Existing airworthiness directive AD 2001-05-05, amendment 39-12141 (66 FR 13424), applicable to certain Boeing Model 747 series airplanes, was published in the Federal Register on March 6, 2001 as a final rule with request for comments. This AD requires repetitive detailed visual inspections to find discrepancies of the installation of the midspar fuse pins of the inboard and outboard struts, and follow-on actions, if necessary. This AD also provides for an optional terminating modification for the repetitive inspections. The rule became effective on March 21, 2001.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 2001-05-05 was published in the Federal Register on April 26, 2001 (66 FR 20950). The action proposed to continue to require repetitive detailed visual inspections to find discrepancies of the installation of the midspar fuse pins of the inboard and outboard struts, and follow-on actions, if necessary. The action also proposed to mandate accomplishment of the previously optional terminating modification.

Since the issuance of the NPRM, the FAA has reviewed and approved Boeing Service Bulletin 747-54A2206, Revision 2, dated May 17, 2001. Revision 2 describes procedures for use of an alternate replacement nut, in addition to the replacement nut specified in Revision 1, dated February 22, 2001.

Interested persons have been afforded an opportunity to participate in the making of this rule. The FAA received comments regarding both AD 2001-05-05 and the proposed rule having Docket Number 2001-NM-02-AD. These comments and our response are presented below.

One commenter requests that the FAA provide for use of an alternate replacement for the primary retention nut having part number (P/N) BACN10JC24CD, which is listed in Boeing Service Bulletin 747-54A2206, Revision 1, dated February 22, 2001. The commenter states that the replacement nuts specified in AD 2001-05-05 are not readily available from the manufacturer.

The FAA concurs, and has changed this final rule accordingly by approving Boeing Service Bulletin 747-54A2206, Revision 2, dated May 17, 2001, which provides for use of an alternate replacement nut.

Another commenter asks that the repetitive inspection interval specified in paragraph (a) be increased from 8,000 flight hours to 8,500 flight hours to facilitate inspections at the C-check.

The FAA does not concur because the specified repetitive interval is based on the recommendation of the manufacturer and on the C-check schedule of the majority of operators. However, the FAA notes that the commenter may apply for an alternative method of compliance, in accordance with paragraph (c)(1) of this AD.

One commenter objects to the proposal to mandate accomplishment of the previously optional terminating action. The commenter cites two reasons for its objection: (1) It has found no instances of backed-off primary retention nuts for the midspar fuse pins on the inboard and the outboard strut, and (2) there are two fuse pin retention devices in place, which are designed to prevent midspar fuse pin migration.

The FAA does not concur that the previously optional terminating action should remain optional. The unsafe condition has resulted in at least three incidents of the primary retention nut on the midspar fitting fuse pin backing off. In one of these incidents, the primary retention nut contacted the secondary retention washer. This action will require that the terminating action be performed within 6 years. If the repetitive inspections reveal a discrepancy, the terminating action must be performed sooner. Therefore, no change to the final rule has been made in response to this comment.

The manufacturer requests that the wording in paragraph (a)(1) of the proposed AD be changed from “For airplanes modified per the production equivalent of one of the AD's listed in Table 1 of this AD:” to “For airplanes having the production equivalent of one of the AD's listed in Table I of this AD:” and that AD 99-10-10 be removed from Table 1.

The FAA agrees that these changes will provide clarification and has changed paragraph (a)(1) of this AD accordingly. In line with this change, the FAA has also revised the applicability of this AD to specify this clarification.

One commenter requests that the FAA revise the Cost Impact paragraph to reflect that at least 12 work-hours may be necessary to perform the required action rather than the 4 work-hours cited in the proposed rule.

The FAA does not concur. The cost analysis of the AD is limited to the cost of actions actually required by the rule. It does not consider the costs of “on condition” actions, such as replacing a nut, if replacement is needed during a required inspection. Such “on-condition” actions would be required to be accomplished, regardless of AD direction, in order to correct an unsafe condition identified in an airplane and to ensure operation of that airplane in an airworthy condition, as required by the Federal Aviation Regulations. In addition, the FAA recognizes that, in accomplishing the requirements of any AD, operators may incur “incidental” costs in addition to the “direct” costs that are reflected in the cost analysis presented in the AD preamble. However, the cost analysis in AD rulemaking actions typically does not include incidental costs, such as the time required to gain access and close up; planning time; or time necessitated by other administrative requirements. No change to the cost impact is necessary in the final rule.

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described above. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are approximately 1,111 Boeing Model 747 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 256 airplanes of U.S. registry will be affected by this AD.

The inspections that are currently required by AD 2001-05-05 take approximately 4 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the currently required inspections on U.S. operators is estimated to be $61,440, or $240 per airplane, per inspection cycle.

The terminating modification that is required by this new AD will take approximately 4 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Required parts will cost approximately $1,000 per airplane. Based on these figures, the cost impact of the modification required by this AD on U.S. will be $317,440, or $1,240 per airplane.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would 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.

The Departamento de Aviacao Civil (DEAC), which is the airworthiness authority for Brazil, recently notified FAA that an unsafe condition may exist on certain Aeromot Models AMT-100 and AMT-200 powered sailplanes. The DEAC reports an instance where the elevator control jammed on one of the affected powered sailplanes. This occurred when the main landing gear lever interfered with the nut that attaches the rod end of the elevator control rod.

Bending or warping in the main landing gear lever, if not detected and corrected before it interferes with the elevator control rod, could result in the elevator control becoming jammed with consequent loss of control of the powered sailplane.

Aeromot has issued Service Bulletin (S.B.) No. 200-27-078, Issue Date: September 18, 2001.

The service bulletin includes procedures for inspecting the main landing gear lever and elevator control rod for interference, warping, or incorrect gaps. It also specifies reconfiguring or replacing discrepant parts.

The DEAC classified this service bulletin as mandatory and issued Brazilian Emergency Airworthiness Directive (EAD) 2001-10-01, dated October 9, 2001, in order to ensure the continued airworthiness of these powered sailplanes in Brazil.

These powered sailplane 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 DEAC has kept us informed of the situation described above.

The FAA has examined the findings of the DEAC; reviewed all available information, including the service information referenced above; and determined that:

This AD requires you to inspect (one-time) the main landing gear lever and elevator control rod for interference, warping, or incorrect gaps; and requires you to reconfigure or replace discrepant parts. This AD also requires you to report to the FAA any instances of interference, warping, or incorrect gaps.

We will use the information from the reports to determine whether additional rulemaking action is necessary ( e.g., repetitive inspections).

In preparation of this rule, we contacted type clubs and aircraft operators to obtain technical information and information on operational and economic impacts. We did not receive any information through these contacts. If received, we would have included, in the rulemaking docket, a discussion of any information that may have influenced this action.

Because the unsafe condition described in this document could result in the elevator control becoming jammed with consequent loss of control of the powered sailplane, we find that notice and opportunity for public prior comment are impracticable. Therefore, good cause exists for making this amendment effective in less than 30 days.

Although this action is in the form of a final rule and was not preceded by notice and opportunity for public comment, FAA invites your comments on the rule. You may submit whatever written data, views, or arguments you choose. You need to include the rule's docket number and submit your comments to the address specified under the caption ADDRESSES. We will consider all comments received on or before the closing date specified above. We may amend this rule in light of comments received. Factual information that supports your ideas and suggestions is extremely helpful in evaluating the effectiveness of this AD action and determining whether we need to take additional rulemaking action.

We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the rule that might suggest a need to modify the rule. You may view all comments we receive before and after the closing date of the rule in the Rules Docket. We will file a report in the Rules Docket that summarizes each FAA contact with the public that concerns the substantive parts of this AD.

If you want us to acknowledge the receipt of your comments, you must include a self-addressed, stamped postcard. On the postcard, write “Comments to Docket No. 2001-CE-40-AD.” We will date stamp and mail the postcard back to you.

These regulations 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, FAA has determined that this final rule does not have federalism implications under Executive Order 13132.

We have determined that this regulation is an emergency regulation that must be issued immediately to correct an unsafe condition in aircraft, and 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 (otherwise, an evaluation is not required). A copy of it, if filed, may be obtained from the Rules Docket.

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 Boeing 747 series airplanes was published in the Federal Register on May 14, 2001 (66 FR 24304). That action proposed to require an inspection of the flap drive transmission of the trailing edge flaps at positions 2 and 7 to determine if a wound-spring torque brake is installed; and corrective action, if necessary.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received. The Air Transport Association of America, on behalf of its members, states that two commenters agree with the intent of the proposal, but recommend certain changes. These recommendations and additional requests are described in the following paragraphs.

A number of commenters request an extension to the proposed compliance time of 6,000 flight hours in paragraph (a) of the proposed AD. These comments and the rationale for requesting such an extension are described in the following paragraphs.

• One commenter states that 6,000 flight hours would fall short of its average C-check, which is usually at 7,500 flight hours. A compliance time of 10,000 flight hours would be more appropriate.

• One commenter states that 6,000 flight hours would require accomplishment of the work at another repair facility, which would put the airplane out of service for at least 1 month. In addition, modification of its fleet of 12 affected airplanes is estimated at 2 to 3 years. In light of this, the commenter recommends a compliance time of 3 years.

• Two commenters recommend that the requirements of the proposed AD be accomplished at a D-check interval. Both commenters are concerned about the availability of spare parts within the proposed compliance time.

The first commenter recommends a compliance time of between 5 and 8 years (25,000 to 38,000 flight hours) for several reasons. Over a 30-year period, none of its Model 747 series airplanes have experienced the unsafe condition cited in the proposed AD (i.e., damage to the flap system, adjacent systems, or structural components; or excessive skew of the trailing edge flap). It is not aware of any incidents related to such a condition anywhere in the world. In light of this, it considers that such a compliance time is unwarranted and unrealistic. In addition, the manufacturer recommended that the proposed actions be accomplished at the earliest convenient maintenance opportunity, which is more realistic.

The second commenter states that a large number of components and special maintenance schedules would be required to accomplish the proposed actions within 6,000 flight hours. The commenter recommends that the FAA consider how the costs of accomplishing the required actions would affect operators worldwide, and suggests a compliance time of 5 years.

• One commenter contends that the turnaround time required to accomplish the proposed inspection and corrective actions would exceed 6,000 flight hours. In addition, the affected airplanes would need to be transported to a specific repair station because of the test equipment available at that facility. The commenter recommends extending the compliance time to 10,000 flight hours so that the proposed actions could be accomplished during regular maintenance schedules.

• One commenter suggests an 18-month compliance time instead of 6,000 flight hours. The commenter notes that the proposed work could be best accomplished during a C-check maintenance schedule, which coincides with an 18-month compliance time. In addition, all of its Model 747 series airplanes are on an 18-month flight cycle. During that period, a Model 747-200 series airplane accumulates about 6,000 flight hours; however, a Model 747-400 series airplane can accumulate up to 7,000 flight hours. Because flaps typically are used only during climb and descent, flap transmissions are more dependent on flight cycles than flight hours. Therefore, 18 months would provide an equivalent level of safety because actual use of the flap transmission, by cycles, is less on Model 747-400 series airplanes than on Model 747-200 series airplanes. For these reasons, the commenter suggests that the compliance time be revised to “Within 6,000 flight hours or 18 months after the effective date of this AD, whichever is later.”

• One commenter, the manufacturer, states that 6,000 flight hours would be unduly restrictive, with an unjustified impact on airline operations. It suggests scheduling the rework during a D-check, and recommends extending the compliance time to 3 years or 15,000 flight hours, whichever occurs later. The commenter also requests an extension of the proposed compliance time so that it could buy “seed” transmissions that will be required by the operators for their replacement program. This extension would avoid creating an undue burden.

The FAA partially concurs with the commenters' requests, and has determined that the compliance time can be extended somewhat. We point out that the “Differences” paragraph in the proposed AD is not included in the final rule, so no change to that paragraph is necessary. However, we have extended the compliance time somewhat in paragraph (a) of the final rule.

Our intent in developing an appropriate compliance time for the inspections and corrective actions was that the proposed actions be conducted during a regularly scheduled maintenance visit for the majority of the affected fleet. We also intended that the proposed actions be accomplished when the airplanes are located at a facility where special equipment and trained personnel are readily available. Based on the information provided by the commenters, we now recognize that a compliance time of within 18 months or 7,500 flight hours after the effective date of this AD, whichever occurs later, corresponds more closely to the interval that represents most of the affected operators' normal maintenance schedules. This extension will allow operators to schedule the required actions during a convenient maintenance opportunity, and will not adversely affect safety. Paragraph (a) of the final rule is revised accordingly.

One commenter requests revising the compliance time in paragraph (a)(ii), which is cited as (a)(2)(ii) in the proposed AD. The commenter considers that, given the level of the hazard posed to the fleet by the torque brake discrepancy, requiring replacement of the torque brake “before further flight” is not warranted. Instead, the proposed AD should allow operators to accomplish the corrective action at a convenient maintenance opportunity. The FAA infers that the commenter is requesting that we revise paragraph (a)(2)(ii) of this AD to require the corrective action within 18 months or 7,500 flight hours after the effective date of this AD, instead of “before further flight.”

The FAA concurs with the commenter's request. The extended compliance time in paragraph (a) of this AD should allow sufficient time for operators to accomplish the rework or replacement action specified in paragraph (a)(2)(ii) at a convenient maintenance opportunity. However, in the final rule we have revised paragraph (a)(2)(ii) to require such action “within the compliance time required by paragraph (a) of this AD,” instead of “before further flight.”

One commenter requests a revision to the “Explanation of Relevant Service Information” paragraph in the proposed AD. The AD should clarify that operators have the option of either replacing the transmission with a new, improved transmission or reworking the existing transmission by replacing the torque brake with a new or reworked torque brake.

The FAA partially concurs with the commenter's request. Although the “Explanation of Relevant Service Information” paragraph is not included in the final rule, we agree that the replacement and rework action should be revised. In response, we have revised paragraph (a)(2)(ii) in the final rule to require operators to either replace the transmission with a new, improved transmission or rework the existing transmission by replacing the torque brake with a new or reworked torque brake per the service bulletin.

One commenter states that “an Information Notice (IN) made available for 747-27-2374 (IN 01)” was issued June 1, 2000, to clarify that Model 747SP series airplanes are excluded from the effectivity. The notice lists 10 Model 747SP series airplanes by line number and variable number. In addition, those same airplanes are excluded from the effectivity of Boeing Service Bulletin 747-27-2374. The FAA infers that the commenter is suggesting that we revise the applicability of the proposed AD to reflect the exclusion of these airplanes.

The FAA concurs that the applicability of this AD should be changed. We agree that Model 747SP series airplanes should be excluded from the applicability of this AD, and have determined that further clarification of the applicability is necessary. We point out that the applicability of the proposed AD references Boeing Service Bulletin 747-27-2374, dated November 18, 1999, as the appropriate source of service information for determining the affected Model 747 series airplanes. We have revised the applicability of the final rule to include line numbers 0001 through 1207, and to exclude the airplane having line number 1174 and Model 747SP series airplanes.

One commenter requests that all references to “wound-spring” torque brakes be removed from the proposed AD. That type of brake is not used in the rework or replacement actions required by the proposed AD.

The FAA concurs. We have removed all references to “wound-spring” torque brakes in the final rule, and have clarified that the “Belleville” spring design is the discrepant torque brake.

One commenter states that the Boeing and Moog service bulletins list different part numbers for the flap drive transmission and torque brake installed on Model 747 series airplanes. Any such discrepancies should be resolved before the final rule is issued.

The FAA concurs that any parts discrepancies should be resolved before issuance of the final rule. However, we point out that the parts references included in the Boeing and Moog service bulletins are correct, and that the incorrect parts references were included in the proposed AD. After contacting Boeing, we were informed that it had contacted United to explain that the discrepant torque brake is a “Belleville” spring design, not a “wound-spring” design as cited in the proposed AD. This clarification resolved the commenter's confusion. We have removed all references to the wound-spring torque brake from the final rule, and clarified that the Belleville spring design is the discrepant torque brake.

One commenter states that only 1 hour for the inspection was estimated in the cost impact information in the proposed NPRM to determine whether the affected transmissions are installed on an airplane. The cost of removal, overhaul, and reinstallation of the transmission is not included, and the service bulletin estimates 50 hours per airplane for the associated costs. The FAA infers that the commenter considers that the cost estimate in the proposed AD is too low.

The FAA partially concurs with the commenter. However, we do not agree with the cost estimate of 50 hours specified by the service bulletin for the removal, overhaul, and reinstallation of transmissions. We point out that the estimate in the service bulletin included the action required to replace or rework the torque brake in positions 2, 4, 5, and 7. However, the proposed AD only requires rework or replacement action for positions 2 and 7. As indicated in the preamble of this AD, the economic analysis is limited only to the cost of actions actually required by the rule and does not include the costs of on-condition actions, such as the rework or replacement action specified in paragraph (a)(2)(ii) of the NPRM. However, in this case we have included the on-condition action. These costs include a total of 32 hours per airplane for accomplishing the replacement or rework action for transmission positions 2 and 7 (10 hours for the replacement and 6 hours for the rework). We also have included an estimate of $12,942 for parts. The final rule is revised accordingly.

The Civil Aviation Authority (CAA), which is the airworthiness authority of the United Kingdom, requests reducing the compliance time for the inspection and corrective action if a discrepant part is found installed on the airplane. The CAA considers that the proposed 6,000 flight hours for the inspection is excessively long. It recommends full accomplishment of the inspection and corrective action within 3,000 flight hours, which is approximately 1 year for most operators. In addition, operators should have the discretion of accomplishing corrective action within the recommended total timeframe of 3,000 flight hours.

The FAA does not concur with the need for a shorter compliance time, although operators are always permitted to accomplish the requirements of an AD at a time earlier than that specified as the compliance time. As described earlier, we have determined that it is necessary to somewhat extend the compliance time in paragraphs (a) and (a)(2)(ii) of the final rule to require accomplishment of the actions within 18 months or 7,500 flight hours. We consider such an extension appropriate in consideration of the safety implications, practical aspects of accomplishing the work during regular maintenance periods, and availability of required parts. Therefore, a reduction to the compliance time in paragraph (a) of the final rule would not be warranted.

One commenter states that, in paragraph (a) of the proposed AD, paragraphs (a)(3) and (a)(4) do not exist. The FAA concurs and has deleted those two paragraph references in paragraph (a) of the final rule.

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes previously described. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are approximately 1,181 Model 747 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 263 airplanes of U.S. registry will be affected by this AD.

It will take approximately 1 work hour per airplane to accomplish the inspection, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the required inspection on U.S. operators is estimated to be $15,780, or $60 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 would 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.

If an operator is required to accomplish the replacement or rework action, it will take approximately 32 work hours per airplane to accomplish such action, at an average labor rate of $60 per work hour. Required parts will cost approximately $12,942 per airplane. Based on these figures, the cost impact of the required replacement or rework is estimated to be $14,862 per airplane.

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 airworthiness directive (AD) that is applicable to certain Boeing Model 757 series airplanes was published in the Federal Register on May 15, 2001 (66 FR 26819). That action proposed to require an inspection to determine the serial numbers of geared rotary actuators (GRA) for the leading edge slats, and replacement of certain actuators with new or reworked actuators.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received.

One commenter supports the proposed rule.

Two commenters request that, in lieu of the inspection of the GRAs in paragraph (a) of the proposed AD, we allow a review of the maintenance records to determine the part number series and serial number for each installed GRA for the leading edge slats. One of the commenters states that if an operator tracks installed parts by serial number, that operator ought to be allowed to use its records to demonstrate compliance.

We concur and have revised paragraph (a) to allow a review of the airplane's maintenance records as an acceptable means of determining the part number series and serial number for each installed GRA for the leading edge slats.

One commenter requests that the FAA extend the compliance time for the proposed requirements to 36 months for all affected airplanes. The commenter states that the parts manufacturer will be unable to provide an adequate number of parts to allow affected operators to meet the proposed compliance time of 18 months for replacement of GRAs on airplanes without an enhanced slat skew or loss detection system.

We concur to extend the compliance time, but not necessarily for the reason stated by the commenter. We find that the 18-month compliance time for the required actions is necessary only for GRAs on slat number 2 outboard, slat number 9 outboard, slat number 4 inboard, and slat number 7 inboard on Boeing 757-200 series airplanes with line numbers 1 through 803, on which an enhanced slat skew or loss detection system has NOT been installed according to Boeing Service Bulletin 757-27-0126, dated May 11, 2000, or Boeing Production Revision Record 54755. For other slats on those airplanes, we find a 36-month compliance time (which is the compliance time for airplanes on which an enhanced slat skew or loss detection system has been installed) to be adequate. We have revised paragraphs (a)(1), (a)(2), (c)(1), and (c)(2) of this AD accordingly. This change to this AD will limit the number of replacement parts that will be needed within the 18-month compliance time, thus resolving the commenter's concern.

One commenter requests that we revise paragraph (b) of the proposed AD to clarify that no further action is required by this AD for any subject GRA that has been reworked and marked with “SB27-21” on the modification plate. The same commenter asks that we revise paragraph (c) of the proposed AD to state that further action is required for any subject part number that has NOT been previously reworked and marked with “SB27-21” on the modification plate. The commenter states that the wording of paragraphs (b) and (c) of the proposed AD suggest that GRAs with a part number series and serial number listed under Section 1.A. of Hamilton Sundstrand Service Bulletins 5006397/755299-27-21 or 5006398/755300-27-21, both dated January 24, 2000, cannot be installed on an airplane whether they have been reworked or not.

Similarly, several other commenters request that we revise paragraph (d), the “Spares” paragraph, of the proposed AD, to allow use of affected GRAs, as long as the GRAs have a modification plate installed. These commenters note that the part number series and serial number of the parts will not be changed when they are reworked, but a modification plate will be installed on the reworked parts.

We agree that some clarification of parts affected by this AD is necessary. We have confirmed with the parts supplier that, when the parts are reworked, the part number series and serial number are not necessarily changed, but the dash number for the service bulletin associated with the rework is stamped on the modification plate, which is installed on the part to the left of the data plate. In this case, the modification plate will be stamped with “-21,” if the part has been reworked per Hamilton Sundstrand Service Bulletins 5006397/755299-27-21 or 5006398/755300-27-21. Based on this information and the requests of the commenters, we have made the following changes to this final rule:

• Paragraph (b) of this AD states that no further action is required by this AD if no GRA has a part number series and serial number listed under Section 1.A. of the Hamilton Sundstrand service bulletins, or if GRAs with a part number series and serial number listed under Section 1.A. of the referenced service bulletins have been reworked previously and the modification plates are marked with “-21.”

• Paragraph (c) of this AD identifies parts subject to the actions in that paragraph as any GRA with a part number series and serial number listed under Section 1.A. of the referenced service bulletins that does not have a modification plate marked with “-21.”

• Paragraph (d) of this AD states that no one may install a GRA that has a part number series and serial number listed under Section 1.A. of Hamilton Sundstrand Service Bulletins 5006397/755299-27-21 or 5006398/755300-27-21, on any airplane, unless the part has been reworked and the modification plate has been marked with “-21.”

One commenter requests that the FAA revise the section in the preamble of the proposed rule titled “Explanation of Applicability.” The commenter asks that we clarify that paragraph (d) of the proposed AD prohibits installation of NON-REWORKED affected parts after the effective date of this AD.

We concur with the intent of the commenter's request. However, the section to which the commenter refers is not restated in this final rule, so no change is necessary in this regard.

One commenter states that it projects that a total of 90 work hours will be necessary to accomplish the proposed requirements, including 20 work hours for the inspection, and 40 hours for replacement of the GRAs. The commenter also provides a summary of its costs associated with the proposed rule, based on actual direct costs associated with replacing all GRAs. Its estimates include time for testing and inspection of the installation of GRAs.

The FAA does not concur that any change to the proposed rule is necessary in this regard. As stated in the proposed rule, the cost impact information in AD rulemaking actions typically includes only the “direct” costs of the specific actions required by that AD. The number of work hours necessary to accomplish the required actions, specified in the cost impact information as 20 work hours for the inspection, and 30 work hours for replacement of the GRAs, if necessary, was provided to the FAA by the manufacturer based on the best data available to date. The FAA recognizes that, in accomplishing the requirements of any AD, operators may incur “incidental” costs in addition to the “direct” costs. The cost analysis in AD rulemaking actions, however, typically does not include incidental costs, such as the time required to gain access and close up, planning time, or time necessitated by other administrative actions. Because incidental costs may vary significantly from operator to operator, they are almost impossible to calculate.

The applicability statement of the proposed AD included “Model 757 series airplanes with a date of manufacture that is on or before the effective date of this AD.” However, since the issuance of the proposed AD, we have determined that such an applicability may not ensure that a part subject to this AD is not installed in the future as a replacement part on airplanes manufactured after the effective date of this AD. Therefore, the applicability statement in this final rule has been revised to “All Model 757 series airplanes.” Because all Model 757 airplanes that are currently operating were included in the applicability of the proposed AD, we find that this change will not impose an additional burden on any operator and does not necessitate providing an additional opportunity for public comment.

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes previously described. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

There are approximately 950 Model 757 series airplanes of the affected design in the worldwide fleet. The FAA estimates that 606 airplanes of U.S. registry will be affected by this AD, that it will take approximately 20 work hours per airplane to accomplish the required inspection, and that the average labor rate is $60 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $727,200, or $1,200 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 would 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.

Should an operator be required to accomplish the replacement of all GRAs on an airplane, it will take approximately 30 work hours per airplane (1.5 work hours per actuator), at an average labor rate of $60 per work hour. Required parts may be provided by the parts manufacturer at no cost to the operator. Based on these figures, the cost impact of the replacement is estimated to be up to $1,800 per airplane.

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 20, 2001, the FAA issued AD 2001-17-28, amendment 39-12419 (66 FR 45579, August 29, 2001), applicable to all Boeing Model 767 series airplanes, to require a one-time inspection to detect abrasion damage and installation discrepancies of the wire bundles located below the P37 panel, corrective action if necessary, relocating the wire support standoff, and installing protective sleeving over the wire bundles. The actions required by that AD are intended to detect and correct such damage and other discrepancies, which could result in arcing to structure and consequent fire or loss of function of affected systems.

AD 2001-17-28 cited the original versions of Boeing Alert Service Bulletins 767-24A0134 and 767-24A0135 as the appropriate sources of service information for accomplishment of the requirements. Since that AD was issued, Boeing has issued Revision 1, dated October 18, 2001, of both alert service bulletins. Revision 1 clarifies certain accomplishment instructions and specifies optional sleeving material. Revision 1 also revises the effectivity to add “Group 2” airplanes, which comprise airplanes on which the sleeving installed in production may have been an incorrect type or incorrectly installed. Revision 1 includes different actions for Group 2 airplanes to address the discrepant sleeving installation.

Since the issuance of AD 2001-17-28, the FAA has become aware of certain requirements that were inadvertently included in that AD.

The FAA has determined that the 90-day compliance time required by AD 2001-17-28 is sufficient for operators to accomplish the inspection and repair any damage found, but insufficient to also relocate the wire support standoff and install protective sleeving over the wire bundles. The FAA has revised the AD to remove the relocation and installation actions.

In addition, the FAA has determined that, because Group 2 airplanes are newly manufactured, the unsafe condition does not indicate the need for the immediate accomplishment of the actions specified for those airplanes in the alert service bulletins; i.e., delaying their accomplishment would not adversely affect safety. The FAA has therefore determined that, if the actions are necessary to be accomplished on Group 2 airplanes, a notice of proposed rulemaking would be proper because notice and the opportunity for public comment would be practicable.

The FAA is considering issuing a notice of proposed rulemaking that would add requirements to relocate the wire support standoff and install protective sleeving over the wire bundles, and revise the applicability to add Group 2 airplanes to accomplish additional actions in the event of discrepant sleeving installation.

After AD 2001-17-28 was issued, the FAA received a comment regarding the routing of the bundle under the blanket. According to the AD, such routing “violates wire bundle installation and routing requirements.” The commenter suggests that, if the violation refers to Boeing's routing requirements, the unsafe condition would result not from a design error but rather a production quality problem. In that event, the commenter considers that other aircraft types might be affected, and questions whether the FAA has investigated this possibility.

The FAA has determined that the cause of the discrepant wiring installation is unknown; the routing of the wire bundle under an insulation blanket is isolated to the incident airplane. Its operator reports that all Model 767 series airplanes remaining in the fleet (approximately 100) have been inspected. The results of those inspections revealed other installation discrepancies, but no wire bundle found under an insulation blanket in another airplane. Boeing specifies that wire bundles be installed inboard of (over) the insulation blankets; i.e., insulation blankets are installed before wire bundles. The FAA has concluded that the wire bundle in the incident airplane had been covered by the blanket inadvertently during in-service maintenance.

Since an unsafe condition has been identified that is likely to exist or develop on other airplanes of this same type design, this amendment revises AD 2001-17-28 to continue to require a one-time detailed visual inspection to detect abrasion damage and installation discrepancies of the wire bundles located below the P37 panel, and corrective action if necessary. This amendment revises AD 2001-17-28 to remove the requirements to relocate the wire support standoff and install protective sleeving over the wire bundles. This amendment also revises the applicability to remove certain airplanes.

This is considered to be interim action. The FAA is considering future rulemaking to add requirements to relocate the wire support standoff and install protective sleeving over the wire bundles. The planned compliance time for these actions is sufficiently long so that notice and opportunity for prior public comment will be practicable. In addition, the FAA may revise the applicability to include Group 2 airplanes.

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 2001-NM-258-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 Saab Model SAAB SF340A and SAAB 340B series airplanes was published in the Federal Register on August 17, 2001 (66 FR 43130). That action proposed to require a one-time review of records to determine whether an airplane has been repainted since its delivery from the factory; and a one-time inspection to detect damage associated with improper preparation for the repainting, and corrective action if necessary.

Interested persons have been afforded an opportunity to participate in the making of this amendment. Due consideration has been given to the comments received.

The compliance time of the proposed AD is 200 flight hours, which corresponds to the compliance time mandated by parallel Swedish airworthiness directive SAD 1-161 R1, dated March 5, 2001. Several commenters note that the parallel Swedish airworthiness directive has been further revised to correct a printing error. SAD 1-161 R2, dated March 13, 2001, was issued to revise the compliance time to 2,000 flight hours. The commenters request that the proposed AD be revised to reflect the longer compliance time. They assert that there is no correlation between 200 flight hours and 1 year, and that the average fleet utilization is approximately 2,000 flight hours annually or about 200 flight hours every 2 to 3 months.

The FAA concurs, for the reasons identified by the commenters. The compliance times for the initial actions specified by paragraphs (a) and (b) of the final rule have been revised accordingly.

Paragraph (b)(2) of the proposed AD specifies that chemical stripping and corrective action must be accomplished prior to further flight after detection of discrepancies. Two commenters request that the proposed AD be revised to extend this compliance time to correspond to that specified in Saab Service Bulletin 340-51-020: 4,000 flight hours or 2 years. One commenter states that the proposed compliance time is far too restrictive, and requests that the airplane be allowed to continue in service for the period of time specified by the service bulletin. The commenter anticipates that requiring immediate repair might ground numerous airplanes and impose significant economic impact on Saab operators.

Based on the comments and the findings of the manufacturer and the Luftfartsverket (LFV), which is the airworthiness authority for Sweden, FAA agrees that allowing up to 4,000 flight hours or 2 years for those actions would not compromise the safety of affected airplanes. Such an interim period of flight with known discrepancies is acceptable in light of the safety implications, the average utilization rate of the affected fleet, the practical aspects of scheduling repair during regular maintenance periods, and the availability of required parts. Paragraph (b)(2) of this final rule has been revised accordingly.

One commenter requests that the proposed AD be revised to allow use of an alternative paint system that would extend the compliance time temporarily until final corrective action, if necessary, can be accomplished. The commenter asserts that other paint systems commonly used in the industry, if appropriately applied, would provide adequate protection for another two years if no corrosion is found.

The FAA does not concur with the request. Developing an exhaustive list of all possible paint systems that would be acceptable for compliance with this AD would be very difficult. However, under the provisions of paragraph (c) of the final rule, the FAA may approve requests to use an alternative paint system if data are submitted to substantiate that such an alternative paint system would provide an acceptable level of safety.

The proposed AD specifies that the FAA or the LFV (or its delegated agent) must approve methods of corrective action if pitting corrosion or reduced skin thickness is detected. One commenter requests that the proposed AD be revised to specify that the manufacturer, rather than the FAA or the LFV, approve the repair methods. The commenter asserts that repair approval by the manufacturer would omit unnecessary approval actions by the FAA or the LFV. The commenter adds that the FAA has always accepted manufacturer's data, and that this policy of manufacturer involvement should continue in this case to avoid inappropriate repairs.

The FAA does not concur with the request to allow manufacturer approval of repair methods, which would constitute delegating the FAA's rulemaking authority to the manufacturer. However, as the proposed AD stated, the approval may be obtained from either the FAA or the LFV (or the LFV's designated agent). The LFV's designated agent is often a representative of the manufacturer. In any event, the manufacturer is consulted on issues related to appropriate repair methods so that the approved repair scheme will be consistent with methods previously used on a particular airplane. No change to the final rule is necessary in this regard.

Two commenters request that paragraph (b) of the proposed AD be revised to clearly define an “approved” paint system. One of the commenters notes that the proposed AD does not account for previous paint systems applied on the airplane. That commenter requests that the AD provide specifications that will enable operators to distinguish approved from unapproved paint systems to avoid confusion. The other commenter questions whether a paint system is “approved” by the manufacturer or by virtue of being performed at a paint facility using an FAA-approved paint system.

The FAA agrees that clarification may be necessary. The SAAB 340 paint system is approved by the LFV as part of the type design. The FAA accepts the LFV approval and considers the paint system to be FAA-approved. Criteria for an approved paint system are found in section 51-20-43 of the Saab 340 Structural Repair Manual, as referred to by Saab Service Bulletin 340-51-020, Revision 01, dated May 16, 2001. Paragraph (b)(2)(ii)(B) of this AD has been revised to include this definition.

The FAA notes that paragraph (b)(2)(ii)(B)(2) of the proposed AD inadvertently referred to airplanes that were “painted,” instead of “repainted,” using an unapproved paint system. This final rule has been revised accordingly.

After careful review of the available data, including the comments noted above, the FAA has determined that air safety and the public interest require the adoption of the rule with the changes described previously. The FAA has determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD.

The FAA estimates that 288 airplanes of U.S. registry will be affected by this AD.

It will take 1 work hour per airplane to review the records, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the records review on U.S. operators is estimated to be $17,280, or $60 per airplane.

For those airplanes that have been repainted, it will take 20 to 45 work hours per airplane to accomplish the inspection, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of the inspection is estimated to be $1,200 to $2,700 per airplane.

The cost impact figures discussed above are based on assumptions that no operator has yet accomplished any of the requirements of this AD action, and that no operator would 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.

On June 12, 2001, the FAA issued AD 2001-13-04, Amendment 39-12284 (66 FR 34103), to require, before each flight, visually checking the door rails of the sliding cabin door to ensure that each roller is inside its rail and revised the Limitations section of the Rotorcraft Flight Manual (RFM) to prohibit opening and closing either cabin sliding door in flight. That action was prompted by the loss of a cabin sliding door in flight. That condition, if not corrected, could result in loss of a cabin sliding door, impact with the main rotor or fenestron, and subsequent loss of control of the helicopter.

The manufacturer has introduced a modification to the cabin sliding door that mechanically restrains the roller within its rail. However, sufficient information about this modification was not received by the FAA in time to be incorporated into AD 2001-13-04.

The Direction Generale De L'Aviation Civile (DGAC), the airworthiness authority for France, notified the FAA that an unsafe condition may exist on Eurocopter France Model EC 155B helicopters. The DGAC advises of an in-flight loss of a cabin sliding door.

Eurocopter France has issued Alert Service Bulletin No. 52A004, dated March 15, 2001 (ASB). The ASB specifies modifying the left-hand and right-hand cabin sliding door fitting roller attachment and upper rail. The DGAC classified this ASB as mandatory and issued AD No. 2001-058-001(A) R1, dated April 18, 2001, to ensure the continued airworthiness of these helicopters in France.

This helicopter model is manufactured in France and is type certificated for operation in the United States under the provisions of 14 CFR 21.29 and the applicable bilateral agreement. Pursuant to this bilateral agreement, the DGAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DGAC, 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.

Since we have identified an unsafe condition that is likely to exist or develop on other Eurocopter France Model EC 155B helicopters of the same type design registered in the United States, this AD supersedes AD 2001-13-04 to require, before further flight, modifying the cabin sliding door rails and replacing the roller fitting. The actions must be accomplished in accordance with the service bulletin described previously. The short compliance time involved is required because the previously described critical unsafe condition can adversely affect the controllability and structural integrity of the helicopter. Therefore, modifying the cabin sliding door rails and replacing the roller fitting are required before further flight, and this AD must be issued immediately.

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.

The FAA estimates that 2 helicopters will be affected by this AD, that it will take approximately 20 work hours to modify the sliding cabin door, and that the average labor rate is $60 per work hour. Required parts will cost approximately $800 per helicopter. Based on these figures, the total cost impact of the AD on U.S. operators is estimated to be $4,000.

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 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 No. 2001-SW-32-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.

On October 22, 2001, the Federal Aviation Administration (FAA) issued AD 2001-22-09, amendment 39-12488 (66 FR 54658, October 30, 2001), which applies to certain Bombardier Model CL-600-2B19 series airplanes. That AD requires repetitive eddy current inspections for cracking of the main landing gear (MLG) main fittings, and replacement with a new or serviceable MLG, if necessary. That AD also requires servicing the MLG shock struts; inspecting the MLG shock struts for nitrogen pressure, visible chrome dimension, and oil leakage; and performing corrective actions, if necessary. The actions specified by that AD are intended to prevent failure of the MLG main fitting, which could result in collapse of the MLG upon landing. The actions are intended to address the identified unsafe condition.

The FAA notes that a typographical error occurred in the “Applicability” section of AD 2001-22-09. Although the airplane model was referred to correctly as “CL-600-2B19” in all other areas of that AD, the “Applicability” section incorrectly identified the applicable airplane model as “CL-200-2B19.” We have corrected the “Applicability” section of this AD to specify “CL-600-2B19.”

The FAA has determined that a correction to AD 2001-22-09 is necessary. The correction will correctly identify the applicable airplane model in the “applicability” section of the AD.

This document corrects the error and correctly adds the AD as an amendment to section 39.13 of the Federal Aviation Regulations (14 CFR 39.13).

The AD is reprinted in its entirety for the convenience of affected operators. The effective date of the AD remains December 4, 2001.

Since this action only corrected a typographical error, it has no adverse economic impact and imposes no additional burden on any person. Therefore, the FAA has determined that notice and public procedures are unnecessary.

The Direction Générale de l'Aviation Civile (DGAC), which is the airworthiness authority for France, recently notified the FAA that an unsafe condition may exist on certain Dassault Model Mystere-Falcon 50 series airplanes. The DGAC advises that certain airplanes may exceed the reduced vertical separation minimum (RVSM) that was established by the International Civil Aviation Organization (ICAO). The cause of exceeding RVSM is currently under investigation by the manufacturer. This condition, if not corrected, could result in flight operation under RVSM, and consequent near misses or collision with other aircraft.

The DGAC has issued French airworthiness directive T2001-524-037(B), effective October 27, 2001, in order to assure the continued airworthiness of these airplanes in France.

This airplane model is manufactured in France and is 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 DGAC has kept the FAA informed of the situation described above. The FAA has examined the findings of the DGAC, 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.

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 is being issued to prevent near misses or collision with other aircraft during flight, due to incorrect altitude information. This AD requires revising the Airplane Flight Manual to prohibit flight operation under RVSM until further testing and corrective actions are accomplished.

This is considered to be interim action until final action is identified, at which time the FAA may consider further rulemaking.

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 2001-NM-330-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.

Bimeda, Inc., 288 County Rd. 28, LeSueur, MN 56058-9322, filed a supplement to ANADA 200-144 that provides for use of TETROXY® (oxytetracycline HCl) Soluble Powder for making medicated drinking water for the treatment of various bacterial diseases of livestock. The supplemental ANADA provides for a zero-day withdrawal time after the use of the product in the drinking water of turkeys and swine. The ANADA is approved as of September 17, 2001, and the regulations are amended in 21 CFR 520.1660d to reflect the approval.

Section 520.1660d is also being amended to reflect approval of a 3.09-pound pail size, which was approved under ANADA 200-144 on June 26, 1995.

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.

FDA has discovered that an error has become incorporated into the agency's regulation for part 558 (21 CFR part 558). A portion of the list of indications for fenbendazole medicated feeds for cattle was inadvertently deleted as a publication error beginning with the April 1, 1996, edition of the CFR. At this time, the regulations are being amended in § 558.258 to correct this error, to format some portions of this section as a table, and to restructure other portions to more closely resemble similar regulations for free-choice medicated feeds for cattle. Indications for the control of certain swine parasites, inadvertently removed in a previous revision of the regulations in the Federal Register of November 20, 1990 (55 FR 48230), are also being added. The entire text of § 558.258 is being provided for the convenience of the reader.

Publication of this document constitutes final action on these changes under the Administrative Procedure Act (5 U.S.C. 553). Notice and public procedure are unnecessary because FDA is merely correcting nonsubstantive errors.

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.

This final rule implements some of the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105-34, specifically the sections that amended the Internal Revenue Code (26 U.S.C., “the IRC”) to:

—Create a wine excise tax category for hard cider (sec. 908),

—List semi-generic designations for wine (sec. 910), and

—Repeal the requirement for wholesale dealers in liquors to post signs (sec. 1415).

The definition of hard cider in Public Law 105-34 was amended by section 6009 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, as we will discuss later.

On August 21, 1998, ATF issued a temporary rule, T.D. ATF-398 (63 FR 44779), to implement various sections of Public Law 105-34. On the same day, ATF issued a notice of proposed rulemaking, Notice No. 859 (63 FR 44819), inviting comments on this temporary rule for a 60 day period. In response to requests from the industry, ATF reopened the comment period for an additional 30 days on November 6, 1998, by Notice No. 869 (63 FR 59921). We will discuss our proposals, the public comments, and our decisions below.

Section 910 of Public Law 105-34 amended 26 U.S.C. 5388 by adding a new subsection (c), Use of semi-generic designations, which generally parallels the language of 27 CFR 4.24 on the same subject, but places the existing list of semi-generic designations outside the discretion of the Secretary.

Since the IRC regulations concerning wine labeling appear in 27 CFR 24.257, we amended that regulation to incorporate the wording of 26 U.S.C. 5388, concerning the use of semi-generic wine designations. Additionally, we incorporated the standards of identity for wines under 27 U.S.C. 205 by reference in this section. Finally, we placed a cross-reference to this new rule in § 4.24.

Since the rules for use of semi-generic designations have been made part of the IRC, the rules apply to all wines, including wines that contain less than 7 percent alcohol by volume and to wines sold only in intrastate commerce.

The use of semi-generic designations on wine labels was the subject of two comments. Peter M. Brody of Ropes & Gray, writing on behalf of the Institut National des Appellations d'Origine (INAO) objected to “entrenching” the U.S. policy of allowing use of the names champagne, chablis, burgundy and sauternes, on wines made outside France. Jean-Christophe Paille, Counselor for Agriculture of the Ambassade de France aux Etats-Unis, made the same objection. However, these objections were to the underlying statute and not to the regulatory changes made as a result. Therefore, we are adopting the language of the temporary rule in this final regulation.

Section 1415 of Public Law 105-34 repealed the requirement for wholesale dealers in liquor to post signs identifying their premises and made conforming changes to sections of the law which referenced that requirement. In the temporary rule, ATF amended the Liquor Dealers' regulations by removing §§ 194.239 through 194.241, which relate to this requirement. This change received no comments, so we are adopting the language of the temporary rule in this final regulation.

The Taxpayer Relief Act of 1997, Pub. L. 105-34, was enacted on August 5, 1997. Section 908 added a new tax class (6) for wine, called “hard cider,” to 26 U.S.C. 5041 and imposed a new rate of tax on hard cider as follows:

The phrase in brackets was added by section 6009 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, enacted July 22, 1998, and effective as if it were part of Pub. L. 105-34.

In the temporary rule, ATF added a definition of hard cider to the wine regulations and made other changes to the wine production and labeling regulations. In associated Notice Number 859, ATF invited comments on the definition of hard cider established in the temporary rule. We noted there were numerous traditional ways of making fermented cider, some of which may not fit the definition of hard cider provided in the temporary rule. We invited comments, including citations of standard references on cider making, on whether adjustments to the definition of hard cider are warranted.

The portion of the temporary rule related to cider generated 48 comments on our definition of cider and the labeling rules. In particular, many commenters expressed concern that the labeling rules for hard cider in T.D. ATF-398 did not allow appropriate designation of their products. Therefore, on September 27, 1999, ATF published T.D. ATF-418 (64 FR 51896) postponing the labeling compliance date for the rules in T.D. ATF-398 for one year. At the same time, we published Notice No. 881 (64 FR 51933) to solicit comments on alternative labeling rules. ATF subsequently published T.D. ATF-430 (65 FR 57734) postponing the labeling compliance date until January 31, 2001. Our proposals and the public comments on both the original temporary rule and the later notice related only to labeling will be summarized and discussed below as background for this final rule.

Public Law 105-34 created a new tax rate that applied to hard cider removed from bond on or after October 1, 1997. This law also amended the small producer's wine tax credit allowed by 26 U.S.C. 5041(c) to provide for a 5.6 cent credit on hard cider removed by small producers. This credit has the effect of reducing the net tax paid on hard cider by a small domestic producer to 17 cents, the equivalent of the lowest tax available to domestic producers for still wine under 14 percent alcohol by volume ($1.07 tax less $0.90 credit). As with the full 90 cent credit applicable to other wines, the hard cider credit of 5.6 cents per gallon is reduced by 1 percent ($.00056 per gallon) for each thousand gallons of wine over 150,000 gallons which are produced in a year. The full tax rate is reached at the 250,000 gallon annual production level. We amended 27 CFR 24.278, which implements the tax credit for small domestic producers, to reflect the change.

Commenter Jeffrey House of California Cider Company, Inc. noted that “Hard cider is marketed like beer and merchandised next to beer. It is fermented like wine but at less than half the volume of alcohol. It is unfair and illogical that a small beer producer is allowed up to 1.8 million gallons before a new tax bracket and a cider mill that produces * * * hard apple/pear cider is only allowed 100,000 before a very substantial tax change.”

Mr. House correctly notes that the reduced tax rate for small domestic brewers applies to the first 60,000 31-gallon barrels per year (1.86 million gallons), whereas the small domestic wine producer's tax credit applies only to the first 100,000 gallons per year. Mr. House's comment relates to a distinction that exists in the law, so we are unable to change the regulations. No other comments related directly to either the tax rate or the credit provisions, so we are adopting these provisions in the final rule without any change.

In T.D. ATF-398, we reworded the regulations related to the wine and flavor credit allowed against distilled spirits tax under 26 U.S.C. 5010. We made these changes to clarify that the new still wine category of hard cider was not eligible for the wine and flavor credit. No comments were received on these changes, so they are adopted in the final rule.

ATF took the statutory definition of “hard cider” eligible for the new tax rate and placed it in the regulations. We added detail and clarification as follows:

Each element of the regulatory definition was the subject of comment.

Ten commenters, all distributors of cider and other alcohol beverages, specifically advocated adopting the Washington State definition of cider, which they quoted as:

Other commenters addressed only specific elements of the definition. We will summarize the comments and our decision for each element separately.

First, the regulatory definition specifies that hard cider is a still wine, as stated in 26 U.S.C. 5041(b)(6). The commenters supporting ATF adoption of similar rules to the Washington State definition noted that it allowed carbonation of cider. In addition, e-mail commenter Dan Burick expressed support for a modest amount of carbonation in hard cider, equivalent to the carbonation in microbrews. ATF is precluded from even considering such a change, since the statute limits the application of the hard cider tax rate to still wine. In this final rule, we continue to specify that hard cider is a still wine. The law defines still wine as wine that contains not more than 0.392 gram of carbon dioxide per hundred milliliters of wine.

We interpreted the statutory phrase “derived primarily from apples or apple concentrate and water” to mean that apple juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration, must represent more than 50 percent of the volume of the finished product. We note the Washington State definition, supported by ten commenters, does not contain a requirement for a minimum percentage of apple juice, as we did in our temporary rule. When we set a threshold for apple juice content as part of the regulatory definition of hard cider, we did so in an effort to implement the statutory requirement that hard cider be made “primarily from apples.” Although one commenter stated that he believed 95% apple juice should be the minimum, we recognize that one traditional method of making hard cider involves diluting apple wine (approximately 12% alcohol) with juice, concentrate and water, or other non-alcoholic ingredients to a final strength of 6 to 7 % alcohol. We also consulted dictionary definitions of the word “primarily”, which yielded synonyms such as “mainly” “chiefly,” and “for the most part.”

Several other commenters objected to any use of concentrate in production of hard cider; however, the statutory definition of hard cider specifically allows the use of concentrate. In all other wine regulations, reconstituted concentrate is treated the same as unconcentrated juice.

Several commenters stated that 50% was too high a requirement for apple juice. Nicholas Bradstock of the UK National Association of Cider Makers, stated that a “parallel exists with beer where the characterising ingredient is malt, but the malt levels may often be at less than 50% of the extract material in beer.”

In view of the comments on both sides of the question, we consulted the legislative history. When they introduced S. 475, the bill that eventually became the hard cider tax, Senator James Jeffords of Vermont noted it was “designed to increase opportunities for the apple industry in the United States,” and Senator Patrick Leahy of Vermont noted he had “received letters from officials at state agriculture departments from across the nation—Arizona, Connecticut, Georgia, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Vermont and Virginia—supporting the taxing of draft cider at the beer rate because this change would allow apple farmers in their States to reap the benefits of an expanded culled apple market.” That expressed intent, together with the choice of the word “primarily” in the version of the law that was finally enacted, leads us to adopt the definition of “primarily” in the temporary rule, unchanged, in this document.

The Act defined hard cider as “containing no other fruit product.” In the regulatory definition, ATF interpreted that to mean, “containing no other fruit product nor any artificial product which imparts a fruit flavor other than apple.” In the accompanying notice, we acknowledged that some cider makers were experimenting with apple ciders flavored with other fruits, much as craft brewers experiment with different ingredients, including fruit. However, the statutory language expressly precludes the addition of any other fruit product to hard cider.

The Washington State definition recommended as a model by ten commenters allows apple or pear juice as a base and includes flavored cider. In addition to those commenters, 21 commenters stated they believed fruit flavors should be allowed in hard cider. One commenter, Cheryl Lau, of Transportation, Inc., submitted letters from Senators James Jeffords and Patrick Leahy of Vermont and Representative Richard Neal of Massachusetts, all of whom sponsored bills to allow cider its own tax rate, and from former Senator Bob Dole. These letters were originally sent to ATF before the issuance of the temporary rule. In response to the publication of the temporary rule and the associated notice, we also received comments concerning flavored cider from Senator Harry Reid of Nevada and Representative Michael D. Crapo of Idaho. These legislators expressed concern that ATF was too restrictive in its interpretation of the statute. They stated that they believed a fermented apple cider could contain a minor amount of some other fruit flavor yet retain its cider character and remain eligible for the hard cider tax rate. Senators Jeffords and Leahy, in the April 23, 1998, letter submitted by Ms. Lau, said they “hope [ATF] will adopt a definition of 'hard cider' which does not bar the addition of post-fermentation fruit flavorings.” Representative Crapo expressed concern on behalf of American cidermakers because he believed ATF's regulatory definition of hard cider would favor imports of traditional all-apple cider at the expense of the vitality of the American industry. He notes that the restrictive definition of cider “is at odds with the historical nature of cidermaking in the U.S.” He cites the book The Art of Cider Making by Paul Correnty, as an example: “Raspberries have always held a special place in the cellars and casks of cidermakers.” We did not receive any comments from legislators expressing the opposite view.

Other commenters who favor allowing fruit flavors in hard cider included cidermakers, distributors, a State legislator (Don Perata of the California Assembly), and a publisher (Thomas E. Dalldorf, Sr. of Celebrator Beer News). Mr. Dalldorf noted the omission of fruit flavored ciders “would adversely affect producers and consumers alike.” Some of the producers and distributors commenting on this issue noted that cider has the same alcohol content as beer and is generally marketed in competition with beer. Fruit-flavored beers are taxed at the same rate as conventional beers ($0.584 per gallon), yet if cider producers add flavors to their cider, their tax would rise from $0.226 to the “table wine” rate ($1.07 per gallon).

Other commenters did not discuss fruit flavors in general, but said they believed some pear juice should be allowed in cider. Jean-Christophe Paille, Counselor for Agriculture of the Ambassade de France aux Etats-Unis, noted that French regulations authorize the use of pear must in apple cider “for purpose of gustative quality.” Nicholas Bradstock of the National Association of Cider Makers (NACM, representing UK cider makers) and Jeffrey House of California Cider Company expressed the view that perry (wine derived from pears) should be given equal tax treatment with cider since the two products are so similar. Only one commenter, Brian Black of Black & Fagan Cider Co., supported the complete prohibition on other fruit flavors, saying “wine coolers exist for that category.” Representative Neal, in his March 17, 1998, letter to ATF, supported the idea of fruit flavored ciders, but noted the need for a distinction between an eligible product marketed as cider and ineligible products marketed as “a fruit flavored wine cooler which was produced with an apple wine base.”

Although the law specified “no other fruit product,” ATF interpreted this to mean no artificial fruit flavors, either. Our basis for making that decision was the legislative history of the Taxpayer Relief Act of 1997, Public Law 105-34, contained in the General Explanation of Tax Legislation Enacted in 1997 (the “Blue Book”) published by the Joint Committee (JCS-23-97, Government Printing Office ISBN 0-16-055897-2), which said,

Further, we do not believe it was Congress's intent to provide a tax incentive for use of artificial ingredients in preference to real ones.

Finally, H.P. Bulmer North America suggested, in its comment, that ATF has the authority to make a de minimis rule that would allow a small amount of fruit flavor in hard cider. They cited court cases recognizing administrative discretion inherent in a statutory scheme to allow de minimis rules despite the absence of such an allowance in the statute, and to allow a de minimis maximum in accordance with congressional intent even when the statute is absolute.

In the present case, ATF does not have discretion to set de minimis exceptions to the statutory definition of hard cider, which proscribes the use of any fruit product other than apples. First, the Blue Book reveals Congress' expressed intent to limit the fruit component of hard cider to apples as reflected in its statement that hard cider must be “fermented solely from apples or apple concentrate and water, containing no other fruit product” and that post fermentation processing may not include the addition of other fruit juices or flavors prior to bottling and still be eligible for the 22.6 cents-per-gallon rate. In addition, when Congress revisited the hard cider provisions in Public Law 105-206, the Internal Revenue Service Restructuring and Reform Act, it declined to allow other fruit products despite the fact that this very issue had been raised. These factors present a statutory scheme indicating that Congress intended that hard cider would not be composed of any fruit product other than apples. Finally, we note that the examples cited in the Bulmer comment differ from our situation in that the fruit flavorings, while small as a percentage of the total product, would change the character of the product enough so that the product would be described as, for instance, “raspberry flavored apple cider,” and not “apple cider.” We are adopting this part of the temporary rule without change.

Mr. House expressed concern that his cyser (apple cider mixed with honey) or his mulled cider (flavored with spices) might not be eligible for the hard cider tax rate. Flavoring materials will only affect the tax classification of hard cider if they are derived from or impart the flavor of a fruit other than apple. Products that are otherwise eligible for the hard cider tax rate may be flavored with honey or spices, to use Mr. House's examples, without affecting the tax. We did not make any regulatory changes related to this question.

Although we did not address other wine ingredients in the regulatory language of the temporary rule, we asked in the notice if the prohibition on “other fruit products” should be interpreted to restrict use of authorized wine treating materials or sugars that were derived from fruits other than apple. We noted that some wine treating materials, such as tannin or citric acid, may be derived from fruit other than apples. Mr. Daniels of Green Mountain Cidery, Stephen Swift, Export Manager of Matthew Clark Brands, Ltd., Paul Thorpe of E. & J. Gallo Winery and Mr. Bradstock of NACM, expressed support for continued acceptance of citric acid and sugars as wine treating materials and not as fruit additives. Mr. Thorpe noted that, despite their names, “citric” acid and “fructose” sugar may be derived from sources other than fruit. Scott Benson, an independent cider distributor, said he thought if fruit flavored ciders were not eligible for the cider tax rate, then citric acid and fruit derived sugars should not be allowed in cider, either. After reviewing these comments, we have decided not to restrict the use of approved wine treating materials in cider. We believe it would be impractical to make a distinction between fruit derived wine treating materials and the same materials derived from other sources, unless there were other circumstances that indicated the producer was using these materials as flavorings. Used as directed in 27 CFR part 24, authorized wine treating materials would not impart a fruit flavor to wine. However, we note that some ciders are made under approved formulas rather than under the rules for production of natural wine in subparts F and L of part 24. In approving such formulas, ATF may allow the use of wine treating materials at a level beyond the amount necessary to stabilize or adjust the acidity of a natural wine. While there is no limit on the amount of wine treating materials that may be used in a formula wine, hard cider may not contain treating materials in amounts sufficient to impart a fruit flavor other than apple and still be taxed as hard cider. For example, if a cider contained more citric acid than the amount allowed under subpart L, and was labeled as “citrus flavored,” the product would be classified for tax purposes as a still wine under 14% alcohol by volume rather than a hard cider. As we will discuss in more detail in the background material on labeling, we will allow the use of the term “hard cider” on labels of products that do not belong to the “hard cider” tax class, as long as other information on the label allows us to determine the tax class.

ATF's regulatory definition of hard cider included the phrase “containing at least one-half of 1 percent and less than 7 percent alcohol by volume.” This portion of the definition comes directly from the law. Commenter Greg Kushmerek, who identified himself as someone who has made hard cider in the past, noted it would be difficult for a small producer or hobbyist to control fermentation to prevent the cider from exceeding 7% abv. The “less than 7 percent” limit was imposed by statute. Home winemakers may produce any type of wine, subject to the limitations in 24.75, Wine for personal or family use, so they will not be affected by the 7% alcohol limit for hard cider. For commercial producers, the tolerances as to alcohol content already in wine regulations at 24.257 will apply to cider as well. This portion of the definition is adopted without change from the temporary rule.

ATF concluded the definition by stating that hard cider must have the taste, aroma and characteristics generally attributed to hard cider, and that it must be sold or offered for sale as hard cider. In its comment, Green Mountain Cidery noted that “there are currently no agreed subjective taste, aroma or characteristic' profiles within the industry for cider.” We recognize that hard cider may be made and presented a number of different ways. The limitations were added to insure that products eligible for the hard cider tax rate would not be confused with other types of beverages that are subject to different tax rates, such as malt-based “coolers.”

Senator Leahy, when he introduced S. 475, said,

In his comment on the temporary rule, Richard G. Burge of Wyder's Cider said, “We fail to understand how it is that our hard ciders will not only be unable to enjoy the lower tax rate, but will also be completely shut out of the very product category that we helped to establish * * *. We believe the rules should promote the category, not choke it * * *.”

The exact wording of the law precludes ATF from making the changes in the definition requested by so many commenters.

In T.D. ATF-398, ATF added temporary regulations for labeling hard cider. We changed both the IRC and the Federal Alcohol Administration (FAA) Act labeling rules to require use of the term “hard cider” on products that are taxable as hard cider, and prohibit use of that term on any other wine. We set a compliance date of February 17, 1999 (six months after publication), to allow time for producers to change labels to comply with the temporary rule. In associated Notice No. 859, ATF requested comments on the labeling rules. The comments we received on the labeling portion of our temporary rule indicated that we had imposed an unintended and unnecessary burden.

We learned there are producers who make ciders that are not eligible for the new tax rate, but who have been using the term “hard cider” to describe their products. Their products include apple wines containing 7 percent or more alcohol by volume and ciders that contain less than 7 percent alcohol by volume with other fruit flavors. Since such products are excluded from the definition of hard cider, we said in the temporary rule they were not entitled to be called “hard cider” on labels. The producers and other interested persons expressed concern that the temporary rule would create consumer confusion, since the word “hard” suggests “hard liquor” or higher alcohol content, rather than the meaning we gave it. Some producers of wines eligible for the hard cider tax rate stated they prefer to use a phrase like “draft cider” or “fermented cider” on their labels and in their marketing, for the same reason.

ATF based the requirement in the temporary rule on 26 U.S.C. 5368(b), which gives the Secretary of the Treasury general authority to issue labeling regulations that require evidence of compliance with tax rules. The Secretary of the Treasury also has authority under the FAA Act, 27 U.S.C. 205(e), to prescribe regulations to insure that wines with 7 percent alcohol by volume or more are labeled or marked to “* * * provide the consumer with adequate information as to the identity and quality of the products * * *”

When we drafted the hard cider labeling sections of the temporary rule, we did not intend to cause a hardship for the industry or consumers. We intended to maintain the current system of identifying the tax class of wine by information on the label. The function of ATF's marking requirement is to insure proper identification of the wine for tax purposes, and to inform consumers of the identity of the product. From the comments, we saw that the term “hard cider” has broader meaning in the industry and among consumers than the definition given in the regulations.

In light of these comments, we reviewed our need for tax identification on the labels of wines. Although much of our work takes place on wine premises where supplemental information is available to establish the tax rate of a given lot of wine, we believe there are times when we must be able to tell the tax rate by looking at the label alone. However, we believed it would be possible to meet our tax identification needs and still allow greater flexibility for the industry. On September 27, 1999, we issued T.D. ATF-418 (64 FR 51896) to postpone the effective date of the cider labeling rules until September 27, 2000, and associated Notice No. 881 (64 FR 51933) proposing alternative labeling rules and requesting public comments.

Specifically, we proposed to remove the amendment we made to § 4.21(e)(5) of the FAA Act wine labeling regulations. Part 4 only applies to wines that contain 7%-24% alcohol by volume. As amended, that section prohibited the use of the term “hard cider” on any wine with 7% or more alcohol by volume. We intended to avoid confusion between these higher alcohol wines and wines in the new hard cider tax class by this prohibition. After reviewing the comments, we find this precaution unnecessary. We believe, since hard cider with 7% or more alcohol by volume will be marked with the alcohol content, it will be easy to distinguish the product from a lower-alcohol hard cider eligible for the hard cider tax rate. Therefore, we will allow use of the term “hard cider” on products over 7% alcohol by volume. Second, we are amending the IRC marking requirements in part 24. When the new tax class of hard cider was established, we amended the labeling rules to substitute the phrase “hard cider” for the word “wine” to identify the tax class. On IRC wine labels, no single item of information gives the tax class. On conventional wines, the word “wine” and the alcohol content (modified by the word “carbonated” or “sparkling” if either applies) identify the tax class.

For products under 7% alcohol by volume, we want to differentiate between ciders which are eligible for the hard cider tax rate and those which are taxable as still wine containing not more than 14% alcohol by volume. Some producers have marketed eligible products as “draft cider,” “fermented cider” or “apple cider” and do not wish to use the term “hard cider” on labels. Some producers have marketed mixed-fruit ciders or low-alcohol ciders that are otherwise excluded from the current definition of hard cider under the name “hard cider” and do not wish to rename their products.

Other commenters asked questions that indicated labeling requirements were not clear in the temporary rule:

—Does ATF require that the words “hard cider” must be inserted in the brand name?

—Where on the label must the required information appear?

—What size type should be used for the required information?

—Do the FAA Act labeling rules and standards of fill apply to hard cider?

To address these concerns, we proposed several changes to 27 CFR 24.257. First, we proposed to adopt the minimum and maximum type size requirements of 27 CFR 4.38 because they are already in use by the wine industry for higher alcohol products. We did not propose to specify placement of information required in § 24.257. Products with 7 percent or more alcohol by volume will still be subject to the FAA Act rules covering placement.

We proposed to remove the requirement that the word “wine” or the words “carbonated wine” must be “part of the brand name or in a phrase in direct conjunction with the brand name.” Information on the kind of wine may be anywhere on the label. We also proposed to add some alternative labeling terms to reflect the industry practice of calling products “cider” instead of “wine” on these labels. We did not propose to require or restrict the use of words such as “draft”, “fermented” or “hard” to identify products in the tax class of hard cider. We proposed, where the words on the label leave doubt as to the tax class, that cider makers must include a reference to the tax class by section of the law. For example, hard cider must contain more than 50 percent apple juice. If a cider contains less than 50 percent apple juice, it is taxed as a still wine under 14 percent alcohol by volume, but it may still be called cider. In order to make it clear that this cider is taxed at $1.07 instead of $0.226, we will require that the label show “tax class 5041(b)(1) IRC” or an equivalent phrase. This wording is similar to the wording of 27 CFR 25.242, on marking nontaxable cereal beverages. We requested industry and consumer comments on these proposals.

In response to Notice No. 881, ATF received four comments. Roger Daniels of Green Mountain Cidery wrote to support the proposed changes, but objected to use of specific examples in the proposed rule that used the temporary rule's definition of hard cider, which they believe should be changed. Since we have not changed the definition, we have retained the examples. Mr. Daniels also reiterated his request that we clarify when FAA Act labeling rules apply and when they do not. We have amended the final rule to include this information. We have also added a reference to the Health Warning Statement, which is required for any alcohol beverage over 1/2 percent alcohol, including cider. Richard G. Burge of Wyder's Cider supported our proposal to allow more open use of the word cider, but objected to our proposal that the tax class should be added to the label. He said the added tax information “is not meaningful to the consumer and can be confusing.” Mr. Bradstock of NACM said: “Ciders qualifying as Hard Cider for tax purposes might be described in other terms, * * * and if the tax class is not clear from the manner of labelling [sic] then this might be confirmed by quoting the tax class on the label * * * with or without a supplementary declaration of hard cider.” Stephen Swift of Matthew Clark Brands, Ltd., a cider maker from the U.K., wrote to express support for the NACM comment.

All the commenters supported ATF's proposal to allow more flexibility in naming hard cider and related products. Three of the four also accepted ATF's suggestion to supplement the product name with the IRC quote when the name and alcohol content alone do not give enough information to establish the tax class.

In response to Mr. Burge's objection to the use of the IRC cite as tax class identification, it is our responsibility under the Internal Revenue Code to identify taxable commodities and collect the tax. We have revised the requirement for the law cite to emphasize that it only applies in cases where it is impossible to identify the tax class from existing label information. In the notice, we requested suggestions for other ways of identifying the tax class, and received no suggestions. We have decided to adopt the proposed changes in this final rule with the revisions noted.

We amended the definition of “eligible wine” that appears in parts 19, 250 and 251 to clarify that wine in the new tax category of hard cider is not eligible for wine and flavor credit if used in a distilled spirits product. We did not receive any comments on this change, so amendments to 27 CFR 19.11, 250.11 and 251.11 in the temporary rule are adopted in this final rule without change.

While the labeling changes in this final rule are effective 60 days after publication in the Federal Register for new labels, we recognize that it is not practical to enforce the new requirements immediately for products already on the market. Therefore, we will allow a six-month period to change labels as necessary. The new requirements will become mandatory six months after publication in the Federal Register .

Because no notice of proposed rulemaking is required, the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) do not apply. Moreover, any revenue effects of this rulemaking on small businesses flow directly from the underlying statute. Likewise, any secondary or incidental effects, and any reporting, recordkeeping, or other compliance burdens flow directly from the statute. Pursuant to 26 U.S.C. 7805(f), the temporary regulation was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business. That office did not comment on the regulation.

Nine commenters mentioned potential economic harm coming from the exclusion of fruit flavored ciders from the tax category “hard cider.” As noted earlier, we believe the wording of the statute does not allow for any other interpretation, thus, any economic effects flow directly from the statute.

It has been determined that this temporary rule is not a significant regulatory action as defined by Executive Order 12866. Therefore, a regulatory assessment is not required.

The provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) and its implementing regulations, 5 CFR part 1320, do not apply to this final rule because no new collection of information is contained in these regulations. Some of the amended regulatory sections contain collections of information that were previously approved by the Office of Management and Budget (OMB). Although these sections are being amended, the changes are not substantive or material.

Marjorie Ruhf, of the Regulations Division, Bureau of Alcohol, Tobacco and Firearms, drafted this document. Other personnel of ATF and the Treasury Department participated in developing the document.

In this rulemaking, the Postal Service announces the adoption of a new preparation option named “co-packaging,” which was initially proposed in a Federal Register notice dated August 28, 2001. The new co-packaging preparation option will allow mailers to combine flat-sized automation rate pieces and flat-sized Presorted rate pieces of the same mail class within the same package.

As information, this rule is an outgrowth of two related preparation standards the Postal Service previously adopted. The first of those two standards was adopted on January 7, 2001. It provided new preparation standards in Domestic Mail Manual (DMM) M910 that required mailers of Periodicals nonletters, and permitted mailers of First-Class Mail and Standard Mail flats, to co-sack (Periodicals and Standard Mail) or co-tray (First-Class Mail) packages of automation rate mail with packages of Presorted rate mail. The second of those two previously adopted standards was published on May 24, 2001 (66 FR 28659), and required mailers to begin co-traying First-Class Mail flats and co-sacking Standard Mail flats within certain conditions, effective September 1, 2001.

The adoption of the new co-packaging rule is justified since most of the same operational justifications for allowing packages of automation rate and Presorted rate flats to be combined in the same container (co-sacking and co-traying) also support allowing the combining of flats within the same package (co-packaging). Currently, automation rate flats (ZIP+4 or delivery point barcoded) and Presorted rate flats (no barcode required) are usually processed by the Postal Service within the same operation.

It can also be noted that the Postal Service's prior need for segregating barcoded and nonbarcoded pieces no longer exists due to advances that include an optical character reader (OCR) on the flat sorting machine (FSM) 881 and the OCR/image lift capabilities of the new automated flat sorting machine (AFSM) 100. Beginning in 2002, the Postal Service plans to retrofit FSM 1000s with OCR capabilities. Therefore, continuing to require the separate preparation of automation rate and Presorted rate pieces results in more packages, which reduces the average depth of sort. This causes additional workhours for the Postal Service associated with sorting, opening, and prepping flats for processing.

The Postal Service requested that comments on the proposed rule for co-packaging (published in the Federal Register on August 28, 2001) be submitted by September 27, 2001. Comments were received from a total of seven interested parties that included two mailers, three mailing agents, and two industry organizations.

One of the mailing agents and both of the industry organizations supported the proposal and generally noted that it should reduce package handlings for the Postal Service. One industry organization agreed that a 5-digit barcode would be needed on Presorted rate pieces that are co-packaged. The Postal Service agrees with those comments.

One of the mailing agents maintained that the proposal should be made mandatory, while one of the industry organizations felt the proposal should remain optional. The Postal Service will adopt the rule as a mail preparation option.

One mailing agent, the two mailers, and one industry organization commented that they saw no benefit to limiting the co-packaging of automation rate and Presorted rate pieces to one physical package per logical presort destination. The other mailing agent contended that mailings presented under a manifest mailing system should not be subject to this requirement. Contrary to those comments, the second industry organization stated the limitation was reasonable. In this final rule, the Postal Service will limit the co-packaging of automation rate and Presorted rate pieces to one physical package for each “logical” destination. This is necessary in order to assist Postal Service personnel during the mail verification and acceptance processes.

The two mailers requested clarification of the rate eligibility requirements for pieces that are co-packaged, and one industry organization asked for clarification on the requirements for firm packages. The Postal Service believes the eligibility rules adopted for co-packaging and the existing rules for firm packages provide sufficient explanation.

However, in order to avoid confusion, we are providing this further clarification of the rate eligibility standards for co-packaged mail. Postage for Presorted rate and automation rate pieces will continue to be determined under DMM E130 and E140 for First-Class Mail; under E220 and E240 for Periodicals; and under E620 and E640 for Standard Mail. For example, a Periodicals mailer would prepare packages when there are a total of 6 or more Presorted rate and automation rate pieces to the same presort destination. First-Class Mail and Standard Mail users would prepare packages when there are a total of 10 or more Presorted rate and automation rate pieces to the same presort destination. The package level would always determine the automation rates.

For Periodicals and Standard Mail Presorted rate pieces, the rates will continue to be based on the sack level for mail in sacks, and on the package level for packages prepared on pallets. For example, in a sacked Periodicals or Standard Mail mailing, if a 5-digit package placed in a 5-digit sack contains 5 automation rate pieces and 5 Presorted rate pieces, the automation and Presorted 5-digit rates for Periodicals, or 3/5 -digit rates for Standard Mail, would apply as appropriate. However, if that 5-digit package is placed in an SCF (Periodicals), ADC, or mixed ADC sack, the 5 Presorted rate pieces would be subject to the Presorted basic rate and the 5 automation rate pieces would still be subject to the automation 5-digit rate for Periodicals or the automation 3/5 rate for Standard Mail, as appropriate.

Periodicals firm packages claimed as a single piece will continue to be subject to the applicable Presorted rate based on the presort level of the logical package with which they are associated (e.g., 5 other pieces to the same destination whether automation rate or Presorted rate) and the sack level, if sacked.

One mailer requested an implementation date for co-packaging that would be earlier than the proposed date of March 31, 2002. In order to allow presort software vendors enough time to update, test, and distribute software to their clients, and because of Postal Service needs associated with the certification process for Presort Accuracy, Validation, and Evaluation (PAVE)-certified software, the Postal Service keeps the implementation date of March 31, 2002.

Both of the mailers commented that they preferred the third option for placing mail on pallets. Under the final rule in DMM M930.1.4e, M930.2.3e, M940.1.4e, and M940.2.3e, mailers may elect to use any one of the three options identified for placing mail on pallets.

One industry organization suggested that a 5-percent “re-order” tolerance be extended to co-packaged pieces. Presently, a 1-percent tolerance is applied to ink jet re-order pieces prepared under an authorized Optional Procedure (OP) agreement. As such, that comment falls outside the scope of this rulemaking. However, if necessary, the Postal Service can consider the need to include appropriate provisions in a mailer's OP agreement.

Finally, one industry organization asked that the Postal Service be tolerant of mailers who cannot follow these complex rules by issuing gentle treatment (i.e., education) rather than revenue deficiencies. That comment also falls outside the scope of this rulemaking and therefore will not be addressed at this time.

After full consideration of the comments received and for the reasons cited above, the Postal Service believes it appropriate to adopt a rulemaking for “co-packaging” as follows:

In Title 40 of the Code of Federal Regulations, Parts 87 to 99, revised as of July 1, 2001, part 92 is corrected in § 92.120 by revising equations (1) and (2) in paragraph (c)(2)(v), in § 92.121 by revising paragraphs (b)(2)(vi), (b)(2)(ix), (b)(2)(xi)(A), and (b)(4)(iv), and by revising § 92.132 to read as follows:

States which have received Final authorization from EPA under RCRA section 3006(b), 42 U.S.C. 6926(b), must maintain a hazardous waste program that is equivalent to, consistent with, and no less stringent than the Federal hazardous waste program. As the Federal program changes, the States must change their programs and ask EPA to authorize the changes. Changes to State hazardous waste programs may be necessary when Federal or State statutory or regulatory authority is modified or when certain other changes occur. Most commonly, States must change their programs because of changes to EPA's regulations in 40 CFR parts 124, 260 through 266, 268, 270, 273 and 279. States can also initiate their own changes to their hazardous waste program and these changes must then be authorized.

We conclude that Utah's revisions to its authorized program meet all of the statutory and regulatory requirements established by RCRA. We found that the State-initiated changes make Utah's rules more clear or conform more closely to the Federal equivalents and are so minor in nature that a formal application is unnecessary. Therefore, we grant Utah Final authorization to operate its hazardous waste program with the changes described in the table at item I.G. of this document. Utah has responsibility for permitting Treatment, Storage, and Disposal Facilities (TSDFs) within its borders (except in Indian Country) and for carrying out all authorized aspects of the RCRA program, subject to the limitations of the Hazardous and Solid Waste Amendments of 1984 (HSWA). New Federal requirements and prohibitions imposed by Federal regulations that EPA promulgates under the authority of HSWA take effect in authorized States before they are authorized for the requirements. Thus, EPA will implement those requirements and prohibitions in Utah, including issuing permits, until the State is granted authorization to do so.

The effect of this decision is that a facility in Utah will continue to be subject to the authorized State requirements instead of the equivalent Federal requirements in order to comply with RCRA. Utah has enforcement responsibilities under its State hazardous waste program for violations of such program, but EPA retains its authority under RCRA sections 3007, 3008, 3013, and 7003, which include, among others, authority to: do inspections, and require monitoring, tests, analyses or reports; enforce RCRA requirements and suspend or revoke permits; and take enforcement actions regardless of whether the State has taken its own actions.

This action does not impose additional requirements on the regulated community because the regulations for which Utah is being authorized by today's action are already effective and are not changed by today's action.

EPA did not publish a proposal before today's rule because we view this as a routine program change and do not expect comments that oppose this approval. We are providing an opportunity for public comment now. In addition to this rule, in the proposed rules section of today's Federal Register we are publishing a separate document that proposes to authorize the State program changes. If EPA receives comments which oppose this authorization or portion(s) thereof, that document will serve as a proposal to authorize such changes.

If EPA receives comments that oppose this authorization or the incorporation by reference of the State program, we will withdraw this authorization and/or incorporation by reference of the State program decision by publishing a timely document in the Federal Register before the rule becomes effective. We will base any further decision on the authorization of the State program changes, or the incorporation by reference, on the proposed rule mentioned in paragraph I.D. of this document. We will then address all public comments in a later Final rule. If you want to comment on this authorization and incorporation by reference, you must do so at this time. You may not have another opportunity to comment.

If EPA receives comments that oppose only the authorization of a particular change to the State hazardous waste program or the incorporation by reference of the State program, we may withdraw only that part of this rule, but the authorization of the program changes or the incorporation by reference of the State program that the comments do not oppose will become effective on the date specified above. The Federal Register withdrawal document will specify which part of the authorization or incorporation by reference of the State program will become effective and which part is being withdrawn.

Utah initially received Final authorization for its RCRA hazardous waste base program on 10/10/84, effective 10/24/84 (49 FR 39683). Utah received authorization for revisions to its program on 2/21/89, effective 03/07/89 (54 FR 7417); on 5/23/91 and 8/6/91, effective 07/22/91 (56 FR 23648 as corrected by 56 FR 37291); on 5/15/92, effective 7/14/92 (57 FR 20770); on 2/12/93 and 5/5/93, effective 4/13/93 (58 FR 8232 as corrected by 58 FR 26689); on 10/14/94 and 11/10/94, effective 12/13/94 (59 FR 52084 as corrected by 59 FR 56114); on 5/20/97, effective 7/21/97 (62 FR 27501); on 1/13/99, effective 3/15/99 (64 FR 2144), and on 10/16/00, effective 1/16/01 (65 FR 61109).

Utah has made conforming changes to its regulations for internal consistency relative to the changes made for the authorizations listed in Section I.F. Utah has also changed its regulations to make them more consistent with the Federal requirements.

We are granting Utah Final authorization to carry out the following provisions of the State's program in lieu of the Federal program. These provisions are analogous to the indicated RCRA statutory provisions or RCRA regulations found at 40 CFR as of July 1, 1995 unless otherwise noted. The Utah provisions are from the Utah Administrative Code (UAC) effective as indicated.

In addition to the above listed changes, EPA is authorizing changes to the following State provisions. These provisions do not have a direct analog in the Federal RCRA regulations; however, none are considered broader-in-scope than the Federal program. This is because these provisions were either previously authorized as part of Utah's base authorization or have been added to make the State's regulations internally consistent with changes made for the other authorizations listed in Section F of this document. We have reviewed these provisions and have determined that they are consistent with and no less stringent than the Federal requirements.

Since the base program, Utah has removed certain provisions from the base regulations that had no Federal analog and which clarified the State's program. These provisions have been reviewed and we have determined that it is appropriate for the State to remove them and that their removal has no impact on the equivalency or consistency with the Federal program. The provisions removed were section 2.1.10, section 2.2, section 3.3.2(b)(3)(iii), section 3.3.2(b)(4)(iv), and the undesignated paragraph after section 7.20.2(d).

This authorization does not affect the status of State permits and those permits issued by EPA because no new substantive requirements are a part of these revisions.

This program revision does not extend to “Indian Country” as defined in 18 U.S.C. 1151. Indian Country includes lands within the exterior boundaries of the following Indian reservations located within or abutting the State of Utah:

1. Goshute Indian Reservation.

2. Navajo Indian Reservation.

3. Northwestern Band of Shoshoni Nation of Utah (Washakie) Indian Reservation.

4. Paiute Indian Tribe of Utah Indian Reservation.

5. Skull Valley Band of Goshute Indians of Utah Indian Reservation.

6. Uintah and Ouray Indian Reservation (see below).

7. Ute Mountain Indian Reservation.

With respect to the Uintah & Ouray Indian Reservation, Federal courts have determined that certain lands within the exterior boundaries of the Reservation do not constitute Indian Country. This State program revision approval will extend to those lands which the courts have determined are not Indian Country.

In excluding Indian Country from the scope of this program revision, EPA is not making a determination that the State either has adequate jurisdiction or lacks jurisdiction over sources in Indian Country. Should the State of Utah choose to seek program authorization within Indian Country, it may do so without prejudice. Before EPA would approve the State's program for any portion of Indian Country, EPA would have to be satisfied that the State has authority, either pursuant to explicit Congressional authorization or applicable principles of Federal Indian law, to enforce its laws against existing and potential pollution sources within any geographical area for which it seeks program approval and that such approval would constitute sound administrative practice.

There were omissions in the table published as part of the May 23, 1991 (56 FR 23648), as amended August 6, 1991 (56 FR 37291), authorization notice for Utah. The affected entries for that table are shown in the table below. The corrections have been bolded and italicized.

This is a summary of the Commission's Report and Order (R&O) in MM Docket No. 98-203, FCC 01-306, adopted on October 11, 2001, and released on October 17, 2001. The full text of the Commission's R&O 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, Qualex International, (202) 863-2893, 445 Twelfth Street, SW., Room CY-B402, Washington, DC. The complete text is also available under the file name fcc01306.pdf on the Commission's Internet site at www.fcc.gov.

This document contains new or modified information collection requirements. The fee program established herein will require NCE TV licensees annually to file a new reporting form. Licensees will be required to report whether they provided ancillary or supplementary services, what ancillary or supplementary services they provided, which of those services are subject to a fee, and the gross revenues received from all feeable ancillary or ancillary services. NCE licensees providing service subject to a fee additionally will be required annually to file FCC Form 159 in remittance of the fee. So that the Commission may audit NCE licensees records supporting the calculation of the fees due, each NCE licensee will be required to retain such records for three years from the date of remittance of fees. In addition, each NCE TV licensee will be required to maintain documentation sufficient to show compliance at renewal time and in response to any complaint with the requirement to use their entire bitstream primarily for nonprofit, noncommercial, educational broadcast services on a weekly basis. Implementation of these new or modified reporting and recordkeeping requirements will be subject to approval by the Office of Management and Budget as prescribed by the Paperwork Reduction Act of 1995.

1. With this Report and Order , we clarify the manner in which noncommercial educational (“NCE”) television licensees may use their excess digital television (“DTV”) capacity for remunerative purposes. Among other things, we amend § 73.621 of our rules to apply to the entire digital bitstream, including ancillary or supplementary services, thereby requiring NCE licensees to use their digital capacity primarily for a noncommercial, nonprofit, educational broadcast service. We also amend §§ 73.642 and 73.644 of our rules to clarify that NCE licenses may offer subscription services on their excess digital capacity. We determine that section 399B of the Communications Act of 1934, as amended, the provision restricting advertising by NCE licensees, continues to apply to all broadcasting by NCE licensees, but does not apply to nonbroadcast services, such as subscription services provided on their DTV channels. Finally, we amend § 73.624(g) of our rules to apply to NCE licensees the program for assessing and collecting fees upon feeable ancillary or supplementary services provided on their DTV capacity that we have established for commercial licensees, as required by the Telecommunications Act of 1996 (“1996 Act”), Public Law 104-104, 110 Stat. 56 sec. 201 (1996), codified at 47 U.S.C. 336.

2. The 1996 Act provided that initial eligibility for any advanced television licenses that we issue should be limited to existing broadcasters, conditioned upon the requirement that “either the additional license or the original license held by the licensee be surrendered to the Commission for reallocation or reassignment (or both) pursuant to Commission regulation.” In our Fifth Report and Order in the DTV proceeding, we adopted rules to implement the statute, providing a specific transition process to digital technology for all existing television broadcasters. 62 FR 26996, May 16, 1997. Among other things, we established standards for license eligibility, a transition and construction schedule, and a requirement that broadcasters continue to provide one free over-the-air video programming service. We also adopted rules permitting DTV licensees, without distinguishing between commercial and noncommercial licensees, to use their DTV capacity to provide ancillary or supplementary services, provided that these services do not derogate the free digital television service.

3. In their Petition for Reconsideration of the Fifth Report and Order, the Association of America's Public Television Stations and the Public Broadcasting Service (“AAPTS/PBS”) requested clarification of public television stations authority to use excess capacity on DTV channels for commercial purposes. As neither section 336 nor our DTV rules distinguishes between commercial and noncommercial stations, AAPTS/PBS argued that both are intended to allow public stations to offer ancillary or supplementary services for revenue-generating purposes. In opposing this request in part, Media Access Project and other public interest parties (“MAP”), jointly argued that, while public television stations should be able to provide some revenue-generating ancillary or supplementary services, these services must be consistent with the noncommercial nature of public television as set forth in section 399B of the Communications Act, the provision restricting advertising by these stations.

4. This request for clarification made by AAPTS/PBS raised significant issues regarding the service and funding opportunities made available to NCE stations as a result of the transition to digital transmission. In recognition of the importance of this issue to the future of public television as it enters the digital age, in the Notice of Proposed Rulemaking (“ NPRM ”) in this proceeding, we sought further comment on the AAPTS/PBS petition in order to establish a more complete record on the issues it raised. 63 FR 68722, December 14, 1998.

5. In their Petition AAPTS/PBS also requested that we exempt public television licensees from any fee assessed in connection with use of digital spectrum for ancillary or supplementary services to the extent revenues from those service are used to support the licensee's mission-related activities. Section 336(e) of the 1996 Act, which requires DTV licensees receiving fees or certain other compensation for ancillary or supplementary services provided on the DTV spectrum to return a portion of that revenue to the public, charged us with establishing a means of assessing and collecting fees for those ancillary or supplementary services.

6. In a Notice of Proposed Rule Making in MM Docket No. 97-247 (“ DTV Fees Proceeding ”), we sought comment on AAPTS/PBS's request for such an exemption and subsequently determined that AAPTS/PBS's request should be considered in this proceeding. 63 FR 460, January 6, 1998. In the DTV Fees Report and Order, we established a program for assessing and collecting fees for certain ancillary or supplementary services provided by commercial licensees on their DTV capacity. 63 FR 69208, December 16, 1998. In the NPRM in this proceeding, MM Docket No. 98-203, we sought additional comment regarding an exemption for noncommercial licensees in light of the comments received on this issue in the DTV Fees Proceeding . 63 FR 68722, December 14, 1998. We also sought comment on tentative proposals set forth in the NPRM .

7. Background . The Communications Act defines a “noncommercial educational broadcast station” and “public broadcast station” as a television or radio broadcast station that is eligible under the FCC's rules to be licensed as “a noncommercial educational radio or television broadcast station which is owned and operated by a public agency or nonprofit private foundation, cooperation, or association” or “is owned and operated by a municipality and which transmits only noncommercial programs for educational purposes,” 47 U.S.C. 397(6). In 1981, Congress amended the Communications Act to give public broadcasters more flexibility to generate funds for their operations. Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, sec. 1231, 95 Stat. 357, 731 (codified at 47 U.S.C. 399B). See also H.R. Rep. No. 97-82, at 13-14. As amended, section 399B of the Act permits public stations to provide facilities and services in exchange for remuneration as long as those uses do not interfere with the stations' provision of public telecommunications services. Section 399B, however, does not permit public broadcast stations to make their facilities “available to any person for the broadcasting of any advertisement.” In addition, under § 73.621 of our rules, public television stations are required to furnish primarily an educational as well as a nonprofit and noncommercial broadcast service.

8. In the Fifth Report and Order, we implemented section 336 of the 1996 Act, which sets forth the DTV licensing provisions of the 1996 Act, by adopting § 73.624 of our rules. 62 FR 26996, May 16, 1997. Section 73.624(g) allows broadcasters the flexibility to respond to the demands of their audience by providing ancillary or supplementary services, including subscription television, provided that these services do not derogate the mandated free, over-the-air program service. In the NPRM in this proceeding, we invited comment on AAPTS/PBS's request that we clarify that § 73.621 of our rules, which requires public stations to provide a primarily nonprofit, noncommercial, educational broadcast service, is not applicable to ancillary or supplementary services provided on DTV capacity, and on whether such a clarification is consistent with the nonderogation of services provisions of section 399B.

9. In particular, we sought comment on a number of options with respect to whether and how we should amend § 73.621 of our rules. For example, we sought comment on whether we should extend the requirement to provide an educational nonprofit service to ancillary or supplementary services provided by noncommercial licensees on their DTV capacity, or whether we should clarify that the requirement applies only to the single, free-over-the-air broadcast service it is required to provide.

10. We also sought comment on whether and how we can permit NCE stations to provide remunerative ancillary or supplementary services in a manner that does “not interfere with the provision of public telecommunications services” by such stations as required by section 399B of the Act. In particular, we asked whether NCE DTV stations will have the capacity to provide ancillary or supplementary services without interfering with their ability to provide a primarily educational NCE broadcast service, and whether such ancillary or supplementary services can provide an important funding source that could facilitate the transition to DTV for NCE stations, and, more generally, enhance their primary mission of providing a robust noncommercial, educational broadcasting service.

11. Comments. In its comments, AAPTS modifies its original request, presented in its Petition for Reconsideration of the Fifth Report and Order, which would have exempted remunerative ancillary or supplementary services from § 73.621 of our rules. AAPTS now agrees that, with respect to provision of remunerative ancillary or supplementary service, a public television station must be used primarily to provide a noncommercial educational broadcast service, and the offering of such service must not interfere with the provision of public telecommunications services. AAPTS also contends that its proposed standards are consistent with those we have applied in the analog environment in approving the offer by public television stations of a variety of ancillary services. AAPTS suggests that we only need clarify that § 73.621 of our rules applies, without change, to the digital channel. It states that the requirement that the primary use of public television stations is to provide an educational and nonprofit, noncommercial broadcast service would still allow ancillary or supplementary service to be provided on NCE's excess digital capacity. AAPTS also requests that, since we concluded in the Fifth Report and Order that DTV broadcasters may offer subscription television as an ancillary or supplementary service, that we amend §§ 73.642 and 73.644 of our rules to clarify that public television stations may provide subscription television services.

12. AAPTS denies that provision of remunerative ancillary or supplementary services would change the essential nature of public television. It contends that digital technology will provide sufficient capacity for public television stations to offer a range of services while preserving their primary use for a noncommercial educational broadcast service. In addition, it argues that section 336 provides, via its prohibition against derogation of services, separate assurance that any ancillary or supplementary service will not interfere with a public television station's basic broadcast service. AAPTS submits that other limitations on the extent to which public televisions stations can engage in commercial ventures include their nonprofit educational mission upon which their tax exempt status is based, the need to preserve viewer and government support, the requirement to pay taxes on income unrelated to the exempt purpose of the organization, and the oversight of stations by responsible bodies. AAPTS also notes that although section 336 itself does not impose special restrictions on public television stations, two limitations must be applied to the provision of ancillary or supplementary service by these stations: first, a public television station must be used primarily to provide a noncommercial educational broadcast service under the Commission's rules; second, the offering of these services must not interfere with the provision of public telecommunications services under section 399B of the Communications Act.

13. AAPTS states that, at this point, public television stations do not have firm plans for the use of their digital spectrum, and it is impossible to predict what opportunities may be available to them or to what extent individual stations will take advantage of such opportunities. It urges us not to impose restrictions now on the activities of public television stations, but to wait until the scheduled biennial examination of digital regulations, set forth in the Fifth Report and Order , to determine whether changes are needed. The Office of the United Church of Christ and other public interest parties (“UCC et al. ”), however, contend that AAPTS is unclear about its members” plans to engage in advertiser supported ancillary or supplementary services and how much of their digital capacity they plan to commit to subscription and other remunerative services. UCC et al. urges us to draw a bright line and find that an NCE broadcaster “primarily” serves the educational needs of a community when it provides free, not-for-profit over-the-air services over 50 percent or more of its digital capacity at any one time.

14. National Datacast, Inc. (“National Datacast”) is a for-profit subsidiary of the Public Broadcasting Service that provides data services using the vertical blanking interval (VBI) on the analog signal of public television stations. It argues that the Commission imposed no restrictions on the commercial operation of data services using the VBI, including advertiser-supported services, by public television stations or entities affiliated with public television; that the force of this ruling remains unaltered by section 336; and that no restrictions should be applied to National Datacast's data transmission in the digital spectrum of public television stations. The analog spectrum requires the use of most of an NCE licensee's channel to carry their video broadcast signal, leaving only a very small portion, the VBI and the Visual Signal, available to be used for ancillary or supplementary services. The digital spectrum, however, allows NCE licensees to offer a number of ancillary or supplementary services on their excess digital capacity in addition to mandated free, over-the-air program service. National Datacast points to its service as a “precursor to the successful use of digital spectrum” for generating revenues to help support public television.

15. Decision. We will amend § 73.621 of our rules to clarify that the section's requirements apply to the entire digital bitstream of NCE licensees, including the provision of ancillary or supplementary services. We will require that NCE licensees use their entire digital capacity primarily for a nonprofit, noncommercial, educational broadcast service. This amendment will adapt § 73.621 of our rules to the digital environment. Although we decline to quantify the term “primarily,” we will consider it to mean a “substantial majority” of their entire digital capacity.

16. We decline to adopt the suggestion of UCC et al. that we draw a bright line to require that NCE broadcasters provide free, not-for-profit over-the-air services over 50 percent or more of their digital capacity at any one time. Such a decision would provide substantially less flexibility to NCE licensees in developing their digital services. For example, an NCE licensee might want to use most of its digital capacity for High Definition Television (“HDTV”) programming during certain times of the day and, at other times, various amounts of capacity for Standard Definition Television (“SDTV”) programming and remunerative ancillary or supplementary services. UCC et al. 's suggestion, by specifying 50 percent or more at all times, would seem to restrict their flexibility in this regard. We see no persuasive reason to impose such a limitation. While we believe that a “minute by minute” approach, such as that suggested by UCC et al. , above, would restrict the flexibility of NCE licensees to too great an extent, we believe that some time period limitation is appropriate. Because stations typically schedule their programming on a weekly basis, we believe that requiring them to use their entire bitstream primarily for nonprofit, noncommercial, educational broadcast services on a weekly basis will provide them with sufficient flexibility. We will require NCE licensees to maintain documentation sufficient to show compliance with this requirement at renewal time and in response to any complaints.

17. Our decision to apply § 73.621 of our rules to the entire digital bitstream also is consistent with the 1996 Act, as well as our Fifth Report and Order , in which we stated that our overarching goal is to promote the success of a free, local television service using digital technology. We believe that this action will help to preserve the noncommercial educational nature of public broadcasting, while allowing NCE licensees some flexibility in remunerative use of their spectrum and indicating the boundaries that we will apply to such use. We agree with AAPTS that digital technology will allow sufficient capacity for public television stations to offer a range of services while preserving their primary use for a nonprofit, noncommercial, educational broadcast service. We also note that section 336 provides, via its prohibition against derogation of services, separate assurance that any ancillary or supplementary service will not interfere with a public television station's basic broadcast service. Moreover, NCE licensees are, of course, subject to the general requirement to provide one free over-the-air video programming service. In light of the other limitations on the extent to which public televisions stations can engage in commercial ventures, we will not, at this time, impose additional restrictions on an NCE licensee's ability to provide ancillary or supplementary services on its excess digital capacity. We will address any problems that might arise in the periodic reviews of our digital regulations set forth in the Fifth Report and Order , or on a case-by-case basis.

18. We will amend §§ 73.642 and 73.644 of our rules to clarify that NCE licenses may offer subscription services on their excess digital capacity. We included such services in our definition of ancillary or supplementary services in the Fifth Report and Order. Given our goal of providing NCE licensees with flexibility in the use of their digital spectrum, within certain boundaries, we see no reason to prohibit them from providing subscription services.

19. Background. In its Petition for Reconsideration of the Fifth Report and Order , AAPTS/PBS requested that we clarify that public television stations may use their excess capacity on DTV channels for commercial purposes. In opposing this request in part, MAP argued that, while public television stations should be able to provide some revenue-generating ancillary or supplementary services, these services must be consistent with the noncommercial nature of public television as set forth in section 399B, which restricts advertising by these stations. In reply, AAPTS/PBS argued for an interpretation in which the advertising ban of section 399B would continue to apply to the primary noncommercial broadcast service, while any ancillary or supplementary use of DTV channels would be free from the restrictions of this section. It also argued that even if the section 399B advertising restrictions are found to apply to these services, we have discretion under section 336(a)(2) to allow public TV licensees to offer advertiser-supported services if we find these services to be in the public interest.

20. In the NPRM we sought comment on how the advertising ban set forth in section 399B of the Communications Act implicates the provision of remunerative services by public DTV stations. Section 399B prohibits a public station from “making its facilities available to any person for the broadcasting of any advertisement.” By its plain language, we noted that this section would appear to prohibit advertisements on any service that would constitute broadcasting, while permitting a public DTV station to air advertisements on any nonbroadcast service.

21. We sought comment on our tentative conclusion that while section 399B continues to apply to all video broadcast programming streams provided by public DTV stations, it does not apply to any subscription services they provide on their DTV channels since such services do not constitute “broadcasting.” We also sought comment on the extent to which section 399B applies to advertising carried on any other non-subscription ancillary or supplementary services carried by a public TV station. In addition, we asked parties to address AAPTS/PBS's argument that even if section 399B's advertising restrictions apply to some ancillary or supplementary services, we have discretion under section 336(a)(2) of the Act to allow public TV licensees to include advertiser-supported services if we find these services to be in the public interest.

22. Comments. UCC et al. contends that the plain language of 399B, its legislative history, and subsequent actions by Congress demonstrate that Congress as recently as the 1996 Act did not intend that NCE licensees carry commercial advertisements, including on any ancillary or supplementary services provided on their DTV capacity. An advertisement is defined in section 399B(b) as “any message or other programming material which is broadcast or otherwise transmitted in exchange for any remuneration.” UCC et al. contends that this definition is incorporated by reference in section 399B(b)(2), so that when the statute prohibits broadcasting of “advertisements,” it prohibits any message that is either broadcast or otherwise transmitted. Moreover, although section 399B expressly prohibits only the “broadcasting” of advertisements, UCC et al. notes that in 1981 that was the only way NCE stations could carry advertising. UCC et al. urges us to not extend the Subscription Video decision to allow NCEs to provide advertiser-supported subscription services over public broadcast stations. It particularly would object to advertisements on NCE licensees' free over-the-air services. UCC et al. contends that NCE licensees did not, and still do not, have the authority to provide advertiser-supported subscription services.

23. UCC et al. also contends that section 336(a)(2) does not explicitly permit NCE licensees to carry commercial advertising based on the Commission's finding that it is in the public interest, nor does section 336(a)(2) explicitly repeal the ban on advertising in section 399B(b)(2). It argues that to interpret section 336 in that manner would directly conflict with section 399B. UCC et al. submits that these sections can be harmonized by permitting NCE licensees only to provide non-advertiser-supported ancillary or supplementary services.

24. AAPTS and Family Stations of New Jersey, Inc. (“Family NJ”) contend that the section 399B ban on advertising by NCE stations applies only to the basic broadcast service, not to any ancillary or supplementary services. AAPTS acknowledges that the 399B definition of advertisement is broader, referring to material that is “broadcast or otherwise transmitted,” than the language of the prohibition. But AAPTS contends that it is the language of the prohibition, which only forbids “broadcasting” of an advertisement, not “broadcasting or otherwise transmitting,” that is relevant. AAPTS reasons that Congress adopted section 399B in the context of analog broadcasting, where a station carries only a single broadcast service, and was concerned with insulating public television program control and content from the influence of special interests. AAPTS argues that digital technology would allow a station to offer advertiser-supported broadcast service on its ancillary or supplementary capacity that is completely unrelated to and has no influence over the station's primary noncommercial broadcast service.

25. AAPTS, Family NJ, and National Datacast also contend that our previous decisions have allowed NCEs to provide subsidiary communications services on the VBI without regard to whether they include advertisements. National Datacast argues that we authorized the use of the VBI for commercial services, including advertising, in Teletext Transmission. The only pertinent restriction was that any offering of services for remuneration “shall not interfere with the provision of public telecommunications services”.

26. UCC et al. , however, argues that our 1980 decisions allowing NCE licensees to use their analog VBI for remunerative services do not support commenters' assertions that we have allowed advertiser-supported ancillary services on noncommercial stations. UCC et al. contends that we never squarely addressed in those decisions whether section 399B prohibits advertiser-supported services on the VBI, but always specified that the activity must be consistent with section 399B. UCC et al. also contends that it would be arbitrary and capricious for us to apply decisions that affect a minuscule slice of analog capacity used only for text to digital services that could use as much as 80% of the bitstream at any one time for services that would include text, data, broadband and, most importantly, video services. UCC et al. cautions that providing advertiser-supported services would harm NCE licensees more than it would help them, leading to a loss of public and Congressional support. AAPTS, however, urges us to allow public television stations the flexibility to develop and implement remunerative ancillary or supplementary uses of the digital spectrum and avoid premature promulgation of rules that may be overbroad and unnecessary, addressing any concerns arising under section 399B in a “concrete context.”

27. Decision. We conclude that the section 399B ban on advertising applies to all broadcast programming streams provided by NCE licensees, but does not apply to ancillary or supplementary services on their DTV channels, such as subscription services or data transmission services, to the extent that such services do not constitute “broadcasting.”

28. While the definition of “advertisement” in section 399B refers to material that is “broadcast or otherwise transmitted,” the plain language of the specific prohibition only forbids the “broadcasting” of any advertisement. UCC et al. argues that limiting the prohibition on advertisements to “broadcasting” renders the “otherwise transmitted” language in the definition of “advertisement” meaningless and, thus, UCC et al. would read the prohibition as applying to all transmissions. Although UCC et al. 's argument is one way to read the statute, we believe that UCC et al. 's reading is problematic because, as noted, the prohibition in section 399B(b)(2) refers to the “broadcasting of any advertisement,” whereas the definition in (a)(1) treats broadcasting as only one means of transmitting advertising. We believe the better way to reconcile this disparity is the following: By defining an “advertisement” as “any message or other programming material which is broadcast or otherwise transmitted in exchange for any remuneration,” Congress was arguably acknowledging that noncommercial stations were technologically capable of transmitting advertisements on a broadcast or nonbroadcast basis. AAPTS argues that (t)he phrase ‘otherwise transmitted’ also has clear meaning, given the technologies available in 1981 when the legislation was under consideration. At the time the statute was being deliberated, several forms of ‘non-broadcast’ transmission services were being used or had been used by television stations. It is therefore reasonable to suppose that Congress was fully aware of these developments and intentionally considered them when legislating. Ex parte letter of AAPTS, October 8, 1999, at 2; see id. at 2-7 (describing such nonbroadcast services as use of the vertical blanking interval, teletext, the instructional television fixed service, and the broadcast auxiliary service). When Congress set out the prohibition in section 399B(b)(2), however, it expressly limited it to those advertisements provided on a broadcast basis. We thus believe that the better reading is the literal one: that section 399B only prohibits public broadcast stations from making their facilities “available to any person for the broadcasting of any advertisement.”

29. The term “broadcasting” is defined in the Communications Act as “the dissemination of radio communications intended to be received by the public, directly or by the intermediary of relay stations,” 47 U.S.C. 153(6). In 1986, we addressed this definition in our Subscription Video proceeding. Subscription Video, 52 FR 6152, March 2, 1987, aff'd sub nom. National Association for Better Broadcasting v. FCC, 849 F.2d 665 (D.C. Cir. 1988). We recognize that section 399B was enacted before Subscription Video. Congress gave no indication in section 399B, however, that it intended to lock in the Commission's prior interpretation of the statutory definition of the term “broadcasting.” See Lukhard v. Reed, 481 U.S. 368, 379 (1987) (“It is of course not true that whenever Congress enacts legislation using a word that has a given administrative interpretation it means to freeze that administrative interpretation in place.”). In Subscription Video we determined that the term “broadcasting” as defined by the Communications Act “refers only to those signals which the sender intends to be received by the indeterminate public.” We therefore found that “a necessary condition for the classification of a service as broadcasting is that the licensee's programming is available to all members of the public, without any special arrangements or equipment.” Based on these criteria, we ruled that subscription television does not constitute broadcasting. Applying these same criteria to the digital spectrum, we find that subscription television provided by NCE licensees on their excess digital spectrum does not constitute “broadcasting.” We conclude therefore that NCE licensees may include advertising in their subscription television offerings, as the section 399B ban on advertising applies only to broadcast streams. We also conclude that these same criteria continue to apply to any DTV capacity that NCE licensee might lease to other parties. For example, a public television station would not be permitted to enter into an agreement that would allow “Network A” to broadcast its advertiser-supported “Popular Program B” over the public television station's excess digital capacity, while an agreement that would allow “Network A” to transmit its “Popular Program B” on a subscription basis would be permitted.

30. With respect to the extent to which section 399B applies to advertising carried on any other ancillary or supplementary services carried by a public TV station, we turn to the rules that we adopted in the Fifth Report and Order. These rules list examples of the kinds of services that may be offered as ancillary or supplementary services. They include, but are not limited to, “computer software distribution, data transmissions, teletext, interactive materials, aural messages, paging services, audio signals, subscription video, and any other services that do not derogate DTV broadcast stations' obligations” to “transmit at least one over-the-air video broadcast signal provided at no direct charge to viewers.” We stated that such services may be provided on a broadcast, point-to-point or point-to-multipoint basis, provided, however, that “no video broadcast signal provided at no direct charge to viewers shall be considered ancillary or supplementary.”

31. This definition and illustrative list of ancillary or supplementary services makes clear, first, that over-the-air video programming provided at no charge to viewers is not ancillary or supplementary service, and, conversely, that services other than a free video broadcast signal are, by definition, ancillary or supplementary services. Although we received very little comment on the types of non-subscription ancillary or supplementary services parties contemplate providing, it is possible that NCE licensees may provide without a fee to viewers data, audio or other services. For example, an NCE licensee might provide data services that could be accessed by the general public using a personal computer or provide, through interactive DTV programming, sports scores that could be accessed by the public viewing a broadcast sports event. Such services, although ancillary or supplementary, if constituting “the dissemination of radio communications intended to be received by the public, directly or by the intermediary of relay stations,” would fall under the definition of “broadcasting” as defined in the Communications Act, and would be subject to the section 399B advertising ban. To the extent that ancillary or supplementary services offered by DTV licensees are not broadcasting services, NCE licensees may include advertising in their ancillary or supplementary services on their excess DTV capacity, as the section 399B prohibition of advertising applies only to broadcast programming. Section 399B also requires that public stations engaged in revenue generating activities comply with accounting procedures designed to separately identify these commercial revenues and costs, and it prohibits Corporation for Public Broadcasting funds from being used to defray any costs associated with these activities. Until we gain more experience in determining whether an ancillary or supplementary service is a broadcasting service, we will simply be guided by the statutory criteria as questions arise.

32. Finally, in the NPRM, we asked parties to address AAPTS/PBS's argument that even if section 399B's advertising restrictions apply to some ancillary or supplementary services, we have discretion under section 336(a)(2) of the Act to allow public TV licensees to include advertiser-supported services if we find these services to be in the public interest. Section 336(a)(2) states that if we issue additional licenses for DTV, we shall “adopt such regulations that allow the holders of such licensees to offer such ancillary or supplementary services on designated frequencies as may be consistent with the public interest, convenience or necessity.” Given our statutory interpretation of section 399B, which allows NCE licensees considerable flexibility to offer advertiser-supported subscription services and other ancillary or supplementary services, there is no need to interpret section 336(a)(2) as AAPTS/PBS suggests. More importantly, we conclude that the plain language of section 336(a)(2) does not support the result AAPTS/PBS suggests.

33. As we stated in the NPRM, we are sympathetic to the relief requested in the AAPTS/PBS petition, which described a range of revenue-generating ancillary or supplementary services that could help NCE stations flourish in a digital age. We noted that the costs of converting to digital service will be considerable, and that many NCE stations rely on public funds for the digital build-out. Our decision regarding the provision of advertising on NCE licensees' ancillary or supplementary services will permit NCE stations flexibility in providing such services as well as enhancing their ability to raise revenue for their support and the transition to digital television. We are mindful, however, of UCC et al. 's concern that allowing NCE licensees to provide advertiser-supported services will denigrate the noncommercial nature of the public television system. We emphasize that NCE licensees will continue to be prohibited from providing advertising on their free over-the-air service. Moreover, although we are allowing NCE licensees considerable flexibility in providing remunerative ancillary or supplementary services, they are, of course, required by our amendment of § 73.621 in this Report and Order to use their entire digital capacity primarily for a nonprofit, noncommercial, educational broadcast service and to provide at least one free over-the-air video program signal. Although we decline to quantify the term “primarily,” we will consider it to mean a “substantial majority” of their entire digital capacity. As noted above, NCE licensees are further constrained by such limitations as the nonprofit educational mission upon which their tax exempt status is based, the need to preserve viewer and government support, the requirement to pay taxes on income unrelated to the exempt purpose of the organization, and the oversight of stations by responsible bodies. If we find that these requirements are not sufficient to ensure the integrity of the noncommercial educational broadcast service, we will revisit our decision to allow NCE licensees to provide advertiser-supported ancillary or supplementary services.

34. Background. Section 336(e) of the 1996 Act requires DTV licensees receiving fees or certain other compensation for ancillary or supplementary services provided on the DTV spectrum to return a portion of that revenue to the public. In the DTV Fees Report and Order in MM Docket No. 97-247, we established a program for assessing and collecting fees for the provision of ancillary or supplementary services by commercial DTV licensees as required by the 1996 Act. 63 FR 69208, December 16, 1998. We defined as “feeable ancillary or supplementary service” any ancillary or supplementary services for which the payment of a subscription fee is required to receive such services or for which the licensee receives any compensation from a third party other than commercial advertisements used to support non-subscription broadcasting.

35. In its Petition for Reconsideration of the Fifth Report and Order, AAPTS/PBS requested that we exempt public television licensees from any fee assessed in connection with revenue-generating use of the ancillary or supplementary services on their DTV spectrum “to the extent that revenues from those service are used to support the licensee's mission-related activities.” We sought comment in the DTV Fees Proceeding on whether noncommercial television licensees should be exempt from such fees or subject to a nominal fee when they offer ancillary or supplementary services as a source of funding for public television. 63 FR 460, January 6, 1998. In the DTV Fees Report and Order, we decided to consider the request for exempting NCE licensees from DTV fees in this proceeding, which focuses specifically on questions related to the remunerative use by NCE licensees of their excess digital capacity.

36. In the NPRM in this proceeding, we sought additional comment on this issue in light of the comments received in the DTV Fees Proceeding and the tentative proposals outlined in the NPRM. We sought comment on whether NCE licensees should be exempt from DTV fees when they offer remunerative ancillary or supplementary services as a source of funding for their mission-related activities. We sought comment generally on AAPTS/PBS's arguments in the DTV Fees Proceeding to exempt noncommercial licensees from fees for remunerative ancillary or supplementary services offered on their excess digital capacity. We particularly sought comment on whether such an exemption is consistent with section 336, which does not distinguish between commercial and noncommercial licensees. We also sought comment on whether, if such an exemption is inconsistent with the statute, a nominal or reduced fee would be consistent with the statute. We also asked parties to address MAP's argument that if we allow noncommercial licensees to include advertising in any ancillary or supplementary services, these licensees should pay a fee comparable to that imposed on commercial broadcasters.

37. Comments. All NCE licensees that responded to this issue support granting NCE licensees an exemption from any assessment of fees on revenues earned by use of their digital spectrum for ancillary or supplementary services when those revenues are used to fund mission-related activities. AAPTS argues that although section 336 requires us to collect a fee when a licensee uses its digital spectrum for ancillary or supplementary service, when the revenue is used to support noncommercial services that are in the public interest, there is no need to “recover” anything for the public, as the revenue is already devoted to that purpose. AAPTS also argues that because these revenues help to support noncommercial activities, the provision of ancillary or supplementary services would not result in any “unjust enrichment” of the stations. AAPTS asserts that the provision in section 336 governing the amount to be recovered through any fee, i.e., the amount that would have been received if the excess digital spectrum had been subject to competitive bidding, makes no sense in the context of public television, as our competitive bidding authority does not apply to licenses issued to public television. In addition, the Curators of the University of Missouri (“Curators”), the licensee of commercial VHF station KOMU-TV, an NBC affiliate, urge us to make clear that governmental licensees are exempt from paying fees for ancillary or supplementary DTV services.

38. Go, Inc., Goodlife Broadcasting, Inc. and Central Florida Educational Foundation (filing collectively as “Hardy & Carey Clients”) and AAPTS contend that such an exemption would be consistent with Congressional policy to provide support to public television. AAPTS notes that Congress has exempted public television from fees on various occasions, and it would be counterproductive to detract from the federal financial assistance for public broadcasting and place additional pressure on that support by imposing a DTV fee. Hardy & Carey Clients and Family Stations of New Jersey, Inc. (“Family NJ”) also contend that imposing such fees could slow the transition to DTV and undermine the ability of noncommercial stations to sustain their operations.

39. UCC et al., however, supports exempting NCE licensees from DTV fees only if the licensees are not permitted to provide advertiser-supported ancillary or supplementary services. It contends that the plain language of section 336(e) requires that fees be paid to recover a portion of the public spectrum resource made available for commercial use, and that AAPTS is inconsistent in arguing that section 336 makes no distinction between noncommercial and commercial broadcasters for the purpose of offering ancillary or supplementary services, but then reading into the statute a distinction to exempt NCEs from paying fees for providing such services.

40. Decision. We conclude that NCE licensees are not exempt from the requirement to pay fees on revenues generated by the remunerative use of their excess digital capacity, even when those revenues are used to support their mission-related activities. Section 336(e)(1) of the 1996 Act does not support exempting NCE licensees from DTV fees or charging them nominal fees when they offer feeable ancillary or supplementary services as a source of funding for their mission-related activities. It draws no distinction between commercial and noncommercial stations, stating that the Commission “shall establish a program to assess and collect. * * * an annual fee” from DTV licensees offering subscription-based ancillary or supplementary services. The statute requires that a fee be assessed upon any ancillary or supplementary services on DTV spectrum “for which the payment of a subscription fee is required in order to receive such services” or “for which the licensee directly or indirectly receives compensation from a third party in return for transmitting materials furnished by such third party.”

41. As noted above, section 336 requires, among other things, that the amount of the fee be designed to recover for the public an amount that would have been received had feeable ancillary or supplementary services been licensed pursuant to competitive bidding. We are not persuaded by AAPTS's argument that this provision makes no sense in the context of public television licensees because they are not subject to competitive bidding. The Commission was not directed to take into account the amount of money that would have been recovered had broadcasters purchased this spectrum through competitive bidding. Rather, the provision refers to the amount of money that would have been recovered if spectrum had been made available for these kinds of ancillary or supplementary services and had been licensed pursuant to auction. Indeed, existing commercial broadcasters were also statutorily exempt from competitive bidding for initial digital television licenses. Thus, under AAPTS's reading, all existing commercial broadcasters that received initial DTV licenses under section 336(a) would also be exempt from the fee, making the fee provision almost meaningless. We therefore reject AAPTS's argument.

42. Consequently, we will amend § 73.624(g) of our rules to apply to NCE licensees the same program for assessing and collecting fees upon feeable ancillary or supplementary services provided on their DTV capacity that we established for commercial licensees in the DTV Fees Proceeding, as required by the 1996 Act. NCE licensees will be required to report to us annually on December 1 on their use of their digital bitstreams, and remit fees of five percent of their gross revenues received for feeable ancillary or supplementary services provided on their digital bitstreams. For the first report filed on December 1, 2002, NCE licensees are to report only on services provided from the effective date of this Report and Order through September 30, 2002. We will amend form FCC 317, which currently is used to collect information on DTV ancillary or supplementary use by commercial TV licensees, to include NCE licenses. We will release a Public Notice with a copy of the revised form once it is approved by the Office of Management and Budget.

43. Finally, we also conclude that the Curators of the University of Missouri, the licensee of commercial VHF station KOMU-TV, an NBC affiliate, is not exempt from the requirement to pay fees on revenues generated by the remunerative use of its excess digital capacity, even when those revenues are used to support noncommercial services that are in the public interest. Although Curators is a not-for-profit governmental entity that we have exempted from paying certain application and regulatory fees, section 336(e)(1) does not distinguish between governmental and nongovernmental licensees with respect to the requirement to pay DTV fees. Curators are therefore subject to the program for assessing and collecting fees upon feeable ancillary or supplementary services provided on their DTV capacity that we established for commercial licensees in the DTV Fees Report and Order in MM Docket No. 97-247, and apply to NCE licenses in this proceeding.

44.We are sensitive to NCE licensees' need to provide funding to support their programming and operations and their transition to DTV. As described above, NCE licensees will be able to use their ancillary or supplementary services for remunerative purposes, and earn advertising revenue, as well, on ancillary or supplementary services.

45. We also note that we have previously recognized the financial difficulties often faced by NCE licensees. For example, the construction timetable we adopted in the Fifth Report and Order provides noncommercial stations a six-year period within which to construct their DTV facilities, the longest construction period allotted to any category of DTV applicant. In the Fifth Report and Order, we also stated that special relief measures may eventually be warranted to assist public television stations to make the transition to DTV, but we concluded that it was premature to determine what those specific measures should be. We stated then, and we continue to believe, that determining the specific nature of whatever special relief may be needed for noncommercial educational broadcasters is best considered during our periodic reviews.

46. Paperwork Reduction Act of 1995 Analysis. The action contained herein has been analyzed with respect to the Paperwork Reduction Act of 1995 and found to impose new or modified reporting and recordkeeping requirements or burdens on the public. Implementation of these new or modified reporting and recordkeeping requirements will be subject to approval by the Office of Management and Budget as prescribed by the Act.

47. Accordingly, it is ordered that, pursuant to authority contained in sections 4(i), 303, 336 and 399B of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303, 307, 336 and 399B, part 73 of the Commission's rules is amended as set forth.

48. A Final Regulatory Flexibility Analysis (“FRFA”), see 5 U.S.C. 604, is included in this Report and Order. It is further ordered that the Commission's Compliance and Information Bureau, Reference Information Center, shall send a copy of this Report and Order, including the FRFA, to the Chief Counsel for Advocacy of the Small Business Administration.

49. It is further ordered that, pursuant to the Contract with America Advancement Act of 1996, the rule amendments set forth shall be effective on the later of either December 26, 2001, or upon receipt by Congress of a report in compliance with the Contract with America Advancement Act of 1996, Public Law 104-121.

50. It is further ordered that implementation of the new or modified reporting and recordkeeping requirements imposed by this action shall be effective upon approval by the Office of Management and Budget as prescribed by the Paperwork Reduction Act of 1995.

51. It is further ordered that this proceeding is terminated .

As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility Analysis (IRFA), was incorporated in the Notice of Proposed Rule Making (NPRM) in this proceeding. The Commission sought written public comment on the proposals in the NPRM, including comment on the IRFA. This present Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.

A. Need for, and Objectives of, the Report and Order: With this Report and Order , the Commission clarifies the manner in which noncommercial educational (NCE) television licensees may use their excess digital television (DTV) capacity for remunerative purposes. The objectives of this Report and Order are to: (1) Require NCE licensees to use their entire digital capacity primarily for a nonprofit, noncommercial, educational broadcast service; (2) clarify that NCE licensees may provide subscription television services; (3) determine that although NCE licensees are prohibited form including advertising on their broadcasting services, they may include advertising on nonbroadcast services, such as subscription services, provided on their DTV channels; and (4) require NCE licensees to pay fees on revenues generated by the remunerative use of their excess digital capacity.

The action taken with respect to the first objective amends § 73.621 of the Commission's rules to require NCE licensees to use their entire digital capacity primarily for a nonprofit, noncommercial, educational broadcast service. Although the Report and Order declined to quantify the term “primarily,” it states that it considers it to mean a “substantial majority” of NCE licensees’ entire digital capacity. Because stations typically schedule their programming on a weekly basis, it requires NCE TV licensees to use their entire bitstream primarily for nonprofit, noncommercial, educational broadcast services on a weekly basis. This action adapts § 73.621 of the Commission's rules to the digital environment.

The action taken with respect to the second objective amends §§ 73.642 and 73.644 of the Commission's rules to allow NCE licensees to provide subscription television services. It is taken because the Commission included subscription services in its definition of ancillary and supplementary services in the Fifth Report and Order that may be provided by DTV licensees, and because such action advances the Commission's goal of providing NCE licensees with flexibility in the use of their digital spectrum, within certain boundaries.

The action taken with respect to the third objective determines that section 399B, the provision of the Communications Act restricting advertising by NCE licensees, continues to apply to all broadcasting by NCE licensees, but does not apply to nonbroadcast services, such as subscription services, provided on their DTV channels. This action maintains the integrity of NCE licensees' nonprofit, noncommercial, educational service on their free over-the-air video programming, while allowing NCE licensees some flexibility to use their ancillary and supplementary services for remunerative purposes.

The action taken with respect to the fourth objective amends § 73.624(g) of the Commission's rules to apply to NCE licensees the program for assessing and collecting fees upon feeable ancillary or supplementary services provided on their DTV capacity that the Commission established for commercial DTV licensees. This action is taken because section 336(e) of the Telecommunications Act of 1996 requires the Commission, without distinguishing between commercial and NCE DTV licensees, to return to the public a portion of the fees or certain other compensation earned by DTV licensees for ancillary and supplementary services provided on their DTV spectrum.

B. Summary of Significant Issues Raised by Public Comments in Response to the IRFA: No comments were received specifically in response to the IRFA attached to the NPRM. No small business issues were raised specifically in the comments responsive to the NPRM.

C. Description and Estimate of the Number of Small Entities to Which the Rules Would Apply: 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: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). The RFA generally defines the term “small organization” to mean “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.” A small organization is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.”

The rules and policies adopted in this Report and Order will apply to noncommercial educational (NCE) television licensees, particularly those television stations licensed to operate on channels reserved as “noncommercial educational.” For RFA purposes, television broadcasting stations consist of establishments primarily engaged in broadcasting visual programs by television to the public, except cable and other pay television services. Included in this industry are commercial, religious, educational, and other television stations. Also included are establishments primarily engaged in television broadcasting and that produce taped television program materials. There were 1,678 operating television broadcasting stations in the nation as of June 30, 2001, of which 374 were noncommercial educational stations. FCC News Release “Broadcast Station Totals as of June 30, 2001,” issued July 19, 2001. The SBA has determined that television broadcasters are considered small when they have $10.5 million or less in annual revenue. 13 CFR 121, NAICS Code 51312.

NCE TV licensees, by virtue of their nonprofit, noncommercial, educational broadcasting operations, generate less revenue than commercial TV licensees and are more likely than commercial TV broadcasters to experience financial difficulties in constructing their DTV facilities and making the transition to DTV broadcasting. NCE TV licensees depend partially on fundraising activities and grants from the Corporation for Public Broadcasting to support their programming and operations and their transition to DTV. Based on such differences between typical commercial TV licensees and typical NCE TV licensees, and based on the concern that NCE TV licensees may be differently impacted by the rule amendments and other actions taken in this Report and Order, we choose to separate out NCE TV licensees as smaller entities in the context established herein by the RFA. Therefore, of the 1,678 television stations previously noted, we will consider the 374 NCE TV stations to be smaller entities in the context established herein by the RFA.

At this time, the Commission does not have access to information about the annual revenues of NCE stations. The Commission is therefore unable to distinguish between NCE broadcasters based on their annual revenues. However, based on the differences between typical commercial TV licensees and typical NCR TV licensees, and based on the concern that NCE TV licensees may be differently impacted by the rule amendments and other actions taken in this Report and Order, we choose to separate out NCE TV licensees as smaller entities in the context established herein by the RFA.

D. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements: The Report and Order adopts modifications to existing reporting and recordkeeping requirements. The fee program established herein will require NCE TV licensees annually to file a new reporting form. Licensees will be required to report whether they provided ancillary or supplementary services, what ancillary or supplementary services they provided, which of those services are subject to a fee, and the gross revenues received from all feeable ancillary or ancillary services. NCE licensees providing service subject to a fee additionally will be required annually to file FCC Form 159 in remittance of the fee. So that we may audit NCE licensees records supporting the calculation of the fees due, each NCE licensee will be required to retain such records for three years from the date of remittance of fees. In addition, each NCE TV licensee will be required to maintain documentation sufficient to show compliance at renewal time and in response to any complaint with the requirement to use their entire bitstream primarily for nonprofit, noncommercial, educational broadcast services on a weekly basis.

All these new recordkeeping and reporting requirements will apply to all NCE TV licensees in the same way. Therefore, the action taken here imposes no separate or greater compliance burdens on smaller commercial or non-commercial TV stations within the group of all stations hereby affected.

E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered: With respect to steps taken to minimize significant economic impact on small entities, the actions taken herein will enhance NCE TV licensees' ability to provide funding to support their programming and operations and their transition to DTV. As described above, NCE licensees will be able to use a portion of their digital capacity for remunerative purposes, including the provision of advertising on their non-broadcast ancillary and supplementary services. We also note that the Commission has previously recognized the financial difficulties often faced by NCE licensees. For example, the construction timetable adopted in the Fifth Report and Order provides noncommercial stations a six-year period within which to construct their DTV facilities, the longest construction period allotted to any category of DTV applicant. The Fifth Report and Order also stated that special relief measures may eventually be warranted to assist public television stations to make the transition to DTV, but concluded that it was premature to determine what those specific measures should be. The Commission stated then, and continues to believe, that determining the specific nature of whatever special relief may be needed for noncommercial educational broadcasters is best considered during the Commission's periodic reviews. Lastly, the Commission is considering all NCE broadcasters to be small for the purposes of this RFA analysis.

With respect to significant alternatives considered with respect to the first objective, the Commission considered applying § 73.621 of the Commission's rules to only the one free-over-the-air video broadcast required of all DTV licensees, allowing NCE TV licensees commercial use on their remaining digital capacity. This alternative was not adopted because the Commission believed that it would conflict with § 73.621, which requires that public television stations furnish primarily an educational as well as a nonprofit and noncommercial broadcast service.

Another significant alternative to the first objective considered requiring NCE TV licensees to provide free, not-for-profit over-the-air services over 50 percent or more of their digital capacity at any one time. This alternative was not adopted as such a decision would provide substantially less flexibility to NCE licensees in developing their digital services. For example, an NCE licensee might want to use most of its digital capacity for High Definition Television (“HDTV”) programming during certain times of the day and, at other times, various amounts of capacity for Standard Definition Television (“SDTV”) programming and remunerative ancillary or supplementary services.

With respect to the second objective, a significant alternative considered prohibiting NCE TV licensees from providing subscription services on their excess digital capacity. This alternative was not adopted because the Commission had included such services in the definition of ancillary or supplementary services in the Fifth Report and Order. Moreover, given the Commission's goal of providing NCE licensees with flexibility in the use of their digital spectrum, within certain boundaries, there seemed to be no reason to prohibit them from providing subscription services. Moreover, the ability to provide such a remunerative service is positive.

With respect to significant alternatives considered to the third objective, the Commission considered interpreting section 399B of the Communications Act as prohibiting all advertising on all of NCE TV licensees' digital capacity. This alternative was not adopted because the Commission decided that the better interpretation of the statute was that the broadcasting of advertising is prohibited to NCE TV licensees, but that they may include advertising on their non-broadcast ancillary and supplementary services. Moreover, as the action allows all stations affected to earn money from the provision of advertising, the effect is positive.

With respect to significant alternatives to the fourth action taken, the Commission considered collecting a reduced fee or no fee on the gross revenues earned by NCE TV licenses from all feeable ancillary and supplementary services. The Commission did not adopt either of these alternatives because the Telecommunications Act of 1996, without distinguishing between commercial TV licensees and NCE TV licensees, requires it to collect fees from such revenues from DTV licensees. The Commission will apply to NCE TV licensees the program for assessing and collecting such fees that it established for commercial DTV licensees. Although all NCE TV licensees, including small entity licensees, will be required to pay these fees, they will be allowed to retain 95 percent of such revenues, which is a positive, impact.

Report to Congress: The Commission will send a copy of this Report and Order, including this FRFA, in a report to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of this Report and Order, including this FRFA, to the Chief Counsel or Advocacy of the SBA. A copy of this Report and Order, including this FRFA, will also be published in the Federal Register .