Executive Order 12866

The Office of Management and Budget (OMB) has determined that this rule is not-significant for the purpose of Executive Order 12866 and, therefore, it has not been reviewed by OMB.

In accordance with section 3507(d) of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ), the information collection or recordkeeping requirements included in this final rule, which were filed under 0563-0085, have been submitted for approval to the Office of Management and Budget (OMB). When OMB notifies us of its decision, if approval is denied, we will publish a document in the Federal Register providing notice of what action we plan to take.

FCIC is committed to complying with the E-Government Act of 2002, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.

It has been determined under section 1(a) of Executive Order 13132, Federalism, that this rule does not have sufficient implications to warrant consultation with the States. The provisions contained in this rule will not have a substantial direct effect on States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

This rule has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation will not have substantial and direct effects on Tribal governments and will not have significant Tribal implications.

FCIC certifies that this regulation will not have a significant economic impact on a substantial number of small entities. Program requirements for the Federal crop insurance program are the same for all producers regardless of the size of their farming operation. However, FCIC does waive certain administrative fees for limited resource farmers to help ensure that small entities are given the same opportunities as large entities to obtain crop insurance. This regulation provides the rules regarding ineligibility for crop insurance under the Act based on actions or inactions of the producer, such as violations of the Controlled Substance Act, debarment from Federal government programs, and failure to pay premiums and administrative fees when due. As such, all producers are treated equally under this regulation. A Regulatory Flexibility Analysis has not been prepared since this regulation does not have an unduly burdening impact on small entities, and therefore, this regulation is exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

This program is listed in the Catalog of Federal Domestic Assistance under No. 10.450.

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115, June 24, 1983.

This rule has been reviewed in accordance with Executive Order 12988 on civil justice reform. The provisions of this rule will not have a retroactive effect. The provisions of this rule will preempt State and local laws to the extent such State and local laws are inconsistent herewith.

This action is not expected to have a significant economic impact on the quality of the human environment, health, or safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed.

This rule finalizes changes to 7 CFR part 400 by revising subpart U—Ineligibility for Programs Under the Federal Crop Insurance Act that were published by FCIC on December 5, 2011, as a notice of proposed rulemaking in the Federal Register at 76 FR 75799—75805. The public was afforded 61 days to submit comments after the regulation was published in the Federal Register .

A total of 25 comments were received from 4 commenters. The commenters were insurance providers and an insurance service organization.

The public comments received regarding the proposed rule and FCIC's responses to the comments are as follows:

Comment: A commenter questioned whether the provisions in the proposed rule would apply only to convictions that occur after the effective date of the final rule.

Response: Yes. The laws and regulations in effect at the time of a conviction will apply.

Comment: A commenter stated the definition of “conviction” is vague, will lead to delays in determinations, and is unclear what the effective date of the conviction will be for purposes of determining ineligibility.

Response: FCIC does not agree the definition of “conviction” is vague or will result in delays in determinations. The definition only defines the term; it does not include provisions regarding the effective date or consequences of a conviction. The effective date and duration of ineligibility due to a conviction is provided in section 400.683. No changes were made as a result of this comment.

Comment: A commenter questioned the phrase “functional equivalent of a judgment” within the definition of “conviction,” and states the definition of the term “conviction” should be limited to “criminal judgments.”

Response: FCIC agrees the reference to other resolutions that are the functional equivalent of a judgment is not necessary because the definition already includes the phrase “a judgment or any other determination of guilt.” The commenter did not define “criminal judgment” or state how it would differ from the proposed definition of “conviction” which includes “a judgment or any other determination of guilt of a criminal offense by any court of competent jurisdiction.” Accordingly, the reference to other resolutions that are the functional equivalent of a judgment were removed in the final rule; however, no change was made to limit the definition to “criminal judgments.”

Comment: A commenter questioned what role the Excluded Parties List System (EPLS) plays in the Ineligible Tracking System (ITS) for the insurance provider.

Response: The EPLS and ITS are separate sources of data, each with a separate function and purpose. ITS is a list of persons who have been determined to be ineligible for crop insurance because of various reasons related to the crop insurance program. This list is created and maintained by FCIC. The EPLS is a list of persons who have met the criteria for inclusion and whose names were submitted by all government agencies to the General Services Administration (GSA). GSA creates and maintains the EPLS. Therefore, to the extent that FCIC reports to GSA ineligible persons who meet the criteria for inclusion in the EPLS, there is some overlap of the two lists. However, there are persons on the EPLS who may not appear on the ITS because of violations related to other government programs. Similarly, there are persons included on the ITS who do not appear on the ELPS because they do not meet the criteria from inclusion. There is no role for the insurance provider regarding submitting data to the EPLS. However, insurance providers are precluded from insuring or doing business with anyone on the ITS or the EPLS. Therefore, the insurance provider is required to check both the ITS and EPLS to ensure that it is not insuring or doing business with an ineligible person.

Comment: A commenter questioned whether the definition of the EPLS will change how the insurance provider transmits or receives information.

Response: The rule does not provide instructions regarding how insurance providers transmit or receive any applicable information regarding the EPLS. Since the ELPS is maintained by GSA, GSA will provide information to the public on how it can be accessed. This rule is just intended to provide notice to the insurance providers that they do need to access to EPLS to ensure that it is not insuring or doing business with an ineligible person.

Comment: A commenter questioned the timeframe for the “meaningful opportunity to contest” and whether the definition of “meaningful opportunity to contest” is a change from the notification process provided in the 2011 Ineligible Tracking System Handbook that allows 30 days from the date of Notice of Debt for the insured to challenge the debt.

Response: Nothing in this rule is intended to change the established time frames for filing for mediation, arbitration or judicial review contained in existing regulations, policy provisions, and procedures. To the extent that any time frame will be changed, such change will occur in the applicable regulation, policy provision, or procedure. Therefore, no changes have been made as a result of this comment.

Comment: A commenter questioned whether the term “Livestock Price Reinsurance Agreement” should be defined and whether the provisions of the rule apply to policies covered under the Livestock Price Reinsurance Agreement.

Response: The provisions contained within 7 CFR, part 400, subpart U apply to all policies insured under the Federal Crop Insurance Act, including those reinsured under the Livestock Price Reinsurance Agreement. FCIC agrees the term “Livestock Price Reinsurance Agreement” should be defined in the final rule. The definition was added and the term was referenced where applicable in the final rule.

Comment: A few commenters stated the provisions in section 400.679(d) should apply only to individuals and not to all “persons” as defined in the rule.

Response: FCIC agrees and has made the changes in section 400.679 and other applicable sections in the final rule.

Comment: A commenter stated the references to the regulations at 7 CFR part 3017 are incorrect because those regulations are obsolete and have been replaced with 2 CFR part 180 and 2 CFR part 417.

Response: FCIC agrees 7 CFR part 3017 is obsolete. All references to 7 CFR part 3017 have been corrected in the final rule to reference 2 CFR part 180 and 2 CFR part 417. Further, these are no longer the only provisions related to debarment since permanent debarment has been added by the 2008 Farm Bill. Therefore, FCIC has clarified the provisions in section 400.679 to make the distinction between suspensions and debarments under 2 CFR part 180 and 2 CFR part 417 and debarments under 7 U.S.C. 2209j.

Comment: A few commenters stated sections 400.679(c) and (f) are vague, ambiguous, and impose an unnecessary administrative burden on insurance providers and insured producers. They state subsection (f) is ambiguous because it is unclear whether the phrase “ineligible person,” refers to persons made ineligible under 2 CFR part 417, previously 7 CFR part 3017, or all persons ineligible under section 400.679 of the proposed rule. They also state the phrase “knowingly doing business” will impose an unnecessary administrative burden on the insurance providers if it is applied to ineligible persons outside of 2 CFR part 180 and 2 CFR part 417.

Response: The phrase “ineligible person” in section 400.679(f) of the proposed rule referred to persons found ineligible under 2 CFR part 180 and 2 CFR part 417, previously 7 CFR part 3017, and 7 U.S.C. 2209j, as a result of the 2008 Farm Bill. The language in the final rule has been amended to refer to persons debarred or suspended under 2 CFR part 180, 2 CFR part 417, and 7 U.S.C. 2209j to provide more clarity. With respect to the burdens, both 2 CFR parts 180 and 417 makes it clear that knowingly doing business with an ineligible person can subject a person to debarment. This applies to all persons, including insurance providers so FCIC cannot change the requirement or exempt insurance providers. As part of normal business operations, insurance providers must be in compliance with USDA regulations, policies and procedures regarding debarment, suspension and eligibility. FCIC has revised the provisions to clarify that it only applies to knowingly doing business with debarred persons as required by the debarment regulations and statutes.

Comment: A commenter stated section 400.679(e) should be eliminated or limit its application to those persons who have been listed in the EPLS.

Response: FCIC understands that there may be problems of identifying persons who have committed crimes for knowingly defrauding the United States. Further, as drafted, the proposed rule presumed that permanent debarment was automatic after such a conviction but there is still a process that must be followed for the Secretary to debar a person and once that process is completed, the debarred person will be reported to the EPLS. In addition, to make clear that this applies to persons listed on the EPLS, FCIC has referenced debarments under 2 CFR part 180, 2 CFR part 417, and 7 U.S.C. 2209j.

Comment: A commenter questioned the logic of barring someone convicted of a controlled substance violation from obtaining Federal crop insurance. The commenter stated there is no statutory authority for barring someone convicted of possession of or trafficking in a controlled substance, and the references to such in the rule should be deleted. The commenter stated that Chapter 13 of Title 21 is not applicable to the Federal crop insurance program because eligibility for Federal crop insurance is contingent upon various “payments” and the term “Federal benefit” does not include any benefit for which payments are required for eligibility.

Response: FCIC disagrees that there is no statutory authority for barring someone convicted of possession of or trafficking in a controlled substance. The statutory provisions of Chapter 13 of Title 21 regarding convictions for the possession of or trafficking in a controlled substance are applicable to Federal crop insurance because eligibility for Federal crop insurance is not contingent upon any payment. Therefore, no changes have been made as a result of this comment.

Comment: A commenter stated that convictions for possession of or trafficking a controlled substance do not result in automatic denial of Federal benefits, or denial of such benefits for a set amount of time, according to Title 21. The determination regarding the denial of Federal benefits and for how long is at the court's discretion; therefore, section 400.680 is incorrect.

Response: FCIC agrees the language in the proposed rule was inaccurate regarding automatic denial of benefits under the Act for conviction of the possession of or trafficking in controlled substances. The final rule has been amended to be consistent with the provisions of Title 21 regarding such convictions.

Comment: A commenter questioned whether National Appeals Division (NAD) appealable disputes are changing.

Response: Neither the proposed rule or final rule change appealable disputes under the NAD regulations.

Comment: A commenter stated the term “crop year” for determining when ineligibility begins for a person convicted of a controlled substance violation is vague and needs to be further defined or expanded.

Response: The proposed rule did not define the term “crop year.” The term “crop year” is defined in the policy for applicable commodities, and the public was not provided the opportunity to comment on those definitions under the proposed rule. In addition, the applicability of the term “crop year” regarding persons convicted under Federal or State law of planting, cultivation, growing, producing, harvesting or storing a controlled substance is statutory.

Comment: A commenter stated they understood that they, as an insurance provider, would deny coverage to an applicant who is not a United States citizen, United States non-citizen national, or a qualified alien, but were not aware of any obligation or requirement to report such individuals as part of the ITS process.

Response: Sections 400.682 and 400.684 of the proposed rule did provide that insurance providers must notify FCIC of applicants who are not a United States citizen, United States non-citizen national, or a qualified alien and that such individuals would be placed on the ITS. FCIC agrees that insurance providers are not required to report individuals who are not a United States citizen, United States non-citizen national, or a qualified alien to FCIC. FCIC also agrees that such individuals are not placed on ITS if the sole reason they are ineligible is because they are not a United States citizen, United States non-citizen national, or a qualified alien. The final rule has been amended to remove the reporting requirement of such individuals and the reference that such individuals would be placed on the ITS.

Comment: A couple of commenters stated the proposed rule had two subsections labeled “b” under section 400.684.

Response: FCIC agrees and has made the applicable changes in the final rule.

Comment: A commenter stated they agree with the consolidation of the provisions in 7 CFR, part 400, subpart F, into 7 CFR, part 400, subpart U, to eliminate redundancies. However, the commenter also stated the provisions in 7 CFR, part 400, subpart F, that allowed insurance providers to continue to receive reinsurance if the insurance provider follows all the regulations and procedures were not retained and consolidated in the proposed rule. The commenter stated the elimination of those provisions could result in an insurance provider being penalized even though it had followed all of the applicable regulations and procedures.

Response: FCIC agrees the provisions of 7 CFR, part 400, subpart F, regarding the continuation of reinsurance in cases involving controlled substance violations where the insurance provider followed all FCIC procedures and regulations should have been retained and consolidated in the proposed rule. The applicable provisions have been added to the final rule.

Comment: A commenter stated that subsections 400.684(b)(3) and (4), for general and limited liability partnerships and joint ventures, respectively, are the same and could be combined.

Response: FCIC agrees the provisions for general partnerships, limited liability partnerships and joint ventures are repetitive and although legally there may be distinctions between these entities, they are being treated the same for the purposes of this final rule. Therefore, FCIC has combined the provisions and renumbers the subsequent provisions accordingly.

Comment: A few commenters stated section 400.684(b)(5)(redesignated as 400.684(b)(4)) is ambiguous, denies appeal rights and liability protections to insured producers and insurance providers, could adversely affect a person's eligibility for program benefits even when that person is not a party to a contract, and that FCIC should revise or eliminate the subsection because it creates a burden that outweighs the potential benefits.

Response: FCIC does not agree the subsection is ambiguous, denies any appeal rights or liability protections or could affect a person who is not a party to the applicable policy. The provision applies to different types of entities and specifies that it applies to the persons who are in control of the actions of such entities or are responsible for the action or inaction that resulted in the ineligibility. Since entities have no ability to take action except through the persons conducting the business of the entity, it is appropriate to hold such individuals responsible for their actions or inactions. Further, appeal rights will be afforded such individuals the same as they would for any other person determined to be ineligible. While certain state laws protect individuals within certain entities, the crop insurance program is funded with taxpayer dollars and FCIC has the responsibility to ensure those dollars are properly spent. The provisions are necessary to ensure the integrity of the Federal crop insurance program and prevent producers from circumventing their ineligibility by hiding behind the façade of an entity. Therefore, no changes have been made as a result of this comment.

Comment: A commenter stated that subsection 400.686(d) should be rewritten to read “AIPs must check to ensure that the persons with whom they are doing business are eligible to participate in the programs authorized under the Act. The ITS does not include all persons ineligible to receive government benefits, such as persons debarred, disqualified or suspended from receiving government benefits as a result of being listed in EPLS.”

Response: FCIC disagrees with the commenters suggested changes. The provision applies to all participants in the program, and that includes not only insurance providers but it also includes partners, cooperators, and contractors, to ensure that the persons with whom they are doing business are eligible to participate in the programs authorized under the Act. The provision has been clarified to specify that insurance providers, partners, cooperators, and contractors must check ITS and other sources, such as the EPLS, to identify ineligible persons. Further, there appears to be some confusion regarding the EPLS. The EPLS is a source of information about certain persons who are ineligible for certain benefits or transactions. The government agency that reported the person to EPLS actually determined the person's ineligibility.

In addition to the changes described above, FCIC has made minor editorial changes, revisions to specific sections of 7 CFR, part 400, subpart U, and revisions to 7 CFR, parts 407 and 457 as follows:

1. Revised the definition of “debt” and “delinquent debt” for consistency with § 400.682 and § 400.684 regarding debtors that file bankruptcy. The definitions in the proposed rule were in conflict with the existing provisions regarding the eligibility of a person in bankruptcy in section 400.683(b)(1). The final rule clarifies that only discharge of the debt in bankruptcy will restore eligibility.

2. Revised § 400.682(a) because of the inconsistency in the proposed rule regarding bankruptcy. The intent of the proposed rule was to specify that filing for bankruptcy did not make a person eligible for crop insurance. To be eligible the debt must be discharged in bankruptcy. However, nothing in this rule was intended to abrogate any existing bankruptcy laws regarding the collection of a debt while the producer is in bankruptcy. Therefore, FCIC has clarified that a debtor who has filed for bankruptcy may be notified of the amount of debt owed and their ineligibility for insurance; however, no request for payment of the debt can be made, unless approved in writing by the Office of General Counsel. The clarified language will ensure that insurance providers do not request payment of a debt when they are aware the debtor has filed bankruptcy.

3. Revised § 400.683 to distinguish between suspensions and debarments under 2 CFR part 180 and 2 CFR part 417 and debarments under 7 U.S.C. 2209j because the effective date for each is different and that was not clear in the proposed rule.

4. Revised § 400.684(a)(1) to clarify that filing bankruptcy does not make an ineligible person eligible for crop insurance or preclude the ineligible person from being placed on the ITS. There was an inconsistency in the proposed rule and the intent was to not allow debtors to be eligible for insurance until their debt was discharged in bankruptcy and FCIC had revised the provisions to be consistent. This does not change the law regarding the collection of debts from persons in bankruptcy so FCIC has clarified that while insurance providers are precluded from requesting payment of the debt once a person files bankruptcy, such filing does not make the person eligible to obtain crop insurance.

5. Revised § 400.684(b)(3) to include limited partnerships and limited liability companies. The proposed rule impacted partners and members of limited partnerships and limited liability companies differently than members of limited liability partnerships, which was not the intent of FCIC. In addition, the proposed rule created program vulnerability because it would allow certain partners and members to evade ineligibility determinations. The revision will address the program vulnerability and ensure equal treatment of partners and members of limited partnerships, limited liability partnerships, and limited liability companies. Also revised § 400.684(b)(3) to include references to joint ventures because although they may be legally different, they are treated the same as of limited partnerships, limited liability partnerships, and limited liability companies for the purposes of this rule. As a result, § 400.684(b)(4) has been deleted and § 400.684(b)(5) has been redesignated as § 400.684(b)(4).

6. Revised § 400.684(b)(5) (redesignated § 400.684(b)(4)) to remove limited partnerships and limited liability companies. The proposed rule impacted partners and members of limited partnerships and limited liability companies differently than members of limited liability partnerships, which was not the intent of FCIC. In addition, the proposed rule created program vulnerability because it would allow certain partners and members to evade ineligibility determinations. The revision will address the program vulnerability and ensure equal treatment of partners and members of limited partnerships, limited liability partnerships, and limited liability companies.

1. Revise sections 2(k) and (p) to be consistent with the provisions in 7 CFR, part 400, subpart U. After it had published the proposed rule for 7 CFR, part 400, subpart U, FCIC discovered the Area Risk Insurance Policy Basic Provisions regarding debt for persons in bankruptcy were inconsistent with the existing provisions.

1. Revise section 2(f) to be consistent with the provisions in 7 CFR, part 400, subpart U. After it had published the proposed rule for 7 CFR, part 400, subpart U, FCIC discovered the Common Crop insurance Policy Basic Provisions regarding debt for persons in bankruptcy were inconsistent with the existing provisions.

Accordingly, as set forth in the preamble, the Federal Crop Insurance Corporation amends 7 CFR parts 400, 407 and 457 as follows:

The U.S. Small Business Administration (SBA) guarantees bid, payment and performance bonds for small and emerging contractors who cannot obtain surety bonds through regular commercial channels. SBA's guarantee gives Sureties an incentive to provide bonding for small businesses and thereby assists small businesses in obtaining greater access to contracting opportunities. SBA's guarantee is an agreement between a Surety and SBA that SBA will assume a certain percentage of the Surety's loss should a contractor default on the underlying contract.

On August 1, 2013, SBA published a notice of proposed rulemaking with a request for comments in the Federal Register . The rule proposed to: (1) Conform SBA's Surety Bond Guarantee Program (“SBG Program”) to certain provisions of the National Defense Authorization Act of 2013 (NDAA); (2) clarify the extent to which a Principal may subcontract work performed under the Contract; (3) make changes to the Quick Bond Guarantee Application and Agreement; (4) increase the dollar threshold for determining when a change in the Contract or bond amounts may result in denial of liability or require certain actions; (5) reduce the timeframes for taking certain actions related to claims; and (6) eliminate references to the provisions of the American Recovery and Reinvestment Act of 2009 (Recovery Act) that have expired. See 78 FR 46528.

The comment period was open until September 30, 2013. SBA received two comments, both from trade associations, that expressed their support for the proposed rule and indicated that the changes are favorable to small businesses. With respect to the proposed increases in the dollar thresholds, one commenter noted that a Surety may not be in a position to notify SBA or seek SBA's approval when a change order exceeds the specified dollar threshold because a Surety may be required contractually to waive notice of contract amount changes. Under section 115.32(d), a Prior Approval Surety is required to notify SBA of any required changes in the Contract or bond amount that aggregate 25% or $50,000 (to be increased to $100,000 under this final rule) “as soon as the Surety acquires knowledge of the change”. Thus, the Surety is required to provide notice to SBA under this provision upon acquiring knowledge of these aggregated changes. It is important to note that, under section 115.15(b), the Surety is required to monitor the Principal's progress on bonded Contracts guaranteed by SBA and, accordingly, SBA would expect the Surety to be aware of changes in the Contract or bond amounts. Moreover, for increases in the original bond amount as a result of a single change order of at least 25% or $50,000 (to be increased to $100,000 by this final rule), the Surety must, under section 115.32(d), obtain SBA's prior written approval of such increase (and such approval is conditioned upon payment by the Surety of the increase in the Principal's guarantee fee).

In addition, as the commenter observed, SBA now has the discretion, under section 115.19, to deny liability in whole or in part. The commenter suggested that SBA propose regulations to address the use of such discretion where the Surety does not obtain approval or notify SBA of the change in the Contract or bond amount. However, the exercise of this discretion must be based on the circumstances of each case and will be determined on a case-by-case basis.

SBA is adopting the rule as proposed and as described in the section-by-section analysis below.

Section 115.10. SBA is revising the definition of “Applicable Statutory Limit” to include the maximum amounts of any Contract or Order for which SBA is authorized by the NDAA to guarantee, or commit to guarantee, a Bid Bond, Payment Bond, Performance Bond, or Ancillary Bond. The statutory limits set by the NDAA are (1) $6.5 million (as adjusted for inflation in accordance with 41 U.S.C. 1908); and (2) $10 million if a contracting officer of a Federal agency certifies that such guarantee is necessary. In addition, SBA is including a reference in the definition to the maximum amounts of any Contract or Order when SBA guarantees the bond in connection with a procurement related to a major disaster pursuant to section 12079 of Public Law 110-246. Under this provision, which was enacted on June 18, 2008, the maximum amounts are: (1) $5 million; and (2) $10 million on Federal Contracts or Orders at the request of the Head of any Federal agency involved in reconstruction efforts in response to a major disaster. The authority to guarantee bonds under this provision is subject to the availability of funds appropriated in advance specifically for the purpose of guaranteeing bonds for any Contract or Order related to a major disaster. SBA does not expect this authority to be often used, given NDAA's increase in the maximum amounts for any Contract or Order up to $6.5 million (and $10 million if a Federal contracting officer certifies that such guarantee is necessary) and the requirement that funds be appropriated in advance specifically for guaranteeing bonds related to a major disaster. No changes have been made to this provision as proposed.

Section 115.12(b). SBA is deleting the reference to the “Contract Bonds” section of the current “Manual of Rules, Procedures and Classifications of the Surety Association of America” and is replacing this reference with two specific types of bonds, Commercial and Fidelity bonds, which are not eligible for an SBA guarantee. No changes have been made to this provision as proposed.

Section 115.12(e)(3). This provision is being deleted in its entirety, as it relates to requirements imposed by the Recovery Act that expired on September 30, 2010. No changes have been made to this provision as proposed.

Section 115.12(e)(4). This provision is being renumbered as (e)(3), and now reflects the authority to guarantee bonds on Federal Contracts or Orders greater than $6.5 million, but not exceeding $10 million, upon a signed certification of a Federal contracting officer, as authorized by the NDAA. No changes have been made to this provision as proposed.

Section 115.12(e)(5). This provision has been renumbered as (e)(4), and implements an alternative statutory authority provided SBA under Public Law 110-246 for guaranteeing bonds for procurements related to a major disaster. References to requirements imposed by the Recovery Act that expired on September 30, 2010, have been deleted. No changes have been made to this provision as proposed.

Section 115.13(a)(5). SBA is revising this provision to clarify that, to be eligible for a bond guaranteed by SBA, the Principal must retain full responsibility for the oversight and management of the Contract, including any work performed by any subcontractor, and may not subcontract the full scope of the statement of work. No changes have been made to this provision as proposed.

Section 115.17(b)(2). SBA is reducing the time frame allowed for a Surety to reimburse or credit SBA for salvage and recovery from 90 days to 45 days after the Surety receives any salvage and recovery. No changes have been made to this provision as proposed.

Section 115.19. SBA is revising the introductory paragraph of this provision to conform it to current law by deleting the time frame reference required by the Recovery Act, which has expired, and by inserting the relevant requirements of the NDAA, including the authority of SBA to deny liability, in whole or in part, within its discretion if any of the circumstances in paragraphs (a) through (h) of this section exist, and the prohibition on denying liability based on material information that was provided to SBA as part of the Surety's guarantee application in the Prior Approval Program. SBA made one minor clarification to the provision as proposed by revising the introductory language in section 115.19 to make it clear that the material information must have been provided to SBA in the Surety's application. SBA is also amending section 115.19(c)(1) by increasing the dollar threshold for determining whether the Surety has committed a material breach of one or more terms or conditions of its Prior Approval or PSB Agreement from $50,000 to $100,000. In addition, SBA is amending section 115.19(d) by increasing the dollar threshold for determining whether the Surety has committed a substantial violation of SBA regulations from $50,000 to $100,000, and is amending section 115.19(e)(2) by increasing the dollar threshold for determining whether a Prior Approval Surety has agreed to or acquiesced in any material alteration in the terms, conditions, or provisions of the bond from $50,000 to $100,000. In each of these sections, the phrase “whichever is less” is being added after the $100,000 to clarify the meaning of this requirement. No other changes have been made to this provision as proposed.

Section 115.30(d)(2). SBA is deleting the phrase “or the warranty/maintenance period” from this provision to allow the Quick Bond Application and Agreement (SBA Form 990A) to be used for a Contract that includes a maintenance period of 2 years or less (for defective workmanship or materials only), and with SBA's approval, for longer maintenance periods and broader coverage, as provided in section 115.10 under the definition of “Contract”. In addition, SBA is increasing the allowable liquidated damages provision from $250.00 per day to $1,000.00 per day. No changes have been made to this provision as proposed.

Section 115.31(d). SBA is revising the final sentence of this provision by basing the example on the current statutory limit of $6.5 million. No changes have been made to this provision as proposed.

Section 115.32(d). SBA is amending this provision by changing the dollar threshold for determining when the Prior Approval Surety must notify SBA of the change and/or obtain SBA's approval from at least $50,000 to $100,000. The phrase “whichever is less” has been added to clarify the meaning of this requirement. No changes have been made to this provision as proposed.

Section 115.35(c)(1). SBA is reducing the time frame allowed for a Prior Approval Surety to submit a claim to SBA from one year to 90 days after the Surety pays the claim. In addition, the title of the SBA Form 994H, “Default Report, Claim for Reimbursement and Record of Administrative Action,” has been changed to “Default Report, Claim for Reimbursement and Report of Recoveries,” to reflect the current version of the form. No changes have been made to this provision as proposed.

Section 115.35(c)(4). SBA is reducing the time frame for SBA to pay a claim submitted by a Surety in the Prior Approval Program from 90 days to 45 days after receipt of the requisite information. No changes have been made to this provision as proposed.

Section 115.36(a)(3). SBA is reducing the time frame allowed for a Surety to reimburse SBA its share of a settlement from 90 days to 45 days after receipt. No changes have been made to this provision as proposed.

Section 115.67(a). SBA is increasing the dollar threshold for determining when a PSB Surety must present checks for additional fees due from the Principal and Surety from $50,000 to $100,000. The phrase “whichever is less” has been added to clarify the meaning of this requirement. No changes have been made to this provision as proposed.

Section 115.69. For imminent breach payments that exceed 10% of the Contract amount, SBA is revising this provision to give the PSB Surety the opportunity to request SBA to approve the amount prior to the Surety making the Imminent Breach payment. SBA will approve such payment if SBA finds that the payment is necessary and reasonable. If the Surety does not request prior SBA approval for such payments, SBA may refuse to reimburse the Surety if SBA finds that the payment that exceeds 10% of the Contract amount was not necessary and reasonable. No changes have been made to this provision as proposed.

SBA 115.70(a). SBA is reducing the time frame allowed for a PSB Surety to submit a claim to SBA from one year to 90 days after the Surety pays the claim. SBA is also reducing the time frame for SBA to pay a claim submitted by a Surety in the PSB Program from 90 days to 45 days after receipt of the requisite information. No changes have been made to this provision as proposed.

The Office of Management and Budget (OMB) has determined that this final rule does not constitute a significant regulatory action under Executive Order 12866. This is also not a “major rule” under the Congressional Review Act, 5 U.S.C. 800.

This action meets applicable standards set forth in Sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

SBA has determined that this final rule will 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. Therefore, for the purposes of Executive Order 13132, SBA has determined that this final rule has no federalism implications warranting preparation of a federalism assessment.

SBA has determined that this final rule does not impose additional reporting or recordkeeping requirements under the Paperwork Reduction Act, 44 U.S.C., Chapter 35.

The Regulatory Flexibility Act (RFA) requires administrative agencies to consider the effect of their actions on small entities, small non-profit enterprises, and small local governments. Pursuant to the RFA, when an agency issues a rulemaking, the agency must prepare a regulatory flexibility analysis which describes the impact of the rule on small entities. However, section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the rulemaking is not expected to have a significant economic impact on a substantial number of small entities. There are twenty-one Sureties that participate in the SBA program, and no part of this final rule would impose any additional cost or any significant burden on them. Consequently, this final rule does not meet the substantial number of small businesses criterion anticipated by the Regulatory Flexibility Act.

For the reasons stated in the preamble, SBA amends 13 CFR part 115 as follows:

Background

The final rule amended three appendices in 14 CFR related to flight data recorder (FDR) requirements:

• First, Appendix E to part 91 was amended to correct a typographical error introduced when the rule was published. For the altitude parameter, the sampling rate per second was listed as 11. The correct rate had always been 1 sample per second.

• The second and third corrections concerned identical standards in Appendix M to part 121 and Appendix E to part 125. When footnote 5 was added in 1999 to each Appendix, the sampling interval was left off for certain airplanes. The correction put the sampling interval of once per second back in the footnote for the affected airplanes.

None of these changes required action by airplane owners, operators or manufacturers as the affected airplanes already complied with the requirements of the originally adopted rules and the corrections adopted. Since these requirements were intended in the original rules, there was no new impact on safety.

The FAA received no comments on the final rule.

Since no comments were submitted in response to the final rule, the FAA has determined that no revisions to the rule are warranted.

Pursuant to the provisions of the 1970 United Nations Educational, Scientific and Cultural Organization (UNESCO) Convention, codified into U.S. law as the Convention on Cultural Property Implementation Act (Pub. L. 97-446, 19 U.S.C. 2601 et seq. ) (hereafter, the “Cultural Property Implementation Act” or the “Act”), signatory nations (State Parties) may enter into bilateral or multilateral agreements to impose import restrictions on eligible archaeological and ethnological materials under procedures and requirements prescribed by the Act. Under the Act and applicable CBP regulations (19 CFR 12.104g), the restrictions are effective for no more than five years beginning on the date on which the agreement enters into force with respect to the United States (19 U.S.C. 2602(b)). This period may be extended for additional periods, each such period not to exceed five years, where it is determined that the factors justifying the initial agreement still pertain and no cause for suspension of the agreement exists (19 U.S.C. 2602(e); 19 CFR 12.104g(a)).

On January 14, 2009, the United States entered into a bilateral agreement with the People's Republic of China (China), concerning the imposition of import restrictions on certain archaeological materials representing China's cultural heritage from the Paleolithic Period (c. 75,000 B.C.) through the end of the Tang Period (A.D. 907) and monumental sculpture and wall art at least 250 years old. On January 16, 2009, CBP published CBP Dec. 09-03 in the Federal Register (74 FR 2838), which amended 19 CFR 12.104g(a) to reflect the imposition of these restrictions.

Import restrictions listed in 19 CFR 12.104g(a) are effective for no more than five years beginning on the date on which the agreement enters into force with respect to the United States. This period can be extended for additional periods not to exceed five years if it is determined that the factors which justified the initial agreement still pertain and no cause for suspension of the agreement exists. (19 CFR 12.104g(a)).

On April 1, 2013, by publication in the Federal Register (78 FR 19565), the United States Department of State proposed to extend the MOU between the U.S. and China concerning the imposition of import restrictions on archaeological material from the Paleolithic Period through the Tang Period and monumental sculpture and wall art at least 250 years old.

On August 1, 2013, after reviewing the findings and recommendations of the Cultural Property Advisory Committee, the Assistant Secretary for Educational and Cultural Affairs, United States Department of State, concluding that the cultural heritage of China continues to be in jeopardy from pillage of certain archaeological materials, made the necessary determination to extend the import restrictions for an additional five years. On January 8, 2014, diplomatic notes were exchanged reflecting the extension of the restrictions for an additional five-year period as described in this document.

By request of China, and pursuant to the statutory and decision-making process, the Designated List of materials covered by the restrictions is being amended to clarify that the agreement applies to monumental sculpture and wall art that was at least 250 years old as of January 14, 2009, the date the MOU first entered into force. Thus, CBP is amending 19 CFR 12.104g(a) accordingly to reflect the extension of the import restrictions and the intention of the parties to cover monumental sculpture and wall art that was at least 250 years old as of January 14, 2009, through January 14, 2019, in accordance with the conditions set forth in 19 U.S.C. 2606 and 19 CFR 12.104c.

In this document, the Designated List of articles that was published in CBP Dec. 09-03 ( see 74 FR 2838, dated January 16, 2009) is amended to clarify that the intentions of both parties is to include monumental sculpture and wall art that was at least 250 years old as of January 14, 2009.

This Designated List, amended as set forth in this document, includes archaeological materials representing China's cultural heritage from the Paleolithic Period (c. 75,000 B.C.) through the end of the Tang Period (A.D. 907) and monumental sculpture and wall art at least 250 years old as of January 14, 2009. The Designated List and additional information about the agreement may also be found at the following Internet Web site address: http://eca.state.gov/cultural-heritage-center/international-cultural-property-protection/bilateral-agreements/china .

The ceramic tradition in China extends back to at least the 6th millennium B.C. and encompasses a tremendous variety of shapes, pastes, and decorations. Chinese ceramics include earthenwares, stonewares and porcelains, and these may be unglazed, glazed, underglazed, painted, carved, impressed with designs, decorated with applied designs or a combination of all of these. Only the most distinctive are listed here. Vessels are the most numerous and varied types of ceramics. Ceramic sculptures include human, animal, mythic subjects, and models of scenes of daily life. Architectural elements include decorated bricks, baked clay tiles with different glaze colors, and acroteria (ridge pole decorations).

Archaeological work over the past thirty years has identified numerous cultures of the Neolithic period from every part of China, all producing distinctive ceramics. Early Neolithic cultures (c. 7500-5000 BC) include such cultures as Pengtoushan (northern Hunan Province), Peiligang (Henan Province), Cishan (Hebei Province), Houli (Shandong Province), Xinglongwa (eastern Inner Mongolia and Liaoning Province), Dadiwan and Laoguantai (Gansu and Shaanxi Province), Xinle (Liaodong peninsula, Liaoning Province), among others. Examples of Middle Neolithic cultures (c. 5000-3000 BC) include Yangshao (Shaanxi, Shanxi, and Henan Provinces), Daxi (eastern Sichuan and western Hubei Provinces), Hemudu (lower Yangzi River valley, Zhejiang Province), Majiabang (Lake Tai/Taihu area to Hangzhou Bay, Zhejiang and southern Jiangsu Provinces), Hongshan (eastern Inner Mongolia, Liaoning, and northern Hebei Provinces), and Dawenkou (Shandong Province), among others. Later Neolithic cultures (c. 3500-2000 BC) include Liangzhu (lower Yangzi River Valley), Longshan (Shandong and Henan Provinces), Taosi (southern Shanxi Province), Qujialing (middle Yangzi River valley in Hubei and Hunan Provinces), Baodun (Chengdu Plain, Sichuan Province), Shijiahe (western Hubei Province), and Shixia (Guangdong Province), among many others.

Neolithic vessels are sometimes inscribed with pictographs. When present, they are often single incised marks on vessels of the Neolithic period, and multiple incised marks (sometimes around the rim) on late Neolithic vessels.

a. Yangshao: The “classic” form of Neolithic culture, c. 5000-3000 BC in Shanxi, Shaanxi, Gansu, Henan, and adjacent areas. Hand-made, red paste painted with black, sometimes white motifs, that are abstract and depict plants, animals, and humans. Forms include bulbous jars with lug handles, usually with a broad shoulder and narrow tapered base, bowls, open mouth vases, and flasks (usually undecorated) with two lug handles and a pointed base.

b. Shandong Longshan: Vessels are wheel-made, black, very thin-walled, and highly polished, sometimes with open cut-out decoration. Forms include tall stemmed cups ( dou ), tripods ( li and ding ), cauldrons, flasks, and containers for water or other liquids.

a. Vessels are mostly utilitarian gray paste cooking tripod basins, cooking and storage jars, wide mouth containers, pan circular dishes with flat base, and broad three legged version of pan. The latter also appear in fine gray and black pastes. The forms of these include the kettle with lid ( he ), tripod liquid heating vessel with pouring spout ( jue ), tripod cooking pot ( ding ), goblet or beaker ( gu ), tripod water heater without pouring spout ( jia ).

b. Shang and Zhou: Vessels may be wheel-made or coiled. Vessels can be utilitarian gray paste cooking vessels, often cord-impressed, or more highly decorated types. Surfaces can be impressed and glazed yellow to brown to dark green. White porcelain-like vessels also occur. Forms include those of the Erlitou plus wide-mouth containers and variously shaped jars and serving vessels.

Most vessels are wheel-made. The main developments are in glazing. Earthenwares may have a lead-based shiny green glaze. Grey stonewares with an olive color are called Yue ware.

a. Sui: Pottery is plain or stamped.

b. Tang: A three-color glazing technique is introduced for earthenwares ( sancai ). Green, yellow, brown, and sometimes blue glazes are used together on the same vessel. For stoneware, the olive glaze remains typical.

1. Neolithic: Occasional small figurines of animals or humans. From the Hongshan culture come human figures, some of which appear pregnant, and human faces ranging from small to life size, as well as life-size and larger fragments of human body parts (ears, belly, hands, and others).

2. Shang through Eastern Zhou: Ceramic models and molds for use in the piece-mold bronze casting process. Examples include frontal animal mask ( taotie ), birds, dragons, spirals, and other decorative motifs.

3. Eastern Zhou, Qin and Han: Figures are life-size or smaller. They are hand- and mold-made, and may be unpainted, painted, or glazed. Figures commonly represent warriors on foot or horseback, servants, acrobats, and others. Very large numbers date to the Han Dynasty. In some cases, the ceramic male and female figurines are anatomically accurate, nude, and lack arms (in these cases, the figures were originally clad in clothes and had wooden arms that have not been preserved). Other ceramic objects, originally combined to make scenes, take many forms including buildings, courtyards, ships, wells, and pig pens.

4. Tang: Figures depicting Chinese people, foreigners, and animals may be glazed or unglazed with added paint. Approximately 15 cm to 150 cm high.

1. Han: Bricks having a molded surface with geometric or figural design. These depict scenes of daily life, mythic and historical stories, gods, or demons.

2. Three Kingdoms through Tang: Bricks may be stamped or painted with the same kinds of scenes as in the Han Dynasty.

3. Han through Tang: Roof tiles may have a corded design. Eaves tiles with antefixes have Chinese characters or geometric designs. Glazed acroteria (ridge pole decorations) in owl tail shape.

Ancient Chinese jade is, for the most part, the mineral nephrite. It should be noted, however, that many varieties of hard stone are sometimes called “jad” (yu) in Chinese. True nephrite jade can range in color from white to black, and from the familiar shades of green to almost any other color. Jade has been valued in China since the Neolithic period. Types commonly encountered include ornaments, amulets, jewelry, weapons, insignia, and vessels.

a. Neolithic (Hongshan): Types are mostly hair cylinders or pendant ornamental animal forms such as turtles, fish-hawks, cicadas, and dragons. One common variety is the so-called “pigdragon” ( zhulong ), a circular ring form with a head having wrinkled snout (the “pig”) and long dragon-like body.

b. Neolithic (Liangzhu): Types include awl-shaped pendants, three-prong attachments, openwork crown-shapes, beads, birds, fishes, frogs.

c. Neolithic (Shandong Longshan) and Erlitou: Ornaments for body and clothing such as stick pins and beads.

d. Shang and Zhou: Earrings, necklaces, pectorals, hair stickpins, ornaments, sometimes in the shape of small animals, dragons, or other forms; belt buckles, and garment hooks. During the Zhou Dynasty, there appear elaborate pectorals made of jade links, and jade inlay on bronze.

e. Qin, Han and Three Kingdoms: Pectoral ornaments and small-scale pendants continue to be produced. Types include pectoral slit earrings, large disks ( bi ), openwork disks ( bi ), openwork plaques showing a mythic bird ( feng ), and various types of rings. Entire burial suits of jade occur during the Han Dynasty. More frequently occurring are Han Dynasty belthooks, decorated with dragons, and garment hooks.

a. Neolithic (Liangzhu): Types include weapons such as broad-bladed axes ( yue ), long rectangular or trapezoidal blades ( zhang ), often with holes along the back (non-sharpened) edge for hafting; tools such as hoe, adze, knife blades.

b. Neolithic (Shandong Longshan) and Erlitou: Broad axe ( yue ) and halberd or “dagger axe” ( ge ).

c. Shang and Zhou: Broad axes ( yue ) and halberd ( ge ) may be attached to turquoise inlaid bronze shafts.

d. Neolithic (Liangzhu) to Zhou: Tool types include hoe, adze, knife blades.

e. Neolithic (Shandong Longshan) to Zhou: Insignia blades based on tool shapes such as long hoe, flat adze, and knife.

Neolithic—Han: Types include flat circular disks ( bi ) with a cut-out central hole and prismatic cylindrical tubes ( cong ), usually square on the outside with a circular hole through its length, often with surface carving that segments the outer surface into three or more registers. The cong tubes are often decorated with a motif on each corner of each register showing abstract pairs of eyes, animal and/or human faces. Cong tubes, while most closely linked with the Liangzhu culture, were widely distributed among the many late Neolithic cultures of China.

a. Shang through Han: Types include eared cups and other tableware.

b. Qin through Tang: Tableware forms such as cups, saucers, bowls, vases, and inkstones.

Chimes from all eras may be rectangular or disk-shaped.

Amber is used for small ornaments from the Neolithic through Tang dynasties.

a. Paleolithic and later eras: Chipped lithics from the Paleolithic and later eras including axes, blades, scrapers, arrowheads, and cores.

b. Neolithic and later eras: Ground stone including hoes, sickles, spades, axes, adzes, pestles, and grinders.

c. Erlitou through Zhou: As with jade, weapon types include blades, broad axes ( yue ), and halberds ( ge ).

Stone becomes a medium for large-scale images in the Qin and Han. It is put to many uses in tombs. It also plays a major role in representing personages associated with Buddhism, Daoism, and Confucianism.

a. Sculpture in the round.

i. Shang: Sculpture includes humans, often kneeling with hands on knees, sometimes with highly decorated incised robes, owls, buffalo, and other animals. The Jinsha site near Chengdu, Sichuan, dating to the late Shang Dynasty, has yielded numerous examples of stone figurines in a kneeling position, with carefully depicted hair parted in the center, and with hands bound behind their back.

ii. Han to Qing: The sculpture for tombs includes human figures such as warriors, court attendants, and foreigners. Animals include horse, tiger, pig, bull, sheep, elephant, and fish, among many others.

iii. The sculpture associated with Buddhism is usually made of limestone, sandstone, schist and white marble. These be covered with clay, plaster, and then painted. Figures commonly represented are the Buddha and disciples in different poses and garments.

iv. The sculpture associated with Daoism is usually sandstone and limestone which may be covered and painted. Figures commonly represented are Laozi or a Daoist priest.

v. The sculpture associated with Confucianism represents Confucius and his disciples.

b. Relief Sculpture.

i. Han: Relief sculpture is used for all elements of tombs including sarcophagi, tomb walls, and monumental towers. Images include hunting, banqueting, historical events, processions, scenes of daily life, fantastic creatures, and animals.

ii. Tang: Tomb imagery now includes landscapes framed by vegetal motifs.

c. Art of cave or grotto temples.

Han—Qing: Note that this section includes monumental sculpture at least 250 years old as of January 14, 2009. These temples, mostly Buddhist, combine relief sculpture, sculpture in the round, and sometimes mural painting. The sculptures in the round may be stone or composites of stone, wood, and clay and are painted with bright colors.

d. Stelae.

Han—Qing: Note that this section includes monumental sculpture at least 250 years old as of January 14, 2009. Tall stone slabs set vertically, usually on a tortoise-shaped base and with a crown in the form of intertwining dragons. Stelae range in size from around 0.60m to 3m. Some include relief sculpture consisting of Buddhist imagery and inscription, and others are secular memorials with long memorial inscription on front and back faces.

a. Erlitou through Zhou: Marble or other stone is used as a support for wooden columns and other architectural or furniture fixtures.

b. Qing: Note that this section includes monumental sculpture at least 250 years old as of January 14, 2009. Sculpture is an integral part of Qing Dynasty architecture. Bridges, archways, columns, staircases and terraces throughout China are decorated with reliefs. Colored stones may be used, including small bright red, green, yellow and black ones. Statue bases are draped with imitations of embroidered cloths. Stone parapets are carved with small, elaborately adorned fabulous beasts.

Neolithic through Han, and later: Chimestones, chipped and/or ground from limestone and other resonant rock. They may be highly polished, carved with images of animals or other motifs, and bear inscriptions in Chinese characters. They usually have a chipped or ground hole to facilitate suspension from a rack.

The most important metal in traditional Chinese culture is bronze (an alloy of copper, tin and lead), and it is used most frequently to cast vessels, weapons, and other military hardware. Iron artifacts are not as common, although iron was used beginning in the middle of the Zhou Dynasty to cast agricultural tool types, vessels, weapons and measuring utensils. As with ceramics, only the most distinctive are listed here.

a. Erlitou: Types include variations on pots for cooking, serving and eating food including such vessels as the cooking pot ( ding ), liquid heating vessel with open spout ( jue ), or with tubular spout ( he ), and water heater without spout ( jia ).

b. Shang: Bronze vessels and implements include variations on the ceramic posts used for cooking, serving, and eating including but not limited to the tripod or quadripod cooking pot ( ding ), water container ( hu ), and goblet ( gu ). Animal-shaped vessels include the owl, mythic bird, tiger, ram, buffalo, deer, and occasionally elephant and rhinoceros. Most types are decorated with symbolic images of a frontal animal mask ( taotie ) flanked by mythical birds and dragons, or with simpler images of dragons or birds, profile cicadas, and geometric motifs, including a background “cloud and thunder” pattern of fine squared spirals.

c. Zhou: Types include those of previous eras. Sets begin to be made with individual vessels having similar designs. Late innovations are made to surface treatment: Relief decorations of intertwined dragons and feline appendages; inlay with precious stones and gems; inlay with other metals such as gold and silver; gilding; pictorial narratives featuring fighting, feasting and rituals; and various geometric designs.

d. Qin and Han: All vessel types and styles popularized of the immediately preceding era continue.

a. Shang and other Bronze Age Cultures through Zhou: Wide variety of cast human and animal sculptures. Particularly distinctive are the bronze sculptures from the Sanxingdui Culture in Sichuan which include life-sized human heads (often with fantastic features and sometimes overlaid with gold leaf) and standing or kneeling figurines ranging in size from 5cm to more than 2 meters; tree-shaped assemblages; birds, dragons, and other real and fantastic animals. Bronze sculpture from Chu and related cultures include supports for drums and bell sets (often in the shape of guardian figures, fantastic animals, or intertwined snakes).

b. Qin and Han: Decorative bronze types include statues of horses, lamps in the shape of female servants, screen supports in the shape of winged immortals, incense burners in the shape of mountains, mirrors, and inlaid cosmetic boxes.

c. Buddhist: In the Han there first appear small portable images of Sakyamuni Buddha. During the next historical eras, such images proliferate and become more varied in terms of size and imagery. Most of these are free-standing, depicting such subjects as the historical Buddha Sakyamuni, Buddhas associated with paradises, Buddha's disciples, and scenes from the Lotus Sutra. Gilt bronzes are made from the Han to Tang.

a. Zhou Media of Exchange and Tool-shaped Coins: Early media of exchange include bronze spades, bronze knives, and cowrie shells. During the 6th century BC, flat, simplified, and standardized cast bronze versions of spades appear and these constitute China's first coins. Other coin shapes appear in bronze including knives and cowrie shells. These early coins may bear inscriptions.

b. Later, tool-shaped coins began to be replaced by disc-shaped ones which are also cast in bronze and marked with inscriptions. These coins have a central round or square hole.

c. Qin: In the reign of Qin Shi Huangdi (221-210 BC) the square-holed round coins become the norm. The new Qin coin is inscribed simply with its weight, expressed in two Chinese characters ban liang. These are written in small seal script and are placed symmetrically to the right and left of the central hole.

d. Han through Sui: Inscriptions become longer, and may indicate that inscribed object is a coin, its value in relation to other coins, or its size. Later, the period of issue, name of the mint, and numerals representing dates may also appear on obverse or reverse. A new script, clerical ( lishu ), comes into use in the Jin.

e. Tang: The clerical script becomes the norm until 959, when coins with regular script ( kaishu ) also begin to be issued.

a. Shang: Instruments include individual clapper-less bells ( nao ), singly and in sets. Barrel drums lay horizontally, have a saddle on top, and rest on four legs.

b. Zhou through Tang: Bells and bell sets continue to be important. The bells vary considerably in size in shape. Other instruments include mouth organs ( hulu sheng ), gongs, cymbals, and a variety of types of drums, including drums ( chunyu ) and large “kettledrums” from south and southwest China.

Tools and implements of all eras include needles, spoons, ladles, lifting poles, axes, and knives. Weapons and military gear include the broad axe, dagger axe, knives, spear points, arrowheads, helmets, chariot fittings, combination of spear and dagger ( ji ), cross-bow, and horse frontlets.

Other bronze items include but are not limited to mirrors, furniture parts, and utensils such belt buckles, garment hooks, weights, measuring implements, incense burners, lamps, spirit trees, tallies, seals, rings, bells, and cosmetic containers.

Iron is used for such utilitarian objects as axes, hammers, chisels, and spades. At the end of the Zhou, steel swords with multi-faceted metal inlay are produced.

1. Zhou through Han: Bimetallic weapons such as iron-bladed swords and knives with a bronze hilt.

2. Three Kingdoms through Sui: Small scale Buddhist images are cast.

3. Tang: Large scale castings include Buddhist statues, bells, lions, dragons, human figures, and pagodas.

During the Shang and Zhou Dynasties, gold is used to produce jewelry and a limited number of vessel types, and as gilding, gold leaf, or inlay on bronze. Gold and silver become widely used in the Han Dynasty and remain so through the Tang Dynasty. Objects include vessels such as cups, ewers, jars, bowls; utensils such as lamps, containers, jewelry, liturgical wares, furniture parts; and Buddhist sculpture such as images of Buddha and reliquaries.

Neolithic through Tang: The most important uses of these materials is for vessels, seals, small-scale sculptures, and personal ornaments. In the Neolithic period, Erlitou culture, and Shang Dynasty bone (bovine scapula and tortoise plastrons, or lower shells) is used for divination: A carefully prepared bone or shell was thinned by drilling series of holes almost through the bone, to which heat was applied to make the bone crack. In some cases from the Late Shang Dynasty, the bones carry inscriptions revealing the date and nature of the question asked and, occasionally, the outcome of the event. The cowrie shells used as money in the Shang Dynasty and later periods show signs of use. Worked shell imitations of cowries are also known. Ivory and horn are used to craft tableware utensils such as cups and containers as early as the Shang Dynasty; these are sometimes inlaid with turquoise or other stones.

Neolithic through Tang: Silk worms are domesticated in China as early as the Neolithic. Silk cloth is preserved as garments and parts thereof, as a covering for furniture, and as painted or embroidered banners. Techniques include flat weave, moiré, damask, gauze, quilting, and embroidery.

Neolithic through Tang: Lacquer is a transparent sap collected from the lac tree. When dissolved, it may be repeatedly applied to a wood or fabric form. The resulting product is sturdy and light. Lacquer vessels first appear in the Neolithic period, and become highly sophisticated and numerous by the middle Zhou through Han Dynasties. In the Sui and Tang Dynasties the practice is invented of creating a hard, thick surface of lacquer with the application of many thin layers. The resulting object may be carved and or inlaid before it hardens completely. Common colors for lacquer are red and black. Object types include: Vessels such as bowls, dishes, and goblets; military gear such shields and armor; musical instruments such as zithers ( qin ) and drums, related supports for drums and for bell sets; and boxes and baskets with painted or carved lids.

Wooden objects from this era are mainly preserved when painted with lacquer. These include architectural elements, utensils, coffins, musical instruments, and wood sculptures.

Zhou through Tang: Types include texts on bamboo and wooden slips, and on paper. The slips may be found singly, or in groups numbering into the thousands. Some Buddhist sutras were printed with movable wooden type.

Zhou through Tang: Glass types include mostly tablewares, such as cups, plates, saucers.

Note that this section includes wall art at least 250 years old as of January 14, 2009. The painted bricks of the Han through Tang tomb walls have already been mentioned. That tradition is partially concurrent with a fresco tradition that runs from the Han through Qing Dynasties. Temples including those in caves or grottos have wall paintings with Buddhist, Confucian, and Daoist themes.

Han through Tang: Paintings, dating to as early as the Southern and Northern, are on such media as banners, hand-scrolls, and fans. Subjects are drawn from Buddhism, Confucianism, and Daoism. Other subjects include landscapes and hunting scenes.

This amendment involves a foreign affairs function of the United States and is, therefore, being made without notice or public procedure or a delayed effective date (5 U.S.C. 553(a)(1)).

Because no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do not apply.

Because this rule involves a foreign affairs function of the United States, it is not subject to Executive Order 12866.

This regulation is being issued in accordance with 19 CFR 0.1(a)(1).

For the reasons set forth above, part 12 of Title 19 of the Code of Federal Regulations (19 CFR part 12), is amended as set forth below:

FDA announced the original establishment of the Pharmacy Compounding Advisory Committee (the Committee) and amended the regulations at § 14.100 (21 CFR 14.100) to add the Committee to the Agency's standing list of advisory committees in the Federal Register of March 10, 1998 (63 FR 11596). The Committee was established under authorities that included the Federal Advisory Committee Act (Pub. L. 92-463), section 1004 of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 394), and section 503A of the FD&C Act (21 U.S.C. 353a), as enacted as part of the Food and Drug Administration Modernization Act of 1997 (FDAMA) (Pub. L. 105-115), which exempted drugs compounded by pharmacies from the FD&C Act's new drug approval, adequate directions for use, and good manufacturing practice requirements if specified conditions, including two restrictions on commercial speech, were met. Section 503A of the FD&C Act as added by FDAMA also required the Agency to convene and consult with an advisory committee on compounding before issuing specified regulations.

In 2002, FDA terminated the Committee in response to the Supreme Court's decision in Thompson, et al. v. Western States Medical Center Pharmacy, et al. (535 U.S. 357 (2002)). That decision affirmed a decision of the U.S. Court of Appeals for the Ninth Circuit that held the speech related provisions of section 503A of the FD&C Act, as added by FDAMA, were unconstitutional. The Supreme Court held that the speech related restrictions in section 503A of the FD&C Act violated the First Amendment. The Ninth Circuit had also concluded that the unconstitutional speech restriction could not be severed from the other provisions of section 503A of the FD&C Act. The Supreme Court did not reach this issue. Therefore, the Ninth Circuit's opinion invalidating section 503A of the FD&C Act in its entirety remained intact. FDA stated its view at the time, which was that the underlying authority in section 503A of the FD&C Act to establish the Pharmacy Compounding Advisory Committee was invalidated and without a statutory basis for the Committee, the Agency terminated the Committee (67 FR 70227, November 21, 2002).

Subsequently, in 2008, the U.S. Court of Appeals for the Fifth Circuit decided Medical Center Pharmacy v. Mukasey (536 F.3d 383 (5th Cir. 2008)), in which that court disagreed with the Ninth Circuit's holding regarding the severability of section 503A of the FD&C Act as added by FDAMA. The Fifth Circuit found the unconstitutional provisions of section 503A of the FD&C Act to be severable and that the other provisions could remain in effect. Based on this decision, FDA reestablished the Pharmacy Compounding Advisory Committee in 2012.

On November 27, 2013, the President signed into law the Drug Quality and Security Act (Pub. L. 113-54). This law removed the unconstitutional provisions from section 503A and added a new section 503B to the FD&C Act (21 U.S.C. 353b) that also requires FDA to consult with a Pharmacy Compounding Advisory Committee before issuing certain regulations pertaining to outsourcing facilities. As a result, FDA has amended the charter of the Pharmacy Compounding Advisory Committee to reflect the relevant statutory changes.

Under the amended charter, the Committee provides advice on scientific, technical, and medical issues concerning drug compounding under sections 503A and 503B of the FD&C Act and, as required, any other product for which FDA has regulatory responsibility, and makes appropriate recommendations to the Commissioner of Food and Drugs (the Commissioner).

The Committee will be composed of a core of 12 voting members including the Chair. Members and the Chair are selected by the Commissioner or designee from among authorities knowledgeable in the fields of pharmaceutical compounding, pharmaceutical manufacturing, pharmacy, medicine, and related specialties. Membership also includes representatives from the National Association of Boards of Pharmacy and the United States Pharmacopoeia, and representatives of patient and public health advocacy organizations. Members will be invited to serve for overlapping terms of up to 4 years. Almost all non-Federal members of this committee will serve as special Government employees. The core of voting members may include one qualified member, selected by the Commissioner or designee, who is identified with consumer interests and is recommended by either a consortium of consumer-oriented organizations or other interested persons. In addition to the voting members, the Committee may include one or more non-voting members who are identified with industry interests.

Under 5 U.S.C. 553(b)(3)(B) and (d) and 21 CFR 10.40(d) and (e), the Agency finds good cause to dispense with notice and public comment procedures and to proceed to an immediate effective date on this rule. Notice and public comment and a delayed effective date are unnecessary and are not in the public interest as this final rule merely updates information regarding the function of the Committee already set out in the charter, and updates information regarding the dates related to the Committee establishment in the list of standing advisory committees in § 14.100. Therefore, the Agency is amending § 14.100.

Elsewhere in this issue of the Federal Register , FDA is publishing a notice requesting nominations for voting members of the Committee, a notice for industry organizations to participate in the nominations for and selection of industry representatives for the Committee, and a notice for consumer organizations to participate in the nominations for and selection of the consumer representative for the Committee.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, 21 CFR part 14 is amended as follows:

Background

This document contains final regulations that amend the Income Tax Regulations (26 CFR part 1) relating to the allocation under section 263A of the Internal Revenue Code (Code) of certain sales-based royalties and relating to the determination of cost of merchandise in inventory under section 471 when a taxpayer earns a type of sales-based vendor allowance. On December 17, 2010, a notice of proposed rulemaking (REG-149335-08) was published in the Federal Register (75 FR 78940). Written comments responding to the notice of proposed rulemaking were received. The comments are available for public inspection at www.regulations.gov or on request. A public hearing was requested and held on April 13, 2011. After consideration of all the comments, the proposed regulations are adopted as revised by this Treasury decision. The comments are discussed in the preamble.

The proposed regulations clarified that sales-based royalties, like other royalties, may be capitalizable to property a taxpayer produces or acquires for resale. Royalty costs are capitalizable when they are incurred in securing the contractual right to use a trademark, corporate plan, manufacturing procedure, special recipe, or other similar right associated with property produced or property acquired for resale. Sales-based royalty costs are royalties that are incurred only upon the sale of property produced or acquired for resale.

The proposed regulations provided that sales-based royalties required to be capitalized must be allocated only to property that has been sold or, for inventory property, deemed to be sold under the taxpayer's inventory cost flow assumption. In response to concerns that the requirement to allocate sales-based royalties only to cost of goods sold would unduly burden taxpayers using simplified allocation methods, the final regulations provide that the allocation of sales-based royalties to property sold is optional rather than mandatory. Therefore, the final regulations permit taxpayers to either allocate sales-based royalties entirely to property sold and include those costs in cost of goods sold or to allocate sales-based royalties between cost of goods sold and ending inventory using a facts-and-circumstances cost allocation method described in § 1.263A-1(f) or a simplified method provided in § 1.263A-2(b) (the simplified production method) or § 1.263A-3(d) (the simplified resale method). The final regulations also clarify that sales-based royalties that a taxpayer allocates entirely to inventory property sold are included in cost of goods sold and may not be included in determining the cost of goods on hand at the end of the taxable year regardless of the taxpayer's cost flow assumption.

A commentator suggested that the final regulations acknowledge that a sales-based royalty payable by a reseller of inventory to its supplier is a direct acquisition cost under section 471 and included in cost of goods sold when the inventory item is sold. The final regulations do not adopt this comment because whether a cost is a royalty described in § 1.263A-1(e)(3)(ii)(U) or is a contingent acquisition cost is beyond the scope of these regulations.

The proposed regulations provided that the amount of an allowance, discount, or price rebate that a taxpayer earns by selling specific merchandise is a reduction in the cost of the merchandise sold or deemed sold under a taxpayer's cost flow assumption. The preamble to the proposed regulations referred to this type of allowance as a sales-based vendor allowance. The proposed regulations required that these allowances reduce cost of goods sold and not reduce ending inventory cost or value of goods on hand at the end of the taxable year.

A commentator disagreed with the requirement in the proposed regulations that the vendor allowances described in the proposed regulations always must reduce cost of goods sold. The commentator disputed that a vendor allowance should reduce cost of goods sold merely because the allowance is dependent on a sale of merchandise. Citing Pittsburgh Milk Co. v. Commissioner, 26 T.C. 707 (1956), the commentator suggested that sales-based vendor allowances that are the subject of an advance agreement between the vendor and the purchaser at the time the merchandise is purchased must be netted against the original cost of the merchandise and applied to ending inventory or cost of goods sold depending on the taxpayer's inventory cost flow assumption. Accordingly, the commentator suggested that the regulations be revised to provide that a sales-based vendor allowance may properly reduce the value of goods on hand at the end of the taxable year.

The final regulations reflect the commentator's suggestion that a vendor allowance does not reduce the cost of goods sold merely because the allowance is dependent on a sale of merchandise. The proposed regulations were overbroad because they required taxpayers to allocate to cost of goods sold all allowances that arise from selling merchandise. For example, if, after selling a certain number of units, a taxpayer earns a discount off each unit purchased during the taxable year, the allowance properly may be allocable to both the cost of units that remains in ending inventory and the cost of units included in cost of goods sold during the year. Similarly, a sales-volume allowance that provides only a reduction in the cost of any purchases made by a taxpayer in the next taxable year properly reduces the cost of the units of the product purchased in the next year. As the preceding two examples illustrate, the proposed regulations were overbroad in that they could be interpreted to require these allowances to reduce cost of goods sold solely because they arose as a result of selling merchandise. The extent to which a vendor allowance is properly allocable to the cost of goods in ending inventory or the cost of goods sold depends on all facts and circumstances, including the terms and conditions of the agreement between the vendor and the taxpayer. See Pittsburgh Milk Co. v. Commissioner. As described later in this preamble, the final regulations more clearly identify a type of sales-based vendor allowance that, to clearly reflect income, must reduce the cost of goods sold.

The commentator also asserted that Rev. Rul. 2001-8 (2001-1 CB 726), see § 601.601(d)(2), and earlier rulings support the proposition that sales-based vendor allowances are an adjustment to the cost of merchandise physically removed from inventory. Although allowances, discounts, and price rebates properly are treated as adjustments to the price of merchandise, the final regulations do not adopt the commentator's rationale for determining whether these adjustments properly reduce ending inventory or cost of goods sold. Rev. Rul. 2001-8 does not establish a general principle that sales-based vendor allowances reduce the invoice cost of merchandise physically sold. Rev. Rul. 2001-8 addresses a unique cost adjustment (floor stocks payments) that relates to goods physically on hand on a particular date and should not be applied beyond its specific facts.

In response to comments that the proposed regulations were overbroad, the Treasury and IRS are considering alternatives to a broad definition of sales-based vendor allowances. The final regulations, however, specifically identify one type of sales-based vendor allowance (sales-based vendor chargebacks) that, to clearly reflect income, reduces cost of goods sold and does not reduce the cost of goods on hand at the end of the taxable year. Therefore, the final regulations apply the rule articulated in the notice of proposed rulemaking to sales-based vendor chargebacks. A sales-based vendor chargeback is defined as an allowance, discount, or price rebate that a taxpayer becomes unconditionally entitled to by selling a vendor's merchandise to specific customers identified by the vendor at a price determined by the vendor. Sales-based vendor chargebacks protect a taxpayer from realizing a loss or a reduced profit on the sale of specific merchandise when the taxpayer is obligated by contract with the vendor of the merchandise to resell the merchandise at a specific price (in some cases below the taxpayer's cost). Under the terms and conditions of the agreement between the vendor and the taxpayer and the economics of the transaction, it is inappropriate to treat the allowance as an adjustment to the cost of goods in ending inventory. A sales-based vendor chargeback properly reduces only cost of goods sold because it arises from and relates only to merchandise sold. Thus, it reduces the invoice cost of the merchandise sold and clearly reflects income only if it reduces cost of goods sold.

The final regulations reserve rules for the treatment of other sales-based vendor allowances. Given the factual nature of particular vendor allowance arrangements between sellers and purchasers of merchandise, the IRS and Treasury Department request comments regarding additional guidance defining or describing particular sales-based vendor allowances and on objective rules for allocating such allowances to the purchase price of goods acquired in the future, ending inventory, or cost of goods sold.

These regulations apply for taxable years ending on or after January 13, 2014.

This Treasury decision is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. Section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations, and because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to section 7805(f) of the Code, the notice of proposed rulemaking that preceded these final regulations was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. No comments were received from the Small Business Administration.

The principal author of these regulations is John Roman Faron of the Office of the Associate Chief Counsel (Income Tax and Accounting). However, other personnel from the IRS and Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

The Louisiana Department of Transportation and Development requested a temporary deviation from the normal operation of the SR 14 Vermilion River, mile 25.4, at Abbeville, Vermilion Parish, Louisiana in order to remove and replace the wire rope cables required to operate the bridge. This maintenance is essential for the continued safe operation of the vertical lift bridge. This temporary deviation allows the bridge to remain closed from 6 a.m. on January 20, 2014 through 7 p.m. on February 2, 2014.

The bridge has a vertical clearance of 6 feet above mean gulf (MGL), elevation 0.0 feet (NGVD 29), in the closed-to-navigation position and 61 feet in the open-to-navigation position.

In accordance with to 33 CFR 117.509(b)(1), the draw of the SR 14 Bridge, mile 25.4, shall open on signal; except that, from 6 p.m. to 10 a.m. the draw shall open on signal if at least four hour notice is given. The draw will be unable to open for a vessel in distress.

Navigation on the waterway consists mainly of commercial tug and barge traffic. The bridge logs for all of January and February show 26 and 50 openings respectively. The time period for the deviation is the slow time for the commercial entities that would be most affected. As a result of coordination between the State, Coast Guard and the waterway users, it has been determined that this closure will not have a significant effect on these vessels.

Vessels able to pass through the bridge in the closed positions may do so at anytime. The bridge will not be able to open for emergencies. There are no alternate routes for vessels that cannot pass through the bridge in the closed-to-navigation position. The Coast Guard will also inform the users of the waterways through our Local and Broadcast Notices to Mariners of the change in operating schedule for the bridge so that vessels can arrange their transits to minimize any impact caused by the temporary deviation.

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

In April 2011, VA divided its Compensation and Pension Service (an office within VA's Veterans Benefits Administration) into two separate Services, the “Compensation Service” and the “Pension and Fiduciary Service.” This final rule amends VA regulations to reflect this change. No substantive changes are intended by these amendments.

This final rule concerns only agency organization, procedure, or practice and therefore is not subject to the notice and comment provisions of 5 U.S.C. 553(b). This final rule consists of only nonsubstantive changes that will make the regulations more accurate and less confusing to readers. Pursuant to 5 U.S.C. 553(d)(3), the Secretary finds that there is good cause to make these amendments effective on the date of their publication in the Federal Register .

The Unfunded Mandates Reform Act requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector of $100 million or more in any given year. This final rule will have no such effect on State, local, or tribal governments, or on the private sector.

This final rule contains no provisions constituting a collection of information under the Paperwork Reduction Act (44 U.S.C. 3501-3521).

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the Office of Management and Budget (OMB), as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

VA has examined the economic, interagency, budgetary, legal, and policy implications of this regulatory action, and it has been determined not to be a significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at http://www.regulations.gov , usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available on VA's Web site at http://www1.va.gov/orpm/ , by following the link for “VA Regulations Published.”

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This final rule consists of only nonsubstantive changes. Therefore, pursuant to 5 U.S.C. 605(b), this amendment is exempt from the final regulatory flexibility analysis requirements of section 604.

The Catalog of Federal Domestic Assistance program numbers and titles are 64.100, Automobiles and Adaptive Equipment for Certain Disabled Veterans and Members of the Armed Forces; 64.101, Burial Expenses Allowance for Veterans; 64.104, Pension for Non-Service-Connected Disability for Veterans; 64.105, Pension to Veterans Surviving Spouses, and Children; 64.106, Specially Adapted Housing for Disabled Veterans; 64.109, Veterans Compensation for Service-Connected Disability; and 64.110, Veterans Dependency and Indemnity Compensation for Service-Connected Death.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Jose D. Riojas, Chief of Staff, Department of Veterans Affairs, approved this document on January 2, 2014, for publication.

For the reasons stated in the preamble, VA amends 38 CFR parts 3, 4, and 60 as follows:

Minimum property requirements are necessary to ensure that a property is adequate security for a VA-guaranteed loan. Both 38 United States Code (U.S.C.) 3704(a) and 3710(b)(4) prohibit guarantees on properties that do not meet minimum acceptability requirements, as determined by the Secretary.

The implementing regulation found at 38 Code of Federal Regulation (CFR) 36.4351 states that no loan for the purchase or construction of residential property shall be eligible for a VA guaranty unless the property complies with the Secretary's minimum property requirements for planning, construction, and general acceptability. Although § 36.4351 refers to 38 U.S.C. 3704(a), a statutory provision that applies specifically to new or proposed construction, it does not include a reference to 38 U.S.C. 3710(b)(4), which applies generally to properties securing VA-guaranteed loans. This final rule amends 38 CFR 36.4351 so that it provides references to both of the relevant statutory provisions.

This final rule does not affect any substantive rights or implement any policy changes. Pursuant to 38 U.S.C. 3710(b)(4), VA has had a longstanding policy of requiring that “the nature and condition of the property [to secure a VA-guaranteed loan] is such as to be suitable for dwelling purposes.” The requirements for general suitability can be found in chapter 12 of VA Pamphlet M26-7, sometimes called the Lender's Handbook. Similarly, pursuant to 38 U.S.C. 3704(a), VA has for decades retained a comprehensive list of requirements to ensure that homes that have been built for 1 year or less “meet or exceed minimum requirements for planning, construction, and general acceptability prescribed by the Secretary.” Those requirements, like those required under section 3710(b)(4), are also found in chapter 12 of M26-7.

With the implementation of this final rule, participants in the VA guaranteed loan program will continue to follow longstanding policy and refer to M26-7 in determining whether a property being used as security can satisfy the statutory requirements for planning, construction, and general acceptability. The only change is a correction to the CFR so that 38 CFR 36.4351 properly reflects full statutory authority for VA's existing policies.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, and other advantages; distributive impacts; and equity). Executive Order 13563 (Improving Regulation and Regulatory Review) emphasizes the importance of quantifying both costs and benefits, reducing costs, harmonizing rules, and promoting flexibility. Executive Order 12866 (Regulatory Planning and Review) defines a “significant regulatory action,” which requires review by the Office of Management and Budget (OMB), as “any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive Order.”

The economic, interagency, budgetary, legal, and policy implications of this regulatory action have been examined, and it has been determined not to be a significant regulatory action under Executive Order 12866. VA's impact analysis can be found as a supporting document at http://www.regulations.gov, usually within 48 hours after the rulemaking document is published. Additionally, a copy of the rulemaking and its impact analysis are available at VA's Web site at http://www1.va.gov/orpm/, by following the link for “VA Regulations Published.”

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This final rule will have no such effect on State, local, and tribal governments, or on the private sector.

This document contains no provisions constituting a collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

The Secretary hereby certifies that this final rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. The impact of this rule will be to clarify the existing statutory authority of the VA to prescribe minimum property requirements for existing and proposed or newly constructed properties. There should be no impact on individuals, small or large entities, or State or local governments. Therefore, this final rule is exempt pursuant to 5 U.S.C. 605(b) from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Catalog of Federal Domestic Assistance Program number and title for the program affected by this document are 64.114, Veterans Housing—Guaranteed and Insured Loans.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. Jose D. Riojas, Chief of Staff, Department of Veterans Affairs, approved this document on December 6, 2013, for publication.

For the reasons set forth in the preamble, VA amends 38 CFR part 36 as follows:

The Postal Service is publishing this interim final rule with request for comments to amend a categorical exclusion under the National Environmental Policy Act (NEPA). Amending this categorical exclusion (CATEX) is consistent with NEPA and the Council on Environmental Quality's (CEQ's) regulations. This amendment focuses the CATEX more clearly on activities that, absent extraordinary circumstances, do not normally have the potential for individual or cumulative significant impacts on the quality of the human environment. The amendment also makes the CATEX more consistent with analogous CATEXs used by the General Services Administration (GSA) and other Federal entities. The Postal Service has determined that the activities included in this category— i.e., property disposals undertaken in the normal course of the Postal Service's business—do not normally, absent extraordinary circumstances, individually or cumulatively create the potential for significant effects on the human environment. The updated CATEX is necessary to ensure greater clarity and consistency when the CATEX is used because of the increasing regularity of property disposals by the Postal Service. There have also been changes to the Postal Service's business and infrastructure since its last CATEX revisions in 1997. This amendment maintains the Postal Service's compliance with NEPA while greatly reducing the Postal Service's administrative burden, and the amendment advances the ongoing efforts to enhance the efficiency and effectiveness of timely environmental review processes.

NEPA applies to Federal actions and requires an Environmental Impact Statement (EIS) for major actions significantly affecting the quality of the human environment (42 U.S.C. 4332(C)). NEPA established CEQ, whose regulations at 40 CFR parts 1500-1508 implement NEPA across the Executive Branch. CEQ's regulations require Federal agencies to adopt their own implementing procedures to supplement CEQ's regulations and to establish and use CATEXs to define categories of actions that do not normally, absent extraordinary circumstances, have the potential for individual or cumulative significant impacts on the human environment and, thus, do not necessitate the preparation of an EIS or an environmental assessment (EA) (40 CFR 1507.3(b)(2)(ii), 1508.4).

CEQ also requires that CATEXs be used to reduce paperwork and delay (40 CFR 1500.4(p), 1500.5(k)). In its guidance on “Establishing, Applying, and Revising Categorical Exclusions under the National Environmental Policy Act” (75 FR 75628, February 18, 2010), CEQ recommends that agencies periodically review their CATEXs and benchmark them against those of other agencies. An agency can substantiate its own CATEX by comparing another agency's experience promulgating and applying a comparable CATEX. CEQ also encourages agencies to establish new CATEXs and to revise existing CATEXs to eliminate unnecessary paperwork and delay for categories of actions that, absent extraordinary circumstances, do not have significant environmental effects. This approach leaves more resources available to assess, either in an EA or EIS, those proposed Federal actions that are actually likely to have the potential to cause significant environmental effects.

The Postal Service, which is an independent establishment of the executive branch rather than a Federal agency (39 U.S.C. 201), has its own NEPA regulations at 39 CFR part 775. Those regulations include several CATEXs for categories of actions that the Postal Service has determined do not individually or cumulatively have the potential for significant effects on the human environment (39 CFR 775.6). The Postal Service last revised its CATEXs through a rulemaking that became effective on October 1, 1997 (63 FR 45720). One of the CATEXs promulgated in that rulemaking applied to the “[a]cquisition and disposal through sale, lease, transfer or exchange of real property that does not involve an increase in volumes, concentrations, or discharge rates of wastes, air emissions, or water effluents, and that under reasonably foreseeable uses, have generally similar environmental impacts as compared to those before the acquisition or disposal” (39 CFR 775.6(e)(8)).

In the 16 years since, the Postal Service became aware of refinements in similar CATEXs in other Federal agency regulations. In particular, the Postal Service examined a similar CATEX for disposals finalized in 2000 by the General Services Administration (GSA) (65 FR 69558). GSA's disposal CATEX is included in that agency's NEPA Desk Guide, which the Environmental Protection Agency called “a good model for other agencies” (65 FR 69558). Indeed, in July 2013, the U.S. Coast Guard (USCG) used GSA's disposal CATEX as a basis for USCG's own CATEX (78 FR 44140). Whereas the Postal Service's disposal CATEX at 39 CFR 775.6(e)(8)—prior to this interim final rule—could have been read to compare the environmental impact of current and reasonably foreseeable uses only on the property being disposed of, the GSA's and USCG's CATEXs more broadly and realistically compare the reasonably anticipated and reasonably foreseeable uses on the disposal property to other property uses in the surrounding area. In other words, those CATEXs take into account the environmental effects of the agencies' disposals in the context of the surrounding neighborhoods. Both GSA and USCG have determined that a property disposal that results in a use or uses similar to those on surrounding properties does not, when undertaken in the normal course of business, give rise to the potential for significant impacts and therefor does not necessitate the preparation of an EA (or an EIS).

The frequency of property disposals by the Postal Service has increased dramatically in recent years. For example, the total number of Postal Service facilities fell from 34,175 in 2008 to 32,604 in 2012 (U.S. Postal Service 2012 Sustainability Report (2013)). The Postal Service anticipates that the frequency of property disposals will persist or increase in the foreseeable future. As a result, the Postal Service would reduce paperwork and delay by updating its CATEX to clarify that an EA is not required for the overwhelming majority of its normal course of business property disposals. That determination is based on the Postal Service's experience that such disposals do not normally result in significant environmental effects.

The Postal Service's NEPA procedural safeguards will continue to apply to the Postal Service's application of the amended CATEX. Specifically, the Postal Service's NEPA regulations require that all proposed real property actions, including property disposals, be reviewed using a process that includes the completion of a Facilities Environmental Checklist (FEC). The FEC allows the Postal Service's personnel and consultants to identify and list any potential environmental effects of the proposed action. The FEC's signatory determines whether the proposed action qualifies for a CATEX under NEPA and whether extraordinary circumstances exist that could cause the proposed action to have a significant environmental effect that would preclude the use of the CATEX.

If the person completing the FEC concludes that a CATEX applies, then a Record of Environmental Consideration (REC)—a formal record justifying the use of a CATEX—must be completed and signed by both the project manager and a responsible official at the Postal Service. The REC's signatories must affirm they have reviewed the applicable NEPA guidance and considered the environmental impacts of the proposed property action.

The Postal Service's experience leads it to believe that, as demonstrated by the GSA's and USCG's use of their property disposal CATEXs, its amended CATEX reflects an appropriate and realistic view that such activities undertaken in the normal course of business do not individually or cumulatively have significant impacts on the human environment. The Postal Service also finds those agencies' experience and consideration to be a useful guide. Like the Postal Service, both agencies are responsible for the acquisition and disposal of Federal property. GSA, which is responsible for the acquisition and disposal of most Federal property, has promulgated a property disposal CATEX that reflects its seasoned judgment about the precise scope of real property acquisition and disposal that lacks significant individual and cumulative environmental impact. The Postal Service also notes that neither GSA nor USCG received adverse public comments regarding their property disposal CATEXs ( see 65 FR 69558; 78 FR 44139).

Although the Postal Service notes minor differences between the phrasing of GSA's and USCG's CATEXs, those differences are not substantive or otherwise of a nature to change the projected environmental consequences of the activities. Because of GSA's preeminent experience with the acquisition and disposal of Federal real property, the Postal Service believes that it is appropriate to amend its own CATEX to match that of the GSA. The Postal Service does not believe that this update to a single CATEX, which follows the model of Federal agencies' existing CATEXs, should be significant or controversial.

The Administrative Procedure Act does not apply to this action (5 U.S.C. 553(a)(2); 39 U.S.C. 410(a)), which is being taken pursuant to the Postal Service's general rulemaking authority under 39 U.S.C. 401(2). Nevertheless, the Postal Service is complying with CEQ Regulations and seeking public input when revising this CATEX. The Postal Service therefore invites comments on the following revision of 39 CFR 775.6(e)(8).

Note that this interim final rule is effective upon its date of publication in the Federal Register . The Postal Service will review any comments received during the 30-day comment period. Following the expiration of the comment period, the Postal Service will publish its responses to any adverse comments in a subsequent Federal Register notice, together with its determination whether the interim final rule will be made permanent without change, or adjusted in response to the comments received.

For the reasons stated in the preamble, 39 CFR part 775 is amended as follows:

The Federal Emergency Management Agency (FEMA) makes the final determinations listed below for the modified BFEs for each community listed. These modified elevations have been published in newspapers of local circulation and ninety (90) days have elapsed since that publication. The Deputy Associate Administrator for Mitigation has resolved any appeals resulting from this notification.

This final rule is issued in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR part 67. FEMA has developed criteria for floodplain management in floodprone areas in accordance with 44 CFR part 60.

Interested lessees and owners of real property are encouraged to review the proof Flood Insurance Study and FIRM available at the address cited below for each community. The BFEs and modified BFEs are made final in the communities listed below. Elevations at selected locations in each community are shown.

National Environmental Policy Act. This final rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Consideration. An environmental impact assessment has not been prepared.

Regulatory Flexibility Act. As flood elevation determinations are not within the scope of the Regulatory Flexibility Act, 5 U.S.C. 601-612, a regulatory flexibility analysis is not required.

Regulatory Classification. This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

Executive Order 13132, Federalism. This final rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This final rule meets the applicable standards of Executive Order 12988.

Accordingly, 44 CFR part 67 is amended as follows:

This document is issued under the authority of 5 U.S.C. 552(a). The August 16, 2013 interim rule (78 FR 50147) related to this document promotes the Coast Guard's marine safety mission by updating and revising regulatory tables that list liquid hazardous materials, liquefied gases, and compressed gases that have been approved for maritime transportation in bulk, and that indicate how the pollution potential of each substance has been categorized. The Coast Guard is delaying the effective date of this interim rule from January 16, 2014, to January 16, 2015. The delay until 2015 will allow the Coast Guard to investigate and, if necessary, correct technical errors that were brought to the Coast Guard's attention by public comments on the interim rule.

Background

On July 6, 2012, President Obama signed into law MAP-21, Public Law 112-141, 126 Stat. 405, which contains new requirements that the FHWA and the FTA, hereafter referred to as the “Agencies,” must meet in complying with NEPA (42 U.S.C. 4321 et seq. ). Sections 1316 and 1317 of MAP-21 require the Secretary of Transportation to promulgate regulations designating two types of actions as categorical exclusions in 23 CFR part 771: (1) Any project (as defined in 23 U.S.C. 101(a)) within an existing operational right-of-way; and (2) any project that receives less than $5,000,000 of Federal funds or with a total estimated cost of not more than $30,000,000 and Federal funds comprising less than 15 percent of the total estimated project cost, respectively. The Agencies are carrying out this rulemaking on behalf of the Secretary.

The Agencies' joint procedures at 23 CFR part 771 describe how the Agencies comply with NEPA and the Council on Environmental Quality (CEQ) regulations implementing NEPA, and include categorical exclusions that identify actions the Agencies have determined do not normally have the potential for significant environmental impacts and therefore do not require the preparation of an environmental assessment (EA) or environmental impact statement (EIS), pursuant to 40 CFR 1508.4. Section 771.117 applies to FHWA actions and section 771.118 applies to FTA actions. Sections 771.117(c) and 771.118(c) establish specific lists of categories of actions, or (c)-list CEs, that the Agencies have determined normally do not individually or cumulatively have a significant effect on the human environment, and do not require an EA or EIS. Sections 771.117(d) and 771.118(d) establish example lists of categorical exclusions, or (d)-list CEs, that the Agencies also have determined are normally categorically excluded from further NEPA review but require Agency approval based on additional documentation demonstrating that the specific criteria for the CE are satisfied and that no significant environmental impacts will result from the action. Additionally, sections 771.117 and 771.118 include the requirement for considering unusual circumstances, which is how the Agencies consider extraordinary circumstances in accordance with the CEQ regulations. These refer to circumstances in which a normally excluded action may have a significant environmental effect and, therefore, requires an EA or EIS. Examples of unusual circumstances include substantial controversy on environmental grounds, significant impacts on properties protected by section 4(f) of the Department of Transportation (DOT) Act (23 U.S.C. 138; 49 U.S.C. 303) or section 106 of the National Historic Preservation Act (NHPA), or inconsistencies with any Federal, State, or local law, requirement, or administrative determination relating to the environmental aspects of the action (23 CFR 771.117(b); 23 CFR 771.118(b)). This rulemaking does not change the procedural requirements for the Agencies' approval of projects as CEs, either for (c)-list CEs or for (d)-list CEs.

In order to qualify for either of the new CEs, the action must comply with NEPA requirements relating to connected actions and segmentation ( see, e.g., 40 CFR 1508.25, and 23 CFR 771.111(f)). To avoid impermissible segmentation, the action must have independent utility, connect logical termini when applicable ( i.e., linear facilities), and not restrict consideration of alternatives for other reasonably foreseeable transportation improvements. In addition, even though a CE may apply to a proposed action, thereby satisfying NEPA requirements, all other requirements applicable to the activity under other Federal and State statutes and regulations still apply, such as the Clean Water Act (CWA), Clean Air Act, General Bridge Act of 1946, section 4(f) of the DOT Act, NHPA, and the Endangered Species Act (ESA). Some of these requirements may require the collection and analysis of information, or coordination and consultation efforts that are independent of the Agencies' NEPA CE determination. Also, some of these requirements may involve actions by other Federal agencies (such as approvals or issuance of permits) that could inform the Agency determination regarding unusual circumstances and potentially trigger a different level of NEPA review for those Federal agencies. These requirements must be met before the action proceeds, regardless of the availability of a CE for the transportation project under 23 CFR part 771.

This final rule contains a description of the notice of proposed rulemaking (NPRM) issued on February 28, 2013 (78 FR 13609), a summary of public comments received on that NPRM and responses to those comments, as well as a description of the final regulatory text at the end of this rule. Those changes to the regulatory text not described in the summary and response to comments are described in the Section-by-Section Analysis. Following the Section-by-Section Analysis, this rule explains the various rulemaking requirements that apply and how they have been met. Finally, this rule provides the regulatory text.

On February 28, 2013, the Agencies published an NPRM, in which the Agencies proposed 2 new CEs to be listed in 23 CFR 771.117(c) and 23 CFR 771.118(c) as mandated by sections 1316 and 1317 of MAP-21. The Agencies proposed CEs based on the statutory language provided under sections 1316 and 1317, as well as clarifying language the Agencies proposed to achieve the overall purposes of sections 1316 and 1317 or avoid confusion in program administration. The NPRM sought comments on how the Agencies proposed to interpret and implement the provisions.

The public comment period closed on April 29, 2013. The Agencies considered all comments received when developing this final rule.

The Agencies received comments from a total of 40 entities, which included 12 State DOTs and agencies, 4 transit agencies, 8 State/local transportation entities, ten transportation interest groups, 3 national/regional environmental interest groups, one Federal agency, and 2 individuals. The submitted comments have been organized by section (1316 or 1317) and by theme or topic.

All of the 40 parties commenting on the NRPM generally supported the proposed CEs contained in MAP-21 sections 1316 and 1317. Thirty-five reviewers commented on the proposed CE language at sections 771.117(c)(22) and 771.118(c)(12) for projects within the “operational right-of-way.” Thirty-two parties commented on the Agencies' proposed CE language at sections 771.117(c)(23) and 771.118(c)(13) for projects receiving limited Federal assistance. Eleven parties commented on the need to review or document “unusual circumstances” for projects seeking to use either of the proposed CEs. Nine of the commenting parties supported the proposed rule as it was written in the NPRM. The majority of commenters suggested additional clarifications on the use of the CEs, including expanding or limiting their scope.

Five State DOTs, two transportation interest groups, three national/regional environmental interest groups, and one Federal agency submitted comments regarding the requirements for the CEs to address unusual circumstances or to document the absence of such circumstances. Seven commenters expressed the opinion that requiring additional documentation is inconsistent with the statutory direction to include these CEs in 23 CFR 771.117(c). Four commenters expressed the opinion that requiring evaluation and documentation for the consideration of unusual circumstances is appropriate and consistent with the statute. One commenter recommended a clarification that documentation should be retained by the applicant and not require further approval by the Agencies. Another commenter indicated that the proposed rule restricted the availability of the new CEs by establishing a “no unusual circumstances” test, and that nowhere in MAP-21 did Congress incorporate the “no unusual circumstances” test to the proposed CEs.

The MAP-21 sections 1316 and 1317 require that the new CEs be consistent with 40 CFR 1508.4. Section 1508.4 requires Federal agencies to take into account “extraordinary circumstances in which a normally excluded action may have a significant environmental effect.” The Agencies use the term “unusual circumstances” when defining extraordinary circumstances. The Agencies addressed the need for considering unusual circumstances in the NPRM preamble and noted that actions falling under the new CEs are not exempt from meeting this requirement. Consideration of unusual circumstances applies to all CEs addressed in sections 771.117(c) and (d), and 771.118(c) and (d); the Agencies are not creating a new standard for assessing actions through this rulemaking. The potential for unusual circumstances for a project does not automatically trigger an EA or EIS. The regulations require the Agencies to conduct appropriate environmental studies to determine if the CE classification is proper (23 CFR 771.117(b) and 771.118(b)). This means that documentation is expected to demonstrate that there are no unusual circumstances that warrant a higher level of NEPA review even when the project does not require detailed documentation and Agency review. The Agencies have not created a new “no unusual circumstances” requirement because that requirement is long-standing. Instead, in the NPRM, the Agencies re-emphasized the need to consider unusual circumstances for all CEs as required by 40 CFR 1508.4 and the Agencies' NEPA implementing procedures at 23 CFR part 771.

One commenter expressed appreciation for the reference to unusual circumstances, but indicated that some of the criteria were not necessarily adequate safeguards. The commenter indicated that reviews under section 4(f) of the DOT Act and section 106 of the NHPA were examples when thresholds in an environmental law would not determine whether or not the impact of an action is significant for NEPA purposes. Another commenter indicated that regulatory requirements protecting wetlands, endangered species, and historic properties would continue to apply and would ensure that unusual circumstances applicable to these resources are identified and addressed.

The Agencies consider unusual circumstances in determining whether an action that would normally be classified as a CE deserves another level of NEPA review. Sections 771.117(b) and 771.118(b) provide non-inclusive lists of examples for consideration. “Significant impact on properties protected by section 4(f) of the DOT Act and Section 106 of the [NHPA]” is included in the list of examples. In the Agencies' experience these examples have been appropriate for identifying when an action that would otherwise be classified as a CE merits an EA or EIS for the consideration of environmental impacts. It is important to note that unusual circumstances may require the consideration of factors, impacts, or resources that do not fall under an established regulatory framework (for example, substantial controversy on environmental grounds). The Agencies do not believe that compliance with legal requirements should be the only unusual circumstance considered for projects.

One commenter indicated that language in the NPRM requiring actions under the proposed CE to meet applicable requirements under other Federal and State laws should be deleted from the final rule. Two commenters expressed appreciation for the inclusion of the NPRM preamble reference that other laws may require collection and analysis of information independent of the Agencies' NEPA determination, and the discussion that these other laws may trigger a different level of NEPA review for another Federal agency. The commenters indicated that this was the intent of Congress because these provisions in MAP-21 did not apply to or require rulemaking from any other Federal agency. One commenter questioned whether it was possible for FHWA to implement sections 1316 and 1317 without running afoul of environmental statutes such as ESA and section 404 of the CWA. The commenter expressed that accompanying complementary changes to those statutes should be made in conjunction to the changes in part 771 to realize congressional intent to streamline the project delivery process.

A determination that an action qualifies for a CE under the Agencies' NEPA procedures is not an exemption from the environmental laws that apply to that project. A project may not require the higher level of NEPA analysis associated with an EA or EIS and still require analysis under section 106 of the NHPA, section 404 of the CWA, section 7 of the ESA, or section 4(f) of the DOT Act. Applicants need to apply and obtain applicable environmental permits and approvals even for projects that qualify for CEs. The MAP-21 neither amended nor exempted these laws, and they continue to apply.

Two commenters indicated that the two proposed CEs could cover actions that already qualify for other CEs in part 771. One commenter was having difficulty in identifying examples where a project would qualify for the proposed CEs but not for an existing CE and requested specific examples of projects where these CEs would apply that are not currently addressed by other existing CE categories. One commenter indicated that the NPRM failed to streamline the NEPA process as it had hoped. Another commenter indicated that the NPRM limited the availability of the CEs to such an extent that the relevant provisions of MAP-21 appear meaningless or redundant with existing law. Two commenters noted that the statutory language for the CEs should be read in the context of the overarching policy of accelerating project delivery. In this context, the commenters observed, the rule should provide maximum flexibility to limit redundant and lengthy process driven environmental reviews, and new flexibility to expand the universe of projects that can be approved as CEs. One commenter stated that expansion of the CE list would save time and costs for project sponsors without compromising protection of the environment. One commenter indicated that the new CE for operational right-of-way would benefit the State by allowing some additional projects to be classified as CEs. The commenter also provided numbers, but no specific details of planned projects that would meet the Federal fund threshold that would benefit from the CE. Another commenter noted that increased use of CEs along with the streamlined approval process associated with simpler Federal-aid projects is appropriate. The commenter indicated this strategy will ultimately deliver public benefits from Federal-aid transportation improvements more rapidly and also improve environmental protection by enabling Federal resource agencies to focus their efforts on more complicated projects that warrant significant environmental review. One commenter indicated that MAP-21's goal of increasing the use of CEs will help reduce delay in the current review and approval process for transportation projects by clarifying the type of projects that appropriately qualify for less intensive environmental reviews.

The Agencies agree there may be actions that qualify for the CEs subject to this rule that could qualify for other CEs in part 771. The regulation does not compel the use of the new CEs in these instances. The Agencies and applicants can continue to rely on other available CEs if their use is appropriate. The Agencies agree that the appropriate use of CEs can result in time and cost savings.

Three commenters indicated that small and low-cost bicycle and pedestrian projects (including sidewalks, cross walks, pathways, etc.) within an existing built environment should not require detailed documentation to qualify for a CE unless special circumstances exist. The commenters recommended modifying the rule to encourage the use of a CE where a project qualifies for two or more CEs and there are no unusual circumstances.

Many bicycle and pedestrian projects qualify for CEs that do not require detailed review by the Agencies ( see e.g., section 771.117(c)(3) (construction of bicycle and pedestrian lanes, paths, and facilities)). Applicability of a (c)-list CE, however, does not mean that additional information is not needed from project applicants on environmental considerations to demonstrate the applicability of a CE. In some circumstances this documentation is needed to address unusual circumstances or for meeting other environmental considerations and requirements.

The Agencies are not modifying the rule to encourage the use of a CE when a project qualifies for two or more CEs. The use of a CE when it applies is encouraged regardless of whether the action would also qualify for another CE. One CE should be used per FHWA or FTA action.

One commenter recommended adding the two new CEs as examples in the (d)-list CE rather than adding them as (c)-list CEs. Another commenter indicated that it is possible to have projects that meet the new CEs but require a great deal of analysis to determine if there are any significant impacts. The commenter suggested that for projects qualifying for the new CEs, the NEPA documentation would be minor, but the analysis would in many circumstances be the same as currently required for projects in the (d)-list. Another commenter indicated that these new CEs were different from the other CEs in part 771 because they were not based on the scope of a project, but rather on the project's location or level of Federal funding involved. The commenter indicated that the proposed CEs appeared to be screening criteria for projects where a specific scope is cited.

The statute requires the new CEs be located in section 771.117(c) for FHWA actions and, in the Agencies interpretation, in section 771.118(c) for FTA actions (given the addition of this parallel section after the enactment of MAP-21). The Agencies do not have the discretion to place these new CEs in sections 771.117(d) and 771.118(d). The Agencies recognize that these two statutorily mandated CEs are different than other CEs in that they are unrelated to a project's scope and its potential level of environmental impacts. Projects receiving less than the Federal funding threshold established in the statute may have the potential to cause significant impacts depending on the context of what is proposed and its surrounding environment. Similarly, the location of a project within an existing operational right-of-way may have the potential to cause significant impacts depending on the context of what is proposed and its surrounding environment. The Agencies agree with the commenters that without information on the scope of the project and its context (such as timing, surrounding environment, context and intensity of impacts) it would be difficult to determine if the project can be appropriately classified as a CE or if another level of NEPA review is needed even if the project meets the conditions of the CE. The Agencies believe that the consideration of unusual circumstances will identify when the project may need more documentation or another level of NEPA review.

Three commenters encouraged DOT to disseminate clear guidance on when a CE is appropriate—especially in cases where more than one CE could apply. One commenter suggested the Agencies develop training and guidance materials for State DOT and Federal staff to ensure that those responsible for implementation can administer the CE process with confidence and uniformity. One commenter recommended the development of training, guidance, and frequently asked questions to ensure consistent implementation of the CEs. The commenter recommended a training goal of preparing State DOTs to make CE determinations in place of the Agencies. One commenter urged the Agencies to actively monitor and audit the use of these new CEs for the first few years in order to evaluate whether additional guidance is necessary.

The Agencies interpreted the comments and their reference to DOT to apply to the Agencies engaged in this rulemaking. The Agencies have training institutes, the National Highway Institute and the National Transit Institute, that conduct NEPA courses across the nation for employees of the Agencies, State DOTs, transit agencies, consultants, and other Federal, State, and local entities involved in transportation NEPA processes. The Agencies also have guidance on their NEPA processes, including CEs. The Agencies will provide information on the availability of the new CEs to their environmental and field staff. The FTA will update its Guidance for Implementation of FTA's Categorical Exclusions (23 CFR 771.118) to reflect the new CEs and post it on FTA's public Web site ( www.fta.dot.gov ), as well. The FHWA will provide any additional guidance and assistance, as necessary. In addition, section 1323 of MAP-21 requires a report to Congress “on the types and justification for the additional categorical exclusions granted under the authority provided under sections 1316 and 1317” not later than October 1, 2014. This report will provide information and help determine if any additional guidance is needed.

One commenter suggested the Agencies consider further modifications to create predictable expectations for the completion of CEs such as guidelines, time limits, or deadlines for the completion of CEs.

The Agencies encourage timely review of environmental documents. However, the Agencies recognize that individual projects and their impacts are unique and subject to other requirements, which makes establishing standard review times problematic. Projects approved through the new CEs subject to this rule normally would not require further NEPA approvals, though the Agencies expect documentation exhibiting that the project fits the CE and that no unusual circumstances are present. This may be achieved with a complete project description. However, if the project has the potential to result in impacts to resources protected under other environmental laws, additional documentation and review time could be needed for that project. For example, the consultation required under Section 106 of the NHPA already has regulatory timeframes in 36 CFR part 800 associated with consultation between Federal agencies and the State Historic Preservation Officer. The Agencies cannot shorten that consultation process through review times mandated by their regulation.

One commenter stated that less restrictive rulemaking and subsequent agency guidance would allow agencies to make CE determinations and documentation to the project record earlier in the process such as in the long range planning and multiyear project programming. The commenter indicated that making this determination earlier in the process without further and broad based staff engagement would allow for a more reliable project delivery process, streamlined project delivery, and ensure program continuity necessary to better deliver transportation improvements.

Consideration of environmental impacts of a project during the transportation planning process is encouraged by the Agencies ( see 23 CFR part 771 and part 450; 23 U.S.C. 168; and the Agencies' Planning and Environmental Linkages guidance at http://www.environment.fhwa.dot.gov/integ/ ). This consideration early in the process can expedite environmental review, especially if actions are planned in a way that allows them to meet the criteria for the CEs listed in Sections 771.117 or 771.118. The NEPA review may be conducted in parallel with the planning process. However, it is important to note that the Agencies cannot make a determination that a project qualifies for a CE until there is sufficient project information to determine the likely project impacts and the project is contained in the applicable transportation improvement program(s) under 23 U.S.C. 134-135. As a result, a CE determination normally does not occur until the planning process is finished.

One commenter stated the statute required that regulations for both new CEs be promulgated within 150 days of July 6, 2012, the date MAP-21 was signed into law, and that this deadline was exceeded by several months.

Sections 1316 and 1317 require the Secretary to designate the new CEs “not later than 180 days” after MAP-21's enactment and to promulgate regulations to carry out this requirement no later than 150 days from its enactment. Section 3 establishes that “any reference to date of enactment shall be deemed to be a reference to the effective date” of MAP-21, which is October 1, 2012. Sections 1316 and 1317 do not automatically create new CEs; their designation requires administrative action by the Agencies in the form of rulemaking. On February 28, 2013, the Agencies, acting on behalf of the Secretary, issued proposed regulations to “designate” the new CEs. The Agencies issued the proposal 150 days from the effective date of MAP-21.

In the NPRM the Agencies proposed identical language for an operational right-of-way CE in sections 771.117(c)(22) and 771.118(c)(12): “Projects, as defined in 23 U.S.C. 101, that would take place entirely within the existing operational right-of-way. The operational right-of-way includes those portions of the right-of-way that have been disturbed for an existing transportation facility or are regularly maintained for transportation purposes. This area includes the features associated with the physical footprint of the transportation facility (including the roadway, bridges, interchanges, culverts, drainage, fixed guideways, substations, etc.) and other areas regularly maintained for transportation purposes such as clear zone, traffic control signage, landscaping, any rest areas with direct access to a controlled access highway, or park and ride lots with direct access to an existing transit facility. It does not include portions of the existing right-of-way that are not currently being used or not regularly maintained for transportation purposes.”

The Agencies are adopting operational right-of-way CEs that are slightly different from the proposed language. The final CE language is identical for both FHWA and FTA and would cover “[p]rojects, as defined in 23 U.S.C. 101, that would take place entirely within the existing operational right-of-way. Existing operational right-of-way refers to right-of-way that has been disturbed for an existing transportation facility or is maintained for a transportation purpose. This area includes the features associated with the physical footprint of the transportation facility (including the roadway, bridges, interchanges, culverts, drainage, fixed guideways, mitigation areas, etc.) and other areas maintained for transportation purposes such as clear zone, traffic control signage, landscaping, any rest areas with direct access to a controlled access highway, areas maintained for safety and security of a transportation facility, parking facilities with direct access to an existing transportation facility, transit power substations, transit venting structures, and transit maintenance facilities. Portions of the right-of-way that have not been disturbed or that are not maintained for transportation purposes are not in the existing operational right-of-way.”

The discussion of comments below describes the rationale for these changes and differences.

Nine State DOTs, 3 regional transit agencies, 10 national transportation interest groups, 7 State/local transportation groups, 3 national/regional environmental interest groups, 1 Federal agency, and 1 individual commented on the description of “operational right-of-way” used in the NPRM. Eighteen commenters noted the NPRM's description of operational right-of-way was inconsistent with that used in MAP-21, and that any final language should be consistent with the statute. Ten commenters specifically noted that describing operational right-of-way as property that is “needed,” “used,” “disturbed,” and “regularly maintained” limits the universe of actions that would otherwise qualify for the CE. Three commenters indicated that a CE for projects within a right-of-way is appropriate because environmental reviews have already occurred prior to the acquisition and additional reviews would be duplicative. Three commenters noted that the NPRM's use of terms such as “disturbed” in the description of right-of-way could result in destruction of buffer zones or other areas that are not regularly maintained. Three commenters stated that undisturbed and unmaintained land along a right-of-way in current use may have been obtained to keep the public away in order to make operations in the right-of-way safer. The commenters indicated that projects in these areas would qualify for the CE under the statutory language, but they would not qualify under the regulatory language. One commenter indicated that the use of the term “disturbed” would result in the requirement of archeological investigations to determine if the area had been disturbed. Another commenter suggested placing safeguards, such as a documentation requirement, to confirm the timing of the disturbance. One commenter objected to the exclusion of areas where the transportation facility has fallen into disuse. One commenter requested a clarification of whether operations and maintenance included trash pick-up, weed control, snow storage, maintenance of cut slopes, and rockfall mitigation. The commenter requested a clarification that the determination that an area was “previously disturbed” could be based on observation and did not require actual construction plans for verification. The commenter also requested that separated bike and pedestrian facilities be considered transportation facilities under the rule. Eight commenters supported the NPRM's limitation of operational right-of-way to existing transportation facilities. One commenter provided a comment that section 1316 was intended to apply only to projects where there is an existing right-of-way. The commenter opposed an interpretation that would allow State DOT's to acquire right-of-way for a future project and then use the CE for a project once it has been identified for the corridor.

Due to the number of comments received regarding the NPRM's proposed description of “operational right-of-way” and upon further consideration, the Agencies have made various modifications. The Agencies are not redefining “operational right-of-way.” The Agencies are interpreting the phrase “existing operational right-of-way” by providing that this “refers to right-of-way that has been disturbed for an existing transportation facility or is maintained for a transportation purpose.” The purpose for including the phrase “disturbed for an existing transportation facility” is to clarify that a transportation facility must already exist at the time of the review of the proposed project being considered for the CE. The Agencies are using “disturbed” as defined in the New Oxford American Dictionary “having its normal pattern or function disrupted” or “interfere with the normal arrangement or function of” (New Oxford American Dictionary 497 (Elizabeth J. Jewell & Frank R. Abate ed., 1st ed., Oxford Press 2001)). Evidence that the area was disturbed for a transportation facility should be provided (such as photographs, visual inspection), but this does not mean that archeology surveys or construction plans for the original facility are required to demonstrate that the area has been disturbed. As explained in the NPRM, the term “transportation facility” is used in this CE to establish that the existing facility or structure must be related to surface transportation. The phrase is intended to be used in its plain meaning, and is specifically not intended to be limited to the term “transportation facilities” as defined under 23 CFR 973.104, which is applicable to the Indian Reservation Roads Program. The term in this CE includes bicycle and pedestrian facilities.

The purpose for including the phrase “maintained for a transportation purpose” is to include areas that may not be traditionally considered a transportation facility but are maintained to serve a transportation purpose for an existing transportation facility such as clear zones and areas for safety and security of the transportation facility. A transportation facility that has fallen in disuse may require an assessment to determine if it is still being maintained for a transportation purpose and, therefore, qualifies as an operational right-of-way. The term “maintained” is used as defined in the New Oxford American Dictionary “cause or enable [a condition or state of affairs] to continue” (New Oxford American Dictionary at 1030). Applicants do not need to develop or engage in regular maintenance actions within these areas to ensure they become part of the existing operational right-of-way in the future. Natural methods of managing roadside vegetation, clear zones, and areas necessary for maintaining the safety and security of a transportation facility are covered as requested by the commenters. The term, as used in the CE, does not cover areas outside those areas necessary for existing transportation facilities, such as uneconomic remnants or excess right-of-way that is secured by a fence to prevent trespassing, or that are acquired and held for a future transportation project. Lastly, the Agencies included “mitigation areas” and “areas maintained for safety and security of a transportation facility” in the list of examples of features that comprise the existing operational right-of-way. The concept of “mitigation areas” is included in the statutory definition of “operational right-of-way” in section 1316 of MAP-21 and is being added to the final rule for consistency.

The Agencies found that section 1316's phrase “existing operational right-of-way” was subject to various interpretations. One interpretation would allow the use of the CE for the construction of a project in an undeveloped area as long as real property interests were previously acquired for its future construction. This interpretation would ignore the use of the modifier “existing” before “operational right-of-way” in the statutory language in section 1316. The Agencies interpret the addition of that modifier to mean that proposed projects on property interests acquired for a future project but simply held in perpetuity with no associated transportation use cannot be covered by this CE. In addition, the Agencies interpret the reference to a “project” in the statutory definition of operational right-of-way to be different from the proposed project being evaluated for the CE. The Agencies interpret the statute to refer to a past transportation project when defining the footprint of the operational right-of-way.

The Agencies concluded that restating the statute in the regulation would not facilitate its implementation because it could allow an unreasonable interpretation. The meaning of the phrase “existing operational right-of-way” in the statute required the Agencies' interpretation to ensure consistent and legally defensible use of the CE. The Agencies interpret the addition of that modifier by Congress to mean that property interests acquired and held for a future project are not covered by this CE if there is no existing transportation facility or the area is not maintained for a transportation purpose for an existing transportation facility. This interpretation is supported by the statute's use of the adjective “existing” to modify “operational right-of-way;” the reference in the statutory definition to a project that is different from the proposed project being considered for the CE; and the particular examples used in the statute to describe the operational right-of-way (such as roadway, bridges, interchanges, landscaping, clear zones, etc.).

One commenter expressed concern that the proposed CE limited the ability of the States to shift roadway alignments and straighten dangerous curves.

The text of the CE would not affect a project sponsor's ability to shift roadway alignments, straighten dangerous curves, or engage in other eligible project activities for safety purposes. Rather, the CE text only affects the level of NEPA review that would be required for the eligible project. A number of safety projects, such as those shifting roadway alignments and straightening curves, may be accommodated within an existing operational right-of-way. Other CEs may be available for those projects that extend beyond the existing operational right-of-way limits (such as construction beyond the clear zone area).

One commenter expressed concerns with a potential expansion of the CE to allow its use for projects in buffer zones or undeveloped areas, indicating that many historic parkways and other roads include wooded areas that serve as crucial character-defining features of historic roadways or an important mitigation role in shielding historic districts and other neighborhoods from adjacent highways.

The Agencies note that the statutory definition of operational right-of-way includes “mitigation” and “clear zones” areas. Mitigation sites, such as wooded areas mitigating impacts of highways on historic districts, noise walls, and buffer zones used for transportation safety purposes are part of the operational right-of-way. However, the Agencies and the applicants must consider unusual circumstances to determine if the CE is the appropriate NEPA classification. In addition, the applicability of a NEPA CE for a transportation project does not exempt compliance with other environmental requirements. In the case of a buffer area that is a character defining feature of a historic property, the Agencies and the applicants must comply with the requirements of section 106 of NHPA and section 4(f) of the DOT Act. Consideration of unusual circumstances and compliance with other environmental laws may trigger the need to identify substitute mitigation or compensatory measures, as appropriate. The Agencies note that the inclusion of “mitigation” as a component of the operational right-of-way is in the statute and regulation does not override, waive, or alter the mitigation commitments that were established for the original transportation facility. The use of mitigation areas for a new project may trigger other actions to meet the original mitigation commitments.

Two commenters requested that the CE language explicitly apply to transportation project areas that are on land acquired to mitigate a project. One commenter expressed concerns with including land acquired for mitigation as part of the operational right-of-way.

Mitigation areas are explicitly recognized in the statutory definition of operational right-of-way. The Agencies are adding the term “mitigation areas” to the list of example features associated with the physical footprint of a transportation facility to be consistent with the statutory definition of “operational right-of-way” in section 1316 of MAP-21. The Agencies note that the inclusion of “mitigation” as a component of the operational right-of-way in the statute and regulation does not override, waive, or alter the mitigation commitments that were established for the original transportation facility. The use of mitigation areas for a new project may trigger other actions to meet the original mitigation commitments.

One transit agency requested that the rule clarify whether operational right-of-way needed to be contiguous with an existing road or guideway.

Public transportation facilities often have non-contiguous features that are part of a transportation system and are, therefore, part of the operational right-of-way. One example mentioned in the proposed rule is substations, which include transit power substations. This example has been moved to the list of examples of other areas maintained for transportation purposes in the final CE text. Other examples in the public transportation context include transit maintenance yards and transit venting structures. The Agencies have added these examples to their CE text to clarify that these types of structures are included in the footprint of the operational right-of-way.

One commenter requested the addition of “parking structures,” ( e.g., revise the example of “park and ride lots” to read “park and ride lots and structures”) to the list of examples of features that comprise the operational right-of-way.

The Agencies consider “park and ride lots” to include both surface lots and parking structures. The Agencies changed the term to “parking facilities” in order to provide clarity and maintain consistency with other CEs found in part 771 and how those terms are used by the Agencies.

One commenter expressed concerns with the inclusion of clear zones as these could entail a large footprint. The commenter indicated that clear zones can cover more than 35 feet on both sides of roadway. Another commenter stated that operational right-of-way should not include the full width of clear zones on either side of a road because standards for clear zones have become much wider recently for safety purposes. The commenter expressed that the standard should be limited to the operation, construction, or mitigation of the original roadway at the time it was purchased.

The Agencies found that the statute was clear in identifying clear zones of an existing transportation facility as part of the operational right-of-way. This means that construction of a transportation facility within already existing clear zones would qualify for the CE unless unusual circumstances exist that warrant an EA or EIS. However, a project within the operational right-of-way that requires the creation of new clear zones or extension of clear zone areas beyond what already exists would not qualify for this CE.

One commenter recommended adding noise walls and fencing to the list of examples of elements or components that are part of the operational right-of-way. The commenter also requested the addition of facilities within the right-of-way, but that are performed by other government entities.

The Agencies did not intend to create an all-inclusive list of components or features that comprise the operational right-of-way. Some of the additions recommended by the commenters are captured by features listed in the final regulatory text. For example, noise walls are a form of mitigation, which is included in the text. Some fencing structures may be necessary to maintain safety and security of an existing transportation facility and would, therefore, be part of the operational right-of-way. Other fencing structures may have been established to preserve a property, but are not necessary to maintain safety and security of an existing transportation facility. These features would not be considered part of an existing operational right-of-way. The identity of the entity that owns, maintains, or operates the transportation feature (for example, bridge, road, mitigation, clear zone, parking, etc.) is not a factor in determining whether the feature is part of the operational right-of-way. The test is whether the feature is in use or is maintained for a transportation purpose.

Five commenters noted that the statute refers to “all real property interests” acquired for the construction, operation, or mitigation of a project, and this includes property acquired for corridor preservation and future transportation facility capacity expansion. One commenter expressed an opinion that the term should include prescriptive easements, leases, utility easements, and other non-fee simple property interests. Another commenter opposed an interpretation that would allow development of transportation projects on real property interests that are less than fee simple interests, such as utility easements and leases. One commenter proposed regulatory language that the CE cover “all real property interests acquired or secured for the construction, operation, or mitigation of a project or transportation corridor” (emphasis added). Seven commenters objected to the requests to expand the CE to cover actions occurring within areas acquired, but not developed, for corridor preservation and facility expansion. One commenter indicated that an expansion of the CE to cover projects that would take place in property that has been acquired but not developed could be combined with the “significant expansion” of advanced acquisition allowed under section 1302 of MAP-21 to create a strong incentive for aggressive land acquisition in an effort to insulate potential future transportation projects from a higher level of NEPA review (e.g. an EA or EIS). The commenter expressed concerns with an interpretation of the CE that would allow the development of previously acquired areas owned for decades but that had not received final approval from FHWA under NEPA because of litigation, new information, lack of funding, or other problems. One commenter expressed that right-of-way purchased under section 1302 of MAP-21 should not be included in the operational right-of-way definition because such land has independent utility, rather than utility for construction, operations, or mitigation purposes.

The Agencies do not interpret the statutory CE provision in a manner that would allow construction of a project in an undeveloped area simply because the real property interests were previously acquired. The use of the modifier “existing” to describe the operational right-of-way means that a transportation facility must already exist at the location where the proposed project will be built. Areas acquired and held as a transportation corridor for a future project would not constitute an existing operational right-of-way. The real property interest in question must be disturbed for an existing transportation facility or maintained for a transportation purpose for an existing transportation facility. Utility use and occupancy agreements, and other real property interests that are not maintained for existing transportation purposes would not be part of the existing operational right-of-way.

One commenter noted that the proposed rule does not clearly address whether section 1316 CEs apply to project-related work that requires temporary construction easements rather than permanent acquisition.

The Agencies have concluded that the geographic reference in the CE is for the final project. The final project must be entirely within the operational right-of-way. The method to construct a project within the operational right-of-way is accounted for in the CE since it is presumed a CE accounts for all connected actions ( see CEQ Final Guidance on Establishing, Applying, and Revising Categorical Exclusions under NEPA, 75 FR 75628, 75632, Dec. 6, 2010). This includes temporary work taking place outside an operational right-of-way that is necessary for the construction of a project within the operational right-of-way. Therefore, this CE also covers temporary easements and temporary work needed for the project even if this work is outside an operational right-of-way. It is important to note that temporary easements and work are subject to review for any unusual circumstances (such as work taking place in endangered species habitat) that would trigger the need for a higher level of NEPA review for the project. Furthermore, some temporary work such as the construction of a detour road or bridge may require a higher level of scrutiny to ensure adequate consideration of unusual circumstances. Finally, the Agencies do not interpret the CE to apply to the construction of a permanent project within an area acquired as temporary easements for the construction of past projects. Temporary easements end once the original project is completed and, therefore, cannot be considered “existing” transportation facilities when a new project is being considered.

One commenter indicated that the description of the operational right-of-way in the proposal conflicted with the definition of “right-of-way” in 23 CFR 710.105 and the requirements for managing real property within the boundaries of a federally assisted facility. The commenter's opinion was that using a definition that does not include all real property within the right-of-way boundary of a project would undermine the State's ability to acquire any real estate beyond the proposed “operational right-of-way” boundaries and will impede the State's ability to manage the entire right-of-way. The commenter indicated that the proposed rule would undermine the State's defense and necessity for acquisition outside the operational right-of-way boundaries.

Section 710.105 defines the term “right-of-way” as “real property and rights therein used for the construction, operation, or maintenance of a transportation or related facility funded under title 23 of the United States Code.” “Real property” is defined in the same section as “land and any improvements thereto, including but not limited to, fee interests, easements, air or access rights, and the rights to control use, leasehold, and leased fee interests.” These terms are consistent with the description of “existing operational right-of-way” provided in the final rule. The Agencies note that the new CE does not overturn or modify applicable State laws and requirements for the acquisition of land. Those laws may require agencies to articulate and substantiate the necessity for their acquisition.

One commenter requested a clarification on whether operational right-of-way includes easements that are necessary for operations and maintenance of existing transportation facilities. The commenter provided an example of a situation where a Federal land management agency provides an easement through the Federal land for the State's construction, operation, and maintenance of a transportation facility.

The Agencies interpret existing operational right-of-way provision to include easements provided by Federal land management agencies for the construction, operation, and maintenance of transportation projects that use Federal lands. The CE would apply to FHWA or FTA actions contained within an easement area already granted by a Federal land management agency. However, the Agencies note that the CE only applies to FTA and FHWA actions. The decision to grant an easement or other approvals in Federal lands may constitute major Federal actions for the Federal land management agencies, which could require them to conduct their own NEPA reviews for their actions.

In the NPRM, the Agencies proposed identical language for a limited Federal assistance CE in sections 771.117(c)(23) and 771.118(c)(13). The proposed CE language was for “[f]ederally funded projects that do not require Administration actions other than funding, and: (i) That receive less than $5,000,000 of Federal funds; or (ii) with a total estimated cost of not more than $30,000,000 and Federal funds comprising less than 15 percent of the total estimated project cost.”

The Agencies are adopting final CE language that is different from the proposed language. The final CE language is identical for both FHWA and FTA and would cover “Federally-funded projects: (i) That receive less than $5,000,000 of Federal funds; or (ii) with a total estimated cost of not more than $30,000,000 and Federal funds comprising less than 15 percent of the total estimated project cost.” The discussion of comments below describes the rationale for these changes and differences.

Twenty-five entities commented on the NPRM language limiting the application of the CE to situations in which the only Agency action involved is funding. Eighteen commenters expressed the position that such a limitation to the scope of the CE is inconsistent with the statutory language that provides that the CE is available to “any” project. One commenter indicated that the NPRM's preamble statement that the CE would apply to projects that only involve Agency funding decisions and actions was unclear. One commenter stated that funding approval and approval of construction could be considered two separate actions under the CEQ definition of “major Federal action” in 40 CFR 1508.18, and this would prevent the use of the CE for any construction project. The commenter also indicated that other approvals would be considered separately from funding, such as approvals of right-of-way or design approvals. One commenter expressed his belief that the congressional intent was to utilize this CE on Interstate projects even if an Interstate Access Justification report was needed. Another commenter stated that other Administration actions such as Interstate access approvals or nationwide permits from the U.S. Army Corps of Engineers do not have the potential on their own or collectively to create significant environmental impacts. Six commenters supported the exclusion of Administration actions other than funding such as approvals for Interstate access. One commenter discussed two examples of major highway projects that did not receive Federal-aid but still required detailed NEPA reviews because of FHWA's involvement in the approval of a request for an Interstate System access change under 23 U.S.C. 111(a). Another commenter recommended including Interstate access in the regulatory text if it was going to be excluded from the CE's applicability. The commenter also recommended including in the preamble and the regulatory text the example of right-of-way disposals as another type of action that does not require Federal aid but that should not automatically qualify for a CE in this category.

The Agencies have revised the text of the CE in response to the commenters, which recommended expanding the CE to all projects that fall within the monetary thresholds established by Congress (that is, no more than $5 million or no more than 15 percent in Federal funding for a project with total estimated cost of no more than $30 million). As noted in the NPRM, the action has to have some level of Federal assistance in order to qualify for the CE. This is based on the Agencies' understanding that the title of section 1317, the use of the term “funds” in section 1317(1)(A)-(B), and the Conference Report articulated a congressional intent to limit the CE to federally funded projects. Projects not funded with Federal funds but requiring other forms of approvals from the Agencies do not qualify for this CE. The Agencies note that other CEs continue to be available for projects that do not meet this condition. For example, a project not funded with Federal funds that require an Interstate System access change approval from FHWA may qualify for a CE under FHWA's (d)-list CEs (for example section 771.117(d)(7) (approvals for changes in access control)).

The proposal set forth in the NPRM would have prevented the use of the CE for projects that receive Federal-aid within the established thresholds but that required other Agency approvals (such as approvals for changes in access control). However, the commenters highlighted ambiguities in the proposed rule that would have led to confusion in its application. For example, one commenter indicated that approval of construction could be interpreted to be a separate approval from the decision to fund the project and this would render the CE meaningless. In addition, interpreting the statutory provision in this manner would be inconsistent with the principle that the scope of a CE must include all connected actions ( see CEQ Final Guidance on Establishing, Applying, and Revising Categorical Exclusions under NEPA, 75 FR 75628, 75632, Dec. 6, 2010). The language in section 1317 does not exclude a subgroup of projects that require other Agency approvals. A project receiving Federal funds within the statutory thresholds and that also requires other Agency approvals qualifies for the CE under the statutory provision in section 1317. As a result, the Agencies are deleting the phrase “that do not require Administration actions other than funding” in the final rule.

The Agencies understand that Federal funding alone is not a reliable indicator of the significance of the environmental impacts associated with a project. However, the Agencies find that the statute clearly conveys the congressional direction that FHWA or FTA projects receiving Federal funding below the thresholds should be presumed to not trigger EA and EIS requirements. This presumption applies unless the project involves unusual circumstances that make its application improper. The uniqueness of this CE (that is, a CE determination based on dollar thresholds instead of a particular scope or description of the action) makes the consideration of unusual circumstances particularly important to ensure that projects that receive Federal funds below the established thresholds are not processed as CEs when the unusual circumstances warrant another level of NEPA review.

Nine entities commented specifically on the second statutory funding criterion for projects with a total estimated to cost of not more than $30,000,000 and Federal funds of less than 15 percent of the total estimated project cost. Four commenters recommended the deletion of this criterion to avoid confusion since projects meeting this threshold would also meet the threshold in the first criterion for projects receiving less than $5,000,000 in Federal funds. One commenter suggested that Congress intended to apply the CE to projects that cost more than $30,000,000 and receive Federal funds of less than 15 percent ($4,500,000) of the project's estimated cost. Four commenters submitted general comments on section 1317 indicating that the statutory language for this CE was clear and did not need revisions.

The Agencies will retain the two criteria. Although $4,500,000 is 15 percent of the total estimated project cost for a project with total estimated project cost of $30,000,000, and this is below the $5,000,000 threshold in the first criterion, the Agencies decided to retain the provision because it is explicitly stated in the law.

Four commenters commented on the Agencies' statement in the NPRM that re-evaluations could be triggered under 23 CFR 771.129 if, after the limited Federal assistance CE was used, there was a change to the project that raised the level of Federal funding beyond the funding thresholds, and there was still an FHWA and/or FTA action to be taken. Two of those commenters indicated that the final rule should clarify that when the State relies upon the second criterion, the only changes that could trigger re-evaluation would be an increase in the percentage of Federal funds above the 15 percent threshold or a change in the project's scope to include activities not included by the original CE. Another of the commenters indicated that requiring re-evaluation for changes in the funding thresholds appeared to be contrary to the intent of MAP-21 that specifies “estimated” project costs. The fourth commenter stated that the Agencies' statement on re-evaluation was in direct conflict with section 1317 of MAP-21 because it states that the CE applies to the estimated project cost and not final project costs.

Re-evaluation would be triggered if there is an increase in the amount of Federal funds for the project beyond the established thresholds, and there is still an FHWA and/or FTA action that needs to be taken when these changes occur. The need for re-evaluation is not unique to this CE. This CE, however, highlights the importance of obtaining accurate cost estimates and the need for careful deliberation before applying this CE to a project that is close to the established thresholds. The applicant and the Agency(s) would consult prior to any request for further approvals or grants (including approval of project plans, specifications, or estimates) to ascertain whether the CE designation remains valid. Even when a change occurs, the project may continue to qualify for a CE under other CEs designated in part 771, if it meets the requirements of the CE. An interpretation that the only basis for determining the applicability of the CE should be the applicant's estimate without opportunity to re-evaluate would not promote good project cost estimates and would be inconsistent with the Agencies' re-evaluation process that applies to all NEPA reviews.

One commenter indicated that the funding thresholds should be indexed for inflation. The commenter stated that the funding thresholds will become outdated with inflation, and Congress likely did not intend for the value of the thresholds to be eroded over time. Another commenter recommended building some flexibility into the process to accommodate small cost increases or changes in the Federal participation rate. The commenter stated that planning level costs estimates and anticipated Federal participation rates available at the project development stage where NEPA review occurs are likely to change as the project advances to construction.

The Agencies find that the statutory language regarding the funding thresholds is clear. Therefore, the Agencies do not provide for inflation considerations or for small cost increases beyond the thresholds provided, and do not make the suggested changes.

Three commenters supported the requirement that the projects demonstrate independent utility, connect logical termini, and not restrict consideration of alternatives, but recommended a clarification that projects can qualify for the CE even if they are built in segments. They indicated that pedestrian, bicycle, and shared use pathway projects are often built in phases even though the overall project meets the funding threshold. One commenter stated that the limited Federal assistance CE, by its very nature, creates an incentive to divide transportation projects into smaller components if doing so would enable the project to come within the scope of the CE. The commenter recommended documentation demonstrating that the project has independent utility, connects logical termini, and does not restrict consideration of alternatives for other reasonably foreseeable transportation improvements.

The Agencies agree with the commenters. A CE must capture the entire proposed action, which includes all connected actions ( see CEQ “Final Guidance on Establishing, Applying, and Revising Categorical Exclusions under NEPA,” 75 FR 75628, 75632, Dec. 6, 2010). The requirement that the projects demonstrate independent utility, connect logical termini, and not restrict consideration of alternatives reflects the Agencies' test for determining the full scope of a project for NEPA review purposes and avoiding impermissible segmentation. This does not prohibit the construction of a transportation facility in phases so long as the full project scope receives NEPA review before the first phase begins construction. Typically, the documentation for the project will be sufficient to demonstrate that the proposal has independent utility, connects logical termini (for linear projects), and does not restrict consideration of alternatives for other reasonably foreseeable transportation improvements. In some instances, additional information may be needed to establish that these criteria will be met.

One commenter recommended the use of the CE for multiple Agency funding decisions and actions. The commenter mentioned the Partnership for Sustainable Communities among the U.S. Department of Housing and Urban Development, U.S. Environmental Protection Agency, and DOT as an initiative that allows for multiagency collaboration that should extend to this CE's use. Two commenters indicated that the proposed CEs appear to apply to all types of Federal funds used for transportation facility projects and should not be limited to only FHWA's rules.

Although the CE takes into account to all sources of Federal funding for a transportation project, the statute is very specific in limiting the CE to the FHWA and FTA joint NEPA procedures. A CE determination for FHWA or FTA does not satisfy the NEPA procedural requirements for other Federal agencies that also have actions for the same project (such as permits or other approvals). The CE is only available for FHWA and FTA actions.

The Agencies provide guidance throughout the Summary and Response to Comments section above on their interpretation of the CEs as modified in response to public comment. A minor additional change is made to remove section 771.118(d)(5) due to the availability of the new section 771.118(c)(12). The changes are described in this section.

The FHWA is adding paragraph (c)(22) to this section for “[p]rojects, as defined in 23 U.S.C. 101, that would take place entirely within the existing operational right-of-way. Existing operational right-of-way refers to right-of-way that has been disturbed for an existing transportation facility or is maintained for a transportation purpose. This area includes the features associated with the physical footprint of the transportation facility (including the roadway, bridges, interchanges, culverts, drainage, fixed guideways, mitigation areas, etc.) and other areas maintained for transportation purposes such as clear zone, traffic control signage, landscaping, any rest areas with direct access to a controlled access highway, areas maintained for safety and security of a facility, parking facilities with direct access to an existing transportation facility, transit power substations, transit venting structures, and transit maintenance facilities. Portions of the right-of-way that have not been disturbed or that are not maintained for transportation purposes are not in the existing operational right-of-way.”

The FHWA is also adding paragraph (c)(23) to this section for “Federally funded projects (i) that receive less than $5,000,000 of Federal funds; or (ii) with a total estimated cost of not more than $30,000,000 and Federal funds comprising less than 15 percent of the total estimated project cost.”

FTA is adding paragraph (c)(12) to this section with the same text as the new paragraph (22) in section 771.117(c). FTA is also adding paragraph (c)(13) to this section with the same text as the new paragraph (23) in section 771.117(c).

FTA reviewed its existing list of CEs at section 771.118, and determined that paragraph (d)(5) (“[c]onstruction of bicycle facilities within existing transportation right-of-way”) is subsumed by paragraph (c)(12). Therefore, FTA is removing paragraph 771.118(d)(5) to reduce CE application confusion, and is reserving it for a future section 771.118(d) example.

The Agencies derive explicit authority for this rulemaking action from 49 U.S.C. 322, which provides authority to “[a]n officer of the Department of Transportation [to] prescribe regulations to carry out the duties and powers of the officer.” That authority is delegated to the Agencies in 49 CFR 1.81(a)(3), which provides that the authority to prescribe regulations contained in 49 U.S.C. 322 is delegated to each Administrator “with respect to statutory provisions for which authority is delegated by other sections in [49 CFR Part 1].” Included in 49 CFR Part 1, specifically 49 CFR 1.81(a)(5), is the delegation of authority with respect to NEPA, the statute implemented by this final rule. Moreover, the CEQ regulations that implement NEPA provide at 40 CFR 1507.3 that agencies shall continue to review their policies and NEPA implementing procedures and revise them as necessary to insure full compliance with the purposes and provisions of NEPA.

The Agencies considered all comments received before the close of business on the comment closing date indicated above, and the comments are available for examination in the docket at Regulations.gov. The Agencies also considered comments received after the comment closing date and filed in the docket prior to this final rule.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). The Agencies determined that this action is not a significant regulatory action under section 3(f) of Executive Order 12866 nor is it significant within the meaning of DOT regulatory policies and procedures (44 FR 11032). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. It is anticipated that the economic impact of this rulemaking are minimal. The changes to this rule are requirements mandated by MAP-21 to increase efficiencies in environmental review by making changes in the Agencies' environmental review procedures.

The activities in this final rule are inherently limited in their potential to cause significant environmental impacts because the use of the CEs is subject to the unusual circumstances provision in 23 CFR 771.117(b) and 23 CFR 771.118(b), respectively. These provisions require appropriate environmental studies, and may result in the reclassification of the NEPA evaluation of the project to an EA or EIS, if the Agencies determine that the proposal involves potentially significant or significant environmental impacts. These changes will not adversely affect, in any material way, any sector of the economy. In addition, these changes will not interfere with any action taken or planned by another agency and will not materially alter the budgetary impact of any entitlements, grants, user fees, or loan programs. Consequently, a full regulatory evaluation is not required.

Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq. ), the Agencies must consider whether this final rule would have a significant economic impact on a substantial number of small entities. “Small entities” include small businesses, not for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations under 50,000. The Agencies do not believe this final rule will have a significant economic impact on entities of any size, and the Agencies received no comment in response to our request for any such information in the NPRM. These revisions could expedite environmental review and thus would be less than any current impact on small business entities. Thus, the Agencies determine that this final rule will not have a significant economic impact on a substantial number of small entities.

This final rule would not impose unfunded mandates as defined by the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48). This final rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $148.8 million or more in any one year (2 U.S.C. 1532).

Executive Order 13132 requires agencies to assure meaningful and timely input by State and local officials in the development of regulatory policies that may have a substantial, direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. The Agencies have analyzed this final rule in accordance with the principles and criteria contained in Executive Order 13132 and determined that this action will not have a substantial direct effect on the States, the relationship between the Federal Government and the States, or the distribution of power and responsibilities among the various levels of government, and, therefore, does not have federalism implications. The Agencies have also determined that this action will not preempt any State law or State regulation or affect the States' ability to discharge traditional State governmental functions. The NPRM invited State and local governments with an interest in this rulemaking to comment on the effect that adoption of specific proposals may have on State or local governments. No State or local governments provided comments on this issue.

Executive Order 13175 requires agencies to assure meaningful and timely input from Indian tribal government representatives in the development of rules that “significantly or uniquely affect” Indian communities and that impose “substantial and direct compliance costs” on such communities. The Agencies have analyzed this action under Executive Order 13175, dated November 6, 2000, and believe that it will not have substantial direct effects on one or more Indian tribes; will not impose substantial direct compliance costs on Indian tribal governments; and will not preempt tribal law. Therefore, a tribal summary impact statement is not required. The Agencies received no comment in response to our request in the NPRM for comments from Indian tribal governments on the effect that adoption of specific proposals might have on Indian communities.

The Agencies have analyzed this action under Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” dated May 18, 2001. The Agencies determined that this action is not a significant energy action under that order because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Therefore, a Statement of Energy Effects under Executive Order 13211 is not required.

The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities apply to these programs and were carried out in the development of this rule.

Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501, et seq. ), no Federal agency shall conduct or sponsor a collection of information unless in advance the agency has obtained approval by and a control number from the Office of Management and Budget (OMB), and no person is required to respond to a collection of information unless it displays a valid OMB control number.. The Agencies determined that the final rule does not contain collection of information requirements for the purposes of the PRA.

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.

Executive Order 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations, and DOT Order 5610.2(a), 91 FR 27534, May 10, 2012, require DOT agencies to achieve environmental justice (EJ) as part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects, including interrelated social and economic effects, of their programs, policies, and activities on minority populations and low-income populations in the United States. The DOT Order requires DOT agencies to address compliance with the Executive Order and the DOT Order in all rulemaking activities. In addition, both Agencies have issued additional documents relating to administration of the Executive Order and the DOT Order. On June 14, 2012, the FHWA issued an update to its EJ order, FHWA Order 6640.23A, “FHWA Actions to Address Environmental Justice in Minority Populations and Low Income Populations” (available online at www.fhwa.dot.gov/legsregs/directives/orders/664023a.htm ). The FTA also issued an update to its EJ policy, “FTA Policy Guidance for Federal Transit Recipients,” 77 FR 42077, July 17, 2012 (available online at www.fta.dot.gov/legislation_law/12349_14740.html ).

The Agencies evaluated the CE under the Executive Order, the DOT Order, the FHWA Order, and the FTA Circular. The Agencies determined that designation of the new CEs for actions within the operational right-of-way and for actions with limited Federal assistance through this rulemaking will not cause disproportionately high and adverse effects on minority or low income populations. The rule simply adds a provision to the Agencies' NEPA procedures under which they may decide in the future that a project or program does not require the preparation of an EA or EIS. The rule itself has no potential for effects until it is applied to a proposed action requiring approval by the FHWA or FTA.

At the time the Agencies apply a CE established by this rulemaking, the Agencies have an independent obligation to conduct an evaluation of the proposed action under the applicable EJ orders and guidance. The adoption of this rule does not affect the scope or outcome of that EJ evaluation. Nor does the new rule affect the ability of affected populations to raise any concerns about potential EJ effects at the time the Agencies consider applying a new CE. Indeed, outreach to ensure the effective involvement of minority and low income populations in the environmental review process is a core aspect of the EJ orders and guidance. For these reasons, the Agencies also determined no further EJ analysis is needed and no mitigation is required in connection with the designation of the CEs for actions within the operational right-of-way and for actions with limited Federal assistance.

The Agencies analyzed this action under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. The Agencies certify that this action is not economically significant rule and will not cause an environmental risk to health or safety that may disproportionately affect children.

The Agencies analyzed this final rule under Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights” and determined the rule will not affect a taking of private property or otherwise have taking implications under Executive Order 12630.

This action will not have any effect on the quality of the environment under NEPA. Agencies are required to adopt implementing procedures for NEPA that establish specific criteria for, and identification of, three classes of actions: those that normally require preparation of an EIS; those that normally require preparation of an EA; and those that are categorically excluded from further NEPA review (40 CFR 1507.3(b)). The CEQ regulations do not direct agencies to prepare a NEPA analysis or document before establishing Agency procedures (such as this regulation) that supplement the CEQ regulations for implementing NEPA. The CEs are one part of those agency procedures, and therefore establishing CEs does not require preparation of a NEPA analysis or document. Agency NEPA procedures are generally procedural guidance to assist agencies in the fulfillment of agency responsibilities under NEPA, but are not the agency's final determination of what level of NEPA analysis is required for a particular proposed action. The requirements for establishing agency NEPA procedures are set forth at 40 CFR 1505.1 and 1507.3. The determination that establishing CEs does not require NEPA analysis and documentation was upheld in Heartwood, Inc. v. U.S. Forest Service, 73 F. Supp. 2d 962, 972-73 (S.D. Ill. 1999), aff'd, 230 F.3d 947, 954-55 (7th Cir. 2000).

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 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 Agencies are amending 23 CFR part 771 and 49 CFR part 622 as follows:

Availability of Rulemaking Document

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(1) Searching the electronic Federal Docket Management System (FDMS) Web page at http://www.regulations.gov;

(2) Accessing the Government Printing Office's Web page at http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR to view the daily published Federal Register edition; or accessing the “Search the Federal Register by Citation” in the “Related Resources” column on the left, if you need to do a Simple or Advanced search for information, such as a type of document that crosses multiple agencies or dates; or

(3) Visiting TSA's Security Regulations Web page at http://www.tsa.gov and accessing the link for “Research Center” at the top of the page.

In addition, copies are available by writing or calling the individual in the FOR FURTHER INFORMATION CONTACT section. Make sure to identify the docket number of this rulemaking.

The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires TSA to comply with small entity requests for information and advice about compliance with statutes and regulations within TSA's jurisdiction. Any small entity that has a question regarding this document may contact the person listed in FOR FURTHER INFORMATION CONTACT . Persons can obtain further information regarding SBREFA on the U.S. Small Business Administration's (SBA) Web page at http://www.sba.gov/advo/laws/law_lib.html .

TSA is issuing regulations to improve security at repair stations located within and outside the United States as required by Vision 100-Century of Aviation Reauthorization Act, Public Law 108-176 (117 Stat. 2489, December 12, 2003), codified at 49 U.S.C. 44924 (Vision 100). 1 The statutory requirements of Vision 100 are discussed in the preamble of the Notice of Proposed Rulemaking (NPRM) published in the Federal Register on November 18, 2009. See 74 FR 59874, 59875. There are approximately a total of 4,067 repair stations located in the United States and 707 located outside the United States certificated by FAA under part 145 as of August 2013. 2 The final rule contains the following requirements:

• Application. The regulations apply to repair stations certificated by the FAA under 14 CFR part 145, except repair stations located on a U.S. or foreign government military base. All repair stations are subject to inspection as provided in the rule and to Security Directives should there be a security need. However, the rule text requires only certain repair stations, discussed below, to carry out security measures on a regular basis.

• TSA Inspection Authority. Repair stations must allow TSA and other authorized DHS officials to enter, conduct inspections, and view and copy records as needed to carry out TSA's security-related statutory and regulatory responsibilities. For repair stations not required to carry out security measures on a regular basis (i.e., those repair stations not located on or adjacent to an airport, as further defined below), TSA does not intend to inspect such facilities, except (1) for compliance with security directives issued by TSA and with airport security programs required by TSA (for those repair stations that are included in an airport security program), and (2) to respond to security information provided to TSA by U.S. or foreign government entities.

• Implementation of Security Measures. The security measures in this rule cover repair stations that are on or adjacent to certain airports. TSA will consider a repair station to be “on airport” if it is on an air operations area (AOA) or security identification display area (SIDA) of an airport covered by an airport security program under 49 CFR part 1542 in the United States, or on the security restricted area any commensurate airport outside the United States regulated by a government entity. TSA will consider a repair station to be adjacent to an airport if there is an access point between the repair station and the airport of sufficient size to allow the movement of large aircraft between the repair station and the area described as “on airport.”  3

• Security Measures. Certain repair stations, as described above, are required to (1) designate a point of contact(s) to carry out specified responsibilities; (2) prevent the unauthorized operation of large aircraft capable of flight that are left unattended; and (3) verify background information of those individuals who are designated as the TSA point(s) of contact and those who have access to any keys or other means used to prevent the unauthorized operation of large aircraft capable of flight that are left unattended. See section 1554.101.

• Security Directives. Repair stations are required to comply with Security Directives (SDs) issued by TSA. See section 1554.103.

• Notification of Deficiencies; Suspension of Certificate and Review Process. The regulations describe the process whereby TSA will notify the repair station and the FAA of a security deficiency identified by TSA and provide an opportunity for the repair station to obtain review of a determination by TSA to suspend its operating certification.

• Immediate Risk to Security; Revocation of Certificate and Review Process. The regulations specify that when TSA determines a repair station poses an immediate risk to security, TSA will notify the repair station and the FAA that the certificate must be revoked. The regulations also provide the process for the repair station to obtain review of such a determination.

While the FAA has implemented extensive safety requirements for repair stations located within and outside the United States, supplementing those safety provisions with the security requirements contained in the final rule will further reduce the likelihood that terrorists would be able to use large aircraft as a weapon. As terrorist organizations continue to target civil aviation, TSA believes it is important for aircraft repair stations that are located on or adjacent to an airport to have specific security measures in place to prevent terrorists from commandeering large aircraft that are capable of flight and are not attended. Enhancement of security at repair stations that have access to runways will mitigate the potential threat that a large aircraft could be used as a weapon.

In developing this rule, TSA consulted with the FAA and built upon the certification and safety requirements FAA has instituted requiring repair stations to establish and maintain a quality control system. See 14 CFR 145.211. While these quality control measures provide a significant layer of protection and oversight of articles and aircraft under repair, this final rule supplements those measures by requiring repair stations that are located on or adjacent to an airport, as defined in the final rule, to implement security measures to prevent the unauthorized operation of large aircraft capable of flight left unattended.

In accordance with Executive Orders (E.O.) 12866 and 13563, TSA includes in this preamble a summary of the costs and benefits associated with the Aircraft Repair Station Security final rule. The table below summarizes the costs and benefits of the final rule to U.S. and foreign entities. A detailed estimate of these costs and benefits can be found in the regulatory impact analysis accompanying this final rule; the regulatory impact analysis is available in the docket.

TSA adopts as final the proposed rule with changes based primarily on the public comments received. This section summarizes the regulatory text changes that TSA has made to the NPRM in this final rule. A detailed description of the responses to the public comments is included in Section II.

TSA eliminated the amendments to part 1520 of its rules because it has eliminated the proposed requirement to adopt and implement a security program.

TSA modified the language in § 1554.1 to eliminate the reference to “U.S. government” and inserted “a U.S. or foreign government military installation” in its place to respond to questions raised in some comments. This change will eliminate from the scope of the final rule FAA part 145-certificated repair stations located on a military base, whether within or outside the United States. The change clarifies TSA's intention not to exclude from the scope of the final rule those repair stations that are subject to government regulation.

Commenting parties noted that TSA used different terms than the FAA to describe repair stations and repair work and found that the different terms were confusing. TSA eliminated the terms section to avoid confusion. TSA also eliminated the terms “foreign repair station” and “domestic repair station” from the final rule and uses the terms “repair station located within the United States” and “repair station located outside the United States” to be consistent with FAA part 145 regulations.

In response to commenters who requested exemptions from the proposed requirement to adopt and carry out a security program, TSA has eliminated the requirement to adopt and implement a security program. As will be explained below, TSA will only require certain repair stations located on or adjacent to an airport to adopt and carry out security measures to prevent the unauthorized operation of large aircraft capable of flight that are left unattended. TSA has conducted a security risk assessment and determined that other repair stations represent a minimal risk to aviation security. TSA has eliminated all security measures regarding preventing access to repair stations. This change will reduce the regulatory requirements and the costs of implementation. While TSA has retained the requirement to verify employee background information, it has reduced the application of that requirement to those individuals who are designated as the TSA point of contact and those who have access to the keys or other means used to prevent the unauthorized operation of large aircraft capable of flight that are left unattended. TSA has clarified that it will accept employment history checks or background checks conducted on individuals who have obtained a FAA airman certificate or a SIDA badge. All proposed regulations regarding the content, format and availability of a security program have been eliminated in the final rule.

TSA has eliminated the requirement proposed in § 1554.101(b) for repair stations to submit profile information to TSA. TSA will use information available from the FAA.

TSA has added language to permit repair stations to comment upon a security directive issued by TSA. This language is consistent with the regulatory language used for airport operators and aircraft operators under 49 CFR 1542.303(e) and 1544.305(e).

In response to comments, TSA has clarified the process in part 1554, subpart C, which a repair station may use to seek review of a TSA determination that a certificate must be suspended or revoked.

TSA received 177 public submissions. Sixty-seven submissions were from repair station owner/operators. Other commenters included private individuals, industry associations, labor unions, foreign governments, airport owner/operators, domestic and foreign aircraft operators, State agencies, and the Small Business Administration (SBA). The discussion below groups the comments by the primary issues raised in the public submissions.

Comments: Thirty-three commenters said the proposed rule is unnecessary because repair stations already have adequate security or are already sufficiently regulated. Ten of these commenters cited procedures and controls already in place to safeguard security, such as quality controls, employee background checks, access controls, and general safety procedures already approved by the FAA. Seven commenters said the proposed regulations added a duplicate layer of security already provided by other TSA requirements described in current TSA security programs or SDs. A few commenters said that TSA should not regulate repair stations if they are part of an airline that already has an air carrier security program.

TSA response: Vision 100 requires TSA to issue regulations “to ensure the security of foreign and domestic repair stations.” 49 U.S.C. 44924(f). TSA believes that the security regulations described in the final rule will reduce the likelihood that a terrorist could commandeer a large aircraft capable of flight and use it as a weapon.

The final rule supplements the safety requirements imposed by the FAA, but does not duplicate FAA regulations. TSA disagrees with those comments that claim the final rule will duplicate other TSA security requirements. TSA does not currently regulate aircraft repair stations and the requirements referenced by the commenters do not apply to aircraft repair stations. TSA has eliminated the proposed requirement to adopt and implement a security program, thus there will not be duplication with airport security programs.

Air carrier-owned and -operated maintenance repair and overhaul facilities conducting maintenance under the authority of a certificate issued under 14 CFR parts 121 or 135 are not subject to the requirements of this rule, since the statute and this rule specifically requires regulation of repair stations certificated under part 145 of the FAA regulations.

Comments: Several commenters asked TSA to consider a repair station to be in full compliance with the rule if it is already incorporated within an airport's security program and uses the airport's access control measures.

TSA Response: TSA is aware that some repair stations may be incorporated within an existing airport security program and has eliminated the proposed requirement that repair stations adopt and implement a security program to avoid unnecessary duplication.

Comments: Eight commenters stated that repair stations in general do not pose a risk to security, especially compared to other facilities or operations in the aviation system. Ten commenters claimed that TSA did not conduct any type of risk analysis that quantified the security risks at repair stations or the benefits of the proposed rule. An association said TSA had correctly used a risk-based approach to determine the security measures that repair stations would be required to carry out under the proposed rule and concluded that this approach is the most effective way to advance repair station security.

TSA Response: TSA agrees that the security risks posed by repair stations vary and that the most effective way to advance repair station security is to use a risk-based approach to address security matters. In developing this rule, TSA conducted a security risk analysis, including visits to repair stations located within the United States and outside the United States, interviews with industry and FAA experts, and a review of intelligence concerning a repair station's susceptibility to a terrorist attack.

The NPRM described the site visits TSA made to repair stations between June 2005 and May 2008. See 74 FR 59877. Since that time, TSA has visited 47 repair stations located outside the United States and 928 repair station facilities within the United States to observe and discuss repair station security practices. The site visits provided valuable insight into the different types of facilities certificated by the FAA, the different types of repair work performed at those facilities, and the different security measures that are deployed.

In addition, TSA considered whether certain factors could increase the security risks of a repair station. The risk factors TSA considered were: (1) The size and type of aircraft to which employees had access; (2) the type of repair work permitted by the FAA certificate; (3) whether the repair station was located on an airport and the type of airport; and (4) the number of employees at the repair station.

Comments: An industry association stated that aircraft operators that use repair stations should not be responsible for ensuring that repair stations comply with the regulation.

TSA Response: TSA agrees that aircraft operators that use repair stations will not be responsible for ensuring that the FAA part 145-certificated repair stations comply with the final rule.

Comments: Some commenters asked the FAA and TSA to coordinate their efforts to avoid placing any unnecessary burdens on repair station owners or operators. For example, one commenter pointed out that TSA could obtain repair station profile information from the FAA. Several commenters expressed concern regarding TSA's authority to request the FAA to suspend or revoke the operating certificate of a repair station. A few of these commenters said that because the FAA issues the repair station certificate and is the Federal agency responsible for the oversight and regulation of repair stations, the FAA should be the one Federal entity that is able to suspend or revoke the certificate. Other commenters questioned whether TSA, the FAA, or the National Transportation Safety Board (NTSB) has jurisdiction over the appeals process for certificate suspensions and revocations. Eight commenters said the rule would compromise aircraft safety. Three of these commenters claimed the FAA would lose oversight of repair stations and would no longer conduct mandatory inspections and surveillance. One commenter said the cost of the rule would cause repair facilities to divert operating funds away from aircraft safety. Two commenters noted the possibility that repair station operators would turn in their repair station rating and would instead operate using mechanics holding Airframe & Powerplant certification, resulting in a decrease in safety.

TSA response: TSA has coordinated its efforts with the FAA throughout the rulemaking process and the final rule does not duplicate FAA's authority to regulate repair station safety matters or interfere in any way with the FAA certification process. In response to the comments requesting that TSA reduce the burden on repair stations by using FAA profile information, TSA eliminated the requirement for repair stations to provide profile information from the final rule. TSA will obtain the profile information from the FAA.

The final rule is consistent with the statutory provisions regarding the processes for suspension and revocation of a repair station certificate. Under 49 U.S.C. 44924(c), TSA must notify the FAA Administrator when a repair station poses an immediate security risk or is found to have security deficiencies. The statute requires the FAA Administrator to act upon the TSA determination to suspend or revoke a repair station's certificate. Since the suspension or revocation is based on a determination that involves security, neither the FAA nor the NTSB has jurisdiction over the appeals process. The final rule includes a process whereby repair stations may request review of a TSA determination that the repair station certificate must be suspended or revoked. The procedure is consistent with the procedure now in place for TSA to withdraw approval of the security program of an airport operator, aircraft operator, foreign air carrier, indirect air carrier, or certified cargo screening facility, as provided in 49 CFR part 1540, subpart D.

TSA disagrees with the comments that claim the rule would compromise aircraft safety, and that FAA would lose oversight of repair stations. FAA authority over repair station safety is not affected by this rule and repair stations must continue to comply with FAA safety regulations. This rule will supplement existing FAA safety requirements with security measures to ensure that unattended, large aircraft capable of flight cannot be commandeered. The costs of the rule are summarized in Section III.C below and described in detail in the regulatory impact analysis accompanying this final rule. As explained therein, TSA has minimized the cost burden of compliance, particularly to small businesses, by using a risk-based approach and eliminating the requirement for repair stations to implement a security program. In addition, if a repair station operator turned in the repair station rating and instead used mechanics holding Airframe & Powerplant certifications, the repair station operator would not be permitted to perform maintenance on passenger aircraft unless hired by an aircraft operator, in which case the maintenance work would be subject to the safety requirements of parts 121 or 135 of the FAA rules.

Comments: Twenty-seven commenters indicated the proposed rule did not adequately accommodate or account for the diversity of repair stations to which it would apply. A commenter noted that TSA recognized that a “one size fits all approach” would not appropriately address the diversity in repair station characteristics. Other commenters asked TSA for more information on how the security program would accommodate the different levels of risk posed by different types of repair stations.

TSA response: TSA recognizes that just as aircraft repair stations vary widely in size, type of repairs, and numbers of employees, existing security measures also vary widely. As stated in the NPRM, TSA agrees that a “one size fits all” approach will not adequately address the diversity of certificated repair stations. As will be discussed below in Section G, repair stations that are not on or adjacent to an airport as defined in the final rule, are not required to implement security measures.

Comments: Several commenters, including representatives of foreign governments, addressed the relationship of the proposed rule to other countries' security laws and standards. Commenters said TSA should recognize the equivalency of the security requirements of other countries and the European Union (EU). They also questioned the legal basis for application of the final rule without consultation and agreement as laid out in international and bilateral aviation agreements such as the EU-U.S. Air Transport Agreement. Other commenters noted the potential conflict of the proposed rule's requirements with national or EU laws or regulations in areas such as unannounced inspections and background checks of repair station employees.

TSA response: TSA acknowledges the concerns of foreign governments regarding TSA authority to apply security requirements to part 145-certificated repair stations located outside the United States. TSA is aware of and has complied with its obligations under the EU-U.S. Air Transport Agreement, as well as other bilateral and multilateral instruments. TSA has discussed and will continue to discuss current and proposed security requirements with its international partners in order to enhance the compatibility of security regulations and standards, including the possibility of developing protocols for reciprocity and mutual recognition of repair station security regulations. TSA will address any specific conflicts between the final rule and any national or EU laws or regulations that may arise.

TSA has established procedures for conducting inspections outside the United States through its Foreign Airport and Foreign Air Carrier Assessment Programs and intends to use those same procedures when conducting inspections of FAA-certificated repair stations located outside the United States. These established procedures require coordination with the U.S. Department of State and the appropriate foreign government authorities.

With regard to background checks, TSA will require repair stations that are on or adjacent to an airport, as defined in this rule, to verify background information of those individuals who are designated as the TSA point(s) of contact and those who have access to any keys or other means used to prevent the operation of large aircraft. The repair station may either verify the individual's employment history, confirm that the individual holds a FAA airman certificate, or (for a repair station located in the United States) confirm that the individual has obtained a security threat assessment, such as by holding a SIDA badge. TSA will not require any other specific type of background check since the laws regarding the ability to conduct certain background checks vary widely. However, repair stations may conduct other background checks consistent with applicable laws.

Comments: Two commenters were concerned the proposed rule did not cover FAA-certificated repair stations in Canada. One of these commenters said Canadian facilities could pose the same security risks as FAA part 145 certificated facilities and contended that they should be subject to the regulation.

TSA Response: TSA is aware that the final rule will not cover repair stations located in Canada and agrees that these repair stations could pose the same security risk as other repair stations. Canadian repair stations are covered under part 43 of the FAA regulations and operate under a bilateral agreement between the FAA and the Transport Canada Civil Aviation Authority. Since they are not certificated under Part 145 of the FAA regulations, they are not within the scope of this rule.

Comments: One commenter said some foreign repair stations are already under regulatory oversight by established government authorities and should be exempt from the rule.

TSA Response: A repair station that is regulated by a governmental authority is not exempt from the final rule. While a repair station may be regulated by a government agency for safety or other purposes, as is the case with the FAA, TSA cannot be assured that such regulation would encompass the security requirements in the final rule.

Comments: Eight commenters said Congress omitted the word “domestic” from the statute and concluded that TSA does not have authority to impose regulations on domestic repair stations. One repair station owner/operator acknowledged that 49 U.S.C. 44924(f) requires TSA to issue regulations to ensure the security of both domestic and foreign repair stations. However, the commenter noted the remainder of the statute refers only to foreign repair stations and concluded that Vision 100 does not give TSA authority to suspend the certificates of domestic repair stations. Several commenters stated that the rule should apply only to foreign repair stations, that domestic repair stations pose a lower security threat than foreign repair stations, and that TSA is overstepping its authority to regulate both domestic and foreign repair stations.

TSA response: TSA disagrees with the comments that claim the regulation should apply only to repair stations located outside the United States, that repair stations located within the United States necessarily pose a lower security threat than those located outside the United States, and that TSA is overstepping its authority to regulate aircraft repair stations. TSA is required to issue regulations to “ensure the security of foreign and domestic aircraft repair stations.” See 49 U.S.C. 44924(f). Therefore, the final rule applies to repair stations that are certificated by the FAA under part 145 of its regulations. By including all FAA part 145-certificated repair stations in the scope of the rule, TSA will be able to verify that repair stations certificated by the U.S. government are in compliance with the final rule. TSA will not suspend a repair station certificate. The statute provides that the FAA must suspend a certificate upon notification by TSA until such time as TSA determines the repair station maintains and carries out effective security measures. See 49 U.S.C. 44924(c).

While the final rule is consistent with the statutory language, TSA has ample statutory authority to address all domestic transportation security matters. For example, 49 U.S.C. 114(f) gives TSA the authority to: Assess threats to transportation; develop policies, strategies, and plans for dealing with threats to transportation security; enforce security-related regulations and requirements; inspect, maintain, and test security facilities, equipment, and systems; and work in conjunction with the Administrator of the FAA with respect to any actions or activities that may affect aviation safety or air carrier operations. Section 611 of Vision 100 discusses the need to “strengthen oversight of domestic and foreign repair stations” and to “ensure that foreign repair stations that are certified by the Administrator under part 145 of title 14, Code of Federal Regulations, are subject to an equivalent level of safety, oversight, and quality control as those located in the United States.”  4 Exempting repair stations within the United States from the enforcement provisions of the final rule would not permit TSA to effectively oversee the security of repair stations located within the United States or ensure that repair stations located outside the United States are subject to an equivalent level of safety, oversight, or quality control.

Regulating only repair stations outside the United States would not help TSA meet the statutory objective to ensure the security of foreign and domestic aircraft repair stations. In fact, the majority of FAA part 145-certificated repair stations are located in the United States and U.S. aircraft continue to be a prime target of terrorist threats. Exempting U.S. repair stations from the final rule would create a significant gap in TSA's efforts to secure U.S. aircraft and the traveling public. Repair stations located in the United States present an immediate opportunity for terrorists to attempt to harm U.S. aviation interests. For that reason, and consistent with statutory language, the final rule applies to FAA part 145-certificated repair stations.

Many commenters requested TSA to exempt particular types of repair stations from the rule. Nineteen commenters stated that off-airport repair stations do not pose a security threat and contended the final rule should apply only to repair stations located on airport grounds. Another commenter agreed off-airport repair stations are less desirable targets than on-airport repair stations because they do not have access to operational aircraft. However, one commenter observed there are off-airport repair stations that repair complete aircraft.

A number of commenters requested additional types of repair stations be exempted from the regulation, including: Stations with a small number of employees, stations servicing hot-air balloons, and stations servicing aircraft with a MTOW below 12,500 pounds. In contrast, a labor union urged TSA not to exempt any repair stations from the rule.

Eighteen commenters stated repair stations servicing aircraft with a MTOW below 12,500 pounds should be exempt from the rule. Several other commenters said any weight threshold used for this rule should be consistent with the threshold adopted in the General Aviation Security final rule. A few others suggested weight thresholds ranging as high as 100,000 pounds.

Eleven commenters requested TSA to exempt repair stations that work only on aircraft components and do not have access to complete aircraft. Commenters stated these repair stations do not pose a security threat because existing FAA rules require testing of the airworthiness of the repaired components prior to installation.

TSA response: TSA agrees with commenters that repair stations located on or adjacent to an airport could pose a higher security risk than other repair stations. As the commenters point out and as discussed in the NPRM, TSA found that repair station employees at off-airport locations had little, if any, access to operational aircraft or runways and are not the last individuals with access to aircraft prior to the reintroduction of the aircraft into service. TSA concluded that it may be more difficult for potential terrorists to attempt to attack aviation interests from an off-airport repair station location.

TSA also agrees with commenters that it would be difficult for a terrorist to damage an aircraft at a repair station that is rated to repair only aircraft component parts. FAA safety regulations require inspection of the repair work and the component part prior to installation in an aircraft and before the aircraft is determined to be airworthy. TSA agrees with the commenters who believe that it is less likely that a terrorist would attempt to target an aircraft by attempting to sabotage or tamper with a component part at an off-airport location.

In addition, TSA agrees with those commenters that repair stations that do not work on large aircraft pose less of a security risk. TSA has long recognized that aircraft with a MTOW of more than 12,500 pounds may be a greater security risk because the aircraft are of sufficient size and weight to inflict significant damage and loss of lives. See Security Programs for Aircraft 12,500 Pounds or More, 67 FR 8295 (Feb. 22, 2002). Smaller aircraft may be a less attractive target for terrorists.

TSA believes that it must maintain its authority to conduct security inspections to ensure that repair stations do not pose a risk to transportation security and to make clear that repair stations must comply with security directives issued by TSA to respond to a specific threat. However, TSA has determined that only higher risk repair stations will be required to adopt security measures. Repair stations considered to be higher risk include those located on or adjacent to an airport. TSA will consider a repair station to be “on airport” if it is located on an AOA or SIDA of an airport covered by an airport security program under 49 CFR part 1542 in the United States, or on the security restricted area of any commensurate airport outside the United States regulated by a government entity. TSA will consider a repair station to be adjacent to an airport if there is an access point between the repair station and the airport of sufficient size to allow the movement of large aircraft between the repair station and the area described as “on airport.” These repair stations present the highest risk to security due to their proximity to an airport and a runway and the presence of operational aircraft of a size and weight that could inflict significant damage and loss of lives. These repair stations must implement security measures described in the final rule. TSA has retained the current definition of large aircraft used in its regulations, and will change that definition throughout the regulations should another definition be adopted in the General Aviation Security rulemaking proceeding.

Other repair stations, in general, represent a minimal risk to aviation security because they are not located on or adjacent to an airport and do not have access to aircraft of sufficient size and weight to inflict significant damage or loss of lives. All FAA part 145 certificated repair stations are subject to other requirements in the rule, such as submission to TSA inspection and compliance with security directives.

Comments: Two repair station owners/operators and an industry association supported the proposed SSI regulations. Another repair station owner/operator said the proposed SSI requirements may be redundant, because some corporations already have controls for business purposes to protect information from public disclosure. Another commenter warned the SSI requirements could adversely affect corporate operations and the availability of an operator's procedural documentation to its employees. An airport owner/operator expressed concern that the proposed rule would impose SSI responsibilities on repair stations even if they pose a low security risk. A repair station owner/operator and an industry association suggested the SSI provisions should apply to repair station owners but not to operators. Three commenters, including the European Commission, expressed concern about the applicability of the SSI provisions to foreign nationals who own and operate aircraft repair stations. They also said the proposed SSI provisions might be incompatible with the data protection directives of other nations or the EU.

TSA response: TSA has eliminated the proposed requirement to adopt and implement a security program and has, therefore, eliminated the proposed changes to part 1520. TSA's SSI regulations already require security directives (SDs) to be treated as SSI. 49 CFR 1520.5. Part 1520 applies to entities that receive a TSA SD, including U.S. and foreign air carriers for their operations both within and outside the United States. While businesses may have procedures in place to protect certain types of information, they may not include specific SSI protections.

Repair stations will be responsible for developing procedures to safeguard against unauthorized disclosure of a SD. When an individual is not in physical possession of SSI, that individual must store the SSI in a secure container, such as a locked desk, office, or file cabinet. TSA disagrees with the comments that the SSI regulations could make it difficult to share security information with repair station employees. The SSI regulations permit disclosure to persons with a need to know. 49 CFR 1520.9.

TSA appreciates the concerns of the European Commission regarding the applicability of SSI requirements to foreign repair stations; however, TSA does not believe that this will cause difficulties with regard to EU legislation and data protection policies. TSA already applies SSI requirements to foreign air carriers operating under a TSA-accepted Model Security Program or who receive a TSA-issued emergency amendment. The EU has not objected to or raised concerns regarding conflicts with EU data protection laws and regulations in those instances. TSA will continue to discuss with the EU any specific conflicting regulatory requirements that may arise.

Comments: A repair station owner/operator supported the scope of the rule as proposed. Another repair station owner/operator suggested the words “or excluded from this part by TSA” be added to account for situations in which a repair station is already incorporated within an airport's security program or in which the repair station does not constitute a security threat. An industry association suggested the addition of “or host government” after “U.S. Government” in recognition of the fact that many other governments already have standards that meet or exceed those in the proposed rule.

TSA response: TSA has modified the language in the final rule. The final rule does not apply to FAA part 145-certificated repair stations located on a U.S. or foreign government military installation. However, certificated repair stations that are regulated or under the oversight of a governmental entity are not exempt from the final rule. As explained previously, only higher risk repair stations will be required to implement security measures.

Comments: Four commenters addressed the proposed definition of “repair station.” One industry association suggested narrowing the definition to include only repair stations that convey aircraft directly into commercial flight operations under parts 121 or 135 of the FAA's regulations. Another industry association suggested narrowing the definition to include only those repair stations authorized to perform maintenance or alteration of civil aviation aircraft located on a commercial airport. A third industry association objected to the proposed definition because it does not recognize mixed maintenance operations, in which a repair station is co-located at a larger facility that is not otherwise covered by TSA security requirements. A repair station owner/operator asked whether the scope and boundaries of a repair station for purposes of the TSA rule would differ from the scope and boundaries of the repair station for FAA purposes.

TSA response: In response to the comments, TSA has eliminated the terms to avoid confusion with FAA terminology.

TSA is aware of the existence of mixed-use facilities, for example those that combine maintenance and manufacturing stations. It will be the repair station operator's responsibility to delineate the parts of the station used for activities subject to this final rule and those that are not. If a repair station determines it is not possible to make such a delineation then the entire station would need to meet the requirements of this final rule.

Comments: Several commenters suggested that TSA's authority to enter a repair station should be limited to normal business hours or after business hours with an escort upon reasonable notice, unless there is a known specific threat. These comments point out that, with prior notification, a repair station could make certain that the correct personnel are available to answer questions and provide documentation. Two labor unions supported unannounced inspections, saying repair stations must constantly ensure that they are complying with security requirements, and that advance notice would nullify the benefit of a security inspection. Four commenters supported the proposed language authorizing TSA to conduct unannounced inspections. However, they expressed concern that TSA indicated it would follow existing protocols for inspection of repair stations located outside the United States and provide advance notice to the facility being inspected and the host government. The commenters asserted that giving advance notice would nullify the benefit of the security inspection. Eight commenters, including a foreign government and the European Commission, said TSA could not legally inspect repair stations located outside the United States without prior notification and the approval of the authorities of the country in which the repair station is located.

TSA response: TSA will follow current agency practices regarding inspections of repair station facilities outside the United States. TSA will always coordinate any inspections with the host government prior to starting an inspection. With regard to repair stations within the United States, TSA acknowledges the concerns expressed regarding such government inspections. While TSA anticipates that in some cases it will notify these repair stations of scheduled inspections, this regulation allows TSA to conduct an inspection without advance notice at any time and in a reasonable manner. In those instances where notice is given, TSA will give the repair station the opportunity to gather evidence of compliance and to arrange to have the appropriate personnel available to assist TSA. However, TSA anticipates that unannounced inspections will be conducted in the United States, particularly if warranted by a security incident at a repair station. Some inspections can be effective only if they are unannounced in order to determine whether the regulated party is in compliance when it is unaware that TSA may be inspecting. Terrorists will seek to take advantage of vulnerabilities whenever they occur. TSA must have the ability to respond to information, operations, and specific circumstances whenever they develop and to assess the security of regulated entities at any time, including weekends or holidays.

Comments: Several commenters said the rule should clearly define the scope of TSA audits and should specify that the repair station property, facility, and records to be inspected are only those relevant to repair station security. In addition, a repair station owner/operator and an industry association stated that business records, corporate correspondence, and aircraft maintenance records should be off-limits without a search warrant. They said the proposed rule language was too broad and should be narrowed in the final rule.

TSA response: TSA disagrees that the inspection authority is overly broad and has not modified the language in the final rule. The statute authorizes TSA to “complete a security review and audit.” See 49 U.S.C. 44924(a). In addition, TSA has authority to “inspect, maintain, and test security facilities, equipment, and systems.” See 49 U.S.C. 114(f)(9). The regulatory text states specifically that the purpose of the inspection is to “carry out TSA's security-related or regulatory authorities.” Thus, TSA will seek access to records relevant only to security. The inspection authority section in new § 1554.5 includes audits, assessments, or inspections and is consistent with existing TSA rules, such as in § 1542.5 (airport operators) and § 1580.5 (railroad operators).

Also in connection with scope, TSA notes that consistent with its statutory authority (which currently allows inspections for security reasons irrespective of this final rule), inspections will be for compliance with this final rule's requirements and for security reasons only. For repair stations not subject to security measures under this rule (that is, those repair stations not located on or adjacent to an airport, as defined in this rule), TSA does not intend to inspect such facilities except as necessary to comply with the requirement in 49 U.S.C. 44924 to conduct a security audit of all part 145 certificated repair stations located outside the United States, to evaluate security risks as conditions warrant, and, in the event that TSA issues a security directive to such a repair station, for compliance with the security directive.

Comments: Some commenters said repair station security policy may require anyone inside the repair station to have an identification badge, and suggested that TSA and DHS officials comply with established security programs at the site. A few commenters asked how repair station personnel would know if TSA or DHS credentials are valid. One of them asked if repair station personnel could record the names and badge numbers of TSA and DHS inspectors.

TSA response: The final rule allows repair stations to request inspectors to present their credentials for examination. Repair stations may not photocopy or otherwise reproduce the credential to prevent unauthorized individuals from using fake credentials to access a repair station. Repair stations may issue access or identification media to inspectors for their use while conducting inspections of the facilities. However, they may not prevent an inspector from conducting an inspection because the inspector was not issued identification media by the repair station. TSA will assist repair stations to develop training to identify TSA and DHS credentials.

Comments: A repair station owner/operator observed that TSA and DHS officials would need an escort for their own safety. Several other commenters were concerned that untrained TSA personnel could damage aircraft parts during their inspections or cause a disruption of work.

TSA response: TSA appreciates that it must properly train its inspectors so that they avoid dangers to themselves, to employees, and other individuals at the repair station, and to property. TSA intends to use only properly trained and credentialed personnel to conduct inspections.

Comments: A repair station owner/operator supported the proposed requirement to submit a profile because it would prevent use of a “one size fits all” approach to repair station security. One commenter asked TSA to accept the company profile used for FAA repair station approvals. Another repair station owner/operator said that TSA should eliminate this requirement or provide more information on what would constitute an adequate profile. Several commenters said that the proposed rule provided no guidance on how repair stations would report changes in profile information or how they would know which changes were significant enough to require reporting.

TSA response: TSA concurs with the majority of comments regarding the submission of a profile and has not included the requirement in the final rule. TSA will use existing repair station profile information from the FAA.

Comments: Several commenters questioned how TSA could achieve its stated objective of appropriately addressing the diversity in repair station characteristics while requiring repair stations to use a standard security program, unless otherwise authorized by TSA. They expressed concern about having to adopt a “canned” or “cookie-cutter” security program. In contrast, two labor unions said that there needs to be a baseline security standard applied to all repair stations and that allowing for any variation presents an opportunity for disparities in security from station to station.

TSA response: TSA has eliminated the requirement to adopt and carry out a security program in the final rule.

Comments: Some commenters expressed the belief that a 30-day deadline for a repair station to submit a profile was insufficient, particularly for small entities, those located overseas, and large corporations with many subsidiaries or joint ventures. Three of them suggested that 90 days would be more realistic.

TSA response: TSA has eliminated the requirement for repair stations to submit a profile so there is no longer a 30-day deadline requirement.

Comments: Two repair station owners/operators objected to the fact that the proposed rule does not define specific minimum performance standards, and entities may be subject to inconsistent compliance expectations. Another commenter asked that the detail provided in the preamble regarding the security program be included in the regulatory language.

TSA response: TSA has eliminated the language in the NPRM regarding the security program requirements. The final rule describes security measures that repair stations on an airport or adjacent to an airport, as defined in the final rule, must adopt. In order to reduce the potential regulatory burden and implementation costs of the proposed rule, TSA has removed all security measures that restrict access to a repair station in the final rule. Instead, repair stations will be required to prevent unauthorized operation of large, unattended aircraft that are capable of flight. Large aircraft are defined as aircraft with a maximum certificated take-off weight of more than 12,500 pounds and attended aircraft means aircraft to which access is limited to authorized individuals and property.

The final rule explains that preventing unauthorized operation may be accomplished in several ways and a repair station may even develop its own measure so long as it obtains approval from TSA. The final rule states that a repair station may block the path of the aircraft so that it cannot be moved and control the key to a vehicle used for that purpose, park the aircraft in a locked hangar and control the key to the hangar, or move stairs away from the aircraft and shut and lock, if feasible, all cabin and cargo doors and control the key. Controlling the key, if used, is described as making sure that keys are only available to an authorized individual who has undergone an employment history check or a security threat assessment.

Comments: Ten commenters addressed the provision of the proposed rule requiring the security programs to include measures to identify all individuals authorized to enter the repair station. Three of the commenters said the actual language of the provision was not detailed enough to establish TSA's intent. A repair station owner/operator expressed support for TSA's statement in the NPRM that TSA will deem repair stations with established personnel identification media systems as compliant with the requirement. The commenter asked TSA to incorporate that language into the final rule. Three of the commenters also questioned TSA's intent with regard to compliance by small repair stations. They said small repair stations should be able to rely on simple identification measures such as personal recognition.

TSA Response: In response to the comments, TSA has eliminated this requirement in the final rule.

Comments: A repair station owner/operator said it is already in compliance with many elements of the proposed standard security program, including use of an employee identification system. Another repair station owner/operator said TSA should not require repair stations with established and existing escort policies and programs to replicate “redundant” government escort procedures, because it would cause confusion among employees and would impose excessive labor costs. With regard to the proposed training requirements, three commenters said existing International Civil Aviation Organization (ICAO) and EU requirements should be sufficient to meet the requirements, and a repair station owner/operator said security training already is part of its operations.

TSA response: TSA has eliminated these security requirements in the final rule. TSA acknowledges that many repair stations may already have existing measures that meet or exceed the requirements described in the final rule.

Comments: Twenty-one commenters expressed divergent views regarding the requirement for employee background checks. Three commenters supported the proposed rule and said it should be imposed on repair station employees to the same degree it is imposed on FAA-certificated mechanics. Five commenters said the requirement to check previous employment might not be possible under EU Directive 95/46/EC and national legislation. A repair station owner/operator said TSA failed to recognize the limits imposed by Federal and State labor laws, as well as union contracts. One industry association said other laws and FAA regulations already require confirmation of citizenship and other information related to employment history. Another industry association also stated this requirement would be redundant for airport-based facilities.

Seven commenters said the requirement was too vague and lacked details, such as screening criteria and adjudication procedures. One industry association said the phrase “any other means as appropriate to validate employee information” is unclear and said the final rule should have specific requirements such as the number of years or number of employers to include. Another industry association said it was unclear whether TSA intended employers to conduct a criminal history or a security threat assessment, but that neither should be required. Another commenter said the rule should include language that prevents operators from having to repeat background checks they have already conducted.

TSA response: TSA has retained the requirement to verify employee background information, but has limited the number of repair stations that must implement security measures and has reduced the number of individuals whose background information must be verified. TSA recognizes that many countries have different laws and regulations regarding this matter, and not all repair stations have a need or the ability to conduct certain types of background checks. The final rule requires that only the individual or individuals responsible for compliance with the final rule and recordkeeping, designated as TSA point(s) of contact, and authorized access to keys used to secure large aircraft must undergo a background check. The final rule does not mandate the number of individuals who must undergo a background check, but the number must be sufficient to ensure that a point of contact is available on a 24-hour-a-day basis and all large aircraft capable of flight are secured when not attended.

The final rule includes four examples of background checks that are acceptable and allows a repair station to use another means if approved by TSA.

(1) Verification of employment history for the most recent five year period or the time since the employee's 18th birthday, whichever is shorter. Verification may be accomplished via telephone, email, or in writing. If the verification is performed by telephone, the repair station must record the date and the name of person who verified the employment. If there is a gap in employment of six months or more that is not satisfactorily explained, employment history is not verified for purposes of this rule. Employment history verification records must be maintained for at least 180 days after the employment ends.

(2) Confirmation that the employee holds an airman certificate issued by the FAA is sufficient since TSA vets all such certificate holders.

(3) For a repair station located within the United States confirmation that an employee has successfully completed a security threat assessment pursuant to part 1540 of TSA's regulations, such as by holding a SIDA badge.

(4) For a repair station located outside the United States, confirmation that an employee has obtained a security threat assessment commensurate to a security threat assessment described in part 1540 of TSA's regulations.

TSA is aware that many repair stations already conduct security threat assessments or other background checks on their employees. If the background check is commensurate with the requirement of the final rule, TSA will not require duplicative or redundant measures.

Comment: A few commenters urged TSA to require drug and alcohol testing of personnel at foreign repair stations, just as the FAA requires such testing under its authority over domestic repair stations. The European Commission commented that such testing in EU member nations is a matter for the law enforcement services in those nations.

TSA response: As stated in the NPRM, drug and alcohol testing is a safety issue that is under the purview of the FAA and is not included as a requirement in the final rule.

Comments: A repair station owner/operator said the NPRM provided no training criteria or scope of incident management for the security coordinator. An industry association recommended TSA specify all training requirements in one place and requested that the expectations for the training of security coordinators be defined. One repair station owner/operator indicated that 24-hour contact would not be feasible for a small component repair station located outside of an airport. A second owner/operator said the requirement should be imposed at the airport level, not at the facility level. A third owner-operator suggested TSA allow repair stations to designate an alternate security coordinator.

TSA response: TSA has eliminated the requirement to train a security coordinator in the final rule. The repair station must designate one or more individuals, as necessary, to serve as TSA point(s) of contact and to be responsible for compliance with the final rule and recordkeeping. Training is not required to perform these responsibilities. TSA does not agree that an airport Security Coordinator would be sufficient to serve as the primary and immediate contact for repair station security-related activities and communications with TSA, unless TSA determines the repair station is incorporated within the airport security program and the airport is responsible for the security of the repair station itself.

Comments: A commenter stated that requiring a repair station to make its security program available for review by TSA is insufficient. The commenter said TSA should review and approve each security program. A repair station owner/operator asked to whom the security program must be accessible. One industry association asked if airport operators would be able to access and review a repair station's security program to verify that the airport operator is contacted for all security related issues or incidents.

The European Commission and a repair station owner/operator opposed the proposed English language requirement, noting that it would be burdensome for foreign repair stations. The European Commission pointed out that English is the official language of only three of the 27 EU member states and said the requirements for oral and written communications to be in English would be impossible to implement.

TSA response: The proposed requirement to adopt and implement a security program has been eliminated in the final rule.

With regard to the proposed English language requirements, while TSA has eliminated the security program requirement, it retains the requirement in the inspection provision to request documents in English. TSA notes that this requirement is consistent with FAA regulations, such as 14 CFR 145.219, which requires a certificated repair station to retain records of compliance in English.

Comments: Several commenters objected to the requirement to comply with SDs and asserted TSA has used SDs to issue requirements without notice and the opportunity for public comment, thus circumventing the rulemaking process. Several industry associations expressed concern that TSA will require repair stations to comply with SDs that are not applicable to their circumstances.

A commenter suggested TSA allow electronic acknowledgement of receipt of an SD so that a record of compliance is maintained. Other commenters thought verbal acknowledgement would be impractical and burdensome to TSA and to repair stations, particularly small facilities. Two repair station owners/operators said TSA should specify the method of compliance in the SD. A repair station owner/operator requested TSA identify the process for obtaining approval for alternative measures of complying with an SD.

An industry association asserted that foreign repair stations are not under TSA jurisdiction, and a repair station owner/operator said the requirement to comply with SDs might be incompatible with foreign security requirements.

One commenter requested TSA avoid using common aviation-related abbreviations for TSA-related items. As an example, the commenter said Security Directives should be called “TSA Directives.”

TSA response: The term “Security Directive” is a standard term used throughout TSA's regulations to describe the regulatory document issued by TSA when TSA determines that additional security measures are necessary to respond to a threat assessment or to a specific threat against civil aviation. See 49 CFR 1542.303, 1544.305, 1548.19, and 1549.109. TSA declines to rename these documents. TSA intends to maintain its current practice and issue SDs to repair stations when necessary to respond to a threat assessment or a specific threat against aviation. TSA has added language to the final rule to clarify that repair stations may comment on SDs issued by TSA in § 1554.103(d). TSA may amend an SD based on those comments. TSA will include in an SD the procedures to acknowledge receipt, to implement the requirements, and to request alternative measures if a particular measure is incompatible with a security requirement imposed by a foreign government or cannot reasonably be implemented.

Comments: A few commenters asserted the statutory provisions regarding the suspension and revocation of certificates apply only to repair stations located outside the United States and thus the final rule should not apply to repair stations within the United States. Commenters claimed the proposed rule includes procedures for appealing the revocation of certification, but not for appealing the suspension of certification. Some recommended following the FAA process in 14 CFR part 13. Several commenters said the rule should include the criteria TSA would use when initiating a suspension or reinstating a certification. Another industry association added TSA is as likely to err in its judgment, as the industry is likely to err in compliance. Several commenters also expressed concern about the consequences of suspension and the resulting economic burden, especially on small businesses. Several commenters objected to the appeal process because it did not provide for appeal of TSA's decision to an impartial third party. One repair station owner/operator stated the proposal violates the current rules of discovery and does not reflect current judicial process, and other commenters urged that final certification authority be left to the FAA or NTSB. Other commenters warned that even though the suspension and review may be temporary, either action would jeopardize a repair station's ability to remain viable and the rule should include specific timelines that TSA must meet.

Commenters expressed concern because the proposed rule provided no guidelines for TSA's determination of revocation and there are no effective checks on TSA's power to revoke. They also objected that under the proposed rule, a certificate remains revoked during the review process. One industry association requested TSA follow the procedures already in place for the revocation of an FAA airman certificate, including appeal to an administrative law judge and then to the NTSB. Another industry association observed that in some TSA actions against individual airmen, certificates were revoked while the documentation supporting TSA's actions were withheld. A repair station owner/operator requested harmonization with FAA's enforcement process, which includes voluntary self-disclosure, administrative corrections, processes to handle repeat offenders, and published guidelines for legal enforcement, including suspending or revoking domestic repair station certificates. An industry association expressed the belief that review of a revocation must be reconciled with existing FAA and TSA regulations. An anonymous commenter pointed out that the statute requires consulting with the Administrator to establish procedures to appeal a revocation of a certificate.

Nineteen commenters said that the proposed rule did not provide enough detail or left too much to interpretation by those who would enforce it. A few commenters expressed concern about a lack of key definitions such as “immediate risk to security” and procedural protections such as other tools to achieve compliance objectives, and time limits for review, which could lead to inconsistencies and certificate revocation without due process.

TSA response: TSA has clarified the regulatory language that provides for judicial review of a final agency order. TSA has also modified the language in the final rule to specify that repair stations have the opportunity to petition for reconsideration of a TSA determination that a repair station certificate must be suspended or revoked. The certificate enforcement actions in the final rule are consistent with TSA's procedures governing the withdrawal of approval of a security program. 49 CFR 1540.301. TSA agrees with commenters that the FAA has the authority to issue, suspend, or revoke certificates and the statute requires the FAA to suspend or revoke a certificate if notified by TSA to do so. 49 U.S.C. 44924(c). Since any certificate action initiated by TSA will involve compliance with TSA's security regulations, the basis for the certificate action must remain with TSA and not the FAA or the NTSB. Further, TSA has general authority to enforce security-related regulations and requirements. 49 U.S.C. 114(f)(7). TSA has consulted with the FAA in the development of the final rule.

TSA appreciates the concerns expressed regarding the impact of a suspension or revocation of a certificate on a repair station business. TSA intends to follow current enforcement practices and anticipates that most instances of non-compliance will not result in certificate action. When appropriate, TSA will use a progressive enforcement process whereby instances of non-compliance can be resolved with non-certificate action, including counseling, administrative actions, and civil penalties. See 49 CFR part 1503.

Comment: Two repair station owners/operators expressed concern that the proposed regulations would preclude them from obtaining information needed to appeal TSA determinations.

TSA response: TSA has retained the language from the NPRM in § 1554.205 in the final rule. In accordance with E.O. 12968, TSA does not disclose classified information. In accordance with 49 CFR 1520, TSA also does not disclose SSI to individuals without a “need to know.” However, consistent with current enforcement practice, TSA will provide the repair station with the information it collected and upon which the enforcement action is based.

Comment: One commenter suggested repair station operators be required to amend their FAA repair station manuals to make all personnel aware of TSA security concerns.

TSA response: The FAA repair station manual is outside the scope of this rulemaking and TSA authority. TSA, however, has shared this comment with FAA.

Comment: Several industry associations said that TSA should allow them and repair station owner/operators to review the standard security program prior to implementation of the rule.

TSA response: TSA held briefing sessions with industry representatives in the United States and overseas. During the sessions, TSA provided a draft security program template for review and received comments. TSA notes that the requirement to adopt and implement a security program has been eliminated in the final rule.

Comment: A commenter asserted that a substantial number of maintenance workers at repair stations are not certified and that some may not be legally working in the United States.

TSA response: TSA notes that all employees hired after November 1, 1986, must complete Form I-9, Employment Eligibility Verification, issued by U.S. Citizenship and Immigration Services of the Department of Homeland Security to document that they are authorized to work in the United States.

Comment: Ten commenters requested a more collaborative rulemaking process. Another commenter recommended consulting with four specific industry associations and other industry organizations during revision of the proposed rule. One industry association also suggested the creation of a Repair Station Sector Coordinating Council as a formal means of obtaining industry input for the rulemaking process. An association requested TSA to issue a Supplemental NPRM to make certain that the concerns raised in the public comments are addressed. Two commenters stated the lack of ability to review details of the Standard Security Program as part of the proposed regulations, specifically the associated information deemed by TSA to be SSI, render this rulemaking non-compliant with the requirements of the Administrative Procedure Act and applicable case law defining adequate rulemaking notice and opportunity to comment.

TSA response: The NPRM containing the proposed regulations was published in the Federal Register for public comment. 74 FR 59874 (Nov. 18, 2009). TSA has reviewed all of the comments it received during the public comment periods in 2004 and 2009, as well as those received during the public listening session conducted in 2004, and has adjusted the final rule to address the comments as necessary. TSA has met all requirements of the Administrative Procedure Act. As noted above, TSA met with the repair station industry to receive comment on the security program template format. TSA held briefing sessions with industry representatives in the United States and overseas. During the sessions, TSA provided a draft security program template for review and received comments, although it ultimately determined not to include the security program requirement in the final rule. TSA will continue to consult with its stakeholders and sees no need for a coordinating council at this time.

Comments: Five commenters said TSA lacks the budget and staffing levels needed to implement the security programs and provide oversight of repair stations as detailed in the rule. Two commenters said TSA is understaffed and suggested this rulemaking would serve only to divert necessary resources from the agency's other security programs. Two other commenters requested TSA secure the necessary resources to make certain the proposed program is implemented efficiently and immediately.

Several commenters said TSA would likely need to hire new inspectors to implement the rule, and two commenters requested any new TSA inspectors be required to complete mandatory training to ensure all inspectors understand the safety measures and precautions that must be taken when performing security audits at repair stations.

TSA response: The costs to the government to enforce the final rule are included in the regulatory impact analysis. TSA is aware of the complexity of work performed at repair stations. TSA has developed the appropriate inspection guidance documents and relevant training for its inspectors.

Comments: Two commenters questioned the statutory requirement that TSA complete a security review and audit of all foreign repair stations certificated by the FAA no later than six months after the final rule is issued. Both said that the six-month period is too short. One requested that the period be extended to 12 months, while the other requested that the compliance period be extended to 18 months, the time specified in Vision 100. One commenter warned that if TSA does not extend the timeframe, the ability of new repair stations to be certified could be impeded, which would negatively affect the aircraft repair industry.

TSA response: In the Implementing Recommendations of the 9/11 Commission Act of 2007 (Pub. L. 110-53, 121 Stat. 266, Aug. 3, 2007), the original 18-month deadline for completing security audits of repair stations located outside the United States was reduced to six months. TSA is committed to meeting the statutory deadline. TSA has hired inspectors and developed a database that will serve as an inspection scheduling and tracking tool. TSA has also developed an implementation plan for inspecting repair stations located outside the United States.

Comment: An industry association suggested TSA collaborate with foreign authorities to help implement the proposed program in their respective countries. According to the association, this approach would allow TSA to use its resources more efficiently.

TSA response: TSA will continue to meet and work with its international partners to discuss implementation of the final rule.

Comments: Ten commenters said the proposed rule did not include a compliance date or adequate details on TSA's implementation plans, such as whether some repair stations would have to come into compliance before others. An aircraft manufacturer recommended adding a long-term compliance date for including measures to control access to a repair station because a business plan would need to be modified in order to accommodate increased capital expenses. The commenter also suggested providing a more flexible “phase-in period” for repair stations that recognizes current industry business models in order to enable repair stations to adequately and appropriately address any identified security lapses. The commenter further recommended adopting a compliance schedule similar to that of 14 CFR parts 1, 21, 43, and 45, which focus on addressing potential industry constraints with meeting new compliance requirements. One commenter recommended an 18-month period, to allow adequate time to prepare for necessary costs and ensure that repair stations have an adequate understanding of what is required of them. One industry association suggested using a compliance date of 180 days from the publication of the final rule.

TSA response: The final rule will be effective 45 days after the date of publication in the Federal Register . TSA will conduct appropriate outreach and communication to industry representatives and the aircraft repair station community to discuss specific implementation timeframes and issues. TSA notes that it has eliminated the requirement to adopt and carry out a security program in the final rule. In addition, TSA anticipates that many of these repair stations already have security measures in place that may meet or exceed the measures contained in the final rule.

Comment: One commenter requested more information on the fees charged for TSA repair station audits, noting that the initial audit will require an additional charge for repair stations if the FAA is conducting the audits.

TSA response: TSA is not charging a fee to conduct security audits or inspections.

Comment: One industry association suggested TSA establish a 24-hour point of contact to answer compliance-related questions.

TSA response: TSA has established a dedicated email address, ARS@tsa.dhs.gov , where repair stations can send questions. In addition, repair stations will be provided with the name and contact information for inspectors who will be available to respond to questions.

Comment: The Small Business Administration Office of Advocacy (SBA) recommended that TSA limit the scope of the rule. SBA offered the following three alternatives to meet the objectives of Vision 100 while minimizing significant economic impacts on small repair stations: (1) Exempt all repair stations that are not located at a commercial airport or that do not have access to aircraft; (2) adopt a risk-based, tiered approach based on size of aircraft and access to aircraft; and (3) align the final rule with the threshold level TSA ultimately adopts in the proposed General Aviation Security rule.

TSA response: TSA has reduced the scope of the final rule and has eliminated the proposed requirement to adopt and implement a security program. TSA has analyzed the possible security risk associated with repair stations and agrees that those not located on or adjacent to an airport, as defined in the final rule pose a lower risk to transportation security. This risk-based approach will minimize the economic impact on small repair stations consistent with SBA's recommendation. The aircraft size threshold in this final rule is consistent with TSA's current regulatory threshold. TSA agrees that its regulations should be consistent and will evaluate all of its regulations to determine whether changes are needed to enhance consistent regulatory treatment once the General Aviation Security rule is final.

Comment: SBA recommended that TSA provide clear guidance to small business regarding the implementation of the security program.

TSA response: TSA has eliminated the requirement to implement a security program. TSA will work with all stakeholders to provide guidance on the final rule.

Comment: SBA was concerned that the costs of the regulation were understated, explaining that TSA either failed to estimate or underestimated costs of inspections, correcting security deficiencies, complying with security directives, implementing access control measures, implementing the security program, appealing suspension and revocation determinations, and implementing identification media systems. SBA recommended that TSA reassess its cost estimates.

TSA response: TSA has added estimates or updated its previous estimates in the regulatory impact analysis to reflect the requirements in the final rule. TSA notes that the requirement to implement a security program has been eliminated and the application of security measure requirements has been reduced significantly. The costs of complying with future SDs cannot be estimated. SDs are issued on a limited basis to respond to a specific threat. The measures required to respond to the threat and the frequency of such threats cannot be reasonably predicted. TSA does permit regulated entities to comment on a SD and propose alternate measures if the measures cannot be reasonably implemented.

Comment: SBA recommended that TSA address the concerns of small businesses regarding SSI and develop procedures to assist small businesses to control SSI.

TSA response: The requirements for the protection of SSI are described in part 1520 of TSA's regulations. TSA will provide assistance and will answer specific questions regarding the protection of SSI. The SSI regulations explain that SDs are SSI. Those repair stations that receive a SD will be required to safeguard it to prevent access by individuals who are not authorized to possess SSI. Repair station employees must have access to the SD to ensure that security measures are implemented. To protect SSI, TSA only requires that SSI be stored in a locked cabinet or desk drawer, or electronically as a password-protected file. Therefore, TSA believes that the costs of protecting SSI will be minimal and will only be incurred if the repair station receives a SD.

Comment: SBA recommended that TSA address concerns expressed by small businesses regarding the appeals process if TSA determines that a repair station certificate must be suspended or revoked. It also recommended that intermediate processes such as warnings, or requests for information be used since small businesses may go out of business if closed pending appeal of a suspension.

TSA response: Since TSA has eliminated the proposed requirement to adopt and carry out a security program; we do not expect that there will be many instances that would require suspension or revocation of a certificate. This expectation is based on the repair station visits TSA conducted that demonstrated the vast majority of repair stations already have reasonable and sufficient security measures in place. While some aspects of the appeals process are specified in the statute, TSA has clarified the regulatory language that provides for judicial review of a final agency order. TSA has also modified the language in the final rule to specify that repair stations have the opportunity to petition for reconsideration of a TSA determination that a certificate must be suspended or revoked. The final rule is consistent with TSA's current regulations regarding withdrawal of a security program. 49 CFR 1540.301. TSA agrees that intermediate processes will be used. This is consistent with TSA's current inspection protocols used to inspect airports and air carrier or aircraft operator operations. TSA anticipates that in most instances repair stations will be able to implement immediate measures to correct security deficiencies without the need for any formal enforcement mechanism. When necessary, TSA will use a progressive process whereby instances of non-compliance can be resolved with non-certificate action, including counseling, administrative action, and civil penalties. See 49 CFR part 1503.

Comment: SBA recommended that TSA consider how its proposed rule would affect non-typical and “hybrid” repair station facilities. For example, some repair stations are tenants in large facilities in which the landlord is not a regulated entity, some only occupy a workbench within a large building, and some work on the “air side” of an airport where pilots and other visitors frequently walk up to an open hangar to ask questions.

TSA response: TSA understands that there is a wide variety of certificated repair stations that differ in size, type of repairs, and number of employees. TSA has eliminated the proposed requirement to implement a security program and has reduced the number of repair stations that will be required to implement the security measures described in the final rule.

TSA is aware of the existence of “hybrid” or mixed-use facilities, for example, those that combine maintenance and manufacturing stations. It will be the part 145 certificated repair station's responsibility to delineate the parts of the station that are subject to the final rule and those that are not. If a repair station determines it is not possible to make such a delineation, the entire repair station must be in compliance with the final rule.

Comment: One association addressed the cost of complying with the proposed amendments to part 1520, which would designate repair station security programs as SSI and would include repair station owners and operators as entities subject to SSI requirements. The association said that it was not possible to estimate and comment on the cost of controlling SSI, because TSA had failed to indicate what it would consider an adequate and secure information management system.

TSA response: TSA has eliminated the requirement to carry out a security program and the proposed amendment to part 1520 to treat the security program as SSI. However, part 1520 requires that SDs be treated as SSI. If a repair station receives a SD, a system for securely managing and controlling SSI could be storing that information or material in a secure container (e.g., locked desk or filing cabinet) that prevents the unauthorized disclosure of this information or material. SSI materials may also be stored electronically as password-protected files. Considering these options are compliant with part 1520, TSA does not believe that there will be any additional cost burden on repair stations to control access to SDs.

Comment: Several commenters questioned the attack scenarios found in the economic analysis and stated that the probability of these attack scenarios actually occurring is remote. One stated that the basic premise of the scenarios is off because the break even analysis assumes that the majority of repair stations have access to airports and aircraft.

TSA Response: TSA has analyzed the security risks of the repair station population and has revised the implementation plan to only require repair stations located on or adjacent to an airport, as defined in the final rule, to adopt and implement security measures.

Comments: Seventeen commenters stated that TSA had significantly underestimated the cost of compliance. Two commenters stated that the costs estimated are too low and that TSA should redo the cost analysis and the Initial Regulatory Flexibility Analysis (IRFA). Commenters provided lists of items that they claim TSA failed to address adequately, including the costs of creating and implementing a security program, facility access control measures, personnel identification media systems, security coordinators, and security awareness training.

One repair station owner/operator said that the estimate that an off-airport repair station would require only four hours to complete and implement a security program seemed extraordinarily low, as did other estimates of average compliance costs in the NPRM. Another operator stated that rule familiarization had taken 10 hours. It estimated that writing a program would cost $12,000 and the actual implementation cost could exceed $80,000.

An industry association and a repair station owner/operator said that the analysis failed to consider the cost of fencing, guards, cameras, badges, and access control systems, which they said that small repair stations and general aviation airports may not already have. The industry association said that the cost to establish access control would not be feasible for a small repair station at a general aviation airport. One commenter said that it had priced three “off-the-shelf” non-biometric photo ID badge systems at an average cost of $2,346; similarly, the commenter said it priced a 750-foot perimeter fence with access gates at $14,905. The commenter noted that the sum of these two estimates far exceeds TSA's estimate of total compliance costs of $4,216 for a business with 45 employees. Various commenters estimated the cost of background checks and a badge system as $4,600 to $6,000, and a security system as $17,250.

An industry association stated that the rule would require repair stations to add at least one full time position, which would create a financial burden for small repair stations and make it harder for them to remain competitive. Another association stated that TSA was asking repair stations to prove their approach was sufficient; while stations with professional security staff could do this, it was unreasonable to expect small GA repair stations to do this. A third commenter estimated salary for security staff as $70,350.

One industry association also stated that TSA had underestimated training costs and should double them. Another commenter estimated training costs at up to $2,000 per employee.

One industry association stated that the analysis failed to consider that small entities do not physically separate work areas, which the NPRM would require. The contingency plan requirement for identifying unauthorized persons is not defined. It noted that small stations do not routinely escort visitors and do not have staff who can be assigned to do this without losing productive work. The escort requirement will disproportionately affect small stations.

An operator stated that TSA had based its analysis on small repair stations, which calls into question whether the agency has met the requirements of E.O. 12866, the Regulatory Flexibility Act (RFA), and the Trade Agreement Act.

TSA response: In order to address the concerns of the commenters and better estimate the costs of compliance associated with the security measures described in the final rule, TSA has revised its cost estimates. TSA has eliminated the requirement to adopt and implement a security program. Specifically, TSA has eliminated all security measures regarding preventing access to repair stations and will only require certain repair stations to prevent the unauthorized operation of large aircraft that are unattended. This change will reduce the regulatory requirement and the costs of implementation. While TSA has retained the requirement to verify employee background information, it has reduced the application of that requirement only to those individuals who are designated as the TSA point of contact and those who have access to the keys or other means used to prevent the unauthorized operation of large aircraft. TSA has clarified that it will accept the background check obtained by individuals who have obtained a FAA airman certificate or a SIDA badge. All proposed regulations regarding the content, format and availability of a security program have been eliminated in the final rule. The cost estimates for both the NPRM and the final rule are listed in Chapter 4 of the regulatory impact analysis accompanying this final rule. That chapter also describes the reasons for the differences in the cost estimates.

In conjunction with the NPRM, TSA published a regulatory impact analysis that addressed the requirements of EO 12866, the RFA, the Unfunded Mandates Reform Act, and the Trade Agreement Act. The cost estimates in that regulatory impact analysis were not based on small repair stations. However, the IRFA considered the cost impact of the proposed regulations on repair stations classified under SBA standards as “small” businesses. In the final rule, TSA has updated these analyses, considering all costs incurred by TSA and any repair stations notified to adopt security measures under the final rule.

Comments: Forty-eight commenters argued that complying with the proposed requirements in part 1554 would be too costly, and some said that the compliance costs would force repair stations out of business. Six commenters stated that taxpayers and the flying public would also feel the financial burden. Twelve commenters said that the proposed rule would likely result in small GA repair stations either closing their businesses or surrendering their repair station certificates in favor of becoming maintenance repair shops that would not be required to comply with the proposed rule. Fifty commenters said that small aircraft repair stations in particular would suffer significant economic and staffing losses because of the proposed rule. Many of these commenters said that because small repair stations each employ a small number of people, the compliance cost per employee would be significant.

TSA response: With respect to the comments about station closings, TSA recognizes that some aircraft repair stations will incur costs associated with the implementation of security measures, but TSA has reduced the requirements of this final rule and therefore, the costs of implementation. TSA has eliminated the requirement of all security measures regarding preventing access to repair stations and will only require repair stations to prevent the unauthorized operation of large aircraft. All proposed regulations regarding the content, format and availability of a security program have been eliminated in the final rule. Additionally, the requirement to adopt security measures was revised to include only repair stations located on or adjacent to an airport, as defined in the final rule.

TSA has prepared a Final Regulatory Flexibility Analysis (FRFA) as part of the economic analysis of the final rule. This analysis can be found in the regulatory impact analysis, and presents the estimated compliance costs small businesses would incur as a percentage of annual revenues.

TSA has kept the costs of implementation of this rule on small businesses to a minimum by eliminating the security program requirement for all repair stations. Further, the security measures in this final rule allow flexibility in implementation.

In keeping with U.S. obligations under the Convention on International Civil Aviation, it is TSA policy to comply with International Civil Aviation Organization (ICAO) Standards and Recommended Practices where possible. TSA has determined that these regulations are consistent with ICAO Standards and Recommended Practices for security of airports and facilities contained in Annex 17 of the Convention, the ICAO Security Manual and the ICAO Security Audit Reference Manual.

Changes to Federal regulations must undergo several economic analyses. First, E.O. 12866, Regulatory Planning and Review (58 FR 51735, October 4, 1993), as supplemented by E.O. 13563, Improving Regulation and Regulatory Review (76 FR 3821, January 21, 2011), directs each Federal agency to propose or adopt a regulation only if the agency makes a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, requires agencies to consider the economic impact of regulatory changes on small entities when an agency is required to issue a NPRM. Third, the Trade Agreements Act (19 U.S.C. 2531-2533) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards, where appropriate, as the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation).

In conducting the following four analyses, TSA has determined:

1. This final rule is a “significant regulatory action,” although not an economically significant regulatory action, under section 3(f)(1) of E.O. 12866. Accordingly, the Office of Management and Budget has reviewed this regulation.

2. This final rule imposes no significant barriers to international trade.

3. This final rule does not impose an unfunded mandate on State, local, or tribal governments, or on the private sector in excess of $100 million (adjusted for inflation) in any one year.

These analyses, as well as the Final Regulatory Flexibility Analysis, are summarized below and are detailed in the regulatory impact analysis accompanying the final rule.

Executive Orders 12866 and 13563 direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

TSA issued an NPRM on November 18, 2009 (74 FR 68774). This final rule makes the following major changes to the NPRM. The first major change is the elimination of the requirement for a repair station to submit a security profile to TSA. TSA will obtain data from the FAA and conduct field visits to acquire other data and information. TSA has also eliminated the requirement to adopt and implement a security program and all security measures preventing access to repair stations. While TSA has retained the requirement to verify employee background information, it has reduced the application of that requirement to those individuals who are designated as the TSA point of contact and those who have access to the keys or other means used to prevent the unauthorized operation of large aircraft capable of flight that are left unattended. TSA has clarified that it will accept employment history checks or background checks conducted on individuals who have obtained a FAA airman certificate or a SIDA badge.

TSA assessed the risk profile of the repair station population and determined that not all repair stations present sufficient risk to warrant security program requirements. Therefore, TSA is only requiring those repair stations located on or adjacent to certain airports, as defined in this final rule, to adopt security measures. As noted above, TSA will consider a repair station to be “on airport” if it is on an AOA or SIDA of an airport covered by an airport security program under 49 CFR part 1542 in the United States, or on the security restricted area of any commensurate airport outside the United States regulated by a government entity. TSA will consider a repair station to be adjacent to an airport if there is an access point between the repair station and the airport of sufficient size to allow the movement of large aircraft between the repair station and the area described as “on airport.” Under the NPRM, approximately 4,800 repair stations certificated under part 145 would have been affected by the rulemaking's affirmative requirements, while under this final rule, that number has been reduced to an estimated 678 repair stations.

In response to public comments and changes in final rule implementation, TSA has adjusted the estimated costs for the final rule. The regulatory impact analysis accompanying this final rule summarizes the revised cost estimates of the regulation.

In summary, over the 10-year period of the analysis, TSA estimates the aggregate costs of the Aircraft Repair Station Security Final Rule to total approximately $23.22 million, undiscounted. This total is distributed among repair stations located within the United States, which would incur total costs of $8.7 million; repair stations located outside the United States, which would incur costs of $14.18 million; and TSA, which would incur costs of $0.34 million. Chapter 2 of the regulatory impact analysis, available in the public docket, provides detailed estimates of these costs. The following table presents the annual costs of the rule over the 10-year period of analysis, broken out into costs incurred by TSA, repair stations located within the United States, and repair stations located outside the United States, respectively.

The cost estimates for this final rule differ from those reported in the NPRM due to the elimination of security program, facility access control and other requirements as described above. TSA also uses more recently available data from its outreach efforts and from FAA databases to update population projections and program costs. The following tables present the cost estimates of the final rule compared to those presented in the NPRM.