The final regulations that are the subject of this correction revised § 51.1214, Tolerances.

As published, the regulatory text in paragraphs (a)(2)(ii) and (b)(2)(ii) of § 51.1214 inadvertently included soft and overripe peaches with the tolerance for decayed peaches. This document removes soft and overripe from the decay tolerance.

This rule is issued under Marketing Agreement No. 148 and Order No. 932, both as amended (7 CFR part 932), regulating the handling of olives 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.”

USDA is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the marketing order now in effect, California olive handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate established herein will be applicable to all assessable olives beginning on January 1, 2004, and continue until amended, suspended, or terminated. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with 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. Such 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 continues in effect the decreased assessment rate established for the committee for the 2004 and subsequent fiscal years from $13.89 per ton of assessable olives to $12.18 per ton of assessable olives.

The California olive marketing order provides authority for the committee, with the approval of USDA, to formulate an annual budget of expenses and collect assessments from handlers to administer the program under §§ 932.38 and 932.39. The members of the committee are producers and handlers of California olives. They are familiar with the committee's needs and with the costs for goods and services in their local area, and are, thus, in a position to formulate an appropriate budget and assessment rate. The assessment rate is deliberated and formulated in a public meeting, and the expenditures are deliberated in various public subcommittee meetings prior to the committee meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 2003 and subsequent fiscal years, the committee recommended, and USDA approved, an assessment rate that would continue in effect from one fiscal year to another unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the committee or other information available to USDA.

The committee met on December 11, 2003, and unanimously recommended fiscal year 2004 expenditures of $1,269,063 and an assessment rate of $12.18 per ton of olives. In comparison, last year's budgeted expenditures were $1,230,590. The assessment rate of $12.18 is $1.71 lower than the $13.89 rate previously in effect.

Expenditures recommended by the committee for the 2004 fiscal year include $633,500 for marketing development, $360,563 for administration, and $225,000 for research. The committee also recommended a fiscal year 2004 expenditure of $50,000 for the development of an enhanced flavor standards program.

Budgeted expenses for these items in 2003 were $633,500 for marketing development, $347,090 for administration, $250,000 for research. There were no budgeted expenditures for the development of flavor standards and flavor-standards inspection training for the 2003 fiscal year.

The California Agricultural Statistics Service (CASS) reported olive receipts for the 2003-04 crop year at 102,703 tons, which compares to 89,006 for the 2002-03 crop year. The increase in size of the 2003-04 crop, due in large part to the alternate-bearing characteristics of olives, has made it possible for the committee to recommend a decrease of $1.71 per ton in the assessment rate from the previous $13.89 per assessable ton to $12.18 per assessable ton. The assessment rate recommended by the committee was derived by considering anticipated expenses, actual olive tonnage received by handlers, and additional pertinent factors.

Income derived from handler assessments, interest, and utilization of reserve funds will be adequate to cover budgeted expenses. Funds in the reserve will be kept within the maximum of approximately one fiscal period's expenses as required by § 932.40 of the marketing order.

The assessable tonnage for the 2004 fiscal year is expected to be less than the receipts of 102,703 tons reported by CASS, because some olives may be diverted by handlers for uses that are exempt from marketing order requirements. The quantity of olives expected to be diverted cannot be published in this document. The olive industry consists of only three handlers, two of which are much larger than the third, and the confidentially of this handler information must be maintained to protect the proprietary business positions of each of the handlers.

The assessment rate will continue in effect indefinitely unless modified, suspended, or terminated by USDA upon recommendation and information submitted by the Committee or other available information.

Although this assessment rate will be in effect for an indefinite period, the committee will continue to meet prior to or during each fiscal year to recommend a budget of expenses and consider recommendations for modification of the assessment rate. The dates and times of committee meetings are available from the committee or USDA.

Committee and subcommittee meetings are open to the public and interested persons may express their views at these meetings. USDA will evaluate committee recommendations and other available information to determine whether modification of the assessment rate is needed. Further rulemaking will be undertaken as necessary. The committee's 2004 budget and those for subsequent fiscal years would be reviewed and, as appropriate, approved by USDA.

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

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions to ensure that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the 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 1,200 producers of olives in the production area and 3 handlers subject to regulation under the marketing order. The Small Business Administration (13 CFR 121.201) defines small agricultural producers as those with annual receipts less than $750,000, and small agricultural service firms as those with annual receipts less than $5,000,000. Based upon information from the committee, the majority of olive producers may be classified as small entities, but only one of the three handlers may be classified as a small entity.

This rule continues in effect the decreased assessment rate established for the committee and collected from handlers for the 2004 and subsequent fiscal years. The assessment rate was decreased from $13.89 per ton to $12.18 per ton of assessable olives. The committee unanimously recommended 2004 fiscal year expenditures of $1,269,063 at the assessment rate of $12.18 per ton. That assessment rate is $1.71 per ton lower than the previous rate.

The quantity of olive receipts for the 2003-04 crop year was reported by CASS to be 102,703 tons, but the actual assessable tonnage for the 2004 fiscal year is expected to be lower. This is because handlers are expected to divert some olives to exempt outlets on which assessments are not paid. The amount of assessable tonnage cannot be reported in this document because such information must be kept confidential to protect the business position of each of the three olive handlers.

The $12.18 per ton assessment rate should be adequate to meet this year's expenses when combined with funds from the authorized reserve and interest income. Funds in the reserve will be kept within the maximum of approximately one fiscal period's expenses as required by § 932.40 of the marketing order.

Expenditures recommended by the committee for the 2004 fiscal year include $633,500 for marketing development, $360,563 for administration, and $225,000 for research. The committee also recommended a fiscal year 2004 expenditure of $50,000 for the development of an enhanced flavor standards program.

Budgeted expenses for these items in 2003 were $633,500 for marketing development, $347,090 for administration, and $250,000 for research. There were no expenditures for the development of flavor standards and flavor-standards training for inspection personnel in the 2003 fiscal year.

Olive receipts totaled 102,703 tons for the 2003-04 crop year compared to the previous crop year's tonnage of 89,006. The committee has increased fiscal year 2004 expenses, but the increase in olive production makes the lower assessment rate possible.

The research expenditures will fund studies to develop chemical and scientific defenses to counteract a threat from the olive fruit fly in the California production area. Market development expenditures are the same because the committee's marketing program for fiscal year 2004 is similar.

The committee reviewed the budget and assessment rate, and unanimously recommended fiscal year 2004 expenditures of $1,269,063, which reflect decreased research expenditures and increased administrative and inspection expenditures.

While deliberating this budget, the committee considered information from various sources, such as the committee's Executive, Research, and Marketing Subcommittees. Alternate spending levels were discussed by these groups, based upon the relative costs and benefits to the olive industry of various research and marketing projects, the total quantity of assessable olives received by handlers, and other pertinent factors. Such deliberations resulted in the recommended assessment rate of $12.18 per ton of assessable olives.

A review of historical industry information and preliminary information pertaining to the upcoming fiscal year indicates that the grower price for the 2003-04 crop year will be a weighted average of $478 per ton for canning-size fruit and $254 per ton for limited-use size fruit. The weighted average is calculated by the committee staff and takes into account the prices per ton offered by each handler for various sizes of the major olive varieties produced.

Approximately 85 percent of a ton of olives are canning sizes and 10 percent are limited-use sizes, leaving the balance as cull fruit. Thus, given the current anticipated grower prices, the average grower price per ton would be $431.70. The estimated assessment revenue is expected to be approximately 2.8 percent of the average grower price. Total grower revenue on 102.703 tons would be $44,336,885.

This action will continue in effect the decreased assessment obligation imposed on handlers. While assessments impose some additional costs on handlers, the costs are minimal and uniform on all handlers. Some of the additional costs may be passed on to producers. However, these costs are offset by the benefits derived by the operation of the marketing order.

In addition, the committee's meeting was widely publicized throughout the California olive industry and all interested persons were invited to attend the meeting and participate in committee deliberations on all issues. Like all committee meetings, the December 11, 2003, meeting was a public meeting and all entities, both large and small, were able to express views on this issue. The subcommittee meetings, as well, were public and all interested parties were encouraged to attend and provide comments. Finally, interested persons were invited to submit information on the regulatory and informational impacts of this action on small businesses.

This rule imposes no additional reporting or recordkeeping requirements on California olive 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. USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

The interim final rule was published in the Federal Register on February 9, 2004 (69 FR 5905). Copies of the rule were provided to all handlers. Finally, USDA and the Office of the Federal Register made the interim final rule available through the Internet. A 60-day comment period was provided for interested persons to respond to the interim final rule. The comment period closed on April 9, 2004, and no comments were received.

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.

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

The Office of Management and Budget (OMB) determined that this interim final rule is significant and must be reviewed by the Office of Management and Budget under Executive Order 12866. USDA conducted a cost-benefit analysis of the potential impacts associated with this Interim Final Rule.

Five options for determining State funding levels and their impacts on enrollment are examined. The first two examine alternatives for balancing GRP objectives. These options include: The Selected Option, which balances the amount of grassland, number of livestock operations, biodiversity, and landowner demand, and a continuation of FY2003 procedures, which is like the Selected Option, except for not giving consideration to landowner demand. The three additional options examine the consequences of concentrating on only a single objective, e.g. , native grasslands.

The Selected Option allocates State funding as a function of State number of grazing operations, acres of grassland under the threat of conversion, bio-diversity considerations, and State demand for funds, as measured by the number of offers for the GRP. This process is the same used in FY2003, except it includes consideration of interest within a State for demand for funds. This last component addresses high FY2003 participation demand.

Although the Selected Option enrolls fewer grasslands than some other options, the Selected Option distributes funds to States based on the number of grazing operations, the threat of grassland conversion to other uses, and a bio-diversity index, recognizing the implicit equality given the three program objectives by the statute. The demand component was used to capture producer willingness to participate and the quality of offers. Because this option balances the three statutory objectives, no single objective is maximized.

Copies of the analysis may be obtained from Richard Swenson, Director, Easement Division, NRCS, P.O. Box 2890, Washington, DC 20013-2890; telephone: (202) 720-1845; fax (202) 720-4265; e-mail: richard.swenson@usda.gov , Attention: Grassland Reserve Program and electronically at http://www.nrcs.usda.gov/programs/GRP/ .

Pursuant to section 304 of the Federal Crop Insurance Reform Act of 1994 (Pub. L. 103-354), USDA classified this rule as non-major. Therefore, a risk analysis was not conducted.

The Regulatory Flexibility Act is not applicable to this Interim Final Rule because the Commodity Credit Corporation (CCC) is not required by 5 U.S.C. 553, or by any other provision of law, to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

This Interim Final Rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This Interim Final Rule will not result in annual effect on the economy of $100 million or more, a major increase in costs or prices, or significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based companies to compete in domestic and export markets.

An Environmental Assessment (EA) has been prepared to assist in determining whether this Interim Final Rule would have a significant impact on the quality of the human environment such that an Environmental Impact Statement (EIS) should be prepared. Based on the results of the EA, USDA proposes issuing a Finding of No Significant Impact (FONSI) before a final rule is published. Copies of the EA and FONSI may be obtained from Andree DuVarney, National Environmental Specialist, Ecological Sciences Division, Natural Resources Conservation Service, P.O. Box 2890, Washington, DC 20013-2890. The GRP EA and FONSI will also be available at the following Internet address: http://www.nrcs.usda.gov/programs/GRP . Written comments on the EA and FONSI should be sent to Andree DuVarney, National Environmental Specialist, Ecological Sciences Division, Natural Resources Conservation Service, P.O. Box 2890, Washington, DC 20013-2890, or submit them via the Internet to andree.duvarney@usda.gov.

Section 2702 of the Farm Security and Rural Investment Act of 2002 requires that the implementation of this provision be carried out without regard to the Paperwork Reduction Act, Chapter 35 of title 44, United States Code. Therefore, USDA is not reporting recordkeeping or estimated paperwork burden associated with this Interim Final Rule.

NRCS is committed to compliance with the Government Paperwork Elimination Act (GPEA) and the Freedom to E-File Act, which require government agencies in general, and NRCS in particular, to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

USDA has determined through a Civil Rights Impact Analysis that the issuance of this rule discloses no disproportionately adverse impacts for minorities, women, or persons with disabilities. Copies of the Civil Rights Impact Analysis is available, and may be obtained from Richard Swenson, Director, Easement Division, Natural Resources Conservation Service, P.O. Box 2890, Washington, DC 20013-2890, and electronically at http://www.nrcs.usda.gov/programs/GRP .

This Interim Final Rule has been reviewed in accordance with Executive Order 12988, Civil Justice Reform. The rule is not retroactive and preempts State and local laws to the extent that such laws are inconsistent with this rule. Before an action may be brought in a Federal court of competent jurisdiction, the administrative appeal rights afforded persons at 7 CFR parts 614, 780, and 11 must be exhausted.

This Interim Final Rule has been reviewed in accordance with the requirements of Executive Order 13132, Federalism. USDA has determined that the rule conforms to the federalism principles set forth in the Executive Order; would not impose any compliance cost on the States; and would not have substantial direct effects on the States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities on the various levels of government.

Pursuant to Title II of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538, USDA assessed the effects of this rulemaking action of State, local, and tribal governments, and the public. This action does not compel the expenditure of $100 million or more by any State, local, or tribal government, or anyone in the private sector; therefore, a statement under section 202 of the Act is not required.

Historically, grassland and shrublands occupied approximately one billion acres, about half the landmass of the 48 contiguous United States (Richard Conner, Texas A&M, June 2001). Roughly 50 percent of these lands have been converted to cropland, urban land, and other land uses. Privately owned grasslands (pastureland and rangeland) cover approximately 526 million acres in this country (1997 National Resource Inventory (NRI)). Grasslands provide both ecological and economic benefits to local residents and society in general. Grassland importance lies not only in the immense area covered, but also in the diversity of benefits they produce. These lands provide water for urban and rural uses, livestock products, flood protection, wildlife habitat, and carbon sequestration. These lands also provide aesthetic value in the form of open space and are vital links in the enhancement of rural social stability and economic vigor, as well as being part of the Nation's history.

Grassland loss through conversion to other land uses such as cropland, parcels for home sites, invasion of woody or non-native species, and urban development threatens grassland resources. About 24 million acres of grasslands and shrublands were converted to cropland or non-agriculture uses between 1992 through 1997 (1997 National Resource Inventory).

In Fiscal Year (FY) 2003, GRP was implemented through a notice of funds availability published in the Federal Register on June 13, 2003 (See Federal Register Vol. 68, No. 114). The document explained that in FY 2003, CCC intended to use GRP to protect grazing lands from conversion, and support efforts to maintain or enhance biodiversity.

The Secretary has delegated authority to implement GRP jointly to the Administrator, Farm Service Agency (FSA), and the Chief, Natural Resources Conservation Service (NRCS). In addition, limited responsibilities associated with easement management and general program development have been delegated to the Forest Service (FS). Activities identified in this interim rule as being conducted by the USDA or the CCC will be performed by representatives of these three agencies, as appropriate.

The GRP rental agreements and easements are designed for working agricultural lands. Therefore, the program provides incentives to protect grassland resources while enabling agricultural producers to use the forage in their agricultural operation. There are multiple enrollment duration options for both the rental agreements and easements.

In the 2002 Farm Bill Managers' Report, Congress recommended that the GRP enrollment process be modeled after the Conservation Reserve Program (CRP), 16 U.S.C.3835a and the Wetlands Reserve Program (WRP), 16 U.S.C.3837 et seq. Like the CRP Continuous Sign-up and the WRP, applications for program enrollment in GRP can be filed at any time throughout the year. Application selection is based on ranking and selection criteria developed at the State level, following broad National guidelines. Although the GRP rental agreements are for working lands, the rental agreements are modeled after the CRP long-term rental contracts. Likewise, the easement acquisition process is similar to that used in the WRP. With both GRP easements and rental agreements, participants will have the opportunity to utilize common management practices to maintain the viability of the grassland acreage.

The Secretary evaluated whether the GRP could be administered by partnering with third parties to acquire easements, similar to the Farm and Ranch Lands Protection Program, 16 U.S.C. 3838h and 3838i, and concluded that the GRP statute does not provide authority to do so.

The GRP statute provides broad land eligibility criteria regarding the type of grasslands that can be enrolled in the program. USDA proposes in this regulation to emphasize program implementation to preserve the Nation's most critical grassland resources, both native and natural grasslands, and shrublands.

The Grassland Reserve Program (GRP) is a voluntary program to assist landowners and agriculture operators in restoring and protecting grassland and land that contains forbs and shrublands. The Secretary of Agriculture delegated the authority to administer GRP on behalf of the Commodity Credit Corporation, to the Chief, Natural Resources Conservation Service (NRCS) and the Administrator, Farm Service Agency (FSA). These agency leaders are Vice Presidents of the CCC. NRCS has the lead responsibility on technical issues and easement administration, and FSA has the lead responsibility for rental agreement administration and financial activities. The Secretary also delegated authority to the Forest Service to hold easements at the option of the landowner, on properties adjacent to USDA Forest Service properties. At the State level, the NRCS State Conservationist and the FSA State Executive Director will determine how best to utilize the human resources of both agencies to deliver the program and implement National policies in an efficient manner.

The program has a statutory enrollment cap of two million acres of restored or improved grasslands. USDA may enroll an excess of two million acres in the program, providing the additional acreage does not require restoration, and the program has sufficient funding. The statute also requires that 40 percent of the program funds be used for 10-year, 15-year, and 20-year rental agreements, and 60 percent of the funds be used for 30-year rental agreements and easements.

As defined in this rule, the term “restoration” not only includes restoring grassland from cropland and other uses, but it also refers to improving lands with existing stands of grasses, forbs, and shrubs. USDA has defined “restoration” as the implementation of any conservation practice (vegetative, management, or structural) that improves the values and functions of grasslands (native and natural plant communities). The term “improves” in this context means taking an existing grassland and moving it toward a higher functioning grassland condition. The definition of restoration is found in section 1415.3 of this rule. This regulation does not define the required restored condition in order to allow for flexibility in making such determinations at the local level in accordance with local conditions and desired outcomes. USDA recognizes that restoration includes the process of establishing practices and managing the land to reach a desired grassland condition. Enrolled lands will require periodic manipulation to maximize wildlife habitat and preserve grassland functions and values over time. The “restored” grassland condition will be determined by the NRCS State Conservationist, with input from the State Technical Committee.

GRP enrollment options include easements with various durations, including 30 years, permanent, or for the maximum duration allowed under State law; or rental agreements with a duration of 10-, 15-, 20-, or 30-years. Participants can enter into a restoration agreement in conjunction with either an easement or rental agreement, at the discretion of the USDA and if desired by the participant, to restore the ecological functions and values of these lands. The GRP statute does not authorize USDA to use restoration agreements as a stand-alone enrollment option.

As set forth in section 1415.5, land is eligible if it is privately owned land, including tribal land, and it is: (1) Grassland, land that contains forbs, or shrubs (including rangeland and pastureland); or (2) located in an area that has been historically dominated by grassland, forbs, and shrubs and has potential to provide habitat for animal or plant populations of significant ecological value if the land is retained in the current use of the land or restored to a natural condition. Lands incidental to the above described eligible lands may also be enrolled if the Secretary determines enrollment of such land is necessary for the efficient administration of a rental agreement or easement. Privately owned land does not include land owned by the Federal, State, or local government.

USDA, at the State level, based on national guidance, shall establish criteria to evaluate and rank applications for easements and rental agreements as outlined in this regulation at section 1415.8. As required by statute, emphasis will be placed on supporting grazing operations, plant and animal biodiversity, and grassland and land containing shrubs or forbs under the greatest threat of conversion.

USDA evaluated the following two approaches for allocating funds to projects. One approach is to allocate funds to States using a formula that incorporates factors associated with the program's areas of emphasis. Under this approach, each NRCS State Conservationist and the FSA State Executive Director would be given the responsibility to develop, within broad national guidelines and with input from State Technical Committees, ranking criteria against which to evaluate and select applications for funding.

Another approach is to develop national criteria and have all applications evaluated and selected nationally. Allocations would not be provided to States. USDA has used both approaches when implementing other conservation programs. Based on its experience with implementing GRP in fiscal year 2003, USDA is adopting the approach of allocating funds to States for selection of projects at the State level. This approach allows USDA to enhance its ability to address State grassland concerns, as well as enable States to use all conservation programs in a coordinated effort to address grassland concerns, giving consideration to the entire ecosystem. USDA recognizes that this approach results in some differences between State ranking criteria, and that it may be more challenging to address specific national priorities. USDA welcomes comments on this decision. State ranking criteria will be available to the public through local USDA service centers or on the NRCS Grassland Reserve Program web site. See http://www.nrcs.usda.gov. Select “Programs” from the menu, then “Grassland Reserve Program.” Anyone having comments on the 2003 State ranking criteria should refer the comments to the respective NRCS State Conservationist or FSA State Executive Director located in the USDA State Office. Addresses for the State offices are available at http://www.fsa.usda.gov/pas/default.asp . Select “Your State Office” from the menu bar.

USDA seeks public comment on the criteria and weighting factors that should be used to allocate funds to States, and the national guidance from which States develop their individual ranking criteria. In particular, USDA asks that respondents provide information on credible data that is national in scope related to grassland plant and animal biodiversity. The current allocation formula, developed by USDA at the national level, includes data from the NRI regarding pasture and rangeland conversion, prime farmland used as range or pasture, and total range and pastureland acreage. From agriculture statistics USDA uses data regarding agriculture operations. USDA also includes information from the U.S. Fish and Wildlife Service about threatened and endangered plant and animal species. The data was categorized as either being a biodiversity, conversion, or grazing operation factor. In addition, now that USDA has collected program demand data from the 2003 signup, there will be a demand factor included in the State allocation formula. Program demand data is expressed in terms of total applications received, total acres offered for enrollment, and total estimated cost of applications received. For fiscal year 2004 and beyond, demand may be reflected in terms of applications received, acreage associated with such applications, funding needs associated with unfunded applications, or a combination of all three. USDA intends to provide equal weight to each area of emphasis (grazing operations, threat of conversion, and biodiversity of plants and animals) and the demand category in the allocation formula.

Once USDA State offices receive their allocation, FSA and NRCS, at the State level, will determine the distribution of funds within the State, with input from the State Technical Committee. FSA and NRCS may allocate funds to regions based on natural resource priority, distribute funds for easements and rental agreements based on landowner interest in the various enrollment options, or establish funding pools. If a State office lacks funds to enroll an entire project, the applicant will be provided the opportunity to reduce the amount of land offered, or change the duration of the enrollment option, providing the ranking score is not lowered below the score of the next application on the ranking list. If the applicant declines adjusting the offered acreage level, the USDA at the State level can accept the next eligible application on the list of unfunded applicants.

Section 1415.4 provides that for participation in an easement option, the applicant must be the owner of the eligible land. To grant an easement to the United States, the landowner must possess clear title to the land or be able to provide subordination agreements from third parties with interest in the land, and provide access to the property from a public road. The landowner must comply with the terms of the easement and associated restoration agreement, if one is required.

Easement payments are based on the current market value of the land less the grazing value of the land encumbered by the easement. Under the terms of the easement, in addition to the use of the forage, the landowner retains the right to grassland uses so long as such use is compatible with maintaining the viability of the grassland resources. In addition to grazing, haying, mowing, and seed production, other uses may include hunting, fishing, hiking, camping, bird watching, and other non-motorized recreational activities. Since landowners retain certain rights to grassland resources, for appraisal purposes, grazing value has been defined as grassland value. Land values will be determined through a site-specific appraisal. For 30-year easements, or an easement for the maximum duration allowed under State or tribal law, a landowner receives 30 percent of the appraised value for a permanent easement. Easement payments may be provided in one lump sum payment at the time of closing or participants may elect to receive installment payments. Participants who elect to receive installment payments can receive no more than 10 annual payments of equal or unequal amount, as agreed to by the USDA and the landowner.

USDA has developed a standard conservation deed that the United States will use for all easements purchased under GRP. A copy of the deed may be viewed at http://www.nrcs.usda.gov .

In promulgating this rule, USDA considered whether the exploration and development of subsurface resources was compatible with the purpose of GRP. The GRP statute provides that the conduct of any activity that would disturb the surface of the land covered by the GRP easement or rental agreement is prohibited, except for restoration, fire rehabilitation, and construction of fire breaks. Therefore, the extraction of subsurface resources is prohibited on all lands participating in GRP. However, subsurface resource exploration and extraction is permissible when it is accomplished remotely, that is from adjacent land not covered by a GRP easement, and when it does not result in subsidence or any other adverse effects to the surface estate. USDA finds the extraction of certain materials, such as gravel, to be inconsistent with the purposes of the program. USDA contemplated appraising land based on surface rights alone, but determined that this appraisal method prohibits USDA from restricting the disturbance of the surface when such rights are owned by the GRP participation landowner. Therefore, the easement appraisal will consider full market value rather than surface value, in those instances where the applicant owns the rights to the surface and subsurface estate.

For rental agreements, USDA is adopting subsurface resource policy similar to that of the Conservation Reserve Program. If the subsurface resources are severed and the owner of such rights decides to extract the resources, the affected land will be terminated from the rental agreement with no penalty to the participant. If the rights are not severed and the landowner participant exercises such rights, the participant will have to refund to the USDA payments received on the affected acres.

Section 1415.4 provides that landowners and other people who have general control of property may apply for enrollment in rental agreements through GRP. Applicants who are not landowners need to provide evidence of control of the property for the length of the agreement. If rental agreement payments are to be divided between the landowner and other participants or multiple landowners, the rental agreement will need to be signed by all parties, indicating their respective share of the payments.

As required by statute, rental payment amounts will not exceed 75 percent of the grazing value for the length of the agreement. Rental payments will be paid annually after the anniversary date of the agreement. Local grazing values are determined based on a methodology developed for the CRP using estimated forage production by soil type and knowledge of local rental rates. USDA will make administrative adjustments to local rates in areas where there is a dramatic difference between county rates. County rental rates will be posted in USDA Service Centers after being evaluated locally by USDA representatives to determine whether the rates generally reflect local prevailing rental rates. There may be some significant differences within a State due to elevation changes and precipitation variability.

Persons who participate in a rental agreement may offer the land for an easement, providing the duration of the easement exceeds the duration of the rental agreement, the application ranks high enough to be funded, all other eligibility criteria are met, and funds are available to acquire an easement. The easement application will be considered a new offer that will be evaluated with all other new offers. The rental agreement will be terminated upon easement closing. This policy allows USDA to obtain longer term protection on lands considered valuable for enrollment. This policy will apply to those individuals who signed up for a rental agreement in FY2003 and subsequent years.

Program participants are subject to the Adjusted Gross Income Limitation set forth at 7 CFR part 1400. In summary, this limitation provides that individuals or entities that have an average adjusted gross income exceeding $2.5 million for the three tax years immediately preceding the year the contract is approved are not eligible to receive program benefits or payments, unless 75 percent of the adjusted gross income is derived from farming, ranching, or forestry operations. Easement or rental agreement payments received by a participant shall be in addition to any payments that the participant is otherwise eligible to receive under other Federal laws.

As required by statute, easements and rental agreements will:

(1) Permit grazing on the land in a manner that is consistent with maintaining the viability of the grassland, shrubs, forbs, and habitat for wildlife species adapted to the locality.

(2) Permit haying, mowing, or harvesting for seed production, except during the nesting season for birds in the local area that are in significant decline. When bird species are identified by USDA as needing protection during the nesting season, mowing, haying, and harvesting of grass seed will be permitted as determined by the NRCS State Conservationist in accordance with Federal and State law. In making this determination, NRCS will consult with the State Technical Committee, which includes representation from appropriate State and Federal agencies.

(3) Allow for fire rehabilitation and construction of firebreaks, fences, watering facilities, and practices that protect and restore the grasslands functions and values.

(4) Prohibit the production of row crops, fruit trees, vineyards, or any other agricultural commodities or activity that requires disturbance of the soil surface, except for those activities permitted above. Grassland and wildlife management practices and restoration activities that require disturbing the soil surface, such as light discing, will be permitted at the discretion of USDA.

Both GRP easements and rental agreements will require that the land is managed to maintain the vitality of the plant community as described in the conservation plan. The plan will take into account management practices necessary for the control of invasive species. At the discretion of USDA and subject to funding availability, landowners may include a restoration agreement with both enrollment options that will provide for: maintaining the viability of the grassland; sufficient ground cover to protect the soil from wind and water erosion; forage production for grazing animals, and wildlife habitat. The grassland restoration plan will be implemented according to the schedule developed by USDA. Restoration agreements will provide cost-share assistance for installing practices that will restore or protect the functions and values of the grassland and shrubland. In addition to reestablishing desirable grass cover, restoration practices may include practices associated with grazing management, or other management activities designed to preserve grassland acreage, such as controlled burns. The GRP statute provides that payments may be made to the participant of not more than 90 percent for the cost of carrying out restoration measures and practices on grassland and shrubland that has never been cultivated, and not more than 75 percent on restored grassland and shrubland that at one time was cultivated. Cost-shared practices shall be maintained by the participant for the life of the practice. The life of the practice is determined by the NRCS State Conservationist, and shall be consistent with other USDA conservation programs. All conservation practices will be implemented in accordance with the NRCS Field Office Technical Guide.

USDA welcomes comments on all aspects of this Interim Final Rule. The following describes the specific requirements in each section of the regulation. Activities identified in this regulation as being conducted by USDA or the CCC, will be performed by representatives of either the Farm Service Agency, the Natural Resources Conservation Service, or the U.S. Forest Service. Additionally, USDA fully intends to use the services of third party providers identified in 7 CFR part 652.

This section sets forth the purpose and objectives of the program. In carrying out this program, the Secretary will focus GRP resources on the following:

1. Preserving native and natural grasslands and shrublands;

2. Protecting grassland and shrubland from the threat of conversion; conversion refers to all threats, including conversion to non agriculture uses, conversion to cropland, and vegetation changes to non-grassland covers;

3. Supporting grazing operations; and

4. Maintaining and improving plant and animal biodiversity.

The Secretary has determined that it makes sense to focus the program on those grasslands and shrublands that are at greatest risk of being lost. Therefore, the overall program emphasis will be on preserving native and natural species.

After completing the FY 2003 sign-up, USDA received feedback from conservation organizations and Congressional representatives that GRP should focus on restoring and protecting native and natural grasses, shrubs, and forbs. The statute identifies eligible land as grassland, land that contains forbs, or shrubland. It does not identify whether the program should emphasize native species, nor does it exclude certain types of grassland or shrublands from being enrolled in the program. However, USDA recognizes that grassland and shrublands that are native support an abundant diversity of plant and animal species along with other attributes. Once native grassland or shrubland is converted, it is often impractical, and sometimes impossible, to restore the land with its many attributes back to its original state. In many areas of the country where it is impractical to restore native plant species, other nonnative species have been used to serve similar purposes. Consequently, USDA proposes to emphasize protecting those eligible lands that consist of native and natural species.

Conservation organizations and Congressional representatives also expressed that USDA should use the Farm and Ranch Lands Protection Program (FRPP) to protect land subject to urban conversion pressures, and that GRP should focus on lower cost land subject to other conversion pressures outside of developing urban areas. These concerns primarily result from the high cost of easements in urban areas. The Secretary has the authority through FRPP, not GRP, to leverage Federal funds with non-Federal funds. The GRP statute does not provide the Secretary the flexibility to offer easement applicants amounts lower than the fair market value less the grazing value, nor does the USDA have the authority to share with other third parties the cost of acquiring easements. Therefore, the Secretary has been contemplating how the implementation of these two easement programs should fit together. When considering the scope of eligible lands, the amount of interest expressed by people to participate in GRP (approximately 13,000 applications offering 8.9 million acres received in FY 2003), and the limited GRP funding, the Secretary determined that USDA can preserve far greater grassland resources if GRP focuses on non-urban lands. The Secretary recognizes that in some States the primary threat to grassland is urban development, and that GRP rental agreement payment rates will provide little incentive to keep the acreage in grass cover. Since easement costs in areas with intense urban pressures tends to be quite high on a per acre basis, and FRPP is able to leverage a large percentage of funds with non-Federal sources while GRP cannot, the Secretary may utilize FRPP easements to the extent practical on lands under extreme threat of conversion to non-agricultural uses. However, the focus of FRPP will remain protecting lands for broad agricultural use, including cropland. The Secretary intends to take a common sense approach to implementing both programs, and where it is more appropriate or strategically advantageous to protect important grassland in urbanizing areas, the USDA may use GRP to purchase easements in those areas. USDA State offices will be provided the flexibility to minimize the enrollment of high cost projects by considering cost in the State ranking criteria.

This section includes language on general program administration and policy that sets forth the role of the State Technical Committee in the development of criteria for ranking and selecting applications and addressing related technical and policy matters in the implementation of the program.

This section defines terms used throughout the proposed rule. Some of the terms in this section such as Administrator, Chief, Commodity Credit Corporation, Cost-share, Department, etc., are not unique to GRP, and the definitions are consistent with definitions in other program regulations. For other terms, such as grassland value, grazing value, restored grassland, restoration etc. this section defines how these terms will be utilized for GRP.

In this section, USDA identifies the requirements for participation in GRP. Earlier in the preamble § 1415.4(a) was referenced regarding ownership requirements. Section 1415.4(c) requires that participants follow a conservation plan that maintains the viability of the grassland regardless of the grassland use. The Secretary has determined that such a requirement is needed to carryout the purposes of GRP (see 16 U.S.C. 3830o). The level of restoration or management required in a conservation plan is established by the NRCS State Conservationist in each State, with input from the State Technical Committee.

USDA is seeking input regarding GRP project management. Under this rule, USDA is requiring participants to manage the GRP acreage to move toward a certain natural resource condition without requiring that certain species of grasses, shrubs, or forbs be planted. This policy makes sense considering the general purpose of the authorizing statute on land eligibility and the high cost of reestablishing native grasses in some settings. Management requirements may change over the life of the easement or rental agreement based on the natural resource response to such activities. Since the GRP statute is not specific about the types of land that should be enrolled in the program, once land has been accepted into the program USDA seeks input on whether a participant should be able to maintain the current cover even if it contains a monoculture of a less desirable species, or whether a participant should be required to manage the property to move toward a certain natural resource condition. USDA is reluctant to require participants to fully restore project acreage to native species because of the extreme cost, and in some localities, it is impractical to do so. However, in instances where a grassland cover does not exist, participants will be required to establish a grassland cover with either native or natural species to the extent it is practical, as determined by the NRCS State Conservationist.

The language in this section identifies eligible land as defined in the GRP statute. The GRP statute does not restrict the amount of acreage a landowner can offer for the program or the maximum payment a person can receive over the life of the contract or otherwise. The statute does provide for a minimum acreage enrollment level.

Section 1415.5(d) provides that 40 contiguous acres is the minimum acreage offer that will be accepted in the program, however, less than 40 acres may be accepted if USDA grants a waiver. USDA recognizes that some grassland habitat is considered irreplaceable and thus has determined to provide States the discretion to determine when the 40 acre minimum requirement will be waived. Decisions associated with this waiver should be granted based on input from the State Technical Committee and local natural resource concerns. USDA policy is to ensure that NRCS State Conservationists make this determination based on all the purposes of GRP as provided for in § 1415.1. State Conservationists may consider establishing separate funding pools based on offer size.

USDA considered providing States greater flexibility to set minimum acreage levels in States where there is a strong interest in preserving very large blocks of grassland and offers below a certain level have virtually no chance of being accepted into the program due to intense competition. However, the statute directs which lands are eligible for consideration under GRP. Accordingly, rather than establish policy that impacts eligibility, USDA determined to address this issue through the ranking criteria at the State level. Allowances shall be made to ensure the ranking criteria does not discriminate against small or limited resource producers. USDA will periodically review the types of projects being enrolled and compare those projects with the applications being submitted for participation to evaluate whether small or limited resource producers are being routinely prohibited from participating in the program.

Section 1415.5(f) makes land ineligible if it is already protected by an easement or contract that requires the GRP applicant to maintain the grassland resources. If the existing easement or agreement is with USDA or with a program funded through USDA, USDA will look to the program rules of the existing contract or the terms of the easement to determine whether such agreement can be canceled in order to enroll the land in GRP. This policy was determined because it is not fiscally responsible to pay someone twice for the same natural resource protection. USDA welcomes comment on this policy, especially as it relates to the relationship between GRP and the Conservation Reserve Program, Environmental Quality Incentives Program and the Wildlife Habitat Incentives Program.

Section 1415(g) of the Interim Final Rule addresses the issue of third party ownership of subsurface mineral rights on land proposed for enrollment under a rental agreement or an easement. Specifically, this rule provides that such lands may be enrolled in GRP. If the third party exercises such rights during the agreement period, the agreement will be terminated without penalty on the affected land. The land may be reoffered for the program at a later date if the grassland resources are restored, subject to eligibility rules and funding at that time. For easement enrollment, such lands may only be offered if the third party subordinates its rights to the resources or if USDA determines that the risk to the grassland resources is minimal if such rights are exercised ( i.e. , would not undermine the conservation purposes of the easement).

This section sets forth the eligibility for participation in GRP. Only landowners may participate in the easement option, because only landowners have the ability to convey property rights. Both landowners and tenants can participate in the rental agreement enrollment options. However, if a tenant wishes to participate without a landowner, the tenant must provide evidence of control for the duration of the agreement period.

Since the GRP is a Title XII program, all participants are subject to the conservation compliance requirements found in 7 CFR, part 12.

This section provides general information about the application process. Interested applicants can file an application at any time with their local USDA Service Center.

This section sets forth policy for developing the ranking and evaluation criteria. The GRP statute directs the Secretary to emphasize support for grazing operations, plant and animal biodiversity, and the threat of conversion in project selection. It does not give guidance about whether any of these factors should be given greater consideration than the others.

As discussed earlier in the preamble, USDA is placing a priority on protecting native or natural grassland and shrubland in the ranking process to the extent practical, and it is providing States the flexibility to develop ranking criteria that may encourage participants to restore their land back to a natural or native plant community. Land not currently in grass or shrubs that needs to be reseeded back to a grassland or shrubland may be eligible for the program if the applicant agrees to reseed the land back to its historically dominated grassland, shrubland, or forb plant community. However, if it can be demonstrated that reseeding to appropriate introduced plant species has potential to serve as habitat for animal or plant populations of significant ecological value, such land may be enrolled in the program and reseeding can take place through a GRP restoration agreement. Lower enrollment priority may be given to smaller parcels, especially in States where protecting larger grassland parcels is more desirable from an administrative and environmental standpoint. By prioritizing the types of eligible land for funding, USDA seeks to secure maximum conservation benefits for the Federal dollar expended. USDA is seeking specific comments on this decision.

USDA does provide its offices at the State level, the flexibility to establish one or more ranking pools. Although each pool will use the State established ranking criteria, the projects within one pool will only compete with similar projects. USDA, at the State level, may determine the portion of its funds to direct to each established ranking pool. Ranking pools will be established prior to conducting a signup.

This section describes the process for enrollment in GRP which is similar to that used for the Conservation Reserve Program for rental agreements and the Wetlands Reserve Program for easements. This approach was suggested by Congress in the Managers Report to the authorizing statute. For rental agreement projects, land is considered enrolled when the rental agreement is approved by USDA. For easement projects, land is considered enrolled when a landowner accepts a letter of tentative acceptance by signing documentation that indicates the landowner's intent to continue with the project.

This section sets forth the methodology for determining compensation for both easements and rental agreements. For rental agreements, the statute at 16 U.S.C. 3838p requires that USDA pay participants not more than 75 percent of the grazing values. For the FY 2003, signup period grazing values for rental agreements were determined administratively based on compensation rates for the Conservation Reserve Program. Rates were established for each county, rather than on a site specific basis. This process enabled USDA to post compensation rates for public information and minimized the administrative burden at the field level for USDA employees.

The statute provides at 16 U.S.C. 3838p that easement compensation rates be determined based on the fair market value of the land, less the grazing value of the land encumbered by the easement. USDA will use certified land appraisers to develop easement compensation rates on a site specific basis. USDA recognizes that in certain parts of the country, the cost of acquiring easements may be considerable. Therefore, the Secretary evaluated alternatives to minimize the per acre cost of enrolling projects in the program, such as establishing maximum payment rates or contract limits. However, the Secretary determined the statute, by requiring a fair market valuation, does not permit a non-appraisal approach to valuing conservation easements.

This section sets forth the terms and conditions under which USDA will enter into a restoration agreement. GRP does not have the authority to enroll land in restoration agreements as a separate, stand-alone enrollment option. Consequently, USDA will only enter into restoration agreements in conjunction with easements and rental agreements at the discretion of USDA, subject to available funding, and when it is supported by the participant.

Eligible practices include land management, vegetative, and structural practices and measures that will improve the grassland and shrubland ecological functions. Specific practices eligible for payment will be determined by the USDA at the State level with advice from the State Technical Committee. Limitations on cost-share rates set forth in this rule are those provided for in the GRP statute at 16 U.S.C. 3838p.

This section describes when easements and rental agreements may be modified. For both easements and rental agreements, modifications may be made to the conservation plan by mutual agreement between the USDA and the participant as changes occur in the participant's operation and land management strategy. However, any modification must continue to ensure the viability of the grassland, and meet the other objectives of the GRP.

This section discusses the impact of transferring ownership or control of land enrolled in GRP.

The GRP statute at 16 U.S.C. 3838q provides that the Secretary may permit a private conservation or land trust organization, or a State agency to hold and enforce an easement, in lieu of the Secretary, subject to the right of the Secretary to conduct periodic inspections and enforce the easement. The Secretary has interpreted the word “hold” in this context to mean “administer.” Prior to permitting an approved third party to hold and enforce an easement, USDA must determine that granting such permission will result in the protection of grassland, land that contains forbs, and shrubland; the owner authorizes the third party to hold and enforce the easement; and the third party agrees to assume the costs incurred in administering and enforcing the easement, including the costs of restoration or rehabilitation of the land as required by the landowner and the third party. The intent is not to have the third party cover the costs of natural resource practices required through GRP. However, the third party must cover costs of practices that it requires above what is required by GRP. The third party must submit its intent to impose these additional requirements to USDA to determine whether they are consistent with the conservation purposes of the easement.

In GRP, the Secretary administers the easement on behalf of the United States, and may delegate the easement administrative responsibilities to a private organization or State agency under certain conditions. However, the GRP statute does not provide authority for the Secretary to convey property rights acquired under the authority of the GRP statute.

This section provides that certain private organizations, as set forth in the statute, and State agencies interested in managing and enforcing GRP easements, may apply for GRP administration. The criteria and approval process required for participation are set forth below. The application packages must include:

(1) Certification that the conservation organization or land trust is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 that is exempt from taxation under section 501(a) of that Code; or is described in section 509(a)(3), and is controlled by an organization described in section 509(a)(2), of that Code.

(2) Certification that the applicant has the human and financial resources necessary to administer and enforce the easements, and that the applicant has relevant experience with easement enforcement activities.

(3) Certification that the applicant's charter expresses a commitment to conserving agriculture land, grassland, or rangeland. The application will require a summary of such commitment.

(4) Estimates in terms of acreage, number of easements, and funding requirements that the third party is willing to assume on behalf of the Secretary.

(5) Description of the human resources available to perform tasks associated with easement management and enforcement, including information about range and grassland management for livestock and wildlife, and realty management expertise.

(6) Budgetary information that demonstrates the organization is prepared to assume the Secretary's duties.

State agencies do not have to submit information related to items (1) or (3) above. All other requested information must be included with State agency applications. Application packages will be reviewed by both the Chief, NRCS, and the Administrator, Farm Service Agency, or their designees, for suitability of the party to administer the GRP easement. This authority may be delegated to NRCS State Conservationists and FSA State Executive Directors. Multiple third party applications may be approved for each State.

Application approval means the private organization or State agency meets the Secretary's requirements for managing and enforcing easements. Since landowners must authorize a third party easement administrator, Secretarial approval does not guarantee that the approved applicant will receive GRP easements to administer. Those agencies and organizations selected to manage easements will be required to submit an annual report to the Secretary.

These sections are consistent with other conservation programs and contain standard administrative policy associated with contract violations and remedies, payments not subject to claims, assignment of payments, appeals, etc. Nonetheless, USDA welcomes comments regarding this section on land enrolled in GRP.

There has been much discussion within USDA regarding the development of industrial windmills on grassland acreage. USDA is prohibiting industrial windmills on GRP acreage because the structure is unrelated to protecting the viability of the grassland acreage, it requires disturbing the soil surface in a manner that is not permitted in the GRP statute, and it would encourage people wanting to establish other types of towers on GRP acreage. The public is free to comment on this policy decision as well.

The NRC usually performs a regulatory analysis for an entire rule in evaluating a proposed regulatory initiative to determine if the rule is cost-justified. External stakeholders from the nuclear power industry raised concerns that bundling different requirements in a single regulatory analysis can potentially mask the inclusion of an individual requirement when the net benefit from one of the requirements supports a second requirement that is not cost-justified.

In order to address this concern, the NRC published proposed criteria for the treatment of individual requirements in a regulatory analysis for comment on April 18, 2003 (68 FR 19162).

After publishing its proposed criteria for the treatment of individual requirements in a regulatory analysis, the NRC received two sets of comments: one set from the Nuclear Energy Institute (NEI), an organization responsible for establishing unified nuclear industry policy on matters affecting the nuclear energy industry and the second from the Nuclear Regulatory Services Group (NRSG), a consortium of power reactor licensees.

In general, NEI states that the NRC's proposed criteria do not adequately incorporate the relevant Commission guidance on this issue and that the public comments made at a public meeting on March 21, 2002, were not taken into account by the NRC staff. The two areas of concern to NEI were the NRC's criteria necessary to evaluate the bundling of individual requirements and the NRC's guidance on using subjective judgment in making bundling decisions.

The law firm of Ballard Spahr Andrews & Ingersoll, LLP, also submitted a set of comments on behalf of the Nuclear Regulatory Services Group (NRSG). NRSG calls the proposed criteria “a positive step in providing detailed guidance in this area for the first time” and suggested some refinements of the criteria so that “all proposed new regulatory requirements receive a proper analysis of their costs and benefits.”

Comment: NEI's initial comment was that on “* * * rules that provide risk-informed voluntary alternatives to current regulations, an individual requirement should have to be cost-justified and integral to the purpose of the rule rather than [NRC's position that it be] cost-justified or integral to the purpose of the rule.” NEI claims that the NRC's criteria “* * * would be a significant disincentive to implementation of voluntary alternative requirements developed by industry groups because of the lack of scrutable guidance regarding the addition of individual requirements by the NRC staff.”

Response: The NRC believes that its position is correct with respect to the need for each criterion to be considered as a basis for bundling. NRC's position may be clearer if one considers requirements that are not necessary to a rule as enhancements. Then, if one uses NEI's criteria of requiring both conditions, i.e. , being both cost-beneficial and necessary, no enhancements to a rule would be tolerated or should even be considered because an enhancement is not necessary to the purpose of the rule. But a fundamental principle of cost-benefit methodology is to select the alternative that achieves the largest net benefit, which could conceivably be an alternative with enhancements. Thus, NEI's position is tantamount to ignoring the cost-benefit implications of any requirement that is not necessary to meet the objective of the rule. Under NEI's approach, cost-beneficial relaxations could not be included in a rulemaking if they were not necessary to the purpose of the rule.

Alternatively, the NRC's position allows for the selection of the alternative with the largest net benefit. Also, the NRC does not believe that NEI has demonstrated how the proposed criteria would be a “significant disincentive” to the implementation of voluntary alternative requirements developed by industry groups. As long as the voluntary alternatives are shown to be cost-beneficial and result in no decrease in safety from the NRC's proposed requirement, there should not be a problem.

Comment: NEI notes that the phrase “integral to the purpose of the rule,” used both in a Staff Requirements Memorandum (SRM), dated January 19, 2001, and in the February 2002 preliminary criteria, was subsequently dropped from the proposed criteria. The phrase relates to whether a proposed requirement can be “integral to the purpose of the rule” if the individual requirement is not cost-beneficial, not required for compliance, and not required for adequate protection. NEI's position is that the phrase should be included in the NRC's final criteria.

Response: The NRC replaced the phrase “integral to the purpose of the rule” as stated in the 2002 criteria, with “necessary to the purpose of the rule” because NRC believes that “necessary” conveys a clearer meaning. As discussed in both the proposed and final criteria papers, a requirement is necessary to the purpose of the rule if it is needed for the regulatory initiative to resolve the problems and concerns, and meet the stated objectives that are the focus of the regulatory initiative.

Comment: NEI believes that NRC analysts need more guidance on making bundling judgments. They claim that because NRC's guidance is confusing and provides no meaningful standard, it is easier for the NRC staff to aggregate requirements without explanation.

Response: The NRC's guidance is consistent with that provided in the Office of Management and Budget's (OMB) Circular A-4, “Regulatory Analysis” issued September 17, 2003, in which OMB recognizes the need to examine individual provisions separately and goes on to state:

The OMB circular recognizes that judgment must be used for such analyses. The level of analysis needs to be tempered by many factors such as controversiality, complexity, magnitude of consequences, and the like. Also, each regulatory analysis could possibly have unique features that would likely affect the type of analysis that should be done. Further, NRC final guidance will include reference to the OMB circular and the NRC does not believe additional guidance is needed.

Comment: NEI claims that the use of an analyst's judgment as proposed by the NRC relies too much on NRC management review and public comment. They state: “The burden should be on the NRC to provide sufficient information to evaluate regulatory analysis decisions.”

Response: Regulatory analyses are well founded and rely on sound judgments. This is done through peer review, management oversight, review of public comments, etc., and reliance on the analyst's judgment which is central to the regulatory analysis process. The NRC believes that its guidance ensures that its regulatory analyses will provide sufficient information for the public to evaluate regulatory decisions and makes the process both “meaningful and scrutable.”

Comment: NEI quotes the SRM calling for regulatory analyses to be “meaningful and scrutable” and claims that the analysis cannot meet this requirement unless there is some documented basis for disaggregation.

Response: The NRC believes that regulatory analyses prepared under the revised guidelines are “meaningful and scrutable,” especially given that the guidance is consistent with that provided by OMB on this issue. The reason for disaggregation would be discussed in each regulatory analysis on a case-by-case basis.

Comment: NEI states that the proposed criteria are inconsistent with the other detailed guidance on the treatment of values and impacts contained in NUREG/BR/0058, as currently written.

Response: The NRC disagrees with this comment and believes this final guidance clarifies and supports existing guidance in NUREG/BR-0058. Further, the NRC believes this new guidance is directly relevant to the current discussion on the identification of alternatives. This guidance considers the scope of requirements and the variability in physical and technical requirements as bases for defining alternatives. This bundling issue should be viewed as an extension or clarification of that discussion.

Comment: NEI states with respect to bundling that the “proposed criteria do not establish a common understanding of new requirements, do not establish a scrutable process for making regulatory decisions about voluntary initiatives, and do not provide sufficient documentation to inform future decisions.”

Response: The NRC reiterates its position that “bundling” guidance sets forth in detail how an analyst should handle the “bundling” issue and is also consistent with the cited OMB guidance. The NRC also believes that regulatory analyses and supporting documentation prepared under the revised guidance will be sufficient to provide documentation which may be reviewed to inform future decisions. The NRC notes that regulatory analyses are prepared as tools to support reasoned decision making and public understanding of the NRC's decisions; in this regard, the NRC believes that the revised guidelines achieve these objectives.

Comment: NEI requests that the NRC defer its final decision on these criteria until previous comments are “properly addressed.”

Response: Sufficient information was not provided to defer a final decision. The NRC maintains that it has properly addressed all public comments. Also, the Advisory Committee on Reactor Safeguards has stated in a July 17, 2003, letter from its Chairman, Mario V. Bonaca, to the Chairman of the Commission, that the NRC staff's criteria “are appropriate and responsive to the Commission's direction.”

Comment: NRSG stated that the NRC should require separate analysis of individual requirements to the extent practicable. They went on to state “that disaggregation of requirements should be the preferred approach, with the burden on the NRC to justify why separate analysis of individual requirements is not appropriate in a given case.”

Response: The NRC acknowledges that, for the purposes of developing an overall cost estimate of a regulatory initiative, the analyst should obtain separate cost estimates for each individual requirement to the extent practical. This is because it is the most logical model for developing an overall cost estimate, namely a bottom up approach. Further, the NRC agrees that cost-benefit analyses of individual requirements that are related (but not necessary) to the overall regulatory initiative need to be considered in reaching a sound regulatory decision. However, it is important to remember that the underlying purpose of a regulatory analysis is to provide decision makers with a tool for choosing between options or alternatives. When a regulatory initiative has a number of discreet, yet necessary requirements, the decision maker's choice is not whether to include or exclude necessary individual requirements but, rather, whether or not to enact the initiative as a whole. Therefore, the separate analyses of necessary individual requirements cannot contribute to this decision.

Further, as stated in the proposed criteria, published for public comment in the Federal Register on April 18, 2003 (68 FR 19162): “Specifically, this guidance states that a decision on the level of disaggregation needs to be tempered by considerations of reasonableness and practicality, and that a more detailed disaggregation would only be appropriate if it produces substantially different alternatives with potentially meaningful results.” This implies that the analyst must be able to demonstrate that any aggregation in the analysis would not result in different conclusions of the analysis. Therefore, the NRC still does not believe that disaggregation in all cases should be the preferred approach and stands by the position stated in the proposed criteria. As stated in the guidance, “the NRC does not believe that there should be a general requirement for a separate analysis of each individual requirement of a rule. This could lead to unnecessary complexities.” Also, NRC believes that its guidance is consistent with OMB Circular A-4, cited above.

Comment: NRSG states that if, according to the criteria, an individual requirement must be both “related” to the stated objective of the regulatory initiative and be “cost-beneficial,” then the NRC should clarify what it means by “cost-beneficial.” The commenter also states that the criteria for the treatment of any individual requirement must be consistent with the standards of the backfitting rule. Under the backfit rule, any new requirement that is a backfit must be shown to be cost-justified and produce a “substantial increase” in overall safety. Lastly, their final two points in this section are in agreement with the NRC criteria. First, the commenter agrees with the NRC that in “cases where a new backfit requirement is being considered for inclusion in a voluntary alternative, to current regulations * * * NRC should consider imposing such a new requirement, if justified under the standards of Section 50.109, through the normal disciplined backfitting process, * * * rather than merely including it in a voluntary-alternative rule.” Second, NRSG “agree(s) with the NRC position that if an individual backfit requirement is not related to the objective of the regulatory initiative * * * , the “requirement must be addressed and justified as a backfit separately.”'

Response: For the most part, the NRC agrees with these comments. With respect to the NRC's meaning of “cost-beneficial” in the situation discussed by the commenter, the NRC means that the regulatory initiative results in a larger net benefit than would accrue to an action without that requirement. Further, with respect to the backfit rule, the NRC position is that when an individual requirement is related to the stated regulatory objective, the individual requirement should be cost-justified, and the overall regulatory initiative should constitute a substantial increase in the public health and safety.

Comment: NRSG stated that there should be further guidance on backfitting issues related to the American Society of Mechanical Engineers (ASME) Code. Specifically, they state:

Response: The Commission's policy regarding Inservice Inspection (ISI) requirements is to assure the integrity of the reactor coolant system (RCS) boundary and containment as they relate to defense-in-depth considerations, that do not lend themselves to cost-benefit analyses. Further, in this specific instance, cost-benefit analyses are not well suited to determine if new requirements that address aging of components are appropriate because of the many uncertainties associated with the effects of aging.

When the Commission formulated its policy, the then Chairman stated that: “Both the ASME and the ACRS have strongly urged that the Commission maintain the current updating requirement” and that—

The Chairman also indicated he was aware “that industry participates in the development of the ASME codes and that costs are considered in the amendment process. Thus, although the revisions may not be analyzed with the rigor required by our backfit analysis, the costs and benefits are implicitly weighed.”

Another Commissioner commented:

In sum, NRSG's suggested approach is inconsistent with the Commission's previous guidance to the staff.

In evaluating a proposed regulatory initiative, the NRC usually performs a regulatory analysis for the entire rule to determine whether or not it is cost-justified. However, aggregating or “bundling” different requirements in a single analysis could potentially mask the inclusion of an unnecessary individual requirement. In the case of a rule that provides a voluntary alternative to current requirements, the net benefit from the relaxation of one requirement could potentially support a second unnecessary requirement that is not cost-justified. Similarly, in the case of other types of rules, including those subject to backfit analysis, 1 the net benefit from one requirement could potentially support another requirement that is not cost-justified. 2

Therefore, when analyzing and making decisions about regulatory initiatives that are composed of individual requirements, the NRC must determine if it is appropriate to include each individual requirement. Clearly, in certain instances, the inclusion of an individual requirement is necessary. This would be the case, for example, when the individual requirement is needed for the regulatory initiative to resolve the problems and concerns and meet the stated objectives  3 that are the focus of the regulatory initiative. Even though inclusion of individual requirements is necessary in this case, the analyst should obtain separate cost estimates for each requirement, to the extent practical, in deriving the total cost estimate presented for the aggregated requirements.

However, there will also be instances in which the individual requirement is not a necessary component of the regulatory initiative, and thus the NRC will have some discretion regarding its inclusion. In these circumstances, the NRC should adhere to the following guideline:

In applying this guideline, the NRC will need to separate out the discrete requirements in order to evaluate their effect on the cost-benefit results. In theory, each regulatory initiative could include several discretionary individual requirements and each of those discretionary requirements could be comprised of many discrete steps, in which each discrete step could be viewed as a distinct individual requirement. This raises the potential for a large number of iterative cost-benefit comparisons, with attendant analytical complexities. Thus, considerable care needs to be given to the level of disaggregation that one attaches to a discretionary requirement.

In general, a decision on the level of disaggregation needs to be tempered by considerations of reasonableness and practicality. For example, more detailed disaggregation is only appropriate if it produces substantively different alternatives with potentially meaningful implications on the cost-benefit results. Alternatively, individual elements that contribute little to the overall costs and benefits and are noncontroversial may not warrant much, if any, consideration. In general, it will not be necessary to provide additional documentation or analysis to explain how this determination is made, although such a finding can certainly be challenged at the public comment stage. 5 For further guidance, the analyst is referred to principles regarding the appropriate level of detail to be included in a regulatory analysis, as discussed in Chapter 4 of the “Regulatory Analysis Guidelines of the U.S. Nuclear Regulatory Commission.”

In some cases, an individual requirement that is being considered for inclusion in a voluntary alternative to current regulations may be justifiable under the backfit criteria. In these cases the individual requirement is both cost-justified and provides a substantial increase in the overall protection of the public health and safety or the common defense and security. If so, the NRC should consider imposing the individual requirement as a backfit affecting all plants to which it applies, rather than merely including it in a voluntary-alternative rule affecting only those plants where the voluntary alternative is adopted.

A special case involves the NRC's periodic review and endorsement of consensus standards, such as new versions of the American Society of Mechanical Engineers (ASME) codes. These NRC endorsements can typically involve hundreds, if not thousands, of individual provisions. Thus, evaluating the benefits and costs of each individual provision in a regulatory analysis can be a monumental task. Further, the value gained by performing such an exercise appears limited. These consensus standards tend to be noncontroversial and have already undergone extensive external review and been endorsed by industry. Although regulatory actions endorsing these consensus standards must be addressed in a regulatory analysis, it is usually not necessary for the regulatory analysis to address the individual provisions of the consensus standards.

The NRC believes this is appropriate for several reasons:

(1) It has been longstanding NRC policy to incorporate later versions of the ASME Code into its regulations; and thus, licensees know when receiving their operating licenses that updating the ASME Code is part of the regulatory process;

(2) Endorsement of the ASME Code is consistent with the National Technology Transfer and Advancement Act, inasmuch as the NRC has determined that there are sound regulatory reasons for establishing regulatory requirements for design, maintenance, inservice inspection and inservice testing by rulemaking; and

(3) These consensus standards undergo significant external review and discussion before being endorsed by the NRC.

Some aspects of these regulatory actions endorsing consensus standards are backfits which must be addressed and justified individually. For example, NRC endorsement (incorporation by reference) of the ASME Boiler and Pressure Vessel Code (BPV) provisions on inservice inspection and inservice testing, and the ASME Operations and Maintenance (OM) Code, are not ordinarily considered backfits, because it has been the NRC's longstanding policy to incorporate later versions of the ASME codes into its regulations. However, under some circumstances the NRC's endorsement of a later ASME BPV or OM Code is treated as a backfit. The application of the backfit rule to ASME code endorsements is discussed in the Appendix below. Aside from these backfits, these regulatory analyses should include consideration of the major features ( e.g. , process changes, recordkeeping requirements) of the regulatory action which should then be aggregated to produce qualitative or quantitative estimates of the overall burdens and benefits in order to determine if the remainder of the action is justified.

On November 22, 2002, the U.S. Small Business Administration (SBA or Agency) published in the Federal Register , 67 FR 70339, a proposed rule to amend its regulations governing size. The SBA's size regulations (13 CFR part 121) are used to determine eligibility for all SBA and Federal programs that require an entity to be a small business concern (SBC).

In general, the SBA's size standards are based on either average annual receipts or number of employees, depending on the industry. When measuring a concern's size, the receipts or employees of affiliated concerns are included. This final rule modifies the definitions of affiliation and number of employees. In addition, the rule amends 13 CFR part 134 and clarifies the jurisdiction of the SBA's Office of Hearings and Appeals (OHA).

The SBA received two comments on its proposal to amend § 121.102 and add a new paragraph (d) that would recognize that there currently exists an internal Size Policy Board at the SBA responsible for making recommendations to the Administrator on size standards, other size eligibility requirements, and size protest procedures. One commenter concurred with the proposal to recognize the size policy board, while another commenter noted a typographical error in the paragraph numbering. Upon further deliberation, the SBA has decided not to adopt this rule as proposed. The SBA believes that the make-up and utilization of a Size Policy Board or other means to effect size policy is an internal matter, and need not be spelled out in the regulations. The SBA's current organizational structure ensures that size standard issues are considered by all appropriate officials in the Agency.

The SBA also proposed amending the definition of affiliation set forth at § 121.103. The proposed rule provided that control may be affirmative or negative, set forth an example of negative control, stated that control may be exercised indirectly through a third party, and stated that affiliation may be found under the totality of circumstances even though no single factor is sufficient to constitute affiliation. The SBA received several comments on these proposed changes, including comments supporting the incorporation of certain provisions previously contained in the regulations to provide clearer guidance regarding the application of the affiliation rules.

The SBA received one comment regarding § 121.103(a)(6), which provides that when determining the concern's size, the SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit. The commenter stated that this regulation, along with § 121.104(d), does not explain how to aggregate and then average the receipts or employees of a concern's affiliates. The commenter explained that there are three different ways to calculate an average and with each, a different answer is obtained.

In response to this comment, the SBA has amended § 121.104 (receipts) and § 121.106 (employees) to explain how to calculate receipts and employees of affiliates. The amended language describes the SBA's historical practice of separately calculating the average annual receipts and average number employees for the business concerns and each affiliate and then aggregating them together. For example, a business concern with an average of 75 employees is added to the 20 employee average of an affiliate to arrive at an average number of employees of 95. This is not a change in policy, but merely more fully explains current policy.

The SBA also proposed amending § 121.103(b)(2) to clarify the exception to affiliation for Indian tribes, Alaska Native Corporations (ANCs), Community Development Corporations (CDCs) and Native Hawaiian Organizations (NHOs). The proposed rule specified that the exception applies whether the tribe, ANC, CDC or NHO owns the concern whose size is at issue directly, or through another entity, which is wholly-owned by the tribe, ANC, CDC or NHO. The proposed rule also provided that affiliation could not be found among several tribally, ANC, CDC or NHO-owned concerns based on common management.

The SBA received several comments on this proposed rule. Most supported the exception to affiliation when the subsidiary is wholly-owned by the tribe, ANC, CDC or NHO, or through another entity, because many tribes and ANCs have formed holding companies. However, some commenters requested a clarification of the meaning of wholly-owned because a literal interpretation would encompass any business that is 100% owned by a tribe, ANC, CDC or NHO. These commenters believe that for purposes of the 8(a) Business Development (BD) Program, “wholly-owned” refers only to holding companies. Thus, they recommended the SBA define the term “holding company” in its size regulations.

The SBA disagrees with these latter comments. For purposes of the 8(a) BD Program, “wholly-owned” does not refer only to holding companies. In addition, the SBA believes that the term “wholly-owned” is clear. It means 100% ownership.

Several commenters supported the proposed exception to affiliation for tribes, ANCs, CDCs and NHOs based on common management. However, each recommended that the SBA also include common contractual relationships between the tribe or ANC and its subsidiaries as an exception to affiliation. These commenters argued that tribes and ANCs provide support services to their subsidiaries and that these services are inherently part of their ownership and management responsibilities. The commenters suggested that the final rule specify that “common administrative services” should be permissible.

The SBA agrees with these comments. The Agency recognizes that it is common practice for tribes, ANCs, CDCs, and NHOs to own other concerns and for the tribal managers to manage these concerns. However, allowing the tribes, ANCs, CDCs, and NHOs to own, manage, and perform the common administrative services for the concern would create an unfair, competitive advantage unless fair and adequate consideration is given. Thus, the SBA amends its regulation to state that no affiliation is found as a result of the performance of common administrative services by a tribe, ANC, CDC, or NHO for one of its subsidiaries, so long as proper consideration is provided for these services.

The SBA stated in the proposed rule that although SBA will not find affiliation between tribes, ANCs, CDCs and NHOs and the business concerns they owned and control because of common management and ownership, “affiliation may be found for other reasons.” One commenter believed this statement is too confusing and is unclear as to which “other reasons” the SBA is referring. In response to this comment, the SBA notes that its regulations set forth numerous criteria to determine when the SBA may deem two or more business concerns affiliates. For example, the SBA may find affiliation based upon the totality of circumstances, the newly organized concern rule, or shared common facilities.

Numerous commenters believed that the SBA should make its size rules and 8(a) BD rules on affiliation with respect to Tribes and ANCs the same because the conflict between the two rules provides for inconsistent size determinations, which then have to be explained to contracting officers (COs) and potential teaming partners. Some commenters argued that the legislative history of the 8(a) BD Program supports this position. Others argued that the Alaskan Native Claims Settlement Act (ANCSA) entitles ANCs to all the benefits afforded disadvantaged and minority businesses, and this would apply to size matters, as well. The SBA disagrees with these comments. For either 8(a) BD program entry or 8(a) contract award, there is specific statutory language that generally provides that in determining the size of a concern owned by a tribe or ANC the firm's size will be determined independently without regard to its affiliation with the tribe or ANC, or any other business entity owned by the tribe or ANC. Thus, while there is specific statutory authority for a total exclusion from affiliation between a concern and the tribe or ANC that owns it for purposes of the 8(a) BD program, there is no such similar authority outside the 8(a) BD program. Congress specifically limited the full exclusion only to the 8(a) BD program.

In addition, the differing purposes of the SBA's size regulations and the regulations implementing the 8(a) BD program support distinct affiliation exclusions for 8(a) and non-8(a) contracting opportunities. The purpose of the SBA's size regulations in the context of Federal procurement is to provide a benefit to SBCs that will assist SBCs in receiving a fair proportion of Federal procurements. The purpose of the 8(a) BD Program is to promote business development of SBCs owned and controlled by socially and economically disadvantaged individuals or qualified entities (tribes, ANCs, NHOs and CDCs). The 8(a) BD program is intended to assist such firms toward economic viability so that they can compete with all other businesses, including SBCs that are not owned and controlled by socially and economically disadvantaged individuals and qualified entities. The final rule remains as proposed.

One commenter explained that this part of the proposed rule, if enacted as final, would reverse the result in Size Appeal of HCI Construction, Inc., SBA No. SIZ-4460 (2001). In HCI Construction, Inc., SBA No. SIZ-4460, HCI was a tribal holding company that owned several companies. SBA found that HCI's subsidiaries were all affiliated and the exclusion for affiliation for tribally-owned business concerns did not apply because HCI was not a tribe. OHA stated that the appeal allegations raised a policy question calling for a change in the size regulations and were not a justiciable issue.

SBA concurs with the comment that the rule reverses the result in HCI Construction, Inc. That is SBA's intent. In the final rule, SBA has divided this section into two parts to make clear that business concerns owned by Indian tribes, ANCs, CDCs, and NHOs (including wholly owned entities of tribes, ANCs, CDCs and NHOs) are not considered to be affiliated with those entities or other concerns owned by those entities for size determination purposes; however, two or more concerns owned by such entities may be affiliated with each other on grounds other than common ownership, common management, and common administrative services.

The proposed rule added language to § 121.103(b)(6) to clarify that the SBA may find affiliation with respect to approved mentor/protégé relationships for reasons other than the mentor/protégé relationship. One commenter thought the phrase “other reasons” was unclear. In response, the SBA notes that Federal Mentor/Protégé Programs allow mentors to provide specific assistance to the protégé and therefore place limits upon the mentor/protégé relationship. The SBA's size regulations set forth numerous criteria to determine when the SBA will deem two or more business concerns affiliates. These criteria, if outside of the mentor/protégé relationship, are the “other reasons” the SBA may determine that the two concerns engaged in a mentor/protégé relationship are affiliated. The SBA has implemented the final rule as proposed.

Two commenters believed that there should be an exclusion from affiliation for joint ventures with mentors/protégés and another SBC (for size and 8(a)). Specifically, these commenters recommend the SBA's size regulations state that a joint venture between an 8(a) protégé, a mentor and one or more other SBCs is permissible without subjecting the mentor and the other SBCs to an affiliation determination. The SBA does not agree with this suggestion because it would not serve the purpose of Federal mentor/protégé programs and it would create an unfair competitive advantage for such joint ventures.

The SBA received one comment on its proposal to amend § 121.103(c), which provided that where a concern's voting stock is widely held and no single block of stock is large as compared with all other stock holdings, the SBA will deem the concern's Board and Chief Executive Officer (CEO) or President to have the power to control the concern in the absence of evidence to the contrary. In the absence of evidence to the contrary, the SBA will find control in such circumstances to rest with the Board of Directors and with the highest ranking officer of the concern (either its CEO or President) because control of the concern must rest somewhere. One commenter believed that the President/CEO should not be considered as controlling with the Board because the Board selects the President. The SBA notes that even when this is true, the President or CEO still exercises certain elements of control over the concern. Again, someone controls the concern. It is up to the concern itself or the relevant individuals themselves to provide evidence to the contrary that one or more individuals truly do not control the concern. SBA has implemented the final rule as proposed.

Section 121.103(d) discusses affiliation arising under stock options, convertible securities, and agreements to merge. The SBA gives present effect to all such arrangements in determining affiliation and proposed several exceptions to this “present effect” rule, which stem from OHA rulings. One commenter acknowledged support for this proposed rule, while another noted that the last three lines would be clearer if they read “conjectural, or unenforceable under state or Federal law, or where the probability of the transaction (or exercise of the rights) occurring is shown to be extremely remote, are not given present effect.” The SBA concurs with this comment and the final regulation provides that options, convertible securities, and agreements that are subject to conditions precedent which are incapable of fulfillment, speculative, conjectural, unenforceable under state or Federal law, or where the probability of the transaction (or exercise of the rights) occurring is shown to be extremely remote, are not given present effect. The rule also makes clear that SBA will not give present effect to options, convertible securities or agreements in order to make a firm eligible as a small business. For example, a concern cannot claim that an individual owning 40% of the concern where that block is large as compared to all others should not be deemed to control the concern because an agreement exists to sell his 40% some unspecified time in the future.

Section 121.103(e) covers control through common management. The SBA proposed clarifying that affiliation arises when an officer, director, managing member, or partner controls two concerns. One commenter stated that the regulation is not clear and questions whether it reads that if an officer owns 51% of two concerns then there is affiliation or if the two concerns have a director in common then they are affiliated. The regulation provides that the SBA will find affiliation based upon common management when a manager controls more than one business concern. Thus, if one person is the President of two concerns, the concerns are affiliated based upon common management. If one person is simply on the Board of two business concerns, but does not control either or both concerns, there would be no finding of affiliation based upon common management. The SBA has implemented the final rule as proposed.

Others commented that the proposed regulation at § 121.103(e), dealing with common management, is in conflict with the 8(a) preclusion from outside employment found in 13 CFR 124.109. The SBA does not believe there is a conflict. The purpose of the size regulations is to determine whether a concern is small and the purpose of the 8(a) BD regulations is to determine eligibility for a business development program. The requirement that the disadvantaged individual upon whom 8(a) eligibility is based must devote full-time to his or her business is a requirement to ensure that the business development purposes of the 8(a) BD program are advanced. That provision has nothing to do with ownership in or membership on boards of directors of more than one concern for size affiliation purposes.

In its proposed regulation, the SBA added § 121.103(g), “Affiliation based on the newly organized concern rule.” This proposed section provided that affiliation may arise where former officers, directors, stockholders, managing members (in a limited liability corporation) or key employees of one concern organize a new concern in the same or related industry and serve as its officers, directors, stockholders, managing members or key employees, and the first concern will provide contractual, financial, or other assistance to the new concern. One commenter recommended defining the term “key employee” and suggested reviewing the SBA's former size regulations as reference. This commenter also believed that the proposed rule's preamble discussion of post-1996 OHA decisions should note that the newly organized concern rule was used as a factor in the totality of circumstances. The SBA concurs with these comments and has defined “key employee” to mean an employee who, because of his/her position in the concern, has a critical influence in or substantive control over the operations or management of the concern.

One comment recommended noting in the preamble that with the return of the newly organized concern rule as an independent basis of affiliation, the totality of circumstances ground for affiliation would be rarely used. The SBA disagrees with this comment. The newly organized concern rule is one factor used when determining the totality of circumstances. The totality of circumstances can arise in many instances, aside from newly-organized concerns. The totality of circumstances is used when, absent a single factor sufficient by itself to constitute affiliation, connecting relationships between firms are so suggestive of dependence as to render them affiliated. For example, the connecting relationships may include financial assistance, the sharing of office space and personnel, and a minority owner having the power to control a challenged firm.

The SBA proposed to redesignate the joint venture regulation currently at § 121.103(f) to § 121.103(h), clarify it, and define its key terms using definitions similar to those set forth in parts 9 and 19 of the Federal Acquisition Regulation (FAR), title 48 of the Code of Federal Regulations. The SBA stated in its preamble to the proposed rule that it was considering adopting a rule that would allow two or more SBCs to form a joint venture relationship that would go beyond a specific contract and still afford them the exclusion from affiliation (if the other requirements are met). In other words, the joint venture could be an ongoing relationship that would allow the concerns to seek out several different larger contract opportunities and still get an exclusion from affiliation without requiring the entities to form a separate joint venture for each contract opportunity. The SBA received several comments on its proposed rule regarding joint ventures.

One commenter expressed support for this clarification and the utilization of FAR definitions to have consistency with the FAR and the SBA's regulations, while others believed that the proposed definition is too narrow. Specifically, the latter commenters stated that joint ventures should not be limited to informal partnership structures but instead should include ongoing relationships, as well as corporations, limited liability corporations and other legally recognized types of entities. These commenters supported the SBA's proposal to permit two or more SBCs to form a joint venture that would last beyond a specific contract and still afford them the exclusion from affiliation because: (1) Many SBCs pursue multiple procurements together; (2) a single ongoing joint venture vehicle should facilitate faster approval by the SBA, if required; and (3) it will increase the ability of SBCs to pursue bundled contracts. However, commenters also believed that if the SBA does allow SBCs to enter into a joint venture for multiple contracts, then the Agency should limit the number of contracts or revenues or define at what point the two companies are affiliated. Otherwise, these joint ventures could create an unfair competitive advantage.

In response to these comments, the SBA first notes that joint ventures are not limited to informal partnership structures. The final rule clarifies that joint ventures may be in the form of a new legal entity ( e.g. , a limited liability corporation) or may be informal arrangements so long as the agreement between the business concerns explains that it is a joint venture and meets the regulation's definition of joint venture. Second, the SBA believes that it is reasonable to allow SBCs to enter into a joint venture relationship on more than one contract and not be considered “affiliates” generally for purposes of size. However, the SBA also believes that it must limit the application of the exclusion from affiliations for SBCs that have engaged in a joint venture with each other to no more than three offers over a two year time frame. This limitation will allow SBCs to work together for larger procurements on more that one contract while still ensuring that the joint venture relationship remains limited in nature. In addition, the SBA notes that it limits the exclusion from affiliation for those joint ventures that carry out no more than three specific or limited-purpose business ventures. Thus, joint ventures which compete for limited-purpose contracts, such as encryption contracts, would be excluded from affiliation. However, joint ventures which compete for varying types of contracts, such as an encryption contract and then a computer supply contract or an engineering services contract, would not be excluded from an affiliation determination. The SBA has amended its regulation accordingly.

In addition, several commenters argued that there was a conflict between the proposed size rule regarding joint ventures and the 8(a) BD regulations and stated that allowing joint ventures for multiple contracts contradicts the 8(a) BD regulations on the issue. Specifically, 13 CFR 124.513(a) allows a joint venture for the purpose of performing a specific contract. The SBA concurs with this comment and has amended that regulation so that it is consistent with § 121.103(h).

One commenter believed that the SBA should amend the 8(a) BD regulations to conform to the size joint venture regulation such that there should no longer be a requirement for an 8(a) joint venture to have an 8(a) SBC as the managing venture, etc. The SBA notes that the purpose of the 8(a) BD joint venture requirements is to ensure compliance with the Small Business Act. With respect to the statutory requirement that all 8(a) BD contracts be performed by Participant concerns, the SBA interprets the acceptance of Participants into the program to extend to approved joint ventures in which the Participant is the lead joint venture partner. In other words, for purposes of contracting, admission into the program includes both a concern in its own capacity and any approved joint venture in which the concern is the lead entity. For contracting purposes, the SBA will consider the joint venture to be the Participant where the joint venture meets all applicable requirements and is approved by the SBA. Thus, the SBA believes that it is inappropriate and declines to change either the 8(a) BD joint venture regulations or the size regulations to conform to each other.

The proposed regulations also provided for an exception to affiliation for certain joint ventures so long as each concern is small under the size standard corresponding to the NAICS assigned to the contract. However, an existing regulation provides that for joint ventures between a prote ge and its approved mentor, the SBA will deem the joint venture small if the prote ge qualifies as small for the NAICS code assigned to the procurement. This is not a change in the SBA policy. Nonetheless, one commenter believes this existing regulation conflicts with the SBA's 8(a) BD regulations. The SBA concurs and notes that the proposed size regulation is consistent with the 8(a) BD regulations set forth in § 124.513(b)(3), which addresses the size of concerns to an 8(a) joint venture, including a joint venture between a mentor protégé. However, as noted by the commenter, the proposed size regulation and § 124.513(b)(3) are inconsistent with § 124.520(d)(1), which also addresses the size of mentors and their 8(a) BD protégés that enter into a joint venture for a contract. The SBA has determined that § 124.520(d)(1), which requires that both the mentor and protégé qualify as small for the procurement, contains an inadvertent error and has amended that regulation so that it is now consistent with § 124.513 and the size regulations.

Finally, one commenter stated that if this is issued as final, then former § 121.103(f)(3) becomes § 121.103(h)(3) and references to the former regulation must be changed in § 124.1002(f)(3) and § 125.6(g). The SBA concurs and has made those changes accordingly. In addition, SBA notes that § 125.6(g) states that when an offeror is exempt from affiliation under § 121.103(h)(3) the performance of work requirement set forth in this section applies to the cooperative effort of the team or joint venture. This implies that all the exclusions under § 121.103(f)(3) are included. However, one commenter believed that this would not apply when dealing with the Mentor/Protégé Program. The SBA disagrees with this comment. Section 124.513(d) specifically provides that for any 8(a) contract, including those between mentors and protégés, the joint venture must perform the applicable percentage of work required by § 124.510, and the 8(a) partner to the joint venture must perform a significant portion of the contract.

The SBA proposed, at § 121.103(h)(4), that it would treat a contractor and its ostensible subcontractor as joint venturers and affiliates for size determination purposes and defined ostensible subcontractor. One commenter suggested separating out the “ostensible subcontractor rule” because the rule requires full affiliation treatment and forbids more favorable joint venture treatment. The same person also believed that the first sentence should omit the reference to “joint venturers.” This commenter also recommended refining the last sentence and suggested language. The SBA does not agree with this comment and does not believe it should separate the ostensible contractor rule from the joint venture paragraph. If the SBA considers the prime and its ostensible subcontractor as joint venturers, there may be instances where an exception to affiliation for the joint venture applies. For instance, if an ostensible subcontractor is an SBA-approved mentor to the prime contractor, the two firms would be treated as joint venturers, but the exclusion from affiliation would apply.

The SBA proposed several changes to § 121.104, which pertain to how the annual receipts of a concern are calculated. This modification would identify the items on a Federal tax return that are to be used to calculate receipts. Specifically, the SBA proposed substituting the phrases “gross receipts,” “gross sales,” and “other income” for “total income” and “gross income.” This change in terminology reflects the items on a Federal tax return that comprise all or part of total or gross income. In addition, the SBA proposed a revision to the definition of receipts to include interest, dividends, rents and royalties received by partnerships, S corporations, and sole proprietorships. For corporations, income from these sources is included in total income as reported on IRS Form 1120. However, for partnerships and S corporations, these items are reported separately from total income on Schedule K of IRS Form 1165 and 1120S, respectively, and on Schedule C or S of IRS Form 1040 for sole proprietorships. Business entities such as limited liability corporations can elect the tax entity (partnership, corporation, or disregarded entity) that best suits their need.

One commenter stated that the proposed definition of receipts is confusing because it does not specify with certainty all of the required items and the formulae the size specialist is to apply to them. For example, this commenter questioned whether gross receipts, gross sales, interest, dividends, royalties and other income are all to be combined and what other income is included. This commenter believes the proposed definition invites a challenged firm to present its own receipts theory; in contrast, the current definition operates mechanically from items easily found on tax returns.

At this time, the SBA has decided not to amend that part of § 121.104(a)(1). Although the SBA received only one comment on this definition, the comment suggested that the proposed rule was less clear than the current one. Therefore, the SBA feels it is necessary to further research the definition of “receipts” before implementing an amendment. It remains SBA's intent that amounts received from any source are to be counted in determining a firm's annual receipts. As noted in the proposed rule, this includes amounts received from gross sales, interest, dividends, rents, royalties and other income.

The SBA also proposed to expand its exclusion of receipts received by an agent for another. The proposed regulation set forth those agency-type business entities for which the SBA would exclude amounts collected for another, and permitted the SBA to exclude amounts for similar agent-type situations.

One commenter expressed concern with opening up the list of industries where “agents” may exclude receipts received in trust for another. Currently, the SBA makes changes in the list only after a detailed study of a particular industry and a notice and comment rulemaking. This commenter recommended retaining the current approach because of its certainty, uniformity and ease of application and stated that the proposed rule would invite all kinds of pass-through theories. Another commenter supported the proposed amendments as they relate to insurance agencies and financial businesses and supported not counting pass-through income as part of receipts. One commenter stated that the SBA does not expressly define “received in trust,” “claim of right” and “asset base” and each has a different meaning in different industries and contexts. As a result, this commenter believes that the proposed language creates confusion with respect to pass-throughs. In addition, the commenter recommended definitions for these terms.

The SBA has decided not to adopt the proposed language and to retain its current policy of specifically listing those agent-like industries in which certain receipts may be excluded in the calculation of average annual receipts. Although the SBA could develop definitions of certain terms and explain under what conditions it would allow such exclusions, they would remain general guidance in which businesses would not know with certainty how the SBA would ultimately decide. The proposed language could likely, and unnecessarily, invite challenges that raised specious “pass-through” theories that would have to be interpreted through a size protest or size appeal. The current policy of limiting these exclusions to specific industries represents a more workable and clearer policy for the public. Specific industries seeking to exclude “pass-through” amounts will continue to be required to address their concerns to SBA's Office of Size Standards. SBA will then continue to review such submissions and determine whether a further regulatory change regarding “pass-through” amounts is needed.

Finally, the SBA proposed a clarification to the definition of receipts, which stated that the only exclusions from the definition are those specifically provided for in the section and that all other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, and employee-based costs such as payroll taxes, may not be excluded from receipts. The SBA received several comments on this proposal.

One commenter believes that there is some confusion with respect to the phrase in current § 121.104 “if also excluded from gross or total income on a consolidated return filed with the IRS.” The proposed regulation deleted this parenthetical. Prior to the amendment in 1996, the SBA excluded interaffiliate transactions from an applicant firm's receipts without regard to whether the firm and its affiliates filed a consolidated tax return. The commenter questioned whether there is a return to the SBA's previous policy (pre-1996) of allowing exclusions for interaffiliate transactions even in situations where the business concern has not filed a consolidated return or whether the SBA simply does not feel the parenthetical is necessary because other areas of the current or proposed regulation address the situation. The commenter stated that it supported the position that no consolidated tax return need be filed for the exclusion to apply because a parent company that subcontracts to a subsidiary does not always file a consolidated tax return. In addition, some affiliates do not qualify for a consolidated return. This commenter believes that the SBA should exclude all interaffiliate transactions.

In response to this comment, the SBA notes that it did intend to delete the parenthetical requiring the filing of a consolidated return in this instance. The SBA understands that not all firms file such consolidated returns, but that these amounts should nonetheless still be excluded. Whether a consolidated return is filed should have no bearing on whether properly documented interaffiliate transactions are excluded from annual receipts. To do otherwise would be to count such amounts twice.

The SBA received one comment supporting its clarification of § 121.104(b)(3), which describes the formula the SBA uses to determine annual receipts when the concern has a “short year” (as defined by the IRS) as one of the years within the period of measurement. The SBA has issued the final rule as proposed.

The SBA also proposed to revise Footnote 14 to the Table of Small Business Size Standards by NAICS Industry in § 121.201. Specifically, the proposed revisions to Footnote 14(b) added language to clarify that a Federal procurement involving a range of environmental services to restore a contaminated environment does not need to include remedial action as one of three activities to be classified under this size standard. One commenter supported the proposed language because they were aware of a situation where a SBC lost a contract as a result of a CO's belief that the larger size standard for Environmental Remediation Services required remedial action. However, the commenter favors even stronger language clarifying the intent of the footnote and recommended revising the footnote to state that “although the general purpose of the procurement need not necessarily include remedial actions, such purpose must be to restore. * * *” The commenter also recommended creating a separate NAICS code for environmental remediation.

The SBA agrees with this comment and has revised the proposed language as recommended to ensure a better understanding of the application of the environmental remediation services size standard. The recommended language by the commenter is consistent with the SBA's purpose of revising the footnote description. The U.S. Bureau of the Census (Census) evaluates requests to establish new industry categories under the NAICS. The SBA is beginning a review of the two size standards it has established under NAICS 562910. As part of that review, it will give consideration to advising Census on the issue, if appropriate.

The SBA also received a comment suggesting the Agency revise the “note” to sector 42 of the NAICS, which would incorrectly restate the nonmanufacturer rule of proposed 121.406. The note states the requirement that the concern have fewer than 500 employees but does not include the two other tests. The commenter therefore recommended that the SBA simply refer readers to § 121.406. The SBA disagrees. The comment under Sector 42 of § 121.201 sets forth the size standard for nonmanufacturers. The term “nonmanufacturer” is defined in § 121.406. There is no need to revise the comment in Sector 42 and refer readers to § 121.406.

The SBA has also added a note to Sector 92. Because of the emphasis on contracting out Government operational services, the SBA has experienced an increase in inquiries regarding the use of Public Administration NAICS codes to classify procurements and firms performing traditionally government-provided activities. The SBA has amended its Table of Size Standards to clarify that small business size standards are not assigned to codes under Public Administration, NAICS Sector 92. This sector consists of establishments in the public sector, i.e. , Federal, state, and local government agencies. The SBA establishes small business size standards to assist business concerns in the private sector, NAICS Sectors 11 through 81. The SBA's definition of a business concern, found in § 121.105, emphasizes that a business concern is an “entity organized for profit * * * which makes a significant contribution to the U.S. economy through payment of taxes.” By their nature, establishments in the Public Administration Sector are not organized for profit and are the administrators of public funding. Therefore, establishments in this sector do not meet the SBA's definition of a concern.

In addition, the NAICS manual stresses that “the administration of governmental programs is classified in Sector 92, Public Administration, while the operation of that same government program is classified elsewhere in NAICS based on the activities performed.” Concerns performing operational services for the administration of a government program are classified under the NAICS code based on the activities performed. Similarly, procurements for these types of services are classified under the NAICS code that best describes the activities to be performed. For example, the administration (oversight, funding, and policy) of Veterans' programs falls under NAICS code 923140, Administration of Veterans' Affairs. The operation and services for a Veterans Hospital are classified using NAICS codes under Subsector 622, Hospitals. The incorporation of this explanation on NAICS Sector 92 into the Table of Size Standards will assist Government officials in assigning the correct NAICS codes for various small business assistance programs.

The SBA proposed an amendment to § 121.401, covering what procurement programs are subject to size determinations, for plain language purposes. One commenter stated that the SBA should clarify that its regulations on size apply to all competitions in which SBCs are competing and not just set-asides. The SBA believes that this regulation is clear that the size rules apply to all procurement programs to which size status as a small business is required or advantageous, and that a further change is not needed. Another commenter stated that the regulations should address representations of small business size status in public announcements, the SBA's Pro-Net (which, effective January 2004, has been merged into the Central Contractor Registration and is referred to as the Dynamic Small Business Search), GSA Advantage, etc. The SBA does not have the jurisdiction to impose its size rules in public announcements. However, if a business concern improperly certifies its size in the Dynamic Small Business Search or GSA's Advantage, then the appropriate Federal agency may deem it a false statement. The SBA notes that the proposed rule would cover such instances. SBA had in fact removed firms from Pro-Net that it found to be other than small after performing a formal size determination.

Another commenter suggested adding a clarifying sentence distinguishing size determinations from protests. In response to this comment, the SBA notes that §§ 134.101 and 134.102 define size determination. In addition, part 134 also distinguishes appeals from size determinations. Therefore, it is unnecessary to repeat this information in part 121.

Section § 121.404 proposed additional exceptions to the general rule that the size status of a concern is determined as of the date the concern submits a written self-certification that it is small to the procuring agency as part of its initial offer including price. Proposed § 121.404(a)(1) provided that a concern applying to be certified as a Participant in the SBA's 8(a) BD Program, as a small disadvantaged business (SDB), or as a HUBZone SBC must qualify as small as of the date of certification by the SBA. When requiring an 8(a) BD, SDB, or HUBZone applicant to be small for “its primary industry classification,” the concern's primary industry classification is determined by looking solely at the applicant concern ( i.e. , by excluding its affiliates), but the size of the concern is determined by including the receipts or employees of all affiliates. One commenter stated that the “exceptions for size determinations” is confusing. The commenter asked the Agency to clarify that it determines size at the time of program admission for 8(a), SDB and the HUBZone Programs, and at time of contract offer for a contract. While that has always been SBA's position, SBA has clarified this provision.

In proposed § 121.404(a)(3), the SBA addressed size status for purposes of compliance with the nonmanufacturer and ostensible subcontractor rule. Several commenters stated that the use of the phrase “best and final offer” does not take sealed bids into consideration and recommended using the phrase “as of the date of a bid or offer which, if accepted by the Government, would result in a contract.” Another commenter stated that “best and final offer” should be “final proposal revision.” The SBA concurs and has amended the regulation to state “ * * * as of the date of the final proposal revision for negotiated acquisitions and final bid for sealed bidding.” The SBA notes that the phrase “final proposal revision” is utilized by the FAR now, rather than “best and final offer.”

The SBA received several comments regarding proposed § 121.404(g), which specified that a concern that qualified as a small business at the time it receives a contract is considered to be a small business throughout the life of that contract. The SBA noted in the preamble that it was considering a rule that would permit a procuring agency to treat a concern as a SBC for no more than 5 years from the date of award.

Four commenters opposed any rule that would require an agency to consider a business small only for a period of 5 years. These commenters stated that agencies are contracting for longer periods and simply because a contract is lengthy does not mean the concern will grow large over the length of the contract. The length of the contract should not be a factor when the original competition was among SBCs.

Meanwhile, several commenters expressed a different view and stated that they do not support allowing a concern to be considered small “throughout the life of the contract.” These commenters support GSA's FAR deviation (GSA Acquisition Letter MV-03-01, dated February 21, 2003, and Supplemental Number 1, dated February 11, 2004) that requires businesses to re-certify their size status each time an option for performance in a new contract period is exercised. For example, if the concern is found to be other than small, the agency should be forced to count those contract dollars as an award to an other than small business. This may force agencies to re-solicit for a small business set aside rather than exercise the contract option.

SBA notes that the GSA FAR deviation applies only to awards under the Multiple Awards Schedule (MAS) Program. It has been the SBA's longstanding policy to allow a concern that qualified as a small business at the time it received a contract to be considered a small business throughout the life of that contract. At this time, the SBA is not addressing awards under the MAS program and is not changing its policy regarding other than multiple award contracts. As such, the SBA is implementing the rule as proposed. However, the SBA will continue to consider this issue, including all of the comments received and issues raised.

The SBA also received comments requesting that the Agency address how to treat the acquisition of a SBC by another concern during contract performance, especially since the awardee may then no longer be small. This includes instances where a contract is novated. The commenter believed that the SBA's regulations should require re-certification at the time the contract is novated pursuant to FAR 42.12 and that the SBA should consider re-certifications for other acquisitions, such as the acquisition of stock. The SBA concurs with this comment and has amended the size regulations to address novation of contracts at § 121.404(i), including novations that occur for multiple award schedule contracts. The amended regulations now state that the new entity must submit a written self-certification that it is small to the procuring agency so that the agency can count the award options, or orders issued pursuant to that contract, towards its small business goals.

The SBA proposed amendments to § 121.406, which, in general, address how a SBC qualifies to provide manufactured products under a small business set-aside or an 8(a) contract. One commenter recommended that the SBA add a paragraph clarifying that this rule and § 125.6 (limitations on subcontracting) do not apply to § 8(d) subcontracting. The SBA concurs and has added a sentence clarifying this issue.

Other commenters stated that they oppose the two-tiered size standard for nonmanufacturers—one for most procurements and another for procurements at or under the simplified acquisition threshold. These commenters believe that the two-tiered approach can result in confusion and suggest changing the regulation to provide that the rule does not have to be met if no bidder or offeror proposes to supply the end item of a small business manufacturer or processor. The commenters believe that this change would provide a preference for small business suppliers when no item manufactured by a small business is proposed. The SBA does not agree with this comment and notes that the nonmanufacturer rule is statutory and applies to all procurements above the simplified acquisition threshold unless the SBA grants a waiver. The SBA has promulgated the regulation as proposed.

In § 121.406(b)(1)(ii), the SBA proposed deleting the requirement that a nonmanufacturer must normally sell the items being supplied to the public. This rule was based on provisions of the Walsh-Healey Public Contracts Act, which permitted Federal acquisitions of supplies only from manufacturers or “regular dealers.” One of the requirements for being a regular dealer was to sell items to the general public. These provisions of the Walsh-Healey Act were repealed by the Federal Acquisition and Streamlining Act of 1994. The SBA believes that requiring a firm to sell to the general public is overly restrictive. Several commenters supported this amendment. However, some believed the rule should be limited to the defined sector of the small business community engaged in reselling. The SBA does not agree with this last comment because if the SBA limits application of the rule to only “resellers,” it will not be helping SBCs.

With proposed § 121.406(b)(2), the SBA explained how a reseller can qualify as an eligible small business manufacturer. According to the proposed regulation, if a firm adds something to an item that the manufacturer of that existing item does not provide, the SBA will consider the firm to be the manufacturer of the ultimate end item ( i.e. , the item plus the addition). The SBA received several comments on this proposed rule.

Several commenters stated that the explanation to this proposed regulation is confusing and inconsistent. The regulation states that the test is whether the modifications can be performed by and are available from the manufacturer of the existing end item. One commenter believed the examples provided in the preamble to the proposed rule were inconsistent with this definition. In one example, a SBC is considered the manufacturer because the safety switch it adds to a saw is a feature that the saw's manufacturer does not make or provide. In a second example, a concern is not a manufacturer because the video card it adds is one that the computer manufacturer could have installed. The commenter believed that whether the item is added or could be added are two different tests and the proposed rule is unclear as to whether both tests must be met. Similarly, another commenter believes that the original manufacturer could install any number of add-in peripherals but elects not to thereby allowing the SBC the option of adding it on. Thus, it should not be a factor in determining whether a concern is or is not considered a manufacturer. Rather, this commenter believed that the SBA should consider the following factors when determining whether the SBC is a reseller: (1) Whether the facility has true engineering capabilities; (2) whether the facility has the equipment to fabricate metal or plastic; (3) whether there is an assembly line operation; (4) whether there is a custom packaging and boxing operation; (5) whether the new name of the end product reflects the manufacturing changes; and (6) whether the company uses custom cases or bezels distinguishing it from the original. For example, this commenter believes that the SBA should consider a SBC that goes through the trouble of customizing logos, computer chassis, etc. and delivering a product under its own name a computer manufacturer.

One commenter believed that firms that provide computer and other information technology equipment should have a specific rule detailing when such a firm will be treated as the manufacturer of the end item being supplied. The commenter suggested looking at the percentage (by value) of components installed.

Finally, another commenter opposed the amendment because it could corrupt the current process. The simple process of setting up a bagging operation does not constitute manufacturing and unscrupulous operators could take advantage of this change.

SBA believes that its regulations are clear—a business concern will not be deemed the end item manufacturer if the modification can be performed by and is available from the manufacturer of an existing end item. In addition, SBA agrees with the comment that when determining who is a manufacturer, factors that characterize the operations of a manufacturer, as opposed to a reseller, should be considered. SBA is adding as part of its assessment of a manufacturer a concern's technical capabilities; plant, facilities and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and product warranties. Consideration of these factors is consistent with the current regulations, which require a concern, through its own facilities, to perform activities to produce an end item to be deemed a manufacturer. The additional language enables SBA to better distinguish activities that constitute manufacturing from activities that are incidental or of minor value.

SBA also agrees that the computer industry deserves special attention, as there has been confusion as to how much installation must be done before a firm will be considered a manufacturer of computers. The final rule provides that a firm must generally install components totaling at least 50% of the value of the end item in order to be considered the manufacturer. However, where a firm installs one or more components to an existing end item where those identical modifications cannot be performed by and are not available from the manufacturer of the existing end item, the general language of § 121.406(b)(2) may permit the firm to be considered the manufacturer in appropriate circumstances.

However, SBA notes that it is not making any changes in response to the comment regarding bagging operations. The issue raised by this comment pertains primarily to small business participation on commodity purchases. SBA plans to address that broader issue as part of a separate rulemaking action to be published in the near future.

With § 121.410, the SBA proposed an amendment to determining size for purposes of subcontracts. Specifically, the proposed rule eliminated the 500-employee size standard provision for subcontracts of less than $10,000 and required that the size standard of the NAICS industry that best matches the purpose of the subcontract be used. This change merely adopted the size standard policy now in effect for subcontracts of $10,000 or greater. The SBA received two comments on this proposal. Both supported the elimination of the 500-employee size standard for subcontracts, but recommended clarification that prime contractors can select the NAICS code for the subcontracts because many primes believe the NAICS code for the subcontract is the same as for the prime contract. The SBA concurs with this comment and has clarified the rule accordingly.

Proposed § 121.411(a) changed the reference to representations made in SBA's Procurement Automated Source System (PASS) to SBA's Procurement Marketing & Access Network (PRO-Net). This final rule makes a further change. PRO-Net has now become part of the Central Contractor Registration (CCR). Specifically, CCR's Dynamic Small Business Search provides the same representations as were contained in PRO-Net. As such, the final rule changes the reference from PASS to CCR.

With § 121.702(a), the SBA proposed recognizing that for purposes of the SBIR Program, the SBA permits a joint venture when each entity to the venture is at least 51 percent owned and controlled by one or more individuals who are citizens of, or permanent resident aliens in, the United States. The SBA received one comment on this rule, which noted a grammatical error. At this time, however, the SBA has decided not to implement the rule as proposed. The SBA published a proposed rule in the Federal Register on June 4, 2003, 68 FR 33412, which sought to amend the eligibility requirements of the SBIR Program. The SBA believes that any amendments to the eligibility requirements of the program should therefore be addressed as part of the finalization of that rule.

The SBA received one comment on when size determinations are made for purposes of the SBIR Program. The commenter stated that based upon a ruling by OHA, Bend Research, Inc., SBA No. 4369 (July 29, 1999), size protests must be determined on the date of award of the Phase I or II SBIR funding agreement. However, many agencies are reluctant to issue a funding agreement to a concern if the concern may not be eligible for the program. The commenter believed that SBA should amend its regulation to state that SBA will allow size protests for Phase I or II SBIR awards in anticipation of the award. In other words, once the procuring agency has selected a business concern for an SBIR award, but prior to the actual issuance of the award, SBA will review the size of the concern in response to a protest to determine if it is actually eligible for that award.

SBA concurs with this comment and has amended the regulation accordingly. The final regulation provides that the size status of a concern for the purpose of a funding agreement under the SBIR program is determined as of the date of the award for both Phase I and Phase II SBIR awards or on the date of the request for a size determination, if an award is pending.

The SBA proposed amending § 121.1001 entitled “Who may initiate a size protest or request a formal size determination?” The SBA received one comment supporting this proposal. The SBA has promulgated the final rule as proposed.

The SBA received several comments to § 121.1001(a)(7), which provided that “For any unrestricted Government procurement in which status as a small business may be beneficial, including, but not limited to, the award of a contract to a small business where there are tie bids, the opportunity to seek a Certificate of Competency by a small business, and SDB or HUBZone price evaluation preferences, the following entities may protest in connection with a particular procurement: * * *” According to the commenters, SBCs should be permitted to protest certifications by competitors in all contracts and not just those where a specific benefit is in question. Thus, for an unrestricted government procurement in which status as a SBC has been declared or represented by an awardee, any offeror can protest. These commenters point out that it is important to ensure that statistics reported on small business awards are accurate to determine if agencies are meeting their small business goals.

SBA concurs with this comment, and believes that size protests should be allowed on unrestricted procurements. Small business concerns competing on unrestricted procurements have certain benefits not available to other businesses, such as faster progress payments, an exemption from submitting a small business subcontracting plan on certain contracts, and an exemption from cost accounting standards. If a business concern represents itself as small, the SBA believes it should have the opportunity to accept a challenge to ensure that these benefits are limited to eligible small businesses. Allowing size protests on unrestricted solicitations will provide an incentive for businesses and contracting officers to more carefully review small business representations. SBA is also concerned with the quality and integrity of the data it relies upon in establishing and monitoring small business goals. This new policy partly addresses that issue. Section 121.1001(a)(7) is therefore revised to permit size protests challenging a firm's representation that it is a small business on any unrestricted contract.

One commenter noted that the SBA should add the AA for HUBZones to proposed § 121.1001(a)(7)(iii). The SBA is not adopting that proposal as part of this final rule because that change is being made as part of another rulemaking. SBA notes that it proposed such an amendment pursuant to a rule issued on January 28, 2002, 67 FR 3826, amending the HUBZone Program.

The SBA proposed a new § 121.1004(a)(4) to address instances where notification of contract award is posted on the Internet, as authorized under Simplified Acquisition Procedures (SAP). In such cases, the SBA proposed that a size protest must be made to the CO within five business days after the electronic posting. One commenter stated that the 5-day protest period should begin “upon oral or electronic notification by the contracting officer or the date that the protester learns the identity of the apparent successful offeror via another means.” This commenter believes that protesters sometimes learn about awards via an awardee's public announcement or through oral communications.

The SBA concurs and has added a new paragraph at § 121.1004(a)(5) that would provide that where no written notification is required, either prior to or at the time of award, a protest will be considered timely if filed within five days after receipt of verbal notification from the CO or other agency representative. For example, under SAP, there is no requirement for the CO to provide either pre-award or award notification to unsuccessful offerors. Consequently, the date of verbal notification or date of posting on the internet will be considered the start of the 5-day period allotted for a timely size protest.

The SBA proposes to amend § 121.1007 containing the requirement that a size protest must allege specific facts by restoring the six examples that were formerly found at § 121.1604(a) (1995). The SBA received one comment about these examples. One commenter noted that some of the examples used the term “unspecific” while the regulation itself uses the term “non-specific” and recommends changing the examples accordingly. The SBA concurs with this comment and has made the necessary changes.

The proposed rule amended § 121.1008(d) by adding a sentence requiring a concern whose size status is at issue to furnish information about its alleged affiliates to the SBA, notwithstanding any third party claims of privacy or confidentiality, because the SBA does not disclose information obtained in the course of a size determination except as permitted by Federal law. One commenter opposed any rule that would require a concern to provide information concerning an alleged third party affiliate because there is no means to force an alleged affiliated third party to produce the information. In addition, although the SBA does not “disclose” the information, it allegedly “misplaces” the information. The SBA notes that this rule codifies several OHA rulings and therefore remains as proposed. See, e.g., Size Appeal of Donovan Travel, Inc., d/b/a Carlson Wagonlit Travel, SBA No. SIZ-4270 (1997); Size Appeal of Quantrad Sensor, Inc., SBA No. SIZ-4255 (1997).

With § 121.1103(b)(3), the SBA proposed a regulation explaining service of a NAICS appeal to the SBA. One commenter noted that the new requirement to serve NAICS code appeals to the Associate General Counsel for Procurement Law and the CO is inconsistent with existing § 134.305(c) which requires service to the CO only. The commenter recommends a conforming change to § 134.305(c). The SBA concurs and has made a corresponding change to § 134.305(c).

Part 134 contains rules of procedure governing cases before OHA, including size appeals and former SIC (now NAICS) code appeals. The SBA proposed several amendments to part 134, mainly to conform to the changes proposed for part 121. The proposed rule amended § 134.102(k) to authorize an affected party to appeal a determination by the SBA Government Contracting Area Office as to whether two or more concerns are affiliated for purposes of the SBA's financial assistance programs, or other programs for which an affiliation determination was requested. One commenter noted that the definition of size determination is inconsistent with the definition in § 134.101 and recommended conforming the revision to § 134.101. The SBA concurs and has made a corresponding change to § 134.101.

As indicated above, this final rule is effective 30 days after the date of publication in the Federal Register . The amendments apply to all solicitations issued on or after the effective date, as well as all applications for financial or other assistance pending as of or submitted to the SBA on or after the effective date.

OMB has determined that this final rule does not constitute a “significant regulatory action” under Executive Order 12866. This rule clarifies the SBA's procedural and definitional size rules. As such, the rule has no effect on the amount or dollar value of any Federal contract requirements or of any financial assistance provided through the SBA. Therefore, the rule is not likely to have an annual economic effect of $100 million or more, result in a major increase in costs or prices, or have a significant adverse effect on competition or the United States economy. In addition, the final rule does not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency, materially alter the budgetary impact of entitlements, grants, user fees, loan programs or the rights and obligations of such recipients, nor raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, the SBA determines that this rule does not impose new reporting or record keeping requirements.

This action meets applicable standards set forth in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

This regulation will not have 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, for the purposes of Executive Order 13132, SBA determines that this final rule has no federalism implications warranting preparation of a federalism assessment.

The SBA has determined that this rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. Although the rule amends several definitions concerning the size of a business concern, the majority of these amendments are clarification of current policy.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to a certain McDonnell Douglas Model DC-10-30 airplane was published in the Federal Register on March 5, 2004 (69 FR 10366). That action proposed to require an inspection of the power feeder cable assembly of the auxiliary power unit (APU) for chafing, correct type of clamps, and proper clamp installation; and corrective actions, if necessary.

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

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

The FAA estimates that 1 Model DC-10-30 airplane, having fuselage number 0106, of U.S. registry will be affected by this AD, that it will take approximately 1 work hour per airplane to accomplish the required inspection, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the required inspection on U.S. operators is estimated to be $65.

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

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

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

The FAA proposed to amend 14 CFR Part 39, by superseding an AD with a proposed airworthiness directive (AD). The proposed AD applies to Lycoming Engines direct-drive reciprocating engines (except O-145, O-320H, O-360E, LO-360E, LTO-360E, O-435, and TIO-541 series engines). We published the proposed AD in the Federal Register on March 25, 2003 (68 FR 14350). That action proposed to require inspection of the crankshaft gear installation and rework or replacement of the gears where necessary after a propeller strike, sudden stoppage, at overhaul, or whenever gear train repair is required. That action also proposed to revise the definitions for sudden stoppage and propeller strike.

We provided the public the opportunity to participate in the development of this AD. We have considered the comments received.

One commenter requests that the proposed AD should provide a trigger level to alert maintenance personnel of the need for action. The commenter states that this is required to avoid having maintenance personnel determine the need for action. Also, this would avoid miscommunication between the pilot and the maintenance personnel. The commenter also states that the proposed AD is too general for proper action in the field.

The FAA does not agree. Section 91.7(b) of the Code of Federal Regulations (14 CFR 91.7(b)) states: “The pilot in command of a civil aircraft is responsible for determining whether that aircraft is in condition for safe flight.” The pilot must advise the maintenance technician and inspector of the need to perform maintenance. It is also the responsibility of the maintenance technician and or inspector to advise the pilot when an unsafe condition is found during routine maintenance. The actions required by this AD, like many other situations in aviation, may require some judgment on the part of the pilot, maintenance technician, and or inspector, as well as good communication among all parties. Adding additional conditions will only require more judgment and more decisions by all parties involved.

One commenter states that the proposed AD would require unneeded inspections by “tying the hands” of knowledgeable mechanics. The commenter also states that the final determination regarding needed inspections should be made by the maintenance personnel in the field. The commenter further states that the mechanics are in the best position to evaluate the factors surrounding each incident, and to determine which engine components should be inspected.

The FAA does not agree. The wording in this AD is designed to assist the mechanics when deciding on what action to take in a given situation. Based on Lycoming's engine design knowledge and worldwide service experience, certain situations are known to have caused engine problems. This AD is not designed to “tie the hands of the mechanic”. The AD is intended to help the pilot in command and maintenance personnel make the best possible maintenance decision.

As a correction to the compliance, we added paragraphs to require the existing gear retaining bolt and lockplate be removed from service and a new bolt and lockplate be installed, and to prohibit installation of the removed hardware into any engine. This correction places the AD in agreement with the referenced SB.

We have carefully reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD with the changes described previously. We have determined that these changes will neither increase the economic burden on any operator nor increase the scope of the AD. The assigned paragraph letters in the regulatory section have been changed from what appeared in the proposal, as we are continuing our introduction of plain language into our documents.

We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

For the reasons discussed above, I certify that this AD:

(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.

We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES. Include “AD Docket No. 89-ANE-10-AD” in your request.

What events have caused this AD? The GTX 330/GTX 330D may detect from other aircraft the S1 (suppression) interrogating pulse below the MTL and, in some circumstances, does not reply. The GTX 330/330D should still reply even if it detects S1 interrogating pulses below the MTL. GARMIN International Inc. suspected the suppression problem after observation between GARMIN company aircraft that were equipped with the GTX 330 and Ryan Traffic and Collision Alert Device (TCAD). Engineering bench tests and test flights confirmed that this suppression problem existed.

What is the potential impact if FAA took no action? Interrogating aircraft could possibly receive inaccurate replies due to suppression from aircraft equipped with the GTX 330/330D Mode S Transponders when the pulses are below the MTL. The inaccurate replies could result in reduced vertical separation or unsafe TCAS resolution advisories.

Has FAA taken any action to this point? We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to certain GARMIN International Inc. GTX 330/330D Mode S transponders that are installed on aircraft. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on December 30, 2003 (68 FR 75174). The NPRM proposed to require you to install GTX 330/330D Software Upgrade Version 3.03.

Was the public invited to comment? We provided the public the opportunity to participate in developing this AD. The following presents the comments received on the proposal and FAA's response to each comment:

What is the commenter's concern? The NPRM currently requires installation of GTX 330/330D Software Upgrade to Version 3.03 to comply with the proposed AD. Two commenters request a text change of the AD to allow installation of later software upgrade versions to comply with the proposed AD.

What is FAA's response to the concern? Since later software upgrade versions will contain, at a minimum, the elements of Version 3.03 and thus will correct the unsafe condition, we agree with their request and have changed the text from “Version 3.03” to “Version 3.03, 3.04, or 3.05.”

What is FAA's final determination on this issue? We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for the changes discussed above and minor editorial corrections. We have determined that these changes and minor corrections:

How does the revision to 14 CFR part 39 affect this AD? On July 10, 2002, the FAA published a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. This regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. This material previously was included in each individual AD. Since this material is included in 14 CFR part 39, we will not include it in future AD actions.

How many airplanes does this AD impact? We estimate that this AD affects 1,300 airplanes in the U.S. registry.

What is the cost impact of this AD on owners/operators of the affected airplanes? Garmin International Inc. will reimburse the 1.0 hours required for this modification per the most current GTX 330 Software Service Bulletin. This reimbursement will follow Garmin's warranty Policies and Procedures stating that the most current software, which includes this update and all other updates, should be installed.

What will be the compliance time of this AD? The compliance time of this AD is within 30 days after the effective date of the AD.

Why is the compliance time presented in calendar time instead of hours time-in-service (TIS)? The unsafe condition exists or could develop on airplanes equipped with the affected equipment regardless of airplane operation. For example, the unsafe condition has the same chance of occurring on an airplane with 50 hours TIS as it does on one with 5,000 hours TIS. Therefore, we are presenting the compliance time of this AD in calendar time instead of hours TIS.

Will this AD impact various entities? We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

Will this AD involve a significant rule or regulatory action? For the reasons discussed above, I certify that this AD:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. 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.

We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES . Include “AD Docket No. 2003-CE-39-AD” in your request.

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain BAE Systems (Operations) Limited Model BAe 146 and Avro 146-RJ series airplanes equipped with Pacific Scientific engine fire extinguisher bottles was published in the Federal Register on March 17, 2004 (69 FR 12585). That action proposed to require a one-time inspection to detect discrepancies in the wiring installation of the engine fire extinguisher bottles, and related investigative/corrective actions as necessary.

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

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

The FAA estimates that 54 airplanes of U.S. registry will be affected by this AD, that it will take approximately 3 work hours per airplane to accomplish the required actions, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $10,530, or $195 per airplane.

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

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

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

A proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an airworthiness directive (AD) that is applicable to certain BAE Systems (Operations) Limited Model BAe 146 series airplanes was published in the Federal Register on March 17, 2004 (69 FR 12592). That action proposed to require repetitive detailed inspections for heat damage to any in-line splice in the auxiliary power unit (APU) and integrated drive generator (IDG) feeder cable circuits, and corrective action if necessary. The proposed AD also provided for optional terminating action for the repetitive inspections.

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

The cost information specified in the proposed AD inadvertently contained an erroneous figure. The estimated cost of the optional terminating action was understated as “between $1,069 and $2,847 per airplane.” The cost information, below, has been revised to show the correct figure.

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

The FAA estimates that 17 airplanes of U.S. registry will be affected by this AD, that it will take approximately 6 work hours per airplane to accomplish the required inspections, and that the average labor rate is $65 per work hour. Based on these figures, the cost impact of the AD on U.S. operators is estimated to be $6,630, or $390 per airplane, per inspection cycle.

The optional terminating action, if done, will take approximately between 5 and 30 work hours per airplane, at an average labor rate of $65 per work hour. Required parts will cost approximately between $744 and $1,379 per airplane. Based on these figures, we estimate the cost of the optional terminating action to be between $1,069 and $3,329 per airplane.

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

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

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

What events have caused this AD? The Luftfahrt-Bundesamt (LBA), which is the airworthiness authority for Germany, recently notified FAA that an unsafe condition may exist on Alexander Schleicher sailplanes. The LBA reports that an incorrect fitting at one end of a fuel line was installed during production of the Model ASH 25M sailplane equipped with fuel injected engine IAE50R-AA. The incorrect fitting includes a combination of sealing cones. After maintenance, the incorrect combination of sealing cones inside the fittings might cause a fuel leak.

What is the potential impact if FAA took no action? Any fuel line with improper fittings could result in fuel leakage and a possible fire hazard.

Has FAA taken any action to this point? We issued a proposal to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) to include an AD that would apply to all Alexander Schleicher Model ASH 25M sailplanes equipped with fuel injected engine IAE50R-AA. This proposal was published in the Federal Register as a notice of proposed rulemaking (NPRM) on February 11, 2004 (69 FR 6585). The NPRM proposed to require you to inspect the fuel line for correct fittings, and, if any incorrect fitting is found, replace the fuel line.

Was the public invited to comment? We provided the public the opportunity to participate in developing this AD. We received no comments on the proposal or on the determination of the cost to the public.

What is FAA's final determination on this issue? We have carefully reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed except for minor editorial corrections. We have determined that these minor corrections:

How does the revision to 14 CFR part 39 affect this AD? On July 10, 2002, the FAA published a new version of 14 CFR part 39 (67 FR 47997, July 22, 2002), which governs the FAA's AD system. This regulation now includes material that relates to altered products, special flight permits, and alternative methods of compliance. This material previously was included in each individual AD. Since this material is included in 14 CFR part 39, we will not include it in future AD actions.

How many airplanes does this AD impact? We estimate that this AD affects 2 sailplanes in the U.S. registry.

What is the cost impact of this AD on owners/operators of the affected sailplanes? We estimate the following costs to accomplish the inspection:

We estimate the following costs to accomplish any necessary replacement that will be required based on the results of this inspection. We have no way of determining the number of sailplanes that may need this replacement:

Will this AD impact various entities? We have determined that this AD will not have federalism implications under Executive Order 13132. This AD 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.

Will this AD involve a significant rule or regulatory action? For the reasons discussed above, I certify that this AD:

1. Is not a “significant regulatory action” under Executive Order 12866;

2. Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and

3. 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.

We prepared a summary of the costs to comply with this AD and placed it in the AD Docket. You may get a copy of this summary by sending a request to us at the address listed under ADDRESSES . Include “AD Docket No. 2003-CE-64-AD” in your request.

FDA last revised its CGMP regulations for food (part 110 (21 CFR part 110)) in 1986 (51 FR 22458, June 19, 1986). The primary purpose of the revision was to establish new, updated, or more detailed provisions concerning food industry personnel; plants and grounds; sanitary facilities, controls, and operations; equipment and utensils, warehousing, and distribution; and natural or unavoidable defect levels. FDA designed the revised CGMP regulations to help ensure the safe and sanitary manufacturing, processing, and holding of food for human consumption.

In the almost 20 years since the food CGMPs were revised, the food industry has undergone considerable change, and the agency believes that it is now time to revisit these regulations and determine appropriate revisions to better ensure a safe and sanitary food supply. FDA believes that a good first step is to obtain the views of the industry and the public generally by holding a series of public meetings. The three public meetings are intended to provide interested parties an opportunity to comment on what revisions to the CGMPs FDA should consider. The meetings are also intended to fulfill part of the outreach requirement of the Small Business Regulatory Enforcement Fairness Act of 1996.

FDA has drafted the questions set out in this document to help focus comments presented at the public meetings or otherwise communicated to the agency. One area of particular agency focus is potential hazards in the food supply. Generally speaking, there are three categories of hazards that may be present during the production or warehousing of food: Physical hazards (such as the presence of glass fragments in food), chemical hazards (such as the unintended presence of a cleaning solution in food), and microbiological hazards (such as the presence of Listeria monocytogenes in ready-to-eat foods).

In responding to the questions set out in this document, please address, to the extent you are able, each of the three types of hazards discussed in the previous paragraph. FDA is particularly interested in receiving comments about food manufacturing practices and other controls used by small food manufacturing and processing entities.

In general, do the current good manufacturing regulations (part 110) need to be revised or otherwise modernized? If yes, please describe generally the shortcomings of the current regulations.

1. Which practices specified in current part 110 are most effective at preventing each type of food hazard? Which practices are least effective at such prevention?

2. In today's food manufacturing environment, what conditions, practices, or other factors are the principal contributors to each type of food hazard?

3. If the CGMP regulations were revised, which type or types of food hazards could be most readily prevented through CGMP-type controls?

4. Are there preventive controls, in addition to those set out in part 110, needed to reduce, control, or eliminate each of the three types of food hazards? If yes, please identify the specific hazard and the particular controls, that would reduce, control, or eliminate the hazard.

5. What concepts or underlying principles should guide FDA's adoption of new preventive controls?

6. How should the effectiveness of preventive controls for each of the three types of hazards be most accurately measured?

7. In today's food manufacturing environment, what are the principal contributors to the presence of undeclared allergens in food? For example, do labeling errors or cross-contamination contribute? Which preventive controls could help reduce, control, or eliminate the presence of undeclared allergens in food?

8. Are there existing quality systems or standards (such as international standards) that FDA should consider as part of the agency's exploration of food CGMP modernization? Please identify these systems or standards and explain what their consideration might contribute to this effort.

9. There is a broad variation within the food manufacturing and processing industry, including variations in size of establishments, the nature of the food produced, the degree to which the food is processed, and the vulnerability of a particular operation to physical, chemical, or microbial hazards. How, if at all, should the CGMP regulations be revised to take into account such variation? For example, should there be different sets of preventive controls for identifiable segments of the food industry, such as different storage temperature limits?

10. There are a number of measures, procedures, and programs that help to ensure that preventive controls are carried out adequately. These include the following items:

• Training programs for managers and/or workers;

• Audit programs;

• Written records, e.g., batch records, sanitation records;

• Validation of control measures;

• Written sanitation standard operating procedures;

• Food label review and control program; and

• Testing of incoming raw materials, inprocess materials, or finished products.

Which (if any) of these should be required practices for food and manufacturers and why? Which (if any) of these should be recommended practices for food manufacturers and processors and why?

11. Are there preventive controls in addition to those already set out in part 110 for food distributors, wholesalers, and warehousers that are needed to help ensure the safe and sanitary holding of food? If yes, please identify the controls by hazard and sector of the industry.

You should register for any of the meetings by fax or e-mail (see FOR FURTHER INFORMATION CONTACT ). For security reasons and due to space limitations, we recommend that you register at least 5 days prior to the meeting you wish to attend. Registration will be accepted on a space-available basis. You may register until close of business June 4, 2004, for the College Park meeting, close of business on June 25, 2004, for the Monterey meeting, and close of business July 15, 2004, for the Chicago meeting. If you need special accommodations due to a disability, please inform the contact person at least 7 days in advance (see FOR FURTHER INFORMATION CONTACT ). Please include your name, title, firm name, address, telephone number, and e-mail address (if available) when you register. FDA encourages individuals or firms with relevant data or information to present such information at the meeting or in written comments to the record. If you would like to make oral comments at one of the meetings, please specify your interest in speaking when you register. The amount of time for each oral presentation may be limited due to the number of requests to speak.

A transcript will be made of the proceedings of each meeting. You may request a copy of a meeting transcript in writing from FDA's Freedom of Information Office (HFI-35), Food and Drug Administration, 5600 Fishers Lane, rm. 12A-16, Rockville, MD 20857, approximately 30 working days after the public meetings at a cost of 10 cents per page. The transcript of each public meeting and all comments submitted will be available for public examination at the Division of Dockets Management (see ADDRESSES ) between 9 a.m. and 4 p.m., Monday through Friday.

In addition to presenting oral comments at a public meeting, interested persons may submit (see ADDRESSES ) written or electronic comments on the subject of these meetings. Submit a single copy of electronic comments or two paper copies of any mailed comments, except that individuals may submit one paper copy. Comments are to be identified with the docket number found in the brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday.

The specific results of the Department of State lead interagency review by category are as follows:

The review of Category IX—Military Training Equipment resulted in no change in the coverage, but the scope of coverage was clarified by adding the word “training” to the title of the category. However, added to the list of items identified as a trainer are pilot-less aircraft and human rated centrifuge trainers. In addition, certain trainers are consolidated ( e.g. , attack trainers, instrument flight trainers, operational flight trainer and air combat training systems). A weapons system trainer includes any trainer that provides rules of engagement including flight, tactics, techniques and/or simulation. A radar trainer includes any trainer that provides training for radar operation and target systems. The absence of radar target generators from the list of items included as training equipment is not a change in coverage, but a determination that the radar target generator is a component, part, or accessory of a radar system and more appropriately controlled in Category XI.

Specific changes to the category are the identification in paragraph (c) of tooling and equipment specifically designed or modified for production of the items in the category. This resulted in components, parts, accessories, attachment, and associated equipment moving to paragraph (d) and technical data and defense services to a new paragraph (e). In addition, a new paragraph (f) contains interpretations that explain and amplify terms used in the category.

The review changed the title of the category to better reflect the items controlled. The title now reads Category X—Protective Personnel Equipment and Shelters. Also, it was determined that reformatting the category would provide better identification to users of the items controlled. To provide specified control levels for body armor an interpretive note was added to outline the standards established by the National Institute of Justice Classification. In addition, a threshold parameter for pressure suits with military applications was added. Category X now specifically identifies the controls of certain military protective equipment ( e.g. , diving suits, goggles, glasses, visors). Similarly, the control of clothing designed to protect against sensor detection was clarified via the addition of a threshold parameter. Underwater breathing apparatus currently controlled in Category XIII are transferred to this category. Finally, having determined that they are more appropriately considered to be a component of an aircraft, liquid oxygen converters are transferred from paragraph (b) of this category to paragraph 8(h) of Category VIII and USML control is maintained on these commodities even though they no longer are specifically enumerated in the text.

To accomplish these changes paragraph (a) now controls protective personnel equipment, with subparagraphs for body armor, radar protective clothing, G-suits, full and partial pressure suits, submarine diving rescue suits, helmets designed to be compatible with communications hardware or optical sights/slewing devices, protective goggles, glasses or visors. With the movement of partial pressures suits to paragraph (a) of this category and the movement of liquid oxygen converters to Category VIII (h), paragraph (b) now contains permanent or transportable shelters. With the transfer of components, parts, accessories, attachments, and associated equipment currently in paragraph (c) and technical data and defense services currently in paragraph (d) to new paragraphs (d) and (e) respectively, paragraph (c) now controls tooling and equipment specifically designed or modified for the production of the articles controlled by the category. Finally, a new paragraph (f) is added to the category to provide interpretations that explain and amplify the terms used in the category.

The Department of Commerce Export Commodity Control Numbers (ECCNs) found in paragraph (c) dealing with military second and third generation image intensification tubes and military infrared focal plane arrays that are part of a commercial system are corrected for accuracy.

The Military Information Security Systems in paragraph (b) are now described as Military Information Security Assurance Systems to more appropriately define the criteria for the evaluation of such systems. The language describing criteria in paragraph (b)(4) is changed to reflect current evaluation criteria. Paragraph (e) now controls armor and reactive armor not controlled elsewhere in this subchapter, while paragraph (f) controls certain specified structural materials. The current paragraphs (e) and (f) and redesignated (g) and (h) without any change in control. The chemiluminescent compounds currently in paragraph (g) are assessed to be more properly considered as components; those used for the detection or identification of chemical agents are covered under Category XIV as a component of chemical agent equipment, while solid state devices made from compounds designed or modified for military applications, such as semiconductors, are controlled in Category XI. The text referring to particle beam devices in paragraph (h) is transferred to Category XVIII—Directed Energy Weapons as an interpretive note. Paragraph (k) now controls tooling and equipment designed to produce the articles controlled by the category. Finally, a new paragraph (m) is added to the category to provide interpretations that explain and amplify the terms used in the category.

Since the publication on November 27, 2002 (67 FR 70839) of the revision to this category, information has become available demonstrating the existence of personal protection devices for domestic applications such as civil defense that integrate components and parts subject to the controls of the International Traffic in Arms Regulations (ITAR). As in the case of Category XII of the USML, wherein commercial systems that incorporate military second and third generation image intensification tubes and military focal plane arrays identified in the category are licensed by the Department of Commerce, commercial domestic preparedness devices that integrate components and parts subject to the controls of the ITAR will be licensed by the Department of Commerce. To effect this change, a new interpretive note is added to paragraph (n) of the Category, designated as (4), stating that domestic preparedness devices for individual protection that integrate components and parts identified in this subparagraph are licensed by the Department of Commerce when such components are: (1) Integral to the device; (2) inseparable from the device; and (3) incapable of replacement without compromising the effectiveness of the device. In addition, components and parts identified in this subparagraph exported for integration into domestic preparedness devices for individual protection are subject to the controls of the ITAR. Explanatory language currently in paragraph (f)(4) of the Category is transferred to and incorporated into the interpretive note. Because of the insertion of the new interpretive note (4) in paragraph (n), the interpretative notes currently identified as (4), (5), and (6) are renumbered as (5), (6) and (7). In accordance with Section 38(f) of the Arms Export Control Act (AECA), as amended, this removal has been notified to the Congress and the Commerce Control List (CCL) control identified for this commodity is ECCN 1A004.

As noted above under the discussion for Category XIII, paragraph (h) pertaining to particle beam devices is moved to this category as a new interpretive note designated (g)(2).

This amendment involves a foreign affairs function of the United States and, therefore, is not subject to the procedures required by 5 U.S.C. 553 and 554. It is exempt from review under Executive Order 12866; but has been reviewed internally by the Department of State to ensure consistency with the purposes thereof. This rule does not require analysis under the Regulatory Flexibility Act or the Unfunded Mandates Reform Act. It has been found not to be a major rule within the meaning of the Small Business Regulatory Enforcement Act of 1996. It will not have substantial direct effects on the States, 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 rule does not have sufficient federalism implications to warrant application of consultation provisions of Executive Orders 12372 and 13132.

At present only two types of anesthesia providers may provide services to TRICARE beneficiaries—anesthesiologists and certified registered nurse anesthetists (CRNAs). In some areas of the country, anesthesiologist assistants, after completing the specified training, being accredited, and, where required, being licensed by the state also provide anesthesia services. The Centers for Medicare and Medicaid Services (CMS) already recognizes anesthesiologist assistants as authorized providers (42 CFR 410.69). This final rule establishes anesthesiologist assistants as authorized providers under the same conditions applied by CMS.

The reader should refer to the proposed rule that was published on April 3, 2003, (68 FR 16247) for detailed information regarding this action.

Currently TRICARE provides coverage/payment for inpatient or outpatient services and/or supplies provided in connection with a cardiac rehabilitation program when provided by a TRICARE authorized hospital. Since hospital based cardiac rehabilitation is already an established benefit under TRICARE, this final rule simply applies that benefit and reimbursement structure to freestanding cardiac rehabilitation programs.

The reader should refer to the proposed rule that was published on April 3, 2003, (68 FR 16247) for detailed information regarding this benefit and reimbursement for it.

TRICARE is issuing a provision for certified registered nurse anesthetists (CRNAs). It provides a separate designation for CRNAs by clarifying their existing status in the TRICARE program as an independent provider operating under their state licensure and meeting the requirements for a certified registered nurse anesthetist.

We received no comments regarding the coverage of cardiac rehabilitation services in freestanding cardiac rehabilitation facilities.

We received a large number of comments, both in support of and opposed to, our proposal to authorize AAs as TRICARE providers. The comments were from individuals as well as national organizations representing groups of providers. The following comments were in support of our proposal.

Comment: A number of anesthesiologists commented that they employ AAs and are very satisfied with their services.

Comment: A number of commenters noted that AAs are recognized by many commercial insurances and managed care plans.

Comment: Many commenters, both individuals and national provider organizations, described the extensive training that AAs receive. They noted that the training lasts for 24-27 months and includes master's level coursework after a bachelor's degree that must include pre-medical courses such as biology, chemistry, physics, and calculus. The training also includes 2,500 hours of direct patient contact of clinical rotations in every area of anesthesia ( i.e. , trauma, cardiac, thoracic, obstetrical, pediatric, etc.). They also noted that the AA training programs are nationally accredited by the Commission on Accreditation of Allied Health Education Programs (CAAHEP) which accredits training programs for 2,100 other allied health educational programs at 1,300 institutions. Presently, there are two AA training programs (Case Western Medical School and Emory University Medical School) with another to begin shortly (South University Medical School). Graduates of the programs must pass a national certification examination administered by the National Board of Medical Examiners for the National Commission for Certification of Anesthesiologist Assistants. This examination is administered the first Saturday in June and has a six hour duration. The exam may occur prior to graduation; however, all course work and instruction has been completed by the date of the exam. Additional clinical experience finishes out the time from exam to graduation. Upon graduation, the AA will be told whether he or she has passed the exam. The AA can not practice without official notification that he or she has passed the exam.

Comment: Many commenters noted that in order to practice their profession, AAs must pass a national certification examination administered by the National Board of Medical Examiners for the National Commission for Certification of Anesthesiologist Assistants. In addition, AAs must have 40 hours of continuing medical education every two years and complete a recertification every six years.

As stated above, we also received a number of comments that were opposed to our proposal to authorize AAs as TRICARE providers. Since these comments disagree with our final decision, we provide a response to each comment to explain why we have elected to authorize AAs as TRICARE providers.

Comment: A number of commenters stated that only five states license AAs and questioned why TRICARE should recognize AAs “if most of the country does not recognize the AA practice”.

Response: As stated in the proposed rule, we will require that AAs comply with all applicable requirements of state law and be licensed, where applicable, by the state in which they practice. As described in § 199.6(c)(2) of this part describing conditions of authorization for individual providers, in jurisdictions that do not license a specific category of individual professional, certification by a Qualified Accreditation Organization is required. As described in § 199.6(c)(3) of this part, in jurisdictions that do not provide for licensure or certification, the provider must be certified by or eligible for full clinical membership in the appropriate national professional association that sets standards for the specific profession. The fact that AAs are required to be licensed in six states and not all is not pertinent. Many other states recognize them, but do not require them to be licensed and we believe that their qualifications justify TRICARE recognition.

Comment: A national provider organization noted that AAs have been recognized by Medicare since 1983, and that CMS considers AAs and CRNAs to be equivalent providers and uses the term “anesthetist” for both professions.

Response: However, TRICARE recognizes the increased training required by certified registered nurse anesthetists compared to AAs, and as a result, authorizes CRNAs to practice independent of physician supervision in those states where the licensure permits. TRICARE is publishing a provision in this rule to clarify CRNAs' authority to practice independently.

Comment: Many commenters stated that AAs may not be the solution to correct the current national anesthesia provider shortage, since they must be supervised by an anesthesiologist.

Response: We did not propose authorizing AAs in order to alleviate any provider shortage or to solve any other problem. Our proposal was based on the fact that they are certified by a nationally recognized organization, are a recognized provider in many states and by many third-party payers, are licensed by several states, and are authorized under Medicare.

Comment: One national provider organization questioned if recognizing AAs will increase TRICARE costs.

Response: It will not. As we stated in the proposed rule, payment for anesthesia services provided by an anesthesiologist and an AA under the anesthesiologist's direct supervision will never exceed what would have been paid if the services were provided only by the anesthesiologist.

Comment: A number of commenters noted that the military system requires healthcare providers who can be mobilized at a moment's notice to provide quick response in military conflicts. It is not effective to deploy AAs who would have to be accompanied by an anesthesiologist.

Response: We want to stress that this final rule affects only services provided in civilian facilities and is wholly separate from services provided within the military's direct care system. AAs will not practice in MTFs; they will not be commissioned, nor will they deploy to support our troops.

Comment: Many commenters suggested that TRICARE should conduct a study on the safety record and cost effectiveness of AAs before recognizing them.

Response: We believe the issue of cost effectiveness is moot, as explained above. With regard to a study of the safety record of AAs, we don't believe this is necessary for several reasons. First, CMS has recognized AAs for 20 years and there have been no issues of safety. Second, a national provider organization stated that the professional liability insurance rates charged to AAs and nurse anesthetists are the same, and there is no evidence to indicate there is any difference between AAs and nurse anesthetists with respect to claims filed. Perhaps most importantly, two national organizations representing physicians have strongly endorsed our proposal, and the physician is ultimately the person most responsible for patient safety. Third, AAs will not be recognized as individual professional providers with the ability to bill independently, but rather as extenders of the anesthesiologist who is responsible for direct supervision of the AA or AAs.

Comment: One commenter noted that when CMS proposed allowing CRNAs to practice without physician supervision in 1997 this was opposed, and the final rule called for a patient safety study to be conducted. The commenter believes AAs should be included in this study.

Response: As stated above, we do not believe a study of the safety of AAs is necessary. In addition, a study of whether an allied health professional can safely practice without physician supervision is an entirely different issue from what we have proposed, since we will require AAs to be under the direct supervision of a physician. TRICARE defines direct supervision of an AA by an anesthesiologist as follows: The anesthesiologist performs a pre-anesthetic examination and evaluation; the anesthesiologist prescribes the anesthesia plan; the anesthesiologist personally participates in the most demanding aspects of the anesthesia plan including, if applicable, induction and emergence; the anesthesiologist ensures that any procedures in the anesthesia plan that he or she does not perform are performed by a qualified AA; the anesthesiologist monitors the course of anesthesia administration at frequent intervals; the anesthesiologist remains physically present and available for immediate personal diagnosis and treatment of emergencies; the anesthesiologist provides indicated post-anesthesia care; the anesthesiologist performs no other services while he or she supervises no more than four anesthesiologist assistants concurrently or a lesser number if so limited by the state in which the procedure is performed. The Director, TMA, or a designee, shall issue TRICARE policies, instructions, procedures, guidelines, standards, and criteria as may be necessary to implement the intent of this section. TRICARE has modeled its definition of direct supervision on the current Medicare definition of “medically directed anesthesia services,” with three notable variations. First, Medicare uses the terminology “medically directed anesthesia services;” whereas, TRICARE uses “direct supervision.” For purposes of definition, such terminology is interchangeable. Second, Medicare refers to a qualified individual who performs anesthesia procedures not rendered by a physician as defined in Medicare operating instructions. For TRICARE, a qualified individual who performs anesthesia procedures under 32 CFR 199.6(I), established by this final rule, is an AA. The final difference pertains to the number of AAs an anesthesiologist may concurrently supervise. TRICARE and MEDICARE both require that “the anesthesiologist performs no other services while he or she supervises no more than four anesthesiologist assistants concurrently” however TRICARE includes additional language to indicate that in cases where state law further restricts the number of AAs an Anesthesiologist can concurrently supervise TRICARE will defer to state law. The relevant phrase states “or a lesser number if so limited by the state in which the procedure is performed.”

Comment: One commenter noted that our proposed rule stated that AAs will be authorized under the same conditions applied by CMS and questioned if that means that all CMS rules relating to anesthesia apply to AAs or just some. Also, will the CMS medical direction rules apply, and what does direct supervision mean?

Response: We intend to apply all the CMS rules to AAs who provide services to TRICARE beneficiaries. However, we are adding one additional condition regarding the medical direction of AAs. CMS allows physicians to provide concurrent medical direction of up to four AAs or CRNAs. We will use that standard in general, but we will also require that if a state has a more stringent requirement, the state's requirement must be followed. Direct supervision means the same as medical direction under CMS, and we have expanded the regulatory section to include those requirements.

Comment: One commenter asked if AAs must be licensed or can they practice under a form of delegated medicine?

Response: As stated in the proposed rule, AAs must comply with all applicable requirements of state law and be licensed, where applicable. Therefore, they must be licensed only where a state requires them to be licensed. In other states, they may practice as unlicensed providers under the delegated authority of a physician as permitted by state law.

Comment: One commenter noted that the proposed rule states that an AA program must build on a premedical undergraduate science background but stated that neither currently existing AA educational program requires a premedical major. The commenter asked if this means the programs will have to change their requirements.

Response: The AA programs will not have to change their requirements. The proposed rule and the final rule require only that the AA program must build on a premedical science background. It does not require that the participant have a premedical science major. It is important to note that both programs require extensive undergraduate science coursework. In addition, the accreditation standard for AA programs as required by the Commission on Accreditation of Allied Health Education Programs requires undergraduate coursework that includes “studies in biology, chemistry, mathematics, and physics which are usually required for graduate study or its equivalent in the basic medical sciences.”

We have made no changes to the provisions on coverage of cardiac rehabilitation in freestanding cardiac rehabilitation centers. However, based on comments we received on the proposed rule, we have made several changes to the final rule language regarding the inclusion of anesthesiologist assistants as authorized providers.

The profession's name is singular and not singular possessive as we used it in the proposed rule. Accordingly, the final rule uses “anesthesiologist assistant”.

It was suggested that we delete the term “Master's level medical school-based” in describing the required AA programs in order to reflect changes in CAAHEP accreditation standards that permit a shared program between a medical school and a university program outside the medical school. We reviewed the accreditation standards and, based on that, we have changed the wording to require that the program be established under the auspices of a medical school rather than be “medical school-based”. However, we are retaining the language regarding Master's level for clarity.

It was also suggested that when we refer to the Committee on Allied Health Education and Accreditation we include the words “or its successor organization”. We have done this in the final rule.

As stated in our response to the public comments, we have added language to the regulatory provisions to ensure clarity of what is required for direct supervision.

Lastly, we have within this final rule included a provision to provide a separate designation for certified registered nurse anesthetists (CRNAs) by clarifying their existing status in the TRICARE program as an independent provider operating under their state licensure and meeting the requirements for a certified registered nurse anesthetist.

Executive Order (EO) 12866 requires that a comprehensive regulatory impact analysis be performed on any economically significant regulatory action, defined as one which would result in an annual effect of $100 million or more on the national economy or which would 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 a significant impact on a substantial number of small entities.

This is not a significant regulatory action under EO 12866 and has been reviewed by the Office of Management and Budget. In addition, we certify that this final rule will not significantly affect a substantial number of small entities.

This rule imposes no burden as defined by the Paperwork Reduction Act of 1995.

In FR Doc. 04-9955 appearing on page 24513 in the Federal Register of Tuesday, May 4, 2004, make the following correction:

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(B) and 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for not publishing an NPRM and for making this rule effective less than 30 days after publication in the Federal Register . Publishing a NPRM and incorporating these events into 33 CFR 165.13-1315 would be contrary to public interest since the dates for these three events will not always fall on the same day in future years. In addition, immediate action is necessary to ensure the safety of vessels and spectators gathering in the vicinity of the various fireworks launching barges and displays.

The Coast Guard is establishing temporary safety zones to allow for safe fireworks displays. All events occur within the Captain of the Port's, Portland, OR, Area of Responsibility (AOR). These events may result in a number of vessels congregating near fireworks launching barges and sites. The safety zones are needed to protect watercraft and their occupants from safety hazards associated with fireworks displays. These safety zones will be enforced by representatives of the Captain of the Port, Portland, Oregon. The Captain of the Port may be assisted by other Federal and 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 this rule under that Order. This rule is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS). This expectation is based on the fact that the regulated areas established by the regulation will encompass small portions of rivers in the Portland AOR on different dates, all in the evening when vessel traffic is low.

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), we considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” includes 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 a portion of the Willamette River during the times mentioned under Background and Purpose . These safety zones will not have significant economic impact on a substantial number of small entities for the following reasons. This rule will be in effect for only 1 hour during three evenings when vessel traffic is low. Traffic will be allowed to pass through the zone with the permission of the Captain of the Port or his designated representatives on scene, if safe to do so. Because the impacts of this rule are expected to be so minimal, the Coast Guard certifies under 5 U.S.C. 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) 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 (Pub. L. 104-121), we want 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 the rule will 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 calls 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 final 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 unfunded mandate costs. This rule will not impose an unfunded mandate.

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 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.

The Coast Guard considered the environmental impact of this rule and concluded that, under figure 2-1, paragraph (34)(g) of Commandant Instruction M16475.1D, this rule is categorically excluded from further environmental documentation. A Categorical Exclusion is provided for temporary safety zones of less than one week in duration.

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 a NPRM. Publishing a NPRM and delaying the rule's effective date would be contrary to the public interest since immediate action is needed to protect the public, ports and waterways of the United States.

For the same reasons, 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 . Similar temporary security zones have been established over the past few years and published in the Federal Register: 67 FR 2332, January 17, 2002; 67 FR 57952, September 13, 2002; 67 FR 22296, April 28, 2003; 67 FR 41081, July 10, 2003; and 69 FR 6150, February 10, 2004. However, the last in this series of temporary final rules expired April 15, 2004. We did not receive any comments on these past temporary final rules.

The Captain of the Port San Juan has determined that due to the continued risk and recent increases in maritime security concerns, there is the need to continue to have this regulation in place. The Coast Guard intends to publish a notice of proposed rulemaking to create a permanent security zone.

Although the Coast Guard has good cause to implement this regulation without a notice of proposed rulemaking, we want to afford the public the opportunity to participate in this rulemaking by submitting comments and related material regarding the size and boundaries of these security zones in order to minimize unnecessary burdens. If you do so, please include your name and address, identify the docket number for this rulemaking (COTP San Juan-04-044), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this temporary final rule in view of them.

Based on the September 11, 2001, terrorist attacks and recent increases in maritime security concerns, there is an increased risk that subversive activity could be launched by vessels or persons in close proximity to the HOVENSA refinery on St. Croix, USVI against tank vessels and the waterfront facility. Given the highly volatile nature of the substances stored at the HOVENSA facility, this security zone is necessary to decrease the risk that subversive activity could be launched against the HOVENSA facility. The Captain of the Port San Juan is reducing this risk by prohibiting all vessels without a scheduled arrival from coming within 3 miles of the HOVENSA facility unless specifically permitted by the Captain of the Port San Juan, or that officer's designated representative. The Captain of the Port San Juan can be reached on VHF Marine Band Radio, Channel 16 (156.8 Mhz) or by calling (787) 289-2040, 24 hours a day, 7 days a week. The HOVENSA Facility Port Captain can be reached on VHF Marine Band Radio channel 11 (156.6 Mhz) or by calling (340) 692-3488, 24 hours a day, seven days a week.

The temporary security zone is defined by a triangular area that extends 3 miles seaward from the HOVENSA facility and encompasses the waters of Limetree Bay and Limetree Channel, as outlined by the following coordinates: 17°41′32″N, 64°45′09″W; thence to 17°41′44″N, 64°44′39″W; thence to 17°38′30″N, 64°43′12″W; thence returning to the beginning point at 17°41′39″N, 64°45′09″W. The security zone does not include the waters of the Cross Channel and Krause Lagoon Channel.

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) because this zone covers an area that is not typically used by commercial vessel traffic, including fishermen, and vessels may be allowed to enter the zone on a case-by-case basis with the permission of the Captain of the Port San Juan.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), the Coast Guard considered whether this rule would have a significant economic effect upon 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 may affect the following entities, some of which may be small entities: owners of small charter fishing or diving operations that operate near the HOVENSA facility. 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 because this zone covers an area that is not typically used by commercial fishermen and vessels may be allowed to enter the zone on a case by case basis with the permission of the Captain of the Port San Juan.

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 offer to assist small entities in understanding this rule so that they can better evaluate its effects on them and participate in the rulemaking process. If the rule will affect your small business, organization, or government jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed under FOR FURTHER INFORMATION CONTACT for assistance in understanding this rule.

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this 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 would not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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 would 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 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 invite your comments on how this proposed rule might impact tribal governments, even if that impact may not constitute a “tribal implication” under the Order.

We have analyzed this 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. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

We have analyzed this proposed rule under Commandant Instruction M16475.lD, 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)(g), of the Instruction, from further environmental documentation. An “Environmental Analysis Check List” and a “Categorical Exclusion Determination” (CED) are available in the docket where indicated under ADDRESSES.

On December 15, 2003 (68 FR 69637), EPA published a notice of proposed rulemaking regarding a State Implementation Plan (SIP) revision submitted by the State of New Jersey. The notice proposed to approve a revision to the SIP for New Jersey's enhanced inspection and maintenance (I/M) program. New Jersey made several amendments to its I/M rules to comply with EPA regulations and to improve performance of the program and requested that the SIP be revised to include these changes. Chief among the amendments EPA proposed to approve is New Jersey's On-Board Diagnostic (OBD) program. A detailed description of New Jersey's submittals and EPA's rationale for the proposed action were presented in the December 15, 2003 proposal, referenced above, and will not be restated here.

No comments were received for the proposed rulemaking published in the December 15, 2003 Federal Register .

EPA is taking final action to approve New Jersey's OBD I/M program and additional changes to the I/M SIP discussed in the Notice of Proposed Rulemaking titled “Approval and Promulgation of Implementation Plans; New Jersey; Motor Vehicle Enhanced Inspection and Maintenance Program.” EPA is approving the request for the exemption of OBD-eligible gasoline-fueled and bi-fueled school buses from enhanced I/M inspection, and for leasing companies and out-of-state dealerships to be allowed to issue temporary inspection decals. The SIP revision also incorporated several features of the current New Jersey Enhanced Inspection and Maintenance program, such as, the increase of the minimum cost expenditure value for the issuance of a waiver from $200 to $450; the exemption from dynamometer testing any motor vehicle “with a chassis height that has been modified so as to make its operation on a dynamometer either impractical or hazardous”; and the removal of all references to the evaporative pressure and purge test, while retaining the evaporative fuel cap leak test; and additional amendments to clarify definitions and other aspects of the program. The State demonstrated there is no adverse impact to air quality with the exemption of new cars from inspection for four years, as opposed to two years, and the change in the minimum cost expenditure value for the issuance of a waiver, from $200 to $450. Please refer to the proposed rulemaking 68 FR 69637 for further details on all approved measures. EPA's authority to approve New Jersey's enhanced I/M program is set forth at sections 110 and 182 of the Clean Air Act.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).

This rule also does not have tribal implications because it will 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, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does 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 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 20, 2004. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2).)

On January 24, 2003 (68 FR 3410), EPA promulgated a final rule reclassifying the Metropolitan Washington, DC ozone nonattainment area from serious to severe nonattainment for the 1-hour ozone national ambient air quality standard (NAAQS). This final rule established a deadline of March 1, 2004, by which the District, Maryland and Virginia were required to submit state implementation plan (SIP) revisions to their respective SIP to meet the additional requirements of severe ozone nonattainment areas found in section 182(d) of the CAA. These additional requirements were discussed in the notice of proposed rulemaking and the final rulemaking for the reclassification. See, 67 FR 68805, November 13, 2002 and 68 FR 3410, January 24, 2003.

The effect of our January 24, 2003 final rule (68 FR 3410) that reclassified the Metropolitan Washington, DC ozone nonattainment area to severe nonattainment was to set a new attainment deadline for this area of November 15, 2005, and to require Maryland, Virginia and the District of Columbia to submit, as necessary, a revision or revisions to their SIPs for the Metropolitan Washington, D.C. ozone nonattainment area to meet the CAA's requirements for severe one-hour ozone nonattainment areas. Pursuant section 182(i), EPA set March 1, 2004 as the submittal deadline for Maryland, Virginia and the District of Columbia to submit these new planning requirements.

Maryland has not submitted a SIP revision to implement the penalty fee provisions specified by CAA section 185. Section 185 of the CAA requires that major stationary sources of volatile organic compound (VOC) and nitrogen oxide (NO X ) emissions located in severe ozone nonattainment areas pay a fee for every ton of annual emissions over 80 percent of a baseline amount if the area fails to attain the ozone national ambient air quality standards. 1 The fee is set at $5,000 per ton (adjusted annually using the same consumer price index (CPI) adjustment as is used for the Title V operating permit program fees).

Pursuant to our January 24, 2003 reclassification final rule (68 FR 3410), under section 182(d)(3) of the CAA, Maryland was required to submit a SIP revision to implement this “section 185 fee” provision in the Metropolitan Washington, DC area and has not done so.

EPA believes that Maryland has made submittals addressing all the other severe area elements with the exception of the section 185 fee provision. EPA has determined that these submittals are complete. 2

Under section 179(a) of the CAA, if EPA has not found that the State has made a complete submittal within 18 months of the effective date of EPA's finding, pursuant to CAA section 179(a) and 40 CFR 52.31, the offset sanction identified in CAA section 179(b) will be applied in the affected area. If the State still has not made a complete submission six months after the offset sanction is imposed, then the highway funding sanction will apply in the affected areas, in accordance with 40 CFR 52.31. In addition, CAA section 110(c) provides for EPA to promulgate a Federal implementation plan (FIP) no later than two years after a finding under section 179(a).

The 18-month clock will stop and the sanctions will not take effect if, within 18 months after the date of the finding, EPA finds that the State has made a complete submittal. In addition, EPA will not promulgate a FIP if the State makes the required SIP submittal and EPA takes final action to approve the submittal within two years of EPA's finding.

In addition, EPA recently promulgated regulations addressing the transition from the 1-hour ozone NAAQS to the 8-hour ozone NAAQS. 3 These regulations provide that once the 1-hour ozone NAAQS is revoked for an area, the section 185 fees provision for purposes of the 1-hour ozone NAAQS will no longer apply. Because at that time the State would no longer be obligated to submit a SIP revision for the section 185 requirement for the 1-hour standard, the sanctions and FIP clocks would stop upon revocation of the 1-hour ozone NAAQS.

In this final rule, pursuant to section 179(a) of the CAA, EPA is issuing to the State of Maryland a finding of failure to submit a required SIP element for failure to submit a SIP revision to implement the provisions of section 185 of the CAA in the Metropolitan Washington, DC severe one-hour ozone nonattainment area.

At the same time as the signing of this document, the EPA Regional Administrator for Region III sent a letter to Maryland describing this finding in more detail. This letter and its enclosure is included in the docket to this rulemaking.

This notice is a final agency action, but is not subject to the notice-and-comment requirements of the APA, 5 U.S.C. 553(b). EPA believes that because of the limited time provided to make findings of failure to submit and findings of incompleteness regarding SIP submissions or elements of SIP submission requirements, Congress did not intend such findings to be subject to notice-and-comment rulemaking. However, to the extent such findings are subject to notice-and-comment rulemaking, EPA invokes, consistent with past practice (for example, see at 65 FR at 81368, December 26, 200, or, see 61 FR at 36294, July 10, 1996), the good cause exception pursuant to the APA, 5 U.S.C. 553(b)(3)(B). Notice and comment are unnecessary because no significant judgment is involved in making a nonsubstantive finding of failure to submit SIP revisions or elements of SIP submissions required by the Clean Air Act. Furthermore, providing notice and comment would be impracticable because of the limited time provided under the statute for making such determinations. Finally, notice and comment would be contrary to the public interest because it would divert agency resources from the critical substantive review of complete SIPs. See 58 FR 51270 (October 1, 1993) and 59 FR 39832 (August 4, 1994).

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The various CAA provisions discussed in this notice require the states to submit SIP revisions. This notice merely provides a finding that the states have not met those requirements. This notice does not, by itself, require any particular action by any State, local, or tribal government; or by the private sector and therefore is not a Federal mandate. This final rule will not have a significant impact on a substantial number of small entities because findings of failure to submit required SIP revisions do not by themselves create any new requirements. Therefore, I certify that this action will not have a significant economic impact on a substantial number of small entities. Because this rule contains no Federal mandates under the regulatory provisions of title II of the Unfunded Mandates Reform Act (UMRA) of 1995 (Pub. L. 104-4) for State, local, or tribal governments or the private sector, this rule does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the UMRA. This rule also does not have tribal implications because it will 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, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does 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 (64 FR 43255, August 10, 1999). This notice merely provides a finding that the State of Maryland has not submitted the SIP revision required by the CAA provisions discussed in this notice. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant.

Section 12 of the National Technology Transfer and Advancement Act (NTTAA) of 1995 requires Federal agencies to evaluate existing technical standards when developing a new regulation. To comply with NTTAA, EPA must consider and use “voluntary consensus standards” (VCS) if available and applicable when developing programs and policies unless doing so would be inconsistent with applicable law or otherwise impractical. EPA believes that VCS are inapplicable to today's action because it does not require the public to perform activities conducive to the use of VCS. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Under section 801(a)(1)(A) of the APA, as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), EPA submitted, by the effective date of this rule , a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives and the Comptroller General of the General Accounting Office. This rule is not a “major rule” as defined by APA section 804(2), as amended. As noted above, EPA is issuing this action as a rulemaking. There is a question as to whether this action is a rule of “particular applicability,” under section 804(3)(A) of APA as amended by SBREFA, and thus exempt from the congressional submission requirements, because this rule applies only to named States. In this case, EPA has decided to err on the side of submitting this rule to Congress, but will continue to consider this issue of the scope of the exemption for rules of “particular applicability.”

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 20, 2004. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action issuing a finding that the State of Maryland has failed to submit a SIP revision to implement the “section 185 fee” provision in the Metropolitan Washington, DC area may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

On March 16, 2004 (69 FR 12293), EPA published a notice of proposed rulemaking (NPR) proposing approval of revisions to Pennsylvania's 2005 ROP plan for its portion of the Philadelphia area. The revisions update the plan's mobile emissions inventories and 2005 MVEBs to reflect the use of MOBILE6, an updated model for calculating mobile emissions of ozone precursors. These SIP revisions were proposed under a procedure called parallel processing, whereby EPA proposes its rulemaking action on a SIP revision concurrently with a state's procedures for amending its SIP. The Pennsylvania Department of the Environmental Protection (PADEP) submitted the proposed SIP revisions to EPA on January 9, 2004 for parallel processing. On March 16, 2004 (69 FR 12293), EPA proposed approval of Pennsylvania's January 9, 2004 submittal. No comments were submitted to EPA on its March 16, 2004 proposal. The PADEP formally submitted the final SIP revisions to EPA on February 23, 2004. That final submittal had no substantive changes from the proposed version submitted on January 9, 2004. A detailed description of Pennsylvania's submittal and EPA's rationale for its proposed approval were presented in NPR published on March 16, 2004, and will not be restated in their entirety here.

These SIP revisions amend the 1990 and 2005 motor vehicle emissions inventories and 2005 MVEBs of Pennsylvania's 2005 ROP plan for its portion of the Philadelphia area to reflect the use of the MOBILE6 motor vehicle emissions model. The PADEP has demonstrated that the revised plan's levels of motor vehicle emissions, calculated using MOBILE6, continue to demonstrate the required ROP for 2005. These revised MOBILE6-based MVEBs in the 2005 ROP plan are identical to the MOBILE6-based MVEBs of the 2005 attainment demonstration plan for the Philadelphia area found adequate by EPA on May 28, 2003 (68 FR 31700). The revised mobile inventories and MVEBs being approved for Pennsylvania's 2005 ROP Plan are shown in tons per day (tpd) in Tables 1 and 2.

EPA is taking final action to approve the SIP revisions submitted by the Commonwealth of Pennsylvania on February 23, 2004. These revisions amend the 1990 and 2005 motor vehicle emissions inventories and 2005 MVEBs of Pennsylvania's 2005 ROP plan for the Philadelphia area severe 1-hour ozone nonattainment area to reflect the use of MOBILE6.

These SIP revisions were proposed under a procedure called parallel processing, whereby EPA proposes a rulemaking action concurrently with a state's procedures for amending its SIP. On January 9, 2004, the PADEP submitted its proposed SIP revisions to EPA. On March 16, 2004 (69 FR 12293), EPA proposed approval of Pennsylvania's January 9, 2004 submittal. No comments were submitted to EPA on its EPA's March 16, 2004 proposal. The PADEP formally submitted the final SIP revisions to EPA on February 23, 2004. EPA has evaluated Pennsylvania's final SIP revisions submitted on February 23, 2004 and finds that no substantive changes were made from the proposed SIP revisions submitted on January 9, 2004.

Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” and therefore is not subject to review by the Office of Management and Budget. For this reason, this action is also not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). This action merely approves state law as meeting Federal requirements and imposes no additional requirements beyond those imposed by state law. Accordingly, the Administrator certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). Because this rule approves pre-existing requirements under state law and does not impose any additional enforceable duty beyond that required by state law, it does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). This rule also does not have tribal implications because it will 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, as specified by Executive Order 13175 (65 FR 67249, November 9, 2000). This action also does not have Federalism implications because it does 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 (64 FR 43255, August 10, 1999). This action merely approves a state rule implementing a Federal standard, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. This rule also is not subject to Executive Order 13045 “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because it is not economically significant. In reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. In this context, in the absence of a prior existing requirement for the State to use voluntary consensus standards (VCS), EPA has no authority to disapprove a SIP submission for failure to use VCS. It would thus be inconsistent with applicable law for EPA, when it reviews a SIP submission, to use VCS in place of a SIP submission that otherwise satisfies the provisions of the Clean Air Act. Thus, the requirements of section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272) do not apply. This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . This rule is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by July 20, 2004. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this rule for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action.

This action to approve revisions to Pennsylvania's 2005 ROP plan for its portion of the Philadelphia area to reflect the use of MOBILE6 may not be challenged later in proceedings to enforce their requirements. (See section 307(b)(2).)

This is a synopsis of the Commission's Report and Order, MM Docket No. 01-271, adopted April 30, 2004, and released May 4, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Information Center (Room CY-A257), 445 12th Street, SW., Washington, DC. The complete text of this decision may also be purchased from the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20054.

Provisions of the Regulatory Flexibility Act of 1980 do not apply to this proceeding.

Members of the public should note that from the time a Notice of Proposed Rule Making is issued until the matter is no longer subject to Commission consideration or court review, all ex parte contacts are prohibited in Commission proceedings, such as this one, which involve channel allotments. See 47 CFR 1.1204(b) for rules governing permissible ex parte contacts.

For information regarding proper filing procedures for comments, see 47 CFR 1.415 and 1.420.

This is a synopsis of the Commission's Report and Order, MB Docket No. 02-212, adopted April 30, 2004, and released May 4, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Reference Center (Room 239), 445 12th Street, SW., Washington, DC. This document may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com.

This is a synopsis of the Commission's Report and Order, MB Docket No. 02-73, adopted April 12, 2004, and released April 14, 2004. The full text of this Commission decision is available for inspection and copying during normal business hours in the FCC Information Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's duplicating contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, (202) 863-2893, facsimile (202) 863-2898, or via e-mail qualexint@aol.com. The Audio Division granted Station KRXS-FM, Globe, Arizona a license to specify operation on Channel 247C2 in lieu of Channel 247C3, which is not reflected in the FM Table of Allotments. See BPH-20020515AAG.

This is a synopsis of the Commission's Memorandum Opinion and Order in MM Docket No. 00-148, adopted April 22, 2004, and released April 27, 2004. The full text of this decision is available for inspection and copying during normal business hours in the FCC's Reference Information Center at Portals II, CY-A257, 445 12th Street, SW., Washington, DC 20554. The complete text of this decision may also be purchased from the Commission's copy contractor, Qualex International, Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, or via e-mail qualexint@aol.com. This document is not subject to the Congressional Review Act.