of SNM and do not meet these criteria.

For both §§ 73.57(g)(2)(i) and (ii), for the purposes of determining which individuals must be fingerprinted, an individual must additionally (beyond simply seeking unescorted access) possess the capability and knowledge to make unauthorized use of the special nuclear material in the non-power reactor. This constraint in the requirement may limit the requirement for application of fingerprint-based criminal history records checks. In some cases, more than simple physical access to special nuclear material or specified areas is necessary to require licensees to obtain fingerprint-based criminal history records checks under §§ 73.57(g)(2)(i) and (ii). To determine which individuals should be fingerprinted for unescorted access, NPR licensees need to evaluate their current security plans and procedures considering the definition of vital area (in 10 CFR part 73) and the requirements of §§ 73.57(g)(2)(i) and (ii), as well as any other security assessment information that might be available. For example, an NPR licensee may decide for practical reasons to fingerprint individuals who wish to have unescorted access within the controlled access area.

In most cases, the provisions of § 73.57(g) use an NPR licensee's procedures similar to those used to implement the previous unescorted access and SGI access fingerprinting orders and rulemaking (73 FR 63546; October 24, 2008). More importantly, these provisions of § 73.57 follow the regulatory processing and handling requirements already incorporated into § 73.57.

When a licensee submits fingerprints to the NRC under these provisions, the licensee will receive a criminal history review, provided in Federal records, since the individual's eighteenth birthday. The licensee's reviewing official shall evaluate the criminal history record information pertaining to the individual as required by revised § 73.57(g). The criminal history records checks shall be used in the determination of whether the individual has a record of criminal activity that indicates that the individual should not have unescorted access at the non-power reactor facility. Each determination of unescorted access includes a review of the fingerprint-based criminal history records information and shall include the licensee's documentation of the basis for the decision.

1. When negative information is discovered that was not provided by the individual, or that is different in any material respect from the information provided by the individual, this information shall be considered, and actions taken based on these findings shall be documented.

2. A record containing a pattern of behaviors that indicates that the behaviors could be expected to recur or continue, or recent behaviors that cast questions on whether an individual should have unescorted access in accordance with the proposed provisions, would be carefully evaluated prior to any authorization of unescorted access.

The NRC is making the documents identified in the following table available to interested persons through the methods identified. Please see the ADDRESSES section of this document for more information.

For the purpose of Section 223 of the AEA, the Commission amends 10 CFR part 73 under Sections 149 of the AEA. Willful violations of the rule will be subject to criminal enforcement.

Under the Policy Statement on Adequacy and Compatibility of Agreement States Programs, approved by the Commission on June 20, 1997, and published in the Federal Register (62 FR 46517; September 3, 1997), this rule is classified as compatibility “NRC.” Compatibility is not required for Category “NRC” regulations. The NRC program elements in this category are those that relate directly to areas of regulation reserved to the NRC by the AEA or the provisions of this chapter. Although an Agreement State may not adopt program elements reserved to the NRC, it may wish to inform its licensees of certain requirements by a mechanism that is consistent with the particular State's administrative procedure laws. Category “NRC” regulations do not confer regulatory authority on the State.

The Plain Writing Act of 2010 (Pub. L. 111-274) requires Federal agencies to write documents in a clear, concise, well-organized manner that also follows other best practices appropriate to the subject or field and the intended audience. The NRC has attempted to use plain language in promulgating this rule consistent with the Federal Plain Writing Act guidelines.

The National Technology Transfer and Advancement Act of 1995, Public Law 104-113, requires that Federal agencies use technical standards that are developed or adopted by voluntary consensus standards bodies unless using such a standard is inconsistent with applicable law or is otherwise impractical. The NRC is not aware of any voluntary consensus standard that could be used instead of the Government-unique standards.

The Commission has determined under the National Environmental Policy Act of 1969, as amended, and the Commission's regulations in subpart A, National Environmental Policy Act; Regulations Implementing Section 102(2), of 10 CFR part 51, Environmental Protection Regulations for Domestic Licensing and Related Regulatory Functions, that this rule is not a major Federal action significantly affecting the quality of the human environment and, therefore, an environmental impact statement is not required. The determination of this environmental assessment is that there will be no significant offsite impact to the public from this action.

This final rule contains new or amended information collection requirements that are subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). These requirements were approved by the Office of Management and Budget (OMB), approval number 3150-0002.

The burden to non-power reactors for the information collections associated with unescorted access to vital areas is estimated to average 2.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the information collection. Send comments on any aspect of these information collections, including suggestions for reducing the burden, to the Information Services Branch (T-5 F53), U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, or by Internet electronic mail to Infocollects.Resource@nrc.gov; and to the Desk Officer, Chad Whiteman, Office of Information and Regulatory Affairs, NEOB-10202, (3150-0002), Office of Management and Budget, Washington, DC 20503. You may also email comments to Chad_S_Whiteman@omb.eop.gov or comment by telephone at 202-395-4718.

The NRC may not conduct or sponsor, and a person is not required to respond to, a request for information or an information collection requirement unless the requesting document displays a currently valid OMB control number.

The Commission has prepared a regulatory analysis on this final regulation. The analysis examines the costs and benefits of the alternatives considered by the Commission. An opportunity for public comment on the regulatory analysis was published in the Federal Register on July 20, 2010 (73 FR 42000). Availability of the regulatory analysis is indicated in the preamble of this final rule document within the Availability of Documents table in Section V of this document.

Under the Regulatory Flexibility Act (5 U.S.C. 605(b)), the Commission certifies that this rule does not have a significant economic impact on a substantial number of small entities. This final rule affects only the licensing and operation of non-power reactors. Only one of the companies and universities that own and operate these facilities falls within the scope of the definition of small entities set forth in the Regulatory Flexibility Act or the size standards established by the NRC (10 CFR 2.810), and the economic impact on this entity is judged to be small.

The NRC's backfit provisions are found in the regulations at 10 CFR 50.109, 70.76, 72.62, and 76.76, and its issue finality provisions are located in 10 CFR part 52. Under § 50.2, non-power reactors are research or test reactors licensed in accordance with Sections 103 or 104.c of the AEA and 10 CFR 50.21(c) or 50.22 for research and development. Accordingly, the backfit provisions of 10 CFR part 50 would be the only backfit provision potentially implicated by the licensing of test, research, or training reactors. The NRC has determined that the backfit provisions in § 50.109 do not apply to test, research, or training reactors because the rulemaking record for § 50.109 indicates that the Commission intended to apply this provision to only power reactors, and NRC practice has been consistent with this rulemaking record. The 10 CFR part 52 issue finality provisions do not apply to test, research, or training reactors because these reactors are not licensed under 10 CFR part 52. Therefore, a backfit analysis was not prepared for this final rule.

In accordance with the Congressional Review Act of 1996, the NRC has determined that this action is not a major rule and has verified this determination with the Office of Information and Regulatory Affairs of the OMB.

For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following amendments to 10 CFR part 73.

Before Commissioners: Jon Wellinghoff, Chairman; Philip D. Moeller, John R. Norris. Final Rule Issued May 7, 2012.

1. Under section 215 of the Federal Power Act (FPA), 1 the Commission approves Reliability Standards PRC-006-1 (Automatic Underfrequency Load Shedding) and EOP-003-2 (Load Shedding Plans). In addition, pursuant to section 215(d)(5) of the FPA, the Commission directs the North American Electric Reliability Corporation (NERC) to develop a modification to clarify the intent of one provision of the Reliability Standard. The approved Reliability Standards were developed and submitted for approval to the Commission by NERC, the Commission certified Electric Reliability Organization (ERO) responsible for developing and enforcing mandatory Reliability Standards. The approved Reliability Standards establish design and documentation requirements for automatic underfrequency load shedding (UFLS) programs, which are meant to arrest declining frequency and assist recovery of frequency following underfrequency events and provide last resort system preservation measures.

2. The Commission approves, with modifications, the related Violation Risk Factors (VRFs) and Violation Severity Levels (VSLs), implementation plan, and effective date proposed by NERC. The Commission approves the retirement of the currently-effective Reliability Standards PRC-007-0, PRC-009-0, and EOP-003-1, and the NERC-approved Reliability Standard PRC-006-0. Further, the Commission approves the regional variance for the Western Electricity Coordinating Council (WECC) in PRC-006-1.

3. Section 215 of the FPA requires a Commission-certified ERO to develop mandatory and enforceable Reliability Standards, which are subject to Commission review and approval. Once approved, the Reliability Standards may be enforced by the ERO, subject to Commission oversight, or by the Commission independently. 2

4. Pursuant to section 215 of the FPA, the Commission established a process to select and certify an ERO  3 and, subsequently, certified NERC as the ERO. 4 On March 16, 2007, the Commission issued Order No. 693, approving 83 of the 107 Reliability Standards filed by NERC, including Reliability Standards PRC-007-0, PRC-009-0, and EOP-003-1. 5 The Commission neither approved nor remanded NERC-approved Reliability Standard PRC-006-0 in Order No. 693, 6 which required regional reliability organizations to develop, coordinate, document and assess UFLS program design and effectiveness at least every five years. The Commission determined neither to approve nor remand this “fill-in-the-blank” Reliability Standard because the regional procedures had not been submitted, and the Commission held that it would not propose to approve or remand PRC-006-0 until the ERO submitted the additional information. 7

5. On March 31, 2011, NERC filed a petition seeking Commission approval of Reliability Standards PRC-006-1 (Automatic Underfrequency Load Shedding) and EOP-003-2 (Load Shedding Plans), and the concurrent retirement of the currently-effective Reliability Standards PRC-007-0, PRC-009-0, and EOP-003-1, and the NERC-approved Reliability Standard PRC-006-0. The petition, as amended on May 17, 2011, states that PRC-006-1 establishes design and document requirements for UFLS programs that arrest declining frequency and assist recovery of frequency following system events leading to frequency degradation. 8 The petition states that EOP-003-2 makes minimal changes to EOP-003-1 by removing references to UFLS, which NERC describes as redundant in light of PRC-006-1, and instead focuses EOP-003-2 on undervoltage conditions.

6. The petition states that Reliability Standard PRC-006-1 achieves a specific reliability goal by establishing design and documentation requirements for automatic UFLS programs to arrest declining frequency, assist recovery of frequency following underfrequency events, and provide last resort system preservation measures. Further, the petition states that PRC-006-1 contains a technically sound method to achieve its reliability goal by establishing a framework for developing, designing, assessing and coordinating UFLS programs, and that PRC-006-1 is clear and unambiguous regarding what is required and who is required to comply with the Reliability Standard.

7. In the petition, NERC proposes VRFs and VSLs, an implementation plan, and an effective date. The petition requests an effective date for Reliability Standards PRC-006-1 and EOP-003-2 of one year following the first day of the first calendar quarter after applicable regulatory approvals with respect to all Requirements of the Reliability Standards except Parts 4.1 through 4.6 of Requirement R4 of PRC-006-1. With respect to Parts 4.1 through 4.6 of Requirement R4 of PRC-006-1, NERC requests an effective date of one year following the receipt of the generation data that would be required in draft Reliability Standard PRC-024-1  9 but no sooner than one year following the first day of the first calendar quarter after applicable regulatory approvals of PRC-006-1.

8. On October 20, 2011, the Commission issued a Notice of Proposed Rulemaking (NOPR) proposing to approve Reliability Standards PRC-006-1 and EOP-003-2 as just, reasonable, not unduly discriminatory or preferential, and in the public interest. The Commission proposed to approve PRC-006-1 and EOP-003-2 because the UFLS program addressed in the Reliability Standards is important to arresting declining frequency and assisting recovery of frequency following system events that lead to system instability, which can result in a blackout. The NOPR stated that the Reliability Standards are necessary for reliability because UFLS is used in extreme conditions to stabilize the balance between generation and load after an electrical island has been formed, dropping enough load to allow frequency to stabilize within the island. The NOPR concluded that PRC-006-1, in conjunction with the conforming changes to EOP-003-2, provides last resort Bulk-Power System preservation measures by establishing the first national Reliability Standard of common performance characteristics that all UFLS programs must meet.

9. The NOPR proposed to approve the related VRFs and VSLs, implementation plan, and effective date proposed by NERC. The NOPR also proposed to approve the regional variance for WECC in Reliability Standard PRC-006-1.

10. While proposing to approve Reliability Standards PRC-006-1 and EOP-003-2, the NOPR addressed or sought comments on the following issues: (A) Impact of resources not connected to the bulk electric system; (B) validation of power system models used to simulate UFLS programs; (C) scope of UFLS events assessments; (D) impact of generator owner trip settings outside of the UFLS program; (E) UFLS program coordination with other protection systems; (F) identification of island boundaries in UFLS programs; (G) automatic load shedding in PRC-006-1 and manual load shedding in EOP-003-2; (H) elimination of balancing authority responsibilities in EOP-003-2; and (I) the “Lower VSL” for Requirement R8 and the “Medium” VRF for Requirement R5 of PRC-006-1.

11. In response to the NOPR, comments were filed by NERC and 12 interested persons. 10 The comments generally support the approval of Reliability Standards PRC-006-1 and EOP-003-2. The comments also provide information responsive to the questions raised in the NOPR. In the discussion below, we address the questions raised in the NOPR in light of the comments.

12. The Commission approves Reliability Standards PRC-006-1 and EOP-003-2 as just, reasonable, not unduly discriminatory or preferential, and in the public interest. The Commission's approval is consistent with the broad support for the Reliability Standards expressed in the comments. The UFLS program addressed in Reliability Standard PRC-006-1 is important to arresting declining frequency and assisting recovery of frequency following system events that lead to system instability, which can result in a blackout. Accordingly, the Reliability Standard is necessary for reliability because UFLS is used in extreme conditions to stabilize the balance between generation and load after an electrical island has been formed, dropping enough load to allow frequency to stabilize within the island. PRC-006-1, in conjunction with the conforming changes to EOP-003-2, provides last resort Bulk-Power System preservation measures by establishing the first national Reliability Standard of common performance characteristics that all UFLS programs must meet. For the same reasons, we approve the regional variance for WECC in PRC-006-1. We also approve the VRFs and VSLs designated for the requirements of the Reliability Standards, with modifications, and the implementation plan and effective date, as proposed by NERC.

13. We address below the following issues raised in the NOPR in light of the comments received: (A) Impact of resources not connected to the bulk electric system; (B) validation of power system models used to simulate UFLS programs; (C) scope of UFLS events assessments; (D) impact of generator owner trip settings outside of the UFLS program; (E) UFLS program coordination with other protection systems; (F) identification of island boundaries in UFLS programs; (G) automatic load shedding in PRC-006-1 and manual load shedding in EOP-003-2; (H) elimination of balancing authority responsibilities in EOP-003-2; and (I) the “Lower VSL” for Requirement R8 and the “Medium” VRF for Requirement R5 of PRC-006-1. Regarding the last issue, the Commission directs NERC to modify the “Lower VSL” for Requirement R8 of PRC-0061 and the “Medium” VRF for Requirement R5 of PRC-006-1 consistent with the discussion below.

14. Requirement R2 of Reliability Standard PRC-006-1 requires planning coordinators to identify islands to serve as a basis for designing UFLS programs. Requirement R3 addresses performance characteristics for UFLS programs. Requirement R4 requires each planning coordinator to conduct and document the assessment of its UFLS design and determine if the UFLS program meets the performance characteristics in Requirement R3 for each island identified in Requirement R2. The simulations outlined in Requirement R4 all concern individual generating units greater than 20 MVA gross nameplate rating or generating plants/facilities greater then 75 MVA “connected to the bulk electric system.”

15. In the NOPR, the Commission stated that some generation meeting the 20 MVA and 75 MVA criteria in Reliability Standard PRC-006-1, Requirement R4 would not be modeled pursuant to Requirement R4 because it is not connected to bulk electric system facilities. The Commission explained that a resource not directly connected to the bulk electric system may serve load designed to be shed in a UFLS program. The Commission expressed concern that failure to account for resources not directly connected to the bulk electric system could result in planning coordinators being unaware of how those resources respond to underfrequency conditions. The Commission stated that if a planning coordinator is unaware of how these resources respond, it may plan to shed more load than is necessary for an area's frequency to return to normal, which could cause an unintended overfrequency condition if the plan is carried out in the operating timeframe. These conditions, in turn, could cause the UFLS program to violate the performance characteristics specified in Requirement R3 of PRC-006-1. The Commission sought comment as to whether and how all resources required for the reliable operation of the bulk electric system, including resources not connected to bulk electric system facilities, are considered in the development of UFLS programs under Requirements R3 and R4 of PRC-006-1.

16. NERC agrees with the NOPR that failing to model qualifying generation not directly connected to the bulk electric system could affect the simulated frequency response. NERC, however, clarifies that Reliability Standard PRC-006-1 does not “establish parameters for what resources are modeled in [] simulations” and that “power system models used in UFLS assessments are generally the same models used in transmission planning assessments, which include models of all generation units and plants that meet the threshold size requirements even those not connected directly to the Bulk Electric System.”  11 In addition, NERC states that a standard authorization request is under development as part of the “second phase” of the project to revise the definition of bulk electric system, and information developed as part of that project could be used to assess whether any changes are needed to PRC-006-1.

17. EEI, TAPS, MISO, and FRCC maintain that the vast majority of qualifying generation is accounted for in Reliability Standard PRC-006-1. EEI comments that bulk electric system resources account for the “vast majority of resources within all interconnections” and supports the standard drafting team's belief that the Reliability Standard generally captures about 95 percent of utility-owned installed capacity. 12 While EEI acknowledges that there are a small number of unaccounted for generation resources that meet the qualifying criteria, EEI comments that what is captured is sufficient for assessing reliable operation of the bulk electric system. EEI also maintains that planning coordinators already consider other resources as appropriate.

18. TAPS states that the “great majority” of generators are not set to trip before the underfrequency set points, so they will be available for UFLS programs. 13 TAPS contends that the only generators of concern are those that: (1) Do not meet Reliability Standard PRC-006-1's size and connection criteria; (2) trip prior to underfrequency set points; and (3) are dispatched during underfrequency events because they are not required to be modeled under PRC-006-1. TAPS maintains that the number of generators that meet these criteria is “very small” so that modeling them would have an “infinitesimal reliability benefit,” not improving the overall accuracy of the UFLS program design and not justifying the additional costs. 14

19. MISO states that UFLS simulations should not be required to include all generation that meets the 20 MVA and 75 MVA criteria in Reliability Standard PRC-006-1, Requirement R4. MISO cites the standard drafting team's belief that PRC-006-1 captures about 95 percent of utility-owned installed capacity. 15 MISO also maintains that the standard drafting team deserves deference and that simulations will always contain some degree of uncertainty.

20. FRCC states that generators that fall within the size requirements of Reliability Standard PRC-006-1 but that are not connected to bulk electric system facilities constitute a “very small amount.”  16 FRCC maintains that this amount is well below the error tolerance of a well-designed UFLS program and, thus, is not important.

21. SWPA states that planning coordinators, in developing UFLS programs, should consider all resources that are determined to be required for the reliable operation of the bulk electric system, regardless of whether those resources are directly connected to the bulk electric system.

22. NYISO comments that it analyzes UFLS effectiveness using a Multiregional Modeling Working Group dynamics model of the Eastern Interconnection, which includes all resources on the system regardless of bulk electric system connections.

23. In the NOPR, the Commission expressed concern regarding the development of UFLS programs that fail to account for qualifying generation not directly connected to the bulk electric system. We are satisfied with the explanations provided by commenters. First, we are persuaded by NERC's explanation that Reliability Standard PRC-006-1 does not limit the resources that can be modeled in the UFLS assessments and that power system models used in UFLS assessments generally model all qualifying generation, including resources not directly connected to the bulk electric system. In summary, although PRC-006-1 does not require all of the generation that is not directly connected to the bulk electric system to be included in the modeling, the subset of these resources that are required to assure that the UFLS models are sufficient to accurately predict system performance will be included. Similarly, we accept comments from EEI, TAPS, MISO, and FRCC that PRC-006-1 requires modeling of the vast majority of qualifying generation to ensure the reliable operation of the bulk electric system.

24. Like SWPA, the Commission believes that requiring all qualifying assets to be accounted for in UFLS programs, regardless of whether they are directly or indirectly connected to the bulk electric system, is useful to ensuring the effectiveness of the programs. Not requiring applicable entities to model sufficient amounts of qualifying generation indirectly connected to the bulk electric system could result in applicable entities not knowing how those resources react during underfrequency situations, which could cause excessive load shedding in an emergency and further contribute to system instability.

25. NERC states in its comments that this issue could be further evaluated in the “second phase” of the project to revise the definition of bulk electric system, and that information from that project could be used as a basis for revising Reliability Standard PRC-006-1 if necessary. 17 Without prejudging those efforts, the Commission will not issue a directive requiring the modeling of qualifying generation not directly connected to the bulk electric system.

26. In the NOPR, the Commission stated that dynamic simulations that fail to accurately represent the power system can result in UFLS programs that are ineffective. The Commission, however, concluded that the UFLS program design requirements established in Requirement R2 of Reliability Standard PRC-006-1 and the required assessments established in Requirements R4 and R11 of PRC-006-1 are generally acceptable and include improvements over the current Reliability Standards.

27. FRCC comments that improving the accuracy of power system models used in simulating system response to forecasted system conditions is an appropriate goal, but achieving 100 percent accuracy is not practicable. EEI comments that dynamic simulations for any large power system will never be 100 percent accurate and asks the Commission not to impose any new directives which might unnecessarily increase costs to industry.

28. NYISO states that a lack of accuracy in modeling can have a significant impact on analyses of under-generated islands. Specifically, NYISO states that “optimistic models of unit governing response can lead to invalid conclusions regarding minimum frequency and frequency recovery.”  18 NYISO indicates that it is taking steps to improve the accuracy of modeling frequency recovery by, among other things, aligning the dynamics model to observed system response.

29. The Commission accepts the comments from EEI and FRCC that power system models with 100 percent accuracy are not practicable. The Commission, however, is mindful of the consequences of inaccurate power system models and their impact on an entity's ability to accurately simulate system performance. As noted by NYISO, inaccurate models can lead to invalid conclusions which can be detrimental to the analysis and operation of the bulk electric system. At a minimum, the models should accurately predict system performance during UFLS events. Although entities may take additional steps, such as the step taken by NYISO to ensure accurate models, as stated in the NOPR, the Commission believes that the design requirements in Reliability Standard PRC-006-1 are acceptable. 19

30. Requirement R11 of Reliability Standard PRC-006-1 requires planning coordinators to conduct assessments after a “BES islanding event results in system frequency excursion below the initializing set points of the UFLS program.”

31. In the NOPR, the Commission expressed concern that the phrase “BES islanding event” could be interpreted to mean that a planning coordinator only has to assess an event if it meets both of the following requirements: (1) System frequency excursions fall below the initializing set point for UFLS; and (2) bulk electric system islands form within the Interconnection. The Commission explained that, if frequency falls below the initializing UFLS set point but islands do not form (e.g., because the event was not severe enough to isolate portions of the Interconnection, or UFLS or other protection systems failed to operate properly to form islands), an assessment of the performance of the UFLS program for this event is still useful because it can determine if the UFLS program operated as expected. The Commission sought comment on what actions must planning coordinators take under Requirement R11 of PRC-006-1 if an event results in system frequency excursions falling below this initializing set point for UFLS but without the formation of a bulk electric system island.

32. In its comments, NERC states that “[a]lthough PRC-006-1 does not prescribe an analysis for [the non-islanding scenario identified in the NOPR], activating UFLS during an Interconnection-wide event would involve a significant loss of generation and analysis would be performed under the NERC Event Analysis program or the NERC Rules of Procedure, depending on the severity of the event.”  20 NERC further states that the “activation of UFLS, while highly unlikely, would be a significant event requiring assessment of several aspects of system frequency, including system Frequency Response, equipment performance, and coordination of protection and control systems, in addition to the assessment of UFLS program operation.”  21 Ultimately, NERC agrees that an assessment of the performance of UFLS, even in the absence of island formation, is useful.

33. EEI and MISO agree with NERC that Requirement R11 of Reliability Standard PRC-006-1 requires both conditions (i.e., frequency excursion and islanding) to be met. MISO agrees with the NOPR that an analysis of excursions without islanding is useful. However, MISO and EEI comment that such an analysis is outside the scope of the Reliability Standard. MISO, quoting the NOPR, states that UFLS “is designed for use in extreme conditions to stabilize the balance between generation and load after an electrical island has been formed.”  22 Accordingly, MISO argues that a UFLS program “can only truly be assessed in light of its performance after an island has formed.”  23 In addition, such assessments are costly, time consuming and resource intensive, according to MISO. EEI maintains that entities “broadly perform assessments of lesser events as they deem necessary.”  24 EEI contends that such assessments are not required in PRC-006-1 because “to do so would go beyond the intent of the program which is the design of UFLS programs.”  25 Instead, EEI notes that applicable entities normally conduct operational assessments regularly, and if an entity identifies a problem the entity would report the matter as a misoperation with an obligation to remediate. EEI also points to the draft NERC Event Analysis Process  26 and its application to what EEI describes as “underfrequency events of a lesser level” (i.e., events resulting in load shedding with a loss of load of 100 MW or more). 27 EEI contends that the Commission's concerns regarding analysis of lesser events will be satisfied once the NERC Event Analysis Process is finalized.

34. SWPA states that it is reasonable for planning coordinators to request and analyze event data in the absence of island formation to assess the performance of UFLS programs. Specifically, SWPA comments that “[t]he assessment of a UFLS event during varying system conditions caused by generator outages, transmission outages, and various maintenance activities, provides an opportunity to discover the impacts of these activities on the expected outcomes described in the plan.”  28

35. NERC clarifies that Requirements R11 and R12 of Reliability Standard PRC-006-1 are triggered when system frequency excursions fall below the initializing set points for UFLS programs and bulk electric system islands form within Interconnections. 29

36. The Commission agrees with commenters that it would be useful to have an analysis of system frequency excursions to assess the performance of UFLS programs even in the absence of island formation. 30 To that end, we agree with NERC that underfrequency events that result in the initializing of the UFLS set point, even in the absence of island formation, would be analyzed under provisions contained in the NERC Rules of Procedure and the NERC Event Analysis program. 31

37. Requirements R5 and R13 of Reliability Standard PRC-006-1 provide flexibility in coordinating UFLS design programs and event assessments among planning coordinators whose areas fall within the same island or whose areas are affected by the same event. In the NOPR, the Commission sought comments on whether differences in assessments between planning coordinators should be reported to reliability coordinators for resolution in the event that the process identified in PRC-006-1 does not resolve the differences.

38. NERC, MISO, and EEI comment that reliability coordinators should not be tasked with resolving differences between planning coordinator event assessments. NERC states that differences between planning coordinator event assessments should not be reported to reliability coordinators because: (1) Reliability coordinator's wide-area view may not coincide with island boundaries; (2) reliability coordinators may have conflicts of interest; (3) reliability coordinators may not have the tools to resolve the differences; and (4) reliability coordinators work in a real-time operating environment, which makes them ill-suited to resolve disputes among planning coordinators.

39. MISO and EEI comment that event assessment differences should not be reported to reliability coordinators because planning coordinators are better positioned to reconcile differences. MISO notes that in some cases where an applicable entity is both a reliability coordinator and planning coordinator (as is the case with MISO), there would be a conflict of interest. Further, MISO maintains that referring disputes to reliability coordinators imposes additional costs with little to no benefit. MISO and EEI also contend that event assessment differences do not pose a risk to the reliability of the bulk electric system, with EEI noting that such differences are “a result of legitimate engineering and regional practices and processes.”  32 At most, EEI suggests that reliability coordinators might be used as informal facilitators.

40. SWPA states that a clear resolution process is necessary and that referring disputes to reliability coordinators is a reasonable consideration.

41. The Commission is persuaded by the comments of NERC, MISO, and EEI that differences between planning coordinator event assessments should not be referred to reliability coordinators for resolution. We share the concern of NERC, MISO, and EEI that referring disputes to reliability coordinators may create conflicts of interest because a planning coordinator may also serve as a reliability coordinator. We agree, however, with SWPA that disputes between planning coordinator event assessments should be resolved. Therefore, the Commission expects planning coordinators to work in good faith including, as appropriate, use of third parties to resolve disputes concerning event assessments. If the Commission finds that these disputes are not being resolved, the Commission may consider adoption of an appropriate process to ensure resolution of the disputes.

42. Requirement R11 of Reliability Standard PRC-006-1 requires planning coordinators to perform island event assessments within one year of an event. If the planning coordinator identifies program deficiencies, Requirement R12 of PRC-006-1 requires planning coordinators to conduct and document UFLS design assessments, which are meant to consider the deficiencies, within two years of an event.

43. In the NOPR, the Commission expressed concern that this time frame could be too long because island event assessments and consideration of deficiencies could reasonably be done in a shorter time frame. Moreover, the Commission noted that under PRC-006-1, deficiencies could remain within a UFLS program for two years from an event exposing the Bulk-Power System to instability, uncontrolled separation and cascading outages should a frequency event occur that the UFLS program mishandles. The Commission sought comments on the basis for the two-year time frame and clarification as to how soon after an event would an entity need to implement corrections in response to any deficiencies identified in the event assessment under Requirement R11 of PRC-006-1.

44. NERC comments that, while some events can be assessed in less time, one year is a realistic time-frame to assess performance for complex events and two years is a realistic time-frame to address identified deficiencies. NERC states that “the amount of time that a UFLS entity has to implement corrections will be established by the Planning Coordinator, as specified in Requirement R9 of PRC-006-1 * * * [and] [t]he time allotted for corrections will depend on the extent of the deficiencies identified.”  33

45. EEI, MISO, and G&T Cooperatives support the timelines in Reliability Standard PRC-006-1. MISO maintains that event assessments are time and resource intensive and must not be rushed. EEI, MISO, and G&T Cooperatives state that planning coordinators can complete analyses of less complex events before the two-year deadline, but they need the maximum allowable time to finish analyses of complex events. With respect to the time allowed for correcting problems, EEI comments that any deadline in a requirement would be difficult to enforce and would not improve reliability given the variable nature of possible deficiencies.

46. SWPA states that an applicable entity may need to implement corrections that require complex procurement or acquisition processes, and such contracts can be complex, involving many required decisions and actions. Given these complexities, SWPA maintains that four years after event actuation is a reasonable deadline to implement corrections.

47. Based on the comments, the Commission is persuaded that two years to complete design assessments pursuant to Reliability Standard PRC-006-1 is appropriate. As noted by EEI, MISO, and G&T Cooperatives, assessments of complex events can be time and resource intensive. Thus, we agree that two years is a reasonable maximum allowable time for completion of design assessments. However, we agree with commenters that efforts should be made to complete assessments of less complex events before the two-year maximum allowable period. 34

48. In response to the Commission's concern that Reliability Standard PRC-006-1 does not specify how soon after an event would an entity need to implement corrections in response to any deficiencies identified in the event assessment under Requirement R11 of PRC-006-1, NERC stated in its comments that:

Requirement R9 of PRC-006-1 states:

Notwithstanding NERC's comments, the Commission is not persuaded that Requirement R9 requires corrective action in accordance with a schedule established by the planning coordinator. Based on its comments, however, NERC has expressed no opposition to such a requirement. We accept NERC's comments that Requirement R9 requires a schedule established by the planning coordinator, but NERC's reading of Requirement R9 should be made clear in the Requirement itself. Accordingly, we direct NERC to make that requirement explicit in future versions of the Reliability Standard. Within 30 days of the effective date of this Final Rule, NERC is directed to submit a compliance filing indicating how it plans to comply with this directive and a deadline for compliance.

49. In the NOPR, the Commission stated that Requirements 4.1 through 4.7 of Reliability Standard PRC-006-1 are intended to capture the effects of generators that trip prior to UFLS initiation. While agreeing that planning coordinators should consider generators that trip prior to underfrequency set points when developing their UFLS programs, the Commission sought comments on how generation losses outside of the UFLS set points ( i.e., generators having trip settings prior to the UFLS underfrequency set points) should be accounted for in UFLS programs ( e.g., generator owners who trip outside of the UFLS set points could procure load to shed to account for the loss in generation).

50. NERC, EEI, TAPS, Dominion, FRCC and EPSA oppose requiring generator owners to procure load to shed for generators that trip outside of the UFLS set points. NERC states that it is appropriate for planning coordinators to consider generators that trip outside of the UFLS set points when designing UFLS programs, but it is inappropriate for planning coordinators to determine whether mitigation is necessary and who will be responsible for providing mitigation.

51. EEI states that Reliability Standard PRC-006-1, Requirement R4 requires that all resources included in the UFLS program that operate outside the specified trip settings be factored in to the dynamic simulation models used to develop the program. EEI further notes that, while there is no formal obligation for generator owners to supply trip setting data to planning coordinators, this information is shared. Unlike modeling generators that trip outside of the UFLS set points, EEI maintains that the issue of procuring load to shed to compensate for such trips is outside the scope of PRC-006-1.

52. TAPS comments that generators that trip prior to underfrequency set points are separately modeled under Reliability Standard PRC-006-1 and that this is the correct approach to account for such generators. TAPS opposes requiring generator owners who trip outside of the UFLS set points to procure load to shed to account for the loss in generation. TAPS objects to a “one-size-fits all market/contractual solution” given the absence of a demonstrable reliability problem and the market power concerns it might create. 36 TAPS maintains that in some small islands it may be impossible to procure the necessary load to shed.

53. Dominion states that generator owners whose generators trip prior to UFLS set points should not be required to procure load to shed. Dominion contends that such a scheme could be extremely difficult to design and coordinate, and Dominion is unaware of any distribution provider or transmission owner tariff that offers such a service.

54. FRCC maintains that a small minority of generator underfrequency protection settings are above the minimum UFLS frequency set points and that in many cases any conflicts can be resolved by reexamination of the technical basis for the generator's underfrequency protection. FRCC also states that requiring generator operators to procure load to shed would be technically impossible, and there is no market for compensatory, assignable UFLS to make generator contracts for load shedding feasible.

55. EPSA states that planning coordinators should consider generators that trip prior to underfrequency set points when collecting information and developing their UFLS programs. EPSA maintains, however, that requiring planning coordinators to account for generators that trip prior to the UFLS set points presupposes that there is a material amount of generator losses occurring. EPSA believes that implementation of Reliability Standard PRC-006-1 will allow planning coordinators to gather information to determine the amount of losses, which can then be used to decide whether generator losses need to be accounted for. EPSA states that if generator losses are found to be a material concern that needs to be accounted for, the Commission should consider that: (1) Generator owners do not and cannot play an active role in UFLS program decisions; (2) generator owners do not determine the set points for their generation; and (3) the NERC process should not be used to influence market decisions and competitiveness.

56. SWPA states that the design assessment in Requirement R4 of Reliability Standard PRC-006-1 addresses the modeling of generators having trip settings prior to the UFLS set points but that the Reliability Standard does not address how planning coordinators would resolve the need for supplemental UFLS. SWPA maintains that PRC-006-1 should include a requirement for planning coordinators to identify the UFLS entity that needs to provide supplemental UFLS, the basis for the identification, and coordination of this information with those entities and affected generator owners.

57. NYISO states that it conducts an annual survey of all generator owners within the New York Control Area for their UFLS trip setting and addresses those that have settings outside the UFLS program range established by the Northeast Power Coordinating Council (NPCC). NYISO states that it conducts a UFLS simulation that excludes non-conforming generation and a separate simulation that incorporates 260 MW of compensatory load shedding with tripping of non-conforming generation.

58. Based on the comments, the Commission is persuaded to take no action to require compensation for generation losses outside of the UFLS set points (i.e., generators having trip settings prior to the UFLS underfrequency set points). Reliability Standard PRC-006-1 is an improvement because it requires planning coordinators to consider generators that trip outside of the UFLS set points when modeling and designing UFLS programs. We are persuaded by NERC's comments that it is appropriate for planning coordinators to consider generators that trip outside of the UFLS set points when designing UFLS programs, but it is inappropriate for planning coordinators to determine whether mitigation is necessary and who will be responsible for providing mitigation. For these reasons, we take no action to modify the Reliability Standard.

59. In the NOPR, the Commission stated that an integrated approach to the coordination of all types of protection systems (e.g., UFLS, undervoltage load shedding  37 ), internally and externally to an entity's area, is required to be responsive to the 2003 Blackout Report. 38 The Commission noted that, while Reliability Standard PRC-006-1 requires coordination of UFLS programs among planning coordinators in Requirements R5, R7, and R13, it does not appear to capture the same level of coordination with other protection systems as in Requirement R1.2.8 of PRC-006-0, which was approved by the NERC Board of Trustees but left pending in Order No. 693. 39 The Commission sought comments on whether and how coordination with other protection systems is or is not achieved under the new requirements.

60. NERC states that Requirement R1.2.8 of PRC-006-0 includes a broad mandate and that the intent was to replace it with more specific requirements that are clear and measurable. NERC contends that Requirements R3, R4, and R10 of Reliability Standard PRC-006-1 include requirements for the coordination of UFLS programs with specific protections that “are part of or could impact the UFLS program.”  40 EEI and G&T Cooperatives likewise believe that Requirement R1.2.8 is vague, while PRC-006-1 contains the specificity to ensure that UFLS programs are adequately designed and coordinated. G&T Cooperatives maintains that coordination of UFLS and UVLS programs is already provided for in PRC-010-0, Requirement R1.1.1.

61. FRCC states that there is seldom a need to coordinate UFLS with UVLS and that the Reliability Standard PRC-006-1 correctly identifies the protection systems that entities should coordinate with UFLS programs. FRCC contends that the potential for interaction between UFLS and UVLS programs is minimal given that UVLS schemes are not deployed throughout an interconnection and are, instead, deployed in specific locations that may be exposed to low voltage for a specific contingency. NYISO likewise states that, due to the distributed nature of UFLS, there should not be any significant interaction between fault clearing protections and UFLS and that under-voltage inhibition of relays is not expected to interfere with UFLS programs.

62. With regard to our concern raised in the NOPR regarding the coordination of UFLS with other protection systems, we are persuaded by NERC's comments that Reliability Standard PRC-006-1 provides an adequate level of coordination between the UFLS program and specific protection systems and controls that NERC identifies as part of, or could impact, the UFLS program. 41

63. We are persuaded by NERC comments that “Requirements R3, R4, and R10 of PRC-006-1 address coordination of the UFLS program with other protection and control systems * * * includ[ing] generator protections that could respond to frequency and voltage excursions, automatic Load restoration, and equipment switching that may be included in the UFLS program to control voltage.”  42 Specifically, planning coordinators are to coordinate expected generation performance during underfrequency events and generator trip settings under PRC-006-1, Requirements R3 and R4. 43 To satisfy PRC-006-1, Requirement R10, transmission owners must provide the necessary automatic switching of elements as directed by the planning coordinator in the UFLS program and schedule. 44 To maintain the required system restoration capability required by PRC-006-1, Requirement R10, transmission owners must coordinate other protection system components with the established UFLS program components.

64. Additionally, the Commission notes that currently-effective Reliability Standard PRC-001-1 (System Protection Coordination) ensures system protection coordination for protection systems. 45 The Commission believes that this level of coordination between UFLS programs and other specific protection systems is adequate.

65. Requirement R1 of Reliability Standard PRC-006-1 directs planning coordinators to develop criteria to select areas that may form islands based on historical events and system studies. Historical events and system studies provide planning coordinators with the data necessary to determine where islands will occur based on the physics of the system. Requirement R2.3 of PRC-006-1 allows planning coordinators to “adjust the island boundaries to differ from the Regional Entity area boundaries by mutual consent where necessary” to preserve contiguous island boundaries that better reflect simulations.

66. In the NOPR, the Commission agreed with the premise behind Requirement R1, which requires identifying island boundaries based on where they are likely to occur as opposed to following rigid Regional Entity area boundaries, because it should result in more effective UFLS programs. The NOPR also noted that NERC, in its petition, stated that Reliability Standard PRC-006-1 allows planning coordinators to “select islands including interconnected portions of the bulk electric system in adjacent Planning Coordinator areas and Regional Entity areas, without the need for coordinating this selection with Planning Coordinators in neighboring regions.”  46 The Commission observed, however, that Requirement R2.3 of PRC-006-1 requires “mutual consent” to adjust island boundaries from Regional Entity boundaries. The Commission sought clarification concerning the required degree of cooperation and/or “mutual consent” between planning coordinators under the proposed Reliability Standard.

67. In its comments, NERC clarifies that “mutual consent” is required by part 2.3 of Requirement R2 of Reliability Standard PRC-006-1 when planning coordinators select island boundaries that do not coincide with the Regional Entity area or Interconnection boundary. NERC explains that, when a planning coordinator selects an island boundary that does not coincide with the Regional Entity area or Interconnection boundary, mutual consent must be obtained from neighboring planning coordinators to ensure that the deviation does not result in a portion of the bulk electric system being excluded from a UFLS assessment.

68. EEI states that the Reliability Standard PRC-006-1 requires “mutual consent” between affected planning coordinators and that the level of consent is voluntary and undefined to allow the parties to determine the level of cooperation necessary. EEI maintains that this scheme is necessary to ensure that all parts of the bulk electric system are covered within a UFLS plan.

69. MISO states that planning coordinators should be able to study islands as they see fit and without the consent of neighboring planning coordinators, which includes studying islands that deviate from Regional Entity boundaries. MISO maintains that there is no detrimental effect associated with multiple or non-coordinated island studies.

70. NYISO comments that it regularly conducts stability evaluations on a New York Control Area and regional basis and is aware of the potential breakpoints on the system.

71. EPSA states that UFLS programs are best developed on an interconnection-wide basis, not on a regional basis. EPSA notes that region-specific Reliability Standards could undermine Reliability Standards PRC-006-1 and EOP-003-2 if they do not address interregional coordination among planning coordinators.

72. PSEG states that it has concerns with the active draft regional versions of PRC-006-1 pertaining to Reliability First Corporation and NPCC. PSEG maintains that these regional versions will hamper needed interregional coordination for UFLS program design in the Eastern Interconnection (i.e., the proposed regional standards do not require interregional coordination among planning coordinators and may require planning coordinators who span multiple regions to follow different standards); they violate a key NERC market principle by requiring existing generator owners to procure offsetting UFLS for the early tripping of their generating units if these units cannot meet specific performance requirements; and they may contravene the Energy Policy Act of 2005  47 by placing NERC and the regions in the role of imposing generation adequacy requirements. PSEG maintains that UFLS is an interconnection-wide issue and should be addressed on an interconnection-wide basis.

73. The Commission accepts NERC's clarification of the level of consent required between planning coordinators to adjust island boundaries under Reliability Standard PRC-006-1, Requirement R2.3. As stated in the NOPR, we believe that the reliability of the bulk electric system benefits from entities basing their studies on physical characteristics, as allowed in PRC-006-1, as opposed to hewing to artificial boundaries. 48 To the extent MISO suggests in its comments that planning coordinators should not have to reach a consensus with neighboring planning authorities when adjusting island boundaries, we disagree. As NERC and EEI explain in their comments, it is important to coordinate adjustments in island boundaries to ensure that no part of the bulk electric system is inadvertently left unstudied. 49 However, nothing in PRC-006-1 precludes entities from conducting additional assessments based on any island boundaries they wish to analyze.

74. With respect to the comments from EPSA and PSEG, there are no Regional Reliability Standards currently before us in this matter and, therefore, the matter is not ripe for us to address.

75. In the NOPR, the Commission observed that there are no requirements in Reliability Standard PRC-006-1 to coordinate automatic load shedding by UFLS and manual load shedding under Reliability Standard EOP-003-2. The Commission noted that once load is disconnected from the system, either automatically or manually, it cannot be used again to arrest frequency decline. The Commission expressed concern that in the event that a load resource is double-counted and removed during automatic UFLS, the manual load shedding cannot be completed if called upon. Accordingly, the Commission stated that resources allocated to each type of load shedding (i.e., automatic and manual) should not overlap. The Commission sought comments on how the coordination of automatic and manual load shedding is considered in light of the fact that the Reliability Standards do not explicitly require coordination.

76. NERC acknowledges that the Reliability Standards do not explicitly require coordination of manual load shedding and UFLS but states that Reliability Standard EOP-003-2 addresses the concern that a load resource could be unintentionally double-counted. Specifically, NERC maintains that Requirement R6 of EOP-003-2 requires transmission operators and balancing authorities to include load in the manual load shedding program that is not included in the UFLS program to achieve the reliability objective of EOP-003-2. 50

77. Wisconsin Electric and FRCC state that it is difficult for a UFLS program not to overlap with manual loadshed plans. Wisconsin Electric comments that it is “overly conservative to prevent a load from being used in both a UFLS program and a manual loadshed plan.”  51 Wisconsin Electric also observes that a reliability coordinator may require an entity to manually shed load that is part of a UFLS program, which the entity cannot ignore. FRCC maintains that a non-overlap rule is likely to have a negative impact on reliability because it may reduce the amount of load available to address capacity emergencies. FRCC further contends that underfrequency events are rare and it is even less likely for an underfrequency event to coincide with a capacity emergency.

78. Dominion states that the Commission should not force coordination of manual load shedding and UFLS load shedding because it would prevent balancing authorities and transmission operators from using currently available tools to manage emergency conditions. Dominion contrasts the precision of manual load shedding with the widespread automatic response provided by UFLS programs. According to Dominion, forced coordination could remove manual load shedding from the emergency response toolkit for local issues, which, according to Dominion, could allow them to turn into cascading events. EEI states that the purpose of UFLS programs and manual load shedding are separate. EEI argues that, while a broad understanding of the operation of each program is important, coordination to the level implied by the NOPR serves no purpose since each program addresses different problems. EEI further notes that coordination in the form of “information sharing” already occurs. NYISO also states that manual load shedding and UFLS address different issues and should be addressed in separate Reliability Standards.

79. SWPA states that there is a need to address what consideration planning authorities give to other protective schemes and remedial action plans. SWPA maintains that Reliability Standard PRC-006-1 should address how a balancing authority and transmission operator address overlap concerns where most of its balancing authority area entities are subject to load shedding plans under Reliability Standard EOP-003-2 but these loads are also subject to UFLS plans under PRC-006-1.

80. Based on the comments, we find that there is an adequate level of coordination between UFLS and manual load shedding. We are persuaded by NERC's comments that the term “additional load” in Reliability Standard EOP-003-2, Requirement R6, includes resources allocated to manual load shedding that are not included in the UFLS program. UFLS and manual load shedding programs are developed separately and have, as EEI stated, separate purposes. As such, to avoid insufficiencies in available load if manual load shedding is needed after UFLS has been activated, UFLS and manual load shedding programs cannot be planned to shed the same load.

81. In the NOPR, the Commission observed that Requirements R2, R4, and R7 of the currently-effective Reliability Standard EOP-003-1 apply to transmission operators and balancing authorities but that Reliability Standard EOP-003-2 eliminates balancing authorities from Requirements R2, R4, and R7. The Commission sought clarification as to why these balancing authority responsibilities were not incorporated into Reliability Standards PRC-006-1 or EOP-003-2. The Commission also sought comments as to why balancing authorities should not be informed of UFLS program plans that directly impact balancing authority functions.

82. NERC states that Reliability Standard EOP-003-2 removes requirements on UFLS design, incorporates them in Reliability Standard PRC-006-1, and assigns those activities to planning coordinators. NERC further states that EOP-003-2 does not remove any requirements for UVLS, which are assigned to transmission operators. NERC maintains that, while balancing authorities contribute to managing Interconnection frequency by balancing load and generation resources in real-time, UFLS and UVLS programs are automatic and must be set in advance. NERC, however, agrees that balancing authorities should be informed of UFLS program plans that directly impact the balancing authority function.

83. EEI, TAPS, MISO, Dominion and NYISO largely support NERC's comments. EEI states that the changes in Reliability Standard EOP-003-2 are consistent with the roles and responsibilities of balancing authorities and transmission operators. EEI also maintains that balancing authorities are already informed of UFLS programs by transmission operators because balancing authorities and transmission operators “are specifically identified as coordinating other load shedding plans as identified in EOP-003-2” and to “effectively develop those plans [balancing authorities] and [transmission operators] must have knowledge of the UFLS programs of which [transmission operators] are intimately aware through PRC-006-1.”  52

84. TAPS states that Reliability Standards PRC-006-1 and EOP-003-2 clarify the requirements in the existing Reliability Standards and assign them to the functional entities best suited to program design. TAPS also states that Reliability Standard PRC-001-1, Requirement R1 ensures that balancing authorities are familiar with UFLS programs because the requirement provides that they “shall be familiar with the purpose and limitations of protection system schemes applied in its area.”  53

85. MISO states that balancing authorities need not be informed of UFLS programs because planning coordinators are the functional entities tasked with overseeing those programs. MISO also contends that requiring planning coordinators to report to balancing authorities on UFLS programs would impose additional costs with little benefit to reliability. MISO notes, however, that balancing authorities could benefit if NERC periodically published prevailing UFLS set points by planning coordinator area.

86. Dominion states that planning coordinators should not be required to inform balancing authorities of UFLS program plans because balancing authorities have no role in the design and implementation of UFLS and have no action to take to affect the successful operation of UFLS.

87. NYISO comments that balancing authorities have no role in load shedding and agrees with the removal of UFLS references from Reliability Standard EOP-003-2.

88. SWPA states that balancing authorities, by definition, do not perform the functions referred to in Reliability Standards PRC-006-1 or EOP-003-2, Requirements R2, R4, and R7. However, SWPA believes that PRC-006-1 should incorporate language that ensures that balancing authorities are kept informed of UFLS program plans that directly impact the balancing authority functions.

89. The Commission accepts the elimination of requirements for balancing authorities in Reliability Standard EOP-003-2. NERC states in its comments that “all activities required for UFLS programs in the existing standards are incorporated into PRC-006-1, and are assigned to the Planning Coordinator,”  54 and that balancing authorities will still be made aware of UFLS programs in order to “be familiar with the purpose and limitations of protection system schemes applied in its area,”  55 as stated in Reliability Standard PRC-001-1, Requirement R1. To that end, the Commission believes that the comments address the questions raised in the NOPR regarding the elimination of balancing authority responsibility for Requirements R2, R4, and R7 of EOP-003-2.

90. In the NOPR, the Commission proposed to approve the VRFs and VSLs in Reliability Standards PRC-006-1 and EOP-003-2. However, the Commission sought comments on one VSL and one VRF for PRC-006-1.

91. The Commission stated that the “Lower VSL” assignment for Requirement R8 in PRC-006-1 applies when a UFLS entity fails to provide data to its planning coordinator for 5 to 10 calendar days following the schedule specified by the planning coordinator. The Commission noted in the NOPR that Requirement R8 of PRC-006-1 does not include a 5-day grace period for providing data to planning coordinators and thus the subject VSL assignment may be inconsistent with the Commission's VSL Guideline 3.

92. The Commission noted that NERC proposed a “Medium” VRF for Reliability Standard PRC-006-1, Requirement R5, which requires planning coordinators to coordinate their UFLS program design with other planning coordinators whose area is in part of the same identified island. The Commission observed the statement in NERC's petition that Requirement R5 is “not related to similar reliability goals in other standards.”  56 However, the Commission explained that coordination of load shedding plans is required in a similar manner in Requirement R3 of currently-effective Reliability Standard EOP-003-1, which includes a VRF of “High.”  57 The Commission stated that the lack of coordination of UFLS programs among planning coordinators within the same identified island could lead to ineffective UFLS operations and further cascading outages within the island when UFLS is activated. The Commission explained that this might be inconsistent with Guideline 3 of the Commission's VRF Guidelines states that “[a]bsent justification to the contrary, the Commission expects the assignment of Violation Risk Factors corresponding to Requirements that address similar reliability goals in different Reliability Standards would be treated comparably.”  58

93. NERC agrees with the NOPR regarding both the “Lower VSL” for Requirement R8 of Reliability Standard PRC-006-1 and the VRF for Requirement R5 of PRC-006-1. In its comments, NERC proposes to modify the “Lower VSL” to remove the phrase “more than 5 calendar days but” to address the concern stated in the NOPR. NERC also proposes to modify the VRF for Requirement R5 by raising it from “Medium” to “High.”

94. EEI, SWPA, and NYISO agree with the need to modify the VSL for Requirement R8 of PRC-006-1, consistent with NERC's proposal. NYISO also supports changing the VRF for PRC-006-1, Requirement R5.

95. Consistent with the proposal in NERC's comments, the Commission directs the ERO to modify the language of the Lower VSL for Reliability Standard PRC-006-1, Requirement R8 and the Medium VRF for PRC-006-1, Requirement R5. NERC is directed to submit the revised VRF and VSL within 30 days of the effective date of this final rule.

96. In the NOPR, the Commission noted that NERC requests an effective date for Reliability Standards PRC-006-1 and EOP-003-2 of one year following the first day of the first calendar quarter after applicable regulatory approvals with respect to all Requirements of the proposed Reliability Standards except Parts 4.1 through 4.6 of Requirement R4 of PRC-006-1. With respect to Parts 4.1 through 4.6 of Requirement R4 of PRC-006-1, NERC requests an effective date of one year following the receipt of generation data as required in Reliability Standard PRC-024-1, 59 but no sooner than one year following the first day of the first calendar quarter after applicable regulatory approvals of PRC-006-1. The Commission sought comments about any potential reliability gaps that may occur during the development and implementation of PRC-024-1, such as how the planning coordinators will adequately determine and apply UFLS simulations and plans in the absence of generator trip settings.

97. NERC maintains that there should not be a reliability gap because planning coordinators have access to and utilize trip settings in UFLS assessments. NERC explains its proposal by noting that generator owners currently cannot be compelled to provide trip settings to planning coordinators. NERC states that the implementation schedule defers a compliance obligation for planning coordinators to model the trip settings until a compliance obligation for generator owners to provide these settings exists.

98. EEI believes that a reliability gap will exist until draft Reliability Standard PRC-024-1 is approved, but it believes that the gap is minor and manageable. EEI agrees with NERC that information that will be mandated in PRC-024-1 is already supplied through mutual cooperation between entities. EEI states that the Commission might consider directing NERC to reevaluate its priority list to determine if the PRC-024-1 project is being given sufficient priority.

99. TAPS comments that planning coordinators have the ability to run UFLS simulations, even though modeling generator trip settings is not currently mandatory, because all significantly sized generators are included in models. TAPS contends that while some generators that trip outside of the UFLS set points may not be modeled, this will not have a significant impact on the reliability of the bulk electric system.

100. The Commission approves the implementation plan and effective dates of Reliability Standards PRC-006-1 and EOP-003-2. We agree with EEI that there is a reliability gap given the lack of mandatory requirements for providing generator trip settings, which will continue until draft Reliability Standard PRC-024-1 is approved. The Commission, however, also agrees with EEI that the gap is limited because the information mandated by PRC-024-1 is already supplied through mutual cooperation between utilities. To ensure that any gap pending implementation of PRC-024-1 remains limited, the Commission encourages the current practice of voluntarily sharing generator trip settings between entities to continue.

101. The Office of Management and Budget (OMB) regulations require that OMB approve certain reporting and recordkeeping (collections of information) imposed by an agency. 60 Upon approval of a collection(s) of information, OMB will assign an OMB control number and expiration date. Respondents subject to the filing requirements of this rule will not be penalized for failing to respond to these collections of information unless the collections of information display a valid OMB control number.

102. The Commission is submitting these reporting and recordkeeping requirements to OMB for its review and approval under section 3507(d) of Paperwork Reduction Act of 1995. 61 The Commission solicited comments on the need for and the purpose of the information contained in Reliability Standard PRC-006-1 and EOP-003-2 and the corresponding burden to implement them. The Commission received comments on specific requirements in the Reliability Standards, which we address in this final rule. However, we did not receive any comments on our reporting burden estimates.

103. This final rule approves Reliability Standards PRC-006-1 and EOP-003-2, which would replace currently effective Reliability Standards PRC-007-0, PRC-009-0, EOP-003-1 and NERC-approved Reliability Standard PRC-006-0. 62 As noted previously, Reliability Standard PRC-006-0 was never approved by the Commission, and therefore has never been mandatory and enforceable. On the other hand, Reliability Standards PRC-007-0 and PRC-009-0 were approved by the Commission and are currently mandatory and enforceable. Because Proposed Reliability Standard PRC-006-1 incorporates the requirements from Reliability Standards PRC-006-0, PRC-007-0, and PRC-009-0 some of the existing requirements will become mandatory and enforceable (where previously they were voluntary), while others continue to be so. To properly account for the burden on respondents, the Commission will treat the burden resulting from NERC-approved Reliability Standard PRC-006-0 as essentially new to the industry, even though it is likely that most applicable entities have already been complying. 63

104. The reporting requirements in Reliability Standard EOP-003-2 are virtually the same as those in currently effective Reliability Standard EOP-003-1. The difference is that Reliability Standard EOP-003-2 eliminates balancing authorities from Requirements R2 and from Measure M1. 64 This requirement and measure deal with establishing and documenting automatic load shedding plans.

105. Public Reporting Burden: Our estimate below regarding the number of respondents is based on the NERC compliance registry as of July 29, 2011. According to the NERC compliance registry, there are 72 planning coordinators and 126 balancing authorities. The individual burden estimates are based on the time needed to gather data, run studies, and analyze study results to design or update the UFLS programs. Additionally, documentation and the review of UFLS program results by supervisors and management is included in the administrative estimations. These are consistent with estimates for similar tasks in other Commission approved standards.

I. Introduction

In the Federal Register of August 16, 1999 (64 FR 44530), FDA published a notice announcing the filing of a food additive petition (FAP 9M4673) submitted by Caudill Seed Co., Inc., to amend the regulations in part 179 Irradiation in the Production, Processing, and Handling of Food (21 CFR part 179) by providing for the safe use of ionizing radiation to control microbial pathogens in seeds for sprouting. In response to this petition, FDA issued a final rule in the Federal Register of October 30, 2000 (65 FR 64605), permitting the irradiation of seeds for sprouting to control microbial pathogens in alfalfa and other sprouting seeds at an absorbed dose not to exceed 8.0 kiloGray (kGy) (hereafter referred to as the “seeds for sprouting rule”). FDA based its decision on data in the petition and in its files. The preamble to the final rule advised that objections to the final rule and requests for a hearing were due within 30 days of the publication date (i.e., by November 29, 2000).

Section 409(f)(1) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 348(f)(1)) provides that, within 30 days after publication of an order relating to a food additive regulation, any person adversely affected by such order may file objections, “specifying with particularity the provisions of the order deemed objectionable, stating reasonable grounds therefor [sic], and requesting a public hearing upon such objections.”

Under the food additive regulations at 21 CFR 171.110, objections and requests for a hearing are governed by part 12 (21 CFR part 12) of FDA's regulations. Under § 12.22(a), each objection must meet the following conditions: (1) Must be submitted on or before the 30th day after the date of publication of the final rule; (2) must be separately numbered; (3) must specify with particularity the provision of the regulation or proposed order objected to; (4) must specifically state each objection on which a hearing is requested; failure to request a hearing on an objection constitutes a waiver of the right to a hearing on that objection; and (5) must include a detailed description and analysis of the factual information to be presented in support of the objection if a hearing is requested; failure to include a description and analysis for an objection constitutes a waiver of the right to a hearing on that objection.

Following publication of the final rule permitting the irradiation of seeds for sprouting to control food-borne pathogens, FDA received numerous submissions within the 30-day objection period. FDA received a letter from Public Citizen (letter to Docket No. 4602, November 15, 2000) containing eight numbered objections with a request for a hearing on each objection, and a letter by Jonathan Sprouts, Inc. (letter to Docket No. 5055, December 19, 2000), expressing concern over the labeling of sprouts grown from seeds that have been irradiated. The remaining submissions expressed general opposition to the final rule. Those submissions are brief form letters which state either one or a combination of the following general concerns: That no toxicity studies were performed directly on the consumable sprouts, that nutrition data was submitted for irradiation doses of 6 kGy and not the petitioned maximum of 8 kGy, or that the lack of labeling for sprouts grown from irradiated seeds was a concern. Those concerns were raised with more specificity by the other two submissions and will be addressed as part of the response to those submissions in section IV of this document.

Specific criteria for deciding whether to grant or deny a request for a hearing are set out in § 12.24(b). Under that regulation, a hearing will be granted if the material submitted by the requester shows, among other things, the following: (1) There is a genuine and substantial factual issue for resolution at a hearing; a hearing will not be granted on issues of policy or law; (2) the factual issue can be resolved by available and specifically identified reliable evidence; a hearing will not be granted on the basis of mere allegations or denials or general descriptions of positions and contentions; (3) the data and information submitted, if established at a hearing, would be adequate to justify resolution of the factual issue in the way sought by the requestor; a hearing will be denied if the data and information submitted are insufficient to justify the factual determination urged, even if accurate; (4) resolution of the factual issue in the way sought by the person is adequate to justify the action requested; a hearing will not be granted on factual issues that are not determinative with respect to the action requested (e.g., if the action would be the same even if the factual issue were resolved in the way sought); (5) the action requested is not inconsistent with any provision in the act or any FDA regulation; and (6) the requirements in other applicable regulations, e.g., 21 CFR 10.20, 12.21, and 12.22, and in the notice issuing the final regulation or the notice of opportunity for hearing are met.

A party seeking a hearing is required to meet a “threshold burden of tendering evidence suggesting the need for a hearing” ( Costle v. Pacific Legal Foundation, 445 U.S. 198, 214 (1980), reh. denied, 446 U.S. 947 (1980), citing Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 620-21 (1973)). An allegation that a hearing is necessary to “sharpen the issues” or to “fully develop the facts” does not meet this test ( Georgia Pacific Corp. v. U.S. EPA, 671 F.2d 1235, 1241 (9th Cir. 1982)). If a hearing request fails to identify any factual evidence that would be the subject of a hearing, there is no point in holding one. In judicial proceedings, a court is authorized to issue summary judgment without an evidentiary hearing whenever it finds that there are no genuine issues of material fact in dispute and a party is entitled to judgment as a matter of law (see Rule 56, Federal Rules of Civil Procedure). The same principle applies in administrative proceedings (see § 12.28).

A hearing request must not only contain evidence, but that evidence should raise a material issue of fact concerning which a meaningful hearing might be held ( Pineapple Growers Association v. FDA, 673 F.2d 1083, 1085 (9th Cir. 1982)). Where the issues raised in the objection are, even if true, legally insufficient to alter the decision, the Agency need not grant a hearing (see Dyestuffs and Chemicals, Inc. v. Flemming, 271 F.2d 281, 286 (8th Cir. 1959), cert. denied, 362 U.S. 911 (1960)). A hearing is justified only if the objections are made in good faith and if they “draw in question in a material way the underpinnings of the regulation at issue” ( Pactra Industries v. CPSC, 555 F.2d 677, 684 (9th Cir. 1977)). A hearing need not be held to resolve questions of law or policy (see Citizens for Allegan County, Inc. v. FPC, 414 F.2d 1125, 1128 (DC Cir. 1969); Sun Oil Co. v. FPC, 256 F.2d 233, 240 (5th Cir.), cert. denied, 358 U.S. 872 (1958)).

Even if the objections raise material issues of fact, FDA need not grant a hearing if those same issues were adequately raised and considered in an earlier proceeding. Once an issue has been so raised and considered, a party is estopped from raising that same issue in a later proceeding without new evidence. The various judicial doctrines dealing with finality, such as collateral estoppel, can be validly applied to the administrative process (see Pac. Seafarers, Inc. v. Pac. Far East Line, Inc., 404 F.2d 804, 809 (DC Cir. 1968), cert. denied, 393 U.S. 1093 (1969)). In explaining why these principles ought to apply to an agency proceeding, the U.S. Court of Appeals for the District of Columbia Circuit wrote: “The underlying concept is as simple as this: Justice requires that a party have a fair chance to present his position. But overall interests of administration do not require or generally contemplate that he will be given more than one fair opportunity.” Retail Clerks Union, Local 1401 v. NLRB, 463 F.2d 316, 322 (DC Cir. 1972; see also Costle v. Pacific Legal Foundation, 445 U.S. at 215-217.

In summary, a hearing request must present sufficient credible evidence to raise a material issue of fact and the evidence must be adequate to resolve the issue as requested and to justify the action requested.

The letter from Public Citizen contains eight numbered objections and requests a hearing on each of them. Where Public Citizen's objections overlap, FDA has combined its response. The letter from Jonathan Sprouts, Inc., raised one objection and requested a hearing on its objection. FDA addresses each of the objections below, as well as the evidence and information filed in support of each, comparing each objection and the information submitted in support of it to the standards for granting a hearing in § 12.24(b).

The first objection raised by Public Citizen in response to the seeds for sprouting rule contends that the Agency failed to apply a 100-fold safety factor, as required by § 170.22 (21 CFR 170.22), 1 for the irradiation of seeds for sprouting. While FDA agrees that § 170.22 states that FDA will use a 100-fold safety factor when applying animal data to man, FDA notes that § 170.22 provides for use of a different safety factor “where evidence is submitted which justifies use of a different safety factor.”

The Agency has determined that use of a different safety factor is appropriate based on the considerable body of data available from studies involving irradiated foods fed to laboratory animals and reviewed by FDA. FDA's Bureau of Foods Irradiated Foods Committee (BFIFC) determined that the studies involving irradiated foods that they evaluated did not appear to show adverse effects (Ref. 1). These studies, taken as a whole, serve as an independent method to assess toxicological safety. The studies included in that evaluation are those which have been relied on by the Agency in previous evaluations of the safety of other irradiated foods, such as lettuce, spinach, molluscan shellfish, shell eggs, meat, and poultry (see 73 FR 49593, August 22, 2008; 70 FR 48057, August 16, 2005; 65 FR 45280, July 21, 2000; 62 FR 64107, December 3, 1997; 55 FR 18538, May 2, 1990; and 51 FR 13376, April 18, 1986), and additional data and information from FDA files or other published reports regarding studies in which animals were fed a wide variety of foods irradiated at different doses.

The Agency's analysis incorporates the principle that toxicological data collected from studies on a given food may be applied to the toxicological evaluation of foods of a similar generic class and that data from foods irradiated at high doses can be applied to the toxicological evaluation of foods of similar generic class receiving lower doses (Ref. 2). The Agency's analysis also draws upon the integrated toxicological database derived from the extensive body of work reviewed by the Agency (see 51 FR 13376 at 13378) and by WHO  2 in previous evaluations of the safety of irradiated foods (Refs. 3 and 4).

In light of the substantial data and the toxicological assessments that have been reviewed by FDA, the Agency concludes that under § 170.22 the Agency is not required to apply the 100-fold safety factor to the use of ionizing radiation for seeds for sprouting. This collective information is sufficient to justify the use of a different safety factor. Further, the applicability of § 170.22 is a legal issue, and a hearing will not be granted on issues of law (§ 12.24(b)(1)).

Public Citizen's second objection asserts that FDA did not follow the “principles and procedures for establishing the safety of food additives stated in current publication of the National Academy of Sciences-National Research Council,” as required by § 170.20.

The Agency has consistently taken the position that many scientifically valid types of data may properly support a finding that the proposed use of a food additive is safe. The Agency pointed out in the molluscan shellfish final rule (70 FR 48057 at 48068) that the National Academy of Sciences-National Research Council testing standards and guidelines have been stated in relatively general terms and that in practice, FDA has applied exposure and toxicological criteria that were both current for the time and appropriate for assessing the safety of a particular food additive.

In its objection, Public Citizen asserts that FDA failed to properly interpret its own regulation, but has provided no new information that would refute the Agency's reasoning. The objection implies that the Agency is obligated to explicitly discuss its consideration of National Academy of Sciences-National Research Council guidelines in its rules, but there is nothing in § 170.20 that imposes such an obligation on the Agency. Further, the applicability of § 170.20 is a legal issue, and a hearing will not be granted on issues of law (§ 12.24(b)(1)). Public Citizen has not provided a basis for a hearing and FDA is denying their request for a hearing based on this objection.

Public Citizen objects to the seeds for sprouting final rule because the petitioner, Caudill Seed Co. Inc., submitted, “[n]o conventional animal toxicity studies on sprouts from irradiated seeds.” Additionally, Public Citizen asserts that the references contained within FAP 9M4673 “do not address the potential toxicity of irradiated sprouts.”

The Agency agrees that the petition did not include toxicological studies conducted using irradiated sprouts. As noted in the seeds for sprouting final rule (65 FR 64605), the Agency has reviewed both the data included in its database, as well as the published references, submitted by the petitioner, of toxicology studies related to irradiated foods. FDA has consistently taken the position that various scientifically validated types of data may properly support a safety determination for a proposed use of a food additive (see § 170.20). In the case of food irradiation, the Agency has taken advantage of the extensive research and large body of knowledge, such as the information compiled by BFIFC and other studies in FDA's files, concerning the principles of radiation chemistry and the chemical composition of foods.

Public Citizen also contends that FDA's statement that the “petitioner submitted published articles and other study reports containing data and information related to seeds for sprouting * * * in the areas of radiation chemistry [and] toxicity” in the final rule is incorrect. Public Citizen's claim is without merit. The petitioner provided articles on the toxicity of irradiated foods along with their submission, which are listed and summarized in the toxicology memorandum (Ref. 5). As previously stated, in reviewing the petitioner's application, FDA considered the articles submitted by the petitioner in addition to relevant international reports and relevant scientific articles in FDA's files (see e.g. Refs. 2, 6, and 7). However, FDA does agree that there were no toxicological studies conducted using irradiated seeds for sprouting. FDA has consistently taken the position that it is unnecessary for a safety analysis to be performed involving the specific food to be irradiated. As noted in the meat final rule (62 FR 64107 at 64112), the Agency relies on scientific studies evaluating the extent to which safety data on an irradiated food type can be extrapolated to other food types and the extent to which individual studies of irradiated foods can be evaluated as a whole (Ref. 4). Thus, data and information derived from studies of irradiated foods in general are sufficient to support a determination of safety for irradiated seeds for sprouting. Public Citizen's suggestion that such information is not sufficient to support a determination of safety is unsupported by specific data or other factual information.

Public Citizen failed to include any new information or data that would refute the Agency's findings about the toxicity of irradiated seeds for sprouting. The request for a hearing merely alleges that there is a potential for harm, without providing any evidence that the Agency has not considered previously. A hearing will not be granted on the basis of mere allegations or general descriptions of positions and contentions (§ 12.24(b)(2)). The objectors must, at a minimum, raise a material issue concerning which a meaningful hearing might be held.

Public Citizen alleges that there are unsubstantiated statements contained in the review memorandum and final rule regarding radiolytic byproducts. There are two parts to this objection; the Agency will address each part as follows.

The first statement to which Public Citizen objects is found in the Chemistry Memorandum from K. Morehouse to J. Ziyad dated February 23, 2000 (Ref. 8), asserting that “radiolysis products which may have been formed by irradiation of the seeds will be `diluted' in the final product * * *. Also, it is likely that the water-soluble products will be removed by the growth medium.” Public Citizen claims that this statement is unfounded because no data was cited regarding the dilution potential of radiolytic byproducts.

The Agency disagrees that the statement was unsubstantiated. The full statement is as follows: “As the seeds mature and form sprouts, radiolysis products which may have been formed by irradiation of the seeds will be “diluted” in the final product. For example, alfalfa seeds contain only 7.4 percent water whereas alfalfa sprouts contain 88.3 percent water (see Table I of Ref. 8). Also, it is likely that water-soluble products will be removed by the growth medium.”

“Table I,” referred to in the previous quotation, contains the nutrient composition for alfalfa seeds and raw alfalfa sprouts. This data was obtained from a published study which determined the nutrient content of various seeds and sprouts (Ref. 9). It is apparent from the data supplied that as the seeds sprout to the final product, they absorb water, in the case of alfalfa sprouts the water content increases from 7.4 percent to 88.3 percent. It follows that any byproducts would be diluted by the absorption of water, which is the growth medium for sprouts. The same study asserts that it is possible for sugars to leach into the growth medium during the sprouting procedure; therefore, it is likely that other water-soluble products could also be removed by the growth medium. Furthermore, Public Citizen did not provide any information related to the safety of irradiated seeds for sprouting that the Agency had not considered, and the objection contains no information that would cause the Agency to change its safety determination. An objector must make an adequate proffer of evidence to support its allegations and to show that they provide a basis on which to call into question the Agencies conclusions (§ 12.24(b)(2)). Public Citizen has not provided a basis for a hearing, and FDA is denying Public Citizen's request for a hearing based on this objection.

Public Citizen also objects to the Agency's conclusion that because the concentrations and types of radiolysis products formed by the irradiation of seeds for sprouting will be comparable to those products produced by the irradiation of foods of similar composition the chemical compositions of sprouts grown from irradiated seeds will not differ in any significant manner from sprouts grown from seeds that have not been irradiated. Public Citizen feels that these statements are unsupported and is requesting a hearing based on this matter.

FDA disagrees with the allegation that the statements made in the final seed for sprouting rule (65 FR 64605) are unsupported. Through information compiled by FDA and the materials submitted with each food additive petition involving irradiation (see e.g., section IV.A of this document), FDA has established that the effect ionizing radiation has on the characteristics of foods are a direct result of the chemical reactions induced by the absorbed radiation. This large body of data includes studies regarding the effects of ionizing radiation on different foods under various conditions of irradiation allowing FDA to extrapolate data obtained from one food to other foods (for more information see 73 FR 49593 at 49594 and 70 FR 48057 at 48059). Research has established that the types and amounts of products generated depend on the chemical constituents of the food and the conditions of radiation (Refs. 6, 7, and10). See the final rule permitting the irradiation of meat (62 FR 64107) for a more in depth discussion of radiation chemistry, nutrition, toxicology, and microbiology related to irradiation of foods under various conditions of use. Additionally, the review memorandum and the evidence reviewed and discussed therein, support the statement that radiolytic byproducts would be formed in low amounts in seeds for sprouting (Ref. 8). The Agency also notes that ionizing radiation causes fewer chemical changes in dry material (i.e. the seeds for sprouting) than in fresh fruits and vegetables due to the increased water content of the fresh items (Ref. 6).

Public Citizen's assertion provides no basis to challenge FDA's assessment of the safety of irradiated seeds for sprouting. A hearing will not be granted on the basis of mere allegations or general descriptions of positions and contentions (§ 12.24(b)(2)). The objector must, at a minimum, raise a material issue concerning which a meaningful hearing might be held. Public Citizen has not provided a basis for a hearing; therefore, FDA is denying their request for a hearing based on this objection.

In its request for a hearing, Public Citizen questions the nutritional adequacy of the irradiated seeds for sprouting and cites an FDA toxicology review memorandum (Ref. 5) in which the reviewer describes the data submitted by the petitioner as “crude” and notes a discrepancy between laboratory assessments in the vitamin A content of sprouts grown from irradiated seeds. Moreover, Public Citizen objects to the final rule on the grounds that nutritional assessments were conducted on sprouts grown from seeds that were irradiated at 6 kGy, rather than the petitioned maximum of 8 kGy.

As noted in the final rule, there were no relevant losses in the vitamin A content when comparing the sprouts grown from irradiated seeds to the control sprouts, which were grown from non-irradiated seeds. Rather, the vitamin A content was higher in all instances comparing the sprouts grown from irradiated seeds to the control seeds (65 FR 64605). The final rule also indicated that any vitamin loss that occurs in sprouts grown from irradiated seeds is expected to be inconsequential when compared to the total dietary nutrient consumption (Ref. 5).

In response to Public Citizen's objection based on the studies conducted at 6 kGy as opposed to 8 kGy, the Agency notes that there were no nutritional losses associated with sprouts grown from seeds irradiated at 6 kGy. Changes in the level of vitamins associated with irradiation are gradual with each increasing dose; scientific evidence does not support a threshold effect above which significant losses would occur (Ref. 6). Therefore, it is reasonable to anticipate that sprouts grown from seeds irradiated at 8 kGy would not lead to nutritionally relevant losses either. Furthermore, the Codex Alimentarius Commission (Codex) published its standard for irradiated foods in 1983 for adoption by Codex member countries (Ref. 11). This standard was based on the conclusion that the irradiation of any food commodity at an overall average dose of up to 10 kGy presents no concerns (Ref. 3). The Codex standard was revised in 2003, 3 at which time Codex integrated the joint FAO/IAEA/WHO study group conclusion that food irradiated to any dose appropriate to achieve the intended technological effect is both safe to consume and nutritionally adequate (i.e. at doses up to and above 10 kGy) (Ref. 12).

Overall, Public Citizen's request for a hearing suggests that there is potential for harm from possible nutritional losses from the irradiation of seeds for sprouting, without providing any evidence to support this suggestion. An objector must make an adequate proffer of evidence to support its allegations and to show that they provide a basis on which to call into question the Agency's conclusions. A hearing will be denied if the Commissioner of Food and Drugs concludes that the data and information submitted are insufficient to justify the factual determination urged, even if accurate (§ 12.24(b)(3)). Public Citizen does not submit or otherwise identify any factual data that would cause the Agency to alter its conclusions about the nutritional changes in irradiated seeds. Therefore, FDA is denying the request for a hearing based on this objection.

The final objection to the seeds for sprouting rule was submitted by Jonathan Sprouts, Inc, objecting to the lack of a requirement that sprouts grown from seeds that have been irradiated be labeled as treated by irradiation. Some of the general objections FDA received to the seeds for sprouting final rule also raised this point. Most of these objections were brief and expressed general dissatisfaction regarding FDA's decision on labeling, but did not provide any substantive data or information. Jonathan Sprouts, Inc., claimed that there are morphological differences between sprouts grown from irradiated versus non-irradiated seeds, which, they claim, support the need for labeling sprouts grown from seeds that have been irradiated; however, they failed to provide any additional data or information to substantiate their claim.

The Agency specifically discussed in the seeds for sprouting rule the labeling of irradiated seeds for sprouting and sprouts grown from such seeds (65 FR 64605 at 64606). The FDA evaluated the need for special labeling against the labeling provisions for food treated by ionizing radiation in § 179.26(c) (21 CFR 179.26(c)). Specifically, § 179.26(c) states that “the label and labeling of retail packages of foods irradiated * * * shall bear the * * * logo along with either the statement `Treated with radiation' or * * * `Treated by irradiation.'” (emphasis added). Thus, the requirement applies only to the food that has been irradiated. It was noted in the seeds for sprouting rule that the irradiated article, the unsprouted seed, is not what is generally consumed and that the nutritional and flavor characteristics of the sprouts is based upon the fact that the irradiated seeds were grown into sprouts; therefore, sprouts grown from irradiated seeds do not require labeling as they are not the food that is being irradiated.

Additionally, neither Jonathan Sprouts, Inc., nor any of the other objectors that raised this point, provided any evidence that sprouts grown from irradiated seeds differ from sprouts grown from seeds that were not irradiated. An objector must make an adequate proffer of evidence to support its allegations and to show that they provide a basis on which to call into question the Agency's conclusions (§ 12.24(b)(2)). Therefore, the Agency is denying Jonathan Sprouts' objection.

Section 409 of the Federal Food, Drug and Cosmetic Act requires that a food additive be shown to be safe prior to marketing. Under § 170.3(i), a food additive is “safe” if “there is a reasonable certainty in the minds of competent scientists that the substance is not harmful under the intended conditions of use.” In the Agency's October 30, 2000, seeds for sprouting rule, FDA concluded that the studies conducted, based on its evaluation of the data submitted in the petition and other relevant material, that this use of irradiation is safe for its intended use in seeds for sprouting.

The petitioner has the burden to demonstrate the safety of the additive to gain FDA approval. However, once FDA makes a finding of safety in an approval document, the burden shifts to an objector, who must come forward with evidence that calls into question FDA's conclusion (see section 409(f)(1) of the Federal Food, Drug, and Cosmetic Act).

Despite their allegations, neither Public Citizen nor Jonathan Sprouts, Inc., has established that FDA overlooked significant information contained within the record in reaching its conclusion that the use of irradiation for microbial control of pathogens in seeds for sprouting is safe. In such circumstances, FDA has determined that the objections do not raise any genuine and substantial issue of fact that can be resolved by an evidentiary hearing (§ 12.24(b)). Accordingly, FDA is denying the requests for a hearing.

The following references are on display in the Division of Dockets Management (HFA-303) Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20857, under Docket No. FDA-1999-F-0021 (formerly 1999F-2673) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday.

In the Federal Register of June 17, 2011, a final rule was published for OTC sunscreen products (hereafter referred to as “2011 final rule”). The 2011 final rule established labeling and effectiveness testing requirements for certain OTC sunscreen products containing specified active ingredients and marketed without approved applications, to be codified in the Code of Federal Regulations (CFR) at § 201.327 (21 CFR 201.327) (which is effective June 18, 2012). It also amended § 310.545 (21 CFR 310.545) to classify as new drugs, requiring premarket approval, sunscreens labeled with certain claims (claims for “instant protection” or protection immediately upon application, or claims for “all-day” protection or extended wear claims citing a specific number of hours of protection that is inconsistent with the directions for application in § 201.327). Finally, it lifted the delay of implementation of the Drug Facts regulation, § 201.66 (21 CFR 201.66), published at 69 FR 53801, September 3, 2004, requiring those products to comply with § 201.66 on the same date as they would be required to comply with § 201.327 (76 FR 35620 at 35629). The 2011 final rule had an effective date of June 18, 2012, which was 1 year following publication of the final rule. For OTC sunscreen products with annual sales of $25,000 or more, the 2011 final rule had a compliance date of June 18, 2012. For OTC sunscreen products with annual sales of less than $25,000, the 2011 final rule had a compliance date of June 17, 2013.

The 2011 final rule explains why these effective and compliance dates were chosen (76 FR 35620 at 35623 through 35624). The primary reason for a 1-year effective date and compliance date for the majority of products was that FDA chose a simpler and less expensive testing method to demonstrate broad spectrum activity than had been originally proposed. Because a simpler testing method was chosen, it was projected that most OTC sunscreen drug products could be brought into compliance with the new testing and labeling requirements within 1 year.

Following publication of the 2011 final rule, a request to extend the period for implementation of the 2011 final rule by 6 months was submitted to FDA by The Personal Care Products Council (PCPC) and The Consumer Healthcare Products Association (CHPA), which are trade associations for the cosmetic and personal care products industry and the OTC drug products industry, respectively, in the United States (Ref. 1). PCPC and CHPA consolidated comments from its member companies in this submission. The submission provided several reasons, and supporting information, for requesting the additional time for implementation. Based on this submission, FDA is extending the compliance dates for the 2011 final rule, as explained in the paragraphs that follow.

FDA is delaying the compliance dates of the 2011 final rule by 6 months, to December 17, 2012, for products with sales of $25,000 or more, and until December 17, 2013, for products with annual sales of less than $25,000. The 2011 final rule requirements are intended to ensure that OTC sunscreen products are used safely and effectively. Therefore, allowing adequate time for the 2011 final rule requirements to be fully implemented is in the interest of public health. Our reassessment of the time needed for full implementation of the 2011 final rule requirements supports delaying the compliance dates by 6 months.

FDA finds that the information provided by the PCPC/CHPA submission, describing the process for testing and relabeling sunscreen products, supports the requested extension of the time for compliance with the 2011 final rule. The submission included an operational timeline that detailed the numerous steps involved in implementation of the new labeling requirements for a given product, and included specific time estimates for the different stages of implementation (Ref. 1). The operational timeline's time estimates were calculated by taking the average of time estimates calculated by PCPC's and CHPA's member companies. The submission stated that complete implementation of new labeling could not be achieved by June 18, 2012, particularly for sunscreen products that: (1) Had complex label redesign issues and (2) required broad spectrum testing. Complex label redesign issues included contending with special production techniques to implement relabeling (e.g., glass or plastic bottles that require embossing), incorporating complete Drug Facts panel labeling, and coordinating relabeling of product lines with many variants. The submission also estimated that because of the substantial number of existing or new formulations that would need to undergo broad spectrum testing and the limited capacity of testing facilities, it would require approximately 10 months for industry to complete the broad spectrum testing for all products. The overall operational timeline provided in the submission indicates that testing and other necessary label redesign issues could not be completed for all products in time for labeling consistent with those test results to be applied to products by June, 2012, the original compliance date for sunscreens with annual sales of $25,000 or more.

FDA concurs that the operational timeline included in the submission supports extending the implementation period by an additional 6 months. One of our primary objectives in the 2011 final rule is to provide labeling that will enable consumers to identify and select sunscreen products that provide broad spectrum protection as well as a minimum sun protection factor (SPF) of 15. These sunscreens are particularly important for the public health because, in addition to helping prevent sunburn, sunscreens with a broad spectrum SPF value of 15 or higher, if used as directed with other sun protection measures, decrease the risk of skin cancer and early skin aging caused by the sun. If the timeline for implementation discourages manufacturers from conducting broad spectrum testing, and instead prompts them to apply the labeling that the final rule establishes for products that have not been established to offer broad spectrum protection, a major public health goal of the rule will be undermined. For this reason, granting manufacturers additional time to complete testing and relabeling is in the public interest. Also, implementation of § 201.66, the general Drug Facts labeling requirements, has been intended to be coordinated with the implementation of the substantive labeling changes necessitated by § 201.327, which provide the specific content for the Drug Facts panel for sunscreens. We therefore conclude that the implementation periods for these rules should remain coordinated.

We also conclude that extension of the compliance dates for § 310.545(a)(29)(ii) should likewise be extended because it is claims in labeling, and not formulation, that defines what sunscreens are subject to this provision of the 2011 final rule. The claims that would necessitate submission of a new drug application (NDA), as defined by that provision of the rule, are claims that would be in conflict with the labeling required by § 201.327. We believe that in many cases the relabeling of products to comply with § 201.327 will remove claims that would otherwise bring the sunscreen within § 310.545(a)(29)(ii). We therefore intend to revise the compliance dates to be codified in § 310.545(d)(40), so as to avoid requiring sunscreens that bear the indicated claims to be removed from the market before their relabeled replacements are ready.

We note that the PCPC/CHPA submission also stated that instituting a 6-month extension in the implementation period would be consistent with actions taken on previous FDA sunscreen rulemakings. The submission cited the 2007 sunscreen proposed rule (72 FR 49070 at 49073, August 27, 2007) and the 1999 sunscreen final rule (64 FR 27666 at 27686, May 21, 1999), where it was stated that complying with requirements in a sunscreen final monograph may require an implementation period of more than 1 year. The submission stated that FDA has delayed implementation of rules in the past when a delay is justified.

We acknowledge that implementation periods of more than 1 year were allowed for previous OTC sunscreen rulemakings and concur with the requested delay of implementation in light of the specific information submitted after the publication of the final rule, detailing specific reasons why additional time is required for all sunscreen drug products to achieve compliance. Because we cannot determine which particular products would be unable to comply, we are extending the compliance dates generally, but we nonetheless encourage manufacturers to act with diligence to bring products into compliance as soon as possible, so as to provide the public with the benefits of the new labeling. We have not altered the effective date of the regulation, and encourage manufacturers to introduce individual products bearing the new labeling as it becomes available, even in advance of the revised compliance date.

We find that there is adequate rationale to delay the compliance dates for the 2011 final rule. We are issuing this rule directly, without issuing a notice of proposed rulemaking or taking comments on this action, for good cause. Because manufacturers' plans depend on the date by which compliance is expected, and the original compliance date for most products is now imminent, we find that issuing notice and taking comments are impracticable, unnecessary, and contrary to the public interest with respect to this action. As already noted, without this extension of the time for implementation, manufacturers who do not anticipate being able to comply by the original compliance dates expressed in the final rule would be faced either with discontinuing distribution, or potentially confining themselves to the labeling for products that have not been established to be broad spectrum. This means that consumers would be deprived of the additional information to make informed choices regarding their sun protection options. With regard to § 310.545, in particular, we also find it is in the public interest to extend the compliance date prior to the effective date, to avoid the confusion that would likely ensue if the codified had already been incorporated into the CFR with the earlier compliance dates. Accordingly, 5 U.S.C. 553(b) and § 10.40(e)(1) (21 CFR 10.40(e)(1)) provide a statutory and regulatory basis for not issuing notice or taking comment prior to implementing the delay of the compliance dates for the 2011 final rule. In accordance with § 10.40(e)(1), however, interested parties may submit comments on whether the extension of compliance dates set forth in this document should subsequently be modified or revoked.

Interested persons may submit to the Division of Dockets Management (see ADDRESSES ) either electronic or written comments regarding this document. It is only necessary to send one set of comments. Identify comments with the docket number found in brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday.

The 2011 final rule includes a comprehensive examination of the economic impact of the 2011 final rule (76 FR 35620 at 35654 through 35657). A 6-month delay of the compliance dates for the 2011 final rule is unlikely to significantly affect the time or cost estimates made in that economic impact analysis. The 6-month delay allows additional time for testing and relabeling. However, the economic impact analysis in the 2011 final rule presumed that testing and relabeling could be fully implemented without the additional 6 months. Therefore, delaying the compliance dates by 6 months should not increase the time and cost estimates in the 2011 final rule.

We have examined the impacts of the final rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). We have determined that this final rule is not a significant regulatory action under Executive Order 12866. Consistent with Executive Order 13563, the approach taken here maintains “flexibility and freedom of choice for the public,” above all by providing “information for the public in a form that is clear and intelligible.”

The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. We concluded that the 2011 final rule would have a significant economic impact on a substantial number of small entities. Our analysis of this economic impact is discussed at 76 FR 35620 at 35657. However, delaying the compliance dates of the 2011 final rule does not affect any of the numerical estimates made in our analysis.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $139 million, using the most current (2011) Implicit Price Deflator for the Gross Domestic Product. It is not expected that this final rule will result in any 1-year expenditure that would meet or exceed this amount.

The purpose of this final rule is to delay the compliance dates for the 2011 final rule by 6 months. The delay of the compliance dates is based upon information received after publication of the 2011 final rule that indicates that full implementation of the 2011 final rule's requirements for all affected products will require an additional 6 months.

The Agency has determined under 21 CFR 25.31(a) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

The following reference has been placed on display in the Division of Dockets Management (see ADDRESSES ), and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday. (FDA has verified the Web site address, but we are not responsible for any subsequent changes to the Web site after this document publishes in the Federal Register .)

1. “Personal Care Products Council—Comment, FDA-2011-N-0449-0003, 10/06/2011,” http://www.regulations.gov.

Therefore, under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 310 is amended as follows:

Executive Summary

Statement of Need. In recent years, the work component of the Summer Work Travel Program has too often overshadowed the core cultural component necessary for the Program to be consistent with the Fulbright-Hays Act. In addition, there have been complaints regarding job placements, work conditions, and participant accommodations. As a result, the Department initiated a comprehensive review of the Summer Work Travel Program in mid-2010, and issued the 2011 IFR based on this review. However, events that occurred in the summer of 2011 confirmed to the Department that it needed to enhance its scrutiny of the Summer Work Travel Program and take additional steps to amend regulations to protect program participants.

The Department is keenly aware, however, that the salutary foreign affairs goals of the Exchange Visitor Program, including the Summer Work Travel Program can be seriously jeopardized, when even a single participant has a harmful or abusive exchange experience, or is inappropriately placed without due regard for the core cultural requirements and intended benefits of the Program. Therefore, through this second IFR, the Department seeks to continue: (i) Reforming the Summer Work Travel Program; (ii) ensuring that the Program better protects the health, safety, and welfare of program participants; and (iii) fortifying the Program's prestige as a world class U.S. public diplomacy initiative.

Statement of Legal Authority. The Exchange Visitor Program (of which the Summer Work Travel Program is one of 15 categories of program types) was authorized by the Mutual Educational and Cultural Exchange Act of 1961 (Pub. L. 87-256, 75 Stat. 527) (Fulbright-Hays Act or Act) and implemented through 22 CFR part 62. Enacted by the 87th United States Congress on September 21, 1961, the Act's stated purpose was “to increase mutual understanding between the people of the United States and the people of other countries by means of educational and cultural exchange; to strengthen the ties which unite us with other nations by demonstrating the educational and cultural interests, developments, and achievements of the people of the United States and other nations, and the contributions being made toward a peaceful and more fruitful life for people throughout the world. * * *” In the half century since the Act's passage, millions of people—program participants, Americans with whom they interact, and friends and family of the participants with whom they share their experiences upon returning home—have benefitted from the mutual understanding and peaceful relations that can derive best from such person-to-person contact. The Summer Work Travel Program embodies and carries forward the stated purpose and intent of the Act.

Provisions of the 2011 IFR. The 2011 IFR presented four major changes (and several minor changes) to the Summer Work Travel Program regulations that were designed to strengthen sponsors' oversight of both their program participants and the third parties who assist them in performing the core administrative functions of the Exchange Visitor Program. Those changes were:

1. Sponsors were required to vet and confirm the validity of all host employers and fully vet all job offers;

2. Only Summer Work Travel Program participants from countries that participated in the Visa Waiver Program could depart their home countries without pre-placed jobs;

3. Sponsors were required to fully vet all third parties who they engaged to assist in performing certain enumerated core functions; and

4. Sponsors were required to contact active program participants on a monthly basis to monitor both their welfare and their geographical physical location.

Changes to the 2011 IFR. Following the publication of the 2011 IFR, the Department reviewed comments received from 35 parties. Effective immediately, this rule makes further changes to some provisions introduced in the 2011 IFR to reflect those comments, clarify ambiguities, and make necessary corrections. These changes include:

1. The Department corrected two inadvertent changes to the regulations: Sponsors must continue to offer participants assistance in finding job placements starting one week (versus two) after participants initiate their job searches; and it reinserted language prohibiting employers from paying participants less than their American counterparts;

2. Sponsors are not required to maintain listings of bona fide job offers (but must offer participants reasonable assistance in finding new jobs);

3. Sponsors are not required to verify the Employee Identification Numbers (EIN) of host employers (although they must obtain them);

4. Sponsors must obtain evidence that potential host employers are registered to do business in the jurisdictions where participants will be placed;

5. Sponsors must input job titles and sites of activity in the Student and Exchange Visitor Information System (SEVIS) prior to participants' visa interviews (and not prior to issuing Forms DS-2019);

6. Host employers may not assist sponsors in the monthly monitoring of participants; and

7. Acknowledging the Department does not have jurisdiction over host employers, the “host employer obligation” section is renamed “host employer cooperation” and refocused to urge sponsors to work only with host employers willing to make good faith efforts to comply with the requirements therein.

The provisions of the 2011 IFR, as amended by the 2012 IFR, are considered final upon publication of this 2012 IFR. The Department is not soliciting further notice and comment on these provisions.

New Provisions in the 2012 IFR. Additional changes to the Summer Work Travel Program regulations presented in the 2012 IFR allows the U.S. government to better regulate sponsors in order to protect participants, the program itself, and U.S. communities that support Summer Work Travel participants. The 2012 IFR implements new regulations to expand sponsors' obligations with respect to the cultural component mandated by the Act, clarify characteristics of jobs that are consistent with the purpose of the Act, identify jobs that are inconsistent with the purpose of the Act, and otherwise provide guidance to sponsors to ensure appropriate administration of the Summer Work Travel Program, with one exception, starting with the 2012 summer season. The 2012 IFR clarifies several issues that commenting parties raised:

1. The requirement that participants contact sponsors within ten days following their arrivals does not conflict with the requirement that sponsors validate SEVIS records within 30 days of participants' arrivals;

2. Individuals enrolled full time in on-line universities are not eligible for the program;

3. Sponsors and foreign entities cannot provide host employers cash or gift incentives (though they may host job fairs);

4. Sponsors must provide itemized annual cost schedules for all fees participants pay for program participation (including fees charged by foreign entities);

5. Sponsors must terminate (versus end ) the programs of participants who do not comply with certain requirements that sponsors are obligated to enumerate during program orientation;

6. Sponsor outreach to participants must be answered in order for the contacts to be considered monthly monitoring;

7. Sponsors must annually vet host employers and third parties (foreign and domestic) and each season must reconfirm the number of jobs available with each host employer; and

8. Sponsors must vet initial, subsequent, and additional jobs before participants start work.

A significant enhancement presented in the 2012 IFR is the refocus of the program on the cultural experience of participants, which in recent years has been overshadowed by the goal of income production. In addition, the 2012 IFR makes changes to better protect the health, safety, and welfare of participants. To this end, the 2012 IFR makes several changes including adding the following requirements:

1. Sponsors must provide information to incoming participants explaining the cultural component of the Summer Work Travel Program, including guidance on how best to experience U.S. culture and/or descriptions of cultural opportunities that sponsors have arranged;

2. Job placements must be seasonal or temporary and must provide opportunities for participants to interact regularly with U.S. citizens and experience U.S. culture during the work portion (i.e., not travel portion) of their programs;

3. In addition to the job prohibitions expanded in the 2011 IFR, sponsors must not place participants:

a. With employers that fill non-seasonal or non-temporary job openings with participants with staggered vacation schedules;

b. In positions that require licensing or as operators or drivers of vehicles or vessels for which drivers' licenses are required regardless of whether they carry passengers or not;

c. In jobs for which there is another specific J visa category;

d. In positions requiring work hours that fall predominantly between 10:00 p.m. and 6:00 a.m.;

e. In positions declared hazardous to youth by the Secretary of Labor at Subpart E of 29 CFR part 570;

f. In positions that require sustained physical contact with other people and/or adherence to the Center for Disease Control and Prevention's Universal Blood and Body Fluid Precautions guidelines (e.g., body piercing, tattooing, massage, manicure);

g. In positions that are substantially commission-based and thus do not guarantee that participants will be paid minimum wage in accordance with federal and state laws;

h. In positions involved in gaming and gambling that include direct participation in wagering and/or betting;

i. In positions in chemical pest control, warehousing, catalogue/online order distribution centers;

j. In positions with travelling fairs or itinerant concessionaires; and

k. After November 1, 2012, in positions in the North American Industry Classification System's (NAICS) Goods-Producing Industries occupational categories industry sectors 11, 21, 23, 31-33 (set forth at http://www.bls.gov/iag/tgs/iag_index_naics.htm ).

Sponsors are also required to take more active roles in ensuring that participants have access to suitable, affordable, and safe housing and reliable and affordable transportation between their residences and worksites.

The 2012 IFR also includes new protections for U.S. workers. Each season, sponsors must confirm that the host employers with which they intend to place participants:

1. Will not displace U.S. workers at worksites where they place program participants;

2. Have not experienced layoffs in the past 120 days; and

3. Do not have workers on lockout or on strike.

The Department seeks comment on the new provisions presented in the 2012 IFR.

On April 26, 2011, the Department of State (Department) issued an interim final rule with request for comment modifying the regulations of the Summer Work Travel category of the Exchange Visitor Program (2011 IFR) (see 76 FR 23177). Those regulations became effective on July 15, 2011. The Department has reviewed the comments of 35 parties, and this rule modifies the regulations to reflect those comments. Effective immediately, this rule makes further changes on an interim final basis to the Summer Work Travel Program regulations and requests comments.

The Department is aware of and appreciates the efforts the sponsor community has undertaken to adjust in a short timeframe to the new regulatory model presented in the 2011 IFR. It is imperative, however, to amend further the Summer Work Travel Program regulations before the next large wave of participants arrives. The changes included in the 2012 IFR bear most directly on the health, safety, and welfare of the participants and reinforce the cultural exchange aspects of the Program to promote mutual understanding in accordance with the Mutual Educational and Cultural Exchange Act of 1961, as amended; 22 U.S.C. 2451 et seq. (Fulbright-Hays Act or Act). The Department will propose other modifications to the Summer Work Travel Program later in 2012 through a Notice of Proposed Rulemaking (NPRM).

The focus of the 2012 IFR is three-fold. First, the Department will introduce new requirements to remind sponsors of the centrality of the cultural component of the Summer Work Travel Program and, in this regard, prescribe characteristics of certain job placements and types of cultural activities that can appropriately promote mutual understanding, a core purpose of the Fulbright-Hays Act. Second, the Department will discuss changes it adopted in the 2011 IFR in light of the comments it received and will announce the final regulatory changes associated with that effort. Finally, it will implement new regulations, most of which are effective with the publication of this rule, to expand sponsors' obligations with respect to the cultural component, clarify characteristics of jobs that are consistent with the purpose of the Act, identify jobs that are inconsistent with the purpose of the Act, and otherwise provide guidance to sponsors to ensure appropriate administration of the Summer Work Travel Program starting with the 2012 summer season, during which roughly 80 percent of all program participants come to the United States.

Summer Work Travel Program. The Summer Work Travel Program allows foreign post-secondary students (mostly between the ages of 18 and 30) to come to the United States—for a maximum of four months—during their major academic breaks to travel and work in largely unskilled jobs. For nearly 50 years, this category of the Exchange Visitor Program has been a part of U.S. public diplomacy efforts, under the auspices of the Fulbright-Hays Act. As reflected in a Statement of Policy dated March 28, 1996 (see 61 FR 13760), this category of the Exchange Visitor Program was implemented to open the program to those persons who were otherwise financially unable to visit the United States. During the initial 50 years of the program, more than one million foreign students have participated in the Sumer Work Travel Program. The popularity of this Program—both with participants and U.S. embassies and consulates abroad as part of their public diplomacy efforts—arises from the participants' ability to enjoy cultural exchange experiences while offsetting at least a portion of their travel costs through temporary employment in the United States. However, despite its popularity, the Program is not without challenges.

In recent years, the work component has too often overshadowed the core cultural component necessary for the Summer Work Travel Program to be consistent with the intent of the Fulbright-Hays Act. Also, the Department learned that criminal organizations were involving participants in incidents relating to the illegal transfer of cash, the creation of fraudulent businesses, and violations of immigration law. There also were increasing numbers of complaints related to the Program, such as reports of improper or unsafe job placements, fraudulent job offers, post-arrival job cancellations, inappropriate work hours, and problems regarding housing and transportation.

In response, the Department initiated a comprehensive review of the Summer Work Travel Program in mid-2010, intended both to enhance the Department's governance of the designated Summer Work Travel Program sponsors and to tighten the regulations these sponsors must follow. To this end, the Department has been re-evaluating the regulations and making changes to the Summer Work Travel Program regulatory model. In January 2011, following a series of meetings with law enforcement agencies, employers, industry associations, and sponsors, the Department adopted a pilot program for Summer Work Travel Program participants from certain countries with a higher prevalence of problems (Pilot Program). The second step to safeguarding and strengthening the Summer Work Travel Program was incorporating Pilot Program concepts as key elements of the 2011 IFR. The 2011 IFR presented four major changes (and several minor changes) to the Summer Work Travel Program regulations that were designed to strengthen sponsors' oversight of both their program participants and third parties who assist them in performing core functions that are inherent in the administration of the Exchange Visitor Program (i.e., participant screening, selection, orientation, placement, and monitoring; and the promotion of mutual understanding). First, sponsors were required to vet and confirm the legitimacy of all host employers and fully vet all job offers. Second, only Summer Work Travel Program participants from countries that participated in the Visa Waiver Program could depart their home countries without pre-placed jobs. Third, sponsors were required to vet fully all third parties whom they engaged to assist in performing certain enumerated core functions. Finally, sponsors were required to contact active program participants on a monthly basis to monitor both their welfare and their geographical physical location. The incorporation of these concepts into the overall Summer Work Travel Program regulations in the 2011 IFR formally ended the separate Pilot Program.

Events that occurred in the summer of 2011 confirmed the Department's initial assessment that it needed to enhance further its scrutiny of the Summer Work Travel Program and take additional steps to amend regulations that safeguard program participants. While the 2011 IFR established procedures for confirming the existence of proposed job placements, it did not provide guidance for assessing the suitability of job offers or preventing the displacement of U.S. workers. In August, the Department learned of inappropriate job placements for Summer Work Travel Program participants who were staffing a packaging plant. Summer Work Travel Program participants: (1) Were concentrated in single locations for long hours in jobs that provided little or no opportunity to interact with U.S. citizens; (2) were exposed to workplace safety and health hazards; and (3) were subjected to predatory practices through wage deductions for housing costs. These circumstances informed the Department that additional regulatory changes were necessary in order better to regulate the sponsors to protect participants, the program itself and U.S. communities that support Summer Work Travel participants.

As part of the overall Program review, in September 2011, the Department announced and initiated on-site reviews of 14 Summer Work Travel Program sponsors. (See 76 FR 59182 (Sept. 23, 2011).) In addition to assessing sponsor compliance with the current regulations, these reviews allowed the Department to consult with sponsors regarding the impact of the 2011 IFR on their operations. The Department completed these site visits and is in the process of analyzing the results.

Next, the Department announced a cap on the maximum number of Summer Work Travel Program participants for calendar year 2012 and a moratorium on the designation of additional organizations as sponsors in the Summer Work Travel Program category. (See 76 FR 68808 (Nov. 7, 2011)) Peaking at just over 153,000 participants in 2008, the Summer Work Travel Program will proceed for the near future at a level not to exceed 109,000 participants annually. The cap is sponsor-specific and based on the number of participants for each sponsor with program start dates between January 1 and December 31, 2011 (i.e., for the calendar year). The Department intends to retain these restrictions until it is confident that the program regulations are sufficient to remedy identified concerns.

In November 2011, the Department hosted an open meeting with the sponsor community, including the Alliance for International Educational and Cultural Exchange. On December 13, 2011, the Department issued Guidance Directive 2011-05. See http://j1visa.state.gov/wp-content/uploads/2012/01/2011-GD05-12_13_2011Summer-Work-Travel-A-Cultural-Experience.pdf. The Department used these forums to announce its heightened scrutiny of the Summer Work Travel Program and its intention to publish new program regulations through additional rulemakings, including the 2012 IFR. The Department invited comments on both occasions. A number of sponsors criticized the Department for opting to modify the Summer Work Travel Program regulations through another interim final rule. The Department concluded that it must issue another interim final rule in order to promptly improve its existing regulatory framework given the potential impact on individual participants' health, safety, and well-being. The use of traditional notice and comment procedures would not allow for implementation of these important safeguards prior to the summer of 2012. Accordingly, the Department is making certain rule changes in the 2012 IFR and will publish additional modifications through NPRM procedures later this year. To further monitor and ensure the health, safety, and welfare of program participants, the Department of State is in discussion with the Department of Homeland Security and other federal agencies and enforcement authorities regarding the appropriateness of an information-sharing memorandum of understanding (MOU). Such MOU would establish guidelines and a protocol for the exchange of, analysis of, and appropriate action on, information indicating possible criminal abuse or misuse of the Summer Work Travel Program.

Cultural exchange. The Summer Work Travel Program is intended to allow foreign nationals, who could not otherwise afford to visit the United States as tourists or students, the opportunity to experience U.S. culture by defraying part of their travel and living expenses by working while in the United States. Over time, however, some sponsors, participants, and host employers lost sight of the central cultural exchange focus of the Act. Additionally, many participants viewed the Program as an opportunity simply to work in jobs that allow them to earn more money than they would in their home countries. The Program's evolution did not comport with the intentions of the Act or the purpose of international exchange programs to increase mutual understanding. Accordingly, the 2012 IFR refocuses the Summer Work Travel Program towards the U.S. cultural experience and away from its income and labor opportunities.

The cultural dimension of the Summer Work Travel Program experience is essential to all participants. Sponsors must consider the cultural component in all placement decisions. Rather than mandating specific types of cultural programs, however, the Department offers as guidance two examples of ways sponsors can meet the cultural component requirement. Sponsors could organize activities that acquaint participants with recognized features of U.S. culture and history (e.g., national parks, historic sites, major cities, scenic areas) and/or offer activities that engage participants with the communities in which they work and live. A core presumption underlies the Department's renewed focus on the cultural component of the Summer Work Travel Program: solely work-based cultural exposure is insufficient. Only those sponsors that demonstrate that their Summer Work Travel Program participants engage in cultural exchange activities outside of their places of employment will qualify to be considered for biannual re-designation.

Summer Work Travel Program participants historically have been placed in a wide variety of jobs in all 50 states and the District of Columbia. The Department recognizes that it would be difficult, at best, to prescribe specific cultural activities that the current 49 designated sponsors must offer to their program participants. With this in mind, the Department changes the Summer Work Travel Program regulations to ensure that participants are placed in jobs that are conducive to experiencing U.S. culture. To that end, the 2012 IFR enumerates criteria that sponsors must meet when approving job offers, and it expands the list of prohibited placements. More specifically, it requires sponsors to ensure participants have specific opportunities to interact with U.S. citizens and experience U.S. culture outside their workplaces.

Many sponsors already provide cultural opportunities for their Summer Work Travel Program participants. The Department commends those sponsors and encourages them to share their “best practices” when commenting on the 2012 IFR. Sponsors must focus their placements on jobs that are clearly appropriate under these new regulations and that offer opportunities to interact with U.S. citizens. Sponsors must also enable regular interaction with Americans during work and non-work hours. For example, a significant majority of Summer Work Travel Program participants work in vacation areas—in or near beach communities, amusement parks, and campgrounds in the summer and at or around ski resorts in the winter. These service industry jobs provide routine opportunities for participants to interact with U.S. citizens—both as customers and co-workers.

Although the new placement criteria and prohibitions together establish that the participants' jobs must provide them interactions with U.S. citizens (e.g., co-workers, customers), such exposure during the course of the work-day will not satisfy the cultural requirement of the Summer Work Travel Program. Sponsors must intentionally plan and implement cultural activities to augment this quotidian exposure in order to be in compliance with the purpose of the Act. The Department understands that the more widely participants are geographically dispersed, however, the more difficult it may be for sponsors to arrange and/or monitor directly these mandatory cultural events. Accordingly, the Department reassesses both the types of third parties that sponsors may use to assist them in performing core programmatic functions, e.g., promoting mutual understanding, as well as the specific functions third parties may perform.

Specifically, this 2012 IFR allows sponsors to enlist third parties to oversee cultural activities designed to expose participants to U.S. citizens and U.S. culture. That is, domestic third parties—including employers—may assist sponsors in “the promotion of mutual understanding” by arranging sightseeing tours, trips to sporting events, local community activities, etc. As the 2012 IFR modifies the 2011 IFR to allow only sponsors to complete the monthly monitoring requirement, third party arranged cultural activities are not a substitute for the monthly monitoring requirement. The Department reminds sponsors that they are responsible for the actions of third parties they may engage to fulfill the cultural component requirement and that such actions will be imputed to the sponsors. The Department seeks comment on sponsors' provision of cultural opportunities, especially with respect to best practices that can be shared with the sponsor community.

Comment analysis received on the 2011 IFR. Thirty-five parties submitted comments to the 2011 IFR. Of those, 12 parties were designated sponsors and one was an association that represents designated sponsors. Most of the commenting parties recognized both the value of the Summer Work Travel Program and the need for modified regulations. However, both sponsors and small businesses who hire Summer Work Travel Program participants stated that the regulatory changes were administratively burdensome. Sponsors argued that the Department had understated the cost to implement the changes. Two research organizations and two individual citizens recommended shutting down or sharply reducing the Program's size. The 14 non-sponsor participants who supported the Summer Work Travel Program included small businesses, an amusement park industry association, and individual citizens. The small businesses noted that they often cannot find sufficient numbers of qualified Americans to fill the positions where J-1 exchange visitors are traditionally placed. The Department has carefully considered all comments and has accordingly made modifications to the regulations proposed in the 2011 IFR as described below.

Purpose. One commenting party remarked on redundant language about program duration in the “Purpose” section of the regulations, and the Department has accordingly eliminated that language. However, the refocus of the cultural component of the Program has been added to this section. The Department has modified the language both to emphasize the cultural aspect of the Program and to call attention to the types of jobs that are appropriate for Summer Work Travel participants.

Duration. Seven parties commented about the length and timing of participants' Summer Work Travel programs. Several of them urged the Department to allow participants to stay past Labor Day, as seasonal employers may require their continued presence in order to meet this final concentration of demand. Others commented that the Department had adopted countrywide dates for program participation without regard for individual schools' academic calendars. Some disputed the requirement that final year students be restricted to those schedules, citing no reason for them to have to return home.

Other than final-year students who are expected to return home to start their careers, participants are expected to return to their studies following participation in the Summer Work Travel Program. Thus, these dates must necessarily reflect academic calendars—without regard for host employers' specific needs. To facilitate appropriate participation in the Summer Work Travel Program, the Department has established country-specific program start and end dates according to the academic year calendars of each country's universities. The Department may modify the list of country-specific program dates should a particular need arise (e.g., a shift in the academic year in a particular country). The Department notes that it does not allow final year participants to extend their programs beyond the country-specific end dates.

Participant screening and selecting. The 2011 IFR reintroduced the concept of “core” programmatic functions (see 61 FR 13760 (published March 28, 1996)). Several parties commented on the concept of core functions, seeking further definition and clarification. The six core programmatic functions which are differentiated from more general business administrative functions are: participant screening, selection, orientation, placement, monitoring; and the promotion of mutual understanding. While the Department requires sponsors to undergo the rigorous designation and re-designation processes, it has correspondingly less influence and oversight over third parties who assist sponsors in the administration of their programs. Accordingly, the new Summer Work Travel Program paradigm prevents wholesale delegation of sponsor duties to parties unknown to the Department both by limiting the functions third parties can perform and by delineating steps sponsors must undertake to confirm the bona fides of such third parties. The Department continues to impute the actions of all third parties to the sponsors that engage them.

The 2011 IFR states that “sponsors are solely responsible for adequately screening and making the final selection of their program participants. * * * ” The Department has since realized that third parties should not assist sponsors in the core function of selecting participants, and it modifies the regulations accordingly. However, the Department broadly construes activity of “screening” to include recruiting, interviewing, assessing English language proficiency, etc. While foreign entities may screen participants, sponsors remain solely—and ultimately—responsible both for setting the standards for screening and for making final participant selection, based upon information foreign entities gathered as part of the screening process.

English language. Two parties commenting on the 2011 IFR remarked about the importance of participants being proficient in English (e.g., safety of students and success of program depend on English language skills). In the 2011 IFR, the Department allowed sponsors to interview participants via video conference, thereby providing sponsors with a low-cost means of interviewing participants “in person.” Despite this change, the Department continues to notice a significant number of Summer Work Travel Program applicants who are denied visas because their English proficiency is not sufficient to participate in the Program. Since the lack of adequate English ability may put participants at risk during their exchanges, the 2012 IFR establishes more explicit English proficiency standards that applicants to the Summer Work Travel Program must demonstrate to their sponsors' satisfaction. Specifically, applicants must have sufficient English proficiency not just to perform their jobs, but also to navigate daily life; read and comprehend program materials; fully understand their job benefits and responsibilities and their rights and protections; and know how to obtain assistance, if necessary. The Department reminds sponsors that the addition of video-conferencing as an interview tool provided them a cost-effective means of conducting these interviews themselves should they find foreign entities not fully capable of accurately assessing applicants' English proficiency. The Department will interpret inordinately high visa rejection rates because of insufficient English language proficiency as an indication that sponsors are not sufficiently screening potential applicants.

Accredited academic institutions. The 2011 IFR also added the requirement that participants in the Summer Work Travel Program be “enrolled full-time and pursuing studies at accredited post-secondary academic institutions located outside the United States” (emphasis added). One party commented on this change, specifically with respect to the absence in the language of a requirement that these institutions have a formal campus of the “bricks and mortar” variety, and not be on-line schools. The Department did not intend to open the door to students enrolled in purely Internet-based schools. Summer Work Travel participants must have an academic pull back in their home countries (or in the foreign countries where they are studying) that requires them to leave the United States at the end of their academic breaks. Accordingly, the Department clarifies that the post-secondary institutions in which participants must be enrolled to participate in the Summer Work Travel Program must be classroom based, in addition to being accredited and academic in nature.

Participant orientation. The Department adds to the list of required orientation materials and information that sponsors must provide Summer Work Travel Program participants before they depart their home countries. Sponsors must explain the importance of the cultural component of the Summer Work Travel Program. They must provide guidance on how best to experience U.S. culture and/or describe cultural opportunities they have arranged. For participants with pre-placed jobs, sponsors must provide details on job offers and information about housing and transportation to and from work. Additionally, sponsors must inform participants that they risk program termination if they (1) fail timely to report their arrival and/or changes of residence; (2) start work at un-vetted jobs; and/or (3) fail timely to respond to sponsors' monthly monitoring outreach contacts. Many commenting parties opined that it would be difficult to get college students to respond to sponsors' outreach. The Department disagrees. By providing sufficient orientation and a clear understanding of the conditions of program participation at the outset, sponsors should be able to gain the cooperation of their participants to comply with program rules. The Department encourages sponsors that already achieve this level of cooperation from their participants to share their best practices with the Department during the comment period.

Consequences of non-compliance by participants. With respect to how to respond to participants who fail to meet the obligations enumerated above, the preamble accompanying the 2011 IFR stated: “As a point of clarification of existing regulations, sponsors are obligated to end the exchange programs of participants who do not report their arrival within ten days following the program start date or who do not report changes in their U.S. addresses or sites of activity within ten days of such moves.” (76 FR 23177, 23180) (April 24, 2011)) During the on-site reviews, at association meetings, and in comments filed in response to the 2011 IFR, many sponsors inquired whether they should simply “end” programs of non-compliant participants' programs or actually terminate their status in the Student and Exchange Visitor Information System (SEVIS). The Department recognizes that this statement needs further clarification. Sponsors must inform participants that their non-compliance will result in their termination from the program, and that program termination puts at risk their ability to travel to the United States in the future.

Many commenting parties expressed concern that the requirement that participants contact their sponsors within ten days of arrival in the United States conflicted with the requirement that sponsors validate participants' records in the SEVIS within 30 days. The Department clarifies that this new notification requirement does not change the requirement in 22 CFR 62.70(b) that sponsors update SEVIS records within 21 days of learning of changes of current U.S. addresses, or the requirement in 22 CFR 62.70(d) that sponsors validate SEVIS records of Summer Work Travel Program participants within 30 days of their program start dates. These are obligations of sponsors with respect to SEVIS maintenance; the new regulatory language imposes an obligation on participants to report their arrivals and any address changes promptly to their sponsors. Since implementing the 2011 IFR, however, the Department has determined that participants cannot change or add jobs independently. If they wish to change or add jobs, they must first consult with their sponsors who must verify the terms and conditions of prospective jobs and fully vet potential host employers. This change has made unnecessary the previous requirement that participants inform sponsors within ten days of changing jobs. Accordingly, the Department modifies the regulations to make clear that the participants' ten-day notification requirement applies only to reporting participants' arrivals and changes of residences (including securing initial residences). It further clarifies that sponsors must inform participants that they may not start, change, or add jobs before their sponsors have vetted the host employers and the terms and conditions of the jobs pursuant to 22 CFR 62.32(n). The Department requires sponsors to act promptly (i.e., within 72 hours) to verify this information and to report back to the participants the results of such action.

The Department considers participants starting work before their sponsors fully vet their jobs to be engaged in unauthorized employment and reminds sponsors of 22 CFR 62.16(b), which states: “An exchange visitor who engages in unauthorized employment shall be deemed to be in violation of his or her program status and is subject to termination as a participant in an exchange visitor program.” The requirement that program participants not change jobs without permission from their sponsors in no way suggests that participants must remain in unsuitable positions such as those that are not consistent with written job offers or in other ways do not meet the expectations of participants or the purpose of the Act. The Department expects that sponsors will not unreasonably withhold their assistance or permission for participants who have valid reasons for wishing to change or add jobs.

Employees at will. One sponsor sought clarification of the requirement that sponsors provide pre-placed participants with information about the “contractual obligations” between the participants and their employers. This party asked what kind of information was required and how a “contract” could exist given that most participants—like their U.S. counterparts in these jobs—would be considered “employees at will.” The Department agrees that Summer Work Travel Program participants are employees at will, but nevertheless requires sponsors to inform participants about the terms and conditions of their job offers. This creates a degree of transparency that can ensure that the participants' expectations are in line with the jobs and conditions that they will encounter upon their arrival in the United States. The Department is developing a Summer Work Travel Program Job Placement Form (i.e., Form DS-7007) to capture the information necessary for sponsors to demonstrate that they have fully vetted potential jobs (e.g., the name and address of the host employer, the hourly wage, benefits, the range of hours per week the participants likely will work, whether the host employer has arranged housing, and if so, its cost to the participant). The Department published the form in the Federal Register and sought comment on its design (see 76 FR 72996 (Nov. 28, 2011)). Until such time as the DS-7007 Form is finalized and adopted, as a “best practice,” sponsors may voluntarily begin using forms similar to the Form DS-7007 for informing participants about the details of their vetted jobs.

Cultural component. Sponsors are required to inform participants prior to their departure from their home countries about the importance of the cultural aspects of the Summer Work Travel Program. They must provide specific guidance on how participants can avail themselves of cultural opportunities in general as well as identify specific activities that the sponsors intend to arrange to further promote cultural exchange. Sponsors must screen out those applicants whose interests in the Summer Work Travel Program predominantly appear focused on earning income. Accordingly, the Department will view the lack of documented evidence of participants' cultural activities required by Summer Work Travel Program regulation as, among other things, a deficiency by sponsors adequately to screen and orient program participants. The Department seeks comment on the Program's refocus on the cultural component and encourages sponsors to share their best practices.

Participant placement. In the 2011 IFR, the Department established a new process by which sponsors must vet both potential job offers and potential host employers. The Department's experience with this requirement—both for the Pilot Program this past summer and this most recent winter session—has demonstrated the benefits of this new model. No sponsor commenting on the 2011 IFR objected to this new requirement; accordingly, the Department makes no substantive changes to the job and employer vetting requirements. It does clarify, however, that sponsors must vet potential host employers annually and that prior to each season, sponsors must confirm the number of jobs each host employer seeks to fill with program participants. The Department clarifies, however, that placement is one of the core functions that sponsors may not enlist third parties to perform. In this context, placement means matching particular participants with specific job opportunities. In other words, third parties (foreign and domestic alike) may provide sponsors with leads for potential jobs, but sponsors must determine the suitability of individual participants for specific jobs and make all placements.

In the 2011 IFR, the Department prohibited sponsors and foreign entities from providing incentives to employers to accept program participants for job placements. In the 2012 IFR, the Department clarifies that participant placement is the sole responsibility of sponsors, i.e., foreign entities may not match participants with available jobs. The Department, however, realizes that despite this restriction, both U.S. and foreign third parties could play an ancillary role in finding job placements, e.g., by informing sponsors or participants (who find their own jobs) about potential job openings. Accordingly, the 2012 IFR expands the prohibition to include the provision of incentives to employers by all third parties acting on behalf of sponsors. While the regulations continue to prohibit such third parties from actually placing participants, the Department wishes to ensure that third parties or sponsors in no way provide potential host employers with incentives to accept any participants for job placements.

With respect to the definition of “incentives” in this context, seven commenting parties urged the Department to clarify that it does not intend to prohibit sponsors from funding travel expenses for employers of Summer Work Travel Program participants to international job fairs that provide hiring entities the opportunity to meet their prospective workers. The Department understands that the cost of travel, accommodations, meetings, and meals would be included in the cost of such job fairs. It considers job fairs to be opportunities for potential host employers to meet their prospective employees and, therefore, not incentives to hire particular sponsors' participants. Likewise, the Department does not seek to prohibit meetings between prospective or current host employers and sponsors at mealtimes. However, the Department does consider gifts, cash payments, and trips paid for by sponsors that do not include opportunities to meet prospective participants to be prohibited “incentives” to host employers.

Confirm all jobs. Under the terms of the Pilot Program, sponsors were required to confirm all jobs prior to participants' departures from their home countries by verifying both the bona fides of the potential employers and the terms and conditions of the job offers themselves. In the 2011 IFR, this requirement was extended to all participants from non-Visa Waiver Program countries. In comments on the 2011 IFR, one party urged the Department to allow participants from Visa Waiver Program countries to begin work as soon as they obtained job offers and allow sponsors five days to vet the employers and the jobs in order to allow participants to start work immediately. Theoretically, this could apply also to participants from non-Visa Waiver Program countries who wanted to change or add jobs or to participants from Visa Waiver Program countries both under those circumstances and in the case of their initial employment. The Department respectfully rejects this recommendation because it believes it will cause unnecessary confusion as to which participants could start unverified jobs and under what conditions. Once participants have arrived in the United States and secured job offers, sponsors must vet initial, subsequent, and additional jobs within 72 hours. The Department requires sponsors to have sufficient staff and resources to ensure the jobs of all participants to whom they offer exchange programs are timely and fully vetted. The Department seeks comment on potential barriers to sponsors meeting this 72 hour deadline.

Obligation to work with participants seeking new or additional jobs. The 2011 IFR proposed new requirements for vetting both host employers and the terms and conditions of individual job offers. The Department adopts those provisions with limited change. Although the text of the regulation has been slightly restructured to provide more clarity, the only substantive change the Department makes is in response to comments on the 2011 IFR and during the on-site reviews. There was widespread objection to retaining the requirement that sponsors maintain rosters of bona fide job listings for participants seeking job placements. Some commented that not only is it difficult to keep these lists updated, this requirement is also an anachronism in the Internet era. The Department agrees and eliminates the requirement that sponsors maintain such lists of available jobs. Instead, the Department now explicitly requires sponsors to offer reasonable assistance to participants seeking additional or subsequent jobs (regardless of whether participants were initially direct-placed or self-placed). The 2011 IFR incorrectly changed from one to two weeks the amount of time non-pre-placed participants must attempt to find work before obtaining assistance from their sponsors. The Department clarifies that sponsors are expected to undertake reasonable efforts to assist non-pre-placed participants (i.e., those from Visa Waiver Program countries) who have not found suitable employment within one week of commencing job searches.

The Department recognizes that there are many reasons that participants may be unsatisfied with their initial jobs and that the expectations of some participants may differ from the reality of their placements. Although sponsors are required to make reasonable efforts to find replacement jobs for participants, under certain circumstances, it would be appropriate for sponsors to end (not terminate) programs of participants for whom subsequent suitable jobs cannot reasonably be arranged. While participants who end the work portion of their programs early may travel in the United States before returning home, those with terminated programs may not.

New criteria for appropriate job placements. The Department adds new criteria that sponsors must consider when determining the suitability of job placements. In addition, it expands the list of prohibited job placements. The goal is further to ensure the placement of participants in appropriate jobs that provide them better opportunities to experience U.S. culture and to ensure that participants work in environments that are safe and appropriate for the Exchange Visitor Program. Jobs must be seasonal or temporary in nature. Employment is of a seasonal nature when the required services or labor are traditionally tied to a season of the year by an event or pattern, and employers require labor levels above and beyond existing worker levels. Employment is of a temporary nature when employers' needs for duties to be performed are short-term, a one-time occurrence, a peak load need, or an intermittent need. It is the nature of employers' needs, not the nature of the duties that is controlling.

Sponsors must place participants only in jobs that offer opportunities to interact routinely with U.S. citizens and experience U.S. culture. Sponsors may place participants only in those jobs that adhere to the participant placement criteria listed in 22 CFR 62.32(g)(4-6), which among other things includes prohibited jobs found at 22 CFR 62.32(h). Sponsors must use extra caution when placing participants in positions with host employers in lines of business that have been associated with trafficking in persons (e.g., modeling agencies, housekeeping, janitorial services). When sponsors follow the previously cited regulations and guidance, the result will be job placements that:

Do not have the effect of displacing U.S. workers, especially young U.S. citizens (18-25 years old), a group that is currently experiencing high unemployment levels;

Do not overly concentrate program participants or isolate program participants from interactions with U.S. citizens, both of which will diminish the cultural exchange component of the program; and

Permit participants to work alongside U.S. citizens in the same or similar jobs.

Sponsors may place participants with employment or job placement agencies only under the following three circumstances: First, participants must be employees of and paid by the staffing agencies; second, staffing agencies must provide full-time, primary, on-site supervision of the participants; and third, staffing agencies must effectively control the work sites, e.g., have hands-on management responsibility for the participants. If these three conditions are not met, staffing agencies are not fulfilling the role of employers, and sponsors may not place participants with them.

Program exclusions. Notwithstanding its development of this new guidance for identifying appropriate jobs, the Department retains and enhances the list of prohibited positions that have traditionally been incorporated in Summer Work Travel Program regulations. As the Department's concern for the health, safety, and welfare of participants and the integrity of the Summer Work Travel Program remain of paramount importance, it views this approach to job selection guidance as both prudent and necessary.

First, the Department clarified that sponsors cannot place participants in jobs as operators or drivers of vehicles or vessels, even if they are not carrying passengers. It also articulated additional examples of prohibited jobs in the adult entertainment industry. Moreover, due to concerns about participants' health, safety and welfare, the Department further expanded this list to include jobs that have already been declared by the Secretary of Labor to be hazardous to youth; jobs that require adherence to the Center for Disease Control and Prevention's Universal Blood and Body Fluid Precautions guidelines and/or require sustained physical human contact; jobs in warehouses; and chemical pest control jobs. Further, jobs that fall under the North American Industrial Classification System (NAICS) Goods-Producing Industries occupational categories industry sectors 11, 21, 23, 31-33 are prohibited, specifically: Natural Resources and Mining (including Agriculture, Forestry, and Fishing and Hunting as well as Mining, Quarrying, and Oil and Gas Extraction); Construction; and Manufacturing. This prohibition is the only portion of the 2012 IFR that will be effective, not with publication of the 2012 IFR, but on November 1, 2012.

Two other job positions are now excluded. Sponsors may not place participants in positions for which the compensation is substantially commission-based because they do not guarantee that participants will be paid minimum wage in accordance with federal and state standards. Also, positions with traveling fairs or itinerant concessionaires are also now prohibited due to health and safety concerns associated with a nomadic lifestyle, as well as the resulting difficulty in tracking the locations of such participants in SEVIS. Finally, as part of its effort to refocus the program on its cultural purpose, the Department further expands the list of excluded positions in the 2012 IFR to include types of employment that are incompatible with a cultural exchange program: including positions requiring work hours that fall predominantly between the hours of 10:00 p.m. and 6:00 a.m. and positions in catalogue/online order distribution centers. Consistent with Executive Order 13563, and its particular emphasis on the importance of public participation, the Department requests comments on these expanded job prohibitions in this interim final rule.

The Department recognizes that in light of the timing of this interim final rule, the immediate implementation of the NAICS prohibitions at this date may cause serious economic hardship for certain employers, sectors, or locations for the immediate summer 2012 season. For this reason, the Department is adopting a phased approach and implementation of those specific prohibitions will not go into effect until November 1, 2012, after the immediate summer season. On or before that date, sponsors that place participants in these jobs, must either end the participants' programs or place the participants in permitted jobs.

The Department emphasizes that all other provisions of the 2012 IFR are effective immediately upon publication. This means that the programs of participants placed this summer in jobs that will be prohibited starting November 1, 2012 are still subject to all program regulations during the upcoming summer season. For example, sponsors must ensure those positions provide participants opportunities to interact routinely with U.S. citizens during the day and after, do not fall predominantly between the hours of 10:00 p.m. and 6:00 a.m., and do not prevent participants from actively and routinely taking part in cultural activities. In addition, such placements may not create over-concentration of participants in any one location, or displace U.S. citizen workers at the specific worksites.

Housing and transportation. The regulations adopted in the 2011 IFR required sponsors to advise only participants from Visa Waiver Program countries how to find appropriate and reasonably priced housing. The Department now amends the regulations to include all Summer Work Travel Program participants. When evaluating the suitability of potential jobs, sponsors must consider the availability, affordability, and suitability of local housing and transportation. When host employers do not offer housing and transportation or participants do not wish to avail themselves of employer-provided housing and transportation, sponsors must actively and immediately assist Summer Work Travel Program participants in arranging suitable, affordable, and safe housing, and ensuring that reliable and affordable transportation between their residences and work sites is available. To be considered safe, housing must, at a minimum, meet all applicable local laws and regulations, including with respect to ventilation, utilities, and occupancy rates. If it is difficult for sponsors to identify appropriate housing and/or transportation under certain circumstances, this should signal the sponsors to search for other jobs in other locations. The Department seeks comment on the expanded roles of sponsors in ensuring the availability of appropriate housing and transportation.

Often, host employers provide housing and/or transportation to program participants and reduce their hourly pay or otherwise deduct from their pay to cover the cost of such housing and/or transportation. In these cases, job offers must explicitly describe such arrangements and specify the market value of the housing and/or transportation. In this way, it is clear whether the participants are being compensated in compliance with program regulations, including compliance with state wage requirements and section 531 of the Fair Labor Standards Act (FLSA), which requires that such deductions be voluntary and not include a profit to the employer or to any affiliated person.

Forms DS-2019. Four parties objected to the requirement that sponsors enter the host employer sites of activities and job titles in SEVIS prior to issuing Forms DS-2019. One party commented that this requirement was unworkable because it forces employers to commit months before knowing their summer employment needs. It recommended that, instead, the language be changed to require collection of employment information in SEVIS before applicants' visa interviews. Others expressed concern that employers do not know the sites of activity prior to the preparation of Forms DS-2019, and one stated that participants are often assigned specific job titles only after they report to work.

The Department disagrees with respect to participants from non-visa waiver countries. Sponsors must vet their potential employers as set forth at 62.32(n), confirm the terms and conditions of their job offers, and input complete and correct data into SEVIS prior to issuing Forms DS-2019 to participants from non-visa waiver countries. In the rare cases where sponsors do not know the sites of activity, they may initially enter the employers' main addresses in the site of activity fields, noting that such information will change, and update SEVIS prior to the visa interview. Clearly, such job and employer information is available for participants from visa-waiver countries only if they opt to secure placements prior to departing their home countries—in which case, they will be treated as participants from visa-waiver countries for purposes of determining when such information must be entered into SEVIS. Accordingly, sponsors can issue Forms DS-2019 for non-pre-placed participants from visa waiver countries prior to entering any of this information into SEVIS. However, sponsors must always vet employers and job offers prior to entering the data into SEVIS.

Participant compensation. Sponsors must ensure that host employers fairly compensate participants for their work. In the 2011 IFR, the Department adopted the requirement that Summer Work Travel Program participants, regardless of age, be compensated at the higher of the applicable state minimum wage or the federal minimum wage. One party commented that the broader and more protective language of the prior regulations (i.e., “shall ensure that participants receive pay and benefits commensurate with those offered to their American counterparts”) should be retained. The Department notes that this language was unintentionally dropped from the 2011 IFR and hereby reinserts it. Another commenting party expressed concern that the regulations did not include the minimum wage exemption for jobs with amusement and recreational establishments found in the FLSA. By reinserting the dropped language, the regulations implicitly recognize the minimum wage exemption of the FLSA for such placements. If a sponsor has reason to suspect that a participant is not being compensated in accordance with Federal, State or local law, the sponsor must contact the appropriate authorities, including, but not limited to the U.S. Department of Labor's Wage and Hour Division.

Monitoring. There are numerous reasons for sponsors to stay in regular and direct communication with their participants. First, this type of contact allows sponsors to check on participants' health, safety, and welfare. Also, it reinforces the primacy of the sponsor/participant relationship in the Summer Work Travel Program so that participants with concerns about their programs will reach out to their sponsors for assistance should they need it. Further, it provides sponsors with the opportunity to confirm that they have the participants' correct “Current U.S. Addresses” and “Sites of Activity” listed in SEVIS, so they may maintain accurate SEVIS records in the interest of National Security. It also allows sponsors to confirm that participants are enjoying the mandatory cultural experiences. For these reasons, the 2011 IFR expanded the obligations of sponsors to monitor their program participants by requiring personal contact with all participants on a monthly basis. Sponsors must document such monthly contacts, which can be in-person, by telephone, or via email exchange. Many sponsors commenting on the 2011 IFR objected to having to actually reach participants to meet this obligation, suggesting that it would be difficult if not impossible to compel participants to respond to sponsors' outreach. The Department disagrees and subsequently clarifies that although broadcast or individual texts, emails, or voice messages, for example, may be considered attempts to initiate contact with participants, participants must respond to communications in order for such contacts to be considered complete. Sponsors must terminate the programs of participants who exhibit a pattern of failing to respond to the monthly monitoring. Accordingly, sponsors must not place participants in locations where it is difficult for them to access the normal forms of communications.

Sponsors' use of third parties. One commenting party urged the Department to allow foreign entities to participate in the monitoring function of participants, stating that foreign entities provide native language support, and the parents of participants appreciate their supportive roles. The Department recognizes the critical role that foreign entities can play in reaching out to participants when unusual circumstances require clear communication, and it clarifies that these regulations in no way prohibit foreign entities from contacting participants and/or their parents. Such contacts, however, do not count as part of the sponsors' monthly monitoring requirement. The Department does not allow host employers or any other third party to assist in conducting monthly monitoring. If program participants are having problems with their employers or the conditions of their jobs, allowing employers to assist in monthly monitoring effectively denies participants' access to neutral advocates. In sum, sponsors may not delegate their monthly monitoring responsibilities to third parties, but must themselves initiate, complete, and document monthly contacts with all program participants.

With renewed focus on the cultural component of the Summer Work Travel Program and the understanding that sponsors often place participants throughout the United States, the Department has determined that sponsors may have third parties assist them in the core programmatic function of promoting mutual understanding. That is, sponsors may engage third parties to arrange local activities, sightseeing trips, or other events that allow participants to interact with U.S. citizens and/or learn about U.S. culture. Sponsors may wish to work together to offer joint activities. Sponsors must vet these domestic third parties according to the requirements set forth in Sec. 62.32(n).

Vetting third parties (foreign entities). The 2011 IFR also required sponsors to vet all foreign entities (i.e., overseas agents or partners) that assist them in fulfilling the core programmatic functions that may be conducted outside the United States and to maintain current listings of such parties in a new “Foreign Entity Report.” Specifically, sponsors must obtain proof of these entities' business licenses, disclosures of previous bankruptcies or pending legal actions, three written references, summaries of the entities' prior J-1 experience, criminal background check reports, and copies of sponsor-approved advertising materials. After sponsors have successfully vetted foreign entities, they must provide the Department with this information to allow the Department to update the Foreign Entity Report. Although applicants do not need to work with foreign entities, they may not work with those foreign entities who are not included in the Report. If any material information (e.g., contact information, financial status, criminal backgrounds of principals, relationship with sponsor) changes, sponsors must promptly provide this information to the Department.

Eight parties commented on these requirements, voicing almost unanimous concern that it would be too expensive to maintain English translations of foreign entities' marketing materials, especially given the Internet-focus of today's advertising environment. They requested that instead, sponsors approve the major marketing themes of their foreign entities. The Department disagrees. The foreign entities' initial outreach to potential program participants sets the stage for participants' expectations about the Summer Work Travel Program. Sponsors must be aware of what the foreign entities are posting on web sites, communicating through social media, and distributing in printed materials to ensure the information conforms to the purpose and intent of the program and meets regulatory requirements. It is important, for example, that the cultural exchange aspects of the program are accentuated, and that students' expectations about how much money they can earn are realistic.

During its on-site reviews, the Department had the opportunity to assess several sponsors' compliance with foreign entity verification requirements for the winter 2011-2012 season. Overall, the Department found that sponsors were readily able to obtain almost all the requested documents without undue cost or burden. Accordingly, the Department makes only minor changes to the provisions enumerated in this section of the regulations to correct for errors in the text that allowed foreign entities to select participants and failed to require annual vetting of foreign third parties.

Although not included in the regulations, the preamble to the 2011 IFR mentioned that sponsors must obtain notarized financial statements to demonstrate the financial solvency of potential foreign entities (See 76 FR 23177-23179). Two parties commenting on this language suggested that it would be difficult to obtain notarized financial statements and recommended that the Department require sponsors to obtain copies of bank statements instead. The Department does not believe that a single view of an entity's bank account provides sufficient evidence of its financial viability, while it believes notarized statements are a step in fraud prevention. The Department also clarifies that sponsors must annually update the records and credentials of the foreign entities they engage to help administer their Summer Work Travel Programs. Additionally, pursuant to 22 CFR 62.32(p)(2), the Department takes this requirement one step further and now requires sponsors to inform the Department when and why particular foreign entities are no longer under contract with them.

Vetting third parties (domestic entities). The 2011 IFR limited the domestic entities that could assist sponsors in performing core programmatic functions to host employers of participants. However, the broad range of structured and planned cultural events that can satisfy the cultural component requires flexibility with respect to the types of third parties sponsors can engage. For example, sponsors may partner with individuals who voluntarily assist in arranging local community events or major international corporations in the tourism line-of-business. As a result, there can be no one-size-fits-all process for vetting such third parties.

Accordingly, sponsors who engage business entities to provide cultural events or activities for which participants must pay (either directly or through the sponsors) must vet these entities according to the standards required for host employers set forth in the 2011 IFR and clarified in the 2012 IFR. In addition, they must enter into written agreements with such parties, and these agreements must explicitly describe the activities or events and itemize all costs. Private individuals or local groups (e.g., local consortia created to assist with the assimilation of Summer Work Travel Participants into the community, including church groups) that do not charge for participation need not be similarly vetted or enter into such written agreements. For this purpose, the Department would not consider, e.g., participants buying their own tickets to or food at local sporting events to be paying for participation, even if an individual or group made the arrangements. Sponsors should engage in assisting the provision of cultural events only with local individuals or groups that are known and reputable in the community.

The 2011 IFR requires that sponsors directly contact potential employers to verify key information as well as utilize publicly available information to confirm the existence and legitimacy of the potential host employers. Nine parties commented on this proposed rule change, with most of them either seeking clarification of the requirement that they verify potential host employers' Employer Identification Numbers (EINs) or opposing altogether the requirement to obtain EINs. One party recommended that the Department alternatively require sponsors to obtain copies of employers' current business licenses. The Department agrees and replaces the requirement that sponsors verify EINs with the requirement that they obtain proof that the businesses (e.g., corporations, partnerships) are authorized to operate in the state or jurisdiction. Such information is generally available from the Web sites of each state's Secretary of State. Copies of such registration documents should sufficiently demonstrate that potential host employers are active and registered businesses in the locations where they will place participants.

Commenting parties sought guidance on what constitutes sufficient verification of host employer's worker's compensation coverage. First, sponsors must be aware of current state-specific requirements. Second, sponsors must obtain each host employer's workers' compensation policy identification number and a copy of the policy's Cover Page and/or Deck Sheet, confirming that the coverage is sufficient and active during the period of placement. Third, sponsors must determine whether the host employer has been recently sanctioned by the U.S. Department of Labor's Occupational Safety and Health Administration or Wage and Hour Division. Sponsors can check the Department of Labor's sanctioned list at: http://ogesdw.dol.gov/ . Sponsors should hesitate to place participants with recently sanctioned employers.

One sponsor inquired whether there were certain conditions under which verification of an employer would be unnecessary (e.g., a previously vetted host employer or a host employer with whom the sponsor has worked for more than two years). The Department understands that many sponsors place program participants with the same host employers year after year. However, the cost and effort required to reconfirm the bona fides of past host employers are modest enough to warrant annual reconfirmation of all organizations' basic information. Also, the Department has observed too many job offers that were used in the summer and again in the winter season even though those host employers had no need for winter seasonal employees. Accordingly, the Department hereby modifies the regulations to require sponsors to vet host employers annually, and each season to verify the actual number of job placements available.

Host employer cooperation. The 2011 IFR also added a new section on host employer obligations. Nine parties commented on these new regulations, noting that the Department has no jurisdiction over employers, rendering unenforceable this entire new section of the rules. There also was concern about the inability of host employers to guarantee that participants would work a certain number of hours each week. Some commented that many seasonal and temporary jobs are dependent upon weather and customer demand, and employers do not guarantee U.S. summer workers a minimum number of hours. While the Department acknowledges these comments, it believes that sponsors should work only with employers who agree to make good faith efforts to comply with certain terms of employment. Accordingly, the Department changed the title of the section “Host employer obligations” to “Host employer cooperation,” thereby removing language suggesting it has jurisdiction over employers and has placed the obligation on sponsors to work only with those employers who would voluntarily commit to comply with these requirements.

With respect to ensuring participants are working sufficient hours to cover their basic expenses and meet their program expectations, sponsors should avail themselves of the monthly contact with participants to inquire about their job satisfaction and financial state. If conditions are such that participants simply are not earning enough money to cover their basic expenses, it is incumbent upon the sponsors to assist them in finding new or additional jobs.

Reporting requirements. Three parties opposed the Department's requirement that sponsors submit semi-annual placement reports. They contended that there is no value in identifying second or subsequent jobs or that the information is already available in SEVIS. The Department disagrees: SEVIS does not retain such information. Moreover, the Department believes that the more carefully sponsors screen participants and match their expectations to vetted job placements, the less frequently participants will change jobs, and such improved screening will be reflected in these reports. Accordingly, it retains this requirement to monitor participant job change rates and other program statistics.

Annual price lists. In the 2011 IFR, the Department adopted a requirement that written agreements between sponsors and foreign entities contain annually updated price lists. During the on-site reviews, Department staff reviewed many such sponsor agreements and determined that the inconsistent formats sponsors used to present program costs made it necessary for the Department to request information in a more standardized format. Accordingly, the Department has qualified this requirement so that sponsors specify the itemized costs that participants must pay to both foreign agents and sponsors to participate in the Summer Work Travel Program. Recent criticism of the program has included alleged exorbitant costs that program participants must pay to work in minimum wage jobs. The Department requests this information in order to protect participants, sponsors, and the integrity of the program.

Cultural exchange. While legitimate employment is an important component that defrays a portion of participants' program costs, it is neither the only element nor the primary element of the J-1 Exchange Visitor Program. Instead of merely lining up summer jobs for participants, sponsors must also consider—at the outset of any job placement consideration—the availability of housing and transportation, as well as the location of the position and the opportunities for cultural activities and community engagement. The balance between work time and free time, including the nature of the work itself and the opportunities for interaction with U.S. citizens during the workday, are also key considerations.

With this in mind, sponsors must place students in jobs that provide daily and ongoing interaction with U.S. citizens. Additionally, sponsors must ensure that participants have opportunities to engage in cultural exchange outside of work. During the biannual re-designation of sponsors as well as in the day-to-day oversight and monitoring of program sponsors, the Department will look specifically for evidence that sponsors are actively facilitating or offering non-work cultural opportunities for participants. Clearly, sponsors should consider the accessibility of cultural opportunities as an important factor in determining whether specific jobs are suitable for program participants. Implementation of cultural activities is further facilitated by group excursions to sporting events, establishing local volunteer networks that pair exchange visitors with local citizens, or otherwise making intentional efforts to integrate program participants into local communities. Finally, as noted above, sponsors may engage third parties to assist in providing this cultural component to their program participants.

Sponsors are not permitted to use cultural opportunities associated with the participants' employment to fulfill this requirement (e.g., amusement park visits are not acceptable cultural offerings for participants working at amusement parks). Registering participants on publicly available listserves of events is not sufficient by itself to meet this requirement; nor does the Department consider exclusively on-line interactions to be satisfactory cultural offerings. How well sponsors develop and implement the program's cultural component will carry significant weight in the Department's biannual re-designation process for sponsors. The Department will presume that participants' significant non-participation in organized cultural activities is caused by inadequacies in the sponsors' cultural offerings, their inability to adequately calibrate participants' work/non-work experiences, and/or sponsors' failure to select participants who are seeking cultural exchange.

Sponsors are permitted to use cultural offerings as part of the required monthly contact with participants as long as any issues affecting the participants' health, safety, and welfare identified through such contacts are promptly and appropriately addressed. Sponsors should maintain evidence of participants' attendance in cultural events in their program files (e.g., event sign-up lists or emails confirming attendance at cultural events, signed and executed agreements with local organizations for volunteer service opportunities, cultural or educational excursions, group participation in cultural events).

The Department of State is of the opinion that administration of the Exchange Visitor Program, including the Summer Work Travel Program, is a foreign affairs function of the U.S. Government and that rules implementing this function are exempt from Sec. 553 (Rulemaking) and Sec. 554 (Adjudications) of the Administrative Procedure Act (APA). As reflected in the Fulbright-Hays Act, the purpose of such programs is to increase mutual understanding between the people of the United States and those of other countries, “unite us with other nations”, and “to promote international cooperation”. Pursuant to law, policy, and longstanding practice, the Department of State has supervised either directly or through private sector program sponsors or grantee organizations, those foreign nationals who come to the United States as participants in exchange visitor programs, one of which is the Summer Work Travel Program. Summer Work Travel participants come to the United States from over 190 countries and when problems occur in a program such as this, foreign governments often directly engage the Department of State regarding the treatment of their nationals, regardless of who is responsible for the problems.

The Department emphasizes that many provisions of this interim final rule—indeed, the majority—reflect careful consideration of public comments received on a previous interim final rule, issued on April 26, 2011. Those provisions have been subject to detailed comments and this interim final rule has greatly benefited from those comments. At the same time, some provisions of this interim final rule are new. Some of these provisions will be enforced immediately, but others will not be enforced until November 1, 2012.

The Department has two overriding purposes for issuing this interim final rule. One purpose is to put in place urgently needed measures to protect the health, safety, and welfare of foreign nationals entering the United States to participate in the Summer Work Travel Program for a finite period of time (up to four months) and then return to their countries of nationality or last legal permanent residence upon completion of their programs.

The need for such efforts was made evident by a situation where Summer Work Travel participants were placed in nightshift jobs requiring long work hours in a packing warehouse and did not have free time available or the ability to interact daily with Americans, an experience in its totality that is contrary to a cultural exchange program. It is critical that Summer Work Travel sponsors currently planning for the summer of 2012 cycle of Summer Work Travel participants are now informed by regulation that exposure to such placements, and other jobs contrary to a cultural exchange program, are now strictly prohibited henceforth, starting with the summer 2012 cycles of Summer Work Travel participants. Failure to act swiftly and decisively with an interim final rule to protect the health, safety, and welfare of these program participants will have direct, foreseeable, and substantial adverse effects on the foreign affairs and relations of the United States.

The incidents were sufficiently of concern to cause the Department to engage in outreach to concerned officials from foreign affairs ministries around the world both to assuage them about our response to those incidents and to reaffirm the Department's intent to continue the Summer Work Travel program, but with necessary repairs (as was done in recent discussions the Department had with the governments of four of the largest countries sending Summer Work Travel participants). In short, a number of foreign governments have unequivocally informed the Department that they regard this program as important to their bilateral relationship with the United States and also important to their nationals who seek to participate in that program. Participating countries, therefore, look to the Department to keep the program alive but to fix it in a way that helps protect their nationals.

The second overriding purpose of this interim final rule is to help restore the Summer Work Travel program to its original raison d'être as a U.S. public diplomacy program intended to promote international cultural understanding in line with the overall purposes of the Fulbright-Hays Act, as discussed above. These two overriding goals are mutually reinforcing and provide the requisite foreign affairs function basis on which to adopt this interim final rule. Although the Department is of the opinion that this interim final rule is exempt from the rulemaking provisions of the APA, the Department is aware of the importance of public comment consistent with Executive Order 13563 and is publishing this rule as an interim final rule, with a discretionary 60-day provision for public comment and without prejudice to its judgment that the Exchange Visitor Program is a foreign affairs function. As noted above and discussed below, certain provisions of this interim final rule will not be enforced immediately, and will be delayed until November 1, 2012; comments are specifically invited on those provisions.

In addition, and without prejudice to its determination that the function discussed herein is a foreign affairs function of the United States, the Department also finds that there is “good cause” under 5 U.S.C. 553(b) and (d) for forgoing prior publication of an NPRM and for making this interim final rule effective upon publication, for the reasons summarized in this analysis, above, and explained more fully in the preamble.

This interim final rule is not a major rule as defined by 5 U.S.C. 804 for the purposes of Congressional review of agency rulemaking under the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq. ). This interim final rule will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of U.S.-based companies to compete with foreign-based companies in domestic and export markets.

This interim final rule will not result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $100 million in any year and it will not significantly or uniquely affect small governments. Therefore, no actions were deemed necessary under the provisions of the Unfunded Mandates Reform Act of 1995.

The Department has determined that this rulemaking will not have tribal implications, will not impose substantial direct compliance costs on Indian tribal governments, and will not pre-empt tribal law. Accordingly, the requirements of Executive Order 13175 do not apply to this rulemaking.

Since this interim final rule (2012 IFR) is exempt from 5 U.S.C. 553, and no other law requires the Department of State to give notice of such rulemaking, it is not subject to the Regulatory Flexibility Act (5 U.S.C. 601, et seq. ) and Executive Order 13272, Sec. 3(b). However, to better inform the public as to the costs and burdens of this rule upon designated program sponsors, the Department notes that the 2012 IFR will affect the operations of 49 corporate, academic, and tax-exempt program sponsors designated by the Department to conduct Summer Work Travel Programs. Further information follows.

Of the 49 currently designated Summer Work Travel Program sponsors, 33 sponsors have annual revenues of less than $7 million. These 33 small program sponsors accounted for approximately 36,000 of the 109,000 Summer Work Travel Program participants in 2011.

The 2012 IFR specifically expands the list of prohibited job placements (at 22 CFR 62.32(h) Program Exclusions ) to now include: positions declared hazardous to youth by the Secretary of Labor at 29 CFR 570.50 through 570.72; positions that require sustained physical contact with other people and/or adherence to the Center for Disease Control and Prevention Universal Blood and Body Fluid Precautions guidelines (e.g., body piercing, tattooing, massage, manicure); positions that are substantially commission-based and thus do not guarantee that participants will be paid minimum wage in accordance with federal and state standards; positions in the North American Industry Classification System's (NAICS) Goods-Producing Industries (set forth at http://www.bls.gov/iag/tgs/iag_index_naics.htm) , specifically NAICS Sectors 11, 21, 23, and 31-33: Natural Resources and Mining (including Agriculture, Forestry, and Fishing and Hunting as well as Mining, Quarrying, and Oil and Gas Extraction); Construction; and Manufacturing (e.g., industrial food processing); positions requiring work hours that fall predominantly between the hours of 10 p.m. and 6 a.m.; positions directly involved in gaming and gambling that include direct participation in wagering and/or betting; positions in chemical pest control, warehousing, or catalogue/online order distribution centers; and in positions with travelling fairs or itinerant concessionaires.

Collectively, these positions accounted for approximately eight percent (8%) of all Summer Work Travel Program placements in 2011. A single large program sponsor, which voluntarily terminated its Summer Work Travel Program designation in 2012, sponsored approximately 40% of 2011 participants placed in jobs prohibited by the 2012 IFR. Of the remaining placements last year in prohibited jobs, 24% were sponsored by small program sponsors. The Department estimates the cost of transferring participants scheduled for prohibited jobs to new placements at approximately $6,000 to $18,000 (one to three man hours at $20 per hour for the approximately 300 new positions to be arranged) for the 24 sponsors that made placements last year that will be prohibited by the 2012 IFR.

The Department notes that there will be some indirect impact in the short-run on the U.S. businesses that have historically employed Summer Work Travel Program participants in positions prohibited by the 2012 IFR. However, the Department is not imposing any direct regulatory requirements on these U.S. businesses.

The 2012 IFR requires program sponsors to ensure that all participants have opportunities to interact regularly with U.S. citizens and experience U.S. culture during the work portion of their Summer Work Travel Programs and to participate in organized events, trips, or other activities outside of work. The Department estimates that the new cultural component requirement will cost, on average, $20 per participant, or approximately $2.2 million for the program. The Department notes that the actual cost of this requirement is likely less than $20 per participant: Many sponsors already provide such cultural activities for their participants and a significant majority of Summer Work Travel Program participants work in touristic areas where such activities may be organized for less than this estimated cost. The Department also emphasizes that it desires the cost of the cultural component not to be a burden on sponsors, and reiterates the number and variety of ways this requirement may be achieved. The Department accordingly estimates that approximately $720,000 of the cultural component cost of the 2012 IFR would fall upon small program sponsors. Collectively, the 2012 IFR will impose new costs of no more than $738,000 on the 33 small program sponsors. These costs as a percentage of small sponsor revenue are as follows: for 26 sponsors, the cost of these new requirements are between one and five percent (1-5%) of their annual revenues; for six sponsors the cost of these new requirements are between five and ten percent (5-10%) of their annual revenues; and for one small sponsor, the cost of these new requirements is approximately 20% of its annual revenue.

The Department determines that costs of the 2012 IFR are not significant to 26 of the 33 small program sponsors. The Department thus certifies that it does not believe that these regulatory changes will have a significant economic impact on a substantial number of small entities.

As discussed above, the Department is of the opinion that the subject of this rulemaking constitutes a foreign affairs function of the United States, and thus is exempt from the provisions of Executive Order 12866. The Department has nevertheless reviewed this rulemaking to ensure its consistency with the regulatory philosophy and principles set forth in Executive Orders 12866 and 13563. The Department of State does not consider this interim final rule to be a “significant regulatory action” under Executive Order 12866, Sec. 3(f), Regulatory Planning and Review, and Executive Order 13563. However, to better inform the public as to the costs and benefits of this rule, the Department presents a discussion below.

Affected Population. The Department estimates this rule will affect 49 currently designated Summer Work Travel Program sponsors hosting a maximum of 109,000 participants. These sponsors are responsible for the individuals, many between the ages of 18 and 25, while in the Summer Work Travel Program. Sponsors provide the necessary information, support, and guidance for program participants. Although sponsors will be provided with professional automony regarding how they incorporate the requirements presented in the 2012 IFR, the Department estimates sponsors may still incur costs due to the rule.

Costs. Implementation of certain of the provisions set forth in the 2012 IFR may result in costs for the sponsors—those provisions are: implementation of placement prohibitions, implementation of a cultural requirement for program participants, and implementation of additional vetting, reporting, and record keeping requirements.

Prohibited Job Placements. This IFR prohibits certain jobs that sponsors may already have selected for participant placements. The cost of finding replacement jobs will be minimal for the prohibitions that do not become effective until November 1, 2012. For the category of jobs that are immediately prohibited based on concerns for health, safety and welfare, participants already placed in these jobs will need to be re-located to new placements. The Department estimates that number to be no more than 300 and has calculated the cost of transferring participants scheduled for those jobs to be approximately $6,000 to $18,000 (one to three man hours at $20 per hour times 300) for the 24 sponsors that made placements last year that will be prohibited by the 2012 IFR.

Cultural Component. The 2012 IFR requires program sponsors to ensure that all participants have opportunities to interact regularly with U.S. citizens and experience U.S. culture during the work portion of their Summer Work Travel programs and to participate in organized events or other activities outside of work. The Department estimates that the new cultural component requirement will cost an average of $20 per participant for up to 109,000 participants; or approximately $2.18 million annually for the program.

Vetting, Reporting, and Recordkeeping. The 2012 IFR places additional vetting, reporting, and recordkeeping requirements on sponsors. The Department calculates that the new requirements may entail up to two additional hours of work per placement for Summer Work Travel sponsors that include an additional half hour for participant orientation; one additional hour towards third party screening, vetting and monitoring; and an additional half hour for the recordkeeping of the cultural component that each Summer Work Travel participant receives. The Department estimates that half of the participating sponsors already incorporate these additional requirements into their business practices. The Department estimates the costs for vetting the host employers and participant placements for all Summer Work Travel sponsors at $2.18 million [ 1/2 × (2 hrs. × $20/hr. × 109,000 participants)].

Total Costs. The Department estimates that total costs to sponsors from implementation of the 2012 IFR requirements are estimated at $4.37 to $4.38 million in the first year. Recurring costs for the 2012 IFR requirements are estimated at $4.36 million for the cultural component of the program and the additional vetting, reporting, and recordkeeping component of the program.

Benefits. The 2012 IFR is a continuation of efforts the State Department is implementing based on a comprehensive review of the Summer Work Travel Program. The Department issued the 2011 IFR based on this review. However, events that occurred in the summer of 2011 confirmed to the Department that it needed to enhance its scrutiny of the Summer Work Travel Program and take additional steps to amend regulations to protect program participants. Several foreign governments and entities complained to the Department about job placements, work conditions, and participant accommodations. Additionally, in recent years, the work component of the Summer Work Travel Program has too often overshadowed the core cultural component necessary for the Program to be consistent with the Fulbright-Hays Act.

The changes included in the 2012 IFR bear most directly on the health, safety, and welfare of the participants and serve to reinforce the cultural exchange aspects of the program to promote mutual understanding in accordance with the Fulbright-Hays Act. These changes are expected to protect/improve the health, safety, and welfare of participants by reducing the number of improper or unsafe job placements, fraudulent job offers, post-arrival job cancellations, inappropriate work hours, and problems regarding housing and transportation. Additionally, these changes are designed to help ensure participants are properly compensated, thereby helping to defray their travel costs.

The cultural dimension of the Summer Work Travel Program experience is essential to all participants. The changes in the 2012 IFR require sponsors to consider the cultural component in all placement decisions. However, rather than mandating a specific type of cultural program, the Department offers flexibility in implementing this requirement. This cultural component is essential to promoting cultural exchanges with foreign governments. A number of foreign governments have unequivocally informed the Department that they regard this program as important to their bilateral relationship with the United States and also important to their nationals who seek to participate in that program. Participating countries, therefore, look to the Department to keep the program alive but to fix it in a way that helps protect their nationals. These changes help accomplish this goal.

The changes in the 2012 IFR will allow the United States government to better regulate the sponsors in order to protect participants, the program itself and U.S. communities that support Summer Work Travel participants. Sponsors are also required to take more active roles in ensuring that participants have access to suitable, affordable, and safe housing and reliable and affordable transportation between their residences and worksites. These changes will help ensure the health, safety, and welfare of participants as well as promote the intent of the Fulbright-Hays Act through cultural exchanges.

The Department of State has reviewed this interim final rule in light of Sec. 3(a) and 3(b)(2) of Executive Order 12988 to eliminate ambiguity, minimize litigation, establish clear legal standards, and reduce burden.

This regulation will not have substantial direct effect on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this interim final rule does not have sufficient federalism implications to require consultations or warrant the preparation of a federalism summary impact statement. Executive Order 12372, regarding intergovernmental consultation on federal programs and activities, does not apply to this regulation.

The information collection requirements contained in this interim final rule (2012 IFR) are pursuant to the Paperwork Reduction Act, 44 U.S.C. chapter 35 and OMB Control Number 1405-0147, Form DS-7000. As part of this rulemaking, the Department is seeking comment regarding the additional administrative burden placed on sponsors due to the corresponding requirements for the sponsors to maintain additional records in the administration of their programs ( see 22 CFR 62.10(f)).

(1) Type of Information Collection: Revision of a Currently Approved Collection.

(2) Title of the Form/Collection: Recording, Reporting, and Data Collection Requirements Under 22 CFR part 62.

(3) Agency form number: DS-7000.

(4) Affected public: This is an expansion and continuation of an existing information collection utilized by the Bureau of Educational and Cultural Affairs in its administration and program oversight of the Exchange Visitor Program (J-Visa) under the provisions of the Mutual Educational and Cultural Exchange Act, as amended. The Department seeks comment from Summer Work Travel Program sponsors and other persons directly involved in the administration of the Summer Work Travel Program.

(5) Change to information collected by the Department of State: The existing Placement Report and Foreign Entity Report data collections are current collections required by all Summer Work Travel sponsors, and due to electronic reporting, do not impose any further recordkeeping burden. The 2012 IFR requires Summer Work Travel sponsors to submit annual price lists for all foreign entities to the Department, which is expected to place a minimal additional administrative burden on the 49 currently designated Summer Work Travel program sponsors. The Department believes that the additional regulatory requirements for documenting interviews, monthly contact with participants, and vetting host employers are already a standard business practice; however, the new requirements will bring all sponsors into conformity with program administration and will add a minimal administration burden as well.

Based on the current 2011 Foreign Entity Report, Summer Work Travel sponsors are working with approximately 960 foreign entities. The Department requires Summer Work Travel sponsors to conduct thorough vetting and institute formal agreements with each third party entity that assists in certain core programmatic functions. The Department believes this screening is already conducted in the routine administration and only foresees the additional cost of criminal background checks for those sponsors not already conducting such checks. In addition, the 2012 IFR requires Summer Work Travel sponsors to ensure that all participants have opportunities to interact regularly with U.S. citizens and experience U.S. culture during the work portion of their Summer Work Travel Programs and to accordingly organize events, trips, or other activities to provide them exposure to U.S. culture. The Department outlines the increased cost and burden hours associated with this collection requirement and discussed it fully in the Regulatory Flexibility Act/Executive Order 13272: Small Business section above.

(6) You may submit comments by any of the following methods: Direct comments to the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB). You may submit comments by the following methods:

• Email: oira_submission@omb.eop.gov. You must include the DS form number, information collection title, and OMB control number in the subject line of your message.

• Fax: 202-395-5806. Attention: Desk Officer for Department of State.

(7) The Department seeks public comment on:

• Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

• The accuracy of the agency's estimate of the burden of the collection of information, including the validity of the methodology and assumptions used;

• The quality, utility, and clarity of the information to be collected; and collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.

(8) An estimate of the total number of respondents and the amount of time estimated for an average respondent to respond: The total number of respondents is estimated to be those 49 organizations designated by the Department to conduct the Summer Work Travel Program activities.

(9) An estimate of the total annual public burden (in hours) associated with the collection: The Department calculates that the new requirements under the 2012 IFR may require up to two additional hours of work per placement for Summer Work Travel sponsors that include an additional half hour for participant orientation; one additional hour towards third party screening, vetting and monitoring; and an additional half hour for the recordkeeping of the cultural component that each Summer Work Travel participant receives.

The Department estimates that for approximately half of the 109,000 annual Summer Work Travel placements, a minimal additional burden will be imposed to the sponsors given current business practices of some sponsors with respect to vetting host employers. The total burden for vetting the host employers and participant placements for all Summer Work Travel sponsors is two hours, or 218,000 hours of work, which is an increase of one hour per placement. The increased burden will be imposed on those sponsors not currently documenting host employer interviews, obtaining references and court documents, financial viability, and housing being provided.

In addition, the Department estimates that the vetting recordkeeping obligations of third party foreign agents is a standard business practice and that the total burden of a half hour per third party, should be added to the estimated half hour that it already takes to vet and establish contracts of the 960 existing foreign agents. The additional reporting of annual price lists for each foreign entity is expected to be minimal. There are approximately 960 foreign entities and the time to collect and report the price list is expected to be a half hour.

Accordingly, 22 CFR Part 62 is amended as follows:

Section 956 was enacted to require an income inclusion by United States shareholders (as defined in section 951(b)) of a controlled foreign corporation (as defined in section 957(a)) that invests certain earnings and profits in United States property (U.S. property) “on the grounds that [the investment] is substantially the equivalent of a dividend being paid to them.” S. Rep. No. 87-1881, 1962-3 CB 703, 794 (1962). Under section 951(a)(1)(B), each United States shareholder (U.S. shareholder) of a controlled foreign corporation (CFC) is generally required to currently include in its gross income the amount determined under section 956 with respect to such shareholder.

The amount determined under section 956 with respect to a U.S. shareholder of a CFC for any taxable year is the lesser of: (1) The excess, if any, of the shareholder's pro rata share of the average of the amounts of U.S. property held (directly or indirectly) by the CFC as of the close of each quarter of such taxable year, over the amount of earnings and profits of the CFC described in section 959(c)(1)(A) with respect to such shareholder; or (2) the shareholder's pro rata share of the applicable earnings of the CFC. In general, the amount taken into account with respect to any U.S. property for this purpose is the adjusted basis of such property as determined for purposes of computing earnings and profits, reduced by any liability to which the property is subject. Earnings and profits described in section 959(c)(1)(A) are attributable to amounts previously included in gross income by the U.S. shareholder under section 951(a)(1)(B) (or which would have been included except for section 959(a)(2)).

Section 956(c)(1) defines U.S. property to generally include stock of a domestic corporation and an obligation of a United States person (U.S. person). Section 956(c)(2), however, generally excludes from the definition of U.S. property the stock or obligations of a domestic corporation that is neither a U.S. shareholder of the CFC nor a domestic corporation, 25 percent or more of the total combined voting power of which, immediately after the CFC's acquisition of stock in such domestic corporation, is owned, or is considered as being owned, by U.S. shareholders of the CFC. Under § 1.956-2T(d)(2), subject to certain exceptions not relevant here, the term “obligation” includes any bond, note, debenture, certificate, bill receivable, account receivable, note receivable, open account, or other indebtedness, whether or not issued at a discount and whether or not bearing interest.

When a notional principal contract (within the meaning of § 1.446-3(c)(1)) (NPC) includes a significant nonperiodic payment, the contract is generally treated as two separate transactions. One transaction is an on-market, level payment swap; the other is a loan. For purposes of section 956, the Commissioner may treat any nonperiodic payment in connection with an NPC, whether or not it is significant, as one or more loans. See § 1.446-3(g)(4). If a party to an NPC makes below-market periodic payments or receives above-market periodic payments under the terms of the contract, typically that party will make a nonperiodic payment, such as an upfront payment, to the counterparty in order to compensate for the off-market coupon payments specified in the contract.

For example, if A and B enter into an off-market interest rate swap the terms of which require A to make periodic below-market fixed rate payments to B and require B to make periodic on-market floating rate payments to A, then A typically will compensate B (for receiving the below-market fixed rate payments) by making a nonperiodic payment at the outset of the interest rate swap (henceforth, an upfront payment) so that the present value of the fixed rate leg of the swap will equal the present value of the floating rate leg of the swap.

Recently, certain contracts (cleared contracts), including some credit default swaps and interest rate swaps, have begun to be cleared through U.S.-registered derivatives clearing organizations or clearing agencies (collectively, U.S.-registered clearinghouses). Contracts cleared through a U.S.-registered clearinghouse generally are required to have standardized terms. For example, credit default swaps that are cleared through a U.S.-registered clearinghouse have common documentation and standardized coupons (currently 100 or 500 basis points). Consequently, except for the rare instance when the market coupon rate for a particular credit default swap is exactly 100 or 500 basis points, a credit default swap with a standardized coupon will be off-market and will require an upfront payment to equalize the present value of the payment obligations under the contract.

The volume of contracts cleared by U.S.-registered clearinghouses is expected to increase substantially as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law 111-203, 124 Stat. 1376 (the Dodd-Frank Act). Title VII of the Dodd-Frank Act, among other things: (1) Provides for the registration and comprehensive regulation of swap dealers and major swap participants; (2) imposes clearing and trade execution requirements on many swap contracts; and (3) creates rigorous recordkeeping and real-time reporting regimes.

U.S.-registered clearinghouses manage credit risk (the risk of counterparty default) in part by requiring that each party to a cleared contract provide various types of margin, including initial variation margin and daily variation margin (both of which are discussed in this section of the preamble). Cash margin payments (as well as other payments made pursuant to the terms of a cleared contract) to and from a U.S.-registered clearinghouse are made to or through a clearing member (that is, a futures commission merchant, broker, or dealer who is a member of the clearinghouse) which, in turn, makes corresponding payments to or receives corresponding payments from a counterparty.

The party that makes an upfront payment pursuant to a cleared contract (the first party) has credit risk with respect to that payment because, if the clearinghouse (or the first party's clearing member) were to default, the first party would not receive the full benefit it paid for (the benefit of making below-market fixed rate payments or receiving above-market payments for the term of the contract). When the U.S.-registered clearinghouse makes the upfront payment to the other party to the cleared contract (the second party), the U.S.-registered clearinghouse similarly has credit risk with respect to that second party (or its clearing member). The second party (the ultimate recipient of the upfront payment) is thus required to make a payment in the nature of variation margin (initial variation margin) to the U.S.-registered clearinghouse, generally no later than the end of the business day on which the upfront payment is made, in an amount that is equal to the upfront payment.

In some instances, the total amount of margin posted by the second party on the day that it is required to post initial variation margin may not equal the amount of the first party's upfront payment, due to either: (1) The netting of the second party's notional exposure to the first party, or to the clearinghouse, as a result of other transactions; or (2) changes in the value of the contract between the time the contract is entered into and the time when the required margin is paid, requiring daily variation margin to be added to or subtracted from the second party's initial variation margin payment, as the case may be. However, on a transaction-by-transaction basis, the payment of initial variation margin by the second party should equal the first party's upfront payment when any daily variation margin is treated as separate from the initial variation margin posted on that day.

After receiving the second party's initial variation margin payment, the U.S.-registered clearinghouse will pay the same amount to the first party. In each case, unless the first party and the second party are clearing members of the U.S.-registered clearinghouse, the payment will be made to or through each party's clearing member, which may be an affiliate of that party.

Assume that D (a dealer under section 475) and C (a customer) enter into a contract that is accepted for clearing by a U.S.-registered clearinghouse, the terms of which require D to make below-market periodic payments to C. D is required under the contract to make an upfront payment of $25,000 to compensate C for the below-market coupon payments that C will receive. D (not a clearing member) makes that upfront payment to its clearing member, who then pays the U.S.-registered clearinghouse an identical amount. The U.S.-registered clearinghouse in turn pays that amount to the clearing member for C, which makes the upfront payment to C. C, on the same business day, makes an initial variation margin payment of $25,000 to its clearing member, who then pays that amount to the U.S.-registered clearinghouse; the U.S.-registered clearinghouse makes the initial variation margin payment to D's clearing member; and D's clearing member makes the payment to D. Thus, the upfront payment from D is immediately offset by an initial variation margin payment in the same amount from C.

In addition to initial variation margin, U.S.-registered clearinghouses manage credit risk by requiring that each party to a cleared contract provide daily variation margin (also referred to as mark-to-market or maintenance margin). Daily variation margin is a cash margin payment made on a daily or intraday basis between the counterparties to a contract to protect against the risk of counterparty default. The rules of U.S.-registered clearinghouses generally require that daily variation margin be paid in an amount equal to the change in the fair market value of the contract.

The text of these temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register . These temporary regulations establish an exception to the definition of U.S. property for obligations of U.S. persons arising from upfront payments made with respect to certain cleared contracts that are properly classified as NPCs. The temporary regulations provide that obligations of U.S. persons arising from such upfront payments by a CFC that is a dealer in securities or commodities (within the meaning of section 475) do not constitute U.S. property for purposes of section 956(a).

To qualify for this exception: (1) The upfront payment must be required under a contract that is cleared by a derivatives clearing organization (as such term is defined in section 1a of the Commodity Exchange Act (7 U.S.C. 1a)) or a clearing agency (as such term is defined in section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c)) that is registered as a derivatives clearing organization under the Commodity Exchange Act or as a clearing agency under the Securities Exchange Act of 1934, respectively; (2) the CFC must make the upfront payment to or through a United States person that is a clearing member of the derivatives clearing organization or clearing agency, or directly to the derivatives clearing organization or clearing agency if the CFC is a clearing member of such derivatives clearing organization or clearing agency; (3) the upfront payment must be made, directly or indirectly, to the counterparty to the contract; (4) the counterparty to the contract must be required to make a payment in the nature of initial variation margin that is equal (before taking into account any change in the value of the contract between the time the contract is entered into and the time at which the payment is made) to the amount of the upfront payment made by the CFC; and (5) such payment in the nature of initial variation margin must be paid, directly or indirectly, to the CFC.

The IRS and the Treasury Department do not believe that an obligation of a U.S. person created by an upfront payment resulting from a cleared contract that satisfies the requirements listed in this regulation is the type of transaction intended to be covered by section 956, whether or not the payment is treated as a loan under the NPC rules under section 446. While the section 956 exception in these temporary regulations currently is limited to cleared contracts, the IRS and the Treasury Department continue to study, and request comments on, whether and under what circumstances it would be appropriate to extend the exception to contracts that are not cleared by a U.S.-registered clearinghouse, but that would otherwise meet the criteria set forth in these temporary regulations.

These regulations apply to payments described in § 1.956-2T(b)(1)(xi) made on or after May 11, 2012. However, taxpayers may apply the rules of these regulations retroactively to payments made prior to May 11, 2012.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), refer to the cross-reference notice of proposed rulemaking published in the proposed rules section in this issue of the Federal Register . Pursuant to section 7805(f) of the Internal Revenue Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small entities.

The principal author of these regulations is Kristine A. Crabtree of the Office of Associate Chief Counsel (International). However, other personnel from the IRS and the Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

Cyber threats to DIB unclassified information systems represent an unacceptable risk of compromise of DoD information and pose an imminent threat to U.S. national security and economic security interests. DoD's voluntary DIB CS/IA program enhances and supplements DIB participants' capabilities to safeguard DoD information that resides on, or transits, DIB unclassified information systems.

This rule is being published as an interim final rule to:

(a) Allow eligible DIB companies to receive USG threat information and share information about network intrusions that could compromise critical DOD programs and missions.

(b) Permit DIB companies and DOD to assess and reduce damage to critical DOD programs and missions when DOD information is compromised.

(c) Fulfill statutory requirements to ensure the protection of DOD information.

(d) Address vigorous congressional and public interest in increasing cyber security and information assurance activities through government-industry cooperation.

(e) Immediately provide a voluntary framework for DOD and DIB companies to share information to address sophisticated cyber threats that represent an imminent threat to U.S. national security and economic security interests.

Until this rule is published as an interim final rule, eligible DIB companies cannot receive USG information about cyber threats and mitigation strategies or share information about cyber incidents that may compromise critical DOD programs and missions. Without this information, eligible DIB companies' ability to protect USG information cannot be fully effective. While this vulnerability remains open, the USG faces an elevated risk that critical program information could be compromised, resulting in potential economic losses or damage to U.S. national security. For example, the compromise of such information can significantly diminish return on DIB company and U.S. Government research and development investment and represents a loss of intellectual property that compromises the security and technical advantages of DoD weapons systems.

DIB CS/IA activities, including the collection, management and sharing of information for cyber security purposes, support and implement the following national and DoD-specific guidance and authority: information assurance (IA) requirements to establish programs and activities to protect DoD information and DoD information systems, including information and information systems operated and maintained by contractors or others in support of DoD activities (see 10 U.S.C. 2224; and the Federal Information Security Management Act (FISMA), codified at 44 U.S.C. 3541 et seq.); critical infrastructure protection responsibilities, in which DoD is the sector specific agency for the DIB sector, (see Homeland Security Presidential Directive 7 (HSPD-7), “Critical Infrastructure Identification, Prioritization, and Protection”).

The DoD established the voluntary DIB CS/IA program to enhance and supplement DIB participants' capabilities to safeguard DoD unclassified information that resides on, or transits, DIB unclassified information systems. At the core of the program is a bilateral cyber security information sharing activity, in which DoD provides cyber threat information and information assurance (IA) best practices to DIB companies to enhance and supplement DIB companies' capabilities to safeguard DoD unclassified information; and in return, DIB companies report certain types of cyber intrusion incidents to the Defense Cyber Crime Center's DoD-DIB Collaborative Information Sharing Environment (DCISE), DoD's operational focal point for cyber threat information sharing and incident response under this program. The DoD analyzes the information reported by the DIB company regarding any such cyber incident, to glean information regarding cyber threats, vulnerabilities, and the development of effective response measures. In addition to this initial reporting and analysis, the DoD and DIB company may pursue, on a voluntary basis, follow-on, more detailed, digital forensics analysis or damage assessments of individual incidents, including sharing of additional electronic media/files or information regarding the incident or the affected systems, networks, or information. The information sharing arrangements between the DoD and each participating DIB company are memorialized in a standardized bilateral Framework Agreement (FA), signed by the participating DIB company and the Government, that implements the requirements of this part and is signed by the participating DIB company and the Government. The FA is available to eligible DIB companies during the application process. As provided by the FA, participation in the program is entirely voluntary and does not obligate any DIB participant to change its information systems or otherwise alter its normal conduct of cyber security activities. In keeping with the voluntary, collaborative nature of the activity described in the FA, each Party bears responsibility for its own actions under this FA. The FA emphasizes sharing to the greatest extent possible information to provide the clearest understanding of the cyber threat. This will allow the Company to improve defense and remediation efforts and allow the Government to assess the damage or impact to defense information and programs entrusted to the Company.

A foundational element of this bilateral information sharing model is the recognition that the information being shared between the parties includes extremely sensitive nonpublic information, which must be protected against unauthorized uses and disclosures in order to preserve the integrity of the program. For example, the cyber threat information shared by the Government must be protected against compromise by the cyber threat, which may already have a presence on the DIB participant's system; and thus the DIB participants must utilize security measures and limited sharing within the company, to ensure that the cyber threat information retains its operational value—for the benefit of all of the DIB participants. Similarly, the DIB participants typically treat information regarding potential cyber intrusion incidents on their networks as extremely sensitive proprietary, commercial, or operational information and tightly control that information within the company, let alone sharing outside the company. The DIB participants share this type of information with the Government only on the condition that the Government safeguards that information against any unauthorized use or release (both within the Government and outside the Government), which could cause substantial competitive harm to the DIB participant that reported that information. In addition, during any follow-on forensics or damage assessment activities, the Government and DIB companies may share additional types of sensitive information, which may include information regarding the types of DoD information or DIB company information that may have been compromised during the reported incident—potentially including the most sensitive types of unclassified information (e.g., critical program information relating to DoD weapons systems, DIB company trade secrets related to DoD programs, personally identifiable information (PII) regarding individuals). For additional information regarding the Government's safeguarding of information received from the DIB companies, with specific focus on PII, see the Privacy Impact Assessment for the DIB CS/IA Program ( http://dodcio.defense.gov/Portals/0/Documents/DIB%20CS-IA%20PIA_FINAL_signed_30jun2011_VMSS_GGMR_RC.pdf ).

As part of DoD's instantiation of the voluntary DIB CS/IA program, DoD developed new policies and procedures, developed a dedicated threat sharing and collaboration system, and validated on-line application procedures in order to support participation by a large number of companies. The on-line application procedures provide the administrative and security requirements for DIB participants, including the standardized bilateral FA that implements the requirements of the DIB CS/IA program. The FA will typically be executed by a senior DoD official, such as the DoD Chief Information Officer (CIO), and by a DIB company corporate senior official (e.g., Company CIO or equivalent).

This interim-final rule establishes a new part 236 in title 32 of the Code of Federal Regulations, with the following new sections: Section 236.2 establishes the definitions of terms used in the new part, leveraging established definitions to the maximum extent possible (e.g., those provided in the Committee on National Security Systems Instruction No. 4009, “National Information Assurance Glossary”) ( http://www.cnss.gov/Assets/pdf/cnssi_4009.pdf ); Section 236.4 sets forth the basic requirements and procedures of the voluntary program, including information collection requirements; Section 236.5 characterizes cyber security information sharing and collection procedures; Section 236.6 establishes the general provisions of the voluntary DIB CS/IA program; and Section 236.7 sets forth the eligibility requirements to participate in the voluntary program.

Nothing in this rule or program is intended to be inconsistent with any other related or similar federal agency or private sector activity or requirement. For example, nothing in this rule or program abrogates the Government's or the DIB participants' rights or obligations regarding the handling, safeguarding, sharing, or reporting of information, or regarding any physical, personnel, or other security requirements, as required by law, regulation, policy, or a valid legal contractual obligation.

Similarly, this rule and program are intended to be consistent and coordinated with, and updated as necessary to ensure consistency with and support for, other federal activities related to the handling and safeguarding of controlled unclassified information, such as those that are being led by the National Archives and Records Administration pursuant to Executive Order 13556 “Controlled Unclassified Information” (November 4, 2010) (see http://www.archives.gov/cui/ ).

It has been certified that 32 CFR part 236 does not:

(a) Have an annual effect on the economy of $100 million or more, or adversely affect in a material way, the economy; a section of the economy; productivity; competition; jobs; the environment; public health or safety; or State, local, or tribal governments or communities;

(b) Create a serious inconsistency, or otherwise interfere with, an action taken or planned by another Agency;

(c) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs, or the rights and obligations of recipients thereof; or

(d) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles as set forth in these Executive Orders.

It has been determined that 32 CFR part 236 is not a “major” rule under 5 U.S.C. 801, enacted by Public Law 104-121, because it will not result in an annual effect on the economy of $100 million or more; a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.

It has been certified that 32 CFR part 236 does not contain a Federal mandate that may result in expenditure by State, local and tribal governments, in aggregate, or by the private sector, of $100 million or more in any one year.

It has been certified that 32 CFR part 236 is not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if promulgated, have a significant economic impact on a substantial number of small entities. DIB participation in the DIB CS/IA Program is voluntary.

Sections 236.4 and 236.5 and 236.7 of this interim final rule contain information collection requirements. DoD has submitted the following proposal to Office of Management and Budget (OMB) under the provisions of the Paperwork Reduction Act (44 U.S.C. Chapter 35). Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of DoD, including whether the information will have practical utility; (b) the accuracy of the estimate of the burden of the proposed information collection; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the information collection on respondents, including the use of automated collection techniques or other forms of information technology.

(a) Title: Defense Industrial Base Cyber Security/Information Assurance (DIB CS/IA) Points of Contact Information.

Type of Request: New.

Projected Responses per Respondent: One response is required initially and thereafter only on an “as needed/required” basis, as changes to the points of contact occur.

Annual Responses: 275, which includes the additional responses required on an “as needed/required” basis.

Average Burden per Response: 20 minutes.

Annual Burden Hours: Total annual burden for respondents 92 hours.

Total Annualized Cost to Respondents: One-time cost of ~$12 per respondent. Total cumulative annual cost for 250 respondents (275 responses) is $3,337.

Needs and Uses: The DIB CS/IA program collects Point of Contact (POC) information from DIB participants. POC information is needed to facilitate communication between DoD and DIB participants, as well as prospective participants. The POC information includes the names, security clearance information, citizenship, work addresses, including division/group, work email addresses and work telephone numbers of company-identified representatives. DIB POCs include the Chief Executive Officer (CEO), Chief Information Officer (CIO), Chief Information Security Officer (CISO), General Counsel, the Chief Privacy Officer, and the Corporate Security Officer (CSO) or Facility Security Officer (FSO), or their equivalents. DIB participants also provide POC information for personnel responsible for the implementation and execution of the DIB CS/IA program within their company including designated personnel authorized to report incidents and any policy, administrative, or technical personnel identified to interact with DOD in the operational implementation of the program.

Affected Public: Business or other for-profit and not-for-profit institutions participating in the voluntary DIB CS/IA program.

Frequency: On occasion.

Respondent's Obligation: Voluntary.

(b) Title: DIB Cyber Security/Information Assurance Cyber Incident Reporting.

Type of Request: New.

Phased expansion of DIB CS/IA Number of Participants increases to 750 over three years.

Projected Responses per Participant: 5.

Annual Responses: Year 1 responses are 1,250. Year 2 responses are 2,500. Year 3 responses are 3,750.

Average Burden per Response: 7 hours (this includes searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information).

Annual Burden Hours: Year 1 burden hours are 8,750 hours. Year 2 burden hours are 17,500 hours. Year 3 burden hours are 26,250 hours.

Needs and Uses: The collection of this information is necessary to enhance and supplement DIB participants' information security capabilities to safeguard DoD information that resides on, or transits, DIB unclassified information systems. The requested information supports the information assurance objectives, cyber threat information sharing, and incident reporting between DoD and the DIB participants. In most cases, DIB participants report incidents using a DIB CS/IA standardized Incident Collection Form (ICF). In some cases, a company may elect to report the incident without using the ICF; and companies may report incidents through a variety of communications channels, including email, fax, or by phone, if necessary.

Affected Public: Business or other for-profit and not-for-profit institutions participating in the DIB CS/IA program.

Frequency: On occasion.

Respondent's Obligation: Voluntary.

OMB Desk Officer: Written comments and recommendations on the information collection should be sent to Ms. Jasmeet Seehra at the Office of Management and Budget, DoD Desk Officer, Room 10102, New Executive Office Building, Washington, DC 20503, with a copy to the Director, DIB CS/IA Program Office, at the Office of the DoD Chief Information Officer, 6000 Defense Pentagon, Attn: DIB CS/IA Program Office, Washington, DC 20301, or email at DIB.CS/IA.Reg@osd.mil. Comments can be received from 30 to 60 days after the date of this notice, but comments to OMB will be most useful if received by OMB within 30 days after the date of this notice.

You may also submit comments, identified by docket number and title, by the following method: Federal Rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.

Instructions: All submissions received must include the agency name, docket number and title for this Federal Register document. The general policy for comments and other submissions from members of the public is to make these submissions available for public viewing on the Internet at http://www.regulations.gov as they are received without change, including any personal identifiers or contact information.

To request more information on this information collection or to obtain a copy of the proposal and associated collection instruments, please write to Director, DIB CS/IA Program Office, at Office of the DoD Chief Information Officer, Attn: DIB CS/IA Program Office, 6000 Defense Pentagon, Washington, DC 20301.

It has been certified that 32 CFR part 236 does not have federalism implications, as set forth in Executive Order 13132. This rule does not have substantial direct effects on:

(a) The States;

(b) The relationship between the National Government and the States; or

(c) The distribution of power and responsibilities among the various levels of Government.

Accordingly 32 CFR part 236 is added to read as follows:

Regulatory Information

On March 15, 2012, we published a notice of proposed rulemaking (NPRM) entitled “War of 1812 Bicentennial Commemorations, Chesapeake Bay and Port of Baltimore, MD” in the Federal Register (77 FR 15323). We received one comment on the proposed rule. No public meeting was requested, and none was held.

The U.S. Department of the Navy is sponsoring War of 1812 Bicentennial Commemorations in the Chesapeake Bay and Port of Baltimore, Maryland. Planned events include the scheduled arrival of U.S. and foreign naval vessels, public vessels, tall ships and other vessels beginning on June 12, 2012 and the scheduled departure of those vessels ending on June 20, 2012. The Coast Guard anticipates a large spectator fleet for these events. Operators should expect significant vessel congestion along the arrival and departure routes. The purpose of these regulations is to promote maritime safety and protect participants and the boating public in the Port of Baltimore and the waters of the Chesapeake Bay immediately prior to, during, and after the scheduled events. The regulations will provide for clear passage of participating vessels, a safety buffer around the participating vessels while they are in transit for the benefit of participants and spectators. The regulations will impact the movement of all vessels operating in specified waters of the Chesapeake Bay, Patapsco River, Northwest Harbor and the Inner Harbor.

It may be necessary for the Coast Guard to establish additional safety or security zones in addition to these regulations to safeguard dignitaries and certain vessels participating in the event. If the Coast Guard deems it necessary to establish such zones at a later date, the details of those zones will be announced separately via the Federal Register , Local Notice to Mariners, Safety Voice Broadcasts, and any other means available.

With the arrival of War of 1812 Bicentennial Commemorations participants and spectator vessels in the Port of Baltimore for this event, it will be necessary to curtail normal port operations to some extent. The Coast Guard will attempt to minimize interference while still ensuring the safety of life on the navigable waters immediately before, during, and after the scheduled events.

The Coast Guard received one comment in response to the NPRM. No public meeting was requested and none was held. What follows is a review of, and the Coast Guard's response to, the issue that was presented by the commenter concerning the proposed regulations.

The commenter stated that while the War of 1812 Bicentennial Celebration will be an important event that normally calls for an increased safety of participating vessels, smaller shipping operations will be unable to afford unforeseen schedule changes, dock workers and their communities will suffer from a lack of labor, and ships unable to access Port of Baltimore terminals may choose to go elsewhere that week and maybe for the foreseeable future; allowing the shipping industry alone to operate as they see fit during the event without the proposed regulations, and providing additional law enforcement patrol resources to monitor the situation, would not cause business losses in the private sector.

We disagree. We feel that as a result of the extensive planning and notice provided to the public, which began in 2009 and will continue through the event, the Port of Baltimore stakeholders and waterway users will not be substantially adversely affected during the event as suggested by the commenter. The highly-publicized, international event is expected to create a large spectator fleet and attract many other waterway users to the area.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. The primary impact of these regulations will be on vessels wishing to transit the affected waterways during the War of 1812 Bicentennial Commemorations vessels arrival beginning on June 12, 2012 and their departure ending on June 20, 2012. Although these regulations prevent traffic from transiting a portion of the Inner Harbor, Northwest Harbor, Patapsco River and the Chesapeake Bay during these events, that restriction is limited in duration, affects only a limited area, and will be well publicized to allow mariners to make alternative plans for transiting the affected area. Moreover, the magnitude of the event itself will severely hamper or prevent transit of the waterway, even absent these regulations designed to ensure it is conducted in a safe and orderly fashion.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule may affect the following entities, some of which might be small entities: The owners or operators of vessels intending to operate or anchor in portions of the Inner Harbor, the Northwest Harbor and Patapsco River, and the Chesapeake Bay, in Maryland. The regulations would not have a significant impact on a substantial number of small entities for the following reasons: The restrictions are limited in duration, affect only limited areas, and will be well publicized to allow mariners to make alternative plans for transiting the affected areas. Moreover, the magnitude of the event itself will severely hamper or prevent transit of the waterway, even absent these regulations designed to ensure it is conducted in a safe and orderly fashion.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), in the NPRM we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 (adjusted for inflation) or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have concluded this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded, under figure 2-1, paragraph (34)(h), of the Instruction. This rule involves implementation of regulations within 33 CFR Part 100 applicable to organized marine events on the navigable waters of the United States that could negatively impact the safety of waterway users and shore side activities in the event area. The category of water activities includes but is not limited to sail boat regattas, boat parades, power boat racing, swimming events, crew racing, canoe and sail board racing. An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES .

Additionally, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction. This rule also involves establishing a temporary safety zone. An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES .

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR parts 100 and 165 as follows:

The California Department of Transportation requested a temporary change to the operation of the Commodore Schuyler F. Heim Drawbridge, mile 4.9, over Cerritos Channel, at Long Beach, CA. The drawbridge navigation span provides a vertical clearance of 37 feet above Mean High Water in the closed-to-navigation position and 163 feet in the full open to navigation position. Pursuant to § 117.147, the draw opens on signal; except that, from 6:30 a.m. to 8 a.m. and 3:30 p.m. to 6 p.m., Monday through Friday except Federal holidays, the draw need not be opened for the passage of vessels. Navigation on the waterway is commercial, recreational, search and rescue, and law enforcement.

The drawspan will be secured in the closed-to-navigation position from 7 a.m. through 7 p.m. on June 10, 2012 to perform critical repair and replacement of electrical components for drawspan operation. The alternative path around Terminal Island will be available for routine and emergency navigation. This temporary deviation has been coordinated with commercial and recreational waterway users. No objections to the proposed temporary deviation were raised.

Vessels that can transit the bridge, while in the closed-to-navigation position, may continue to do so at any time.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Coast Guard will enforce the safety zone listed in 33 CFR 165.935, Safety Zone, Milwaukee Harbor, Milwaukee, WI, at the following time for the following events:

(1) Pridefest fireworks display on June 9, 2012 from 9:15 p.m. through 10:00 p.m.

(2) Polish Festival fireworks display on June 16, 2012 from 10:15 p.m. through 11:00 p.m.;

(3) Summerfest fireworks display on June 27, 2012 from 9:15 p.m. through 10:30 p.m.

All vessels must obtain permission from the Captain of the Port, Sector Lake Michigan, or his or her on-scene representative to enter, move within, or exit the safety zone. Vessels and persons granted permission to enter the safety zone shall obey all lawful orders or directions of the Captain of the Port, Sector Lake Michigan, or his or her on-scene representative. While within a safety zone, all vessels shall operate at the minimum speed necessary to maintain a safe course.

This notice is issued under authority of 33 CFR 165.935 Safety Zone, Milwaukee Harbor, Milwaukee, WI and 5 U.S.C. 552(a). In addition to this notice in the Federal Register , the Coast Guard will provide the maritime community with advance notification of these enforcement periods via broadcast Notice to Mariners or Local Notice to Mariners. The Captain of the Port, Sector Lake Michigan, will issue a Broadcast Notice to Mariners notifying the public when enforcement of the safety zone established by this section is suspended. If the Captain of the Port, Sector Lake Michigan, determines that the safety zone need not be enforced for the full duration stated in this notice, he or she may use a Broadcast Notice to Mariners to grant general permission to enter the safety zone. The Captain of the Port, Sector Lake Michigan, or his or her on-scene representative may be contacted via VHF Channel 16.

The Coast Guard will enforce the safety zone listed in 33 CFR 165.935, Safety Zone, Milwaukee Harbor, Milwaukee, WI, for the following events:

(1) Festa Italiana fireworks display on July 19, 2012 from 10:00 p.m. through 10:45 p.m.; on July 20, 2012 from 10:00 p.m. through 10:45 p.m.; on July 21, 2012 from 10:00 p.m. through 10:45 p.m.; on July 22, 2012 from 10:00 p.m. through 10:45 p.m.

(2) German Festival fireworks display on July 27, 2012 from 10:15 p.m. through 11:00 p.m.; on July 28, 2012 from 10:15 p.m. through 11:00 p.m.

(3) Irish Festival fireworks display on August 19, 2012 from 10:15 p.m. through 11:00 p.m.

All vessels must obtain permission from the Captain of the Port, Sector Lake Michigan, or his or her on-scene representative to enter, move within, or exit a safety zone. Vessels and persons granted permission to enter the safety zone shall obey all lawful orders or directions of the Captain of the Port, Sector Lake Michigan, or a designated representative. While within a safety zone, all vessels shall operate at the minimum speed necessary to maintain a safe course.

This notice is issued under authority of 33 CFR 165.935 Safety Zone, Milwaukee Harbor, Milwaukee, WI and 5 U.S.C. 552(a). In addition to this notice in the Federal Register , the Coast Guard will provide the maritime community with advance notification of these enforcement periods via Broadcast Notice to Mariners or Local Notice to Mariners. The Captain of the Port, Sector Lake Michigan will issue a Broadcast Notice to Mariners notifying the public when enforcement of the safety zone established by this section is suspended. If the Captain of the Port, Sector Lake Michigan, determines that the safety zone need not be enforced for the full duration stated in this notice, he or she may use a Broadcast Notice to Mariners to grant general permission to enter the safety zone. The Captain of the Port, Sector Lake Michigan, or his or her on-scene representative may be contacted via VHF Channel 16.

On March 30, 2012, EPA published a rule finalizing a limited approval and a limited disapproval of two revisions to the Kentucky SIP submitted by DAQ on June 25, 2008, and May 28, 2010, addressing regional haze. See 77 FR 19098. In the final action, EPA inadvertently excluded an entry identifying Kentucky's regional haze SIP and SIP amendment in the table of “EPA-Approved Kentucky Non-Regulatory Provisions” located at 40 CFR 52.920(e).

This action amends the table in 40 CFR 52.920(e) by adding an entry for Kentucky's regional haze SIP and SIP amendment. EPA has determined that today's action falls under the “good cause” exemption in section 553(b)(3)(B) of the Administrative Procedure Act (APA) which, upon finding “good cause,” authorizes agencies to dispense with public participation where public notice and comment procedures are impracticable, unnecessary, or contrary to the public interest. Public notice and comment for this action are unnecessary because today's action, adding an entry in the table located at 40 CFR 52.920(e), has no substantive impact on EPA's March 30, 2012, limited approval and limited disapproval of the regional haze SIP revisions. In addition, EPA can identify no particular reason why the public would be interested in being notified of the correction, or in having the opportunity to comment on the correction prior to this action being finalized, since this correction action does not change the meaning of EPA's analysis or action related to the regional haze SIP revisions.

EPA also finds that there is good cause under APA section 553(d)(3) for this correction to become effective on the date of publication of this action. Section 553(d)(3) of the APA allows an effective date less than 30 days after publication “as otherwise provided by the agency for good cause found and published with the rule.” The purpose of the 30-day waiting period prescribed in APA section 553(d)(3) is to give affected parties a reasonable time to adjust their behavior and prepare before the final rule takes effect. Today's rule, however, does not create any new regulatory requirements such that affected parties would need time to prepare before the rule takes effect. Rather, today's action only adds an entry in 40 CFR 52.920(e) identifying EPA's March 30, 2012, limited approval of Kentucky's regional haze SIP. For these reasons, EPA finds good cause under APA section 553(d)(3) for this correction to become effective on the date of publication of this action.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action only adds an entry identifying EPA's March 30, 2012, limited approval of Kentucky's regional haze SIP in the table located at 40 CFR 52.920(e), and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq . ). Furthermore, this rule does not contain any unfunded mandates or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), given the nature of this action as described above.

This rule does not have tribal implications because it will not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This rule also does not have Federalism implications because it does not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). This rule only adds an entry identifying EPA's limited approval of Kentucky's regional haze SIP in the table located at 40 CFR 52.920(e), and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act (CAA). This rule is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. In addition, this rule does not involve technical standards, thus the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule also does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq .).

The Congressional Review Act, 5 U.S.C. section 801 et seq., as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 10, 2012. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. See CAA section 307(b)(2).

40 CFR part 52 is amended as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

You may access a frequently updated electronic version of 40 CFR part 180 through the Government Printing Office's e-CFR site at http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?&c=ecfr&tpl=/ecfrbrowse/Title40/40tab_02.tpl. To access the OCSPP test guidelines referenced in this document electronically, please go to http://www.epa.gov/ocspp and select “Test Methods and Guidelines.”

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2011-0525 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before July 10, 2012. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit a copy of your non-CBI objection or hearing request, identified by docket ID number EPA-HQ-OPP-2011-0525, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the online instructions for submitting comments.

• Mail: Office of Pesticide Programs (OPP) Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001.

• Delivery: OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket Facility's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is (703) 305-5805.

In the Federal Register of August 26, 2011 (76 FR 53372) (FRL-8884-9), EPA issued a notice pursuant to FFDCA section 408, 21 U.S.C. 346a, announcing the filing of a pesticide petition (PP 1E7858) by Joint Inerts Task Force, Cluster Support Team 5, c/o CropLife America, 1156 15th St. NW., Suite 400, Washington, DC 20005. The petition requested that 40 CFR 180.910 be amended by establishing an exemption from the requirement of a tolerance for residues of α-[p-(1,1,3,3-tetramethylbutyl)phenyl]-ω-hydroxypoly(oxyethylene) (CAS Reg. Nos. 9036-19-5, 9002-93-1) when used as an inert ingredient at levels not to exceed 7% in pesticide formulations applied to growing crops and raw agricultural commodities after harvest. That notice referenced a summary of the petition prepared by Joint Inerts Task Force, Cluster Support Team 5, the petitioner, which is available in the docket, http://www.regulations.gov. There were no comments received in response to the notice of filing.

Previously, in the Federal Register of May 17, 2010 (75 FR 27443) (FRL-8826-3), EPA established a time-limited tolerance exemption for α-[p-(1,1,3,3-tetramethylbutyl)phenyl]-ω-hydroxypoly(oxyethylene) (herein referred to in this document as octylphenol ethoxylate) with an expiration date of May 17, 2012. The 2-year time limitation was established for two purposes:

1. To provide time for the development and submission of confirmatory toxicity data to address equivocal results in the available genotoxicity studies conducted on octylphenol ethoxylate (as described in Unit IV.C., of the May 17, 2010 final rule); and

2. To provide additional time, should the initial testing not confirm EPA's conclusion regarding the lack of a cancer concern, for registrants to attain EPA approval of registration amendments for reformulation of their pesticide products to remove octylphenol ethoxylate and to replace existing products with reformulated products.

In establishing the time-limited tolerance exemption for octylphenol ethoxylate, EPA stated that if the submitted data confirmed its conclusion regarding a lack of cancer concern, the Agency intended to remove the expiration date from the tolerance exemption prior to expiration of the exemption.

Inert ingredients are all ingredients that are not active ingredients as defined in 40 CFR 153.125 and include, but are not limited to, the following types of ingredients (except when they have a pesticidal efficacy of their own): Solvents such as alcohols and hydrocarbons; surfactants such as polyoxyethylene polymers and fatty acids; carriers such as clay and diatomaceous earth; thickeners such as carrageenan and modified cellulose; wetting, spreading, and dispersing agents; propellants in aerosol dispensers; microencapsulating agents; and emulsifiers. The term “inert” is not intended to imply nontoxicity; the ingredient may or may not be chemically active. Generally, EPA has exempted inert ingredients from the requirement of a tolerance based on the low toxicity of the individual inert ingredients.

Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue * * *.”

EPA establishes exemptions from the requirement of a tolerance only in those cases where it can be clearly demonstrated that the risks from aggregate exposure to pesticide chemical residues under reasonably foreseeable circumstances will pose no appreciable risks to human health. In order to determine the risks from aggregate exposure to pesticide inert ingredients, the Agency considers the toxicity of the inert in conjunction with possible exposure to residues of the inert ingredient through food, drinking water, and through other exposures that occur as a result of pesticide use in residential settings. If EPA is able to determine that a finite tolerance is not necessary to ensure that there is a reasonable certainty that no harm will result from aggregate exposure to the inert ingredient, an exemption from the requirement of a tolerance may be established.

Consistent with FFDCA section 408(c)(2)(A), and the factors specified in FFDCA section 408(c)(2)(B), EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for octylphenol ethoxylate including exposure resulting from the exemption established by this action.

In the Federal Register of May 17, 2010, EPA issued a final rule establishing an exemption from the requirement of a tolerance for residues of octylphenol ethoxylate when used as an inert ingredient at levels not to exceed 7% in pesticide formulations applied to growing crops and raw agricultural commodities after harvest under 40 CFR 180.910 with an expiration date of May 17, 2012. EPA has determined that establishing an exemption from the requirement of a tolerance for residues of octylphenol ethoxylate when used as an inert ingredient an inert ingredient at levels not to exceed 7% in pesticide formulations applied to growing crops and raw agricultural commodities after harvest will not significantly change the risk assessments the Agency relied on to support the May 17, 2010, tolerance action, as explained in this unit.

As part of the Agency's conduct of the risk assessment in support of the May 17, 2010, tolerance action, it was determined that there were no acute, chronic, short- or intermediate term aggregate risks of concern. With regards to aggregate cancer risk, the assessment concluded that based on a weight of the evidence consideration of the available data, the Agency believed that cancer risks would be negligible. However, due to the equivocal findings in the mutagenicity data base, the Agency asked for confirmatory data. Specifically, EPA recommended that supporters of the octylphenol ethoxylate tolerance exemption perform the following studies for confirmatory purposes:

A new Ames assay (OCSPP Harmonized Guideline 870.5100—Bacterial reverse mutation test) and a mouse lymphoma assay (OCSPP Harmonized Guideline 870.5300— in vitro Mammalian cell gene mutation test).

A bone marrow assay (OCSPP Harmonized Guideline 870.5395—Mammalian erythrocyte micronucleus test).

Since in vivo mutagenicity studies such as the bone marrow assay are generally regarded as more definitive than in vitro studies, and a negative result in the bone marrow test may outweigh whatever results are found in the Ames test and mouse lymphoma assay, supporters of the octylphenol ethoxylate tolerance exemption were given the option of conducting the mammalian erythrocyte micronucleus test in lieu of the two in vitro mutagenicity studies. If those data did not confirm EPA's cancer conclusion, then EPA would need 2-year cancer bioassays in the mouse and rat (OCSPP Harmonized Guideline 870.4200—Carcinogenicity (mouse) and OCSPP Harmonized Guideline 870.4300—Combined Chronic Toxicity/Carcinogenicity (rat)) to make a safety finding in support of the tolerance exemption.

In response to the May 17, 2010, final rule, the Joint Inerts Task Force, Cluster Support Team Number 5 conducted an in vivo Mouse Bone Marrow Erythrocyte Micronucleus Test Following Oral Administration (OCSPP Harmonized Test Guideline 870.5395) of the representative test compound, poly(oxy-1,2-ethanediyl),α-[4-(1,1,3,3-tetramethylbutyl)phenyl]-ω-hydroxy- (CAS Reg. No. 9002-93-1). These data were submitted to the Agency on November 12, 2010 (Master Record Identification Number 48293301).

The data were evaluated by EPA and it was determined that the test substance did not induce numerical or structural chromosomal damage, providing further confirmation that octylphenol ethoxylate is not of concern for aggregate cancer risk. Further details of this evaluation can be found at http://www.regulations.gov in the document “Octylphenol Ethoxylates—(JITF CST 5 Inert Ingredients).—Review of Confirmatory Mutagencity Toxicity Data” in docket ID number EPA-HQ-OPP-2011-0525.

Refer to the May 17, 2010, Federal Register document, available at http://www.regulations.gov, for a detailed discussion of the aggregate risk assessment and determination of safety.

Therefore, based on this information and the findings in the final rule published in the Federal Register of May 17, 2010, EPA concludes that there is a reasonable certainty that no harm will result to the general population, or to infants and children from aggregate exposure to octylphenol ethoxylate residues.

An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance without any numerical limitation.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint United Nation Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level. The Codex has not established a MRL for octylphenol ethoxylate.

Therefore, an exemption from the requirement of a tolerance is established for residues of α-[p-(1,1,3,3-tetramethylbutyl)phenyl]-ω-hydroxypoly(oxyethylene) when used as an inert ingredient at levels not to exceed 7% in pesticide formulations applied to growing crops and raw agricultural commodities after harvest under 40 CFR 180.910.

This final rule establishes an exemption from the requirement of a tolerance under FFDCA section 408(d) in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final rule is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) or Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any special considerations under Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under FFDCA section 408(d), such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) do not apply.

This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of FFDCA section 408(n)(4). As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000) do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

The Congressional Review Act, 5 U.S.C. 801 et seq., generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of this final rule in the Federal Register . This final rule is not a “major rule” as defined by 5 U.S.C. 804(2).

Therefore, 40 CFR chapter I is amended as follows:

This is a summary of the Commission's Second Report and Order, FCC 12-44, adopted and released on April 27, 2012. The full text of this document is available for public inspection and copying during regular business hours in the FCC Reference Center, Federal Communications Commission, 445 12th Street SW., CY-A257, Washington, DC 20554. This document will also be available via ECFS ( http://www.fcc.gov/cgb/ecfs/ ). (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) The complete text may be purchased from the Commission's copy contractor, 445 12th Street SW., Room CY-B402, Washington, DC 20554. To request this document in accessible formats (computer diskettes, large print, audio recording, and Braille), send an email to fcc504@fcc.go v or call the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

The Commission will seek written comments on the Paperwork Reduction Act (PRA) modified information collection requirements in a separate notice that will be published in the Federal Register .

This document contains modified information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, will invite the general public to comment on the information collection requirements contained in this Second Report and Order as required by the Paperwork Reduction Act of 1995, Public Law 104-13 in a separate notice to be published in the Federal Register . In addition, the Commission notes that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees. We received one comment specifically addressing this issue. In the present document, we have assessed the effects of the new requirements on small businesses, including those with fewer than 25 employees, in the Final Regulatory Flexibility Analysis (“FRFA”) below.

1. In this Second Report and Order we modernize the procedures television broadcasters use to inform the public about how they are serving their communities, by having stations post their public files online in a central, Commission-hosted database, rather than maintaining the files locally at their main studios. This updating of our rules harnesses current technology to make information concerning broadcast service more accessible to the public and, over time, reduce broadcasters' costs of compliance. This Order is another step in our modernization of the Commission's processes to transition from paper filings and recordkeeping to digital technology. Without imposing any new reporting obligation, it will help bring broadcast disclosure into the 21st century.

2. Specifically, we adopt—with significant modifications—the proposal discussed in the Further Notice of Proposed Rulemaking (“ FNPRM” ) to replace the decades-old requirement that commercial and noncommercial television stations maintain a public file at their main studios with a requirement to post most of the documents in that file to an online public file to be hosted by the Commission. All permittees and licensees of a TV or Class A TV station in the commercial and noncommercial educational broadcast services must maintain a public inspection file. We have departed from the proposal in a number of respects to maximize public benefits while avoiding compliance costs that the record suggests would not be justified at this time. First, because many stations' existing political files are large, and the retention period for the political file is shorter than for other portions of the public file, we will not require stations to incur the cost of upload their existing political files to the online public file. Rather, stations may upload documents in that portion of the public file only prospectively. Second, broadcasters will be responsible for uploading only those items now required to be in the public file but not otherwise filed with the Commission or available on the Commission's Web site. In particular, the Commission will itself import to the online public file any document or information now required to be kept in the public file and that must already be filed with the Commission electronically in the Consolidated DataBase System (“CDBS”), so that stations do not need to post that information. Third, we do not adopt new disclosure obligations for sponsorship identifications and shared services agreements at this time, as had been proposed in the FNPRM. Rather, broadcasters will only be required to place in their online files material that is already required to be placed in their local files. Fourth, we do not impose specific formatting requirements on broadcasters at this time, although stations should upload relevant documents either in their existing electronic format or in a simple, easily created electronic format such as .pdf. Finally, we will provide an organized file system for uploading documents so that the resulting public file for each station is orderly, and organizationally similar for all stations, thus promoting ease of use by stations and the public.

3. To better ensure that the Commission can accommodate television broadcasters' online filings and to limit any unforeseen start-up difficulties to those stations that are best able to address them, we will phase in the new posting requirements. For the next two years we will only require stations that are affiliated with the top four national networks (ABC, NBC, CBS and Fox) and that are licensed to serve communities in the top 50 Designated Market Areas (“DMAs”) to post political file documents online. We exempt all other stations from posting their political file documents to their online public file until July 1, 2014. The Media Bureau will issue a Public Notice no later than July 1, 2013 to seek comment on the impact of this posting requirement, to enable us to consider whether any changes should be made before it takes effect for the other stations. We also defer considering whether to adopt online posting for radio licensees and multichannel video programming distributors until we have gained experience with online posting of public files of television broadcasters.

4. One of a television broadcaster's fundamental public interest obligations is to air programming responsive to the needs and interests of its community of license. Rather than dictating how broadcasters must meet that obligation, the Commission affords broadcasters broad latitude, subject to a reporting requirement under which broadcasters must maintain a public inspection file that gives the public access to information about the station's operations.

5. Almost seventy-five years ago—in 1938—the Commission promulgated its first political file rule. That initial rule was essentially identical to our current political file regulation in its requirements that the file be available for “public inspection” and include both candidate requests for time and the disposition of those requests, including the “charges made” for the broadcast time. More than 45 years ago—in 1965—the Commission additionally adopted a broader public inspection file rule. The public file requirement grew out of Congress' 1960 amendment of Sections 309 and 311 of the Communications Act of 1934 (the “Act”), which allowed greater public participation in broadcast licensing. Finding that Congress, in enacting these provisions, was guarding “the right of the general public to be informed, not merely the rights of those who have special interests,” the Commission adopted the public inspection file requirement to “make information to which the public already has a right more readily available, so that the public will be encouraged to play a more active part in dialogue with broadcast licensees.”

6. In October 2000, in the first Notice of Proposed Rulemaking issued in this proceeding, the Commission concluded that “making information regarding how a television broadcast station serves the public interest easier to understand and more accessible will not only promote discussion between the licensee and its community, but will lessen the need for government involvement in ensuring that a station is meeting its public interest obligation.” The Commission tentatively concluded that it should require television licensees to make the contents of their public inspection files, including a standardized form reflecting the stations' public interest programming, available on their stations' Web sites or, alternatively, on the Web site of their state broadcasters association. In 2007, the Commission adopted a Report and Order implementing these proposals.

7. Following the release of the 2007 Report and Order, the Commission received petitions for reconsideration from several industry petitioners and public interest advocates. The industry petitioners raised a number of issues, generally contending that the requirements were overly complex and burdensome. Public interest advocates argued that the political file should be included in the online public file requirement rather than exempted as provided in the 2007 Report and Order. In addition, five parties appealed the 2007 Report and Order, and the cases were consolidated in the United States Court of Appeals for the District of Columbia Circuit. The court granted a petition to hold the proceeding in abeyance while the Commission reviewed the petitions for reconsideration. Challenging the rules in a third forum, several parties opposed the 2007 Report and Order' s “information collection” under the Paperwork Reduction Act. 1