Section 729 of Public Law 104-193, the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, enacted on August 22, 1996, amended a wide range of WIC Program provisions in such areas as program outreach; referral and access; coordination; nutrition education and breastfeeding promotion and support. Congress eliminated many WIC provisions to decrease the burden on State agencies and to give State agencies more flexibility in administering the program. WIC requirements that were eliminated include the annual evaluation of nutrition education and breastfeeding promotion and support efforts; provision of written information on Child Support, Temporary Assistance for Needy Families (TANF) (formerly known as AFDC), and the Food Stamp Program; the nutrition education “master file” documentation method; and timeframes for State agency action on local agency applications for participation in the program. In addition, several State Plan requirements were modified or eliminated. All of these provisions are mandatory, and have been incorporated into this interim rule exactly as they appear in the law itself. As such, they are considered to be nondiscretionary provisions, and cannot be modified based on any comments that may be submitted regarding them.

Section 742 of Public Law 104-193 also grants State agencies the option to prohibit service to persons other than citizens and qualified aliens. Comments are welcome regarding the Department's treatment of this provision, found at 7 CFR part 246.7(c)(2), and its anticipated effect(s) upon the administration of the WIC Program.

The following is a discussion of each provision addressed in section 729 of Public Law 104-193 that is incorporated in this interim rule. The provision of Public Law 104-193 requiring the Secretary to establish criteria for the disqualification of WIC vendors who have been disqualified from the Food Stamp Program has been addressed in a separate rulemaking published on March 18, 1999, at 64 FR 13311.

The previous definition of “homeless individual” included an individual whose primary nighttime residence is a temporary accommodation in the residence of another individual. Section 729(a)(1) of Public Law 104-193 amended section 17(b)(15)(B)(iii) of the Child Nutrition Act of 1966 (CNA) by revising the definition of homeless individual to state that a temporary accommodation in the residence of another individual cannot exceed 365 days. The definition of homeless individual in § 246.2 has been revised to reflect this change.

Previous WIC regulations required that by August 15 of each year, each State agency would submit to the Food and Nutrition Service (FNS) for approval a State plan for the following year as a prerequisite to receiving funds. Section 729(e)(1)(A)(i) of Public Law 104-193 amended section 17(f)(1)(A) of the CNA by modifying the State plan submission requirement. The State agency is now only required to submit an initial plan of operation and administration. Once approved, the State agency is only required to submit for approval substantive changes in the plan, as defined in WIC Policy Memorandum 97-4, issued by FNS July 16, 1997. Section 246.4(a) has been amended to reflect this change.

In addition to the annual submission change, there were several State plan requirements that were eliminated or modified. State agencies should keep in mind that while the required content of the State Plan has been reduced, the actual activities and operations that were previously described in the State Plan are still required or, if they are conducted at the State agency's option, permitted. The only change is that FNS no longer requires a detailed explanation of these activities, as discussed below, as a condition of the State Plan's final approval.

Section 729(e)(1)(B)(iv) of Public Law 104-193 deleted, among other provisions, section 17(f)(1)(C)(xii), thus eliminating the State plan requirement for an estimate of increased participation when funds conversion authority is requested by the State agency. As such, § 246.4(a)(14)(ix) has been revised to eliminate the participation estimate.

Also, section 729(e)(1)(B)(iii) of Public Law 104-193 amended section 17(f)(1)(C)(vii) of the CNA by removing the requirement for a plan to provide program benefits to eligible individuals most in need of the benefits and to provide eligible individuals not participating in the program with information on the program, the eligibility criteria for the program, and how to apply for the program. Section 246.4(a)(18) has been amended to reflect this legislative change. Please note, however, that the statutory requirement that the State plan include a plan for reaching and enrolling women in the early months of pregnancy, including provisions to reach and enroll eligible migrant farmworkers, Indians and homeless individuals, is retained both in the CNA and in program regulations.

The requirement to include a plan addressing how incarcerated persons or juveniles in detention facilities will be provided WIC benefits was also eliminated. The Department would like to clarify that under the CNA, State agencies may continue to serve these individuals. Congress merely eliminated the requirement that State agencies include in their State plans their procedures for addressing the special needs of these individuals.

In addition, section 729(e)(1)(B)(iv) of Public Law 104-193 deleted, among other provisions, section 17(f)(1)(C)(x) of the CNA, thus eliminating the requirement that a State agency use statutorily specified techniques in its plan to improve access to the program for participants and prospective applicants who are employed, or who reside in rural areas. The statutory requirements for specific use of appointment scheduling, adjustment of clinic hours, clinic locations, and mailing of multiple vouchers were deleted. At the same time, an amendment was made to section 17(f)(1)(C)(vi) of the CNA to add a requirement for a plan to provide benefits to unserved and underserved areas in the State, including a plan to improve access to the program for those participants and prospective applicants who are employed, or who reside in rural areas if sufficient funds are available to serve additional persons. The net result of these two amendments is that Congress eliminated only the specific methods or procedures to be used to address the special needs of employed participants as well as applicants and individuals who reside in rural areas. While the Department of Agriculture (Department) still encourages the scheduling of appointments and adjustment of clinic hours and locations, State agencies now determine the specific practices they will use to accommodate working and rural applicants and participants. Section 246.4(a)(21) is amended to reflect these changes.

Prior to the enactment of Public Law 104-193, § 246.5(b) required that the State agency act on local agency applications for participation in the program within specific timeframes. Upon the receipt of a completed application from a local agency for participation in the program, State agencies were required to notify the applicant agency in writing within 30 days of the approval or disapproval of its application. When an application was disapproved, the State agency was required to advise the applicant agency of the reasons for such disapproval. In addition, within 15 days after the receipt of an incomplete application the State agency was required to notify the applicant agency of additional information needed to complete the application. Section 729(e)(2) of Public Law 104-193 deleted, among other provisions, section 17(f)(6) of the CNA, thus eliminating all timeframes for State agency action on local agency applications to participate in the program. State agencies now determine the timeframes for such action. Section 246.5(b) has been amended to reflect this change. While timeframes for action are now left to State agency discretion, the Department encourages State agencies to continue to use the 30 and 15-day timeframes.

Section 729(d)(2) of Public Law 104-193 deleted section 17(e)(4)(A) of the CNA, thus eliminating the requirement that applicants be provided with written information concerning the receipt of food stamps, TANF (formerly known as AFDC), and the child support enforcement program under part D of title IV of the Social Security Act, on at least one occasion, by each adult participant in and each applicant for the WIC Program. In addition, section 729(d)(2) also added new statutory authority allowing State agencies to provide local agencies with materials describing other programs for which a participant may be eligible. Section 246.7(b) has been amended to reflect these changes.

Section 729(e)(9) of Public Law 104-193 amended redesignated section 17(f)(18) (formerly section 17(f)(19)) of the CNA by making optional the requirement for a local agency to provide information about other potential sources of food assistance in the local area to individuals who apply in person to participate in the WIC Program, but who cannot be served because the WIC Program is operating at capacity in the local area. Section 246.7(b)(3) has been amended to reflect this change.

Section 742 of Public Law 104-193 specifies that States are neither required nor prohibited from providing program benefits to individuals who are not United States (U.S.) citizens, nationals, or qualified aliens. The use of the term “State” in the legislation conveys this authority to WIC State agencies and to Indian Tribal Organizations (ITOs) operating as WIC State agencies. Section 431(b) of Public Law 104-193 defines “qualified alien.” Qualified aliens include: (1) Lawful permanent residents; (2) asylees; (3) refugees; (4) parolees admitted for at least one year; (5) certain aliens whose deportations are being withheld; (6) certain conditional entrants; (7) certain Cuban and Haitian entrants; and (8) certain battered aliens, alien parents of battered children, and alien children whose parents are battered. Therefore, under Public Law 104-193, States and WIC State agencies have the option to limit WIC participation to U.S. citizens, nationals, and qualified aliens. Section 246.7(c)(2) has been added to reflect this option.

Because a State agency's decision to implement this option will effectively reduce the State agency's eligible WIC population, FNS, by regulatory authority, will make a downward adjustment of that State agency's estimated WIC-eligible population to reflect the number of aliens the State agency declares no longer eligible. If a State agency's participation decreases and food funds are not expended, for whatever reason, including the exclusion of certain categories of aliens, FNS may execute its regulatory authority to recover funds during the year from the State agency in question. FNS apprised State agencies on January 13, 1997, of these potential consequences of implementing the option to limit participation to U.S. citizens, nationals, and qualified aliens.

States/WIC State agencies choosing to implement the option have flexibility in the development of specific policies and procedures for implementation. States/WIC State agencies assume full liability for implementation of this option and are responsible for ensuring their procedures are not discriminatory or capriciously applied. Given the wide latitude under which State agencies may implement this option, State agencies are strongly encouraged to consult with their legal counsel regarding the development and implementation of procedures.

Section 432 of Public Law 104-193 requires the U.S. Attorney General to issue regulations requiring verification of eligibility for certain Federal public benefits.

Further, section 504 of the Illegal Immigration Reform and Immigrant Responsibility Act, Public Law 104-208, requires the U.S. Attorney General to establish procedures whereby persons applying for certain Federal public benefits would provide proof of citizenship. States or WIC State agencies that choose to implement the option to limit WIC participation to U.S. citizens, nationals, and qualified aliens are encouraged to review the guidance and regulations issued by the U.S. Attorney General when developing their specific policies and procedures to implement the option. The guidance (Interim Guidance on Verification of Citizenship, Qualified Alien Status and Eligibility Under Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996) was published at 62 FR 61344, Nov. 17, 1997. The proposed rule (Verification of Eligibility for Public Benefits) was published at 63 FR 41662, August 4, 1998. The final regulation on verifying alien eligibility for public benefits is forthcoming. However, States and State agencies who do elect to limit WIC participation to U.S. citizens, nationals, and qualified aliens are not required to implement the guidance and regulations issued by the Attorney General on these matters, even after the final rule has been published.

If a State/State agency, including an ITO serving as a WIC State agency, chooses to implement this option, it must inform FNS of its intentions and provide written copies of the procedures it will establish. This documentation and notification are for informational purposes only. Neither the State agency's decision nor its procedures will be subject to FNS approval. To date, no State has chosen to implement this option.

Three provisions in Public Law 104-193 address the certification of aliens but do not apply to WIC. This portion of the preamble is provided to clarify those provisions and their inapplicability to WIC. First, the law specifies in section 421 that in determining the eligibility and benefits of an alien for any Federal means-tested public benefit programs as provided in section 403 of the law, the income and resources of an alien shall include the income and resources of the person who sponsors the alien, i.e. , signs an affidavit of support, including the income of the sponsor's spouse. This provision, however, does not apply to the WIC Program. The WIC Program is specifically exempted from the application of the term “Federal means-tested public benefit” under section 403. In addition, FNS published a Notice in the Federal Register on July 7, 1998 at 63 FR 36653 which clarifies that the WIC Program is not a Federal means-tested public benefit program as that term is used in Public Law 104-193 and is exempt from the application of the term.

Second, section 551 of Public Law 104-208, codified at 8 U.S.C. 1183a (which replaced sections 423(a) through 423(c) of Public Law 104-193), provides that if a sponsored alien receives any means-tested public benefit, the appropriate official at the Federal, State, or local level shall request reimbursement by the sponsor in the amount of the assistance. However, section 423(d)(4) of Public Law 104-193, codified at 8 U.S.C. 1183a note, exempts benefits under the CNA, including the WIC Program, from the reimbursement requirement.

Third, section 403(a) of Public Law 104-193 imposes a five-year waiting period after a qualified alien enters the country before he or she is eligible for any Federal means-tested public benefit. Section 403(c), however, exempts benefits under the CNA, including the WIC Program, from this requirement. Therefore, qualified aliens are eligible for the WIC Program without regard to the length of time in the qualifying immigration status.

Section 246.7(q) has been added to clarify in regulations the requirements associated with the certification of qualified aliens.

Section 109(h) of Public Law 104-193 amended section 17(d)(2)(A)(ii)(II), and section 729(d)(2) deleted preexisting section 17(e)(4)(A) of the CNA to conform the CNA's adjunct or automatic income eligibility provisions with the redesignation of the Aid to Families with Dependent Children program as the Temporary Assistance for Needy Families program. Sections 246.7(d)(2)(vi)(1), 246.7(d)(2)(vi)(2), and 246.7(h)(1) are amended to reflect this name change.

Section 729(e)(4) of Public Law 104-193 amended preexisting section 17(f)(9)(B) (redesignated as section 17(f)(8)(B)) by eliminating the requirement to include specific information on the categories of participants whose benefits are being suspended or terminated because of funding shortages in the notice provided to affected participants. State agencies must still provide notice to participants whose benefits are suspended or terminated because of funding shortages before taking action to suspend or terminate benefits. However, such notice no longer must include the categories of persons whose benefits are being suspended or terminated. Section 246.7(j)(9) has been amended to reflect this change.

Section 729(d)(1) of Public Law 104-193 amended section 17(e)(2) of the CNA by eliminating the requirement that State agencies annually evaluate nutrition education and breastfeeding promotion and support activities. However, because State agencies must still spend a targeted amount of Nutrition Services and Administration funds on nutrition education and breastfeeding promotion and support activities, this is considered an important function. As such, State agencies are strongly encouraged to maintain a system to evaluate the effectiveness of their activities in these areas. Section 246.11(c)(5) has been deleted to reflect the elimination of the annual evaluation requirement.

Section 729(d)(4) of Public Law 104-193 deleted preexisting section 17(e)(6) of the CNA, thus eliminating the requirement that local agencies use master files to document and monitor the provision of nutrition education. The Department wishes to point out that even though this provision was eliminated legislatively, local agencies may continue using a “master file” to document nutrition education contacts, rather than documenting them in individual participant case files. Recognizing that master file documentation was intended to minimize administrative burden at the local level, State agencies may continue to permit local agencies to use a “master file” to document second or any subsequent nutrition education contacts during a certification period that are provided to a participant, so long as the system also allows a local agency to retrieve the information by participant, so as to review the nutrition education provided to an individual.

Section 729(f)(1) of Public Law 104-193 amended section 17(g)(5) of the CNA by making a technical change to replace biennial participation report with reports on program participant characteristics. Section 246.16(a)(6) has been revised to reflect this technical change.

Section 729(g)(1)(B) further amended section 17(h)(8)(G) of the CNA by changing from “shall” to “may” the authority for FNS to promote the joint purchase of infant formula and other foods. The Department has always encouraged this practice as a cost containment measure and will, for the foreseeable future, continue to do so.

Prior to the enactment of Public Law 104-193, section 17(h)(4)(E) of the CNA required that each State agency collect data regarding the incidence and duration of breastfeeding for inclusion in a Department-compiled biennial report to Congress on participant characteristics. Section 729(g)(1)(A) of Public Law 104-193 amended section 17(h)(4)(E) of the CNA by making a technical correction to reflect the elimination of the biennial report to Congress that was to include data on the incidence and duration of breastfeeding. Although the Department is no longer required to send a biennial report to Congress, State agencies must continue to collect the data for inclusion in the report on program participant characteristics that will replace the biennial report. This new report will continue to require the collection of data on breastfeeding incidence and duration. Section 246.25(b)(3) has been revised to reflect this technical change.

This interim rule has been determined to be significant and was reviewed by the Office of Management and Budget (OMB) under Executive Order 12866.

This interim rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). Shirley R. Watkins, Under Secretary for Food, Nutrition and Consumer Services, has certified that this rule will not have a significant impact on a substantial number of small entities. This rule provides WIC State and local agencies with increased flexibility in providing program benefits to participants. Several program administration requirements have been reduced or eliminated by this rule.

This interim rule imposes no new reporting or recordkeeping requirements that are subject to OMB review in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-20).

The Special Supplemental Nutrition Program for Women, Infants and Children (WIC) is listed in the Catalog of Federal Domestic Assistance Programs under 10.557. For reasons set forth in the final rule in 7 CFR part 3015, subpart V, and related notice (48 FR 29115, June 24, 1983), this program is included in the scope of Executive Order 12372 which requires intergovernmental consultation with State and local officials.

This interim rule has been reviewed under Executive Order 12998, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the DATES paragraph of this interim rule. Prior to any judicial challenge to the application of provisions of this rule, all applicable administrative procedures must be exhausted.

FNS has analyzed this final rule in accordance with the principles set forth in Executive Order 13132. As such, FNS has determined that the rule does not contain policies that have federalism implications as defined in the order and, consequently, a federalism summary impact statement is not required.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under section 202 of the UMRA, the FNS generally must prepare a written statement, including a cost-benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures to State, local, or tribal governments, in the aggregate, or the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, section 205 of the UMRA generally requires FNS to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule.

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 of $100 million or more in any one year. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

As discussed above, Section 729 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 contained provisions affecting a wide range of WIC Program provisions, with the stated intention of decreasing the burden on State agencies and giving State agencies more flexibility in administering the program. These provisions of law are mandatory. Therefore, Under Secretary Shirley R. Watkins has determined in accordance with 5 U.S.C. 553(b) that prior notice and comment would be unnecessary, and that good cause exists for making this rule effective without first publishing a proposed rule.

In an interim rule effective and published in the Federal Register on June 2, 2000 (65 FR 35261-35265, Docket No. 00-034-1), we amended the “Domestic Quarantine Notices” in 7 CFR part 301 by adding a new subpart, “Plum Pox,” composed of new §§ 301.74 through 301.74-4 and referred to below as the regulations. These regulations quarantine portions of Adams County, PA, due to the detection of plum pox and restrict the interstate movement of stone fruit budwood, root stock, and other plant material from the quarantined area that present a risk of transmitting plum pox. We took this action to prevent the spread of plum pox to noninfested areas of the United States.

Comments on the interim rule were required to be received on or before August 1, 2000. We did not receive any comments. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule.

This action also affirms the information contained in the interim rule concerning Executive Order 12866 and the Regulatory Flexibility Act, Executive Orders 12372 and 12988, and the Paperwork Reduction Act.

Further, for this action, the Office of Management and Budget has waived the review process required by Executive Order 12866.

Citrus canker is a plant disease that affects plants and plant parts, including fresh fruit, of citrus and citrus relatives (Family Rutaceae). Citrus canker can cause defoliation and other serious damage to the leaves and twigs of susceptible plants. It can also cause lesions on the fruit of infected plants, which renders the fruit unmarketable, and cause infected fruit to drop from the trees before reaching maturity. The aggressive A (Asiatic) strain of citrus canker can infect susceptible plants rapidly and lead to extensive economic losses in commercial citrus-producing areas.

The regulations to prevent the interstate spread of citrus canker are contained in 7 CFR 301.75-1 through 301.75-14 (referred to below as the regulations). The regulations restrict the interstate movement of regulated articles from and through areas quarantined because of citrus canker and provide for the designation of survey areas around quarantined areas. Survey areas undergo close monitoring by Animal and Plant Health Inspection Service (APHIS) and State inspectors for citrus canker and serve as buffer zones against the disease.

Under § 301.75-4(c) of the regulations, any State or portion of a State where an infestation is detected will be designated as a quarantined area and will retain that designation until the area has been free from citrus canker for 2 years.

Section 301.75-4, paragraph (d), of the regulations provides that less than an entire State will be designated as a quarantined area only if certain conditions are met. The State must, with certain specified exceptions, enforce restrictions on the intrastate movement of regulated articles from the quarantined area that are at least as stringent as those being enforced on the interstate movement of regulated articles from the quarantined area. The State must also undertake the destruction of all infected plants and trees. Under the regulations in § 301.75-6(c), within 7 days after confirmation that a plant or tree is infected, the State must provide written notice to the owner that the plant or tree must be destroyed. The owner then has 45 days in which to destroy the infected plant or tree. These State-conducted eradication activities within quarantined areas are an integral element of a cooperative State/Federal citrus canker program that, when successfully completed, will result in the eradication of citrus canker and the removal of an area's designation as a quarantined area.

New infestations of citrus canker have been detected on properties in Broward, Collier, Dade, and Manatee Counties, FL, that lie outside the previously quarantined areas, and in areas in Hendry, Hillsborough, and Palm Beach Counties, FL, which previously did not contain any quarantined areas. The State of Florida has placed these new areas under State quarantine and is enforcing restrictions on the intrastate movement of regulated articles from these quarantined areas. We have determined that Florida's restrictions on the intrastate movement of regulated articles from the quarantined areas are at least as stringent as those on the interstate movement of regulated articles from the quarantined areas. Therefore, as provided in § 301.75-4(d), we are designating areas less than the entire State as quarantined areas.

Specifically, we are amending the regulations by adding two areas in Hendry County, FL, one area in Hillsborough County, FL, and a combined area in Broward, Dade, and Palm Beach Counties, FL, to the list of quarantined areas. The combined entry includes the portion of Broward and Dade Counties, FL, that was previously designated as a quarantined area. We are also expanding the previously quarantined areas in Collier and Manatee Counties, FL. An exact description of the quarantined areas can be found in the rule portion of this document.

These new and expanded quarantined areas include a buffer zone around the areas where infection has been detected. The buffer zone extends at least 1 mile from the edge of any premises where citrus canker has been detected, with the exception of that portion of the quarantined area that is adjacent to the Florida Everglades. Along that edge of the quarantine boundary, there is no buffer zone because no host material occurs in the Everglades. In most cases, the buffer zone extends several miles from the edge of any premises where citrus canker has been detected, but the exact distance varies. This is because we drew the boundary lines by using the nearest observable landmarks, such as roads or rivers, or political boundaries, so that the boundary lines can be easily identified.

This rulemaking is necessary on an emergency basis to prevent the spread of citrus canker into noninfested areas of the United States. Under these circumstances, the Administrator has determined that prior notice and opportunity for public comment are contrary to the public interest and that there is good cause under 5 U.S.C. 553 for making this rule effective less than 30 days after publication in the Federal Register .

We will consider comments that are received within 60 days of publication of this rule in the Federal Register . After the comment period closes, we will publish another document in the Federal Register . The document will include a discussion of any comments we receive and any amendments we are making to the rule as a result of the comments.

This rule has been reviewed under Executive Order 12866. The rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.

We are amending the citrus canker regulations by adding portions of Hendry, Hillsborough, and Palm Beach Counties, FL, to the list of quarantined areas and by expanding the boundaries of the quarantined areas in Broward, Collier, Dade, and Manatee Counties, FL, due to recent detections of citrus canker in these areas. This action is necessary on an emergency basis to prevent the spread of citrus canker into noninfested areas of the United States. This action restricts the interstate movement of regulated articles from and through the quarantined areas.

This emergency situation makes timely compliance with section 604 of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) impracticable. We are currently assessing the potential economic effects of this action on small entities. Based on that assessment, we will either certify that the rule will not have a significant economic impact on a substantial number of small entities or publish a final regulatory flexibility analysis.

This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are inconsistent with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.

An environmental assessment and finding of no significant impact have been prepared for this interim rule. The assessment provides a basis for the conclusion that the selected citrus canker eradication program will not have a significant impact on the quality of the human environment. Based on the finding of no significant impact, the Administrator of the Animal and Plant Health Inspection Service has determined that an environmental impact statement need not be prepared.

The environmental assessment and finding of no significant impact were prepared in accordance with: (1) The National Environmental Policy Act of 1969, as amended (NEPA) (42 U.S.C. 4321 et seq. ), (2) regulations of the Council on Environmental Quality for implementing the procedural provisions of NEPA (40 CFR parts 1500-1508), (3) USDA regulations implementing NEPA (7 CFR part 1b), and (4) APHIS' NEPA Implementing Procedures (7 CFR part 372).

Copies of the environmental assessment and finding of no significant impact are available for public inspection at USDA, room 1141, South Building, 14th Street and Independence Avenue, SW., Washington, DC, between 8 a.m. and 4:30 p.m., Monday through Friday, except holidays. Persons wishing to inspect copies are requested to call ahead on (202) 690-2817 to facilitate entry into the reading room. In addition, copies may be obtained by writing to the individual listed under FOR FURTHER INFORMATION CONTACT .

This rule contains no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Broward, Dade, and Palm Beach Counties. That portion of the counties bounded by a line drawn as follows: Beginning at the intersection of the shoreline of the Atlantic Ocean and the Broward/Palm Beach County line; then west along the Broward/Palm Beach County line to the eastern boundary of the Loxahatchee Conservation Area; then south along the eastern boundary of the Loxahatchee Conservation Area to the Sawgrass Expressway; then south along the Sawgrass Expressway to Interstate Highway 75; then north along Interstate Highway 75 to U.S. Highway 27; then south along U.S. Highway 27 to the Florida Turnpike Homestead Extension; then south along the Florida Turnpike Homestead Extension to NW 58th Street; then west along NW 58th Street to Krome Avenue (NW 177th Avenue); then south along Krome Avenue (NW and SW 177th Avenue) to U.S. Highway 41 (Tamiami Trail); then west along U.S. Highway 41 (Tamiami Trail) to sec. 11, 14, 23, 26, 35, and lot 2, T. 54, R. 38; then south along sec. 11, 14, 23, 26, 35, and lot 2, T. 54, R. 38, to sec. 2 and 11, T. 55, R. 38; then south along sec. 2 and 11, T. 55, R. 38, to SW 197th Avenue; then south along SW 197th Avenue to SW 152nd Street; then west along SW 152nd Street to the L-31N Canal; then south and west along the L-31N Canal to the shoreline of the Florida Bay; then east along the shoreline of the Florida Bay to the shoreline of the Atlantic Ocean; then north along the shoreline of the Atlantic Ocean to the point of beginning.

Collier County. That portion of the county bounded by a line drawn as follows: Beginning at the intersection of State Highway 29 and County Road 858; then west along County Road 858 to sec. 13, T. 48 S., R. 29 E.; then north along sec. 13, T. 48 S., R. 29 E., to sec. 25, T. 47 S., R. 29 E.; then east along sec. 25, T. 47 S., R. 29 E., to sec. 30, T. 47 S., R. 30 E.; then north along sec. 30, T. 47 S., R. 30 E., to sec. 19, T. 47 S., R. 30 E.; then east along sec. 19, T. 47 S., R. 30 E., to sec. 20, T. 47 S., R. 30 E.; then south along sec. 20, T. 47 S., R. 30 E., to sec. 29, T. 47 S., R. 30 E.; then east along sec. 29, T. 47 S., R. 30 E., to sec. 28, T. 47 S., R. 30 E.; then south along sec. 28, T. 47 S., R. 30 E., to sec. 33, T. 47 S., R. 30 E.; then east along sec. 33, T. 47 S., R. 30 E., to the Collier/Hendry County line; then south along the Collier/Hendry County line to sec. 25, T. 48 S., R. 30 E.; then west along sec. 25, T. 48 S., R. 30 E., to State Highway 29; then north along State Highway 29 to the point of beginning.

Hendry County. That portion of the county bounded by a line drawn as follows: Beginning at the northwest corner of sec. 7, T. 48 S., R. 33 E.; then east along sec. 7, T. 48 S., R. 33 E., to Government Road; then north along Government Road to State Road 833; then north along State Road 833 to sec. 11, T. 48 S., R. 33 E.; then east along sec. 11, T. 48 S., R. 33 E., to sec. 24, T. 48 S., R. 33 E.; then west along sec. 24, T. 48 S., R. 33 E., to sec. 19, T. 48 S., R. 33 E.; then north along sec. 19, T. 48 S., R. 33 E., to the point of beginning.

That portion of the county bounded by a line drawn as follows: Beginning at the intersection of State Road 835 and Deer Fence Road; then north along Deer Fence Road to sec. 6; then east along sec. 6 to sec. 2; then south along sec. 2 to sec. 35; then west along sec. 35 to the point of beginning.

Hillsborough County. That portion of the county bounded by a line drawn as follows: Beginning at the northwest corner of sec. 34, T. 31, R. 19; then south along sec. 34, T. 31, R. 19, to 24th Street NE; then south along 24th Street NE to sec. 3 and 10, T. 32, R. 19; then south along sec. 3 and 10, T. 32, R. 19, to 24th Street SE; then south along 24th Street SE to sec. 15, 14, and 13, T. 32, R. 19; then east along sec. 15, 14, and 13, T. 32, R. 19, to sec. 18, T. 32, R. 20; then east along sec. 18, T. 32, R. 20, to Bishop Road; then east along Bishop Road to West Lake Drive; then north along West Lake Drive to sec. 32 and 31, T. 31, R. 20; then west along sec. 32 and 31, T. 31, R. 20, to sec. 36, 35, and 34, T. 31, R. 19; then west along sec. 36, 35, and 34, T. 31, R. 19, to the point of beginning.

Manatee County. That portion of the county bounded by a line drawn as follows: Beginning at the intersection of Interstate Highway 75 and the shoreline of the Manatee River; then west along the shoreline of the Manatee River to the shoreline of the Terra Ceia Bay; then northeast along the shoreline of the Terra Ceia Bay to sec. 25, 24, 13, 12, and 1, T. 33 S., R. 17 E.; then north along sec. 25, 24, 13, 12, and 1, T. 33 S., R. 17 E., to the Manatee/Hillsborough County line; then east along the Manatee/Hillsborough County line to sec. 3 and 10, T. 33 S., R. 18 E.; then south along sec. 3 and 10, T. 33 S., R. 18 E., to Carter Road; then south along Carter Road to sec. 22 and 27, T. 33 S., R. 18 E.; then south along sec. 22 and 27, T. 33 S., R. 18 E., to 69th Street East; then east along 69th Street East to Erie Road; then south along Erie Road to U.S. Highway 301; then southwest along U.S. Highway 301 to Interstate Highway 75; then south along Interstate Highway 75 to the point of beginning.

That portion of the county bounded by a line drawn as follows: Beginning at the northwest corner of sec. 8, 9, 10, 11, and 12, T. 33 S., R. 21 E.; then east along sec. 8, 9, 10, 11, and 12, T. 33 S., R. 21 E., to sec. 12, T. 33 S., R. 21 E.; then south along sec. 12, T. 33 S., R. 21 E., to sec. 18, 19, 30, and 31, T. 33 S., R. 22 E.; then east along sec. 18, 19, 30, and 31, T. 33 S., R. 22 E., to sec. 6, T. 34 S., R. 22 E.; then south along sec. 6, T. 34 S., R. 22 E., to sec. 7, T. 34 S., R. 22 E.; then west along sec. 7, T. 34 S., R. 22 E., to sec. 12, 11, 10, and 9, T. 34 S., R. 21 E.; then south along sec. 12, 11, 10, and 9, T. 34 S., R. 21 E., to sec. 8 and 5, T. 34 S., R. 21 E.; then north along sec. 8 and 5, T. 34 S., R. 21 E., to sec. 31, 29, 20, 17, and 8, T. 33 S., R. 21 E.; then north along sec. 31, 29, 20, 17, and 8, T. 33 S., R. 12 E., to the point of beginning.

The final regulations that are the subject of this correction revised § 927.105 and added a new § 927.316.

As published, the regulatory text in paragraph (a) of § 927.316 indicates, in part, that Beurre D'Anjou pears shall have a certification by the Federal-State Inspection Service, issued prior to shipment, showing that such pears have an average pressure test of 14 pounds. The words “or less” were inadvertently omitted following the words “14 pounds.” The words “14 pounds or less” are needed to recognize that pears naturally ripen and soften, over time, and could have an average pressure test less than 14 pounds, which would be acceptable in the marketplace.

The final rule that is the subject of these corrections amends the meat and poultry products inspection regulations by removing the remaining requirements pertaining to partial quality control (PQC) programs. A PQC program controls a single product, operation, or part of an operation in a meat or poultry establishment, whereas a total quality control (TQC) system controls all products and processes in an establishment. FSIS is removing the design requirements for PQC programs and the requirements for establishments to have PQC programs for certain products or processes. The amended regulations are more consistent with the Agency's Pathogen Reduction (PR)/Hazard Analysis and Critical Control Points (HACCP) regulations, and inspected establishments will have greater flexibility to adopt new technologies and methods that will improve food safety and other consumer protections.

Under the PR/HACCP regulations (at 9 CFR 417.2(b)(3)), thermal processing establishments do not have to have HACCP plans that address food safety hazards associated with microbial contamination if the establishments comply with the canning regulations in 9 CFR 318 subpart G or 9 CFR 381 subpart X. The canning regulations, before amendment by the May 30 final rule, have allowed establishments to handle process deviations or finished product inspections with TQC system provisions or PQC programs or specified procedures for handling deviations during processing or through record review (9 CFR 318.308(d), 318.309(d), 381.308(d), 381.309(d)). The PQC-related requirements pertaining to the control of process deviations and finished product inspections at canning establishments are among the requirements eliminated by the final rule.

As published, the final rule contained errors in the regulatory text that could prove to be misleading because they are inconsistent with the preamble explanation.

As FSIS noted in the preamble to the final rule eliminating PQC requirements (65 FR 34385), the proposed rule on the subject would have provided options for handling process deviations and finished product inspections to thermal processing establishments that were not yet subject to the PR/HACCP regulations. During the period before the PR/HACCP regulations were implemented in all establishments, FSIS maintained a policy of encouraging the early adoption of HACCP systems by establishments to which the PR/HACCP regulations were not yet applicable (63 FR 4622; January 30, 1998). Thus, the proposed options included HACCP plan provisions addressing food safety hazards associated with microbial contamination, as well as TQC system provisions and alternative documented procedures for handling process deviations. Because the final rule eliminating PQC requirements was published after January 25, 2000, when all FSIS-inspected establishments became subject to the PR/HACCP requirements, it is no longer necessary to provide options specifically for establishments not yet subject to those regulations. The final rule preamble states that deviations in processing are now to be handled according to HACCP plan or alternative procedures, and cites §§ 318.308(d) and 381.308(d).

In the context of the proposed rule, the cited subsections were to provide procedures for handling process deviations where the establishment's HACCP plan does not address food safety hazards associated with microbial contamination hazards, where there is no approved TQC system, or where the establishment has no alternative documented procedures (such as PQC programs) for handling process deviations. The proposed introductory text of these subsections paralleled the proposed introductory text for the subsections on alternative finished product inspection procedures (§§ 318.309(d) and 381.309(d)). The procedures provided by §§ 318.308(d), 318.309(d), 381.308(d), and 381.309(d), and the alternatives delineated in the proposed introductory text of those subsections, were to be available to all thermal processing establishments.

In the preamble to the final rule, FSIS further stated that it was including, as an option for handling process deviations or final product inspections, alternative documented procedures that ensure that only safe and stable products are shipped in commerce (65 FR 34385, col. 3). This option is intended to provide canning establishments with the flexibility to use PQC programs or other procedures for these purposes. However, in the regulatory text of the final rule, FSIS provided such an option for handling final product inspections (§§ 318.309(a), 381.309(a)) but not for handling process deviations (§§ 318.308(b), 381.308(b)). Also, the introductory text of §§ 318.308(d) and 381.308(d), “alternative procedures for handling process deviations,” and the introductory text of 318.309(d) and 381.309(d), “alternative procedures for handling finished product inspections,” does not state explicitly what the procedures are alternative to.

FSIS is therefore correcting §§ 318.308 (b) and (d), 381.308(b) and (d), 318.309(d), and 381.309(d) to reflect the Agency's intention to provide, for the handling of process deviations and finished product inspections, alternative documented procedures that ensure that thermally processed products will be safe and stable.

On page 50606, in the right column, in the third complete paragraph, in the last line, “ML003736106” is corrected to read “ML003701140”.

SBA is publishing below a new complete table of small business size standards based on industries as they are defined in NAICS. This table corrects, updates and replaces the table included in the final rule SBA published in the Federal Register on May 15, 2000. The originally published table included a number of errors that occurred during the printing process. Because the errors are significant in nature and number, SBA believes that merely listing the corrections is not sufficient. Therefore, this new full table replaces the table found in the final rule published on May 15, 2000.

Page 30841—NAICS 211112—deleted under Subsector 115, where it is duplicated. It appears correctly in Subsector 211.

Page 30843—NAICS 311421—footnote “14” is corrected to read footnote “3.”

Page 30850—NAICS 336413—added footnote “7,” which had been omitted.

Page 30853—NAICS 448130—corrected size standard to “$5.0” million.

Page 30853—NAICS 448150—corrected size standard to “$5.0” million.

Page 30853—NAICS 452990—deleted redundant dollar sign.

Page 30853—NAICS 454110—corrected size standard to “$18.5” million.

Page 30854—NAICS 454311—deleted redundant dollar sign.

Page 30854—NAICS 481111—deleted dollar sign.

Page 30854—NAICS 481112—deleted dollar sign.

Page 30854—NAICS 481211—deleted dollar sign.

Page 30854—NAICS 481212 and NAICS 481219 corrected to read as follows:

Page 30854—NAICS 482111 through NAICS 483212—deleted dollar signs.

Page 30854—NAICS 511210—moved “$18.0” from the description column to the size standard column.

Page 30856—NAICS 522120 through NAICS 522210—added footnote “8.”

Page 30856—NAICS 522293—added footnote “8.”

Page 30857—added NAICS 531320 and NAICS 531390, which had been omitted, as follow:

Page 30857—change NAICS 53212 to NAICS 532120.

Since May 15, 2000, SBA has published two final rules that modify existing size standards as they are described in the Standard Industrial Classification (SIC) system. SBA originally intended to issue Federal Register notices before October 1, 2000, to update the table of small business size standards based on NAICS that result from those changes. However, SBA is using this opportunity to include those changes here. The updates, based on final rules issued since May 15, 2000, are the following:

1. NAICS code 561320, Temporary Help Services, and NAICS code 561330, Employment Leasing Services—On June 6, 2000, SBA published a final rule establishing a size standard of $10 million in average annual receipts for Help Supply Services, SIC code 7363 (65 FR 35810-35813). The activities described by SIC 7363 are related to NAICS 561320 and NAICS 561330. Therefore, size standards NAICS 561320 and NAICS 561330 are being updated to conform the table of size standards based on NAICS to the June 6, 2000, Federal Register notice.

2. On June 16, 2000, SBA published a final rule in the Federal Register (65 FR 37689-37694) establishing a size standard of $27.5 million in average annual receipts for all industries in General Building Contractors, Standard Industrial Classification (SIC) Major Group 15, and for all industries except Dredging and Surface Cleanup Activities in Heavy Construction Other Than Building Construction, SIC Major Group 16; $17.0 million for Dredging and Surface Cleanup Activities, part of SIC 1629, Heavy Construction, Not Elsewhere Classified (NEC); $11.5 million for all industries in Special Trade Contractors, SIC Major Group 17; and $10.0 million for Garbage and Refuse Collection, Without Disposal, part of SIC 4212, Local Trucking Without Storage, and Refuse Systems, SIC 4953. As a result, the following NAICS codes, which are related to these SIC industries and activities, are revised accordingly, effective October 1, 2000. For additional information on how they are related, see SBA's proposed rule in the October 22, 1999, Federal Register (64 FR 57187-57286). Therefore, size standards for the following NAICS industries are being updated to conform the table of size standards based on NAICS to the June 16, 2000, Federal Register notice:

SBA is also making other minor editorial changes at this time. They are the following:

(1) On page 30854, NAICS code 485110 is corrected to read NAICS code 485111.

(2) On page 30859, NAICS code 562111, Solid Waste Collection, is moved from its last place in Subsector 561, Administrative and Support Services, to first place in Subsector 562, Waste Management and Remediation Services.

(3) On page 30861, NAICS code 812391, Garment Pressing, and Agents for Laundries, and NAICS code 81239, All Other Laundry Services, are deleted. These activities are included in NAICS code 812320, Drycleaning and Laundry Services (except Coin-Operated) (see 63 FR 41699).

(4) The following NAICS Industry descriptive titles are changed:

(5) On page 30854 SBA is adding footnote 15 to Subsector 483, Water Transportation. This is the same footnote that was used (as footnote 8) in 13 CFR 121.601 up to and including the January 1, 1995, edition. Beginning with the March 1, 1996, edition of the 13 CFR 121, footnote 8 was omitted and “Offshore Marine Water Transportation Services” was added as a segment of SIC 4499, Water Transportation Services, N.E.C. SIC 4499 is related to a number of NAICS codes in Subsector 483. However, SBA omitted this segment from the October 22, 1999, proposed and the May 15, 2000, final rules. Rather than include numerous “exceptions,” SBA is replacing the entire text of the footnote, as it could apply to any of the NAICS codes. This does not change or alter existing size standards for any activities, and is consistent with Guideline 4 in Table III of the October 22, 1999, proposed rule (64 FR 57191).

The name of the Melbourne Regional Airport, FL, has been changed to the Melbourne International Airport. Therefore, the descriptions of the Class D airspace at Cocoa Patrick AFB, FL, and the Class E5 airspace at Melbourne, FL, must be amended to reflect this change. This rule will become effective on the date specified in the EFFECTIVE DATE section. Since this action has no impact on the users of the airspace in the vicinity of the Cocoa Patrick AFB and the Melbourne International Airports, notice and public procedure under 5 U.S.C. 553(b) are unnecessary.

This amendment to Part 71 of the Federal Aviation Regulations (14 CFR part 71) amends the Class D airspace descriptions at Cocoa Patrick AFB, FL, and the Class E4 airspace description at Melbourne, FL. Class D airspace designations and Class E5 airspace designations are published in paragraph 5000 and paragraph 6005, respectively, of FAA Order 7400.9G dated September 1, 1999, and effective September 16, 1999, incorporated by reference in 14 CFR 71.1. The airspace designations in this action will appear subsequently in this order.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

In 1996, OMB incorporated guidance to agencies on implementing the reporting and publication requirements of the Privacy Act into Appendix I to OMB Circular A-130 (61 FR 6428, February 20, 1996). OMB revised Appendix 1, changing the annual requirement to review recordkeeping practices, training, violations and notices under the Privacy Act to a biennial review. To conform the review and publication of its system of records to OMB requirements, the Commission is amending § 146.11(a) to require biennial rather than annual publication of the Commission's systems of records under the Privacy Act.

The Commission has determined that the Administrative Procedure Act, 5 U.S.C. 553, does not require notice of proposed rulemaking and an opportunity for public participation in connection with this amendment. In this regard, the Commission notes that such notice and opportunity for comment is unnecessary because this amendment is related solely to agency organization, procedure and practice and conforms the Commission rules to earlier amendments to the Privacy Act. Accordingly, the Commission finds good cause to make this amendment effective immediately upon publication in the Federal Register . 5 U.S.C. 553(b)(B).

Section 12(f) of the Exchange Act  1 governs when a national securities exchange may extend UTP to a security, i.e. , allow trading in a security that is not listed and registered on that exchange. 2 The UTP Act of 1994 (“UTP Act”)  3 substantially amended Section 12(f). Prior to that time, exchanges had to apply to the Commission for approval before extending UTP to a particular security. The UTP Act removed the application, notice, and Commission approval process from Section 12(f) (except in cases of Commission suspension of UTP in a particular security on an exchange). Accordingly, under Section 12(f) of the Exchange Act, exchanges may immediately extend UTP to a security listed on another exchange unless it is a listed IPO security. 4 For listed IPO securities, Rule 12f-2 of the Exchange Act requires exchanges to wait one full day before they can extend UTP to such securities.

On December 9, 1999, the Commission proposed for comment an amendment to Rule 12f-2 under the Exchange Act that would eliminate the one-day waiting period and permit a national securities exchange to extend UTP to an IPO security immediately after the first trade in the IPO security on the listing exchange is reported to the Consolidated Tape. 5

The UTP Act established a temporary two-day waiting period for extending UTP to an IPO security, but allowed the Commission to adopt a rule providing for a shorter waiting period. 6 On April 21, 1995, the Commission adopted Rule 12f-2 under the Exchange Act to provide for a shorter waiting period. The final rule differed from the original proposed rule, which would have allowed a UTP exchange to trade a listed IPO as soon as the first trade on the listing exchange was reported to the Consolidated Tape. The final rule instead established a one-day trading delay for extending UTP to listed IPOs. 7

In arriving at this position in 1995, the Commission acknowledged the substantial volume of trading that occurs on the initial trading days of IPOs. As a general matter, the Commission agreed with the comments of the regional exchanges that early UTP in IPO securities would enhance the ability of multiple markets to compete for this volume. However, in response to concerns raised by the NYSE and two underwriting firms that IPO pricing could be at risk if there were no opportunity for early centralized trading, the Commission decided to require the one-day waiting period. In making this determination, the Commission noted the possibility that virtually immediate UTP in IPO securities could complicate the pricing and orderly distribution of IPO securities by increasing the risk of price volatility as the securities are distributed to the public. Another significant factor in the Commission's decision to adopt a one-day trading delay in 1995 was the fact that insufficient data was available with which to assess the potential impact of immediate IPO trading in multiple markets.

The Commission stated at the time, however, that it would continue to monitor the trading of IPOs, and that it would be willing to consider revisiting the question of the appropriate waiting period for extending UTP to listed IPO securities after experience had been gained with the amended rules. 8

In August 1998, the Chicago Stock Exchange (“CHX”), the Cincinnati Stock Exchange (“CSE”), and the Pacific Exchange (“PCX”) presented to the Commission for review a new study (“1998 Study”) examining the effects of immediate multiple trading of IPO securities. 9 The study was conducted at the request of the CHX in response to the Commission's 1995 indication that it would be open to reconsidering the issue when new data became available.

The study comprised two sets of inquiries. Each compared a group of newly issued securities that were permitted to trade immediately on more than one exchange, with a group of IPO securities that were similar in type but that were subject to the one-day trading delay. The study examined whether bid-ask spreads and intraday price volatility were greater for the IPOs that were dually or multiply traded than for the IPOs that were not, compiling data from the first five days of trading for each of the securities.

Specifically, the first analysis compared a group of nine dually listed IPOs and six spin-offs  10 that traded on more than one exchange  11 with a similar group of IPO securities and spin-offs that were not dually or multiply listed. The two groups of offerings were issued during the same general time period, 12 and were similar in terms of the industry of the issuer and the amount of proceeds from the offering. Because an IPO as defined under the Exchange Act includes both traditional IPOs and spin-offs, the study included both in its analysis. The sampling for comparison was small because IPOs are rarely listed on more than one exchange.

This first inquiry found that price volatility was higher on the first day of trading for both groups of IPOs and spin-offs than on any of the subsequent four days. However, the price volatility of IPOs and spin-offs traded on only one exchange was approximately 30% higher than that of the IPOs and spin-offs that were traded on at least two exchanges. In addition, in its comparison of bid-ask spreads, the study showed that there was no statistically significant difference between the two groups. Thus, the study concluded, neither an analysis of price volatility nor a survey of bid-ask spreads revealed any evidence of damage to market quality caused by immediate trading of IPOs on a second exchange.

The second analysis compared a group of securities issued by companies that underwent some type of restructuring and could be dually or multiply traded because they were not subject to the UTP prohibition, with a group of stocks that similarly were issued as a result of reorganizations but that were subject to the UTP prohibition. Although the latter group did not include securities of a private company going public for the first time, the reorganizations were considered “technical IPOs” because they met the Section 12(f) definition of an IPO for the purposes of the statutory one-day trading delay. 13 The analysis compared data between 1994 and 1997 for eleven companies that were not subject to the UTP prohibition with six companies that were.

This second inquiry found that the price volatility on the first day of trading in either group of securities was not exceptionally high. Moreover, the price volatility of new issuances that traded on more than one exchange the first day did not differ significantly from that of the technical IPOs trading on only one exchange. The study also found no significant differences in the bid-ask spreads between the technical IPOs and the comparison group that traded on more than one exchange the first day. 14

The study concluded that there is no empirical basis for the contention that multiple exchange trading on the first day of an IPO adversely affects market quality, either by increasing price volatility or widening bid-ask spreads. In fact, the evidence indicated that listed IPOs that are not traded on more than one exchange can be more volatile than dually or multiply listed IPOs. The study further noted that the third market, which is not subject to the one-day delay, currently competes with the listing exchange in trading IPOs on the first day with no visible adverse effect.

In addition, the study contained data demonstrating that regional exchanges have been unable to attract a substantial share of first-day trading volume in IPOs even when not barred by the statute from participating. For example, in the case of the dually or multiply listed IPOs studied, the regional exchanges garnered an average of only 1.8% of the total trading volume on the first day. Although the proportion increased over the next four trading days, it still remained comparatively small. In the case of IPOs subject to the one-day trading delay, the regional exchanges accounted for no more than an average 5% of the total trading volume for days two through five. In view of the small amount of volume at issue, the study concluded that eliminating the one-day delay should not have a major impact on the market as a whole.

Under the proposed amendment to Rule 12f-2, a national securities exchange could extend UTP to an IPO security immediately after the first trade in the IPO security on the listing exchange is reported to the Consolidated Tape.

In the Proposing Release, the Commission stated that it preliminarily believed that there was little evidence that the one-day delay protects the markets and that, accordingly, there was no justification for retaining the one-day trading delay. In proposing the revision to Rule 12f-2, the Commission relied, in part, on the 1998 Study. The Commission noted that the 1998 Study, as well as the lack of any problems with reducing the waiting period from two days to one day during the preceding four years, provided support for amending the rule. The Commission also observed that the ban on first day trading puts regional exchanges at a competitive disadvantage vis-a-vis the third market, which is not subject to the one-day delay. The Proposing Release solicited comment on, among other things, the one-trade waiting period and asked commenters whether some other interval was appropriate.

The Commission received seven comment letters, all of which were favorable and supported the adoption of the proposed rule change. 15 Several regional exchanges commented that the one-day trading delay serves as a barrier to competition and has existed for five years with no justification. 16 These commenters all cited the 1998 Study's conclusion that dually listed IPOs were not more volatile on the first day of trading than non-dually listed IPOs as proof that the one-day waiting period is unnecessary and unjustified. In addition, the BSE noted that specialist obligations and the framework of the Intermarket Trading System work to ensure that securities are trading in a fair and orderly market. 17 The PHLX argued that no adverse effects were observed following the change from a two-day to a one-day delay, due in part to the automated execution systems used on most exchanges which provide guaranteed liquidity. 18 The regional exchanges also argued that the waiting period is unjustified because electronic communication networks (“ECNs”) and the third market are not subject to the delay and have traded IPO securities immediately with no evidence of harm to the market. 19

One commenter submitted a study completed in 1998 that examines the effects on volatility of regional exchange participation in IPOs. 20 The study compared the volatility on the second and third trading days after an IPO with regional exchange participation to the second and third trading days after an IPO without regional exchange participation. 21 While the study did not directly examine the question of a one- day delay as compared to a one- trade delay, the study did provide some evidence regarding the more general question of the benefits of regional exchange participation in trading IPO securities. The study concluded that the decrease in volatility from the first day of trading in an IPO to the second and third day was greater in 1997 with regional exchange participation than in 1993 without regional exchange participation. 22 The study indicated that regional exchange participation does not negatively impact volatility and may, in fact, make the IPO market less volatile. Based on the findings, the commenter urged the Commission to amend Rule 12f-2 to allow competition by regional exchanges on the first day of trading in a listed IPO security. NASAA also supported the amendment, noting that it would enhance investor access to all securities markets without delay and boost investor confidence. 23

Schwab also commented in support of the amendment. Schwab argued that the current delay is an impediment to free and open competition in the listed markets, noting that it insulates the primary market from competition and precludes valuable price discovery. 24 In this context, Schwab noted that, although the willingness of firms to route order flow has improved with just a one-day waiting period, the anticompetitive effects of the waiting period still remain. Schwab also noted that the delay will hamper ECNs that choose to register as exchanges, and provides an unfair advantage to ECNs that are not regulated as exchanges.

The Commission has decided to adopt the amendment to Rule 12f-2(a)  25 as proposed to allow exchanges to extend UTP to IPO securities after the first trade on the listed market is reported to the Consolidated Tape. Specifically, as amended, Rule 12f-2(a) provides that an exchange may extend UTP to a listed IPO security when at least one transaction in the subject security has been effected on the listing exchange and the transaction has been reported pursuant to an effective transaction reporting plan as defined in Rule 11Aa3-1 under the Exchange Act. 26

The Commission believes that the current one-day trading delay provides no real benefits and actually inhibits competition among markets. The Commission's conclusions are based on recent experience, as well as the results of the 1998 Study. The 1998 Study showed no evidence that the one-day trading delay provides any tangible benefits to market quality. As discussed in the Proposing Release, the 1998 Study suggested that greater price volatility might actually exist on the first day of an IPO with the trading delay in place. The 1998 Study examined both bid-ask spreads and price volatility and was unable to determine that there was an adverse impact on market quality resulting from the trading of IPO securities in multiple markets. 27 We also note that no commenters submitted data to the contrary in response to the Commission's specific request for comments on this issue. 28

Accordingly, the Commission sees no compelling reason to maintain a restriction that inhibits competition among the exchanges. Removing the one-day trade delay will enhance competition among linked markets, consistent with Section 11A(a)(1)(D) of the Exchange Act. 29 As one commenter noted, the enhanced competition in an IPO should benefit investors by providing increased opportunities for order execution. 30 The amended rule should enhance the ability of exchanges to compete for order flow in IPO securities consistent with Section 11A(a)(1)(C)(ii), 31 especially in light of the fact that over-the-counter dealers and ECNs may already trade IPO securities immediately upon effective registration with the Commission. In view of the rapidly expanding choices that investors have for trade execution, placing unnecessary restrictions on some markets in favor of others tends to hamper competition. While the listing exchange should have the benefit of listing the IPO, other markets should be permitted to provide a place for investors to trade those securities. With no evidence to the contrary justifying the one-day waiting period, the Commission believes it is time to lift this regulatory restraint.

The final rule continues to require non-listing exchanges to wait for one trade before they begin trading an IPO. None of the commentators opposed the one trade delay. The Commission believes the one trade delay is justified because the first transaction in an IPO, as disseminated on the Consolidated Tape, conveys essential information to the public concerning the price of the security set by the underwriting process. In addition, the timing of the initial trade and commencement of trading in a new issue entail significant coordination among the issuer, the listing exchange, and the underwriters of the public offering of the security. If competing exchanges were to allow their members to trade a listed IPO security before it initially traded on the listing exchange, it could be difficult to ensure that the preparation for the IPO had been completed before public trading in the security commenced. 32

In the Proposing Release the Commission requested comment on whether changes to the consolidated quotation system would have to be made as a result of lifting the one-day waiting period, as well as whether any additional procedures would be necessary to ensure that a UTP market does not commence trading prior to the first trade. The commenters addressing these issues stated that no changes to the consolidated quotation system were necessary to comply with the one-trade delay. 33 These commenters also stated that existing procedures now in place on regional exchanges to identify IPOs will continue to be used to identify IPOs subject to the first trade restriction.

The Commission agrees that existing procedures should be adequate to identify those IPO securities subject to the one-trade delay. The Commission will continue to work with the regional exchanges to ensure that their procedures continue to appropriately identify IPO securities for purposes of the rule. Further, the Commission, at this time, has not identified any necessary changes to the consolidated quotation system that would be necessary to implement the rule.

In summary, the Commission believes it is appropriate to remove the one-day trading delay for extending UTP to IPO securities. The Commission has carefully considered all of the comments and issues. All of the data submitted supports the conclusion that the one-day trading delay is an unnecessary restraint on competition. The Commission believes that, consistent with Section 11A of the Exchange Act, reducing the trading delay will enhance competition among the markets to the benefit of all investors.

The Paperwork Reduction Act does not apply because the amendment does not impose recordkeeping or information collection requirements, or other collections of information that require the approval of the Office of Management and Budget under 44 U.S.C. 3501 et seq.

The Commission is sensitive to the costs and benefits of its regulations. To assist the Commission in its evaluation of the costs and benefits and the effect on competition, efficiency, and capital formation that may result from the amendment, commenters were requested to provide analysis and data, if possible, relating to the costs and benefits associated with the proposal. Commenters supported the proposed rule change, citing the benefits of reducing barriers to competition and opening the market for trading IPO securities to more market participants. Some commenters also said that investors would benefit from lower transaction costs caused by increased competition. None of the commenters suggested any potential costs to the proposed amendment.

The amended rule will benefit market participants by allowing UTP exchanges to compete with the listing exchange and the third market for order flow on the first day an IPO starts trading. Investors could benefit when more participants offer liquidity to the market. In addition, issuers could benefit from wider distribution of IPO securities and greater opportunities for price discovery.

In 1998 and 1999, total first day trading volume for IPOs on the NYSE that were not dually traded on the first day was about 454 million shares and 515 million shares, respectively. 34 Comparable figures for the American Stock Exchange (“Amex”) were 8.9 million first day shares in 1998 and 3.9 million first day shares in 1999. Under the rule change, the exchange where such shares are listed would now be subject to competition from other national securities exchanges on the first day of trading.

The above-cited 1998 Study  35 compared IPOs listed on one exchange with dual-listed IPOs and showed that the dual-listed IPOs did not have statistically significant differences in bid-ask spreads in the first day of trading, and that price volatility, if anything, was higher for singly-listed IPOs. This indicates that increasing competition in IPO listings will not increase costs to investors.

The Commission recognizes that there are some potential costs associated with this amendment. Listing exchanges could be impacted because they will lose a one-day trading advantage over other exchanges, but they will probably retain a large percentage of the first day trading volume in any case. The 1998 Study showed that, in a sample of dually traded stocks, regional exchanges attracted about 1.8% of the first day trading volume. This result suggests that the elimination of the one-day trading advantage will affect only a small percentage of the first day trading volume.

The NYSE reported total trading fees of $138.4 million in 1999, which on the basis of 204 billion shares traded  36 is an average of less than .1 cents per share. Although the overall effect of the proposal cannot be determined with precision, assuming a first day migration of IPO share trading of 3 percent (higher than the 1.8 percent found in the 1998 Study) and a trading fee loss of 1 cent per share (more than 10 times higher than average calculated above  37 ) the trading fee loss to the NYSE for the first day would have been, at most, $154,500 (= .03 × 515 million first day shares traded × $.01/share) in 1999; and $136,200 (=.03 × 454 million first day shares traded × $.01/share) in 1998. 38

Specialists also will be affected by the rule. The NYSE reports that in 1999 the unweighted average spread was $.22 per share, and that specialists handled about 13.1% of the volume.  39 Using the previous assumption of 3 percent first day IPO trading volume migration to other exchanges, the revenue loss to NYSE specialists would be $445,269 (= .03 × 515 million first day shares traded × .131 specialists' share × $.22 spread/share) per year. These revenue losses would likely result in comparable revenue gains to specialists on regional exchanges.

Similar assumptions for the Amex—where first day trading in IPO shares was less than 2% of that on the NYSE in 1998, and less than 1% in 1999—would yield much smaller figures.

Finally, the Commission does not anticipate any direct or indirect costs to U.S. investors or other market participants because the rule imposes no recordkeeping or compliance burdens.

Section 23(a)(2) of the Exchange Act  40 requires the Commission, when adopting or amending rules under the Exchange Act, to consider the anti-competitive effects of such rules, if any, and refrain from adopting a rule that would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. Moreover, Section 3(f) of the Exchange Act, 41 as amended by the National Securities Markets Improvement Act of 1996, 42 provides that whenever the Commission is engaged in a rulemaking and is required to determine whether an action is necessary or appropriate in the public interest, the Commission must consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation. In the Proposing Release, the Commission solicited comment on the effects of the proposed amendment to Rule 12f-2 on competition, efficiency and capital formation as cited in Sections 3(f) and 23(a)(2). Six of the seven comment letters received directly argued in support of the amendment because, in part, it would remove a barrier to competition. The remaining comment letter asserted that reducing the trading delay would reduce volatility in IPO trading.

The Commission has considered the amendment to Rule 12f-2 in light of the comments received and the standards cited in Sections 3(f)  43 and 23(a)(2)  44 of the Exchange Act. The Commission believes that, by permitting all exchanges to compete for IPO order flow, the amendment removes an artificial barrier to competition. Accordingly, the Commission does not believe that the amendment would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act. In addition, enhancing the environment for trading IPO securities will work to benefit issuers, remove a barrier to greater efficiency in the markets, and encourage capital formation.

This Final Regulatory Flexibility Analysis (“FRFA”) is being prepared in accordance with Section 4 of the Regulatory Flexibility Act (“RFA”). 45 It relates to an amendment to Rule 12f-2(a)  46 under the Exchange Act. The amendment will permit exchanges to extend UTP to an IPO security listed on another exchange after the first trade on the listing exchange is reported to the Consolidated Tape, rather than waiting one full trading day as currently required.

This amendment is intended to further the purposes of Section 11A(a)(1)(D) of the Exchange Act  47 by fostering efficiency, enhancing competition, increasing the amount of information available to brokers, dealers, and investors, facilitating the offsetting of investors' orders, and contributing to best execution of those orders. The amendment addresses a barrier to competition that currently operates as a restriction on trading activity. Under the current one-day trading delay, exchanges that do not list IPOs are unable to compete with ECNs and the third market for order flow. The rule change will facilitate competition among various markets for order flow consistent with Section 11A(a)(1)(C)(ii)  48 of the Exchange Act and enhance investor options for order execution.

No public comments were received in response to the IRFA and no comments specifically addressed that analysis. Commenters did, however, offer support for the amendment on the basis that the current one-day trading delay imposes a burden on competition. In response to the commenters and based in part on empirical evidence, the Commission has decided to adopt the rule amendment as proposed.

The amendment will directly affect the national securities exchanges, none of which is a small entity. Paragraph (e) of the Rule 0-10  49 states that the term “small business,” when referring to an exchange, means any exchange that has been exempted from the reporting requirements of § 240.11Aa3-1. Because no exchange has been exempted from the reporting requirements of § 240.11Aa3-1, there will be no impact for purposes of the RFA on small businesses.

The amendment does not impose any new reporting, recordkeeping, or other compliance requirements on exchanges, or entities indirectly affected by the proposal.

The RFA directs the Commission to consider significant alternatives that would accomplish the stated objectives, while minimizing any significant economic impact on small entities. In connection with the proposal, the Commission considered the following alternatives: (1) the establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the Rule for small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the Rule, or any part thereof, for small entities.

The Commission believes that none of the above alternatives is applicable to the amendment. The exchanges are directly subject to the requirements of Rule 12f-2(a) and are not “small entities” because they are all national securities exchanges that do not meet the definition of small entity. Therefore, the Commission does not believe the alternatives are applicable in the present amendment.

The rule amendments in this release are being adopted pursuant to 15 U.S.C. 78 et seq. , particularly Sections 11A(a)(1)(C)(ii), 11A(a)(1)(D), 12(f)(1)(C), 12(f)(1)(D), and 23(a) of the Exchange Act, 15 U.S.C. 78k-1, 78 l (f)(1)(C), 78 l (f)(1)(D), 78w(a).

Reporting and recordkeeping requirements, Securities.

Under the provisions of sections 618 and 623 of the Tariff Act of 1930, as amended (19 U.S.C. 1618 and 1623), section 320 of title 46, United States Code App. (46 U.S.C. App. 320), and section 5321 of title 31, United States Code (31 U.S.C. 5321), the Secretary of the Treasury is empowered to remit forfeitures, mitigate penalties, or cancel claims arising from violation of Customs bonds upon terms and conditions that he deems appropriate. Under sections 66 and 624 of the Tariff Act of 1930, as amended (19 U.S.C. 66 and 1624), the Secretary is authorized to issue regulations necessary to carry out the provisions of the Tariff Act. Consistent with that authority, Parts 171 (relating to seizures and penalties) and 172 (relating to liquidated damages) of the Customs Regulations (19 CFR Parts 171 and 172) were promulgated to provide for the petitioning process in order to allow for the orderly remission of forfeitures, mitigation of penalties, and cancellation of claims for liquidated damages.

In a Notice of Proposed Rulemaking published in the Federal Register (63 FR 5329) on February 2, 1998, Customs proposed to substantially revise Parts 171 and 172 of the Customs Regulations relating to the filing of petitions in penalty, liquidated damages, and seizure cases to make the proposed regulations briefer and to allow more flexibility and useful contact with government officials in an effort to administer cases in the most efficient way possible. The amendments to the regulations were also proposed to eliminate needless or redundant provisions.

Below is a summary of the Notice of Proposed Rulemaking:

1. The scope of Parts 171 and 172 was proposed to be changed. Part 171, as proposed, related to unsecured fines and penalties and all seizure and forfeiture cases. Inasmuch as the payment of certain penalties is guaranteed by the conditions of the International Carrier Bond and, therefore, can involve demands against sureties, the provisions of Part 172 were proposed to be amended to relate to all claims for liquidated damages and penalties secured by a bond. This proposed change would guarantee that all such claims against sureties would be handled in a consistent manner.

2. The proposed regulations anticipated that electronic filing of petitions is an inevitability even though Customs does not currently have, on a nationwide basis, the capabilities to accept petitions electronically. Accordingly, the proposed regulations reflected the acceptance of electronic signatures and eliminated the requirement of duplicate copies if an electronic petition is filed.

3. The proposed regulations required that petitions for relief be signed by the petitioner, his attorney-at-law or a Customs broker, but would allow others, in certain non-commercial violations (such as passenger/baggage-line violations), to file petitions on behalf of non-English speaking claimants to property or other petitioners who have some disability that may impede the ability to file a petition. Instances have occurred where such petitions were rejected because they did not meet the signature requirements of the current regulations. A strict reading of the current regulations would bar Customs from considering those petitions. This position caused needless delay in administrative processing of cases. As proposed, the process would be opened in these situations and efficiency would be promoted by allowing, in non-commercial violations, a non-English speaking petitioner or petitioner who has a disability which may impede his ability to file a petition to enlist a family member or other representative to file a petition on his behalf.

4. Under the current regulations Customs may limit the petitioning period to 7 days in cases involving violations of 19 U.S.C. 1592 when the running of the statute of limitations is imminent. As Customs finds no reason to limit the 7-day petitioning period option to just cases involving violations of 19 U.S.C. 1592, it was proposed to extend the 7-day rule to all cases and clarify that it is 7 working days, rather than calendar days.

5. The regulatory section entitled “Additional evidence required with certain petitions” was proposed to be eliminated as unnecessary. The proposed new § 171.2 indicated that the claimant or petitioner must establish a petitionable interest in seized property. How that proof is presented is not a subject requiring control by regulation.

6. The current regulations provide that there is a right to make an oral presentation to seek relief from a penalty incurred for a violation of 19 U.S.C. 1592 for which proceedings commenced after December 31, 1978, and that oral presentations seeking relief for other penalties incurred may be allowed at the discretion of Customs. It was proposed to simply remove the reference to cases commenced subsequent to December 31, 1978, as that provision has become obsolete with the passage of time.

7. Title VI of the North American Free Trade Agreement Implementation Act (known commonly as the Customs Modernization Act) (Pub.L. 103-182, 107 Stat. 2057) amended the provisions of 19 U.S.C. 1595a(c) to provide for the seizure and forfeiture of stolen property. This amendment rendered current § 171.22(c) obsolete, as those provisions of the new statute are applicable to any stolen property, not only that stolen in Canada and brought into the United States. Accordingly, it was proposed to eliminate that provision.

8. Mitigation guidelines for monetary penalties assessed pursuant to 19 U.S.C. 1592 are currently published as Appendix B to Part 171 of the Regulations. Since the guidelines are now published, the provisions of § 171.23 of the regulations, making these guidelines available upon request, became obsolete and that section was proposed to be eliminated.

9. The offices of Regional Commissioner and District Director were eliminated under Customs reorganization; therefore, all references to those offices and delegations of authority to those individuals to decide petitions and supplemental petitions for relief became obsolete. In Treasury Decision 95-78 (T.D. 95-78, 60 FR 48645, September 20, 1995), Customs published an Interim Rule which amended the regulations and authorized Fines, Penalties, and Forfeitures Officers to decide petitions for relief, and certain designated Headquarters officials assigned to field locations to decide supplemental and second supplemental petitions for relief in certain cases (although the Notice of Proposed Rulemaking proposed the elimination of second supplemental petitions, as discussed later herein). T.D. 95-78 was later finalized by Treasury Decision 99-27 (T.D. 99-27, 64 FR 13673, March 22, 1999). Changes promulgated by the interim rule were reflected in the Notice of Proposed Rulemaking.

10. Consistent with the Customs reorganization, it was proposed to remove specific delegations of mitigation authority from the body of regulatory text with the intention of affording the Secretary of the Treasury and the Commissioner of Customs the opportunity to delegate authority to decide petitions and supplemental petitions to the field through delegation orders, without the necessity of amending the regulations. It was contemplated that a separate document would be published in the Federal Register detailing the new delegations.

11. The provisions of Part 111 were proposed to be amended to eliminate the requirement of Headquarters approval of broker penalty cases assessed in excess of $10,000.

12. Novel or complex issues often arise concerning Customs policy with regard to Customs actions or potential actions relating to seizures and forfeitures, penalties (including penalty-based demands for duty), liquidated damages or penalty assessment or mitigation in cases that are otherwise within field jurisdiction because of the value of the property or the amount of the penalty or claim for liquidated damages. In those instances, Headquarters advice may need to be sought. Accordingly, it was proposed to include a section in both Parts 171 and 172 to allow any Customs officer or an alleged violator to initiate a request for advice to be submitted to the Fines, Penalties, and Forfeitures Officer for forwarding to the Chief, Penalties Branch, Office of Regulations and Rulings. It was proposed that the Fines, Penalties, and Forfeitures Officer would retain the authority to refuse to forward any request that fails to raise a qualifying issue and to seek legal advice from the appropriate Associate or Assistant Chief Counsel in such cases.

13. Under current policy, Customs officers may accept petitions filed untimely in response to claims for liquidated damages. Those petitions can be accepted at any time prior to commencement of any sanctioning action against a bond principal or the issuance of any notice to show cause against a surety. It was proposed to permit Customs to accept late petitions in penalty cases as well, but, as articulated in guidelines published for cancellation of bond charges ( see T.D. 94-38, 59 FR 17830, April 12, 1994), lateness in filing a petition was to be factored when considering remission or mitigation of a claim and less generous relief, if otherwise merited, was to be afforded to the petitioner who files in an untimely manner.

14. The courts have consistently held that a claim for liquidated damages is not a “charge or exaction” which is properly the subject of a protest filed pursuant to the authority of 19 U.S.C. 1514. See United States versus Toshoku America, Inc. , 879 F.2d 815 (Fed. Cir. 1989); Halperin Shipping Co., Inc. v. United States , 14 CIT 438, 742 F. Supp. 1163 (1990). In light of these decisions, it was proposed to amend the regulations to indicate that claims for liquidated damages and decisions on petitions are not properly the subject of a protest filed pursuant to 19 U.S.C. 1514.

15. In Trayco, Inc. v. United States , 994 F.2d 832 (Fed. Cir. 1993), the Court permitted a company that had petitioned for relief, received a decision on the petition and, although unhappy with the mitigation offered, paid that mitigated amount “under protest,” to file suit to recover the amount paid. The Court noted that as “ * * * nothing in the statute or regulations gives notice that a party may relinquish its rights to judicial review by paying a mitigated penalty and filing a second supplemental petition, we decline to hold that Trayco is estopped where it accompanied its payment with a statement expressly reserving its rights to judicial review.” Id. at 839. Customs proposed to amend the regulations to eliminate this regulatory gap and provide that any payment made in compliance with a mitigation decision will act as an accord and satisfaction where the paying party has elected to resolve the case through the administrative process and has waived the right to sue for a refund. It was proposed that this express statement be included in all mitigation decisions offered to petitioners in order to provide full disclosure as to their administrative or judicial rights. According to the proposal, Customs will not accept payments “under protest.”

16. It was proposed to eliminate second supplemental petitions. As proposed, payment of a mitigated amount would never be necessary to receive original or appellate administrative review. If a petitioner believes the underlying penalty was incorrectly assessed or the claim improperly mitigated, he would not be required to pay and then later sue for a refund of monies paid.

17. The proposed regulations included a provision allowing the deciding Customs official to reserve the right to require a waiver of the statute of limitations executed by the claimants to the property or charged party or parties as a condition precedent before accepting a supplemental petition in any case if less than one year remains before the statute of limitations may be asserted as a defense to all or part of that case. Upon receipt of such a waiver, any reduced time period for acceptance of a petition would not be necessary.

18. Under current § 111.95, Customs Regulations, a final determination of $1,000 or less in response to a petition for relief in a case involving assessment of a penalty for violation of the provisions of 19 U.S.C. 1641 could not be the subject of a supplemental petition. As there is no basis to single out this particular violation as not being worthy of a supplemental petition for relief, and as Customs believes all parties should have the same administrative rights, it was proposed to remove this restriction on the filing of supplemental petitions in broker penalty cases.

19. Sections 10.39(e) and (f) of the regulations, relating to the filing of petitions in cases involving breaches of the terms and conditions of temporary importation bonds (TIBs), provide for different standards of review if there has been a default with respect to all of the articles entered under bond or if there has been a default with respect to part, but not all, of the articles entered under bond. Because this bifurcation is unnecessary, it was proposed to combine the provisions of §§ 10.39(e) and (f) to provide a single standard for review of TIB petitions without regard to whether all or part of the merchandise entered under the TIB are in breach.

20. Current § 162.48, Customs Regulations, relating to the disposition of perishable and low-value property, permits Customs, by the authority granted in section 612 of the Tariff Act of 1930, as amended (19 U.S.C. 1612), to destroy summarily low-value seized property (less than $1,000) when the costs of storing and maintaining such property are disproportionate to its value. Customs would then reimburse any successful petitioning claimant from the Treasury Forfeiture Fund. The provisions of section 667 of the Customs Modernization Act removed this $1,000 cap and permitted the summary destruction of any seized property, without regard to value, if the costs of maintaining such property were disproportionate to its value. Section 162.48 was proposed to be amended, consistent with this legislative change.

21. Finally, the provisions of Part 162 were proposed to be amended to specifically authorize Fines, Penalties, and Forfeitures Officers to accept waivers of the statute of limitations with regard to actual or potential violations arising within their respective ports. It was proposed that the Office of Regulations and Rulings would retain authority to accept waivers in established actual cases over which it has jurisdiction and a petition for relief has been filed.

Proposed conforming amendments to Parts 10, 12, 18, 24, 111, 113, 114, 125, 134, 145, and 162 were also set forth in the Notice of Proposed Rulemaking.

The February 2, 1998, Notice of Proposed Rulemaking made provision for the submission of public comments on the proposed regulatory changes for consideration before adoption of those changes as a final rule. The prescribed comment period closed on April 3, 1998. A total of 18 responses to the solicitation of comments was received by Customs. The comments submitted are summarized and responded to below.

Five commenters are opposed to the combination of §§ 10.39(e) and 10.39(f). The commenters state that current § 10.39(e) provides for relief from liquidated damages involving breach of the terms and conditions of the TIB when partial exportation or destruction of such merchandise occurs. The commenters are of the view that the proposed recrafted regulation would unfairly penalize importers on entire shipments when only a small portion may not have been exported or destroyed in the prescribed manner. Section 10.39(f) currently indicates that the amount to be tendered is determined by the value of the goods involved in the breach of the bond. The commenters assert that the proposed new regulation would not do this and it is unclear as to the level of liability for the importer when a partial exportation or destruction occurs.

The commenters' fears are misplaced. First, the proposed amendment in no way would change the provisions of § 10.39(d)(1), which governs assessment of liquidated damages for failure to export or destroy TIB merchandise in the time period prescribed by regulation. Claims will still be assessed at two times or 110 percent of the estimated duties applicable to the entry, depending on the HTSUS provision under which entry is made. The proposed regulatory text would eliminate unnecessary differences in the authority of the Fines, Penalties, and Forfeitures Officer to act on a petition for relief with regard to those cases where all of the merchandise covered under the TIB was not exported or destroyed as opposed to those cases where partial exportation or destruction occurred. The provisions of § 10.39(e)(1) through (e)(4), relating to the standards to be considered when canceling the claim upon payment of a lesser amount, are not being changed. Those standards will be applied to partial breaches as well as breaches involving all merchandise covered by a TIB entry. In accordance with this response, Customs is proceeding with combining § 10.39(e) and § 10.39(f) in the final regulatory text.

Numerous commenters express the view that oral presentations should be granted as a matter of right in all cases.

Customs does not agree that oral presentations should be granted as a matter of right in all cases, but does concede that reference to 19 U.S.C. 1593a(b)(2) regarding petitioning of penalties assessed for false drawback claims was inadvertently excluded from this proposed regulation. The provisions of 19 U.S.C. 1592(b)(2) and 19 U.S.C. 1593a(b)(2) specifically state that a person charged with a penalty thereunder shall have reasonable opportunity under 19 U.S.C. 1618 to make representations, both oral and written, seeking remission or mitigation of the monetary penalty. For the most part, other statutes enforced by Customs do not provide for such an opportunity. It would be administratively burdensome to require Customs to hear oral presentations in all violations for which cases are developed. Accordingly, the regulations provide Customs with discretion to allow oral conferences in other cases. However, the final regulatory text is amended to include reference to 19 U.S.C. 1593a(b)(2).

One commenter indicates that the regulations should be amended in a manner to require Customs to act on petitions within 120 days. The commenter states that when a petition is received, not much else has to be done by Customs and there is no basis for continued delays.

Customs does not agree. When a petition is received, an investigation often must be undertaken in order to determine the veracity of statements made in that petition. This can be a time consuming process, particularly if information from foreign sources must be obtained. Additionally, there are instances when a claimant to seized property or a charged party asks that Customs delay a decision on a petition for relief. If Customs is required to adhere to a rigid decision schedule, it could work to the disadvantage of such a party. While Customs makes every effort to decide petitions for relief as expeditiously as possible, Customs sees no reason to amend the regulations to place a strict time frame on the processing of petitions.

A comment was received from the Food and Drug Administration (FDA), indicating its concern that the provisions of proposed §§ 172.11 and 172.12 would authorize Fines, Penalties, and Forfeitures Officers to decide petitions for relief in cases involving the failure to redeliver FDA-regulated merchandise which has been refused admission. There is a concern that the Customs officers will not have the technical expertise to make such a determination.

Customs appreciates FDA's concern, but notes that the provisions of 21 CFR 1.97(b), which require FDA and Customs to be in agreement with regard to the terms and conditions of cancellation of any bond charge arising from the failure to comply with FDA admissibility requirements, have not been overridden by these regulations. Fines, Penalties, and Forfeitures Officers will still be required to forward all petitions for relief in FDA cases to FDA and will follow the recommendation of FDA with regard to the disposition of those cases consistent with the regulations.

Numerous commenters object to proposed § 171.2(e), which allows Customs to reduce the time for filing a petition for relief to no less than seven working days when fewer than 180 days remain from the date of penalty notice or seizure before the statute of limitations may be available as a defense. One commenter asks that the new regulations commit Customs to making every effort to issue notices of penalty and seizure within sufficient time so as to allow importers 30 days to file petitions for relief. Another commenter claims that this provision would interfere with a surety's right to investigate and raise appropriate defenses, if any, before deciding to extend the statute of limitations. The same commenter states that the surety should receive notice at the same time the claim is made against the principal on the bond. If at least 90 days remained before expiration of the statute of limitations, the surety should receive the full 60 days to investigate the claim and file a petition. In the alternative, the commenter suggests that Customs accept limited waivers of the statute of limitations to enlarge the time remaining to the full 180-day period. Finally, another commenter states that Customs is now proposing to extend the 7-day petitioning period to other types of cases when the running of the statute of limitations is “imminent.” The commenter suggests that Customs define the term “imminent.”

Customs does not agree that this provision is onerous and should be changed. It is noted that this provision is not a newly promulgated exception from the usual 30 or 60-day time periods for the filing of petitions for relief. This provision is basically unchanged from the current regulations. Under current 19 CFR 171.12(e), Customs may shorten the petitioning period to 7 days if less than 180 days remains before the statute of limitations is to run. Because the current regulation does not distinguish between calendar or working days so as to determine the appropriate length of that 7-day period, Customs has clarified the length of this shortened petitioning period by expressly indicating that 7 working days is the minimum time period for providing a petition for relief.

Also, it should be noted that sureties have received and will continue to receive courtesy copies of notices to principals of claims for liquidated damages which are issued against any bond the sureties have written. The proposed regulations, by combining liquidated damages case processing with processing of penalties secured by bonds, insure that sureties will also receive courtesy copies of penalty notices issued against their bond principals when the sureties have written the underlying International Carrier's Bond. If anything, notification to sureties of potential liabilities has expanded.

There is no regulatory proscription against execution of waivers of the statute of limitations which would enlarge the time to 180 days from the date of issuance of the claim for liquidated damages in order to allow for the full 60-day petitioning period.

While Customs certainly aspires to avoid having to curtail the time a petitioner has to file a petition for relief and Customs attempts to issue notices of penalty, seizure or claims for liquidated damages more than 180 days prior to the running of the statute of limitations, Customs concedes that on occasion these notices do not meet that time frame. While Customs continues to strive to issue notices so as to provide the claimant with full regulatory petitioning times, such notice issuance is not always possible. Customs is of the view that continuation of the current regulatory scheme provides a reasonable method to allow for maximum administrative petitioning rights.

Further, the proposed regulatory text in § 171.2(e) includes language indicating that if a penalty is assessed or a seizure is made and less than 180 days remain from the date of the penalty notice or seizure before the statute of limitations is available as a defense, the Fines, Penalties, and Forfeitures Officer may specify in the notice a reasonable period of time, but not less than 7 working days, for the filing of a petition for relief. For the sake of clarity, Customs is removing the phrase “from the date of penalty notice or seizure” and is rephrasing the final regulatory text to indicate that the Fines, Penalties, and Forfeitures Officer may specify in the seizure or penalty notice a reasonable period of time for the filing of a petition for relief.

Finally, the regulatory text does not include any reference to the running of the statute of limitations being “imminent.” Rather, a time certain of 180 days prior to the availability of the statute as an affirmative defense is referenced. Customs sees no reason to define the term “imminent” because it does not appear in the proposed regulation.

Many commenters disagree with the proposal to eliminate second supplemental petitions. They consistently claim that second supplemental petitions serve an important function and provide a necessary level of review. One commenter notes that the second supplemental petition is particularly useful in vessel repair cases established for violation of 19 U.S.C. 1466, particularly when a protest decision on the vessel entry liquidation reduces the loss of revenue to be collected on that entry. As currently configured in 19 CFR 171.33(c)(2)(ii), the regulation allows for the filing of a second supplemental petition within 30 days following an administrative or judicial decision with respect to entries involved in the penalty case which reduces the loss of duties upon which the mitigated penalty amount was based. The second supplemental petition affords the petitioner the ability to obtain the proper mitigated penalty amount. In vessel repair cases, the duty involved can often be substantial. That same commenter goes on to argue that elimination of the second supplemental petition would substantially reduce the petitioner's ability to receive full mitigation. The only avenue for further relief would be litigation, the least desirable alternative.

Customs agrees that an avenue for relief should be available to the party who must rely on an administrative or judicial decision which would reduce the amount of administrative penalties; however, the second supplemental petition, which requires full payment from that party prior to Customs acceptance of that second supplemental petition, places a substantial burden on that party when those same large sums are at issue.

Accordingly, in acknowledgment of the need to provide an administrative alternative to the party who would be affected by an administrative or judicial decision, Customs has decided to amend the provisions of proposed §§ 171.61 and 172.41 (relating to the filing of supplemental petitions) to allow for the filing of a supplemental petition within 60 days from an administrative or judicial decision with respect to entries involved in the penalty case which reduces the loss of duties upon which the mitigated penalty amount was based. This amendment would save petitioning rights for the party who awaits another administrative decision that would influence the outcome of its penalty case.

Notwithstanding the above, Customs remains of the view that the second supplemental petition should be eliminated. Currently, the petitioner is afforded up to two years after a decision on a supplemental petition for relief to file a second supplemental petition. That is simply too long a time to keep administrative matters open. Additionally, the Trayco court viewed with disfavor the regulatory requirement of payment in compliance with the decision on the supplemental petition for relief in order to obtain the third level of administrative review. Rather than prolong the process, Customs is of the view that two administrative opportunities provide sufficient levels of review for the charged party or claimant to seized property.

Numerous comments were received with regard to Customs' proposal to allow any Customs officer or alleged violator to initiate a request for Headquarters advice with a Fines, Penalties, and Forfeitures Officer for forwarding to the Chief, Penalties Branch, Office of Regulations and Rulings. This advice request, as proposed, must relate to any novel or complex issue arising concerning Customs policy regarding Customs actions or potential actions relating to seizures and forfeitures, penalties (including penalty-based demands for duty), liquidated damages or case assessment or mitigation in cases that are otherwise within field jurisdiction because of the value of the property or the amount of the penalty or claim for liquidated damages. The Fines, Penalties, and Forfeitures Officer would retain authority to refuse to forward any request that fails to raise a qualifying issue and to seek advice from the appropriate Associate or Assistant Chief Counsel in such cases.

Reaction to this proposed regulation ranged from strongly negative (with one commenter stating “the field office is typically the source of the problem which the petitioner would like Headquarters to review, and therefore is far too interested and biased a party to determine whether that review is warranted”; and referring to this as “asking the fox to guard the chicken coop”) to positively disposed, but cautious. The latter group seeks the establishment of criteria for the referral to Headquarters, seeing those criteria as being key to the effectiveness of the change. Several commenters suggest that the regulations provide for a right of appeal from the decision of the Fines, Penalties, and Forfeitures Officer to refuse referral.

Customs is of the view that sufficient safeguards and guarantees have been written into the regulation to allay the fears that deserving claimants will be barred from being heard. Concomitantly, the regulation is drawn narrowly enough to prevent frivolous claims that Headquarters review is required. The Fines, Penalties, and Forfeitures Officer is and must be afforded discretion to refuse to forward a request that fails to raise a qualifying issue, but he or she is also encouraged to seek legal advice from Associate or Assistant Chief Counsel as to whether a request does raise such a qualifying issue. The regulation was not designed to permit Headquarters review of all petitions, nor is it necessary to provide for appeal rights of a decision to disallow Headquarters review of novel and complex issues. That would impose yet another administrative layer to decide whether a claim should be heard at a Headquarters level. That would clearly not promote administrative efficiency.

Customs is also of the view that establishment in regulation of criteria to be followed for the granting of Headquarters review would be difficult. It is impossible to predict what issues might arise from Customs policies. Unlike Applications for Further Review in the protest process, mitigation decisions are acts of administrative discretion and do not have precedential value. Facts underlying the issuance of claims or the making of seizures can be very different yet involve the same statutory violation. Decisions are made within published guideline ranges. To allow further review of any act of administrative discretion would involve Headquarters review of every decision. This is not the intent of this regulatory change.

Numerous commenters express objection to the proposal to eliminate Customs Headquarters authorization of broker penalties when such penalties are proposed for issuance in amounts in excess of $10,000.

When the Tariff and Trade Act of 1984 (Pub.L. 98-573) amended 19 U.S.C. 1641 to provide for civil monetary penalties against brokers, Customs agreed with the brokerage community that the novelty of these penalties was such that Headquarters review of all proposed 19 U.S.C. 1641 penalties was necessary so as to provide guidance to the field and to identify those situations for which a penalty response was appropriate. In Treasury Decision 86-161 (T.D. 86-161, 51 FR 30345, August 26, 1986; corrected 51 FR 31760, September 5, 1986), Customs first published broker penalty assessment and mitigation guidelines by adding Appendix C to Part 171 to provide further guidance for field offices. A revision to Appendix C was published in Treasury Decision 90-20 (T.D. 90-20, 55 FR 10056, March 19, 1990.) After approximately five years of experience in assessing these penalties, Customs published Treasury Decision 91-77 (T.D. 91-77, 56 FR 46115, September 10, 1991), in which field offices were empowered to issue broker penalties without Headquarters review when the amount to be assessed did not exceed $10,000. At that point, it was believed that the agency had sufficient experience with these penalties that Headquarters review was only necessary when the most serious assessments were contemplated.

Customs is now of the view that Headquarters review of broker penalty cases is unnecessary. Headquarters does not by regulation review the issuance of any other type of penalty. There is no compelling reason to continue to approve broker penalties of any size. The Penalties Branch, Office of Regulations and Rulings, will review and decide supplemental petitions for relief in broker penalty cases when the amount assessed exceeds $10,000, so Headquarters review will still be afforded in the more serious cases.

Some commenters indicate that it is unnecessary for Customs, by regulation, to require proof of representation. One commenter suggests that standards of local bar associations provide adequate protections.

As Customs brokers may also represent parties that have been charged with penalties or claims for liquidated damages or seek return of seized property, standards of local bar associations do not provide adequate protection. The local bar association would not have jurisdiction to discipline a Customs broker. Because Customs concedes that not every petition for relief need be accompanied by a statement of representation, the proposed regulation left this requirement to the discretion of the Fines, Penalties, and Forfeitures Officer. Accordingly, no change is made to the proposed regulations based on these comments.

One commenter is extremely concerned about unauthorized filing of petitions and believes that petitions should be signed only by an attorney or a Customs broker. The commenter suggests that proposed § 171.1(b), which would allow a corporation's petition to be signed by “an officer or responsible supervisory official or a representative of the corporation,” would allow anyone claiming to be a representative to sign a petition. In the view of the commenter, virtually every significant commercial penalty claim involves a corporation and the proposed regulatory text would eliminate any and all restrictions with regard to individuals signing on behalf of corporations.

Customs disagrees with the commenter that signing of petitions by corporations should be limited to attorneys or Customs brokers because a principal can always act on its own behalf. Customs believes that when a corporation is the petitioner, it clearly can have a petition signed by an officer. Customs also believes that a large corporation may not want to require that a petition be signed by an officer in all cases and may want the flexibility to allow a responsible individual in a supervisory position or other responsible employee (such as a claims examiner) to be able to act on its behalf. Customs does agree, however, with the commenter that the proposed language may be too broad in seeming to allow any individual claiming to be a “representative” of the corporation to sign a petition for the corporation. Because the language as proposed may be read too broadly, Customs is modifying the proposed “representative of the corporation” language in the final rule to provide that a “responsible employee representative” as well as an officer or responsible individual in a supervisory position may sign a petition for a corporation.

Proposed § 172.43 states that Customs may require a waiver of the statute of limitations as a condition precedent prior to consideration of a supplemental petition for relief if the statute will be available as a defense to all or part of a case within one year from the date of decision on an original petition for relief. One commenter suggests that this proposed language only relieves Customs from its duty to issue demands timely. It is averred that unless Customs is held accountable for issuing timely decisions on the original petition, there is no impetus for Customs to decide claims promptly.

Customs does not agree with this analysis. The statute of limitations may loom as a defense for many reasons, not just because Customs did not issue a demand timely. Customs seeks the statute of limitations waiver to encourage the orderly processing of the case so as to avoid litigation. It is not now, nor has it ever been, Customs policy to delay without good cause issuance of any claim. The claimant can always refuse to provide the statute of limitations waiver and the matter can be referred for commencement of a judicial action.

One commenter suggests that proposed § 172.22(b), relating to the payment of mitigation amounts acting as an accord and satisfaction, could compromise the rights of a surety in that it would force the surety to settle a claim because, being threatened with sanction, the surety would have to choose between obtaining a preliminary injunction or protesting the payment.

Customs does not agree with the commenter. A surety is provided with courtesy copies of original demands on bond principals. When the bond principal either fails to respond or exhausts its administrative rights and does not comply with decisions on any petitions for relief, a demand on surety is issued and the surety is afforded all petitioning rights. Once the surety is provided with a mitigation decision, if the surety refuses to pay and has raised a justiciable issue, Customs will commence a collection action and the surety may have its day in court. Customs is not of the view that application of the principles of accord and satisfaction to any single payment in compliance with a mitigation decision is an event that will force the surety either to comply or go to court to avoid sanction. Accordingly, Customs believes that the regulation should be adopted as proposed.

Another commenter strongly opposes the provisions of proposed § 171.23. The commenter states that the government will exercise greater care when it knows that its decision may be reviewed by the courts. The commenter believes that the court will only review the question of whether a violation occurred, not the mitigation. The commenter indicates that the government should welcome rather than oppose the court's view of whether a violation occurred.

Customs does not intend to deny a charged party its day in court. After Customs determines that a violation has occurred and assesses and mitigates a penalty, effects a seizure and remits a forfeiture, or assesses a claim for liquidated damages and cancels the claim upon payment of a lesser amount, all in accordance with the administrative procedure, there will be no coercion to pay. If a party wishes to have its day in court it can inform Customs that it will not pay and can wait for judicial action to be commenced.

However, Customs believes that once a party agrees to pay an administratively determined mitigation, remission or cancellation amount, the party should not be permitted also to pursue the matter in the courts. This has always been Customs view—a party can choose between administrative proceedings and judicial proceedings. This view was not, however, reflected in the regulations. Section 171.23 was proposed in reaction to the court's statement in Trayco, supra., that “nothing in the statute or regulations gives notice that a party may relinquish its rights to judicial review by paying a mitigated penalty.” The proposed regulation, once adopted, will serve to give the notice that the court stated was missing, in that payment of a penalty will act as an accord and satisfaction and bar judicial review.

It is noted that if a party chooses to pay the mitigated penalty, forfeiture remission amount or bond claim cancellation amount, one still has the right to pursue the administrative proceeding by filing a supplemental petition for relief.

One commenter representing sureties objects to proposed § 172.13(c), which states that no action shall be taken on any petition from a principal or surety if received after issuance of a notice to show cause is issued to a surety.

Customs will soon be issuing procedures with regard to the nonacceptance of bonds from delinquent sureties. Those procedures include the issuance of notices to show cause. They are being formulated with considerable consultation with the surety community. At the time a notice to show cause is issued to a surety, the surety will have already received at least six notifications of the existence of the claim. Customs does not agree that failure to accept a petition at that late a juncture in the administrative proceedings will place a chilling effect on meaningful exchanges.

One commenter suggests that in proposed § 171.1(c)(4), Customs should not require proof of a petitionable interest in seized property from an importer of record. The commenter suggests that this provision be amended to allow any party who may act as importer of record to file a petition for remission of a forfeiture without additional proof of a petitionable interest in the property.

Customs does not agree. While Customs concedes that in the overwhelming number of cases, the importer of record will have a petitionable interest in any seized merchandise, there are situations where a Customs broker filing an entry as a nominal importer of record will have no petitionable interest in the merchandise being entered. As such, it would not be appropriate to include regulatory text that would automatically confer upon an importer of record a petitionable interest in seized property.

One commenter suggests that the provisions of proposed § 171.21 should require a written decision with regard to a petition submitted in response to an alleged violation of 19 U.S.C. 1595a.

Sections 19 U.S.C. 1592, 1593a and 1641 all specifically provide that a written statement which sets forth the final determination and the findings of fact and conclusions of law on which such determination is based must be issued. Customs is of the view that the agency should not identify through rulemaking other violations for which written decisions will or will not be given as a matter of right. However, Customs endeavors to issue written decisions in response to all petitions, regardless of the underlying violation.

Customs notes that the proposed rule inadvertently omitted a reference to 19 U.S.C. 1593a in this section. The regulatory text has been amended to so include that statute in this provision.

One commenter disagrees with the certification by Customs pursuant to the Regulatory Flexibility Act that the provisions of the proposed regulatory amendments, if adopted, will not have a substantial impact on a number of small entities. The commenter states that there is no credible support for the statement that small business entities are rarely repeat violators of Customs laws and, therefore, will seldom need to avail themselves of these regulatory provisions and file petitions for relief on a regular basis. The commenter provides anecdotal evidence that it had a bond principal that was a small entity that had seven delinquent liquidated damages claims. The commenter goes on to state that common sense suggests that small companies are frequent violators of the customs laws and are substantially and directly affected by the proposed regulations.

Customs does not deny that some small businesses will be affected by these regulations. The statement included in the Notice of Proposed Rulemaking did not state that small companies would never be impacted, but that there would not be a significant impact on a substantial number of small entities. Prompted by the commenter's concern, Customs, to verify its certification statement, reviewed all claims for liquidated damages (the most common sort of violation that would be incurred by a small entity) in a large port for Fiscal Year 1998. Some 830 violators were identified. Those 830 violators incurred 1,690 claims for liquidated damages, an average of two per entity. Only 34 entities incurred more than 5 claims for liquidated damages and of those 34 entities more than two-thirds were large transportation companies and retailers, clearly not small businesses. Of those 830 identified violators, (which is an unknown percentage of all businesses that deal with Customs in some form or fashion, many of whom incur no liabilities whatsoever and don't appear in any list of violators), only 11 could be identified as small businesses—slightly over one percent. In light of this sampling, Customs remains of the view that these amendments will not have a significant impact on a substantial number of small entities.

One commenter indicates that it would be opposed to the provisions of proposed § 172.33 (which permits Customs, as a condition to accepting an offer in compromise, to require that the offeror enter into any collateral agreement or post security which is deemed necessary for the protection of the interest of the United States), if such a provision is intended to extend the period in which the surety would be liable, either by request for extension of the statute of limitations or other means.

The commenter should be assured that Customs does not intend, through promulgation of this section, to extend the statute of limitations or to otherwise compromise any rights that a party may have to raise any defenses with regard to any claim brought against it.

One commenting surety representative indicates that Customs had recently adopted a policy whereby any mitigation offered to a bond principal (and not acted on by it) would be described in the first demand on surety, and made available to the surety as a basis for settlement. The commenter urges that the revised regulation provide that this information be included in the first demand on surety and that the surety be offered a reasonable opportunity to accept the mitigation offered. In that same vein, other commenters suggest that the proposed regulatory text of §§ 171.62(a) and 172.42(a) be amended to add the following language: “In no event can the reviewing official grant less relief than contained in the decision on the original petition for relief.” It is averred that this protects petitioners from the risk of having to pay a higher penalty merely by exercising the due process right of an administrative review of the original decision.

Customs does not agree with either of these comments. As to the comment of the surety, Customs offers mitigation as a matter of administrative discretion. While in the vast majority of cases the mitigation offered to the bond principal will be offered to the principal's surety, Customs does not want its mitigation policies to be dictated by regulation.

The same logic applies to Customs rejection of the proposed language limiting mitigation authority when considering a supplemental petition for relief. Facts may arise that were not available when considering the original petition for relief that would call for less generous mitigation when considering a supplemental petition for relief. As a matter of policy, Customs does not grant less generous mitigation upon review of a supplemental petition for relief than was afforded on the original petition without an articulable reason for doing so. The filing of a supplemental petition for relief questioning the decision on the original petition is never, in and of itself, an adequate reason to grant less generous relief than was afforded on the original petition. A petitioner should never be penalized for the mere act of filing a supplemental petition for relief. In order to safeguard against abuses of this type, Customs affords review of supplemental petitions for relief by officials other than those deciding the original petition. Customs cannot agree to the proposed regulatory language barring the granting of less generous mitigation in all situations inasmuch as such language would interfere with the exercise of administrative discretion.

Finally, numerous commenters object to Customs elimination of specifically enumerated delegations of authority within the language of the regulations. One commenter states that the Notice of Proposed Rulemaking stated that additional authority is to be delegated to the Customs ports to render decisions on petitions and supplemental petitions. The commenter suggests that such further delegation will only magnify a problem of lack of uniformity between ports.

Customs notes that the Notice of Proposed Rulemaking proposed to remove specific delegations of mitigation authority from the body of the regulatory text with the intention of affording the Secretary of the Treasury and the Commissioner of Customs the opportunity to delegate authority to decide petitions and supplemental petitions through delegation orders without the necessity of amending the regulations. The Notice also stated that a separate document would be published in the Federal Register detailing new delegations. It is unclear how any further delegations of authority will only magnify a problem of lack of uniformity between ports, as the commenter suggests. All ports function under the same delegations. Rather than causing a lack of uniformity, those delegations promote uniformity. Accordingly, Customs disagrees with the comments and will publish this proposed regulatory text without change.

After analysis of the comments and further review of the matter, Customs has determined to adopt the amendments proposed in the Notice of Proposed Rulemaking published in the Federal Register (63 FR 5329) on February 2, 1998, with the changes mentioned in the comment discussion and with the following additional changes that are necessary to bring consistency to the regulations or to remove unnecessary language:

1. Customs has removed § 113.46 from the regulatory text. As Customs is not setting forth guidelines relating to cancellation of bond charges resulting from failure to produce documents in the regulations and is not directing the reader to the location of these guidelines, this language is unnecessary.

2. Customs has reviewed the last sentence of proposed § 171.3(a) and has determined that said sentence is unnecessary. Proposed § 171.3(a) discusses the arrangement of oral presentations in cases involving alleged violations of 19 U.S.C. 1592. In the current regulation, it was necessary to define when a proceeding was commenced because of the change in the underlying statute promulgated in 1978. Therefore, through the passage of time the sentence has become obsolete and has been eliminated.

3. The provisions of proposed § 171.64 contain an error. The language of the regulation indicates that the deciding official reserves the right to require a waiver as a condition precedent before accepting a petition for relief or supplemental petition for relief in any case where the statute of limitations will be available as a defense within one year from the date of the decision on the original petition for relief. Requirement of a waiver cannot be a condition precedent to the acceptance of an original petition for relief, provided the statute will be available as a defense within one year from the date of the decision on that petition. The regulation has been amended to eliminate the reference to petitions. The regulation is now consistent with the provisions of § 172.43.

4. In reviewing the provisions of proposed § 162.81, Customs is of the view that the ministerial acts involving the processing of statute of limitations waivers are operational in nature and need not be the subject of regulation. Accordingly, that proposed section has been removed from the final document.

5. In the regulatory text of proposed §§ 171.13(a) and 172.13(a), Customs indicated that late petitions could be accepted if the deciding official, in his or her discretion, believed the efficient administration of justice would be met. Upon further review of this proposed regulation, Customs has decided that codification of the acceptance of untimely petitions in penalty, seizure and liquidated damages cases could be construed by claimants to seized property and alleged violators as bestowing a right to file a late petition. While Customs concededly, as a matter of policy, has accepted late petitions in claims for liquidated damages cases and merely afforded less generous mitigation, Customs has decided that such a decision should remain a matter of policy and should not be included in regulation. Accordingly, in the final regulatory text, proposed §§ 171.13(a) and 172.13(a) have been removed. Paragraphs (b) and (c) of proposed § 171.13 have been redesignated in the final text as paragraphs (a) and (b). Paragraphs (b) and (c) in proposed § 172.13 have been redesignated in the final text as paragraphs (a) and (b).

6. Customs has also removed proposed § 171.32 from the final regulatory text and redesignated proposed § 171.33 as § 171.32. Customs Headquarters will retain all offer acceptance authority, still subject to the approval of the General Counsel of the Treasury or his delegee, in cases administered under Part 171. The proposed regulatory text regarding authority to accept offers in cases administered under Part 172 has not been changed in the final document.

7. The proposed regulatory texts in §§ 171.1 and 172.2 did not make it clear that Customs can require that petitions and any documents submitted in support of petitions be in English or have English translations provided. Accordingly, language has been added to both of the noted regulations to clarify this requirement.

8. The proposed regulatory texts in §§ 171.14 and 172.14 have been amended to reflect the fact that Headquarters advice regarding actual duty loss tenders determined by Customs pursuant to § 162.74(c) of the Customs Regulations relating to prior disclosure and actual duty loss demands made under § 162.79b of the Customs Regulations are outside the scope of those particular regulations. The last sentence of § 162.79b will be retained. This section will continue to provide for Headquarters review of any determination of actual loss of duties in which a § 1592(d) demand has been made and there is no penalty assessment, the assessed penalty is remitted in full or the penalty amount (or mitigated penalty) has been paid.

9. The proposed regulatory text in § 10.39(e) has been amended to indicate that the Fines, Penalties, and Forfeitures Officer may cancel Temporary Importation Bond liquidated damages liability upon payment of a lesser amount in accordance with delegated authority. The proposed version of this section did not include this limiting language and apparently gave unintended full claim cancellation authority to Fines, Penalties, and Forfeiture Officers in these situations.

10. The proposed rule overlooked the provisions of § 12.8 of the Customs Regulations regarding claims for liquidated damages for failure to comply with meat inspection requirements. Customs is amending § 12.8 to conform with the provisions of Part 172.

11. In the fourth sentence of § 162.74(c) the word “demanded” is removed and replaced with the word “determined”. In prior disclosure, Customs does not “demand” the actual loss of revenue. Rather, the disclosing party tenders the duty to perfect the prior disclosure.

12. Consistent with the current practice of removing unnecessary footnotes, Part 18 of the Customs Regulations has been amended by removing footnote 9 which relates to § 18.24(a).

13. On Wednesday, March 15, 2000, Customs published Treasury Decision 00-17 (T.D. 00-17) in the Federal Register (65 FR 13880), amending the regulations relating to Customs brokers. In that document, the provisions of 19 CFR 111.92 and 111.93 explain the process involving issuance of monetary penalties for violations of the laws and regulations relating to Customs brokers. For purposes of clarity, this document has redesignated the existing text of § 111.92 as paragraph (a) with minor changes and added a new paragraph (b) to distinguish between pre-penalty and penalty notices. Also, provisions of Appendix C to Part 171 of the Customs Regulations which announce guidelines for the imposition and mitigation of penalties for violation of 19 U.S.C. 1641 have been amended to remove sections which are not consistent with regulatory changes promulgated in T.D. 00-17.

It is also noted that Customs is publishing in this issue of the Federal Register a separate document that details delegations of authority to decide petitions and supplemental petitions submitted pursuant to Part 171 and Part 172 of the Customs Regulations.

Inasmuch as small business entities are infrequently repeat violators of Customs laws, and, therefore, will seldom need to avail themselves of the these regulatory provisions and file petitions for relief on a regular basis, it is certified, pursuant to the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), that these amendments will not have a significant economic impact on a substantial number of small entities. Accordingly, the amendments are not subject to the regulatory analysis requirements of 5 U.S.C. 603 and 604.

This document does not meet the criteria for a “significant regulatory action” under E.O. 12866.