This final rule is issued under Marketing Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR part 905), regulating the handling of oranges, grapefruit, tangerines, and tangelos grown in Florida, hereinafter referred to as the “order.” The marketing agreement and order are effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

This rule also is issued under section 8e of the Act, which provides that whenever certain specified commodities, including grapefruit, are regulated under a Federal marketing order, imports of these commodities into the United States are prohibited unless they meet the same or comparable grade, size, quality, or maturity requirements as those in effect for the domestically produced commodities.

The Department of Agriculture (Department) is issuing this rule in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with the Secretary a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing the Secretary would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review the Secretary's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

There are no administrative procedures which must be exhausted prior to any judicial challenge to the provisions of import regulations issued under section 8e of the Act.

The order for Florida citrus provides for the establishment of minimum grade and size requirements with the concurrence of the Secretary. The minimum grade and size requirements are designed to provide fresh markets with fruit of acceptable quality and size, thereby maintaining consumer confidence for fresh Florida citrus. This contributes to stable marketing conditions in the interest of growers, handlers, and consumers, and helps increase returns to Florida citrus growers. The current minimum grade standard for red seedless grapefruit is U.S. No. 1. The current minimum size requirement for domestic shipments is size 56 (at least 3 5/16 inches in diameter) through November 12, 2000, and size 48 (3 9/16 inches in diameter), thereafter. The current minimum size for export shipments is size 56 throughout the year.

This final rule relaxes the minimum size requirement for domestic shipments from size 48 (3 9/16 inches in diameter) to size 56 (3 5/16 inches in diameter). Absent this change, the minimum size reverts to size 48 (3 9/16 inches in diameter) on November 13, 2000. This change allows handlers and importers to continue to ship size 56 red seedless grapefruit, and it is expected to maximize grapefruit shipments to fresh market channels. The Committee met on May 26, 2000, and unanimously recommended this action.

Section 905.52 of the order, in part, authorizes the Committee to recommend minimum grade and size regulations to the Secretary. Section 905.306 (7 CFR part 905.306) specifies minimum grade and size requirements for different varieties of fresh Florida grapefruit. Such requirements for domestic shipments are specified in § 905.306 in Table I of paragraph (a), and for export shipments in Table II of paragraph (b). This rule adjusts Table I to establish a minimum size of 56 (3 5/16 inches diameter). Minimum grade and size requirements for grapefruit imported into the United States are currently in effect under § 944.106 (7 CFR part 944.106). This rule also adjusts § 944.106 to establish a minimum size of 56. Export requirements for Florida red seedless grapefruit are not changed by this rule.

In the past, the Committee recommended relaxing the minimum size for red seedless grapefruit to size 56 in one year intervals. Rather than continuing to make this recommendation each year, the Committee recommended relaxing the minimum size for red seedless grapefruit from size 48 (3 9/16 inches in diameter) to size 56 (3 5/16 inches in diameter) on a continuous basis. In making this recommendation, the Committee recognized that the reasoning behind past recommendations to relax the minimum size to size 56 would most probably continue to exist at least into the foreseeable future.

As in the past, the Committee considered supply and demand in making its recommendation. Since the 1994-95 season, the production of red seedless grapefruit has been somewhere between 28.1 and 31.4 million 1 3/5 bushel boxes each year. Future production is expected to be near or below this range.

The Committee expects fresh market demand to continue to be sufficient to permit the shipment of size 56 red seedless grapefruit. The Committee believes that domestic markets have been developed for size 56 fruit and that the industry should continue to supply those markets. This size relaxation enables Florida grapefruit shippers to continue shipping size 56 red seedless grapefruit to the domestic market. This rule is expected to have a beneficial impact on producers and handlers because it permits Florida grapefruit handlers to make available the sizes of fruit needed to meet consumer needs. Matching the sizes with consumer needs is consistent with current and anticipated demand, and maximizes shipments to fresh market channels.

For the grapefruit industry, it is important to maximize shipments to the fresh market. This is especially true for red seedless grapefruit because the returns for processing are negligible. On-tree returns for processed red seedless grapefruit averaged $.17 per 1 3/5 bushel box from 1994 through 1999. In many cases, this is below the cost of production. Comparatively, the average on-tree return is $3.32 for fresh shipments during the same period.

For the years 1994 through 1999, fresh domestic shipments of red seedless grapefruit averaged 16.7 million 4/5 bushel cartons per season. Of these shipments, approximately 2.9 percent were size 56. The average f.o.b. price for size 56 red seedless grapefruit was $5.22 during the 1998-99 season. Combining this price with the average volume of size 56 calculates an approximate market value of $2.5 million for size 56 red seedless grapefruit.

During the first 11 weeks of the season, beginning with the third week in September, the Committee has been using a volume regulation to limit the volume of small red seedless grapefruit that can enter the fresh market. The Committee has used this regulation for the past three seasons, and has recommended using it again for the current season. The Committee believes the percentage size regulation has been helpful in reducing the negative effects of having size 56 red seedless grapefruit available on the domestic market, and that no other restrictions on size 56 are needed.

Therefore, based on available information, the Committee unanimously recommended that the minimum size for shipping red seedless grapefruit to the domestic market should be size 56. This minimum size change pertains to the domestic market, and does not change the minimum size for export shipments, which will remain at size 56. The largest market for size 56 red seedless grapefruit is for export. Additionally, importers will be favorably affected by this change since the relaxation of the minimum size regulation also applies to imported grapefruit.

Section 8e of the Act provides that when certain domestically produced commodities, including grapefruit, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. Since this rule will relax the minimum size requirement under the domestic handling regulations, a corresponding change to the import regulations must also be considered.

Minimum grade and size requirements for grapefruit imported into the United States are currently in effect under § 944.106 (7 CFR 944.106). This rule relaxes the minimum size requirement for imported red seedless grapefruit to 3 5/16 inches in diameter (size 56), to reflect the relaxation being made under the order for red seedless grapefruit grown in Florida.

Handlers in Florida shipped approximately 33,650,000 4/5 bushel cartons of grapefruit to the fresh market during the 1999-2000 season. Of these cartons, about 18,463,000 were exported. In the past three seasons, domestic shipments of Florida grapefruit averaged about 16,172,000 cartons. Imports totaled about 456,470 cartons in 1999. Imports account for less than five percent of domestic grapefruit shipments.

During the period January 1, 1999, through December 31, 1999, imports of grapefruit totaled 19,400,000 pounds (approximately 456,470 cartons). Recent yearly data indicate that imports from May through November are typically negligible. Future imports should not vary significantly from the 19,400,000 pounds figure. The Bahamas were the principal source of imported grapefruit, accounting for 93 percent of the total. Israel, Mexico and Turkey supplied remaining imports. Most imported grapefruit enters the United States from November through May.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Thus, both statutes have small entity orientation and compatibility.

There are approximately 75 grapefruit handlers who are subject to regulation under the order, and approximately 11,000 growers of citrus in the regulated area, and about 25 grapefruit importers. Small agricultural service firms, which include grapefruit handlers and importers, are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $5,000,000, and small agricultural producers are defined as those having annual receipts of less than $500,000.

Based on the industry and Committee data for the 1999-2000 season, the average annual f.o.b. price for fresh Florida red seedless grapefruit was around $7.52 per 4/5 bushel carton, and total fresh shipments for the 1999-2000 season are estimated at 25.6 million cartons of red seedless grapefruit. Approximately 25 percent of all handlers handled 70 percent of Florida grapefruit shipments. In addition, many of those handlers ship other citrus fruit and products which are not included in Committee data but would contribute further to handler receipts. Using the average f.o.b. price, about 69 percent of grapefruit handlers could be considered small businesses under SBA's definition. The majority of handlers, importers, and growers may be classified as small entities.

During the period January 1, 1999, through December 31, 1999, imports of grapefruit totaled 19,400,000 pounds (approximately 456,470 cartons). Recent yearly data indicate that imports from May through November are typically negligible. Future imports should not vary significantly from the 19,400,000 pounds. The Bahamas were the principal source of imported grapefruit, accounting for 93 percent of the total. Israel, Mexico, and Turkey supplied remaining imports. Most imported grapefruit enters the United States from November through May.

This rule relaxes the minimum size requirement for domestic shipments of red seedless grapefruit from size 48 (3 9/16 inches in diameter) to size 56 (3 5/16 inches in diameter). Absent this rule, the minimum size requirement for domestic shipments will revert to size 48 on November 13, 2000. The Committee believes that domestic markets have been developed for size 56 red seedless grapefruit and that the industry should continue to supply those markets. This change allows handlers and importers to continue to ship size 56 red seedless grapefruit, and it is expected to maximize shipments to fresh market channels. The Committee unanimously recommended this action. Section 905.306 specifies the minimum grade and size requirements for different varieties of fresh Florida grapefruit. Authority for this action is provided in § 905.52 of the order.

This action provides for the continued shipment of size 56 red seedless grapefruit. This change is not expected to increase costs associated with the order requirements, or the grapefruit import regulation. This rule is expected to have a positive impact on affected entities. This rule benefits producers and handlers by making available those sizes of fruit needed to meet consumer needs. This is consistent with current and anticipated demand, and provides for the maximization of shipments to fresh market channels. The opportunities and benefits of this rule are expected to be equally available to all grapefruit handlers, growers, and importers regardless of their size of operation.

Section 8e of the Act provides that when certain domestically produced commodities, including grapefruit, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. Because this rule changes the minimum size for domestic red seedless grapefruit shipments, a similar change is also applicable to imported grapefruit. Therefore, this rule also relaxes the minimum size for imported red seedless grapefruit to size 56. This regulation benefits importers to the same extent that it benefits Florida grapefruit producers and handlers because it continues to allow shipments of size 56 red seedless grapefruit into U.S. markets.

The Committee considered one alternative to this action. The Committee discussed relaxing the minimum size to size 56 for one year, as in the past, rather than on a continuous basis. Members said that, rather than discussing the issue each year and recommending a change, they preferred to make the change effective on a continuous basis. They also stated that should they ever want to increase the minimum size, they could meet and recommend the change to the Secretary. Therefore, the option of relaxing the minimum size for one year was rejected.

This final rule relaxes size requirements under the marketing order for Florida citrus. Accordingly, this action will not impose any additional reporting or recordkeeping requirements on either small or large red seedless grapefruit handlers and importers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

The Department has not identified any relevant Federal rules that duplicate, overlap or conflict with this final rule. However, red seedless grapefruit must meet the requirements as specified in the U.S. Standards for Grades of Florida Grapefruit (7 CFR 51.750 through 51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 through 1627). Further, no public comments were received concerning the proposal which addressed the initial regulatory flexibility analysis.

In addition, the Committee's meeting was widely publicized throughout the Florida citrus industry and all interested persons were invited to attend the meeting and participate in Committee deliberations on all issues. Like all Committee meetings, the May 26, 2000, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

A proposed rule concerning this action was published in the Federal Register on October 2, 2000 (65 FR 58672). Copies of the rule were mailed or sent via facsimile to all Committee members and red seedless grapefruit handlers. Finally, the rule was made available through the Internet by the Office of the Federal Register. A 15-day comment period ending October 17, 2000, was provided to allow interested persons to respond to the proposal. No comments were received during the comment period in response to the proposal. Accordingly, no changes will be made to the rule as proposed.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

In accordance with section 8e of the Act, the United States Trade Representative has concurred with the issuance of this final rule.

After consideration of all relevant matter presented, including the information and recommendation submitted by the Committee and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register (5 U.S.C. 553) so handlers and importers can continue to ship size 56 red seedless grapefruit after November 12, 2000. Further, handlers are aware of this relaxation, which was recommended at a public meeting. Also, a 15-day comment period was provided for in the proposed rule and no comments were received.

For the reasons set forth above, 7 CFR part 905 and 944 are amended as follows:

On October 4, 2000, the FAA issued Emergency AD 2000-20-51, for RHC Model R22 helicopters, which requires checking the yoke for any crack and replacing a cracked yoke assembly before further flight. The Emergency AD also requires replacing certain yokes with airworthy yokes before further flight after January 1, 2001. That action was prompted by the discovery of cracks in the yokes. The cracked yokes were still in service and functioned for an unknown duration. Several lots of the yokes were machined from 2024-T3 aluminum billet, which has poor stress corrosion properties in the transverse grain directions. Clamping the yokes in place causes a preload tension in areas that have exposed transverse grain. When these areas are exposed to a corrosive environment, such as salty air, stress corrosion causes crack formation and growth. This condition, if not corrected, could result in separation of the yokes from the main rotor drive shaft and subsequent loss of control of the helicopter.

The FAA has reviewed RHC R22 Service Bulletin SB-88A, dated September 13, 2000, which describes procedures for determining the lot number for yokes, P/N A203-5, and replacing any affected yoke with yoke, P/N A203-7.

Since the unsafe condition described is likely to exist or develop on other RHC Model R22 helicopters of the same type design, the FAA issued Emergency AD 2000-20-51 to detect crack formation and growth, which could result in separation of the yokes from the main rotor drive shaft and subsequent loss of control of the helicopter. The AD requires the following:

• Before further flight and thereafter before the first flight of each day, check the identified area of each yoke for a crack. The visual check required by the AD may be performed by an owner/operator (pilot) but must be entered into the aircraft records showing compliance with paragraph (a) of the AD in accordance with 14 CFR 43.11 and 91.417(a)(2)(v). The AD allows a pilot to perform this check because it involves only a visual check for a crack in the yoke and can be performed equally well by a pilot or a mechanic.

• If a yoke has a crack, before further flight, replace the yokes with airworthy yokes, P/N A203-7. Both yokes must be replaced with yoke, P/N A203-7.

• Before further flight after January 1, 2001, determine the lot identifier for each yoke, P/N A203-5, and replace any affected yokes, P/N A203-5, with yokes, P/N A203-7.

Determining that the installed yokes are not in the lots affected by this AD or replacing both yokes, P/N A203-5, with yokes, P/N A203-7, is terminating action for the requirements of this AD. The short compliance time involved is required because the previously described critical unsafe condition can adversely affect the structural integrity and controllability of the helicopter. Therefore, checking the yoke for any crack and replacing any cracked yoke are required before further flight, and this AD must be issued immediately.

Since it was found that immediate corrective action was required, notice and opportunity for prior public comment thereon were impracticable and contrary to the public interest, and good cause existed to make the AD effective immediately by individual letters issued on October 4, 2000 to all known U.S. owners and operators of RHC Model R22 helicopters. These conditions still exist, and the AD is hereby published in the Federal Register as an amendment to section 39.13 of the Federal Aviation Regulations (14 CFR 39.13) to make it effective to all persons. However, one minor editorial correction is made in this AD. The note concerning existing alternative methods of compliance was incorrectly numbered in the emergency AD. This AD corrects that Note number as NOTE 3. The FAA has determined that this change will neither increase the economic burden on any operator nor increase the scope of the AD.

The FAA estimates that 1305 helicopters of U.S. registry will be affected by this AD, that it will take approximately 0.3 work hour per helicopter to check both yokes and 0.5 work hour to replace both yokes. The average labor rate is $60 per work hour. Required parts will cost approximately $150 per helicopter (two yokes). Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $258,390, assuming each helicopter is inspected once and both yokes are replaced on all helicopters.

Although this action is in the form of a final rule that involves requirements affecting flight safety and, thus, was not preceded by notice and an opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications should identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES. All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their mailed comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. 2000-SW-51-AD.” The postcard will be date stamped and returned to the commenter.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

The FAA has determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and that it is not a “significant regulatory action” under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket. A copy of it, if filed, may be obtained from the Rules Docket at the FAA, Office of the Regional Counsel, Southwest Region, 2601 Meacham Blvd., Room 663, Fort Worth, Texas.

On March 10, 2000, the FAA issued AD 2000-05-30, amendment 39-11640 (65 FR 14838, March 20, 2000), applicable to certain Boeing Model 747 series airplanes, to require repetitive inspections to detect discrepancies of the cables, fittings, and pulleys of the engine thrust control cable installation; replacement, if necessary; and, for certain airplanes, certain preventative actions on the engine thrust control cable installation. That action was prompted by reports of failure of engine thrust control cables. The requirements of that AD are intended to prevent such failures, which could result in a severe asymmetric thrust condition during landing, and consequent reduced controllability of the airplane.

Paragraph (g) of AD 2000-05-30 requires, for certain Model 747-100B series airplanes with a stretched upper deck (SUD), a detailed visual inspection and measurement of the clearance between certain engine thrust control cables and the cable penetration holes, and follow-on corrective actions, if necessary. Since the issuance of AD 2000-05-30, the FAA has determined that certain other Model 747 series airplanes delivered with or modified to have a SUD are subject to the same unsafe condition as the Model 747-100B SUD airplanes identified in paragraph (g) of the existing AD. Therefore, the FAA finds that further rulemaking is necessary to prevent chafing and failure of engine thrust control cables, which could result in a severe asymmetric thrust condition during landing, and consequent reduced controllability of the airplane, on all affected airplanes.

The FAA has previously reviewed and approved Boeing Service Bulletin 747-53-2327, Revision 2, dated September 24, 1998. That service bulletin describes procedures for repetitive inspections of certain upper deck floor beams to detect cracking, and repair of any cracks found or reinforcement of those floor beams. The service bulletin also describes procedures for a detailed inspection and measurement of the clearance between the engine thrust control cables and the cable penetration holes in that area, and modification of the holes or replacement of the plate, if necessary.

Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design, this AD is being issued to prevent chafing and failure of engine thrust control cables, which could result in a severe asymmetric thrust condition during landing, and consequent reduced controllability of the airplane. This AD requires accomplishment of the actions specified in the service bulletin described previously, except as discussed below.

Operators should note that, although Boeing Service Bulletin 747-53-2327 describes procedures for inspection of certain upper deck floor beams, and repair of any cracks found or reinforcement of those floor beams, as applicable, this AD requires only the detailed visual inspection and measurement of the clearance between the engine thrust control cables and the cable penetration holes in that area. The inspection, repair, and reinforcement of certain upper deck floor beams are mandated by AD 92-24-07, amendment 39-8412 (57 FR 53436, November 10, 1992). The detailed visual inspection and measurement of the clearance between the engine thrust control cables and the cable penetration holes was incorporated into the service bulletin after AD 92-24-07 was issued. Therefore, the FAA is requiring that part of the service bulletin in this AD. In addition, for airplanes on which insufficient clearance is measured, this AD adds an additional inspection of the cable for wear in that area using procedures referenced in Appendix 1 (including Figure 1) of this AD and would require replacement of the cable, if necessary.

Operators also should note that the effectivity listing of Boeing Service Bulletin 747-53-2327, Revision 2, includes Boeing Model 747-400 series airplanes. However, the actions required by this AD are not applicable to Model 747-400 series airplanes, so those airplanes are not included in the applicability of this AD.

None of the airplanes affected by this action are on the U.S. Register. All airplanes included in the applicability of this rule currently are operated by non-U.S. operators under foreign registry; therefore, they are not directly affected by this AD action. However, the FAA considers that this rule is necessary to ensure that the unsafe condition is addressed in the event that any of these subject airplanes are imported and placed on the U.S. Register in the future.

Should an affected airplane be imported and placed on the U.S. Register in the future, it would require approximately 1 work hour to accomplish the required inspection, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of this AD would be $60 per airplane.

Since this AD action does not affect any airplane that is currently on the U.S. register, it has no adverse economic impact and imposes no additional burden on any person. Therefore, prior notice and public procedures hereon are unnecessary and the amendment may be made effective in less than 30 days after publication in the Federal Register.

Although this action is in the form of a final rule and was not preceded by notice and opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES . All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-136-AD.” The postcard will be date stamped and returned to the commenter.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (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) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

AD 2000-15-21, Amendment 39-11854, applicable to Model HH-1K, TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH-1F, UH-1H, UH-1L, and UH-1P; and Southwest Florida Aviation SW204, SW204HP, SW205, and SW205A-1 helicopters, which were manufactured by BHTI for the Armed Forces of the United States, was published in the Federal Register on August 9, 2000 (65 FR 48605). That AD requires removing and replacing certain mast assemblies.

After that AD was issued, the FAA discovered that the mast assembly part numbers listed in the applicability section are 205-011-450-001 and -005; the correct mast assembly part numbers are 204-011-450-001 and -005.

The FAA has determined that this revision will neither increase the economic burden on any operator nor increase the scope of the AD, therefore, no additional comments were solicited and this AD is being issued with the same requirements previously imposed but with the correct part number.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (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) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the FAA, Office of the Regional Counsel, Southwest Region, 2601 Meacham Blvd., Room 663, Fort Worth, Texas.

On February 15, 2000, the FAA issued AD 2000-04-09, amendment 39-11591 (65 FR 9217, February 24, 1000), applicable to certain EMBRAER Model EMB-135 and EMB-145 series airplanes, to require various inspections to detect discrepancies of the elevator servo tab and spring tab hinge fittings of the horizontal stabilizer, and follow-on corrective actions, if necessary. That action was prompted by issuance of mandatory continuing airworthiness information by a foreign civil airworthiness authority. The actions required by that AD are intended to prevent the linkage of the elevator servo tab or spring tab hinge fittings from separating from the horizontal stabilizer, which could result in loss of control of the airplane.

Since the issuance of that AD, the Departmento de Aviacao Civil (DAC), which is the airworthiness authority for Brazil, has received new information regarding the corrective action necessary to address this unsafe condition. As a result, the DAC has issued the following Brazilian airworthiness directives:

• 1999-09-01R2, dated May 1, 2000, supersedes Brazilian airworthiness directive 1999-09-01R1, dated October 25, 1999. This new revision was issued to specify repetitive inspection intervals and final rework of certain components. Part III of this revision specifies that, for certain Model EMB-135 and EMB-145 series airplanes, certain modifications of the elevator mass balance assembly and control column nose-up spring modifications, in accordance with Embraer Service Bulletin (S.B.) 145-27-0034, must be completed before accomplishment of the rework specified in Part III of S.B. 145-55-0022, Change 01, dated January 25, 2000.

• 2000-05-01, dated May 25, 2000, corrects any possible misinterpretation of the replacement procedures included in Brazilian airworthiness directive 1999-09-01R2, and in alert S.B. 145-55-A022 and S.B. 145-55-0022.

Reports indicated that loose hinge fittings were found, which was attributed to the incorrect application of the attachment fasteners to the tab upper skin. It is considered that the loss of fitting rigidity could cause damage to the other fasteners in the tab spar. Reports also indicated that some of the fasteners (which attach the spring-tab actuating arm to the tab upper skin and the servo-tab actuating linkage hinge to the tab lower skin) were not replaced with fasteners having a washer, because the collar conformation of those fasteners was found to be correct. In addition, maintenance records revealed that such fasteners may not have been replaced on certain airplanes. As a result of these findings, the DAC issued the previously referenced Brazilian airworthiness directives to clarify that all attachment fasteners must be installed with a washer, and that the fasteners must be replaced independently of the installation condition (even if the collar conformation is found to be “correct”).

These airplane models are manufactured in Brazil and are type certificated for operation in the United States under the provisions of section 21.29 of the Federal Aviation Regulations (14 CFR 21.29) and the applicable bilateral airworthiness agreement. Pursuant to this bilateral airworthiness agreement, the DAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DAC, reviewed all available information, and determined that AD action is necessary for products of this type design that are certificated for operation in the United States.

Embraer has issued the following service information:

• Service Bulletin 145-55-0022, Change 02, dated May 4, 2000, adds a fiberscopic inspection in Part II of the Accomplishment Instructions to detect the presence of a washer; and installation of a washer, if necessary. Part III of this service bulletin revises certain rework procedures (including rework and installation of the elevator servo and spring tabs; and reidentification, static balancing, and installation of the elevator). This rework procedure also specifies that, for certain airplanes, the modification specified by Embraer S.B. 145-27-0034 must be accomplished before Part III of S.B. 145-55-0022, Change 02, is accomplished. Accomplishment of the actions specified in Part III of S.B. 145-55-0022, Change 02, eliminates the need for the repetitive inspections.

• Service Bulletin 145-55-0024, dated May 25, 2000, adds a fiberscopic inspection of the attachment of the servo tab center hinge fitting to the tab skin in Part II of the Accomplishment Instructions of this service bulletin. This inspection specifies detecting the presence of washers under the collar bases of both attaching fasteners, in the inner side of the tab skin; and corrective actions, if necessary. Procedures include additional action to clarify certain replacement procedures that were specified in alert S.B. 145-55-A022, Change 01, dated October 7, 1999, and Change 02, dated October 8, 1999. Such action specifies that any discrepant fastener must be replaced with a new fastener having a washer, and that the action if required to be accomplished independently of the installation condition. In addition, S.B. 145-55-0024 specifies that operators report any discrepancy found during inspections of elevator spring tab and servo tab hinge fittings that are specified in Part I of the Accomplishment Instructions of the service bulletin.

• Service Bulletin 145-27-0034, Change 01, dated August 5, 1998, revises procedures for replacing the elevator mass-balance weight assembly and nose-up spring. Procedures also revise static balancing and weight and balance, add new mass-balance weight and its attachment bolt, and delete the instruction for checking the backlash.

The DAC mandated compliance with the preceding service bulletins, and issued previously referenced Brazilian airworthiness directive 1999-09-01R2 in order to assure the continued airworthiness of these airplanes in Brazil.

Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of the same type design registered in the United States, this AD supersedes AD 2000-04-09 to continue to require various inspections to detect discrepancies of the elevator servo tab and spring tab hinge fittings of the horizontal stabilizer, and follow-on corrective actions, if necessary. This amendment clarifies certain fiberscopic inspection and replacement procedures, and corrective actions; revises the applicability of the existing AD; and adds an inspection procedure for the servo tab center hinge fittings to detect the presence of washers for both attaching fasteners, and follow-on corrective actions. This amendment also provides for optional terminating action for the repetitive inspections. In addition, this amendment requires that operators report to the manufacturer any discrepancy found during any detailed visual inspection accomplished in accordance with S.B. 145-55-0024, dated May 25, 2000. This AD requires accomplishment of actions specified in the service bulletin described previously, except as discussed below.

Operators should note that, although the previously referenced Brazilian airworthiness directives and Embraer service information specify that certain rework actions are required, this AD provides those actions as optional. The FAA has determined that such action may be required in subsequent rulemaking action to provide sufficient time for public comment.

The applicability of AD 2000-04-09 included all of the serial numbers for Model EMB-135 and EMB-145 series airplanes, as listed in alert S.B. 145-55-A022, Change 02, dated October 8, 1999. However, this AD revises the applicability of this AD to those airplanes listed in S.B. 145-55-0022, Change 02, dated May 4, 2000, or S.B. 145-55-0024, dated May 25, 2000, and those airplanes on which the elevator servo tabs and spring tabs have been replaced in accordance with alert S.B. 145-55-A022, Change 02, dated October 8, 1999, or S.B. 145-55-0022, Change 01, dated January 25, 2000.

This AD is considered to be interim action. The FAA is currently considering requiring the rework of all elevator servo and spring tabs, which will constitute terminating action for the repetitive inspections required by this AD action. However, such action will be proposed in a separate rulemaking action since the compliance time for the rework is sufficiently long so that notice and opportunity for prior public comment will be practicable.

Since a situation exists that requires the immediate adoption of this regulation, it is found that notice and opportunity for prior public comment hereon are impracticable, and that good cause exists for making this amendment effective in less than 30 days.

Although this action is in the form of a final rule that involves requirements affecting flight safety and, thus, was not preceded by notice and an opportunity for public comment, comments are invited on this rule. Interested persons are invited to comment on this rule by submitting such written data, views, or arguments as they may desire. Communications shall identify the Rules Docket number and be submitted in triplicate to the address specified under the caption ADDRESSES . All communications received on or before the closing date for comments will be considered, and this rule may be amended in light of the comments received. Factual information that supports the commenter's ideas and suggestions is extremely helpful in evaluating the effectiveness of the AD action and determining whether additional rulemaking action would be needed.

Submit comments using the following format:

• Organize comments issue-by-issue. For example, discuss a request to change the compliance time and a request to change the service bulletin reference as two separate issues.

• For each issue, state what specific change to the AD is being requested.

• Include justification (e.g., reasons or data) for each request.

Comments are specifically invited on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. All comments submitted will be available, both before and after the closing date for comments, in the Rules Docket for examination by interested persons. A report that summarizes each FAA-public contact concerned with the substance of this AD will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this rule must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2000-NM-204-AD.” The postcard will be date stamped and returned to the commenter.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

The FAA has determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and that it is not a “significant regulatory action” under Executive Order 12866. It has been determined further that this action involves an emergency regulation under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979). If it is determined that this emergency regulation otherwise would be significant under DOT Regulatory Policies and Procedures, a final regulatory evaluation will be prepared and placed in the Rules Docket. A copy of it, if filed, may be obtained from the Rules Docket at the location provided under the caption ADDRESSES .

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain EMBRAER Model EMB-120 series airplanes, was published in the Federal Register on July 31, 2000 (65 FR 46671). That action proposed to require replacement of the existing wire between certain circuit breakers with an improved wire.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were submitted in response to the proposal or the FAA's determination of the cost to the public.

The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

The FAA estimates that 240 airplanes of U.S. registry will be affected by this AD, that it will take approximately 2 work hours per airplane to accomplish the required action, and that the average labor rate is $60 per work hour. Required parts will cost approximately $8 per airplane. Based on these figures, the cost impact of this AD on U.S. operators is estimated to be $30,720, or $128 per airplane.

The cost impact figure discussed above is based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator will accomplish those actions in the future if this AD were not adopted. The cost impact figures discussed in AD rulemaking actions represent only the time necessary to perform the specific actions actually required by the AD. These figures typically do not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (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) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD for BHTC Model 430 helicopters was published in the Federal Register on August 9, 2000 (65 FR 48643). That action proposed to require calibration of the fuel quantity indicating system.

Interested persons have been afforded an opportunity to participate in the making of this amendment. No comments were received on the proposal or the FAA's determination of the cost to the public. The FAA has determined that air safety and the public interest require the adoption of the rule as proposed.

The FAA estimates that 50 helicopters of U.S. registry will be affected by this AD, that it will take approximately 2 work hours per helicopter to accomplish the required actions, and that the average labor rate is $60 per work hour. Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $6,000.

The regulations adopted herein will not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, it is determined that this final rule does not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this action (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) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

On August 28, 2000, the Commission published for comment proposed amendments to Rule 1.17(c)(5)(xiii) (“proposing release”). 2 The comment period expired on September 27, 2000. No comments were received. Accordingly, the Commission is adopting the amendments as proposed.

Commission Rule 1.17(c)(5)(xiii) requires an FCM or IBI, in computing its adjusted net capital, to take a five percent capital charge on any unsecured receivables resulting from commodity futures and option transactions executed on foreign boards of trade and which are due from foreign brokers that are not registered with the Commission as FCMs or with the Securities and Exchange Commission (“SEC”) as securities brokers or dealers. 3 As more fully set forth in the proposing release, Rule 1.17(c)(5)(xiii) currently permits an FCM or IBI to exclude from the five percent capital charge that portion of the unsecured receivable that represents amounts required to be on deposit to maintain futures and option positions transacted on foreign boards of trade. Deposits in excess of required margin or performance bond are subject to the capital charge. In addition, to be exempt from the capital charge, the receivable must be due from a foreign broker that has received confirmation of “comparability relief” in accordance with a Commission order issued under Rule 30.10 and the margin deposits must be held by the foreign broker itself, another foreign broker that has received confirmation of Rule 30.10 “comparability relief,” or at a depository that qualifies as a depository pursuant to Rule 30.7 and which is located within the same jurisdiction as either foreign broker. 4

The amendments being adopted herein increase the maximum amount eligible for exclusion from the five percent capital charge to the greater of: 150 percent of the amount immediately required to support futures and option transactions in an account; or 100 percent of the maximum amount required to support futures and option transactions at any time during the preceding six-month period. The amendments are intended to provide FCMs and IBIs with greater flexibility with respect to their cash and risk management while also reducing costs associated with frequent transfers of excess margin funds out of foreign brokers in order to avoid the five percent capital charge.

The amendments also eliminate the requirement that an FCM or IBI be responsible for monitoring the ultimate destination of margin funds deposited with a Rule 30.10 foreign broker in order for such funds to qualify for the exemption from the capital charge. As set forth in the proposing release, by granting Rule 30.10 “comparability relief” to a foreign broker, the Commission has made a determination that the foreign broker is subject to a regulatory structure that is comparable to the structure imposed on entities that operate on U.S. futures exchanges. Of particular relevance is that the Commission, as part of the Rule 30.10 petition process, assesses the extent to which a foreign broker is subject to a regulatory program that imposes bona fide minimum financial requirements on its regulatees or members and that provides for the protection of customers by the segregation of funds and bankruptcy rules. 5 The Commission's determination that these standards and protections exist and are enforced supports an easing of the capital charge.

The Regulatory Flexibility Act (“RFA”), 5 U.S.C. 601-611, requires that agencies, in adopting rules, consider the impact of those rules on small businesses. The Commission has previously established certain definitions of “small entities” to be used by the Commission in evaluating the impact of its rules on such entities. 6 The Commission previously has determined that registered FCMs are not small entities for the purposes of the RFA. 7 With respect to IBIs, the Commission stated that it is appropriate to evaluate within the context of a particular rule whether some or all introducing broker should be considered to be small entities and, if so, to analyze the economic impact on such entities at that time. 8 The amendments to Rule 1.17(c)(5)(xiii) expanding the amount of funds that may be excluded from the foreign brokers receivable capital charge do not impose additional requirements on an IBI. Therefore, the Chairman, on behalf of the Commission, certifies that these regulations will not have a significant economic impact on a substantial number of small entities.

The Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq. (Supp. I 1995), imposes certain requirements on federal agencies (including the Commission) to review rules and rule amendments to evaluate the information collection burden that they impose on the public. The Commission believes that the amendments to Rule 1.17(c)(5)(xiii) will impose a minimal information collection burden on the public, namely those FCMs and IBIs who wish to take advantage of the exemption will be required to maintain a record of the margins required to be on deposit with a foreign broker over the preceding six month period. However, this burden is believed to be minimal when compared to the capital savings to be generated by the exclusion of increased amounts from the capital charge.

Bayer Corp., Agriculture Division, Animal Health, P.O. Box 390, Shawnee Mission, KS 66201, filed NADA 141-176 that provides for veterinary prescription use of BAYTRIL® (0.5 % enrofloxacin/1.0% silver sulfadiazine) Otic Emulsion for the treatment of otitis externa in dogs. The NADA is approved as of September 29, 2000, and the regulations are amended in 21 CFR part 524 by adding new section 524.802 to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

Under section 512(c)(2)(F)(ii) of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360b(c)(2)(F)(ii)), this approval qualifies for 3 years of marketing exclusivity beginning September 29, 2000, because the application contains substantial evidence of effectiveness of the drug involved, or any studies of animal safety, required for approval of the application and conducted or sponsored by the applicant.

The agency has determined under 21 CFR 25.33(d)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Alpharma Inc., One Executive Dr., P.O. Box 1399, Fort Lee, NJ 07024, filed NADA 141-147 that provides for use of Deccox® (27.2 grams per pound g/lb) and ChlorMax TM (50, 65, or 70 g/lb CTC) Type A medicated articles to make combination drug Type B and Type C medicated feeds for calves, beef and nonlactating dairy cattle. The combination Type C feeds are for prevention of coccidiosis caused by Eimeria bovis and E. zuernii , for treatment of bacterial enteritis caused by Escherichia coli , and for treatment of bacterial pneumonia caused by Pasteurella multocida organisms susceptible to CTC. The NADA is approved as of September 29, 2000, and the regulations are amended in the table in 21 CFR 558.195(d) to reflect the approval. The basis of approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

The agency has determined under 21 CFR 25.33(a)(2) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

Farnam Companies, Inc., 301 West Osborn, Phoenix, AZ 85013-3928, is sponsor of ANADA 200-282 that provides for use of CONTINUEX TM (pyrantel tartrate) Daily Dewormer. The ANADA provides for use of pyrantel tartrate in horse feed for the prevention and control of various species of internal parasites. The ANADA is approved as a generic copy of Pfizer Inc.'s NADA 140-819 for STRONGID® 48. ANADA 200-282 is approved as of September 26, 2000, and the regulations are amended in 21 CFR 558.485 to reflect the approval. The basis for approval is discussed in the freedom of information summary.

In accordance with the freedom of information provisions of 21 CFR part 20 and 514.11(e)(2)(ii), a summary of safety and effectiveness data and information submitted to support approval of this application may be seen in the Dockets Management Branch (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061, Rockville, MD 20852, between 9 a.m. and 4 p.m., Monday through Friday.

The agency has determined under 21 CFR 25.33(a)(1) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This rule does not meet the definition of “rule” in 5 U.S.C. 804(3)(A) because it is a rule of “particular applicability.” Therefore, it is not subject to the congressional review requirements in 5 U.S.C. 801-808.

In the Federal Register of September 23, 1997 (62 FR 49642), FDA published a proposed rule to amend the requirements for reporting errors and accidents in manufacturing biological products in § 600.14 (21 CFR 600.14). The proposed rule would also have added § 606.171 and expanded the requirement for reporting of errors and accidents in the manufacturing of biological products to include unlicensed registered blood establishments and transfusion services. FDA provided 90 days for comments on the proposed rule.

FDA is extending a reporting requirement to establishments defined in 21 CFR 607.3(c) that manufacture blood and blood components. Such establishments include unlicensed registered blood establishments and transfusion services (hereinafter referred to as “unlicensed blood establishments”). FDA believes this action is necessary because it has observed an increase in the number of product recalls initiated by unlicensed blood establishments due to biological product deviations in manufacturing that were not reported voluntarily to the agency. FDA is also narrowing the scope of the reporting requirement as discussed in section II of this document to those reports that are necessary to protect the public health, while relieving industry of some reporting burden. FDA also believes the reporting requirement will address concerns, identified by the Office of Inspector General of the Department of Health and Human Services, that: (1) Error and accident reports required under § 600.14 were not being submitted in a timely manner; and (2) unlicensed blood establishments were not obligated to submit such reports.

In response to comments received on the proposed rule, FDA has revised several substantive provisions of the proposed rule. FDA has replaced the term “error and accident”with the term “biological product deviation.” In §§ 600.14(b) and 606.171(b), the final rule more clearly describes the types of events, now termed “biological product deviations,” that must be reported to FDA. These are events which may affect the safety, purity, or potency of a distributed biological product and which represent either a deviation from CGMP, applicable regulations, applicable standards, or established specifications, or are unforeseen or unexpected.

In an effort to reduce the reporting burden on both industry and the agency, while protecting the public health, FDA has changed the threshold for when a deviation must be reported. As proposed, a licensed manufacturer or unlicensed blood establishment would have reported deviations related to products “made available for distribution.” The final rule focuses on deviations involving distributed products only, because such deviations may involve products administered to patients, and therefore present the greatest risk to public health.

FDA defines the terms “distributed” and “control” to make clear that the reporting requirement applies only to distributed product. The final rule defines “distributed” as meaning the biological product has left the control of the licensed manufacturer or unlicensed blood establishment; or the licensed manufacturer has provided Source Plasma or any other blood component for use in the manufacture of a licensed product. “Control” is defined as having responsibility for maintaining a product's continued safety, purity, and potency, and compliance with applicable product and establishment standards and CGMP requirements.

If the product never leaves the control of the licensed manufacturer or unlicensed blood establishment, no biological product deviation report (BPDR) should be filed. However, the licensed manufacturer or unlicensed blood establishment who discovers a biological product deviation before the product has left its control must investigate the deviation. Such an obligation exists independent of this rule. For example, under CGMP, a licensed manufacturer must thoroughly investigate unexplained discrepancies and batch failures, including the failure of a product to meet specifications, and must document the discovery, investigation, and followup taken (parts 211 and 820 (21 CFR parts 211 and 820)). Manufacturers of in vitro products licensed under section 351 of the Public Health Service Act (PHS Act) (42 U.S.C. 262) must investigate the cause of nonconformities related to product, processes, and the quality system, and identify the action needed to correct and prevent recurrence of nonconforming product and other quality problems ( § 820.100). The CGMP regulations applicable to licensed and unlicensed blood establishments provide, “A thorough investigation, including the conclusions and follow-up, of any unexplained discrepancy or the failure of a lot or unit to meet any of its specifications shall be made and recorded” (§ 606.100(c) (21 CFR 606.100(c))). FDA will monitor internal quality assurance (QA) procedures through routine inspections.

In § 600.14(a)(2)(i), FDA has limited the exception to the reporting requirement for manufacturers of in vitro diagnostic products to manufacturers who only manufacture in vitro diagnostic products that are not licensed under section 351 of the PHS Act. Manufacturers of such products continue to have reporting obligations under 21 CFR part 803. Establishments that manufacture both in vitro diagnostic products licensed under section 351 of the PHS Act and unlicensed medical devices will be required to report under § 600.14 only those events which may affect the safety, purity, or potency of the licensed product.

In § 600.14(a)(2)(iii), FDA is clarifying the reporting requirement for licensed manufacturers of biological products when the manufacturer, as part of its license application, is approved to manufacture Source Plasma or any other blood component for further manufacture of other biological products. When a biological product deviation occurs during the manufacture of the Source Plasma or any other blood component, the BPDR must be submitted under § 606.171. When a biological product deviation occurs after the manufacture of that Source Plasma or any other blood component and during the manufacture of another biological product, the BPDR is submitted under § 600.14. When a licensed manufacturer provides Source Plasma or any other blood component for use in the manufacture of another licensed biological product, such Source Plasma or any other blood component has been distributed under § 606.3(k).

FDA also is clarifying the reporting responsibilities of licensed manufacturers and unlicensed blood establishments who contract out certain manufacturing steps. A manufacturer who contracts with another person to perform any manufacturing step but who retains control over the product is still responsible for reporting under the rule even if the deviation occurred or was discovered at the contract establishment. Sections 600.14(a)(1) and 606.171(a)(1) make explicit that licensed manufacturers and unlicensed blood establishments must establish, maintain, and follow a procedure for receiving from their contractors the information necessary to fulfill their reporting requirements.

FDA is retaining the proposed 45-day reporting time in the final rule but is clarifying that the 45-day time period runs from the date that the manufacturer, its agent, or another person performing a manufacturing, holding, or distribution step under the manufacturer's control, first discovers information reasonably suggesting a reportable event has occurred. FDA is also adding a requirement in §§ 600.14(d) and 606.171(d) that licensed manufacturers and unlicensed blood establishments use Form FDA-3486 to report biological product deviations. This form is available in paper form and also on the Internet. Sections 600.14(e) and 606.171(e) indicate where and how the BPDR form should be submitted.

Finally, FDA has written the final rule using plain language in accordance with the presidential memorandum on plain language in government writing, dated June 1, 1998. FDA has adopted the plain language approach to make its written communications with the public more accessible and understandable. As a result, FDA is expanding § 600.14 and 606.171 in the final rule to address the following: (1) Who must report, (2) What must be reported, (3) When must the report be submitted, (4) How must the report be submitted, and (5) Where must the report be sent?

FDA received 98 comments on the proposed rule. The comments were submitted by manufacturers, blood establishments, trade associations, professional associations, Department of Defense, and individuals. In addition, the Office of Management and Budget (OMB) forwarded to FDA a number of comments it received on the proposed rule. Thirty-two comments supported FDA's goal of creating a standardized reporting system to identify biological product deviations in manufacturing and recognized the importance to blood safety of requiring prompt reporting of biological product deviations in the manufacture of blood and blood components. Fifteen comments objected to the proposed rule. Several comments, mostly those from transfusion services and pharmaceutical entities, objected to a mandatory reporting requirement being applied to them. Several expressed concerns that the reporting burden would be overwhelming.

In general, the comments expressed specific concerns about the scope and content of the proposed rule and requested clarification of certain definitions. FDA summarizes and responds to each of the received comments in the following sections.

(Comment 1) Twenty-one comments questioned the public health benefit of the proposed rule and asked FDA to further define its public health and safety objective. Many of the comments suggested that the reporting system overlapped existing QA programs and was, therefore, unnecessary.

The objectives of the biological product deviation reporting requirement are to: (1) Enable FDA to respond when public health may be at risk, (2) expedite reporting of biological product deviations in manufacturing, (3) provide FDA with uniform data to track trends that may indicate broader threats to the public health, (4) create a uniform reporting requirement that can be enforced against noncomplying entities, and (5) help ensure licensed manufacturers and unlicensed blood establishments are taking appropriate actions to investigate and correct biological product deviations.

The reporting system will enable the agency to evaluate and monitor blood establishments in response to detected deviations, and regularly alert field staff and blood establishments with trend analysis of the types of deviations reported. Under the existing rule, there were two impediments to the success of the reporting process: (1) Error and accident reports were not being submitted in a timely manner by establishments, and (2) there was no assurance that unlicensed blood establishments were submitting reports.

The reporting system is not intended to overlap QA programs. Instead, it provides FDA with information that an individual establishment's QA program may not detect. For example, if an event occurs once a year in every establishment, it may not appear significant to any single establishment. The reporting system will allow FDA to recognize the significance of that event in a timely fashion and to take appropriate action to protect the public health. Reporting of biological product deviations will enable FDA to identify areas in which further regulation or guidance is needed to assist licensed manufacturers and unlicensed blood establishments in decreasing the occurrence of these events.

(Comment 2) Fifty comments wanted to know how FDA will use or analyze the information and what procedure FDA will use to respond to reports received under the rule. Two comments stated that the reports should not be used as a basis for issuing a Form FDA-483.

A BPDR alone will not be a basis for issuing a Form FDA-483. Form FDA-483 is a list a list of observations noted during an FDA inspection and issued to the firm at the conclusion of the inspection. The firm is expected to respond to the observations and make the necessary corrections. First, this information will aid FDA, licensed manufacturers, and unlicensed blood establishments in appropriately targeting QA efforts to improve product quality and reduce manufacturing problems. In addition to reviewing reports upon receipt at FDA, FDA will review all reports during routine inspections and examine all manufacturing deviations, not merely reportable deviations, to ensure that the establishment has followed all established standard operating procedures (SOP's) related to investigation, followup, and reporting of deviations. Secondly, the BPDR's will inform FDA about specific problems licensed manufacturers and unlicensed blood establishments encounter in the manufacture of biological products. FDA intends to provide this data to industry, in accordance with its responsibility to safeguard trade secrets and confidential commercial information. FDA already provides this kind of data in fiscal quarter summaries, available to the public by mail, facsimile, and Internet. Thirdly, these reports will identify areas needing future guidance from the agency. FDA will issue such guidance in accordance with its good guidance practices (GGP's).

A BPDR alone will not be a basis for issuing a Form FDA-483. However, a documented failure to follow CGMP or other regulatory compliance problem connected to a deviation may become an observation on a Form FDA-483. For example, an investigator may include an observation under one of the following conditions: (1) The deviation reoccurs because of inadequate corrective action, (2) investigation of the deviation is inadequate, or (3) the deviation represents an underlying systemic problem in the operation. Significant CGMP deficiencies related to a BPDR may also become the subject of a Form FDA-483 observation. Of course, an investigator may include the failure to file a BPDR as an observation on a Form FDA-483.

(Comment 3) Several comments expressed concern that FDA would not have the resources to handle the reports submitted under the proposed rule.

After reviewing the comments to the proposed rule, FDA has worked actively to reduce the burden of reporting on licensed manufacturers, unlicensed blood establishments, and the agency under the final rule. FDA has refocused the final rule to require reports only for distributed products. FDA is also developing a standardized format for reporting, which will not only streamline the process for the reporter, but also allow FDA to process the reports more efficiently. FDA believes that the reporting requirement under the final rule will not present an undue burden on licensed manufacturers, unlicensed blood establishments, or the agency.

(Comment 4) Three comments asked how FDA would enforce the proposed rule.

In 1983, through a memorandum of understanding (MOU), the Healthcare Financing Administration (HCFA) and FDA coordinated all federally authorized inspections of unlicensed blood establishments in order to minimize duplication of effort and to reduce the burden on affected facilities. HCFA and FDA will use their usual enforcement tools available under the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 301 et seq .) and the PHS Act (42 U.S.C. 201 et seq .). The agencies will review compliance with the reporting requirements during inspections. If upon inspection of a licensed manufacturer or unlicensed blood establishment, the inspecting agency discovers the establishment is not complying with the biological product deviation reporting requirement, or the requirements for investigation and followup, the inspecting agency may take further enforcement action, as warranted.

(Comment 5) One comment questioned whether biological product deviation reports would be subject to the Freedom of Information Act (FOIA) and, accordingly, available to the media or public and whether reporting could cause disclosure of confidential information.

BPDR's would be subject to disclosure under the provisions of the FOIA and the implementing regulations in 21 CFR part 20. FDA will appropriately purge all nondisclosable information prior to the release of the reports.

(Comment 6) Seven comments requested that FDA obtain additional data and hold a public meeting before implementing a final rule. One comment suggested proceeding with a demonstration project first.

In addition to following the normal rulemaking process, FDA has discussed the rule in various public forums. FDA believes interested parties have been given ample opportunity to express their views on the proposed rule. A “demonstration program” is unnecessary because this is not a new program, but a revision and updating of an existing program with which most licensed manufacturers have experience. However, FDA may engage in further public discussion to provide guidance to industry concerning what constitutes a reportable deviation within the parameters of the final rule.

(Comment 7) Three comments requested that FDA develop guidance for the proposed rule.

FDA agrees that guidance to industry would be helpful. FDA has developed draft guidance regarding those events it would expect to be reported under this rule. The draft guidance recognizes that licensed manufacturers and unlicensed blood establishments may shoulder a wide range of responsibilities in manufacturing. A manufacturer of licensed biological products would be in control of the product for more steps in manufacturing than a small hospital transfusion service. Accordingly, the draft guidance describes specific guidance for each type of licensed manufacturer and unlicensed blood establishment. The notice of availability for the draft guidances specific for licensed manufacturers of products other than blood and blood components, and licensed and unlicensed blood establishments will issue in the Federal Register in the near future.

(Comment 8) FDA received several comments from industry that extending the reporting requirement to unlicensed entities in proposed § 606.171 imposed an unnecessary burden on these entities.

FDA indicated in proposing this regulation that one of its primary objectives was to make the biological product deviation reporting requirement applicable to all blood establishments, whether licensed manufacturers, unlicensed registered blood establishments, or transfusion services. In the proposed rule, FDA stated that reports from the full spectrum of establishments engaged in manufacturing and distribution of blood and blood components were necessary to effectively evaluate and monitor the blood industry. FDA continues to believe that a mandatory reporting requirement is necessary for all establishments involved in blood and blood product manufacturing and is establishing the biological deviation reporting requirement as part of the CGMP regulations, which these establishments must follow.

(Comment 9) One comment recommended FDA adopt a single mechanism for reporting all errors and accidents, adverse events, etc., for all blood products, medical devices and all drugs, and eliminate all other reporting programs, voluntary or mandatory.

FDA recognizes that the reporting programs for biological products, human drugs, and medical devices have varying requirements. What is reported, and how it is reported, are different under the different systems. These differences are intentional. For example, the adverse event reporting (AER) and medical device reporting systems focus on patient impact. The starting point for reporting, therefore, is often patient reaction to a product. In contrast, biological product deviation reporting focuses on the manufacturing process as it may affect the safety, purity, and potency of the product. FDA anticipates that information submitted in BPDR's will improve product quality and may help reduce the incidence of adverse patient outcomes without undue burden on licensed manufacturers and unlicensed blood establishments.

(Comment 10) Five comments stated that the proposed rule should apply only to blood and blood products and should not extend to biotechnology products. These comments argued that the need to revise error and accident regulations for biotechnology products is not clear because there does not exist a pattern of recalls for these products. The comments stated that the recall guidelines in part 7 (21 CFR part 7) and the AER system (21 CFR 600.80) are adequate to ensure the safety and quality of biotechnology products.

The regulatory scheme for biotechnology products has always included recall guidelines (part 7), AER, and error and accident reporting ( § 600.14). These three programs, each designed to serve different objectives, have worked together to ensure the safety and quality of biotechnology products. Adverse experience reporting focuses on patient outcomes. Consequently, the type and specificity of the information reported as adverse experiences differs substantially from that required in biological product deviation reports. Under the recall provisions of part 7, manufacturers notify FDA when they voluntarily remove products from the marketplace that are in violation of the laws administered by FDA. The biological product deviation regulations are designed to gather information about the events that give rise to defective or potentially defective products and provide FDA with an essential tool to monitor potential risks to public health and to facilitate a response when necessary.

Section 600.14, in its current form, requires error and accident reporting by all licensed biological product manufacturers, including manufacturers of biotechnology products. This rule would not impose new requirements on such manufacturers. In fact, by limiting reporting to biological product deviations involving distributed products, the new rule would decrease the preexisting burden on such manufacturers. FDA believes the revised reporting requirement is necessary to ensure that all manufacturers understand their reporting requirements, to expedite biological product deviation reporting, and to enable FDA to monitor accurately the safety of biological products.

(Comment 11) Ten comments requested that transfusion centers not be regulated to the same extent as blood collection centers and the pharmaceutical industry under the proposed rule. Of these, five comments proposed that the reporting guidelines themselves be specific to each type of establishment. Six comments called for definitions or examples specific to transfusion service practice and two comments called for separate data collection forms.

FDA believes that in order to achieve an accurate overview of the industry, it is most useful to impose the same reporting requirement on all blood establishments, including transfusion centers. However, FDA recognizes that different regulated entities may need specific guidance on how the biological deviation reporting requirement will apply to them. FDA is issuing guidance to support the final rule that will include examples specific to blood and source plasma collection centers, pharmaceutical and biological device manufacturers, and transfusion services. FDA also developed a biological product deviation reporting form. FDA believes one form for all the entities covered under the rule will facilitate processing of the reports and will aid reporters in providing the necessary information. The agency will provide separate instructions on completing and submitting the biological product deviation reporting form.

(Comment 12) Eight comments asked how the biological product deviation reporting requirement will affect the new drug application (NDA) Field Alert Report regulations under 21 CFR 314.81(b)(1) and several comments recommended harmonizing these regulations.

The BPDR's will have little, if any affect on the NDA Field Alert regulations. The NDA Field Alert regulations are applicable only to those products that are approved for marketing under the provisions of part 314 (21 CFR part 314), and not to drug products subject to licensing under the PHS Act. FDA has harmonized a number of regulations for certain biotechnology products where products regulated as biological products subject to licensure are similar to products subject to regulation as new drugs. See § 601.2(c) (21 CFR 601.2(c)) for a list of such biotechnology products and § 314.70(g), 601.2(c)(1) and (c)(2), and 601.12 (21 CFR 601.12) for examples of harmonization.

For these biotechnology products, a total of 13 error and accident reports were submitted under § 600.14 in the fiscal year (FY) 1999. Because FDA believes this is a very small burden to industry, FDA has determined that reports for such biotechnology products should continue to be submitted consistent with the requirements for other biological products under § 600.14 of the final rule. This will allow the Center for Biologics Evaluation and Research (CBER) to keep all reports in a single data base and will facilitate the overall assessment of its biological product deviation reporting program. If the level of reporting or the needs of the agency change, FDA will reconsider whether to harmonize its reporting requirements for biotechnology products.

(Comment 13) Twenty-two comments recommended developing a tiered system of reporting based on the severity of the deviation in which serious errors or accidents would be reported and all other errors and accidents would be handled through internal QA programs.

FDA considers any biological product deviation that may affect the safety, purity, and potency of a product to be “serious.” However, deviations that are discovered before distribution pose less of a threat to the public health because no patient would receive the product, and because the licensed manufacturer or unlicensed blood establishment's QA procedures worked to prevent the distribution of product subject to that biological product deviation. Accordingly, FDA has established an approach to reporting biological product deviations that limits reporting to events that involve distributed products and that may affect the safety, purity, or potency of the product.

(Comment 14) Eighteen comments recommended adopting an alternative reporting system such as the medical event reporting system for transfusion medicine (MERS-TM).

MERS-TM, a voluntary reporting system, was designed as a standard method for collection and analysis of event reports for blood establishments to implement as part of their QA system. The MERS-TM is designed to capture all manufacturing errors and accidents, including those “near miss” events that may be discovered by the blood establishment prior to distribution of the product. While FDA believes that the MERS-TM system is useful in reporting “near miss” events on a voluntary basis, FDA is limiting the requirement for reporting to biological product deviations affecting distributed products.

(Comment 15) Forty-five comments requested clarification of the definition of the terms “errors and accidents” in proposed §§ 600.3(hh) and 606.3(k). Several of these comments suggested alternative language.

FDA is clarifying the regulations by eliminating the terms “error and accident.” The classification of events as an “error” or “accident” is immaterial to the purposes underlying the rule and appears to have caused confusion. Consequently, FDA has revised the rule to focus the reporting requirement on events that represent a deviation from CGMP, applicable regulations, applicable standards or established specifications, or represent unexpected or unforeseeable events, which may affect the safety, purity, or potency of a distributed product. Such events are reportable regardless of whether or not they are considered “errors” or “accidents.” In the final rule, FDA has termed such events “biological product deviations” and described what constitutes a biological product deviation in §§ 600.14(b) and 606.171(b).

(Comment 16) Three comments suggested that the reporting requirement in proposed §§ 600.3(hh)(1) and 606.3(k)(1) should be limited to deviations from CGMP and that extending it to “applicable standards” or “established specifications” was beyond the FDA's jurisdiction.

FDA disagrees with the suggestion that such matters are beyond FDA's jurisdiction. As set out in §§ 600.14(b) and 606.171(b), licensed manufacturers and unlicensed blood establishments must submit a BPDR only if the deviation “may affect the safety, purity, or potency” of a product, and if other reporting criteria are met. Events affecting the safety, purity, and potency of biological products fall squarely within FDA's jurisdiction. Moreover, the PHS Act requires FDA to consider “standards designed to assure that the biological product continues to be safe, pure, and potent” (42 U.S.C. 262(a)(2)(B)(i)(II)).

(Comment 17) Thirty-two comments requested clarification of the definition of “made available for distribution” in proposed §§ 600.3(ii) and 606.3(l). Thirty-seven comments requested that the definition be amended to limit the scope of the proposed rule to reporting of deviations which occur after a product has been distributed, and six comments asked that “made available for distribution” be defined by each facility based on their established process controls.

FDA agrees with the comments that suggested that the scope be limited to those products that have been distributed and has written the final rule to reflect this. FDA considers all events that may affect the safety, purity, or potency of a biological product to be significant, whether prior to or after distribution. Limiting the reporting requirement to distributed products will reduce the burden of reporting on licensed manufacturers, unlicensed blood establishments, and on FDA, while not sacrificing public safety.

Licensed manufacturers and unlicensed blood establishments remain obligated to document, investigate and followup any event that may affect the safety, purity, or potency of a biological product under CGMP regulations, whether the event is reportable under this rule or not. FDA will continue to monitor both reportable and nonreportable events and corrective actions through inspections.

(Comment 18) One comment stated the term “made available for distribution” in proposed §§ 600.3(ii) and 606.3(l) is ambiguous in relation to intermediates since at each intermediate state the product may be released for further processing.

FDA has clarified the final rule by limiting reporting of biological product deviations to distributed products, i.e., they have left the licensed manufacturer or unlicensed blood establishment who controlled the product at the time the deviation occurred; or the licensed manufacturer has provided Source Plasma or any other blood component for use in the manufacture of a licensed product.

(Comment 19) One comment asked for clarification on how FDA will apply this regulation to cooperative manufacturing arrangements, including shared and contract manufacturers.

Under § 600.14, it is the licensed manufacturer who must report biological product deviations. That is because, up until the time the product is distributed, it is the license holder who is responsible for maintaining the continued safety, purity, and potency of the biological product, for compliance with applicable product and establishment standards, and for compliance with CGMP. If the license holder arranges for another manufacturer to perform a manufacturing step, that manufacturing step is performed under the license holder's control, and the license holder must report biological product deviations that occur during that manufacturing step. In shared manufacturing situations, where two or more manufacturers operate under their own license, each manufacturer would report a biological product deviation that occurred when the product was in its control; i.e., when the first shared manufacturer completes his manufacturing step and sends the product to the second shared manufacturer for additional manufacturing, the product is considered distributed by the first shared manufacturer.

Section 606.171 applies to all blood establishments, including licensed establishments, unlicensed registered blood establishments, and transfusion services. The rule requires the blood establishment that has control over a product when a blood product deviation occurs to report to FDA. If a blood establishment contracts a manufacturing step to another facility, or enters into a shared manufacturing agreement, the establishment responsible for maintaining the continued safety, purity, and potency of the product and for compliance with applicable product and establishment standards, and for compliance with CGMP, must submit a BPDR for any deviation occurring while the biological product is under its control.

(Comment 20) One comment suggested FDA require both the blood bank or transfusion service who receives a defective product from a licensed manufacturer and the licensed manufacturer to report biological product deviations to ensure the effectiveness of the reporting process.

In the final rule, FDA has attempted to eliminate duplicate reporting by regulated entities. The licensed manufacturer or unlicensed blood establishment who had control over the product when the deviation occurred is in the best position to provide the necessary information to FDA. Therefore, under the final rule, the licensed manufacturer or unlicensed blood establishment who had control over the product when the deviation occurred is responsible for reporting. Consignees should report product deficiencies to the licensed manufacturer or unlicensed blood establishment and assist in the investigation of the product's deficiencies, if necessary.

Example 1: An unlicensed blood establishment pools 10 units of cryoprecipitate and affixed an incorrect, extended expiration date. The unlicensed blood establishment issues the pooled cryoprecipitate to a patient. The unlicensed blood establishment would be required to submit a BPDR to FDA because: (1) The product did not meet CGMP; (2) the unlicensed blood establishment had control of the product when the deviation occurred; (3) the deviation may have affected the safety, purity, and potency of the product for the patient; and (4) the product was distributed.

Example 2: An unlicensed blood establishment receives a unit of irradiated red blood cells from a licensed manufacturer and issues the product to a patient requiring irradiated red blood cells. The licensed manufacturer of the blood product subsequently notifies the unlicensed blood establishment that the unit was improperly irradiated. The licensed manufacturer, not the unlicensed blood establishment, is required to submit a BPDR to FDA because: (1) The product did not meet CGMP; (2) the deviation occurred under the control of the licensed manufacturer; (3) the deviation may affect the safety, purity, and potency of the product; and (4) the licensed manufacturer distributed the product to the unlicensed blood establishment.

(Comment 21) Forty-two comments stated that FDA provided insufficient information about what events must be reported in proposed §§ 600.14 and 606.171. Numerous comments also expressed concern regarding the examples of what events to report that FDA provided in the preamble to the proposed rule. Ten comments asked for information on what not to report. Seven comments asked FDA to provide specific examples of events to be reported by hospital-based transfusion services.

In response to these comments, FDA has changed the final rule to limit reportable events to those involving distributed products. As discussed in comment seven of this document, FDA developed guidance that will provide specific examples of reportable events as those events relate to the various regulated entities. FDA considered these comments in developing its guidance.

(Comment 22) Two comments asked whether the proposed rule was limited to manufacturing activities or whether it included nonmanufacturing events such as testing, storage, labeling, and recordkeeping.

FDA disagrees with the interpretation that testing, storage, labeling, and recordkeeping are not manufacturing activities. The term “manufacture” is defined in 21 CFR 600.3(u) as “all steps in propagation or manufacture and preparation” and includes, for example, filling, testing, labeling, packaging, and storage.

The final rule further states in §§ 600.14(b) and 606.171(b) that any event, and information relevant to the event, associated with manufacturing, to include testing, processing, packing, labeling, or storage, or with the holding, or distribution, must be reported if they meet the other criteria. If a recordkeeping error may have affected the safety, purity, and potency of the product and meets the other criteria in §§ 600.14(b) and 606.171(b), it is reportable under the regulations.

(Comment 23) One comment asked how a licensed manufacturer or unlicensed blood establishment would distinguish between an error and accident that would be reportable from any unexplained discrepancies or in-process or final specification investigations conducted under § 211.192 or other regulation, which would not have to be reported.

The requirements to investigate discrepancies under § 211.192 and to report product deviations under §§ 600.14 and 606.171 are not mutually exclusive. Under § 211.192, manufacturers are required to investigate any unexplained discrepancies or failure to meet in-process or final product specifications. The CGMP regulations applicable to blood establishments provide, “A thorough investigation, including the conclusions and follow-up, of any unexplained discrepancy or the failure of a lot or unit to meet any of its specifications shall be made and recorded” (§ 606.100(c)). If during the investigation the criteria described in §§ 600.14(b) and 606.171(b) are met, a BPDR is required.

(Comment 24) One comment asked whether the biological product deviation reporting requirement applied to validation batches submitted in support of a biologics license application (BLA), or to materials submitted under an investigative new drug application (IND).

Under §§ 600.14 and 606.171, biological product deviations related to products under an IND would not be reportable unless the product was licensed for another intended use. However, information related to the deviation may be required to be reported under the IND regulations in 21 CFR part 312. Biological product deviations related to validation batches would not be reportable unless the products were distributed after receipt of a biologics license.

(Comment 25) One comment asked if the submission of a supplement for reprocessing would preclude the submission of a BPDR.

The submission of a supplement for reprocessing would not preclude the submission of a BPDR. If a product has been distributed and a licensed manufacturer or unlicensed blood establishment determines that a biological product deviation has occurred, then the licensed manufacturer or unlicensed blood establishment must submit a BPDR whether or not it subsequently reprocesses the product. If the licensed manufacturer or unlicensed blood establishment discovers a biological product deviation before it distributes the product, and subsequently reprocesses and distributes the affected product, no BPDR would be required as long as the reprocessed product was unaffected by the original deviation.

(Comment 26) Two comments requested that FDA delete any reference to “disposition of the product” from the information that is to be reported under the rule because this information would not be available within the 45-day time requirement.

FDA believes licensed manufacturers and unlicensed blood establishments will usually know the disposition of the product within the 45-day reporting period. Licensed manufacturers and unlicensed blood establishments should know if the product was shipped to another facility, destroyed, quarantined, designated for reprocessing, disposed of in some other manner, or, in many cases, administered to a patient.

(Comment 27) Seventeen comments recommended that if the product has been subject to recall, then the recall should be the instrument for reporting the disposition of the product.

FDA disagrees. FDA believes information on the disposition of the product and retrieval efforts are important in analyzing the impact of reported deviations on the public and should be submitted in BPDR's. The information required for the BPDR is not as extensive as the recall information voluntarily provided to the district. The information regarding final disposition does not need to be complete by the time the BPDR is submitted. By obtaining as much information as possible on the disposition of a product at the time the report is submitted, FDA will be able to perform appropriate followup action. The draft guidance document will further describe the required information to be reported in the BPDR.

(Comment 28) One comment asked if FDA would require licensed manufacturers and unlicensed blood establishments to consider previous and subsequent lots in investigating any lot that instigated a BPDR.

The regulations in this final rule do not affect the manner in which a biological product deviation is investigated. The obligation to investigate a biological product deviation is part of the CGMP regulations for biological drug products and biological devices, including blood and blood components. The CGMP requirements for blood establishments, whether licensed or unlicensed, require blood establishments to thoroughly investigate discrepancies (§ 606.100(c)) and to maintain and make available to FDA appropriate records of such investigation, conclusions, and followup (§§ 606.100(c) and 606.160(b)(7)(iii) (21 CFR 606.160(b)(7)(iii))). Licensed manufacturers subject to drug CGMP (§§ 211.192 and 211.198) and medical device manufacturers (see § 820.100) are similarly obligated to investigate, correct, and record findings related to biological product deviations. Under these existing regulations FDA expects the licensed manufacturer or unlicensed blood establishment to determine what impact the deviation may have had on other product lots and take appropriate corrective action. These regulations do not mandate the manner of investigation by a licensed manufacturer or unlicensed blood establishment but require that the investigation be complete.

(Comment 29) Twenty-three comments stated that 45-calendar days to report a biological product deviation as proposed in §§ 600.14(a) and 606.171 is not enough time since licensed manufacturers and unlicensed blood establishments must analyze and correct the deviation prior to reporting. One comment suggested that fewer than 45 days to report would be better.

In adopting a 45-day time requirement, FDA looked at the history of reporting under the prior regulations and determined that 45 days was a reasonable period given the importance of timely reporting. The agency reviewed the reports submitted during FY 1997 through 1999 and an average of 73 percent of the reports was received within 45 days.

Licensed manufacturers and unlicensed blood establishments should not wait to report biological product deviations until after completing their corrective actions. Rather, licensed manufacturers and unlicensed blood establishments should submit BPDR's as soon as possible but no later than 45 days after the date that the licensed manufacturer or unlicensed blood establishment, its agent, or another person performing a manufacturing, holding, or distribution step under the manufacturer's or establishment's control, first discovers information reasonably suggesting a reportable event has occurred. The reports should include information on the intended followup to be taken if followup is not completed prior to submission of the report. To facilitate timely reporting by licensed manufacturers and unlicensed blood establishments, FDA is providing guidance on how to report as well as a standardized form for reporting.

(Comment 30) Fourteen comments requested clarification as to when the 45-day reporting time limit begins. Several of these comments offered various possible starting dates.

In response to these comments, FDA has clarified the 45-day time requirement in the final rule. The 45 days commence on “the date (the licensed manufacturer or unlicensed blood establishment, its agent, or another person who performs a manufacturing, holding, or distribution step under the control of the licensed manufacturer or unlicensed establishment) acquire(s) information reasonably suggesting that a reportable event has occurred.” For example, if a manufacturer contracted with a third party to receive and process its customer complaints, that third party would be the manufacturer's agent for purposes of this rule, and the 45 days would begin to run upon the agent's receipt of information reasonably suggesting a reportable event has occurred.

(Comment 31) Four comments recommended adopting a hierarchy for when to report based on the potential risk of the deviation. For example, one comment suggested errors with substantial risk be reported within 45 days, errors with moderate risk be reported when the internal investigation is complete and errors with minimal risk be reported in an annual report.

FDA has adopted a simpler approach based on the potential public health risk of the event. Biological product deviations involving distributed products must be reported within 45 days. Biological product deviations that are discovered before the product leaves the control of the licensed manufacturer or unlicensed blood establishments are nonreportable, but reviewable during routine inspections, because such events present significantly less public health risk.

(Comment 32) Forty-seven comments requested a standardized format for reporting biological product deviations and several of these submitted a proposed form. Fourteen comments requested one form for hospital-based transfusion centers and a separate form for blood collection centers and pharmaceutical manufacturers. Seventeen comments requested FDA to develop means for electronic reporting. One comment suggested FDA supply forms to blood suppliers.

FDA recognizes the need for a standardized method for reporting biological product deviations. FDA has developed a form for licensed manufacturers and unlicensed blood establishments to use to report under the final rule and is issuing guidance including instructions for completing the biological product deviation reporting form. FDA also has developed an electronic format for reporting. The agency has taken into consideration the comments and sample forms submitted in devising the biological product deviation reporting form. The agency also is requesting comments to the docket from the public on the report form and the instructions for preparing the report in accordance with the Paperwork Reduction Act of 1995. The agency is making the form available in various ways, including the FDA website at http://www.fda.gov/cber and the CBER FAX information system at 1-888-CBER-FAX.

FDA has examined the impacts of the final rule under Executive Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612) (as amended by subtitle D of the Small Business Regulatory Fairness Act of 1996 (Public Law 104-121)), and the Unfunded Mandates Reform Act of 1995 (Public Law 104094). Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Regulatory Flexibility Act requires agencies to analyze whether a rule may have a significant impact on a substantial number of small entities and, if it does, to analyze regulatory options that would minimize the impact. Section 202(a) of the Unfunded Mandates Reform Act requires that agencies prepare a written statement of anticipated costs and benefits before proposing any rule that may result in an expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million (adjusted annually for inflation) in any one year.

The agency has determined that the final rule is a significant action as defined in section 3, paragraph (f)(4) of Executive Order 12866. We have also determined that this rule will not result in aggregate expenditures for State, local, and tribal governments, or the private sector of $100 million in any one year. Based on FDA's analysis using available data, the agency does not anticipate that the rule will result in a significant impact on a substantial number of small entities.

The rule will have an impact on licensed manufacturers and unlicensed blood establishments as described in table 1 of this document. All of these types of establishments will experience both a one-time cost impact to make changes to their recordkeeping systems and reporting procedures, as well as an annual cost impact associated with the ongoing reporting of product deviations that are encountered. Table 1 below summarizes these two components of cost impact. The rule is estimated to have an aggregate one-time cost impact of $8,131,648 and an annual cost impact of $340,319. These estimates are detailed in the discussion that follows.

Based on the agency's registration data base, there are an estimated 111 licensed biologics manufacturers, 232 licensed blood establishments, and 2,800 unlicensed registered blood establishments. Based on data from the HCFA, there are estimated to be 3,400 transfusion services currently in operation. Such manufacturers and establishments currently conduct some QA activities. The impact of the final rule reflects the change in these ongoing activities that would be required by the rule.

Licensed biologics manufacturers must comply with part 211 or part 820; and licensed and unlicensed blood establishments must comply with parts 211 and 606 (21 CFR part 606), which encompasses a variety of QA activities embodied in CGMP's, to include investigating problems, performing followup, and recordkeeping.

The proposed rule stated that FDA had no precise estimates of the one-time cost for preparation and/or revision of the SOP, staff training, and time spent making the report. The agency expected that such activities would require an average of 2 hours to create an SOP for submitting error and accident reports, and approximately 1 hour to review and update existing SOP's at the establishments that have been reporting. The majority of the comments from industry stated that the estimates were underestimated. However, only a couple of comments, based on their experience, suggested a range of timeframes from 20 hours to a few days to develop and implement a new SOP. FDA has reassessed the time for staff review of the requirements of the rule, establishing or making adjustments to current systems and procedures, and for staff training. These estimates are discussed below.

Licensed biologics manufacturers currently have recordkeeping systems and QA systems in place. These establishments are estimated to incur a one-time cost for staff review of the requirements of the rule, and accompanying modifications to current systems and procedures, and for staff training in the use of modified procedures. FDA estimates that these activities may require a total of 80 hours of staff time. Using an estimated hourly wage rate of $39.20, 1 the total one-time cost for these manufacturers is estimated to be $348,096 ($39.20 × 80 × 111).

For blood establishments, the changes made in response to the rule are expected to vary according to whether the establishment is currently licensed. The 232 licensed blood establishments are currently required to report the product deviations under § 606.14. These facilities are likely to have systems in place for keeping record of product deviations, and will not be expected to have to establish a new reporting system. However, the licensed blood establishments are also likely to handle the majority of product deviation reports, because these facilities account for an estimated 90 percent of the total volume of U.S. blood collections. The licensed blood establishments will need to allocate staff time for a one-time review of the rule and some modifications to their current recordkeeping system and reporting procedures. In addition, these facilities will allocate a few hours of training time to review the reporting changes with staff who will be involved in the reporting of product deviations to FDA. FDA estimates that these activities may require a total of 80 hours of staff time. Using an estimated hourly wage rate of $39.20, the total one-time cost for these manufacturers is estimated to be $727,552 ($39.20 x 80 x 232).

The 2,800 registered blood establishments that are not licensed are estimated to account for about 10 percent of total U.S. blood collections, and currently perform product deviation reporting on a voluntary but less consistent basis. It is anticipated that the registered blood establishments will allocate staff time to establish a recordkeeping system for reportable product deviations involving products. In addition, the registered blood establishments will allocate staff time to modify current SOP's to comply with the biological product deviation reporting required by the rule, and to review the SOP changes with the staff who will be involved in reporting these deviations to FDA. FDA estimates that these activities will require an average of 40 hours of staff time per facility. Using an estimated hourly wage rate of $39.20, the total one-time cost for these establishments is estimated to be $4,390,400 ($39.20 x 40 x 2,800).

Transfusion services currently perform a variety of QA activities, but report product deviations to FDA on a voluntary and very limited basis. Transfusion services currently must comply with 42 CFR 493.1273(a). This regulation requires transfusion services to comply with parts 606 and 640 (21 CFR part 640) provisions, which includes keeping records of errors and accidents, transfusion reaction reports and complaints, with a record of investigation and followup. These establishments are expected to allocate staff time to review the requirements of the rule, modify current SOP's to comply with the biological product deviation reporting requirements, and train appropriate staff in using the modified procedures. This one-time effort is estimated to involve approximately 20 hours of staff time per facility, yielding an estimated cost of $2,665,600 ($39.20 x 20 x 3,400) for transfusion services. Based on the estimates for licensed and unlicensed blood establishments, the total one-time cost for blood and blood component manufacturers is $7,783,552 ($727,552 + $4,390,400 + $2,665,600).

In addition to the cost of establishing modified systems and procedures, unlicensed blood establishments will experience some annual costs associated with ongoing reporting of product deviations that fit the criteria specified in the rule. Those costs are estimated below.

Licensed manufacturers and unlicensed blood establishments will be required to report to FDA product deviations when: (1) The event is associated with the manufacturing, to include testing, processing, packing, labeling, and storage, or with the holding or distribution of a licensed biological product, or a licensed or unlicensed blood or blood component; (2) the deviation occurs in the licensed manufacturer or unlicensed blood establishment's facility or in another facility while the product remains in the control of the licensed manufacturer or unlicensed blood establishment; (3) the deviation may affect the safety, purity, or potency of that product, and either represents a deviation from CGMP, applicable regulations, applicable standards, or established specifications; or represents an unexpected or unforeseeable event; and (4) the deviation involves a distributed product.

When a manufacturer becomes aware of a reportable product deviation, the manufacturer investigates the deviation, records the deviation, and performs followup. FDA estimates that the establishment will allocate an additional 2 hours of staff time to prepare and submit a report to FDA. In the comments on the proposed rule, FDA received one comment that suggested the agency's estimate of 30 minutes to file a report was reasonable for the filing task itself, but would not cover the time needed to prepare the report. Other comments stated that their establishments average 4, 6, or 8 hours to prepare a report, but some comments also explained that these hours included investigations, followup, and SOP revision. FDA agrees that 30 minutes would not reflect the anticipated time for preparing, in addition to filing, the report. The reporting to FDA required in this rule does not introduce additional requirements for recordkeeping, investigation, and followup of manufacturing problems and deviations beyond what is required under CGMP requirements. Therefore, the estimated time for complying with this final rule does not include recordkeeping, investigation, and followup of a biological product deviation.

Licensed manufacturers already report a broad range of product deviations to FDA. This range includes all deviations in products made available for distribution, and has not previously been limited to those products actually distributed. Under the existing regulation, a total of 93 biologics manufacturing deviations were reported to FDA in 1999. Since the new rule limits the criteria for reporting, FDA estimates that reporting will be 25 percent reduced, yielding an estimated total of 70 reports (93 x (1090.25)) rather than the current 93 reports. Based on the estimate of 2 hours to complete and file a report, FDA estimates a total savings of $1,803 ((93-70) × 2 × $39.20).

Under the current rule, a total of 14,611 blood and blood component errors and accidents were reported by licensed blood establishments to FDA in FY 1999. These facilities are also estimated to account for approximately 90 percent of all blood and plasma collections, totaling approximately 26 million units, or 23,400,000 (0.90 x 26,000,000) units processed by licensed blood establishments. The current rate of reporting per unit of blood collected and processed is thus 6.24 ((14,611/23,400,000) x 10,000) per 10,000 units. Under the final rule, FDA estimates that reporting for these facilities will be reduced by 25 percent, reducing the total reports to 10,958 ((1090.25) x 14,611) or a rate of 4.68 (10,958/23,400,000 x 10,000) per 10,000 units of collection. This translates to a projected savings of $286,395 ((14,611-10,958) × 2 × $39.20)).

Assuming a deviation reporting rate of 4.68 per 10,000 units for those unlicensed registered blood establishments that account for approximately 10 percent of the total blood collections of 26 million units, the agency estimates that unlicensed registered blood establishments will incur new annual costs of $95,397 (0.10 x 26,000,000 x (4.68/10,000) x 2 x $39.20) to make an estimated 1,217 reports. This translates to an increased annual cost of approximately $34.07 ($95,397/2,800) per unlicensed registered blood establishment.

Transfusion services will be newly required to report product deviations that meet the criteria specified in the rule. The annual cost to transfusion services for this reporting requirement is based on the voluntary annual reporting rate of transfusion services for FY 99, i.e., two reports per transfusion service. This reporting rate is supported by the estimate of BPDR's per hospital per year by bedsize calculated in table 2 of this document. The reporting by the transfusion service is estimated to involve approximately 2 hours of staff time at the transfusion facility. As noted earlier, this rule does not require new investigations of such reports. Records of investigations and followup to address problems with the manufacturing process are already required as part of the CGMP for blood and blood components. FDA therefore estimates the total cost of annual reporting by transfusion services to be $533,120 (3,400 x 2 x 2 x $39.20). This translates to an increased annual cost of approximately $156.80 per transfusion service.

In summary, the annual cost impact of the rule is estimated to be $342,122 (($95,397 + $533,120)—$286,395) for licensed and unlicensed blood establishments, and a net savings of $1,803 for licensed manufacturers of biological products other than blood and blood components.

The agency does not anticipate that the final rule will have a significant impact on a substantial number of small business establishments. However, because of the limits of available data, the agency is uncertain about the number of small entities affected and the actual extent of current product deviations at these facilities that would trigger reporting and determine the cost impact. Since the agency received no comments supported by data regarding the estimated impact on small entities in the proposed rule, the following analysis is based on the limited data available.

The licensed manufacturers and unlicensed blood establishments affected by the final rule are included under the major Standard Industrial Code (SIC) group 80 for providers of health services. According to section 601 of the Regulatory Flexibility Act of 1980, the term “small entity” encompasses the terms “small business,” “small organization,” and “small governmental jurisdiction.” According to the Small Business Administration (SBA), a small business within the blood industry is an enterprise with less than $5 million in annual receipts. A small organization is a not-for-profit enterprise which is independently owned and operated and is not dominant in its field. A “small governmental jurisdiction” generally means governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000. Because the rule would reduce reporting requirements for currently licensed facilities, FDA has focused the following small business analysis on those blood collection facilities and transfusion services that will be newly required to report these product deviations, and are therefore expected to incur new costs.

The FDA registry of blood establishments does not provide an indication of the size of the registered entities. Although uncertain, it is likely that some smaller facilities may experience significant costs as a result of compliance with the final rule. According to the 1996 directory of the American Association of Blood Banks (AABB), only 34 regional and community blood centers have annual revenues of less than $5 million and each collect no more than 30,000 donations per year. With an estimated rate of 4.68 product deviation reports per 10,000 units collected [see annual cost estimates in section IV.C of this document], this would imply an estimated 14 product deviation reports (4.68 x 3) per smaller blood center per year, and associated cost of $1,098 ($39.20 x 2 x 14 reports). The one-time cost for these facilities is expected to be similar to the unlicensed registered blood establishments estimate involving 40 hours of staff time, thus $1,568 ($39.20 x 40) per facility.

Hospital transfusion services are expected to be the primary entity affected by the requirements, but the extent of the small business impact is uncertain. Although the details of manufacturing activities at transfusion services are not available, FDA examined other data to develop a preliminary assessment of small business impact. The size of U.S. hospitals varies substantially. The 1998 American Hospital Association (AHA) survey data indicate a total of 5,134 U.S. registered community hospitals grouped into 8-bedsize categories. The average annual revenues for facilities in these bedsize categories range from approximately $5.5 million to $513 million. However, since many hospitals are not-for-profit or are operated by State and local governments, the SBA annual receipt criteria for small businesses would not apply to these facilities. Of the 5,134 U.S. community hospitals included in the AHA report 1,330 are under the control of State and local government, 3,045 are nonprofit institutions and the remaining 759 are reported to be investor-owned.

The number of hospitals that would meet at least one of the various SBA definitions for small entities is uncertain. According to the AHA statistics for 1998, the smallest reported hospital size category includes 262 hospitals with 6 to 24 beds, and total gross revenues of $1.43 billion, yielding average revenues of $5.46 million. FDA assumes that the 11 facilities reported to be investor-owned within this bedsize category could qualify as small entities. Although it is possible that all nonprofit hospitals may qualify as small entities, it appears that a number of facilities might be excluded from that definition because they are reported to be hospitals in a system. According to the AHA survey definition, “hospitals in a system” refer to those “hospitals belonging to a corporate body that owns and/or manages health provider facilities or health-related subsidiaries; the system may also own non-health-related facilities.” The AHA currently has record of 1,592 hospitals that are nonfederal and nonprofit (including State and local government controlled) that are hospitals in a system. If these facilities were excluded, FDA estimates that 2,783 [1,330 State & local + 3,045 nonprofit—1,592 in-a-system] nonfederal, nonprofit hospitals may qualify as small entities. Thus, a total of 2,794 [2,783 + 11] hospitals might qualify as small entities.

The following analysis of potential impact by size of hospital suggests that, regardless of hospital size, the cost impact of product deviation reporting will be limited if the number of deviation reports per facility is proportionate to the utilization of blood transfusions implied by relative number of inpatient surgeries performed by hospitals in different size categories. Table 2 of this document estimates the percentage of all inpatient hospital surgeries, based on the number of inpatient surgeries reported to AHA as performed by hospitals in different bedsize categories. This percentage is used to estimate a share of the total reports that would be made by hospitals in each category. The estimated number of product deviation reports per hospital within a bedsize category is based on the total projected number of reports and the percentage of inpatient surgeries reported for hospitals within each size category.

In the Federal Register of August 28, 1996 (61 FR 44398), FDA issued a final regulation restricting the sale and distribution of cigarettes and smokeless tobacco to children and adolescents. In the Federal Register of November 28, 1997 (62 FR 63271), FDA issued a final rule granting exemption from preemption under section 521 of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 360k) for certain cigarette and smokeless tobacco requirements in Alabama, Alaska, and Utah. These requirements were preempted under section 521 of the act because they were different from FDA's requirements but they could be exempted because they were more stringent than FDA's requirements.

On March 21, 2000, in Food and Drug Administration vs. Brown & Williamson Tobacco Corp. , et al., the Supreme Court ruled that Congress has not granted FDA jurisdiction to regulate tobacco products as customarily marketed. In accordance with this ruling, the agency issued a final rule in the Federal Register of March 31, 2000 (65 FR 17135), removing its regulations restricting the sale and distribution of cigarettes and smokeless tobacco to children and adolescents. The agency inadvertently failed to remove the regulations granting exemptions from Federal preemption for these three States. Because the FDA regulations are not in effect, the State requirements are not preempted and may remain in effect. The agency also inadvertently removed § 820.1(e) (21 CFR 820.1(e)) (65 FR 17135). Section 820.1(e) did not relate to tobacco. Therefore, it is being added in this rule.

This document allows VA to pay hospitals and physicians the amount that they on their own or through agents have negotiated to receive from VA. Accordingly, this document reflects contract actions that are exempt from the prior notice-and-comment and delayed effective date provisions of 5 U.S.C. 553.

The Unfunded Mandates Reform Act requires (in section 202) that agencies prepare an assessment of anticipated costs and benefits before developing any rule that may result in an expenditure by State, local, or tribal governments, in the aggregate, or by the private sector of $100 million or more in any given year. This rule would have no consequential effect on State, local, or tribal governments.

The Secretary hereby certifies that this rule will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This rule would affect only a small portion of the business of the affected entities. Accordingly, pursuant to 5 U.S.C. 605(b), this rule is exempt from the initial and final regulatory flexibility analysis requirements of §§ 603 and 604.

On September 11, 1998, the Operations and Regulations Committee (“Committee”) of the Legal Services Corporation (“LSC” or “the Corporation”) Board of Directors (“Board”) met to consider proposed revisions to the Corporation's rule governing recipient fund balances, 45 CFR part 1628. The Committee adopted a proposed rule that was published in the Federal Register for public comment at 63 FR 56591 (October 22, 1998). Nineteen comments were received and considered by the Corporation.

Following the close of the comment period, the Committee met on February 21, 1999, to review the public comment on the proposed rule. No action was taken on the proposed rule at that time as the Committee was advised by the Corporation's staff that additional time was needed to consider fully a number of issues raised by the public comment and to formulate informed recommendations for the Committee's consideration in adopting a final rule.

The Committee was briefed by staff on two issues raised by one commenter which challenged the legal sufficiency of the proposed rulemaking and the legal authority for the Corporation to permit any carryover of fund balances by recipients. The commenter's legal sufficiency claim was mistakenly based on the Administrative Procedures Act, a law which does not apply to LSC rulemaking, and a similarly erroneous allegation that the public record failed to include certain “factual information” on which LSC relied—or, in the eyes of the commenter, should have relied—in developing the proposed rule. As explained to the Committee, the preamble to the proposed rule properly incorporated by reference information which was already a matter of public record and readily made these materials and any other factual information available to the public upon request. The commenter further asserted that the Corporation's proposed fund balance provisions were contrary to federal law, specifically relying on the Office of Management and Budget Circular A-110, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations (OMB Circular A-110). Contrary to the commenter's assertion, OMB Circular A-110 expressly authorizes the recipients to carry forward unobligated balances to subsequent funding periods. OMB Circular A-110, § _.25(e)(3), 58 FR 62992, 62999 (November 29, 1993).

On June 11, 1999, the Committee again met to consider public comments on the proposed rule. The Committee adopted a number of revisions to the rule, but deferred action on the final rule pending additional staff research into the policies and practices of other agencies awarding federal grants and contracts with regard to extraordinary and compelling circumstances for the carryover of an excess fund balance. The Committee took under consideration the need to permit a fund balance in excess of its 25% limitation in extraordinary cases, where a recipient received a large, lump-sum infusion of funds, for example, from the sale of real property, insurance proceeds, or a court-awarded judgment. Where such funds are derived from the past expenditure of LSC funds, they may, because of the amount or timing of their receipt, cause a fund balance in excess of 25% of the recipient's total LSC support for that year. In particular, the Committee sought additional information from staff on the policies adopted by federal agencies with regard to grantee fund balances and whether fund balances in excess of 25% of a grantee's annual federal support are ever permitted, and, if so, under what circumstances.

On November 19, 1999, the Committee met to consider the staff's report on the outstanding issues raised at its last meeting and to again receive public comment. The Committee was advised that in 1993, OMB Circular A-110, the governing authority for most federal grants to non-profit organizations, was amended to expand the authority of discretionary grantees to undertake certain types of administrative actions without prior agency approval, including the ability to carry forward unobligated fund balances into a subsequent funding period (58 FR 62992, November 29, 1993). Having reviewed the regulations and policies issued by more than twenty federal agencies under the amended OMB guidelines, LSC staff advised the Committee that the Corporation's proposed fund balance policies were more strict than those adopted by most federal agencies. Few federal agencies employ a cap on the amount of funds that may be carried over by a grantee, with or without prior agency approval. Most agencies require notification of fund balances, and some reserve the discretion to disallow the carryover or to offset it against future grant funds under particular circumstances, such as when it exceeded 25% of the grant award, or the grantee was at high risk of failure to comply with statutory requirements. Staff also provided the Committee with a breakout of the fund balances reported by recipients for fiscal year 1997, the most recent, complete data available. After considering the staff report and taking other public comment on the rule, the Committee made a number of additional revisions to the rule and voted to recommend to the Board that the rule as revised be adopted as a final rule. On November 20, 1999, the Board did adopt as final the rule as revised and reported by the Committee.

This final rule is intended to provide the Corporation with more discretion to determine whether to permit a recipient to maintain a fund balance of up to 25% of its LSC support for a particular period and sets forth the requirements and limitations applicable to waiver requests and the uses of fund balances. The final rule also authorizes the Corporation to exercise its discretion to waive the 25% cap on excess fund balances in three specific circumstances when extraordinary and compelling reasons exist for such a waiver. Finally, the rule is restructured for clarity and consistency with other LSC regulations.

A section-by-section analysis is provided below.

The final rule adopts the revisions to this section as proposed. Those revisions deleted or moved parts of the section because they were not statements of the purpose of the rule. As revised, the purpose of the rule is stated as setting forth the Corporation's policies and procedures for recipient fund balances. The final rule retains the underlying intent of the current rule which is to ensure the timely expenditure of LSC funds for the effective and economical provision of high quality legal assistance to eligible clients.

The proposed rule clarified and updated the meaning of three of the current terms to make them consistent with other changes in LSC regulations, and retained a fourth term without change.

In the final rule, “excess fund balance” has been added as a defined term for clarity. “Excess fund balance” is defined to mean the amount of a recipient's LSC fund balance that exceeds the amount the recipient is authorized to retain under the regulation.

As proposed, the term “LSC support” was defined as the sum of three amounts: (1) The recipient's LSC carryover funds from the prior fiscal year; (2) the amount of the recipient's LSC grant for the year in question; and (3) any LSC derivative income earned by the recipient during the year in question. In the final rule, the Corporation has deleted a recipient's prior year carryover funds from the definition of LSC support. As pointed out during the comment period, including carryover funds in LSC support could artificially inflate the amount of funds permitted to be carried over under the percentage ceilings used in the rule. As this result was not intended by the Corporation, the reference to the prior year's carryover funds has been deleted and the remaining components of the definition of “LSC support” renumbered accordingly. The language was further amended to make clear the fiscal year being referenced and that one-time and special purpose grants were not to be included in the definition of “LSC support” as either financial assistance or derivative income. The rules governing fund balances for one-time and special purpose grants are discussed in more detail in § 1628.3(g) below.

The final rule replaces the defined term “fund balance amount” with “fund balance” for ease of use and clarity. Other minor language changes were also incorporated for clarity. The final definition makes clear that a “fund balance” is the amount by which LSC support, together with the prior year's carryover amount of LSC Funds, exceeds the recipient's expenditures of LSC Funds, including capital acquisitions, as these amounts are reported in the recipient's annual audit. Some commenters recommended doing away with the term “fund balance” altogether as that term is inconsistent with generally accepted accounting principles set forth in the Statement of Financial Accounting Standards (FASB) No. 117, Financial Statements for Not-for-Profit Organizations. The current FASB Statement No. 117 speaks in terms of three categories of “net assets” rather than fund accounting. This issue was addressed by the Corporation in 1997 when it republished its Accounting Guide for LSC Recipients (August, 1997) following the FASB Statement No. 117 change. To permit the separate reporting of LSC revenue and expenditures, while at the same time adhering to Statement No. 117, Section 2-4 of LSC's Accounting Guide requires separate reporting, preferably through a supplemental schedule to be attached to audited financial statements prepared in accordance with FASB Statement No. 117. The supplemental schedule details the receipt and expenditure of LSC funds and permits the calculation of the LSC “fund balance.” Therefore, the final rule retains the term “fund balance.”

The final rule retains the meaning of the term “fund balance percentage” but has revised the language to be consistent with its use as a defined term. The fund balance percentage is the percentage ratio of the LSC fund balance to the recipient's LSC support.

The final rule adopts without change the proposed definition of “recipient,” which was updated to reflect the current law limiting grants for financial assistance to those authorized by § 1006(a)(1)(A) of the LSC Act and to be consistent with the meaning of the term as defined elsewhere in the regulations.

The proposed rule restructured this section to consolidate statements of general policy on recipient fund balances in this section and to move provisions that dealt more with procedure to other sections of the rule.

Paragraph (a) states the Corporation's long-standing policy that recipients may, without any prior LSC approval, retain a fund balance of up to 10% of their LSC support. While this policy has not changed from the current rule, the Corporation received significant comment urging that the ceiling on fund balances be raised. A number of commenters argued that their own accountants or auditors recommended higher fund balance retention in the interests of sound financial management for nonprofit corporations. The commenters, however, differed on the appropriate level for such fund balances, with recommendations ranging as low as one month's operating expenses to three or six months of expenses, or even higher. The majority of the recipients that commented suggested increasing the fund balance which could be retained without specific LSC approval to between 15% and 25% of LSC support. Several commenters noted that their other funders generally did not permit their funds to be included in fund balances, making the inclusion of LSC funds for this purpose more critical for the recipient's stability as an ongoing enterprise and to ease the transition for the recipient should it lose some or all of its LSC funding.

The Corporation has retained the 10% ceiling on the level of fund balances that recipients may carryover without specific LSC approval. The Corporation was not convinced by the comments that a higher level was either necessary or appropriate at this time. The primary purpose of LSC funding is to enable the recipient to provide a maximum of high quality legal assistance to eligible clients, rather than to underwrite the long term fiscal stability of the recipient. There is an inherent tension between the purpose of the grant funds and the non-expenditure of these funds solely to underwrite the entity's viability as an ongoing enterprise. Nothing in the comments persuades the Corporation that an amount in excess of the current 10% ceiling is necessary.

In 1980, the GAO was critical of fund balances between 20% and 31% of a recipient's annual grant. While OMB introduced more flexibility into grantee administration of its federal funding through its amendments to Circular A-110, there is no empirical evidence that the GAO criticisms of fund balances for LSC recipients are any less valid today. Nor have the commenters demonstrated any compelling need for higher fund balances. Additionally, large fund balances could create the potential for misuse of such funds. In 1997, the last year for which complete records were available, recipients carried over $17.9 million in LSC funding, compared to $49.6 million in non-LSC funding. The data further reflect that most recipients report carry over of funds and that, of those that do, the majority carried over significantly more non-LSC funds than LSC funds. These data tend to refute the argument of the commenters that LSC funds are necessary for an adequate fund balance because of the general lack of non-LSC funds available for this purpose. Nor does the Corporation adhere to the principle underlying these claims, that LSC funds should be used to underwrite a recipient's financial stability when other funders will not do so. Especially with the advent of competitive grants, LSC would prefer to have its grants go to client service rather than to reserve funds for grant transition activities and needs. Where such needs exist, LSC can provide the necessary funding.

Paragraph (b) permits recipients to request a waiver from LSC to retain a fund balance of up to 25% of their LSC support. Such waivers are granted at the discretion of LSC and require a showing of special circumstances to justify the waiver. As discussed above, several commenters sought a fund balance ceiling of 25% or higher to be automatic, rather than by waiver. However, the Corporation disagreed with these comments and has retained the ceiling of 10% for fund balances which can be retained without prior LSC approval, and up to 25% only upon a waiver request to LSC, supported by a showing of special circumstance. Consistent with the proposed rulemaking, however, LSC has relaxed somewhat the showing required to obtain a waiver for a fund balance of up to 25% of a recipient's LSC support. The particular standards are discussed below in § 1628.4.

In the final rule, the Corporation has added a new paragraph (c) which permits a recipient to request a waiver to retain a fund balance in excess of 25% of their LSC support in extraordinary and compelling circumstances. The rule further limits “extraordinary and compelling circumstances” by specifying only three possible sources for such funds: (1) An insurance reimbursement; (2) the sale of real property; and (3) the receipt of monies from a lawsuit in which the recipient was a party.

Although the Corporation did not find it necessary or appropriate to raise the ceilings in effect for routine fund balance carryovers or waivers, it was swayed by the comments concerning unusual and compelling circumstances which could arise that may justify retention of a fund balance in excess of 25% of a recipient's LSC support. In general these circumstances arise when there is a sudden and unexpected infusion of funds which are derived from prior LSC grant funds but are not part of the current year's funding. By their nature, these funds may be substantial in amount. Instances discussed included the settlement of an insurance claim resulting in the payment to the recipient of a large insurance reimbursement; the receipt of a substantial amount as proceeds from the sale of real property; or, the receipt of an award based on a judgment or settlement in a lawsuit to which the recipient was a party. In these cases, because of the timing of the receipt of the funds or the amount of such funds or both, it may be more prudent to permit the recipient to carryover the funding into the next fiscal year, even if the amount of the carryover will exceed 25%, than to require the recipient to spend the funds in the fiscal year received. The recipient can better plan and find the best use for the funds, rather than being forced into a hasty expenditure simply to avoid the limitation on the carryover of fund balances and the resultant surrender of the excess fund balances to the Corporation.

The Committee considered using a standard of “extraordinary and compelling” for these waivers with the three specific circumstances discussed as examples. However, it was felt that more guidance was required to avoid erosion of the standard. Therefore, the Board ultimately decided to limit the permissible circumstances for these extraordinary waivers to the three conditions which have in the past been known to give rise to the sudden infusion of large sums, and hence may precipitate the need for a waiver. By limiting the circumstances justifying such waivers, the Corporation intends to provide notice to recipients of the limited types of circumstance in which extraordinary excess fund balances will be tolerated, thereby avoiding any misunderstanding, abuse, or erosion of the standard.

In the final rule, proposed paragraph (c) is relettered as (d) and otherwise retains the policy that the granting of any waiver request is at the discretion of the Corporation. The final rule makes explicit that the discretion to grant a waiver applies to both requests for waivers of up to 25% of a recipient's LSC support and for waivers in excess of 25%. In addition, the final rule refers to the criteria in § 1628.4(d) which governs the Corporation's exercise of its waiver discretion.

In the final rule, proposed paragraph (d) is relettered as (e) and continues to state that, absent a waiver, a fund balance in excess of 10% of LSC support is to be repaid to the Corporation. In addition, the final rule continues the policy requiring repayment to LSC of any amount in excess of the amount permitted under a waiver granted by the Corporation. As suggested during the comment period, the two sentences describing the alternative means of repayment have been moved to the section on procedures (see § 1628.4(c)).

In the final rule, proposed paragraph (e) is relettered as (f), but is otherwise unchanged. It continues to clarify LSC policy that the recovery of excess fund balances does not constitute a termination of funds under Part 1606 of the Corporation's regulations.

Finally, the final rule reletters paragraph (f) as (g) and retains the substance of the proposed rule to make clear that one-time and special purpose grants awarded by the Corporation are not subject to the fund balance rules in this part, are not part of the calculation of fund balances pursuant to this rule, but are to be separately accounted for and reported. The rule also continues LSC's policy that unexpended funds from one-time and special purpose grants must be returned to the Corporation at the end of the grant term unless the Corporation has approved the expenditure of those funds in writing. The Corporation Office of Compliance and Enforcement is planning to update the LSC Accounting Guide to reflect the revisions to the rule, including treatment of one-time and special purpose grants as provided for in this provision.

This section sets out the procedures applicable to recipient fund balances. It has been revised to provide the basis on which the Corporation will exercise its discretion to grant a waiver of an excess fund balance and the requirements which are intended to ensure careful oversight by the Corporation of a recipient's fund balances. The procedures apply to both waivers of the 10% ceiling for a fund balance of up to 25% of a recipient's LSC support and waivers of the 25% ceiling in extraordinary and compelling circumstances. The final rule consolidates the procedural requirements in the current rule in this section and updates those requirements as necessary.

Paragraph (a) of the final rule sets out the timeframe for recipients whose fund balance exceeds the 10% ceiling to request a waiver from the Corporation and the required content of such waiver requests. The final rule provides a recipient with 30 days from the submission of the recipient's annual financial audit in which to request a waiver. By tying the waiver request to the submission date for the recipient's annual financial audit, the Corporation intends to place recipients on notice of a fixed date for such requests. As used in this paragraph, the submission date for the recipient's annual financial audit is the date on which such audit is due to be submitted to the Corporation, which is currently specified in the LSC Audit Guide as 120 days from the close of the grantee's fiscal year.

Several comments urged that the rule provide for advance or preliminary approvals. According to the comments, advance approval would permit better fiscal planning and would allow the expenditure of fund balances earlier in the following fiscal year. Although these concerns have merit, approval is by definition based on the amount of fund balance indicated in the recipient's audit, and that audit is not available until after the end of the fiscal year. This rule does not preclude the recipient's request for a Corporation action on a waiver prior to the close of the fiscal year, it simply does not require the Corporation to provide for advance approval. The Corporation already has a practice of providing informal guidance to recipients who inquire early about their anticipated fund balances. This practice will continue to be available to recipients, but need not be required by regulation.

Paragraph (a) of the final rule incorporates the content of waiver requests which was specified in paragraph (c) of the proposed rule. The final rule continues to require that waiver requests specify: (1) The fund balance as reported in the recipient's annual audit; (2) the reason for the excess fund balance; (3) the recipient's plans for use of the excess fund balance; (4) the fund balance, if any, that the recipient projects for the current fiscal year; and (5) the circumstances justifying retention of the excess fund balance. The Corporation revised item (3) to delete the proposed reference to a Technology Investment Plan and other specific requirements related to information technology systems. The Corporation decided there was insufficient support for singling out information technology systems for special treatment under its fund balance rules. The need to acquire or update the hardware or software related to a recipient's information technology systems is simply one example of equipment or property acquisition for which an excess fund balance may be used. Other stylistic and clarifying language changes have been made, including expanding the reference to circumstances in item (5) to include both the special circumstances required to justify the retention of an excess fund balance of up to 25% of the recipient's LSC support and the extraordinary and compelling circumstances specified in § 1628.3(c) necessary to justify retention of a fund balance in excess of 25% of the recipient's LSC support.

The Corporation proposed in paragraph (b) of this section to identify its obligations to consider the recipient's final audit, fund balance statements, and waiver requests, if any, and to provide timely written notice to the recipient of any fund balance amount to be recovered and the method of recovery. In the final rule, the scope of paragraph (b) was narrowed to focus on the Corporation's obligation to respond in a timely fashion to a recipient's request for a waiver or to notify the recipient that the excess fund balance must be repaid to the Corporation. In addition, the final rule requires that the Corporation respond within 45 days of its receipt of a waiver request. The 45 day period for the Corporation's decision and response to a waiver request was deemed reasonable and necessary because of the likelihood that multiple requests would be submitted at about the same time each year. In this regard, the written response to a waiver request or notice of demand for repayment of the excess fund balance may be provided by the Corporation by physical delivery, such as regular mail, or electronically, such as e-mail, when feasible. Either method is likewise acceptable for the submission of waiver requests.

The final rule contains a new paragraph (c) which consolidates the information previously located in paragraph (b) (discussed above) concerning the timeliness of repayment notices and in the policy section (see § 1628.3(e), supra ) concerning the methods of repayment. The final rule continues to require written notice of repayment of an excess fund balance at least 30 days prior to the date when repayment is due. Furthermore, the final rule continues to authorize the Corporation to decide, after consultation with the recipient, on the method of repayment. Two repayment methods are contemplated: a lump sum payment or a pro rated deduction from the recipient's monthly grant payments spread over a specified number of months. Irrespective of the recovery method used, however, the recipient should generally expect the recovery to be complete within the term of the current grant.

Paragraph (d) of the proposed rule stated that excess fund balances could not be expended by the recipient prior to approval by the Corporation of a waiver request. This paragraph has been deleted from the final rule as unnecessary and redundant. It remains the policy of the Corporation that a recipient needs to obtain LSC's approval of a waiver request before it may expend any excess fund balances.

In the final rule, proposed paragraph (e) is relettered as paragraph (d) and continues to identify the standards governing the Corporation's decision to grant a waiver request. The overarching standard continues to be that recipients provide high quality legal assistance to clients in an effective and economical manner. While prohibiting excess fund balances promotes this purpose, regulated use of carryover funds under certain circumstances is also consistent with this purpose. Based on changing needs and the Corporation's experience with fund balances since 1984, the standards enumerated in paragraph (d) are intended to reflect both generally and specifically the circumstances under which the Corporation may grant a fund balance waiver.

The first standard under paragraph (d) garnered the most comment. The Corporation had proposed relaxing the standard from “emergencies, or unusual or unexpected occurrences, or extraordinary circumstances” to “emergencies, unusual or unexpected occurrences, or circumstances” which give rise to an excess fund balance. Commenters generally approved the broader discretion available to the Corporation under the proposed standard. According to the commenters, justifiable reasons for waiving the 10% ceiling on fund balance retention exist which do not rise to the current standard of “extraordinary circumstances.” One commenter, however, critiqued the proposed standard as too lax and feared it may result in a de facto increase in the ceiling on fund balances from 10% to 25%.

In the final rule, the standard has been changed to refer to the “circumstances giving rise to the existence of a fund balance in excess of 10% of LSC support set out in § 1628.3(b) or (c).” Thus, the final standard incorporates by reference the need for “special circumstances” to justify a waiver to retain an excess fund balance of up to 25% of a recipient's LSC support and “extraordinary and compelling circumstances” as specified in § 1628.3(c) to justify a waiver for a fund balance in excess of 25% of a recipient's LSC support. For waivers of up to 25% of LSC support, the Corporation has more flexibility and discretion than under the current standard to grant a waiver, while at the same time requiring a showing of a special circumstance to avoid such waivers from becoming the norm. Moreover, to obtain a waiver in excess of 25% of LSC support, the recipient must demonstrate that one of the three circumstances specified in § 1628.3(c) gave rise to the excess fund balance in order to show extraordinary and compelling circumstances to justify a waiver. Thus, the ability of a recipient to obtain a waiver to retain a fund balance in excess of 25% of its LSC support is narrowly circumscribed.

Moreover, the circumstances giving rise to the excess fund balance remain but one of four factors to be considered by the Corporation in granting or denying a waiver request. The final rule retains without change two factors from the current rule: the special needs of clients and the recipient's financial management record. The final factor combines subparagraphs (3) and (4) of the proposed rule into a single subparagraph (3) in the final rule. As revised, subparagraph (3) in the final rule retains authority for the Corporation to consider the recipient's need for a cash reserve for payments to private attorneys participating in the recipient's private attorney involvement (“PAI”) program and adds language authorizing the consideration of the recipient's need to acquire equipment or property or for other expenditures which are reasonable and necessary for the performance of the LSC grant. The additional language, in part, replaces the proposed rule's subparagraph (4) which separately stated as a factor the recipient's need for a cash reserve to replace or update information technology systems. Only a few comments addressed the technology issue and a review of past fund balance requests and prior approval requests under Part 1630 (Cost standards and procedures) indicated no need for a specific regulatory factor related solely to information technology systems. The language in the final rule is expected to provide the Corporation with sufficient discretion and flexibility to deal with a variety of requests for waivers, not merely those related to information technology systems. For example, a cash reserve in a coming fiscal year may be needed to acquire new property or to acquire equipment that may make the program more accessible to handicapped clients, or for additional staff necessary to handle an anticipated influx of clients due to changes in medical, housing or other benefits adversely impacting on the client community.

In the final rule, the proposed new paragraph (f) is re-lettered as paragraph (e), and its substantive provisions for tighter controls on the use of fund balances by recipients are retained without change. Thus, the Corporation's written approval of waiver request will specify the time period within which the excess fund balance must be expended and the uses for which the funds may be expended. In specifying the time period for the expenditure of any excess fund balances, the Corporation's written approval will indicate whether the expenditure may be permitted beyond the end of the current fiscal year.

The final rule retains as paragraph (f) the current and proposed requirements for the separate reporting of any excess fund balance retained by a recipient for expenditure pursuant to an approved waiver request. Revisions to this paragraph clarify that approved excess fund balances should be reported separately by natural line item in the current fiscal year's audited financial statements. “Natural line item” or “natural expense classification” is a term of art in the accounting field which means the itemizing of expenses according to the kinds of economic benefits received by incurring the expense. Examples of natural line items or natural expense classifications include salaries and wages, employee benefits, supplies, rent, and utilities. See the American Institute of Certified Public Accountants Audit and Accounting Guide for Not-for-Profit Organizations, June 1, 1996 edition, Glossary, at 367.

Finally, in the final rule, a new paragraph (g) has been added. Paragraph (g) requires recipients to inform the Corporation of and seek its guidance with respect to changes in the conditions on the timing or purposes for the expenditure of excess fund balances as set out in the Corporation's written approval of a waiver request. The new paragraph is intended to place recipients on notice of their obligation to inform LSC of changes in circumstances which make compliance with the terms and conditions of their waiver difficult or impossible, for example, uncontrollable delays in settling on the purchase of new property, sudden and unexpected market changes that may alter the economics of a planned purchase, or newly emergent priorities for which the expenditure should be redirected. The Corporation will then provide the recipient with guidance on whether the change in the purpose of the expenditure or the need for more time for the expenditure, or both, warrants a change in the conditions for the waiver. Failure of a recipient to notify the Corporation and obtain approval for changes in its waiver conditions could result in any nonconforming expenditures being treated as a questioned cost by the Corporation under Part 1630.

The final rule retains with only minor technical or clarifying changes the provisions of the current rules governing recipient deficits. Deficits continue to be discouraged and use of LSC funds to liquidate a deficit requires prior Corporation approval. Absent prior approval, LSC funds used for this purpose will result in a questioned cost. Only a few conforming language changes have been made to this section.

This is a summary of the Order in MM Docket No. 83-484, FCC 00-386, adopted October 26, 2000; released October 26, 2000. The full text of this decision is available for inspection and copying during regular business hours in the FCC Reference Center, 445 Twelfth Street, SW., Room CY-A257, Washington, DC, and also may be purchased from the Commission's copy contractor, International Transcription Service, (202) 857-3800, 445 Twelfth Street, SW., Room CY-B402, Washington, DC. The complete text is also available under the file name fcc00386.pdf on the Commission's Internet site at www.fcc.gov.

1. Pursuant to the D.C. Circuit Court of Appeals' order in Radio-Television News Directors Association v. FCC, No. 98-1305, slip op. (D.C. Cir. Oct. 11, 2000) ( RTNDA ), the Commission hereby repeals §§ 73.1920 and 73.1930 of our rules, 47 CFR 73.1920, 73.1930, the broadcast personal attack and political editorial rules. Further, in light of these actions, the Commission vacates its Order and Request to Update Record released October 4, 2000 (FCC 00-360) (65 FR 60387, October 11, 2000) and terminate this proceeding.

2. The Commission also repeals the personal attack and political editorial rules that apply to cable television operators. 47 CFR 76.209(b), (c), and (d). Although these rules were not specifically cited in the proceeding before the Court of Appeals in RTNDA, they are identical to those rules in all material respects. The potential elimination of these rules was raised in a Notice of Proposed Rule Making in MM Docket No. 83-331, 48 FR 26471 (June 8, 1983), and was specifically addressed in a 1996 request for further information in the instant docket, MM Docket No. 83-484, 48 FR 28295 (June 21, 1983). Given the delay in concluding these proceedings and the Court of Appeals' decision, the Commission also vacates these identical cable television rules placed at issue in MM Docket No. 83-331. The Commission does so on the procedural grounds set forth in the Court of Appeals' decision in RTNDA, without expressing any conclusion as to the substantive issues underlying these rules. As the Court of Appeals noted, “[o]f course, the Commission may institute a new rule-making proceeding to determine whether, consistent with constitutional constraints, the public interest requires the personal attack and political editorial rules.” RTNDA, slip op. at 4. With respect to the personal attack and political editorial rules, “these are issues that the court has yet to decide.” Id.

3. Sections 73.1920, 73.1930 and 76.209(b), (c), and (d) of the Commission's rules, 47 CFR 73.1920, 73.1930, 76.209(b), (c), (d) are repealed.

4. The Commission's rules are amended as set forth.

5. The Order and Request to Update Record, FCC 00-360 (rel. Oct. 4, 2000) is vacated.

6. This proceeding is terminated.

7. This action is taken pursuant to sections 4(i), 4(j) and 303 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 154(j), and 303.

This document is a summary of the Commission's Third Memorandum Opinion and Order (Third MO&O) and Third Report and Order (Third R&O), FCC 00-348 in WT Docket No. 96-86, adopted on September 18, 2000, and released on October 10, 2000. The full text of this Third MO&O and Third R&O is available for inspection and copying during normal business hours in the FCC Reference Information Center, Room CY-A257, 445 Twelfth Street, SW., Washington, DC. The complete text may be purchased from the Commission's copy contractor, International Transcription Service, Inc., 1231 20th Street, NW., Washington, DC 20037. The full text may also be downloaded at www.fcc.gov. Alternative formats are available to persons with disabilities by contacting Martha Contee at (202) 418-0260 or TTY (202) 418-2555.

1. Band Plan. The Third MO&O addresses the remaining issues raised in the petitions for reconsideration of the First Report and Order (First R&O) in WT Docket No. 96-86, 63 FR 58645, November 2, 1998, which are granted to the extent indicated and are otherwise denied. On reconsideration, the Commission revises the band plan adopted in the First R&O to reposition the location of the narrowband and wideband channel groups for the general use, interoperability, and reserve spectrum and to designate 48 narrowband channels (24 channel pairs) for low power use for on-scene communication. Among the limitations imposed on use of these frequencies, the maximum effective radiated power (ERP) on these channels is limited to 2 watts. Additionally, applications for 18 of the channel pairs are subject to the regional planning process where the regional planning committee will determine the most appropriate low power application(s) on these channels and the frequency coordinators will be responsible for providing appropriate interference protection. The other 6 channel pairs will be licensed on a nationwide, itinerant basis. A Commission license will be required for operation on any of the low power channels.

2. In the Third R&O portion of this combined item, the Commission addresses designation and licensing issues for spectrum reserved in the First R&O to be subject to the Third Notice of Proposed Rule Making (Third NPRM) in WT Docket No. 96-86, 63 FR 58685, November 2, 1998. The Commission designates 2.4 MHz of spectrum, all narrowband channels for statewide, geographic-area licenses. The governor, or designee, of each state has the option until December 31, 2001, to apply for all or part of this 2.4 MHz of spectrum under a state license. Whatever spectrum has not been applied for by December 31, 2001, will revert to General Use public safety and will be administered by the relevant RPC. Each state license will be granted subject to the condition that the state certifies, on or before each applicable benchmark date, that it is providing or prepared to provide “substantial service” as set forth in the new § 90.529 of the Commission's Rules. The Commission reserves 6.2 MHz of the 24 MHz allocated for public safety for future developments in broadband technologies. Of the 6.2 MHz reserved, 0.8 MHz is set-aside pending resolution of interoperability guard band issues raised in the Fourth Notice of Proposed Rulemaking (Fourth NPRM) in WT Docket No. 96-86, 65 FR 51788, August 2, 2000. The remaining 5.4 MHz of the 700 MHz band are grouped into four segments of 1.35 MHz each located between the narrowband and wideband segments and reserved for future developments in broadband technologies.

3. Protection of Satellite-Based Global Systems. The Commission designates 794-806 MHz band for mobile-to-base communications because; in part, of its proximity to the adjacent 806-824 MHz band and in an effort to facilitate unit-to-unit operations in the 700 MHz and 800 MHz bands. The Commission also adopted specific emission limits for equipment operating in the 1559-1610 MHz band that will sufficiently protect aeronautical radionavigation operations. Outside of the 1559-1610 MHz band, the Commission's traditional standard ( i.e., generally 43 + 10 log P) will apply.

4. Interoperability Below 512 MHz. The Commission designates 5 VHF channels in the 150-174 MHz band and 4 UHF channel pairs in the 450-512 MHz band for nationwide interoperability use. For existing licensees operating on these channels, the Commission provides a transition period through January 1, 2005, after which these licensees will be secondary to interoperability communication. Under our Rules, an entity must have a license to operate a base or control station on these interoperability channels. Mobile operation, however, is permitted on these channels without an individual license ( i.e., a blanket licensing approach). Public safety licensees who are eligible to hold a part 90 license, or who are otherwise licensed under part 90 of our Rules, can operate mobile units on these interoperability channels without an individual license. Additionally, as suggested in comments, we also will require, as of January 1, 2005, every newly certified public safety mobile radio unit to have the capacity to transmit and receive on at least one nationwide interoperability channel ( i.e., the calling channel) in the band in which it is operating. For licensing and administration of these interoperability channels, the Commission will rely on the four public safety frequency coordinators, who we envision will jointly develop an interoperability plan regarding the management and nationwide use of these interoperability channels, perhaps in concert with the group(s) tasked with administering the interoperability channels in the 700 MHz band. Additionally, the Commission designates two channels in the 156-162 MHz band for interoperability purposes in thirty-three inland Economic Areas and adopts criteria for licensing on these channels, including frequency coordination. Until general interoperability provisions can be made with Canada and Mexico, interoperability operations within the Canadian and Mexican border areas will need to be coordinated on an individual basis with these countries in the usual manner.

As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in Appendix A of the Second Notice of Proposed Rulemaking (Second NPRM) 62 FR 60199, November 7, 1999 issued in this proceeding. The Commission sought written public comments on the proposals in the Second NPRM, including comments on the IRFA. No comments were filed in direct response to the IRFA. Subsequently, a Final Regulatory Flexibility Analysis (FRFA) was incorporated in Appendix A of the First R&O issued in this proceeding. A Supplemental Final Regulatory Flexibility Analysis, ( SFRFA ) was incorporated in Appendix A of the Memorandum Opinion and Order on Reconsideration, (First MO&O) 64 FR 60123, November 4, 1999, issued in this proceeding. A Second Supplemental Final Regulatory Flexibility Analysis Second SFRFA was incorporated in Appendix A of the Second Memorandum Opinion and Order (Second MO&O) issued in this proceeding. The Third Supplemental Final Regulatory Flexibility Analysis (Third SFRFA) contained in this Third MO&O supplements the information contained in the FRFA, First SFRFA, and Second SFRFA and is limited to matters raised on reconsideration or clarification with regard to the First R&O and addressed in this Third MO&O. This Third SFRFA conforms to the RFA.

1. In this Third MO&O, we address the multiple Petitions for Reconsideration and/or Clarification filed in connection with the First R&O in this docket that established a band plan and adopted service rules in the newly-reallocated public safety spectrum at 764-776 MHz and 794-806 MHz (“the 700 MHz band”). This Third MO&O presents our decisions in response to those various portions of the petitions that address the: (i) Band plan for the 700 MHz band, and (ii) low power narrowband devices for on-scene communication.

2. In the Third MO&O, we revise the band plan adopted in the First R&O to reposition the location of the narrowband and wideband channel groups for the general use, interoperability, and reserve spectrum. We also modify the adopted narrowband general use channel plan by designating forty-eight narrowband channels for low power use for on-scene communication. These clarifications are needed in order to promote efficient spectrum usage and flexibility.

3. No comments were filed in direct response to the FRFA.

4. The RFA directs agencies to provide a description of, and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (i) Is independently owned and operated; (ii) is not dominant in its field of operation; and (iii) satisfies any additional criteria established by the Small Business Administration (“SBA”). A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of 1992, there were approximately 275,801 small organizations. “Small governmental jurisdiction” generally means “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000.” As of 1992, there were approximately 85,006 such jurisdictions in the United States. This number includes 38,978 counties, cities, and towns; of these, 37,566, or ninety-six percent, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 81,600 (ninety-one percent) are small entities.

5. Public Safety Radio Pool Licensees. As a general matter, Public Safety Radio Pool licensees include police, fire, local government, forestry conservation, highway maintenance, and emergency medical services. Spectrum in the 700 MHz band for public safety services is governed by 47 U.S.C. 337; there are approximately 127,540 licensees within these services. Non-Federal governmental entities as well as private businesses are licensees for these services. All governmental entities with populations of less than 50,000 fall within the definition of a small entity. The rule changes adopted in this Third MO&O could affect public safety entities who wished to utilize frequencies in the low power pool for uses such as on-scene firefighting communications and various other short-range communications systems which would be developed for 700 MHz band equipment.

6. Radio and Television Equipment Manufacturers. We anticipate that at least six radio equipment manufacturers will be affected by our decisions in this proceeding. According to the SBA's regulations, a radio and television broadcasting and communications equipment manufacturer must have 750 or fewer employees in order to qualify as a small business concern. Census Bureau data indicate that there are 858 U.S. firms that manufacture radio and television broadcasting and communications equipment, and that 778 of these firms have fewer than 750 employees and would therefore be classified as small entities.

7. Television Stations. This proceeding will affect full service TV station licensees (Channels 60-69), TV translator facilities, and low power TV (“LPTV”) stations. The SBA defines a TV broadcasting station that has no more than $10.5 million in annual receipts as a small business. TV broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by TV to the public, except cable and other pay TV services. Included in this industry are commercial, religious, educational, and other TV stations. Also included are establishments primarily engaged in TV broadcasting and which produce taped TV program materials. Separate establishments primarily engaged in producing taped TV program materials are classified under another SIC number. There were 1,509 TV stations operating in the Nation in 1992. That number has remained fairly constant as indicated by the approximately 1,551 operating TV broadcasting stations in the Nation as of February 28, 1997. For 1992, the number of TV stations that produced less than $10.0 million in revenue was 1,155 establishments, or approximately 77 percent of the 1,509 establishments. There are currently 95 full service analog TV stations, either operating or with approved construction permits on channels 60-69.

8. In the DTV Proceeding, we adopted a Digital Television (“DTV”) Table, which provides only 15 allotments for digital television stations on channels 60-69 in the continental United States. There are seven DTV allotments in channels 60-69 outside the continental United States. Thus, the rules will affect approximately 117 TV stations; approximately 90 of those stations may be considered small businesses. These estimates may overstate the number of small entities since the revenue figures on which they are based do not include or aggregate revenues from non-TV affiliated companies. We recognize that the rules may also impact minority-owned and women-owned stations, some of which may be small entities. In 1995, minorities owned and controlled 37 (3.0 percent) of 1,221 commercial TV stations in the United States. According to the U.S. Bureau of the Census, in 1987 women owned and controlled 27 (1.9 percent) of 1,342 commercial and non-commercial TV stations in the United States.

9. There are currently 4,977 TV translator stations and 1,952 LPTV stations. Approximately 1,309 low power TV and TV translator stations are on channels 60-69 which could be affected by policies in this proceeding. The Commission does not collect financial information on any broadcast facility and the Department of Commerce does not collect financial information on these broadcast facilities. We will assume for present purposes, however, that most of these broadcast facilities, including LPTV stations, could be classified as small businesses. As indicated earlier, approximately 77 percent of TV stations are designated under this analysis as potentially small businesses.

10. The only compliance requirement that is newly imposed by this Third MO&O is that we now require applicants for channels which where once reserved and are now available for low power licensing to go through the regional planning committee (RPC) process, including frequency coordination. RPCs will be responsible for determining the most appropriate low power application(s) on these channels and the frequency coordinators will be responsible for providing appropriate interference protection.

11. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (ii) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (iii) the use of performance, rather than design, standards; and (iv) an exemption from coverage of the rule, or any part thereof, for small entities.

12. Channel Plans. We appropriately decided to modify the narrowband and wideband interoperability channeling plans to permit the use of efficient transmitter combiners for common antennas. This revision lowers costs for public safety entities. Thus, these rule changes will benefit all public safety entities, including small entities. On the other hand, denying these petitions was not a viable alternative because maintaining the channel plan adopted in the First R&O would have increased costs for public safety entities, including small entities, by precluding the use of combiners. Additionally, our decision grouping the reserve spectrum into four segments of 1.35 MHz each located between the narrowband and wideband segments offers improved flexibility to accommodate future requirements that are unforeseen at this time. These rule changes will have future benefits for all public safety entities, including small entities.

13. Low Power Channels. Our decision allocating channels nationwide for low power mobile operations offers improved flexibility for the public safety community to meet specialized, on-scene communication requirements. Thus, these rule changes will benefit all public safety entities, including small entities. Moreover, designating the twenty-four pairs as low power channels nationwide will lower costs for equipment manufacturers and public safety users, including small entities, as will our decision to exempt these low power devices from the interoperability capability, digital modulation, and trunking requirements. The regional planning and frequency coordination process that we apply to the “regional” channels and the licensing process that we apply to all of these channels are necessary to minimize interference. We minimized burdens by exempting the nationwide, itinerant channels from regional planning and frequency coordination. This exemption benefits all public safety entities including small entities, resulting in reduced costs and improved operational flexibility to meet on-scene communication requirements. We also note that about half of the new low power channels were previously general use channels and thus already subject to regional planning, frequency coordination, and licensing under the First R&O. Other alternatives were not changing the rule and/or requiring regional planning and frequency coordination for all of the low power channels. Our decision reflects a balance between the need to minimize interference and the need for operational flexibility.

14. By establishing this low power designation, we ease the economic burden, of funding communications systems in the new 700 MHz band, on public safety agencies, including small entities, that forego purchasing more expensive high power equipment when less expensive low-power equipment meets their short distance communications needs. We also ease the burden on equipment manufacturers, including small entities, because this low power designation provides flexibility to produce high-power equipment, low-power equipment, or both. Moreover, exempting this low power equipment from the interoperability capability requirement will quicken the type certification process for manufacturers of this low power equipment.

The Commission will send a copy of the Third MO&O, including the Third Supplemental Final Regulatory Flexibility Analysis, in a report to be sent to Congress pursuant to SBREFA. A copy of the Third MO&O including the Third Supplemental Final Regulatory Flexibility Analysis (or summaries thereof) will also be published in the Federal Register . In addition, the Commission will send a copy of the Third MO&O, including this Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the SBA.

As required by the Regulatory Flexibility Act (RFA), Initial Regulatory Flexibility Analysis (collectively referred to as “IRFAs”) were incorporated in the Notice of Proposed Rule Making (Public Safety NPRM) 61 FR 25185, May 20, 1996, the Second Notice of Proposed Rule Making (Second NPRM) and the Third Notice of Proposed Rulemaking (Third NPRM) in Docket 96-86. The Commission sought written public comments on the proposals in the Public Safety NPRM, Second NPRM, and Third NPRM, including comments on the IRFAs. No comments on the IRFAs were received. This Final Regulatory Flexibility Analysis (“FRFA”) conforms to the RFA.

15. In the Third R&O portion of this combined item, we address technical, designation and licensing issues for the spectrum that we reserved in the First R&O to be “subject to the Third NPRM”. In addition, we adopt technical criteria for 700 MHz band operations to protect satellite-based global navigation systems (“GNSS”) from harmful interference and establish measures to promote interoperability on public safety channels below 512 MHz. These are crucial developmental steps towards the flexible regulatory framework needed to meet vital current and future public safety communications needs.

16. Based on the comments submitted generally by small entities, the Commission found that the rules we proposed to adopt in this proceeding may have a significant impact on a substantial number of small businesses. Therefore, the IRFAs solicited comments on alternatives to our proposed rules that would minimize the impact on small entities consistent with the objectives of this proceeding. No comments were submitted directly in response to the IRFAs; however, as described in Section V, we have taken into account all general comments received which addressed the impact on small entities.

17. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (i) is independently owned and operated; (ii) is not dominant in its field of operation; and (iii) satisfies any additional criteria established by the SBA. A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” Nationwide, as of 1992, there were approximately 275,801 small organizations. “Small governmental jurisdiction” generally means “governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000.” As of 1992, there were approximately 85,006 such jurisdictions in the United States. This number includes 38,978 counties, cities, and towns; of these, 37,566, or ninety-six percent, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 81,600 (ninety-one percent) are small entities.

18. Public Safety Radio Pool Licensees. As a general matter, Public Safety Radio Pool licensees include police, fire, local government, forestry conservation, highway maintenance, and emergency medical services. Spectrum in the 700 MHz band for public safety services is governed by 47 U.S.C. 337; there are approximately 127,540 licensees within these services. Non-Federal governmental entities as well as private businesses are licensees for these services. All governmental entities with populations of less than 50,000 fall within the definition of a small entity. The rule changes adopted in this Third MO&O could affect public safety entities who wished to utilize frequencies in the low power pool for uses such as on-scene firefighting communications and various other short-range communications systems which would be developed for 700 MHz band equipment. As required by the Regulatory Flexibility Act (RFA), Initial Regulatory Flexibility Analysis (collectively referred to as “IRFAs”) were incorporated in the Public Safety Notice, the Second Notice and the Third Notice in Docket 96-86. The Commission sought written public comments on the proposals in the Public Safety NPRM, Second NPRM, and Third NPRM, including comments on the IRFAs. No comments on the IRFAs were received. This Final Regulatory Flexibility Analysis (“FRFA”) conforms to the RFA.

19. Radio and Television Equipment Manufacturers. We anticipate that at least six radio equipment manufacturers will be affected by our decisions in this proceeding. According to the SBA's regulations, a radio and television broadcasting and communications equipment manufacturer must have 750 or fewer employees in order to qualify as a small business concern. Census Bureau data indicate that there are 858 U.S. firms that manufacture radio and television broadcasting and communications equipment, and that 778 of these firms have fewer than 750 employees and would therefore be classified as small entities.

20. Television Stations. This proceeding will affect full service TV station licensees (Channels 60-69), TV translator facilities, and low power TV (LPTV) stations. The SBA defines a TV broadcasting station that has no more than $10.5 million in annual receipts as a small business. TV broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by TV to the public, except cable and other pay TV services. Included in this industry are commercial, religious, educational, and other TV stations. Also included are establishments primarily engaged in TV broadcasting and which produce taped TV program materials. Separate establishments primarily engaged in producing taped TV program materials are classified under another SIC number.

21. There were 1,509 TV stations operating in the Nation in 1992. That number has remained fairly constant as indicated by the approximately 1,551 operating TV broadcasting stations in the Nation as of February 28, 1997. For 1992, the number of TV stations that produced less than $10.0 million in revenue was 1,155 establishments, or approximately 77 percent of the 1,509 establishments. There are currently 95 full service analog TV stations, either operating or with approved construction permits on channels 60-69. In the DTV Proceeding, we adopted a Digital Television (“DTV”) Table which provides only 15 allotments for DTV stations on channels 60-69 in the continental United States. There are seven DTV allotments in channels 60-69 outside the continental United States. Thus, the rules will affect approximately 117 TV stations; approximately 90 of those stations may be considered small businesses. These estimates may overstate the number of small entities since the revenue figures on which they are based do not include or aggregate revenues from non-TV affiliated companies. We recognize that the rules may also impact minority-owned and women-owned stations, some of which may be small entities. In 1995, minorities owned and controlled 37 (3.0 percent) of 1,221 commercial TV stations in the United States. According to the U.S. Bureau of the Census, in 1987 women owned and controlled 27 (1.9 percent) of 1,342 commercial and non-commercial TV stations in the United States. There are currently 4,977 TV translator stations and 1,952 LPTV stations. Approximately 1,309 low power TV and TV translator stations are on channels 60-69 which could be affected by policies +in this proceeding. The Commission does not collect financial information of any broadcast facility and the Department of Commerce does not collect financial information on these broadcast facilities. We will assume for present purposes, however, that most of these broadcast facilities, including LPTV stations, could be classified as small businesses. As indicated earlier, approximately 77 percent of TV stations are designated under this analysis as potentially small businesses. Given this, LPTV and TV translator stations would not likely have revenues that exceed the SBA maximum to be designated as small businesses.

22. This Third R&O adopts some rules that will entail additional compliance requirements. These three additional requirements may have an effect on small entities. First, we adopt additional technical criteria for 700 MHz band operations. These new requirements are enacted in order to protect satellite-based global navigation systems from harmful interference. Although this requirement may result in increases in manufacturing costs, including for small manufacturing entities, and may result in higher equipment costs, including for small entities, this modification is essential due to safety concerns related to GNSS operations. Second, we establish measures to promote interoperability on public safety channels below 512 MHz. After January 1, 2005, applications for equipment certification will only be granted for mobile and portable transmitters operating on public safety frequencies in the 150-174 MHz and/or 450-470 MHz bands that are capable of operating on at least one nationwide public safety interoperability channel designated in the band(s) in which the equipment operates. Although this requirement may result in increases in manufacturing costs, including for small manufacturing entities, and may result in higher equipment costs, including for small entities, this modification is essential to improve interoperability capabilities in existing public safety bands for public safety entities, including small entities, that operate in these bands. Lastly, we also require applicants for interoperability channels designated in the 156-162 MHz band (in thirty-three inland VHF public coast areas (VPC)) to complete the frequency coordination process. This process requires applicants to pay fees to frequency coordinators. These fees are generally based on the number of sites, frequencies, and complexity of the coordination process. The adoption of these rules is crucial in order to minimize the potential for interference among the varied users of these channels.

23. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (i) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (ii) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (iii) the use of performance, rather than design, standards; and (iv) an exemption from coverage of the rule, or any part thereof, for small entities.

24. State License. We designate 2.4 MHz of the 700 MHz band for licensing directly to each state. The rules we adopt will preclude all non-state entities from being licensed for the designated state license frequencies. Most commenters agreed that licensing states for this amount of spectrum (for state agency use) is reasonable. We also include provisions to ensure that this spectrum will become available for “general use” if a given state either (i) declines to apply for a state license or (ii) fails to provide or be prepared to provide “substantial service” by certain benchmark dates. Additionally, we amend § 90.179 to allow states to share the use of the 2.4 MHz of spectrum with local and other public safety entities, which removes an impediment to small entities accessing this spectrum under sharing agreements with states. We considered a variety of alternative approaches for the use and licensing of the reserve spectrum. We declined to adopt an alternative “State Licensing” approach under which states—rather than regional planning committees—would manage state, local, and Federal use of all or most of the 8.8 MHz of spectrum reserved subject to the Third NPRM. While there were no comments specifically responding to the IRFAs, we considered numerous comments that raised the concern that licensing states for the entire amount would designate the spectrum in a manner deleterious to small entities. Accordingly, we designated an appropriate amount of spectrum for state use instead of designating all of the reserve spectrum to manage. We also believe our decision to allocate the same 2.4 MHz nationwide will benefit small entities because they will not face the possibility of interference on a variety of frequencies from their parent state as well as from adjoining states.

25. GNSS Protection Criteria. The technical solutions we adopt to protect certain global navigation satellite systems (“GNSS”) will impact all manufacturers of equipment that operates in the 700 MHz public safety band. This includes even small manufacturing entities. However, as discussed in the Third Report and Order, these limits are necessary to protect GNSS operations, including Global Orbiting Navigation Satellite Systems and Global Positioning System in accordance with international requirements. Moreover, Congress directed the Commission to “protect the integrity of the [GPS] frequency spectrum against interference and disruption.” Nevertheless, we have attempted to minimize, to the extent possible, the effect of these additional technical requirements.

26. Interoperability below 512 MHz. We establish measures to promote interoperability on public safety channels below 512 MHz by designating specific channels in each band for nationwide interoperability purposes. We did this because the record demonstrated the need for improved interoperability capabilities below 512 MHz. This designation requires that existing licensees on these channels operate on a secondary basis to interoperability communication. In order to minimize the impact of these rules, we “grandfathered” these licensees on a secondary basis only to interoperability communication rather than ordering them to vacate the channels or use them exclusively for interoperability purposes. We also provide these licensees a transition period, until January 1, 2005. We selected the “least licensed channels” in each band to minimize the economic impact arising from the need to designate interoperability channels in these existing public safety bands. Additionally, after January 1, 2005, applications for equipment certification will only be granted for mobile and portable transmitters operating on public safety frequencies in these bands that are capable of operating on at least one nationwide public safety interoperability channel designated in the band(s) in which the equipment operates. We provide a similar transition period for equipment manufacturers in order to minimize the impact of these rules. This transition period will allow small manufacturing entities, in particular, an opportunity to plan for this new requirement. The alternative of not adopting this interoperability capability requirement was not acceptable because of the need to improve public safety interoperability below 512 MHz. Lastly, we also require applicants for interoperability channels designated in the 156-162 MHz band (in thirty-three inland VHF public coast areas (VPC)) to complete the frequency coordination and licensing process. We briefly considered the alternative of not requiring frequency coordination for these channels. This was unacceptable because of the potential for interference among the varied users of these channels.

27. As discussed in the Third R&O, we note that one reason for establishing measures to promote interoperability below 512 MHz is to assist public safety entities, including small entities, that cannot afford to or do not want to purchase equipment in the new 700 MHz public safety band, wherein 2.6 megahertz of spectrum is designated for nationwide interoperability. We also attempted to minimize burdens on public safety entities, including small entities, by not requiring that existing public safety licensees apply-for and be licensed to operate mobile and portable transmitters on the nationwide interoperability channels in the existing public safety bands below 470 MHz.

The Commission will send a copy of the Third R&O, including this Final Regulatory Flexibility Analysis, in a report to be sent to Congress pursuant to SBREFA. A copy of the Third R&O including the Final Regulatory Flexibility Analysis (or summaries thereof) will also be published in the Federal Register . In addition, the Commission will send a copy of the Third R&O, including the Final Regulatory Flexibility Analysis to the Chief Counsel for Advocacy of the SBA.

1. Authority for issuance of this Third Memorandum Opinion and Order and Third Report and Order is contained in sections 4(i), 302, 303(f) and (r), 332, and 337 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 302, 303(f) and (r), 332, 337.

2. Pursuant to 4(i), 302, 303(f) and (r), 332, and 337 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 302, 303(f) and (r), 332, 337 that part 90 of the Commission's Rules, 47 CFR part 90, is amended as set forth in the rule changes, effective December 7, 2000 of this Third MO&O and Third R&O

3. The Commission's Consumer Information Bureau, Reference Information Center, shall send a copy of this Third MO&O and Third R&O, including the Supplemental Final and Final Regulatory Flexibility Analyses, to the Chief Counsel for Advocacy of the Small Business Administration.

The following change to current lingcod management measures for waters off California was recommended by the Pacific Fishery Management Council (Council,) in consultation with the State of California, at its September 11-15, 2000, meeting in Sacramento, CA, and by the California Fish and Game Commission (Commission) at its October 19-20, 2000, meeting in San Diego, CA.

On October 6, 2000, NMFS published a document in the Federal Register announcing inseason changes to trip limits for Pacific coast groundfish (65 FR 59752). The preamble to that document discussed the possibility of further inseason actions to close certain fisheries off California, pending decisions made in the Commission’s October meeting.

At its October 19-20, 2000, meeting, the Commission discussed whether fishery closures were necessary for the months of November and December to protect overfished and depleted species (bocaccio, lingcod, canary rockfish, cowcod). The best available information used by the Commission indicated that the coastwide lingcod optimum yield (OY) would be exceeded by October 31, 2000. Since the weather in central and southern California often remains conducive to recreational fishing throughout the year, the Commission decided to close the recreational lingcod fishery within State waters (0-3 nm offshore) for November and December in order to prevent further landings of lingcod. The Commission also asked NMFS to set complementary regulations for Federal waters (3-200 nm offshore).

At its September 2000 meeting, the Council had asked NMFS to coordinate with the State of California to implement Federal management measures consistent with those of the State. Consistent with the Council’s request and to ensure that the lingcod fishery conforms with the lingcod overfished species rebuilding plan, this action implements the Commission’s recommendations on a lingcod fishery closure within Federal waters off California. Previously, the Council had asked NMFS to close the recreational fishery for lingcod off Washington State. Therefore, all commercial fisheries for lingcod are closed in November and December. Oregon’s recreational fishery for lingcod remains open, but landings are expected to be minimal due to rough winter weather constraining fishing opportunities.

For the reasons stated here, NMFS concurs with the Council’s recommendations and announces the following changes to the 2000 annual management measures (65 FR 221, January 4, 2000, as amended at 65 FR 4169, January 26, 2000; 65 FR 17805, April 5, 2000; 65 FR 25881, May 4, 2000; 65 FR 31283, May 17, 2000; 65 FR 33423, May 23, 2000; and 65 FR 45308, July 21, 2000) as follows:

In Section IV, under D. Recreational Fishery, paragraph (1) (b) is revised to read as follows: