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

The FSP is listed in the Catalog of Federal Domestic Assistance under No. 10.551. For the reasons set forth in the final rule at 7 CFR part 3015, subpart V and related Notice (48 FR 29115, June 24, 1983), the FSP is excluded from the scope of Executive Order 12372 which requires intergovernmental consultation with State and local officials.

This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Eric M. Bost, Under Secretary for Food, Nutrition, and Consumer Services, has certified that this rule will not have a significant impact on a substantial number of small entities. This rule may have minimal impact on some small entities.

This proposed rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect unless so specified in the DATES section of the final rule. Prior to any judicial challenge to the provisions of this proposed rule or the application of its provisions, all applicable administrative procedures must be exhausted.

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

This proposed rule contains no Federal mandates under the regulatory provisions of Title II of the UMRA for State, local and tribal governments or the private sector of $100 million or more in any one year. Therefore, this rule is not subject to the requirements of Sections 202 and 205 of the UMRA.

Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's considerations in terms of the three categories called for under section (6)(b)(2)(B) of Executive Order 13132.

Prior to drafting this proposed rule, we consulted with State and local agencies at various times. Because the FSP is a State-administered, Federally funded program, our regional offices have formal and informal discussions with State and local officials on an ongoing basis regarding program implementation and policy issues. This arrangement allows State and local agencies to provide comments that form the basis for many discretionary decisions in this and other Food Stamp rules. Further, we first requested comments on the proposed data collection for the revised standards in our November 30, 1999 Federal Register notice. Since then, State agency comments have helped us make the rule responsive to concerns presented by State agencies.

State agencies generally were concerned that the classification by caseworkers of an applicant's multiple race heritage via visual observation of people who chose not to self-identify may not always be accurate. They were also concerned about the cost involved and time that will be allowed for States to make system changes to collect and compile the data, to train workers, and to convert the current caseload. The standardization of the data collection addresses another major State concern, the need to have the data collected in the same way across other means-tested Federal programs. Specific comments and policy questions submitted by State agencies helped us identify issues that needed to be clarified in the proposed rule. Implementing the revised racial classification standards will allow data standardization across the Federal Government.

FNS has considered the impact of the proposed rule on State and local agencies. This rule makes changes that conform to the revised OMB standards for the collection and reporting of racial ethnic data. Although the rule implementing the revised data collection standards will require eligibility workers to collect both race and ethnicity on participating households, the information will standardize racial ethnic data collection by States for the Federal Government and will permit more accurate data collection on individuals who classify themselves as being of more than one race. It will show the increasing diversity of our Nation over time. FNS intends to allow States to obtain one race per person when visual observation is used because the applicant chooses not to self-identify. While State agencies will have to change their application form and information system to collect, compile, and report data, train workers, and convert the caseload, this is a one-time change. The 50 percent Federal reimbursement by FNS helps defray half the State's cost to make the change for the FSP and to collect, compile and report the data. The proposed rule provides States ample time to implement the revised data collection standards and convert the existing caseload to the revised data requirements. In the proposed rule, we have addressed every concern submitted by State agencies regarding this provision. States will have the opportunity to comment on the implementation timeframe in the proposed rule. FNS is not aware of any case where the provisions of the rule would preempt State law.

In accordance with the Paperwork Reduction Act of 1995, the proposed information collection requirements contained in this rule are being made available for public comment in a Notice published elsewhere in this issue of the Federal Register . Readers who would like more information on the information collection aspects of the rule, or would like to comment on the revised information collection burden, should refer to that notice for more information.

It is important to note that, as discussed in the following preamble, OMB has received public comment on the revised data collection standards addressed in the Notice published in today's Federal Register . Thus, in the Notice, FNS is offering the public to comment only on its proposal for implementing the new OMB standards, not on the standards themselves. The Notice addresses implementation of the revised OMB standards for the FSP, the Commodity Supplemental Food Program (CSFP), and the Food Distribution Program on Indian Reservations (FDPIR). These three programs have historically been approved under the same OMB approval package.

The revised data collection requirements will be submitted to OMB for approval after comments are received during the 60-day comment period. Until the OMB approves FNS' revised data collection requirements, State agencies would continue to use current forms (FNS 101 and FNS 191) approved under OMB Approval No. 0584-0025.

FNS is proposing this regulation separate from the Notice because the regulations governing the FSP contain provisions that must be amended to implement the revised standards, since they specifically identify the old racial/ethnic classifications. The CSFP and FDPIR do not require similar regulatory changes.

Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, and national origin in programs receiving federal financial assistance. The Department of Justice (DOJ) regulations, at Title 28 of the Code of Federal Regulations (CFR), Section 42.406(a), require all Federal agencies to provide for the collection of racial and ethnic information from applicants for and beneficiaries of Federal assistance sufficient to permit effective enforcement of Title VI. Section 272.6(g) and (h) of the current program rules require States to collect data on households by racial/ethnic data and to report the summary data to FNS.

FNS collects this data in order to comply with the statutory mandates of the Civil Rights Act of 1964, DOJ regulations, and USDA regulations on nondiscrimination. The data are provided to the Department's Office of Minority Affairs to satisfy the regulatory requirement for annual participation data. The Department includes this data in an annual USDA Equal Opportunity Report. FNS compares the data to Census data and uses the data to identify any minority participation trends or disparities that need follow-up. FNS also reviews the data prior to conducting State or local agency compliance reviews as well as in selecting areas for review.

Section 272.6(g) of the FSP rules specifies the racial/ethnic categories as American Indian or Alaskan Native, Asian or Pacific Islander, black (not of Hispanic origin), Hispanic, and white (not of Hispanic origin). These current racial and ethnic categories, which have been in place for more than 20 years, conformed to classification standards set by OMB in Statistical Policy Directive No. 15, Race and Ethnic Standards for Federal Statistics and Administrative Reporting.

On October 30, 1997, OMB issued revised standards for the classification of Federal data on race and ethnicity in a notice in the Federal Register (62 FR 58782 et al. ). They replace and supersede Statistical Policy Directive No. 15. All Federal agencies are required to comply with the revised OMB standards. The OMB standards revise the racial and ethnic categories and require that respondents be offered the option of selecting one or more racial designations. Only the FSP regulations specify the old racial ethnic data classifications that are being replaced. We are now proposing to amend the FSP regulations to comply with OMB policy.

Under the revised standards, there are new categories for race and ethnicity. There are now five categories for race and two categories for ethnicity. The new racial categories are: American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, or White. Under the revised standards, the former “Asian or Pacific Islander” category has been separated into two categories, “Asian” and “Native Hawaiian or Other Pacific Islander.” The revised standards allow individuals to choose more than one race to describe themselves. The revised categories on ethnicity are: “Hispanic or Latino”, and “Not Hispanic or Latino.” The State agency must include these racial and ethnic categories on the State agency's application or data input screen.

To ensure data quality, the State agency's application or data input screen must use separate questions for collecting ethnicity and race, with ethnicity requested first. Applicants must be allowed to identify themselves as being of more than one race by choosing multiple racial categories. Instructions on the application should instruct applicants to “Mark one or more * * *” or “Select one or more * * *.” The State agency must develop alternative means of collecting racial and ethnic data on households, such as by observation during the interview when the information is not provided voluntarily by the household on the application form.

The changes in the standards deal with the way in which State agencies collect racial/ethnic data and the racial/ethnic classifications. However, we wish to point out that some things have not changed. The current policy that the racial categories are not to be used for determining the eligibility of population groups for participation in the program would continue. The application form would continue to indicate that (1) the racial and ethnic information is voluntary, (2) that it will not affect eligibility or the level of benefits, and (3) that the reason for the information is to assure that program benefits are distributed without regard to race, color, or national origin.

Currently, § 272.6(g) lists the old racial/ethnic categories, specifies the method of data collection, and specifies related requirements for application forms. We do not believe it is appropriate to continue to list in the regulations the specific individual racial and ethnic categories. Instead the proposed regulations specify that State agencies shall collect the data “as specified by FNS”. Racial designations and the manner of racial/ethnic data collection are based on Federal policy which is issued by OMB and which all Federal agencies must follow. Since the Federal policy was based on public comment, it would involve a duplication of effort for Federal agencies, in turn, to codify and implement the revised standards by further rulemaking with more public comment on the same issue. The intent is to pass along revisions to the State agencies on a more timely basis. As part of this streamlining, FNS will collect comments in the future through comments to proposed notices on the data collection and reporting. FNS guidance will be issued to provide clarification as necessary appropriate to the program in order to comply with the Federal policy.

By being less detailed in program regulations, we are streamlining the Federal policy process, while maintaining flexibility for any future changes in the Federal policy and FNS data collection and reporting procedures. Further, since the Paperwork Reduction Act requires the publication of a Federal Register notice for comment if a Federal reporting form change is proposed, comments on any future changes in racial designations for data reporting would be obtained and considered in conjunction with any proposed form changes. Accordingly, the Department proposes to revise § 272.6(g) to drop the specific racial category references and to replace that text with a more general requirement in the regulations that will be automatically linked to the Federal policy. However, the gist of the policy has been briefly explained in this preamble. FNS will issue supplementary guidance in the form of an implementing memorandum to State agencies once the final rule is published that will conform to the revised standards. To capture data under the new standards, State information systems will need to be changed.

The current regulations at § 272.6(h) specify that the State agency shall report the racial/ethnic data on participating households on forms provided by FNS. The above changes will necessitate a form revision. Although the Department is not specifically describing the form changes in the regulatory text of § 272.6(h), the revision of the FNS reporting form will impact the way State agencies must compile data in order to report it to us. FNS has discussed the changes in a Federal Register notice dated November 30, 1999, in October 2000 and 2001 supplementary guidance issued to State agencies, and again in this proposed rule.

To comply with the new standards, State information systems will need to be changed. We are proposing to require State agencies to report the number of household contacts who selected (or were observed to be under) only one racial category, separately for each of the five racial categories, and to provide a count of household contacts who selected more than one race for various multiple-race categories. The State agencies must report the number of household contacts who identified themselves as being Hispanic or Latino by racial category. Confidential or identifying information, such as names of participants, are not being reported to us under this reporting mechanism.

We would continue to use the summary data to evaluate conformance with the Civil Rights Act and to provide the data to other Federal agencies upon request for their missions related to the Civil Rights Act. The data on the number of household contacts of more than one race will help us track changes in our Nation's diversity over time in the program. The more detailed data on the Hispanic data by race would allow us to monitor changes in racial/ethnic response patterns over time. We are very interested in State agency comment on the proposed data collection and reporting and on the reporting burden estimate per State agency. We are also interested in any cost estimates from State agencies for making the change to their information systems to comply with the new proposed reporting.

We are proposing to revise § 272.6(h) to provide that State agencies must report the racial/ethnic data on forms or formats provided by FNS. This change is intended to speed the movement from paper reporting forms to electronic reporting format. It also complies with the intent to move to electronic reporting of this information as soon as our system modifications will allow.

As explained previously in this preamble, until comment is received on these proposed regulations and approval for the revised forms are approved by OMB, State agencies would continue with the current data collection requirements for the fiscal year 2003 reporting period. FNS anticipates the publication of the final rule early in 2003. In the interim, FNS would accept comments on this rule and on the new reporting requirements through the Notice published elsewhere in this issue of the Federal Register . FNS recognizes that State and local agencies will need time to modify their application forms, data input screens, and information systems in order to begin capturing and tabulating data. It is crucial for FNS' information system that all State agencies implement the revised reporting format at the same time.

The Forms FNS 101 and 191 currently in use would remain in effect for the fiscal year 2003 reporting period. State agencies would be required to implement the revised FNS 191 for the report month of April 2004. For the FNS 101, State agencies would be required to implement for the report month of July 2004.

Accordingly, 7 CFR part 272 is proposed to be amended as follows:

1. The authority citation for part 272 continues to read as follows:

The Animal and Plant Health Inspection Service (APHIS), U.S. Department of Agriculture (USDA), has many programs to protect the health of livestock and poultry in the United States. These include programs to prevent endemic diseases and pests from spreading within the United States and programs to prevent the introduction of foreign animal diseases, as well as programs to control or eradicate certain animal diseases from the United States.

Regulations governing the interstate movement of animals for the purpose of preventing the dissemination of animal diseases within the United States are contained in 9 CFR, subchapter C—“Interstate Transportation of Animals (Including Poultry) and Animal Products.”

The legal authority for USDA to conduct testing was recently restated in the Animal Health Protection Act of 2002 (Subtitle E of the Farm Security and Rural Investment Act of 2002, Public Law 107-171). Section 10409 states that the Secretary of Agriculture “may carry out operations and measures to detect, control, or eradicate any pest or disease of livestock (including the drawing of blood and diagnostic testing of animals), including animals at a slaughterhouse, stockyard, or other point of concentration.”

We are proposing to amend the regulations in subchapter C, part 71, “General Provisions,” to provide for the collection of blood and tissue samples from livestock (horses, cattle, bison, captive cervids, sheep and goats, swine, and other farmed animals) and poultry at slaughter. We propose to require that persons moving livestock and poultry interstate for slaughter may only move the animals to slaughtering establishments that have been listed by the Administrator of APHIS. We do not propose to collect samples from all livestock or poultry at slaughter, but to collect samples whenever we believe it is necessary for effective surveillance. Some establishments slaughter relatively few animals, or process animals that are not susceptible to testing ( e.g. , sheep and goats that are too young to test for scrapie), or receive animals from sources for which we already have sufficient epidemiological data, and it would not substantially aid our surveillance to require testing at these establishments. Therefore, the Administrator would list some establishments to receive livestock or poultry without conducting testing at those establishments. For establishments where it is necessary to conduct testing, the Administrator would list the establishment only if it allows APHIS, FSIS, or APHIS contractors to collect blood and tissue samples from animals at the establishment. To be listed, a slaughtering establishment where testing is required would have to grant access to the personnel conducting the tests and provide certain space and equipment necessary to collect and process test samples. Slaughtering establishments that are not listed could not receive livestock moving in interstate commerce.

In conjunction with this rulemaking, APHIS will develop a list of slaughtering establishments. Establishments will not have to actively contact APHIS in order to be placed on the list; APHIS will contact the plants where we intend to collect samples, and work with them to meet the requirements for listing. APHIS will list all plants that meet the qualifications, and will also list those plants at which APHIS has determined sample collection is not needed. There are 1,341 meat packing firms included in the North American Industry Classification System (NAICS) code of 311611, of which 1,260 are small businesses. Many of these small businesses are local operations that do not receive animals moving interstate, and thus do not need to be listed. We expect to conduct sampling at roughly 50 to 100 of the 1341 meat packing firms included in NAICS 311611. Since some of these firms have multiple plants, testing could occur at several hundred plants. In almost all cases, some testing already occurs at these plants; this rule would allow us to increase the level of testing as needed. While we will focus primarily on testing at the plants of large business firms, we will also test at some small plants, as necessary to ensure a valid representative sample for disease surveillance.

We are particularly seeking comments on the standards APHIS should apply in identifying the plants where APHIS should conduct sampling. Our goal is to collect samples at a representative number of plants in each region, so that sample testing will provide a statistically valid nationwide profile of diseased animals sent to slaughter plants. Because sample collection imposes some financial and operational burden on plants, we wish to keep the number of plants sampled down to the minimum number required to provide the data we need. Therefore, we urge commenters to address how APHIS should select plants for sampling; e.g. , their size, fraction of the regional market, proximity to other sampled plants, source of animals, and other characteristics.

The provisions regarding the collection of blood and tissue samples would be set out in a new § 71.21, “Tissue and blood testing at slaughter.”

In § 71.1, we would amend the definition of livestock so that it includes horses, cattle, bison, captive cervids, sheep and goats, swine, and other farmed animals. (We would not include non-captive cervids in the definition because most such animals that go to slaughter plants are brought there by hunters, to a local slaughter plant, and do not thereafter move interstate in commerce. Also, the hunters generally gut and clean the animals in the field, reducing the opportunity to collect useful samples.)

We would also define recognized slaughtering establishment to be “Any slaughtering establishment operating under the provisions of the Federal Meat Inspection Act (21 U.S.C. 601 et seq. ) or a State meat inspection act. A list of recognized slaughtering establishments in any State may be obtained from an APHIS representative, the State animal health official, or a State representative.” This definition is consistent with other APHIS and FSIS regulations addressing slaughtering plants. We need this defined term as part of the explanation in § 71.21 of what types of establishments must be listed by the Administrator for interstate movement. Listing applies to both recognized slaughtering establishments, which are under mandatory inspection under the Federal Meat Inspection Act, and other specialty plants ( e.g. , for cervids and bison) that undergo voluntary inspection under the provisions of the Agricultural Marketing Act (12 U.S.C. 1141 et seq. )).

We would also add a definition of move (moved) to § 71.1, to make it clear that the requirements of the rule would apply to both persons transporting livestock and poultry and persons who cause the livestock or poultry to be moved. This definition, which is identical to one used in part 78 of our regulations, would read “Shipped, transported, delivered, or otherwise aided, induced, or caused to be moved.”

We propose that the Administrator may list slaughtering establishments either when sample collection and testing is not needed at them to meet APHIS epidemiological surveillance needs, or when testing is needed and the establishment meets the following standards with regard to sample collection activities. The slaughtering plant would have to allow APHIS, FSIS, or APHIS contractors to collect and record any individual animal identification on animals, retain any identification devices on or in the animals (backtags, electronic implants, etc.), and take tissue and blood samples from animals at the facility. Slaughtering plants must allow samples to be collected at no cost to the United States; that is, they would not be able to charge the government for access to collect samples, or for the value of the samples collected. These are the basic tasks that need to be performed to test the animals for disease and collect the information that may be needed to trace back the animals.

In terms of the specific space for sample collection activities, the slaughtering plant would have to space where samples could be safely and efficiently collected. The plant would have to provide office and sample collection space, including necessary furnishings, light, heat, and janitor service, rent free, for use by APHIS, FSIS, or APHIS contractors collecting samples for blood and tissue testing. At the discretion of the Administrator, small plants would not have to furnish facilities if adequate facilities exist in a nearby convenient location. The space provided by the slaughtering establishment would be subject to the approval of the Administrator. In many cases the facilities that establishments already provide for use by FSIS will also suffice for additional sample collection conducted under this proposed rule.

When approving the space provided by a slaughtering plant in which testing is required, the Administrator would consider whether the space:

1. Is conveniently located, properly ventilated, and provided with lockers suitable for the protection and storage of supplies;

2. Has sufficient light to be adequate for proper conduct of sample collection and processing;

3. Includes racks, receptacles, or other suitable devices for retaining such parts as the head, glands, and viscera, and all parts and blood to be collected, until after the post-mortem examination is completed;

4. Includes tables, benches, and other equipment on which sample collection and processing are to be performed, of such design, material, and construction as to enable sample collection and processing in a ready, efficient, and clean manner;

5. Has adequate arrangements, including liquid soap and cleansers, for cleansing and disinfecting hands, dissection tools, floors, and other articles and places that may be contaminated by diseased carcasses or otherwise; and

6. Has adequate facilities, including denaturing materials, for the proper disposal of tissue, blood, and other waste generated during test sample collection.

We believe the space provided by the slaughtering plant should have these characteristics in order to allow APHIS, FSIS, or APHIS contractor personnel to collect and process test samples in an accurate, efficient, and safe manner.

We also propose that the Administrator or his or her designee would give the owner of a slaughtering establishment notice as to when we would be collecting test samples at the plant. The Administrator would give the operator of the slaughtering establishment as much advance notice as possible. However, the actual amount of notice would depend on the specific situation.

We also propose to include language allowing the Administrator to deny or withdraw listing of a slaughtering establishment if the establishment does not comply with the requirements of the regulations. This language is essentially the same as existing language in § 71.20 concerning denial and withdrawal of approval of livestock facilities.

Under our proposal, sample collection would be done on the premises of the slaughtering plant. Full testing of samples might sometimes occur on the premises, although APHIS often will elect to send the samples offsite for testing. APHIS employees, FSIS employees, or a contractor hired by APHIS would collect the samples. There would be no personnel cost to slaughtering plants, although they would incur some expenses in providing the space and equipment used by APHIS, FSIS, or contractors. In some cases, the slaughtering plant itself may be the contractor employed by APHIS to collect samples.

The difficulty and expense of collecting the samples would depend on the type of testing. The most difficult sampling involves the collection of tissue from sheep to test for scrapie. We may wish to test any slaughtered sheep or goat after we determine that it has sufficient animal identification to trace it back to its flock of origin. Collecting the sample involves removing the brainstem from an animal through the spinal opening and sending it to a laboratory for histopathological procedures, and may involve collecting other tissue or blood samples as well, depending on the tests in use at the time.

Collecting samples to test for tuberculosis is also difficult, involving necropsy to collect multiple tissue samples. Collecting samples to test for brucellosis and pseudorabies is a relatively simple matter of collecting blood samples.

We realize that collection of tissue and blood samples at slaughter may affect slaughtering plant operations by disrupting or slowing down the work. While many samples can be collected without slowing down production lines, there would be occasional slowdowns. We also realize that plants would have to set aside, or make available, adequate and suitable space for us to work. This could be inconvenient and involve additional expense. APHIS intends to be as flexible as possible in adapting the proposed requirements to the needs of individual slaughtering plants. When it is possible, we would share space and facilities at the plant that are already devoted to other Federal or State inspection activities, and when this is not possible, we would work with slaughtering plant management to minimize their expenses. The proposed rule would also allow sample processing to occur outside the slaughtering plant in some cases; e.g. , at some small sheep plants, it may be possible for APHIS to simply collect the heads of animals to be tested and take them to a nearby laboratory or other facility for processing.

Also, we are not proposing to test all slaughtered livestock all the time. We believe our more limited proposal—to test when we believe it is necessary and to test only those animals we believe are necessary, based on epidemiological information—is justified because it would substantially enhance the control of livestock diseases, particularly brucellosis, tuberculosis, scrapie, and pseudorabies, in the United States. We anticipate that the sampling of sheep would occur only at plants that kill sheep old enough to test for scrapie, so operations at plants that slaughter only lambs would not be significantly affected. Also, APHIS would be able to modify its sampling to some degree to accommodate special needs at individual plants, e.g. , to avoid damaging the heads of sheep when there is a contract to sell the heads as meat, or to suspend sampling when plant renovations are underway.

As described in the preceding section, the essential changes proposed by this rule are a requirement that persons moving livestock and poultry interstate for slaughter may only move the animals to slaughtering establishments that have been listed by the Administrator of APHIS, and a requirement that slaughtering establishments where we choose to collect samples must grant access to the personnel conducting the tests and provide certain space and equipment necessary to collect and process test samples. This rule would therefore chiefly affect slaughtering establishments that must allow us to collect samples.

This section provides additional background to help interested persons understand the role of sampling and testing in various APHIS animal disease programs, and the difficulties and costs involved in different types of sample collection and testing.

Testing animals' blood or tissue for diseases is an important component of APHIS regulations. Although the regulations in subchapter C do not require testing for most animals moving interstate, testing with negative results is often one of several options for qualifying an animal for interstate movement. In some programs ( e.g. , brucellosis), APHIS regulations also require that certain animals and herds be tested, including at slaughter, in order for a State or area to achieve or maintain a particular disease status. At other times, voluntary testing allows the owners of animals to achieve a market advantage by certifying their animals free of particular diseases.

In support of both mandatory and voluntary testing programs, APHIS cooperates with State and local governments, as well as individuals and businesses. In some situations, APHIS personnel collect blood or tissue samples to be tested immediately or sent to laboratories for testing. In other situations, accredited veterinarians, State or local veterinary officials, or other individuals may collect the samples.

APHIS uses epidemiological data from many mandatory and voluntary tests to assess the prevalence of disease and to identify sources of diseases. When testing is coupled with animal identification, we can trace a positive animal's movements and identify other animals it may have been in contact with that were exposed to the disease. We call this process “traceback.” We can then test source herds or flocks and exposed animals and take other measures to ensure that the disease does not spread.

Testing at slaughter is extremely important. Not only is it the last point in normal channels for animal movement when we can test an animal, but for some diseases for which there is no validated live-animal test, like bovine spongiform encephalopathy or chronic wasting disease, it is the only time we can conduct routine diagnostic testing. For other diseases, such as tuberculosis in cattle and bison, brucellosis in cattle, bison, and swine, and exotic Newcastle disease in poultry, testing at slaughter provides a cost-effective means of monitoring the extent of the diseases and detecting areas where the diseases are highly prevalent. APHIS has not been able to use voluntary cooperation by slaughter plants to obtain all the samples it needs for optimal disease surveillance. For instance, APHIS has been allowed to collect some samples in 45 of the 50 major swine processing plants, but we need samples from all 50 plants to construct a valid model of swine disease incidence. Also, when APHIS collectors have gone into plants to replace voluntary collection by the slaughtering plants, the number of samples collected has increased two fold, indicating that voluntary collection has not been effective.

APHIS has held substantial discussions with animal industry groups to explore options for collecting all the samples we need for optimal disease surveillance. Most recently, we participated in a National Dialogue on Animal Disease Surveillance on March 12, 2002, that was sponsored by the National Institute for Animal Agriculture in Arlington, VA. We also participated in a follow-up conference call for interested industry members on April 9, 2002. The approach of this proposed rule has taken those discussions and the concerns of industry members into account.

The reasons why slaughter testing is important in the control of various diseases are discussed below. This discussion does not attempt to identify every disease for which APHIS may want to test animals at slaughter, but is intended to identify the benefits of such testing with regard to certain diseases of major concern, and to identify where testing might help us determine whether other diseases have a greater effect than is currently understood.

There is no simple answer to the question “How much slaughter testing is needed for proper surveillance of a disease?” If the animals continually passing through slaughter plants constituted a true random sample of animal populations in the United States, it would be possible to identify a statistically valid number of animals to test, in order to detect animal diseases in U.S. animal populations at whatever prevalence we choose, with whatever confidence we choose. However, the animals passing through a slaughter plant at any given time do not constitute a random sample of the national population. The desirable level of testing at slaughter is also affected by the amount of data already available from non-slaughter testing ( e.g. , federal and State herd and flock testing, and voluntary testing by animal owners). Finally, the amount of slaughter testing required for proper surveillance will vary with increasing or decreasing national animal inventories each year.

For informational purposes, this document projects certain levels of sample collection at slaughter that we currently believe are required for optimal surveillance of various animal diseases. These estimates of the number of samples required take into account the factors mentioned above—biases in the composition of animals at slaughter plants that make them non-random samples; availability of test data from non-slaughter testing for various diseases; and varying animal populations.

To illustrate the requirements of APHIS sample collection programs, the following discussion examines programs for several major animal diseases: tuberculosis, brucellosis, pseudorabies, and scrapie.

Bovine tuberculosis is a contagious, infectious, and communicable disease caused by Mycobacterium bovis . It affects cattle, bison, deer, elk, goats, and other species, including humans. Bovine tuberculosis in infected animals and humans manifests itself in lesions of the lung, bone, and other body parts, causes weight loss and general debilitation, and can be fatal. At the beginning of this century, bovine tuberculosis caused more losses of livestock than all other livestock diseases combined.

While cooperation with USDA's Food Safety and Inspection Service (FSIS) and slaughtering plants already allows us to perform a large amount of tuberculosis testing, this proposal would allow us to perform additional testing of animals at slaughtering plants if and when we determine such testing is necessary to improve our knowledge of the distribution of tuberculosis. The data gained through additional testing would improve our ability to administer national tuberculosis programs and to design effective program improvements. Because the activities of FSIS inspectors address primarily human food safety risks rather than animal disease risks, APHIS has never been able to rely completely on sample collection by FSIS inspectors to provide all the samples needed for a statistically valid evaluation of the animal disease profile of animals passing through a slaughter plant. Testing by APHIS rather than FSIS will become increasingly important as FSIS continues to implement its Hazard Analysis Critical Control Point (HACCP) approach to food safety at slaughter plants. The critical control points implemented by slaughter plants to ensure food safety and verified by FSIS do not necessarily provide the sample collection and testing APHIS needs for animal disease surveillance purposes. Therefore, APHIS needs the proposed authority to design and perform its own testing at slaughter plants.

Brucellosis is a contagious disease affecting animals and humans, caused by bacteria of the genus Brucella. In its principal animal hosts, brucellosis is characterized by abortion and impaired fertility. The brucellosis regulations, contained in 9 CFR part 78, prescribe conditions for the interstate movement of cattle, bison, and swine, and provide a system for classifying States or portions of States (areas) according to the rate of Brucella abortus infection present and the general effectiveness of the brucellosis control and eradication program conducted in the State or area.

This proposal would allow us to perform additional testing of animals for brucellosis at slaughtering plants if and when we determine such testing is necessary to improve our knowledge of the distribution of brucellosis. The data gained through additional testing would improve our ability to properly classify herds and States, to administer national brucellosis programs, and to design effective program improvements.

Under existing programs to detect brucellosis, two primary surveillance procedures are used to locate infection without having to test each animal in every herd. Milk from dairy herds is checked two to four times a year by testing a small sample obtained from creameries or farm milk tanks for evidence of brucellosis, and some animals from bison herds and cattle herds that do not produce milk for sale are tested for brucellosis at livestock markets or at slaughter. While these surveillance programs are valuable in monitoring brucellosis, the availability of slaughter testing under this proposal is critical to provide complete coverage in the data provided by current surveillance efforts.

Pseudorabies is a contagious, infectious, and communicable disease of livestock, primarily swine, and other animals. The disease is caused by a herpes virus. Our regulations in 9 CFR part 85 govern the interstate movement of swine and other livestock in order to help prevent the spread of pseudorabies.

A great many feeder pigs and butcher hogs move to slaughter each year, and such swine are not currently required to be tested for pseudorabies. This proposal would allow APHIS to test such swine at slaughter if we find it necessary to do so to improve our knowledge of the prevalence and distribution of pseudorabies. Such testing could also help us assess the success of the recent indemnification program to reduce the incidence of pseudorabies by destroying affected animals.

Scrapie is a degenerative and eventually fatal disease affecting the central nervous systems of sheep and goats. Currently, to definitively test for scrapie, the brainstem of an animal must be removed through the spinal opening and sent to a laboratory for histopathological procedures. In the near future, testing may involve collecting other tissue or blood samples as well, depending on the tests in use at the time.

APHIS is attempting to improve the effectiveness of its scrapie control program. On August 21, 2001, we published a final rule (Docket No. 97-093-5, 66 FR 43963) in the Federal Register that encourages improvement of State quarantine programs for scrapie, reinstituted a Federal indemnity program for scrapie, and made other changes to strengthen scrapie control. Slaughter testing for scrapie would dramatically improve surveillance for scrapie and is an important and necessary part of the broader efforts to improve scrapie control.

Currently, slaughter testing is not required for sheep and goats. There is a small amount of voluntary testing of sheep and goats at slaughter, where we have made special arrangements with slaughtering establishments. However, this is not sufficient because so few sheep are tested at slaughter. Although we do not believe it is necessary to test all sheep and goats at slaughter, we believe that additional animals must be tested at slaughter if we are to have an effective surveillance program and, in turn, control and eventually eradicate the disease.

There are many other animal diseases that APHIS may test for at slaughter to gain better data about their extent and their effects on productivity. For example, The National Poultry Improvement Plan (NPIP), described in 9 CFR parts 145 and 147, is a cooperative Federal-State-industry mechanism that includes slaughter testing to control certain poultry diseases, particularly those caused by various species of Salmonella, Mycoplasma gallisepticum, M. synoviae, M. meleagridis, and avian influenza viruses.

Equine infectious anemia (EIA), also known as swamp fever, is a viral disease of equines that is characterized by sudden fever, swelling of the legs and lower parts of the body, severe weight loss, and anemia. Approximately 1 million live horses are tested for EIA each year, and approximately 0.2 percent of these test positive. However, no comprehensive testing for EIA is currently done at slaughter.

Johne's disease, also known as paratuberculosis, is a disease caused by Mycobacterium paratuberculosis . This disease primarily affects cattle, sheep, goats, elk, and other domestic, exotic, and wild ruminants. Improved testing at slaughter for Johne's disease would improve our baseline knowledge of the distribution and extent of Johne's disease and would allow us to better calculate the true cost of this disease to animal industries.

Slaughter testing can also yield valuable information about reservoirs of bluetongue, can help distinguish the prevalence of different strains of this virus, and can also distinguish bluetongue from epizootic hemorrhagic disease. Slaughter testing could also help us better understand the significance of diseases such as porcine reproductive and respiratory syndrome, chronic wasting disease, and other diseases of emerging importance. In addition, if bovine spongiform encephalopathy (BSE) or other transmissible spongiform encephalopathies (TSE's) ever become established in the United States, slaughter testing would be essential for their control. It should be noted that extensive testing for TSE's, should it ever be needed, would raise the overall cost of our testing program considerably, since these tests require necropsy and tissue collection rather than a simple blood sample.

This proposed rule has been reviewed under Executive Order 12866. The rule has been determined to be significant for the purposes of Executive Order 12866 and, therefore, has been reviewed by the Office of Management and Budget. The economic analysis prepared for this proposed rule is set out below. It includes both a cost-benefit analysis as required by Executive Order 12866 and an analysis of the economic effects on small entities as required by the Regulatory Flexibility Act.

APHIS is proposing to require persons moving horses, cattle, bison, sheep, swine, cervids, or poultry interstate to slaughter to move them only to slaughtering establishments that have been listed by the Administrator. The Administrator would list an establishment after determining that it is not necessary to conduct testing there, or determining that testing is necessary and that the establishment provides access and facilities for the collection of tissue and blood samples from the animals slaughtered. We are proposing this action to increase the effectiveness of our surveillance for livestock diseases. Collection of samples currently occurs on a small, voluntary scale, but it needs to be expanded and to include both large and small slaughtering plants. Samples are currently collected by personnel employed by APHIS, FSIS, or the slaughtering plants themselves.

According to NASS and FSIS statistics for slaughtering establishments that may receive animals in interstate movement, there are approximately 795 plants slaughtering cattle, 757 plants slaughtering swine, and 350 plants slaughtering poultry. Fourteen of the cattle plants and 11 of the swine plants are very large operations that account for 50 percent of the cattle and swine slaughtered each year. Several dozen of the plants are of moderate size; the rest are small businesses. Some of these plants slaughter both cattle and swine, and some slaughter other animals as well (sheep, horses, cervids, etc.). Some degree of sample collection already occurs at virtually all of the cattle plants, e.g. , to collect the 12 million blood samples required each year under Part 78 for States to maintain their brucellosis classifications. Sample collection also occurs at virtually all of the poultry plants in accordance with the National Poultry Improvement Plan. Some sample collection already occurs at about 20-25 of the largest swine plants to collect blood samples for pseudorabies testing.

This proposed rule would allow us to collect samples at plants where sampling does not now occur, but where sampling is needed to fill information gaps in our animal disease programs. We expect to initiate testing at several large plants, primarily swine plants, where testing has not occurred before, and at approximately 20 small businesses.

As noted above, many slaughtering plants already voluntarily cooperate with APHIS to allow us to collect samples for testing. Because of the relatively small number of additional animals that would be tested and the relatively small number of cases of disease expected to be identified, we do not expect that this rule would have a significant economic effect on any affected entities. Based on discussions with livestock industry groups and slaughter industry groups, and the fact that most slaughtering plants accepting animals in interstate commerce already cooperate with voluntary testing programs, we expect there will be minimal effects on most slaughtering plants in complying with the proposed standards. While this proposal may increase costs slightly for some slaughtering plants, prices for agricultural products vary for many reasons, and it is unlikely that additional testing for this disease would have any measurable effect on costs for producers or consumers.

The primary economic effects of this proposal would be direct costs to those slaughter plants that would have to provide us with access, workspace, and equipment to collect samples. We do not have reliable data to document these costs, but we estimate that they would average no more than a few thousand dollars a year per plant, for 20 to 30 plants that have not already been providing access under voluntary sampling programs. We particularly invite small businesses that may be affected by this proposed rule to comment on its economic impacts. We are seeking additional data on whether small businesses that must provide space and access for sample collection will incur additional expenses for rents, facility costs, or salaries. We are also seeking data on costs that slaughter plants might incur if it is necessary to slow the production line to collect some types of samples ( e.g. , tissue samples).

In the following sections we discuss potential economic effects on the various categories of slaughtering plants, based on the types of animals each processes. First, we present two tables summarizing the per-unit costs and the total industry costs estimated to result from the blood and tissue sampling requirements in this proposed rule for cattle, swine, and sheep. Bear in mind that the major costs of sample collection are borne by the Federal government, and that the costs to slaughter plants are limited to costs associated with providing access for sample collection.

Interested persons are invited to participate in the making of the proposed 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 above. All communications received on or before the closing date for comments, specified above, will be considered before taking action on the proposed rule. The proposals contained in this action may be changed in light of the comments received.

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 proposed 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 proposed 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 summarizing each FAA-public contact concerned with the substance of this proposal will be filed in the Rules Docket.

Commenters wishing the FAA to acknowledge receipt of their comments submitted in response to this action must submit a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket Number 2002-NM-23-AD.” The postcard will be date stamped and returned to the commenter.

Any person may obtain a copy of this NPRM by submitting a request to the FAA, Transport Airplane Directorate, ANM-114, Attention: Rules Docket No. 2002-NM-23-AD, 1601 Lind Avenue, SW., Renton, Washington 98055-4056.

The FAA has received reports from three operators who found heat damage (discoloration) and cracking adjacent to and aft of the precooler exhaust vent on the nacelle struts of three Boeing Model 747 series airplanes powered by Pratt & Whitney JT9D-70 series engines. Investigation revealed that high temperature exhaust air from the precooler vent caused the heat damage. Such damage to the structure could result in cracking or fracture of the nacelle struts, and consequent reduced structural integrity and possible separation of the strut and engine from the airplane.

We have reviewed and approved Boeing Special Attention Service Bulletin 747-54-2210, dated December 19, 2001, which describes procedures for repetitive detailed inspections of the pylon skin and internal structure of the nacelle struts adjacent to and aft of the precooler exhaust vent for heat discoloration, wrinkling, and cracking; and corrective action, if necessary. The corrective action includes the following:

• If heat discoloration but no wrinkling is found, do a conductivity test of the damaged area(s). If the conductivity test is within specified limits, do a penetrant or high frequency eddy current (HFEC) inspection of the heat discolored areas for cracking. If no cracking is found, repeat the detailed inspection.

• If wrinkling is found, do a penetrant inspection for cracking of the wrinkled area(s). An optional HFEC inspection can also be done for such damage. The service bulletin specifies contacting the manufacturer for additional instructions if wrinkling is found.

• If cracking is found, or the conductivity readings are not within the limits specified in the service bulletin, the service bulletin specifies contacting the manufacturer for additional instructions.

Accomplishment of the actions specified in the service bulletin is intended to adequately address the identified unsafe condition.

Since an unsafe condition has been identified that is likely to exist or develop on other products of this same type design, the proposed AD would require accomplishment of the actions specified in the service bulletin described previously, except as discussed below.

Although the service bulletin specifies that the manufacturer may be contacted for disposition of certain repair conditions, this proposal would require the repair of those conditions to be accomplished per a method approved by the FAA, or per data meeting the type certification basis of the airplane approved by a Boeing Company Designated Engineering Representative who has been authorized by the FAA to make such findings.

There are approximately 7 airplanes of the affected design in the worldwide fleet. The FAA estimates that 6 airplanes of U.S. registry would be affected by this proposed AD, that it would take approximately 8 work hours per airplane to accomplish the proposed inspection, and that the average labor rate is $60 per work hour. Based on these figures, the cost impact of the proposed AD on U.S. operators is estimated to be $2,880, or $480 per airplane, per inspection cycle.

The cost impact figure discussed above is based on assumptions that no operator has yet accomplished any of the proposed requirements of this AD action, and that no operator would accomplish those actions in the future if this proposed 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 proposed herein would 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 proposal would not have federalism implications under Executive Order 13132.

For the reasons discussed above, I certify that this proposed regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, 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 copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption ADDRESSES.

FAA invites interested people to take part in this proposed action by presenting written data, views, or arguments. We also invite comments about the environmental, energy, federalism, or economic impact that might result from adopting the proposals. Commenters should provide cost estimates for substantive comments. Commenters should send two copies of their remarks to the DOT Docket Office address mentioned above. Comments must identify the regulatory docket or notice number.

We will file all comments, as well as a report summarizing each substantive public contact with FAA personnel about this proposed rulemaking, in the docket. The docket is available for public inspection before and after the comment closing date.

FAA will consider all comments received by the closing date before acting on this proposed rulemaking. We will consider comments filed late if possible without incurring expense or delay. FAA may change the proposals in this document because of the comments received.

Commenters wishing to receive confirmation that FAA received their comments must include a self-addressed, stamped postcard stating: “Comments to Docket No. FAA-2002-13918.” We will date stamp and mail the postcard to the commenter.

You can get an electronic copy of this notice using the Internet by taking the following steps:

(1) Select the search button on the Department of Transportation's electronic Docket Management System (DMS) Web page (http://dms.dot.gov/search) .

(2) On the search page type in the last five digits of the Docket number shown at the beginning of this notice. Click on “search.”

(3) On the next page, which contains the Docket summary information for the Docket you selected, click on the document number of the item you wish to view.

You can also get an electronic copy using the Internet through the Office of Rulemaking's Web page at http://www.faa.gov/avr/armhome.htm or the Government Printing Office's web page at http://www.access.gpo.gov/su_docs/aces/aces140.html .

You can also get a copy by sending a letter to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue, SW., Washington, DC 20591, or by calling (202) 267-9680. Make sure to identify the docket number, notice number, or amendment number of this rulemaking.

The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996 requires FAA to comply with small entity requests for information or advice about compliance with statutes and regulations within its jurisdiction. Therefore, any small entity that has a question regarding this document may contact its local FAA official. Internet users can find additional information on SBREFA on FAA's Web page at http://www.faa.gov/avr/arm/sbrefa.htm and may send electronic inquiries to the following Internet address: 9-AW-SBREFA@faa.gov .

The Aviation Safety and Capacity Expansion Act of 1990 (ASCE Act), codified at 49 U.S.C. 40117, authorized the passenger facility charge (PFC) program. On May 29, 1991, the Department of Transportation adopted regulations to establish the PFC program. The regulations are codified at 14 CFR part 158. The Secretary of Transportation (Secretary), by regulations codified at 49 CFR 1.48(r), delegated authority to the FAA Administrator to allow a public agency (as defined in 14 CFR 158.3) to impose a PFC of $1, $2, or $3 for each enplaned passenger at a commercial service airport the public agency controls. Public agencies may use the money from such PFC collections only to finance FAA-approved, eligible airport-related projects, as defined at 49 U.S.C. 40117(a)(3). To approve a project, FAA must determine that the project (1) preserves or enhances safety, security, or capacity of the national air transportation system; (2) reduces noise from an airport that is part of such system; or (3) provides opportunities for increased competition between or among carriers.

The ASCE Act directed the Secretary to issue regulations requiring air carriers, foreign air carriers, and their agents, collectively referred to as “carriers,” to collect PFCs and pay them promptly to public agencies. The regulations were also to establish a uniform amount, reflecting the average reasonable and necessary expenses of collecting and handling the PFC, that carriers could retain from PFCs collected. This amount, referred to in 14 CFR part 158 as “carrier compensation,” as discussed below, is to be determined by the Secretary net of interest earned on PFC revenue between the time of collection and payment.

FAA carried out this requirement in section 158.53 of the regulations, entitled “collection compensation.” Section 158.53 allowed carriers initially to keep “[a]s compensation for collecting, handling and remitting the PFC revenues” $0.12 of each PFC remitted, in part to recover the expenses of setting up their systems to process and record charges under the PFC program. On June 28, 1994, under the terms of § 158.53, compensation dropped from $0.12 to $0.08 for each PFC collected, reflecting completion of a recoupment period from program start-up costs. Currently, carriers may keep $0.08 of each PFC remitted. For convenience, we refer to this amount as the “handling fee” or “PFC handling fee,” as well as “carrier compensation,” in the remainder of this discussion. Section 158.53 (b) also authorizes carriers to keep any interest or other investment return earned on PFC revenue between the time the carrier collects and remits it to the airport public agency.

On May 27, 1994, the Air Transport Association of America (ATA) petitioned FAA to amend § 158.53 by extending the handling fee of $0.12 for three more years. ATA proposed to file comments after the three-year extension, showing whether the airline industry had fully recovered the cost necessary to run the PFC collection program. Further, ATA requested that FAA amend § 158.53(a) to allow carriers to keep the handling fee for each refunded PFC, as well as each PFC remitted. FAA published in the Federal Register a summary of ATA's petition on June 24, 1994 (59 FR 32668). Recognizing that the standard for setting the level of the handling fee was “average necessary and reasonable expenses,” FAA asked carriers and public agencies to send specific data to enable the agency to determine this amount. FAA received twelve comments in response to the notice, but determined the comments did not contain enough information to enable FAA to decide on a rate of compensation that met this standard.

On April 16, 1996, FAA issued an advance notice of proposed rulemaking (ANPRM) (61 FR 16678). In that notice, FAA provided guidance on the quantity and quality of information needed to decide ATA's petition. FAA requested detailed data from carriers that, in total, represented at least 75 percent of the enplanements at PFC-collecting airport locations. FAA needed enough information on current industry costs to decide if the authorized handling fee of $0.08 continued to reflect average necessary and reasonable expenses for collecting and handling and remitting PFCs. FAA determined that a smaller sample, if it included a disproportionate representation from carriers with higher PFC handling costs, would not provide an accurate average handling cost calculation for the industry. In the ANPRM, FAA also invited comments on other issues about PFC revenues and changes in part 158 to address new legislation and industry practices. FAA withdrew this ANPRM on April 10, 2000 (65 FR 18932), because carrier responses fell below the 75 percent minimum response requested by FAA.

The Wendell H. Ford Aviation Investment and Reform Act for the 21st Century (AIR-21) (Pub. L. 106-181), signed into law on April 5, 2000, changed the PFC program. Public agencies may now collect PFCs of $4 or $4.50. On May 30, 2000, FAA issued a final rule that amended part 158. The amendment incorporated administrative and statutory changes in the procedures to set up PFCs based on AIR-21 and other recent acts by Congress and records of decision by FAA. The rule became effective on June 29, 2000.

The issue of carrier compensation arose again during the congressional deliberations leading up to the passage of AIR-21. In report language (House Report 106-513) which accompanied AIR-21, Congress noted that several carriers communicated to the conferees their views that carrier compensation at $.08 for each PFC remitted is too low. While the conferees did not evaluate the correctness of these claims, they noted that FAA should give carriers the opportunity to prove their correctness in a rulemaking action. The report, HR 106-513 encouraged FAA to make its final decision within 189 days from the time carriers present the evidence necessary for evaluation of their claims.

On April 27, 2000, the Office of the Inspector General (OIG) of the Department of Transportation issued a memorandum to FAA. In that memorandum, OIG provided recommendations on the conduct of the proposed rulemaking on PFC collection costs. To ensure that FAA receives the information necessary for evaluation, OIG suggested that cost data be—

• “[L]imited only to those incremental costs that are directly associated with PFC collection, handling, remittance, reporting, recordkeeping, or auditing. Though incremental cost compensation does not include an allocation for indirect costs such as utilities, officer salaries, and other administrative expense, it will compensate air carriers for the additional costs of handling and remitting PFC's;” and

• “[A]ccompanied by an independent audit opinion stating the costs are supportable, presented in accordance with generally accepted accounting principles, and in compliance with the requirement of the proposed rulemaking.”

A copy of this memorandum is included in the docket for this proceeding.

FAA adopted the OIG's recommendations in this rulemaking. Specifically, FAA determined that consideration of incremental costs would best implement the statutory standard that the handling fee reflect “necessary costs.” FAA also determined an independent audit opinion would ensure that the calculation of average expenses was based on reliable carrier cost data.

Beginning in April 2000, FAA consulted with the carrier industry through ATA to identify cost categories compatible with carrier cost accounting practices that would meet the specifications of OIG. FAA gathered this information before starting this rulemaking to avoid the data collection problems experienced in its previous rulemaking effort. In addition, FAA consulted with independent accountants familiar with the accounting methods of carriers. FAA examined the extent to which independent accountants could determine if costs reported by carriers are justifiable. Based on these contacts, FAA was able to assemble cost categories and formats, as well as recommended accounting procedures, to ensure the data evaluated in this NPRM are comparable across carriers and conforms to OIG's recommendation.

On October 19, 2000, FAA sent letters to the largest domestic ATA-member carriers. FAA asked the carriers to voluntarily send their 1999 PFC collection and handling cost data to FAA. These carriers account for most of the PFCs collected nationally. At the same time, FAA asked regional and foreign carriers through their trade associations (Regional Air Carriers Association and International Air Transport Association, respectively) if they would voluntarily send their cost data. None of the regional or foreign carriers provided data. The reporting ATA carriers, however, included costs of their subsidiary regional carriers.

The FAA's letter to the carriers suggested the cost categories and instructions for collecting incremental costs associated with PFC collection, handling, remittance, reporting, recordkeeping, or auditing. The cost categories were: Credit card fees; audit fees; PFC disclosure; reservations; passenger services; revenue accounting, data entry, accounts payable, tax and legal; corporate property department; training reservations, ticket agents, and other departments; carrier ongoing information systems; computer reservation system ongoing; PFC absorption; Airline Tariff Publishing Corporation; and Airline Reporting Corporation. The FAA letter also suggested categories for implementation costs, including carrier one-time information systems and one-time computer reservation costs. In addition, FAA requested data on interest income on unremitted PFC funds. An example of the letter is included in the docket of this proceeding.

In its letter to the carriers, FAA emphasized that carriers will not receive compensation from PFC revenue for an item just because the item appeared on the list of cost definitions. FAA included some items because at least one carrier proposed the item as a collection or handling cost. FAA noted that not all interested parties will agree with the items included in cost definitions. FAA requested data on all cost items listed above, however, to avoid collecting more data later if FAA finds that each cost item qualifies as a “necessary and reasonable expense of collecting, handling and remitting PFCs.”

In the letter, FAA also said that it was not seeking cost data for years before 1999. FAA stated that if a carrier found evidence of additional costs exceeding the amount authorized for retention in years before 1999, the carrier could petition FAA for a separate rulemaking to address possible under compensation in those years.

Initially, FAA considered asking carriers to have cost data audited before submission to insure its accuracy. Consultation with the independent accountants for the carrier industry, however, found the cost of getting an audit on such cost items would prohibit carriers from conducting such an audit. After consulting with OIG and the airline independent accountants, FAA decided the data could be used if carriers and their independent auditors followed certain procedures (referred to as “agreed-upon procedures”). Therefore, the letter told each carrier to give its cost data to its independent accountant. In turn, the accountant would use the approved procedures to prepare a report similar to the agreed-upon procedures report in the docket of this proceeding.

To ensure that carriers send data in a consistent format, FAA provided a sample spreadsheet that included cost categories. FAA asked carriers to estimate what 1999 costs would have been for items such as “credit card fees” and “interest revenue on float” if the carrier had collected $4.50 PFCs at all airports that year. FAA also offered the carriers the opportunity to send out-year projections of costs. Carrier independent accountants could not, however, apply the agreed-upon procedures to out-year projections that would be cost estimates.

FAA invites comments on the categories and agreed-upon procedures. In addition, any carrier who has not already submitted data may submit their own data (that conforms to the agreed-upon procedures included in the docket of this proceeding) during the comment period. Any data submitted will be considered to the extent possible.

Nine carriers provided cost data to FAA by the end of January 2001 under the categories, formats, and procedures suggested by FAA. These carriers were Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, Southwest Airlines, TransWorld Airlines, United Airlines, and U.S. Airways. Each of these airlines sent its data to its independent accountant, who then provided its report using the agreed-upon procedures. The independent accountants sent these reports with the carrier data submissions to FAA.The nine responding carriers reported that in 1999 they remitted 436,659,521 PFCs to airports, representing 84 percent of the calculated total of 518,731,500 PFCs sent nationally in 1999. Thus, the cost data sent by the nine carriers significantly exceed the 75 percent threshold requested in the previous ANPRM data collection effort undertaken by FAA. FAA has no reason to believe that those collecting carriers not presenting data (including international and regional carriers) would have collection and remittance costs significantly different than those of the reporting carriers.

People interested in reviewing the individual carrier data submissions and the procedures reports may inspect them at the U.S. Department of Transportation Dockets, Docket No. FAA-2002-13918, 400 Seventh Street, SW., Room Plaza 401, Washington, DC 20590. In addition, individuals may access electronic copies through the Docket Management System Internet Web page located at http//dms.got.gov.

FAA reviewed the carrier's cost data for consistent data categories and formats. Then, FAA consolidated all the information into a single summary table (Table 1). This table summarizes the raw actual cost data for 1999, with estimated costs of imposing the new $4.50 PFC level.

The same data, presented in terms of the average cost for each PFC collected and remitted, are presented in Tables 2 and 3.

Values shown as $0.0000 on this table were either reported as zero, not reported (assumed to be zero for calculation purposes), or are a calculated figure determined to be statistically insignificant ( i.e. less than $0.0001).

The carriers gave data according to the formats requested. FAA examined the presented data and proposes to accept all cost categories suggested (either in whole or in part), except for the PFC absorption category, as valid incremental costs associated with PFC collection and handling, and thus valid average necessary and reasonable expenses of PFC collection and handling.

Some carriers reported that, in some air service markets, they must “absorb” the PFC from other carrier revenues because the markets are too price sensitive for the carrier to pass the PFC along to consumers. In this case, the carriers wish to treat such absorbed costs as administrative expenses associated with PFC collection and handling.

FAA allowed carriers to present estimates of “absorbed” PFC costs as part of this data collection effort, but noted that FAA may discount such data. In particular, it is unclear why the PFC should bear the burden of price sensitivity in a market. FAA asked carriers to show why “absorption” is an incremental cost of collecting, handling, remitting, reporting, recordkeeping, and/or auditing the PFC. FAA also requested that carriers send detailed explanations of their method for determining markets where absorption occurs and for calculating absorption.

Four carriers sent information on PFC absorption expenses. One of these carriers accounted for 63 percent of the $30.5 million of such charges identified. On average, for all carriers, these charges would add $0.063 to the cost of each PFC collected nationally. For the one carrier accounting for most of the absorption cost, the cost would amount $0.42 for each PFC collected by that carrier.

The carriers presenting PFC absorption cost data did not provide information on how the absorption cost is related to the cost of collecting and handling the PFC. One carrier imputed an $0.08 charge for each PFC it refunded to passengers as an absorbed cost, in that it did not received the $0.08 handling fee for these collections. However, FAA notes that this imputed charge is not an actual cost of collecting and handling PFCs. Air carriers also have not shown why absorption costs should not be associated with some other cost center of the carrier. Further, the carriers did not explain their methods for determining markets where absorption occurs and or their methods for calculating absorption. FAA has determined there is no reason to classify the charge of a ticket price adjustment as an expense associated with PFC collection and handling (including remitting, reporting, recordkeeping, and/or auditing.) FAA finds it more suitable to classify such a charge as one associated with providing air service, such as company overhead, fuel, labor expense, or airport rates and charges.

Based on the foregoing, FAA proposes to exclude PFC absorption from the calculation of average, reasonable, and necessary expenses of PFC collection and handling.

FAA reviewed the non-absorption 1999 data reported by carriers and found that five cost categories account for 92.3 percent of PFC collection and handling expenses. These categories include credit card fees, disclosure costs, reservations, passenger services, and CRS fees.

The credit card fee was the largest single cost item that FAA proposes to accept, accounting on average for 43.7 percent of PFC collection and handling costs. That amount equals just over $0.05 for each PFC collected or $.056 for each $3 PFC remitted to airport public agencies. FAA found a high degree of uniformity in the cost amounts the nine carriers allocated to this item.

The next largest cost item is reservation services, at 17.5 percent of PFC collection and handling costs, accounting on average for $.02 for each PFC collected and $0.022 for each PFC remitted. Reservations charges include the cost of increased telephone “talk time” with airline customers explaining PFCs to customers when they make airline reservations by telephone. Air carriers considered, in some degree, the following items: Total reservation calls handled; PFC calls handled; seconds for each normal call; difficult calls handled; seconds for each difficult call; call hours; and average wage rate per hour. FAA found significant variability among carriers in estimates of this cost item, ranging from $0.00 to $0.038 with a standard deviation of $.013 around the average.

The third largest cost item in the raw data is disclosure costs, at 11.2 percent of PFC collection and handling costs. That amount equals, on average, $.013 for each PFC collected and $0.014 for each PFC remitted. Disclosure costs are attributable to FAA requirement that carriers provide notice to the passenger that PFC fees may be applicable to the passenger. One carrier (Southwest Airlines) accounted for 91 percent of the total reported disclosure costs, but only 13 percent of the total PFCs reported collected by the nine carriers.

FAA notes that Southwest's independent accountant, using the agreed-upon procedures, accepted the carrier's claim of disproportionately high disclosure costs. Moreover, the reason provided for the high disclosure cost, that Southwest Airlines relies disproportionately on television fare advertising as causing the higher cost, is not implausible. Consequently, FAA proposes, on a preliminary basis, to set disclosure costs for this carrier at a level equal to the disclosure costs for all other carriers combined to calculate the handling fee. We have therefore reduced the estimate for total cost of disclosure for all nine carriers to $0.0024 for each PFC collected. That amount is equal to twice the combined $.0012 for each PFC collected charge for all carriers except Southwest Airlines. FAA's eventual acceptance of a significantly higher disclosure cost, as identified by Southwest Airlines, depends, in part, on that carrier's or other carriers' submission of data supporting this claim.

The fourth largest cost item is the on-going CRS (Computer Reservation Systems) expense, at 10.5 percent of PFC collection and handling costs. This amount accounts, on average, for $.012 of each PFC collected and $0.013 of each PFC remitted. Air carriers incur on-going CRS costs, in the form of booking fees, for using the CRS. These costs do not include the one-time charges associated with reprogramming the CRS software to allow a $4.50 PFC or other changes associated with AIR-21.

The fifth and last major cost item is passenger services. This item represents 9.4 percent of PFC collection and handling costs, accounting on average for $.011 of each PFC collected and $0.012 of each PFC remitted. Passenger service costs are attributable to increased face-to-face time with airline customers. FAA found significant variability in estimates of this cost item, ranging from $0.00 to $0.029 with a standard deviation of $.010 around the average.

FAA notes that several carriers may have allocated cost items to the passenger services category that other carriers allocated to the reservations category. Combined, the reservations and passenger services categories vary less than they do independently among the nine carriers. The combined average cost has a standard deviation of $0.014 compared to a mean of $0.025.

The remaining 13 cost categories collectively account for less than 8 percent of total cost of collecting and handling PFCs. No one category exceeds 2 percent.

Table 4 shows FAA's proposed adjustments to Table 1, reflecting the exclusion of claimed “PFC absorption” expenses and the proposed reduction of PFC disclosure costs.

Interest earned on the PFC revenue collected by the carrier but not yet remitted to the airport public agencies forms a portion of the collection compensation carriers are entitled to under section 158.53. As part of the analysis of the total collection compensation for the carriers, FAA also requested information on the amount of interest earned by the carriers on unremitted PFC revenue. FAA determined that this interest amounted to $0.0146 for each $3 PFC in 1999. This amount is roughly equivalent to what FAA had estimated based on an assumed retention period of 45 to 50 days and a 4 percent annual interest rate. The variability around this average is low. The highest reported interest is $0.0185 at a 5 percent interest rate. The lowest reported interest rate was $0.0089 at a 2.5 percent interest rate.

Total adjusted average cost for each PFC collected, minus interest earned on the PFC while held by the carrier, was $0.0896 for each PFC collected and $0.0995 for each PFC remitted in 1999. We base this amount on the adjusted values in Table 4. This amount compares to the $0.08 for each PFC remitted currently allowed under the PFC regulation for each PFC remitted. This information provided a reference point for the next step in FAA's process.

FAA sought information on projected or “pro forma” costs that would be associated with handling $4.50 PFC levels. FAA specifically asked about the effect of the $4.50 level on credit card fees and interest earned on higher PFC balances. We expected that all other costs would not vary significantly between PFC levels.

To simplify presentation of the “pro forma” costs, the carriers included their estimates for credit card fees and interest income with actual 1999 data for the other cost items. One of the nine carriers reporting 1999 actual data did not report the pro forma estimate for the $4.50 PFC level. FAA found that, if it excluded the data from the non-reporting carrier, all data other than credit card fees and interest income are identical between 1999 actual and the $4.50 pro forma data for the remaining eight carriers.

The credit card fee expense becomes a significantly larger item in PFC handling costs at the $4.50 PFC level allowed by AIR-21. This is because the fee paid by the carriers to the credit card company is a percentage of the amount charged. The credit card and bad debt expense items for the $4.50 PFC level would cost carriers, on average, just over $0.074 for each PFC collected or $0.082 for each PFC remitted. We have based these amounts on the pro forma estimates provided by eight of the nine reporting carriers. FAA notes the independent accountants did not evaluate these amounts. These amounts compare to an average credit card fee of $0.0501 for each PFC collected and $0.0557 for each PFC remitted at the $3 PFC level. The estimates at the two PFC levels appear consistent. The actual fee in 1999 equates to about 1.67 percent of the $3 PFC, whereas the estimated pro forma fee equates to 1.64 percent of the $4.50 PFC. The slight difference compared to the $3 PFC amount may be attributable to the one carrier not reporting. It is significant to note that at the $4.50 level, the credit card fee alone would exceed the $0.08 compensation for each PFC remitted currently allowed under § 158.53.

FAA estimated interest earned on the PFC revenue collected by the carrier but not yet remitted to the airport public agencies to be, on average, $0.0220 for each collected $4.50 PFC and $0.0245 for each remitted $4.50 PFC. This amount is about 52 percent more than estimated for a $3 PFC level. FAA notes that one carrier did not report a pro forma estimate of interest.

In summary, collection and handling costs minus interest income for a $4.50 PFC level would yield a cost of $0.1065 for each PFC collected and $0.1184 for each PFC remitted.

FAA requested data from the carriers on the total cost of setting up the $4.50 PFC allowed by AIR-21. Specifically, FAA asked how much it cost the carriers to change their computer systems and other systems such as the CRS providers, the Airline Tariff Publishing Company (ATPCO), and the Airline Reporting Corporation (ARC). Air carriers and other data providers had to change programming codes and terminal screen formats to allow for four data columns. Previously, the systems only needed a single column for the $1, $2, and $3 PFC levels. Now, computer systems need columns for three numbers and a decimal point for the $4.50 PFC charge. Air carriers and other data providers completed reprogramming by April 1, 2001; however, carriers presented their handling cost data to FAA in December 2000 and January 2001 while efforts were still underway. FAA, therefore, did not require the independent accountants to apply the agreed-upon procedures to these cost items.

Cost items claimed by the carriers for setting up the increased PFC levels included charges for revenue accounting, training of reservations and ticket agents, fees to ATPCO, ARC, and CRS vendors, one-time information technology updates, and audit fees. One of these cost items, one-time information technology updates, accounted for 87 percent of the set-up costs. After analyzing the carrier data, FAA found the total set up cost for carriers was only $.0077 for each PFC collected. That means that carriers could recover the total cost of implementation with a one-year handling fee surcharge of less than one cent.

Although the independent accountants did not review the set up costs, the low cost claimed, particularly for reimbursement of computer service providers, was below FAA's expectations given the size of the reprogramming effort.

The data we received from the carriers reveals an overall average ticket refund rate of 10 percent. Because a carrier must handle refunded tickets twice, a higher volume of refunded tickets means higher costs for the carrier. The data format specified by FAA did not specifically ask the carriers to send data on the costs associated with refunded tickets because gathering the data would burden the carriers. Rather, the carriers included the costs associated with refunds in their overall cost data.

FAA notes that compensating carriers for each PFC collected compared to compensating them for each PFC remitted are equally valid means of compensation. Suppose total industry costs, minus interest earned, for handling PFCs were $50 million where carriers collected 500 million PFCs and remitted 416 million PFCs. In this example, carriers refunded 84 million PFCs after collections. The carriers collectively would receive the same compensation, $50 million, from collecting airports if the handling fee were set at $0.10 for each PFC collected or $0.12 for each PFC remitted. If all carriers had equivalent refund rates, all would receive equal compensation for the expenses associated with PFC refunds under either method.

FAA notes that selection of a standard fee for each PFC collected or for each PFC remitted may yield different amounts of compensation to individual carriers. In particular, a compensation standard for each PFC remitted, calculated from total industry handling costs and PFC remittances, assumes all carriers have the same PFC refund rates. Air carriers with higher ticket refund rates and higher PFC refund-related handling costs would receive less overall compensation relative to their actual costs than would carriers with low refund rates if compensated for each PFC remitted. This assumes everything else is equal. The data received from the carriers show that refund rates vary significantly among carriers. One large carrier reported a refund rate of only 5.4 percent, whereas another large carrier had a refund rate of 20.2 percent.

Section 40117 of title 49 of the U.S. Code requires FAA to set up a compensation fee that is uniform and reflects the average necessary and reasonable expenses incurred in collecting and handling the PFC, minus interest accrued before remittance. Therefore, FAA cannot set two or more compensation rates based on the different needs of each carrier. FAA does, however, have the choice of setting one fee to compensate carriers either for each PFC collected or each PFC remitted. If FAA elects to compensate carriers for each PFC collected, carriers with high refund rates would not be penalized, and carriers with low refund rates would not receive a windfall.

The average PFC handling fee reported by the carriers was $0.0896 for each $3 PFC collected in 1999 and $0.0995 for each $3 PFC remitted in 1999. ( See the 1999 actual costs at the bottom of Table 4). We propose to subtract interest earned on collected PFCs from this amount and excluded “PFC absorption” expenses. The amount also includes a downward adjustment for disclosure costs. Had a $4.50 PFC been in place that year at all airports where PFCs are collected, the carriers estimate the increase in their costs, minus interest, would have raised their overall cost to $0.1065 for each $4.50 PFC collected and $0.1184 for each $4.50 PFC remitted. (See the 1999 pro forma costs at the bottom of Table 4). A surcharge would be necessary to compensate carriers for the one-time cost of setting up the $4.50 PFC level.

Selecting the right compensation level clearly depends on the assumption made about what mix of $4.50 and $3 PFCs carriers will collect. FAA estimates that nearly 50 percent of all collected PFCs will be at $4.50 in 2002, 75 percent will be at $4.50 in 2003, and 90 percent will be at the $4.50 level in 2004, and almost 100 percent thereafter. Therefore, FAA proposes to phase in a new collection fee based on the estimated mix of $3 and $4.50 collections over the next several years. Table 5 summarizes FAA's proposal for compensating carriers for each PFC collected or each PFC remitted.

FAA considered using fees involving fractional cents but opted to use whole cent units for ease of explanation and to prevent possible reprogramming expenses for carriers and airports. Table 5 shows that if carriers receive compensation for each PFC collected, the proposed rate would be $0.10 for each PFC collected, through calendar year (CY) 2004. In CY 2005 and beyond, the rate would increase to $0.11 and remain at that level. If carriers received compensation for each PFC remitted, the proposal would set the fee at $0.11 for each PFC remitted through CY 2003. Then, the rate would go to $0.12 for each PFC remitted in CY 2004 and beyond.

Based on data reported by the nine carriers for 1999, Table 6 shows that either method yields about the same compensation over a ten year period, measured by net present value using a 7 percent discount rate. FAA finds the discounted compensation over a 10-year period exceeds ongoing PFC handling expenses by roughly the amount needed to recover the one-time set up costs (adjusted to 2002 present value) for the $4.50 PFC. Excess compensation would be less than half of one percent of estimated carrier costs over the 10-year period. Air carriers would receive more compensation if the rate is set for each PFC collected instead of each PFC remitted, but the difference between the two methods is not significant.

Table 7 shows the proposed rates of compensation compared with the existing $0.08 rate of compensation for each PFC remitted over a ten-year period, from 2002 to 2011. Table 7 is calculated based on compensation for each remitted PFC because that is the method for the current $0.08 compensation level. However, the amount of increase in total compensation to carriers shown in Table 7 for the remitted PFC methodology is comparable to what would result from the collected PFC methodology. Under the proposed rates of compensation, the reporting carriers would receive $13 million more in compensation each year through 2003 than they would under the $0.08 rate of compensation. Then, they would receive more than $17 million in added compensation in 2004 and beyond.

FAA notes the data presented by the nine carriers represented 84 percent of the estimated total PFCs collected in 1999. When we estimated the total impact on the entire PFC program, including all PFC collections and remittances, we found that air carries would receive $16 million more in compensation in 2002 and 2003, and $21 million more in the years after. These estimates are based on 1999 enplanement levels.

By 2005, this added compensation would constitute less than 1 percent (0.89 percent) of the total PFC collection stream realized by the airports. The total compensation amount, including the $0.08 level existing, would constitute 2.67 percent of collections. Over a ten-year period, increased collection as measured in present value terms would be 0.87 percent of total PFCs collected.

Most of the nine carriers reporting handling costs also asserted that inflation affects costs. FAA has found, however, that the use of an inflation factor for handling fees is problematic for several reasons. First, the largest cost item, the credit card transaction fee, is not necessarily linked to inflation in the economy. Second, the long-term link between prevailing rates of wage compensation for reservations agents and other airline personnel, and productivity, such as the ability to handle ticket transactions more efficiently through e-ticketing from internet sites, is difficult to forecast. Should handling fees for each PFC rise significantly because of inflation, FAA notes that airlines should document this increase and provide the information to FAA in a petition to amend part 158.

Currently, FAA bases PFC handling fees on remitted PFCs rather than collected PFCs. However, as noted above, data show that refund rates vary significantly among carriers. Therefore, FAA proposes to compensate carriers for PFCs collected. Specifically, FAA proposes that carriers receive $0.10 for each PFC collected through CY 2004. From CY 2005 and beyond carriers will receive $0.11 for each PFC collected. FAA reminds all parties the current requirements of § 158.53 remain in effect unless FAA issues a final rule changing the PFC rule. Until changed through a final rule, carriers remain entitled to receive $0.08 for each PFC remitted. New fees, if any, set up in a final rule will not be retroactive from the date of that final rule, nor will a change in the basis for compensation be retroactive.

Information collection requirements in the amendment to part 158 previously have been approved by the Office of Management and Budget (OMB) under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), and have been assigned OMB Control Number 2120-0557. Note that nine carriers voluntarily presented data to FAA for analysis before FAA began this rulemaking action.

In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to comply with International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. FAA determined there are no ICAO Standards and Recommended Practices that correspond to these proposed compensation adjustments.

Proposed changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 directs that each Federal agency propose or adopt a regulation only upon a determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (19 U.S.C. section 2531-2533) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, this Trade Act also requires agencies to consider international standards and, where appropriate, use them as the basis of U.S. standards. And fourth, the Unfunded Mandates Reform Act of 1995 (Public Law 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by private sector, of $100 million or more annually (adjusted for inflation).

In conducting these analyses, FAA has determined this rule (1) has benefits which do justify its costs, is a “significant regulatory action” as defined in section 3(f) of Executive Order 12866 and is “significant” as defined in DOT's Regulatory Policies and Procedures; (2) will not have a significant impact on a substantial number of small entities; (3) will not reduce barriers to international trade; and (4) does not impose an unfunded mandate on state, local, or tribal governments, or on the private sector. These analyses are available in the docket.

This proposed rule will amend part 158 to bring compensation for PFC collection and handling to levels necessary to meet cost increases resulting in part from the new statutory rules set up under AIR-21. AIR-21 allows airport authorities to increase the PFC level to $4 or $4.50 to collect more funds. Airport authorities will use these funds to (1) enhance the safety, security and capacity of their facilities; (3) reduce noise in nearby communities; and (3) enhance airline competition to the benefit of air travelers. The PFC statute requires that the Secretary of Transportation (whose authority has been delegated to FAA) establish by regulation a uniform amount that carriers may retain that reflects the average necessary and reasonable expenses for collecting and handling PFCs. This amount, referred to in 14 CFR part 158 as “carrier compensation,” is to be determined net of interest earned on PFC revenue between the time of collection and payment. The current compensation amount allowed by § 158.53 is $0.08 for each PFC remitted. However, the increase in the PFC level to $4 or $4.50 from the earlier $3 cap introduced new costs to carriers for which carriers do not receive compensation under the prevailing rate of $0.08 for each PFC remitted. In addition, some carriers and their trade organizations have argued that the $0.08 compensation amount is not enough even at the $3 for each PFC remitted level. FAA proposes a new amount of compensation at $0.10 for each PFC collected through calendar year 2004. In 2005 and beyond carriers would receive $0.11 for each PFC collected. Based on 1999 PFC collections, FAA estimates the change would increase carrier compensation by $21 million yearly in PFC funds. Otherwise, airports would have received this added compensation instead of the carriers. Once airports widely adopt the $4.50 PFC, this higher compensation amount would be less than one percent of estimated airport PFC receipts. This proposed amount would not erode airport authorized PFC collection amounts. Rather, airports would be able to recover this slightly higher compensation amount by minimal extensions of PFC collection periods. In addition, any impact on airport revenue streams caused by the higher compensation amount is an unavoidable result of providing a uniform amount that carriers may retain that reflects the average necessary and reasonable expenses for collecting and handling PFCs, as required by the PFC statute. Air travelers will not incur an increase in the cost of their tickets because of this adjustment. Air carriers may incur some minor costs (if any) of setting up the change of compensation amounts in their accounting programs, but the benefits of the higher compensation amounts would outweigh this cost.

The Regulatory Flexibility Act of 1980 establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objective of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the business, organizations, and governmental jurisdictions subject to regulation.” To achieve that principle, the Act requires agencies to solicit and consider flexible regulatory proposals and to explain the rationale for their actions. The Act covers a wide-range of small entities, including small businesses, not-for-profit organizations and small governmental jurisdictions.

Agencies must perform a review to determine whether a proposed or final rule will have a significant economic impact on a substantial number of small entities. If the determination is that it will, the agency must prepare a regulatory flexibility analysis (RFA) as described in the Act.

If an agency determines that a proposed or final rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the 1980 act provides that the head of the agency may so certify and an RFA is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear.

The change to the compensation amount is necessary to conform with the PFC statute, which requires the Secretary to establish by regulation a uniform amount that carriers may retain that reflects the average necessary and reasonable expenses for collecting and handling PFCs (net of interest accruing to the carrier and agent after PFC collection and before remittance of the PFC to the airport public agency). Moreover, all costs to the small entity are fully recoverable through the PFC, if approved. Accordingly, pursuant to the Regulatory Flexibility Act, 5 U.S.C. 605(b), FAA certifies this rule will not have a significant impact on a substantial number of small entities.

The Trade Agreement Act of 1979 prohibits Federal agencies from engaging in any standards or related activities that create unnecessary obstacles to the foreign commerce of the United States. Legitimate domestic objectives, such as safety, are not considered unnecessary obstacles. The statute also requires consideration of international standards and where appropriate, that they be the basis for U.S. standards.

In accordance with the above statute, FAA has assessed the potential effect of this proposed rule and has determined that it will impose the same costs on domestic and international entities for comparable services and thus has a neutral trade impact.

Title II of the Unfunded Mandates Reform Act of 1995 (the Act), codified at 2 U.S.C. 1501-1571, requires each Federal agency, to the extent permitted by law, to prepare a written assessment of the effects of any Federal mandate in a proposed or final agency rule that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any one year. Section 204(a) of the Act, 2 U.S.C. 1534(a), requires the Federal agency to develop an effective process to permit timely input by elected officers (or their designees) of State, local, and tribal governments on a proposed “significant intergovernmental mandate.” A “significant intergovernmental mandate” under the Act is any provision in a Federal agency regulation that would impose an enforceable duty upon State, local, and tribal governments, in the aggregate, of $100 million (adjusted annually for inflation) in any one year. Section 203 of the Act, 2 U.S.C. 1533, which supplements section 204(a), provides that before establishing any regulatory requirements that might significantly or uniquely affect small governments, the agency shall have developed a plan that, among other things, provides for notice to potentially affected small governments, if any, and for a meaningful and timely opportunity to provide input in the development of regulatory proposals.

This proposed rule does not contain a Federal intergovernmental or private sector mandate that exceeds $100 million a year.

FAA has analyzed this proposed rule under the principles and criteria of Executive Order 13132, Federalism. We determined that this action would 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, we determined this notice of proposed rulemaking would not have federalism implications.

In response to the June 1, 1998, Presidential memorandum regarding the use of plain language, FAA re-examined the writing style currently used in the development of regulations. The memorandum requires federal agencies to communicate clearly with the public. We are interested in your comments on whether the style of this document is clear, and in any other suggestions you might have to improve the clarity of FAA communications that affect you. You can get more information about the Presidential memorandum and the plain language initiative at http://www.plainlanguage.gov .

FAA concludes that issuance of this proposed rule would not be a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environmental Policy Act of 1969. The potential environmental effects of any project funded with PFC revenues are already addressed under § 158.29(b)(1)(iv), which requires all applicable requirements pertaining to the National Environmental Policy Act of 1969 (NEPA) to be satisfied before the Administrator may approve the project to use PFC funds. A copy of this assessment has been placed in the docket.

We have assessed the energy impact of the proposed notice in accordance with the Energy Policy and Conservation Act (EPCA) Pub. L. 94-163, as amended (43 U.S.C. 6362) and FAA Order 1053.1. We have determined the rule is not a major regulatory action under the provisions of the EPCA.

In consideration of the foregoing, the Federal Aviation Administration proposes to amend part 158 of title 14 of the Code of Federal Regulations as follows:

1. Take notice that a technical conference will be held on December 6, 2002, from approximately 9:30 a.m. until 3 p.m., in the Commission Meeting Room on the second floor of the offices of the Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC. The goal of the conference is to discuss and analyze proposed rules for cyber-security.

2. Conference panelists will discuss the security provisions described in Section M and Appendix G of the Notice of Proposed Rulemaking (NOPR) published in this docket on July 31, 2002. They will also address the updated proposal that the North American Electricity Reliability Council (NERC) filed in this docket on November 15, 2002. There will be a discussion of the public comments filed in response to the system security provisions described in the NOPR, and an opportunity to make additional public comments, as described below.

3. Copies of the NOPR security proposal may be obtained from: http://www.ferc.fed.us/Electric/RTO/Mrkt-Strct-comments/discussion_paper.htm. Copies of the NERC security proposal are available in Appendix A at: ftp://www.nerc.com/pub/sys/all_updl/docs/ferc/RM01-12-000-SMD.pdf.

4. Commission staff has asked selected individuals to speak at this conference, and is not entertaining requests to make presentations. However, interested persons will be permitted to make very brief public statements. Such statements should not be repetitive of materials that speakers have already filed in the public record of this docket. Persons interested in making brief statements should file a request to speak on or before November 27, 2002, in Docket No. RM01-12-000. If possible, interested speakers should also send a copy of their request to speak by e-mail to customer@ferc.gov. The request should clearly specify the name of the speaker; his or her title; the person or entity the speaker represents; the speaker's mailing address, telephone number, facsimile number and e-mail address; and a brief description of the issues the speaker wishes to address. As the number of potential speakers may exceed the time allotted for the conference, interested speakers are encouraged to coordinate their efforts with others who may have similar interests.

5. All interested persons may attend the technical conference, and registration is not required. Further details of the conference, and the conference agenda, will be provided in a subsequent notice.

6. Transcripts of the conference will be immediately available from Ace Reporting Company (202-347-3700 or 1-800-336-6646), for a fee. They will be available for the public on the Commission's FERRIS system two weeks after the conference. Additionally, Capitol Connection offers the opportunity for remote listening and viewing of the conference. It is available for a fee, live over the Internet, via C-Band Satellite. Persons interested in receiving the broadcast, or who need information on making arrangements should contact David Reininger or Julia Morelli at the Capitol Connection (703-993-3100) as soon as possible or visit the Capitol Connection Web site at http://www.capitolconnection.gmu.edu and click on “FERC.”

7. For more information about the conferences, please contact Sarah McKinley at (202) 502-8004 or sarah.mckinley@ferc.gov.

The Federal Energy Regulatory Commission published in the Federal Register of November 19, 2002, a Notice of Proposed Rulemaking proposing to amend its regulations to update its accounting and financial reporting requirements under its Uniform Systems of Accounts. The specific date by which the public should submit comments was not inserted in the Public Comment Procedures section of the preamble. In the Federal Register Document 02-28294 published on November 19, 2002 (67 FR 69816) make the following correction.

On page 69826, in the third column, in number 97, correct the sentence “Comments are due within 45 days from publication in the Federal Register ” to read as follows:

“Comments on the proposed rulemaking are due on or before January 3, 2003.”

The advance notice of proposed rulemaking that is the subject of this correction is under sections 103 and 141 of the Internal Revenue Code.

As published, the advance notice of proposed rulemaking contains errors that may prove to be misleading and are in need of clarification.

Accordingly, the publication of the notice of proposed rulemaking (REG-142599-02), that was the subject of FR Doc. 02-24138, is corrected as follows:

On page 59767, column 2, in the preamble under the paragraph heading “Background”, fifth paragraph, line 4, the language “690 (1986), 1986-3 (Vol. 4) C.B. 686 (the” is corrected to read “690 (1986), 1986-3 (Vol. 4) C.B. 690 (the”.

A notice of proposed rulemaking by cross-reference to temporary regulations and notice of public hearing (REG-143321-02), that was published in the Federal Register on Monday, November 18, 2002 (67 FR 69496), announced that a public hearing on proposed regulations relating to information reporting relating to taxable stock transactions under sections 6043(c) and 6045 of the Internal Revenue Service Code would be held on Wednesday, March 5, 2003, beginning at 10 a.m. in room 4718 of the Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.

The date of the public hearing has changed. The hearing is scheduled for Tuesday, March 25, 2003, beginning at 10 a.m. in room 4718, Internal Revenue Service Building, 1111 Constitution Avenue, NW., Washington, DC. We must receive outlines of oral comments by Tuesday, March 4, 2003.

Because of the controlled access restrictions, attendees are not admitted beyond the lobby on the Internal Revenue Service Building until 9:30 a.m. The IRS will prepare an agenda showing the scheduling of the speakers after the outlines are received from the persons testifying and make copies available free of charge at the hearing.

The notice of proposed rulemaking and notice of public hearing that is the subject of these corrections is under section 417 of the Internal Revenue Code.

As published, the notice of proposed rulemaking and notice of public hearing contains errors that may prove to be misleading and are in need of clarification.

Accordingly, the publication of the notice of proposed rulemaking and notice of public hearing (REG-124677-02), that was the subject of FR Doc. 00-25338, is corrected as follows:

1. On page 62421, column 2, in the preamble under the caption “Comments and Public Hearing”, second full paragraph, line 2, the language “for January 14, 2002, at 10 a.m. in room” is corrected to read “for January 14, 2003, at 10 a.m. in room”.

2. On page 62421, column 2, in the preamble under the caption “Comments and Public Hearing”, third full paragraph, line 8, the language “January 2, 2002. A period of 10 minutes” is corrected to read “January 2, 2003. A period of 10 minutes”.

On August 7, 2002, the Department of Justice (Department) published a rule that proposed amendments to the regulations governing radiation exposure compensation claims. The principal reason for the amendments was implement the provisions of the Radiation Exposure Compensation Act (Act) Amendments of 2000 that expanded coverage under the Act to uranium mill workers and individuals employed in the transport of uranium ore or vanadium-uranium ore, and that expanded the population of eligible uranium mine workers by lowering the radiation exposure threshold for miners, by enlarging the number of uranium mining states with respect to which miners may be eligible for compensation, and by including “above ground” miners within the scope of the regulations. See 67 FR 51440.

The Navajo RECA Reform Working Group, a coalition of six organizations within the Navajo Nation, has requested an additional 60-day period in which to provide comment on the proposed rule. This additional period of time would allow the coalition to translate the proposed rule into the Navajo language, thereby allowing the Navajo elders to participate in the regulation review process. Granting this request ensures that this community, as well as other entities and individuals, have ample opportunity to fully review and comment on the proposed rule.

Accordingly, the Department is reopening the comment period and will accept public comments for an additional 60 days after publication of this notice.

We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking (CGD01-02-132), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them.

We do not now plan to hold a public meeting. But you may submit a request for a meeting by writing to Activities New York Waterways Oversight Branch at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register .

On September 11, 2001, three commercial aircraft were hijacked and flown into the World Trade Center in New York City, and the Pentagon, inflicting catastrophic human casualties and property damage. National security and intelligence officials warn that future terrorist attacks are likely. The President has continued the national emergencies he declared following the September 11, 2001, terrorist attacks. See, Continuation of the National Emergency with Respect to Certain Terrorist Attacks, 67 FR 58317 (September 13, 2002); Continuation of the National Emergency With Respect To Persons Who Commit, Threaten To Commit, Or Support Terrorism, 67 FR 59447 (September 20, 2002). The President also has found pursuant to law, including the Magnuson Act (50 U.S.C. 191 et seq. ), that the security of the United States is endangered by disturbances in international relations of United States that have existed since the terrorist attacks on the United States and such disturbances continue to endanger such relations. Executive Order 13,273 of August 21, 2002, Further Amending Executive Order 10173, as Amended, Prescribing Regulations Relating to the Safeguarding of Vessels, Harbors, Ports, and Waterfront Facilities of the United States, 67 FR 56215 (September 3, 2002).

Immediately following the September 11th attacks, we published a temporary final rule (66 FR 51558) that established a temporary regulated navigation area, and safety and security zones in the New York Marine Inspection and Captain of the Port New York Zones. These measures were taken to safeguard human life, vessels and waterfront facilities from sabotage or terrorist acts. That temporary final rule was subsequently revised (67 FR 16016; 67 FR 53310) to extend its effective period through December 31, 2002.

The Coast Guard proposes to establish permanent safety and security zones throughout the New York Marine Inspection and Captain of the Port Zones as part of a comprehensive, port security regime designed to safeguard human life, vessels and waterfront facilities from sabotage or terrorist acts. Due to continued heightened security concerns, the proposed permanent safety and security zones are necessary to provide for the safety of the port and ensure that vessels, facilities, bridges, overhead power cables, or tunnel ventilators, are not used as targets of, or platforms for terrorist attacks. These zones would restrict entry into or movement within portions of the New York Marine Inspection and Captain of the Port Zones. We anticipate that the final rule developed as a result of this rulemaking will be effective no later than January 1, 2003.

This proposed rule would establish the following safety and security zones:

The Coast Guard proposes to establish a permanent safety and security zone in all waters of the Hudson River within a 300-yard radius of the IPNPS pier in approximate position 41°16′12.4″ N, 073°57′16.2″ W. The zone is necessary to protect the IPNPS, others in the maritime community, and the surrounding communities from subversive or terrorist attack against the facility that could potentially cause serious negative impact to vessels, the port, or the environment. Commercial vessels would still be able to transit through the 540 yards between the western boundary of the safety and security zone and Hudson River Lighted Buoy 27 (LLNR 37930), and recreational vessels would still be able to transit through the western 1,115 yards of the 1,415-yard wide Hudson River. Additionally, vessels would not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zone.

The Coast Guard proposes to revise the Liquid Petroleum Gas (LPG) vessel safety zone at 33 CFR 165.160. That regulation establishes a 100-yard moving safety zone around any LPG vessel while it transits between Scotland Lighted Horn Buoy S (LLNR 35085) and the Arthur Kill. The proposed revision would establish a safety and security zone to include all waters within the New York Marine Inspection and Captain of the Port Zones within a 200-yard radius of any Liquefied Hazardous Gas (LHG) vessel or LHG facility. We also propose to establish a moving safety and security zone to include all waters within a 100-yard radius of any “Designated Vessel” (DVs) transiting the New York Marine Inspection and Captain of the Port Zones. DVs include: Vessels certificated to carry 500 or more passengers; vessels carrying government officials or dignitaries requiring protection by the U.S. Secret Service, or other Federal, State, or local law enforcement agency; and barges or ships carrying petroleum products, chemicals, or other hazardous cargo.

These proposed safety and security zones are necessary to protect the LHG vessels, LHG facilities, DVs, their crews and/or passengers, others in the maritime community, and the surrounding communities from subversive or terrorist attack against a vessel or a facility that could potentially cause serious negative impact to human life, the vessels, facilities, the port, or the environment. Safety and security zones are necessary to protect passenger vessels due to their potential as a target of subversive or terrorist attack, which could result in significant casualties. Vessels may transit through any portion of the proposed LHG facility safety and security zones that extend into the navigable channel for the sole purpose of transiting through the safety and security zones so long as they remain within the navigable channel, maintain the maximum safe distance from the waterfront facility and do not stop or loiter within the safety and security zones.

The Captain of the Port will notify the maritime community of the periods during which the proposed safety and security zones will be enforced by the methods identified in 33 CFR 165.7 including electronic mail broadcasts identifying “Designated Vessel” transit.

The Coast Guard proposes to establish permanent safety and security zones within 100 yards of each moored, or anchored, Coast Guard Cutter operating within the New York Marine Inspection and Captain of the Port Zones. We also propose to establish a safety and security zone within 100 yards of Coast Guard Station New York, Staten Island, NY, Coast Guard Station Sandy Hook, NJ, Coast Guard Station Kings Point, NY, and Coast Guard Aids to Navigation Team New York, Bayonne, NJ.

The proposed safety and security zones would protect Coast Guard assets, others in the maritime community, and the surrounding communities from subversive or terrorist attack against the Coast Guard that could cause serious damage to vessels, the port or the environment or adversely impact the Coast Guard's ability to conduct its assigned missions. The Captain of the Port does not expect this rule to interfere with the transit of any vessels through the waterways adjacent to any cutter or shoreside facility. Additionally, vessels would not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zones.

The Coast Guard proposes to establish a permanent safety and security zone within 25 yards of each commercial waterfront facility located within the New York Marine Inspection and Captain of the Port Zones that is capable of accepting barge, ship, or ferry vessels. A “commercial waterfront facility” means all piers, wharves, docks and similar structures to which commercial vessels may be secured; areas of land or water under and in immediate proximity to them; buildings on such structures or contiguous to them; and equipment and materials on such structures and in such buildings. During transfer operations at a commercial waterfront facility, the 25-yard zone would be measured from the outboard side of the commercial vessel instead of the pierhead. These zones prohibit the entry of vessels that are not actively engaged in legitimate, scheduled transfer operations at the individual facilities. Vessels may transit through any portion of the proposed zone that extends into the navigable channel for the sole purpose of direct and expeditious transit through the zone so long as they remain within the navigable channel, maintain the maximum safe distance from the waterfront facility and do not stop or loiter within the zone.

The proposed safety and security zones are necessary to protect each facility, commercial vessels moored at the facility, others in the maritime community, and the surrounding communities from subversive or terrorist attack against the facility that could potentially cause serious negative impact to commercial vessels, the port, or the environment. The Captain of the Port does not expect this rule to interfere with the transit of any vessels through the waterways adjacent to each facility. Additionally, vessels would not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zone.

The Coast Guard proposes to establish a permanent safety and security zone encompassing all waters within 150 yards of Liberty Island, Ellis Island, and the bridge between Liberty State Park and Ellis Island.

The proposed safety and security zones are necessary to protect each Island, the bridge between Liberty State Park and Ellis Island, authorized sight-seeing vessels operating at each island, others in the maritime community, and the surrounding communities from subversive or terrorist attack against the islands that could potentially cause serious negative impact to vessels, the port, or the environment. The Captain of the Port does not expect this rule to interfere with the transit of any vessels through the waterways adjacent to each Island. Additionally, vessels would not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zones.

The Coast Guard proposes to establish a permanent safety and security zone within 25 yards of each bridge pier and abutment, overhead power cable tower, pier, and tunnel ventilator, located within the waters of the New York Marine Inspection and Captain of the Port New York Zones, south of the Troy, NY Locks.

The proposed safety and security zones are necessary to protect each bridge, overhead power cable, pier, abutment, tunnel ventilator, others in the maritime community, and the surrounding communities from subversive or terrorist attack against the protected structures that could potentially cause serious negative impact to commercial ground shipments by vehicle or railroad, private vehicle traffic, vessels, the port, or the environment. The Captain of the Port does not expect this rule to interfere with the transit of any vessels through the waterways adjacent to each bridge, overhead power cable, and tunnel ventilator. Vessels may transit through any portion of the proposed zone that extends into the navigable channel for the sole purpose of direct and expeditious transit through the zone so long as they remain within the navigable channel, maintain the maximum safe distance from the protected structure and do not stop or loiter within the zone. Additionally, vessels would not be precluded from mooring at or getting underway from commercial or recreational piers in the vicinity of the zones.

The Coast Guard proposes to establish a permanent safety and security zone that would be enforced whenever passenger vessels are pierside at Pier 88, 90, or 92, or whenever the passenger ship terminal or the adjacent Intrepid Sea, Air and Space Museum, Manhattan are being used as an Emergency Operations Center. The Coast Guard will provide notification and termination of a particular safety or security zone by way of methods identified in 33 CFR 165.7.

This proposed safety and security zone includes all waters of the Hudson River bound by the following points: from the northeast corner of Pier 96 where it intersects the seawall, thence west to approximate position 40°46′23.1″ N, 073°59′59.0″ W, thence south to approximate position 40°45′55.3″ N, 074°00′20.2″ W (NAD 1983), thence east to the southeast corner of Pier 84 where it intersects the seawall, thence north along the shoreline to the point of origin. Marine traffic will still be able to transit through the western 660 yards of the 900-yard wide Hudson River during the activation of the zone. Vessels moored at piers within the safety and security zone, however, will not be allowed to transit from their moorings without permission from the Captain of the Port, New York, during the effective periods of the proposed safety and security zone. The only vessels that would be affected by the safety or security zones would be other passenger vessels at the Passenger Terminal or visiting vessels at the Intrepid Sea, Air and Space Museum. The Captain of the Port may authorize these vessels to transit through these zones. The Captain of the Port does not anticipate any negative impact on vessel traffic due to this safety and security zone.

The safety and security zones are necessary to protect the passenger vessels, their crews and passengers, others in the maritime community, and the surrounding communities from subversive or terrorist attack that could cause serious negative impact to vessels, the port, or the environment, and result in numerous casualties.

The Captain of the Port will notify the maritime community of periods during which this safety and security zone will be enforced in accordance with methods identified in 33 CFR 165.7.

Any violation of any safety or security zone proposed herein, is punishable by, among others, civil penalties (not to exceed $27,500 per violation, where each day of a continuing violation is a separate violation), criminal penalties (imprisonment for not more than 10 years and a fine of not more than $100,000), in rem liability against the offending vessel, and license sanctions. This regulation is proposed under the authority contained in 50 U.S.C. 191, 33 U.S.C. 1223, 1225 and 1226.

No person or vessel may enter or remain in a prescribed safety or security zone at any time without the permission of the Captain of the Port, New York. Each person or vessel in a safety or security zone shall obey any direction or order of the Captain of the Port. The Captain of the Port may take possession and control of any vessel in a security zone and/or remove any person, vessel, article or thing from a security zone.

This proposed rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not “significant” under the regulatory policies and procedures of the Department of Transportation (DOT) (44 FR 11040, February 26, 1979).

We expect the economic impact of this proposed rule to be so minimal that a full Regulatory Evaluation under paragraph 10e of the regulatory policies and procedures of DOT is unnecessary. This finding is based on the fact that vessels will be able to transit around the safety and security zones at the Indian Point Nuclear Power Station, the Coast Guard Stations and Cutters, Commercial Waterfront Facilities, Liberty Island, Ellis Island, Bridge Piers and Abutments, Overhead Power Cable Towers and Abutments, Tunnel Ventilators, the New York City Passenger Ship Terminal, and the DVs, vessels can still transit through the harbor before, during, or after these vessels' transits, the expected short duration of these zones' activation, the expected infrequency of the activation of the safety and security zones around LHG vessels and LHG facilities, and advance notifications will be made by methods in accordance with 33 CFR 165.7.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this proposed rule would not have a significant economic impact on a substantial number of small entities. This proposed rule will affect the following entities, some of which might be small entities: the owners or operators of vessels intending to transit or anchor in a portion of the New York Marine Inspection and Captain of the Port Zones in which entry would be prohibited by safety or security zones.

These safety and security zones will not have a significant economic impact on a substantial number of small entities for the following reasons: vessels will be able to transit around the safety and security zones at the Indian Point Nuclear Power Station, the Coast Guard Stations and Cutters, Commercial Waterfront Facilities, Liberty Island, Ellis Island, Bridge Piers and Abutments, Overhead Power Cable Towers and Abutments, Tunnel Ventilators, the New York City Passenger Ship Terminal, and the DVs, vessels can still transit through the harbor before, during, or after these vessels' transits, the expected short duration of these zones' activation, the expected infrequency of the activation of the safety and security zones around LHG vessels and LHG facilities, and the advance notifications that will be provided by the methods described above.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this rule would have a significant economic impact on it, please submit a comment ( see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking. If the proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact LCDR Morton, Waterways Oversight Branch, Activities New York, at 718-354-4012.

This proposed rule would call for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this proposed rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this proposed rule would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This proposed rule would not affect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This proposed rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this proposed rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This proposed rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. We invite your comments on how this proposed rule might impact tribal governments, even if that impact may not constitute a “tribal implication” under the Order.

We have analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. It has not been designated by the Administrator of the Office of Information and Regulatory Affairs as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have considered the environmental impact of this proposed rule and concluded that, under figure 2-1, paragraph 34(g), of Commandant Instruction M16475.1D, this rule is categorically excluded from further environmental documentation. This rule fits paragraph 34(g) as it establishes safety and security zones. A “Categorical Exclusion Determination” is available in the docket where indicated under ADDRESSES .

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 165 as follows:

The Saint Lawrence Seaway Development Corporation (SLSDC) and the St. Lawrence Seaway Management Corporation (SLSMC) of Canada, under international agreement, jointly publish and presently administer the St. Lawrence Seaway Regulations and Rules (Practices and Procedures in Canada) in their respective jurisdictions. Under agreement with the SLSMC, the SLSDC is proposing to amend the joint regulations to make use of Automatic Identification System (AIS) in Seaway waters from St. Lambert, Quebec to Long Point, mid-Lake Erie mandatory effective at the beginning of the 2003 navigation season, which is scheduled for March 25, 2003.

Since the opening of the Saint Lawrence Seaway in 1959, the Saint Lawrence Seaway Development Corporation and the St. Lawrence Seaway Management Corporation Vessel Traffic Services (VTS) system has been responsible for monitoring the progress of commercial traffic to ensure the safe and expeditious passage of vessels operating in Seaway sectors under their control. Procedures in use today include limits on vessel speed and requirements for all commercial traffic to report by voice on marine VHF radio to the Vessel Control (VTC) centers. These reports are made at designated “call-in-points” along the river. Traffic managers at VTC centers use the vessel reports to monitor traffic patterns, including one-way vessel traffic restricted areas and project the estimated times of arrival (ETA) of vessels at locks in the Seaway.

SLSDC and SLSMC sponsored successful prototype demonstrations and evaluations of a Global Positioning System based VTS system in the fall of 1994 and during the 1995 shipping season. The demonstrations established that a VTS using AIS technology was both feasible and cost effective and can improve the efficiency and safety of operations. In the 1999 shipping season, SLSDC and SLSMC deployed a modernized vessel Traffic Management System (TMS). Now, for the first time, all vessel control centers in the Saint Lawrence Seaway share a common vessel information database. Presently, vessel positions, derived from simulations based on transit histories of vessels, are entered manually into the TMS system by traffic controllers and then updated by voice reports from the vessels during actual transits.

AIS is a broadcast system, operating in the VHF maritime mobile band. It is capable of sending and receiving ship information such as identification, position, course, speed and more, to and from other ships and to and from shore. The Seaway TMS will send pertinent navigation information such as local wind speed and direction, water levels, ice conditions, availability of next lockage, and safety-related messages to vessels.

With the capabilities of ship-to-ship, ship-to-shore and shore-to-ship communications, AIS will greatly enhance the safety, improve the efficiency of the traffic management and increase the vessel security and emergency response capabilities. Specifically, the potential benefits of AIS for the Seaway entities include providing a more efficient vessel traffic management as a result of knowing accurate location and speed of the vessels, monitoring vessel speeds especially for hazardous cargo and deeper draft vessels and faster response time to vessels in case of security concerns and vessel accidents or incidents. The potential benefits to the carrier users include the reduction of overall transit time as a result of better scheduling of lockages and other services timely dispatching of pilots. It also provides real-time position, speed, heading and other pertinent information of the vessel, which will allow master or pilot to better coordinate on the meeting or overtaking in critical reaches of the Seaway.

The SLSDC and the SLSMC are proposing a new § 401.20 that would require mandatory use of AIS in Seaway waters from St. Lambert, Quebec to Long Point, mid-Lake Erie effective at the beginning of the 2003 navigation season, which is scheduled for March 25, 2003. All vessels that require pre-clearance and have a 300 gross tonnage or greater, have an Length Over All (LOA) over 20 meters, or carry more than 50 passengers for hire, would have to use an AIS transponder to transit the Saint Lawrence Seaway. Dredges and floating plants and towing vessels over 8 meters in length would also be required to use AIS, except only each lead unit of combined and multiple units (tugs and tows) would have to use it. Each vessel would have to meet the following international recommendations, standards, and guidelines:

1. International Maritime Organization (IMO) Resolution MSC.74(69), Annex 3, Recommendation on Performance Standards for a Universal Shipborne AIS, as amended;

2. International Telecommunication Union, ITU-R Recommendation M.1371-1: 2000, Technical Characteristics For A Universal Shipborne AIS Using Time Division Multiple Access In The VHF Maritime Mobile Band, as amended;

3. International Electrotechnical Commission, IEC 61993-2 Ed.1, Maritime Navigation and Radio Communication Equipment and Systems—AIS —Part 2: Class A Shipborne Equipment of the Universal AIS—Operational and Performance Requirements, Methods of Test and Required Test Results, as amended;

4. International Maritime Organization (IMO) Guidelines for Installation of Shipborne Automatic Identification System (AIS), NAV 48/18, 2 April 2002, as amended, and for ocean vessels only, with a pilot plug, as specified in Section 3.2 of those Guidelines, installed close to the primary conning position in the navigation bridge and a standard 120 Volt, AC, 3-prong power receptacle accessible for the pilot's laptop computer; and

5. Computation of AIS position reports using differential GPS corrections from the U.S. and Canadian Coast Guards' maritime Differential Global Positioning System radiobeacon services.

6. The use of portable AIS is permissible.

This proposed regulation involves a foreign affairs function of the United States and therefore Executive Order 12866 does not apply and evaluation under the Department of Transportation's Regulatory Policies and Procedures is not required.

The Saint Lawrence Seaway Development Corporation certifies that this proposed regulation will not have a significant economic impact on a substantial number of small entities. The St. Lawrence Seaway Tariff of Tolls primarily relates to commercial users of the Seaway, the vast majority of whom are foreign vessel operators. Therefore, any resulting costs will be borne mostly by foreign vessels.

This proposed regulation does not require an environmental impact statement under the National Environmental Policy Act (49 U.S.C. 4321, et reg.) because it is not a major federal action significantly affecting the quality of human environment. All nine AIS shore base stations (three in U.S. and six in Canada) are co-located with the existing Seaway VHF radio or private telephone towers.

The Corporation has analyzed this proposed rule under the principles and criteria in Executive Order 13132, Dated August 4, 1999, and has determined that this proposal does not have sufficient federalism implications to warrant a Federalism Assessment.

The Corporation has analyzed this proposed rule under title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4, 109 Stat. 48) and determined that it does not impose unfunded mandates on State, local, and tribal governments and the private sector requiring a written statement of economic and regulatory alternatives.

This proposed regulation has been analyzed under the Paperwork Reduction Act of 1995 and does not contain new or modified information collection requirements subject to the Office of Management and Budget review.

Accordingly, the Saint Lawrence Seaway Development Corporation proposes to amend 33 CFR chapter IV as follows:

Section 418 of the National Parks Omnibus Management Act of 1998, Public Law 105-391 authorizes NPS to issue commercial use authorizations to persons to provide commercial services to visitors of areas of the national park system. There are two types of commercial use authorizations, incidental activity commercial use authorizations and in-park commercial use authorizations. The types of commercial activities that may be authorized under commercial use authorizations are similar in many respects to the type of activities that are authorized by concession contracts issued under 36 CFR part 51, as amended. Generally, however, commercial use authorizations, unlike concession contracts, do not authorize the construction of improvements in a park area by a holder, and, except in limited circumstances, require that the services provided by the holder begin and end outside of a park area. The proposed regulations when finalized will assure that all NPS commercial use authorizations are issued or solicited and awarded consistently and that the private sector will be aware of NPS authorizing procedures. The proposed commercial use authorization program will replace the current NPS “incidental business permit” program when adopted.

Section 52.1 Authority and Purposes generally describes the authorities for and purposes of the proposed rule. The basic authority is 16 U.S.C. 1 et seq. , the National Park Service Organic Act. This is supplemented by section 418 of the National Parks Omnibus Management Act of 1998, 16 U.S.C. 5966. Commercial use authorizations may authorize commercial services in park areas that are similar to or the same as some types of services authorized by concession contracts issued by the Director under 36 CFR Part 51. Concession contracts may be issued to authorize the provision of services to visitors rather than a commercial use authorization even though the proposed services may be suitable to authorization under a commercial use authorization. The Director may only issue commercial use authorizations under the terms and conditions of this part.

The primary authors of this rule are the members of a team of NPS officials that manage commercial activities in units of the National Park System.

In accordance with the criteria in Executive Order 12866, the Office of Management and Budget makes the final determination as to the significance of this regulatory action and it has determined that this document is a significant rule and is subject to review.

(1) This rule will not have an effect of $100 million or more on the economy. It will not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.

(2) This rule will not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.

(3) This rule does not alter the budgetary effects or entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients.

(4) This rule does not raise novel legal or policy issues.

This rule is not subject to the Regulatory Flexibility Act as it is not required to be published for comment before adoption by 5 U.S.C. 553 or other law. (5 U.S.C. 553 does not apply to regulations regarding contracts or public lands.) NPS is soliciting public comment on this proposed rule as a matter of policy.

However, NPS considers that, even if the proposed regulations were subject to the Regulatory Flexibility Act, they would not have a significant effect on a substantial number of small businesses within the meaning of the Act. This is because the proposed regulations generally only codify, in response to Section 418 of Public Law 105-391, NPS's current requirements regarding incidental business permits. After the proposed regulations are finalized, incidental business permits will be replaced by commercial use authorizations with no anticipated significant changes to the program as currently implemented. In addition, although the large majority of the some 4,000 businesses now holding incidental business permits are “small businesses” within the meaning of the Regulatory Flexibility Act, these businesses (firewood sales, trail guiding, tow truck operators, etc.) represent only a minuscule fraction of the total number of such businesses operating in the United States. In this connection, NPS also notes that the proposed regulations do not in fact “regulate” small businesses in the usual sense of the word. This is because no business is subject to the proposed regulations unless its owner seeks to conduct commercial activities on federal land. The regulations have no applicability to the activities of any business that is not conducted on federal lands.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Fairness Enforcement Act. This rule does not have an annual effect on the economy of $100 million or more; will not cause a major increase in costs or prices for consumers, individual entities, Federal, State, or local government agencies, or geographic regions; and does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. The primary effect of the proposed rule is to establish policies and procedures for the issuance of commercial use authorizations for areas of the National Park System.

This rule does not impose an unfunded mandate on State, local, or tribal governments or the private sector of more than $100 million per year. The rule does not have a significant or unique effect on State, local or tribal governments or the private sector.

In accordance with Executive Order 12360, this rule does not have significant takings implications as this rule does not apply to private property. A takings assessment is not required.

In accordance with Executive Order 13132, this rule does not have sufficient federalism implications to warrant the preparation of a federalism assessment. The rule imposes no requirements on any governmental entity other than NPS.

In accordance with Executive Order 12988, the Office of the Solicitor has determined that this rule does not unduly burden the judicial system and does not meet the requirements of sections 3(a) and 3(b)(2) of the Order.

This rule requires an information collection from 10 or more parties and a submission under the Paperwork Reduction Act is required. An OMB form 83-I has been reviewed by the Department and sent to the Office of Management and Budget (OMB) for approval. OMB has up to 60 days to approve or disapprove this information collection but may respond after 30 days. Therefore, in order to assure maximum consideration, written comments, suggestions or objections should be submitted on or before December 27, 2002 to Attention: Desk Officer for the Interior Department, Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW., Washington, DC 20503. Also, provide a copy of any written comments on this information collection submitted to OMB by mail to: Cynthia Orlando, Concession Program Manager, National Park Service, 1849 C Street, NW., (2410), Washington, DC 20240. E-mail: Cindy_Orlando@nps.gov.

The information collection contained in this proposed regulation is entitled Commercial Use Authorization, Issuance and Reporting Requirements. This collection is based on the requirement for persons interested in conducting business within national parks to provide information regarding their business (documented in the CUA form submitted for approval), provide a non-refundable application fee when filing, and annually report gross receipts from business conducted within national parks. The initial request and the CUA form allows the holder to apply for and conduct business in national parks and the NPS to retain a written record of the holder's business information. The application fee is used to recover the administrative costs associated with issuing the CUA permit. The reporting requirement enables the NPS to verify that the holder has received less than $25,000 in gross receipts for business conducted within national parks and determines eligibility for the CUA.

The NPS expects to receive/award about 3,500 applicants annually. Holders will be required to report gross receipts once a year to the NPS. We expect the annual hours burden to the public to be 14,000 hours—3,500 hours for the initial request, 3,500 hours for the application and 7,000 hours for the reporting requirement. Additionally, we expect to have an annual monetary burden of $525,000 resulting from the application fee [$150 × 3,500 applicants]. The application fee total burden is based on an average fee of $150 per applicant (from a range of $50-$250 per application) and 3,500 applicants.

Regarding this information collection, the NPS specifically requests comments on whether the collection of information is necessary or the proper for the performance of the functions of the bureau, including whether the information will have practical utility; the accuracy of the bureau's estimate of the burden of the collection of information, including the validity of the methodology and assumptions used; the quality, utility, and clarity of the information to be collected; and how to minimize the burden of the collection of information on those who are to respond, including the use of appropriate automated electronic, mechanical or other forms of information technology.

This rule does not constitute a major federal action affecting the quality of the human environment. A detailed statement under the National Environment Policy Act is not required. The rule will not increase public use of park areas, introduce non-compatible uses into park areas, conflict with adjacent land ownerships or land uses, or cause a nuisance to property owners or occupants adjacent to park areas. Accordingly, this rule is categorically excluded from procedural requirements of the National Environmental Policy Act by 516 DM 6, App. 7.4A(10).

In accordance with Executive Order 13175 “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249), the President's memorandum of April 29, 1994, “Government-to-Government Relations with Native American Tribal Governments” (59 FR 22951) and 512 DM 2, we have evaluated potential effects on Federally recognized Indian tribes and have determined that there are no potential effects on the tribes.

Executive Order 12866 requires federal agencies to write regulations that are easy to understand. Comment is invited on how to make this rule easier to understand, including answers to the following questions: (1) Are the requirements in the rule clearly stated? (2) Does the rule contain undefined technical language or jargon that interferes with its clarity? (3) Does the format of the rule (groupings and order of sections, use of headings, paragraphing, etc.) aid in or reduce its clarity? (4) Would the rule be easier to understand if it were divided into more but shorter sections? (5) Is the description of the rule in the “Supplementary Information” section of the preamble helpful in understanding the proposed rule? (6) What else could be done to make the rule easier to understand?

Please send a copy of any comments that concern how this rule could be made easier to understand to: Office of Regulatory Affairs, Department of the Interior, Room 7229, 1849 C Street, NW., Washington, DC 20240.

If you wish to comment, you may submit your comments by any one of several methods. You may mail comments to Cindy Orlando, National Park Service, 1849 C Street, NW., (2410), Washington, DC 20240. You may also comment via the Internet to WASO_Regulations@nps.gov. Please also include “Attn: RIN 1024-AC85” in the subject line and your name and return address in your Internet message. You may fax your comments to (202) 371-2090. Finally, you may hand-deliver comments to Cindy Orlando, National Park Service, 1201 Eye Street, NW., 11th Floor, Washington, DC. Our practice is to make comments, including names and home addresses of respondents, available for public review during regular business hours. Individual respondents may request that we withhold their home address from the rulemaking record, which we will honor to the extent allowable by law. If you wish us to withhold your name and/or address, you must state this prominently at the beginning of your comment. However, we will not consider anonymous comments. We will make all submissions from organizations or businesses, and from individuals identifying themselves as representatives or officials of organizations or businesses available for public inspection in their entirety.

Accordingly, we propose to add 36 CFR Part 52 to read as follows:

The summer flounder, scup, and black sea bass fisheries are managed cooperatively by the Atlantic States Marine Fisheries Commission (Commission) and the Mid-Atlantic Fishery Management Council (Council) in consultation with the New England and South Atlantic Fishery Management Councils. The management units specified in the FMP include summer flounder (Paralichthys dentatus) in U.S. waters of the Atlantic Ocean from the southern border of North Carolina northward to the U.S./Canada border, and scup ( Stenotomus chrysops ) and black sea bass ( Centropristis striata ) in U.S. waters of the Atlantic Ocean from 35°13.3′ N. lat. (the latitude of Cape Hatteras Lighthouse, Buxton, NC) northward to the U.S./Canada border. Implementing regulations for these fisheries are found at 50 CFR part 648, subparts A, G (summer flounder), H (scup), and I (black sea bass).

The regulations outline the process for specifying annually the catch limits for the summer flounder, scup, and black sea bass commercial and recreational fisheries, as well as other management measures (e.g., mesh requirements, minimum fish sizes, gear restrictions, possession restrictions, and area restrictions) for these fisheries. The measures are intended to achieve the annual targets set forth for each species in the FMP, specified either as an F rate or an exploitation rate (the proportion of fish available at the beginning of the year that are removed by fishing during the year). Once the catch limits are established, they are divided into quotas based on formulas contained in the FMP.

As required by the FMP, a Monitoring Committee (MC) for each species, made up of members from NMFS, the Commission, and both the Mid-Atlantic and New England Fishery Management Councils, is required to review annually the best available scientific information and to recommend catch limits and other management measures that will achieve the target F or exploitation rate for each fishery. The Council's Demersal Species Committee and the Commission's Summer Flounder, Scup, and Black Sea Bass Board (Board) then consider the MC's recommendations and any public comment and make their own recommendations. While the Board action is final, the Council's recommendations must be reviewed by NMFS to assure that they comply with FMP objectives. The Council and Board made their annual recommendations at a joint meeting held August 6-8, 2002.

In 2001, regulations were implemented under Framework Adjustment 1 to the FMP to allow up to 3 percent of the Total Allowable Landings (TAL) for each of the species to be set aside each year for scientific research purposes. For the 2003 fishing year, a Request for Proposals was published in March 2002 to solicit research proposals based upon the research priorities that were identified by the Council (67 FR 13602, March 25, 2002). The deadline for submission of proposals was May 13, 2002. Five applicants were notified in August 2002 that their research proposals had received favorable preliminary review. For informational purposes, this proposed rule includes a statement indicating the amount of quota that has been preliminarily set aside for research purposes. The quota set-asides may be adjusted in the final rule establishing the annual specifications for the summer flounder, scup, and black sea bass fisheries or, if the total amount of the quota set-aside is not awarded, NMFS will publish a notice in the Federal Register to restore the unused research set-aside amount to the applicable TAL.

In 2002, NMFS published final regulations to implement a regulatory amendment (67 FR 6877, February 14, 2002) that revised the way in which the commercial quotas for summer flounder, scup, and black sea bass are adjusted if landings in any fishing year exceed the quota allocated (thus resulting in a quota overage). The FMP previously required that any landings in excess of a commercial quota allocation for a state or period in one year must be deducted from that state's or period's annual quota allocation for the following year. However, complete landings data for the year were not available until after the beginning of the subsequent fishing year. As a result, it was impossible to compile complete landings data for one fishing year, establish overages, and finalize adjustments for the following year prior to the start of the next fishing year on January 1. It was often necessary for NMFS to publish several quota adjustments over the course of the fishing year as additional landings data from the previous year became available. These frequent adjustments complicated the resource management efforts of state marine fisheries agencies and hampered efficient planning by commercial fishers.

NMFS established a cut-off date of October 31 for landings data to be used in calculating quota overages and making the resultant adjustments to the quotas for the following fishing year. Any additional overages due to landings occurring after October 31, or landings reported late, will be deducted from a state's (or period's) quota allocation the next year (i.e., 2 years later). This proposed rule calculates commercial quotas based on the proposed TALs and TACs and the formulas for allocation contained in the FMP. If NMFS approves a different TAL or TAC at the final rule stage, the commercial quotas will be recalculated based on the formulas in the FMP. Likewise, if new information indicates that overages have occurred and deductions are necessary, NMFS will publish notice of the adjusted quotas in the Federal Register . NMFS anticipates that the information necessary to determine whether overage deductions are necessary will be available by time of publication of the final rule to implement these specifications. The commercial quotas contained in this proposed rule for summer flounder, scup, and black sea bass do not reflect any deductions for overages. The final rule, however, will contain quotas that have been adjusted consistent with the procedures described above and contained in the regulatory amendment. Accordingly, landings information will be based upon: (1) Landings reported for the period January 1-October 31, 2002; (2) landings from the period November 1-December 31, 2001; and (3) late reported landings for the period January 1-October 31, 2001.

The FMP specifies a target F for 2003 of F max , that is, the level of fishing that produces maximum yield per recruit. The best available scientific information indicates that F max is currently equal to 0.26 (equal to an exploitation rate of about 22 percent from fishing). The TAL associated with the target F is allocated 60 percent to the commercial sector and 40 percent to the recreational sector. The commercial quota is allocated to the coastal states based upon percentage shares specified in the FMP.

The status of the summer flounder stock is re-evaluated annually. The most recent assessment, updated by the Northeast Fisheries Science Center (NEFSC) Southern Demersal Working Group in June 2002, indicated that the summer flounder stock is overfished and overfishing is occurring, according to the definitions in the FMP. This conclusion was derived from the fact that, in 2001, the estimated total stock biomass of 94.6 million lb (42,900 metric tons (mt)) was below the biomass threshold of 117.3 million lb (53,200 mt) under which the stock is considered overfished (B msy ), and the estimated F of 0.27 was marginally above the FMP overfishing definition of 0.26 (F max ).

However, the F of 0.27 estimated for 2001 represents a significant decline since 1994, when F was estimated to be 1.32. Also, total stock biomass has increased substantially from below 39.7 million lb (18,008 mt) in 1989 to 94.6 million lb (42,900 mt) in 2001. Likewise, spawning stock biomass (SSB) has increased steadily from 20.51 million lb (9,303 mt) in 1993 to 84.21 million lb (38,192 mt) in 2001, the highest value in the time series. Projections based on assumptions about future landings, discards, and recruitment to the stock indicate that, if the 2002 TAL and projected discard level are not exceeded, total stock biomass will exceed, by December 31, 2002, the biomass threshold of 117.3 million lb (53,200 mt), below which the stock would be considered overfished. When the total stock biomass is above this biomass threshold, the stock will no longer be considered overfished, although it will still be below the 234.6 million lb (106,400 mt) necessary to produce maximum sustainable yield (B msy ). Because the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) requires that stocks be rebuilt to the level that produces maximum sustainable yield (MSY), additional rebuilding of the stock will still be required.

The Summer Flounder MC reviewed the stock status and the projections based upon these data and made a TAL recommendation to achieve the target F. The Summer Flounder MC recommended a TAL of 23.3 million lb (10,569 mt), which would be allocated 13.98 million lb (6,341 mt) to the commercial sector and 9.32 million lb (4,227 mt) to the recreational sector. This TAL was determined by the MC to have a 50-percent probability of achieving the F target (0.26) that is specified in the FMP, if the 2002 TAL and assumed discard levels are not exceeded. Biomass estimates for 2002 are lower than had previously been estimated, due to a combination of: recreational landings that have consistently exceeded the harvest targets, lower recruitment in recent years, and to a possible underestimation of discards in stock forecasts. Therefore, because the biomass estimate is smaller than previously estimated, the maximum TAL that has at least a 50-percent probability of achieving the target F is lower. It is important to emphasize that the recommended TAL for 2003 is still considerably larger than the average TAL from 1995-2001 of 18.5 million lb.

The Council and Board reviewed the Summer Flounder MC's recommendation and adopted it. The Council and Board also agreed to set aside 91,163 lb (41.4 mt) of the summer flounder TAL for research activities. After deducting the research set-aside, the TAL would be divided into a commercial quota of 13.92 million lb (6,314 mt) and a recreational harvest limit of 9.28 million lb (4,209 mt).

In addition, the Commission is expected to maintain the voluntary measures currently in place to reduce regulatory discards that occur as a result of landing limits established by the states. The Commission established a system whereby 15 percent of each state's quota would be voluntarily set aside each year to enable vessels to land an incidental catch allowance after the directed fishery has been closed. The intent of the incidental catch set-aside is to reduce discards by allowing fishermen to land summer flounder caught incidentally in other fisheries during the year, while also ensuring that the state's overall quota is not exceeded. These Commission set-asides are not included in any tables in this document, because NMFS does not have authority to establish such subcategories.

NMFS proposes to implement the 23.3-million lb (10,569-mt) TAL with a 91,163-lb (41.4-mt) research set-aside, as recommended by the Council and Board. The 9.28-million lb (4,209-mt) recreational harvest limit is allocated on a coastwide basis. The commercial quota is allocated to the states as shown in Table 1. Table 1 presents the allocations by state, with and without the commercial portion of the 91,163-lb (41.4-mt) research set-aside deduction. These state quota allocations are preliminary and are subject to a reduction if there are overages of a state's 2002 quota (using the landings information and procedures described earlier). Any commercial quota adjustments will be published in the Federal Register in the final rule implementing these specifications.