[Federal Register Volume 67, Number 105 (Friday, May 31, 2002)]
[Rules and Regulations]
[Pages 38184-38186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13604]



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Part II





Small Business Administration





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13 CFR Parts 121 and 123



Small Business Size Standards; Travel Agencies; Economic Injury 
Disaster Loan Program; Final Rule

  Federal Register / Vol. 67, No. 105 / Friday, May 31, 2002 / Rules 
and Regulations  

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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 123

RIN 3245-AE93


Small Business Size Standards; Travel Agencies; Economic Injury 
Disaster Loan Program

AGENCY: Small Business Administration (SBA).

ACTION: Final rule.

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SUMMARY: SBA is finalizing the size standard promulgated in the interim 
final rule published on March 15, 2002 that increased the size standard 
for Travel Agencies, North American Industry Classification System 
(NAICS) code 561510, from $1 million to $3 million for economic injury 
disaster loan (EIDL) assistance attributed to the September 11, 2001 
terrorist attacks on the World Trade Center, New York, NY and the 
Pentagon, Arlington, VA. This rule also changes the time at which size 
status is determined for EIDL assistance in connection with the 
September 11, 2001 attacks. This final rule is published in conjunction 
with SBA's final rule that increases the size standard for travel 
agencies for all Federal small business assistance programs. This 
action better defines the size of businesses in this industry that SBA 
believes should be eligible for Federal EIDL assistance.

DATES: This rule is effective May 31, 2002.

FOR FURTHER INFORMATION CONTACT: Diane Heal, Office of Size Standards, 
(202) 205-6618.

SUPPLEMENTARY INFORMATION: SBA is publishing elsewhere in this issue of 
the Federal Register a separate final rule addressing the travel 
agencies size standard for all small business programs.

EIDL Assistance

    On March 15, 2002, SBA issued an interim final rule that increased 
the size standard for the Travel Agencies industry, NAICS code 561510, 
from $1 million to $3 million for EIDL assistance. 67 FR 11874. We 
believe that this action better defines the size of businesses in this 
industry that should be eligible for EIDL loans as a result of the 
September 11, 2001 Terrorist Attacks, 13 CFR Subpart G, and for EIDL 
assistance to businesses in the declared disaster areas under 13 CFR 
Subpart D (September 11 EIDL assistance), especially after the 
September 11, 2001 terrorist attacks. The events of September 11, 2001 
directly impacted travel agencies. The traveling public cancelled and 
rescheduled existing travel arrangements and many postponed further 
travel. Consequently, airlines rescinded travel agencies' commissions 
on flights cancelled or rescheduled due to the attacks. Thus, many 
small travel agencies saw their business decline by 20 to 50 percent. 
On January 23, 2002, SBA issued an inflation adjustment as an interim 
final rule which increased revenue based size standards by 15.8 percent 
and which had an applicability date of September 11, 2001, for the 
purpose of eligibility for September 11 EDIL assistance resulting from 
the terrorist attacks. 67 FR 3041. The travel agencies' $1 million size 
standard was not increased because SBA decided to handle this industry 
by separate rulemaking.
    At the time of the attacks, SBA was preparing a proposed adjustment 
to the travel agencies size standard. The proposed rule, which was 
issued simultaneously with the interim final rule, resulted from recent 
changes in the Travel Agencies industry and SBA's analysis of the 
latest industry data from the U.S. Bureau of the Census, Federal 
contract award data, and information provided by travel agencies trade 
associations.
    SBA found that there was an urgent need to make disaster loans 
available to travel agencies that should be considered small, but that 
did not qualify under SBA's existing size standard of $1 million. For 
more information on the reasons for establishing a $3 million size 
standard, see the March 15, 2002 interim final rule and the proposed 
rule.

Change in the Date of Determination of Size Status

    SBA changed the date of determination of the small business size 
status for purposes of EIDL assistance attributable to the September 
11, 2001 attacks, in order to be able to assist small businesses before 
the deadlines for application of September 11, 2001 EIDL assistance 
under 13 CFR Subpart G expired.

Discussion of Comments on the Interim Final Rule

    SBA received no comments in response to the interim final rule. 
However, in support of the proposed rule to increase the travel 
agencies' size standard for all small business programs, one commenter 
endorsed SBA's actions on EIDL assistance. This commenter stated that 
the need to increase the standard became apparent after the September 
11, 2001 terrorist attacks when many travel agencies were disqualified 
for EIDL assistance due to their revenue size. SBA recognized that 
serious harm would result to the Travel Agencies industry by not 
publishing, as an interim final rule, the increase to the travel 
agencies' size standard for EIDL assistance resulting from September 
11, 2001 terrorist attacks. As pointed out by the commenter, because of 
the $1 million size standard, travel agencies were being harmed by 
being disqualified for EIDL assistance because of their revenue size. 
For more information, see ``Justification for Publication as an Interim 
Final Rule'' in SBA's Interim Final Rule of March 15, 2002. 67 FR 11874 
at 11878-79.

Compliance With Executive Orders 12866, 12988, and 13132, the 
Paperwork Reduction Act (44 U.S.C. Ch. 35) and the Regulatory 
Flexibility Act (5 U.S.C. 601-612).

    This is not a major rule under the Congressional Review Act, 5 
U.S.C. 800. For purposes of the Paperwork Reduction Act, 44 U.S.C. 
Ch.35, SBA has determined that this rule would not impose new reporting 
or record keeping requirements, other than those already required of 
SBA. For purposes of Executive Order 13132, SBA had determined that 
this rule does not have any federalism implications warranting the 
preparation of a Federalism Assessment. For purposes of Executive Order 
12988, SBA has determined that this rule is drafted, to the extent 
practicable, in accordance with the standards set forth in that Order. 
The Office of Management and Budget (OMB) reviewed this rule as a 
``significant regulatory action'' for purposes of Executive Order 
12866. Size standards determine which businesses are eligible for 
Federal small business programs. Below is a regulatory impact analysis 
of this size standard change. SBA received no comments on the analysis 
presented in the interim final rule.

Regulatory Impact Analysis

i. Is There a Need for the Regulatory Action?

    SBA is chartered to aid and assist small businesses through a 
variety of financial, procurement, business development, and advocacy 
programs. To effectively assist intended beneficiaries of these 
programs, SBA must establish distinct definitions of which businesses 
are deemed small businesses. The Small Business Act (15 U.S.C. 632(a)) 
delegates to the SBA Administrator the responsibility for establishing 
small business definitions. It also requires that small business 
definitions vary to reflect industry

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differences. The preamble of the interim final rule explained the 
approach SBA follows when analyzing a size standard for a particular 
industry. Based on that analysis, SBA believes that a revision to the 
current size standard for travel agencies is needed to better define 
small businesses in this industry for purposes of September 11 EIDL 
assistance.
    In addition, the interim final rule explained SBA's reasons for 
changing the date size status is determined for September 11, 2001 EIDL 
assistance. SBA believes that this change is necessary to assist travel 
agencies and other small businesses that should have been considered 
small for purposes of September 11, 2001 EIDL assistance. On January 
23, 2002, SBA increased its size standards to reflect the effects of 
inflation since 1994. Businesses recognized as small under that rule 
are able to file applications for September 11, 2001 EIDL assistance. 
Moreover, of all the industries severely impacted by the September 11 
attacks, the Travel Agencies industry is the only one that did not have 
its size standard adjusted to reflect the effect of inflation. SBA did 
not increase the size standard for this industry at that time since SBA 
was already in the process of re-evaluating the travel agencies size 
standard to reflect changing industry conditions. The combination of 
these unique circumstances necessitate changing the date of 
determination of size status for purposes of September 11, 2001 EIDL 
assistance only. SBA does not foresee the need to apply this approach 
in the future.

ii. What Are the Potential Benefits and Costs of This Regulatory 
Action?

    The most significant benefit to businesses obtaining small business 
status as a result of this rule is eligibility for EIDL assistance 
resulting from the September 11, 2001 attacks. Under this rule, 732 
additional firms may obtain small business status and become eligible 
for this assistance. SBA estimates that $1.3 to $2.8 million in 
additional EIDL assistance may result from increasing the size standard 
for travel agencies. SBA also estimates an additional $2.3 million to 
$2.7 million in EIDL assistance to businesses that became eligible 
small businesses as a result of the recent inflation adjustment to 
monetary size standards. These estimates are based on participation 
rates and EIDL loan amounts of travel agencies and small businesses in 
the industries covered by the size standard inflation adjustment.
    The revision to current size standards for travel agencies is 
consistent with SBA's statutory mandate to assist small businesses. 
This regulatory action promotes the Administration's objectives. One of 
SBA's goals in support of the Administration's objectives is to help 
individual small businesses succeed through fair and equitable access 
to capital and credit, government contracts, and management and 
technical assistance. Reviewing and modifying size standards when 
appropriate ensures that intended beneficiaries have access to small 
business programs designed to assist them. Size standards do not 
interfere with state, local, and tribal governments in the exercise of 
their government functions. In a few cases, state and local governments 
have voluntarily adopted SBA's size standards for their programs to 
eliminate the need to establish an administrative mechanism for 
developing their own size standards.

Final Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA), this rule may have a 
significant impact on a substantial number of small entities. 
Immediately below, SBA sets forth a final regulatory flexibility 
analysis (FRFA) of this rule addressing the reasons and objective of 
the rule; SBA's description and estimate of small entities to which the 
rule will apply; the projected reporting, record keeping, and other 
compliance requirements of the rule; the relevant Federal rules which 
may duplicate, overlap or conflict with the rule; and alternatives to 
the final rule considered by SBA that minimize the impact on small 
businesses.

(1) What Is the Need for and Objectives of This rule?

    The revision to the travel agencies size standard more 
appropriately defines the size of businesses in this industry that SBA 
believes should be eligible for EIDL assistance. The change in date 
status for the sole purpose of September 11, 2001 EIDL assistance is 
necessary to assist travel agencies and other small businesses that 
should have been considered small for the purposes of this assistance.

(2) What Significant Issues Were Raised by the Public Comments in 
Response to the Initial Regulatory Flexibility Analysis (IRFA)?

    There were no comments received in response to the IRFA in the 
Interim Final Rule.

(3) What Is SBA's Description and Estimate of the Number of Small 
Entities to Which the Rule Will Apply?

    Within the Travel Agencies industry, 21,505 out of 22,687 
businesses are small under the $1 million size standard for travel 
agencies. Thus, with the increase in the size standard to $3 million, 
the likely impact of this rule would be limited to the 732 small 
businesses that gain small business status as a result of this rule. 
This is based on the U.S. Census Bureau's special tabulation of the 
1997 Economic Census for SBA's Office of Size Standards, using size 
distribution of firms' tables. Businesses becoming eligible for SBA 
EIDL assistance as a result of this rule cumulatively generate 
approximately $1.0 billion out of a total of $10 billion in revenues. 
The small business coverage for EIDL assistance for travel agencies 
will increase by 10 percent of total receipts.
    Only a small proportion of businesses utilize SBA's EIDL assistance 
program. It is difficult to estimate the number of small businesses 
that will apply for EIDL assistance, as this program focuses solely on 
disasters that occur within the United States and its territories. 
Thus, loan assistance depends on the number of disasters, the severity 
of the disaster, geographic condition, and the type of industries 
affected by the disaster. However, in fiscal year 2001, 917 travel 
agencies applied for EIDL assistance, of which half were declined 
because of credit and other eligibility requirements, and 28 were 
declined due to size requirements. In addition, prior to the 
publication of the interim final rule on March 15, 2002, 144 travel 
agencies applied for September 11 EIDL assistance. As a result of the 
interim final rule 36 additional travel agencies have applied for 
September 11 EIDL assistance as of May 10, 2002.

(4) Will This Rule Impose Any Additional Reporting or Record Keeping 
Requirements on Small Businesses?

    This rule does not impose any new information collection 
requirements from SBA which require approval by OMB under the Paperwork 
Reduction Act of 1980, 44 U.S.C. 3501-3520. A new size standard or 
change in date status does not impose any additional reporting, record 
keeping or compliance requirements on small entities. Increasing size 
standards and changing the status date expands access to SBA programs 
that assist small businesses, but these actions do not impose a 
regulatory burden as they neither regulate nor control business 
behavior.

(5) What Are the Steps SBA Has Taken To Minimize the Significant 
Economic Impact on Small Businesses?

    Most of the economic impact on small businesses will be positive. 
The most significant benefit to businesses that will obtain small 
business status as a

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result of this final rule is the September 11 EIDL assistance. SBA 
estimates that $1.3 to $2.8 million in September 11 EIDL assistance may 
result from increasing the size standard for travel agencies. SBA also 
estimates an additional $2.3 million to $2.7 million in September 11 
EIDL assistance to businesses that became eligible small businesses as 
a result of the recent inflation adjustment to monetary size standards. 
These estimates are based on participation rates and EIDL loan amounts 
of travel agencies and small businesses in the industries covered by 
the size standard inflation adjustment. The small increase in EIDL 
business loans that may result from the size standard increase will not 
crowd out other small travel agencies or small businesses from 
obtaining assistance as a result of the September 11 terrorist attacks 
since funding continues to be available for this program.

(6) Alternatives

(a) What Are the Legal Policies or Factual Reasons for Selecting the 
Alternative Adopted in the Final Rule?
    As stated in the Small Business Act 15 U.S.C. 631 and 13 CFR 121, 
SBA establishes size standards based on industry characteristics and 
for non-manufacturing concerns on the basis of the annual average gross 
receipts of a business concern over a period of three years. For 
certain industries, including the Travel Agencies industry, receipts 
are measured by total revenues, but excluding funds received in trust 
for an unaffiliated third party, such as bookings or sales subject to 
commissions. The commissions received are included as revenue. The 
changing structure of the industry, Census Bureau data, Federal 
contracting data, travel agencies trade association data, and SBA EIDL 
assistance data support increasing the size standard to $3 million.
(b) What Alternatives Did SBA Reject?
    At the time of the September 11, 2001 Terrorist Attacks, SBA was 
preparing a proposed adjustment to the travel agencies size standard. 
SBA found that under the $1 million size standard for travel agencies, 
small travel agencies were no longer competitive in the corporate and 
government travel markets. Because of technology advances and demands 
by corporate and government clients, most firms must adapt to deal with 
higher costs to maintain their businesses, making greater investments 
in technology to meet the needs of their customers, and switching to a 
fee-based compensation system from a commission-based system. Data from 
the GSA Travel Management Center's Program Office also showed that 
small travel agencies obtained only 3.5 percent of total revenues to 
travel agencies, even though small travel agencies account half of 
total industries revenues. In addition, many travel agencies were 
declared ineligible because of size reasons for EIDL assistance as a 
result of the September 11, 2001 terrorist attacks.
    SBA considered two additional alternatives to this rule. First, 
adopting the $6 million anchor size standard to the Travel Agencies 
industry. As discussed in the interim final rule SBA applies the $6 
million anchor size standard to the nonmanufacturing industries unless 
an industry's characteristics are significantly different from the 
typical nonmanufacturing industry. The analysis of the various industry 
factors show that the characteristics of travel agencies are 
significantly below those of the nonmanufacturing anchor group 
industries. To establish a $6 million size standard would increase the 
size standard six fold and assist successful travel agencies that tend 
to operate at several locations and potentially take away assistance 
from small travel agencies this rule is intended to assist. Thus, a 
size standard below the anchor size standard is appropriate for this 
industry.
    Second, SBA considered relevant to this rule comments received in 
response to our March 15, 2002 proposed rule to increase the size 
standard for travel agencies for all small business programs. For the 
proposed rule, SBA considered the commenters' recommendation to not 
increase the travel agencies size standard beyond the amount of 
inflation since 1994 (15.8 percent). These commenters raised three 
significant issues pertaining to the percentage of travel agencies 
defined as small, the overall decline of the industry, and the 
competitiveness of currently defined small businesses. SBA rejected 
these comments because it had also received comments supporting the $3 
million size standard that used, in part, similar facts to show the 
proposed size standard was needed. Also, SBA's analysis of the changing 
structure of the industry, Census Bureau data, Federal contracting 
data, and EIDL assistance data support the need and basis to support 
increasing the size standard above $1 million.

List of Subjects

13 CFR Part 121

    Administrative practice and procedure, Government procurement, 
Government property, Grant programs--business, Loan programs--business, 
Small business.

13 CFR Part 123

    Disaster assistance, Loan programs-business, Reporting and 
recordkeeping requirements, Small businesses.

PART 121--SMALL BUSINESS SIZE REGULATIONS

PART 123--DISASTER LOAN PROGRAM

    Accordingly, for the reasons set forth in the preamble, the interim 
rule amending parts 121 and 123 of title 13 of the Code of Federal 
Regulations which was published at 67 FR 11874 on March 15, 2002, is 
adopted as a final rule without change.

    Dated: May 15, 2002.
Hector V. Barreto,
Administrator.
[FR Doc. 02-13604 Filed 5-30-02; 8:45 am]
BILLING CODE 8025-01-P