On June 29, 2012, the Department published a Notice of Proposed Rulemaking (NPRM) concerning the requirement for air carriers to report to the Department incidents involving the loss, injury, or death of an animal during air transport. The NPRM proposed to: (1) Expand the reporting requirement to U.S. carriers that operate scheduled service with at least one aircraft with a design capacity of more than 60 seats; (2) expand the definition of “animal” to include all cats and dogs transported by the carriers, regardless of whether the cat or dog is transported as a pet by its owner or as part of a commercial shipment (e.g., shipped by a breeder); and (3) require all covered carriers to provide in their December reports for each year the total number of animals that were lost, injured, or died during air transport for the calendar year. We also sought comment on requiring carriers to report the total number of animals transported in the calendar year in the December reports. Comments on the matters proposed were to be received 60 days after publication of the NPRM, or by August 28, 2012.

We received a joint request for an extension of time in the comment period for this rulemaking from Airlines for America (A4A), the Regional Airline Association (RAA), the Air Carrier Association of America, Inc. (ACAA), and their respective members (the petitioners). According to the request, the extension of time is needed so interested parties have sufficient time to review and comment on the preliminary regulatory analysis (PRA). The petitioners state that as of July 20, 2012, the docket associated with this rulemaking did not yet include the Department's PRA, which provides the cost and benefit analysis underpinning the proposal. The petitioners state that comment development cannot progress until the PRA is available. The PRA was posted in the docket on July 24, 2012.

Under the circumstances, we concur with the request for an extension of the comment period. We have decided to grant an extension of 30 days, or until September 27, 2012, for the public to comment on the NPRM. In doing so, we have balanced the stated need for additional time for comments with the need to proceed expeditiously with this important rulemaking. We take note of the fact that with the additional 30 days we are granting here, interested parties will have more than two months to comment on the PRA, which we believe is adequate time for analysis and coordination regarding the proposals. Accordingly, the Department finds that good cause exists to extend the time for comments on the proposed rule from August 28, 2012, to September 27, 2012. We do not anticipate any further extension of the comment period for this rulemaking. Comments received after September 27, 2012, will be considered to the extent practicable.

In addition to requesting that the comment period be extended, the petitioners posed a number of questions to the Department concerning the proposed requirement that carriers report the total number of animals transported during a calendar year with that year's December reports, the cost to carriers of amending the definition of “animal” for reporting purposes, and the number of carriers affected by the reporting requirement.

The petitioners state that there are conflicting statements between the NPRM summary and the NPRM Regulatory Analyses and Notices (RAN) section with respect to the proposed requirement that carriers report the total number of animals transported in the calendar year in the December reports. They state that while the RAN section indicates that carriers would be required to report only during the months where the carriers experience a reportable animal incident, the preamble asks whether carriers should be required to file reports in months when no incident takes place. The petitioners seek clarification on this issue and request that the RAN section of the preamble be clarified if the proposal is that carrier be required to file negative reports.

As stated in the RAN section, in addition to proposing that covered carriers report the total number of animals transported in the calendar year in their December reports, the Department proposed that covered carriers only submit a report during the months when the carriers have a reportable animal incident. However, we also sought comment on whether to require carriers to file reports even if the carriers did not have any incidents involving the loss, injury, or death of an animal during a particular month. This is not inconsistent. The NPRM is not proposing that carriers file a negative report but is soliciting comment on this point so we can determine whether the final rule should include a general requirement that covered carriers must submit reports each month even if the carriers do not have any reportable incidents during a particular month or perhaps a requirement that carriers must file a December report regardless of whether any incidents occurred in that month to cover the total number of animals transported that year.

The petitioners state that for the 15 carriers that are currently required to report incidents involving the loss, injury, or death of an animal during air transport, the RAN is incorrect in stating that there would be no additional costs associated with amending the definition of “animal” for reporting purposes to include all cats and dogs transported by the carrier regardless of whether the cat or dog is transported as a pet by its owner or as part of a commercial shipment. They state that the 15 carriers already subject to the reporting requirement would likely incur additional costs, and the Department should correct the RAN.

The statement in the RAN that there would be no additional costs to the 15 carriers that already collect information on incidents involving loss, injury, or death of an animal refers to costs associated with actually filing monthly reports. The Department acknowledges that there would be costs associated with collecting more information to report, i.e., not only on incidents involving pets but also incidents involving dogs and cats that are shipped commercially. In the NPRM, the Department states that it believes the cost of the proposed expanded definition of an animal covered by the reporting rule would impact airlines but the cost would still be minimal. We encourage comments and data about expected costs resulting from the expansion of the definition of “animal.”

The petitioners state that although the RAN states that the scope of the carriers covered by the animal incident reporting requirements would expand under the NPRM proposal from 15 to 36 carriers, the NPRM does not list the carriers so there is no way to verify if the list is accurate. They point out that presumably the PRA lists the potentially impacted carriers and that informed comment cannot progress until the PRA and that information is available.

The PRA does in fact list the carriers that would be affected by the NPRM and, as noted above, the PRA was posted in the docket on July 24, 2012. The public is invited to comment on the accuracy of that list.

On May 30, 2012, the Minority Business Development Agency (MBDA) published a notice of proposed rulemaking and request for comments regarding a petition received on January 11, 2012 from the American-Arab Anti-Discrimination Committee (ADC) requesting formal designation of Arab-Americans as a minority group that is socially or economically disadvantaged pursuant to 15 CFR Part 1400. The Notice included a thirty-day comment period that ended on June 29, 2012, but also stated that MBDA will make a decision on the petition no later than June 27, 2012. On June 12, 2012, MBDA published a notice in the Federal Register extending the date for making its decision to July 30, 2012. On August 3, 2012, MBDA published a second amendment to extend the deadline for the decision until August 30, 2012, to allow MBDA to complete its independent review and analysis of the issues raised in the petition and comments received to the petition. The Agency has determined that further analysis of the information collected during its independent review is necessary to ensure a reasoned and sound decision. Therefore, MBDA is extending, for an additional ninety (90) day period, its consideration of the issues addressed in the petition and the information presented by MBDA's independent review. The Agency will make its decision on the petition on or before November 30, 2012. This extension will not prejudice the petitioner.

A. Background

The Commission is proposing a safety standard that would prohibit magnet sets that have been involved in serious injuries. The Commission believes that this proposed rule is necessary to address an unreasonable risk of injury and death associated with these magnet sets.

In the mid-2000s, construction toys for children featuring small, powerful magnets were introduced into the toy market. Several children's magnetic construction toys were recalled because the magnets detached from the plastic housing of the toy. (Release #07-164). We received reports of incidents in which children and infants had swallowed the small magnets that had detached from such toys. In some incidents, children swallowed intact magnetic components that were small parts. 1 These incidents revealed that if a child swallows more than one small, powerful magnet or one such magnet and a ferromagnetic object, the objects can attract each other across tissue inside the stomach and intestines and cause perforations and/or blockage, which, if not treated immediately, can be fatal. We are aware of one death and numerous cases requiring intestinal surgery following ingestion of multiple small, powerful magnets from these toys.

To address the hazard in toys, the CPSC worked with ASTM to develop voluntary standard requirements for toys containing magnets. These requirements became part of ASTM F963, Consumer Safety Specification for Toy Safety, which is now a mandatory CPSC standard. ASTM F963-11 defines a “hazardous magnet” and a “hazardous magnetic component” ( i.e., a toy piece that contains an embedded hazardous magnet) as one that has a flux index greater than 50 and that is a small object. ASTM F963 applies to toys intended for children under 14 years of age. The flux index of a magnet is an empirical value developed by ASTM as a way to estimate the attraction force of a magnet. The ASTM working group established a flux index of 50 as a cutoff for what it considered to be a “safe” magnet, based on measurements of toys on the market. Most of the measured magnets were cylindrical in shape, and some had been involved in known incidents. When the ASTM graphed their measurements, they showed a good correlation (fairly linear relationship) between calculated flux index and measured attraction force for a majority of the magnets. Based on this graph, ASTM considered the flux index a reliable way to gauge a magnet's relative attraction force. Since the magnets from toys involved in incidents had flux index measurements greater than 70, the ASTM working group chose a flux index of 50 as a cutoff because it was significantly below the values for the incident magnets.

In 2008, a new type of magnet product came onto the market. The basic product was an aggregated mass of 216 BB-size powerful magnets, generally marketed as adult desk toys for general amusement. These magnet sets were introduced in 2008, but 2009 was the first year with significant sales to U.S. consumers. The products are described more fully in section B of this preamble.

In February 2010, CPSC staff received its first incident report involving this product. No injury resulted from this incident. Shortly after receiving this report, CPSC staff collected and evaluated samples of magnet sets.

In December 2010, we received our first consumer incident report involving the surgical removal of magnets that were part of a magnet set. Information about incidents involving magnet sets is discussed in section C of this preamble.

The CPSC has been warning consumers about the hazards of magnet ingestion since 2006, because of the injuries that have occurred to children from hazardous magnets that were part of construction toys intended for children. Several recalls have been issued for toys containing magnets.

In December 2009, we received a consumer complaint that the magnet sets intended for adults posed hazards similar to magnets in toys. As a follow-up to that complaint, during that month, a sample was collected by staff and age graded by the Directorate for Engineering Sciences, Division of Human Factors to be, in developmental terms appropriate for children ages 9 years old and up.

In February 2010, the CPSC received its first consumer incident report involving a child and a set of magnets intended for adults. A 9-year-old boy swallowed 7 spherical magnets while mimicking body piercings. He was not injured because the magnets passed through his system as a single mass. The magnets had been purchased for a 13-year-old.

Samples of the product were detained and collected at the Customs and Border Protection site in February 2010. At the time of collection, the product was labeled for use by children 13+ years of age. Because of the age grade on the product and the manufacturer's intent, it was subject to the requirements of the toy standard. The Office of Compliance and Field Operations (Compliance) issued a Notice of Noncompliance to the firm in March 2010. At the time, there was very little incident data associated with this product. The firm agreed to a corrective action that included, in part, new warnings to keep the product away from children, a change in the appropriate age for use of the product, and requests to retailers to list the product as appropriate only for consumers over 14 years of age. The firm also removed inventories labeled “13+.” The firm also agreed to ask retailers who market products primarily, though not exclusively, to children to execute a Responsible Sellers Agreement prohibiting marketing and sales to children; stop the sale of these magnets to retailers that market products exclusively to children; and providing a Responsible Sellers Agreement to general use stores for their information.

In December 2010, we received the first report of the surgical removal of magnets from a child who had ingested multiple magnets that came from a magnet set intended for adults. During 2011, Compliance activity included evaluation of the marketing and labeling of the product category, collecting product marketed to children under 13 and evaluating compliance with ASTM F963. In addition, where products did not have labeling or marketing information, the agency encouraged those firms to develop marketing and labeling to ensure that they were not marketed to children. More firms were issued Notices of Noncompliance for marketing to children younger than 14 years.

In response to continuing injuries associated with the products and children of various ages, we published a public service announcement (PSA) in November 2011, concerning the hazard in cooperation with two manufacturers. Reported incidents involving children continued to increase unabated from 8 cases in 2010, 17 cases in 2011, and 25 cases in 2012 (as of July 8, 2012). Twenty two incidents were reported before the PSA; 28 more followed during the eight months after it. A high percentage of the injuries resulted in surgeries or other invasive procedures. Of the 50 reports known to staff, 22 required surgery, and 10 required either invasive procedures such as endoscopies or colonoscopies. In 2011, and into spring 2012, staff continued to identify additional firms offering this product on the Internet with labeling and marketing violations.

Given the continued injuries to children, Compliance began negotiation of corrective action plans with 11 of 13 magnet set importers that voluntarily agreed to cease the importation, distribution, and continued sale of their magnet sets. Two of the importers did not agree to stop sale and are the subject of administrative actions recently initiated by the Commission. As those complaints allege, among other things, CPSC staff experts do not believe warnings will ever be effective in protecting children from this hidden hazard.

The magnet sets covered by this proposed rule typically are comprised of numerous identical, spherical, or cube-shaped magnets, approximately 3 to 6 millimeters in size, with the majority made from NdFeB (Neodymium-Iron-Boron or NIB). These magnets exhibit strong attractive qualities. The magnetized neodymium-iron-boron cores are coated with a variety of metals and other materials to make them more attractive to consumers and to protect the brittle magnetic alloy materials from breaking, chipping, and corroding.

Often referred to as “magnet balls” or “rare earth magnets,” the products currently are marketed as: adult desk toys, the “puzzles of the future,” stress relievers, science kits, and educational tools for “brain development.” As shown in product instructions and in videos on related Web sites, these products can be used and reused to make various two- and three-dimensional forms, jewelry, and toys, such as a spinning top.

The products are sold in sets of varying size, from as few as 27 magnets to more than 1,000. Most of the magnets have been sold in sets of either 125 balls or sets of 216 to 224 balls, although some firms have sold just a few balls as extras. Based on product information provided by marketers, the most common magnet size is approximately 5 mm in diameter, although balls as small as about 3 mm have been sold, as have sets of larger magnet balls (perhaps 15 mm to 25 mm in diameter). In addition to magnetic ball sets, desk sets of small magnetic cubes have also been sold, although they have comprised a relatively small share of the market. The leading marketer of such magnet sets recently added small magnetic rods—intended to be used with balls to make geometric shapes—to its desk toy product line.

The most common color of these magnets is a glossy, highly reflective silver, with the spheres often described as similar in appearance to BBs or ball bearings. Some firms now include sets in a wide range of colors, or combinations of colors, ranging from bright pink, green, and blue, to darker shades, such as purple and black. Most, with the exception of the smaller sets, are sold with a container, such as a square plastic cube, a metal tin, and/or a soft pouch. Most brands are sold in nondescript containers, such as metal tins or black fabric boxes. The largest seller uses colorful, transparent packaging that simulates the cube floating within.

The age labeling of hazardous magnet sets varies; currently, most products carry an age label and are marked “14+.” Some sets have no specific age recommendation on the package, even though retail Web sites may identify them as intended for ages “13+” or “14+.” The small parts warning  2 is sometimes included on the packaging ( i.e., “choking hazard, not for children under 3”), as are warnings to keep the product away from all children.

The proposed rule would define magnet sets as: “any aggregation of separable, permanent magnetic objects that is a consumer product intended or marketed by the manufacturer primarily as a manipulative or construction desk toy for general entertainment, such as puzzle working, sculpture, mental stimulation, or stress relief.”

Although firms that sell magnet sets state that they intend them as desk toys for adults, these sets are found in offices and homes and in locations within the home beyond desk tops, such as on refrigerators. Magnet sets have some appeal for virtually all age groups. They tend to capture attention because they are shiny and reflect light. They are smooth, which gives them tactile appeal, and they make soft snapping sounds as they are manipulated. They have the properties of a novelty, which arouses curiosity; incongruity, which tends to surprise and amuse; and complexity, which tends to challenge and maintain interest. Their strong magnetic properties cause them to move in unexpected ways, with pieces snapping together suddenly, and moving apart—occasionally quite quickly. These properties or characteristics of magnets are likely to seem magical to younger children and may evoke a degree of awe and amusement among older children and teens. These features are the foundation of the product's appeal as a challenging puzzle or as a manipulative or jewelry. They may also be used as a stress ball and as a way to hold things in place.

Children from toddlers through teens have been exposed to these products in the home setting and elsewhere. Ingestion incidents have been reported to involve children 5 years of age and younger and follow similar scenarios as other ingestion incidents among this age group. Mouthing and ingestion of non-food items is a normal part of the exploratory behavior of preschool children. Caregivers, in a few cases, said they had intended to keep the sets away from the victims, but did not realize they had failed to do so, until after the child became ill and the magnets had already caused internal injuries. In other incidents, the child reportedly had never mouthed or ingested objects previously, and as a result, they were permitted by the caregiver to play with the magnets. As might be expected, in a number of cases, the magnets were not in their original containers, and caregivers were unaware that some were missing from the set and in the child's possession. Several importers sell sets of spares, small numbers of balls to replace those lost or missing from a larger set.

These products would also be appealing to children of early-to-middle elementary school age, who might be capable of controlling the magnetic forces exhibited by the pieces while constructing various forms depicted in the product instructions and on the related Web sites. Simple three-dimensional puzzles begin to interest children as they approach 8 and 9 years of age; and 9 through 12 year olds are interested in highly complex puzzles. Children in the 9 through 12 year age group have the reading skills to follow directions for three-dimensional puzzles, and they have the fine motor skills required to handle small, abstract, or interlocking pieces. Nine-year-olds can complete puzzles with 100 to 500 pieces; and 10 through 12 year olds enjoy the challenge of puzzles with 500 to 2,000 pieces. Children in this age group also can engage in activities that require the type of meticulous work and attention that would be needed to create the complex patterns and structures found in the paper and video instructions related to the magnet sets. Additionally, magnets typically are included in elementary school (ages 6 through 12) science curricula, the age at which children are taught the basic concepts of magnetism.

For all of these reasons, magnet sets are sometimes purchased for children under the age of 14, despite the warnings or labeling. This is consistent with reviews on retail Web sites, which indicate that these products are being purchased for children. Approximately one-third of 53 adults reviewing one manufacturer's product on Amazon.com reported purchasing them for children 8 through 11 years of age.

Thus, it is foreseeable that some portion of these products will be purchased for elementary school children and teens. Given the relatively low cost for some sets, children in these age groups also may purchase the magnet sets themselves. The incident reports reflect behaviors that are beyond the intended use of the product, but that are foreseeable for the groups using them. The mouthing of objects, common among younger children, develops into less obvious and more socially acceptable oral habits, which may continue through childhood and adolescence and into adulthood ( e.g., mouthing or chewing a fingertip, fingernail, knuckle, pen, pencil, or other object, especially while concentrating or worrying). This tendency toward mouthing behavior involving magnets could account for some reported ingestions, where incident details are lacking.

Where details are provided, the incident reports describe scenarios that are consistent with the behaviors of children in this age range. Although exploratory play is generally associated with very young children, people of all ages use their senses to explore unfamiliar phenomena. More discussion of the hazard scenarios involving these products is provided in section C.2 of this preamble.

Based on information reviewed on product sales, including reports by firms to the Office of Compliance and Field Operations, the number of such magnet sets that have been sold to U.S. consumers since 2009, the first year of significant sales, may have totaled about 2.7 million sets, with a value of roughly $50 million. This reflects a combination of retail sales directly to consumers (through company Web sites and other Internet retail sites) and sales to retailers who market the products. A review of retail prices reported by importers and observed on Internet sites suggests prices typically ranging from about $20 to $45, with an average price of about $25.

The small powerful magnets most likely to be affected by this proposed rule are made from alloys of neodymium, iron, and boron. They are coated with a variety of metals and other materials to make them more attractive to consumers and to protect the brittle magnetic alloy materials from breaking, chipping, and corroding. Based on available information, all of the small magnets used in magnet sets, as well as most of the finished and packaged products that would be subject to CPSC regulation, are produced by manufacturers located in China.

All of the firms that have marketed the products are believed to import them packaged and labeled for sale to U.S. consumers. Several Chinese manufacturers have the facilities and production capacity to meet the orders of U.S. importers, and there are no major barriers to market entry for firms wishing to source products from China for sale in the United States. Firms often have sales arrangements with Internet retailers who hold stock for them and process orders.

We have identified about 25 U.S. firms and individuals who have recently imported magnetic sets for sale in the United States. The combined sales of the top seven firms have probably accounted for the great majority (perhaps more than 98%) of units sold. One firm is believed to have held a dominant position in the market for magnetic desk sets since it entered the market in 2009. That firm, and a few of the larger firms (including a firm based in Canada with a branch office in the United States), have marketed the products through accounts with retailers, in addition to selling directly to consumers on the Internet, using their own Web sites or other Internet shopping sites. In addition to products offered for sale by U.S. importers, consumers also have the ability to purchase magnetic sets directly from sources in Hong Kong or China; many that market products through “stores” on a leading Internet shopping site.

The risk addressed in this proceeding concerns damage to intestinal tissue caused by the ingestion of more than one magnet from a magnet set, magnets that are attracted to each other in the digestive system, damaging the intestinal tissue trapped between the magnets. In rare cases, there can be interaction between magnets in the airways and digestive tract (esophagus). Serious injury and death are likely consequences when children ingest strong magnets.

NEISS data. CPSC staff reviewed data from the National Electronic Surveillance System (NEISS) database of magnet-related ingestion cases treated in emergency departments from January 1, 2009 to December 31, 2011. 3 To derive estimates, CPSC staff considered all cases reported through NEISS from January 1, 2009 to December 31, 2011, which mentioned “magnet” in the narrative field of NEISS reports. This review produced an estimated 6,100 magnet-related ingestions for that period of time (note that this includes incidents involving all types of magnets, not just magnet sets). This excludes cases with descriptions such as “kitchen magnet” or “plastic-covered magnet.” Staff further analyzed cases that possibly involved magnets that were from magnet sets. This review yielded a count of 72 magnet ingestion cases during this time period, which staff determined (based on a review of narratives in the NEISS reports) to involve or possibly involve magnets from magnet sets. Based on the magnet ingestion cases treated in NEISS hospital emergency departments, staff determined that an estimated 1,700 ingestions of magnets from magnet sets were treated in U.S. emergency departments during this time period. NEISS cases are coded from medical records so brand name is rarely available, but descriptions of the products from the NEISS narrative suggests that the magnets involved in these cases are magnets from magnet sets. For more information about the process for developing the estimates of incidents, see the memorandum from the Directorate for Epidemiology at Tab A of staff's briefing package http://www.cpsc.gov/library/foia/foia12/brief/magnetstd.pdf . It is possible that some number of the estimated 4,400 magnet ingestion-related injuries not classified as high-powered magnets could be attributable to the ingestion of magnets from high powered magnet sets. However, the information provided in the NEISS reports did not provide sufficient detail to place them into that category.

Staff reviewed the NEISS data to obtain more information about incidents involving magnet sets. With regard to age, the largest portion of these incidents involved children 4 through 12 years of age. Of the estimated 1,700 ingestion incidents related to magnet sets, 1,200 of the victims are in the 4- through 12-year-old age group (70.6 percent). It is quite possible that some portion of the estimated 4,400 “magnets, type unknown/other type” category of incidents also involved magnet sets and children in the 4- through 12-year-old age group. Of the estimated 1,700 ingestions, most (approximately 1,600) were treated and released from the hospital.

Databases other than NEISS. In addition to reviewing NEISS data, staff also reviewed incidents reported through other CPSC databases, such as the Injury or Potential Injury Incident database (IPII) and the In-depth Investigation database (INDP). These databases provided more detailed descriptions, and thus, included more information about the products involved and the incident scenarios. In reviewing the initial set of incidents from these databases, staff considered all reported incidents from January 1, 2009 through June 30, 2012, that involved a magnet and an ingestion or injury was reported. Excluded from this review were magnets in children's toys, as well as magnets that were determined to be a different type other than small, strong magnets from sets of magnets. Staff focused on one hazard pattern: ingestion of magnets. Other reported hazard patterns, such as allergic reactions, ear injuries, and a hand injury were excluded.

From review of INDP and IPII databases, we are aware of 50 reported incidents occurring from January 1, 2009 through June 30, 2012 involving the ingestion of magnets by children between the ages of 1 and 15. Of those 50 incidents, 38 involved the ingestion of high-powered, ball-shaped magnets contained in products that meet the definition above of “magnet set”; and 5 of those 50 incidents possibly involved ingestion of this type of magnet. We discuss these 43 incidents (the 38 incidents, plus the 5 possible incidents) in more detail below. 4

In 35 of the 43 incidents, two or more magnets were ingested. Hospitalization was required in order to treat 29 of the 43 incidents, with surgery necessary to remove the magnets in 20 of the 29 hospitalizations. In 9 of the 29 hospitalizations, the victim underwent colonoscopic or endoscopic procedures to remove the magnets. In 37 of the 43 incidents that likely involved magnets from hazardous magnet sets, the magnets were ingested by children younger than 4 years old or between the ages of 4 and 12 years.

In 20 of the 43 incidents, the victims reportedly put the magnets in their mouths because they thought the magnets were edible; they wished to emulate jewelry piercings; or they simply mouthed the magnets while playing with them. In 23 of those 43 incidents, there is insufficient information to determine how the magnets were being used at the time of the ingestion.

In 30 of the 43 incidents, the reports indicate the source of the magnets ingested. In 10 of the incidents, the magnets were owned by a relative and were obtained, presumably by the victim, without the relative's knowledge. In 5 incidents, the magnets were given to the child by an adult; and in 12 incidents, the magnets were obtained from a friend or classmate. In three instances, the magnets were purchased by the victim. The number of ingestion incidents involving magnets from magnet sets has increased over time, from 7 in 2010, to 16 in 2011, and 20, as of June 30, 2012.

The incident reports describe scenarios that are consistent with behaviors of children in the age range described in the incidents. In the incidents reported among the 8- through 12-year-old age group, one child described wanting to feel the force of the magnets through his tongue; one was trying to see if the magnets would stick to her braces; and another wanted to see if the magnets would stick together through her teeth. Another common scenario accounted for half of the reported ingestion incidents among 8 to 15 year olds. Children used at least two and as many as seven magnets to simulate piercings of their tongue, lips, or cheeks. On the tongue or lip, children sometimes used more than two magnets to form the appearance of a ring. This is a type of role-play behavior, particularly for the younger children in the group, and the magnets serve as highly realistic props.

In this section, we summarize some of the incident reports to demonstrate a few of the hazard scenarios that have been reported in incidents involving ingestion of magnets from magnet sets.

In one incident, a 10-year-old girl simulating a tongue piercing, accidentally swallowed two magnetic balls. That same day, her mother took her to the local emergency room, and she was admitted for 5 days; during that time, the movement of the magnets was monitored by 10 x-rays, 3 CT scans, and an endoscopy. Ultimately, the magnets were manipulated from their eventual position in the colon into the appendix via laparoscopic surgery and removed by an appendectomy.

In another incident, a 13-year-old girl accidentally swallowed five small, spherical, high-powered magnets when they suddenly snapped together while she was mimicking a lip piercing. Although her abdominal pains began and worsened over the next 2 days, she did not tell her mother of the ingestion until 3 days later. She was then taken to hospital, where abdominal x-rays confirmed ingestion of five magnetic balls. Medical staff initially tried unsuccessfully to remove the magnets using an oral bowel cleansing solution and then a colonoscopy procedure. Eventually she underwent surgery, and the magnets—located in three different places in her small intestine—were removed during a surgical procedure that involved resection of damaged bowel tissue and removal of her appendix. The victim's complicated recovery resulted in hospitalization for 14 days, and the surgery left a 4-inch abdominal scar.

In another incident, an 18-month-old boy sustained life-threatening intestinal injuries and will have lasting adverse health effects after ingesting three small, spherical magnets. The boy exhibited symptoms of diarrhea and vomiting and was clutching at his right side. When his mother took him to the local hospital, he was diagnosed with an ear infection. When his symptoms did not resolve a few days later, she took him to a second hospital where, reportedly, he was diagnosed with bronchitis, given some medication, and released. One or 2 days later, his mother noticed that his stomach was distended and took him to a third hospital. Abdominal x-rays revealed three small balls, requiring immediate surgical intervention to remove the foreign objects. The procedure required resection of 6 inches of the child's small intestine and resection of 3 inches of his large intestine. The victim remained in intensive care for 1.5 weeks before being released. He continued to have diarrhea and other intestinal problems (at least 2 months post-surgery when the IDI was completed).

In another incident, a 3-year-old girl swallowed eight small spherical magnets from a magnet set, which she found on a refrigerator door. An x-ray revealed two joined magnets that appeared to be located in the victim's esophagus, plus another six magnets that appeared to be joined together in the victim's stomach. A second x-ray image, taken the next day at a different hospital, showed that the magnets had not moved. A third x-ray at a Children's Hospital showed no movement of the magnet pair (described as 3mm beads) in the esophageal area, and some movement of the group in the abdomen. Pre-intervention, the treating physicians correctly recognized that she might have aspirated a magnet into her airways that was interacting through tissues with a magnet located in the esophagus. The girl underwent three coordinated procedures: (1) A bronchoscopy that removed one “magnetic bead” from her right bronchus; (2) an esophagogastro-duodenoscopy (endoscopy) that removed one magnetic bead from the mid-esophagus, and five magnetic beads from the stomach; and (3) a diagnostic laparoscopy, followed by laparoscopic-assisted removal of the remaining magnet, plus laparoscopic repair of a gastric perforation and a small bowel perforation.

In another incident, a 23-month-old male ingested eight small spherical magnets from a product described as a “magnetic puzzle.” He started vomiting overnight and worsened the next day. He was taken to an urgent care facility, where a bilateral ear infection initially was suspected. A few hours later, as the child's condition worsened and he lost consciousness intermittently, an abdominal x-ray indicated six small balls that the mother recognized immediately, and informed the staff, were magnets from the puzzle. He was transferred to a Children's Hospital where an x-ray revealed some slight movement of the magnets. According to the mother, the doctors thought the magnets would pass naturally. An x-ray taken the following day showed the magnets to be located between the small and large intestine; therefore, surgery was undertaken to remove them. During surgery, two balls were found in the small intestine and six balls were found outside of the bowel in the abdominal cavity. These were removed and a small intestine perforation repaired. Staff does not have access to the full medical records, but according to the parents, extremely serious complications ensued after the first surgery. The child underwent several sequential surgeries over the next 10 days to repair leaks (unclear if this involved missed perforations/failure of repairs/new perforations) and treat a blood clot, ischemic necrotic bowel, and serious infection stemming from the initial magnet injury. Ultimately, after what appears to be at least five or six operations, the child was stabilized but was still retained in an intensive care unit for more than a month, having lost all but 10 to 15 centimeters of small intestine ( HS staff notes the small intestine is about 600 to 700 centimeters long) . He is being fed intravenously and has a colostomy bag to remove waste products. He will require a bowel transplant and his long-term prognosis is poor.

As these scenarios demonstrate (and further discussed in the next section), parents and caregivers may not realize that the child has ingested magnets. Thus, diagnosis and treatment is delayed, and the severity of the resulting injuries increases.

As indicated in the previous section describing some of the incident scenarios, diagnosis of injury from magnet ingestion is complicated by multiple factors, and the resulting injuries can be very serious. Medical professionals may not be aware of the dangers posed by ingestion of high-powered magnets and the corresponding need for immediate evaluation and monitoring. Standard diagnostic tools, such as x-rays, may not demonstrate fully that the ingested item is a magnet and they may not allow medical professionals to identify the number of magnets ingested. Moreover, magnets may appear in an x-ray to be other nonmagnetic items that children commonly ingest, such as beads, which typically are monitored without surgical intervention and are allowed to pass through the child's gastrointestinal tract. Furthermore, treatment for injuries resulting from the ingestion of these magnets often is delayed, much to the serious detriment of the patient because the symptoms associated with damage to intestinal tissue resulting from the ingestion of these magnets frequently resemble the symptoms associated with less serious conditions, such as the stomach flu.

Accurate and timely diagnoses also are complicated by the fact that children and teens may not attribute their gastrointestinal symptoms to prior ingestion of magnets, and they may be unable or unwilling to communicate to their parents, caregivers, or medical personnel that they have ingested magnets. Accordingly, the delay of surgical intervention due to the patient's presentation with non-specific symptoms and/or medical personnel's lack of awareness of the dangers posed by multiple magnet ingestion can exacerbate life-threatening internal injuries and has resulted in the need for a bowel transplant.

In medical terms, the magnet injuries are pressure necrosis injuries. The unique mechanism of injury involving harmful tissue compression by strong magnets has become established in recent years. Ingested magnets residing in relatively close proximity to one other are mutually attracted through intestinal walls. The magnets interact rapidly and forcefully. The magnetic attraction can occur over distances of about 10 to 20 mm for a pair of magnets, to distances much greater than that, as the number of magnets involved increases. The attraction forces operating between just one pair of magnets (or a magnet and another ferromagnetic object) is strong enough to withstand any normal muscular contractions of the gastrointestinal tissues (GI) (peristaltic or mixing motions), as well as the intermittent turbulent flow of the considerable volumes of gastrointestinal fluid in the small intestine, or the passage of semisolid contents in the large intestine. The magnets remain coupled, exerting strong bilateral compression forces on the trapped GI tissues, sufficient to block their blood and nutrient supply. The extreme pressure exerted on the trapped tissues ultimately is directly responsible for the progressive tissue injury, which starts with local inflammation and ulceration, progressing to tissue death, then perforation, or fistula formation.

Fistulas (abnormal connections or passageways between two organs or vessels that normally do not connect) cause serious, debilitating symptoms, but generally are not as acutely urgent as perforations. Perforations present a serious risk of leakage of gut contents into the abdominal cavity which, within hours, can escalate quickly from an area of local infection, to peritonitis (an inflammation of the peritoneum, the thin tissue that lines the inner wall of the abdomen and covers most of the abdominal organs), then life-threatening systemic infection (sepsis).

In some rare cases, ingested magnets have caused loops of the bowels to become twisted; this obstructs passage of gut contents and deprives the twisted gut segment of blood. It is considered an extremely urgent situation, requiring immediate surgical intervention to prevent the trapped segment from becoming necrotic, and/or from rupturing and causing contamination of the abdominal cavity. Magnets have also trapped and perforated mesenteric tissues, presenting the possibility that larger blood vessels in the gut mesentery could be damaged, which could cause an intra-abdominal hemorrhage.

Once attracted magnetically to each other through intestinal walls, the magnets involved in GI injuries are unlikely to disengage spontaneously or to move position until they are removed by clinicians. A pair of magnets might be uncoupled by stronger attraction forces exerted by a larger number of magnets in a separate GI location (which then could cause further injury, perhaps unrecognized, in a different GI location). If magnets fall through perforations into the peritoneal cavity, they are expected to require surgical intervention and to have a relatively high associated morbidity.

Complications after these abdominal surgeries include bleeding, infection, and ileus (temporary paralysis of gut motility). Adhesions (where bands of intra-abdominal scar tissue form that can interfere with gut movement and can cause obstruction) may occur as a short-term or long-term (years) complication, frequently resulting in bowel obstructions requiring additional surgeries, and thus, creating a cycle. In females, there also can be future fertility concerns related to abdominal scar tissue and adhesions. In cases where long segments of injured bowel have to be removed, digestive function of victims can be impaired permanently, resulting in malabsorption, diarrhea, cramping, total parental nutritional feeding (and consequent frequent bouts of sepsis), need for a bowel transplant, and even death.

This proceeding is conducted pursuant to the Consumer Product Safety Act (CPSA). Magnet sets are “consumer products” that can be regulated by the Commission under the authority of the CPSA. See 15 U.S.C. 2052(a).

The Commission is authorized, under section 7 of the CPSA, to promulgate a mandatory consumer product safety standard that sets forth certain performance requirements for a consumer product or that sets forth certain requirements that a product be marked or accompanied by clear and adequate warnings or instructions. 15 U.S.C. 2056. A performance, warning, or instruction standard must be reasonably necessary to prevent or reduce an unreasonable risk or injury. In addition, if the Commission finds that no feasible consumer product standard under section 7 would adequately protect consumers from an unreasonable risk or injury associated with hazardous magnet sets, the Commission may promulgate a rule under section 8 of the CPSA declaring hazardous magnet sets to be banned products. 15 U.S.C. 2057.

Section 9 of the CPSA specifies the procedure the Commission must follow to issue a consumer product safety standard under section 7. In accordance with section 9, the Commission may commence rulemaking by issuing an NPR including the proposed rule and a preliminary regulatory analysis in accordance with section 9(c) of the CPSA and requesting comments with respect to the risk of injury identified by the Commission, the regulatory alternatives being considered, and other possible alternatives for addressing the risk. Id. 2058(c). Next, the Commission will consider the comments received in response to the proposed rule and decide whether to issue a final rule and a final regulatory analysis. Id. 2058(c)-(f).

According to section 9(f)(1) of the CPSA, before promulgating a consumer product safety rule, the Commission must consider, and make appropriate findings to be included in the rule, concerning the following issues: (1) The degree and nature of the risk of injury that the rule is designed to eliminate or reduce; (2) the approximate number of consumer products subject to the rule; (3) the need of the public for the products subject to the rule and the probable effect the rule will have on utility, cost, or availability of such products; and (4) means to achieve the objective of the rule while minimizing adverse effects on competition, manufacturing, and commercial practices. Id. 2058(f)(1).

According to section 9(f)(3) of the CPSA, to issue a final rule, the Commission must find that the rule is “reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with such product” and that issuing the rule is in the public interest. Id. 2058(f)(3)(A)&(B). In addition, if a voluntary standard addressing the risk of injury has been adopted and implemented, the Commission must find that: (1) the voluntary standard is not likely to eliminate or adequately reduce the risk of injury, or that (2) substantial compliance with the voluntary standard is unlikely. Id. 2058(f)(3(D). The Commission also must find that expected benefits of the rule bear a reasonable relationship to its costs and that the rule imposes the least burdensome requirements that would adequately reduce the risk of injury. Id. 2058(f)(3)(E)&(F).

The Commission seeks input on whether it should be regulating under section 7 and 9 of the CPSA or seeking a ban under section 8 of the CPSA or under similar provisions of the Federal Hazardous Substances Act.

Currently, there is no voluntary standard applicable to magnet sets. The Consumer Product Safety Improvement Act of 2008 (CPSIA) mandated ASTM F963-11, Standard Consumer Safety Specification for Toy Safety, as a consumer product safety standard (Section 106 of the CPSIA). Whether the toy standard is applicable to magnet sets is not the subject of this rulemaking.

The Commission is proposing a rule that would prohibit certain high-powered magnet sets. As described in previous sections of this preamble, we are aware of serious injuries resulting from children ingesting such magnets. Magnets that do not have the prohibited characteristics and magnets that are not parts of magnet sets would still be allowed.

This section of the proposed rule would state that the proposed requirements in 16 CFR part 1240 are intended to reduce or eliminate an unreasonable risk of injury to children who ingest magnets that are part of hazardous magnet sets. The standard would apply to all magnet sets, as defined in § 1240.2, that are manufactured or imported on or after the date 180 days after publication of a final rule.

This section of the proposed rule would define the term “magnet set” to mean “any aggregation of separable, permanent magnetic objects that is a consumer product intended or marketed by the manufacturer primarily as a manipulative or construction desk toy for general entertainment, such as puzzle working, sculpture building, mental stimulation, or stress relief.” This definition would not include other magnetic products that do not meet the definition, such as toys intended for children and jewelry. Magnets that are part of a toy intended for children are already covered by the requirements in ASTM F963-11, Standard Consumer Safety Specification for Toy Safety, which is a mandatory CPSC standard. The Commission seeks comment on the scope of the products proposed to be covered by this proposed rule and, in particular, whether risks are presented by magnets in science kits or craft and hobby kits no matter how they are age graded and labeled.

The Commission also seeks comment on whether the definition of “magnet set” should include single, i.e., individual, magnets in order to ensure that the regulation prohibits the sale of individual magnets for use as aggregated manipulative or construction desk toys. This is because the hazard posed by magnets attracting in the body can occur when magnets are purchased individually or as a set.

This section would set forth the requirements for magnet sets. If a magnet set contains a magnet that fits within the small parts cylinder that CPSC uses for testing toys, magnets from that set would be required to have a flux index of 50 or less. The Commission recognizes the possible hazard that could be posed by magnets that are purchased individually and subsequently aggregated. Therefore, the proposed language in § 1240.3(a) applies to magnet sets that contain a single magnet that fits completely within the small-parts cylinder described in 16 CFR 1501.4.

The Commission seeks comment regarding whether the proposed language in § 1240.3(a) applies to magnet sets that contain one magnet, or more than one magnet, that fits completely within the small-parts cylinder described in 16 CFR 1501.4.

The small parts cylinder referenced in the proposed rule is specified in 16 CFR part 1501—Method for Identifying Toys and Other Articles Intended for Use by Children Under 3 Years of Age Which Present Choking, Aspiration, or Ingestion Hazards Because of Small Parts. If an object fits completely within the small parts cylinder, this indicates that the object is small enough to be ingested. If a magnet that is part of a magnet set is too large to fit within the small parts cylinder, it would not be prohibited, regardless of the magnet's flux index. Thus, it might be possible for manufacturers to make magnet sets that contain strong magnets so long as the magnets are sufficiently large, although the large size could reduce their utility.

Small magnets ( i.e., those that fit within the small parts cylinder) that are part of a magnet set must have a flux index of 50 or less. This limit is based on the level that is specified in ASTM F963-11, Standard Consumer Safety Specification for Toy Safety, which is a mandatory CPSC standard. As discussed in section A.1 of this preamble, the flux index of a magnet is an empirical value developed by ASTM as a way to estimate the attraction force of a magnet.

The flux index limit of 50 was developed by ASTM, with CPSC staff's participation, to address injuries resulting from strong magnets that separated from toys. The limit was based on an analysis of magnets that were involved in incidents. The Commission seeks input on the limit particularly as to whether there may be health risks should a large number of magnets be ingested even if such magnets are at or below the flux limit of 50.

This section of the proposed rule would describe how to determine the flux index of magnets that are part of a magnet set. If the magnet set contains more than one shape or size of magnet, at least one of each shape and size would be selected for testing. The flux index of the selected magnets would be measured in accordance with the procedure set forth in section 8.24.1 through 8.24.3 of ASTM F963-11, Standard Consumer Safety Specification for Toy Safety . The flux index of the magnet is calculated by multiplying the square of the magnet's surface flux density (in KGauss) by its maximum cross-sectional area (in mm 2 ). The ASTM standard uses a gauss meter and probe that measures the surface flux density at 0.015 inches (0.38 mm) above the magnet's surface. The area is measured at the largest cross-section of the magnet that is perpendicular to the axis of its magnetic poles.

We are proposing to use the methodology specified in ASTM F963-11 to measure the flux index of magnets that are part of a magnet set. The test method was developed to address hazards posed by magnets that are part of a toy. Such magnets are likely to be individual magnets that separate from a toy. Magnet sets may contain hundreds of magnets. Thus, such magnets are more likely to be aggregated than magnets separated from toys. When magnets are aggregated, their magnetic strength may increase. Children exposed to magnets from these magnet sets may ingest more magnets than they would if a magnet separates from a toy. Thus, it may be desirable to develop a method for testing the strength of aggregated magnets. We are interested in receiving comments that would address this issue.

In accordance with the requirements of the CPSA, we are proposing to make the findings stated in section 9 of the CPSA. The proposed findings are discussed in section N of this preamble.

The Commission has considered alternatives to reduce the risk of injuries related to the ingestion of magnets contained in magnet sets. However, as discussed below, the Commission does not believe that any of these would adequately reduce the risk of injury.

Although several of the companies that manufacture or import magnet sets have voluntarily agreed to recall (and in some cases, stop selling) these products, and several retailers have agreed to stop sale, the Commission has been unsuccessful in negotiating voluntary recalls and stop sales with several companies that control a significant portion of the magnet set market, including the company that sells more than 70 percent of the magnet sets purchased in the United States. It is extremely unlikely that all manufacturers/importers will voluntarily agree to stop selling and recall their magnet sets. Moreover, recalls would not prevent new entrants into the market in the future.

Currently, there is no applicable voluntary standard in effect. A group of magnet set importers and distributors have requested that ASTM International develop a voluntary standard for the labeling and marketing of these products. Specifically, these companies have requested the formation of a voluntary standard to: (1) Provide for appropriate warnings and labels on packages of these magnets sets; and (2) establish guidelines for restricting the sale of these magnet sets to children, by not selling to stores that sell children's products exclusively and not selling the magnet sets in proximity to children's products. However, despite companies' marketing and labeling to attempt to limit children's exposure to magnets, ingestion incidents involving children continue to occur and the labeling does not change the attractiveness of the product to children or the intrinsic play value of the magnet sets. From the date that the firm with the largest share of the market undertook certain labeling enhancements and marketing restrictions through June of 2012, the Commission has learned of 47 additional incidents involving ingestion of magnets from hazardous magnet sets, 26 involving ingestion of the company's hazardous magnets. As discussed more fully in the next section of this preamble, we do not believe that warnings would adequately reduce the injuries associated with this product.

It is unlikely that additional or different warnings on the packages of magnet sets would significantly reduce the ingestion-related injuries caused by high-powered magnets. Safety and warnings literature consistently identifies warnings as a less effective hazard-control measure than designing out the hazard or guarding the consumer from a hazard. Warnings do not prevent consumer exposure to the hazard, but rely on persuading consumers to alter their behavior in some way to avoid the hazard. With this product, warnings are particularly unlikely to adequately reduce or eliminate the ingestion of these magnets.

Warnings are especially unlikely to be effective among children because children may lack the cognitive ability to appraise a hazard or appreciate the consequences of their own actions and may not understand how to avoid hazards effectively. In addition, warning design guidelines and literature commonly recommend that the text of warnings intended for the general public be written at no higher than the 6th grade reading level, which is equivalent to a child about 11 years old. A warning that met this guideline presumably would not be understood by many children younger than 11.

Older children, more advanced cognitively, are able to appreciate better the hazards described in a warning. However, these children value peer acceptance more than parental guidelines, and social influences and peer pressure can drive adolescent behavior more strongly than their own independent thought processes. Furthermore, adolescents are at a developmental stage in which they test limits and bend rules. Therefore, warnings about keeping the product away from children could have the unintended effect of making the product more appealing to some children. Older children might view such warnings as attempts to restrict personal freedom or self-expression, which could result in responses that are contrary to the warning's recommendations. For example, warnings about not using the product in the specific ways that might place them at risk, such as mimicking piercings, might have the unintended effect of encouraging this behavior among these children. Repeated use of the product in this way, without ingesting the magnets, most likely will convince these children that the hazard is not especially likely or is not relevant to them.

The ingestion warnings that currently accompany these products appear to be aimed at adults, primarily parents and other caregivers. Staff generally found the content of these warnings to be lacking in the following ways. The warnings often refer to children swallowing the magnets, without describing the incident scenarios that might lead to ingestion among older children and adolescents, whom caregivers may not believe are likely to put magnets into their mouths. Some warnings refer to the potential for swallowed magnets to stick to intestines, without referring to other magnets or ferromagnetic objects. Other warnings refer to magnets sticking together or attaching to other metallic objects inside the body, but they fail to explain that the magnets can attract through the walls of the intestines and forcefully compress these tissues. Without detailed information such as this, consumers may not understand how swallowing magnets differs from swallowing other small parts, or how magnets sticking together could pose a hazard rather than simply pass through the child's system. In sum, without a clear, explicit, and accurate description of the nature of the hazard and its consequences, consumers may have difficulty developing an accurate mental model of the hazard scenario and might find the warning implausible. In such situations, consumers are unlikely to comply with the action recommended in the warning.

Even if warnings could communicate the ingestion hazard, its consequences, and appropriate hazard-avoidance measures in a way that would be understood by most parents and other caregivers, the resulting warnings may not be effective at substantially reducing the incidence of magnet ingestions if consumers do not concur with what the warning states. Avoiding the ingestion hazard requires consumers to keep the product away from all children, or at least children in the incident age group, which is 15 years old and younger. Caregivers who read and understand the warnings may attempt to keep this product out of the hands of young children, but are not likely to be so diligent about heeding the warning with older children and adolescents. Unless caregivers are convinced that their child is likely to mimic lip, nose, or similar piercings or to perform other activities that might lead them to place magnets into their mouth or nose, caregivers may doubt that the warnings are relevant to their child, despite the warnings' assertions to the contrary.

Even if caregivers believe the warnings, several factors may prevent compliance. Some children, especially those who are older, may have peers who already own and use magnets from magnet sets. Some personally may have used the product before. Knowing this, caregivers might feel significant social pressure from the child, other family members and friends, to purchase the product for their children, or allow their children to use the product, especially if magnet sets are very popular among the child's peers. Caregivers who own the product and attempt to heed the warnings might find it quite difficult to prevent their child's access to the magnets and still keep the product reasonably accessible for their own use.

Moreover, securing the product from a child after every use requires time and effort, and warnings research has shown that even small increases in time and effort can prevent compliance with warnings. If the caregiver cannot secure the product properly—without dismantling the shapes and forms created during use—and the caregiver has created especially challenging or interesting designs with the magnets, the caregiver might feel compelled to keep the forms intact and, as a result, fail to secure the product properly. In addition, the difficulty of attempting to identify an appropriate location to store the magnet sets may dissuade consumers from doing so, particularly for a product often marketed to be for “stress relief.” Attempts to secure the product also may fail because the caregiver underestimates the abilities of their child and places the product in locations that seem secure but are still accessible to the child. Teens may have cognitive and motor skills similar to an adult's, making it extremely challenging to keep the magnet sets out of their hands. Furthermore, if caregivers know that their children have friends who own and use magnet sets, caregivers are likely to conclude that securing their magnet set will not prevent exposure to other identical or similar products. This may lead caregivers to reject the warning message.

Based on these concerns about the likely effectiveness of warnings for magnet sets, we do not believe that warning labels would adequately reduce the risk of injury presented by these products. We are interested in receiving comments on the warnings issues.

Theoretically, magnet sets could be sold with special storage containers to reduce the likelihood that children would access the magnets. Possible storage might include: a container that would clearly indicate when a magnet is missing from the set, or a package that is child resistant. Aside from the evident challenges in developing such containers, their effectiveness at reducing ingestions is doubtful. Such approaches would depend on consumers securing the packaging after each use. As discussed above, consumers may be reluctant to place the product back in its packaging after they have created designs with the magnets.

Another possible alternative to address the hazard of children ingesting magnets from magnet sets might be to limit the places where magnet sets are sold, keeping them away from toy stores, children's sections of stores, and other such locations. It is not clear that the Commission would have the regulatory authority to impose such sales restrictions by rule. In any event, such restrictions are unlikely to reduce ingestions significantly. As discussed in section B.2 of this preamble, children access these magnets from sources other than stores. The magnet sets may be available in the home after a caregiver has purchased them. Such sales restrictions are unlikely to deter teens. Moreover, restrictions on in-store sale of magnet sets would not affect Internet sales.

Another option is for the Commission to take no regulatory action to address the risk of injury posed by magnet sets. It is possible that, over time, increased awareness of the hazard could result in some reduction in ingestions. The magnitude of any such reduction in incidents is uncertain, but would likely be smaller than if the Commission issues the proposed rule.

The Commission is proposing to issue a rule under sections 7 and 9 of the CPSA. The CPSA requires that the Commission prepare a preliminary regulatory analysis and that it be published with the text of the proposed rule. 15 U.S.C. 2058(c). The following discussion is extracted from staff's memo, “Preliminary Regulatory Analysis of a Proposed Rule that Would Prohibit Certain Small Powerful Magnet Sets.”

The Commission has preliminarily determined to issue a rule prohibiting magnet sets that have been involved in incidents resulting in serious injuries to children who have ingested magnets that are part of these magnet sets. Some of these incidents have required surgery to remove individual magnets ingested by children. Reported incidents of magnet ingestion involved young children who put the magnets in their mouth and adolescents and teens who paired magnets to mimic tongue or lip piercings. This behavior has led to the powerful magnets being swallowed, resulting sometimes in severe medical consequences, including significant damage to the gastrointestinal tract.

The proposed rule would prohibit magnet sets that do not meet the requirements of the proposed rule. Thus, for magnet sets that contain more than one magnet, if any of the magnets would fit within the small parts cylinder, the magnet set would be prohibited, unless the small magnets meet the specified flux index limit. This performance standard for magnet sets would effectively ban current designs of magnetic desk sets of the type that have become popular in recent years.

Magnetic desk sets that would be affected by the scope of the proposed rule are comprised of small powerful magnetic balls, cubes, and/or cylinders that can be arranged in many different geometric shapes. These magnet sets were introduced in 2008, but the first year with significant sales to U.S. consumers was 2009. 5 Most have been sold in sets of either 125 balls or sets of 216 to 224 balls, although some firms have sold just a few balls as extras, and others have sold large sets of more than 1,000 magnetic balls. Based on product information provided by marketers, the most common magnet size is approximately 5 mm in diameter; although balls as small as about 3 mm have been sold, as have sets of larger magnet balls (perhaps 15 mm to 25 mm in diameter). 6 In addition to magnetic ball sets, desk sets of small magnetic cubes have also been sold, although they have comprised a relatively small share of the market. The leading marketer of such magnet sets has recently added small magnetic rods—intended to be used with balls to make geometric shapes—to its desk toy product line.

Based on information reviewed on product sales, including reports by firms to the Office of Compliance and Field Operations, the number of such magnet sets that have been sold to U.S. consumers since 2009, the first year of significant sales, may have totaled about 2.7 million sets, with a value of roughly $50 million. This value range reflects a combination of retail sales directly to consumers (through company Web sites and other Internet retail sites) and sales to retailers who market the products. A review of retail prices reported by importers and observed on Internet sites suggest prices typically ranging from about $20 to $45, with an average price of about $25.

The small powerful magnets most likely to be affected by this proposed rule are made from alloys of neodymium, iron, and boron. The magnetized neodymium-iron-boron cores are coated with a variety of metals and other materials to make them more attractive to consumers and to protect the brittle magnetic alloy materials from breaking, chipping, and corroding. Nearly 100 percent of neodymium and other rare earth metals now are mined in China, which also reportedly holds a nearly worldwide monopoly on the production of neodymium-iron-boron magnets. Based on available information, all of the small magnets used in magnet sets, as well as most of the finished and packaged products that would be subject to CPSC regulation, are produced by manufacturers located in China. 7

As noted above, none of the magnetic sets within the scope of the proposed rule are produced domestically. All of the firms that have marketed the products are believed to import them packaged and labeled for sale to U.S. consumers. Several Chinese manufacturers have the facilities and production capacity to meet the orders of U.S. importers; and there are no major barriers to market entry for firms wishing to source products from China for sale in the United States. For example, some of the firms with smaller sales volumes reported to Compliance staff that they mainly marketed products (sourced from manufacturers in China) through sales arrangements with a leading Internet retailer, which held stock for them and processed orders. A review of the product listings of the Internet retailer found that several other firms have similar business models. Other U.S. firms and individuals sell magnetic sets they have imported from China through “stores” they maintain on another major Internet shopping site.

To date, the Directorate for Economic Analysis has identified about 25 U.S. firms and individuals who have recently imported magnetic desk sets for sale in the United States. The combined sales of the top seven firms have probably accounted for the great majority (perhaps over 98%) of units sold. Due to resource constraints, the compliance division targeted 13 firms for corrective action. Eleven agreed to stop sale pending negotiations for a corrective action plan, two are now the subject of administrative cases recently initiated by the Commission. One firm is believed to have held a dominant position in the market for magnetic desk sets since it entered the market in 2009. That firm, and a few of the larger firms (including a firm based in Canada with a branch office in the United States), have marketed the products through accounts with retailers, in addition to selling directly to consumers on the Internet, using their own Web sites or other Internet shopping sites. In addition to products offered for sale by U.S. importers, consumers also have the ability to purchase magnetic sets directly from sources in Hong Kong or China, many of which market products through “stores” on a leading Internet shopping site. 8

The purpose of the proposed rule is to prevent serious intestinal injuries that can result when children ingest two or more of the magnets in the subject magnet sets (or one magnet and another ferromagnetic object) (Inkster, 2012). The draft proposed rule would prohibit magnet sets that do not meet specified performance requirements. Therefore, benefits of the proposed rule would be the resulting reduction in injuries. Based on a review of magnet ingestion incidents reported through CPSC databases that include the Injury or Potential Injury Incident database (IPII) and the In-depth Investigation database (INDP), CPSC staff is aware of 38 confirmed incidents involving ingestion of one or more powerful magnets from a subject magnetic desk set since the product was introduced in 2008 (Garland, 2012). An additional five incidents possibly involved magnets from such magnet sets. No fatalities involving the products are known to the CPSC.

Our analysis of the potential benefits of the proposed rule focuses on injuries reported through the National Electronic Injury Surveillance System (NEISS), a probability sample of U.S. hospital emergency departments that can be used to provide national estimates of product-related injuries initially treated in U.S. hospital emergency departments. Based on a review of incident narratives coded from emergency department medical records for magnet ingestion cases obtained from NEISS hospitals, the Directorate for Epidemiology staff has identified 72 magnet ingestions from 2009 through 2011, which were determined to involve, or possibly involve, the magnets of interest. Although manufacturer or brand name information is rarely available in the medical records extracted for NEISS, three of the 72 NEISS-reported cases (4.2%) did mention a brand name of magnet sets that are the magnets of interest; 69 cases (95.8%) were determined to have possibly involved the magnets of interest because the case narratives included terms such as “high powered,” “magnetic ball,” “magnetic marble,” “BB size magnet,” or “magnetic beads” (Garland, 2012).

Based on the 72 NEISS-reported magnet cases, there were an estimated 1,716 injuries treated in U.S. hospital emergency departments during the 2009 through 2011 study period. Roughly 6 percent were hospitalized injuries, as opposed to being treated and released. The benefits of the proposed rule can be estimated as the reduction in the societal costs associated with the injuries that would be prevented by the proposed rule. The Directorate for Economic Analysis bases estimates of the societal costs of emergency department-treated magnet injuries on the CPSC's Injury Cost Model (ICM) (Miller et al., 2000). The ICM is fully integrated with NEISS, and it estimates the societal costs of injuries reported through NEISS. Additionally, based on empirical relationships between the number of medically attended injuries treated in emergency departments and the number of injuries treated in other settings, the ICM also estimates the number and societal costs of medically attended injuries treated outside of emergency departments, such as in doctors' offices and clinics. The estimates of societal costs provided by the ICM depend upon (and vary by) the injury diagnosis, the body part affected, the injury disposition ( i.e., treated in a doctor's office, treated and released from a hospital emergency department, or hospitalized), and the age and sex of the victim.

Table 1 provides annual estimates of the injuries and the societal costs associated with “high-powered and/or ball-shaped magnet ingestions” that involve, or possibly involve, the magnets that are the subject of the proposed rule. As shown in the table, the 2009 through 2011 NEISS estimates suggest an estimated annual average of about 572 emergency department-treated injuries, including 537 injuries that were treated and released and 35 injuries that were hospitalized. About 70 percent of these emergency department-treated ingestions involved children ages 4 through 12 years. Just over half of the magnet cases from the emergency departments of the hospitals that comprise the NEISS sample appear to have involved the ingestion of more than one magnet. 9 Additionally, based on estimates from the ICM, there were another 870 injuries treated annually outside of hospital emergency departments.

After including the injuries treated outside of hospital emergency departments, there was an annual average of about 1,442 medically attended injuries involving ingestions of magnets that were defined as at least “possibly of interest.” These injuries resulted in annual societal costs of about $24.8 million (in 2011 dollars) during the 2009-2011 time period. The average estimated societal costs per injury were about $13,000 for injuries treated outside of emergency departments and hospitals (such as in a doctor's office or clinics), about $17,000 for those that were treated and released from emergency departments, and about $112,000 for those that were admitted to hospitals for treatment. Medical costs and work losses (including work losses of caregivers) accounted for about 25 percent of these injury cost estimates, and the less tangible costs of injury associated with pain and suffering accounted for about 75 percent of the estimated injury costs (Miller et al., 2000).

It should be noted that there is uncertainty concerning these estimates. Some of the cases described as “possibly” involving the magnet injuries that were included in Table 1 may not have involved the magnets that are the subject of the NPR. As noted above, about 95.8 percent of the cases upon which the table was based were described as only possibly involving the magnets of interest because NEISS narratives are not required to list manufacturer or brand name. Hence, it is possible that Table 1 overstates the societal costs associated with the magnets that would be included in the proposed rule.

On the other hand, in addition to the magnet cases upon which the table was based, there were also 175 NEISS cases (representing about 1,440 emergency department-treated injuries annually) in which the magnet type was unknown. These cases included those in which the case narrative mentioned that a magnet was involved, but presented insufficient information to classify the magnet type. Consequently, to the extent that the unknown magnet types involved those that would be covered by the proposed rule, the Table 1 results would tend to understate the societal costs associated with the magnets subject to the proposed rule.

As noted above, the benefits of a proposed magnet rule would be the reduction in the societal costs of the injuries that would be prevented. In general, because the proposed rule would effectively ban certain types of magnet sets, all ingestion injuries that would have involved magnets that, in the absence of the proposed rule, would have been sold after the effective date of the proposed rule, will be prevented. However, if children, adolescents, and teens cannot play with or use the prohibited magnets, they could play with or use substitute products that may also result in injury. Hence, the overall benefits of the proposed rule should be measured as the net reduction in injuries, and the concomitant reduction in societal costs, that would result.

These issues make it difficult to estimate with much certainty the prospective benefits of a proposed rule. However, if we assume that the injuries presented in Table 1 provide a generally accurate estimate of the annual injuries that would be prevented by the proposed rule, and that the risk associated with the use of substitute products is small, the expected benefits might amount to roughly $25 million annually.

The profits of firms represent a measure of the benefits to businesses that result from the production and sale of products. Similarly, the use value or “utility” that consumers receive from products represent the benefits of product use by the consuming public. Consequently, the costs of a proposed rule that effectively bans certain magnetic sets would consist of: (1) the lost profits of firms that would be barred from producing and selling the product in the future, and (2) the lost use value experienced by consumers who would no longer be able to purchase the prohibited magnets at any price.

First consider “profits,” which would be defined as the total revenue (TR) received by firms resulting from the sale of the subject magnets, less the total costs (TC) needed to produce, distribute, and market them. We do not have firsthand knowledge of the profits of firms marketing the magnetic desk sets, but we do have information that may help us provide an upper limit.

Based on the available information described earlier, sales of the magnetic desk sets may have averaged roughly 1 million annually during the 2009-2011 study period, with an average retail price of about $25 per set. Thus, total industry revenues may have averaged about $25 million annually ( i.e., 1 million sets × $25 per set). Additional information provided by firms to the Office of Compliance and Field Operations suggests that the average import cost of the magnets to U.S. importers may have amounted to about $10 per set, or an annual average of about $10 million ( i.e., 1 million sets × $10 import cost per set). Thus, total revenues, less import costs, might have averaged about $15 million annually ( i.e., $25 million−$10 million). While the share of profits from this $15 million in net revenues is unknown, it seems unlikely that profits would amount to more than about half, or about $7.5 million annually. Thus, the costs of a proposed rule in terms of reduced profits might amount to as much as $7.5 million on an annual basis. 10

We cannot estimate in any precise way the use value that consumers receive from these products, but we can describe it conceptually. In general, use value includes the amount of: (1) Consumer expenditures for the product, plus (2) what is called “consumer surplus.” In the case of the magnetic desk sets, given sales of about 1 million sets annually, and an average retail price of about $25 per set, consumer expenditures would amount to about $25 million annually. This $25 million represents the minimum value that consumers would expect to get from these products. It is represented by the area of the rectangle CPBQ in the standard supply and demand graph below, where P equals $25, and Q equals 1 million units.

The consumer surplus is given by the area of the triangle PAB under the graph's demand function, and represents the difference between the market clearing price and the maximum amount consumers would have been willing to pay for the product. This consumer surplus will vary for individual consumers, but it represents a benefit to consumers over and above what they had to pay. For example, while tickets to a concert or football game might sell for $100 each, some consumers who buy them for $100 would have been willing to pay $150 per ticket. In other words, they paid $100 and received benefits that they value at $150. Hence, each of these consumers would receive a consumer surplus of $50. 11

In general, the use value for the magnetic desk sets obtained by consumers is represented by the area of the trapezoid CABQ. However, the prospective loss in use value associated with the proposed rule prohibiting certain magnetic desk sets would amount to, at most, the area of the triangle representing the consumer surplus. This is because consumers would no longer be able to obtain utility from the prohibited product, but they would, nevertheless, still have the $25 million (represented by the rectangle CPBQ) that they would have spent on magnetic sets in the absence of a ban. While they can no longer purchase magnetic desk sets, which would have been their first choice, they can use this money to buy other products providing use value.

We have no information regarding aggregate consumer surplus, and hence, the amount of utility that would be lost from a ban of magnetic sets. While the magnetic desk sets clearly provide “utility” to purchasers, they are not necessities. Consequently, the demand for magnetic desk sets is probably not price inelastic, a factor that would tend to reduce estimates of utility losses. 12 Additionally, if the magnetic sets are “faddish,” they may not be the type of product that will be used intensively by consumers over long periods of time. However, if, for example, consumers who purchased the magnetic sets at an average price of $25 would have been willing to spend, on average, $35 per set, the lost utility from the desk sets might amount to about $10 million on an annual basis ( i.e., [$35−$25] × 1 million units annually).

Finally, it should be noted that the loss in consumer surplus just described represents the maximum loss of consumer utility from the proposed rule; the actual loss is likely to be lower. This is because consumers are likely to gain some amount of consumer surplus from products that are purchased in the place of magnetic desk sets. If, for example, there were close substitutes for magnetic desk sets ( i.e., desk sets that are almost as satisfying and similarly priced), the overall loss in consumer surplus (and hence, the costs of the proposed rule) would probably tend to be small. On the other hand, if there are no close substitutes, the costs of the proposed rule would tend to be higher. Nevertheless, the proposed rule will result in some level of lost utility. By purchasing magnetic desk sets rather than other products, consumers are revealing that they have a preference for the magnetic desk sets that are likely to provide more utility than a substitute purchase.

Implicit in this analysis has been the assumption that the expected useful life of the magnetic desk sets is about 1 year. Because this product has only been in widespread consumer use since 2009, this assumption is made without extensive knowledge about the actual use of the magnetic sets by consumers. Magnetic desk sets are relatively durable products, purchased at an average price of about $25. However, many consumers may find them to be novelties that soon lose much of their appeal. Thus, even if some of the products remain in homes or offices longer than a year, the risk of ingestion by children may be much higher in the first month or two after they are purchased. On the other hand, the magnets may be put away in a place accessible by children at some later date. Although it is somewhat speculative, it seems reasonable to assume that the effective useful product life of magnetic desk sets is, on average, no more than about a year.

However, it should also be noted that the results of our analysis are not particularly sensitive to this product life assumption. For example, had we assumed that the average product life was about 2 years, rather than 1 year, estimates of the number of sets in use at any given time would approximately double, reducing the estimated annual risk of injury, per magnetic desk set in use (and hence, reduce estimated societal costs per set) by about half. However, this reduced estimate of annual societal costs would itself be offset by the fact that the sets remain in use for 2 years, rather than 1 year. Thus, annual benefits would be halved, but benefits would be accrued over a 2-year period rather than 1 year. Consequently, even if we had doubled the assumed product life, the relationship between benefits and costs would have remained about the same.

There are several possible alternatives that the Commission might consider instead of a proposed rule prohibiting certain magnetic desk sets.

As an alternative to the proposed rule, the Commission could consider promulgating an alternative set of requirements that could reduce the risk of injury from magnetic desk sets. Performance requirements might allow a different flux index for the magnets sold as manipulative desk sets; different specifications regarding shapes and sizes of magnets within the scope of the standard; or some other criteria that have not yet been developed (but not as stringent as in the proposed rule). The advantage of such an approach is that it could reduce the potentially unreasonable risk of injury associated with magnetic desk sets and at the same time allow adults to continue to use the product. One practical question, however, is whether such a standard would eliminate or substantially affect the physical qualities of the products that make them enjoyable for adults. Additionally, the expected injury reduction would depend upon the parameters of the performance requirements that are established.

A possible alternative might be for magnetic desk sets to be sold with special storage containers that are fitted to the product so that consumers would be able to determine whether any of the magnets were missing from the sets. Such an approach might prevent injuries resulting from a small number of magnets being separated from a set without the owner knowing. In reality, though, many consumers may not use such containers because it could require time to form the magnets into a shape ( e.g., a cube) to make them fit in the containers; or they might want to keep the magnets out of their container in a shape or structure that took time and effort to construct.

Alternatively (or in combination), the magnets could be sold in child-resistant packaging. Such an approach has the potential to reduce ingestion injuries, but it may result in several practical problems. Child-resistant packaging would not prevent teens and adolescents (and even some younger children) from opening the packaging. Additionally, the child-resistant packaging would have to be secured after each use. According to the Division of Human Factors, it is unlikely that adults would accept child-resistant packaging for a product like the magnetic desk sets because of the level of inconvenience it would involve (Sedney & Smith, 2012). Also, for the reasons described above, consumers may leave magnets outside of their container.

The Commission could require strong warnings on labels and on product instructions designed to prevent the use of the magnetic desk sets by children. The Division of Human Factors, Directorate for Engineering Sciences (HF) memorandum contains an extensive discussion concerning warnings and their potential effectiveness (Sedney & Smith, 2012). Based on HF staff's examination, the ingestion warnings that currently accompany magnetic desk sets are generally aimed at adults, but appear to be deficient in terms of their content. For example, some warn against children swallowing the magnets without describing the incident scenarios. Some warnings refer to the propensity for swallowed magnets to stick to intestines without referring to the presence of other magnets or metal objects. Others warnings did refer to magnets sticking together or attaching to other metallic objects inside the body, but without explaining that the magnets can attract through the walls of the intestines and forcefully compress these tissues, resulting in serious injuries. According to CPSC staff, without detailed information in the warnings, consumers may not really understand how swallowing magnets differs from swallowing other small parts or how magnets sticking together could pose a hazard.

CPSC staff believes that it may be possible to develop warnings that could adequately communicate the ingestion hazard, the consequences of ingestion, and how to avoid the hazard. To the extent that the subject magnets present a “hidden” hazard about which consumers are unaware, explicit and adequate warnings could reduce ingestions and allow adults to continue to enjoy the use of the product. However, the effectiveness of such warnings is unknown, and CPSC staff doubts that even well-written warnings would substantially reduce the incidence of magnet ingestions. Some caregivers who read and understand the message may attempt to keep the magnets out of the hands of young children, but staff doubts many caregivers would attempt to keep the product away from older children and adolescents. Additionally, staff is doubtful that children old enough to understand the warnings would abide by them.

Another option for the Commission to consider might be to prohibit sales of magnetic desk sets in toy stores, children's sections of general purpose stores, and near cash registers of stores that sell any children's products. Sales limitations or requirements for strong warnings might also be required on Web sites advertising the sale of magnets on the Internet.

The details for developing a set of sales limitations and requirements would need to be worked out, but the idea would be to make sure that magnetic desk sets, to the extent possible, are not sold at locations where children are likely to be present. Sales requirements might also be combined with strong and explicit warnings could be developed although the staff has expressed serious concern as to whether such warnings can ever overcome the attractiveness of the magnets and their intrinsic play value.

Such sales limitations, in combination with adequate and explicit warnings, may increase consumer awareness of the hazard, and possibly reduce the number of ingestions. Some parents would still allow their children (especially older children and adolescents) to play with the magnetic desk sets despite the warnings. Also, some young children will get into the packaging, even if parents try to restrict the use of the desk sets. Nevertheless, combining sales limitations with explicit warnings might educate parents about the hidden nature of the hazard, while at the same time allow adults to continue to use a product that they apparently enjoy. We are interested in receiving comments that would address this issue.

Alternatively, the Commission could continue to address the hazard by means of Corrective Action Plans. While staff believes this approach may be deficient, such a strategy might be combined with other actions described above to achieve some reductions in the hazard.

Based on reports to the CPSC, ingestions of small magnets contained in magnetic desk sets have caused multiple, high severity injuries that require surgery to remove the magnets and repair internal damage. However, because of the lack of definitive information on the number of injuries involving magnetic desk sets that would be prevented by a proposed rule, there is uncertainty concerning the benefits that would result. If we assume that the NEISS cases identified by the Directorate for Epidemiology staff as involving high-powered and/or ball-shaped magnet ingestions actually involved the magnets that would be prohibited, then the estimated benefits of the rule might amount to about $25 million annually.

The costs of the proposed rule, in terms of reduced profits for firms and lost utility by consumers, are also uncertain. However, based on annual estimates available for the 2009−2011 study period, these costs could amount to about $7.5 million in lost profits and some unknown quantity of lost utility.

There are alternative regulatory actions that the Commission could consider that might allow the magnetic desk sets to continue to be marketed. For example, the Commission, by regulation, could issue alternative performance requirements or require warnings that explicitly describe the hazard and how to avoid it. Other options might be to develop requirements for the packaging of the magnetic desk sets ( e.g., develop requirements for child-resistant packaging); and/or place limitations on how and where the magnetic desk sets can be sold. These alternative actions—which might be considered alone, or in combination—would have varying levels of effectiveness.

The proposed rule would not require manufacturers (including importers) to perform testing or require manufacturers or retailers to keep records. For this reason, the proposed rule does not contain “collection of information requirements” as that term is used in the Paperwork Reduction Act, 44 U.S.C. 3501-3520. Therefore, the proposed rule need not be submitted to the Office of Management and Budget (OMB) in accordance with 44 U.S.C. 3507(d) and implementing regulations codified at 5 CFR 1320.11.

The Regulatory Flexibility Act (RFA) generally requires that agencies review proposed rules for their potential economic impact on small entities, including small businesses. Section 603 of the RFA calls for agencies to prepare and make available for public comment an initial regulatory flexibility analysis describing the impact of the proposed rule on small entities and identifying impact-reducing alternatives. The initial regulatory flexibility analysis is to contain:

(1) A description of the reasons why the action is being considered;

(2) A succinct statement of the objectives of, and legal basis for, the proposed rule;

(3) A description of and, where feasible, an estimate of the number of small entities to which the proposed rule will apply;

(4) A description of the projected reporting, recordkeeping, and other compliance requirements of the proposed rule, including an estimate of the classes of small entities that will be subject to the requirement and the types of professional skills necessary for the preparation of the report or record; and

(5) An identification, to the extent possible, of all relevant federal rules that may duplicate, overlap, or conflict with the proposed rule.

As discussed previously, the proposed rule would prohibit magnet sets that do not meet the specified requirements described in section F of this preamble. Some of the incidents that have come to the attention of the Commission involving ingestions of magnets from desk sets have resulted in severe medical consequences, including significant damage to the stomach or intestines. Based on a review of emergency department-treated magnet ingestions obtained through the NEISS, the Directorate for Epidemiology staff has identified 72 magnet ingestions from 2009 through 2011, which were determined to involve, or possibly involve, the magnets of interest. Based on these injuries, staff estimates that there has been an annual average of about 572 emergency department-treated injuries involving the products, including 537 injuries that were treated and released and 35 injuries that were hospitalized. 13 Additionally, based on estimates from the CPSC's Injury Cost Model (ICM), which is integrated with NEISS, there were 870 other injuries treated annually outside of hospital emergency departments, such as in doctors' offices and clinics. The estimated total of 1,442 medically attended injuries involving magnet ingestions, which were defined as at least “possibly of interest,” resulted in average annual societal costs of nearly $25 million during 2009 through 2011, based on estimates provided by the ICM.

This proposed rule would cover magnet sets that are comprised of sets of small powerful magnetic balls, cubes, and/or cylinders that can be arranged in many different geometric shapes. The products have been described as desk toys, games, puzzles, and stress relievers. The small powerful magnets most likely to be affected by the proposed rule are made from alloys of neodymium, iron, and boron. We are interested in receiving comments that would address this issue both as to the type of products that should be covered and the composition of the magnets. More information concerning the product and the market is provided in section B of the preamble.

The proposed rule would impact U.S. importers and retailers of manipulative desk sets that are comprised of small powerful magnets of the size and magnetic force proscribed by the proposed rule. None of the magnetic desk sets within the scope of the proposed rule are produced domestically. All of the firms that have marketed the products are believed to import them from manufacturers in China, packaged and labeled for sale to U.S. consumers. The Directorate for Economic Analysis has indentified about 25 firms and individuals in the United States who have recently imported the product for sale to consumers. All of the importers are small businesses under U.S. Small Business Administration (SBA) size standards (SBA, 2012). 14

Based on information on product sales reviewed by the Directorate for Economic Analysis staff, including reports by firms to the Office of Compliance and Field Operations (Compliance), the number of manipulative magnetic desk sets that have been sold by U.S. importers since the products were introduced in 2008 may total about 2.7 million sets, with a value to the firms of roughly $50 million. This value range reflects a combination of retail sales directly to consumers (through company Web sites and other Internet retail sites) and sales to retailers who market the products.

Although there are about 25 U.S. importers of magnet sets that would fall within the scope of the rule, the economic impact of the rule will be most severe for the seven firms that account for the great majority (perhaps over 98%) of units sold. Perhaps five of these larger importers derive most or all of their revenues from the sale of magnetic desk toys falling within the scope of the rule, or related products, such as books and surfaces upon which magnetic designs are constructed. These firms would be severely affected by the proposed rule, which would effectively ban the magnet sets that they have been importing and selling. Consequently, they may go out of business. Two of the other leading importers of magnetic desk sets apparently have fairly broad product offerings, which could lessen the severity of the economic impact of a rule. Nevertheless, the impacts of the proposed rule could be considered significant for these small importers.

Nearly all of the perhaps 18 other recent U.S. importers of magnetic desk sets have sold relatively few of the products. These importers sourced the products from manufacturers in China and have marketed the magnet sets through online “stores” maintained on Internet retail sites. Many of these importers are individuals who may also market a variety of other products through the same Internet outlets. For individuals and firms with these business models, the discontinuance of certain magnetic desk sets as a source of revenue as a result of the rule is less likely to cause significant economic hardship, unlike the firms or individuals who derive most, or all, of their revenue from sales of magnetic desk sets and related products.

Although a large share of magnetic desk sets are sold directly to consumers by the importers using their own Internet Web sites or other Internet shopping sites, a rule prohibiting these products would also affect retailers of the products, whether selling them online or physically in stores. However, these retailers are not likely to derive significant proportions of total revenues from sales of affected desk sets, and the impacts on individual firms should be minimal.

The purpose of the proposed rule is to reduce the risk of injury from ingestion of one or more small, powerful magnets that comprise the subject consumer products. As noted above, the estimated total of 1,442 medically attended injuries involving magnet ingestions that were defined as at least “possibly of interest” resulted in annual societal costs of about $25 million during the 2009 to 2011 time period. These incident numbers may change over the course of the rulemaking because the North American Society for Pediatric Gastroenterology, Hepatology and Nutrition (NASPGHAN) has provided the Commission with some additional incident data and is currently surveying their members regarding any additional incident data they may have to share with the Commission. After receiving this data the Commission may conduct its own survey to collect additional data similar to the exposure surveys the Commission has conducted in the ATV rulemaking. However, it is expected that the proposed rule would substantially reduce the future incidence and cost to society of ingestions of the subject magnetic desk sets. As discussed in section D of this preamble, the rule is being proposed under the authority of the CPSA.

We are not aware of any federal rules that may duplicate, overlap, or conflict with the proposed rule.

There are possible alternatives to the proposed rule that would reduce the impact of a rule on small businesses. These alternatives would include the following:

As an alternative to the proposed rule, the Commission could consider promulgating a different set of performance requirements to reduce the risk of injury from magnetic desk sets. Performance requirements might require a different flux index for the magnets sold as manipulative desk sets, different specifications regarding shapes and sizes of magnets within the scope of the standard, or some other criteria that have not been developed yet. The advantage of such an approach is that, theoretically, it could reduce the potentially unreasonable risk of injury associated with magnetic desk sets, and at the same time, allow adults to continue to use the product. One practical question, however, is whether such a standard would eliminate or substantially reduce the physical qualities of the products that make them enjoyable for adults.

In theory, magnetic desk sets could be sold with special storage containers that are fitted to the product so that consumers would be able to determine whether any of the magnets were missing from the sets. Such a requirement might prevent injuries that result from a small number of magnets becoming separated from a set without the owner knowing. In reality, though, many consumers might be unlikely to use such containers because using a container could require consumers to take time to form the magnets into a shape (e.g., a cube) in order for the magnets to fit back into the container, or consumers might wish to keep the magnets in a formation that took time and effort to construct.

Alternatively, the magnets could be sold in child-resistant packaging. Such an approach has the potential to reduce ingestion injuries, but it may suffer from several practical problems. Child-resistant packaging would not prevent teens and adolescents (and even some younger children) from opening the packaging. Additionally, the packaging would have to be secured after each use. According to the Division of Human Factors, it is unlikely that adults would accept child-resistant packaging for a product such as the magnetic desk set because of the level of inconvenience it would involve.

It is not clear that the Commission would have the authority to require either of these approaches through regulation.

The Commission could require labeling on affected magnetic desk sets to warn consumers in lieu of a rule that prohibits the products. Following its evaluation of this alternative, the Division of Human Factors, Directorate for Engineering Sciences, concluded: “it may be possible to develop warnings that could inform parents and other caregivers better about the ingestion hazard, its consequences, and appropriate hazard-avoidance measures. Nevertheless, the resulting warnings may not be effective at motivating caregivers to comply, and therefore, they may not reduce substantially the incidence of magnet ingestions.”

Another option might be to prohibit sales of magnetic desk sets in toy stores, children's sections of general purpose stores, and near cash registers of stores that sell any children's products. Advertising and sales limitations or requirements for strong warnings might also be required at Web sites advertising the sale of magnets on the Internet.

The details for developing a set of sales limitations and requirements would need to be worked out (and the legal authority to impose such restrictions by regulation is uncertain), but the idea would be to make sure that magnetic desk sets, to the extent possible, are not sold at locations where children are likely to be present. Sales requirements might also be combined with strong and explicit warnings of the sort that CPSC staff has suggested could be developed.

Such sales limitations, in combination with adequate and explicit warnings, may increase consumer awareness of the hazard, and possibly reduce ingestions. Some parents would still allow their children (especially older children and adolescents) to play with the magnetic desk sets despite the warnings. Also, some young children will get into the packaging even if parents try to restrict the use of the products. Nevertheless, combining sales limitations with explicit warnings might educate parents about the hidden nature of the hazard, while at the same time allow adults to continue to use a product that apparently they enjoy.

Alternatively, the Commission could continue to address the hazard by means of Corrective Action Plans. While we believe this approach may be deficient, such a strategy might be combined with other actions described above to achieve some reductions in the hazard.

The Commission could take no regulatory action to reduce the risk of ingestion injuries associated with magnetic desk sets. Under this alternative, future societal losses would be determined by the numbers of products in use, other factors that affect the likelihood that young children, adolescents, and teens will ingest the magnets, and the awareness and response of the medical community to the hazards presented by ingested magnets. Theoretically, over time, increased awareness of the hazards by caregivers could make it more likely that the magnets will be kept away from young children and older children, and school personnel could be made more aware of the hidden dangers of using strong magnets to mimic tongue or lip piercings. Also, the medical community seems to be taking steps to become better educated about the risks of ingested magnets, which should lead to monitoring of patients' medical status more quickly, which would reduce the adverse medical consequences of magnet ingestions.

The results of this initial regulatory flexibility analysis suggest that the proposed rule would likely have a significant adverse impact on seven of the small importers of magnetic desk sets, and perhaps five of these firms that derive most or all of their revenue from the sale of magnetic desk sets might go out of business. Some possible alternatives to a rule prohibiting the products have been identified. All of these alternatives would reduce the expected impact of the rule on small businesses. However, these alternatives might not achieve the same level of benefits as the proposed rule.

Usually, CPSC rules establishing performance requirements are considered to “have little or no potential for affecting the human environment,” and environmental assessments are not usually prepared for these rules (see 16 CFR 1021.5(c)(1)). This proposed rule falls within the categorical exemption.

As required by Executive Order 12988 (February 5, 1996), the CPSC states the preemptive effect of the proposed rule as follows:

The regulation for hazardous magnet sets is proposed under authority of the CPSA. 15 U.S.C. 2051-2089). Section 26 of the CPSA provides that “whenever a consumer product safety standard under this Act is in effect and applies to a risk of injury associated with a consumer product, no State or political subdivision of a State shall have any authority either to establish or to continue in effect any provision of a safety standard or regulation which prescribes any requirements as the performance, composition, contents, design, finish, construction, packaging or labeling of such product which are designed to deal with the same risk of injury associated with such consumer product, unless such requirements are identical to the requirements of the Federal Standard”. 15 U.S.C. 2075(a). Upon application to the Commission, a state or local standard may be excepted from this preemptive effect if the state or local standard: (1) provides a higher degree of protection from the risk of injury or illness than the CPSA standard, and (2) does not unduly burden interstate commerce. In addition, the federal government, or a state or local government, may establish and continue in effect a non-identical requirement that provides a higher degree of protection than the CPSA requirement for the hazardous substance for the federal, state or local government's use. 15 U.S.C. 2075(b).

Thus, with the exceptions noted above, the magnet set requirements proposed in today's Federal Register would preempt non-identical state or local requirements for magnet sets designed to protect against the same risk of injury.

The Commission proposes that this rule would become effective 180 days from publication of a final rule in the Federal Register and would apply to all magnet sets manufactured or imported on or after that date. The CPSA requires that consumer product safety rules take effect not later than 180 days from their promulgation unless the Commission finds there is good cause for a later date. 15 U.S.C. 2058(g)(1).

The CPSA requires the Commission to make certain findings when issuing a consumer product safety standard. Specifically, the CPSA requires that the Commission consider and make findings about the degree and nature of the risk of injury; the number of consumer products subject to the rule; the need of the public for the rule and the probable effect on utility, cost, and availability of the product; and other means to achieve the objective of the rule, while minimizing the impact on competition, manufacturing, and commercial practices. The CPSA also requires that the rule must be reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with the product and issuing the rule must be in the public interest. 15 U.S.C. 2058(f)(3).

In addition, the Commission must find that: (1) If an applicable voluntary standard has been adopted and implemented, that compliance with the voluntary standard is not likely to adequately reduce the risk of injury, or compliance with the voluntary standard is not likely to be substantial; (2) that benefits expected from the regulation bear a reasonable relationship to its costs; and (3) that the regulation imposes the least burdensome requirement that would prevent or adequately reduce the risk of injury. Id. These findings are discussed below.

Degree and nature of the risk of injur y. Based on a review of NEISS data, we have determined that an estimated 1,700 ingestions of magnets from magnet sets were treated in emergency departments during the period from January 1, 2009 to December 31, 2011. From review of INDP and IPII databases, we are aware of 50 reported incidents occurring from January 1, 2009 through June 30, 2012, involving the ingestion of magnets by children between the ages of 1 and 15. Of those 50 incidents, 38 involved the ingestion of high-powered, ball-shaped magnets that were contained in products that meet the above definition of “magnet set,” and 5 of those 50 incidents possibly involved ingestion of this type of magnet. Hospitalization was required in order to treat 29 of the 43 incidents, with surgery necessary to remove the magnets in 20 of the 29 hospitalizations. In 10 of the 29 hospitalizations, the victim underwent colonoscopic or endoscopic procedures to remove the magnets. In 37 of the 43 incidents that likely involved magnets from hazardous magnet sets, the magnets were ingested by children younger than 4 years old, or between the ages of 4 and 12.

Once ingested, these strong magnets begin to interact in the gastrointestinal tract, which can lead to tissue death, perforations, and/or fistulas, and possibly intestinal twisting and obstruction. If left untreated, these injuries can lead to infection of the peritoneal cavity and other life-threatening conditions. The number of magnets swallowed increases the risk of attraction and injury, but as few as two magnets can cause serious internal damage in a very short period of time. The fact that many medical professionals do not appreciate the health consequences of magnet ingestion increases the severity of the risk because a doctor who is unfamiliar with these strong magnets may send a child home and expect the magnets to pass naturally. There are also health consequences to the treatment and surgery for removal of ingested magnets. There may be a risk of gastrointestinal bleeding; leakage of holes that were repaired; rupturing of resectioned bowels; temporary paralysis of the bowels; use of a colostomy bag; IV feeding initially, or for some longer time period; and compromise of nutrition and digestive function. Long-term health consequences can be severe as well: loss of intestinal tissue; compromised nutrition absorption; adhesions and scarring of intestines; need for a bowel transplant; and possible impediments to fertility with girls. Even those children who pass the magnets naturally and do not require surgery still need close observation by doctors and may undergo sequential x-rays, thus, exposing children to repeated dosages of radiation.

Number of consumer products subject to the rule. The market has increased substantially since magnet sets were first introduced. We estimate that the number of such magnet sets that have been sold to U.S. consumers since 2009, the first year of significant sales, may have totaled about 2.7 million sets, with a value of roughly $50 million.

The need of the public for magnet sets and the effects of the rule on their utility, cost, and availability. We cannot estimate, in any precise way, the use value that consumers receive from these products. In general, this would be the amount of money that consumers expend on the product, plus the consumer surplus ( i.e., the difference between the market price and the maximum amount consumers would have been willing to pay for the product). Although the proposed rule would prohibit the magnet sets currently on the market, it is conceivable that a similar product that meets the requirements of the proposed rule could be developed that would serve a similar purpose of the magnet sets that the proposed rule would prohibit.

Other means to achieve the objective of the rule, while minimizing the impact on competition and manufacturing. Various alternatives to the proposed rule are discussed in previous sections of this preamble. We do not believe that options other than the proposed rule prohibiting certain magnet sets would sufficiently reduce the number and severity of injuries resulting from the ingestion of magnets from these magnet sets. As discussed above, the circumstances associated with this product limit the likely effectiveness of warning labels. Despite existing warning labels and market restrictions, ingestion incidents have continued to occur. Parents and caregivers may not appreciate the hazard associated with magnet sets, and as a result, they will continue to allow children access to the product. Children may not appreciate the hazard and will continue to mouth the items, swallow them, or, in the case of young adolescents and teens, mimic body piercings. Once the magnets are removed from their carrying case, the magnets bear no warnings to guard against ingestion or aspiration; the small size of the individual magnets precludes the addition of such a warning. Because individual magnets are shared easily among children, many end users of the product are likely to have had no exposure to any warning.

Unreasonable risk. As noted previously, we have determined that an estimated 1,700 ingestions of magnets from magnet sets were treated in emergency departments during the period from January 1, 2009 to December 31, 2011. Injuries resulting from such ingestions of magnets can be severe and life-threatening. The risk posed by these magnets may not be appreciated by caregivers and children, as they may assume, mistakenly, that the consequences of ingesting magnets would be similar to ingesting any other small object. However, once ingested, these strong magnets are mutually attracted to each other and exert compression forces on the trapped gastrointestinal tissue.

We estimate that the societal costs of resulting injuries could amount to $25 million annually. This would be the expected benefits that could result from the proposed rule. The costs of the proposed rule would consist of the lost profits to firms that produce and sell magnet sets, plus the lost use value that consumers would experience when the product is no longer available. We estimate these costs to be about $7.5 million in lost profits and some unknown quantity of lost utility. Considering the injuries associated with magnet sets—and the resulting societal costs, balanced against the likely impact that the proposed rule would have on firms producing and selling the product, and on consumers who would lose the utility of the product— we preliminarily conclude that magnet sets pose an unreasonable risk of injury and that the proposed rule is reasonably necessary to reduce that risk.

Public interest. This proposed rule is in the public interest because it would reduce magnet-related deaths and injuries in the future. A rule prohibiting certain magnet sets from the chain of commerce will mean that children will have less access to this product, thereby reducing the number of incidents of children swallowing the magnets and the resulting cost to society of treating these injuries. The Commission seeks comment on this issue and also whether similar actions regarding lawn darts and dive sticks have had the effect of reducing injuries by reducing the access to the product.

Voluntary standards. Currently, there is no voluntary standard for magnetic sets. A group of magnet set importers and distributors have requested the formation of a voluntary standard by ASTM International for the labeling and marketing of these products. The companies have requested the formation of a voluntary standard to: (1) Provide for appropriate warnings and labeling on packages of these magnet sets, and (2) establish guidelines for restricting the sale of these magnet sets to, or for the use of children, such as: not selling to stores that sell children's products exclusively, and not selling the magnets in proximity to children's products. Such a voluntary standard would have many of the same limitations as would a labeling standard.

Relationship of benefits to costs. Based on reports to the CPSC, ingestions of small magnets contained in magnet sets have caused multiple, high severity injuries that require surgery to remove the magnets and repair internal damage. Although there is some uncertainty concerning the benefits that would result from the proposed rule, we estimate that benefits of the rule might amount to about $25 million annually.

The costs of the proposed rule, in terms of reduced profits for firms and lost utility by consumers, also are uncertain. However, based on annual estimates available for the 2009-2011 study period, these costs could amount to about $7.5 million in lost profits and some unknown quantity of lost utility.

Least burdensome requirement. We have considered several alternatives to the proposed rule prohibiting certain magnet sets. We conclude that none of these alternatives would adequately reduce the risk of injury. Alternative performance requirements might allow a different flux index for magnets contained in magnetic sets. Theoretically, this might allow some current products to continue to be produced. However, it is unclear that a different flux index would permit products that have the desired physical qualities to make them sufficiently enjoyable to adults while adequately reducing the characteristics that make these strong magnets hazardous to children. Some type of special storage containers or other packaging requirements might be possible. However, it is unlikely that consumers would use such containers, particularly if they wish to keep the magnets out of the container and maintain whatever shape they have constructed with the magnets. We have considered the possibility of requiring rigorous warnings on the products or in the instructions for the products. However, magnet sets currently on the market provide warnings concerning the potential hazard to children. It is unlikely that even strengthened warnings would substantially reduce the incidence of magnet ingestions. This is particularly true for incidents involving older children and adolescents. Moreover, children who are old enough to understand the warnings may still not abide by them. Some type of sales restriction, limiting the location where magnet sets could be sold, might be possible. However, even with restrictions on sales, ingestions are still likely to occur as children encounter these magnets in the home, at school, or other locations when adults have bought them and they are available to children. The Commission could continue to address the hazard from magnet sets through corrective actions, i.e., recalls of the product. However, such action would do nothing to prevent additional companies from continuing to enter the market and import magnet sets into the country. The Commission has the option of taking no regulatory action. Although it is possible that, with increased awareness of the hazard over time, some reduction in ingestions could occur, the magnitude of any such reduction in incidents is uncertain and would likely be smaller than if the Commission issues the proposed rule.

We request comments on all aspects of this proposed rule. We ask for comments concerning the risks of injury associated with these magnet sets; the regulatory alternatives discussed; other possible ways to address these risks; and the economic impacts of the various regulatory alternatives. We specifically seek comments concerning the following issues:

• The proposed definition of “magnet sets” that would be covered by the rulemaking and other issues related to scope of the proposal

• The appropriateness of the proposed flux index limit of 50 or less

• The adequacy of the proposed test procedure for determining the flux index, particularly whether it would be sufficient to account for the strength of aggregated magnets

• Alternatives to the small parts cylinder that limits the size of the magnets at issue

• The likelihood that a magnet set could function as entertainment for adults and meet the proposed requirements

• All alternatives to the proposed regulatory action

• Issues related to warnings for these products

• The options of conducting the rulemaking under section 8 of the CPSA or under provisions of the FHSA

• Whether the definition of magnet set should include magnets sold individually with the possibility that they could be aggregated into a set of two or more magnets by consumers, and if so, whether such individually sold magnets are already covered by the definition of magnet set contained in the proposed rule at 16 CFR 1240.2(b), or whether the definition should be amended with additional language such as “whether sold individually or as part of a set.”

• Proposed § 1240.3(a) would apply to magnet sets that contain a magnet that fits completely within the small-parts cylinder described in 16 CFR 1501.4. Should it instead apply to sets with at least two magnets that fit completely within the small parts cylinder?

For the reasons stated in this preamble, the Commission preliminarily concludes that magnet sets that do not meet the specified proposed requirements present an unreasonable risk of injury.

For the reasons stated in the preamble, the Commission proposes to amend Title 16 of the Code of Federal Regulations as follows:

1. Add part 1240 to read as follows:

In a notice published in the Federal Register on December 20, 2011 (76 FR 78866), FDA announced that a food additive petition (FAP 1A4784) had been filed by Nexira, c/o Keller and Heckman LLP, 1001 G St. NW., Suite 500 West, Washington, DC 20001. The petition proposes to amend the food additive regulations in § 172.780 Acacia (gum arabic) (21 CFR 172.780) to provide for the expanded safe use of acacia gum (gum arabic) in food.

Under 21 CFR 171.1(c)(H), either a claim of categorical exclusion under 21 CFR 25.30 or § 25.32 (21 CFR 25.32) or an environmental assessment under 21 CFR 25.40 is required to be submitted in a food additive petition. A claim of categorical exclusion under § 25.32(k) was submitted with the petition, which applies to substances added directly to food that are intended to remain in food through ingestion by consumers and that are not intended to replace macronutrients in food. The Agency reviewed the claim of categorical exclusion submitted by the petitioner and stated in the original filing notice its determination that, under § 25.32(k), the proposed action was of a type that does not individually or cumulatively have a significant effect on the human environment, and therefore, neither an environmental assessment nor an environmental impact statement is required.

However, upon further review of the petition, the Agency has decided that the food additive may act to replace macronutrients in food and, therefore, the categorical exclusion in § 25.32(k) is not applicable for the proposed action. The Agency informed the petitioner of this decision, who subsequently submitted an environmental assessment.

The potential environmental impact of this petition is being reviewed. To encourage public participation consistent with regulations issued under the National Environmental Policy Act (40 CFR 1501.4(b)), the Agency is placing the environmental assessment submitted with the petition that is the subject of this notice on public display at the Division of Dockets Management (see DATES and ADDRESSES ) for public review and comment.

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. FDA will also place on public display any amendments to, or comments on, the petitioner's environmental assessment without further announcement in the Federal Register . If, based on its review, the Agency finds that an environmental impact statement is not required, and this petition results in a regulation, the notice of availability of the Agency's finding of no significant impact and the evidence supporting that finding will be published with the regulation in the Federal Register in accordance with 21 CFR 25.51(b).

This document and all comments received may be viewed online through the Federal eRulemaking portal at: http://www.regulations.gov. The Web site is available 24 hours each day, 366 days this year. Please follow the instructions. Electronic submission and retrieval help and guidelines are available under the help section of the Web site.

An electronic copy of this document may also be downloaded by accessing the Office of the Federal Register's home page at: http://www.archives.gov/federal-register/ , or the Government Printing Office's Web page at: http://www.gpo.gov/fdsys.

The FHWA proposes to modify existing regulations for the administration of engineering and design related service contracts to ensure consistency and compliance with prior changes in authorizing legislation codified in 23 U.S.C. 112(b)(2) and changes in other applicable Federal regulations. Proposed revisions will also address certain findings contained in a 2008 U.S. Government Accountability Office (GAO) review report ( http://www.gao.gov/products/GAO-08-198 ) regarding increased reliance on consulting firms by State transportation agencies (STAs) and a 2009 DOT Office of Inspector General (OIG) audit report ( http://www.oig.dot.gov/library-item/4710 ) regarding oversight of engineering consulting firms' indirect costs claimed on Federal-aid grants. This rulemaking does not otherwise impose any new burdens on States, local public agencies, or other grantees and subgrantees.

The primary authority for the procurement, management, and administration of engineering and design related services directly related to a highway construction project and reimbursed with FAHP funding is codified in 23 U.S.C. 112(b)(2). On November 30, 2005, the Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act, 2006 (Pub. L. 109-115, 119 Stat. 2396, HR 3058), commonly referred to as the “2006 Appropriations Act,” was signed into law. Section 174 of this Act amended 23 U.S.C. 112(b)(2) by removing the provisions that permitted States to use “alternative” or “equivalent” State qualifications-based selection procedures and other procedures for acceptance and application of consultant indirect cost rates that were enacted into State law prior to June 9, 1998.

Effective on the date of enactment of the “2006 Appropriations Act,” States and local public agencies could no longer use alternative or equivalent procedures. States and local public agencies are required to procure engineering and design related services in accordance with the qualifications-based selection procedures prescribed in the Brooks Act (40 U.S.C. 1101 et seq.) and to accept and apply consultant indirect cost rates established by a cognizant Federal or State agency in accordance with the Federal Acquisition Regulation (FAR) cost principles (48 CFR part 31). To comply with the amendments to 23 U.S.C. 112(b)(2), this proposed rulemaking will remove all references to alternative or equivalent procedures.

In addition, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council published a final rule in the Federal Register of August 30, 2010 (75 FR 53129), and effective on October 1, 2010, raising the Federal simplified acquisition threshold established in 48 CFR 2.101 of the FAR from $100,000 to $150,000 to account for inflation using the Consumer Price Index as required in statute. The FHWA proposes to revise the small purchase procedures section to reflect this increase in the Federal threshold.

The proposed revisions will also address certain findings and recommendations contained in the aforementioned GAO review and OIG audit reports, clarify existing requirements to enhance consistency and compliance with Federal laws and regulations, and address evolutions in industry practices regarding the procurement, management, and administration of consultant services.

Specific proposed revisions are described in the section-by-section analysis below.

The FHWA proposes to revise 23 CFR part 172—Administration of Engineering and Design Related Service Contracts as follows:

The title of this part would be changed to Procurement, Management, and Administration of Engineering and Design Related Services to reflect the range of requirements and Federal interests associated with the procurement, management, and administration of engineering and design related services addressed within this part.

Section 172.1 would be amended to clarify the applicability of the requirements of this part for the procurement, management, and administration of engineering and design related services and the requirements of the common grant rule (49 CFR part 18) for procurement of these and other consultant services reimbursed with FAHP funding.

Section 172.3 would be amended to clarify the definitions of “audit” and “cognizant agency” to provide consistency with the FAR cost principles (48 CFR part 31) and with industry guidance established in the American Association of State Highway and Transportation Officials (AASHTO) Uniform Audit and Accounting Guide, 2010 Edition ( http://audit.transportation.org/Documents/2010_Uniform_Audit_and_Accounting_Guide.pdf ). The definition of “competitive negotiation” would be amended to remove references to State alternative or equivalent procedures prohibited by sec. 174 of the “2006 Appropriations Act.” The definitions of “contracting agencies” and “one-year applicable accounting period” would be amended to provide consistency with other terminology of this part. The definition of “engineering and design related services” would be amended to also include professional services of an architectural or engineering nature as defined by State law, consistent with the Brooks Act and common grant rule requirements. Definitions would be added for the terms “contract,” “contract modification,” “Federal cost principles,” “fixed fee,” “scope of work,” and “State transportation agency (STA)” to clarify the meaning of each within the context of the regulation. A definition would also be added for “management role” to clarify the types of services and roles performed by consultants that require FHWA or direct grantee approval.

This section would be redesignated as sec. 172.7 and revised. The title would be changed to Procurement Methods and Procedures, to reflect the proposed content which would address not only methods of procurement, but also the procurement requirements associated with these methods.

The title of paragraph (a) would be changed from procurement to procurement methods, and would be revised to specify the three currently allowable procurement methods: Competitive negotiation (qualifications-based selection), small purchases, and noncompetitive. The provisions of subparagraph (a)(1) would be amended to remove references to State alternative or equivalent procedures prohibited by sec. 174 of the “2006 Appropriations Act.” Additional provisions would be added to clarify the requirements and expectations for solicitation; request for proposal; evaluation factors; evaluation, ranking, and selection; and negotiation to ensure consistency and compliance with the provisions of the Brooks Act as required by 23 U.S.C. 112(b)(2)(A).

Subparagraph (a)(2) would be amended to clarify the requirements for use of small purchase procedures and reflect the increase in the Federal simplified acquisition threshold from $100,000 to $150,000 (as specified in the final rule published in the Federal Register of August 30, 2010 (75 FR 53129)). Additional revisions would define the negotiation requirements for small purchase procedures and clarify the limitations on participation of FAHP funding in contract costs exceeding the established small purchase threshold.

The provisions of subparagraph (a)(3) would be amended to define contract negotiation requirements for noncompetitive procurement procedures and to remove references to State alternative or equivalent procedures prohibited by sec. 174 of the “2006 Appropriations Act.”

Subparagraph (a)(4) would be removed, as State alternative or equivalent procedures are now prohibited.

Paragraph (b) would be redesignated as sec. 172.7(b)(2) and revised to clarify the methods contracting agencies may use to achieve Disadvantaged Business Enterprise (DBE) participation on engineering and design related services contracts in accordance with the requirements of 49 CFR part 26 and the agency's DBE program approved by FHWA.

Paragraph (b) of the redesignated sec. 172.7 would be amended to reference and clarify the applicability of various title 23 and 49 procurement related requirements, including the common grant rule procurement provisions, verification of suspension and debarment actions, and prevention of conflicts of interest. A requirement to develop a written code of conduct governing the performance of contracting agency employees and consultants is proposed to be included within contracting agency written policies, procedures, and contract documents to ensure consistency with the conflict of interest requirements specified in 23 CFR 1.33 and the common grant rule.

Information in paragraph (c) of the existing sec. 172.5 would be transferred to paragraph (b) of a new sec. 172.9 titled Contracts and Administration. The proposed sec. 172.9(b) would clarify the permitted and prohibited methods of payment and requirements associated with the use of lump sum and cost reimbursement contract payment methods, consistent with FAR requirements and industry guidance established in the AASHTO Guide for Consultant Contracting, 2008 Edition.

This section would be redesignated as sec. 172.11 and revised. The title of this section would be changed to Allowable Costs and Oversight, and would address requirements for the allowability of contract cost and for providing assurance of compliance with the Federal cost principles.

Paragraph (a) of the proposed sec. 172.11 would clarify consultant requirements for accounting for costs, maintaining adequate records, and applying the FAR cost principles to determine the allowability of costs.

Paragraph (b) of the proposed sec. 172.11 would clarify the requirements for the allowability, acceptance, and application of elements of contract cost in accordance with the common grant rule, FAR cost principles, and requirements of 23 U.S.C. 112(b)(2). Subparagraph (b)(1) of the proposed sec. 172.11 would clarify requirements regarding cognizance, acceptance, and application of consultant indirect cost rates consistent with applicable Federal requirements and industry guidance established in the AASHTO Uniform Audit and Accounting Guide, 2010 Edition. Indirect cost rate requirements are proposed to include subconsultant rates since the Federal cost principles also apply to subconsultant costs, the qualifications of subconsultants are considered under a qualifications-based selection, and subconsultants may perform a significant portion of the contracted services. Subparagraph (b)(1)(iii) would clarify the requirement for STAs or other direct grantees to perform an evaluation of a consultant's or subconsultant's indirect cost rate prior to acceptance and application of the rate to a contract when the rate has not been established by a cognizant agency. This subparagraph would permit STAs and other direct grantees to follow a risk-based oversight process for the evaluation performed to provide assurance of indirect cost rate compliance with the FAR cost principles, as described in proposed subparagraph (c)(2).

Information from paragraphs (b) and (c) of the existing sec. 172.7 would be transferred to subparagraph (b)(1) of the proposed sec. 172.11 and revised to remove references to other State procedures prohibited by sec. 174 of the “2006 Appropriations Act.” Subparagraph (b)(2) of the proposed sec. 172.11 would clarify requirements for establishment of consultant direct salary or wage rates on contracts to ensure compliance with qualifications-based selection procurement requirements and the reasonableness provisions of the FAR cost principles. Subparagraph (b)(3) of the proposed sec. 172.11 would clarify requirements for the determination of fixed fees or profit in accordance with qualifications-based selection procurement requirements and industry practices. Subparagraph (b)(4) of the proposed sec. 172.11 would clarify the requirements for determining the allowability of other direct contract costs in accordance with the Federal cost principles.

Paragraph (c) of the proposed sec. 172.11 would clarify the responsibilities for contracting agencies to provide assurance of consultant cost compliance with the FAR cost principles. Subparagraph (c)(2) would permit STAs and other direct grantees written procedures to incorporate a risk-based oversight process for providing assurance of consultant cost compliance with the Federal cost principles on contracts administered by the grantee or its subgrantees. This oversight process would consist of risk assessment, mitigation, and evaluation procedures in support of the STA or other direct grantee effectively allocating resources to provide reasonable assurance of consultant compliance with the FAR cost principles.

Information in paragraph (a) of the existing sec. 172.7, performance of audits, would be transferred to subparagraph (c)(2) of sec. 172.11 and revised to remove references to other State procedures prohibited by sec. 174 of the “2006 Appropriations Act.” Audits performed in accordance with generally accepted government audit standards to test compliance with the FAR cost principles would be listed as an evaluation procedure under an established risk-based oversight process.

Subparagraph (c)(3) of the proposed sec. 172.11 would require consultants to certify to the contracting agency that costs included within proposals to establish indirect cost rates are allowable in accordance with the FAR cost principles prior to contracting agency acceptance of the indirect cost rates for application to contracts. Implementation of this cost certification requirement was a recommendation in the aforementioned 2009 OIG Audit Report, and is based on FHWA Order 4470.1A, FHWA Policy for Contractor Certification of Costs in Accordance with FAR to Establish Indirect Cost Rates on Engineering and Design related Services Contracts ( http://www.fhwa.dot.gov/legsregs/directives/orders/44701a.htm ).

Subparagraph (c)(4) of the proposed sec. 172.11 would require contracting agencies to pursue administrative, contractual, or legal remedies as may be appropriate when consultants knowingly charge unallowable costs to a FAHP funded contract.

Paragraph (d) of the existing sec. 172.7 would be redesignated as sec. 172.11(d) and revised to ensure consistency of terminology within the regulation.

Information in this section would be transferred to a new sec. 172.5, Program Management and Oversight, a redesignated sec. 172.7, Procurement Methods and Procedures, and a new sec. 172.9, Contracts and Administration, and revised for clarification to ensure consistency with applicable Federal laws and regulations.

Paragraph (a) of the existing sec. 172.9 would be redesignated as sec. 172.5(c) and revised to clarify the requirements for contracting agency written procedures to ensure compliance with existing Federal statutes and regulations. A new paragraph (a) of sec. 172.5 would clarify STA or other direct grantee responsibilities for management of consultant services programs and oversight of subgrantees. A new paragraph (b) of sec. 172.5 would clarify program level responsibilities of subgrantees. A new paragraph (d) of sec. 172.5 would clarify a contracting agency's ability to adopt direct Federal Government or other contracting procedures and requirements which are not in conflict with laws and regulations applicable to the FAHP. Paragraph (e) of sec. 172.5 proposes a 12-month period from the effective date of a final rule for contracting agencies to issue or update current written procedures for review and approval by the appropriate oversight agency.

Information in subparagraph (a)(5) of the existing sec. 172.9 would be expanded under a new paragraph (d) of a proposed sec. 172.9 titled Contracts and Administration. This new paragraph (d) would clarify requirements for consultant monitoring and oversight which include providing a qualified, full-time, public employee of the contracting agency in responsible charge of each contract to ensure compliance with the requirements of 23 U.S.C. 302(a) and evaluating a consultant's performance on a contract.

Paragraph (a) of the proposed sec. 172.9, Contracts and Administration, would define the various contract types and clarify the requirements associated with the use of on-call or indefinite delivery/indefinite quantity contracts in a manner that is consistent with Federal laws and regulations.

Paragraph (c) of the proposed sec. 172.9 would clarify the provisions required to be incorporated into engineering and design related services contracts when FAHP funding is used to ensure consistency and compliance with applicable Federal laws and regulations.

Paragraph (e) of the proposed sec. 172.9 would clarify the requirements associated with contract modifications to ensure modifications are warranted, properly scoped, and in compliance with applicable Federal procurement requirements.

Paragraph (b) of the existing sec. 172.9 would be redesignated as paragraph (f) of the proposed sec. 172.9. Paragraph (c) of the existing sec. 172.9 would be removed since the oversight and approval responsibility of contracts for major projects, as specified in 23 U.S.C. 106(h), should be defined within the stewardship and oversight agreements that are established between individual STAs and respective FHWA division offices.

Paragraph (d) of the existing sec. 172.9 would be redesignated as sec. 172.7(b)(5) and revised to clarify contracting agency responsibilities associated with participation of FAHP funding for consultants performing services in a management role. These revisions would ensure compliance with applicable Federal requirements regarding oversight, procurement, conflicts of interest, and cost allowability.

For ease of reference, the following distribution table is provided:

The FHWA has determined that this action does not constitute a significant regulatory action within the meaning of Executive Order 12866 or within the meaning of DOT regulatory policies and procedures. The proposed amendments clarify and revise requirements for the procurement, management, and administration of engineering and design related services using FAHP funding and directly related to a construction project. Additionally, this action complies with the principles of Executive Order 13563. The proposed changes to part 172 will provide additional clarification, guidance, and flexibility to stakeholders implementing these regulations. After evaluating the costs and benefits of these proposed amendments, the FHWA anticipates that the economic impact of this rulemaking would be minimal. These changes are not anticipated to adversely affect, in any material way, any sector of the economy. In addition, these changes will not create a serious inconsistency with any other agency's action or materially alter the budgetary impact of any entitlements, grants, user fees, or loan programs. It is anticipated that the economic impact of this rulemaking will be minimal; therefore, a full regulatory evaluation is not necessary.

In compliance with the Regulatory Flexibility Act (Pub. L. 96-354, 5 U.S.C. 60l-612), the FHWA has evaluated the effects of this proposed rule on small entities, such as local governments and businesses. Based on the evaluation, the FHWA anticipates that this action would not have a significant economic impact on a substantial number of small entities. The proposed amendments clarify and revise requirements for the procurement, management, and administration of engineering and design related services using FAHP funding and directly related to a construction project. After evaluating the cost of these proposed amendments, as required by changes in authorizing legislation, other applicable regulations, and industry practices, the FHWA believes the projected impact upon small entities which utilize FAHP funding for consultant engineering and design related services would be negligible. Therefore, I certify that the proposed action would not have a significant economic impact on a substantial number of small entities.

This NPRM would not impose unfunded mandates as defined by the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, March 22, 1995, 109 Stat. 48). The actions proposed in this NPRM would not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $143.1 million or more in any one year (2 U.S.C. 1532). Further, in compliance with the Unfunded Mandates Reform Act of 1995, FHWA will evaluate any regulatory action that might be proposed in subsequent stages of the proceeding to assess the effects on State, local, and Tribal governments and the private sector. Additionally, the definition of “Federal Mandate” in the Unfunded Mandates Reform Act excludes financial assistance of the type in which State, local, or tribal governments have authority to adjust their participation in the program in accordance with changes made in the program by the Federal Government. The FAHP permits this type of flexibility.

This proposed action has been analyzed in accordance with the principles and criteria contained in Executive Order 13132, dated August 4, 1999, and it has been determined that this proposed action does not have a substantial direct effect or sufficient federalism implications on States that would limit the policymaking discretion of the States. Nothing in this proposed rule directly preempts any State law or regulation or affects the States' ability to discharge traditional State governmental functions.

Federal agencies must obtain approval from the Office of Management and Budget for each collection of information they conduct, sponsor, or require through regulations. This proposed action does not contain a collection of information requirement for the purpose of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.).

The FHWA has analyzed this proposed action for the purpose of the National Environmental Policy Act (42 U.S.C. 4321 et seq.) and has determined that this action would not have any effect on the quality of the human and natural environment because this rule would merely establish the requirements for the procurement, management, and administration of engineering and design related services using FAHP funding and directly related to a construction project.

The FHWA has analyzed this proposed action under Executive Order 13175, dated November 6, 2000, and believes that this proposed action would not have substantial direct effects on one or more Indian Tribes, would not impose substantial direct compliance costs on Indian Tribal governments, and would not preempt Tribal law. This proposed rulemaking merely establishes the requirements for the procurement, management, and administration of engineering and design related services using FAHP funding and directly related to a construction project. As such, this proposed rule would not impose any direct compliance requirements on Indian Tribal governments nor would it have any economic or other impacts on the viability of Indian Tribes. Therefore, a Tribal summary impact statement is not required.

The FHWA has analyzed this proposed action under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use. We have determined that this proposed action would not be a significant energy action under that order because any action contemplated would not be likely to have a significant adverse effect on the supply, distribution, or use of energy. Therefore, the FHWA certifies that a Statement of Energy Effects under Executive Order 13211 is not required.

The FHWA has analyzed this proposed rule and has determined that this proposed action would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This action 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.

The FHWA has analyzed this proposed action under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks, and certifies that this proposed action would not cause an environmental risk to health or safety that may disproportionately affect children.

A regulation identification number (RIN) is assigned to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. The RIN number contained in the heading of this document can be used to cross-reference this action with the Unified Agenda.

In consideration of the foregoing, the FHWA proposes to amend part 172 of title 23, Code of Federal Regulations, as follows:

(4) Sanctions and penalties. Contracting agency written policies, procedures, and contract documents (as specified in § 172.5(c) and § 172.9(c)) shall address the range of administrative, contractual, or legal remedies that may be assessed in accordance with Federal and State laws and regulations where consultants violate or breach contract terms and conditions. Where consultants knowingly charge unallowable costs to a FAHP funded contract:

(i) Contracting agencies shall pursue administrative, contractual, or legal remedies and provide for such sanctions and penalties as may be appropriate; and

(ii) Consultants are subject to suspension and debarment actions (as specified in 2 CFR part 180), potential cause of action under the False Claims Act (as specified in 32 U.S.C. 3729-3733), and prosecution for making a false statement (as specified in 18 U.S.C. 1020).

(d) Prenotification; confidentiality of data. The FHWA, grantees, and subgrantees of FAHP funds may share audit information in complying with the grantee's or subgrantee's acceptance of a consultant's indirect cost rates pursuant to 23 U.S.C. 112 and this part provided that the consultant is given notice of each use and transfer. Audit information shall not be provided to other consultants or any other government agency not sharing the cost data, or to any firm or government agency for purposes other than complying with the grantee's or subgrantee's acceptance of a consultant's indirect cost rates pursuant to 23 U.S.C. 112 and this part without the written permission of the affected consultants. If prohibited by law, such cost and rate data shall not be disclosed under any circumstance; however, should a release be required by law or court order, such release shall make note of the confidential nature of the data.

The proposed rule updates the Commission's FOIA regulations to reflect current Commission practice in responding to FOIA requests as reflected in the OPEN Government Act and the E-FOIA Act, and the Commission's transfer of FOIA responsibilities from its Regional Attorneys to its District Directors. The proposed rule also consolidates Commission public reading rooms in offices where there are adequate FOIA personnel and streamlines the Commission's FOIA regulations by removing excess verbiage.

The OPEN Government Act, Public Law 110-175, 121 Stat. 2524, was enacted into law on December 31, 2007 to make it easier for a requester to access agency records, and to require agencies to be more responsive, transparent, and accountable to the public in responding to FOIA requests. The Act addresses many aspects of agency FOIA administration, including:

• Time limits for agencies to act on FOIA requests;

• Recovery of attorney's fees and litigation costs in FOIA-related lawsuits;

• Disciplinary actions for arbitrary and capricious rejection of FOIA requests;

• Use of individualized identification numbers to track FOIA requests;

• Proper fee charges for FOIA requests from news media;

• Enhanced requirements for agencies' annual FOIA reports to Congress;

• Appointment of a Chief FOIA Officer in an agency;

• Appointment of a FOIA Public Liaison in an agency;

• Disclosure of records maintained for an agency by a private entity pursuant to a records management contract; and

• A new requirement that the amount of material deleted from a document produced pursuant to FOIA must be specifically identified at the site of the deletion, together with the exemption authorizing that deletion.

To conform the Commission's FOIA regulations to the requirements of the Act, the proposed rule revises the following sections of 29 CFR part 1610:

The Electronic FOIA Act of 1996 (E-FOIA) specifies that, after November 1996, information made available to the public for inspection and copying pursuant to FOIA must also be made available in electronic format. To coordinate the Commission's FOIA regulations with the E-FOIA, the proposed rule revises §§ 1610.18 and 1610.21 to state that the information identified therein shall be available in electronic as well as paper form. The E-FOIA Act also allows an agency to adopt a multi-track system for processing FOIA requests. EEOC therefore proposes to revise § 1610.9(a) in order to implement a multi-track system.

The Commission transferred FOIA responsibility from EEOC Regional Attorneys to EEOC District Directors in 2007. To coordinate the Commission's FOIA regulations with the EEOC's current delegation of responsibility for FOIA processing as reflected in EEOC Order 150.001, the proposed rule revises the following sections of 29 CFR part 1610:

In order to consolidate the Commission's public reading area functions in offices with adequate personnel to service the public, the proposed rule revises § 1610.04 by requiring the Commission's Headquarters library and District Offices to maintain public reading areas.

The Commission also wishes to update and clarify its FOIA regulations. To accomplish these goals, the proposed rule removes or revises the following sections of 29 CFR part 1610:

The proposed rule has been drafted and reviewed in accordance with Executive Order 12866, 58 FR 51735 (Sept. 30, 2003), section 1(b), Principles of Regulation, and Executive Order 13563, 76 FR 3821 (January 1, 2011), Improving Regulation and Regulatory Review. The rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866.

The proposed rule contains no new information collection requirements subject to review by the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. Chapter 35).

The Commission certifies under 5 U.S.C. 605(b) that the proposed rule will not have a significant economic impact on a substantial number of small entities because the proposed revisions do not impose any burdens upon FOIA requestors, including those that might be small entities. Therefore, a regulatory flexibility analysis is not required by the Regulatory Flexibility Act.

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

Accordingly, part 1610 is proposed to be amended as follows:

Invitation to Comment: We invite you to submit comments regarding this notice. To ensure that your comments have maximum effect in developing the notice of final priorities, requirements, definitions, and selection criteria, we urge you to identify clearly the specific proposed priority, requirement, definition, or selection criterion that each comment addresses.

We invite you to assist us in complying with the specific requirements of Executive Orders 12866 and 13563 and their overall requirement of reducing regulatory burden that might result from the proposed priorities, requirements, definitions, and selection criteria. Please let us know of any further ways we could reduce potential costs or increase potential benefits while preserving the effective and efficient administration of the Department's programs and activities.

During and after the comment period, you may inspect all public comments about this notice by accessing Regulations.gov. You may also inspect the comments in person, in room 4W335, 400 Maryland Avenue SW., Washington, DC, between the hours of 8:30 a.m. and 4:00 p.m., Washington, DC time, Monday through Friday of each week except Federal holidays.

Assistance to Individuals With Disabilities in Reviewing the Rulemaking Record: On request we will provide an appropriate accommodation or auxiliary aid to an individual with a disability who needs assistance to review the comments or other documents in the public rulemaking record for this notice. If you want to schedule an appointment for this type of accommodation or auxiliary aid, please contact the person listed under FOR FURTHER INFORMATION CONTACT in the SUMMARY section of this notice.

Purpose of Program: The SEED Grant program provides funding for grants to national not-for-profit organizations for projects that support teacher or principal training or professional enhancement activities and are supported by at least moderate evidence of effectiveness (as defined in this notice).

This notice contains seven proposed priorities.

The Department of Education Appropriations Act, 2012, requires the Secretary to reserve up to 1.5 percent of the funds for the Elementary and Secondary Education Act's (ESEA) Title II, Part A programs for competitive awards to national not-for-profit organizations for teacher or principal training or professional enhancement activities.

Reforming and improving schools with high concentrations of high-need students is a key priority for the Department. Strengthening teacher and principal leadership is an essential part of any strategy to make a difference in these schools. Research shows that teachers are a critical element in improving student learning. 1 Additionally, there is compelling evidence that strong principals have positive, although indirect, effects on student learning. 2 The Department is using the SEED Grant program as a mechanism to identify and support projects that will strengthen teaching and school leadership specifically for high-need schools. As proposed in this notice, applicants must demonstrate how they will build evidence on how best to recruit, prepare, and support effective teachers and principals.

The following priorities focus on this goal.

This proposed priority would support projects that will recruit, select, and prepare teachers, principals, or both who are able to increase student achievement and student learning, particularly in high-need schools. Although we included a similar priority in our September 8, 2011, notice inviting applications (76 FR 55658-55664) (2012 SEED NIA), that priority focused only on teachers. The Department of Education Appropriations Act, 2012, provides that projects may serve principals, teachers, or both and, therefore, we are modifying this priority accordingly. Additionally, we propose to include a more explicit focus on schools with high concentrations of high-need students (as defined in this notice) and to provide more direction on required project activities.

Under this proposed priority, the Secretary would fund projects that will create or expand practices and strategies that increase the number of highly effective teachers (as defined in this notice) or highly effective principals (as defined in this notice) by recruiting, selecting, and preparing talented individuals to work in schools with high concentrations of high-need students (as defined in this notice). Projects would include activities that focus on creating or expanding high-performing teacher preparation programs, principal preparation programs, or both. Activities may include but are not limited to expanding clinical experiences, re-designing and implementing program coursework to align with State standards and district requirements for their P-12 teachers, providing induction and other support for program participants in their classrooms and schools, and developing strategies for tracking the effect of program graduates on the achievement of their students or their schools.

In addition, an applicant would need to propose a plan demonstrating a rigorous, competitive selection process to determine which aspiring teachers or principals participate in the applicant's proposed activities.

This proposed priority is based on Absolute Priority 2 published in the 2012 SEED NIA. We propose changing the priority by requiring that the professional development be aligned with State standards. We also propose to require that the professional development align with district needs and include a rigorous evaluation of the effectiveness of teachers who participate in the professional development.

Under this proposed priority, the Secretary would fund projects designed to improve student literacy and writing skills by creating or expanding practices and strategies that increase the number of highly effective teachers (as defined in this notice) of English language arts by improving their knowledge, understanding, and teaching of English language arts, with a specific focus on teaching writing. Projects would focus on increasing student achievement (as defined in this notice) in English language arts by providing high-quality professional development to teachers in schools with high concentrations of high-need students (as defined in this notice).

An applicant would be required to describe the need of the proposed districts to be served for teacher professional development in English language arts and demonstrate alignment of its proposed project with State standards.

In addition, applicants would have to describe how they plan to measure the impact the professional development has on the effectiveness of teachers served by the project. Applicants would need to determine teacher effectiveness through a rigorous, transparent, and fair evaluation in which performance is differentiated using multiple measures of effectiveness and based in significant part on student growth (as defined in this notice).

This proposed priority would support projects that will develop or enhance systems to develop and recognize teachers, principals, or both who will serve as models, coaches, and mentors from whom other teachers, principals, or both can learn and strengthen their practices. We propose changing this priority from Absolute Priority 3 in the 2012 SEED NIA by encouraging applicants to target services to teachers, principals, or both who are working or agree to work in schools with high concentrations of high-need students (as defined in this notice). We also propose adding requirements for the selection of participants and the evaluation of outcomes or effectiveness of participants.

Under this proposed priority, the Secretary would fund projects that will create or expand practices and strategies that increase the number of highly effective teachers (as defined in this notice), highly effective principals (as defined in this notice), or both, who work in schools with high concentrations of high-need students (as defined in this notice).

Applicants would be required to focus their proposed projects on encouraging and supporting teachers, principals, or both, who seek a nationally recognized, standards-based advanced certificate or advanced credential through high-quality professional enhancement projects designed to improve teaching and learning for teachers who would take on career ladder positions (as defined in this notice), principals, or both who would serve as models, mentors, and coaches for other teachers, principals, or both working in schools with high concentrations of high-need students (as defined in this notice).

In addition, effectiveness of teachers or principals who receive advanced certification or credentialing would need to be determined through a rigorous, transparent, and fair evaluation in which performance is differentiated using multiple measures of effectiveness and based in significant part on student growth (as defined in this notice).

Finally, an applicant would need to propose a plan demonstrating a rigorous, competitive selection process to determine which teachers or principals participate in the applicant's proposed activities.

This proposed priority would support projects that will improve professional development for STEM teachers and increase the number of STEM teachers from traditionally underrepresented groups. Improving STEM education is critical in developing a globally competitive workforce.

This priority was not used in the 2012 SEED NIA. We propose adding this priority because it would respond to the high demand for highly effective STEM teachers, particularly in high-need schools. We also note that this proposed priority is based on the notice of final supplemental priorities and definitions for discretionary grant programs, published in the Federal Register on December 15, 2010 (75 FR 78486-78511), and corrected on May 12, 2011 (76 FR 27637-27641) (Supplemental Priorities). However, in both subsections (a) and (b) of this proposed priority, we removed the term “other educators” because the appropriations language for the SEED Grant program allows projects that provide services only to teachers, principals, or both.

Under this proposed priority, the Secretary would fund projects that address one or both of the following priority areas:

(a) Increasing the opportunities for high-quality preparation of, or professional development for, teachers of STEM subjects.

(b) Increasing the number of individuals from groups traditionally underrepresented in STEM, including minorities, individuals with disabilities, and women, who are teachers of STEM subjects and have increased opportunities for high-quality preparation or professional development.

In addition, applicants would have to describe how they plan to measure the impact the proposed project activities have on teacher effectiveness. Applicants would need to determine teacher effectiveness through a rigorous, transparent, and fair evaluation in which performance is differentiated using multiple measures of effectiveness and based in significant part on student growth (as defined in this notice).

This proposed priority would support projects that will provide professional development to teachers of core academic subjects, including special education teachers, to help them continue to improve their pedagogy, increase their knowledge of core subjects, and become highly effective teachers in schools with high concentrations of high-need students (as defined in this notice). We propose adding this priority to support the creation and expansion of high-quality professional development projects that strengthen instruction and raise student achievement across core academic subjects. The priority would require that the professional development be aligned with State standards. We also propose to include requirements for the selection of participants that align with district needs and for the evaluation of the effectiveness of participants.

Under this proposed priority, the Secretary would fund projects that will create or expand practices and strategies that increase the number of highly effective teachers (as defined in this notice) by providing professional development opportunities to teachers, including special education teachers, in schools with high concentrations of high-need students (as defined in this notice). Projects would focus on increasing student achievement (as defined in this notice) in core academic subjects by providing high-quality professional development to teachers. The academic subjects that may be addressed through professional development under this priority include foreign languages, civics and government, economics, arts, history, physical education, geography, environmental education, and financial literacy.

Applicants would be required to describe the need of the proposed districts to be served for teacher professional development in the selected high-need core academic subjects and to demonstrate alignment of its proposed project with State standards.

In addition, applicants would have to describe how they plan to measure the impact the professional development has on teacher effectiveness. Applicants would need to determine teacher effectiveness through a rigorous, transparent, and fair evaluation in which performance is differentiated using multiple measures of effectiveness and based in significant part on student growth (as defined in this notice).

This proposed priority would support projects that identify cost-effective strategies to improve project outcomes. In order to meet this priority, applicants would be required to demonstrate how they will efficiently improve educational outcomes, including student achievement. We propose changing the language in this priority from the Competitive Preference Priority 2 in the 2012 SEED NIA in order to emphasize the use of cost-effective strategies.

Under this proposed priority, the Secretary would fund projects that will identify strategies for providing cost-effective, high-quality services at the State, regional, or local level by making better use of available resources. Such projects may include innovative and sustainable uses of technology, modification of school schedules and teacher compensation systems, use of open educational resources (as defined in this notice), or other strategies.

This proposed priority would support projects that are supported by strong evidence. The Department firmly believes that the strongest available evidence should inform educational funding and policy decisions. Creating a larger pool of evidence-supported implementation sites will provide more opportunities to scale up projects that have a history of success and to improve educational outcomes for more students. We propose to leave this priority unchanged from the 2012 SEED NIA; however, we propose a slightly different definition of “strong evidence of effectiveness”, as explained in the Definitions section of this notice.

Under this proposed priority, the Secretary would fund projects that are supported by strong evidence of effectiveness (as defined in this notice).

When inviting applications for a competition using one or more priorities, we designate the type of each priority as absolute, competitive preference, or invitational through a notice in the Federal Register . The effect of each type of priority follows:

Absolute priority: Under an absolute priority, as specified by 34 CFR 75.105(c)(3), we would consider only applications that meet the priority.

Competitive preference priority: Under a competitive preference priority, we give competitive preference to an application by (1) awarding additional points, depending on the extent to which the application meets the priority (34 CFR 75.105(c)(2)(i)); or (2) selecting an application that meets the priority over an application of comparable merit that does not meet the priority (34 CFR 75.105(c)(2)(ii)).

Invitational priority: Under an invitational priority, we are particularly interested in applications that meet the priority. However, we do not give an application that meets the priority preference over other applications (34 CFR 75.105(c)(1)).

The Secretary proposes the following requirements for the SEED Grant program. We may apply these requirements in any year in which this program is in effect.

Eligible applicants: To be eligible for a SEED Grant program grant, an entity must be a national not-for-profit organization (as defined in this notice). Each applicant must provide in its application documentation that it is a national not-for-profit organization (as defined in this notice).

Evidence of effectiveness: To be eligible for funding, an applicant must demonstrate that its proposed project is supported by at least moderate evidence of effectiveness (as defined in this notice).

Each applicant must provide in its application documentation that its proposed project is supported by at least moderate evidence of effectiveness. An applicant that applies for Proposed Priority 7 also must provide documentation that its proposed project is supported by strong evidence of effectiveness. An applicant must ensure that all evidence is available to the Department from publically available sources and provide links, references, or copies of the evidence in the application. If the Department determines that an applicant has provided insufficient evidence that its proposed project meets the definition of “moderate evidence of effectiveness,” or “strong evidence of effectiveness,” the applicant will not have an opportunity to provide additional evidence to support its application.

Evaluations: An applicant receiving funds under this program must comply with the requirements of any evaluation of the program conducted by the Department. In addition, an applicant receiving funds under this program must make broadly available through formal (e.g., peer-reviewed journals) or informal (e.g., newsletters) mechanisms, and in print or electronically, the results of any evaluations it conducts of its funded activities.

The Secretary proposes the following definitions for this competition. We propose to modify the definition of “national not-for-profit organization” from the definition used in the 2012 SEED NIA to add more objective criteria for determining what type of organizations meet the definition. Additionally, the definitions relating to levels of evidence have both been changed to align more closely with other Department definitions of levels of evidence. We may apply one or more of these definitions in any year in which this program is in effect.

Career ladder positions means school-based instructional leadership positions designed to improve instructional practice, which teachers may voluntarily accept, such as positions described as master teacher, mentor teacher, demonstration or model teacher, or instructional coach, and for which teachers are selected based on criteria that are predictive of the ability to lead other teachers.

High-need students means students at risk of educational failure, such as students who are living in poverty, who are English learners, who are far below grade level or who are not on track to becoming college- or career-ready by graduation, who have left school or college before receiving, respectively, a regular high school diploma or a college degree or certificate, who are at risk of not graduating with a diploma on time, who are homeless, who are in foster care, who are pregnant or parenting teenagers, who have been incarcerated, who are new immigrants, who are migrant, or who have disabilities.

Highly effective principal means a principal whose students, overall and for each subgroup as described in section 1111(b)(2)(C)(v)(II) of the Elementary and Secondary Education Act, as amended (ESEA) (i.e., economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency), achieve high rates (e.g., one and one-half grade levels in an academic year) of student growth. Eligible applicants may include multiple measures, provided that principal effectiveness is evaluated, in significant part, based on student growth. Supplemental measures may include, for example, high school graduation rates; college enrollment rates; evidence of providing supportive teaching and learning conditions, support for ensuring effective instruction across subject areas for a well-rounded education, strong instructional leadership, and positive family and community engagement; or evidence of attracting, developing, and retaining high numbers of effective teachers.

Highly effective teacher means a teacher whose students achieve high rates (e.g., one and one-half grade levels in an academic year) of student growth. Eligible applicants may include multiple measures, provided that teacher effectiveness is evaluated, in significant part, based on student growth. Supplemental measures may include, for example, multiple observation-based assessments of teacher performance or evidence of leadership roles (which may include mentoring or leading professional development learning communities) that increase effectiveness of other teachers in the school or local educational agency (LEA).

Large sample means a sample of 350 or more students (or other single analysis units) who were randomly assigned to a treatment or control group, or 50 or more groups (such as classrooms or schools) that contain 10 or more students (or other single analysis units) and that were randomly assigned to a treatment or control group.

Moderate evidence of effectiveness means one of the following conditions is met:

(1) There is at least one study of the effectiveness of the process, product, strategy, or practice being proposed that meets the What Works Clearinghouse Evidence Standards without reservations;  3 found a statistically significant favorable impact on a relevant outcome (as defined in this notice) (with no statistically significant unfavorable impacts on that outcome for relevant populations in the study or in other studies of the intervention reviewed by and reported on by the What Works Clearinghouse); and includes a sample that overlaps with the populations or settings proposed to receive the process, product, strategy, or practice.

(2) There is at least one study of the effectiveness of the process, product, strategy, or practice being proposed that meets the What Works Clearinghouse Evidence Standards with reservations, 4 found a statistically significant favorable impact on a relevant outcome (as defined in this notice) (with no statistically significant unfavorable impacts on that outcome for relevant populations in the study or in other studies of the intervention reviewed by and reported on by the What Works Clearinghouse), includes a sample that overlaps with the populations or settings proposed to receive the process, product, strategy, or practice, and includes a large sample (as defined in this notice) and a multi-site sample (as defined in this notice) ( Note: multiple studies can cumulatively meet the large and multi-site sample requirements as long as each study meets the other requirements in this paragraph).

Multi-site sample means more than one site, where site can be defined as an LEA, locality, or State.

National level describes the level of scope or effectiveness of a process, product, strategy, or practice that is able to be effective in a wide variety of communities, including rural and urban areas, as well as with different groups (e.g., economically disadvantaged, racial and ethnic groups, migrant populations, individuals with disabilities, English learners, and individuals of each gender).

National not-for-profit organization means an entity that meets the definition of “nonprofit” under 34 CFR 77.1(c) and is of national scope, meaning that the entity provides services in multiple States to a significant number or percentage of recipients and is supported by staff or affiliates in multiple States.

Open educational resources means teaching, learning, and research resources that reside in the public domain or have been released under an intellectual property license that permits their free use or repurposing by others.

Relevant outcome means the student outcome or outcomes (or the ultimate outcome if not related to students) that the proposed project is designed to improve, consistent with the specific goals of a program.

Strong evidence of effectiveness means that one of the following conditions is met:

(1) There is at least one study of the effectiveness of the process, product, strategy, or practice being proposed that meets the What Works Clearinghouse Evidence Standards without reservations;  5 found a statistically significant favorable impact on a relevant outcome (as defined in this notice) (with no statistically significant unfavorable impacts on that outcome for relevant populations in the study or in other studies of the intervention reviewed by and reported on by the What Works Clearinghouse); includes a sample that overlaps with the populations and settings proposed to receive the process, product, strategy, or practice; and includes a large sample (as defined in this notice) and a multi-site sample (as defined in this notice) (Note: multiple studies can cumulatively meet the large and multi-site sample requirements as long as each study meets the other requirements in this paragraph).

(2) There are at least two studies of the effectiveness of the process, product, strategy, or practice being proposed, each of which meets the What Works Clearinghouse Evidence Standards with reservations, 6 found a statistically significant favorable impact on a relevant outcome (as defined in this notice) (with no statistically significant unfavorable impacts on that outcome for relevant populations in the studies or in other studies of the intervention reviewed by and reported on by the What Works Clearinghouse), includes a sample that overlaps with the populations and settings proposed to receive the process, product, strategy, or practice, and includes a large sample (as defined in this notice) and a multi-site sample (as defined in this notice).

Student achievement means—

(a) For tested grades and subjects: (1) A student's score on the State's assessments under the ESEA; and, as appropriate, (2) other measures of student learning, such as those described in paragraph (b) of this definition, provided they are rigorous and comparable across schools.

(b) For non-tested grades and subjects: alternative measures of student learning and performance, such as student scores on pre-tests and end-of-course tests; student performance on English language proficiency assessments; and other measures of student achievement that are rigorous and comparable across schools.

Student growth means the change in student achievement (as defined in this notice) for an individual student between two or more points in time. An applicant may also include other measures that are rigorous and comparable across classrooms.

The proposed selection criteria are intended to ensure that applicants can demonstrate that they have the experience and capacity to expand or develop practices and strategies to recruit, select, and prepare or provide professional enhancement activities for teachers, principals, or both.

In the absence of specific selection criteria for the SEED Grant program, the Department would use the general selection criteria in 34 CFR 75.210 of the Education Department General Administrative Regulations (EDGAR) in selecting grant recipients. While many of the selection criteria subfactors are taken directly from EDGAR at 34 CFR 75.210, they have been combined in some cases or organized under different criteria in other cases. In addition, some subfactors have been edited to focus on that which would affect the ability of the applicant to implement an effective project that meets the SEED Grant program's purposes.

Under the proposed selection criteria, the Secretary would assess the extent to which an applicant would be able to sustain a project once Federal funding through the SEED Grant program is no longer available. Thus, eligible applicants should propose activities that they will be able to sustain without funding from the program and should include in their management plan the specific steps they will take for sustained implementation of the proposed project.

The Secretary proposes the following selection criteria for evaluating an application under the SEED Grant program. We may apply one or more of these criteria, as well as other criteria or factors established in 34 CFR 75.210, in any year in which this program is in effect. In the notice inviting applications or the application package, or both, we will announce the maximum possible points assigned to each criterion.

(a) Significance. The Secretary considers the significance of the proposed project. In determining the significance of the proposed project, the Secretary considers:

(1) The significance of the proposed project on a national level (as defined in this notice).

(2) The potential contribution of the proposed project to the development and advancement of teacher and school leadership theory, knowledge, and practices.

(3) The importance or magnitude of the results or outcomes likely to be attained by the proposed project, especially improvements in teaching and student achievement.

(b) Quality of the Project Design and Services. The Secretary considers the quality of the design and services of the proposed project. In determining the quality of the design and services of the proposed project, the Secretary considers:

(1) The extent to which the goals, objectives, and outcomes to be achieved by the proposed project are clearly specified, aligned, and measurable.

(2) The extent to which the proposed project is part of a comprehensive effort to improve teaching and learning and support rigorous academic standards for students.

(3) The extent to which the training or professional development services to be provided by the proposed project will be of sufficient quality, intensity, and duration to lead to improvements in practice among the recipients of those services.

(c) Quality of the Management Plan and Personnel. The Secretary considers the quality of the management plan for the proposed project and of the personnel who will carry out the proposed project. In determining the quality of the management plan and the project personnel, the Secretary considers:

(1) The qualifications, including relevant training and experience, of the project director, key project personnel, and project consultants or subcontractors.

(2) The adequacy of the management plan to achieve the objectives of the proposed project on time and within budget, including clearly defined responsibilities, timelines, and milestones for accomplishing project tasks.

(3) The extent to which the time commitments of the project director and other key project personnel are appropriate and adequate to meet the objectives of the proposed project.

(4) The extent to which the proposed management plan includes sufficient and reasonable resources to effectively carry out the proposed project, including the project evaluation.

(d) Sustainability. The Secretary considers the adequacy of resources to continue the proposed project after the grant period ends. In determining the adequacy of resources and the potential for utility of the proposed project's activities and products by other organizations, the Secretary considers:

(1) The extent to which the proposed project is designed to build capacity and yield results that will extend beyond the period of Federal financial assistance.

(2) The extent to which the proposed project is likely to yield findings and products (such as information, materials, processes, or techniques) that may be used by other agencies and organizations.

(3) The extent to which the applicant will disseminate information about results and outcomes of the proposed project in ways that will enable others, including the public, to use the information or strategies.

(e) Quality of the Project Evaluation. The Secretary considers the quality of the evaluation to be conducted of the proposed project. In determining the quality of the evaluation, the Secretary considers one or more of the following factors:

(1) The extent to which the methods of evaluation are thorough, feasible, and appropriate to the goals, objectives, and outcomes of the proposed project.

(2) The extent to which the evaluation includes the use of objective performance measures that are clearly related to the intended outcomes of the project and will produce quantitative and qualitative data.

(3) The extent to which the evaluation will provide performance feedback and permit periodic assessment of progress toward achieving intended outcomes.

(4) The extent to which the proposed project plan includes sufficient resources to carry out the project evaluation effectively.

We will announce the final priorities, requirements, definitions, and selection criteria in a notice in the Federal Register . We will determine the final priorities, requirements, definitions, and selection criteria after considering responses to this notice and other information available to the Department. This notice does not preclude us from proposing additional priorities, requirements, definitions, or selection criteria, subject to meeting applicable rulemaking requirements.

This proposed regulatory action is not a significant regulatory action subject to review by OMB under section 3 (f) of Executive Order 12866.

We have also reviewed this proposed regulatory action under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—

(1) Propose or adopt regulations only on a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);

(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practical—the costs of cumulative regulations;

(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety and other advantages; distributive impacts; and equity);

(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and

(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.

Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavior changes.”

We are taking this proposed regulatory action only on a reasoned determination that the benefits justify the costs. In choosing among alternative regulatory approaches, we selected those approaches that maximize net benefits. The Department believes that this proposed regulatory action is consistent with the principles in Executive Order 13563.

We also have determined that this regulatory action would not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.

In accordance with both Executive orders, the Department has assessed the potential costs and benefits of this regulatory action. The potential costs associated with this regulatory action are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.

The costs of carrying out activities would be paid for with program funds and with matching funds provided by private-sector partners. Thus, the costs of implementation would not be a burden for any eligible applicants, including small entities.

As part of its continuing effort to reduce paperwork and respondent burden, the Department conducts a preclearance consultation program to provide the general public and Federal agencies with an opportunity to comment on proposed and continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)). This helps ensure that: the public understands the Department's collection instructions, respondents can provide the requested data in the desired format, reporting burden (time and financial resources) is minimized, collection instruments are clearly understood, and the Department can properly assess the impact of collection requirements on respondents.

We estimate that each applicant would spend approximately 176 hours of staff time to address the proposed requirements and selection criteria, prepare the application, and obtain necessary clearances. The total number of hours for all expected applicants is an estimated 2,640 hours. We estimate the total cost per hour of the applicant-level staff who will carry out this work to be $57 per hour. The total estimated cost for all applicants is estimated to be $150,480.

Under the PRA, the Department has submitted to OMB for its review a copy of the information collection (including the burden estimates) for the SEED discretionary grant application using the proposed priorities, requirements, definitions, and selection criteria. Through this NPP, OII seeks comment on this information collection. If you want to comment on the proposed information collection, please send your comments to the Office of Information and Regulatory Affairs, OMB, Attention: Desk Officer for U.S. Department of Education. Send these comments by email to OIRA_DOCKET@omb.eop.gov or by fax to (202) 395-6974. You may also send a copy of these comments to the Department contact named in the FOR FURTHER INFORMATION CONTACT section of this notice.

In preparing your comments you may want to review the ICR, which we maintain in the Education Department Information Collection System (EDICS) at http://edicsweb.ed.gov . Click on Browse Pending Collections. This proposed collection is identified as proposed collection (04833) 1855-New. This ICR is also available on OMB's RegInfo Web site at www.reginfo.gov.

We consider your comments on this proposed collection of information in—

• Deciding whether the proposed collection is necessary for the proper performance of our functions, including whether the information will have practical use;

• Evaluating the accuracy of our estimate of the burden of the proposed collection, including the validity of our methodology and assumptions;

• Enhancing the quality, usefulness, and clarity of the information we collect; and

• Minimizing the burden on those who must respond. This includes exploring the use of appropriate automated, electronic, mechanical, or other technological collection techniques.

OMB is required to make a decision concerning the collection of information contained in these proposed priorities, requirements, and selection criteria between 30 and 60 days after publication of this document in the Federal Register . Therefore, to ensure that OMB gives your comments full consideration, it is important that OMB receives your comments on the proposed collection within 30 days after publication. This does not affect the deadline for your comments to us on the proposed priorities, requirements, definitions, and selection criteria.

Please note that a Federal agency cannot conduct or sponsor a collection of information unless OMB approves the collection under the PRA and the corresponding information collection instrument displays a currently valid OMB control number. Notwithstanding any other provision of law, no person is required to comply with, or is subject to penalty for failure to comply with, a collection of information if the collection instrument does not display a currently valid OMB control number. We will provide the OMB control number when we publish the notice of final priorities, requirements, definitions, and selection criteria.

Intergovernmental Review: This program is subject to Executive Order 12372 and the regulations in 34 CFR Part 79. One of the objectives of the Executive Order is to foster an intergovernmental partnership and a strengthened federalism. The Executive Order relies on processes developed by State and local governments for coordination and review of proposed Federal financial assistance.

This document provides early notification of our specific plans and actions for this program.

Accessible Format: Individuals with disabilities can obtain this document in an accessible format (e.g., braille, large print, audiotape, or compact disc) on request to the program contact person listed under FOR FURTHER INFORMATION CONTACT .

Electronic Access to This Document: The official version of this document is the document published in the Federal Register . Free Internet access to the official edition of the Federal Register and the Code of Federal Regulations is available via the Federal Digital System at: www.gpo.gov/fdsys . At this site you can view this document, as well as all other documents of this Department published in the Federal Register , in text or Adobe Portable Document Format (PDF). To use PDF you must have Adobe Acrobat Reader, which is available free at the site.

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Background

The National Park Service (NPS) has managed winter use in Yellowstone National Park for several decades. A detailed history of the winter use issue, past planning efforts, and litigation is provided on the park's Web site, http://www.nps.gov/yell/parkmgmt/timeline.htm. The park has most recently operated under a temporary one-year rule (76 FR 77131). That rule, which expired by its own terms on March 15, 2012, had extended for one winter season the daily entry limits and operational requirements for snowmobiles and snowcoaches adopted by the 2009 interim plan, which had been in effect for the prior two winter seasons.

On July 5, 2011, the NPS published a proposed long-term rule to implement the preferred alternative identified in the Draft Environmental Impact Statement (DEIS) (76 FR 39048). Under that alternative, the NPS proposed providing four different use-level combinations for snowmobiles and snowcoaches, which would vary according to a seasonal schedule. The NPS had intended to issue a record of decision and finalize a long-term rule for Yellowstone winter use by December 2011. However, some of the more than 59,000 public comments received on the DEIS raised reasonable questions as to long-term management strategies and environmental impacts, and the NPS decided to delay implementation of a long-term rule in order to prepare a Supplemental Environmental Impact Statement (SEIS) further analyzing the impacts of winter use under various long-term management options.

Accordingly, in its December 2011 Record of Decision (ROD) (76 FR 77249), the NPS announced its decision to select and implement Alternative 8 in the Final Environmental Impact Statement (FEIS). Alternative 8 extended for one additional winter season—the 2011-2012 season—the daily entry limits and operating requirements of the 2009 rule, which allowed up to 318 commercially guided, best available technology snowmobiles and 78 commercially guided snowcoaches in the park per day, as well as authorizing a variety of non-motorized uses. The DEIS and FEIS contained and analyzed an alternative—identified as Alternative 2—implementing those limits and operating requirements indefinitely into the future. On December 12, 2011, the NPS published a final rule to implement Alternative 8 (76 FR 77131). The NPS believed that the additional time afforded by a new one-season rule would allow it to complete the SEIS, decide on a long-term plan for managing winter use, and promulgate a new long-term rule before the beginning of the 2012-2013 winter season.

On June 29, 2012, the NPS released the Draft SEIS and published a Notice of Availability in the Federal Register (77 FR 38824). Public comment on the Draft SEIS closed on August 20, 2012. The response from the public and stakeholders has been robust. A majority of the substantive comments have addressed the proposal in the Draft SEIS's preferred alternative to manage snowmobiles and snowcoaches by a new concept known as “transportation events.” Numerous commenters have requested additional time to consider this new management concept and to respond substantively to it. Accordingly, the NPS has decided to reopen public comment on the Draft SEIS for an additional 30 days. Mindful of the short amount of time left before the December 15, 2012, opening of the 2012-2013 winter season and desiring to take the time necessary to make a reasoned, sustainable long-term decision on winter use, the NPS has decided to amend the December 2011 ROD. Utilizing the analyses contained in Alternative 2 in the 2011 FEIS and updated information gathered during the 2011-2012 winter season, the NPS is promulgating this new rule to extend for one additional winter season the 2011-2012 daily entry limits and operating requirements. The purpose of this publication is to solicit public comment on the NPS's decision to amend the December 2011 ROD and on the new proposed one-season rule.

The NPS is proposing to revise § 7.13 paragraphs (l)(3)(ii) and (l)(4)(vi) and the introductory text of paragraphs (l)(7)(i) and (l)(8)(i) by replacing the terms “the winter season of 2011-2012” and “the winter of 2011-2012” with the terms “the winter season of 2012-2013” and “the winter of 2012-2013.” This would be the only change to the existing regulations.

Executive Order 12866 provides that the Office of Information and Regulatory Affairs will review all significant rules. The Office of Information and Regulatory Affairs has determined that this rule is significant because it will raise novel legal or policy issues.

Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. We have developed this rule in a manner consistent with these requirements.

This rule will not have a significant economic effect on a substantial number of small entities under the RFA (5 U.S.C. 601 et seq. ).

The NPS used two separate baselines for its regulatory flexibility analysis. If no new rule were passed, Baseline 1 would be defined by the no-action alternative in the EIS. Under this baseline, no motorized oversnow vehicles would be allowed in the park. In addition, the NPS defined a second baseline, Baseline 2. Baseline 2 represents the continuation of the same levels of use allowed under the 2009 interim regulation in place for the past three winter seasons. Under Baseline 2, there would be a zero net change between the past three years and the actions being implemented under this rule, because the rule extends the management framework in place the past three winter seasons for one additional year. A regulatory flexibility analysis is included in the report titled “Economic Analysis of Winter Use Regulations in Yellowstone National Park” (RTI International, 2011). The NPS has reviewed the economic analysis contained in that report and has concluded that it still is relevant and that its results would apply to the additional year.

This rule is not a major rule under 5 U.S.C. 804(2), the SBREFA. This rule:

(a) Does not have an annual effect on the economy of $100 million or more.

(b) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, state, or local government agencies, or geographic regions.

(c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This rule has no effect on methods of manufacturing or production and specifically affects the Greater Yellowstone Area, not national or U.S.-based enterprises.

This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local or tribal governments or the private sector. A statement containing the information required by the UMRA (2 U.S.C. 1531 et seq. ) is not required. The rule addresses public use of national park lands, and imposes no requirements on other agencies or governments.

Under the criteria in section 2 Executive Order 12630, this rule does not have significant takings implications. Access to private property located adjacent to the park will be afforded the same access during winter as before this rule. No other property is affected. A takings implication assessment is not required.

Under the criteria in section 1 of Executive Order 13132, this rule does not have sufficient federalism implications to warrant the preparation of a Federalism summary impact statement. It addresses public use of national park lands, and imposes no requirements on other agencies or governments. A Federalism summary impact statement is not required.

This rule complies with the requirements of Executive Order 12988. Specifically, this rule:

(a) Meets the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and

(b) Meets the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards.

The Department of the Interior strives to strengthen its government-to-government relationship with Indian Tribes through a commitment to consultation with Indian Tribes and recognition of their right to self-governance and tribal sovereignty. We have evaluated this rule under the Department's consultation policy and under the criteria in Executive Order 13175 and have determined that it has no substantial direct effects on federally recognized Indian tribes and that consultation under the Department's tribal consultation policy is not required. Numerous tribes in the area were consulted in the development of the previous winter use planning documents.

This rule does not contain any new collection of information that requires approval by the Office of Management and Budget (OMB) under the PRA of 1995 (44 U.S.C. 3501 et seq. ). OMB has approved the collection requirement associated with Commercial Services and has assigned OMB control number 1024-0129 (expires 09/30/2013). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.

This winter use plan and rule constitute a major Federal action with the potential to significantly affect the quality of the human environment. The NPS prepared the 2011 Winter Use Plan/Environmental Impact Statement under the National Environmental Policy Act of 1969. The NPS is reexamining the analyses contained in the 2011 EIS, as well as new data from the 2011-2012 winter season, and intends to amend the December 2011 ROD (76 FR 77249) to authorize extending the current winter use management frame work for an additional year. The EIS is available for review at http://parkplanning.nps.gov/yell.

This rule is not a significant energy action under the definition in Executive Order 13211, a statement of Energy Effects is not required.

We are required by Executive Orders 12866 (section 1 (b)(12)), 12988 (section 3(b)(1)(B)), and 13563 (section 1(a)), and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

(a) Be logically organized;

(b) Use the active voice to address readers directly;

(c) Use common, everyday words and clear language rather than jargon;

(d) Be divided into short sections and sentences; and

(e) Use lists and tables wherever possible.

If you feel that we have not met these requirements, send us comments by one of the methods listed in the ADDRESSES section. To better help us revise the rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that you find unclear, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.

This proposed rule is available for public review and comment for a period of 30 days. Under more typical circumstances the NPS would normally provide a 60-day comment period. In this case, new issues raised in the course of preparing the 2011 EIS necessitated the completion of a Supplemental EIS, resulting in the need for an expedited rulemaking process to authorize winter use during the upcoming winter season. For this regulation, we have determined that in order for a final rule to become effective by December 15, 2012, it is necessary to reduce the normal review and comment period to 30 days.

Good cause exists for the shortened comment period for the following reasons:

(1) The NPS has received voluminous public comment on previous rulemaking efforts regarding winter use of the park, including efforts in 2000, 2003, 2004, 2007, 2008, and 2011. Those rulemaking efforts addressed many of the same issues as are addressed in this rulemaking, and a relatively small number of new issues are being raised.

(2) Since at least December 2011 the NPS has in good faith publicly stated that the 2012-2013 winter season for Yellowstone would commence on or about December 15, 2012, and the public and businesses have made decisions based on the widespread public knowledge of this opening date.

(3) Many persons planning to visit the park have already made travel plans in anticipation of the park being open for snowmobile and snowcoach use, such as reserving time off from work, booking airfares and hotel accommodations, making reservations for snowmobile or snowcoach tours, and the like. The Christmas-New Year period is one of the most heavily visited times of the winter season. If the park does not open as scheduled on December 15, 2012, it would create unnecessary hardship for visitors who have already planned trips, and would likely result in economic losses for some visitors if reservations had to be cancelled. Significant revenue loss for businesses in and around the park would also occur. Many businesses in the gateway communities surrounding the park, and the people who rely upon them for their livelihoods, are highly dependent upon the park being open for the entire duration of the approximately 90-day season.

(4) Snowmobile and snowcoach operators have made business decisions and investments for the winter season premised on an opening date of December 15, 2012. Such actions include purchasing new snowmobiles and snowcoaches for their fleets, making offers of employment, preparing advertising and other materials, and purchasing snowmobile accessories such as suits, helmets, boots, mittens, etc. A late opening would shorten an already-brief winter season, thereby depriving these businesses and others that depend on the winter season (such as hotels, restaurants, service stations, and other hospitality-oriented businesses) of revenue that is important to their livelihoods.

In consideration of the forgoing, the NPS proposes to amend 36 CFR part 7 as set forth below:

On May 17, 2012, the Copyright Office published a Notice of Proposed Rulemaking seeking comments on its proposal to amend the definition of a “claimant” by removing the footnote to the definition in § 202.3(a)(3)(ii). In response to this Notice, the Copyright Office received three comments that are posted on the Office's Web site at: http://www.copyright.gov/docs/claimantfn/comments/index.html.

At the conclusion of the comment period, the online comment submission form was removed from the Web site and was not replaced with a reply comment submission form during the established reply comment period. Although the Office is not aware of any attempts to submit a reply comment, the Copyright Office is extending the reply comment period in this rulemaking for an additional 30 days as a result of the error with the submission form, and invites replies to the initial comments submitted.

FASTforward, a licensed hardware/software change-of-address system, was developed in 1996 to enable Multi-Line Optical Character Reader (MLOCR) users a means to meet the Move Update requirement for their commercial mailings. Using the best technology then available, most of the FASTforward “black boxes” were 386/486 processors using secured cards and cabling operations. By 2009, many of the original black boxes were failing, and finding replacement parts became difficult. In February 2009, the USPS TM announced its intention to retire the FASTforward system by the end of FY2012 and migrate the licensees to the newer, more robust NCOALink® MPE (Mail Processing Equipment) licensed software system.

In August 2011, the USPS established an ad hoc workgroup consisting of postal personnel, MLOCR manufacturers, mailers, and representatives of the National Association of Presort Mailers (NAPM). The workgroup has worked to resolve all issues, enabling a smooth migration from the antiquated FASTforward system to the newer NCOALink MPE system.

NCOALink MPE licensees will have the option of upgrading their agreement to provide an electronic list of COA information to the mail owner, in addition to directly applying new addresses on mailpieces. However, use of the NCOALink MPE process to apply updated addresses on mailpieces will suffice by itself to meet the Move Update standard.

The Postal Service recognizes that not all affected mailers may have been able to participate in the workgroup. Also, the fees for use of NCOALink MPE system may be higher for some mailers than the fees for FASTforward. Therefore, the Postal Service invites comments on the proposal by means of this notice. The termination date for FASTforward would be January 27, 2013. Mailers may begin to use the NCOALink MPE system at any time as a method of meeting the Move Update standards.

The Postal Service accordingly proposes the following changes to Mailing Standards of the United States Postal Service, Domestic Mail Manual (DMM), which is incorporated by reference in the Code of Federal Regulations. See 39 CFR 111.1.

Accordingly, 39 CFR part 111 is proposed to be amended as follows:

The rules of practice in proceedings relative to administrative offsets initiated against former employees of the Postal Service are set forth in 39 CFR part 966. The Postal Service is concurrently revising its regulations pertaining to collecting debts from former employees contained in the Postal Service Employment and Labor Relations Manual (ELM). These ELM revisions conform existing Postal Service regulations to the requirements of the Debt Collection Act. The revisions proposed in this document would revise 39 CFR part 966 to bring its provisions into accord with the Postal Service's revised regulations for collecting debts from former employees by administrative offset. In addition, minor changes would be made to eliminate outdated provisions and conform these rules to the existing practice of the Judicial Officer.

Changes to § 966.2(a) cross reference the Postal Service's new ELM provisions pertaining to administrative offsets and also clarify that such offsets are taken pursuant to the statutory authority of 31 U.S.C. 3716. Changes to § 966.2(b) clarify that the regulations contained in 39 CFR part 966 are intended to be consistent with the Federal Claims Collection Standards promulgated jointly by the Department of Justice and the Treasury, found at 31 CFR parts 900-904.

Changes to § 966.3 update the definitions of part 966 to refer to the Postal Service Accounting Service Center (ASC) or successor installation instead of the area Postmaster/Installation head. The definition of “reconsideration” in paragraph (i) is thus revised to refer to action taken by the ASC. These changes accurately reflect the Postal Service's current practices for collecting debts from former employees, as collections from former employees are normally handled through the ASC. Definitions are also updated to include the Federal Claims Collection Standards, referenced elsewhere in the revised regulations. Changes to paragraph (j) are non-substantive and provide the parties with useful contact information.

Changes to § 966.4 revise the procedures for filing a petition for a hearing under part 966. These revisions align these regulations with the Postal Service's revised ELM regulations pertaining to collecting debts from former employees by administrative offset, the Postal Service's current debt collection procedures, and current practice before the Judicial Officer. Paragraphs (a)(2) and (3) are revised to cross reference and incorporate the Postal Service's ELM provisions, as well as the relevant section of the Debt Collection Act, that detail the notice and due process rights former Postal Service employees are afforded prior to the collection of a debt by administrative offset. Changes to these paragraphs clarify that a former employee may petition for review under part 966 either after receiving the required notice and requesting and receiving a reconsideration determination from the ASC, or after requesting reconsideration but not receiving a determination within 60 days from the request. Changes to paragraph (b) detail those situations whereby the Postal Service may take an administrative offset without affording an opportunity for pre-deprivation review to the former employee. In accordance with the Judicial Officer's current practice and applicable law, these changes further clarify that where prior notice and an opportunity for review are omitted and the circumstances outlined in revised paragraphs (b)(2), (3) and/or (4) do not apply, the former employee may submit a petition for review under part 966 following the offset. Changes to paragraph (c) clarify the procedural time limits for filing a petition for review under revised part 966. In conformance with revisions made elsewhere to part 966, “Accounting Service Center” is substituted for “Postmaster/Installation Head” in paragraph (d)(4). The remaining revisions to paragraph (d) are intended to modernize requirements for the content of hearing petitions.

In § 966.6, paragraph (a) is revised to reflect the Recorder's correct hours, delete the requirement that parties submit documents in triplicate, and clarify that parties should serve papers directly with each other unless otherwise directed by the Hearing Official. Paragraph (c) explicitly requires that parties discuss extensions of time with the opposing party, as is the current practice. Paragraph (d) clarifies that the General Counsel may delegate cases to a designee and establishes a notice of appearance requirement in order to reduce the possibility of misdirected orders. In addition, paragraph (d) is revised to allow for non-attorney representatives. In current practice, former employees are often represented by non-attorneys.

Section 966.7 is revised to simplify the answer's content, eliminate the need for the Postal Service's representative to provide certain information prematurely, and require that the answer clearly explain the basis and calculation of the debt at issue.

Changes to § 966.8(a)(3), (6), and (7) conform the regulations to the existing practice of the Judicial Officer. Changes to § 966.8(a)(9) similarly reflect the Judicial Officer's existing practice and provide notice to parties that time extensions will not be automatically granted.

Changes to § 966.9 update the regulation to reflect the existing practice of the Judicial Officer pertaining to hearing transcripts, as well as the Hearing Official's ability, in case of a party's unexcused absence, to continue with a hearing at the Hearing Official's discretion.

Section 966.11 is revised to provide that the Initial Decision of the presiding Administrative Judge may become the final determination of the Postal Service without any further order by the Judicial Officer, so long as no appeal has been filed and the Judicial Officer has not decided to review the decision on his or her own motion.

Formerly, § 966.12 detailed only circumstances under which the Petitioner could be found in default and administrative offset could thus be initiated. As revised, § 966.12 provides for circumstances under which either party may be found in default. This change is in accordance with existing practice and decisions of the Judicial Officer.

Section 966.13 is revised to reflect more accurately the definition of “ex parte” discussions in the context of proceedings brought under part 966.

Sections 966.5 and 966.10, dealing respectively with the effect of filing a petition, and the initial decision of the Hearing Official, are retained without change.

These revised rules would begin to govern proceedings under part 966 docketed on or after 30 days from their publication in final form.

For the reasons stated in the preamble, the Postal Service proposes to amend 39 CFR part 966 as set forth below:

This notice does not impose requirements on any entity. The action proposed is intended to clarify the status of stormwater discharges from logging roads. Those with an interest in such discharges may be interested in this proposed action. If you have questions regarding the applicability of this notice, consult the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

This document is available for download at http://www.epa.gov/npdes/stormwater/forestroads or under docket EPA-HQ-OW-2012-0195.

The EPA is issuing this notice to address the stormwater discharges identified under Northwest Environmental Defense Center v. Brown, 640 F.3d 1063 (9th Cir. 2011) (NEDC).

This notice proposes adding language to existing stormwater regulations to clarify that, for the purposes of assessing whether stormwater discharges are “associated with industrial activity,” the only facilities under SIC code 2411 that are “industrial” are: rock crushing, gravel washing, log sorting, and log storage. The effect of this would be to clarify, contrary to the Ninth Circuit's decision in NEDC, that discharges of stormwater from silviculture facilities other than the four specifically named silviculture facilities identified above do not require an NPDES permit. 1

The objective of the Clean Water Act is to restore and maintain the chemical, physical, and biological integrity of the nation's waters. 33 U.S.C. 1251(a). To that end, the Act provides that the discharge of any pollutant by any person shall be unlawful, except in compliance with other provisions of the statute. Generally, the Act provides for a permit program for the addition to waters of the United States of a pollutant from a point source, defined as “any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged.” 33 U.S.C. 1362(14). In 1987 Congress amended the Clean Water Act with the addition of section 402(p), which required NPDES permits for certain categories of stormwater point source discharges and allowed EPA discretion to determine how pollution from other stormwater discharges would be addressed.

For the initial phase, section 402(p)(1) created a temporary moratorium on NPDES permits for stormwater discharges from point sources except for those listed in section 402(p)(2), which includes discharges for which a permit had already been issued; discharges from large municipal separate storm sewer systems; and “industrial discharges.” Congress did not define industrial discharges, allowing the EPA to define the term. For subsequent phases, section 402(p)(5) directs the EPA to conduct studies, in consultation with the states, for “identifying those stormwater discharges or classes of stormwater discharges for which permits are not required”; “determining to the maximum extent practicable, the nature and extent of pollutants in such discharges”; and “establishing procedures and methods to control stormwater discharges to the extent necessary to mitigate impacts on water quality.” Section 402(p)(6) directs the Agency to issue regulations, in consultation with state and local officials, based on such studies. The section allows the EPA flexibility in issuing regulations to address designated stormwater discharges where appropriate and does not require the use of NPDES permits or any specific regulatory approach. Specifically, the section states that the regulations “shall establish priorities, establish requirements for state stormwater management programs, and establish expeditious deadlines” and may include “performance standards, guidelines, guidance, and management practices and treatment requirements, as appropriate.” 33 U.S.C. 1342(p)(6). This flexibility is unique to stormwater discharges and is different than the treatment of stormwater discharges listed in section 402(p)(2)(B) of the Act, which requires a permit for a stormwater discharge “associated with industrial activity.”

Prior to the 1987 Amendments, there were numerous questions regarding the appropriate means of regulating stormwater discharges within the NPDES program due to the water quality impacts of stormwater, the variable nature of stormwater, the large number of stormwater discharges, and the limited resources of permitting agencies. The EPA undertook numerous regulatory actions, which resulted in extensive litigation, in an attempt to address these unique discharges.

EPA's Silvicultural Rule (40 CFR 122.27) predates the 1987 amendments to the Clean Water Act that created section 402(p) for stormwater controls. The Agency defined silvicultural point source as part of the Silvicultural Rule to specify which silvicultural discharges were to be included in the NPDES program. The rule defines silvicultural point source to mean any “discernible, confined and discrete conveyance related to rock crushing, gravel washing, log sorting, or log storage facilities which are operated in connection with silvicultural activities and from which pollutants are discharged into waters of the United States” and further explains that “the term does not include non-point source silvicultural activities such as nursery operations, site preparation, reforestation and subsequent cultural treatment, thinning, prescribed burning, pest and fire control, harvesting operations, surface drainage, or road construction and maintenance from which there is natural runoff.”

In 1990, following the 1987 amendments that directed the Agency to develop regulations requiring permits for large municipal separate storm sewer systems and stormwater “discharges associated with industrial activity,” the EPA promulgated the Phase I stormwater regulations. (55 FR 47990, November 16, 1990). The EPA defined in the Phase I regulations “storm water discharge associated with industrial activity” which is not defined by the Act. In describing the scope of the term “associated with industrial activity,” several members of Congress explained in the legislative history that the term applied if a discharge was “directly related to manufacturing, processing or raw materials storage areas at an industrial plant.” (Vol. 132 Cong. Rec. H10932, H10936 (daily ed. October 15, 1986); Vol. 133 Cong. Rec. H176 (daily ed. January 8, 1987)). The Phase I rule clarified the regulatory definition of “associated with industrial activity” by adopting the language used in the legislative history and supplementing it with a description of various types of areas (e.g., material handling sites, sites used for the storage and maintenance of material handling equipment, etc.) that are directly related to an industrial process and to industrial facilities identified by the EPA. The supplemental language in the Phase I rule also includes the term “immediate access road.” The EPA considers “immediate access roads” to refer to roads which are exclusively or primarily dedicated for use by the industrial facility. See 55 FR 47990, 48009 (Nov. 16, 1990). These “immediate access roads” do not include public access roads that are state, county, or federal roads such as highways or Bureau of Land Management roads which happen to be used by the facility. See id. The Phase I regulation defines the term “storm water discharge associated with industrial activity” to include stormwater discharges from facilities identified in the rule by standard industrial classification or “SIC” code at 40 CFR 122.26(b)(14). The Agency specified in the Phase I rule that the term does not include discharges from facilities or activities excluded from the NPDES program under other parts of the EPA's regulations, including the Silvicultural Rule. As discussed above, the EPA had previously specified under the Silvicultural Rule which silvicultural discharges were to be included in the NPDES program (40 CFR 122.27). The EPA intended to regulate those same “silvicultural point source[s]” under the Phase I rule (i.e., rock crushing, gravel washing, log sorting, and log storage facilities) and to exclude from the Phase I regulation stormwater runoff from other silvicultural activities. For the “silvicultural point source[s]” (i.e., rock crushing, gravel washing, log sorting, and log storage facilities) regulated under the Phase I rule, the term “storm water discharge associated with industrial activity” includes “immediate access roads” (40 CFR 122.26(b)(14)(ii)). Unlike “immediate access roads” associated with industrial facilities, many logging roads have multiple uses, including recreation and general transportation, and commonly extend over long distances (i.e.; may not provide “immediate access” to an industrial site). The intent of the EPA in this notice of proposed rulemaking is that the NPDES program requirements be implemented with regard to “immediate access roads” in the same way they were implemented prior to the decision by the Ninth Circuit.

In developing the second phase of stormwater regulations, the EPA submitted to Congress in March 1995 a report that presented the nature of stormwater discharges from municipal and industrial facilities that were not already regulated under the Phase I regulations (U.S. Environmental Protection Agency, Office of Water. 1995. Storm Water Discharges Potentially Addressed by Phase II of the National Pollutant Discharge Elimination System Storm Water Program: Report to Congress. Washington, DC EPA 833-K-94-002). On December 8, 1999, the EPA promulgated the Phase II stormwater regulations to address stormwater discharges from small municipal separate storm sewer systems and construction sites that disturb one to five acres. (64 FR 68722, December 8, 1999). The EPA retains the authority to designate additional stormwater discharges for regulation at a later date under either CWA section 402(p)(2)(E) or 402(p)(6).

The Phase II regulations for stormwater controls were challenged in Environmental Defense Center v. US EPA, 344 F.3d 832 (9th Cir. 2003) ( EDC v. EPA ). In that case, petitioners contended that the EPA arbitrarily failed to regulate discharges from forest roads under the Phase II rule. The court held that the EPA failed to consider the petitioners' comments and remanded the issue to the EPA “so that it may consider in an appropriate proceeding Petitioner's contention that § 402(p)(6) requires the EPA to regulate forest roads. The EPA may then either accept Petitioners' arguments in whole or in part, or reject them on the basis of valid reasons that are adequately set forth to permit judicial review.” Id. at 863.

More recently, in Northwest Environmental Defense Center v. Brown, 640 F.3d 1063 (9th Cir. 2011) ( NEDC ), a citizen suit was filed alleging violations of the Clean Water Act for discharging stormwater from ditches alongside two logging roads in state forests without a permit. The court held that because the stormwater runoff from the two roads in question is collected by and then discharged from a system of ditches, culverts and channels, there was a point source discharge of industrial stormwater for which an NPDES permit is required. As discussed above, the Agency specified in the Phase I rule that the term “storm water discharge associated with industrial activity” does not include discharges from facilities or activities excluded from the NPDES program under other parts of the EPA's regulations, including the aforementioned Silvicultural Rule. The EPA intends through this regulation to more clearly limit Phase I applicability to only those silvicultural facilities that are “rock crushing, gravel washing, log sorting, and log storage facilities.”

In response to the partial remand under EDC v. EPA, the Agency continues to review available information on the water-quality impacts of stormwater discharges from forest roads, which include logging roads as discussed above, as well as existing practices to control those discharges and is considering a range of options to address such discharges, which could include designating a subset of stormwater discharges from forest roads for regulation under the Agency's section 402(p) rulemaking authority. The EPA believes that the broad range of flexible approaches under section 402(p)(6) may be well suited to address the complexity of forest road ownership, management, and use. EPA is currently evaluating comments on its Notice of Intent to Revise Stormwater Regulations To Specify That an NPDES Permit is Not Required for Stormwater Discharges From Logging Roads and To Seek Comment on Approaches for Addressing Water Quality Impacts From Forest Road Discharges (77 FR 30473, May 23, 2012), as it considers possible next steps.

In the interim, the EPA notes that Congress has directed that permits are not required for stormwater discharges for logging roads. Under the Consolidated Appropriations Act of 2012, until September 30, 2012, the Administrator may not require an NPDES permit or directly or indirectly require any state to require a permit, for discharges of stormwater runoff from roads, the construction, use, or maintenance of which are associated with silvicultural activities.

The EPA is proposing to revise 40 CFR 122.26(b)(14)(ii) to clarify that for the purposes of defining stormwater discharges associated with industrial activity, the only activities under SIC code 2411 that are “industrial” are rock crushing, gravel washing, log sorting, and log storage. This revision does not remove any existing exemptions. Though the existing language in 40 CFR 122.26(b)(14)(ii) excepts SIC code 2434, wood kitchen cabinets, the wood kitchen cabinets category remains covered in a separate subsection. See id. at 122.26(b)(14)(xi) (listing “Facilities covered under Standard Industrial Classifications 20, 21, 22, 23, 2434 * * *” as engaging in industrial activity for purposes of the industrial stormwater regulations.)

The EPA did not intend logging roads themselves to be regulated as industrial facilities. However, in light of NEDC, the EPA proposes the addition of language to 40 CFR 122.26(b)(14) to clarify the Agency's intent.

The EPA believes that stormwater discharges from forest roads, including logging roads, should be evaluated under section 402(p)(6) of the Clean Water Act because the section allows for a broad range of flexible approaches that may be better suited to address the complexity of forest road ownership, management, and use.

The EPA requests comment on whether the proposed language sufficiently clarifies that discharges of stormwater from logging roads do not require an NPDES permit. The EPA does not think that changes to 40 CFR 122.27 are necessary to accomplish the goal of clarifying the scope of stormwater discharges associated with industrial activity, but welcomes comments on this point and reserves the option of making changes to that section as appropriate to clearly articulate the Agency's intent.

Although the EPA has conducted a preliminary review of the comments submitted in response to the “Notice of Intent to Revise Stormwater Regulations To Specify That an NPDES Permit is Not Required for Stormwater Discharges From Logging Roads and To Seek Comment on Approaches for Addressing Water Quality Impacts From Forest Road Discharges” (77 FR 30473, May 23, 2012), the Agency does not plan to respond to these comments when taking final action on the rule proposed in today's notice. If you submitted comments in response to the earlier Federal Register Notice that you believe to be relevant to the rule proposed today, please resubmit your comments in accordance with the process outlined above.

The proposed action clarifies existing regulations and has no economic, public health, or environmental impacts.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a “significant regulatory action.” Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the docket for this action.

The Paperwork Reduction Act (44 U.S.C. 3501 et seq. ) requires the EPA to estimate the burden on regulated entities to comply with information collection requirements of the EPA's regulations. This proposed action would clarify existing regulations and would have no impact on existing information collection requirements.

The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of today's rule on small entities, small entity is defined as: (1) A small business “as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201;” (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.

After considering the economic impacts of today's proposed rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This proposed rule will not impose any requirements on small entities. Rather, the proposed rule will clarify that stormwater discharges from logging roads do not constitute stormwater discharges associated with industrial activity and that an NPDES permit is not required for these stormwater discharges. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts.

This action contains no Federal mandates under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538 for state, local, or tribal governments or the private sector. This action imposes no enforceable duty on any state, local or tribal governments or the private sector.

This proposed action would not have Federalism implications. This proposed action would clarify existing regulations and would have no economic impact. Thus, it would 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.

This proposed action would not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). Thus, Executive Order 13175 does not apply to this proposed action.

The proposed action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in Executive Order 12866. Moreover, this proposed action would clarify existing regulations and would have no economic, public health, or environmental impacts.

The proposed action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355, May 22, 2001), because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Additionally, the proposed change does not involve the installation of treatment or other components that use a measurable amount of energy.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, 12(d) (15 U.S.C. 272 note) directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. NTTAA directs the EPA to provide Congress, through OMB, explanations when the EPA decides not to use available and applicable voluntary consensus standards.

The proposed action would clarify existing regulations and would make no change to existing standards.

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission. Agencies must do this by identifying and addressing as appropriate any disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.

The EPA has determined that this action will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. The proposed action would clarify existing regulations and would have no economic, public health, or environmental impacts.

For the reasons set out in the preamble, 40 CFR part 122 is proposed to be amended as follows: