This rule is issued under Marketing Agreement and Order No. 989 (7 CFR part 989), both as amended, regulating the handling of raisins produced from grapes grown in California, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

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

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

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

This rule reduces the additional holding and storage payments regarding 2002 NS reserve raisins that are carried into the 2003 crop year and intended for use as cattle feed. The crop year runs from August 1 through July 31. Under the order, handlers are compensated for receiving, storing, fumigating, and handling reserve tonnage raisins acquired during a crop year. The order also authorizes additional payments for reserve raisins held beyond the crop year of acquisition. The RAC met on July 2, 2003, and unanimously recommended that additional payments for reserve raisins intended for use as cattle feed accrue beginning September 13, 2003, rather than August 1, 2003. This action will reduce expenses incurred by the 2002 reserve pool and thereby help improve returns to 2002 equity holders, primarily raisin producers.

The order provides authority for volume regulation designed to promote orderly marketing conditions, stabilize prices and supplies, and improve producer returns. When volume regulation is in effect, a certain percentage of the California raisin crop may be sold by handlers to any market (free tonnage) while the remaining percentage must be held by handlers in a reserve pool (reserve) for the account of the RAC. Reserve raisins are disposed of through various programs authorized under the order. For example, reserve raisins may be sold by the RAC to handlers for free use or to replace part of the free tonnage they exported; carried over as a hedge against a short crop the following year; or may be disposed of in other outlets not competitive with those for free tonnage raisins, such as government purchase, distilleries, or animal feed. Net proceeds from sales of reserve raisins are ultimately distributed to the reserve pool's equity holders, primarily producers.

Section 989.66(f) of the order specifies that handlers be compensated for receiving, storing, fumigating, and handling that tonnage of reserve raisins determined by the reserve percentage of a crop year and held by them for the account of the RAC, in accordance with a schedule of payments established by the RAC and approved by the Secretary. Further, the RAC must pay rent to producers or handlers for boxes used in storing reserve raisins held beyond the crop year of acquisition. As previously mentioned, the crop year runs from August 1 through July 31.

Section 989.401(b) of the order's rules and regulations specifies additional payments to handlers for storing, handling, and fumigating reserve raisins held beyond the crop year of acquisition. Specifically, handlers must be compensated for such raisins at a rate of $2.30 per ton for the first 3 months (August through October), and at a rate of $1.18 per ton per month for the remaining 9 months (November through July).

Section 989.401(c) specifies further payment of rental on boxes and bins containing raisins held beyond the crop year of acquisition. Specifically, persons who furnish boxes or bins used for storing reserve raisins held for the account of the RAC on August 1 are compensated for the use of such containers as follows: For boxes, 2 1/2 cents per day, not to exceed a total payment of $1.00 per box per year, per average net weight of raisins in a sweatbox, with equivalent rates for raisins in boxes other than sweatboxes; and for bins, 20 cents per day per bin, not to exceed a total of $10.00 per bin per year.

Pursuant to § 989.67(b) of the order, the RAC is implementing a program to dispose of 40,000 tons of 2002 NS reserve raisins for use as cattle feed. The tonnage is stored at handler facilities and will be adulterated to ensure that the raisins remain in non-commercial channels. The program is intended to help the industry reduce its burdensome oversupply of raisins. It will also help make available bins for storing raisins during the new crop year, which begins August 1, 2003. Barring unforeseen circumstances, reserve tonnage intended for use as cattle feed should be removed from handler premises by mid-September 2003.

The RAC met on July 2, 2003, and unanimously recommended reducing the additional holding and storage payments regarding 2002 NS reserve raisins held by handlers on August 1, 2003, and intended for use as cattle feed. Specifically, additional payments for such raisins will accrue beginning September 13, 2003, rather than August 1, 2003. Thus, additional costs will only be incurred for such tonnage that remains at handler premises after September 12, 2003. Payments for storing and holding reserve raisins are deducted from reserve pool proceeds, and net proceeds are ultimately distributed to equity holders. Thus, reducing the expenses for 2002 NS reserve tonnage intended for use as cattle feed will help improve returns to 2002 equity holders.

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

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

There are approximately 20 handlers of California raisins who are subject to regulation under the order and approximately 4,500 raisin producers in the regulated area. Small agricultural service firms are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $5,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000. Thirteen of the 20 handlers subject to regulation have annual sales estimated to be at least $5,000,000, and the remaining 7 handlers have sales less than $5,000,000. No more than 7 handlers, and a majority of producers, of California raisins may be classified as small entities.

This rule reduces the additional holding and storage payments specified in paragraphs (b) and (c) of § 989.401 regarding 2002 NS reserve raisins that are intended for use as cattle feed. Specifically, additional payments for such raisins will accrue beginning September 13, 2003, rather than August 1, 2003. Under the order, handlers are compensated for receiving, storing, fumigating, and handling reserve tonnage raisins acquired during a crop year. The order also authorizes additional holding and storage payments for reserve raisins held beyond the crop year of acquisition. This action reduces these additional payments for 2002 NS reserve raisins held by handlers on August 1, 2003, that are intended for use as cattle feed. Authority for this action is provided in § 989.66(f) of the order.

Regarding the impact of this rule on affected entities, handlers and producers, the order provides that handlers store reserve raisins for the account of the RAC. Net proceeds from sales of such reserve raisins are distributed to the reserve pool's equity holders, primarily producers. Handlers are compensated from reserve pool funds for their costs in receiving, storing, fumigating, and handling reserve raisins during the crop year of acquisition and for the subsequent crop year. Compensation is also paid for the use of bins and boxes for storing reserve raisins held beyond the crop year of acquisition.

Under the disposal program, it is estimated that about 22,500 tons of reserve raisins will remain at handler premises after August 1, 2003. If 634 tons were removed per day, costs to store, handle, and fumigate the tonnage at the current rate of $2.30 per day between August 1 and September 12, 2003, would be $59,133.00. Bin-rental costs for the same period at the current rate of $0.20 per day per bin would be $161,966.00. Thus, the RAC would incur an estimated $221,000 for holding and storing 2002 reserve raisins that are intended for use as cattle feed between August 1 and September 12, 2003. This rule will reduce these costs to zero and thereby reduce expenses incurred by the 2002 NS reserve pool. Handlers, however, will not be compensated this amount for holding and storing this tonnage.

Regarding alternatives to this action, one option would be to maintain the status quo and have the 2002 reserve pool incur these costs. However, this would not help to improve returns to 2002 equity holders. Another alternative would be to reduce the payments for the period August 1 through September 12, 2003, to figures lower than those currently specified in § 989.401. However, all RAC members supported reducing the additional holding and storage payments for 2002 reserve raisins intended for use as cattle feed so that such payments will accrue beginning September 13, 2003, rather than August 1, 2003.

This rule imposes no additional reporting or recordkeeping requirements on either small or large raisin handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies. Finally, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Further, the RAC's Administrative Issues Subcommittee and RAC meetings on July 2, 2003, where this action was deliberated were both public meetings widely publicized throughout the raisin industry. All interested persons were invited to attend the meetings and participate in the industry's deliberations. Finally, all interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

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

A 60-day comment period is invited to allow interested persons to respond to this rule. All written comments timely received will be considered prior to finalization of this rule.

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

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect, and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) This action needs to be in place by August 1, 2003, so that additional payments regarding reserve raisins held by handlers on August 1, 2003, and intended for cattle feed will be incurred beginning September 13, 2003, rather than August 1 2003; (2) handlers and producers are aware of this action which was recommended by the RAC at a public meeting; (3) the action was recommended by a unanimous vote of the RAC; and (4) this interim final rule provides a 60-day comment period for written comments and all comments timely received will be considered prior to finalization of this rule.

On November 2, 2001, FSIS published a proposed rule in the Federal Register to amend part 319 of the Federal meat inspection regulations to rescind the standards of identity for “pizza with meat” and “pizza with sausage” (66 FR 55601). The proposed rule was in response to a petition submitted on February 4, 1999, by the National Frozen Pizza Institute (NFPI). In support of its petition, NFPI submitted data to demonstrate that the pizza standards are restricting the development of new products by the frozen pizza industry, including pizzas with reductions in constituents that are of health concern to some people, such as fat and cholesterol. NFPI also presented evidence that, due to product innovation in the food service industry, consumers’ expectations of what is meant by the term “pizza” are broader that what is prescribed by the current standards.

Once this final rule becomes effective, products identified as meat or sausage pizzas will no longer be required to contain tomato sauce, cheese, and a bread-based crust, as prescribed by the standards under 9 CFR 319.600. In addition, manufacturers of pizza products will be permitted to reduce the minimum meat content from 12 percent cooked or 15 percent raw to 2 percent cooked or 3 percent raw, the level of meat required for a product to be considered a meat food product subject to USDA jurisdiction.

In the preamble to the proposed rule, FSIS mentioned that although the regulations do not contain a standard of identity for pizza products that contain poultry, FSIS has treated these products as “like products” to pizza with meat or sausage. The Agency's policy has been that these products must contain at least 12 percent cooked poultry meat. Once this final rule becomes effective, the policy that pizzas that contain poultry must have a minimum poultry content will also be revoked.

As discussed in the preamble to the proposed rule, rescinding the meat and sausage pizza standards of identity does not mean that the names for products identified as ”pizzas” will be unregulated. Under 9 CFR 317.2(c)(1) and 381.117(a), non-standardized meat and poultry products must be identified by the common or usual name of the product, or if the product has no common or usual name, a truthful, descriptive designation. FSIS has determined that, in the absence of a regulatory standard of identity, the term “pizza” represents the appropriate common or usual name for the class of products that have been traditionally formulated with the components stipulated in the regulatory standard prescribed by 9 CFR 319.600, i.e., tomato sauce, cheese, and meat topping on a bread-based crust. Products that contain these ingredients may be identified by a common or usual name that includes the term “pizza;” identifies the meat or poultry component, e.g., pepperoni; and declares any other components or features that distinguish it from traditional pizzas, e.g., “pizza—garlic sauce, tomatoes, reduced-fat cheese, and seasoned beef strips on a crust.”

In the preamble to the proposed rule, FSIS requested comments on whether the product names of non-standardized pizzas should be required to include the percent of meat or poultry. Based on the comments received in response to this question, FSIS has concluded that some consumers still rely on the standards to ensure that a meat or poultry product identified as a “pizza” contains a certain amount of meat or poultry. To prevent these consumers from being misled about the meat or poultry content of non-standardized pizzas, the Agency is requiring that the labeling of products that are identified in their common or usual names as pizzas that contain a meat or poultry component (e.g. “pizza with meat,” “sausage, green pepper, and mushroom pizza,” “Thai pizza—chicken, peanut sauce, and vegetables on a crust”) include a parenthetical statement of the percent of meat or poultry in the product that is contiguous to the ingredients statement. This labeling requirement will be effective for three years to allow consumers to become familiar with variations in the meat or poultry content that will be permitted in pizzas as non-standardized foods. FSIS will allow manufacturers of meat and poultry pizzas to exhaust their remaining packaging inventory before they will be required to comply with the new labeling requirement.

The comment period for the proposed rule closed on January 2, 2002. However, in response to comments requesting that FSIS extend the comment period, on March 14, 2002, the Agency reopened and extended that comment period for an additional 30 days. Thus, the comment period closed on April 15, 2002.

FSIS received 36 comments in response to the proposed rule from consumers, consumer advocacy organizations, members of the frozen pizza industry, academia, industry consultants, and trade and professional associations representing livestock producers, meat processors, food processors, seasoning manufacturers, soy product producers, and dietitians. Most of the commenters supported eliminating the standards of identity for meat and sausage pizzas. In general, the supporters agreed that the standards are restricting the development of new products by the frozen pizza industry, and that consumers, expectations of what is meant by the term “pizza” are broader that what is prescribed by the current standards. Eight commenters opposed the proposed rule, mainly because they believe that the current standards still serve their intended purpose of protecting consumers from economic deception, particularly with regard to the meat content of products identified as meat or sausage pizzas. Three commenters, a trade association representing the frozen foods industry, a trade association representing meat processors, and a large company that manufactures a variety of food products, including frozen pizzas, took no position on whether FSIS should eliminate the existing pizza standards but submitted comments on certain aspects of the proposed rule. Summaries of issues raised by commenters and Agency responses follow.

Comment: As mentioned above, in the preamble to the proposed rule, FSIS stated that, if it were to rescind the pizza standards, it had tentatively determined that required labeling features, such as the product name, ingredients statement, and nutrition facts panel, will provide adequate information for consumers to make informed choices when purchasing federally inspected pizza products (66 FR 55601, 55602). In particular, the Agency concluded that the product name would become a descriptive feature to convey to the consumer the components of the product. The Agency went on to request comments on whether the product name of non-standardized pizzas should be required to include the percent of meat or poultry in the product. Almost all commenters that supported eliminating the pizza standards opposed this proposed requirement. Following is a summary of the reasons for their opposition.

• The product names of pizzas sold by restaurants and delivery services would not be required to contain the percent of meat or poultry in the product, thereby re-establishing different regulatory treatment for the retail and frozen pizza industries.

• Percentage labeling of a specific ingredient is not required for other products regulated by FSIS or the Food and Drug Administration (FDA).

• If the product name for non-standardized pizzas must include the percent of meat or poultry in the product, then it should also be required to include the percent of other characterizing ingredients, such as mushrooms or seasonings, as well.

• Requiring that the percent of meat or poultry in a non-standardized pizza product be included as part of the product name is not necessary because existing required labeling features, including mandatory ingredient and nutrition information, already provide sufficient information about a product's meat or poultry content.

• Requiring percent labeling of the meat content implies that meat is the most valuable ingredient in the product. The amount of meat topping is not the determining characteristic of the product. Consumers also look at overall cost and quality of ingredients used.

• Unlike some other products, the meat content of a pizza is readily apparent with even a superficial visual exam, which allows consumers to assess the value of the product for the price.

• Such information would have little meaning to consumers and could lead to counter productive competitive labeling contests, which would not serve consumers' best interests.

• Percent meat content labeling assumes that all meat toppings are equivalent in cost, which is not an accurate assumption.

• Pizzas subject to FDA and FSIS jurisdiction should be marketed and regulated similarly. FDA has no such specific requirement or any standards for pizzas subject to FDA's jurisdiction.

• Few consumers have a working knowledge of the current standards. Therefore, it is not relevant to require the labeling to include the percentage of meat or poultry in the pizza.

• Requiring percent labeling of the meat or poultry content would require manufacturers to disclose proprietary information, including trademark recipes. Manufacturers who wish to provide this information voluntarily could do so if they believed that communicating the percent of meat in the product provided them an advantage.

• Percent ingredient labeling, including a requirement for meat or poultry percent ingredient labeling, is not in keeping with historical U.S. government policy regarding standards that suggest percentage ingredient labeling of foods in international trade. For a number of years, the U.S. delegation to the Codex Committee on Food Labeling opposed a European Union (EU) proposal to require labeling of percent fish core in fish sticks. Importantly, unlike frozen pizza, fish sticks do have one characterizing ingredient.

One commenter, a representative of a consumer advocacy organization, stated that requiring that the product names of non-standardized pizzas include the percent of meat or poultry in the product, although well intentioned, seems clumsy and extreme. A better solution, suggested the commenter, is to identify the percent of meat or poultry in a product somewhere outside the ingredients statement, but not as part of the product name.

Another commenter, a trade association representing meat processors, noted that if the meat and sausage pizza standards are rescinded, it is important that FSIS give consideration to alternative ways to provide truthful information about the meat or sausage component of products identified as “pizza.”

Response: The Agency was not persuaded by the comments that opposed percent labeling of the meat or poultry content of non-standardized pizzas because many of these comments are misleading or inaccurate. Requiring percent labeling of the meat or poultry content for packaged pizzas will not re-establish different regulatory requirements for retail and frozen pizza industries, as suggested by the comments. Even with the elimination of the pizza standards, restaurant pizzas and packaged pizzas will still be subject to different regulatory requirements. For example, nutrition labeling is required for packaged pizzas but not for restaurant pizzas.

The statement that percent labeling of a specific ingredient is not required for any other products regulated by FSIS and FDA also is not accurate. FDA regulations require that the common or usual name of a food contain the percentage of any characterizing ingredients when the proportion of such ingredients in the food has a material bearing on price or consumer acceptance, or when the labeling or appearance of the food may create the erroneous impression that the ingredient is present in an amount greater than is actually the case (21 CFR 102.5(b)). Thus, contrary to what was suggested in the comments, requiring percent labeling of the meat or poultry component of a meat or poultry pizza with a common or usual name is consistent with FDA regulations.

Although it is true that the meat content of pizza is readily apparent when examining the pizza itself, the meat content is not readily apparent if there is a solid cover on the package. Furthermore, FSIS disagrees that percent meat content labeling promotes unproductive labeling contests. The Agency believes that it could promote consumer choice and fair competition.

Upon further consideration of the issue, FSIS has determined that required labeling features, such as the nutrition facts panel and ingredients statement, do not provide sufficient information about the meat or poultry content of products identified as “pizza.” Although ingredients must be listed in order of predominance, there could be such a wide range of ingredients in a pizza that such a listing does not effectively convey the proportion of meat or poultry in the product. FSIS agrees with the comment that, once the standards are rescinded, the Agency should consider alternative ways to provide truthful information about the meat or poultry content of products identified as “pizza.” It also agrees that the percent of meat or poultry in products identified as “pizza” need not appear as part of the product name and can be conveyed somewhere else on the product label.

Therefore, FSIS has decided to require, for three years from the effective date of this final rule, that products that are identified as “pizza” and whose common or usual name identify a meat or poultry component state the percent of meat or poultry in the product in a parenthetical statement contiguous to the ingredients statement. If consumers find this information useful, and believe that it should appear on the product labeling permanently, they may petition the Agency to rescind the expiration date of this part of the regulation.

Comment: Most of the commenters who opposed eliminating the meat and sausage pizza standards did so because, as previously mentioned, without the standards a product identified as a “meat pizza” or a “sausage pizza” would be permitted to contain as little as 2 percent cooked or 3 percent raw meat instead of the 12 percent cooked or 15 percent raw meat prescribed by the standards. These commenters noted that meat is the most expensive ingredient in a meat pizza, and that without standards, manufacturers would be able to significantly reduce the meat content of meat pizzas without consumers' knowledge. They also asserted that descriptors of meat or sausage imply that a product contains some minimum amount of these ingredients, and that consumers' expectations are that this amount is greater than two percent. Thus, the commenters argued, removing the meat and sausage pizza standards would lead to economic deception of consumers that purchase non-standardized pizzas.

Response: As discussed above, FSIS believes that these comments demonstrate that some consumers rely on the pizza standards of identity to ensure that a product identified as a meat or poultry pizza contains a certain amount of meat. However, the Agency does not believe that retaining the regulatory pizza standards of identity is necessary to address the concerns expressed by these comments. As discussed above, to address concerns that consumers could be misled about the meat content of non-standardized pizzas, the Agency is requiring temporary supplemental labeling of the meat or poultry content for products that are identified as “pizzas” and whose product name includes a meat or poultry component.

Furthermore, FSIS does not agree that rescinding the meat and sausage pizza standards will lead to economic deception of consumers that purchase non-standardized pizzas. FSIS has determined that over the years consumer expectations, industry creativity, and technological innovation have created new types of pizza products that fall outside the realm of the traditional or standardized pizza of several decades ago. The existing pizza standards inhibit the production and marketing by Federal establishments of new pizza products. Examples of new pizza products found at retail and food service establishments include: “deep dish pizzas” that provide a smaller surface area for toppings, “white pizzas” that do not have a traditional tomato-based sauce, and ethnic-oriented pizzas that often reduce the meat component to permit a greater amount of vegetable toppings. The current standards for meat and sausage pizzas require that the products contain tomato sauce, cheese, and a bread-based crust, in addition to a minimum percentage of meat or poultry. Thus, the current standards impede the development and marketing of these new and innovative products.

Comment: Many commenters that opposed the proposed rule stated that eliminating the meat and sausage pizza standards of identity is not necessary for companies to produce pizzas with nutritional profiles more consistent with nutritional guidance ( e.g. , lower in fat). They stated that nutritionally improved products can and should be achieved by using lower fat ingredients, not less of fat-containing ingredients, such as meat and cheese. One commenter, an individual consumer, stated that even if the pizza standards were eliminated, it would not likely result in more lower-fat frozen meat or sausage pizzas. To support his argument, the commenter noted that of all the restaurant menus that NFPI presented in support of its petition, not one contained a meat or sausage pizza advertised as being a healthier or lower fat product.

Supporters of the proposal felt that the current standards are obstructing producers' ability to create meat pizzas lower in fat, saturated fat, and cholesterol in response to changing consumer tastes. They stated that eliminating the standards will give manufacturers the flexibility to offer pizzas with less meat, sausage, and fat, and will permit the production of frozen pizzas with reduced-fat cheese or no cheese, provided there is disclosure on the product's label. One commenter noted that it is not always economical to use leaner meats, which are more expensive on a per pound basis, when a manufacturer has to comply with a percentage minimum weight.

Response: FSIS does not disagree that once this final rule is effective, many pizza manufacturers will continue to market the traditional pizza products that are available to consumers today. However, these manufacturers will also have greater flexibility to produce meat and poultry pizzas with reductions in constituents that are of health concern to some people, such as calories and fat. While it is true, as noted in some of the comments, that the standards permit the production of pizzas with improved nutritional profiles through the use of lower fat ingredients, removing the standards will give pizza manufacturers additional flexibility to produce and market nutritionally improved packaged pizzas.

Removal of the pizza standards will not only permit greater use of lower fat ingredients in meat pizza products, such as vegetables and soy-based and other reduced-fat cheeses, it will also permit reductions in the amount of fat-containing ingredients, such as meat and cheese, which will result in a wider selection of pizza products that meet nutrient content claims such as “lower fat,” “healthy,” and “lean.” As noted by one commenter, using leaner meats to reduce the fat content of a pizza product that must comply with a minimum meat content is not always economical because leaner meats are more expensive on a per pound basis. Thus, eliminating the standard will permit pizza manufacturers to provide packaged pizza products with improved nutritional profiles at a variety of pricing levels.

Comments: Some of the commenters that opposed eliminating the pizza standards asserted that changes in standards should be based on consumer research. They pointed out that, while NFPI presented restaurant menu data to support its petition, it did not provide research to indicate that consumers liked the new styles of pizzas presented on the menus. One commenter noted that neither FSIS nor the petitioner presented strong evidence of consumer confusion or dissatisfaction with the current standards.

A few commenters presented their own consumer research that they contended provides evidence that consumers are satisfied with the pizza standards. Two commenters, trade associations representing livestock producers, submitted a consumer research report from a consumer focus group study on the meaning of food names and the assumptions underlying them. The report concluded, among other things, that the identities of certain foods, such as bologna and beef stew, are so distinct to consumers, and consumers are so used to the products being labeled as such, that consumers have difficulty grasping the concept of a simulated change to the names or composition of the product. The research report also concluded that changing the composition of a commonly named food product is equivalent to changing the meaning of the name itself. These findings, the commenters asserted, are evidence that consumers rely on product standards to ensure product integrity and prevent economic adulteration.

Another commenter, a manufacturer and distributor of frozen prepared food products that supported removal of the portion of the pizza standards that prescribes the four basic components (meat, cheese, tomato sauce and bread based crust) but opposed elimination of the minimum meat content requirement, submitted a consumer survey that questioned consumers about the meat content of specific meat pizza products produced by the commenter's company. A majority of the consumers surveyed felt that the meat content of each product involved in the survey was “just about right.” The commenter stated that these results indicate that consumers are satisfied with the meat content requirements imposed by the current standards and that the standards still “promote honesty and fair dealing in the interest of the consumer.”

Another commenter, a multinational manufacturer and marketer of consumer branded meat and food products, submitted the results of a survey conducted after publication of the proposed rule in which the company contacted over 1,000 consumers by telephone. The survey asked consumers how they felt about the U.S. Government's proposal “to change the minimum amount of meat for frozen meat pizza to two percent of the cooked weight or three percent of the raw weight.” The commenter's survey found that consumers' were overwhelmingly against the proposed change.

Response: The restaurant menu data submitted by NFPI in support of its petition demonstrate that many products identified as “pizza” that are purchased by consumers in restaurants do not meet the Agency's standards. Thus, even without consumer survey data, it is no longer reasonable to assume that consumer expectations with regard to what constitutes a pizza mirror the standards for FSIS-inspected products. Restaurants would not be offering such a variety of pizza products if consumers were not interested in purchasing such products.

Although FSIS does not dispute the findings of the consumer studies submitted by the commenters, the Agency disagrees that these findings demonstrate a need to retain the meat and sausage pizza standards of identity. The consumer focus group study that examined the meaning of common names for meat products submitted by the two trade associations questioned consumers about their expectations regarding the composition of a variety of products that have regulatory standards of identity, including bacon and bologna. However, it did not question consumers about their expectations regarding the composition of products identified as “pizza.”

The data submitted by NFPI in support of its petition indicate that, unlike consumer perceptions of products that were the subject of the consumer focus group studies, such as bacon or bologna, consumer perceptions of what a product identified as a “pizza” is have changed dramatically in recent years to include a wide variety of non-traditional, non-standard versions of pizzas. Thus, it is unlikely that changing the composition of a product identified as a “pizza” will result in consumer confusion as to the characteristics of the product. FSIS does not completely disagree with the commenters' conclusion that the study results support the notion that consumers rely on product standards to ensure product integrity and prevent economic adulteration. However, when a product standard no longer reflects consumer expectations about the composition of the product, the standard is not serving its purpose and should be rescinded.

The survey conducted by the frozen foods manufacturer that found that a majority of the consumers surveyed felt that the meat content of a variety of meat pizza products was “just about right,” and the survey conducted by the multinational manufacturer of meat products that asked consumers how they felt about the U.S. Government's proposal “to change the minimum amount of meat for frozen meat pizza to two percent of the cooked weight or three percent of the raw weight,” both imply that the sole effect of eliminating the pizza standards would be a reduction in the minimum meat content and that once the standards are rescinded every pizza manufacturer will reduce the meat content of frozen pizzas to 2 percent cooked or 3 percent raw meat.

Rescinding the pizza standards involves more that permitting a reduction in the minimum meat content requirement for meat food products identified as “pizza.” It also involves permitting the use of sauces other than tomato-based sauces, crusts other than bread-based crusts, and components other than standardized cheese and cheese food products in federally inspected pizzas. Thus, in addition to permitting a reduction in the meat content of a meat or sausage pizza, eliminating the pizza standards provides the opportunity for the development and marketing of non-traditional pizza products, such as pizza with no sauce or cheese component. None of the consumer research studies submitted by the commenters questioned consumers on how they felt about this aspect of eliminating the pizza standards.

Furthermore, the fact that consumers state that they are satisfied with the meat content of certain products does not necessarily mean that that meat content must be prescribed by regulation. As discussed above, to allow consumer to become familiar with the variations that will be permitted in the meat content of non-standardized pizzas, the Agency is requiring that products identified as “pizza” that include a meat or poultry component as part of the product name bear temporary supplemental labeling that conveys the percent of meat or poultry in the products. Furthermore, in the absence of a prescribed meat content requirement, companies are likely to continue to manufacture pizzas with an amount of meat that consumers desire because if they do not they will lose their market share to companies that do.

As demonstrated by the studies discussed above, consumer research can be greatly affected by the manner in which questions are posed to consumers. Thus, the results of the consumer surveys submitted in response to the proposed rule have not persuaded FSIS to retain the pizza standards of identity.

Comment: One commenter stated that policy interpretations on the regulations made by FSIS over the years provide frozen pizza manufacturers with sufficient flexibility to produce and market “non-traditional” meat pizzas, and therefore, there is no need to eliminate the pizza standards. The commenter cited FSIS's interpretive policies related to the pizza standards, including the policy that permits certain products to be identified as “white pizza,” the policy that defines “tomato sauce” as any sauce that contains two percent tomatoes, the policy that liberally interprets “bread-based crust” to include most every kind of flour-based component, and the policy that allows for percentage meat labeling on pizza products that do not otherwise comply with the minimum meat content prescribed by the standards.

Response: In addition to allowing pizza manufacturers to produce the “non-traditional” products that are currently described in FSIS policy documents, rescinding the standards of identity for meat and sausage pizza will provide pizza manufacturers with the flexibility to create new and novel styles of pizza products without having to approach FSIS for new policy interpretations or regulatory changes.

Comment: Several commenters requested that FSIS clarify whether it will permit generic label approval for meat and poultry pizza products once the pizza standards are rescinded.

Response: Modifications made to incorporate the percent meat or poultry content declaration prescribed by this final rule into the labels of existing meat or poultry pizza products will be generically approved pursuant to 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1). These provisions of the FSIS regulations allow generic approval of the labeling for products that have product standards as specified in the meat and poultry inspection regulations or in the FSIS Standards and Labeling Policy Book (the Policy Book). In addition to those products produced in accordance with the regulatory pizza standards in 9 CFR 319.600, many of the meat and poultry pizza products on the market today qualify for generic label approval because they are produced under informal standards described in the Policy Book.

Although meat and poultry pizza products will not be subject to prescribed product standards once this final rule becomes effective, for labeling approval purposes, FSIS will consider existing meat or poultry pizza products whose labels were generically approved prior to the effective date of this final rule as products that qualify for generic label approval under 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1).

New meat and poultry pizza products that are developed and marketed after the effective date of this final rule will not qualify for generic label approval under 9 CFR 317.5(b)(1) and 9 CFR 381.133(b)(1) because these products are not subject to a product standard. Thus, unless they qualify for generic label approval under a provision other than 9 CFR 317.5(b)(1) or 9 CFR 381.133(b)(1), the labels of such products must be submitted for formal approval from FSIS.

Once the labels of non-standardized pizza products have been approved as sketch labeling, certain modifications made to the final labeling may be generically approved pursuant to 9 CFR 317.5(b)(9) and 381.133(b)(9). For example, under 9 CFR 317.5(b)(9)(vii) and 9 CFR 381.133(b)(9)(vii), changes made to the percent meat or poultry declaration statement may qualify for generic approval if the modification reflects a change in the quantity of the meat or poultry ingredient shown in the formula without a change in the order of predominance shown on the label. Also, once the three-year effective date for the meat or poultry content labeling requirement has expired, the meat or poultry content declaration will become a non-mandatory feature. Deletions of non-mandatory features qualify for generic labeling approval under 9 CFR 317.5(b)(9)(xxiii) and 9 CFR 381.133(b)(9)(xxiii).

Comment: Several commenters requested that, in conjunction with this rulemaking, FSIS modify the policies contained in the Food Standards and Labeling Policy book and in the FSIS Policy Memoranda that are associated with the regulatory pizza standards of identity. Most of the requested modifications were to eliminate the references to 9 CFR 319.600 in these policies.

Response: Most of the FSIS policies for products identified as “pizza” require that these products comply with the minimum meat content requirement prescribed by 9 CFR 319.600. Once this final rule becomes effective, products with standards specified in the Policy Book will no longer be subject to this requirement. However, like all products identified as “pizza” with a meat or poultry component as part of the product name, the labels of pizza products that had been subject to standards specified in the Policy Book will be required to bear a statement contiguous to the ingredients statement that conveys the percent of meat of poultry in the product.

Comment: Several commenters requested that, in the preamble to the final rule, FSIS provide clarification as to what it considers to be appropriate descriptive names for non-standardized pizza products. These commenters agreed with the Agency's statements in the preamble to the proposed rule that products with the four “traditional” pizza ingredients should be identified by the term “pizza” with a designation of the meat component ( e.g. “pizza with sausage”). These commenters also agreed that the labeling of products that vary in terms of the four traditional components should bear a descriptive qualifier following “pizza” that specifies the principal components ( e.g. , “pizza with sausage and pesto sauce”). However, the commenters believed that the descriptive qualifier for products with “non-traditional” components should not list the ingredients in order of predominance but in the order that best characterizes the non-traditional product. These commenters also suggested that a description of the crust not be required to be included in the descriptive qualifier unless the crust is different from the traditional dough-based crust.

Response: An appropriate descriptive name for a non-standardized pizza product that contains components that differ from those stipulated in the regulatory standard prescribed by 9 CFR 319.600 ( i.e. , tomato sauce, cheese, and meat topping on a bread-based crust) would be a listing of the components used at levels that characterize the product. Historically, the Agency has considered food and ingredient components used at levels above two percent of product formulation to be “characterizing.” While all characterizing components must be listed in the descriptive product name, they need not be listed in order of predominance. As suggested by the commenter, they may be listed in an order that best characterizes the non-traditional product. The descriptive name should list all characterizing components of the non-standardized pizza product, including crust even if the crust is a traditional dough-based crust. This is consistent with descriptive labeling requirements for other non-standardized products such as stuffed sandwiches or meat fillings wrapped in dough.

Comment: One commenter felt that the examples of acceptable descriptive names for products that do not comply with the traditional standards but that purport to be pizzas provided by FSIS in the preamble to the proposed rule are unwieldy, cumbersome, and in direct contradiction to the goals of the proposed rule. The commenter stated that listing names of ingredients in the name of the pizza, as suggested by the Agency, duplicates the information listed in the ingredients statement.

Response: The examples of descriptive names for non-standardized pizzas provided by FSIS in the preamble to the proposed rule list all characterizing components of the non-standardized pizza product. This is consistent with descriptive labeling requirements for other non-standardized meat and poultry products.

Comment: One commenter suggested that rather than rescind the pizza standards, FSIS should decline jurisdiction over pizzas made with processed meat products. The commenter felt that inspection of these products is a waste of resources that could be better directed to overseeing the slaughter of animals and preparation of raw meat products. The commenter stated that legally FSIS could declare that food products that contain less than 50 percent cooked meat are not considered “meat food products” and therefore, are not subject to FSIS jurisdiction.

Response: Under section 1(j) of the FMIA, the Secretary of Agriculture, and FSIS by delegation, may exempt from the definition of “meat food products” those products that contain meat only in relatively small proportions or that have not been considered by consumers as products of the meat food industry (21 U.S.C. 601(j)). FSIS does not believe that products that consist of up to 49 percent cooked meat contain meat in relatively small proportions as contemplated by the FMIA. Furthermore, FSIS is not aware of any evidence to indicate that consumers do not consider meat pizzas as products of the meat food industry. Therefore, FSIS disagrees that it should decline jurisdiction over meat pizzas and other products that contain less than 50 percent cooked meat.

Comment: One commenter suggested that in addition to eliminating the pizza standards, FSIS should examine the wisdom of its remaining regulatory standards. Another commenter stated that standards reform should not be delayed. This commenter felt that continued adherence to the standards by FSIS impedes product innovation to the detriment of consumers and food industry alike. Another commenter stated that rather than eliminating regulatory standards of identity for meat and poultry products, FSIS should implement them in a more harmonious way. The commenter stated that the regulatory standards governing the amount of poultry in processed food products that contain poultry are substantially different from those governing the meat content of similar processed products that contain meat.

Response: FSIS and FDA are jointly developing a proposed rule whose goal is to establish “general principles” that outside parties can apply in requesting changes to food standards. The proposed rule, “Food Standards; General Principles and Standards Modernization” (the “General Principles” proposal) will address all Federal food standards of identity, whether under FSIS jurisdiction or that of the FDA. Following the conclusion of this rulemaking, parties interested in pursuing changes to the regulatory standards of identity may petition the Agency to initiate rulemaking to make the requested changes.

Comment: One commenter noted that in the preamble to the proposed rule, FSIS stated that consumers” understand the term “pizza” to mean “an open-faced crust with one or more of a variety of ingredients” (66 FR 55601). The commenter noted that it produces pizza stuffed sandwiches that are required to comply with the pizza standards and requested that FSIS recognize that the term “pizza” is not limited to products with open-faced crusts.

Response: Products such as “pizza rolls” or “pizza pockets” are non-standardized products that must be identified by descriptive names. Those products that were required to comply with the minimum meat content prescribed by the standards will no longer be required to do so once the standards are eliminated. However, any product identified as “pizza” product that lists a meat or poultry component as part of the product name, including a product identified as a “meat pizza roll,” must comply with the meat or poultry content labeling requirement prescribed by this final rule.

Comment: One commenter stated that in the proposed rule's analysis under the Regulatory Flexibility Act, FSIS failed to discuss the impact that elimination of the pizza standards will have on small businesses that make meat toppings for pizzas.

Response: The four companies that supply most of the meat toppings, such as pepperoni, sausage, and chopped meat, to both major and contract pizza manufacturers are large businesses. There are some small regional companies that supply meat toppings to regional manufacturers. However, this final rule is not likely to have a significant economic impact on these small businesses. Once the standards are rescinded, FSIS has no information to indicate that in the absence of the minimum meat content requirement prescribed by the standards companies will significantly reduce the amount of meat or poultry in products identified as “pizza”. As discussed above, companies are likely to continue to manufacture pizzas with an amount of meat that consumers desire because if they do not they will lose their market share to companies that do. Therefore, FSIS does not believe that this final rule will have an adverse impact on the small businesses that supply meat toppings for packaged pizza products.

As proposed, FSIS is rescinding the regulatory standards of identity for pizza by removing 9 CFR 319.600 from the federal meat inspection regulations. In addition, the Agency is amending 9 CFR 317.8 and 9 CFR 381.129 by adding new paragraphs (b)(40) and (f), respectively, to require that the labeling of meat or poultry products identified as “pizza” that contain a meat or poultry component as part of the product name convey the percent of the meat or poultry in the product in a parenthetical statement contiguous to the ingredients statement. The percentage of meat or poultry in the product must be calculated on the weight of the cooked, dried, or cured meat or poultry in the product (as opposed to the weight of the raw meat or poultry) in relation to all components of the product. This labeling requirement will expire three years after the effective date of this rule. Pizza manufacturers are permitted to exhaust their remaining packaging inventory before they will be required to comply with the new labeling requirement.

This action has been reviewed for compliance with Executive Order (EO) 12866. EO 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when a regulation is necessary, to select the regulatory approach that maximizes net benefits (including potential economic, environmental, public health and safety, and other advantages, distributive impacts, and equity). We have determined that this final rule maximizes net benefits to consumers by removing the standard of identity for “pizza with meat” and “pizza with sausage.”

EO 12866 classifies a rule as significant if it meets any one of a number of specified conditions, including: having an annual effect on the economy of $100 million, adversely affecting a sector of the economy in a material way, adversely affecting competition, or adversely affecting jobs. A regulation is also considered a significant regulatory action if it raises novel legal or policy issues. This final rule has been designated as non-significant as defined by EO 12866 and therefore has not been reviewed by the Office of Management and Budget.

The Unfunded Mandates Reform Act of 1995 (Public Law 104-4), requiring cost-benefit and other analyses, in section 1531 (a) defines a significant rule as “a Federal mandate that may result in the expenditure by State, local, and tribal governments in the aggregate, or by the private sector, of $100,000,000 (adjusted annually for inflation) in any 1 year.” This final rule is not a significant rule under the Unfunded Mandates Reform Act.

The meat and poultry pizza industry affected by this final rule consists of manufacturers who produce refrigerated pizzas, frozen pizzas, pizza kits, and mixes. Because frozen pizzas are the dominant products of this industry, making up 99 percent of the affected market, FSIS is focusing on this segment of the industry in this analysis.

It is estimated that there are about 155 manufacturers of frozen pizzas  1 (manufacturers of both brand and private label frozen pizzas) and these consist of 6 major manufacturers, 20 private-label manufacturers, and approximately one hundred twenty nine regional contract manufacturers. 2 The major manufacturers produce brand-named frozen pizzas on a national basis and the contract manufacturers produce brand-named frozen pizzas on a regional basis. Some restaurants make pizzas, freeze them, and then sell them to the local grocery stores on a contractual basis. Finally, there are several companies, like chain supermarkets, warehouse clubs, restaurants, and franchises, that contract out the production of frozen meat pizzas to approximately 20 private label manufacturers and regional contract manufacturers.

Four major suppliers to pizza manufacturers supply meat toppings, such as pepperoni, sausage, and chopped meat, to both major and contract pizza manufacturers. There are also some small regional companies that supply meat toppings to regional manufacturers. FSIS has determined that the suppliers of meat pizza toppings will most likely not be adversely affected by the final rule because even though pizza manufacturers may reduce the amount of meat toppings on pizzas, these suppliers can still supply other markets with their meat toppings, e.g. deli, frozen dinners, etc. In addition, these suppliers offer several product lines of pizza toppings other than meat, and they may experience an increase in demand for these other toppings. The agency believes, however, that as a direct result of the final rule, the overall demand for frozen pizzas will increase, and therefore the total demand for pizzas with meat toppings will also increase.

The final rule removes the standard of identity for meat and sausage pizza and requires that for a 3-year period, the labeling of products identified as pizza that lists a meat or poultry component as part of the product name will bear a statement that conveys the percent of meat or poultry in the product. The percentage statement must appear contiguous to the ingredients statement.

The following sections contain qualitative descriptions of consumer and manufacturer benefits that will ensue from eliminating the meat and sausage pizza standards of identity.

The final rule will allow consumers to choose from a greater variety of meat and poultry pizzas, some of which may have improved nutritional profiles. Consumers will have a greater opportunity to improve their diets, should they desire to do so, because manufacturers will now be able to market meat and poultry pizzas that contain less meat or poultry and may contain non-meat toppings such as soy-based toppings, 3 and other innovative toppings that contain a lesser amount of meat than the amount of meat (12% cooked or 15% raw) that they are currently required to contain.

Consumers may also benefit because they may be able to purchase less costly meat and poultry pizzas. In addition, some consumers may be willing to pay more for some pizzas if they perceive that these meat and poultry pizzas are healthier than other pizzas. In either case, consumers will benefit because both the low and high end of the market can be expanded.

Under the final rule, consumers will also be protected from any misrepresentations of the amount of meat or poultry contained in pizzas. Percentage labeling of meat and poultry in pizzas, which is required for the next three years, will benefit those consumers who have come to expect a certain amount of meat or poultry on pizzas ( i.e. , consumers who rely on standards) by allowing them to become familiar with and accustomed to a variation in meat or poultry amount on pizzas. Percentage labeling will also help reduce any confusion consumers may experience when they are comparing the amounts of meat or poultry in pizzas. During the 3-year period, consumers will be able to reduce their search costs when comparing pizzas because when selecting meat or poultry pizzas, they will be able to readily ascertain the amount of meat or poultry in different products. Consumers will be able to make choices consistent with their desire to have more or less meat or poultry on pizzas, and the percentage labeling will help them make accurate selections.

Finally, consumers, who live in areas where there are very few restaurants, or in areas where the restaurants do not sell pizzas, or in areas where pizza delivery is limited, will benefit because they will have access to a greater variety of non-traditional pizzas in their local supermarkets.

Manufacturers of pizzas containing meat or poultry will benefit from the final rule because the elimination of the traditional FSIS pizza standards of identity will make them more competitive with non-meat and non-poultry containing pizza producers and retail outlets. Currently, manufacturers of FDA-regulated pizzas and pizzas sold by restaurants and carry out/delivery services, whether frozen or fresh, are able to experiment with innovative recipes and ingredient profiles, in offering consumers new products. These innovative pizzas that are sold in retail stores need not contain cheese or tomato sauce, as FSIS requires.

Manufacturers of non-traditional pizzas will potentially experience an increase in sales and therefore revenues, when they achieve economies of scale while producing a large variety of these pizzas. Since the manufacturers will not be restricted to manufacturing a prescribed recipe pizza, they can become more innovative and create new markets by offering new products and mass producing them. Also, these manufacturers can use less costly ingredients and eliminate or reduce certain ingredients, thereby offering more economically priced meat and poultry pizzas. For some manufacturers, this may increase their market share and revenues.

This final rule does not mandate changes in the way meat or poultry products are produced. However, it does impose a new labeling requirement, for a limited time, on firms that manufacture and market products identified as pizzas that list meat or poultry components as part of the product name. When this rule becomes effective, all companies that produce products identified as pizzas that list a meat or poultry component as part of the product name will be required to modify their product labels by adding a statement contiguous to the ingredients statement that states the percent of meat or poultry in the product. Companies must consequently redesign their product labels by adding the required information to their existing label designs, or by applying a separate sticker with the required information to their existing labels. FSIS will permit companies to use their remaining packaging inventory before they will be required to comply with the new labeling requirement so that they will not have to discard any unused packaging.

Manufacturing of pre-printed packaging is generally contracted out to third-party firms. Costs to redesign product labels or add information to existing label designs are one-time costs and include costs associated with internal administrative activities, assessing the meat or poultry amounts, altering the graphic design, conducting prepress activities, and changing engraving plates or cylinders. 4

FDA's Labeling Cost Model was originally developed by researchers at RTI International for various consumer food products and was adapted for egg products, which are primarily shipped to foodservice and further food manufacturers. RTI adapted the model to determine the cost of the new regulation of placing the statements “keep refrigerated” or “keep frozen” on all egg products that require special handling to maintain their wholesome condition. Additionally such statements had to be printed on the principal display panel of the product. In determining the cost of the proposed egg products rule, the model was used to determine the cost of placing refrigeration labels, the cost of the labels, and the cost of the labeling equipment needed and the average size of the containers requiring the labels. FSIS believes that this is a reasonable and valid model to use to estimate the cost of the final rule for changing the labels on frozen meat and poultry pizzas.

Using the FDA Labeling Cost Model, the following table provides the costs associated with changing labeling information for frozen and refrigerated pizzas packaging using the offset lithography printing method  5 for each universal product code (UPC) that needs to be changed. A UPC is a unique code assigned to every consumer package good and is read by a scanner when purchased. 6

It is estimated that the cost per UPC will range from a low of $462 to a high of $1,144, with the more likely cost being $803  7 as depicted in the above table.

In 2001, there were 1,603 UPC's associated with refrigerated and frozen pizzas including a small percentage of pizza kits and mixes, of which 1,042 were from brand name labels and 561 were from private labels. When all these costs are considered, the estimated one-time cost to modify pre-printed pizza packaging labels for 1,603 UPC, as shown in the table below is $741 thousand ($462 × 1,603 UPCs) to $1.8 million ($1,144 × 1,603 UPC), 8 with the more likely cost being $1.3 million ($803 × 1,603 UPCs).

On May 28, 2003 (68 FR 31587), the NRC published in the Federal Register a direct final rule amending its regulations in 10 CFR Part 110 to issue a general license for the import of major components of utilization facilities for end-use at NRC-licensed reactors. The amendment facilitates imports of major components of domestic nuclear reactors in furtherance of protection of public health and safety and reduces unnecessary regulatory burdens related to the maintenance of NRC-licensed reactors. In the direct final rule, NRC stated that if no significant adverse comments were received, the direct final rule would become final on the date noted above. The NRC did not receive any comments that warranted withdrawal of the direct final rule. Therefore, this rule will become effective as scheduled.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) by superseding AD 92-16-51, amendment 39-8355 (57 FR 40838, September 8, 1992), which is applicable to certain EMBRAER Model EMB-120 series airplanes, was published as a second supplemental notice of proposed rulemaking (NPRM) in the Federal Register on May 15, 2002 (67 FR 34641). That action proposed to continue to require repetitive visual checks or inspections to verify that the flight idle stop system circuit breakers are closed, and functional tests to determine if the backup flight idle stop system is operative. That action proposed to remove one airplane from the applicability, and add new inspections and corrective actions if necessary. Additionally, that action proposed to require modification of the secondary flight idle stop system (SFISS), which would terminate the repetitive actions.

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

One commenter states that an AD addressing the in-flight reversing issue is unjustified and inappropriate, and suggests that the proposed AD be withdrawn. The commenter asserts that an AD is unjustified because the subject unsafe condition is a pilot training issue and that, by adding further complexity to the propeller reversing controls, the proposed AD would only increase the opportunities for mechanical malfunction instead of improving safety. The commenter suggests that, instead of issuing an AD to address the unsafe condition, the FAA require operators to provide proper pilot training and oral testing specifically addressing the in-flight reversing issue.

The FAA does not agree that the AD be withdrawn or that the proposed actions would increase the opportunities for mechanical malfunction of the SFISS. We do not consider this unsafe condition to be simply a result of inadequate pilot training. Operational experience has shown that the existing SFISS is vulnerable to certain maintenance-originated failure modes, which could affect the operational reliability of the system. In addition, such failure modes do not result in a visual indication to the flightcrew of an inoperable condition. We find that these reliability concerns necessitate mandating installation of a more reliable SFISS design, one that also provides flightcrews with a real-time indication of the system's operability. We have determined that this design change adds more reliability and does not add significant complexity to the SFISS. Therefore, we find it necessary to issue the AD as proposed.

The other commenter, the manufacturer, states that EMBRAER Service Bulletins 120-76-0018 and 120-76-0022 will be revised to include procedures for the bellcrank bolt hole repair provided in paragraph (e) of the second supplemental NPRM. The commenter also states that the revised service bulletins would eliminate the need for operators to contact the FAA or the Departmento de Aviacao Civil (DAC) (or its delegated agent) for approved methods of accomplishing the repair.

We agree. Since the issuance of the second supplemental NPRM, the manufacturer has issued EMBRAER Service Bulletins 120-76-0018, Change 06, dated August 9, 2002; and 120-76-0022, Change 03, dated August 9, 2002. The second supplemental NPRM specified that the FAA or DAC (or its delegated agent) be contacted for an approved method of compliance for the proposed repair. We have reviewed and approved these revised service bulletins and find that they do contain the appropriate repair instructions. Accordingly, we have revised paragraph (e) of this final rule to add those revised service bulletins as additional options for accomplishing the repair. However, we have not removed the provision for contacting the FAA or DAC (or its delegated agent) from that paragraph. Changing the requirements in such a manner would require us to issue a third supplemental NPRM, and we find that further delay in issuing this AD would be inappropriate in light of the identified unsafe condition.

The same commenter suggests that reference to EMBRAER Service Bulletin 120-76-0015 be removed from the proposed requirements because it is applicable to only one airplane (serial number (S/N) 120068), currently operated under Brazilian registry, and therefore, does not affect the U.S. fleet.

We do not agree. We consider that those requirements with reference to Service Bulletin 120-76-0015 are necessary to be included in this AD to ensure that the unsafe condition is addressed in the event that the subject airplane is imported and placed on the U.S. Register in the future. No change to the final rule is necessary in this regard.

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

On July 10, 2002, the FAA issued a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's airworthiness directives system. The regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. However, for clarity and consistency in this final rule, we have retained the language of the second supplemental NPRM regarding that material.

After the second supplemental NPRM was issued, we reviewed the figures we use to calculate the labor rate to do the required actions. To account for various inflationary costs in the airline industry, we find it appropriate to increase the labor rate used in these calculations from $60 per work hour to $65 per work hour. The economic impact information, below, has been revised to reflect this increase in the specified hourly labor rate.

The FAA estimates that 230 EMBRAER Model EMB-120 series airplanes of U.S. registry will be affected by this AD.

The actions that are currently required by AD 92-16-51 take approximately 5 work hours per airplane to accomplish, at an average labor rate of $60 per work hour. Based on these figures, the cost impact of that AD on U.S. operators is estimated to be $69,000, or $300 per airplane, per inspection cycle.

The approximate cost, at an average labor rate of $65 per work hour, for the modifications required by this AD, are listed in the following table:

Therefore, based on the figures included in the table above, the cost impact of the modification required by this AD on U.S. operators is estimated to range from $118 to $30,668 per airplane.

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

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

For the reasons discussed above, I certify that this action (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A final evaluation has been prepared for this action and it is contained in the Rules Docket. A copy of it may be obtained from the Rules Docket at the location provided under the caption ADDRESSES.

Effective November 29, 2002, the FAA proposed to amend Title 14 Code of Federal Regulations, part 71 (14 CFR part 71) by establishing Class E5 airspace at Afton Municipal Airport, Afton, WY. This was necessary to provide an increased level of safety for aircraft executing IFR operations between the terminal and en route phase of flight at Afton Municipal Airport, Afton, WY. Interested parties were invited to participate in this rule making proceeding by submitting written comments on the proposal. No comments were received.

This amendment to 14 CFR part 71, establishes Class E5 airspace at Afton, WY. Class E airspace is necessary to provide adequate controlled airspace for IFR operations at Afton Municipal Airport. The FAA establishes Class E airspace where necessary to contain IFR aircraft transitioning between the terminal and en route environments. By this action, the FAA intends to provide for the safe and efficient use of the navigable airspace, and to promote safe flight operations under IFR conditions at the Afton Municipal Airport, Afton, WY.

The new Class E5 airspace will be depicted on aeronautical charts for pilot reference. The coordinates for this airspace docket are based on North American Datum 83. Class E5 airspace areas extending upward from 700 feet above the surface of the earth, are published in Paragraph 6005, of FAA Order 7400.9K dated August 30, 2002, and effective September 16, 2002, which is incorporated by reference in 14 CFR 71.1. The Class E5 airspace designation listed in this document will be published subsequently in the Order. The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore, (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a Regulatory Evaluation as the anticipated impact is so minimal. Since this is a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

This amendment to 14 CFR 71 modifies the Class E airspace area extending upward from 700 feet above the surface at Beatrice, NE. It expands the south extension of this airspace area an additional 2.4 miles to provide appropriate controlled airspace for aircraft executing the NDB-A Standard Instrument Approach Procedure (SIAP) to Beatrice Municipal Airport. It modifies the northwest extension of this airspace area by defining it with the Beatrice very high frequency omnidirectional radio range (VOR) 320° radial versus the current 325° radial. It incorporates the current location of the Shaw NDB and brings the legal description of this airspace area into compliance with FAA Order 7400.2E, Procedures for Handling Airspace Matters. The area will be depicted on appropriate aeronautical charts. Class E airspace areas extending upward from 700 feet or more above the surface of the earth are published in paragraph 6005 of FAA Order 7400.9K, dated August 30, 2002, and effective September 16, 2002, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be published subsequently in the Order.

The FAA anticipates that this regulation will not result in adverse or negative comment and, therefore, is issuing it as a direct final rule. Previous actions of this nature have not been controversial and have not resulted in adverse comments or objections. Unless a written adverse or negative comment, or a written notice of intent to submit an adverse or negative comment is received within the comment period, the regulation will become effective on the dates specified above. After the close of the comment period, the FAA will publish a document in the Federal Register indicating that no adverse or negative comments were received and confirming the date on which the final rule will become effective. If the FAA does receive, within the comment period, an adverse or negative comment, or written notice of intent to submit such a comment, a document withdrawing the direct final rule will be published in the Federal Register , and a notice of proposed rulemaking may be published with a new comment period.

Interested parties are invited to participate in this rulemaking by submitting such written data, views, or arguments, as they may desire. Comments that provide the factual basis supporting the views and suggestions presented are particularly helpful in developing reasoned regulatory decisions on the proposal. Comments are specifically invited on the overall regulatory, aeronautical, economic, environmental, and energy-related aspects of the proposal. Communications should identify both docket numbers and be submitted in triplicate to the address listed above. Commenters wishing the FAA to acknowledge receipt of their comments on this notice must submit with those comments a self-addressed, stamped postcard on which the following statement is made: “Comments to Docket No. FAA-2003-15461/Airspace Docket No. 03-ACE-59.” The postcard will be date/time stamped and returned to the commenter.

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

The FAA has determined that this regulation is noncontroversial and unlikely to result in adverse or negative comments. For the reasons discussed in the preamble, I certify that this regulation (1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under Department of Transportation (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.

Today we are adopting an updated EDGAR Filer Manual (Filer Manual). The Filer Manual describes the technical formatting requirements for the preparation and submission of electronic filings through the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system. 2 It also describes the requirements for filing using modernized EDGARLink. 3

The Filer Manual contains all the technical specifications for filers to submit filings using the EDGAR system. Filers must comply with the applicable provisions of the Filer Manual in order to assure the timely acceptance and processing of filings made in electronic format. 4 Filers should consult the Filer Manual in conjunction with our rules governing mandated electronic filing when preparing documents for electronic submission. 5

We will implement EDGAR Release 8.6 on July 28, 2003, to improve the functionality of the SEC's Online Forms website, to support new extended EDGAR filing and dissemination hours to 6 a.m., to support same day acceptance and dissemination of Form 3, 4 and 5 filings and Securities Act of 1933, Rule 462(b) filings, MEF form types, received on business days on or before 10 p.m., to support recent rulemaking activity related to the addition of the new Form 8-K Items 10, 11, 12, and 13, new form types N-CSRS, N-PX and N-Q and rescinded form types BW-2 and BW-3. This release also includes minor updates to submission Templates 1, 2, 3, and 5, and the EDGARLink software, to allow for new exhibit types: EX-31 and EX-32 and exhibits for use with Form N-CSR (submission types N-CSR and N-CSRS): EX-99.906CERT, EX-99.CERT and EX-99.CODE ETH; to disallow the use of exhibit types, EX-99.102P3 CERT, EX-99.133 CERT, EX-99.77Q3 CERT; to disallow the use of form types BW-2 and BW-3; to allow for the use of new form types N-CSRS and N-CSRS/A (for submission of certified semi-annual shareholder report of registered management investment companies); N-PX and N-PX/A (for submission of annual report of proxy voting record of registered management investment companies); and N-Q and N-Q/A (for submission of quarterly schedule of portfolio holdings of registered management investment company if and when the Commission adopts form N-Q); and to allow for the use of Form 8-K Items 10, 11, 12, and 13.

EDGAR 8.6 supports backward compatibility of the 8.5 templates as long as the reporting requirements for specific form types have not changed. EDGAR 8.6 server software supports all of the field identifiers that were valid in the 8.5 version of the PureEdge templates. Notice of the update has previously been provided on the EDGAR filing Web site and on the Commission's public website. The discrete updates are reflected on the filing Web site and in the updated Filer Manual Volumes.

Along with adoption of the Filer Manual, we are amending Rule 301 of Regulation S-T to provide for the incorporation by reference into the Code of Federal Regulations of today's revisions. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR Part 51.

You may obtain paper copies of the updated Filer Manual at the following address: Public Reference Room, U.S. Securities and Exchange Commission, 450 Fifth Street, NW., Washington DC 20549-0102. We will post electronic format copies on the Commission's Web site; the address for the Filer Manual is http://www.sec.gov/info/edgar.shtml. You may also obtain copies from Thomson Financial Inc, the paper and microfiche contractor for the Commission, at (800) 638-8241.

Since the Filer Manual relates solely to agency procedures or practice, publication for notice and comment is not required under the Administrative Procedure Act (APA). 6 It follows that the requirements of the Regulatory Flexibility Act 7 do not apply.

The effective date for the updated Filer Manual and the rule amendments is July 31, 2003. In accordance with the APA, 8 we find that there is good cause to establish an effective date less than 30 days after publication of these rules. The EDGAR system upgrade to Release 8.6 is scheduled to occur on July 26, 2003, becoming available on July 28, 2003. The Commission believes that it is necessary to coordinate the effectiveness of the updated Filer Manual with the scheduled system upgrade.

We are adopting the amendments to Regulation S-T under Sections 6, 7, 8, 10, and 19(a) of the Securities Act, 9 Sections 3, 12, 13, 14, 15, 23, and 35A of the Securities Exchange Act of 1934, 10 Section 20 of the Public Utility Holding Company Act of 1935, 11 Section 319 of the Trust Indenture Act of 1939, 12 and Sections 8, 30, 31, and 38 of the Investment Company Act of 1940. 13

Pfizer, Inc., 235 East 42d St., New York, NY 10017, has informed FDA that it has transferred ownership of, and all rights and interest in, the following three approved NADAs to Schering-Plough Animal Health Corp., 1095 Morris Ave., Union, NJ 07083:

Accordingly, the agency is amending the regulations in 21 CFR 526.88, 526.464b, and 526.464c to reflect the transfer of ownership.

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

The National Defense Authorization Act for Fiscal Year 2002 (NDAA-02) was signed into law on December 28, 2001. Section 735 of NDAA-02 amends Section 721 of the NDAA-01 with respect to the nonavailability statement (NAS) elimination requirements and eliminates the requirement for non-enrolled TRICARE beneficiaries who live within a 40-mile radius of a military medical treatment facility (MTF) to obtain an NAS or preauthorization from an MTF before receiving nonemergent inpatient or obstetrical (inpatient or outpatient) services from a civilian provider in order that TRICARE will cost-share for such services. A non-enrolled TRICARE beneficiary is a beneficiary who has not enrolled in TRICARE Prime, but who has chosen to use the TRICARE Standard and TRICARE Extra options. Section 735 retains MTF NAS authority for inpatient mental health services within the usual 40-mile catchment area. The section establishes that the NAS elimination requirements are to take effect on the earlier of the date the health care services are provided under new TRICARE contracts or the date that is two years after the date of the enactment of NDAA-02. As the health care services under new TRICARE contracts will not be available until after March 2004, the NAS requirements will be eliminated for admissions occurring on or after December 28, 2003, which is the date that is two years after the date of enactment of NDAA-02. For obstetrical care, the NAS requirement will be eliminated for maternity episodes wherein the first prenatal visit occurs on or after December 28, 2003. An NAS is required when the first prenatal visit occurs before December 28, 2003, by 10 U.S.C. 1080(b). The NAS for inpatient mental health care will continue to be required.

With the exception of maternity care, Section 735 of NDAA-02 gives the Secretary of DoD the authority to waive the NAS elimination requirements if: (a) Significant costs would be avoided by performing specific procedures at the affected military treatment facility (MTF); (b) a specific procedure must be provided at the affected MTF to ensure the proficiency levels of the practitioners at the facility; or (c) the lack of NAS data would significantly interfere with TRICARE contract administration. When this waiver authority will be exercised, the Department will notify the affected beneficiaries by publishing a notice in the Federal Register and notify the Congress.

Section 735 of NDAA-02 furthermore eliminates the multi-regional and national NAS requirement for specialized treatment services (STSs) for TRICARE Standard beneficiaries who live outside the 200-mile radius of a STS facility STS facilities are those designated facilities with regional, multi-regional or national catchment areas which provide complex medical and surgical services as currently provided in 32 CFR 199.4(a)(10). Since the Department has decided to terminate the STS program no later than June 1, 2003, all regional, multi-regional, and national NAS requirements for STSs will be eliminated before that date. The rationale behind the termination of the STS program is that this program was not based upon nationally developed consensus or evidenced-based criteria for clinical quality (there were none at the inception of this program) and had not consistently demonstrated cost-benefit to the government. In addition, the NAS requirement for STSs has placed an unreasonable burden on our beneficiaries who have had to travel extended distances to the STS facilities. This would provide for enhanced continuity of care for TRICARE Standard beneficiaries who generally receive most medical and surgical services from civilian providers of their choice. This rule gives notice of the Department's decision to terminate the STS program entirely no later than June 1, 2003.

This rule will implement Section 728 of the National Defense Authorization Act for Fiscal Year 2001 (NDAA-01) (Pub. L. 106-398) which was enacted on October 30, 2000. Section 728 requires that prior authorization (or more precisely, preauthorization as defined in 32 CFR 199.2(b)) before referral to a specialty care provider that is part of the network be eliminated as part of any new TRICARE contracts entered into by the Department of Defense after the date of the enactment of the Act. This means that medical necessity preauthorization will not be required when primary care or specialty care providers refer TRICARE Prime patients for consultation appointment services, which are provided within the contractors' network of providers. Only TRICARE Prime patients require preauthorization for obtaining consultation appointment services. TRICARE Prime beneficiaries are required to use network providers if available. This rule removes the requirement to obtain a medical necessity determination when the consultation services are provided within the contractor's network. Section 728 of NDAA-01 does not eliminate the requirement for medical necessity preauthorizations for specific procedures or other health care services which specialty providers may recommend for beneficiaries as a result of the original consultation appointment or the need for preauthorization referral to non-network providers. For example, a consultation might result in a recommendation for a high cost surgical procedure on a nonemergent basis. The specialist's intent to perform this procedure may still be subjected to medical necessity preauthorization based upon utilization review criteria as has been TRICARE policy for years in conformance with the peer review organization program in section 199.15.

In summary, under new TRICARE contracts, requests for consultation appointment services will not be subjected to medical necessity preauthorization though other health care services may continue to require preauthorization. TRICARE contractors may determine which other categories of health care services (procedures, nonemergent admissions) will require medical necessity preauthorization in accordance with their best business practices.

Executive Order 12866 requires certain regulatory assessments for any significant regulatory action, defined as one which would result in an annual effect on the economy of $100 million or more, or have other substantial impacts. The Regulatory Flexibility Act (RFA) requires that each Federal agency prepare, and make available for public comment, a regulatory flexibility analysis when the agency issues a regulation which would have significant impact on a substantial number of small entities.

This rule is not a significant regulatory action under E.O. 12866 that could potentially add more than $100 million in estimated annual costs for DoD. This rule does not require a regulatory flexibility analysis as the policy action was taken by Congress and the rule merely puts it into effect. The policy of the Regulatory Flexibility Act that agencies adequately evaluate all potential options for an action does not apply when Congress has already dictated the action.

This rule will not impose significant additional information collection requirements on the public under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3511).

This rule is being issued as an interim final rule, with comment period, as an exception to our standard practice of soliciting public comments prior to issuance. This is because there is no discretion being exercised. The NDAA-02 (Pub. L. 107-107) mandated elimination of the NAS for maternity care entirely, and for inpatient care unless it met very restrictive criteria, and there is no discretion on the effective data. The Assistant Secretary of Defense (Health Affairs) has determined that following the standard practice in this case would be unnecessary, impractical, and contrary to the public interest.

Public comments are invited. All comments will be carefully considered. A discussion of the major issues received by public comments will be included with the issuance of the final rule.

I. Summary of Interim Final Rule Provisions

The reader should refer to the proposed rule that was published on April 18, 2002, (67 FR 19141) for more detailed information regarding these changes. This interim final rule describes the circumstances under which eligible dependents of active duty members, and eligible dependents of Reserve Component and National Guard members called to active duty in support of contingency operations may enroll in TRICARE Prime Remote for Active Duty Family Members. In addition, this interim rule describes the circumstances under which eligible dependents of TRICARE Prime Remote service members who are enrolled in the TRICARE Prime Remote for Active Duty Family Member program may remain enrolled when the service member receives a follow-on accompanied assignment and the dependents continue to reside in the TRICARE Prime Remote location.

Changes to the provisions for TRICARE Prime Remote for Active Duty Family Members (TPRADFM) are required by Section 702 of P.L. 107-314 (the NDAA for FY 2003). First, family members who are enrolled in TPRADFM may continue their enrollment when the member has relocated without the family members pursuant to orders for a permanent change of duty station, if the orders do not authorize dependents to accompany the member to the new duty station at the expense of the United States, and if the family members continue to reside at the same location at which they were enrolled in TPRADFM. Second, family members of a reserve component member ordered to active duty for a period of more than 30 days may enroll in TPRADFM if they reside with the member and if the residence is more than fifty (50) miles, or approximately one hour driving time, from the nearest military medical treatment facility adequate to provide the needed care.

The changes related to TPRADFM were not included in the original proposed rule, but, since they are statutorily required and also require a change to a paragraph of 32 CFR Part 199.17 that was being revised pursuant to the proposed rule, we are including all of the changes in this interim final rule.

We provided a 60-day comment period on the proposed rule. We received no public comments.

In both paragraph (f)(2)(i)(H) of Section 199.4 and paragraph (o)(2) of Section 199.17, we have clarified that these provisions apply only to members of the National Guard who are ordered to federal active duty under authority of the President and not to those members who are ordered to active duty under the authority of a governor of a state. In addition, in paragraph (f)(2)(i)(H) of Section 199.4, we have changed “the Secretary of Defense, or a designee,” to “the Director, TRICARE Management Activity” as the authority to waive the annual fiscal year deductible. This is only a wording change and not a substantive change, since the Secretary of Defense, through 32 CFR 199.1(c)(2) and 32 CFR part 367, has delegated authority to the Assistant Secretary of Defense (Health Affairs), who has delegated authority to the Director, TRICARE Management Activity, to provide policy guidance, management control, and coordination as required by CHAMPUS.

The proposed rule would have established in the regulation an administrative authority for Reservists and members of the National Guard who are called or ordered to active duty for a period of 179 days or more to enroll in TRICARE Prime. We are changing that provision in this interim final rule.

Reserve components (including both reservists and members of the National Guard) participate in military conflicts and peacekeeping missions in areas such as Bosnia, Kosovo, and southwest Asia, and assist in homeland security. The operational tempo following the events of September 11, 2001, showed a dramatic increase in the number of reservists activated for these requirements. These reservists receive varying levels of medical benefits according to their primary residence location, length of call up, and type of activation order. For example, the Department established a demonstration in order to ease the burden imposed on the large number of reserve component members who have been activated in response to September 11 under Operations Noble Eagle and Enduring Freedom (66 FR 55928). This demonstration which is called the TRICARE Reserve Family Member Demonstration Project (TRFMDP) provides three enhancements to the TRICARE Standard benefit for their family members: the annual deductible was waived, the requirement to obtain a non-availability statement was waived, and TRICARE will pay up to fifteen percent above the TRICARE maximum allowable charge for services received from nonparticipating providers. However, the demonstration is due to expire on November 1, 2003, although large numbers of individuals continue to be activated. In addition, family members of reserve component members who are activated under other authorities do not receive these enhanced benefits.

In order to eliminate these discrepancies while continuing to provide some enhanced benefits to family members of activated reserve component members, the Department has authorized family members of activated reserve component members who live in military treatment facility catchment areas to enroll in TRICARE Prime if the member is activated for more than 30 days rather than for 179 days or more. A catchment area is established by zip codes, but is generally a home residence within 50 miles, or approximately one hour driving time, from the nearest military treatment facility adequate to provide care. This change accomplishes three goals. First, it provides family members of these activated reserve component members with substantially the same benefits available to family members of activated reserve component members under the TRFMDP. Second, it provides these family members with the same benefits available to family members who live outside catchment areas under the TPRADFM through the provisions of Section 702 of P.L. 107-314. Third, it ensures that the medical benefits available to family members of activated reservists are as similar as possible to those available to family members of active duty members.

This interim final rule establishes specific regulatory authority for this provision.

Executive Order 12866 requires that a regulatory impact analysis be performed on any major rule. A “major rule” is defined as one that would result in the annual effect on the national economy of $100 million or more, or have other substantial impact. The Regulatory Flexibility Act (RFA) requires that each Federal Agency prepare, and make available for public comment, a regulatory flexibility analysis when the agency issues regulations which would have a significant impact on a substantial number of small entities.

This interim final rule is not major rule under the Congressional Review Act. The changes set forth in this interim final rule are minor revisions to existing regulation. The changes made in this interim final rule involve an expansion of TRICARE benefits. In addition, this interim final rule will have minor impact and will not significantly affect a substantial number of small entities. In light of the above, no regulatory impact analysis is required.

This rule has been designated as significant and has been reviewed by the Office Management and Budget as required under the provisions of E.O. 12866.

This interim final rule will not impose additional information collection requirements on the public under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 55).

The City of Baltimore will sponsor the 189th Defender's Day Celebration fireworks display on September 13, 2003 over the waters of the Patapsco River, Baltimore, Maryland. The fireworks display will be launched from a barge positioned within the regulated area. A fleet of spectator vessels is expected to gather nearby to view the aerial display. In order to ensure the safety of spectators and transiting vessels, 33 CFR 100.515 will be in effect for the duration of the event. Under provisions of 33 CFR 100.515, a vessel may not enter the regulated area unless it receives permission from the Coast Guard Patrol Commander. Spectator vessels may anchor outside the regulated area but may not block a navigable channel.

In addition to this notice, the maritime community will be provided extensive advance notification via the Local Notice to Mariners, marine information broadcasts, and area newspapers, so mariners can adjust their plans accordingly.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B) the Coast Guard finds that good cause exists for not publishing an NPRM. Publishing an NPRM would be impracticable. The event will take place on August 15, 2003. There is not sufficient time to allow for a notice and comment period prior to the event.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date would be contrary to the public interest, since immediate action is needed to ensure the safety of the event participants, spectator craft and other vessels transiting the event area. However, advance notifications will be made to affected users of the waterway via marine information broadcasts and area newspapers.

On August 15, 2003, the Offshore Performance Association and the New Jersey Offshore Racing Association will sponsor the “Point Pleasant OPA/NJ Offshore Grand Prix”. The event will consist of approximately 35 offshore powerboats racing along an oval course on the waters of the Atlantic Ocean. A fleet of approximately 200 spectator vessels is expected to gather near the event site to view the competition. To provide for the safety of participants, spectators and other transiting vessels, the Coast Guard will temporarily restrict vessel traffic in the event area during the races.

The Coast Guard is establishing temporary special local regulations on specified waters of the Atlantic Ocean and the Manasquan River. The temporary special local regulations will be in effect from 9:30 a.m. until 3:30 p.m. on August 15, 2003. The effect will be to restrict general navigation in the regulated area during the event. Except for persons or vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remain in the regulated area. The Patrol Commander will allow non-participants to transit the regulated area between races. These regulations are needed to control vessel traffic during the event to enhance the safety of participants, spectators and transiting vessels.

This 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 Homeland Security (DHS).

We expect the economic impact of this temporary final rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary.

Although this regulation prevents traffic from transiting a portion of the Atlantic Ocean and Manasquan River during the event, the effect of this regulation will not be significant due to the limited duration that the regulated area will be in effect and the extensive advance notifications that will be made to the maritime community via marine information broadcasts and area newspapers so mariners can adjust their plans accordingly. Additionally, vessel traffic will be allowed to transit through the regulated area between races.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we considered whether this 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 rule will not have a significant economic impact on a substantial number of small entities. This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit or anchor in the effected portions of the Atlantic Ocean and Manasquan River during the event.

This rule will not have a significant economic impact on a substantial number of small entities for the following reasons. This rule will be in effect for only a short period, from 9:30 a.m. to 3:30 p.m. on August 15, 2003. Vessel traffic will be allowed to transit the regulated area between races, when the Patrol Commander determines it is safe to do so. Before the enforcement period, we will issue maritime advisories so mariners can adjust their plans accordingly.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this temporary rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the address listed under ADDRESSES.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This rule calls 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 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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial and direct effect on one or more Indian tribes, on the relationship between the Federal Governments and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this 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 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 analyzed this rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded under figure 2-1, paragraph (34)(h), of the Instruction, from further environmental documentation. Special local regulations issued in conjunction with a regatta or marine parade permit are specifically excluded from further analysis and documentation under those sections. Under figure 2-1, paragraph (34)(h), of the Instruction, an “Environmental Analysis Check List” and a “Categorical Exclusion Determination” are not required for this rule.

On April 1, 2003, we published a notice of proposed rulemaking (NPRM) entitled “Anchorage Regulations: Rockland, Maine” in the Federal Register (68 FR 15691). We received no letters commenting on the proposed rule. No public hearing was requested, and none was held.

A request was made by the City of Rockland and Hartley Marine Services, Rockland, Maine, to accommodate the increased number of vessels mooring in Penobscot Bay, Rockland Harbor, and provide for safe navigation between the anchorages within the harbor. This rule will re-designate anchorage ground “C”, identified in 33 CFR 110.132(a)(3), as a special anchorage area and reorient anchorage “A”, identified in 33 CFR 110.132(a)(1).

The Coast Guard determined that the small commercial and recreational vessels now anchoring in anchorage “C” do not have the ability to maintain anchor lights sufficient to meet anchorage ground requirements. Vessel traffic, as well as users of anchorage “C”, will transit and anchor more safely when anchorage “C” is designated a special anchorage area, limited to vessels less than 20 meters in length, since transiting vessels will neither expect sound signals nor anchor lights or shapes from all moored vessels. Establishing this special anchorage area will better meet future vessel traffic expectations of that area when it is re-designated as such and limited to vessels no greater than 20 meters in length.

In order to facilitate the safe and efficient flow of vessel traffic and commerce between anchorages “A” and the newly designated special anchorage area, the Coast Guard intends to reorient anchorage “A”. Reorienting anchorage “A” will provide a wider channel between the two above-mentioned anchorages. Additionally, a wider channel will allow safer passage for vessels anchoring in anchorage “A” and the special anchorage area as well as vessel traffic transiting via Atlantic Point.

The Coast Guard has defined the anchorage areas contained herein with the advice and consent of the Army Corps of Engineers, New England District, located at 696 Virginia Rd., Concord, MA 01742.

This 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 Homeland Security (DHS).

We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under regulatory policies and procedures of DHS is unnecessary.

This finding is based on the fact that this rule conforms to the changing needs of the harbor, the changing needs of recreational, fishing and commercial vessels, and to make the best use of the available navigable water. This rule is in the interest of safe navigation and protection of the Port of Rockland and the marine environment.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this 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 rule will not have a significant economic impact on a substantial number of small entities.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Public Law 104-121), we offered to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking process.

If this rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact John J. Mauro at the address listed in ADDRESSES above.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

This calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). Federalism 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 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 expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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

This 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 rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.

This 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 have analyzed this 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 rule and concluded that, under figure 2-1, paragraph 34(f), of Commandant Instruction M16475.1D, this rule is categorically excluded from further environmental documentation. A “Categorical Exclusion Determination” is available in the docket for inspection or copying where indicated under ADDRESSES. This rule fits paragraph 34(f) as it revises one anchorage ground and establishes a special anchorage area.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. (b)(B) the Coast Guard finds that good cause exists for not publishing an NPRM. The airshow poses several dangers to the public including excessive noise and objects falling from any accidents. Accordingly, prompt regulatory action is needed in order to provide for the safety of spectators and participants during the event. If normal notice and comment procedures were followed, this rule would not become effective until after the date of the event.

For the same reasons, under 5 U.S.C. (d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register .

The Coast Guard is adopting a temporary safety zone regulation on the waters of Lake Washington, Seattle, Washington, for the Seafair Blue Angels Performance. The Coast Guard has determined it is necessary to close the area in the vicinity of the air show in order to minimize the dangers that low-flying aircraft present to persons and vessels. These dangers include, but are not limited to excessive noise and the risk of falling objects from any accidents associated with low flying aircraft. In the event that aircraft require emergency assistance, rescuers must have immediate and unencumbered access to the craft. The Coast Guard, through this action, intends to promote the safety of personnel, vessels, and facilities in the area. Entry into this zone will be prohibited unless authorized by the Captain of the Port or his representative. This safety zone will be enforced by Coast Guard personnel. The Captain of the Port may be assisted by other federal, state, or local agencies.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 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 Homeland Security (DHS). We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under the regulatory policies and procedures of DHS is unnecessary. This expectation is based on the fact that the regulated area established by the regulation would encompass an area near the middle of Lake Washington, not frequented by commercial navigation. The regulation is established for the benefit and safety of the recreational boating public, and any negative recreational boating impact is offset by the benefits of allowing the Blue Angels to fly. For the above reasons, the Coast Guard does not anticipate any significant economic impact.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), the Coast Guard considered whether this rule would have a significant economic impact on a substantial number of small entities. “Small entities” include 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. This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit this portion of Lake Washington during the time this regulation is in effect. The zone will not have a significant economic impact due to its short duration and small area. The only vessels likely to be impacted will be recreational boaters and small passenger vessel operators. The event is held for the benefit and entertainment of those above categories. Because the impacts of this rule are expected to be so minimal, the Coast Guard certifies under 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601-612) that this temporary rule will not have a significant economic impact on a substantial number of small entities.

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 (Pub. L. 104-121), we want to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section.

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

We have analyzed this rule under Executive Order 13132 and have determined that this rule does not have implications for federalism under that Order.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) governs the issuance of Federal regulations that require unfunded mandates. An unfunded mandate is a regulation that requires a State, local, or tribal government or the private sector to incur direct costs without the Federal Government's having first provided the funds to pay those costs. This rule would not impose an unfunded mandate.

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

This 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 rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not concern an environmental risk to health or risk to safety that may disproportionately affect children.

This 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 have analyzed this 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 considered the environmental impact of this rule and concluded that, under figure 2-1, paragraph (34)(g) of Commandant Instruction M16475.lD, this rule is categorically excluded from further environmental documentation. A Categorical Exclusion is provided for temporary safety zones of less than one week in duration. This rule establishes a temporary safety zone of limited duration that will be within the one-week timeframe.

On July 17, 2003, we published a temporary final rule entitled Tall Ships 2003, Navy Pier, Chicago, IL, July 30-August 4, 2003 in the Federal Register (68 FR 42285). In that regulation, we suspended some anchorage regulations, established a moving safety zone, as well as a Regulated Navigation Area (RNA). However, in this rulemaking, the size of that RNA is being increased.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying the effective date of this rule would be contrary to the public interest of ensuring the safety of spectators and vessels during this event and immediate action is necessary to prevent possible loss of life or property. The Coast Guard has not received any complaints or negative comments with regard to this event. The Coast Guard, along with planning officials for the Chicago Tall Ships 2003 from the State of Illinois and the City of Chicago, have decided that a larger RNA is necessary to ensure safety and protection during this event.

For the same reasons, under 5 U.S.C.(b)(B) the Coast Guard finds that good cause exists for not publishing an NPRM.

During the Chicago Tall Ships event, tall ships will be participating in a Tall Ships Parade and then mooring in Chicago harbor and in the Chicago River. While a moving safety zone is being established to ensure the safety of official participant vessels during the parade, an RNA is also being established that encompasses portions of both the Chicago Harbor as well as the Chicago River. This RNA is to ensure the safety of spectator vessels and official participant vessels, as well as those boarding the tall ships, from vessels transiting at excessive speeds creating large wakes, and also to prevent obstructed waterways. The RNA will be established on July 30, 2003 and terminate on August 4, 2003 after all the tall ships have departed the area.

No comments were received regarding this rule. The following change is being made from the previous temporary rule: the regulated navigation area (RNA) is being expanded in order to improve the level of safety for both participant and spectator vessels during the 2003 Tall Ships Challenge and Parade of Ships.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866 on Regulatory Planning and Review and therefore 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 this rule under that order. It is non-significant under Department of Homeland Security regulatory policies and procedures. We expect the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10(e) of the regulatory policies and procedures of DHS is unnecessary. This finding is based on the minimal time that vessels will be restricted from the zone.

In accordance with the Regulatory Flexibility Act (5 U.S.C. 601-612) has determined that this rule will not have a significant 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 rule would not have a significant economic impact on a substantial number of small entities. This final rule would 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 an activated safety zone. The safety zone and suspended anchorage area would not have a significant economic impact on a substantial number of small entities for the following reasons. Vessel traffic can safely pass outside the proposed safety zone during the event. Traffic would be allowed to pass through the safety zone only with the permission of the Captain of the Port or his on-scene representative which will be the Patrol Commander. In addition, before the effective period, the Coast Guard would issue maritime advisories widely available to users who might be in the affected area.

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 (Pub. L. 104-121), the Coast Guard wants to assist small entities in understanding this rule so that they can better evaluate its effects and participate in the rulemaking process. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact MSO Chicago ( see ADDRESSES ).

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

We have analyzed this rule under Executive Order 13132 and have determined that this rule does not have implications for federalism under that Order.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) governs the issuance of Federal regulations that require unfunded mandates. An unfunded mandate is a regulation that requires a state, local, or tribal government or the private sector to incur direct costs without the Federal Government's having first provided the funds to pay those costs. This rule would not impose an unfunded mandate.

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

This 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 rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not concern an environmental risk to health or risk to safety that may disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would 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 have analyzed this 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.

The Coast Guard has considered the environmental impact of this rule and concluded that, under figure 2-1, paragraph 32(g) of Commandant Instruction M16475.1C, this rule is categorically excluded from further environmental documentation. A written categorical exclusion determination is available in the docket for inspection or copying where indicated under ADDRESSES .

This final rule establishes a new class of school buses, multifunction school activity buses (MFSABs), for use in transporting children on trips other those than between home and school.

Under current Federal law, dealers cannot sell a bus for the purpose of transporting school-age students to or from school or related events unless it meets all requirements in all Federal motor vehicle safety standards for school buses. Among those requirements are ones requiring all school buses to be equipped with control traffic ( i.e. , flashing lights and stop arms) designed to avoid crashes and injuries to pedestrians. The standards require those devices to deploy automatically when the front entrance door is opened.

Those traffic control devices are primarily intended to be used on trips involving picking school children up from or dropping them off at a roadside location at or near home. However, not all school children trips involve picking children up from or dropping them off at such locations. For example, some trips involve taking children from a before-school facility to a school or from a school to an after-school facility. State laws do not permit the use of the traffic control devices on those trips.

This rulemaking excludes MFSABS from the requirements for the traffic control devices. This exclusion resolves the conflict between the NHTSA standards that previously required all new school buses to be equipped with traffic control devices, and State laws that do not permit the use of the traffic control devices on the types of trips that the new buses will be making. The new buses are not required to have those devices since the buses, unlike regular yellow school buses, are not intended for the roadside picking up and dropping off of children during service between home and school. While the MFSABs are not required to be equipped with the traffic control devices, they are, however, required to meet all requirements in the school bus crashworthiness standards, all other requirements in the school bus crash avoidance safety standards, and all post-crash school bus standards.

We anticipate that this final rule will also facilitate efforts by the Federal Transit Administration to provide funding to Head Start programs and coordinated transportation providers to purchase the school buses. Currently, that Administration is prohibited from providing financial assistance to purchase regular yellow school buses that exclusively transport students and school personnel in competition with a private school bus operator. We anticipate that the new buses will be used for coordinated transportation purposes by State and local social services agencies, which may, for example, use the new buses to transport children from Head Start facilities to school in the morning, and to transport senior citizens later in the day.

Finally, enabling schools and other institutions to choose the new buses instead of a 15-passenger van will provide them with a safer transportation alternative since the new buses comply with all school bus requirements in the Federal Motor Vehicle Safety Standards except those relating to traffic control devices.

NHTSA's statute requires any person selling or leasing a new vehicle to sell or lease a vehicle that meets all applicable standards issued by the agency. Under our regulations, a “bus” is any vehicle (including a van) that has a seating capacity of 11 persons or more. The statute defines a “school bus” as any vehicle that is designed for carrying 11 or more persons and that is likely to be “used significantly to transport preprimary, primary, and secondary students to or from school or an event related to school.” (Emphasis added.) 49 U.S.C. 30125.

More broadly, we deem a bus likely to be used significantly to transport preprimary, primary, or secondary students to or from school or school-related events if, for example, it will be used for any of the following purposes on a regular basis: Pick students up from home to take them to school; pick them up from a place other than home ( e.g. , a before-school care facility) and drop them off at school; or pick them up from school and drop them off at home or a place other than home ( e.g. , an after-school care facility). The term “school” does not include pre-school (nursery) centers, or Head Start programs.

We have informed motor vehicle dealers that new buses sold to child-care providers and other entities that routinely drop students off at school or pick them up from school are required to be buses that meet the school bus safety standards, even though the purchasing organizations are not schools themselves. ( See, e.g. , July 23, 1998 letter to Mr. Don Cote, Northside Ford, filed in this docket at 13704-51)

In our interpretations of Section 30125, we have stated that a bus that is sold for school transportation must meet all standards applicable to school buses, including the four-way/eight-way alternating flashing lights required by FMVSS No. 108 and the stop-arm required by FMVSS No. 131. 1 Thus, even if school buses will be used only to transport children on activity trips or other trips that do not include home-to-school transportation, dealers currently cannot sell a school bus unless those buses are equipped with flashing lights and stop arms. This is true even if these devices are not likely to be used on such trips. It is also true even if State law does not allow them to be used on such trips or requires them to be removed before making such trips.

One reason we are issuing this final rule is that after selling or leasing school buses, dealers cannot remove the four-way/eight-way flashing lights and stop-arms from them. Under 49 U.S.C. Section 30122, “Making safety devices and elements inoperative,” manufacturers, distributors, dealers, or motor vehicle repair businesses may not “knowingly make inoperative” any part of a device or element of design installed on or in a motor vehicle or motor vehicle equipment in compliance with an applicable motor vehicle safety standard. Before the issuance of this final rule, all school buses had to be equipped with the four-way/eight-way flashing lights and stop arms. Since it does not appear to make sense to have dealers sell school buses with equipment that the buyer wants removed, we are defining a new category of school buses without four-way/eight-way flashing lights and stop arms.

On November 5, 2002 (67 FR 67373) (DOT Docket No. NHTSA-2002-13704), we published in the Federal Register a notice of proposed rulemaking (NPRM) to create a new school bus category, the “Multifunction School Activity Bus” (MFSAB). We proposed to except the new category from the requirement for school bus warning lamps at S5.1.4 of Federal Motor Vehicle Safety Standard (FMVSS) No. 108, Lamps, reflective devices and associated equipment, 49 CFR 571.108, and from the requirement for stop signal arms in FMVSS No. 131, School bus pedestrian safety devices, 49 CFR 571.131. We proposed to limit the category to buses with a gross vehicle weight rating of 6,804 kilograms (15,000 pounds) or less, and invited comment as to whether the new buses should have a label warning drivers that the buses were not for home-to-school service. We denied aspects of the Rabun-Gap petition relating to seat strength, seat spacing, and seat width for reasons set forth in the NPRM. A full explanation of why we granted or denied aspects of Rabun-Gap's petition is in the November 5, 2002 NPRM at 67 FR 67373.

NHTSA received a total of 48 public comment submissions in response to the NPRM. Some commenters commented more than once, and several submissions had identical or similar wording. We received comments from Alabama Department of Education, Amalgamated Transit Union (ATU), American Academy of Pediatrics (AAP), Black Gold Regional Schools Educational Authority, Blue Bird Body Company, Brownsville Independent School District (of Brownsville, Texas), Department of California Highway Patrol, Correctrack Inc., Transportation Consultant John Fairchild, Ford Motor Company, Hurst-Euless-Bedford Independent School District (of Bedford, Texas), IC Corporation, Indiana Department of Education, Kibois Area Transit System (of Stigler, Oklahoma), Les Entreprises Michel Corbeil Inc. (Corbeil), Maine Department of Education, National Association of Independent Schools (NAIS), National Association of State Directors of Pupil Transportation Services (NASDPTS), National Automobile Dealers Association (NADA), National Child Care Association (NCCA), National School Transportation Association (NSTA), National Transportation Safety Board (NTSB), Public Schools of North Carolina, Public Citizen, Pupil Transportation Safety Institute, Inc., Rabun Gap Nacoochee School (Rabun), Texas Association for Pupil Transportation, Texas Department of Public Safety, Thomas Built Buses, U.S. Bus Corporation, Utah State Office of Education, Virginia Association for Pupil Transportation (VAPT), Wisconsin Department of Transportation, and many private citizens. The following summarizes the comments, and our response to the comments.

Most commenters wrote in favor of the proposed new school bus category. However, some individual citizens, the state of Maine and AAP wrote against the proposal. The state of Maine commented that creating a new subcategory of school buses without traffic control features “creates a level of complexity and potentially an elevated hazard level * * * without producing a significant offsetting benefit.” AAP expressed concern about the MFSAB classification, stating that the traffic control features on a school bus “are meant to protect pedestrians, who account for significantly more school bus related fatalities than school bus passengers.” In its May 1996 Policy Statement on School Transportation Safety (R9616), regarding deaths to children as a result of school-bus related events, AAP stated that the “majority of pedestrians killed were young children who were struck by their own school buses.” NHTSA notes that activated traffic control devices on a school bus make surrounding motorists aware that children are outside and around a school bus and that the motorists should take extra precautions for the children. NHTSA and the States have other measures and programs (including school bus driver training) to lessen the chances that school children will be struck by their school buses.

NHTSA has decided to adopt the multifunction school activity bus vehicle classification, as proposed. NHTSA is conducting this rulemaking to promote flexibility in the choice of vehicles. NHTSA emphasizes that the MFSAB is not to be used by schools or school districts to transport school children on regular school bus route transportation. Because of this limitation, school children will not be exposed as pedestrians to traffic situations that stop arm and four-way/eight-way traffic control devices are designed to control, and we have concluded that the MFSAB will not lead to an increase in school children pedestrian fatalities as the AAP comments suggested. NHTSA agrees with Maine that creating a new category of school bus adds an additional level of complexity for school districts because it creates a school bus category that cannot be used for normal home-to-school transportation. However, NHTSA does not agree that this new school bus category will increase the risk of injuries or fatalities for the reasons explained above and below.

As explained in the NPRM, this final rule makes it easier for transportation providers other than schools or school districts to buy the MFSAB, which will be a safer transportation alternative to the 15-passenger van and motor coach bus for use by Head Start programs or senior citizens. If, after carefully considering all possible bus types, the transportation provider decides that the persons it transports are best served by a school bus with traffic control features, it is free to buy such a school bus rather than the MFSAB.

NADA and NCCA recommended that the new vehicle category should be a “multifunction activity bus,” rather than a “multifunction school activity bus.” NADA suggested that the MFSAB does not suit its intended purpose and recommended that the multifunction activity bus be defined as “a bus that is designed for purposes that include transporting students to and from school, but not to and from home.” NADA stated that this definition has the advantage of avoiding the use of the term “ school bus, which has a number of legal and practical Federal, State and local ramifications.” NADA further suggested that NHTSA should redefine the term “school bus” more narrowly and establish a new “bus” subcategory. They suggested that NHTSA should redefine “school bus” (in 49 CFR 571.3 “Definitions”) to read “a bus that is designed for purposes that include carrying students between home and school, but not a bus designed for operation as a common carrier in urban transportation.”  2 NADA also stated that the “sold or introduced in interstate commerce” language in the present definition of school bus, “places an undue focus on the new vehicle sale or lease transaction and inherently requires sellers or lessors to ascertain a purchaser's intended use,” and that the primary burden of standards compliance should be placed on manufacturers of these vehicles.

For the following reasons, NHTSA has decided not to adopt NADA's and NCCA's recommendations for the redefinitions of “school bus” and “bus.” First, redefining these terms would be outside the scope of the rulemaking, as NHTSA in the NPRM proposed a definition of “multifunction school activity bus,” not redefinitions of “school bus” or “bus.” Second, statutory language specifies that only a new school bus may be sold “significantly to transport preprimary, primary, and secondary school students to or from school or an event related to school.” ( See 49 U.S.C. 30125(a)). This statutory definition takes precedence over any regulatory definition, and amending 49 CFR 571.3 (“Definitions”) would not alter the statute. Therefore, defining the MFSAB as a “bus” would put NHTSA in the anomalous situation of fining sellers and lessors that sell or lease new “buses” to child care centers or other transportation providers that use the MFSAB to take children to and from school or on school-related activities. Thus, defining the MFSAB as a “bus” would defeat the purpose of this rulemaking.

Third, NHTSA does not agree that in ensuring that nonconforming new buses are not sold for school transportation purposes, the emphasis on sellers or lessors of new motor vehicles poses a burden on sellers or lessors or on NHTSA. NHTSA's position was explained in an interpretation letter of May 9, 2001 to Collins Bus Corporation, a bus manufacturer. When a day care center wished to purchase a bus to transport children to their homes, Collins asked for guidance about assurances the day care center had to provide a dealer or manufacturer that the intended use does not dictate a school bus. Collins noted that the user is the only person who can actually know how the bus will be used during its life. As part of our answer, we stated that although NHTSA does not currently presume that day care centers universally are engaged in the transportation of children to and from school:

Thus, if the present definition of “school bus” does not include the term “sold, or introduced in interstate commerce,” NHTSA's enforcement efforts to ensure that dealers and lessors of new vehicles do not sell or lease nonconforming buses for school transportation purposes may be frustrated. 3 Therefore, when this final rule takes effect, where it is likely that the purchaser or lessor of a new MFSAB is a State agency, private or public school, or school district, we expect a dealer to inquire as to whether the vehicle will also be used to drop off or pick up students from school. If it appears that the MFSAB will be “used significantly” for transportation between children's homes and school, the requirement to sell a school bus that meets the Federal motor vehicle safety standards for school buses, including FMVSSs No. 108 and No. 131 would apply. NHTSA also notes that changing the “school bus” and “bus” definitions would not affect dealers' and lessors' statutory responsibilities in ensuring that they do not sell new nonconforming buses for school transportation purposes.

Public Citizen stated that it recognized Head Start programs' need to purchase vehicles that meet the crashworthiness and crash avoidance protection of school buses and did not object to NHTSA's proposal. However, Public Citizen urged NHTSA to go further and create a new category of buses called the “Multi-Function Activity Buses” to ensure that all buses weighing less than 15,000 pounds GVWR, including 15-passenger vans, meet the school bus crash avoidance, crashworthiness, and post-crash requirements required for school buses. The NPRM did not propose to apply the school bus requirements to buses that are not used to transport school children. Public Citizen's recommendation is thus outside the scope of the present rulemaking. However, the adoption of this final rule will give transportation providers the alternative for a safer transportation choice.

The California Highway Patrol recommended that the MFSAB be defined as a school bus whose purpose does not include transporting students to and from home “or a school bus stop.” The rationale for this suggestion was that school buses often pick children up at designated school bus stops, rather than at their homes. Specifying the school bus stop in the definition would make explicit that children should not be picked up from their homes or from school bus stops when transported in a MFSAB. NHTSA agrees that specifying that children should not be picked up from school bus stops would eliminate a potential ambiguity. Thus, in this final rule, the definition of MFSAB states: “a school bus whose purposes do not include transporting students to and from home or school bus stops.”

The majority of commenters on this issue, including NTSB, recommended that NHTSA not adopt the 6,804 kg (15,000 pound) gross vehicle weight rating (GVWR) limitation on the MFSAB. NTSB stated that it did not believe the risk of misuse is significant because using vehicles other than school buses to pick up and drop off children at home “is generally prohibited.” NTSB stated that it is not aware of evidence that school districts are misusing vehicles in this manner.

Blue Bird Body Company stated that removing the GVWR weight limitations would meet the need for safety, in that more organizations would be encouraged to buy MFSABs in lieu of non-school buses. Blue Bird noted the increasing public awareness that school buses are safer than non-school buses, and reported increases in requests for school buses (including larger school buses) from churches and colleges to replace the “vans” that had been used. Blue Bird also noted that many schools own used motorcoaches, especially in the western states where travel distances are greater. Blue Bird stated that there is a market demand for a “school activity bus” that is more comfortable than a “typical school bus.” Since the motorcoaches do not meet school bus safety standards, the students are unnecessarily placed at risk. Blue Bird stated its belief that having no weight restrictions on the MFSABs will encourage the schools to buy MFSABs “that meet the school bus crashworthiness standards of construction.”

NASDPTS cautioned that the proposed 15,000 pound GVWR limitation “would eliminate larger buses from the potential of federal funding under the Federal Transit Administration,” possibly frustrating coordinated transportation providers' efforts in meeting the needs of its customers. It also noted that it would not be practicable to expect a school, child care center, Head Start program, or coordinated transportation provider to purchase two or more small MFSABs in lieu of one large MFSAB because of the additional costs that would be incurred for more drivers, additional maintenance, and insurance.

The Texas Department of Public Safety stated that if MFSABs included all sizes of school buses, Texas could change its definition of a “school activity bus” to include the MFSAB. This would mean a school district could buy a vehicle as safe as a school bus to transport students on activity trips.

NSTA, on the other hand, supported the limitation of the MFSAB to buses not larger than 15,000 pounds GVWR. NSTA expressed concern about the possibility of misuse, especially by private schools that often come under less scrutiny by state agencies than do public schools. NSTA also noted that coordinated transportation systems could combine adult and student passenger loads and stage pick-ups at curbside bus stops. Although this would not constitute home-to-school transportation, students could be endangered because there would be roadside loading and offloading without the benefit of the school bus traffic control devices. NSTA also expressed concern that school student safety would be compromised because the large MFSAB would not require a school bus driver, that the MFSAB driver would need only a passenger endorsement, without the additional safety training of a school bus driver.

Regarding the potential misuse of the MFSAB by home to school transportation providers, NHTSA shared this concern. However, every State has laws that require school bus drivers to activate the warning lamps and stop signal arm whenever the school bus is stopped to pick up or discharge students on public roads. A driver failing to activate these devices would be in violation of State law. Thus, every State already has a law that prohibits school districts from using a MFSAB to transport children to and from school, since it would be picking up or discharging students without activating warning lamps and the school bus stop arm. The misuse issue is discussed in greater detail in Section I., “State Law Issues.”

These State laws have also persuaded NHTSA that it is unlikely that larger MFSABs would be misused, and therefore, weight limitations for MFSABs are not necessary. Hence, NHTSA has decided to not adopt the 6,804 kg (15,000 pound) GVWR limitation on MFSABs.

Removing a weight limitation on MFSABs would also further NHTSA's goal of promoting choice for transportation providers since it would mean that those whose transportation choices are now buses over 6,804 kg or school buses over 6,804 kg would have an alternative bus over 6,804 kg ( i.e. , the MFSAB) that provides the same crashworthiness, crash avoidance and post-crash safety protection as does a school bus, without the traffic control features that are not used.

NSTA's concern about coordinated transportation systems where children could be loaded and offloaded without the benefit of school bus traffic control devices is an issue of vehicle use, regulated by the States. Some areas in the U.S. may not be financially able to provide a school bus system for school transportation and a separate bus system for everyone else. Transportation systems using MFSABs would offer all riders more protection than if non-school buses were used.

NSTA's concern that a large MFSAB would not require a school bus driver is a matter that would be addressed by State law. State law would determine the type of license (bus v. school bus) a driver would need to drive the MFSAB.

Although the NPRM denied those aspects of the Rabun-Gap petition pertaining to school bus seats, several comments addressed the issue of seating. Blue Bird Body Company recommended that FMVSS No. 222, School bus passenger seating and crash protection, be amended to make the provisions that presently apply to school buses 10,000 pounds GVWR and under to also apply (at the option of the manufacturer) to MFSABs over 10,000 pounds GVWR.

Blue Bird stated that many schools want their “school activity buses” to have reclining seats, wider seat width for each passenger, and more seat separation so that tall and large students are more comfortable on long trips. They stated that FMVSS No. 222 “compartmentalization” requirements restrict school bus manufacturers' ability to meet comfort requirements, especially for school buses over 10,000 pounds GVWR. Blue Bird noted that FMVSS No. 222 requires that small school buses (10,000 pounds GVWR or under) be equipped with Type 1 or Type 2 seat belts and does not require that they meet S5.2, Restraining Barrier Requirements, of FMVSS No. 222. Thus, MFSABs with a GVWR of 10,000 pounds or less would not be restricted as to the requirement for a restraining barrier forward of a passenger seat and, therefore, would not be constrained as to a maximum allowable seat spacing.

Blue Bird went on to note that if MFSABs over 10,000 pounds GVWR, when equipped with seat belts, were excepted (as small school buses are now excepted) from S5.2, then seat spacing would no longer be an issue. Blue Bird therefore recommended that manufacturers of large MFSABs be allowed to meet the provisions of FMVSS No. 222 as they apply to school buses 10,000 pounds GVWR or under.

Blue Bird also recommended that S4.1 of FMVSS No. 222 be amended to permit a manufacturer of MFSABs to install only two seat belts on any seat that is between 22.5 inches and 39 inches in width, “to meet customer requirements for no more than two passengers per seat on a MFSAB.” Blue Bird cited market demand for more seating room on school bus bench seats and stated that “something will need to be changed to permit the installation of only two seat belts on a 39-inch wide seat in a MFSAB.”

Rabun addressed NHTSA's discussion in the NPRM that the MFSAB could be equipped with reclining motorcoach style seating and still meet FMVSS No. 222 because the standard specifies that when the school bus is tested, adjustable seat backs are to be “adjusted to its most upright position.” ( See NPRM at 67 FR 67378.) Rabun responded that its discussions with school bus manufacturers have led them to believe that “such seats, when in the reclined position, do not meet the intent of FMVSS No. 222 and are therefore not available for sale in buses certified as school buses.” Rabun recommended the use of combination lap/shoulder belts since they believed “a passenger who is seated behind a seat in the reclining position and who is wearing a lap/shoulder restraint would be better protected in a frontal collision than if the passenger did not have seat belts, even if the seating system was certified to meet the requirements of FMVSS No. 222.” Rabun also expressed the view that if each passenger was provided a lap/shoulder restraint and was required to use it, the issue of compartmentalization and seat spacing would be “correspondingly insignificant.”

AAP expressed concern that the proposed rule did not require seating positions to be equipped with lap/shoulder belts and LATCH. AAP called on NHTSA to “move in the direction of ensuring greater safety of children on school buses by requiring them to be equipped with lap/shoulder belts.” John Fairchild recommended that NHTSA should at least “encourage” every MFSAB to provide Type II lap/shoulder seat belt systems at every seating position, and to provide “appropriate securement systems for the child restraint devices Head Start specifies, and could serve other paratransit clients as well.”

Since none of these suggested amendments were proposed in the NPRM, we are unable to adopt them without further notice and opportunity for comment. We are aware of the continuing interest in possible improvements to school bus seating. In May 2002, we reported to Congress on prospective improvements for occupant protection in school buses, as required by the Transportation Equity Act for the 21st Century (TEA-21)(P.L. 105-178). 4

NHTSA is in the process of developing test procedures for voluntarily installed lap/shoulder belts in school buses over 4,536 kg (10,000 pounds) gross vehicle weight rating. We expect to propose some improvements in this area in the next year or so.

Commenters on this issue expressed skepticism about the efficacy of interior labels warning that MFSABs should not be used to transport school children between home and school. NASDPTS questioned the benefit of a warning label on the MFSAB as to its intended use. That organization stated that using the MFSAB to transport students to and from school would violate laws in every state. It noted that if “someone with this knowledge is pre-conditioned to violate state laws, and expose themselves and their school district to extreme liability risks, it does not seem reasonable to assume that the addition of a warning label will change that individual's mind.” NASDPTS also noted that there are already “a large number” of labels on school buses, and that at some point, there are diminishing returns of adding even more warning labels. NASDPTS recommended that any potential MFSAB misuse be addressed through school bus driver training rather than by another warning label.

John Fairchild recommended the adoption of a “performance standard for an interior warning device that specifies the vehicle's current operational status.” Fairchild suggested that the device or label should at a minimum indicate whether the vehicle is in use as a school activity bus, Head Start AAV, or other type of service. Vehicles dedicated to a single use would need to provide “only the one appropriate indicator related to its defined activity.”

The Department of California Highway Patrol recommended a warning label stating: “This vehicle is not intended for daily school-bus route use,” that would be placed in a general location such as the driver's compartment where it would be easily visible by the driver or any passenger who enters or exits the vehicle.

NAIS “sees no harm” in placing a warning label, and suggested a label in the driver's view that “the MFSAB should not load or unload passengers if the passengers are not protected from traffic.”

VAPT recommended that a warning label be placed in a prominent spot and that the label state: “No loading once the trip begins. No unloading until reaching the destination. [Head Start Only—monitor shall accompany students crossing the road.]” NSTA also supported the requirement for a warning label.

The Utah State Office of Education recommended a warning label near the front of the occupant compartment stating: “This Bus Is Not To Be Used To Bus Students To or From School or Home.”

In the NPRM, NHTSA did not propose a specific warning label, but did ask for comments on this issue. In particular, NHTSA asked whether MFSAB manufacturers should be required to place a prominent warning near the front of the occupant compartment, warning the driver and passengers that the bus was not intended to be used to pick children up from and drop them off at places such as home and bus stops. If commenters believed that such a warning was appropriate, NHTSA asked for comment on standardized wording, size and other appearance requirements and location.

A number of commenters addressed the general question of whether or not a warning label was appropriate, without addressing the more specific questions. Commenters who did not believe a label was appropriate expressed concerns about such a label distracting attention from other warning labels or stated that State laws and liability concerns would prevent misuse of the MFSAB. Most of those supporting a label did not give specific information about why a label would be helpful; however, a few did express concern about the possibility of misuse.

A few commenters provided specific comment about the form a warning label should take if required. One commenter, John Fairchild, recommended the adoption of a “performance standard for an interior warning device that specifies the vehicle's current operational status,” i.e. , school activity bus, Head Start AAV, etc. Other commenters offered specific language indicating either that the MFSAB was not to be used for school bus routes or that there should be no unloading before reaching the final destination, but each commenter's suggested language differed from the others.

Only one commenter addressed the issues of size and location. Les Entreprises Michel Corbeil, Inc. indicated that if a warning label were found to be necessary, the “label should be as small as possible but clearly visible to the drivers and to passengers seated in at least the first three rows.”

After carefully considering the public comments, NHTSA has decided not to specify a warning label in the final rule. NHTSA is not convinced that a warning label would be necessary to convey the message that the MFSAB should not be used for regular school bus use. As NASDPTS noted, using the MFSAB to transport students to and from school would violate laws in every state. Further, as many commenters pointed out, there are already a large number of labels in school buses. For these reasons, and because NHTSA did not propose a specific label, NHTSA has decided to monitor the use of the MFSAB. If misuse occurs, NHTSA will reconsider the warning label at a later date.

U.S. Bus Corporation asked for clarification of whether the MFSAB with a GVWR of 10,000 pounds or less must meet passenger restraint system requirements in FMVSS No. 208, Occupant crash protection or in FMVSS No. 222, School bus passenger seating and crash protection. NHTSA's response is that as a school bus category, all MFSABs, including those that are 10,000 pounds GVWR or under, must meet FMVSS No. 222.

U.S. Bus Corporation also noted that FMVSS No. 217, Bus emergency exits and window retention and release, has different requirements for emergency exit windows and emergency exit doors for buses versus school buses. They asked for clarification of which set of FMVSS No. 217 requirements the MFSAB must meet. Because the MFSAB would be a category of school bus, it would have to meet all of the emergency exit requirements specified in FMVSS No. 217 for school buses.

Commenters offered these additional comments on issues that fall within the purview of State law.

In the NPRM, NHTSA explained that it proposed a size limitation on MFSABs because it was concerned about the possibility of misuse, i.e. , the possibility that schools would purchase school buses without traffic control devices as a means of saving money on buses used to pick children up from and drop them off at home. In its comments, NASDPTS addressed NHTSA's concern. NASDPTS stated that every State has laws that require school bus drivers to activate the warning lamps and stop signal arm whenever the school bus is stopped to pick up or discharge students on public roads. A driver failing to activate these devices would be in violation of State law. Further, if a school district used a MFSAB to transport children to and from school, it would be violating its State laws since it would be picking up or discharging students without activating warning lamps and the stop signal arm. NASDPTS noted: “Such actions would not only be punishable under state law, but would also expose the school district, school board, state department of education, etc. to extreme liability risks that would far outweigh any savings that might accrue from ordering a MFSAB rather than a “school bus.”'

VAPT stated its belief that the possibility of misuse is lessened because state agencies that oversee the operations and specifications for school buses used in the public schools do a very good job of educating and training its members. VAPT stated that these state agencies responsible for pupil transportation can also distribute information to other state agencies, or can notify its member schools about any new classification and ask the individual school district directors to distribute notices locally.

NAIS suggested that NHTSA consider requiring schools using MFSABs to load and unload students in protected areas out of roadways, whether in a parking space, parking lot, or turnaround area. NAIS suggested that such a rule “may be a more appropriate reminder on a sticker in the bus than one reminding users that students should not be dropped off at home or other bus stops.” NHTSA does not have the statutory authority to regulate where and how students are to be picked up or dropped off. Operational requirements such as this are matters of State law.

The Amalgamated Transit Union encouraged NHTSA to prohibit school districts from using passenger vans to transport children to and from school and school-related activities. Because regulation of vehicle use is a matter of State law, NHTSA cannot adopt this recommendation. However, NHTSA and the National Transportation Safety Board have been on record as recommending that school children be transported in school buses (including the MFSAB), and not in buses that do not meet NHTSA's school bus standards.

Corbeil (a school bus and bus manufacturer), the National Child Care Association, John Fairchild, and U.S. Bus Corporation recommended that the final rule contain a provision prohibiting the MFSAB from being painted National School Bus Glossy Yellow. This recommendation will not be adopted because NHTSA did not propose to regulate MFSAB color in the NPRM and thus, the issue is outside the scope of this rulemaking. Although NHTSA does not at present regulate school bus color, all States require school buses that provide home-to-school transportation to be painted National School Bus Glossy Yellow, as recommended in Highway Safety Program Guideline No. 17, “Pupil Transportation Safety.”

NHTSA is also aware that some States allow “activity buses” used by schools to be painted a color other than National School Bus Glossy Yellow. When this final rule takes effect, each State will determine whether MFSABs used by schools for activity trips, child care facilities for point-to-point school transportation, or coordinated transportation systems for various transportation services, must be painted a color other than National School Bus Glossy Yellow. NHTSA is not aware of any safety problems associated with color identification in buses that are already performing these services. Should it appear that there is a safety need, NHTSA will consider regulating school bus color.

John Fairchild recommended that NHTSA develop specific training materials related to operational issues for the MFSAB drivers and riders. NASDPTS recommended that any potential MFSAB misuse be addressed through school bus driver training rather than by a warning label.

School bus driver training is primarily a responsibility of State and local governments. However, NHTSA will consider developing educational materials, to be used voluntarily by school transportation trainers, that discuss restrictions on the use of MFSABs, especially involving to and from school transportation for school children.

After reviewing the public comments, NHTSA has decided to adopt a new school bus category, the “multifunction school activity bus,” with the following characteristics:

1. The MFSAB is classified as a “school bus,” not a “bus.”

2. There is no upper weight limit on the MFSAB.

3. The MFSAB must meet FMVSS No. 222, as FMVSS No. 222 is presently written.

4. The MFSAB must meet all warning label requirements applicable to school buses. There is no label unique to the MFSAB.

5. Because school bus color is regulated by State law, NHTSA does not prohibit the MFSAB from being painted National School Bus Glossy Yellow.

With this final rule, we intend to create a subcategory of school buses that qualify as “allowable alternate vehicles” under DHHS' Head Start regulations, 45 CFR 1310.12, and thus could be used to transport Head Start Program participants.

We anticipate that creation of the MFSAB will aid the efforts of Regional Transit Authorities (which must serve the general public) and Head Start both to meet State law and to satisfy the limitations on the availability of funding from the FTA. Since the MFSABs do not have the school bus flashing lights and stop arms, NHTSA expects that transit authorities and other transportation providers can readily obtain FTA funding to buy MFSABs, provided that such vehicles are not used as school buses to provide home-to-school service. Further, as noted above, in many States, the flashing lights and stop arms are permitted only on “school buses” (as defined by State law).

By making available a category of school bus that may be somewhat less expensive than the school bus with traffic control devices, NHTSA anticipates that the final rule will help child transportation providers in implementing the NTSB's recommendation that children be transported in buses that “meet the school bus structural standards or the equivalent set forth in 49 Code of Federal Regulations Part 571. ”

All public commenters addressing the leadtime issue urged that this final rule take effect as soon as possible. Accordingly, this final rule is effective thirty days from the date this document is published in the Federal Register . Optional early compliance with this final rule is provided as of the date this document is published in the Federal Register .

Executive Order 12866, “Regulatory Planning and Review” (58 FR 51735, October 4, 1993), provides for making determinations whether a regulatory action is “significant” and therefore subject to Office of Management and Budget (OMB) review and to the requirements of the Executive Order. The Order defines a “significant regulatory action” as one that is likely to result in a rule that may:

(1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities;

(2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

We have considered the impact of this rulemaking action under Executive Order 12866 and the Department of Transportation's regulatory policies and procedures. This rulemaking document was not reviewed by the Office of Management and Budget under E.O. 12866, “Regulatory Planning and Review.” The rulemaking action is also not considered to be significant under the Department's Regulatory Policies and Procedures (44 FR 11034; February 26, 1979).

For the following reasons, we believe that this final rule will not increase vehicle manufacturers' costs to provide school buses for uses other than transportation of students between home and school. In order to manufacture a “multifunction school activity bus,” vehicle manufacturers need only manufacture a school bus and omit including the four-way/eight-way alternating flashing lights and stop arm.

For the following reasons, depending on how the new “multifunction school activity bus” is priced, NHTSA believes that organizations that at present purchase school buses for transportation purposes other than to and from home to school might realize a cost benefit as a result of this rulemaking.

As earlier discussed, this final rule creates a subcategory of school buses that need not meet requirements for flashing four-way/eight-way alternating flashing lights or a stop arm. Estimates supplied by Blue Bird Body Company (a school bus manufacturer) indicate that the average cost of the four-way/eight-way alternating flashing lights is approximately $417 per school bus and the average cost of the stop-arm is approximately $560. Estimates supplied by Thomas Built Buses (another school bus manufacturer) indicate that the cost for the four-way/eight-way alternating flashing lights ranges from $175 for the least expensive four-way system to $2,300 for the most expensive eight-way system and the cost for stop-arms ranges from $250 to $720. Based on those figures, the cost of adding stop-arms and alternating flashing lights ranges from $425 to $3020 per school bus.

The Annual Fact Book published by School Transportation News reports a strong increase in sales of “Type A” school buses (approximately 4,536 kg (10,000 pounds) GVWR); increasing from 6,389 in the 1995-1996 school year to 10,475 in the 1998-1999 school year. The agency notes that from 1990 through 1997, approximately 6,000 “Type A” school buses were sold each year. The agency believes that the increase in the sales of small school buses for years following 1997 is mostly due to purchases by organizations such as day care centers and Head Start, which provide child transportation. The agency does not have any data to indicate what percentages of the “Type A” school buses are sold to organizations that provide transportation other than between home and school. We note that since approximately 6,000 small “Type A” school buses were sold per year prior to 1997, a reasonable assumption would be that about 4,000 of these buses are sold to day care centers and others for transportation purposes other than to and from home to school.

Based on the cost figures discussed above and the conservative estimate of 4,000 Type A school buses sold each year, we estimate that this final rule may save child transportation providers approximately $3.9 million dollars per year in the small “Type A” school bus market. However, this estimate assumes that school bus manufacturers will reduce the prices of the “multifunction school activity bus” by the amount of money saved as a result of not having to install four-way/eight-way alternating flashing lights or stop arms on those vehicles.

Because the economic impacts of this proposal are so minimal ( i.e. , the annual effect on the economy is less than $100 million), no further regulatory evaluation is necessary.

Executive Order 13132 requires us to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects 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.” Under Executive Order 13132, we may not issue a regulation with Federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or unless we consult with State and local governments, or unless we consult with State and local officials early in the process of developing the proposed regulation. We also may not issue a regulation with Federalism implications and that preempts State law unless we consult with State and local officials early in the process of developing the proposed regulation.

This final rule will not have substantial direct effects 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, as specified in Executive Order 13132. The reason is that this final rule, applies to motor vehicle manufacturers, not to the States or local governments. This final rule assists child transportation providers by making available a school bus that meets the traffic control laws of States and local governments. Thus, the requirements of Section 6 of the Executive Order do not apply to this final rule.

Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any rule that: (1) Is determined to be “economically significant” as defined under E.O. 12866, and (2) concerns an environmental, health or safety risk that NHTSA has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, we must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by us.

This final rule is not subject to the Executive Order because it is not economically significant as defined in E.O. 12866 and does not involve decisions based on environmental, health or safety risks that disproportionately affect children. However, this final rule makes a school bus vehicle type available for transportation purposes other than to and from home to school. Although we do not have any estimates of the extent or nature of the practice throughout the country, the agency is informed by the National Child Care Association that at present, in many cases, children provided transportation to and from child care facilities are transported in 15-passenger vans or other buses that do not meet the special requirements for school buses. This final rule increases the chances that children are transported in MFSABs, rather than in buses that are not school buses and the children's safety is thereby enhanced.

Pursuant to Executive Order 12778, “Civil Justice Reform,” we have considered whether this final rule has any retroactive effect. We conclude that it does not have such an effect. Under 49 U.S.C. 30103, whenever a Federal motor vehicle safety standard is in effect, a State may not adopt or maintain a safety standard applicable to the same aspect of performance which is not identical to the Federal standard, except to the extent that the state requirement imposes a higher level of performance and applies only to vehicles procured for the State's use.

49 U.S.C. 30161 sets forth a procedure for judicial review of final rules establishing, amending or revoking Federal motor vehicle safety standards. That section does not require submission of a petition for reconsideration or other administrative proceedings before parties may file suit in court.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq. , as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996) whenever an agency is required to publish a notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effect of the rule on small entities ( i.e. , small businesses, small organizations, and small governmental jurisdictions). However, no regulatory flexibility analysis is required if the head of an agency certifies the rule would not have a significant economic impact on a substantial number of small entities. SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a rule would not have a significant economic impact on a substantial number of small entities.

The agency Administrator has considered the effects of this rulemaking action under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) and certifies that this final rule will not have a significant economic impact on a substantial number of small entities. We believe that this final rule benefits small businesses, small nonprofits and small local governments slightly because they are now able to purchase a school bus without traffic control devices on them, potentially saving $977 per school bus (using figures provided by Blue Bird Body Company), and saving small entity providers of transportation other than to and from home to school transportation approximately $3.9 million dollars per year. This cost savings assumes that school bus manufacturers (some of which are small businesses) pass on to customers the cost savings resulting from not installing the traffic control devices on the school buses.

Accordingly, the agency believes that this final rule has a small beneficial cost effect on small motor vehicle manufacturers considered to be small business entities, on small businesses (that presently transport children in school buses with the four-way/eight-way alternating flashing lights and stop arms) providing transportation other than to and from home to school, or child care, small nonprofits, and small local governmental entities.

We have analyzed this rule for the purposes of the National Environmental Policy Act and determined that it would not have any significant impact on the quality of the human environment.

NHTSA has determined that this final rule will not impose any “collection of information” burdens on the public, within the meaning of the Paperwork Reduction Act of 1995 (PRA). This rulemaking action will not impose any filing or recordkeeping requirements on any manufacturer or any other party.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272) directs us to use voluntary consensus standards in our regulatory activities unless doing so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies, such as the Society of Automotive Engineers (SAE). The NTTAA directs us to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards.

After conducting a search of available sources, we have determined that there are not any voluntary consensus standards applicable to this rulemaking.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires Federal 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 the private sector, of more than $100 million in any one year (adjusted for inflation with base year of 1995). Before promulgating a NHTSA rule for which a written statement is needed, section 205 of the UMRA generally requires us to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows us to adopt an alternative other than the least costly, most cost-effective or least burdensome alternative if we publish with the final rule an explanation why that alternative was not adopted.

This final rule will not result in costs of $100 million or more to either State, local, or tribal governments, in the aggregate, or to the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 12866 requires each agency to write all rules in plain language. Application of the principles of plain language includes consideration of the following questions:

—Have we organized the material to suit the public's needs?

—Are the requirements in the rule clearly stated?

—Does the rule contain technical language or jargon that is not clear?

—Would a different format (grouping and order of sections, use of headings, paragraphing) make the rule easier to understand?

—Would more (but shorter) sections be better?

—Could we improve clarity by adding tables, lists, or diagrams?

—What else could we do to make this rulemaking easier to understand?

The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.