Pursuant to Marketing Agreement and Order No. 956, both as amended (7 CFR part 956), hereinafter referred to as the “order,” and the applicable provisions of the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act,” it is hereby directed that a referendum be conducted to ascertain whether continuance of the order is favored by the producers. The referendum shall be conducted from May 19 to June 8, 2007, among Walla Walla sweet onion producers in the production area. Only current Walla Walla sweet onion producers that were engaged in the production of Walla Walla sweet onions in Washington and Oregon, during the period of January 1 to December 31, 2006, may participate in the continuance referendum.

USDA has determined that continuance referenda are an effective means for determining whether producers favor continuation of marketing order programs. USDA would consider termination of the order if a majority of the producers voting in the referendum and producers of a majority of the volume of Walla Walla sweet onions represented in the referendum do not favor continuance. In evaluating the merits of continuance versus termination, USDA will not exclusively consider the results of the continuance referendum. USDA will also consider all other relevant information concerning the operation of the order and the relative benefits and disadvantages to producers, handlers, and consumers in order to determine whether continued operation of the order would tend to effectuate the declared policy of the Act.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the ballot materials to be used in the referendum herein ordered are currently approved by the Office of Management and Budget (OMB) and have been assigned OMB No. 0581-0178. It has been estimated that it will take an average of 20 minutes for each of the approximately 35 producers of Walla Walla sweet onions in Washington and Oregon to cast a ballot. Participation is voluntary. Ballots postmarked after June 8, 2007, will not be included in the vote tabulation.

Barry Broadbent and Gary Olson of the Northwest Marketing Field Office, Fruit and Vegetable Programs, AMS, USDA, are hereby designated as the referendum agents of the Secretary of Agriculture to conduct this referendum. The procedure applicable to the referendum shall be the “Procedure for the Conduct of Referenda in Connection With Marketing Orders for Fruits, Vegetables, and Nuts Pursuant to the Agricultural Marketing Agreement Act of 1937, as Amended” (7 CFR 900.400 et seq ).

Ballots will be mailed to all producers of record and may also be obtained from the referendum agents, or from their appointees.

The Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691 et seq. , makes it unlawful for creditors to discriminate in any aspect of a credit transaction on the basis of sex, race, color, religion, national origin, marital status, or age (provided the applicant has the capacity to contract), because all or part of an applicant's income derives from public assistance, or because an applicant has in good faith exercised any right under the Consumer Credit Protection Act. The Board's Regulation B (12 CFR part 202) implements the ECOA. The ECOA and Regulation B require certain disclosures to be provided to applicants, and some of those disclosures must be provided in writing.

On May 2, 1996, the Board proposed to amend Regulation E (Electronic Fund Transfers) to permit financial institutions to provide disclosures by sending them electronically (61 FR 19,696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14,528, March 25, 1998) and similar proposals under Regulations B (Equal Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD (Truth in Savings)(63 FR 14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998).

Based on comments received on the 1998 proposals, in September 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49,688, 49,699, 49,713, 49,722 and 49,740, respectively, September 14, 1999). At the same time, the Board published an interim rule under Regulation DD allowing depository institutions to deliver disclosures on periodic statements in electronic form if the consumer agreed (64 FR 49,846, September 14, 1999). While these rulemakings were pending, federal legislation was enacted addressing the use of electronic documents and records, including consumer disclosures.

On June 30, 2000, the President signed into law the Electronic Signatures in Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et seq. ). The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met.

The E-Sign Act, including the special consumer notice provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, financial institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulations B, E, M, Z and DD if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act.

On April 4, 2001, the Board published interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation B (66 FR 17,779). Similar interim final rules for Regulations E, M, Z, and DD were published on March 30, 2001 (66 FR 17,322 (M) and 17,329 (Z)), and April 4, 2001 (66 FR 17,786 (E) and 17,795 (DD)). The interim final rules incorporated most of the provisions that were part of the 1999 proposals.

Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Creditors and other persons, as applicable, generally were required to obtain applicants' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act.

The 2001 interim final rule for Regulation B established uniform requirements for the timing and delivery of electronic disclosures. Under the interim rule, disclosures could be sent to an e-mail address designated by the applicant, or could be made available at another location, such as an Internet web site. If the disclosures were not sent by e-mail, creditors would have to provide a notice to applicants alerting them to the availability of the disclosures. Disclosures posted on a web site would have to be available for at least 90 days to allow applicants adequate time to access and retain the information. Creditors also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Similar provisions were included in the interim final rules adopted under Regulations E, M, Z, and DD.

Commenters on the interim final rules identified significant operational and security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection.

In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41,439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board has not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices.

The Board is proposing to amend Regulation B and the official staff commentary by (1) withdrawing portions of the 2001 interim final rule on electronic disclosures that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary; (2) withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and (3) retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (Similar amendments are also being proposed by the Board, in today's issue of the Federal Register , under Regulations E, M, Z, and DD.)

Because compliance with the 2001 interim final rules is not mandatory, removing most portions of the interim rules from the Code of Federal Regulations , while finalizing other provisions, would reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. Certain provisions in the interim final rules, including provisions addressing foreign language disclosures, were not affected by the lifting of the mandatory compliance date and accordingly are now in final form; these provisions would not be deleted. The Board is also proposing to adopt certain provisions that are identical or similar to provisions in the 2001 interim final rules in order to enhance the ability of consumers to apply for credit online and provide guidance or eliminate a substantial burden on electronic commerce, as discussed further below.

Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, there has been no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of increased concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is proposing to eliminate certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices.

Pursuant to the Board's authority under section 703(a)(1) of the ECOA, as well as under section 104(d) of the E-Sign Act, 1 the Board is also proposing to specify the circumstances under which certain disclosures may be provided to an applicant in electronic form, rather than in writing as required by Regulation B, without obtaining the applicant's consent under section 101(c) of the E-Sign Act. The proposed rule would also amend § 202.4(d) of Regulation B to clarify that certain disclosures must be provided to the applicant in electronic form on or with an application that is provided to and accessed by the applicant in electronic form.

The interim final rule allowed creditors to provide certain disclosures to applicants in electronic form without obtaining E-Sign consent if the disclosures were provided on or with an application. The Board continues to believe that creditors should not be required to obtain the consumer's consent in order to provide application-related disclosures if the applicant accesses the application containing these disclosures in electronic form, such as at an Internet Web site. The Board believes consumers would not be harmed, and in fact would benefit, by having timely access to these application-related disclosures in electronic form. Consumers who choose to apply for credit online would be unduly burdened if they had to consent in accordance with the E-Sign Act in order to access application forms that are accompanied by disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to apply for credit.

At the same time, the Board recognizes that consumers who apply for credit online may not want to receive other disclosures electronically. Therefore, with respect to, for example, adverse action notices or copies of appraisal reports, creditors would be required to provide written disclosures or obtain the consumer's consent in accordance with the E-Sign Act to provide such disclosures in electronic form.

Finally, the Board is proposing to delete, as unnecessary, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures because the E-Sign Act is a self-effectuating statute. The proposed revisions to Regulation B and the official staff commentary are described more fully below in the Section-by-Section Analysis.

The Board solicits comment on all aspects of this proposal. Specifically, the Board seeks comment on the appropriateness of eliminating certain provisions and retaining other provisions contained in the 2001 interim final rule.

Section 202.4(d) prescribes the form of disclosures, and specifically provides that a creditor that provides in writing any disclosures or information required by the regulation must provide the disclosures in a clear and conspicuous manner and, except for the disclosures required by §§ 202.5 and 202.13, in a form that the applicant may keep. The Board proposes to redesignate this provision as the general rule in § 202.4(d)(1).

The Board also proposes to add a new § 202.4(d)(2) to clarify that, with regard to disclosures that the regulation requires to be given in writing, creditors may provide such disclosures in electronic form, subject to compliance with the consumer consent and other applicable sections of the E-Sign Act. Some creditors may provide disclosures to applicants both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the disclosures may be provided to applicants without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements.

Section 202.4(d)(2) would also provide that certain disclosures, when included on or with an application, must be provided to the applicant in electronic form if the applicant accesses the application electronically. Under those circumstances, these disclosures may be provided in electronic form without regard to the consumer consent or other provisions of the E-Sign Act. The Board believes that, for an application accessed by the consumer in electronic form, permitting creditors to provide application-related disclosures in electronic form without regard to the consumer consent and other provisions of the E-Sign Act will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate applications for credit by enabling consumers to receive important disclosures at the same time they access an application without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to complete an online application is potentially burdensome and could discourage consumers from shopping for credit online. Moreover, because these consumers are viewing the application online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well.

The following disclosures would be provided electronically without obtaining the consumer's consent under E-Sign, as set forth in § 202.4(d)(2):

Section 202.5(b)(1). Section 202.5(b)(1) provides that if a creditor inquires about an applicant's race, color, religion, national origin, or sex for the purpose of conducting a self-test, the creditor must disclose that providing the information is optional for the applicant, that the information is requested to monitor compliance with the ECOA, and that the creditor may not discriminate either on the basis of the information or whether the applicant chooses to furnish it.

Section 202.5(b)(2). Section 202.5(b)(2) provides that when a creditor requests an applicant to designate a title on an application form, the application form must disclose that the designation of a title is optional.

Section 202.5(d)(1). Section 202.5(d)(1) provides that if an application is for other than individual unsecured credit, a creditor may inquire about the applicant's marital status, but must use only the terms married, unmarried, and separated . The creditor may also explain that the unmarried category includes single, divorced, and widowed persons.

Section 202.5(d)(2). Section 202.5(d)(2) prohibits a creditor from inquiring whether income stated in an application is derived from alimony, child support, or separate maintenance payments, unless the creditor discloses to the applicant that such income need not be revealed if the applicant does not want the creditor to consider it in determining the applicant's creditworthiness.

Section 202.13. Section 202.13(a) requires a creditor to request information regarding an applicant's ethnicity, race, sex, marital status, and age as part of an application for dwelling-secured credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence. Section 202.13(b) provides that questions about ethnicity, race, sex, marital status and age may be listed, at the creditor's option, on the application form or on a separate form that refers to the application.

Section 202.13(c) requires the creditor to disclose to the applicant that the information about ethnicity, race, sex, marital, status and age is being requested by the federal government to monitor compliance with federal statutes that prohibit creditors from discriminating against applicants. The creditor must also disclose that if the applicant chooses not to provide the information, the creditor is required to note the ethnicity, race, and sex on the basis of visual observation or surname.

Section 202.14(a)(2)(i). Section 202.14(a)(2)(i) requires a creditor that provides copies of appraisal reports only upon request (rather than routinely) to notify the applicant of the right to obtain a copy of the report.

Under Regulation B, an application generally is not required to be in writing. 2 Section 202.2(f) of the regulation defines the term “application” to include “an oral or written request for an extension of credit that is made in accordance with procedures used by a creditor for the type of credit requested.” Since an application does not have to be in writing, the disclosures that are provided on or with an application in certain circumstances do not have to be provided in writing. These disclosures include those required under §§ 202.5(b)(1), 202.5(b)(2), 202.5(d)(1), 202.5(d)(2), and 202.13. (Section 202.14(a)(2)(i) specifies that the notice of the right to a copy of the appraisal report must be provided in writing.) As a practical matter, however, most creditors use written or electronic application forms and typically make these disclosures, where applicable, on the written or electronic application form or a separate accompanying form. The Board's Model Application Forms in Appendix B to the regulation include some of these disclosures on the application forms.

Therefore, the Board proposes to amend § 202.4(d) to provide that each of the disclosures noted above, where given on or with the application and where the application is accessed by the applicant in electronic form, must be provided to the applicant in electronic form on or with the application. The proposed revision would also clarify that under those circumstances, those disclosures may be provided in electronic form without regard to the consumer consent or other provisions of the E-Sign Act.

The Board also proposes to add new comment 4(d)(2)-1 to clarify that if an applicant accesses an application in electronic form, the disclosures required to accompany the application must be provided to the applicant in electronic form on or with the application. An applicant accesses an application in electronic form when, for example, the applicant views the application on his or her home computer. On the other hand, if an applicant receives an application in the mail, the creditor would not satisfy its obligation to provide the disclosures at that time by including a reference in the application to the web site where the disclosures are located.

Section 202.9(g) provides that when an application for credit is submitted through a third party to more than one creditor and no credit is offered (or the applicant does not expressly accept or use any credit offered), each creditor taking adverse action must provide the notice required by § 202.9(a), but may do so through a third party. The 2001 interim final rule added a new § 202.9(h) to clarify that such third parties may use electronic disclosures to provide the required adverse action notice. The Board is proposing to remove this provision as unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act.

Section 202.16 was added by the 2001 interim final rule to address the general requirements for electronic communications. 3 The Board proposes to remove § 202.16 from Regulation B and the accompanying sections of the staff commentary.

In the interim rule, § 202.16(a) defines the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 202.16(a) would not change applicable legal requirements under the E-Sign Act.

Sections 202.16(b), (c) and (f) incorporate by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form, the requirement to obtain the applicant's affirmative consent before providing disclosures in electronic form, and the provision allowing electronic signatures. The deletion of these provisions will have no impact on the general applicability of the E-Sign Act to Regulation B disclosures.

The special rule in § 202.16(c) exempting from the disclosures relating to adverse action in connection with business credit, appraisal reports, and the collection of monitoring information has been eliminated. The special rule for disclosures relating to adverse action notices provided in connection with business credit has been removed because the E-Sign Act's consumer consent requirements do not apply to business credit. The special rules for disclosures relating to appraisal reports and the collection of monitoring information are addressed in § 202.4(d)(2) of the proposed rule.

Sections 202.16(d) and (e) of the interim final rule address specific timing and delivery requirements for electronic disclosures under Regulation B, such as the requirement to send disclosures to an applicant's e-mail address (or post the disclosures on a Web site and send a notice alerting the applicant to the disclosures). The Board no longer believes that these additional provisions are necessary or appropriate. Electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them. Although many institutions offer e-mail alert notices to consumers in connection with online services, some consumers may choose not to receive notifications by e-mail and the Board sees no reason to require e-mail alert notices in all cases. In addition, the Board has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and phishing that have become more pronounced since 2001.

With regard to the requirement to attempt to redeliver returned electronic disclosures, as the commenters noted, creditors would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. The Board believes that both requirements would likely be unduly burdensome. In addition, the concerns that have been raised about the requirement to use e-mail for the initial delivery of a disclosure or notice apply equally to the use of e-mail for an attempted redelivery.

Under the proposed rule, the Board would not require creditors to maintain disclosures posted on a Web site for at least 90 days as provided in the 2001 interim final rule for several reasons. The Board believes that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods depending on the disclosures. Nevertheless, while the Board is not proposing to require disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation B continue to apply to electronic disclosures, such as the requirement to provide certain disclosures to consumers at specified times and in a form that the consumer may keep. Although these general requirements apply to electronic disclosures, the Board does not believe that the 90-day time period set out in § 202.16(d) of the 2001 interim final rule is needed to ensure that creditors satisfy these requirements when they provide electronic disclosures. The Board, however, will monitor creditors' electronic disclosure practices with regard to the ability of applicants to retain certain Regulation B disclosures and will consider further regulatory action if it appears necessary.

The official staff commentary to § 202.16 of the interim final rule provides guidance on the provisions set forth in § 202.16 such as delivery of disclosures or alert notices by e-mail, redelivery if disclosures or a notice is returned undelivered, and retention of disclosures on a Web site for 90 days. As noted above, because the Board is proposing to delete § 202.16 of the regulation, the Board also proposes to delete the accompanying provisions of the official staff commentary.

The Board proposes to redesignate § 202.17 as § 202.16 concurrent with the deletion of current § 202.16, as discussed above. No changes would be made to the substance of the provision. The Board is also proposing to redesignate the provisions of § 202.17 of the official staff commentary as § 202.16, with a conforming, non-substantive revision.

Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. The Board invites comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities.

However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if an agency certifies, along with a statement providing the factual basis for such certification, that the rule will not have a significant economic impact on a substantial number of small entities. Based on its analysis and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the objectives of the proposal. The Board is proposing revisions to Regulation B to withdraw the 2001 interim final rule on electronic communication and to allow creditors to provide certain disclosures to applicants in electronic form on or with an application that is accessed by the applicant in electronic form without regard to the consumer consent and other provisions of the E-Sign Act. The Board is also proposing to clarify that other Regulation B disclosures may be provided to applicants in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act.

ECOA was enacted to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, age, the fact that all or part of the applicant's income derives form a public assistance program, or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The primary objective of ECOA is to prohibit creditors from discriminating against any applicant on any of these grounds with respect to any aspect of a credit transaction. 15 U.S.C. 1691(a). ECOA authorizes the Board to prescribe regulations to carry out the purposes of the statute. 15 U.S.C. 1691b(a)(1). The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * * as, in the judgment of the Board, are necessary or proper to carry out the purposes of [the Act], to prevent circumvention or evasion [of the Act], or to facilitate compliance [with the Act].” 15 U.S.C. 1691b(a)(1). The Board believes that the proposed revisions to Regulation B discussed above are within the Congress' broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute.

2. Small entities affected by the proposal. The ability to provide application-related disclosures in electronic form on or with an application that is accessed by the applicant in electronic form applies to all creditors, regardless of their size. Accordingly, the proposed revisions would reduce burden and compliance costs for small entities by providing relief, to the extent the E-Sign Act applies in these circumstances. The number of small entities affected by this proposal is unknown.

3. Other federal rules. The Board believes no federal rules duplicate, overlap, or conflict with the proposed revisions to Regulation B.

4. Significant alternatives to the proposed revisions. The Board solicits comment on any significant alternatives that may provide additional ways to reduce regulatory burden associated with this proposed rule.

In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is required by this proposed rule is found in 12 CFR 202. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0201.

Section 703(a)(1) of the Equal Credit Opportunity Act (15 U.S.C. 1691b(a)(1)) authorizes the Board to issue regulations to carry out the provisions of the Act. This information collection is mandatory. The purpose of the Act is to ensure that credit is made available to all creditworthy customers without discrimination on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to contract), receipt of public assistance income, or the fact that the applicant has in good faith exercised any right under the Consumer Credit Protection Act (15 U.S.C. 1600 et seq. ). The adverse action disclosure is confidential between the institution and the consumer involved. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, the information may be protected from disclosure under the exemptions (b)(4), (6), and (8) of the Freedom of Information Act (5 U.S.C. 522(b)).

Regulation B applies to all types of creditors, not just State member banks. However, under the Paperwork Reduction Act, the Federal Reserve accounts for the burden of the paperwork associated with the regulation only for entities that are supervised by the Federal Reserve. Appendix A of Regulation B defines these creditors as State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other federal agencies account for the paperwork burden for the institutions they supervise. Creditors are required to retain records for 12 to 25 months as evidence of compliance. The annual burden is estimated to be 165,630 hours for the 1,172 Federal Reserve-regulated creditors that are respondents for purposes of the PRA.

As mentioned in the Preamble, new § 202.4(d)(2) would be added to clarify the disclosure requirements in §§ 202.5(b)(1), 202.5(b)(2), 202.5(d)(1), 202.5(d)(2), 202.13, and 202.14. The Federal Reserve estimates that 200 respondents would take approximately 1 minute per transaction to comply with the existing disclosures requirements in §§ 202.5(b)(1), 202.5(b)(2), 202.5(d)(1), 202.5(d)(2), and estimates the annual burden to be 8,350 hours; 1,172 respondents would take approximately .50 minutes per transaction to comply with the existing disclosures requirements in § 202.13 and estimates the annual burden to be 3,502 hours. 1,172 respondents would take approximately 5.25 minutes per transaction to comply with the existing disclosures requirements in § 202.14 and estimates the annual burden to be 26,613 hours. The Federal Reserve requests specific comment on whether the revisions in this proposed rule would change the burden on respondents.

Comments are invited on: a. whether the collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility; b. the accuracy of the Federal Reserve's estimate of the burden of the information collection, including the cost of compliance; c. ways to enhance the quality, utility, and clarity of the information to be collected; and d. ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology. Comments on the collections of information should be sent to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551, with copies of such comments to be sent to the Office of Management and Budget, Paperwork Reduction Project (7100-0201), Washington, DC 20503.

Certain conventions have been used to highlight the proposed changes to Regulation B. New language is shown inside bold-faced arrows, while language that would be removed is set off with bold-faced brackets.

For the reasons set forth in the preamble, the Board proposes to amend Regulation B, 12 CFR part 202, as set forth below:

The purpose of the Electronic Fund Transfer Act (EFTA), 15 U.S.C. 1693 et seq. , is to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer (EFT) systems, and to provide individual consumer rights. The Board's Regulation E (12 CFR part 205) implements the EFTA. Examples of types of transfers covered by the EFTA and Regulation E include transfers initiated through an automated teller machine (ATM), point-of-sale (POS) terminal, automated clearinghouse (ACH), telephone bill-payment plan, or remote banking service. The EFTA and Regulation E require financial institutions to provide certain disclosures to consumers in writing, including but not limited to initial disclosures of terms and conditions of an EFT service, documentation of EFTs by means of terminal receipts and periodic account activity statements, and change in terms notices. Certain persons other than financial institutions are also required to comply with specific disclosure provisions of Regulation E.

On May 2, 1996, the Board proposed to amend Regulation E (Electronic Fund Transfers) to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14528, March 25, 1998) and similar proposals under Regulations B (Equal Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD (Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively, March 25, 1998).

Based on comments received on the 1998 proposals, in September 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). At the same time, the Board published an interim rule under Regulation DD allowing depository institutions to deliver disclosures on periodic statements in electronic form if the consumer agreed (64 FR 49846, September 14, 1999). While these rulemakings were pending, Federal legislation was enacted addressing the use of electronic documents and records, including consumer disclosures.

On June 30, 2000, the President signed into law the Electronic Signatures in Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et seq. ). The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met.

The E-Sign Act, including the special consumer notice provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, financial institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulations B, E, M, Z and DD if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act.

On April 4, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation E (66 FR 17,786). Similar interim final rules for Regulations B, M, Z, and DD were published on March 30, 2001 (66 FR 17322 (M) and 17329 (Z)), and April 4, 2001 (66 FR 17779 (B) and 17795 (DD)). The interim final rules incorporated most of the provisions that were part of the 1999 proposals.

Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Financial institutions and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act.

The 2001 interim final rule for Regulation E established uniform requirements for the timing and delivery of electronic disclosures. Under the interim rule, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, financial institutions would have to provide a notice to consumers alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Financial institutions also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Similar provisions were included in the interim final rules adopted under Regulations B, M, Z, and DD.

Commenters on the interim final rules identified significant operational and security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers do not have e-mail addresses or may not want personal financial information sent to them by e-mail. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection.

In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board has not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices.

The Board is proposing to amend Regulation E and the official staff commentary by (1) withdrawing portions of the 2001 interim final rule on electronic disclosures that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary; (2) withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and (3) adding certain provisions to provide guidance regarding electronic disclosures. (Similar amendments are also being proposed by the Board, in today's issue of the Federal Register , under Regulations B, M, Z, and DD.)

Because compliance with the 2001 interim final rules is not mandatory, removing this material from the Code of Federal Regulations would reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. Certain provisions in the interim final rules, including provisions addressing foreign language disclosures, were not affected by the lifting of the mandatory compliance date and accordingly are now in final form; these provisions would not be deleted.

Since 2001, industry and consumers have gained experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board has also reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. The Board is proposing to eliminate certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices.

Finally, the Board is proposing to delete, as unnecessary, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures because the E-Sign Act is a self-effectuating statute. The Board is issuing the proposed rules pursuant to its authority under section 904 of the EFTA to prescribe rules to carry out the purposes of the Act. The proposed revisions to Regulation E and the official staff commentary are described more fully below in the Section-by-Section Analysis.

The Board solicits comment on all aspects of this proposal. Specifically, the Board seeks comment on the appropriateness of eliminating certain provisions contained in the 2001 interim final rule.

Section 205.4 contains the general disclosure requirements under Regulation E, including provisions relating to the form of disclosure. Section 205.4(a)(1) generally requires financial institutions to provide disclosures in writing and in a form that the consumer may keep. The Board proposes to revise § 205.4(a)(1) to clarify that institutions may provide disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some institutions may provide disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those institutions, the duplicate electronic form of the disclosures may be provided to consumers without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements.

Section 205.4(c) in the 2001 interim final rule refers to § 205.17, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is proposing to delete § 205.17, as discussed further below, the Board also proposes to delete § 205.4(c). Sections 205.4(d) (multiple accounts and account holders) and (e) (services offered jointly) would be renumbered as §§ 205.4(c) and (d) respectively.

Section 205.17 was added by the 2001 interim final rule to address the general requirements for electronic communications. The Board proposes to delete § 205.17 from Regulation E and the accompanying sections of the staff commentary, reserving that section for future use.

In the interim rule, § 205.17(a) defines the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 205.17(a) would not change applicable legal requirements under the E-Sign Act.

Section 205.17(b) incorporates by reference the provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form. The deletion of this provision would have no impact on the general applicability of the E-Sign Act to Regulation E disclosures. Section 205.17(e) was added in the 2001 interim final rule to clarify that persons, other than financial institutions, that are required to comply with the regulation may use electronic disclosures. The Board is proposing to delete this provision as unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act.

Sections 205.17(c) and (d) address specific timing and delivery requirements for electronic disclosures under Regulation E, such as the requirement to send disclosures to a consumer's e-mail address (or post the disclosures on a website and send a notice alerting the consumer to the disclosures). The Board no longer believes that these additional provisions are necessary or appropriate. Electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them. Although many institutions offer e-mail alert notices to consumers in connection with online services, some consumers may choose not to receive notifications by e-mail and the Board sees no reason to require e-mail alert notices in all cases. In addition, the Board has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and phishing that have become more pronounced since 2001.

With regard to the requirement to attempt to redeliver returned electronic disclosures, as the commenters noted, institutions would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. The Board believes that both requirements would likely be unduly burdensome. In addition, the concerns that have been raised about the requirement to use e-mail for the initial delivery of a disclosure or notice apply equally to the use of e-mail for an attempted redelivery.

Under the proposed rule, the Board would not require institutions to maintain disclosures posted on a web site for at least 90 days as provided in the 2001 interim final rule for several reasons. First, based on a review of industry practices, it appears that many institutions maintain disclosures posted on an Internet Web site for several months, and, in a number of cases, for more than a year. For example, it appears that institutions that offer online periodic statements to consumers typically make those statements available without charge for six months or longer in electronic form. This practice has developed even though Regulation E does not currently require institutions to maintain disclosures for any specific period of time. Second, the Board believes that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods depending on the disclosures. Nevertheless, while the Board is not proposing to require disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation E continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. Although these general requirements apply to electronic disclosures, the Board does not believe that the 90-day time period set out in § 205.17(c) of the 2001 interim final rule is needed to ensure that institutions satisfy these requirements when they provide electronic disclosures. The Board, however, will monitor institutions' electronic disclosure practices with regard to the ability of consumers to retain Regulation E disclosures and will consider further regulatory action if it appears necessary.

The official staff commentary to § 205.17 of the interim final rule provides guidance on the provisions set forth in § 205.17 such as delivery of disclosures or alert notices by e-mail, redelivery if disclosures or a notice is returned undelivered, and retention of disclosures on a Web site for 90 days. As noted above, because the Board is proposing to delete § 205.17 of the regulation, the Board also proposes to delete the accompanying provisions of the official staff commentary.

Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. The Board invites comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities.

However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if an agency certifies, along with a statement providing the factual basis for such certification, that the rule will not have a significant economic impact on a substantial number of small entities. Based on its analysis and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the objectives of the proposal. The Board is proposing revisions to Regulation E to withdraw the 2001 interim final rule on electronic communication. The Board is also proposing to clarify that Regulation E disclosures may be provided to consumers in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act.

The EFTA was enacted to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund transfer (EFT) systems. The primary purpose of the act is the provision of individual consumer rights. 15 U.S.C. 1593. The EFTA authorizes the Board to prescribe regulations to carry out the purposes of the statute. 15 U.S.C. 1693b. The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * * as, in the judgment of the Board, are necessary or proper to carry out the purposes of [the Act], to prevent circumvention or evasion [of the act], or to facilitate compliance [with the Act].” 15 U.S.C. 1693b(c). The Board believes that the revisions to Regulation E discussed above are within the Congress' broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute.

2. Small entities affected by the proposal. The proposed revisions would delete provisions of Regulation E that are not in effect on a mandatory basis and, accordingly, the proposed revisions would not change the legal requirements applicable to any financial institutions, regardless of their size. Therefore, the proposed revisions would not have a significant economic impact on small entities. The number of small entities affected by this proposal is unknown.

3. Other federal rules. The Board believes no federal rules duplicate, overlap, or conflict with the proposed revisions to Regulation E.

4. Significant alternatives to the proposed revisions. The Board solicits comment on any significant alternatives that may provide additional ways to reduce regulatory burden associated with this proposed rule.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Ch. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is required by this proposed rule is found in 12 CFR part 205. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0200.

Section 904 of the Electronic Fund Transfer Act (EFTA) (15 U.S.C. § 1693b) authorizes the Board to issue regulations to carry out the purposes of the Act. This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, the information, if made available to the Federal Reserve, may be protected from disclosure under exemptions (b)(4), (6), and (8) of the Freedom of Information Act (5 U.S.C. 552 (b)(4), (6), and (8)). The disclosures required by the rule and information about error allegations and their resolution are confidential between the institution and the consumer.

The EFTA and Regulation E are designed to ensure adequate disclosure of basic terms, costs, and rights relating to electronic fund transfer (EFT) services provided to consumers. Institutions offering EFT services must disclose to consumers certain information, including: initial and updated EFT terms, transaction information, periodic statements of activity, the consumer's potential liability for unauthorized transfers, and error resolution rights and procedures. These disclosures are triggered by certain events specified in the EFTA and Regulation E. Institutions are required to retain evidence of compliance for not less than two years from the date that disclosures are required to be made or action is required to be taken; however, the regulation does not specify the types of records that must be retained. To ease institutions' burden and cost of complying with the disclosure requirements of Regulation E (particularly for small entities), the Federal Reserve publishes model forms and disclosure clauses. Regulation E applies to all financial institutions and merchants and payees that engage in ECK transactions. The Board has determined that no new requirements or revisions to existing requirements are contained in this proposed rule.

Comments are invited on: a. Whether the collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility; b. the accuracy of the Federal Reserve's estimate of the burden of the information collection, including the cost of compliance; c. ways to enhance the quality, utility, and clarity of the information to be collected; and d. ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology. Comments on the collections of information should be sent to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551, with copies of such comments to be sent to the Office of Management and Budget, Paperwork Reduction Project (7100-0202), Washington, DC 20503.

Certain conventions have been used to highlight the proposed changes to Regulation E. New language is shown inside bold-faced arrows, while language that would be removed is set off with bold-faced brackets.

For the reasons set forth in the preamble, the Board proposes to amend Regulation E, 12 CFR part 205, as set forth below:

I. Background

The Consumer Leasing Act (CLA), 15 U.S.C. 1667-1667e, was enacted into law in 1976 as an amendment to the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. The CLA requires lessors to provide lessees with uniform cost and other disclosures about consumer lease transactions. The act generally applies to consumer leases of personal property in which the contractual obligation does not exceed $25,000 and has a term of more than four months. An automobile lease is the most common type of consumer lease covered by the act. The Board's Regulation M (12 CFR part 213) implements the act. The CLA and Regulation M require disclosures to be provided in writing.

On May 2, 1996, the Board proposed to amend Regulation E (Electronic Fund Transfers) to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14528, March 25, 1998) and proposals under Regulations B (Equal Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD (Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively, March 25, 1998).

Based on comments received on the 1998 proposals, in September 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). At the same time, the Board published an interim rule under Regulation DD allowing depository institutions to deliver disclosures on periodic statements in electronic form if the consumer agreed (64 FR 49846, September 14, 1999). While these rulemakings were pending, federal legislation was enacted addressing the use of electronic documents and records, including consumer disclosures.

On June 30, 2000, the President signed into law the Electronic Signatures in Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et seq. ). The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met.

The E-Sign Act, including the special consumer notice provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, financial institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulations B, E, M, Z, and DD if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act.

On March 30, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation M (66 FR 17322). Similar interim final rules for Regulations B, E, Z, and DD were published on March 30, 2001 (66 FR 17329 (Z)) and April 4, 2001 (66 FR 17779 (B), 66 FR 17786 (E), and 66 FR 17795 (DD)). The interim final rules incorporated most of the provisions that were part of the 1999 proposals.

Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Lessors, financial institutions, creditors, and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act.

The 2001 interim final rule for Regulation M established uniform requirements for the timing and delivery of electronic disclosures. Under the interim rule, disclosures could be sent to an e-mail address designated by the lessee, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, lessors would have to provide a notice to lessees alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow lessees adequate time to access and retain the information. Lessors also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Similar provisions were included in the interim final rules adopted under Regulations B, E, Z, and DD.

Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection.

In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board has not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices.

The Board is proposing to amend Regulation M and the official staff commentary by (1) withdrawing portions of the 2001 interim final rule on electronic disclosures that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary; (2) withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and (3) retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (Similar amendments are also being proposed by the Board, in today's issue of the Federal Register , under Regulations B, E, Z, and DD.)

Because compliance with the 2001 interim final rules is not mandatory, removing most portions of the interim rules from the Code of Federal Regulations, while finalizing other provisions, would reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. The Board is proposing to adopt certain provisions that are identical or similar to provisions in the 2001 interim final rules in order to enhance the ability of consumers to shop for leases online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below.

Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is proposing to eliminate certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices.

The 2001 interim final rule allowed lessors to provide certain disclosures to lessees electronically, without regard to the consumer consent or other provisions of the E-Sign Act, for disclosures provided on or with an electronic advertisement. The Board reasoned that these disclosures, which would be available to the general public while shopping for a lease, did not “relate to a transaction,” which is a prerequisite for triggering the E-Sign consumer consent provisions, and thus were not subject to those provisions. Some commenters on the interim final rules did not agree with the Board's rationale. Upon further consideration, the Board does not believe it is necessary to determine whether or not these disclosures are related to a transaction. This proposal does not make such determinations.

Instead, pursuant to the Board's authority under section 187 of the CLA, as well as under section 104(d) of the E-Sign Act, 1 the Board is proposing to specify the circumstances under which certain disclosures may be provided to a lessee in electronic form, rather than in writing as generally required by Regulation M, without obtaining the lessee's consent under section 101(c) of the E-Sign Act. The proposed rule would also amend Regulation M, as discussed in detail below, to provide that certain disclosures must be provided to a consumer in electronic form on or with an advertisement that is accessed by the consumer in electronic form.

The Board continues to believe that lessors should not be required to obtain the consumer's consent in order to provide advertising disclosures to the consumer in electronic form if the consumer accesses the advertisement containing those disclosures in electronic form, such as at an Internet Web site. The Board believes consumers would not be harmed, and in fact would benefit, by having timely access to advertising disclosures in electronic form when they are viewing online lease advertising. The Board also believes that consumers' ability to shop for leases online and compare the terms of various lease offers could be substantially diminished if consumers had to consent in accordance with the E-Sign Act in order to access advertisements that must be accompanied by disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to gather information and shop for leases.

At the same time, the Board recognizes that consumers who shop or apply for leases online may not want to receive other disclosures electronically. Therefore, with respect to the disclosures required prior to the consummation of a lease, lessors would be required to provide written disclosures or obtain the lessee's consent in accordance with the E-Sign Act to provide the disclosures in electronic form.

Finally, the Board is proposing to delete, as unnecessary, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures because the E-Sign Act is a self-effectuating statute. The proposed revisions to Regulation M and the official staff commentary are described more fully below in the Section-by-Section Analysis.

The Board solicits comment on all aspects of this proposal. Specifically, the Board seeks comment on the appropriateness of eliminating certain provisions and retaining other provisions contained in the 2001 interim final rule.

Section 213.3(a) generally requires lessors to provide disclosures in writing and in a form that the lessee may keep. The Board proposes to revise § 213.3(a) to clarify that lessors may provide disclosures to lessees in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some lessors may provide disclosures to lessees both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those lessors, the duplicate electronic form of the disclosures may be provided to lessees without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements.

Section 213.3(a) would also be revised to provide that the advertising disclosures required by § 213.7 must be provided to the consumer in electronic form if the consumer accesses the advertisement electronically. Under those circumstances, those disclosures may be provided in electronic form without regard to the consumer consent or other provisions of the E-Sign Act. The Board believes that, for an advertisement accessed by the consumer in electronic form, permitting lessors to provide lease advertising disclosures in electronic form without regard to the consumer consent and other provisions of the E-Sign Act will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate shopping for leases by enabling consumers to receive important disclosures at the same time they access an advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online advertisement is potentially burdensome and could discourage consumers from shopping for leases online. Moreover, because these consumers are viewing the advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well.

Section 213.3(a)(5) in the 2001 interim final rule refers to § 213.6, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is proposing to delete § 213.6, as discussed further below, the Board also proposes to delete § 213.3(a)(5).

Section 213.6 was added by the 2001 interim final rule to address the general requirements for electronic communications. The Board proposes to delete § 213.6 from Regulation M and the accompanying sections of the staff commentary, reserving that section for future use.

In the interim rule, § 213.6(a) defines the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 213.6(a) would not change applicable legal requirements under the E-Sign Act.

Sections 213.6(b) and (c) incorporate by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form and the requirement to obtain the lessee's affirmative consent before providing such disclosures. The deletion of these provisions will have no impact on the general applicability of the E-Sign Act to Regulation M disclosures.

Sections 213.6(d) and (e) address specific timing and delivery requirements for electronic disclosures under Regulation M, such as the requirement to send disclosures to a lessee's e-mail address (or post the disclosures on a Web site and send a notice alerting the lessee to the disclosures). The Board no longer believes that these additional provisions are necessary or appropriate. Electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them. Although many institutions offer e-mail alert notices to consumers, some consumers may choose not to receive notifications by e-mail and the Board sees no reason to require e-mail alert notices. In addition, the Board has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and phishing that have become more pronounced since 2001.

With regard to the requirement to attempt to redeliver returned electronic disclosures, as the commenters noted, lessors would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. The Board believes that both requirements would likely be unduly burdensome. In addition, the concerns that have been raised about the requirement to use e-mail for the initial delivery of a disclosure or notice apply equally to the use of e-mail for an attempted redelivery.

Under the proposed rule, the Board would not require lessors to maintain disclosures posted on a Web site for at least 90 days as provided in the 2001 interim final rule. While the Board is not proposing to require disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation M continue to apply to electronic disclosures, such as the requirement to provide disclosures to lessees at a specified time and in a form that the lessee may keep. Although these general requirements apply to electronic disclosures, the Board does not believe that the 90-day time period set out in § 213.6(d) of the 2001 interim final rule is needed to ensure that lessors satisfy these requirements when they provide electronic disclosures. The Board, however, will monitor lessors' electronic disclosure practices with regard to the ability of lessees to retain Regulation M disclosures and will consider further regulatory action if it appears necessary.

The official staff commentary to § 213.6 of the interim final rule provides guidance on the provisions set forth in § 213.6 such as delivery of disclosures or alert notices by e-mail, redelivery if disclosures or a notice is returned undelivered, and retention of disclosures on a Web site for 90 days. As noted above, because the Board is proposing to delete § 213.6 of the regulation, the Board also proposes to delete the accompanying provisions of the official staff commentary.

Section 213.7 contains requirements for lease advertisements and requires that if an advertisement includes certain “trigger terms” (such as the payment amount), the advertisement must also include certain required disclosures (such as the total amount due prior to or at consummation and a statement that an extra charge may be imposed at the end of the lease term).

Section 213.7(c) relates to catalogs and other multipage advertisements and (under this proposal) to electronic advertisements. The Board is proposing to add a new comment 7(c)-3 to clarify that if a consumer accesses a lease advertisement in electronic form, the disclosures required on or with the advertisement must be provided to the consumer in electronic form on or with the advertisement. A consumer accesses an advertisement in electronic form when, for example, the consumer views the advertisement on his or her home computer. On the other hand, if a consumer receives a written advertisement in the mail, the lessor would not satisfy its obligation to provide the disclosures at that time by including a reference in the advertisement to the Web site where the disclosures are located.

Section 213.7(c) provides that in a catalog or other multipage advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. The 2001 interim final rule clarified, in comment 7(c)-2, that the multipage rule for lease advertising also applies to advertisements in electronic form. For example, if a “trigger term” appears on a particular web page, the additional disclosures may appear in a table or schedule on another web page and still be considered part of a single advertisement if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). The Board proposes to retain the rule allowing the use of links or other cross-references in electronic credit advertisements to provide guidance on how the advertising rules apply to Web sites, by amending § 213.7(c), as well as by retaining comment 7(c)-2 with minor wording changes.

Section 213.7(b)(1) requires that any affirmative or negative reference to a charge that constitutes part of the total amount due prior to or at consummation of the lease not be more prominent in the advertisement than the disclosure of the total amount due. In the 2001 interim final rule, comment 7(b)(1)-3 was added to state that in an advertisement using electronic communication, both the reference to the charge and the disclosure of the total amount due must appear in the same location so that they can be viewed simultaneously. Section 213.7(b)(2) requires that a percentage rate in an advertisement not be more prominent than any of the required disclosures, except for a notice required to accompany the rate under § 213.4(s). The interim final rule revised comment 7(b)(2)-1 to state that in an advertisement using electronic communication, both the rate and the accompanying notice must appear in the same location so that they can be viewed simultaneously, and that this requirement is not satisfied by the use of a link that connects the consumer to information appearing at another location.

The Board proposes to delete comment 7(b)(1)-3, and to delete the language added to comment 7(b)(2)-1 by the interim final rule, as unnecessary. The prominence requirements of § 213.7(b) continue to apply to electronic advertisements no less than to advertisements in other media. Requiring the consumer to scroll to another part of the page, or access a link, in order to view the required disclosures would likely not satisfy this requirement.

Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. The Board invites comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities.

However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if an agency certifies, along with a statement providing the factual basis for such certification, that the rule will not have a significant economic impact on a substantial number of small entities. Based on its analysis and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the objectives of the proposal. The Board is proposing revisions to Regulation M to withdraw the 2001 interim final rule on electronic communication and to allow lessors to provide certain disclosures to lessees in electronic form on or with an advertisement that is accessed by the lessee in electronic form without regard to the consumer consent and other provisions of the E-Sign Act. The Board is also proposing to clarify that other Regulation M disclosures may be provided to lessees in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act.

The purpose of CLA is to assure a meaningful disclosure of the terms of consumer leases, so that the lessee can compare more readily the various lease terms available, limit balloon payments in consumer leasing, enable comparison of lease terms with credit terms where appropriate, and assure meaningful and accurate disclosures of lease terms in advertisements. 15 U.S.C. 1601. CLA authorizes the Board to prescribe regulations to carry out the purposes of the statute. 15 U.S.C. 1604(a), 1667f. The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * *, as in the judgment of the Board are necessary or proper to effectuate the purposes of [the Act], to prevent circumvention or evasion of [the Act], or to facilitate compliance with [the Act].” 15 U.S.C. 1604(a). The Board believes that the revisions to Regulation M discussed above are within Congress's broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute. These revisions facilitate the informed use of leases by consumers in circumstances where a consumer accesses a lease advertisement in electronic form.

2. Small entities affected by the proposal. The ability to provide advertising disclosures in electronic form on or with an advertisement that is accessed by the consumer in electronic form applies to all lessors, regardless of their size. Accordingly, the proposed revisions would reduce burden and compliance costs for small entities by providing relief, to the extent the E-Sign Act applies in these circumstances. The number of small entities affected by this proposal is unknown.

3. Other federal rules. The Board believes no federal rules duplicate, overlap, or conflict with the proposed revisions to Regulation M.

4. Significant alternatives to the proposed revisions. The Board solicits comment on any significant alternatives that may provide additional ways to reduce regulatory burden associated with this proposed rule.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is required by this proposed rule is found in 12 CFR part 213. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0202.

Sections 105(a) and 187 of TILA (15 U.S.C. 1604(a) and 1667f) authorize the Board to issue regulations to carry out the provisions of the Consumer Leasing Act (CLA). The CLA and Regulation M are intended to provide consumers with meaningful disclosures about the costs and terms of leases for personal property. The disclosures enable consumers to compare the terms for a particular lease with those for other leases and, when appropriate, to compare lease terms with those for credit transactions. The act and regulation also contain rules about advertising consumer leases and limit the size of balloon payments in consumer lease transactions. The information collection pursuant to Regulation M is triggered by specific events. All disclosures must be provided to the lessee prior to the consummation of the lease and when the availability of consumer leases on particular terms is advertised. This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, in the event the Board were to retain records regarding consumer leases during the course of an examination, the information regarding the consumer and the lease would be kept confidential pursuant to section (b)(8) of the Freedom of Information Act (5 U.S.C. 522(b)(8)).

Regulation M applies to all types of lessors of personal property. The Federal Reserve accounts for the paperwork burden associated with the regulation only for Federal Reserve-supervised institutions. Appendix B of Regulation M defines the Federal Reserve-supervised institutions as: State member banks, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other federal agencies account for the paperwork burden on other lessors for which they have administrative enforcement authority. To ease the compliance cost (particularly for small entities) model forms are appended to the regulation. Lessors are required to retain evidence of compliance for twenty-four months, but the regulation does not specify types of records that must be retained.

The estimated annual burden for the entities supervised by the Federal Reserve is approximately 3,534 hours for the 270 State member banks that engage in consumer leasing. As mentioned in the Preamble, § 213.3 would be revised to clarify the disclosure requirements in §§ 213.4 and 213.7. The Federal Reserve estimates that 270 respondents would take approximately 6.5minutes per transaction to comply with the existing disclosure requirements in § 213.4 and estimates the annual burden to be 3,509 hours. The Federal Reserve estimates that 15 respondents would take approximately 2.5 minutes per transaction to comply with the existing disclosure requirements in § 213.7 and estimates the annual burden to be 25 hours. The Federal Reserve requests specific comment on whether the revisions in this proposed rule would change the burden on respondents.

Comments are invited on: a. Whether the collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility; b. the accuracy of the Federal Reserve's estimate of the burden of the information collection, including the cost of compliance; c. ways to enhance the quality, utility, and clarity of the information to be collected; and d. ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology. Comments on the collections of information should be sent to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551, with copies of such comments to be sent to the Office of Management and Budget, Paperwork Reduction Project (7100-0202), Washington, DC 20503.

Certain conventions have been used to highlight the proposed changes to Regulation M. New language is shown inside bold-faced arrows, while language that would be removed is set off with bold-faced brackets.

For the reasons set forth in the preamble, the Board proposes to amend Regulation M, 12 CFR part 213, as set forth below:

The purpose of the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq. , is to promote the informed use of consumer credit by requiring disclosures about its terms and cost. The Board's Regulation Z (12 CFR part 226) implements the act. The act requires creditors to disclose the cost of credit as a dollar amount (the finance charge) and as an annual percentage rate (the APR). Uniformity in creditors' disclosures is intended to promote the informed use of credit and assist in shopping for credit. TILA requires additional disclosures for loans secured by consumers' homes and permits consumers to rescind certain transactions that involve their principal dwellings. TILA and Regulation Z require a number of disclosures to be provided in writing.

On May 2, 1996, the Board proposed to amend Regulation E (Electronic Fund Transfers) to permit financial institutions to provide disclosures by sending them electronically (61 FR 19,696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14,528, March 25, 1998) and proposals under Regulations B (Equal Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD (Truth in Savings) (63 FR 14,552, 14,538, 14,548, and 14,533, respectively, March 25, 1998).

Based on comments received on the 1998 proposals, in September 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49,688, 49,699, 49,713, 49,722 and 49,740, respectively, September 14, 1999). At the same time, the Board published an interim rule under Regulation DD allowing depository institutions to deliver disclosures on periodic statements in electronic form if the consumer agreed (64 FR 49,846, September 14, 1999). While these rulemakings were pending, Federal legislation was enacted addressing the use of electronic documents and records, including consumer disclosures.

On June 30, 2000, the President signed into law the Electronic Signatures in Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et seq. ). The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met.

The E-Sign Act, including the special consumer notice provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, financial institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulations B, E, M, Z, and DD if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act.

On March 30, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation Z (66 FR 17,329). Similar interim final rules for Regulations B, E, M, and DD were published on March 30, 2001 (66 FR 17,322 (M)) and April 4, 2001 (66 FR 17,779 (B), 66 FR 17,786 (E), and 66 FR 17,795 (DD)). The interim final rules incorporated most of the provisions that were part of the 1999 proposals.

Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Creditors and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act.

The 2001 interim final rule for Regulation Z established uniform requirements for the timing and delivery of electronic disclosures. Under the interim rule, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, creditors would have to provide a notice to consumers alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Creditors also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Similar provisions were included in the interim final rules adopted under Regulations B, E, M, and DD.

Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection.

In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41,439, August 8, 2001). Thus, institutions are not required to comply with the interim final rules. Since that time, the Board has not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices.

The Board is proposing to amend Regulation Z and the official staff commentary by (1) withdrawing portions of the 2001 interim final rule on electronic disclosures that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary; (2) withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and (3) retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (Similar amendments are also being proposed by the Board, in today's issue of the Federal Register , under Regulations B, E, M, and DD). In addition, the proposal would amend the regulation to implement certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act.

Because compliance with the 2001 interim final rules is not mandatory, removing most portions of the interim rules from the Code of Federal Regulations , while finalizing other provisions, would reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. Certain provisions in the interim final rules, including provisions addressing foreign language disclosures, were not affected by the lifting of the mandatory compliance date and accordingly are now in final form; these provisions would not be deleted. The Board is also proposing to adopt certain provisions that are identical or similar to provisions in the 2001 interim final rules in order to enhance the ability of consumers to shop for credit online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below. Finally, the Board is proposing to implement certain provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23 (the “Bankruptcy Act”), that amend TILA and relate to electronic disclosures.

Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is proposing to eliminate certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices.

The 2001 interim final rule allowed creditors to provide certain disclosures to consumers electronically, without regard to the consumer consent or other provisions of the E-Sign Act, for disclosures provided on or with an application or solicitation (the “shopping disclosures”) or an advertisement. The Board reasoned that these disclosures, which would be available to the general public while shopping for credit, did not “relate to a transaction,” which is a prerequisite for triggering the E-Sign consumer consent provisions, and thus were not subject to those provisions. Some commenters on the interim final rules did not agree with the Board's rationale. Upon further consideration, the Board does not believe it is necessary to determine whether or not these disclosures are related to a transaction. This proposal does not make such determinations.

Instead, pursuant to the Board's authority under section 105(a) of TILA, as well as under section 104(d) of the E-Sign Act, 1 the Board is proposing to specify the circumstances under which certain disclosures may be provided to a consumer in electronic form, rather than in writing as generally required by Regulation Z, without obtaining the consumer's consent under section 101(c) of the E-Sign Act. The proposed rule would also amend various sections of Regulation Z, discussed in detail below, to clarify that certain disclosures must be provided to the consumer in electronic form on or with an application, solicitation, or advertisement that is accessed by the consumer in electronic form.

The Board continues to believe that creditors should not be required to obtain the consumer's consent in order to provide shopping or advertising disclosures to the consumer in electronic form if the consumer accesses an application, solicitation, or advertisement containing those disclosures in electronic form, such as at an Internet Web site. The Board believes consumers would not be harmed, and in fact would benefit, by having timely access to shopping and advertising disclosures in electronic form when they are shopping for credit online or viewing online credit advertising. Conversely, consumers who choose to apply for credit online would be unduly burdened if they had to consent in accordance with the E-Sign Act in order to access application forms that must be accompanied by disclosures. The Board also believes that consumers' ability to shop for credit online and compare the terms of various credit offers could be substantially diminished if consumers had to consent in accordance with the E-Sign Act in order to access solicitations and advertisements that must be accompanied by disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to gather information and shop for credit.

At the same time, the Board recognizes that consumers who shop or apply for credit online may not want to receive other disclosures electronically. Therefore, with respect to, for example, account-opening disclosures, periodic statements, and change-in-terms notices, creditors would be required to provide written disclosures or obtain the consumer's consent in accordance with the E-Sign Act to provide such disclosures in electronic form.

Finally, the Board is proposing to delete, as unnecessary, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures because the E-Sign Act is a self-effectuating statute. The proposed revisions to Regulation Z and the official staff commentary are described more fully below in the Section-by-Section Analysis.

The Board solicits comment on all aspects of this proposal. Specifically, the Board seeks comment on the appropriateness of eliminating certain provisions and retaining other provisions contained in the 2001 interim final rule.

Section 226.5(a) prescribes the form of disclosures required for open-end credit plans. Section 226.5(a)(1) generally requires creditors to provide open-end credit disclosures in writing and in a form that the consumer may keep. The Board proposes to revise § 226.5(a)(1) to clarify that creditors may provide open-end credit disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide open-end credit disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the open-end credit disclosures may be provided to consumers without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's open-end credit disclosure requirements.

Section 226.5(a)(1) would also be revised to provide that the open-end credit disclosures required by §§ 226.5a, 226.5b, and 226.16 may be provided to the consumer in electronic form, under the circumstances set forth in those sections, without regard to the consumer consent or other provisions of the E-Sign Act. The Board believes that, for an application, solicitation, or advertisement accessed by the consumer in electronic form, permitting creditors to provide credit and charge card application and solicitation disclosures, application disclosures for home equity lines of credit (HELOCs), and open-end credit advertising disclosures in electronic form without regard to the consumer consent and other provisions of the E-Sign Act will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate shopping for credit by enabling consumers to receive important disclosures at the same time they access an application, solicitation, or advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online application, solicitation, or advertisement, or complete an online application is potentially burdensome and could discourage consumers from shopping for credit online. Moreover, because these consumers are viewing the application, solicitation, or advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well.

Section 226.5(a)(5) in the 2001 interim final rule refers to § 226.36, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is proposing to delete § 226.36, as discussed further below, the Board also proposes to delete § 226.5(a)(5).

The 2001 interim final rule revised comment 5(b)(2)(ii)-3 to reference the E-Sign Act's consumer consent requirements. The Board proposes to delete this language as unnecessary because the E-Sign Act is a self-effectuating statute.

Section 226.5a(a)(2) prescribes the form of disclosures required with credit and charge card applications and solicitations. The Board proposes to amend § 226.5a(a)(2) by adding a new paragraph (v) to provide that if a consumer accesses an application or solicitation for a credit or charge card in electronic form, the disclosures required on or with an application or solicitation for a credit or charge card must be provided to the consumer in electronic form on or with the application or solicitation. A consumer accesses an application or solicitation in electronic form when, for example, the consumer views the application or solicitation on his or her home computer. On the other hand, if a consumer receives an application or solicitation in the mail, the creditor would not satisfy its obligation to provide § 226.5a disclosures at that time by including a reference in the application or solicitation to the Web site where the disclosures are located. Comment 5a(a)(2)-9 would be added to clarify this point.

Comment 5a(a)(2)-8 of the 2001 interim final rule states that a consumer must be able to access the electronic disclosures at the time the application form or solicitation reply form is made available by electronic communication. The Board proposes to revise this comment to describe alternative methods for presenting electronic disclosures, which are examples rather than an exhaustive list. Comment 5a(a)(2)-2.ii., which was added in 2000, specifies how the tabular disclosures required by § 226.5a can be “prominently located” if provided on or with electronic applications and solicitations, and is similar to revised comment 5a(a)(2)-8. Revised comment 5a(a)(2)-8 reminds creditors that for disclosures required to be provided in tabular form, the electronic form of the table must satisfy the requirements of comment 5a(a)(2)-2.ii.

Section 1304 of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23 (the “Bankruptcy Act”), amends Section 127(c) of TILA to require that credit card application and solicitation disclosures provided “using the Internet or other interactive computer service” must be “readily accessible to consumers in close proximity” to the solicitation. 15 U.S.C. 1637(c)(7). In connection with the Board's ongoing review of Regulation Z, the Board issued an Advance Notice of Proposed Rulemaking (70 FR 60235, October 17, 2005) (October 2005 ANPR), soliciting comments on how these Bankruptcy Act amendments should be implemented.

The Bankruptcy Act provision applies to solicitations to open a card account “using the Internet or other interactive computer service.” The term “Internet” is defined as the international computer network of both Federal and non-Federal interoperable packet switched data networks. The term “interactive computer service” is defined as any information service, system or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions. 15 U.S.C. 1637(c)(7). Based on the definitions of “Internet” and “interactive computer service,” the Board believes that Congress intended to cover all card offers that are provided to consumers in electronic form. In the October 2005 ANPR, the Board solicited comment on what guidance the Board should provide regarding when disclosures are “readily accessible to consumers in close proximity” to an application or solicitation that is made in electronic form. In particular, the Board asked whether additional or different guidance is needed from the guidance previously issued by the Board.

Most commenters stated that the Board should retain the existing guidance in comment 5a(a)(2)-2.ii on “prominent location” to interpret the “close proximity” standard. A few commenters stated that the 2000 guidance should not apply, and that, for example, it should suffice to provide a link to the disclosures that the consumer could choose to access or not. Some commenters urged the Board generally to allow maximum flexibility to creditors regarding the display of electronic disclosures, and stated that no guidance or specific rules were necessary.

The Board intends to interpret the Bankruptcy Act's “close proximity” standard in its ongoing review of the credit card provisions of Regulation Z. Based on comments received on the October 2005 ANPR, the Board is considering how to apply the “close proximity” standard to electronic applications and solicitations, including whether to retain the existing guidance in comment 5a(a)(2)-2.ii. The Board anticipates issuing a proposal addressing these and other Regulation Z issues within the next few months.

Section 226.5a(b)(1) sets forth rules for accuracy of the annual percentage rate (APR) disclosure in an application or solicitation for a variable-rate credit card plan. Section 226.5a(b)(1)(ii) provides, in part, that direct mail APR disclosures are accurate if the rate was in effect within 60 days before mailing the disclosures. The 2001 interim final rule added a new § 226.5a(b)(1)(iii) to provide that, in the case of electronic disclosures, the variable APR disclosure is considered accurate if the disclosed rate was in effect within 30 days before the disclosure was sent by electronic mail to a consumer or made available at another location, such as the card issuer's Internet Web site, and amended § 226.5a(b)(1)(ii) to reference the new section. Preparing revised electronic disclosures when the index rate for a variable APR changes should require less time than revising printed materials in preparation for a direct mail campaign. Thus, specifying a shorter time frame for accuracy of electronic disclosures than for printed disclosures appeared reasonable. The 2001 interim final rule did not contain specific guidance on accuracy requirements for other disclosures provided electronically, such as fee disclosures.

Section 226.5a(c) requires that certain disclosures be included on or with a credit card application or solicitation that is sent to consumers by direct mail. The 2001 interim final rule revised § 226.5a(c) to apply the direct mail rules to applications and solicitations provided to consumers electronically.

More recently, section 1304 of the Bankruptcy Act amended Section 127(c) of TILA to require that solicitations to open a card account using the Internet or other interactive computer service must contain the same disclosures as those made for applications or solicitations sent by direct mail. Although this Bankruptcy Act provision refers to credit card solicitations (where no application is required), the Board requested comment in the October 2005 ANPR on whether the provision should be interpreted also to include applications provided electronically. Almost all commenters on this issue stated that there is no reason to treat electronic applications differently from electronic solicitations in applying the Bankruptcy Act provision. The Board concurs. With respect to both electronic applications and solicitations, it is important for consumers who are shopping for a card to receive accurate cost information about the card before submitting an electronic application or responding to an electronic solicitation. Thus, the Board proposes to use its authority in section 105(a) of TILA to apply the Bankruptcy Act provision relating to electronic offers to both electronic solicitations and applications, as necessary to effectuate the informed use of credit, a primary purpose of TILA. 15 U.S.C. 1601(a), 1604(a).

The Bankruptcy Act also provides that the disclosures for electronic credit card offers must be “updated regularly to reflect the current policies, terms, and fee amounts.” In the October 2005 ANPR, the Board solicited comment on how that standard should be implemented.

The majority of commenters to the October 2005 ANPR who addressed the accuracy of variable rates agreed that a 30-day standard would be appropriate to implement the “updated regularly” standard in the Bankruptcy Act. Some commenters advocated longer periods such as 60 days, or shorter periods such as daily or weekly updating, or suggested that the Board should not provide specific guidance or rules, instead allowing maximum flexibility in this area.

The Board proposes to revise §§ 226.5a(b)(1) and 226.5a(c) to make the direct-mail provision of § 226.5a applicable to electronic applications and solicitations and to implement the “updated regularly” standard in the Bankruptcy Act with regard to the accuracy of variable APRs. Current § 226.5a(c) would be revised and renumbered as new § 226.5a(c)(1). A new § 226.5a(c)(2) would be added to address the accuracy of a variable APR in direct mail solicitations. This new section would require issuers to update variable APRs disclosed on mailed applications and solicitations every 60 days and variable APRs disclosed on applications and solicitations provided in electronic form every 30 days, and to update other terms when they change. The Board believes the 30-day and 60-day accuracy requirements for variable APRs strike an appropriate balance between seeking to ensure consumers receive updated information and avoiding imposing undue burdens on creditors. The Board does not believe it is necessary for creditors to disclose to consumers the exact variable APR in effect on the date the application or solicitation is accessed by the consumer because consumers should understand that variable APRs are subject to change. Moreover, it could be costly and operationally burdensome for creditors to comply with a requirement to disclose the exact variable APR in effect at the time the application or solicitation is accessed. The obligation to update the other terms when they change ensures that consumers receive information that is reasonably accurate and current, and should not impose significant burdens on issuers. Based on discussions with industry concerning operational issues, the Board understands that issuers typically change other terms infrequently, perhaps once or twice a year.

Section 226.5a(c)(2) consists of two subsections. Section 226.5a(c)(2)(i) would provide that § 226.5a disclosures mailed to a consumer must be accurate as of the time the disclosures are mailed. This section would also provide that an accurate variable APR is one that is in effect within 60 days before mailing. Section 226.5a(c)(2)(ii) would provide that § 226.5a disclosures provided in electronic form (except for a variable APR) must be accurate as of the time they are sent to a consumer's e-mail address, or as of the time they are viewed by the public on a web site. For the reasons discussed above, this section would provide that a variable APR is accurate if it is in effect within 30 days before it is sent, or viewed by the public, as applicable. Presently, variable APRs on most credit cards may change on a monthly basis, so the Board believes the 30-day accuracy requirement for variable APRs is appropriate.

Many of the provisions included in proposed § 226.5a(c)(2) have been incorporated from § 226.5a(b)(1). To eliminate redundancy, the Board proposes to revise § 226.5a(b)(1) by deleting § 226.5a(b)(1)(ii) and (iii) and comment 5a(c)-1. The portion of § 226.5a(b)(1)(ii) that relates to the accuracy of APRs provided in “take-ones” would be incorporated in new § 226.5a(e)(5).

Section 226.5b(a) sets forth requirements for the form of disclosures required to be made on or with applications for HELOCs. The Board proposes to amend § 226.5b(a) by adding a new paragraph (3) to provide that if a consumer accesses a HELOC application in electronic form, the disclosures required on or with an application for a HELOC must be provided to the consumer in electronic form on or with the application. A consumer accesses a HELOC application in electronic form when, for example, the consumer views the application on his or her home computer. On the other hand, if a consumer receives a HELOC application in the mail, the creditor would not satisfy its obligation to provide § 226.5b disclosures at that time by including a reference in the application to the web site where the disclosures are located. Comment 5b(a)(3)-1 would be added to clarify this point.

Section 226.5b(c) states that persons other than the creditor that provide HELOC applications to consumers must provide the required home equity disclosures in certain cases. The 2001 interim final rule added a new § 226.5b(c)(2) to clarify that such third parties may use electronic disclosures. The Board is proposing to delete this provision as unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act.

Comment 5b(b)-7 of the 2001 interim final rule states that a consumer must be able to access the electronic disclosures at the time the application form or solicitation reply form is made available by electronic communication. This comment is substantially similar to comment 5a(a)(2)-8 of the 2001 interim final rule, discussed above.

The Board proposes to delete comment 5b(b)-7 and substitute a new comment 5b(a)(1)-5 in its place, which generally parallels the content of the revised comment 5a(a)(2)-8. The new comment would describe alternative methods for presenting electronic disclosures, which are examples rather than an exhaustive list. Comment 5b(a)(1)-5 would omit all references to reply forms to recognize that the HELOC disclosures are application disclosures. The renumbering of the comment reflects the Board's belief that the focus of this comment is the form of electronic disclosures, rather than the timing of those disclosures.

Section 226.15 gives consumers the right to rescind certain open-end credit plans secured by their principal dwelling. Under § 226.15(b), creditors must provide two copies of a notice of this right to each consumer entitled to rescind. For written (paper) disclosures, this allows consumers to return one copy to the creditor if they exercise the right of rescission and retain the second copy. For rescission notices provided in electronic form, the 2001 interim final rule added language permitting creditors to provide only one copy of the electronic notice to each consumer when the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act. The Board proposes to retain this provision. It does not appear that consumers would benefit by receiving two electronic copies of rescission notices because a second electronic “copy” is unnecessary for purposes of consumer retention.

In the 2001 interim final rule, comment 15(b)-1 was revised to state that if there is more than one property owner, a single rescission notice may be sent to each consumer if electronic communication is used, that each co-owner must consent to electronic disclosures, and that each must designate an electronic (e-mail) address to be used for this purpose. The Board believes, as discussed above, that provisions requiring the use of e-mail are no longer appropriate; comment 15(b)-1 would be revised accordingly. The Board also proposes to delete the statement that each co-owner must consent to electronic disclosures.

Section 226.16 contains requirements for advertisements for open-end credit, and in particular requires that if an advertisement includes certain “trigger terms” (such as an APR), the advertisement must also include certain required disclosures (such as minimum finance charge and transaction charges and annual fees).

Section 226.16(c) relates to catalogs and other multiple-page advertisements and to electronic advertisements. The Board proposes to add a new paragraph (3) to § 226.16(c) to clarify that if a consumer accesses an advertisement for open-end credit in electronic form, the disclosures required on or with the open-end credit advertisement must be provided to the consumer in electronic form on or with the advertisement. A consumer accesses an advertisement in electronic form when, for example, the consumer views the advertisement on his or her home computer. On the other hand, if a consumer receives a written advertisement in the mail, the creditor would not satisfy its obligation to provide § 226.16 disclosures at that time by including a reference in the advertisement to the web site where the disclosures are located. Comment 16(c)(3)-1 would be added to clarify this point.

Section 226.16(c) provides that in a catalog or other multiple-page advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. The 2001 interim final rule clarified that this multiple-page rule also applies to credit advertisements in electronic form. For example, if a “trigger term” appears on a particular web page, the additional disclosures may appear in a table or schedule on another web page and still be considered part of a single advertisement if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). The Board proposes to retain the rule (in § 226.16(c)(1) and (2)) allowing the use of links or other cross-references in electronic credit advertisements to provide guidance on how the advertising rules apply to Web sites.

The 2001 interim final rule revised comment 16(c)(1)-1 and added comment 16(c)(1)-2 to provide guidance on multiple-page advertisements in electronic form. Because the Board is proposing to retain the changes to § 226.16(c)(1) with minor wording changes, the Board is also proposing to retain comments 16(c)(1)-1 and 2 as revised by the 2001 interim final rule with corresponding wording changes.

Section 226.17(a) prescribes the form of disclosures required for closed-end credit. Section 226.17(a)(1) requires creditors to provide closed-end credit disclosures in writing and in a form that the consumer may keep. The Board proposes to revise § 226.17(a)(1) to clarify that creditors may provide the closed-end credit disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide closed-end credit disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the closed-end credit disclosures may be provided to consumers without regard to the consumer consent and other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's closed-end credit disclosure requirements.

Section 226.17(a)(1) would also be revised to provide that the closed-end credit disclosures required by §§ 226.19(b) and 226.24 may be provided to the consumer in electronic form, and that the disclosures required by § 226.17(g) may be made available to the consumer or to the public in electronic form, under the circumstances set forth in those sections, without regard to the consumer consent or other provisions of the E-Sign Act. The Board believes that, for an application or advertisement accessed by the consumer in electronic form, permitting creditors to provide disclosures relating to applications for adjustable-rate mortgage (ARM) loans secured by the consumer's principal dwelling (§ 226.19(b)) and closed-end credit advertising (§ 226.24) in electronic form, without regard to the consumer consent and other provisions of the E-Sign Act, will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will assist consumers in shopping for credit by enabling them to receive important disclosures at the same time they access an application or advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online application or advertisement, or complete an online application is potentially burdensome and could discourage consumers from shopping for credit online. Moreover, because these consumers are viewing the application or advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well.

Section 227.17(g) applies where a creditor receives a request for credit by mail, telephone, or electronic communication without face-to-face or direct telephone solicitation. In these circumstances, the creditor may delay making the TILA disclosures for the credit transaction until the due date of the first payment, provided certain disclosures (specified in § 226.17(g)(1)-(5)) have been made available to the consumer or to the public generally (such as in a catalog or advertisement). For example, a retailer may mail catalogs to consumers, or provides advertising inserts in newspapers, containing information for ordering merchandise by telephone or mail. If a consumer calls the retailer, orders an item, and agrees to pay for the item by obtaining a closed-end extension of credit from the retailer, the TILA closed-end disclosures would normally be required to be provided to the consumer before the consummation of the transaction. Since this is impracticable where the transaction is consummated by telephone, however, § 226.17(g) permits the retailer to delay providing the specific disclosures for the transaction, as long as the disclosures in § 226.17(g)(1)-(5), for representative amounts or ranges of credit, are included in the catalog or newspaper insert.

In the 2001 interim final rule, the Board replaced the term “electronic communication” in § 226.17(g) with “facsimile machine.” The Board explained that the rule in § 226.17(g) predated Internet commerce, and the term “electronic communication” was intended to cover credit requests by facsimile or telegram. The rationale underlying the rule was that creditors are unable to provide written transaction-specific disclosures at the time of the consumer's credit request where the request is made by facsimile or telegram, no less than in the case of requests made by telephone or mail. That practical problem does not exist, however, where a consumer requests credit at a web site. Therefore, the Board believes it would be inappropriate to extend the application of § 226.17(g) to electronic requests for credit made at an Internet Web site. Accordingly, the Board proposes to retain the amendment to § 226.17(g) from the 2001 interim final rule.

Where § 226.17(g) does apply, i.e. , where the consumer requests credit by telephone, mail, or facsimile machine, the regulation requires the creditor to make available in written form to the consumer or the public the disclosures set forth in § 226.17(g)(1)-(5) before the actual purchase order or request. The Board believes that these disclosures can appropriately be made available to the consumer or to the public either in electronic form (for example, on the creditor's web site) or in paper form. Accordingly, the Board proposes to amend § 226.17(g) to provide that the requirement to make available the § 226.17(g)(1)-(5) disclosures in written form to the consumer or to the public may be satisfied by making the disclosures available in electronic form, such as at a creditor's Web site. Thus, for example, a consumer might see information about a product on a retailer's web site and order the product by telephone using closed-end credit; the transaction-specific disclosures could be delayed, provided the § 226.17(g)(1)-(5) disclosures are set forth on the Web site. In this situation, the E-Sign consent procedures would not have to be followed in order for the § 226.17(g)(1)-(5) disclosures to be provided in electronic form. On the other hand, if the consumer ordered the product via the web site itself, the transaction-specific disclosures could not be delayed and would be required to be provided before consummation of the transaction. For the disclosures to be provided in electronic form in this situation, the E-Sign consent procedures would have to be followed.

Section 226.17(a)(3) in the interim final rule cross-references § 226.36, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is proposing to delete § 226.36, as discussed further below, the Board also proposes to delete § 226.17(a)(3).

Section 226.19(b) requires creditors to provide certain disclosures relating to ARM loans secured by the consumer's principal dwelling when an application form is provided to the consumer or before the consumer pays a nonrefundable fee, whichever is earlier. The Board proposes to amend § 226.19 by adding a new paragraph (c) to provide that if a consumer accesses a ARM application in electronic form, the disclosures required on or with an application for an ARM must be provided to the consumer in electronic form on or with the application. A consumer accesses an ARM application in electronic form when, for example, the consumer views the ARM application on his or her home computer. On the other hand, if a consumer receives an ARM application in the mail, the creditor would not satisfy its obligation to provide § 226.19 disclosures at that time by including a reference in the application to the web site where the disclosures are located. Comment 19(c)-1 would be added to clarify this point.

Comment 19(b)-2 of the 2001 interim final rule states that a consumer must be able to access the electronic disclosures at the time the blank application form for ARMs is made available by electronic communication. The Board proposes to revise comment 19(b)-2 in a manner substantially similar to proposed comment 5b(a)(1)-5, discussed above. The revised comment would describe alternative methods for presenting electronic disclosures, which are examples rather than an exhaustive list.

Section 226.23 gives consumers the right to rescind certain closed-end mortgage loans secured by their principal dwelling. Under § 226.23(b), creditors must provide two copies of a notice of this right to each consumer entitled to rescind. For written (paper) disclosures, this allows consumers to return one copy to the creditor if they exercise the right of rescission and retain the second copy. For rescission notices provided in electronic form, the 2001 interim final rule added language permitting creditors to provide only one copy of the electronic notice to each consumer when the notice is provided in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act. The Board proposes to retain this provision. It does not appear that consumers would benefit by receiving two electronic copies of rescission notices because a second electronic “copy” is unnecessary for purposes of consumer retention.

In the 2001 interim final rule, comment 23(b)-1 was revised to state that if there is more than one property owner, a single rescission notice may be sent to each consumer if electronic communication is used, that each co-owner must consent to electronic disclosures, and that each must designate an electronic (e-mail) address to be used for this purpose. The Board believes, as discussed above, that provisions requiring the use of e-mail are no longer appropriate; comment 23(b)-1 would be revised accordingly. The Board also proposes to delete the statement that each co-owner must consent to electronic disclosures. The proposed revisions are consistent with the proposed revisions to comment 15(b)-1, discussed above, which relates to rescission in the context of open-end credit.

Section 226.24 contains requirements for advertisements for closed-end credit and requires that if an advertisement includes certain “trigger terms” (such as the payment amount), the advertisement must also include certain required disclosures (such as the APR, the amount or percentage of any downpayment, and the terms of repayment, as applicable).

Section 226.24(d) relates to catalogs and other multiple-page advertisements and to electronic advertisements. The Board is proposing to add a new paragraph (3) to § 226.24(d) (comparable to proposed new paragraph (3) to § 226.16(c) for open-end credit advertising) to clarify that if a consumer accesses an advertisement for closed-end credit in electronic form, the disclosures required on or with the closed-end credit advertisement must be provided to the consumer in electronic form on or with the advertisement. A consumer accesses an advertisement in electronic form when, for example, the consumer views the advertisement on his or her home computer. On the other hand, if a consumer receives a written advertisement in the mail, the creditor would not satisfy its obligation to provide § 226.24 disclosures at that time by including a reference in the advertisement to the web site where the disclosures are located. Comment 24(d)-5 would be added to clarify this point.

Section 226.24(d) provides that in a catalog or other multiple-page advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. As it did for open-end credit advertising, the 2001 interim final rule clarified that the multiple-page rule for closed-end credit advertising also applies to credit advertisements in electronic form. For example, if a “trigger term” appears on a particular Web page, the additional disclosures may appear in a table or schedule on another Web page and still be considered part of a single advertisement if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). The Board proposes to retain the rule (in § 226.24(d)(1) and (2)) allowing the use of links or other cross-references in electronic credit advertisements to provide guidance on how the advertising rules apply to Web sites.

The 2001 interim final rule revised comment 24(d)-2 and added comment 24(d)-4 to provide guidance on multiple-page advertisements in electronic form. Because the Board is proposing to retain the changes to § 226.24(d) with minor wording changes, the Board is also proposing to retain comments 24(d)-2 and 24(d)-4 as revised by the 2001 interim final rule with corresponding wording changes.

Section 226.24(b) permits creditors to state a simple annual rate of interest or periodic rate in addition to the APR, as long as the rate is stated in conjunction with, but not more conspicuously than, the APR. In the 2001 interim final rule, comment 24(b)-6 was added to state that in an advertisement using electronic communication, the consumer must be able to view both rates simultaneously, and that this requirement is not satisfied if the consumer can view the APR only by use of a link that takes the consumer to another Web location. The Board proposes to delete comment 24(b)-6 as unnecessary. The requirement to state the simple annual rate or periodic rate in conjunction with, and not more conspicuously than, the APR, applies to electronic advertisements no less than to advertisements in other media. Requiring the consumer to scroll to another part of the page, or access a link, in order to view the APR would likely not satisfy this requirement.

Subpart E implements the Home Ownership and Equity Protection Act (HOEPA) and sets forth special rules, including disclosure requirements, for certain mortgage loans with rates or fees above specified thresholds (HOEPA loans) and for reverse mortgage loans. Section 226.31(b) prescribes the form of disclosures required under subpart E. Section 226.31(b)(1) requires creditors to provide the HOEPA and reverse mortgage disclosures in writing and in a form that the consumer may keep. Section 226.31(b)(1) would be renumbered as § 226.31(b) and revised to clarify that the HOEPA and reverse mortgage disclosures may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some creditors may provide the HOEPA and reverse mortgage disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those creditors, the duplicate electronic form of the HOEPA and reverse mortgage disclosures may be provided to consumers without regard to the consumer consent and other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's HOEPA and reverse mortgage disclosure requirements.

Section 226.31(b)(2) in the interim final rule cross-references § 226.36, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is proposing to delete § 226.36, as discussed further below, the Board also proposes to delete § 226.31(b)(2).

Section 226.36 was added by the 2001 interim final rule to address the general requirements for electronic communications. The Board proposes to delete § 226.36 (which constitutes all of subpart F) from Regulation Z and the accompanying sections of the staff commentary.

In the interim rule, § 226.36(a) defines the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 226.36(a) would not change applicable legal requirements under the E-Sign Act.

Sections 226.36(b), (c) and (f) incorporate by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form, the requirement to obtain the consumer's affirmative consent before providing disclosures in electronic form, and the provision allowing electronic signatures. The deletion of these provisions will have no impact on the general applicability of the E-Sign Act to Regulation Z disclosures.

Sections 226.36(d) and (e) address specific timing and delivery requirements for electronic disclosures under Regulation Z, such as the requirement to send disclosures to a consumer's e-mail address (or post the disclosures on a Web site and send a notice alerting the consumer to the disclosures). The Board no longer believes that these additional provisions are necessary or appropriate. Electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them. Although many institutions offer e-mail alert notices to consumers in connection with online services, some consumers may choose not to receive notifications by e-mail and the Board sees no reason to require e-mail alert notices in all cases. In addition, the Board has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and phishing that have become more pronounced since 2001.

With regard to the requirement to attempt to redeliver returned electronic disclosures, as the commenters noted, creditors would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. The Board believes that both requirements would likely be unduly burdensome. In addition, the concerns that have been raised about the requirement to use e-mail for the initial delivery of a disclosure or notice apply equally to the use of e-mail for an attempted redelivery.

Under the proposed rule, the Board would not require creditors to maintain disclosures posted on a Web site for at least 90 days as provided in the 2001 interim final rule for several reasons. First, based on a review of industry practices, it appears that many institutions maintain disclosures posted on an Internet web site for several months, and, in a number of cases, for more than a year. For example, it appears that credit card issuers that offer online periodic statements to consumers typically make those statements available without charge for six months or longer in electronic form. This practice has developed even though Regulation Z does not currently require institutions to maintain disclosures for any specific period of time. Second, the Board believes that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods depending on the disclosures. Nevertheless, while the Board is not proposing to require disclosures to be maintained on an Internet web site for any specific time period, the general requirements of Regulation Z continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. Although these general requirements apply to electronic disclosures, the Board does not believe that the 90-day time period set out in § 226.36(d) of the 2001 interim final rule is needed to ensure that creditors satisfy these requirements when they provide electronic disclosures. The Board, however, will monitor creditors' electronic disclosure practices with regard to the ability of consumer to retain Regulation Z disclosures and will consider further regulatory action if it appears necessary.

The official staff commentary to § 226.36 of the interim final rule provides guidance on the provisions set forth in § 226.36 such as delivery of disclosures or alert notices by e-mail, redelivery if disclosures or a notice is returned undelivered, and retention of disclosures on a Web site for 90 days. As noted above, because the Board is proposing to delete § 226.36 (which constitutes all of subpart F) of the regulation, the Board also proposes to delete the accompanying provisions of the official staff commentary.

Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. The Board invites comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities.

However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if an agency certifies, along with a statement providing the factual basis for such certification, that the rule will not have a significant economic impact on a substantial number of small entities. Based on its analysis and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the objectives of the proposal. The Board is proposing revisions to Regulation Z to withdraw the 2001 interim final rule on electronic communication and to allow creditors to provide certain disclosures to consumers in electronic form on or with an application, solicitation, or advertisement that is accessed by the consumer in electronic form without regard to the consumer consent and other provisions of the E-Sign Act. The Board is also proposing to clarify that other Regulation Z disclosures may be provided to consumers in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act.

TILA was enacted to enhance economic stabilization and competition for credit by strengthening the informed use of credit, including an awareness of the cost of credit by consumers. The purpose of TILA is to assure a meaningful disclosure of credit terms so that the consumer can compare the various credit terms available and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices. 15 U.S.C. 1601. TILA authorized the Board to prescribe regulations to carry out the purposes of the statute. 15 U.S.C. 1604(a). The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * *, as in the judgment of the Board are necessary or proper to effectuate the purposes of [the Act], to prevent circumvention or evasion of [the Act], or to facilitate compliance with [the Act].” 15 U.S.C. 1604(a). The Board believes that the revisions to Regulation Z discussed above are within Congress's broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute. These revisions facilitate the informed use of credit by consumers in circumstances where a consumer accesses a credit application, solicitation, or advertisement in electronic form.

2. Small entities affected by the proposal. The ability to provide shopping and advertising disclosures in electronic form on or with an application, solicitation, or advertisement that is accessed by the consumer in electronic form applies to all creditors, regardless of their size. Accordingly, the proposed revisions would reduce burden and compliance costs for small entities by providing relief, to the extent the E-Sign Act applies in these circumstances. The number of small entities affected by this proposal is unknown.

3. Other Federal rules. The Board believes no Federal rules duplicate, overlap, or conflict with the proposed revisions to Regulation Z.

4. Significant alternatives to the proposed revisions. The Board solicits comment on any significant alternatives that may provide additional ways to reduce regulatory burden associated with this proposed rule.

In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is required by this proposed rule is found in 12 CFR 226. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0199.

Title I of the Consumer Credit Protection Act authorizes the Federal Reserve to issue regulations to carry out the provisions of that Act. 15 U.S.C. 1601, 1604(a). This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality normally arises. However, the information may be protected from disclosure under the exemptions (b)(4), (6), and (8) of the Freedom of Information Act (5 U.S.C. 522(b)). Transaction- or account-specific disclosures and billing error allegations are not publicly available and are confidential between the creditor and the consumer. General disclosures of credit terms that appear in advertisements or take-one applications are available to the public.

TILA and Regulation Z ensure adequate disclosure of the costs and terms of credit to consumers. For open-end credit, creditors are required to disclose information about the initial costs and terms and to provide periodic statements of account activity, notices of changes in terms, and statements of rights concerning billing error procedures. The regulation also requires specific types of disclosures for credit and charge card accounts, and home-equity plans. For closed-end loans, such as mortgage and installment loans, cost disclosures are required to be provided prior to consummation. Special disclosures are required of certain products, such as reverse mortgages, certain variable-rate loans, and certain mortgages with rates and fees above specified thresholds. TILA and Regulation Z also contain rules concerning credit advertising. To ease the burden and cost of complying with Regulation Z (particularly for small entities), the Federal Reserve provides model forms, which are appended to the regulation. Creditors are required to retain evidence of compliance for twenty-four months (subpart D, section 226.25), but the regulation does not specify the types of records that must be retained.

Under the PRA, the Federal Reserve accounts for the paperwork burden associated with Regulation Z for the State member banks and other creditors supervised by the Federal Reserve that engage in lending covered by Regulation Z and, therefore, are respondents under the PRA. Appendix I of Regulation Z defines the Federal Reserve-regulated institutions as: State member banks, branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other Federal agencies account for the paperwork burden on other creditors. The annual burden is estimated to be 552,398 hours for the 1,172 Federal Reserve-regulated institutions that are deemed to be respondents for the purposes of the PRA.

As mentioned in the Preamble, § 226.5 would be revised to clarify the disclosure requirements in §§ 226.5a and 226.5b. The Federal Reserve estimates that 279 respondents would take approximately 8 hours per month to comply with the existing disclosure requirements in § 226.5a and estimates the annual burden to be 26,784 hours; and 632 respondents would take approximately 4.5 minutes per transaction to comply with the existing disclosure requirements in § 226.5b and estimates the annual burden to be 12,798 hours. Sections 226.17 and 226.19 would be revised to clarify the existing disclosure requirements in §§ 226.17(g) and 226.19(b). The Federal Reserve estimates that 1,172 respondents would take approximately 6.5 minutes per transaction to comply with the existing disclosure requirements in §§ 226.17(g) and 226.19(b), and estimates the annual burden to be 313,765 hours. Sections 226.5 and 226.17 would also be revised to clarify the disclosure requirements in §§ 226.16 and 226.24 respectively. The Federal Reserve estimates that 1,172 respondents would take approximately 25 minutes per transaction to comply with the existing disclosure requirements in § 226.16 and 226.24, and estimates the annual burden to be 2,442 hours, collectively. The Federal Reserve requests specific comment on whether the revisions in this proposed rule would change the burden on respondents.

Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility; (b) the accuracy of the Federal Reserve's estimate of the burden of the information collection, including the cost of compliance; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology. Comments on the collections of information should be sent to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551, with copies of such comments to be sent to the Office of Management and Budget, Paperwork Reduction Project (7100-0199), Washington, DC 20503.

Certain conventions have been used to highlight the proposed changes to Regulation Z. New language is shown inside bold-faced arrows, while language that would be removed is set off with bold-faced brackets.

For the reasons set forth in the preamble, the Board proposes to amend Regulation Z, 12 CFR part 226, as set forth below:

The purpose of the Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq. , is to enable consumers to make informed decisions about accounts at depository institutions. The act requires depository institutions to disclose yields, fees, and other terms concerning deposit accounts to consumers at account opening, upon request, when changes in terms occur, and in periodic statements. It also includes rules about advertising for deposit accounts. The Board's Regulation DD (12 CFR part 230) implements the act. Credit unions are governed by a substantially similar regulation issued by the National Credit Union Administration. TISA and Regulation DD require a number of disclosures to be provided in writing.

On May 2, 1996, the Board proposed to amend Regulation E (Electronic Fund Transfers) to permit financial institutions to provide disclosures by sending them electronically (61 FR 19696). Based on comments received, in 1998 the Board published an interim rule permitting the electronic delivery of disclosures under Regulation E (63 FR 14528, March 25, 1998) and proposals under Regulations B (Equal Credit Opportunity), M (Consumer Leasing), Z (Truth in Lending), and DD (Truth in Savings) (63 FR 14552, 14538, 14548, and 14533, respectively, March 25, 1998).

Based on comments received on the 1998 proposals, in September 1999 the Board published revised proposals under Regulations B, E, M, Z, and DD (64 FR 49688, 49699, 49713, 49722 and 49740, respectively, September 14, 1999). At the same time, the Board published an interim rule under Regulation DD allowing depository institutions to deliver disclosures on periodic statements in electronic form if the consumer agreed (64 FR 49846, September 14, 1999). While these rulemakings were pending, Federal legislation was enacted addressing the use of electronic documents and records, including consumer disclosures.

On June 30, 2000, the President signed into law the Electronic Signatures in Global and National Commerce Act (the E-Sign Act) (15 U.S.C. 7001 et seq. ). The E-Sign Act provides that electronic documents and electronic signatures have the same validity as paper documents and handwritten signatures. The E-Sign Act contains special rules for the use of electronic disclosures in consumer transactions. Under the E-Sign Act, consumer disclosures required by other laws or regulations to be provided or made available in writing may be provided or made available, as applicable, in electronic form if the consumer affirmatively consents after receiving a notice that contains certain information specified in the statute, and if certain other conditions are met.

The E-Sign Act, including the special consumer notice provisions, became effective October 1, 2000, and did not require implementing regulations. Thus, financial institutions are currently permitted to provide in electronic form any disclosures that are required to be provided or made available to the consumer in writing under Regulations B, E, M, Z, and DD if the consumer affirmatively consents to receipt of electronic disclosures in the manner required by section 101(c) of the E-Sign Act.

On March 30, 2001, the Board published for comment interim final rules to establish uniform standards for the electronic delivery of disclosures required under Regulation DD (66 FR 17795). Similar interim final rules for Regulations B, E, M, and Z were published on March 30, 2001 (66 FR 17322 (M)) and April 4, 2001 (66 FR 17779 (B), 66 FR 17786 (E), and 66 FR 17329 (Z)). The interim final rules incorporated most of the provisions that were part of the 1999 proposals.

Each of the interim final rules incorporated, but did not interpret, the requirements of the E-Sign Act. Depository institutions, creditors, and other persons, as applicable, generally were required to obtain consumers' affirmative consent to provide disclosures electronically, consistent with the requirements of the E-Sign Act.

The 2001 interim final rule for Regulation DD established uniform requirements for the timing and delivery of electronic disclosures. Under the interim rule, disclosures could be sent to an e-mail address designated by the consumer, or could be made available at another location, such as an Internet Web site. If the disclosures were not sent by e-mail, institutions would have to provide a notice to consumers alerting them to the availability of the disclosures. Disclosures posted on a Web site would have to be available for at least 90 days to allow consumers adequate time to access and retain the information. Institutions also would be required to make a good faith attempt to redeliver electronic disclosures that were returned undelivered, using the address information available in their files. Similar provisions were included in the interim final rules adopted under Regulations B, E, M, and Z.

Commenters on the interim final rules identified significant operational and information security concerns with respect to the requirement to send the disclosure or an alert notice to an e-mail address designated by the consumer. For example, commenters stated that some consumers do not have e-mail addresses or may not want personal financial information sent to them by e-mail. Commenters also noted that e-mail is not a secure medium for delivering confidential information and that consumers' e-mail addresses frequently change. The commenters also opposed the requirement for redelivery in the event a disclosure was returned undelivered. In addition, many commenters asserted that making the disclosures available for at least 90 days, as required by the interim final rule, would increase costs and would not be necessary for consumer protection.

In August 2001, in response to comments received, the Board lifted the previously established October 1, 2001 mandatory compliance date for all of the interim final rules. (66 FR 41439, August 8, 2001.) Thus, institutions are not required to comply with the interim final rules. Since that time, the Board has not taken further action with respect to the interim final rules on electronic disclosures in order to allow electronic commerce, including electronic disclosure practices, to continue to develop without regulatory intervention and to allow the Board to gather further information about such practices.

The Board is proposing to amend Regulation DD and the official staff commentary by (1) withdrawing portions of the 2001 interim final rule on electronic disclosures that restate or cross-reference provisions of the E-Sign Act and accordingly are unnecessary; (2) withdrawing other portions of the interim final rule that the Board now believes may impose undue burdens on electronic banking and commerce and may be unnecessary for consumer protection; and (3) retaining the substance of certain provisions of the interim final rule that provide regulatory relief or guidance regarding electronic disclosures. (Similar amendments are also being proposed by the Board, in today's issue of the Federal Register , under Regulations B, E, M, and Z.)

Because compliance with the 2001 interim final rules is not mandatory, removing most portions of the interim rules from the Code of Federal Regulations , while finalizing other provisions, would reduce confusion about the status of the electronic disclosure provisions and simplify the regulation. The Board is proposing to adopt certain provisions that are identical or similar to provisions in the 2001 interim final rules in order to enhance the ability of consumers to shop for deposit account products online, minimize the information-gathering burdens on consumers, and provide guidance or eliminate a substantial burden on the use of electronic disclosures, as discussed further below.

Since 2001, industry and consumers have gained considerable experience with electronic disclosures. During that period, the Board has received no indication that consumers have been harmed by the fact that compliance with the interim final rules is not mandatory. The Board also has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and “phishing” (i.e., prompting consumers to reveal confidential personal or financial information through fraudulent e-mail requests that appear to originate from a financial institution, government agency, or other trusted entity) that have become more pronounced since 2001. Finally, the Board is proposing to eliminate certain aspects of the 2001 interim final rule, such as provisions regarding the availability and retention of electronic disclosures, as unnecessary in light of current industry practices.

The 2001 interim final rule allowed depository institutions to provide certain disclosures to consumers electronically without regard to the consumer consent or other provisions of the E-Sign Act. These included disclosures in connection with advertisements and disclosures about deposit accounts that are provided upon request. The Board reasoned that these disclosures, which would be available to the general public while shopping for deposit products, did not “relate to a transaction,” which is a prerequisite for triggering the E-Sign consumer consent provisions, and thus were not subject to those provisions. Some commenters on the interim final rules did not agree with the Board's rationale. Upon further consideration, the Board does not believe it is necessary to determine whether or not these disclosures are related to a transaction. This proposal does not make such determinations.

Instead, pursuant to the Board's authority under section 269 of TISA, as well as under section 104(d) of the E-Sign Act, 1 the Board is proposing to specify the circumstances under which certain disclosures may be provided to a consumer in electronic form, rather than in writing as generally required by Regulation DD, without obtaining the consumer's consent under section 101(c) of the E-Sign Act. The proposed rule would also clarify, as discussed in detail below, that certain disclosures must be provided to the consumer in electronic form on or with an advertisement that is accessed by the consumer in electronic form.

The Board continues to believe that depository institutions should not be required to obtain the consumer's consent in order to provide advertising disclosures to the consumer in electronic form if the consumer accesses the advertisement containing those disclosures in electronic form, such as at an Internet Web site. Similarly, the Board continues to believe that institutions should not be required to follow the E-Sign consent requirements in order to provide account disclosures upon request to consumers electronically (although under the proposal, the institution could provide the disclosures in electronic form only if the consumer agrees).

The Board believes that consumers would not be harmed, and in fact would benefit, by having timely access to disclosures in electronic form when they are shopping for deposit account products online or viewing online deposit account advertising. The Board also believes that consumers' ability to shop for deposit accounts online and compare the terms of various offers could be substantially diminished if consumers had to consent in accordance with the E-Sign Act in order to access advertisements or obtain account disclosures. Applying the consumer consent provisions of the E-Sign Act to these disclosures could impose substantial burdens on electronic commerce and make it more difficult for consumers to gather information and shop for deposit accounts.

At the same time, the Board recognizes that consumers who shop or apply for deposit accounts online may not want to receive other disclosures electronically. Therefore, with respect to, for example, account-opening disclosures, periodic statements, and change-in-terms notices, depository institutions would be required to provide written disclosures or obtain the consumer's consent in accordance with the E-Sign Act to provide such disclosures in electronic form.

Finally, the Board is proposing to delete, as unnecessary, certain provisions that restate or cross-reference the E-Sign Act's general rules regarding electronic disclosures (including the consumer consent provisions) and electronic signatures because the E-Sign Act is a self-effectuating statute. The proposed revisions to Regulation DD and the official staff commentary are described more fully below in the Section-by-Section Analysis.

The Board solicits comment on all aspects of this proposal. Specifically, the Board seeks comment on the appropriateness of eliminating certain provisions and retaining other provisions contained in the 2001 interim final rule.

Section 230.3(a) prescribes the form of disclosures required for deposit accounts, and generally requires depository institutions to provide the disclosures in writing and in a form that the consumer may keep. The Board proposes to revise § 230.3(a) to clarify that institutions may provide disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the E-Sign Act. Some institutions may provide disclosures to consumers both in paper and electronic form and rely on the paper form of the disclosures to satisfy their compliance obligations. For those institutions, the duplicate electronic form of the disclosures may be provided to consumers without regard to the consumer consent or other provisions of the E-Sign Act because the electronic form of the disclosure is not used to satisfy the regulation's disclosure requirements.

Section 230.3(a) would also be revised to provide that the disclosures required by §§ 230.4(a)(2) (disclosures provided upon request) and 230.8 (advertising) may be provided to the consumer in electronic form, under the circumstances set forth in those sections, without regard to the consumer consent or other provisions of the E-Sign Act.

Section 230.8 requires that if certain information is stated in a deposit account advertisement, or if an advertisement promotes the payment of overdrafts, the advertisement must also include specified disclosures. The Board believes that, for a deposit account advertisement accessed by the consumer in electronic form, permitting institutions to provide the required disclosures in electronic form without regard to the consumer consent and other provisions of the E-Sign Act will eliminate a potential significant burden on electronic commerce without increasing the risk of harm to consumers. This approach will facilitate shopping for deposit products by enabling consumers to receive important disclosures at the same time they access an advertisement without first having to provide consent in accordance with the requirements of the E-Sign Act. Requiring consumers to follow the consent procedures set forth in the E-Sign Act in order to access an online advertisement is potentially burdensome and could discourage consumers from shopping for deposit products online. Moreover, because these consumers are viewing the advertisement online, there appears to be little, if any, risk that the consumer will be unable to view the disclosures online as well.

Similarly, § 230.4(a)(2) requires that depository institutions provide account disclosures, containing account terms, to consumers upon request. If a consumer is not present at the depository institution and requests the account disclosures, it would appear unnecessary and burdensome to require the consumer to go through the E-Sign consent procedures before the request could be satisfied, as long as the consumer requests that the disclosures be provided electronically. Applying the E-Sign consent procedures in this context could discourage consumers from requesting account disclosures.

Section 230.3(g) in the 2001 interim final rule refers to § 230.10, the section of the interim final rule setting forth general rules for electronic disclosures. Because the Board is proposing to delete § 230.10, as discussed further below, the Board also proposes to delete § 230.3(g).

Depository institutions generally must provide account-opening disclosures to consumers before an account is opened or a service is provided. Depository institutions may delay delivering the disclosures if the consumer is not present at the institution when the account is opened (or service is provided). Section 230.4(a)(1) provides that in such cases, account-opening disclosures must be mailed or delivered within ten business days. The rationale underlying the ten-day delay is that the institution cannot provide written disclosures when, for example, an account is opened by telephone. The 2001 interim final rule provided that depository institutions opening accounts by electronic communication (for example, on the Internet) may not delay providing disclosures under § 230.4(a)(1). The difficulties in providing disclosures for accounts opened by mail or telephone are not present for requests to open accounts received by electronic communication using visual text. Thus, specific disclosures must be provided before accounts are opened using electronic communication. The interim final rule added new paragraph (ii) to § 230.4(a)(1) to effectuate this requirement. The Board continues to believe that the rationale underlying § 230.4(a)(1)(ii) is valid; accordingly, the Board proposes to retain the provision as added by the interim final rule, with minor wording changes.

Depository institutions must also provide account disclosures to a consumer upon request. Section 230.4(a)(2)(i) provides that if a consumer is not present at the institution when a request for account disclosures is made, the institution must mail or deliver the disclosures within a reasonable time after the institution receives the request; ten days is deemed to be a reasonable time. The 2001 interim final rule extended these provisions to requests for disclosures made by electronic communication. Specifically, the interim final rule revised § 230.4(a)(2)(i) to allow institutions to mail or deliver disclosures in either paper form or electronically to consumers who are not present at the institution when they make their request. Under the interim final rule, to provide the requested disclosures electronically, the institution must send the disclosures to the consumer's e-mail address, or send a notice alerting the consumer to the location of the disclosures, such as on the institution's Internet web site. Comment 4(a)(2)(i)-3 was revised and comment 4(a)(2)(i)-4 was added to provide guidance.

The Board continues to believe that it is appropriate to allow institutions to respond by paper mail, or by electronic means provided the consumer agrees, if the consumer is not present at the institution when the request is made, without following the E-Sign consent provisions. Accordingly, the Board proposes to retain the changes made to § 230.4(a)(2)(i) and the accompanying commentary by the interim final rule, with some revisions for clarification and to provide greater flexibility for both institutions and consumers.

Section 230.8 contains requirements for advertisements for deposit accounts, including the requirement that if an advertisement includes certain “trigger terms” (such as a bonus or the annual percentage yield), the advertisement must also include certain disclosures. The Board proposes to add new comment 8(a)-11, to clarify that if a consumer accesses an advertisement for deposit accounts in electronic form, the disclosures required on or with the advertisement must be provided to the consumer in electronic form on or with the advertisement. A consumer accesses an advertisement in electronic form when, for example, the consumer views the advertisement on his or her home computer. On the other hand, if a consumer receives a written advertisement in the mail, the institution would not satisfy its obligation to provide § 230.8 disclosures at that time by including a reference in the advertisement to the Web site where the disclosures are located.

Comment 8(a)-9, as added by the interim final rule, provides that in an electronic advertisement, the required disclosures need not be shown on each page where a “trigger term” appears, as long as each such page includes a cross-reference to the page where the required disclosures appear. For example, if a “trigger term” appears on a particular web page, the additional disclosures may appear in a table or schedule on another web page if there is a clear reference to the page or location where the table or schedule begins (which may be accomplished, for example, by including a link). The Board proposes to retain comment 8(a)-9, allowing the use of links or other cross-references in electronic deposit account advertisements, with minor wording changes.

The Board proposes to add new comment 8(a)-12 to clarify that the rules regarding advertising disclosures provided in electronic form also apply to the disclosures described in § 230.11(b), which are incorporated by reference in § 230.8(f).

Section 230.8(b) permits institutions to state an interest rate in addition to the APY, as long as the rate is stated in conjunction with, but not more conspicuously than, the APY. In the 2001 interim final rule, comment 8(b)-4 was added to state that in an advertisement using electronic communication, the consumer must be able to view both rates simultaneously, and that this requirement is not satisfied if the consumer can view the APY only by use of a link that takes the consumer to another web location. The Board proposes to delete comment 8(b)-4 as unnecessary. The requirement to state the simple annual rate or periodic rate in conjunction with, and not more conspicuously than, the APY, continues to apply to electronic advertisements no less than to advertisements in other media. Requiring the consumer to scroll to another part of the page, or access a link, in order to view the APY would likely not satisfy this requirement.

Section 230.8(e) exempts from some disclosure requirements advertisements made through broadcast or electronic media, such as television and radio or outdoor billboards. The interim final rule added comment 8(e)(1)(i)-1 to provide that this exemption would not apply to advertisements using electronic communication, such as Internet advertisements, which do not have the same time and space constraints as radio or television advertisements. The Board continues to believe that space constraints for advertisements on Internet web sites are not significantly different than those for a print advertisement (a newspaper, for example). Thus, requiring advertisements provided by electronic means to comply with the regulation's advertising requirements is not overly burdensome. Accordingly, the Board proposes to retain comment 8(e)(1)(i)-1 with minor wording changes.

Section 230.10 was added by the 2001 interim final rule to address the general requirements for electronic communications. The Board proposes to delete § 230.10 from Regulation DD and the accompanying sections of the staff commentary.

In the interim rule, § 230.10(a) defines the term “electronic communication” to mean a message transmitted electronically that can be displayed on equipment as visual text, such as a message displayed on a personal computer monitor screen. The deletion of § 230.10(a) would not change applicable legal requirements under the E-Sign Act.

Sections 230.10(b) and (c) incorporate by reference provisions of the E-Sign Act, such as the provision allowing disclosures to be provided in electronic form and the requirement to obtain the consumer's affirmative consent before providing disclosures in electronic form. The deletion of these provisions will have no impact on the general applicability of the E-Sign Act to Regulation DD disclosures. Section 230.10(f) was added in the interim final rule to clarify that persons, other than depository institutions, that are required to comply with Regulation DD may use electronic disclosures. This provision is unnecessary because the E-Sign Act is a self-effectuating statute and permits any person to use electronic records subject to the conditions set forth in the Act.

Sections 230.10(d) and (e) address specific timing and delivery requirements for electronic disclosures under Regulation DD, such as the requirement to send disclosures to a consumer's e-mail address (or post the disclosures on a Web site and send a notice alerting the consumer to the disclosures), and to make a good faith attempt to redeliver an e-mailed disclosure or notice returned undelivered. The Board no longer believes that these additional provisions are necessary or appropriate. Electronic disclosures have evolved since 2001, as industry and consumers have gained experience with them. Although many institutions offer e-mail alert notices to consumers in connection with online services, some consumers may choose not to receive notifications by e-mail and the Board sees no reason to require e-mail alert notices in all cases. In addition, the Board has reconsidered certain aspects of the interim final rules, such as sending disclosures by e-mail, in light of concerns about data security, identity theft, and phishing that have become more pronounced since 2001.

With regard to the requirement to attempt to redeliver returned electronic disclosures, as the commenters noted, institutions would be required to search their files for an additional e-mail address to use, and might be required to use a postal mail address for redelivery if no additional e-mail address was available. The Board believes that both requirements would likely be unduly burdensome. In addition, the concerns that have been raised about the requirement to use e-mail for the initial delivery of a disclosure or notice apply equally to the use of e-mail for an attempted redelivery.

Under the proposed rule, the Board would not require depository institutions to maintain disclosures posted on a Web site for at least 90 days as provided in the 2001 interim final rule for several reasons. First, based on a review of industry practices, it appears that many institutions maintain disclosures posted on an Internet Web site for several months, and, in a number of cases, for more than a year. For example, it appears that institutions that offer online periodic statements to consumers typically make those statements available without charge for six months or longer in electronic form. This practice has developed even though Regulation DD does not currently require institutions to maintain disclosures for any specific period of time. Second, the Board believes that an appropriate time period consumers may want electronic disclosures to be available may vary depending upon the type of disclosure, and is reluctant to establish specific time periods depending on the disclosures. Nevertheless, while the Board is not proposing to require disclosures to be maintained on an Internet Web site for any specific time period, the general requirements of Regulation DD continue to apply to electronic disclosures, such as the requirement to provide disclosures to consumers at certain specified times and in a form that the consumer may keep. Although these general requirements apply to electronic disclosures, the Board does not believe that the 90-day time period set out in § 230.10(d) of the 2001 interim final rule is needed to ensure that institutions satisfy these requirements when they provide electronic disclosures. The Board, however, will monitor institutions' electronic disclosure practices with regard to the ability of consumer to retain Regulation DD disclosures and will consider further regulatory action if it appears necessary.

The official staff commentary to § 230.10 of the interim final rule provides guidance on the provisions set forth in § 230.10 such as delivery of disclosures or alert notices by e-mail, redelivery if disclosures or a notice is returned undelivered, and retention of disclosures on a web site for 90 days. As noted above, because the Board is proposing to delete § 230.10 of the regulation, the Board also proposes to delete the accompanying provisions of the official staff commentary.

Section 722 of the Gramm-Leach-Bliley Act of 1999 requires the Board to use “plain language” in all proposed and final rules published after January 1, 2000. The Board invites comments on whether the proposed rules are clearly stated and effectively organized, and how the Board might make the proposed text easier to understand.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities.

However, under section 605(b) of the RFA, 5 U.S.C. 605(b), the regulatory flexibility analysis otherwise required under section 604 of the RFA is not required if an agency certifies, along with a statement providing the factual basis for such certification, that the rule will not have a significant economic impact on a substantial number of small entities. Based on its analysis and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the objectives of the proposal. The Board is proposing revisions to Regulation DD to withdraw the 2001 interim final rule on electronic communication and to allow depository institutions to provide certain disclosures to consumers in electronic form on or with an advertisement that is accessed by the consumer in electronic form, or if the consumer requests the disclosure, without regard to the consumer consent and other provisions of the E-Sign Act. The Board is also proposing to clarify that other Regulation DD disclosures may be provided to consumers in electronic form in accordance with the consumer consent and other applicable provisions of the E-Sign Act.

TISA was enacted to enhance economic stabilization, improve competition between depository institutions, and strengthen the ability of consumers to make informed decisions regarding deposit accounts. 12 U.S.C. 4301. It is the purpose of TISA to require the clear and uniform disclosure of rates of interest payable on deposit accounts and the fees that are assessable against deposit accounts, so that consumers can make a meaningful comparison between the competing claims of institutions. TISA authorizes the Board to prescribe regulations to carry out the purposes of the statute. 12 U.S.C. 4308. The Act expressly states that the Board's regulations may contain “such classifications, differentiations, or other provisions, * * *, as in the judgment of the Board, are necessary or proper to carry out the purposes of [the Act], to prevent circumvention or evasion of [the Act], or to facilitate compliance with [the Act].” 12 U.S.C. 4308(a). The Board believes that the revisions to Regulation DD discussed above are within Congress's broad grant of authority to the Board to adopt provisions that carry out the purposes of the statute. These revisions facilitate informed decisions about deposit accounts by consumers in circumstances where a consumer accesses a deposit account advertisement, or requests deposit account disclosures, in electronic form.

2. Small entities affected by the proposal. The ability to provide advertising disclosures in electronic form on or with an advertisement that is accessed by the consumer in electronic form, or to provide disclosures in electronic form if requested to do so by the consumer, applies to all depository institutions, regardless of their size. Accordingly, the proposed revisions would reduce burden and compliance costs for small entities by providing relief, to the extent the E-Sign Act applies in these circumstances. The number of small entities affected by this proposal is unknown.

3. Other Federal rules. The Board believes no federal rules duplicate, overlap, or conflict with the proposed revisions to Regulation DD.

4. Significant alternatives to the proposed revisions. The Board solicits comment on any significant alternatives that may provide additional ways to reduce regulatory burden associated with this proposed rule.

In accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The collection of information that is required by this proposed rule is found in 12 CFR part 230. The Federal Reserve may not conduct or sponsor, and an organization is not required to respond to, this information collection unless it displays a currently valid OMB control number. The OMB control number is 7100-0271.

Section 269 of the Truth in Savings Act (TISA)(12 U.S.C. 4308) authorizes the Board to issue regulations to carry out the provisions of TISA. TISA and Regulation DD require depository institutions to disclose yields, fees, and other terms concerning deposit accounts to consumers at account opening, upon request, and when changes in terms occur. Depository institutions that provide periodic statements are required to include information about fees imposed, interest earned, and the annual percentage yield earned during those statement periods. The act and regulation mandate the methods by which institutions determine the account balance on which interest is calculated. They also contain rules about advertising deposit accounts. To ease the compliance cost (particularly for small entities), model clauses and sample forms are appended to the regulation. Depository institutions are required to retain evidence of compliance for twenty-four months, but the regulation does not specify types of records that must be retained. This information collection is mandatory. Since the Federal Reserve does not collect any information, no issue of confidentiality arises.

Regulation DD applies to all depository institutions except credit unions. Credit unions are covered by a substantially similar rule issued by the National Credit Union Administration. The Federal Reserve accounts for the paperwork burden associated with Regulation DD only for Federal Reserve-regulated institutions. Federal Reserve-regulated institutions are defined by Regulation DD as: State member banks, branches and agencies of foreign banks (other than Federal branches, Federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Other Federal agencies account for the paperwork burden imposed on the depository institutions for which they have administrative enforcement authority. The annual burden is estimated to be 232,443 hours for 1,172 Federal Reserve-regulated institutions that are deemed respondents for purposes of the PRA.

As mentioned in the Preamble, §§ 230.4 and 230.8 would be revised to clarify the disclosure requirements. The Federal Reserve estimates that 1,172 respondents would take approximately 1.5 minutes per transaction to comply with the existing disclosure requirements in § 230.4 and estimates the annual burden to be 14,650 hours. The Federal Reserve estimates that 1,172 respondents would take approximately 30 minutes per month to comply with the existing disclosure requirements in § 230.8 and estimates the annual burden to be 7,032 hours. The Federal Reserve requests specific comment on whether the revisions in this proposed rule would change the burden on respondents.

Comments are invited on: a. Whether the collection of information is necessary for the proper performance of the Federal Reserve's functions; including whether the information has practical utility; b. the accuracy of the Federal Reserve's estimate of the burden of the information collection, including the cost of compliance; c. ways to enhance the quality, utility, and clarity of the information to be collected; and d. ways to minimize the burden of information collection on respondents, including through the use of automated collection techniques or other forms of information technology. Comments on the collections of information should be sent to Secretary, Board of Governors of the Federal Reserve System, Washington, DC 20551, with copies of such comments to be sent to the Office of Management and Budget, Paperwork Reduction Project (7100-0271), Washington, DC 20503.

Certain conventions have been used to highlight the proposed changes to Regulation DD. New language is shown inside bold-faced arrows, while language that would be removed is set off with bold-faced brackets.

For the reasons set forth in the preamble, the Board proposes to amend Regulation DD, 12 CFR part 230, as set forth below:

The FAA invites 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 proposed 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 notice 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 the proposed special conditions based on comments we receive.

If you want the FAA to acknowledge receipt of your comments on this proposal, 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 March 28, 2003, Boeing applied for an FAA type certificate for its new Boeing Model 787-8 passenger airplane. The Boeing Model 787-8 airplane will be an all-new, two-engine jet transport airplane with a two-aisle cabin. The maximum takeoff weight will be 476,000 pounds, with a maximum passenger count of 381 passengers.

Under provisions of 14 CFR 21.17, Boeing must show that Boeing Model 787-8 airplanes (hereafter referred to as “the 787”) meet the applicable provisions of 14 CFR part 25, as amended by Amendments 25-1 through 25-117, except §§ 25.809(a) and 25.812, which will remain at Amendment 25-115. If the Administrator finds that the applicable airworthiness regulations do not contain adequate or appropriate safety standards for the 787 because of a novel or unusual design feature, special conditions are prescribed under provisions of 14 CFR 21.16.

In addition to the applicable airworthiness regulations and special conditions, the 787 must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of part 36. In addition, the FAA must issue a finding of regulatory adequacy pursuant to section 611 of Public Law 92-574, the “Noise Control Act of 1972.”

Special conditions, as defined in § 11.19, are issued in accordance with § 11.38 and become part of the type certification basis in accordance with § 21.17(a)(2).

Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same or similar novel or unusual design feature, the special conditions would also apply to the other model under the provisions of § 21.101.

The 787 will incorporate a number of novel or unusual design features. Because of rapid improvements in airplane technology, the applicable airworthiness regulations do not contain adequate or appropriate safety standards for these design features. These proposed special conditions for the 787 contain the additional safety standards that the Administrator considers necessary to establish a level of safety equivalent to that established by the existing airworthiness standards.

The 787 design includes planned use of lithium ion batteries for the following applications:

• Main and Auxiliary Power Unit (APU) Battery/Battery Charger System

• Flight Control Electronics

• Emergency Lighting System

• Recorder Independent Power Supply

Large, high capacity, rechargeable lithium ion batteries are a novel or unusual design feature in transport category airplanes. This type of battery has certain failure, operational, and maintenance characteristics that differ significantly from those of the nickel-cadmium and lead-acid rechargeable batteries currently approved for installation on large transport category airplanes. The FAA is proposing this special condition to require that (1) All characteristics of the lithium ion battery and its installation that could affect safe operation of the 787 are addressed, and (2) appropriate maintenance requirements are established to ensure the availability of electrical power from the batteries when needed.

The current regulations governing installation of batteries in large transport category airplanes were derived from Civil Air Regulations (CAR) part 4b.625(d) as part of the re-codification of CAR 4b that established 14 CFR part 25 in February, 1965. The new battery requirements, 14 CFR 25.1353(c)(1) through (c)(4), basically reworded the CAR requirements.

Increased use of nickel-cadmium batteries in small airplanes resulted in increased incidents of battery fires and failures. This led to additional rulemaking affecting large transport category airplanes as well as small airplanes. On September 1, 1977, and March 1, 1978, respectively the FAA issued 14 CFR 25.1353c(5) and c(6), governing nickel-cadmium battery installations on large transport category airplanes.

The proposed use of lithium ion batteries for the emergency lighting system on the 787 has prompted the FAA to review the adequacy of these existing regulations. Our review indicates that existing regulations do not adequately address several failure, operational, and maintenance characteristics of lithium ion batteries that could affect the safety and reliability of the 787's lithium ion battery installation.

At present, there is limited experience with use of rechargeable lithium ion batteries in applications involving commercial aviation. However, other users of this technology, ranging from wireless telephone manufacturing to the electric vehicle industry, have noted safety problems with lithium ion batteries. These problems include overcharging, over-discharging, and flammability of cell components.

In general, lithium ion batteries are significantly more susceptible to internal failures that can result in self-sustaining increases in temperature and pressure (thermal runaway) than their nickel-cadmium or lead-acid counterparts. This is especially true for overcharging, which causes heating and destabilization of the components of the cell, leading to formation (by plating) of highly unstable metallic lithium. The metallic lithium can ignite, resulting in a self-sustaining fire or explosion. Finally, the severity of thermal runaway from overcharging increases with increasing battery capacity, because of the higher amount of electrolytes in large batteries.

Discharge of some types of lithium ion batteries beyond a certain voltage (typically 2.4 volts) can cause corrosion of the electrodes of the cell, resulting in loss of battery capacity that cannot be reversed by recharging. This loss of capacity may not be detected by the simple voltage measurements commonly available to flightcrews as a means of checking battery status. This is a problem shared with nickel-cadmium batteries.

Unlike nickel-cadmium and lead-acid batteries, some types of lithium ion batteries use liquid electrolytes that are flammable. The electrolytes can serve as a source of fuel for an external fire, if there is a breach of the battery container.

These problems experienced by users of lithium ion batteries raise concern about use of these batteries in commercial aviation. The intent of these proposed special conditions is to establish appropriate airworthiness standards for lithium ion battery installations in the 787 and to ensure, as required by 14 CFR 25.601, that these battery installations are not hazardous or unreliable. To address these concerns, these proposed special conditions adopt the following requirements:

• Those sections of 14 CFR 25.1353 that are applicable to lithium ion batteries.

• The flammable fluid fire protection requirements of 14 CFR 25.863. In the past, this rule was not applied to batteries of transport category airplanes, since the electrolytes used in lead-acid and nickel-cadmium batteries are not flammable.

• New requirements to address the hazards of overcharging and over-discharging that are unique to lithium ion batteries.

• New maintenance requirements to ensure that batteries used as spares are maintained in an appropriate state of charge.

These proposed special conditions are similar to special conditions adopted for the Airbus A380 (71 FR 74755); December 13, 2006).

As discussed above, these proposed special conditions are applicable to the 787. Should Boeing apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design features, these proposed special conditions would apply to that model as well under the provisions of § 21.101.

This action would affect only certain novel or unusual design features of the 787. It is not a rule of general applicability, and it would affect only the applicant that applied to the FAA for approval of these features on the airplane.

The authority citation for these Special Conditions is as follows:

Accordingly, the Administrator of the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for the Boeing Model 787-8 airplane.

The FAA is implementing a new process for streamlining the issuance of ADs related to MCAI. This streamlined process will allow us to adopt MCAI safety requirements in a more efficient manner and will reduce safety risks to the public. This process continues to follow all FAA AD issuance processes to meet legal, economic, Administrative Procedure Act, and Federal Register requirements. We also continue to meet our technical decision-making responsibilities to identify and correct unsafe conditions on U.S.-certificated products.

This proposed AD references the MCAI and related service information that we considered in forming the engineering basis to correct the unsafe condition. The proposed AD contains text copied from the MCAI and for this reason might not follow our plain language principles.

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2007-28036; Directorate Identifier 2006-NM-278-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov , including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive about this proposed AD.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2006-0354, dated November 28, 2006 (referred to after this as “the MCAI”), to correct an unsafe condition for the specified products. The MCAI states that several operators have reported non-automatic deployment of slide rafts during ground operational testing. In all cases, the slide raft released correctly from the door but did not inflate automatically. Pulling the manual backup handle correctly inflated the slide raft. Investigation conducted by the slide raft manufacturer showed that non-automatic deployments have two potential root causes:

• Non-opening of the lacing; and

• Stiffness and stiction (static friction) on the painted inflatable material.

This situation, if not corrected, could delay the evacuation of passengers in case of an emergency.

A new design solution has been developed to ensure the automatic slide raft deployment, which consists of:

• Continuous “speed lacing” cord and new soft covers with rounded grommets (this modification ensures that the lacing opens);

• A new shorter firing cable, a new anchor block for the slide raft packboard and a new folding procedure (this modification ensures automatic deployment regardless of the inflatable paint condition).

Both modifications together ensure the automatic deployment function. The MCAI requires accomplishment of the set of modifications. You may obtain further information by examining the MCAI in the AD docket.

Airbus has issued Service Bulletins A330-25-3173, A340-25-4191, and A340-25-5004, all Revision 01, all dated August 2, 2006; and Service Bulletins A330-25-3301, A340-25-4273, and A340-25-5110, all dated March 24, 2006. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with the State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information provided by the State of Design Authority and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

We have reviewed the MCAI and related service information and, in general, agree with their substance. But we might have found it necessary to use different words from those in the MCAI to ensure the AD is clear for U.S. operators and is enforceable. In making these changes, we do not intend to differ substantively from the information provided in the MCAI and related service information.

We might also have proposed different actions in this AD from those in the MCAI in order to follow FAA policies. Any such differences are described in a separate paragraph of the proposed AD. These requirements, if ultimately adopted, will take precedence over the actions copied from the MCAI.

Based on the service information, we estimate that this proposed AD would affect about 28 products of U.S. registry. We also estimate that it would take about 66 work-hours per product to comply with this proposed AD. The average labor rate is $80 per work-hour. Required parts would cost about $3,860 per product. Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $255,920, or $9,140 per product.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. “Subtitle VII: Aviation Programs,” describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in “Subtitle VII, Part A, Subpart III, Section 44701: General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify this proposed regulation:

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

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

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to submit any relevant written data, views, or arguments regarding this proposed AD. Send your comments to an address listed in the ADDRESSES section. Include the docket number “FAA-2007-28035; Directorate Identifier 2006-NM-293-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this proposed AD. Using the search function of that web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov.

You may examine the AD docket on the Internet at http://dms.dot.gov, or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level of the Nassif Building at the DOT street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after the Docket Management System receives them.

The FAA has examined the underlying safety issues involved in fuel tank explosions on several large transport airplanes, including the adequacy of existing regulations, the service history of airplanes subject to those regulations, and existing maintenance practices for fuel tank systems. As a result of those findings, we issued a regulation titled “Transport Airplane Fuel Tank System Design Review, Flammability Reduction and Maintenance and Inspection Requirements” (66 FR 23086, May 7, 2001). In addition to new airworthiness standards for transport airplanes and new maintenance requirements, this rule included Special Federal Aviation Regulation No. 88 (“SFAR 88,” Amendment 21-78, and subsequent Amendments 21-82 and 21-83).

Among other actions, SFAR 88 requires certain type design ( i.e. , type certificate (TC) and supplemental type certificate (STC)) holders to substantiate that their fuel tank systems can prevent ignition sources in the fuel tanks. This requirement applies to type design holders for large turbine-powered transport airplanes and for subsequent modifications to those airplanes. It requires them to perform design reviews and to develop design changes and maintenance procedures if their designs do not meet the new fuel tank safety standards. As explained in the preamble to the rule, we intended to adopt airworthiness directives to mandate any changes found necessary to address unsafe conditions identified as a result of these reviews.

In evaluating these design reviews, we have established four criteria intended to define the unsafe conditions associated with fuel tank systems that require corrective actions. The percentage of operating time during which fuel tanks are exposed to flammable conditions is one of these criteria. The other three criteria address the failure types under evaluation: single failures, single failures in combination with a latent condition(s), and in-service failure experience. For all four criteria, the evaluations included consideration of previous actions taken that may mitigate the need for further action.

We have determined that the actions identified in this AD are necessary to reduce the potential of ignition sources inside fuel tanks, which, in combination with flammable fuel vapors, could result in fuel tank explosions and consequent loss of the airplane.

A safety assessment by Boeing identified a certain fastener type in the fuel tank walls that has an insufficient bond to the structure. These fasteners can be a path for electrical energy to enter the fuel tank if a wiring short occurs in a wire bundle installed along the fuel tank boundary structure, or if lightning strikes a wing surface. If energy from a wiring short or lightning strike goes through these fasteners, arcing can occur at the ends of the fasteners in the fuel tank. The ends of the fasteners in the fuel tank do not have sufficient electrical insulation to contain the energy from the arcs. This condition, if not corrected, could result in a potential ignition source inside a fuel tank.

We have reviewed Boeing Alert Service Bulletin 767-57A0100, dated August 21, 2006. The service bulletin describes procedures for sealing the ends of the fasteners on the brackets that hold the vortex generators, and, for certain airplanes, sealing the ends of fasteners on certain stiffeners on the rear spar.

We have also reviewed Boeing Alert Service Bulletin 767-57A0102, dated October 25, 2006. The service bulletin describes procedures for changing the wire bundle clamp configurations at specified locations on the fuel tank walls, and sealing the fasteners and certain stiffeners at specified locations in the fuel tank.

Accomplishing the actions specified in the service information is intended to adequately address the unsafe condition.

We have evaluated all pertinent information and identified an unsafe condition that is likely to exist or develop on other airplanes of this same type design. For this reason, we are proposing this AD, which would require accomplishing the actions specified in the service information described previously.

There are about 925 airplanes of the affected design in the worldwide fleet. The following table provides the estimated costs for U.S. operators to comply with this proposed AD. There are no U.S.-registered airplanes in Group 3 of Service Bulletin 767-57A0102. The average labor rate is $80 per work hour.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

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

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

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to submit any relevant written data, views, or arguments regarding this supplemental NPRM. Send your comments to an address listed in the ADDRESSES section. Include the docket number “Docket No. FAA 2006-24978; Directorate Identifier 2006-NM-108-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this supplemental NPRM. We will consider all comments received by the closing date and may amend this supplemental NPRM in light of those comments.

We will post all comments submitted, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact with FAA personnel concerning this supplemental NPRM. Using the search function of that web site, anyone can find and read the comments in any of our dockets, including the name of the individual who sent the comment (or signed the comment on behalf of an association, business, labor union, etc.). You may review the DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477-78), or you may visit http://dms.dot.gov.

You may examine the AD docket on the Internet at http://dms.dot.gov, or in person at the Docket Management Facility office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Management Facility office (telephone (800) 647-5227) is located on the plaza level in the Nassif Building at the DOT street address stated in ADDRESSES . Comments will be available in the AD docket shortly after the Docket Management System receives them.

We proposed to amend 14 CFR part 39 with a notice of proposed rulemaking (NPRM) for an AD (the “original NPRM”) for certain McDonnell Douglas Model 717-200 airplanes. The original NPRM was published in the Federal Register on June 8, 2006 (71 FR 33262). The original NPRM proposed to require modifying the fuel boost pump container of the center tank.

We have considered the following comments on the original NPRM.

AirTran Airways supports the proposed actions specified in the NPRM.

AirTran Airways and Boeing request that we reference Boeing Service Bulletin 717-28-0013, Revision 1, dated April 7, 2006, in the NPRM (we referred to Boeing Service Bulletin 717-28-0013, dated July 28, 2004, as the appropriate source of service information for doing the actions specified in the NPRM). AirTran Airways also requests that we give credit for actions done in accordance with the original issue.

Boeing commented that there was additional work required by Revision 1, but in a subsequent comment Boeing states that this was in error and that no additional work was needed. Boeing also notes that Revision 2 of the service bulletin is being drafted.

We agree to revise this AD to refer to the latest revision of the service bulletin as the appropriate source of service information. We have reviewed Boeing Service Bulletin 717-28-0013, Revision 1, dated April 7, 2006; and Boeing Service Bulletin 717-28-0013, Revision 2, dated September 13, 2006. The service bulletins contain essentially the same actions as described in the original issue of the service bulletin.

However, Revision 1 of the service bulletin adds new airplanes to the effectivity (fuselages number 5136 through 5146), clarifies the configuration table, and clarifies the installation of the hat and cover assembles. Revision 2 of the service bulletin revises the parts pricing and clarifies the notes in the figures. We have revised this AD to refer to Revision 2 of the service bulletin.

We have also revised the parts cost from $1,145 to $1,180 in the “Costs of Compliance” paragraph of this AD. We have also added paragraph (g) to this AD to allow the original issue and Revision 1 of the service bulletin to be considered acceptable for compliance with the modification specified in this supplemental NPRM.

Operators should note that we have not revised the 78-month compliance time specified in this supplemental NPRM to match the “10 years after release date of the service bulletin” compliance time specified in Revision 2 of the service bulletin. In developing an appropriate compliance time for this action, we considered the urgency associated with the subject unsafe condition, the manufacturer's recommendation, the availability of required parts, and the practical aspect of accomplishing the proposed modification within a period of time that corresponds to the normal scheduled maintenance for most affected operators. Boeing concurs with the 78-month compliance time. However, according to the provisions of paragraph (h) of the supplemental NPRM, we may approve requests to adjust the compliance time if the request includes data that prove that the new compliance time would provide an acceptable level of safety

Certain changes discussed above expand the scope of the original NPRM; therefore, we have determined that it is necessary to reopen the comment period to provide additional opportunity for public comment on this supplemental NPRM.

There are about 145 airplanes of the affected design in the worldwide fleet. The following table provides the estimated costs for U.S. operators to comply with this supplemental NPRM.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

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

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

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this supplemental NPRM and placed it in the AD docket. See the ADDRESSES section for a location to examine the regulatory evaluation.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

We invite you to send any written relevant data, views, or arguments regarding this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include the docket number “FAA-2006-25927; Directorate Identifier 2006-CE-52-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of the proposed AD. We will consider all comments received by the closing date and may amend the proposed AD in light of those comments.

We will post all comments we receive, without change, to http://dms.dot.gov, including any personal information you provide. We will also post a report summarizing each substantive verbal contact we receive concerning this proposed AD.

Failure of a Barber-Coleman pitch trim actuator, which allowed the horizontal stabilizer to move to a full aircraft nose up position on an M7 Aerospace LP Model SA227 airplane, caused us to issue AD 98-19-15 R1, Amendment 39-11507 (65 FR 1540, January 11, 2000). AD 98-19-15 R1 currently requires you to revise the Limitations Section of the FAA-approved AFM to limit the maximum indicated airspeed and increase the minimum crew size if a Barber-Coleman pitch trim actuator P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005 is installed.

To avoid the above limitations, AD 98-19-15 R1 allows installation of a Barber-Coleman P/N 27-19008-006, Barber Coleman P/N 27-19008-007, Simmonds-Precision P/N DL5040M5, Simmonds-Precision P/N DL5040M6, or Simmonds-Precision P/N DL5040M8 pitch trim actuator. All airplane models are eligible for any of these installations. The applicable service bulletin depends on the airplane model and pitch trim actuator.

The FAA also issued AD 2000-03-17, Amendment 39-11576 (65 FR 8037, February 17, 2000), to establish inspection and replacement intervals for the pitch trim actuators. Inspection times and replacement times vary depending on the model of the airplane and the P/N of the pitch trim actuator installed.

Since we issued ADs 98-19-15 R1 and 2000-03-17, the FAA has determined that the actions fall within the FAA's aging commuter-class aircraft policy, which briefly states that reliance on critical repetitive inspections carries an unnecessary safety risk when a design change exists that could eliminate or, in certain instances, reduce the number of those critical inspections. We also determined that the number of repetitive replacements could be reduced in these AD actions because of pitch trim actuator design changes.

The FAA has identified installation of Barber-Coleman P/N 27-19008-006, Barber-Coleman P/N 27-19008-007, or Simmonds-Precision P/N DL5040M8 pitch trim actuators on all SA226 and SA227 series airplanes or installation of Simmonds-Precision P/N DL5040M6 pitch trim actuators on all SA226 and SA227 series airplanes (except Models SA227-CC and SA227-DC) will significantly reduce the number of repetitive inspections and repetitive replacements currently required by AD 2000-03-17.

We have reviewed the following Fairchild Aircraft service information:

• Fairchild Aircraft SA226 Series Service Letter (SL) 226-SL-005, Revised: August 3, 1999;

• Fairchild Aircraft SA227 Series SL 227-SL-011, Revised August 3, 1999;

• Fairchild Aircraft SA227 Series SL CC7-SL-028, Issued: August 12, 1999;

• Fairchild Aircraft SA226 Series SL 226-SL-014, Revised: February 1, 1999;

• Fairchild Aircraft SA227 Series SL 227-SL-031, Revised: February 1, 1999; and

• Fairchild Aircraft SA227 Series SL CC7-SL-021, Revised: February 1, 1999.

The service information describes procedures for inspecting the various pitch trim actuators that can be installed in SA226 and SA227 series airplanes. This service information is currently referenced in the existing ADs.

We are proposing this AD because we evaluated all information and determined the unsafe condition described previously is likely to exist or develop on other products of the same type design. This proposed AD would supersede AD 98-19-15 R1 and AD 2000-03-17 with a new AD that would retain all of the actions of the previously referenced ADs, but limit the part numbers of the pitch trim actuators that can be used for replacement. This proposed AD would also place a life limit on Barber-Coleman P/N 27-19008-001, Barber-Coleman P/N 27-19008-002, Barber-Coleman P/N 27-19008-004, and Barber-Coleman P/N 27-19008-005 pitch trim actuators. This proposed AD would require you to use the service information described previously to perform these actions.

We estimate that this proposed AD would affect 307 airplanes in the U.S. registry.

This proposed AD requires pitch trim actuators to either be inspected or overhauled. We have no way of determining the number of airplanes that may need the inspection or overhaul. We have presented the fleet cost as the lowest cost based on all airplanes needing the inspection and the highest cost based on all airplanes needing the overhaul. The actual fleet cost will be somewhere between the lowest and highest fleet cost presented.

We estimate the following costs to do the proposed inspection or overhaul:

We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection or proposed mandatory replacement. We have no way of determining the number of airplanes that may need this replacement:

The replacement estimate is based on replacing the pitch trim actuator with a new Simmonds-Precision P/N DL5040M8 pitch trim actuator. If the pitch trim actuator is replaced with a different P/N FAA-approved pitch trim actuator or a zero-timed FAA-approved pitch trim actuator the cost to the owner/operator could be less.

The estimated costs represented in the above actions include the costs associated with AD 98-19-15 R1, AD 2000-03-17, and the costs of this proposed AD. The added cost impact this AD imposes upon an owner/operator over that already required by AD 98-19-15 R1 and AD 2000-03-17 is the eventual replacement of the pitch trim actuator if the airplane currently has a Barber-Coleman P/N 27-19008-001, P/N 27-19008-002, P/N 27-19008-004, or P/N 27-19008-005 installed.

Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, Section 106, describes the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the Agency's authority.

We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701, “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.

We have determined that this proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would not have a substantial direct effect on the States, on the relationship between the national Government and the States, or on the distribution of power and responsibilities among the various levels of government.

For the reasons discussed above, I certify that the proposed regulation:

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

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

3. Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.

We prepared a regulatory evaluation of the estimated costs to comply with this proposed AD and placed it in the AD docket.

You may examine the AD docket that contains the proposed AD, the regulatory evaluation, any comments received, and other information on the Internet at http://dms.dot.gov; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The Docket Office (telephone (800) 647-5227) is located at the street address stated in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:

Section 503(a) of the Act permits a State to assume primacy for the regulation of surface coal mining and reclamation operations on non-Federal and non-Indian lands within its borders by demonstrating that its program includes, among other things, “a State law which provides for the regulation of surface coal mining and reclamation operations in accordance with the requirements of the Act * * * and rules and regulations consistent with regulations issued by the Secretary pursuant to the Act.” See 30 U.S.C. 1253(a)(1) and (7). On the basis of these criteria, the Secretary of the Interior conditionally approved the Ohio program on August 16, 1982. You can find background information on the Ohio program, including the Secretary's findings, the disposition of comments, and conditions of approval of the Ohio program in the August 16, 1982, Federal Register (47 FR 34687). You can also find later actions concerning Ohio's program and program amendments at 30 CFR 935.11, 935.15, and 935.16.

By letter dated March 6, 2007, Ohio sent us a proposed amendment to its program (Administrative Record Number OH-2185-28) under SMCRA (30 U.S.C. 1201 et seq. ). In its letter, Ohio stated that in December of 2006, the Ohio legislature passed House Bill 443, which is intended to address many of the issues of concern relative to Ohio's bond pool. Ohio proposes to revise the Ohio Revised Code (ORC) regarding changes to the State's alternate bonding system (bond pool), funding for its regulatory and abandoned mine land programs and its bond pool, permitting procedures for determining the potential that proposed mine sites may or may not produce acid-mine drainage, and authorizes rule-making if Ohio becomes covered by a State programmatic general permit issued by the U.S. Army Corps of Engineers for the discharge of dredged or fill material into waters of the United States by coal mining operations.

The amendment is intended to satisfy a program condition codified in the Federal regulations at 30 CFR 935.11(h), and is in response to OSM's letter of May 4, 2005, issued under provisions of 30 CFR 733.12(b). The program condition provides that Ohio must submit a program amendment that demonstrates how the alternative bonding system will assure timely reclamation at the site of all operations for which bond has been forfeited.

The State also acknowledged that its March 6, 2007, submittal is intended to replace the bond pool amendment that the State had submitted to OSM on December 19, 2005. We published and requested public comment on that previous bond pool amendment in the Federal Register on February 13, 2006 (71 FR 7480). Because the State has requested that the current amendment replace its previous amendment, we are hereby withdrawing the proposed rulemaking that we announced in the Federal Register on February 13, 2006.

In its March 6, 2007, submittal, Ohio also stated that it realizes that the passage of HB 443 is only the first step in its efforts to establish a bonding program in Ohio that is in accordance with the requirements of SMCRA. Ohio anticipates that significant amendments to the Ohio Administrative Code (OAC) will be needed in order to ensure that the final program amendment, in whole, is consistent with the relevant Federal regulations. To that end, Ohio stated, the Division of Mineral Resources Management (DMRM) has chartered several workgroups made up of internal and external stakeholders to develop final procedures and policies that will be used as a basis for revising the OAC to implement the provisions of HB 443. Ohio has requested OSM's technical assistance on these workgroups.

The current amendment provides the following specific revisions. In the descriptions below, we have not identified the numerous paragraph re-numbering and citation referencing changes that result from the substantive changes proposed in this amendment.

This definition is new, and provides as follows:

In addition to the change quoted above, the State has amended or deleted terms throughout ORC Chapter 1513 in which the word “bond” appears, such as in the terms “performance bond” and “bond coverage,” and has replaced those terms with the term “performance security.”

This provision is being amended by deleting the phrase “coal mining administration and reclamation reserve fund created in section 1513.181 of the Revised Code” and revising that phrase to read: “Reclamation forfeiture fund created in section 1513.18 of the Revised Code.”

This provision is new, and provides as follows:

In its submittal, Ohio stated that “if” a General Permit is issued for Ohio by the U.S. Army Corps of Engineers regarding discharges into jurisdictional waters of United States from surface/underground coal mining operations and abandoned mine land reclamation (AML) projects, then DMRM “may” establish programs, adopt rules and develop procedures to implement the General Permit.

Paragraph (B)(1) is proposed to be deleted in its entirety, and provides as follows.

The following new language is added at the end of this existing paragraph:

In its submittal, Ohio stated that this new provision directs applicants to provide an Acid Base Accounting statement pursuant to methodology prescribed in ORC 1513.075, or another method.

This paragraph is new and provides as follows:

In its submittal, Ohio stated that this new paragraph provides for additional monitoring for Acid Mine Drainage if there is a conflict concerning the assessment of the potential for a mine to discharge AMD. In the event unanticipated AMD occurs during mining and reclamation, additional mining practices and reclamation shall be required in order to prevent AMD discharges.

This provision is new and provides as follows:

In its submittal, Ohio stated that this new provision defines certain terms relative to potential acidity and neutralization potential of strata overlying the coal to be mined. The provision also provides for calculation of proposed mining operations' potential to create acid or toxic drainage based on specific criteria and indicates that proposed mining areas not meeting certain numeric criteria “may” not be considered as potential acid/toxic producers.

This provision is amended by deleting, adding and rearranging language relating to performance security. Much new language is added to this provision, and the provision is reorganized to accommodate the new language. As amended this section provides as follows:

In its submittal, Ohio summarized the amendments at ORC 1513.08 as follows. Ohio stated that ORC 1513.08(B) requires the Chief of DMRM to determine the cost of reclamation, on a case by case basis, for all permit applications submitted. The cost of such reclamation shall be determined as if forfeiture of the performance security had occurred and DMRM is required to perform the reclamation. This determination shall be a basis for the amount of performance security, and shall be made subsequent to application approval, but prior to permit issuance. DMRM notifies the applicant via certified mail of the cost of performance security. Ohio stated that the applicant then responds and indicates the method of providing performance security at ORC 1513.08(C):

If choosing option (C)(2), the company will pay additional tax into the bond pool in the amount provided by ORC 5749.02(A)(8).

Ohio stated that if performance security is forfeited, the bond pool may be used to supplement the $2,500/acre flat bond rate up to the Chief's determination of cost pursuant to ORC1513.08(B). Only applicants holding permits in Ohio for at least 5 years have option (C)(2).

The minimum performance security shall be $10,000 for any one permit. Existing (permitted) coal prep plants/refuse disposal facilities not within a permit of a mine must provide full cost performance security within one year of the effective date of the law.

Ohio stated that under ORC 1513.08(D), performance security liability is limited to obligations established under the permit.

Ohio stated that under ORC 1513.08(E), the Chief's estimated cost of reclamation and amount of performance security may be adjusted by DMRM based upon cost increases/decreases. Operators choosing the flat rate/bond pool option may have the bond rate increased to $5,000/acre if a failure to abate cession order is issued due to non-contemporaneous reclamation.

Ohio stated that performance security adjustments require notification to permittee, surety and any person who has a property interest in the performance security upon request. A permittee may request an informal conference regarding a proposed rate adjustment.

Ohio stated that ORC 1513.08(F), provides for a permittee to request reduction in performance security based upon documentation proving actual cost of reclamation to the Division is less than the amount posted.

Ohio stated that under ORC 1513.08 (G), if performance security is issued in the form of a bond, the surety must be licensed to conduct business in Ohio. If the performance security is cash deposit or a certificate of deposit of a bank or savings and loan association, that business shall be licensed and operating in Ohio. Ohio further stated that the Chief is required to review performance security documents and approve of their use.

Ohio stated that ORC 1513.08(I) provides criteria for performance security held in trust. The Chief must review and approve trust documents.

Ohio stated that ORC 1513.08 (J) provides the following procedures for holder of performance security insolvency: Permittee notification to DMRM; Plan for replacement of performance; security; Replacement of full cost performance security in 90 days; Replacement of flat rate performance security in one year.

Ohio stated that ORC 1513.08(K) provides that subsidence damages and replacement of subsidence damaged water supplies may be satisfied by liability insurance in lieu of performance security. Such insurance specifically must address such damages.

Ohio stated that ORC 1513.08(L) provides that performance security exceeding the cost of reclamation may be returned to the operator along with interest or other earnings.

This provision is new and provides as follows:

In its submittal, Ohio stated that ORC 1513.081(A) provides for DMRM's priority lien ahead of other creditors in event of operator insolvency. Lien can be used to recover the cost of reclamation including all associated administrative costs. Lien must be filed by DMRM in the appropriate county recorder's office. Ohio stated that subsection (B) provides for the release of a filed lien and/or adjustment.

This provision is new and provides as follows:

In its submittal, Ohio stated that ORC 1513.16(F)(8) provides provisions for an Alternative Financial Security (AFS) to address mine drainage treatment or alternative water supply replacement after reclamation is completed. An AFS is to be provided prior to release of remaining bond in the form of a contract, trust or other agreements enforceable under law to provide long-term water treatment or alternative supply. Subsection (b) requires the Chief to adopt new rules to administer the AFS.

This provision is new and provides as follows:

In its submittal, Ohio stated that this provision provides for the final release of performance security and terminates the Division's jurisdiction unless certain specific issues are subsequently found to be present.

This provision is new, and provides as follows:

In its submittal, Ohio stated that this provision establishes procedures for claiming tax credit pursuant to section 5749.11 of the ORC. A coal mine operator may submit an application to reclaim another mined area with forfeited bond. Once reclamation is completed, the Chief shall issue numbered tax credits in the amount of the credit. Under subsection (B), the Chief shall determine the amount of the credit, equivalent to the cost of reclamation to the division if the work had been completed by the state. Subsection (C) requires the Chief to adopt rules to administer and establish procedures to address: Amount of tax credit; Consent of landowner or owner of the water resources to conduct reclamation; and Notification to landowner of reclamation work and schedule.

Subsection (B) is amended in the first sentence by deleting the phrase “any moneys transferred to it under this division from the unreclaimed lands fund created in section 1513.30.” In place of that deleted language, the following phrase is added: “All money from the collection of liens under section 1513.081.” The first sentence in subsection (B) is also amended by identifying that funds derived from certain fines will be added to the reclamation forfeiture fund. Language concerning the Chief's management of the fund is deleted. Language concerning the transfer of funds from the unreclaimed lands fund is deleted. Language concerning use of money from the reclamation forfeiture fund to cover administrative expenses has been added. As amended, subsection (B) provides as follows:

Subsection (C) is amended by adding the phrase “or trustee, if the performance security is held in trust,” immediately following the words “or a contractor hired by the surety.”

Subsection (D) is amended by amending the existing language, codifying the existing language as paragraph (1), and by adding three new paragraphs. As amended, subsection (D) provides as follows:

Section 503(a) of the Act permits a State to assume primacy for the regulation of surface coal mining and reclamation operations on non-Federal and non-Indian lands within its borders by demonstrating that its program includes, among other things, “a State law which provides for the regulation of surface coal mining and reclamation operations in accordance with the requirements of this Act * * *; and rules and regulations consistent with regulations issued by the Secretary pursuant to this Act.” See 30 U.S.C. 1253(a)(1) and (7). On the basis of these criteria, the Secretary of the Interior (Secretary) conditionally approved the Texas program effective February 16, 1980. You can find background information on the Texas program, including the Secretary's findings, the disposition of comments, and the conditions of approval of the Texas program in the February 27, 1980, Federal Register (45 FR 12998). You can also find later actions concerning the Texas program and program amendments at 30 CFR 943.10, 943.15 and 943.16.

The Abandoned Mine Land Reclamation Program was established by Title IV of the Act (30 U.S.C. 1201 et seq. ) in response to concerns over extensive environmental damage caused by past coal mining activities. The program is funded by a reclamation fee collected on each ton of coal that is produced. The money collected is used to finance the reclamation of abandoned coal mines and for other authorized activities. Section 405 of the Act allows States and Indian Tribes to assume exclusive responsibility for reclamation activity within the State or on Indian lands if they develop and submit to the Secretary of the Interior (Secretary) for approval, a program (often referred to as a plan) for the reclamation of abandoned coal mines. On the basis of these criteria, the Secretary approved the Texas plan on June 23, 1980. You can find background information on the Texas plan, including the Secretary's findings, the disposition of comments, and the approval of the plan in the June 23, 1980, Federal Register (45 FR 41937). You can find later actions concerning the Texas plan and amendments to the plan at 30 CFR 943.25.

By letter dated February 14, 2007 (Administrative Record No. TX-662), and at its own initiative, Texas sent us an amendment to its program under SMCRA (30 U.S.C. 1201 et seq. ). Below is a summary of the changes proposed by Texas. The full text of the program amendment is available for you to read at the locations listed above under ADDRESSES .

Texas proposes to delete paragraph (a)(2) that requires permit applicants to submit a detailed management plan if the postmining land use is to be range or grazing. Texas also proposes to redesignate paragraphs (a)(3) and (a)(4) as paragraphs (a)(2) and (a)(3).

Texas proposes to add to paragraph (g)(2) a requirement that a letter of credit used as security in areas requiring continuous bond coverage must be forfeited and collected by the Railroad Commission of Texas if it is not replaced by other suitable bond or letter of credit at least 30 days before it expires.

Texas proposes to revise subsections (a) and (b) to read as follows:

a. Texas proposes to revise paragraph (a)(1) to require standards for success and statistically valid sampling techniques for measuring success to be described in writing and made available to the public.

b. Texas proposes to revise paragraph (b)(1) to read as follows:

c. Paragraph (b)(3) lists the kinds of areas whose success of vegetation is to be determined on the basis of tree and shrub stocking and vegetative ground cover. Texas proposes to revise this paragraph by adding “undeveloped land” as an area requiring this determination and by removing “shelter belts.”

d. For areas to be developed for fish and wildlife habitat, recreation, undeveloped land, or forest products, Texas proposes to revise paragraph (b)(3)(A) to allow consultation with and approval by the State agencies responsible for the administration of forestry and wildlife programs to occur on either a program-wide or permit-specific basis.

e. Texas proposes to revise paragraph (b)(3)(B) by adding instructions explaining how to meet the requirements for determining the success of stocking and the adequacy of the planting arrangement for trees and shrubs.

f. Texas proposes to revise paragraph (c)(3) to read as follows:

g. Texas proposes to revise paragraph (c)(4) by clarifying that selective husbandry practices may be approved if the discontinuance of the practice “after the liability period expires” will not reduce the probability of permanent revegetation success. Texas also proposes to clarify that the unmined land, for which the selective husbandry practices are normal, must be land that has a land use similar to that of the approved postmining land use of the disturbed land.

a. Texas proposes to revise the title of this section to read “Informal Public Hearing.”

b. Texas proposes to revise subsection (a) so that a notice of violation or cessation order which requires cessation of mining will expire within 30 days after it is served unless an informal public hearing has been held within that time. Texas also proposes to clarify that the expiration of the notice or order will not affect the Commission's right to assess civil penalties with respect to the period during which the notice or order was in effect. In addition, Texas proposes that no hearing will be required where the condition, practice, or violation has been abated or the hearing has been waived. Furthermore, Texas proposes to clarify, for the purpose of this section, what is included in “mining.”

c. Texas proposes to revise subsection (b) to clarify that a notice of violation or cessation order will not expire as provided in subsection (a) if the informal public hearing has been waived or if, with the consent of the person to whom the notice or order was issued, the informal public hearing is held later than 30 days after the notice or order is served. Texas also proposes to set forth the conditions under which the informal public hearing is deemed to be waived.

d. Texas proposes to revise subsections (c), (e), (f), and (g) to change the name of the “public hearing” to “informal public hearing.” Also, Texas proposes to revise subsection (g) to clarify that the “review” mentioned in this subsection is a “formal review.”

e. Texas proposes to add new subsection (h) to read as follows:

a. Texas proposes to revise the title of this section to read, “Formal Review of Notice of Violation or Cessation Order.”

b. Texas proposes to revise subsection (a) and to add new subsection (b) to read as follows:

Texas' penalty schedule currently begins with a minimum penalty of $20 and increases to a maximum penalty of $5,000. Texas proposes to change the penalty schedule so that it starts with a minimum penalty of $550 and increases to a maximum penalty of $13,000. Texas proposes to increase the penalties to reflect the decreased value in the dollar since the penalty schedule was promulgated in 1979.

Texas proposes to revise subsection (b) to increase the per day civil penalty from $750 to $1,025 and to make additions and/or corrections regarding regulatory and statutory citations. Texas also proposes to add new paragraph (b)(3) to clarify that the daily penalty will not be assessed for more than 30 days and that if the permittee has not abated the violation within the 30-day period, it will take appropriate action to ensure that abatement occurs or that there will not be a reoccurrence of the failure to abate.

Texas proposes to revise this section to read as follows:

Texas proposes to revise subsection (c) to remove the requirement that the landowner must own the surface before May 2, 1977, before he or she is exempt from having a lien placed against his or her property because reclamation resulted in a significant increase in the fair market value of the property.

Texas proposes to revise subsection (c) to read as follows:

Texas proposes to revise subsection (b) to read as follows:

Under the provisions of 30 CFR 732.17(h), we are seeking your comments on whether the amendment satisfies the applicable program approval criteria of 30 CFR 732.15. If we approve the amendment, it will become part of the State program.

Send your written or electronic comments to OSM at the address given above. Your written comments should be specific, pertain only to the issues proposed in this rulemaking, and include explanations in support of your recommendations. We will not consider or respond to your comments when developing the final rule if they are received after the close of the comment period (see DATES ). We will make every attempt to log all comments into the administrative record, but comments delivered to an address other than the Tulsa Field Office may not be logged in.

Please submit Internet comments as an ASCII or Word file, avoiding the use of special characters and any form of encryption. Please also include “Attn: Docket No. TX-057-FOR” and your name and return address in your Internet message. If you do not receive a confirmation that we have received your Internet message, contact the Tulsa Field Office at (918) 581-6430.

Before including your address, phone number, e-mail address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we will be able to do so.

If you wish to speak at the public hearing, contact the person listed under FOR FURTHER INFORMATION CONTACT by 4 p.m., c.t. on May 15, 2007. If you are disabled and need special accommodations to attend a public hearing, contact the person listed under FOR FURTHER INFORMATION CONTACT . We will arrange the location and time of the hearing with those persons requesting the hearing. If no one requests an opportunity to speak, we will not hold a hearing.

To assist the transcriber and ensure an accurate record, we request, if possible, that each person who speaks at the public hearing provide us with a written copy of his or her comments. The public hearing will continue on the specified date until everyone scheduled to speak has been given an opportunity to be heard. If you are in the audience and have not been scheduled to speak and wish to do so, you will be allowed to speak after those who have been scheduled. We will end the hearing after everyone scheduled to speak and others present in the audience who wish to speak, have been heard.

If only one person requests an opportunity to speak, we may hold a public meeting rather than a public hearing. If you wish to meet with us to discuss the amendment, please request a meeting by contacting the person listed under FOR FURTHER INFORMATION CONTACT . All such meetings are open to the public and, if possible, we will post notices of meetings at the locations listed under ADDRESSES . We will make a written summary of each meeting a part of the administrative record.

This rule does not have takings implications. This determination is based on the analysis performed for the counterpart Federal regulation.

This rule is exempted from review by the Office of Management and Budget (OMB) under Executive Order 12866.

The Department of the Interior has conducted the reviews required by section 3 of Executive Order 12988 and has determined that this rule meets the applicable standards of subsections (a) and (b) of that section. However, these standards are not applicable to the actual language of State regulatory programs and program amendments because each program is drafted and promulgated by a specific State, not by OSM. Under sections 503 and 505 of SMCRA (30 U.S.C. 1253 and 1255) and the Federal regulations at 30 CFR 730.11, 732.15, and 732.17(h)(10), decisions on proposed State regulatory programs and program amendments submitted by the States must be based solely on a determination of whether the submittal is consistent with SMCRA and its implementing Federal regulations and whether the other requirements of 30 CFR parts 730, 731, and 732 have been met.

This rule does not have Federalism implications. SMCRA delineates the roles of the Federal and State governments with regard to the regulation of surface coal mining and reclamation operations. One of the purposes of SMCRA is to “establish a nationwide program to protect society and the environment from the adverse effects of surface coal mining operations.” Section 503(a)(1) of SMCRA requires that State laws regulating surface coal mining and reclamation operations be “in accordance with” the requirements of SMCRA, and section 503(a)(7) requires that State programs contain rules and regulations “consistent with” regulations issued by the Secretary pursuant to SMCRA.

In accordance with Executive Order 13175, we have evaluated the potential effects of this rule on Federally-recognized Indian tribes and have determined that the rule does not have substantial direct effects 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. This determination is based on the fact that the Texas program does not regulate coal exploration and surface coal mining and reclamation operations on Indian lands. Therefore, the Texas program has no effect on Federally-recognized Indian tribes.

On May 18, 2001, the President issued Executive Order 13211 which requires agencies to prepare a Statement of Energy Effects for a rule that is (1) considered significant under Executive Order 12866, and (2) likely to have a significant adverse effect on the supply, distribution, or use of energy. Because this rule is exempt from review under Executive Order 12866 and is not expected to have a significant adverse effect on the supply, distribution, or use of energy, a Statement of Energy Effects is not required.

This rule does not require an environmental impact statement because section 702(d) of SMCRA (30 U.S.C. 1292(d)) provides that agency decisions on proposed State regulatory program provisions do not constitute major Federal actions within the meaning of section 102(2)(C) of the National Environmental Policy Act (42 U.S.C. 4332(2)(C)).

This rule does not contain information collection requirements that require approval by OMB under the Paperwork Reduction Act (44 U.S.C. 3507 et seq. ).

The Department of the Interior certifies that this rule will not have a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an economic analysis was prepared and certification made that such regulations would not have a significant economic effect upon a substantial number of small entities. In making the determination as to whether this rule would have a significant economic impact, the Department relied upon the data and assumptions for the counterpart Federal regulations.

This rule is not a major rule under 5 U.S.C. 804(2), the Small Business Regulatory Enforcement Fairness Act. This rule: (a) Does not have an annual effect on the economy of $100 million; (b) Will not cause a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; and (c) Does not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. This determination is based upon the fact that the State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an analysis was prepared and a determination made that the Federal regulation was not considered a major rule.

This rule will not impose an unfunded mandate on State, local, or tribal governments or the private sector of $100 million or more in any given year. This determination is based upon the fact that the State submittal, which is the subject of this rule, is based upon counterpart Federal regulations for which an analysis was prepared and a determination made that the Federal regulation did not impose an unfunded mandate.

In the Final Rules section of this Federal Register , EPA is approving the State's SIP submittal as a direct final rule without prior proposal because the Agency views this as a noncontroversial submittal and anticipates no adverse comments. A detailed rationale for the approval is set forth in the direct final rule. If no adverse comments are received in response to this rule, no further activity is contemplated. If EPA receives adverse comments, the direct final rule will be withdrawn and all public comments received will be addressed in a subsequent final rule based on this proposed rule. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives an adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. For additional information, see the direct final rule which is located in the Rules section of this Federal Register .

This action primarily applies to the petitioner, the DLA. However, you may be potentially affected by this action if you process, distribute in commerce, or dispose of PCB waste generated by others, i.e., you are an EPA-permitted PCB waste handler. Potentially affected categories and entities include, but are not necessarily limited to:

• Waste Treatment and Disposal (NAICS code 5622), e.g., Facilities that store or dispose of PCB waste.

• Materials Recovery Facilities (NAICS code 56292), e.g., Facilities that process and/or recycle metals.

• Public Administration (NAICS code 92), e.g., the Petitioning Agency (i.e., the Defense Logistics Agency).

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. To determine whether you or your business may be affected by this action, you should carefully examine the applicability provisions in 40 CFR part 761. If you have any questions regarding the applicability of this action to a particular entity, consult the technical person listed under FOR FURTHER INFORMATION CONTACT .

1. Submitting CBI . Do not submit this information to EPA through regulations.gov or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as CBI and then identify electronically within the disk or CD-ROM the specific information that is claimed as CBI. In addition to one complete version of the comments that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

2. Tips for preparing your comments . When submitting comments, remember to:

i. Identify the document by docket ID number and other identifying information (subject heading, Federal Register date and page number).

ii. Follow directions. The Agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

iii. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

iv. Describe any assumptions and provide any technical information and/or data that you used.

v. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

vi. Provide specific examples to illustrate your concerns and suggest alternatives.

vii. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

viii. Make sure to submit your comments by the comment period deadline identified.

In this notice of proposed rulemaking, the Agency is proposing to grant a petition submitted by DLA to import PCB waste for disposal. In the absence of an exemption, import of this waste would be banned by section 6(e)(3) of TSCA. The petition, dated July 21, 2005, is for an exemption to import certain foreign-generated PCBs owned by DOD that are currently in use or storage in Japan. (The term “foreign-generated PCBs” is used to identify those PCBs that DOD acquired from foreign sources and that are subject to the TSCA ban on import.)

On April 16, 2001, DLA submitted a similar petition to import over four million pounds of foreign-generated PCB waste. EPA granted that petition in a final rule document published in the Federal Register of January 31, 2003 (Ref. 1).

Section 6(e) of TSCA, 15 U.S.C. 2605(e), generally prohibits the manufacture (which includes import) of PCBs after January 1, 1979, the processing and distribution in commerce of PCBs after July 1, 1979, and most uses of PCBs after October 11, 1977. Section 6(e)(3)(A) of TSCA prohibits the manufacture, processing, and distribution in commerce of PCBs except for the distribution in commerce of PCBs that were sold for purposes other than resale before July 1, 1979. Section 6(e)(1) of TSCA also authorizes EPA to regulate the disposal of PCBs consistent with the provisions in TSCA section 6(e)(2) and (3).

Section 6(e)(3)(B) of TSCA provides that any person may petition the Administrator for an exemption from the prohibition on the manufacture, processing, and distribution in commerce of PCBs. The Administrator may by rule grant an exemption if the Administrator finds that:

EPA's procedures for rulemaking under TSCA section 6 are found under 40 CFR part 750. This part includes Subpart B—Interim Procedural Rules for Manufacturing Exemptions, which describes the required content for manufacturing exemption petitions and the procedures EPA follows in rulemaking on these petitions. These rules are codified at 40 CFR 750.10 through 750.21.

Before granting an exemption petition, TSCA section 6(e)(3)(B)(i) requires the Administrator to find that granting an exemption would not result in an unreasonable risk of injury to health or the environment in the United States. EPA has interpreted this provision to require a petitioner to demonstrate that the activity will not pose an unreasonable risk. (See 40 CFR 750.11.)

To determine whether a risk is unreasonable, EPA balances the probability that harm will occur to health or the environment against the benefits to society from granting or denying each petition. See generally, 15 U.S.C. 2605(c)(1). Specifically, EPA considers the following factors:

1. Effects of PCBs on human health and the environment . In deciding whether to grant an exemption, EPA considers the magnitude of exposure and the effects of PCBs on humans and the environment. The following discussion summarizes EPA's assessment of these factors. A more complete discussion of these factors is provided in the preamble to the 1988 PCB proposed rule document published in the Federal Register of August 24, 1988 (Ref. 2).

i. Health effects . EPA has determined that PCBs cause significant human health effects including cancer, immune system suppression, liver damage, skin irritation, and endocrine disruption. PCBs exhibit neurotoxicity as well as reproductive and developmental toxicity. PCBs are readily absorbed through the skin and are absorbed at even faster rates when inhaled. Because PCBs are stored in animal fatty tissue, humans are also exposed to PCBs through ingestion of animal products.

ii. Environmental effects . Certain PCB congeners are among the most stable chemicals known, and decompose very slowly once they are released in the environment. PCBs are absorbed and stored in the fatty tissue of higher organisms as they bioaccumulate up the food chain through invertebrates, fish, and mammals. Significantly, bioaccumulated PCBs appear to be even more toxic than those found in the ambient environment, since the more toxic PCB congeners are more persistent and thus more likely to be retained. PCBs also have reproductive and other toxic effects in aquatic organisms, birds, and mammals.

iii. Risks . Toxicity and exposure are the two basic components of risk. EPA has concluded that any exposure of humans or the environment to PCBs may be significant, depending on such factors as the quantity of PCBs involved in the exposure, the likelihood of exposure to humans and the environment, and the effect of exposure. Minimizing exposure to PCBs should minimize any eventual risk. EPA has previously determined that some activities, including the disposal of PCBs in accordance with 40 CFR part 761, pose no unreasonable risks. Other activities, such as long-term storage of PCB waste, are generally considered by EPA to pose unreasonable risks.

2. Benefits and costs . The benefits to society of granting an exemption vary, depending on the activity for which the exemption is requested. The reasonably ascertainable costs of denying an exemption vary, depending on the individual petition. As discussed in Unit IV., EPA has taken benefits and costs into consideration when evaluating this exemption petition.

Section 6(e)(3)(B)(ii) of TSCA also requires the Administrator to find that “good faith efforts have been made to develop a chemical substance which does not present an unreasonable risk of injury to health or the environment and which may be substituted for [PCBs].” EPA has interpreted this provision to require that a petitioner has the burden of demonstrating that it has made the requisite good faith efforts. (40 CFR 750.11) EPA considers several factors in determining whether good faith efforts have been made. For each petition, EPA considers the kind of exemption the petitioner is requesting and whether the petitioner expended time and effort to develop or search for a substitute. In each case, the burden is on the petitioner to show specifically what they did to substitute non-PCB material for PCBs or to show why it was not feasible to substitute non-PCBs for PCBs.

To satisfy this finding for requests for an exemption to import PCBs for disposal, a petitioner must show why such activity must occur in the United States. and what steps will be taken to eliminate the need to import PCBs in the future. While requiring a petitioner to demonstrate that good faith efforts to develop a substitute for PCBs makes sense when dealing with traditional manufacture and distribution exemption petitions, the issue of the development of substitute chemicals seems to have little bearing on whether to grant a petition for exemption that would allow the import into the United States for disposal of waste generated by the Department of Defense overseas. EPA believes the more relevant “good faith” issue for such an exemption request is whether the disposal of the waste could and/or should occur outside the United States.

On July 21, 2005, DLA submitted a petition seeking a 1-year exemption to import PCBs and PCB Items currently in temporary storage at U.S. military installations in Japan. In revised figures provided in November 2006 (Ref. 4), DLA estimates that as much as 1,328,482 pounds of waste contaminated with PCBs could be generated in Japan through the calendar year 2008. Exactly how much of this waste would be imported under this exemption would depend on the date when the final exemption would be in effect, as the exemption is limited to a 1-year maximum. The final exemption would be limited to the specific portion (amount and type) of such waste as provided by DLA prior to publication of the final rule. The material in Japan consists of liquids, electrical transformers, capacitors, switches, circuit breakers, other miscellaneous items and debris (rags, gaskets, and personal protective equipment). PCB concentrations of the waste include amounts in all regulatory concentrations (i.e., <50 parts per million (ppm), 50-499 ppm, and >500 ppm); however, 88% of the waste is at concentrations below 50 ppm PCB and less than 5% of the total shipment is liquid PCBs greater than 50 ppm. Details of the particular amounts and concentrations DLA petitioned to import are provided in Refs. 3 and 4.

DLA proposes to package and transport, treat and dispose of this PCB waste in the same manner as waste identified in its previous petitions (Ref. 1), which EPA granted in 2003 to allow the import of over 4,000,000 pounds of waste contaminated with PCBs; DLA notes that compliance is required with the International Maritime Dangerous Goods Code/International Maritime Organization, the International Civil Aviation Organization Technical Instructions, the International Air Transport Association Dangerous Goods Code, the United Nations Recommendations on the Transport of Dangerous Goods Code, and 49 CFR parts 100-199. DLA further notes that proper handling and shipping will include blocking, bracing, over packing, and inclusion of spill containment devices, as required by applicable transportation regulations.

DLA states that it will handle and dispose of all PCBs in conformance with the PCB regulations at 40 CFR part 761. DLA notes that it has “considerable experience and expertise in awarding and administering disposal contracts for PCB waste in the U.S.” and that it will only “award contracts for treatment and disposal services with commercial firms. Contracts will be awarded in accordance with all applicable federal procurement statutes and the Federal Acquisition Regulations (FAR).” On October 12, 2005, DLA selected Clean Harbors Environmental Services (CHES) in Coffeyville, Kansas to dispose of the PCB waste to be removed from Japan. CHES has disposed of PCBs returning from Japan at the Coffeyville facility on four separate occasions since 2003 without incident. In addition, DLA will use shippers approved by the U.S. Department of Transportation when the waste materials are transported from the California port to the Coffeyville disposal facility. The surface commercial transport trucks and the sea vessels themselves are approved and contracted for use by the DOD Surface Deployment and Distribution Command.

1. Information regarding no unreasonable risk provided by the petitioner . DLA notes that the materials in question would be managed in accordance with all applicable laws and regulations. Once in the United States, the PCB waste would be transported, handled, treated and disposed of in compliance with the PCB regulations at 40 CFR part 761. DLA states that it would only contract with companies with the required Federal and State-permitted storage, treatment, and disposal facilities for dealing with PCBs and PCB items. DLA notes that it and its contractors “have extensive experience in safely returning U.S.-manufactured PCBs and PCB items to the U.S. for disposal,” and that “prior to safely returning and disposing of 2.7 million pounds of foreign-generated PCB containing waste under the previously granted exemption, DLA returned 2.4 million pounds of U.S.-manufactured PCBs and PCB Items from Japan since 1991 for compliant disposal without incident.”

In contrast, DLA notes that the continued storage of PCBs at U.S. facilities in Japan is problematic. DOD currently has a considerable amount of PCB waste in storage at its facilities in Japan, and more will accumulate over the coming years as equipment is retired from use and contaminated sites are cleaned up. DLA notes that due to the unavailability of disposal capacity in Japan, much of DLA's foreign-manufactured PCB waste inventory in Japan has been in storage for years and movement of PCB waste presently in storage is frequently necessary to accommodate additional PCBs taken out of service. DLA summarizes the risks of this situation as follows:

2. Information regarding good faith efforts provided by the petitioner . DLA argues in its petition that disposal of its PCBs in Japan is not an available disposal option:

1. No unreasonable risk determination . EPA finds generally that the disposal of imported PCB waste at an EPA-approved PCB disposal facility poses no unreasonable risks as these facilities have been approved on the basis of that standard. In addition, the risks to human health and the environment associated with long-term storage of this waste far outweigh the risks associated with the transportation of this waste from Japan to an approved disposal facility in the United States.

As with the previous petition, EPA concurs with DLA's assessment that transportation of this waste will pose no unreasonable risk if conducted in accordance with all applicable laws and regulations. EPA permits the domestic processing and distribution in commerce of PCBs and PCB Items for disposal in compliance with 40 CFR part 761, and in issuance of the PCB Import for Disposal rule EPA investigated and sought comment on the risks inherent in transportation of imported PCB waste, and determined those risks to be insignificant (Ref. 5). For the following reasons, EPA finds that there is no unreasonable risk from the transport of this waste to the United States for disposal:

i. PCBs are hazardous and pose a potential risk to health and the environment. Proper disposal would reduce PCB-associated risks.

ii. Risk results from a combination of exposure (likelihood, magnitude and duration) and the probability of effects occurring under the conditions of exposure. Because the probability of a transport accident occurring is low, the likelihood of exposure to PCBs is commensurately low. Consequently, the risk of adverse effects to human health or the environment is minimal.

iii. The PCB-containing materials would be packaged in a manner consistent with federal, state, and local regulations addressing the storage and transport of hazardous materials. In addition, PCB waste would be continuously monitored during the water transport from Japan to the U.S. Contingency plans are required by the International Maritime Dangerous Goods Code and the Department of Transportation to be in place before and after the import of PCB-containing items to the United States. Moreover, the PCB items that would be transported to the United States are not combustible, which would make the probability of fires low. Together, these contingency measures would minimize exposure to humans and the environment in the event of an accident or emergency during ocean transport.

iv. Given the aforementioned information, the exposure likelihood, frequency, and duration are so low that even though PCBs are considered to be highly hazardous, risk (combined exposure and hazard) would not be unreasonable to human health or the environment.

v. The potential for human health risks are further mitigated by duration of exposure. PCBs are most hazardous following long-term (chronic) exposures. Under the transport scenario proposed, any exposures to humans (i.e., accidental or emergency situation) would be of very short duration. Hence, the low probability of exposure occurring combined with the short-term duration of exposure, should one occur, further supports a qualitative conclusion that there is no unreasonable risk to human health.

vi. The long-term concern is the potential for accumulation in the ecological environment. Under a worst case scenario where all of the PCBs were released due to an unforeseen and highly unlikely catastrophic event during transport, PCB-exposed biological receptors could be adversely affected. However, this scenario is highly unlikely because it would require a complete failure of all safeguards that would be in place. The DLA analyses indicate that there would be a low probability of a complete failure. The alternative of storing the PCBs indefinitely seems to pose more risk than transport. Further, should an accident occur, emergency response authorities at least within U.S. waters, would be invoked to mitigate and/or remediate exposures.

2. Good faith efforts to find substitutes met . Section 6(e)(3(B)(ii) of TSCA requires the Administrator to make an additional finding, that “good faith efforts have been made to develop a chemical substance that does not present an unreasonable risk of injury to health or the environment and which may be substituted for such polychlorinated biphenyl.” EPA has interpreted this provision to require that a petitioner has the burden of demonstration that it has made the requisite good faith efforts. (See 40 CFR 750.11.)

EPA believes that DLA has demonstrated good faith efforts to find alternatives to disposal of this PCB waste in the United States. EPA is aware of the lack of adequate PCB disposal capacity in Japan. DLA has explored exporting this waste to other countries as an alternative but since this is waste owned by the United States, the waste may not be shipped to other countries in the area because the United States is not a party to the Basel Convention and does not have bilateral agreements with countries in the area. EPA also acknowledges the peculiar circumstances of DOD's PCBs, which, while present in one country, are owned by another country’s government, leading to significant difficulty in providing Basel notification to third countries. Given these difficulties, EPA concurs with DLA's conclusion that disposal in a third country is not a viable alternative for this waste.

3 . Benefits of granting the petition —i. Avoiding the risks of long-term storage . EPA believes that granting the petition to import 1,328,482 pounds of waste contaminated with PCBs (88% is less than 50 ppm and less than 5% is liquid PCBs greater than 50 ppm) will benefit the United States and the environment in general in several ways. As DLA notes, the continued long term storage of PCB waste on U.S. military facilities in Japan poses risks of exposure to U.S. personnel and the environment—risks that can be eliminated through the action proposed in the petition.

ii. Ensuring proper and safe disposal . Granting the petition would allow the U.S. to accept responsibility for the toxic waste it generates by assuring proper and safe disposal in domestic permitted disposal facilities.

iii . Ensuring the safety of Japanese citizens . EPA considers the reduction of risk to Japanese citizens to be advantageous, especially in light of the heightened concerns over PCBs in that country and the sensitivities surrounding the U.S. military's presence in Japan. Granting the petition is the only practical mechanism to remove this waste from Japan. Otherwise the U.S. military is in the awkward position of explaining to its Japanese hosts that it cannot remove its own toxic waste from their country because U.S. law does not allow the waste to be sent to the United States.

For these reasons EPA finds DLA has satisfied the exemption criteria of TSCA section 6(e)(3)(B) and proposes to grant the petition.

1. EPA, OPPT. Polychlorinated Biphenyls; Manufacturing (Import) Exemptions. Final Rule. OPPT-2002-0013. Federal Register (68 FR 4934, January 31, 2003) (FRL-7288-6). Available at http://www.epa.gov/fedrgstr .

2. EPA, Office of Toxic Substances (OTS). Polychlorinated Biphenyls; Manufacturing, Processing, Distribution in Commerce Exemptions. Proposed Rule. OPTS-66008F. Federal Register (53 FR 32326, August 24, 1988).

3. DOD, DLA. Petition from Keith W. Lippert, Vice Admiral, SC, USN, Director to Stephen L. Johnson, Administrator, EPA. Subject: Petition to the Administrator, United Sates Environmental Protection Agency, For an Exemption Under the Toxic Substances Control Act to Import Polychlorinated Biphenyls (PCB) and PCB Items for Disposal. July 21, 2005. 13 pp. with attachments.

4. DOD, DLA. Electronic mail dated November 2, 2006 from Miriam Alonso, Hazardous Programs, to Tom Simons, National Program Chemicals Division, OPPT, EPA. Subject: Updated Petition Data for EPA for petition submitted July 21, 2005. 2 pp.

5. EPA, OPPTS. Disposal of Polychlorinated Biphenyls; Import for Disposal. Final Rule. Federal Register (61 FR 11096, March 18, 1996) (FRL-5354-8). Available at http://www.epa.gov/fedrgstr .

Under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993), this action is not a “significant regulatory action” subject to review by the Office of Management and Budget (OMB), because this action is not likely to result in a rule that meets any of the criteria for a “significant regulatory action” provided in section 3(f) of the Executive order.

Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq ., an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR part 9 and 48 CFR chapter 15.

This proposed rule would not impose any new information collection burden. EPA is proposing to grant the petition by DLA to import PCBs for disposal. DLA would then be subject to the existing EPA regulations regarding the disposal of PCBs in 40 CFR part 761. OMB has previously approved the information collection requirements contained in 40 CFR part 761 under the provisions of PRA, 44 U.S.C. 3501 et seq ., and has assigned OMB control numbers 2070-0003 (EPA ICR No. 1000.06), 2070-0008 (EPA ICR No. 1001.06), 2070-0011 (EPA ICR No. 1012.06), 2070-0021 (EPA ICR No. 0857.07), 2070-0112 (EPA ICR No. 1446.06), and 2070-0159 (EPA ICR No. 1729.02). Copies of these ICR documents may be obtained by mail at the Office of Environmental Information, Collection Strategies Division (2822), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001, by e-mail at auby.susan@epa.gov or by calling (202) 566-1672. Copies may also be downloaded from the Internet at http://www.epa.gov/icr . Include the ICR and/or OMB numbers in any correspondence.

As defined by PRA and 5 CFR 1230.3(b), “burden” means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information.

The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 5 U.S.C. 601 et seq ., generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute 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 organizations, and small government jurisdictions.

For purposes of assessing the impacts of this proposed rule on small entities, small entity is defined as:

1. A small business that meets the Small Business Administration size standards codified at 13 CFR 121.201.

2. A small governmental jurisdiction that is a government of a city, county, town, school district, or special district with a population of less than 50,000.

3. A small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.

After considering the impacts of this proposed rule on small entities, EPA certifies that this action will not have a significant economic impact on a substantial number of small entities. This proposed rule will not impose any requirements on small entities. EPA is proposing to grant this petition by DLA to import PCBs for disposal. Only DLA, which is not a small entity, would be regulated by this proposed rule.

Pursuant to Title II of the Unfunded Mandates Reform Act of 1995, (UMRA), Public Law 104-4, EPA has determined that this proposal does not contain a Federal mandate that may result in expenditures of $100 million or more for state, local, and tribal governments, in the aggregate, or the private sector in any one year. EPA is proposing to grant a petition by DLA to import PCBs for disposal. If the petition is granted, and DLA imports PCBs for disposal, DLA would be required to comply with the existing regulations on PCB disposal at 40 CFR part 761. The only mandate that would be imposed by this proposal would be imposed on DLA. In addition, EPA has determined that this proposal would not significantly or uniquely affect small governments. The DLA petition states that the PCBs will be disposed of in PCB-approved facilities. No new facilities, which could affect small government resources if a permit is required, are contemplated. EPA believes that the disposal of PCBs in previously approved facilities in the amounts specified in this proposal would have little, if any, impact on small governments. Thus, this proposed rule is not subject to the requirements of UMRA sections 202, 203, 204, or 205.

This action will not have a substantial direct effect on 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, entitled Federalism (64 FR 43255, August 10, 1999).

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 proposed rule does not have tribal implications, as specified in Executive Order 13175. EPA’s proposal would grant a petition from DLA to import PCBs and dispose of them in PCB-approved disposal facilities in accordance with existing regulations. EPA does not believe that this activity will have any impacts on the communities of Indian tribal governments. Thus, Executive Order 13175 does not apply to this proposed rule. However, in the spirit of Executive Order 13175, EPA specifically solicits comment on this proposed rule from tribal officials.

Executive Order 13045, entitled 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.

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 proposed rule is not subject to the Executive order because it is not economically significant as defined in Executive Order 12866, and because the Agency does not have reason to believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. EPA is proposing to grant the petition from DLA to import PCBs and dispose of them in approved PCB disposal facilities in accordance with existing regulations. EPA believes that the import and disposal of the amount of PCBs specified in the exemption petitions will present little, if any, additional risk to persons living in the vicinity of the approved disposal facilities or in the communities through which the PCBs may be transported.

This proposed rule is not subject to Executive Order 13211, entitled 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.

This action does not involve any technical standards; therefore, section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113 (15 U.S.C. 272 note), does not apply to this action.

This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

EPA has complied with Executive Order 12630, entitled Governmental Actions and Interference with Constitutionally Protected Property Rights (53 FR 8859, March 15, 1988), by examining the takings implications of this proposed rule in accordance with the Attorney General's Supplemental Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings issued under the Executive order.

In issuing this proposed rule, EPA has taken the necessary steps to eliminate drafting errors and ambiguity, minimize potential litigation, and provide a clear legal standard for affected conduct, as required by section 3 of Executive Order 12988, entitled Civil Justice Reform (61 FR 4729, February 7, 1996).

Therefore, it is proposed that 40 CFR chapter I be amended as follows:

1. The authority citation for part 761 would continue to read as follows:

2. Section 761.80 is amended by adding a new paragraph (j) to read as follows:

(j) The Administrator grants the United States Defense Logistics Agency's July 21, 2005 petition for an exemption for 1 year to import 1,328,482 pounds of PCBs and PCB items stored or in use in Japan as identified in its petition, as amended, for disposal.

The Gulf of Mexico Fishery Management Council (Council) has scheduled a series of public hearings to receive comments on Draft Amendment 27 to the Reef Fish Fishery Management Plan and Amendment 14 to the Shrimp Fishery Management Plan. This amendment contains potential management measures to modify the rebuilding plan for red snapper in order to end overfishing and recover this overfished stock. These measures would further reduce the directed red snapper harvest as well as bycatch from both the directed fishery and the shrimp fishery.

The public hearings will begin at 6 pm and conclude at the end of public testimony or no later than 10 pm at each of the following locations:

Monday, May 14, 2007, Holiday Inn Brownsville, 3777 N. Expressway, Brownsville, TX 78520, 956-547-1500;

Tuesday, May 15, 2007, Four Points Sheraton New Orleans Airport, 6401 Veterans Memorial Blvd., Metairie, LA 70003, 504-885-5700;

Tuesday, May 15, 2007, Plantation Suites, 1909 Hwy 361, Port Aransas, TX 78373, 361-749-3866;

Wednesday, May 16, 2007, Chauvin Parish Recreation Center, 215 Angel St., Chauvin, LA 70345, 985-594-2020;

Wednesday, May 16, 2007, Palacios Rec Center, 2401 Perryman Ave, Palacios, TX 77465, 361-972-2387;

Thursday, May 17, 2007, LSU Agricultural Center, 1105 W. Port St., Abbeville, LA 70510, 337-898-4335;

Thursday, May 17, 2007, San Luis Resort, 5222 Seawall Boulevard, Galveston, Texas 77550, 409-744-1500;

Monday, May 21, 2007, Embassy Suites Hotel, 570 Scenic Gulf Drive, Destin, FL 32550, 850-337-7000;

Monday, May 21, 2007, Clarion Hotel, 12635 S. Cleveland Ave., Ft. Myers, FL 33907, 239-936-0931;

Tuesday, May 22, 2007, Quorum Hotel, 700 N. Westshore Blvd., Tampa, FL 33609, 813-289-8200;

Tuesday, May 22, 2007, Foley Community Center, 407 E. Laurel Ave., Foley, AL 36535, 251-943-1545;

Wednesday, May 23, 2007, Riverview Plaza Hotel, 64 S. Water St., Mobile, AL 36602, 251-438-4000;

Thursday, May 24, 2007, Donal Snyder Parks & Rec Center, 2520 Pass Road, Biloxi, MS 39531, 228-435-6281.

Copies of the Amendment can be obtained by calling the Council office at 813-348-1630. These hearings are physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to Tina Trezza at the Council (see ADDRESSES ) at least five working days prior to the meeting.

The purpose of the hearings is to receive public input on management actions under consideration in Amendment 9 to the Atlantic Mackerel, Squid, and Butterfish FMP. The proposed management actions could:

(1) Allow multi-year specifications for all four species managed through the FMP,

(2) Extend or eliminate the moratorium on entry into the directed Illex squid fishery,

(3) Revise the current overfishing definition for Loligo squid,

(4) Designate EFH for Loligo eggs,

(5) Implement area closures to reduce damage to habitat from squid-mackerel-butterfish fisheries,

(6) Increase the minimum codend mesh size requirement in the Loligo fishery,

(7) Modify the exemption of the Illex fishery from the minimum codend mesh size requirement of the Loligo fishery,

(8) Modify the Loligo incidental catch limit in the Illex fishery during Loligo fishery closures,

(9) Establish a requirement for electronic daily reporting in the directed Illex fishery,

(10) Establish gear restricted areas that are seasonally closed to small-mesh gear.

Monday May 14, 2007: Hilton Garden Inn Providence Airport, One Thuber Street, Warwick, RI 02886.

Tuesday, May 15, 2007: Holiday Inn Express East End, 1707 Old Country Road, Riverhead, NY 11901.

Wednesday, May 16, 2007: The Grand Hotel, 1045 Beach Ave., Cape May, NJ 08204.

Thursday, May 17, 2007: Days Inn Norfolk Airport, 5708 Northampton Blvd., Virginia Beach, VA 23455.

The meeting is physically accessible to people with disabilities. Requests for sign language interpretation or other auxiliary aids should be directed to M. Jan Bryan at the Mid-Atlantic Council Office (302) 674-2331 extension 18 at least five days prior to the meeting date.

The MSA requires that each regional fishery management council submit any FMP or FMP amendment it prepares to NMFS for review and approval, disapproval, or partial approval by the Secretary. The MSA also requires that NMFS, upon receiving an FMP amendment, immediately publish a notice in the Federal Register that the FMP or amendment is available for public review and comment. This requirement is satisfied by this notice of availability for Amendment 80.

Amendment 80 and its implementing regulations would continue initiatives by the Council and NMFS to reduce bycatch of fish species in the BSAI non-pollock trawl groundfish fisheries. Amendment 80 would reduce the amount of halibut and crab bycatch, known as prohibited species catch (PSC), that may be taken while non-AFA trawl catcher/processors are fishing for groundfish in the BSAI. These measures would consider efficiency in utilization of fishery resources, minimize costs, and further minimize bycatch to the extent practicable, thereby meeting the objectives of National Standards 5, 7, and 9 of the MSA.

Amendment 80 would facilitate this and other bycatch reductions through specific economic incentives provided by a limited access privilege program (LAPP). This LAPP would encourage improved retention and utilization of fishery resources by allocating specific amounts of certain species of non-pollock groundfish, and halibut and crab PSC, to non-AFA trawl catcher processors; and authorize the formation of cooperatives that would receive exclusive harvest privileges for a portion of these fishery resources.

One of the primary reasons for the relatively high discard rates of groundfish by non-AFA trawl catcher/processors is the nature of the fisheries in which those vessels participate. The non-AFA trawl catcher/processor sector primarily participates in non-pollock groundfish fisheries. The non-pollock groundfish fisheries are primarily comprised of groups of species that share similar habitat (e.g., flatfish fisheries such as rock sole, flathead sole, and yellowfin sole). Because these species occur together, they are typically harvested together. When a non-AFA trawl catcher/processor retrieves its net, very often multiple species of fish are present. If a vessel operator is targeting only one species of fish, and other species are retrieved along with the desired catch, the vessel operator may have an incentive to discard the less valuable species and retain only the higher value species. The multi-species nature of these fisheries makes it difficult for vessel operators to target only one species, and an economic incentive exits to discard less valuable fish.

NMFS establishes a total allowable catch (TAC) for each groundfish species based on the species's annual biomass with the goal of providing a conservatively managed sustainable yield. In the non-pollock groundfish fisheries, harvesters compete for the TAC, resulting in a “race for fish,” wherein vessels attempt to maximize their harvest in as little time as possible, in order to claim a larger share of the available TAC. This race for fish only increases the economic incentive to discard less valuable species in a multi-species harvest, and accelerate the harvest rate for the more valuable species.

Because vessel operators are competing with each other for shares of a common quota, a vessel operator has little economic incentive to undertake actions to reduce unwanted incidental catch, such as searching for fishing grounds with lower incidental catch rates, or use gear modifications that may reduce bycatch but have a lower harvest rate, if those actions would limit the ability of that vessel to effectively compete with other vessels. Additionally, a vessel operator has little incentive to process and store less valuable species if by doing so, he loses an opportunity to use that processing or storage capacity for more valuable catch. Therefore, an individual vessel operator has strong incentives to harvest fish as quickly as possible, and discard less valuable species, before the TAC limit is reached because all vessel operators are competing for a limited TAC.

Additionally, non-pollock groundfish fisheries are constrained by catch limits for non-target species, such as halibut, red king crab, Chinocetes bairdi crab, and C. opilio crab. Halibut and crab are harvested in other fisheries and cannot be retained by vessels using trawl gear. NMFS establishes prohibited species catch (PSC) limits for halibut in the entire BSAI, and red king crab, C. opilio crab, and C. bairdi crab in specific areas of the BSAI to limit the adverse impact of harvesting operations on the long-term productivity of those species. NMFS monitors these PSC limits, and may close or otherwise restrict trawl harvests if PSC limits are projected to be reached. Fishery closures due to reaching PSC limits can limit harvest of the groundfish TAC and reduce overall revenue to vessel operators and crew. As vessel operators seek to maximize harvest of TAC, they may accelerate fishing operations to maximize harvest before a crab or halibut PSC limit is reached. A “race for PSC” further exacerbates competition and the incentives to harvest rapidly, resulting in greater potential waste and higher discard rates of less valuable groundfish species.

The multi-species nature of non-pollock groundfish fisheries further limits the ability of a fisherman to specifically target valuable groundfish species as they race with their competitors. Vessel operators may discard considerable portions of their catch to maximize harvests of more valuable species even though the discarded species may have considerable market value if competition did not create such a strong incentive to maximize harvests of the more valuable species in as short a time as possible.

The primary method to offset the economic incentives that lead to a race for fish and relatively high discard rates is to reduce the impact of those incentives through a LAPP. LAPPs have been used extensively in the North Pacific as a means to encourage economic efficiency and less wasteful harvest methods, and to resolve allocation disputes among harvesters by providing a group of harvesters with exclusive harvest privileges that can be traded. North Pacific LAPPs include (1) the halibut and sablefish individual fishing quota (IFQ) Program (November 9, 1993, 58 FR 59375); (2) the AFA (December 30, 2002, 67 FR 69692); (3) the BSAI Crab Rationalization Program (March 2, 2005; 70 FR 10174); and (4) the Central GOA Rockfish Program (November 20, 2006; 71 FR 67210). An extensive discussion of LAPPs can be found in the EA/RIR/IRFA prepared for this action (see ADDRESSES ).

Based on experience with past LAPPs, and after weighing potential advantages and disadvantages, the Council adopted Amendment 80 to create economic incentives that provide additional opportunities to reduce bycatch while increasing the potential for greater economic returns to persons holding the harvest privileges. Amendment 80 would provide an incentive for non-AFA trawl catcher/processors to harvest non-pollock groundfish in a less wasteful manner by granting an exclusive harvest privilege to a limited number of harvesters. Amendment 80 would encourage participants to harvest more efficiently and less wastefully by allowing them to choose to (1) form one or more harvesting cooperatives with other harvesters that would receive an exclusive annual harvest privilege of specific groundfish species and PSC; or (2) fish in a limited access fishery comprised of fishery participants that choose not to join a cooperative. The principal benefits from Amendment 80 would be realized by harvesters that choose to join a cooperative.

The Council adopted Amendment 80 to meet the broad goals of: (1) improving retention and utilization of fishery resources by the non-AFA trawl catcher/processor fleet; (2) allocating fishery resources among BSAI trawl harvesters in consideration of historic and present harvest patterns and future harvest needs; (3) authorizing the allocation of groundfish species to harvesting cooperatives and establishing a LAPP for the non-AFA trawl catcher/processors to reduce potential bycatch reduction costs, encourage fishing practices with lower discard rates, and improve the opportunity for increasing the value of harvested species; and (4) limiting the ability of non-AFA trawl catcher/processors to expand their harvesting capacity into other fisheries not managed under a LAPP.

As with all other LAPPs in the North Pacific, the extensive changes to existing management of BSAI non-pollock trawl fisheries proposed by Amendment 80 would affect a wide range of fishing practices and regulations. Amendment 80 would affect management of the non-AFA trawl catcher/processors, and all other BSAI trawl fishery participants. As such, Amendment 80 proposes a complex suite of measures to ensure the goals of Amendment 80 are met and to minimize potential adverse impacts on other affected fishery participants.

The following section provides an overview of the suite of measures Amendment 80 proposes to implement.

Amendment 80 would incorporate statutory mandates in the MSA as amended by Section 416 of the Coast Guard and Maritime Transportation Act of 2006 (Public Law 109-241; July 11, 2006), and the Magnuson-Stevens Fishery Conservation and Management Reauthorization Act (Public Law 109-479, January 12, 2007). The proposed rule would modify the percentage of the total allowable catch (TAC) for directed fisheries that are allocated to the CDQ Program, and the percentage of halibut, crab, and salmon prohibited species catch (PSC) allocated to the CDQ Program as prohibited species quota. Also proposed are other provisions necessary to bring Amendment 80 and the CDQ Program into compliance with applicable law.

Eligible Amendment 80 sector participants would be defined by applicable legislation and the implementing regulations. Amendment 80 would incorporate statutory mandates in section 219 of the Consolidated Appropriations Act of 2005 (Public Law 108-447; December 8, 2004) which defines who is eligible to harvest fish in the non-AFA catcher/processor sector for a defined list of non-pollock groundfish species. Amendment 80 would define the “Amendment 80 sector” as non-AFA trawl catcher/processor harvesters eligible to fish under this statutory mandate. The list of non-AFA trawl catcher/processor vessels that may be used to fish in the Amendment 80 sector are called “Amendment 80 vessels.”

Amendment 80 would allocate a specific portion of six non-pollock groundfish species among trawl fishery sectors. These six species would be the “Amendment 80 species,” and include Aleutian Islands Pacific ocean perch, BSAI Atka mackerel, BSAI flathead sole, BSAI Pacific cod, BSAI rock sole, and BSAI yellowfin sole. These Amendment 80 species would be allocated between the Amendment 80 sector and all other BSAI trawl fishery participants. These other trawl fishery participants include AFA catcher/processors, AFA catcher vessels, and non-AFA catcher vessels. Collectively, this group of trawl fishery participants comprises the “BSAI trawl limited access sector.” These six species are economically valuable and have historically been targeted by non-AFA trawl catcher/processors, but fisheries associated with these species have high rates of discard of other groundfish species.

Each year, NMFS would allocate an amount of Amendment 80 species available for harvest, and crab and halibut PSC to two defined groups of trawl fishery participants: (1) the Amendment 80 sector; and (2) the BSAI trawl limited access sector. The amount of Amendment 80 species TAC assigned to each sector would be based on the amount of TAC remaining after allocation to the CDQ Program and for incidental catch allowance requirements in other fisheries as necessary. This allocation amount is termed the initial TAC (ITAC). Allocations made to one sector would not be subject to harvest by participants in the other fishery sector except under a specific condition. Fish that are allocated to the BSAI trawl limited access sector and projected to be unharvested could be reallocated to Amendment 80 cooperatives.

Amendment 80 would further address the Council's goals of reducing bycatch and discard of groundfish species by reducing the total amount of crab and halibut PSC allocated to the Amendment 80 sector.

Amendment 80 would provide a specific allocation of Amendment 80 species and crab and halibut PSC to this sector. Amendment 80 would modify the calculation of AFA sideboard limits for Amendment 80 species and crab and halibut PSC limits as necessary to allow the efficient operation of AFA vessels.

Amendment 80 would assign Amendment 80 quota share (QS) for Amendment 80 species to the owners of Amendment 80 vessels. Amendment 80 QS could be used to yield an exclusive harvest privilege for a portion of the Amendment 80 sector ITAC. Amendment 80 would establish criteria for harvesters in the Amendment 80 sector to apply for and receive QS, criteria for initially allocating QS, and criteria for the transfer of QS.

Amendment 80 would assign Amendment 80 QS based on historic catch patterns of an Amendment 80 vessel during 1998 through 2004. Amendment 80 would assign QS based on the relative proportion of an Amendment 80 species harvested by an Amendment 80 vessel compared to all other Amendment 80 vessels.

Amendment 80 would assign Amendment 80 QS only to members of the Amendment 80 sector who submit a complete application for Amendment 80 QS. In most cases, Amendment 80 would assign the Amendment 80 QS to an Amendment 80 vessel owner. In specific cases where an Amendment 80 vessel has been lost or is otherwise permanently ineligible to fish in U.S. waters, the Amendment 80 QS would be assigned to the holder of the license limitation Amendment 80 (LLP) license originally assigned to that Amendment 80 vessel. Once Amendment 80 QS is assigned based on the historic catch patterns of an Amendment 80 vessel, it could not be divided or transferred separately from that Amendment 80 vessel. If Amendment 80 QS is assigned to the LLP license originally issued for that Amendment 80 vessel, it could not be transferred separately from that LLP license.

Persons who receive Amendment 80 QS would be able to join a cooperative to receive an exclusive harvest privilege for a portion of the ITAC. Amendment 80 QS holders would be able to form a cooperative with other Amendment 80 QS holders on an annual basis, provided they meet specific criteria. Each Amendment 80 cooperative would receive an annual cooperative quota (CQ), an amount of Amendment 80 species ITAC that would be for the exclusive use by that cooperative for harvest in a given year. Amendment 80 would establish requirements for forming an Amendment 80 cooperative with other Amendment 80 QS holders, the allocation of annual CQ to a cooperative, and transfers of CQ among cooperatives. A cooperative would receive an amount of CQ equivalent to the proportion of QS held by all of the members of the cooperative relative to the total QS held by all Amendment 80 QS holders.

Each Amendment 80 cooperative would receive an annual CQ with an exclusive limit on the amount of crab and halibut PSC the cooperative can use while harvesting in the BSAI. This halibut and crab PSC CQ would be assigned to a cooperative proportional to the amount of Amendment 80 QS held by the members, and would not be based on the amount of crab or halibut PSC historically used by the cooperative members.

Amendment 80 would provide opportunities for Amendment 80 sector participants to trade harvest privileges among cooperatives to further encourage efficient fishing operations. An Amendment 80 cooperative would not be able to transfer CQ to the Amendment 80 limited access fishery, or to the BSAI trawl limited access sector.

A cooperative structure may allow Amendment 80 vessel operators to manage PSC rates more efficiently than vessels who must race to harvest fish as quickly as possible before a PSC limit is reached and a fishery is subject to closure. By reducing PSC through more efficient cooperative operations, such as through gear modifications that reduce PSC use, Amendment 80 vessel operators may also increase the harvest of valuable targeted groundfish species and improve revenues that would otherwise be foregone if a fishery were closed due to reaching PSC limits.

Amendment 80 would allow Amendment 80 cooperatives to receive a rollover of an additional amount of CQ, if a portion of the Amendment 80 species or crab or halibut PSC allocated to the BSAI trawl limited access sector is projected to go unharvested. This rollover to the Amendment 80 cooperatives would be at the discretion of NMFS based on projected harvest rates in the BSAI trawl limited access sector and other criteria. Each Amendment 80 cooperative would receive an additional amount of CQ that is based on the proportion of the Amendment 80 QS held by that Amendment 80 cooperative compared to all other Amendment 80 cooperatives.

Fishery participants in a cooperative could consolidate fishing operations on a specific Amendment 80 vessel or subset of Amendment 80 vessels, thereby reducing monitoring and enforcement (M&E) and other operational costs, and harvest fish in a manner more likely to be economically efficient and less wasteful.

Amendment 80 QS holders that choose not to join an Amendment 80 cooperative would be able to participate in the Amendment 80 limited access fishery. Amendment 80 would assign the Amendment 80 limited access fishery the amount of the Amendment 80 sector's allocation of Amendment 80 species ITAC and halibut and crab PSC that remains after allocation to all of the Amendment 80 cooperatives. Participants fishing in the Amendment 80 limited access fishery would continue to compete with each other; would not realize the same potential benefits from consolidation and coordination; and would not receive an exclusive harvest privilege that accrues to members of an Amendment 80 cooperative.

The Council considered the effect of consolidation with the allocation of an excessive share of harvest privileges to Amendment 80 cooperatives. In response, Amendment 80 would implement use caps to limit the amount of Amendment 80 QS a person could hold, the amount of CQ they could use, and the amount of ITAC an Amendment 80 vessel could harvest. These use caps would moderate some of the potentially adverse effects of excessive consolidation of fishing operations on fishery participants, such as lost employment opportunities for fishing crew while providing economic efficiencies to Amendment 80 QS holders.

Catch limits, commonly known as sideboards, would limit the ability of Amendment 80 vessel operators to expand their harvest efforts in the Gulf of Alaska (GOA). Amendment 80 is designed to provide certain economic advantages to participants. Amendment 80 participants could use this economic advantage to increase their participation in other fisheries, primarily in the GOA fisheries, adversely affecting the participants in those fisheries. GOA groundfish and halibut PSC sideboards would limit the catch by Amendment 80 vessels to historic levels in the GOA.

Amendment 80 would implement an economic data collection program to assess the impacts of Amendment 80 on various components of the fishery, including skippers and crew. Amendment 80 would establish a process for collecting and reviewing economic data generated under Amendment 80 by requiring the annual submission of an EDR from each Amendment 80 QS holder.

Other management measures necessary to implement Amendment 80 would be provided in the proposed rule that accompanies Amendment 80. These measures include an expansion of the groundfish retention standard to all vessels in the Amendment 80 sector and monitoring and enforcement provisions necessary to support Amendment 80 and its implementing regulations.

Public comments are being solicited on proposed Amendment 80 through the end of the comment period stated (see DATES ). A proposed rule to implement Amendment 80 will be published in the Federal Register for public comment, following NMFS' evaluation under MSA procedures. Public comments on the proposed rule must be received by the end of the comment period on Amendment 80 to be considered in the approval/disapproval decision on the amendment. All comments received by the end of the comment period on Amendment 80, whether specifically directed to the amendment or the proposed rule, will be considered in the decision to approve, partially approve, or disapprove the proposed amendment. Comments received after the comment period for the amendment will not be considered in that decision. To be considered, written comments must be received by NMFS, not just postmarked or otherwise transmitted, by the close of business on the last day of the comment period.