Shell egg grading is a voluntary program provided under the Agricultural Marketing Act of 1946, as amended, (7 U.S.C. 1621 et seq. ) and is offered on a fee-for-service basis. It is designed to assist in the orderly marketing of shell eggs by providing for the official certification of egg quality, quantity, size, temperature, packaging, and other factors.

Changing technology in egg production and processing requires that the regulations governing shell egg grading be updated. These revisions will update the requirements to bring them in line with the requirements that applicants utilizing official grading services must meet. After a plant makes an application for grading service, an agency representative conducts a plant survey. The survey determines if the plant premises, facility, equipment, and operation procedures can satisfactorily support the official grading of shell eggs. These prerequisite requirements are based on good manufacturing practices typically associated with food processing and have specific application to shell egg processing. The revisions include the following:

(1) Definitions. The definitions of “chief of the grading branch” and “national supervisor” will be revised to reflect the current organizational structure in AMS. New definitions for “Agricultural Marketing Service or AMS”, “consumer grades,” “packaging,” “packing,” and “United States Standards, Grades, and Weight Classes for Shell Eggs” will be added to establish a clear meaning for these terms. (§ 56.1)

(2) Candling Lights. This revision will amend the candling light requirement from one to two and will require a candling booth of sufficient size to accommodate at least two candling lights for additional graders and supervisory visits. (§ 56.17)

(3) Communications. The revisions will allow alternate forms of electronic communications as are currently available in the market place. (§§ 56.21, 56.58)

(4) Temporary Grading Service. This revision will add temporary grading service as a type of grading service that could be requested by an applicant. The regulations will also be revised by providing that certificates may be issued to an applicant who utilizes temporary grading. (§§ 56.17, 56.56)

(5) Lot Numbering. This revision will update the regulations to reflect changes in the marking of shell eggs. (§ 56.37)

(6) Official Identification. The revision will clarify that only product which is identified with the grademark shall be officially identified under the supervision of a grader or quality assurance inspector. (§ 56.39)

(7) Types of Grading Services. The types of grading services available to an applicant will be added. (§ 56.28)

(8) Appeal Gradings. The revision will increase the sample size to improve the confidence level of results and properly resolve the issue prompting the applicant's appeal. (§ 56.65)

(9) Occupational Safety and Health Regulations. This revision will update the regulations to reflect that an applicant utilizing the official grading service must be in compliance with all applicable Federal, State, and local government occupational safety and health regulations. (§ 56.76)

(10) General Premises. General premise requirements will be added. The revision will specify that the premises of the facility be maintained in an appropriate manner. (§ 56.76)

(11) Structures and Facilities. The revision will update the regulations to reflect that all structures and facilities subject to moisture must be readily cleanable, sanitarily maintained, and impervious to moisture and that floors are constructed for proper drainage. (§ 56.76)

(12) Lavatories and Toilets. The revisions will also specify that the facilities be located in areas separate and away from the grading and processing rooms. (§ 56.76)

(13) Storage Areas. This revision will specify that adequate packing and packaging storage areas be provided and properly maintained in order that packing and packaging are stored in a dry, clean, and sanitary environment. (§ 56.76)

(14) Grading and Packing Rooms. The revision will update the requirements of the grading and packing rooms by specifying their sanitary design and construction. Additionally, the revision will specify that during operations the sanitation of the processing areas and equipment be maintained in a satisfactory manner. (§ 56.76)

(15) Shell Egg Cooler Rooms. The regulations will continue to provide that humidifying equipment capable of maintaining a relative humidity, which will minimize shrinkage, shall be provided. (§ 56.76)

(16) Shell Egg Protecting Operations. The revision will update the regulations by specifying that the requirements for shell egg protecting equipment include its sanitary design, maintenance, and operation. The revision will also eliminate the requirement that previously used contaminated oil be heat treated prior to its reuse. (§ 56.76)

(17) Shell Egg Washing. The revision will specify that shell egg washing equipment be sanitarily designed and maintained in a clean and sanitary manner. The revision will also specify that shell egg drying equipment be sanitarily designed and maintained, that air used for drying must be filtered, and that filters are to be cleaned and maintained. (§ 56.76)

(18) Shell Egg Wash Water. The revision will clarify that the plant would be responsible for providing an accurate thermometer to measure the temperature of the wash water. (§ 56.76)

(19) Spray Rinse Sanitizer. The revision will revise the regulations to reflect that the spray rinse contains a sanitizer approved by the national supervisor of not less than 100 p/m nor more than 200 p/m of available chlorine or its equivalent. The revision will update the regulations to reflect that shell eggs receive an increased exposure to an approved sanitizer. (§ 56.76)

(20) Shell Egg Washing. The revision will reflect that shell eggs be removed from the processing equipment during any non-processing periods to prevent loss of egg quality from extended exposure to elevated temperatures. (§ 56.76)

(21) Removal of Washing Operation Steam and Vapors. The revision will specify that steam, vapors, or odors originating from washing and rinsing operations shall be exhausted to the outside of the building to prevent the development of an undesirable environment in the shell egg processing room. (§ 56.76)

(22) Shell Egg Packing. The revision will add that eggs that are to be identified with a grademark may be packed in other than fiber packing materials. (§ 56.76)

(23) Approval of Chemicals and Compounds. The regulations will be updated to reflect that the national supervisor, Poultry Programs is responsible for determining acceptance of the intended use of chemicals and compounds for their specified use. (§ 56.76)

The proposed rule was published in the Federal Register June 2, 2004 (69 FR 31039). The comment period ended August 2, 2004.

We received four timely comments: one from a shell egg producer, two from an industry organization, and one from a State department of agriculture.

The State department of agriculture suggested that shell egg processing facilities in the future should comply fully with 21 CFR part 110, giving variances where needed. The Good Manufacturing Practices promulgated by the Food and Drug Administration at 21 CFR part 110 already serve as a foundation for the Agency for the processing and facility requirements of the voluntary shell egg grading regulations. Moreover, the Agency will continue to use them as a source upon which the processing and facility requirements for this program are based.

Both the shell egg producer and the industry organization did not support requiring that cooler rooms holding officially identified shell eggs be capable of maintaining a relative humidity of 70% or higher. Both commenters discussed the difficulty of humidifying ambient air in the colder climates of the United States. The shell egg producer additionally addressed that shell eggs do not remain in egg producer's coolers more than a few days before they enter marketing channels where shell eggs are not subject to humidity requirements. The Agency revisited this issue and after considering the current trend of shell eggs promptly moving through marketing channels is withdrawing this proposal from the final rule. The Agency will not amend the regulations which currently provide the requirements that cooler rooms holding shell eggs that are identified with a consumer grade shall be equipped with humidifying equipment capable of maintaining a relative humidity to minimize shrinkage which affects the quality of shell eggs.

The industry organization suggested that the terms “appropriate manner” and “sanitary” be further clarified in order that shell egg graders apply these terms in a consistent manner. The Agency believes that the descriptors identified by the commenter provide the level of clarity appropriate for our regulatory language. These descriptors also can be found in the product indexes that provide detailed guidance to graders to assure that the regulations are being correctly implemented and to supervisors to assure that the program is being properly administrated.

The industry organization requested that egg producers be able to choose how to lot number shell eggs including continuing to have the option to lot number shell eggs on the carton. The Agency is not restricting how producers lot number shell eggs identified with an official grademark. Moreover, this revision provides producers with an additional option to apply a lot number on an individual shell egg.

The industry organization asked if the Agency will issue levels for quaternary ammonia and other sanitizers in sanitizer spray rinse. The strength of a sanitizer spray rinse is currently based on the concentration of chlorine or its equivalent. The Agency finds that this is an appropriate manner to describe the required level of concentration of the sanitizing solution.

When the proposed rule was published, the Agency inadvertently overlooked a technical revision of the terms describing the official grademark in § 56.76(g)(1). To clearly describe these marks, in § 56.76(g)(1), the Agency is removing the word “consumer” in the requirements for eggs officially identified with a grademark.

This rule has been determined to be not significant for purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget (OMB). In addition, pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ), AMS has considered the economic impact of the rule on small entities and has determined that its provisions would not have a significant economic impact on a substantial number of small entities.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. The Small Business Administration (SBA)(13 CFR 121.201) defines small entities that produce and process chicken eggs as those whose annual receipts are less than $9,000,000. Approximately 625,000 egg laying hens are needed to produce enough eggs to gross $9,000,000.

Currently, the Agricultural Marketing Act of 1946, as amended, (7 U.S.C. 1621 et seq. ) authorizes a voluntary grading program for shell eggs. Shell egg processors that apply for service must pay for the services rendered. So that costs are shared by all users, these user fees are proportional to the volume of shell eggs graded. Shell egg processors are entitled to pack their eggs in packages bearing the USDA grade shield when AMS graders are present to certify that the eggs meet the grade requirements as labeled. Plants in which these grading services are performed are called official plants. Shell egg processors who do not use USDA's grading service may not use the USDA grademark. There are about 558 shell egg processors registered with the Department that have 3,000 or more laying hens. Of these, 161 are official plants that use USDA's grading service and would be subject to this proposed rule. Of these 161 official plants, 38 meet the small business definition.

Sections of the regulations are affected by changes in egg production and processing technology. This rule is intended to clarify and update this regulation and bring them in line with requirements that applicants utilizing official grading services currently are meeting. The revisions will add definitions that describe the official identification and packaging of shell eggs; provide that grading services may be requested or reported by electronic means; clarify the number of samples required for an appeal grading when the original samples are not available; require that plants provide two candling lights in an acceptable candling booth for grade determination; provide an additional method for lot identifying shell eggs; and clarify and update the facility and operating requirements of plants utilizing the voluntary grading service. Accordingly, the revision will not have a significant economic impact on a substantial number of small entities.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This action is not intended to have retroactive effect. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule. There are no administrative procedures which must be exhausted prior to any judicial challenge to the provisions of this rule.

The information collection requirements in §§ 56.21(a), 56.21(c), 56.37, 56.56(a), 56.58, 56.76(f)(7), and 56.76(h) amended by this rule have been previously approved by OMB and assigned OMB control number 0581-0128 under the Paper Reduction Act of 1995.

AMS is committed to compliance with the Government Paperwork Elimination Act, which requires Government agencies in general to provide the public the option of submitting information or transacting business electronically to the maximum extent possible.

(3) The temperature of the wash water shall be maintained at 90 °F (32.2 °C) or higher, and shall be at least 20 °F (6.7 °C) warmer than the internal temperature of the eggs to be washed. These temperatures shall be maintained throughout the cleaning cycle. Accurate thermometers shall be provided for monitoring wash water temperatures.

(4) Approved cleaning compounds shall be used in the wash water.

(5) Wash water shall be changed approximately every 4 hours or more often if needed to maintain sanitary conditions, and at the end of each shift. Remedial measures shall be taken to prevent excess foaming during the egg washing operation.

(6) Replacement water shall be added continuously to the wash water of washers. Chlorine or quaternary sanitizing rinse water may be used as part of the replacement water, provided, they are compatible with the washing compound. Iodine sanitizing rinse water may not be used as part of the replacement water.

(7) Only potable water may be used to wash eggs. Each official plant shall submit certification to the national office stating that their water supply is potable. An analysis of the iron content of the water supply, stated in parts per million, is also required. When the iron content exceeds 2 parts per million, equipment shall be provided to reduce the iron content below the maximum allowed level. Frequency of testing for potability and iron content shall be determined by the Administrator. When the water source is changed, new tests are required.

(8) Waste water from the egg washing operation shall be piped directly to drains.

(9) The washing, rinsing, and drying operations shall be continuous and shall be completed as rapidly as possible to maximize conservation of the egg's quality and to prevent sweating of eggs. Eggs shall not be allowed to stand or soak in water. Immersion-type washers shall not be used.

(10) Prewetting shell eggs prior to washing may be accomplished by spraying a continuous flow of water over the eggs in a manner which permits the water to drain away or other methods which may be approved by the Administrator. The temperature of the water shall be the same as prescribed in this section.

(11) Washed eggs shall be spray-rinsed with water having a temperature equal to, or warmer than, the temperature of the wash water. The spray-rinse water shall contain a sanitizer that has been determined acceptable for the intended use by the national supervisor and of not less than 100 p/m nor more than 200 p/m of available chlorine or its equivalent. Alternate procedures, in lieu of a sanitizer rinse, may be approved by the national supervisor.

(12) Test kits shall be provided and used to determine the strength of the sanitizing solution.

(13) During non-processing periods, eggs shall be removed from the washing and rinsing area of the egg washer and from the scanning area whenever there is a buildup of heat that may diminish the quality of the egg.

(14) Washed eggs shall be reasonably dry before packaging and packing.

(15) Steam, vapors, or odors originating from the washing and rinsing operation shall be continuously and directly exhausted to the outside of the building.

(g) Requirements for eggs officially identified with a grademark. (1) Shell eggs that are officially identified with a grademark shall be placed under refrigeration at an ambient temperature no greater than 45 °F (7.2 °C) promptly after packaging.

(2) Eggs that are to be officially identified with the grademark shall be packed only in new or good used packing material and new packaging materials that are clean, free of mold, mustiness and off odors, and must be of sufficient strength and durability to adequately protect the eggs during normal distribution. When packed in other than fiber packing material, the containers must be of sound construction and maintained in a reasonably clean manner.

(h) Use of approved chemicals and compounds. (1) All egg washing and equipment cleaning compounds, defoamers, destainers, sanitizers, inks, oils, lubricants, or any other compound that comes into contact with the shell eggs shall be approved by the national supervisor for their specified use and handled in accordance with the manufacturer's instructions.

(2) All pesticides, insecticides, and rodenticides shall be approved for their specified use and handled in accordance with the manufacturer's instructions.

Background

In an interim rule effective and published in the Federal Register on September 14, 2004 (69 FR 55315-55320, Docket No. 04-045-1), we amended the regulations in “subpart—Citrus Canker” (7 CFR 301.75 through 301.75-16) by updating the list in § 301.75-4 of areas in the State of Florida quarantined because of citrus canker. Specifically, to reflect the detection of citrus canker in an area adjacent to but outside of one current quarantined area in Florida, as well as in eight additional counties, we expanded the boundaries of one existing quarantined area and added several new areas to the list of quarantined areas. We also removed portions of three counties from the list of quarantined areas because regular surveys showed them to have been free of citrus canker for at least 2 years. These actions were necessary to prevent the spread of citrus canker into noninfested areas of the United States and to relieve restrictions that were no longer warranted.

Comments on the interim rule were required to be received on or before November 15, 2004. We did not receive any comments. Therefore, for the reasons given in the interim rule, we are adopting the interim rule as a final rule.

This action also affirms the information contained in the interim rule concerning Executive Order 12866 and the Regulatory Flexibility Act, Executive Orders 12372 and 12988, and the Paperwork Reduction Act.

Further, for this action, the Office of Management and Budget has waived its review under Executive Order 12866.

Background

On January 10, 2000, the Animal and Plant Health Inspection Service (APHIS) published a final rule in the Federal Register (65 FR 1298-1302, Docket No. 97-025-1) that revised the statement of organization, functions, and delegations of authority of APHIS in 7 CFR part 371 to reflect changes in internal APHIS organization. The rule included delegations of authority from the Administrator of APHIS to the Deputy Administrator of Wildlife Services. However, we inadvertently omitted the delegation of authority from the Administrator to the Deputy Administrator of Wildlife Services for section 101(k) of the Rural Development, Agriculture, and Related Agencies Appropriations Act of 1988, also known as the Act of December 22, 1987. This delegation of authority had already been made, however it is not reflected in the Code of Federal Regulations. Therefore we are amending 7 CFR 371.6(b)(2) to correct this oversight.

This rule relates to internal agency management. Therefore, this rule is exempt from the provisions of Executive Order 12866 and 12988. Moreover, pursuant to 5 U.S.C. 553, notice of proposed rulemaking and opportunity for comment are not required for this rule, and it may be made effective less than 30 days after publication in the Federal Register . In addition, under 5 U.S.C. 804, this rule is not subject to congressional review under the Small Business Regulatory Enforcement Fairness Act of 1996, Pub. L. 104-121. Finally, this action is not a rule as defined by 5 U.S.C. 601 et seq. , the Regulatory Flexibility Act, and thus is exempt from the provisions of that Act.

This rule is issued under Marketing Order No. 920, as amended (7 CFR part 920), regulating the handling of kiwifruit 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 kiwifruit handlers are subject to assessments. Funds to administer the order are derived from such assessments. It is intended that the assessment rate as issued herein will be applicable to all assessable kiwifruit beginning on August 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 action that decreased the assessment rate established for the committee for the 2004-05 and subsequent fiscal periods from $0.045 per 22-pound, volume-fill container or container equivalent to $0.002 per pound of kiwifruit. The California kiwifruit 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. The members of the committee are producers of California kiwifruit. They are familiar with the committee's needs and 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 formulated and discussed at a public meeting. Thus, all directly affected persons have an opportunity to participate and provide input.

For the 2002-03 and subsequent fiscal periods, the committee recommended, and USDA approved, an assessment rate that would continue in effect from fiscal period to fiscal period 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 July 15, 2004, and unanimously recommended 2004-05 fiscal period expenditures of $91,839 and an assessment rate of $0.002 per pound of kiwifruit. In comparison, last fiscal period's budgeted expenditures were $88,659. The assessment rate of $0.002 per pound of kiwifruit is $0.000045 per pound lower than the rate previously in effect and is based upon a per-pound unit rather than upon a 22-pound, volume-fill container or container equivalent.

The committee unanimously recommended decreasing the assessment rate slightly because the 2004-05 fiscal period kiwifruit crop is expected to be 8,550,000 pounds larger than the 2003-04 crop of 41,850,000 pounds. Revenue from assessments, along with other revenue from interest income and reserve carryover funds, should allow the committee to meet its expenses. The reserve at the end of the fiscal period should be about $30,686, which is within the maximum amount permitted under the marketing order.

The following table compares major budget expenditures recommended by the committee for the 2003-04 and 2004-05 fiscal periods:

The assessment rate recommended by the committee was derived by the following formula: The anticipated 2004-05 fiscal period expenses ($91,839) minus the 2003-04 fiscal period carry forward ($21,725), plus the 2005-06 fiscal period anticipated reserve ($30,686), divided by the total estimated 2004-05 fiscal period shipments (50,400,000 pounds of kiwifruit). This results in an assessment rate of $0.002 per-pound. This rate should provide sufficient funds in combination with reserve funds to meet the anticipated expenses of $91,839 and result in a reserve of $30,686 in July 2005, which is acceptable to the committee. This reserve is also within the maximum permitted by the order, approximately one fiscal period's expenses (§ 920.41).

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 is effective for an indefinite period, the committee will continue to meet prior to or during each fiscal period 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 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 2004-05 fiscal period budget and those for subsequent fiscal periods will 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 in order 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 270 producers of kiwifruit in the production area and approximately 45 handlers subject to regulation under the marketing order. The Small Business Administration (13 CFR 121.201) defines small agricultural producers as those having annual receipts less than $750,000, and defines small agricultural service firms as those whose annual receipts are less than $5,000,000.

None of the 45 handlers subject to regulation have annual kiwifruit sales of $5,000,000. In addition, only six producers have annual sales of at least $750,000. Thus, the majority of handlers and producers of kiwifruit may be classified as small entities.

This rule continues in effect the action that decreased the assessment rate established for the committee and collected from handlers for the 2004-05 and subsequent fiscal periods from $0.045 per 22-pound, volume-fill container or container equivalent to $0.002 per pound of kiwifruit. The committee unanimously recommended 2004-05 fiscal period expenditures of $91,839 and an assessment rate of $0.002 per pound of kiwifruit. The assessment rate of $0.002 per pound of kiwifruit is $0.000045 lower than the rate during the 2003-04 fiscal period, and is based upon a per-pound assessable unit rather than upon a 22-pound container or container equivalent. The quantity of assessable kiwifruit for the 2004-05 fiscal period is estimated to be 50,400,000 pounds of kiwifruit. Thus, the $0.002 per-pound rate should provide $100,800 in assessment income and be adequate to meet this fiscal period's expenses.

The following table compares major budget expenditures recommended by the committee for the 2003-04 and 2004-05 fiscal periods:

The committee reviewed and unanimously recommended 2004-05 fiscal period expenditures of $91,839, which included increases in salaries and office/annual audit costs, and a decrease in travel expenses. Prior to arriving at this budget, the committee considered alternative expenditure levels and varying crop sizes, but ultimately decided that the recommended levels were reasonable to properly administer the order.

The assessment rate recommended by the committee was derived by the following formula: The anticipated 2004-05 fiscal period expenses ($91,839) minus the 2003-04 fiscal period carry forward ($21,725), plus the 2005-06 fiscal period anticipated reserve ($30,686), divided by the total estimated 2004-05 fiscal period shipments (50,400,000 pounds of kiwifruit). This results in an assessment rate of $0.002 per-pound. This rate should provide sufficient funds in combination with reserve funds to meet the anticipated expenses of $91,839 and result in a reserve of $30,686 in July 2005, which is acceptable to the committee. This reserve is also within the maximum permitted by the order, approximately one fiscal period's expenses (§ 920.41).

A review of historical information and preliminary information pertaining to the 2004-05 fiscal period indicates that the grower price could range between $9.50 and $13.00 per pound of kiwifruit. Therefore, the estimated assessment revenue for the 2004-05 fiscal period as a percentage of total grower revenue could range between 0.015 and 0.021 percent.

This action continues in effect the action that decreased the assessment obligation imposed on handlers. Assessments are applied uniformly on all handlers, and some of the costs may be passed on to producers. However, decreasing the assessment rate reduces the burden on handlers, and may reduce the burden on producers. In addition, the committee's meeting was widely publicized throughout the California kiwifruit industry, and all interested persons were invited to attend the meeting and participate in committee deliberations on all issues. Like all committee meetings, the July 15, 2004, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

This action imposes no additional reporting or recordkeeping requirements on either small or large California kiwifruit 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.

An interim final rule concerning this action was published in the Federal Register on September 16, 2004 (69 FR 55733). Copies of that rule were also mailed or sent via facsimile to all kiwifruit handlers. Finally, the interim final rule was made available through the Internet by USDA and the Office of the Federal Register. A 60-day comment period was provided for interested persons to respond to the interim final rule. The comment period ended on November 15, 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.

This rule is issued under Marketing Agreement No. 130 and Marketing Order No. 958, both as amended (7 CFR part 958), regulating the handling of onions grown in certain designated counties in Idaho, and Malheur County, Oregon, 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.”

This rule is also issued under section 8e of the Act, which provides that whenever certain specified commodities, including onions, are regulated under a Federal marketing order, imports of these commodities into the United States are prohibited unless they meet the same or comparable grade, size, quality, or maturity requirements as those in effect for the domestically produced commodities.

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

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect. This rule will not preempt any State or local laws, 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. A handler is afforded the opportunity for a hearing on the petition. After the hearing USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

There are no administrative procedures which must be exhausted prior to any judicial challenge to the provisions of import regulations issued under section 8e of the Act.

This rule continues in effect the action that relaxes handling regulations for pearl and cipolline onions produced in certain designated counties in Idaho, and Malheur County Oregon, by redefining pearl onions to mean onions 2 inches in diameter or less, and by establishing a relaxed minimum grade of U.S. No. 2 and a relaxed minimum diameter of 1 1/2 inches for cipolline onion varieties. As provided under section 8e of the Act, these changes continue in effect the actions that also apply to all imported pearl and cipolline onions. This rule also continues in effect the action that adds clarification and specificity to the reporting requirements by updating § 958.328(d) for onions handled for peeling, chopping, or slicing to reflect current form provisions. These changes were unanimously recommended by the Committee on April 1, 2004, and are intended to facilitate the marketing of Idaho-Eastern Oregon onions and improve producer returns.

Sections 958.51 and 958.52 of the order authorize the Committee to recommend, and the USDA to issue, grade, size, quality, pack, and container regulations for any variety or varieties of onions grown in the production area. Section 958.53 authorizes the issuance of special regulations to facilitate the handling of pearl onions as well as other special purpose shipments. Section 958.65 authorizes the Committee to collect information from handlers. Regulations specific to the handling of onions produced in the regulated production area are contained in § 958.328 of the order's handling regulations, whereas relevant import regulations are contained in § 980.117 and § 980.501 of the vegetable import regulations.

Pearl onions and cipolline onions are small, specialty onions with end uses in both the fresh market (raw and cooked) and processed market. Although there are relatively few pearl onions and cipolline onions produced in the Northwest, increased producer interest in both types of onions, as well as changes in customer preferences, encouraged this Committee recommendation.

Pearl onions are defined, in part, in both the order and the import regulations as onions that are produced using specific cultural practices that limit growth and are inspected and certified as measuring no larger than the maximum designated size. Factors that can limit growth, and subsequently final bulb size, include the variety, plant density, depth planted, photoperiod, and temperature. Pearl onions are mild flavored white, red, or yellow skinned onions generally ranging in size from about 3/4 inch to less than 2 inches in diameter.

Although pearl onions must be inspected and certified as measuring no larger than the maximum size designated under the order, they have been exempt from the minimum grade, size, and maturity requirements of the order since 1985. In order to be eligible for this exemption, the onions must be no greater than the stated maximum size limit. Although exempt from the grade, size, and maturity requirements, shipments of pearl onions are subject to administrative assessments.

Due to previous changes in handling, marketing, and buyer preferences, the defined maximum diameter of pearl onions was changed from 1 1/2 inches to 1 3/4 inches in 1990 (55 FR 27825). Similarly, due to ongoing changes in handling, marketing, and buyer preferences, this rule continues in effect the action that further relaxes the size requirements by increasing the defined maximum diameter of pearl onions to 2 inches.

The pearl onion market is a minor segment of the onion market served by the Idaho-Eastern Oregon production area. As such, the Committee continues to believe that pearl onions do not compete directly with most of the onions produced in this area and that the current exemption from size, grade, and maturity requirements should continue.

Due to changing dynamics in the cultural and handling practices in this region, as well as buyer and consumer preferences, this relaxation in requirements will help facilitate the efficient movement of pearl onions into fresh market channels and may also enhance producer returns.

Cipolline onions—also known as Borettana onions—are traditional Italian onions that are relatively small and button shaped, and include white, red, and yellow varieties. As noted earlier, cipolline (pronounced chip-ah-LEE-nee) onions have constituted a very small percentage of the onions produced and marketed in the order's regulated production area in the past. However, due to an increase in cipolline onion production, and a growing consumer interest in this specialty onion, the order's grade and size requirements were beginning to adversely affect the handling and marketing of cipolline onions.

Under the order, white, red, and yellow onion varieties handled for the fresh market have varying minimum grade and size requirements. Specifically, white varieties must meet a minimum grade of U.S. No. 1, 1 inch minimum to 2 inches maximum or at least 1 1/2 inches minimum, whereas red varieties must meet a minimum grade of U.S. No. 2 and a minimum diameter of 1 1/2 inches. The most prevalent onions packed in the Idaho-Eastern Oregon production area, yellow onion varieties, must meet a minimum grade of U.S. No. 2 and measure 3 inches or larger in diameter, or, if packed to U.S. No. 1 grade, they may have a minimum measurement of 1 3/4 inches in diameter. Prior to this change, cipolline onions were handled, graded, and inspected in accordance with the different order requirements for white, red, and yellow onion varieties.

Cipolline onions, however, range in size from about 1 inch in diameter to about 3 inches in diameter, with prevalence found in the 2-inch to 3-inch sizes. Since most of the cipolline onions produced in this area are yellow, U.S. No. 2 grade cipolline onions would have difficulty meeting the three-inch minimum size requirement. Following a review of the cultural practices, supply situation, and demand characteristics for cipolline onions, the Committee determined that the marketing of all cipolline onion varieties would be enhanced if handlers were held to a minimum grade of U.S. No. 2 and a minimum size of 1 1/2 inches in diameter—the same minimum requirements for all Idaho-Eastern Oregon red varieties.

This rule, by establishing a minimum grade and size for all cipolline onion varieties distinct from the prevalent white, red, and yellow varieties, will help ensure that marketable cipolline onions meet the minimum requirements of the order. While the requirements in place prior to this action allowed for the shipment of white cipolline onions that graded U.S. No. 1, 1-inch minimum to 2-inches maximum, no such shipments were ever made from the production area. Therefore, this change in the minimum grade and size requirements is not expected to impact the shipment of white cipolline onions.

As mentioned earlier, section 8e of the Act provides that when certain domestically produced commodities, including onions, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. Section 8e also provides that whenever two or more marketing orders regulating the same commodity produced in different areas of the United States are concurrently in effect, a determination must be made as to which of the areas produces the commodity in most direct competition with the imported commodity. Imports must meet the requirements established for that particular area.

Grade, size, quality, and maturity regulations have been issued regularly under both Marketing Order No. 958 and Marketing Order No. 959, which regulates the handling of onions produced in South Texas, since the marketing orders were established. The import regulations specify that import requirements for onions are to be based on the seasonal categories of onions produced in both marketing order areas. In that regard, imported onions must meet the requirements of the Idaho-Eastern Oregon onion marketing order during the period June 5 through March 9 and the South Texas onion marketing order during the period March 10 through June 4 of each season. Pearl and cipolline onions are not currently produced in South Texas. However, they are produced and marketed in limited quantities through out the year under the Idaho-Eastern Oregon onion marketing order. Therefore, the requirements for imported pearl and cipolline onions should be based upon the requirements established under Marketing Order No. 958 for the entire year.

As a consequence, this action continues in effect changes to § 980.117(a)(1) and (2) and (b)(1) of the onion import regulations by determining that imports of pearl and cipolline onions during the entire year are in most direct competition with the marketing of onions produced under Marketing Order No. 958 and changes to § 980.117(h) and (i) by redefining pearl onions to mean onions produced using specific cultural practices that limit growth to 2 inches or less in diameter. Accordingly, all cipolline onions imported must be U.S. No. 2 grade or better and measure 1 1/2 inches or more in diameter, and pearl onions cannot be larger than 2 inches in diameter.

This rule also continues in effect the action that clarifies certain handler reporting requirements. Under the handling regulations, onions that are inspected and certified as meeting the grade, size, maturity, and pack requirements of the order and are subsequently peeled, chopped, or sliced for fresh market within the production area may be handled without reinspection. Section 958.328(d) provides reporting procedures for the handling of such previously inspected onions for peeling, chopping, or slicing.

The Committee uses Form FV-37, Rehandling of Onions Report, to collect information from handlers specific to onions handled under this section. These reporting requirements are in place primarily to ensure handler compliance with the order's provisions. This rule continues in effect the action that adds clarification and specificity to the regulations by updating § 958.328(d) to reflect current Form FV-37 provisions. The change is expected to minimize handler errors in completing the form and help ensure timely submission of the completed form to the Committee.

This form has been approved previously by the Office of Management and Budget (OMB) under OMB Number 0581-0178, Vegetable and Specialty Crops. This action will not impact the information collection burden hours currently approved by OMB for this form.

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

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and 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.

Import regulations issued under the Act are based on those established under Federal marketing orders which regulate the handling of domestically produced products.

There are approximately 42 handlers of Idaho-Eastern Oregon onions who are subject to regulation under the order and approximately 190 onion producers in the regulated area. In addition, based on the most recent information available, approximately 472 importers of onions are subject to import regulations and may be affected by this rule. Small agricultural service firms are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $5,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000.

Based on its assessment records, the Committee estimates that about 39 of the 42 handlers ship less than $5,000,000 worth of onions on an annual basis. In addition, based on the acreage (20,600), production (12,000,000 cwt), and total producer revenue ($130,768,000) reported by the National Agricultural Statistics Service for 2003, and the current number of onion producers (190), the average annual gross producer revenue is approximately $688,252. Thus, the majority of the onion handlers and the onion producers in this industry may be classified as small entities. Although it is not known how many importers of onions may be classified as small entities, we believe that many of the 472 importers can be classified as such. There are two firms involved in altering onions under the order and both firms may be classified as small entities.

This rule continues in effect the action that relaxes the size requirement for pearl onions, relaxes the minimum grade and size requirements for cipolline onions, and clarifies certain reporting requirements for onions handled under the Idaho-Eastern Oregon onion marketing order. Authority for this action is contained in §§ 958.51, 958.52, 958.53, and 958.65 of the order. This rule—unanimously recommended by the Committee at its April 1, 2004, meeting—continues in effect the action that changes § 958.328(h) by redefining pearl onions to mean onions produced using specific cultural practices that limit growth to the same general size as boilers and picklers (as defined in the U.S. Standards for Grades of Onions), and that have been inspected and certified as measuring 2 inches in diameter or less. In addition, this rule continues in effect the action that changes § 958.328(a)(2) by adding cipolline onions to the minimum grade and size requirements established for red onion varieties: U.S. No. 2 grade or better and 1 1/2 inch diameter or larger.

Under authority in section 8e of the Act, this rule also continues in effect the action that changes § 980.117(a)(1) and (2), and (b)(1), of the onion import regulations by determining that imports of pearl and cipolline onions are in most direct competition during the entire year with the marketing of onions produced under Marketing Order No. 958 and changes § 980.117(h) and (i) by redefining pearl onions to mean onions produced using specific cultural practices that limit growth to 2 inches in diameter or less. Although not specifically referenced in the text of § 980.117, this rule also continues in effect the action that relaxes the minimum grade and size for imported cipolline onions to U.S. No. 2 grade and 1 1/2 inches in diameter.

Finally, this rule continues in effect the action that updates § 958.328(d) to reflect the current form used for onions handled for peeling, chopping, or slicing. This action is intended to facilitate the handling and marketing of pearl and cipolline onions, increase producer returns, and help minimize errors in completing Form FV-37 concerning the handling of onions for peeling, chopping, or slicing, and to help ensure timely submission of the form to the Committee.

According to the Committee, there is currently one producer and one handler of pearl and cipolline onions in the regulated production area, and, as such, statistics relating to the production and marketing of pearl and cipolline onions in the Idaho-Eastern Oregon onion production area cannot be made available. The quantity of such specialty onions, however, would be minor in relation to the prevalent large, globular shaped Spanish-type onion produced in the production area. Regarding pearl and cipolline onions produced elsewhere in the United States or imported into the United States: statistical information is available grouped by dry bulb type onions, green onions, or onion sets and is generally unavailable by variety, size, or color. However, the U.S. Department of Commerce does track the quantity of pearl onions imported into the United States with a maximum diameter of .39 inches. In 2003, for example, approximately 211 hundredweight of pearl onions (less than or equal to .39 inches in diameter) were imported—in diminishing order—from Chile, Spain, China, Mexico, and India. In comparison, most onions imported into the U.S. are produced in Mexico, Canada, Peru, and Chile. Currently, there are no government statistics on the domestic production or importation of cipolline onions.

Regarding the impact of this rule on affected entities, relaxing the size requirement for pearl onions and the grade and size requirement for cipolline onions is expected to benefit handlers, importers, and producers. With the change in the definition of pearl onions to include onions as large as 2 inches in diameter, a potentially greater quantity of onions will pass inspection and thus be certified under the order's pearl onion exemption provisions. Similarly, by relaxing the minimum grade and size requirements for cipolline onions, a greater quantity of these onions should meet the order's handling regulations. This could translate into an increased market for cipolline onions and greater returns for handlers, importers, and producers. While the requirements in place prior to this action allowed for the shipment of white cipolline onions that graded U.S. No. 1, 1-inch minimum to 2 inches maximum, no such shipments were ever made. Therefore, this action is not expected to impact the shipment of white cipolline onions.

The clarification of reporting requirements for peeled, chopped, and sliced onions will have the tangible effect of providing more clearly understood instructions to handlers who are required to complete Form FV-37.

The Committee considered several alternatives to the relaxation in handling regulations for pearl and cipolline onions. The Committee initiated this action due to a request from the Idaho-Eastern Oregon onion industry's single pearl and cipolline onion producer and handler for an all-inclusive exemption from the requirements of the order. A special subcommittee was formed to study the request. The initial request was an exemption for an entire specialty product line, which included onion sets, pearl onions, boiler onions, prepack onions, cipolline onions, and shallots. The requester's main contention with the order is that none of his onions fit the profile of the Idaho-Eastern Oregon onion industry's foremost product, the large, globular shaped and mild Spanish-type onion. In addition, the requester was of the view that the Committee's promotion efforts—a major budgetary item for the Committee—does not benefit him as a producer and marketer of the small specialty onions. The requester also stated that the cost to him in complying with the order—in administrative assessments and inspection fees—is too high when considering his benefits from the order.

The subcommittee noted that onion sets and shallots do not need to be considered for further exemptions since neither is regulated under the marketing order. In addition, the subcommittee determined that boiler and prepacker size onions should not be exempt from the handling regulations since both are produced throughout the regulated production area. Various members of the subcommittee were of the view that the marketing of out-of-grade and off-size boiler and prepacker onions would have a negative impact on the marketing of all Idaho-Eastern Oregon onions.

Further, as noted earlier in this document, pearl onions have been exempt from the minimum grade, size, and maturity requirements of § 958.328 for several years. The subcommittee determined that an increase in the maximum size for pearl onions would facilitate the handling and marketing of these onions. The subcommittee considered increasing the maximum size under the pearl onion definition from 1 7/8 inches to as much as 2 3/4 inches in diameter. This was rejected, however, because this would permit handlers to ship these onions exempt from the quality requirements in competition with larger sized onions subject to such requirements. The subcommittee also rejected consideration of an exemption from the current assessment and inspection requirements for pearl onions as being detrimental to the program. Pearl onions are inspected under the order to assure that they do not exceed the maximum diameter permitted.

Finally, the subcommittee considered various exemption and regulatory options in regard to cipolline onions. A complete exemption from the order was rejected since the subcommittee considered the cipolline onions as being a competitive product to the prevalent onion varieties produced and marketed under the order. Consideration was also given to establishing a different regulatory scheme for the county in which the cipolline onions are produced. This was not considered a viable option due to administrative concerns and the fact cipolline onions can be produced anywhere within the production area.

The Committee, based on the subcommittee's consideration of the issue, determined that pearl and cipolline onions are promoted through the order's generic promotion efforts since a major component of these efforts are coupled to the Idaho-Eastern Oregon onion logo. In this regard, the Committee feels that all handlers within the regulated production area benefit from the order.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large onion 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. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap, or conflict with this rule.

The Committee's meeting was widely publicized throughout the Idaho-Eastern Oregon onion industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the April 1, 2004, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue.

Also, as indicated earlier, the subcommittee appointed to consider this matter met on February 25, 2004, and discussed this issue in detail. That meeting was also a public meeting and both large and small entities were able to participate and express their views.

An interim final rule concerning this action was published in the Federal Register on September 22, 2004. Copies of the rule were made available by the Committee's staff to all producers, handlers, and interested persons. In addition, the rule was made available though the Internet by USDA and the Office of the Federal Register. That rule provided for a 60-day comment period which ended November 22, 2004. Two comments were received during that period. Neither comment addressed the substance of the interim final rule; therefore, no changes are made as a result of these comments.

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 Committee's recommendation, and other information, it is found that finalizing the interim final rule, without change, as published in the Federal Register (69 FR 56667) will tend to effectuate the declared policy of the Act.

In accordance with section 8e of the Act, the United States Trade Representative has concurred with the finalization of this rule.

This rule is issued under Marketing Agreement No. 115 and Marketing Order No. 982, both as amended (7 CFR Part 982), regulating the handling of hazelnuts grown in Oregon and Washington, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

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

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. It is intended that this action apply to all merchantable hazelnuts handled during the 2004-2005 marketing year (July 1, 2004, through June 30, 2005). 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. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rule establishes marketing percentages which allocate the quantity of inshell hazelnuts that may be marketed in domestic markets. The Board is required to meet prior to September 20 of each marketing year to compute its marketing policy for that year, and compute and announce an inshell trade demand if it determines that volume regulations would tend to effectuate the declared policy of the Act. At the same time, the Board computes and announces preliminary free and restricted percentages for that marketing year.

The inshell trade demand is the amount of inshell hazelnuts that handlers may ship to the domestic market throughout the marketing season. The order specifies that the inshell trade demand be computed by averaging the preceding three “normal” years' trade acquisitions of inshell hazelnuts. The Board may increase the computed inshell trade demand by up to 25 percent, if market conditions warrant an increase. The Board may also modify the inshell trade demand to account for abnormalities due to crop or marketing conditions. The Board's authority to recommend volume regulations and the computations used to determine the percentages are specified in § 982.40 of the order.

Volume regulation under the order utilizes free and restricted percentages to allocate available hazelnuts which may be marketed in domestic inshell markets (free) and hazelnuts which must be exported, shelled, or otherwise disposed of by handlers (restricted). Prior to September 20 of each marketing year, the Board must compute and announce preliminary free and restricted percentages. The preliminary free percentage releases 80 percent of the adjusted inshell trade demand to the domestic market. The purpose of releasing only 80 percent of the inshell trade demand under the preliminary percentage is to guard against an underestimate of crop size. The preliminary free percentage is expressed as a percentage of the total supply subject to regulation (supply) and is based on the preliminary crop estimate.

On August 24, 2004, the National Agricultural Statistics Service (NASS) released an estimate of 2004 hazelnut production for the Oregon and Washington area at 44,000 dry orchard-run tons. On August 26, 2004, the Board met and estimated total available supply for the 2004 crop year at 44,954 tons. The Board arrived at this estimate by using the crop estimate compiled by NASS (44,000 tons) and then adjusting that estimate to account for disappearance and carryin. The order requires the Board to reduce the estimate by the average disappearance over the preceding three years (1,584 tons) and to increase it by the amount of undeclared carryin from previous years' production (2,538 tons.)

Disappearance is the difference between the estimated orchard-run production and the actual supply of merchantable product available for sale by handlers. Disappearance can consist of (1) unharvested hazelnuts, (2) culled product (nuts that are delivered to handlers but later discarded), (3) product used on the farm, sold locally, or otherwise disposed of by producers, and (4) statistical error in the orchard-run production estimate.

The Board computed the adjusted inshell trade demand of 2,064 tons by taking the average of the past three years' sales (2,952 tons) and reducing it by the declared carry-in from last year's crop (888 tons). Declared carry-in is product regulated under the order during a preceding marketing year but held in inventory for future sale. Undeclared carry-in is product that was produced in a previous marketing year but was not subject to regulation at that time. Undeclared carry-in is subject to regulation under the order and is accounted for as such by the Board.

The Board computed and announced preliminary free and restricted percentages of 3.6726 percent and 96.3274 percent, respectively, at its August 26, 2004, meeting. The Board computed the preliminary free percentage by multiplying the adjusted trade demand by 80 percent and dividing the result by the adjusted crop estimate (2,064 tons × 80 percent/44,954 tons = 3.6726 percent). The preliminary free percentage thus initially released 1,651 tons of hazelnuts from the 2004 supply for domestic inshell use, and the preliminary restricted percentage withheld 43,303 tons for the export and shelled (kernel) markets.

Under the order, the Board must meet again on or before November 15 to recommend interim final and final percentages. The Board uses current crop estimates to calculate interim final and final percentages. The interim final percentages are calculated in the same way as the preliminary percentages and release the remaining 20 percent (to total 100 percent of the inshell trade demand) previously computed by the Board. Final free and restricted percentages may release up to an additional 15 percent of the average of the preceding three years' trade acquisitions to provide an adequate carryover into the following season ( i.e., desirable carryout). The order requires that the final free and restricted percentages shall be effective 30 days prior to the end of the marketing year, or earlier, if recommended by the Board and approved by USDA. Revisions in the marketing policy can be made until February 15 of each marketing year, but the inshell trade demand can only be revised upward, consistent with § 982.40(e).

The Board met on November 3, 2004, and reviewed and approved an amended marketing policy and recommended the establishment of final free and restricted percentages. The NASS crop production estimate was 44,000 tons. However, based upon industry information, the Board reduced the estimate to 37,425 tons. The Board also decided that market conditions were such that the immediate release of an additional 15 percent for desirable carryout would not adversely affect the 2004-2005 domestic inshell market. No interim final free and restricted percentages were recommended. The Board recommended final free and restricted percentages of 6.4921 and 93.5079 percent, respectively. The final free percentage releases 2,507 tons of inshell hazelnuts from the 2004 supply for domestic use.

The final marketing percentages are based on the Board's final production estimate (which is lower than its initial estimate) and the following supply and demand information for the 2004-2005 marketing year:

In addition to complying with the provisions of the order, the Board also considered USDA's 1982 “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” (Guidelines) when making its computations in the marketing policy. This volume control regulation provides a method to collectively limit the supply of inshell hazelnuts available for sale in domestic markets. The Guidelines provide that the domestic inshell market has available a quantity equal to 110 percent of prior years' shipments before allocating supplies for the export inshell, export kernel, and domestic kernel markets. This provides for plentiful supplies for consumers and for market expansion, while retaining the mechanism for dealing with oversupply situations. The established final percentages will make available an additional 443 tons for desirable carryout. The total free supply for the 2004-2005 marketing year is 3,395 tons of hazelnuts, which is the sum of the final trade demand of 2,952 tons and the 443 ton desirable carryout. This amount is 115 percent of prior years' sales and exceeds the goal of the Guidelines.

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

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and 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.

Small agricultural producers are defined by the Small Business Administration (13 CFR 121.201) as those having annual receipts of less than $750,000, and small agricultural service firms are defined as those having annual receipts of less than $5,000,000. There are approximately 750 producers of hazelnuts in the production area and approximately 18 handlers subject to regulation under the order. Average annual hazelnut revenue per producer is $38,888. This is computed by dividing NASS figures for the average value of production for 2002 and 2003 ($29,166,000) by the number of producers. The level of sales of other crops by hazelnut producers is not known. In addition, based on Board records, about 89 percent of the handlers ship under $5,000,000 worth of hazelnuts on an annual basis. In view of the foregoing, it can be concluded that the majority of hazelnut producers and handlers may be classified as small entities.

Board meetings are widely publicized in advance of the meetings and are held in a location central to the production area. The meetings are open to all industry members and other interested persons who are encouraged to participate in the deliberations and voice their opinions on topics under discussion. Thus, Board recommendations can be considered to represent the interests of small business entities in the industry.

Currently, U.S. hazelnut production is allocated among three main market outlets: domestic inshell, export inshell, and kernel markets. Handlers and growers receive the highest return for sales in the domestic inshell market. They receive less for product going to export inshell, and the least for kernels. Based on Board records of average shipments for 1994-2003, the percentage going to each of these markets was 11 percent (domestic inshell), 43 percent (export inshell), and 34 percent (kernels). Other minor market outlets in total make up the remaining 12 percent.

The inshell hazelnut market can be characterized as having limited and inelastic demand with a very short primary marketing period. On average, 78 percent of domestic inshell hazelnut shipments occur between October 1 and November 30, primarily to supply holiday nut demand. The inshell market is, therefore, prone to oversupply and low grower prices in the absence of supply restrictions. Volume regulation provides a method for the U.S. hazelnut industry to limit the supply of domestic inshell hazelnuts available for sale in the continental U.S. and to prevent oversupplied market conditions.

Many years of marketing experience led to the development of the current volume control procedures. These procedures have helped the industry solve its marketing problems by keeping inshell supplies in balance with domestic needs. Volume controls ensure that the domestic inshell market is fully supplied while protecting the market from the negative effects of oversupply.

The relatively high level of production in 2004 and the large carryin from previous year's production were key market factors leading to the relatively low 6.4921 percent final free percentage. Hazelnut production was originally estimated by NASS to be 44,000 tons, which would have made it the third largest crop on record. The Board revised the forecast to 37,425 tons after harvest was completed, a level that is still 22 percent above the 10 year average. Even if carryin had been zero, the amount of production that handlers typically ship into the domestic inshell market ( i.e., average trade acquisitions of 2,952 tons) equals only about 8.1 percent of supply (the 36,078 tons subject to regulation).

Although the domestic inshell market is a relatively small proportion of total sales (11 percent of total shipments), it remains a profitable market segment. The volume control provisions of the marketing order are designed to avoid oversupplying this particular market segment, because that would likely lead to substantially lower grower prices. The other market segments, export inshell and kernels, are expected to continue to provide good outlets for U.S. hazelnut production.

Recent production and price data reflect the stabilizing effect of the volume control regulations. Data from USDA's National Agricultural Statistics Service (NASS) show that total hazelnut production has varied widely over the 10-year period between 1994 and 2003, from a low of 16,500 tons in 1998 to a high of 49,500 tons in 2001. Production in the shortest crop year and the biggest crop year were 50 percent and 160 percent, respectively, of the 10-year average tonnage of 30,920. Grower price has not fluctuated to the extent of production. Prices in the lowest price year and the highest price year were 93 percent and 115 percent, respectively, of the 10-year average price of $898 per ton. The considerable lower variability of price versus production provides an illustration of the order's price-stabilizing impacts.

Comparing grower revenue to cost is useful in highlighting the impact on growers of recent product and price levels. A recent hazelnut production cost study from Oregon State University estimated cost-of-production per acre to be approximately $1,340 for a typical 100-acre hazelnut enterprise. Average grower revenue per bearing acre (based on NASS acreage and value of production data) equaled or exceeded that typical cost level only twice from 1994 to 2003. Average grower revenue was below typical costs in the other years. Without the stabilizing impact of the order, growers may have lost more money. While crop size has fluctuated, volume regulations contribute to orderly marketing and market stability and help moderate the variation in returns for all producers and handlers, both large and small.

While the level of benefits of this rulemaking is difficult to quantify, the stabilizing effects of the volume regulations impact both small and large handlers positively by helping them maintain and expand markets even though hazelnut supplies fluctuate widely from season to season. This regulation provides equitable allotment of the most profitable market, the domestic inshell market. That market is available to all handlers, regardless of size.

As an alternative to this regulation, the Board discussed not regulating the 2004-2005 hazelnut crop. However, without any regulations in effect, the Board believes that the industry would tend to oversupply the inshell domestic market. The 2004-2005 hazelnut crop is larger than last year and much larger than expected. The unregulated release of 38,616 tons on the domestic inshell market would oversupply that small market and would cause producer returns to decrease, thereby disrupting the market.

Section 982.40 of the order establishes a procedure and computations for the Board to follow in recommending to USDA release of preliminary, interim final, and final quantities of hazelnuts to be released to the free and restricted markets each marketing year. The program results in plentiful supplies for consumers and for market expansion while retaining the mechanism for dealing with oversupply situations.

Hazelnuts produced under the order comprise virtually all of the hazelnuts produced in the U.S. This production represents, on average, less than 4 percent of total U.S. production for other tree nuts, and less than 5 percent of the world's hazelnut production.

Last season, 79 percent of the kernels were marketed in the domestic market and 21 percent were exported. Domestically produced kernels generally command a higher price in the domestic market than imported kernels. The industry is continuing its efforts to develop and expand other markets with emphasis on the domestic kernel market. Small business entities, both producers and handlers, benefit from the expansion efforts resulting from this program.

Inshell hazelnuts produced under the order compete well in export markets because of quality. Based on Board statistics, Europe has historically been the primary export market for U.S. produced inshell hazelnuts, with a 10-year average of 5,255 tons out of total average exports of 14,048 tons. Recent years have seen a significant shift in export destinations. Last season, inshell shipments to Europe totaled 5,526 tons, representing 24 percent of exports, with the largest share going to Germany. Inshell shipments to Southwest Pacific countries, and Hong Kong in particular, have increased dramatically in the past few years, rising to 70 percent of total exports of 23,319 tons in 2003. The industry continues to pursue export opportunities.

There are some reporting, recordkeeping, and other compliance requirements under the order. The reporting and recordkeeping burdens are necessary for compliance purposes and for developing statistical data for maintenance of the program. The information collection requirements have been previously approved by the Office of Management and Budget under OMB No. 0581-0178. The forms require information which is readily available from handler records and which can be provided without data processing equipment or trained statistical staff. 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. This rule does not change those requirements. In addition, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Further, the Board's meetings were widely publicized throughout the hazelnut industry and all interested persons were invited to attend the meetings and participate in Board deliberations. Like all Board meetings, those held on August 26, and November 3, 2004, were public meetings and all entities, both large and small, were able to express their views on this issue. Finally, interested persons are invited to submit information on the regulatory and informational impacts of this action on small businesses.

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

This rule invites comments on the establishment of final free and restricted percentages for the 2004-2005 marketing year under the hazelnut marketing order. Any comments received will be considered prior to finalization of this rule.

After consideration of all relevant material presented, including the Board's recommendation, and other information, it is found that this interim final rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this action until 30 days after publication in the Federal Register because: (1) The 2004-2005 marketing year began July 1, 2004, and the percentages established herein apply to all merchantable hazelnuts handled from the beginning of the crop year; (2) handlers are aware of this rule, which was recommended at an open Board meeting, and need no additional time to comply with this rule; and (3) interested persons are provided a 60-day comment period in which to respond, and all comments timely received will be considered prior to finalization of this action.

The FAA has determined that notice and opportunity for prior public comment is impracticable because these procedures would significantly delay certification of the airplane and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA therefore finds that good cause exists for making these special conditions effective upon issuance; however, we invite interested persons to participate in this rulemaking by submitting written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments.

We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning these special conditions. The docket is available for public inspection before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this preamble between 7:30 a.m. and 4 p.m., Monday through Friday, except Federal holidays.

We will consider all comments we receive on or before the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change these special conditions based on the comments we receive.

If you want the FAA to acknowledge receipt of your comments on these special conditions, include with your comments a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it back to you.

On July 19, 2004, Beechjet TECH, 4500 S. Garnett, Suite #600, Tulsa, Oklahoma 74146 applied for a supplemental type certificate (STC) to modify Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes. Model MU-300 is currently approved under Type Certificate No. A14SW and Models MU-300-10 and 400 are currently approved under Type Certificate No. A16SW. The Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes are small transport category airplanes powered by two turbojet engines. They operate with a 2-pilot crew and can seat up to 9 passengers. The modification incorporates the installation of two Shadin ADC-6400 air data computers, with the capability for operating the airplane at a reduced vertical separation minimum (RVSM). The avionics/electronics and electrical systems installed in this airplane have the potential to be vulnerable to high-intensity radiated fields (HIRF) external to the airplane.

Under the provisions of 14 CFR 21.101, Beechjet TECH must show that the Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes, as changed, continue to meet the applicable provisions of the regulations incorporated by reference in Type Certificates No. A16SW or A14SW, as applicable, or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The certification bases for the Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes include 14 CFR part 25, as amended by Amendments 25-1 through 25-40; §§ 25.1351(d), 25.1353(c)(5), and 25.1450 as amended by Amendment 25-41; §§ 25.29, 25.255, and 25.1353(c)(6) as amended by Amendment 25-42; § 25.361(b) as amended by Amendment 25-46; and 14 CFR part 36 as amended by Amendment 36-1 through 36-12.

If the Administrator finds that the applicable airworthiness regulations ( i.e. , part 25, as amended) do not contain adequate or appropriate safety standards for the Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

In addition to the applicable airworthiness regulations and special conditions, the Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36.

Special conditions, as defined in 14 CFR 11.19, are issued in accordance with § 11.38 and become part of the type certification basis in accordance with § 21.101.

Special conditions are initially applicable to the model for which they are issued. Should Beechjet TECH apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A16SW or A14SW, as applicable, to incorporate the same or similar novel or unusual design feature, these special conditions would also apply to the other model under the provisions of § 21.101.

As noted earlier, the Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes modified by Beechjet TECH will incorporate two Shadin ADC-6400 RVSM-capable air data computers that will perform critical functions. These systems may be vulnerable to high-intensity radiated fields external to the airplane. The current airworthiness standards of part 25 do not contain adequate or appropriate safety standards for the protection of this equipment from the adverse effects of HIRF. Accordingly, this system is considered to be a novel or unusual design feature.

There is no specific regulation that addresses protection requirements for electrical and electronic systems from HIRF. Increased power levels from ground-based radio transmitters and the growing use of sensitive avionics/electronics and electrical systems to command and control airplanes have made it necessary to provide adequate protection.

To ensure that a level of safety is achieved equivalent to that intended by the regulations incorporated by reference, special conditions are needed for the Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes modified by Beechjet TECH. These special conditions require that new avionics/electronics and electrical systems that perform critical functions be designed and installed to preclude component damage and interruption of function due to both the direct and indirect effects of HIRF.

With the trend toward increased power levels from ground-based transmitters, and the advent of space and satellite communications, coupled with electronic command and control of the airplane, the immunity of critical avionics/electronics and electrical systems to HIRF must be established.

It is not possible to precisely define the HIRF to which the airplane will be exposed in service. There is also uncertainty concerning the effectiveness of airframe shielding for HIRF. Furthermore, coupling of electromagnetic energy to cockpit-installed equipment through the cockpit window apertures is undefined. Based on surveys and analysis of existing HIRF emitters, an adequate level of protection exists when compliance with the HIRF protection special condition is shown with either paragraph 1 or 2 below:

1. A minimum threat of 100 volts rms (root-mean-square) per meter electric field strength from 10 KHz to 18 GHz.

a. The threat must be applied to the system elements and their associated wiring harnesses without the benefit of airframe shielding.

b. Demonstration of this level of protection is established through system tests and analysis.

2. A threat external to the airframe of the field strengths identified in the table below for the frequency ranges indicated. Both peak and average field strength components from the table are to be demonstrated.

The threat levels identified above are the result of an FAA review of existing studies on the subject of HIRF, in light of the ongoing work of the Electromagnetic Effects Harmonization Working Group of the Aviation Rulemaking Advisory Committee.

As discussed above, these special conditions are applicable to Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes modified by Beechjet TECH. Should Beechjet TECH apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A16SW or A14SW, as applicable, to incorporate the same or similar novel or unusual design feature, these special conditions would apply to that model as well under the provisions of § 21.101.

This action affects only certain novel or unusual design features on Raytheon Aircraft Company Model MU-300 and MU-300-10 airplanes and Model 400 airplanes modified by Beechjet TECH. It is not a rule of general applicability and affects only the applicant who applied to the FAA for approval of these features on the airplane.

The substance of these special conditions has been subjected to the notice and comment procedure in several prior instances and has been derived without substantive change from those previously issued. Because a delay would significantly affect the certification of the airplane, which is imminent, the FAA has determined that prior public notice and comment are unnecessary and impracticable, and good cause exists for adopting these special conditions upon issuance. The FAA is requesting comments to allow interested persons to submit views that may not have been submitted in response to the prior opportunities for comment described above.

On Friday, September 10, 2004, the FAA proposed to revise part 71 of the Federal Aviation Regulations (14 CFR part 71) to create additional Class E surface area airspace at Kotzebue, AK (69 FR 54758). The action was proposed in order to add Class E airspace sufficient in size to contain aircraft while executing two new Standard Instrument Approach Procedures for the Kotzebue Airport. The new approaches are (1) Area Navigation-Global Positioning System (RNAV GPS) Runway (RWY) 26, original, (2) RNAV (GPS) Y RWY 8, original. Interested parties were invited to participate in this rulemaking proceeding by submitting written comments on the proposal to the FAA. No public comments have been received, thus, the rule is adopted as proposed.

The area will be depicted on aeronautical charts for pilot reference. The coordinates for this airspace docket are based on North American Datum 83. The Class E airspace areas designated as surface areas are published in paragraph 6002 of FAA Order 7400.9M, Airspace Designations and Reporting Points , dated August 30, 2004, and effective September 16, 2004, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designation listed in this document will be revised subsequently in the Order.

This revision to 14 CFR part 71 revises Class E airspace at Kotzebue, Alaska. This additional Class E airspace was created to accommodate aircraft executing two new SIAPs and will be depicted on aeronautical charts for pilot reference. The intended effect of this rule is to provide adequate controlled airspace for IFR operations at Kotzebue Airport, Kotzebue, Alaska.

The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore'(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this a routine matter that will only affect air traffic procedures and air navigation, it is certified that this rule will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

The FAA's authority to issue rules regarding aviation safety is found in title 49 of the United States Code. Subtitle 1, section 106 describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority.

This rulemaking is promulgated under the authority described in subtitle VII, part A, subpart 1, section 40103, Sovereignty and use of airspace. Under that section, the FAA is charged with prescribing regulations to ensure the safe and efficient use of the navigable airspace. This regulation is within the scope of that authority because it revises Class E surface area sufficient in size to contain aircraft executing two new Standard Instrument Approach Procedures for the Kotzebue Airport and represents the FAA's continuing effort to safely and efficiently use the navigable airspace.

The Commission's reporting rules provide an important tool for market oversight and other surveillance activities. The rules governing this system, among other things, require futures commission merchants (FCMs), clearing members and foreign brokers (collectively reporting firms) to report position and identifying information of the largest futures and option traders, and require traders themselves to provide certain position and identifying information to the Commission. Reporting levels are set for futures and option contracts under the authority of sections 4c and 4i of the Commodity Exchange Act (CEA or Act) to ensure that the Commission receives adequate information to carry out its market surveillance programs. 1 These market surveillance programs are designed to detect and prevent price manipulation and market congestion on designated contract markets (DCMs), and to enforce speculative position limits pursuant to section 4a of the Act. The Commission's market surveillance programs also provide information on the overall hedging and speculative use of, and foreign participation in, the futures and option markets and other matters of public interest. 2 On May 12, 2004, the Commission published a notice of rulemaking for public comment proposing to amend its reporting rules. 3 With several minor exceptions, the Commission herein is adopting the amendments as proposed.

Generally, the firm carrying a trader's reportable position files large trader reports. 4 The Commission has traditionally calibrated contract reporting levels to ensure that the aggregate of all positions reported to the Commission typically represents 70 to 90 percent of the open interest in any given contract. The Commission periodically reviews for each contract information concerning trading volume, open interest, the number and position sizes of individual traders relative to the reporting levels, and the Commission's surveillance experience with specific contracts, to determine if coverage of open interest is adequate for effective market surveillance. In this regard, the Commission is mindful of the burden associated with these reporting requirements and reviews them with an eye to streamlining that burden to the extent compatible with its responsibilities for rigorous surveillance of the commodity futures and option markets. The Commission's most recent review of reporting levels indicates that the relative size of trading volume, open interest, and positions of traders enables the Commission to raise reporting levels as follows: (1) Milk, Class III from 25 to 50 contracts; (2) Soybeans from 100 to 150 contracts; (3) Wheat from 100 to 150 contracts; (4) Corn from 150 to 250 contracts; (5) Sugar No. 11 from 400 to 500 contracts; (6) Cotton from 50 to 100 contracts; (7) Natural Gas from 175 to 200 contracts; (8) Crude Oil, Sweet—No. 2 Heating Oil Crack Spread from 25 to 250 contracts; (9) Crude Oil, Sweet—Unleaded Gasoline Crack Spread from 25 to 150 contracts; (10) Unleaded Gasoline—No. 2 Heating Oil Spread Swap from 25 to 150 contracts; (11) 1-Month LIBOR from 300 to 600 contracts; (12) 30-Day Fed Funds from 300 to 600 contracts; (13) 3-Month Eurodollar Time Deposit Rates from 1,000 to 3,000 contracts; (14) TRAKRS from 25,000 to 50,000 contracts; (15) E-Mini S&P 500 Stock Price Index from 300 to 1,000 contracts  5 ; (16) 2-Year U.S. Treasury Notes from 500 to 1,000 contracts; (17) 5-Year U.S. Treasury Notes from 800 to 2,000 contracts; (18) 10-Year U.S. Treasury Notes from 1,000 to 2,000 contracts; and (19) 30-Year U.S. Treasury Bonds from 1,000 to 1,500 contracts.

In response to the proposed rulemaking's request for public comment, U.S. Futures Exchange, L.L.C. (Eurex US), a Commission designated board of trade, recommended increasing the contract reporting level for all U.S. Treasury Notes and Bonds to the 5,000 contract range. 6 As stated in its comment letter, Eurex US based its recommendation on the amount of deliverable supply, increases in trading volume, and the average size of specific transactions. 7 The Commission carefully considered Eurex US's recommendation, but concluded that more modest increases in contract reporting levels better facilitate the Commission's obligation to rigorously surveil the market for U.S. Treasury Notes and Bonds.

The adjustments to reporting levels will decrease the number of daily position and identifying reports, such as Series '01 Reports and Forms 102, that reporting firms are currently required to file. 8 The number of Forms 40 filed by large traders will also decrease. 9 However, according to administrative experience and analysis performed by the Commission's surveillance staff, the percent of total market open interest reported through the large trader reporting system will remain at a level deemed sufficient for rigorous market surveillance.

Furthermore, not all reporting firms may elect to report under the Commission's higher, and therefore potentially less burdensome, reporting levels because exchanges also maintain large trader reporting systems that are similar in most respects to the Commission's system. The exchanges set their own reporting levels, which for particular contracts may vary from Commission set levels. When exchange reporting levels are set lower than those set by the Commission, firms may report to the Commission at the lower exchange set level, thereby saving any cost associated with reprogramming their reporting systems. 10 The Commission, however, only requires the filing of large trader reports for positions that equal or exceed its reporting levels.

The general default reporting level for all positions, including positions in broad-based securities indexes, is currently 25 contracts. The Commission is adopting, as proposed, a new default reporting level of 200 contracts specifically for broad-based securities indexes. By adopting such a default reporting level, the following commodities will no longer be enumerated in Rule 15.03, and therefore, will be subject to the new default reporting level of 200 contracts: (1) S&P 400 Midcap Stock Index—currently 100 contracts; (2) Dow Jones Industrial Average Index—currently 100 contracts; (3) New York Stock Exchange Composite Index—currently 50 contracts; (4) Amex Major Market Index, Maxi—currently 100 contracts; (5) NASDAQ 100 Stock Index—currently 100 contracts; (6) Russell 2000 Stock Index—currently 100 contracts; (7) Value Line Average Index—currently 50 contracts; and (8) NIKKEI Stock Index—currently 100 contracts. The reporting level for the S&P 500 Stock Price Index and the Municipal Bond Index, however, will remain at 1,000 and 300 contracts, respectively.

To address recent market developments, the Commission is establishing enumerated reporting levels for three German federal government debt instruments, as well as a reporting level for products that are offered by HedgeStreet, Inc. (HedgeStreet), a new DCM. The reporting levels for the German debt instruments and the products offered by HedgeStreet are as follows: (1) 10-Year German Federal Government Debt—1,000 contracts; (2) 5-Year German Federal Government Debt—800 contracts; (3) 2-Year German Federal Government Debt—500 contracts; and (4) HedgeStreet Products—125,000 contracts.

The reporting level enumerated for HedgeStreet products is applicable to HedgeStreet contracts that pay a maximum of $10.00 if in the money upon expiration. In light of the relatively low value of these products, the Commission is adopting a reporting level of 125,000 contracts. Since the value of HedgeStreet products could result in the reporting of positions that numerically are very large, and due to current limitations in the Commission's large trader record format, HedgeStreet positions are to be reported under part 17 of the Commission's regulations by rounding down to the nearest 1,000 contracts and then dividing by 1,000. For example, a position of 177,955 contracts would be rounded down to 177,000 contracts, divided by 1,000, and then reported as 177. 11

As initially structured by the Commission, the proposed enumerated reporting level for HedgeStreet products applied only to European-style binary options that were derivatives of economic indexes and paid a fixed $10.00 when in the money upon expiration. The terms of the proposed reporting level were based upon the Commission's understanding that HedgeStreet contracts would initially have economic indexes as their underlying. However, in its comment letter on the proposed rulemaking, HedgeStreet requested that the Commission apply the 125,000 contract reporting level to HedgeStreet products that would not have economic indexes as their underlying. 12

Because of the relatively low notional value of HedgeStreet products, the reporting levels otherwise applicable to such contracts, including the default reporting level of 25 contracts, may place an undue reporting burden on HedgeStreet and its members without substantially facilitating the Commission's objective of, and responsibility for, conducting meaningful market surveillance. The Commission, therefore, believes that a reporting level of 125,000 contracts for all HedgeStreet commodity futures and option contracts with a maximum payout of $10 appropriately apprises the Commission of significant positions and relieves unnecessary burdens on HedgeStreet and its members. 13

On December 21, 2000, the President signed into law the Commodity Futures Modernization Act of 2000 (CFMA), extensively revising the CEA. 14 The CFMA facilitated the introduction of certain new transactions by the exchanges, including certain off-centralized-market trades such as exchanges of futures for swaps (EFS). 15 Currently, several exchanges have rules permitting EFSs and other types of off-centralized-market trades referred to as exchanges of futures for risk (EFR) and exchanges of futures for options (EFO). 16 However, parts 16 and 17 of the Commission's regulations previously required contract markets and reporting firms to separately account only for volume attributable to EFPs. 17

In order to recognize the growing use of these off-centralized-market trades, the final rules require exchanges and reporting firms to report all trades involving the exchange of futures for a commodity or for a derivatives position in the same manner as they previously reported EFP transactions. Therefore, exchanges and reporting firms will group together all EFPs, EFSs, EFRs, EFOs or other exchanges of futures for a commodity or for a derivatives position permitted by exchange rules, and report the sum under the same category. This is an appropriate approach because all of these trades are similar in that they permit the exchange of a futures position for an off-exchange position. Block trades, however, will not be included in this total because they do not involve the exchange of a commodity futures contract for a commodity or for a derivatives position. Volume attributable to block trades shall be reported with other volume.

With regard to the reporting of exchanges of futures, one commenter, Rolfe and Nolan Systems, Inc., a recordkeeping and reporting service provider, requested that the Commission allow at least 90 days after the finalization of the reporting rules for FCMs to comply with the requirement to aggregate exchanges of futures. 18 The commenter indicated that compliance with the new requirement would compel certain programming modifications. 19 In the Commission's view, this request is reasonable. In order to permit ample time for persons with reporting obligations to implement any necessary programming modifications, the Commission will not institute any enforcement proceeding under parts 15 through 18, and part 21, for non-compliance with the adopted reporting requirements applicable to exchanges of futures other than EFPs until the expiration of 90 days from the date of publication of these rules in the Federal Register . During this interval, compliance with the rules applicable to exchanges of futures is voluntary, however, persons with reporting obligations must continue to comply with all reporting requirements that are applicable to EFPs.

The Commission is adopting a series of rule amendments that are designed to update the reporting process in recognition of technological advancements. Parts 16 through 18, and part 21, previously required the submission of reports in hard copy form or through the dial-up transmission of data. The final rules amend these requirements to reflect the existing industry practice of using Internet data transmissions in place of dial-up transmissions and the use of exchange websites as a store of daily data in place of compiling information in hard copy form. The Commission, in addition to making certain other minor amendments that affect the reporting process, is also eliminating the use of Form 103 for the submission of special call data under part 18, and adopting final rules designed to foster innovation in the means reporting firms use to file Forms 102 as required by part 17. 20

In a notice published in the Federal Register of November 18, 1993 (58 FR 60860), FDA announced that a food additive petition (FAP 3M4399) had been filed by Science Applications International Corp., 2950 Patrick Henry Dr., Santa Clara, CA 95054. The petition proposed that the food additive regulations in § 179.21 Sources of radiation used for inspection of food, for inspection of packaged food, and for controlling food processing (21 CFR 179.21) be amended to provide for the safe use of a source of fast (high energy) neutrons to inspect cargo containers that may contain food. In a letter dated January 9, 1998, FDA was informed by Ancore Corp. that they were previously the division of SAIC responsible for this petition but had been reorganized into a separate company. The letter explained that as part of this reorganization, the rights to FAP 3M4399 had been transferred from SAIC to Ancore Corp. (same address as SAIC).

When the petition was filed on November 18, 1993, it contained an environmental assessment (EA). In the notice of filing for this petition, the agency announced that it was placing the EA submitted with this petition on display at the Division of Dockets Management for public review and comment. No comments on the EA were received. Based on the original EA, FDA prepared a finding of no significant impact to the environment dated May 31, 1994. On July 29, 1997, FDA published revised regulations under part 25 (21 CFR part 25), which became effective on August 28, 1997. On May 12, 2003, the petitioner submitted a claim of categorical exclusion under the new § 25.32(j), in accordance with the procedures in § 25.15(a) and (d). Because the environmental record for the FAP was outdated, the agency reviewed the claim of categorical exclusion under § 25.32(j) for this final rule and found it to be warranted.

A source of radiation used for the purpose of inspection of foods meets the definition of a food additive under section 201(s) of the Federal Food, Drug, and Cosmetic Act (the act) (21 U.S.C. 321(s)). Under section 409(c)(3)(A) of the act (21 U.S.C. 348(c)(3)(A)), a food additive cannot be approved for a particular use unless a fair evaluation of the data available to FDA establishes that the additive is “safe” for that use. FDA's food additive regulations in 21 CFR 170.3(i) define safe as “a reasonable certainty in the minds of competent scientists that the substance is not harmful under the intended conditions of use.”

Neutron-based techniques can be used to screen large cargo containers for contraband such as explosives, chemical warfare agents, and illegal drugs. Unlike conventional systems based on x rays or gamma rays, surveillance systems employing neutrons are able to provide more specific information on a cargo's elemental composition. When a neutron beam is directed at a target, the neutrons interact with target nuclei by either scattering or by nuclear reactions such as neutron capture by the target nuclei. Some captured neutrons result in the production of unstable isotopes that decay by emitting characteristic gamma rays, which can be detected and used to identify emitting chemical elements. Using gamma ray spectroscopy, information can be obtained on the concentration of chemical elements of the scanned object. Because the concentrations of certain elements in these types of illicit materials are characteristically different from other materials, such illicit materials can be detected. The present petition proposes the use of a pulsed fast neutron analysis system employing a beam of high energy neutrons at energies up to 9 million electron volts (MeV) to inspect large cargo containers and trucks that may contain food, provided that the maximum dose absorbed by the food does not exceed 0.01 gray (Gy). The scanning neutron beam operates in one of two modes, fast scan and directed search. Most containers would be exposed to a fast scan search only. During a fast scan, the beam impinges on any one position in the container for at most 1 second. Suspicious containers may be subjected to a directed search. A typical directed search would focus the beam on one position in the container for 10 seconds, but it is possible that it may be necessary to dwell on one location for up to 5 minutes.

One of the safety issues considered by FDA when it is evaluating a source of radiation used to inspect or treat food is the potential for formation of products generated in the food by radiation-induced chemical reactions (radiolysis products). The types and amounts of these products generated in the food depend on the chemical constituents of the food and on the conditions of irradiation. Radiation chemistry of components of food previously has been discussed in detail in the agency's final rule permitting the irradiation of meat (62 FR 64107, December 3, 1997). As stated in the meat irradiation final rule, most of the radiolysis products that are generated from food irradiation are also found in foods that have not been irradiated. Some of these compounds are also produced by heating foods, and, in the case of heating, are produced in amounts far greater than the trace amounts that result from irradiating foods.

The amount of radiolysis products generated in food increases with increasing absorbed dose of radiation. FDA has previously established that gamma rays from radionuclides of cobalt-60 or cesium-137, high-energy electrons up to 10 MeV, and x rays up to 5 MeV are safe for the treatment of different types of food at doses ranging from 0.3 kiloGray (kGy) to 30 kGy, depending on the type of food. Because the current petition proposes to limit the maximum absorbed dose to 0.01 Gy (a dose at least 30,000 times less than these approved uses), the amounts of radiolysis products generated in food from the petitioned source of radiation will be less than from these approved sources. Accordingly, FDA has concluded that the proposed use is safe in terms of exposure to potential radiolysis products.

Neutrons have a greater propensity to induce radioactivity in scanned materials than x rays and gamma rays of the same energy. To assess the induction of radioactivity in food by neutron irradiation from a cargo surveillance system, the petitioner submitted a 1992 report (the Harwell Report) that was prepared by Harwell Laboratory of the United Kingdom's Atomic Energy Authority (Ref. 1) and a study that was performed by the petitioner (Ref. 2). FDA contracted for an independent evaluation of the data in the petition by the U.S. Department of Energy, Oak Ridge National Laboratory (ORNL) (Ref. 3). The references provide the primary basis for FDA's conclusion regarding the safety of the petitioned use of neutron radiation.

The Harwell Report assessed the radiological implications of the use of neutron-based cargo surveillance techniques on cargoes of food. Three cargo scenarios were investigated; semi-infinite slabs (representing inspection of a large transport container of food), 1 kilogram (kg) of food in a 20-kg suitcase (representing airport inspection of a piece of luggage containing a small quantity of food (e.g., a lunch)), and 2-meter high pallets of food. Calculations were made for 17 different types of food simulating exposure to 0.5 Gy of neutrons (50 times higher than the maximum petitioned dose level of 0.01 Gy) with energies of 1, 2, 5, 8, and 14 MeV. Calculations included induced activities and the resultant doses to consumers after ingesting foods 5 minutes to 1 month after inspection. In addition, in selecting the food to be used for the cargo scenarios, three types of food were considered for the calculations based upon the chemical elements of the foods (e.g. calcium, iron, magnesium, sodium, potassium): A single distribution representing the maximum credible concentrations of the elements in any food; a single “reference” distribution of 47 elements obtained from studies of dietary intake; and distributions corresponding to elemental concentrations in 17 common food types. Of these three distributions, the one considered the most realistic was the single “reference” distribution because it is based on the daily elemental requirements for “reference” man. For this distribution, the report provided calculations of radiation dose per unit activity intake into the body for induced activities of the neutron-irradiated “reference” food at a consumption rate of 2.88 kg of food per day and the resultant dose to reference man after ingesting the foods immediately after inspection and up to 1 month after inspection. Prior to irradiation, the ingestion dose of “reference” food is reported to be 1.823 x10 -10 Sieverts per gram (Sv/g). The authors calculated that, depending on the energy of the neutron beam and an absorbed dose in the reference food of 0.5 Gy, the ingestion doses from consuming the “reference” food 1 hour, 8 hours, and 1 day after irradiation would range from 9.2 x 10 -10 to 3.2 x 10 -9 Sv/g, 5.3 x 10 -10 to 1.7 x 10 -9 Sv/g, and 3.7 x10 -10 to 9.2x10 -10 Sv/g, respectively. As this example and others below illustrate, any induced radioactivity is small and dissipates rapidly. Therefore, within 1 day, the ingestion dose from inspected foods would be essentially the same from natural radioactivity in the same food. FDA notes that the Harwell Report addresses a neutron dose 50 times higher than that proposed in the petition and reports radioactivity in the food within 24 hours of inspection. Because food subject to this regulation would be inspected at a far lower dose, and would unlikely be consumed within 24 hours of inspection considering the logistics of food transportation, any residual induced radioactivity would be well below what occurs naturally.

The calculations provided by the petitioner were based on computer modeling and estimated the committed effective dose equivalents to adults, children, and infants due to ingestion of neutron-radiation inspected foods 12 hours after exposure to an 8 MeV neutron fluence rate of 5 x 10 5 n cm -2 sec -1 , for a period of 1 second, corresponding to a dose of 0.021 milliGray (mGy). The petitioner identified representative foods, the elemental composition of each food, and typical values for the annual amount of each food ingested. The calculated annual effective doses from consumption of foods that have been irradiated ranged from 3.42 x 10 -11 to 2.01 x 10 -8 Sv, which is significantly below the annual effective dose from natural radioactivity in food that is reported to be 3.9 x 10 -4 Sv per year 1 . Although the absorbed dose in this study is approximately 500 times less than the maximum petitioned dose level of 0.01 Gy (10 mGy), the calculated annual effective dose from foods inspected with high energy neutrons is 20 thousand to 11 million times less than the annual effective dose from naturally occurring radioactivity in food.

ORNL performed an independent assessment for a subset of foods considered by the petitioner, and ingestion doses per unit of food were found to be in general agreement with those presented in the petitioner's supportive documentation. In addition, ORNL designed three extreme-case scenarios regarding consumption of food inspected with pulsed fast neutrons. One scenario assumed the entire diet has been irradiated for 1 second and then consumed 12 hours later. This scenario, although highly conservative, is considered to be the most reasonable of the three. The second scenario assumed infrequent (equivalent to 10 full days of dietary needs per year) consumption of food 5 minutes after it had been irradiated for 1 second. The third scenario assumes infrequent tasting of food immediately after it had been irradiated for 5 minutes. The calculated annual effective doses for each scenario is 4.8x10 -8 Sv, 3.4x10 -7 Sv, and 1.0x10 -5 Sv, respectively, which are approximately 40 to 8,000 times less than the annual effective dose from consumption of foods due to naturally occurring radioactivity.

The petitioner proposed a range of up to 9 MeV and with no lower limit, for the source's average neutron energy. Fast neutrons with high energy (greater than 1 MeV) are necessary to penetrate large cargo containers, whereas lower energy neutrons (less than 1 MeV), including thermal neutrons, have less penetrating power and are more likely to induce radioactivity in food. Therefore, FDA considered whether the data in the petition demonstrate that a source of high energy neutrons would require a lower energy limit to ensure safe use. Although the petitioner originally proposed a neutron energy range up to 9 MeV, the Harwell Report which was submitted by the petitioner is based on neutron energy levels ranging from 1 to 14 MeV and, therefore, supports the safety of neutron energies within that range. Because the data in the petition do not adequately address the issue of induced radioactivity from neutrons of energy below 1 MeV, and because neutrons with such energy levels are not explicitly intended to be used, FDA concludes that a minimum energy level requirement of 1 MeV is appropriate. In addition to this lower energy limit, FDA has also concluded that, based on information in the petition, it is necessary to restrict the neutron source to one that produces monoenergetic neutrons. A monoenergetic source produces neutrons within a narrow energy distribution compared to a source that is not monoenergetic. Such a restriction will limit the number of lower energy neutrons that are emitted even if the source's average neutron energy is 1 MeV.

FDA has evaluated the data submitted in the petition and other relevant material and concludes that consumption of food inspected by a source of monoenergetic neutrons between 1 and 14 MeV is safe, and that the conditions listed in § 179.21 should be amended as set forth below. In accordance with § 171.1(h) (21 CFR 171.1(h)), the petition and the documents that FDA considered and relied upon in reaching its decision to approve the petition are available for inspection at the Center for Food Safety and Applied Nutrition by appointment with the information contact person (see FOR FURTHER INFORMATION CONTACT ). As provided in § 171.1(h), the agency will delete from the documents any materials that are not available for public disclosure before making the documents available for inspection.

The agency has determined under 21 CFR 25.32(j) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an EA nor an environmental impact statement is required.

This final rule contains information collection requirements that are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The title, description, and respondent description of the information collection requirements are shown below with an estimate of the annual reporting burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

Title : Irradiation in the Production, Processing, and Handling of Food

Description : The regulation as amended requires that monoenergetic neutron sources producing neutrons at energies not less than 1 MeV but no greater than 14 MeV used for inspection of container shipments which may contain food bear a label stating the minimum and maximum energy of radiation emitted by the neutron source. The label or accompanying labeling shall also bear adequate directions for safe use and a statement that no food shall be exposed to this radiation source so as to receive a dose in excess of 0.01 Gy. This information is needed to ensure safe use of the source of radiation as a direct food additive.

Description of Respondents : Manufacturers of monoenergetic neutron radiation source.

This document contains amendments to 26 CFR part 31 under sections 3121(b)(10) and 3306(c)(10)(B) of the Internal Revenue Code (Code). These sections except from “employment” for Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) purposes, respectively, service performed in the employ of a school, college, or university by a student who is enrolled and regularly attending classes at such school, college, or university. In addition, this document contains amendments to 26 CFR part 31 under section 3121(b)(2). This section excepts from employment for FICA purposes domestic service performed in a local college club, or local chapter of a college fraternity or sorority, by a student who is enrolled and is regularly attending cases at a school, college, or university.

Proposed regulations under sections 3121(b)(2), 3121(b)(10), and 3306(c)(10)(B) were published in the Federal Register on February 25, 2004 (69 FR 8604, 2004-10 I.R.B. 571). Written and electronic comments responding to the notice of proposed rulemaking were received. A public hearing was held on June 16, 2004. After consideration of all the comments, the proposed regulations are adopted as amended by this Treasury decision. The revisions are discussed below.

The final regulations provide rules for determining whether an organization is a school, college, or university (SCU) and whether an employee is a student for purposes of sections 3121(b)(10), 3121(b)(2), and 3306(c)(10)(B) of the Code. Many comments were received on the proposed regulations and several witnesses testified at the hearing which was held June 16, 2004. After consideration of the comments and testimony, the Treasury department and the IRS decided to make several significant changes described below.

The exceptions from employment for student services apply only if the employee is a student enrolled and regularly attending classes at a SCU. Under the proposed regulations, whether an organization is a SCU is determined with reference to the organization's primary function. An organization whose primary function is to carry on educational activities qualifies as a SCU for purposes of the student exceptions from employment.

A few commentators suggested that an organization, such as a teaching hospital, that has embedded within it a division or function that carries on educational activities should be treated as a SCU for purposes of the student exceptions from employment.

The final regulations retain the primary function standard as described in the proposed regulations. As discussed in the preamble to the proposed regulations, the primary function standard is based upon the existing statutory and regulatory language under section 3121(b)(10), as well as the legislative history relating to the student exception from employment under section 3121(b)(10).

The exceptions from employment for student services require that an employee be “enrolled and regularly attending classes” in order to have the status of a student. Under the proposed regulations, “a class is an instructional activity led by a knowledgeable faculty member for identified students following an established curriculum.”

Commentators requested clarification regarding whether an instructional activity must be led by a regular faculty member in order to be considered a class, or whether an activity led by an adjunct faculty member, graduate teaching assistant, or other qualified individual hired to lead the activity could be considered a class.

The final regulations clarify that a class is an instructional activity led by a faculty member “or other qualified individual” following an established curriculum. Thus, an instructional activity led by an adjunct faculty member, graduate assistant, or other qualified individual can qualify as a class for purposes of the student exceptions from employment.

The existing student FICA regulations provide that an employee whose services are incident to and for the purpose of pursuing a course of study has the status of a student. § 31.3121(b)(10)-2(c). The proposed regulations provide that in order for an employee's services to be considered incident to and for the purpose of pursuing a course of study, the educational aspect of the relationship between the employee and the employer, as compared to the service aspect, must be predominant. Under the proposed regulations, if an employee is a “career employee,” then the service aspect of the employee's relationship with the employer is considered predominant, and thus the employee's services are not considered incident to and for the purpose of pursuing a course of study. The proposed regulations provide that the following employees are considered career employees: (1) Employees who regularly perform services 40 hours or more per week; (2) professional employees; (3) employees who receive certain employment benefits; and (4) employees required to be licensed to work in the field in which the employees are performing services. The IRS requested comments on the criteria used to identify employees having the status of a career employee.

Commentators expressed concern about using these criteria to make certain employees automatically ineligible for the student FICA exception. Rather, according to commentators, whether an employee's services are incident to and for the purpose of pursuing a course of study should be based upon all the relevant facts and circumstances.

The final regulations provide that the educational and service aspects of an employee's relationship with the employer are generally evaluated for an academic term based upon all the relevant facts and circumstances. Similar criteria to those identified in the proposed regulations are described in the final regulations as relevant factors, not dispositive criteria, in determining whether the educational or service aspect of an employee's relationship with the employer is predominant. Nevertheless, under the final regulations, if an employee is a “full-time employee,” then the employee's services are not incident to and for the purpose of pursuing a course of study. In addition, based upon comments received, the criteria identified in the proposed regulations have been modified as described below.

The proposed regulations provide that an employee who “regularly performs services 40 hours or more per week” is a career employee, and is thus ineligible for the student exception from employment. Commentators expressed concern that the 40 hour criterion would be administratively impracticable because it would be difficult to monitor an employee's actual hours worked during an academic term. In addition, commentators expressed concern that the meaning of “regularly” is unclear, making it difficult to assess the effect of changes in hours worked from week to week. Commentators also requested clarification on whether an employee's number of hours worked during academic breaks is considered in determining whether the employee is eligible for the student FICA exception.

The final regulations modify the hours worked criterion. The final regulations provide that the services of a “full-time employee” are not incident to and for the purpose of pursuing a course of study. Under the final regulations, a full-time employee is an employee who is considered a full-time employee based upon the employer's standards and practices, except that an employee whose “normal work schedule is 40 hours or more per week” is considered a full-time employee. This standard is intended to improve administrability for employers. Whether an employee is a full-time employee based upon the employer's standards and practices, or based upon the employee's normal work schedule, should be determinable by employers at the start of an academic term, thus reducing instances where an employee's status shifts from student to non-student during an academic term. An employee's normal work schedule does not change, for example, based upon changes in work demands that are unforeseen at the start of an academic term causing the employee to work additional hours beyond his normal work schedule. In addition, time spent performing services that have an educational or instructional aspect is considered in determining an employee's normal work schedule. Finally, the final regulations provide that an employee's work schedule during an academic break is not considered in determining whether the employee's normal work schedule is 40 hours or more per week.

The final regulations provide that if an employee does not have the status of a full-time employee, then the employee's normal work schedule and actual number of hours worked per week are relevant factors in determining whether the service aspect or educational aspect of the employee's relationship with the employer is predominant. Thus, if an employee is normally scheduled to work 20 hours per week, but consistently works more than 40 hours per week, the amount of time actually worked is taken into account in determining whether or not the employee qualifies as a student.

The proposed regulations provide that a “professional employee” is a career employee, and is thus ineligible for the student exception from employment. Under the proposed regulations, a professional employee is an employee who performs work: (1) Requiring knowledge of an advanced type in a field of science or learning, (2) requiring the consistent exercise of discretion and judgment, and (3) that is predominantly intellectual and varied in character.

Commentators expressed concern that the professional employee criterion would inappropriately disqualify the services of many graduate research and teaching assistants from eligibility for the student exceptions from employment. Commentators maintained that graduate research and teaching assistants are primarily students, and thus their services should not automatically be ineligible for the student exceptions based upon the professional employee criterion.

The final regulations provide that whether an employee is a professional employee is a relevant factor, not a dispositive criterion, in evaluating the service aspect of the employee's relationship with the employer. Under the final regulations, if an employee has the status of a professional employee, then that suggests the service aspect of the employee's relationship with the employer is predominant. Whether a professional employee is a student will depend upon all the facts and circumstances. Thus, under the final regulations, those graduate assistants and other employees whose work is described under the professional employee standard are not automatically ineligible for the student exception.

The proposed regulations provide that an employee who is required to be licensed under state or local law to work in the field in which the employee performs services is a career employee, and is thus ineligible for the student exception. The preamble to the proposed regulations requested comments on the licensure criterion and whether this criterion should be further refined or clarified.

Commentators expressed concern that the licensure criterion under the proposed regulations is overly broad because it would cause employees licensed for health and safety reasons, such as van drivers and life guards, to be ineligible for student status.

Under the final regulations, an employee's licensure status is not a dispositive criterion. Instead, the final regulations provide if an employee is a professional employee, then whether the employee is licensed is a relevant factor in determining whether the service aspect of the employee's relationship with the employer is predominant. The final regulations provide that if an employee has the status of a licensed, professional employee, then that fact further suggests that the service aspect of the employee's relationship with the employer is predominant. However, a worker who is a licensed, professional employee could be considered a student based upon all the relevant facts and circumstances.

The proposed regulations provide that an employee who is eligible to receive certain employment benefits is considered a career employee, and is thus ineligible for the student exception.

Commentators expressed concern that eligibility to receive employment benefits should not disqualify an individual from the student exception. Commentators noted that some state statutes make student employees eligible for retirement and other benefits, meaning that student employees in those states could not qualify as students under the proposed regulations. In addition, commentators noted that many colleges and universities permit student employees to make elective contributions to section 403(b) arrangements. Under the proposed regulations, offering this benefit would prohibit student employees from qualifying as students for purposes of the student exceptions from employment.

The final regulations provide that eligibility to receive employment benefits is a relevant factor, not a dispositive criterion, in determining whether the service aspect of an employee's relationship with the employer is predominant. Thus, an employee who is eligible for employment benefits can still qualify as a student for purposes of the student exceptions from employment. In addition, the final regulations provide that eligibility to receive health insurance benefits is not considered in determining whether the service aspect is predominant, and eligibility for benefits mandated by state or local law is given less weight in determining whether the service aspect is predominant.

Commentators objected to the proposed effective date of February 25, 2004, asserting that it would take some time to adjust to the new rules set forth in the proposed regulations. In response to these comments, the final regulations are applicable with respect to services performed on or after April 1, 2005.

When the IRS issued the proposed regulations, it also issued Notice 2004-12 (2004-10 I.R.B. 556) suspending Rev. Proc. 98-16 (1998-1 C.B. 403) and proposing to replace it with a revenue procedure that is consistent with the proposed regulations. The IRS solicited comments on the proposed revenue procedure. Comments were received and considered in conjunction with the comments on the proposed regulations. The proposed revenue procedure has been modified in response to comments, and in order to provide guidance that is consistent with the final regulations, is being issued in final form in Rev. Proc. 2005-11 (to be published in I.R.B. 2005-2) modifying and superseding Rev. Proc. 98-16. Rev. Proc. 2005-11 is applicable with respect to services performed on or after April 1, 2005. Taxpayers may rely upon Rev. Proc. 98-16 with respect to services performed prior to April 1, 2005.

It has been determined that these final regulations are not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. In addition, because no collection of information is imposed on small entities, the provisions of the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply, and, therefore, a Regulatory Flexibility Analysis is not required. Pursuant to section 7805(f) of the Code, the proposed regulations preceding these regulations were submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on the impact on small business.

The principal author of these proposed regulations is John Richards of the Office of Division Counsel/Associate Chief Counsel (Tax Exempt and Government Entities). However, other personnel from the IRS and Treasury Department participated in their development.

The Office of the Provost Marshal General (DAPM-MPD-LE), is the proponent for regulations in 32 CFR part 503, and has concluded this regulation is obsolete. This regulation has been rescinded. Therefore, it would be helpful in avoiding confusion with the public if 32 CFR, part 503, is removed.

The Office of the Provost Marshal General (DAPM-MPD-LE), is the proponent for regulations in 32 CFR part 630, and has concluded this regulation is obsolete. This regulation has been extensively revised, and the revised regulation does not affect the general public. Therefore, it would be helpful in avoiding confusion with the public if 32 CFR part 630, is removed.

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(8), the Coast Guard finds that good cause exists for not publishing an NPRM. Because general permission to enter the safety zones will be given during non-hazardous times, the impact of this rule on commercial and recreational traffic is expected to be minimal. Any delay encountered in this regulation's effective date would be contrary to public interest because immediate action is needed to protect human life and property from possible fallout from the rocket launch. The parameters of the zones will not unduly impair business and transits of vessels. The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of each launch and will grant general permission to enter the safety zones during those times in which the launch does not pose a hazard to mariners.

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 . The process of scheduling a rocket launch is uncertain due to unforeseen delays such as weather that can cause cancellation of the launch. The Coast Guard attempts to publish a final rule as close to the expected launch date as possible, however, these attempts often prove futile due to frequent re-scheduling. Any delay encountered in this regulation's effective date would be contrary to public interest since immediate action is needed to protect human life and property from possible fallout from the rocket launch. The parameters of the zones will not unduly impair business and transits of vessels. The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of each launch and will grant general permission to enter the safety zones during those times in which the launch does not pose a hazard to mariners.

The Alaska Aerospace Development Corporation will launch an unmanned rocket from their facility at Narrow Cape, Kodiak Island, Alaska between 5 p.m. and 1 a.m. each day between December 8, 2004 and January 31, 2005 until rocket launch operations are complete. The safety zones are necessary to protect spectators and transiting vessels from the potential hazards associated with the launch.

The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of the launch and will grant general permission to enter the safety zones during those times in which a launch schedule does not pose a hazard to mariners. Because general permission to enter the safety zone will be given during non-hazardous times, the impact of this rule on commercial and recreational traffic is expected to be minimal.

From the latest information received from the Alaska Aerospace Development Corporation, the launch window is scheduled for 8 hours each day between December 8, 2004 and January 31, 2004. The sizes of the safety zones have been set based upon the trajectory information in order to provide a greater safety buffer in the event that the launch is aborted shortly after take-off. The Pacific Range Support Team has identified a launch area exclusion zone at Narrow Cape and southwest along the launch trajectory. The COTP will enforce two safety zones in support of this exclusion zone. The first established safety zone includes the waters of the Gulf of Alaska and adjacent coastal areas within the boundaries defined by a line drawn from a point located at 57°27.50′ N, 152°25.00′ W, then southeast to a point located at 57°22.75′ N, 152°15.00′ W, then southwest to a point located at 57°11.00′ N, 152°36.00′ W, and then northwest to a point located at 57°15.75′ N, 152°46.5′ W, and then northeast to the point located at 57°27.50′ N, 152°25.00′ W. The second established safety zone includes the waters adjacent to Narrow Cape within the boundaries defined by a circle centered at 57°26.1′ N, 152°20.49′ W, with a radius of 5 nautical miles. All coordinates reference Datum: NAD 1983.

These safety zones are necessary to protect spectators and transiting vessels from the potential hazards associated with the rocket launch. The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of the launch and will grant general permission to enter the safety zones during those times in which the launch does not pose a hazard to mariners.

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 cost 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). The Coast Guard expects the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10(e) of the regulatory policies and procedures of DHS is unnecessary. Because the hazardous condition is expected to last for approximately 8 hours each day, and because general permission to enter the safety zones will be given during non-hazardous times, the impact of this rule on commercial traffic should be minimal. Before the effective period, we will issue maritime advisories widely available to users of the affected portion of the Gulf of Alaska. We believe there will be minimal economic impact on commercial traffic.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit, anchor, or fish in a portion of the Gulf of Alaska off Narrow Cape from 1 p.m. to 1 a.m. each day from December 8, 2004 until January 31, 2005 until rocket launch operations are complete. Because the hazardous situation, during the planned rocket launch hours, is expected to last for approximately 8 hours each day, and because general permission to enter the safety zones will be given during non-hazardous times, the impact of this rule on commercial and recreational traffic should be minimal. Before the effective period, we will issue maritime advisories widely available to users of the affected portion of the Gulf of Alaska. We believe there will be minimal impact to small entities.

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

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

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

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

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct affect 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. 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.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this proposed rule under Commandant Instruction M16475.1D, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation because it is a safety zone.

Under figure 2-1, paragraph (34)(g), of the Instruction, an “Environmental Analysis Check List” and a “Categorical Exclusion Determination” are not required for this rule.

Regulatory History

We did not publish a notice of proposed rulemaking (NPRM) for this regulation. Under 5 U.S.C. 553(b)(8), the Coast Guard finds that good cause exists for not publishing an NPRM. Because the hazardous condition is expected to last for approximately 8 hours each day, and because general permission to enter the safety zone will be given during non-hazardous times, the impact of this rule on commercial and recreational traffic is expected to be minimal. Any delay encountered in this regulation's effective date would be contrary to public interest because immediate action is needed to protect human life and property from possible fallout from the rocket launch. The parameters of the zone will not unduly impair business and transits of vessels. The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of each launch and will grant general permission to enter the safety zone during those times in which the launch does not pose a hazard to mariners.

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 . The process of scheduling a rocket launch is uncertain due to unforeseen delays such as weather that can cause cancellation of the launch. The Coast Guard attempts to publish a final rule as close to the expected launch date as possible, however, these attempts often prove futile due to frequent re-scheduling. Any delay encountered in this regulation's effective date would be contrary to public interest since immediate action is needed to protect human life and property from possible fallout from the rocket launch. The parameters of the zone will not unduly impair business and transits of vessels. The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of each launch and will grant general permission to enter the safety zone during those times in which the launch does not pose a hazard to mariners.

The Alaska Aerospace Development Corporation will launch an unmanned rocket from their facility at Narrow Cape, Kodiak Island, Alaska sometime between 5 p.m. and 1 a.m. each day between December 8, 2004 and January 31, 2005 until rocket launch operations are complete. The safety zone is necessary to protect spectators and transiting vessels from the potential hazards associated with the launch.

The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of the launch and will grant general permission to enter the safety zone during those times in which a launch schedule does not pose a hazard to mariners. Because the hazardous situation is expected to last for approximately 8 hours each day, and because general permission to enter the safety zone will be given during non-hazardous times, the impact of this rule on commercial and recreational traffic is expected to be minimal.

From the latest information received from the Alaska Aerospace Development Corporation, the launch window is scheduled for 8 hours each day between December 8, 2004 and January 31, 2004. The size of the safety zone has been set to protect the public from the reentry and impact of a rocket motor. The Pacific Range Support Team has identified a first stage exclusion zone at Sitkinak Island along the launch trajectory. The COTP will enforce a single safety zone in support of this exclusion zone. The established safety zone includes the waters of the Gulf of Alaska and adjacent coastal areas within the boundaries defined by a line drawn from a point located at 56°40.50′ N, 153°42.50′ W, then southeast to a point located at 56°34.00′ N, 153°29.50′ W, then southwest to a point located at 56°12.50′ N, 154°2.50′ W, and then northwest to a point located at 56°19.00′ N, 154°16.50′ W, and then northeast to the point located at 56°40.50′ N, 153°42.50′ W. All coordinates reference Datum: NAD 1983.

This safety zone is necessary to protect transiting vessels from the potential hazards associated with the Rocket launch. The Coast Guard will announce via Broadcast Notice to Mariners the anticipated date and time of the launch and will grant general permission to enter the safety zone during those times in which the launch does not pose a hazard to mariners.

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 cost 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) (44 FR 11040; February 26, 1979). The Coast Guard expects the economic impact of this rule to be so minimal that a full Regulatory Evaluation under paragraph 10(e) of the regulatory policies and procedures of DHS is unnecessary. Because the hazardous condition is expected to last for approximately 8 hours each day, and because general permission to enter the safety zone will be given during non-hazardous times, the impact of this rule on commercial traffic should be minimal. Before the effective period, we will issue maritime advisories widely available to users of the affected portion of the Gulf of Alaska. We believe there will be minimal economic impact on commercial traffic.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: the owners or operators of vessels intending to transit, anchor, or fish in a portion of the Gulf of Alaska off Sitkinak Island from 1 p.m. to 1 a.m. each day from December 8, 2004 until January 31, 2005 until rocket launch operations are complete. Because the hazardous situation, during the planned rocket launch hours, is expected to last for approximately 8 hours each day, and because general permission to enter the safety zone will be given during non-hazardous times, the impact of this rule on commercial and recreational traffic should be minimal. Before the effective period, we will issue maritime advisories widely available to users of the affected portion of the Gulf of Alaska. We believe there will be minimal impact to small entities.

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

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

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

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

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

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

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct affect 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. 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.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g. , specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

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 because it is a safety zone.

Under figure 2-1, paragraph (34)(g), of the Instruction, an “Environmental Analysis Check List” and a “Categorical Exclusion Determination” are not required for this rule.

On September 12, 2003, the Coast Guard published a final rule (68 FR 53677) establishing regulations in 33 CFR 165.1318 for the security and safety of large passenger vessels in the navigable waters of Portland, OR, and adjacent waters, of Oregon and Washington. These security and safety zones provide for the regulation of vessel traffic in the vicinity of certain large passenger vessels (as defined in 33 CFR 165.1318(b)) and exclude persons and vessels from the immediate vicinity of these large passenger vessels. Entry into these zones is prohibited unless otherwise exempted or excluded under 33 CFR 165.1318 or unless authorized by the Captain of the Port or his designee. The Captain of the Port, Portland, OR, will suspend enforcement of the Large Passenger Vessel Safety and Security Zones established in 33 CFR 165.1318 on December 8, 2004.

Throughout this document, “we,” “us” and “our” refer to EPA.

On September 20, 2004 (69 FR 58375), and September 14, 2004 (69 FR 55386), respectively, EPA proposed to approve the following rules into the Arizona SIP (MCESD 331) and the California SIP (SCAQMD 2015).

We proposed to approve these rules because we determined that they complied with the relevant CAA requirements. Our proposed action contains more information on the rules and our evaluation.

On June 1, 2004 (69 FR 30845), EPA proposed to disapprove the following rule that was submitted for incorporation into the California SIP.

We proposed to disapprove this rule because some rule provisions conflict with section 110 and part D of the Act. These provisions deal with district enforcement discretion. EPA considers it unproductive and potentially confusing to approve an enforcement discretion rule into the SIP.

Our proposed action contains more information on the basis for this rulemaking and on our evaluation of the submittal.

EPA's proposed action provided a 30-day public comment period for each of these actions. We received no comments on any of these actions during the respective comment periods.

No comments were submitted that change our assessment that MCESD Rule 331 and SCAQMD Rule 2015 comply with the relevant CAA requirements. Therefore, as authorized in section 110(k)(3) of the Act, EPA is fully approving these rules into the Arizona SIP (MCESD Rule 331) and the California SIP (SCAQMD Rule 2015).

No comments were submitted that change our assessment of MBUAPCD Rule 214 as described in our proposed action. Therefore, as authorized in section 110(k)(3) of the Act, EPA is finalizing a full disapproval of the submitted rule. Because this is not a required submittal, there are no sanctions associated with this disapproval. Note that the submitted rule has been adopted by the MBUAPCD, and EPA's final disapproval does not prevent the local agency from enforcing it.

The Office of Management and Budget (OMB) has exempted this regulatory action from Executive Order 12866, entitled “Regulatory Planning and Review.”

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 Regulatory Flexibility Act (RFA) generally requires an agency to conduct a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions.

This rule will not have a significant impact on a substantial number of small entities because SIP approvals and disapprovals under section 110 and subchapter I, part D of the Clean Air Act do not create any new requirements but simply approve or disapprove requirements that the States are already imposing. Therefore, because the Federal SIP action does not create any new requirements, I certify that this action will not have a significant economic impact on a substantial number of small entities.

Moreover, due to the nature of the Federal-State relationship under the Clean Air Act, preparation of flexibility analysis would constitute Federal inquiry into the economic reasonableness of state action. The Clean Air Act forbids EPA to base its actions concerning SIPs on such grounds. Union Electric Co., v. U.S. EPA , 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

Under sections 202 of the Unfunded Mandates Reform Act of 1995 (“Unfunded Mandates Act”), signed into law on March 22, 1995, EPA must prepare a budgetary impact statement to accompany any proposed or final rule that includes a Federal mandate that may result in estimated costs to State, local, or tribal governments in the aggregate; or to the private sector, of $100 million or more. Under section 205, EPA must select the most cost-effective and least burdensome alternative that achieves the objectives of the rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that may be significantly or uniquely impacted by the rule.

EPA has determined that the approval and disapproval actions promulgated do not include a Federal mandate that may result in estimated costs of $100 million or more to either State, local, or tribal governments in the aggregate, or to the private sector. This Federal action approves or disapproves pre-existing requirements under State or local law, and imposes no new requirements. Accordingly, no additional costs to State, local, or tribal governments, or to the private sector, result from this action.

Federalism (64 FR 43255, August 10, 1999) revokes and replaces Executive Orders 12612 (Federalism) and 12875 (Enhancing the Intergovernmental Partnership). Executive Order 13132 requires EPA to develop an accountable process to ensure “meaningful and timely input by State and local officials in the development of regulatory policies that have federalism implications.” “Policies that have federalism implications” is defined in the Executive Order to include regulations that have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” Under Executive Order 13132, EPA may not issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not required by statute, unless the Federal government provides the funds necessary to pay the direct compliance costs incurred by State and local governments, or EPA consults with State and local officials early in the process of developing the proposed regulation. EPA also may not issue a regulation that has federalism implications and that preempts State law unless the Agency consults with State and local officials early in the process of developing the proposed regulation.

This rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, because it merely approves or disapproves state rules implementing federal standards, and does not alter the relationship or the distribution of power and responsibilities established in the Clean Air Act. Thus, the requirements of section 6 of the Executive Order do not apply to this rule.

Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications.” This final rule does not have tribal implications, as specified in Executive Order 13175. It will not have substantial direct effects on tribal governments, 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. Thus, Executive Order 13175 does not apply to this rule.

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

This rule is not subject to Executive Order 13045 because it does not involve decisions intended to mitigate environmental health or safety risks.

This rule is not subject to Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001) because it is not a significant regulatory action under Executive Order 12866.

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.

The EPA believes that VCS are inapplicable to this action. Today's action does not require the public to perform activities conducive to the use of VCS.

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). This rule will be effective January 20, 2005.

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 February 22, 2005. 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).)

The Federal Communications Commission has received OMB approval for rules published at 61 FR 43981 (August 27, 1996). Through this document, the Commission announces that it received this approval on December 30, 1996. The effective date for rules 47 CFR 73.673 and 47 CFR 73.3500 is January 2, 1997.

Pursuant to the Paperwork Reduction Act of 1995, Public Law 104-13, an agency may not conduct or sponsor a collection of information unless it displays a currently valid control number. Notwithstanding any other provisions of law, no person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act (PRA) that does not display a valid control number. Questions concerning the OMB control numbers and expiration dates should be directed to Cathy Williams, Federal Communications Commission, (202) 418-2918 or via the Internet at cathy.williams@fcc.gov.