Affected Entities: Entities that receive grants from EPA.

The Drug-Free Workplace Act of 1988 [Pub. L. 100-690, Title V, Subtitle D; 41 U.S.C. 701, et seq. ] was enacted as a part of omnibus drug legislation on November 18, 1988. Federal agencies issued an interim final common rule to implement the act as it applied to grants [54 FR 4946, January 31, 1989]. The rule was a subpart of the Governmentwide common rule on nonprocurement suspension and debarment. The agencies issued a final common rule after consideration of public comments [55 FR 21681, May 25, 1990].

The agencies proposed an update to the drug-free workplace common rule in 2002 [67 FR 3266, January 23, 2002] and finalized it in 2003 [68 FR 66534, November 26, 2003]. The updated common rule was redrafted in plain language and adopted as a separate part, independent from the common rule on nonprocurement suspension and debarment. Based on an amendment to the drug-free workplace requirements in 41 U.S.C. 702 [Pub. L. 105-85, div. A, title VIII, Sec. 809, Nov. 18, 1997, 111 Stat. 1838], the update also allowed multiple enforcement options from which agencies could select, rather than requiring use of a certification in all cases.

When it established Title 2 of the CFR as the new central location for OMB guidance and agency implementing regulations concerning grants and agreements [69 FR 26276, May 11, 2004], OMB announced its intention to replace common rules with OMB guidance that agencies could adopt in brief regulations. OMB began that process by proposing [70 FR 51863, August 31, 2005] and finalizing [71 FR 66431, November 15, 2006] Governmentwide guidance on nonprocurement suspension and debarment in 2 CFR part 180.

As the next step in that process, OMB proposed for comment [73 FR 55776, September 26, 2008] and finalized [74 FR 28149, June 15, 2009] Governmentwide guidance with policies and procedures to implement drug-free workplace requirements for financial assistance. The guidance requires each agency to replace the common rule on drug-free workplace requirements that the agency previously issued in its own CFR title with a brief regulation in 2 CFR adopting the Governmentwide policies and procedures. One advantage of this approach is that it reduces the total volume of drug-free workplace regulations. A second advantage is that it collocates OMB's guidance and all of the agencies' implementing regulations in 2 CFR.

As the OMB guidance requires, the Environmental Protection Agency is taking two regulatory actions. First, we are removing the drug-free workplace common rule from 40 CFR part 36. Second, to replace the common rule, we are issuing a brief regulation in 2 CFR part 1536 to adopt the Governmentwide policies and procedures in the OMB guidance.

Statutory and Executive Order Reviews: OMB has determined under Executive Order 12866 (58 FR 51735, October 4, 1993), that this action is not a “significant regulatory action.” Because this grants rule is not subject to notice and comment requirements under the Administrative Procedure Act or any other statute, it is not subject to the Regulatory Flexibility Act (5 U.S.C. 601 et. ). Today's rule contains no Federal mandates (under the regulatory provisions of Title 2 of the Unfunded Mandates Reform Act of 1999 (UMRA)) for State, local, or tribal governments or the private sector that would subject the rule to Sections 202 and 205 of the UMRA) (Pub. L. 104-4). The rule imposes no enforceable duty on any State, local, or Tribal governments or the private sector. In addition, this rule does not significantly or uniquely affect small governments. This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). This final rule is solely an administrative simplification that would make no substantive change in Environmental Protection Agency policy or procedures for drug-free workplace. Thus, Executive Order 13175 (63 FR 67249, November 9, 2000) does not apply to this action. EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks. This rule will not have federalism implications, as specified in Executive Order 13132 (64 FR 43255, August 10, 1999). Executive Order 12898 (59 FR 7629 (February 16, 1994)) establishes Federal executive policy on environmental justice. EPA has determined that this rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it is a grant rule that does not affect the level of protection provided to human health or the environment. This rule is not a “significant energy action” as defined in Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355 (May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Further, we have concluded that this rule is not likely to have any adverse energy effects. This rule does not involve technical standards; thus, the requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) do not apply. This rule does not impose an additional information collection burden under the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

Congressional Review Act: The Congressional Review Act, 5 U.S.C. 801 et seq. , generally provides that before certain actions may take effect, the agency promulgating the action must submit a report, which includes a copy of the action, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2). This rule will be effective on December 22, 2010.

Title III, Part B of the Energy Policy and Conservation Act (EPCA), Public Law 94-163 (42 U.S.C. 6291-6309, as codified), established the Energy Conservation Program for “Consumer Products Other Than Automobiles.”  1 The consumer products subject to this program (hereafter “covered products”) include faucets, showerheads, water closets and urinals, the subjects of today's notice. Under EPCA, the overall program consists essentially of testing, labeling, and Federal energy conservation standards, including water conservation standards for faucets, showerheads, water closets and urinals. National standards for these water-using products are based on the American Society of Mechanical Engineers (ASME)/American National Standards Institute (ANSI) standards A112.18.1M, for showerheads and faucets, and A112.19.6, for water closets and urinals. 42 U.S.C. 6295(j), (k).

42 U.S.C. 6295(j)(3)(C) and 6295(k)(3)(C) requires that, not later than six months after the conclusion of a five-consecutive-year period during which the ASME/ANSI has not amended these faucet, showerhead, water closet or urinal standards in order to improve water efficiency, DOE must publish a final rule waiving preemption for Federal standards under 42 U.S.C. 6297(c) with respect to any State regulation concerning the water use or water efficiency of such type or class of showerhead, faucet, water closet or urinal if such State regulation meets the following two conditions. First, the State regulation concerning water use or water efficiency for a particular type or class of showerhead, faucet, water closet or urinal must be more stringent than the Federal regulation concerning water use or water efficiency for that same type or class of showerhead, faucet, water closet or urinal. 42 U.S.C. 6295(j)(3)(C)(i), 6295(k)(3)(C)(i). Second, the State regulation concerning the water use or water efficiency for a particular type or class of showerhead, faucet, water closet or urinal must be applicable to any sale or installation of all products in that particular type or class. 42 U.S.C. 6295(j)(3)(C)(ii), 6295(k)(3)(C)(ii).

The provisions in 42 U.S.C. 6295(j)(3)(C) and 6295(k)(3)(C) represent a choice by Congress to deviate from the general rule of Federal preemption, where the relevant industry consensus body has failed to act to improve water efficiency for a significant period of time. ASME/ANSI last made a substantive amendment to its standards regarding the water efficiency requirements for showerheads and faucets on May 29, 1996 (ASME/ANSI A112.18.1M-1996), and for water closets and urinals on April 19, 1996 (ASME/ANSI A112.19.6-1995). Both of these standards were incorporated by reference into the Code of Federal Regulations in a final rule issued by DOE on March 18, 1998. 63 FR 13308. Because more than five years have passed since ASME/ANSI last amended the water efficiency requirements in either of these standards, DOE must issue this final rule waiving the provisions of 42 U.S.C. 6297(c) with respect to any State regulation concerning the water use or water efficiency of a particular type or class of showerhead, faucet, water closet or urinal that is both more stringent than the relevant Federal regulation and is applicable to any sale or installation or all products in that particular type or class.

Today's regulatory action is not a “significant regulatory action” under section 3(f) of Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (October 4, 1993). Accordingly, this action was not subject to review under that Executive Order by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget (OMB).

The Department of Energy finds good cause to waive prior notice and an opportunity for public comment on these regulations pursuant to 5 U.S.C. 533(b)(B), because such procedures are unnecessary. EPCA imposes a non-discretionary duty on DOE to waive Federal preemption in a defined factual circumstance. That circumstance has occurred. Therefore, this rule is necessary for DOE to implement this statutorily-imposed obligation. Public comment on DOE's implementation of this legal mandate would serve no useful purpose. For the same reason, DOE finds good cause, pursuant to 5 U.S.C. 553(d)(3), to waive the 30-day delay in effective date for this rule. Therefore, these regulations are being published as final regulations and are effective December 22, 2010.

DOE has determined that this rule falls into a class of actions that are categorically excluded from review under the National Environmental Policy Act of 1969 (NEPA; 42 U.S.C. 4321 et seq. ) and DOE's implementing regulations at 10 CFR part 1021. This rule at most amends an existing rule without changing its environmental effect, and, therefore, is covered by the Categorical Exclusion A5 found in appendix A to subpart D, 10 CFR part 1021. Accordingly, neither an environmental assessment nor an environmental impact statement is required. Moreover, a State's promulgation of a regulation concerning water use or water efficiency for a particular type or class of showerhead, faucet, water closet or urinal is not a Federal action subject to NEPA.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires preparation of an initial regulatory flexibility analysis for any rule that must be proposed for public comment, unless the agency certifies that the rule will have no significant economic impact on a substantial number of small entities. As required by Executive Order 13272, “Proper Consideration of Small Entities in Agency Rulemaking,” 67 FR 53461 (August 16, 2002), DOE published procedures and policies on February 19, 2003, to ensure that the potential impacts of its rules on small entities are properly considered during the rulemaking process. 68 FR 7990. DOE has made its procedures and policies available on the Office of the General Counsel's Web site at http://www.gc.doe.gov. Because a notice of proposed rulemaking is not required under the Administrative Procedure Act or other applicable law, the Regulatory Flexibility Act does not require certification or the conduct of a regulatory flexibility analysis for this rule.

This rulemaking imposes no new information or recordkeeping requirements. Accordingly, OMB clearance is not required under the Paperwork Reduction Act. (44 U.S.C. 3501 et seq. )

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4) requires each Federal agency to assess the effects of Federal regulatory actions on State, local, and Tribal governments and the private sector. For proposed regulatory actions likely to result in a rule that may cause expenditures by State, local, and Tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation), section 202 of UMRA requires a Federal agency to publish estimates of the resulting costs, benefits, and other effects on the national economy. (2 U.S.C. 1532(a), (b)) The UMRA also requires a Federal agency to develop an effective process to permit timely input by elected officers of State, local, and Tribal governments on a proposed “significant intergovernmental mandate.” UMRA also requires an agency plan for giving notice and opportunity for timely input to small governments that may be affected before establishing a requirement that might significantly or uniquely affect them. On March 18, 1997, DOE published a statement of policy on its process for intergovernmental consultation under UMRA (62 FR 12820) (also available at http://www.gc.doe.gov ). Today's final rule contains neither an intergovernmental mandate nor a mandate that may result in the expenditure of $100 million or more in any year, so these requirements do not apply.

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any rule that may affect family well-being. Today's rule would have no impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has concluded that it is unnecessary to prepare a Family Policymaking Assessment.

Executive Order 13132, “Federalism,” 64 FR 43255 (August 4, 1999) imposes certain requirements on agencies formulating and implementing policies or regulations that preempt State law or that have Federalism implications. The executive order requires agencies to examine the constitutional and statutory authority supporting any action that would limit the policymaking discretion of the States and to carefully assess the necessity for such actions. DOE has examined this final rule and determined that it would not preempt State law; in fact, this rule waives preemption of State law and has no negative impact on any State. Executive Order 13132 requires no further action.

With respect to the review of existing regulations and the promulgation of new regulations, section 3(a) of Executive Order 12988, “Civil Justice Reform,” 61 FR 4729 (February 7, 1996), imposes on Federal agencies the general duty to adhere to the following requirements: (1) Eliminate drafting errors and ambiguity, (2) write regulations to minimize litigation, (3) provide a clear legal standard for affected conduct rather than a general standard, and (4) promote simplification and burden reduction. Regarding the review required by section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation (1) clearly specifies the preemptive effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to review regulations in light of applicable standards in sections 3(a) and 3(b) to determine whether they are met or it is unreasonable to meet one or more of them. DOE has completed the required review and determined that, to the extent permitted by law, this rule meets the relevant standards of Executive Order 12988.

The Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note) provides for agencies to review most disseminations of information to the public under guidelines established by each agency pursuant to general guidelines issued by OMB. OMB's guidelines were published at 67 FR 8452 (February 22, 2002), and DOE's guidelines were published at 67 FR 62446 (October 7, 2002). DOE has reviewed today's notice under the OMB and DOE guidelines and has concluded that it is consistent with applicable policies in those guidelines.

Executive Order 13211, “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use,” 66 FR 28355 (May 22, 2001), requires Federal agencies to prepare and submit to OMB a Statement of Energy Effects for any proposed significant energy action. A “significant energy action” is defined as any action by an agency that promulgates or is expected to lead to promulgation of a final rule, and that (1) is a significant regulatory action under Executive Order 12866, or any successor order; and (2) is likely to have a significant adverse effect on the supply, distribution, or use of energy; or (3) is designated by the Administrator of OIRA as a significant energy action. For any proposed significant energy action, the agency must give a detailed statement of any adverse effects on energy supply, distribution, or use should the proposal be implemented, and of reasonable alternatives to the action and their expected benefits on energy supply, distribution, and use. Today's regulatory action is not a significant regulatory action under Executive Order 12866 or any successor order; would not have a significant adverse effect on the supply, distribution, or use of energy; and has not been designated by the Administrator of OIRA as a significant energy action. Accordingly, DOE has not prepared a Statement of Energy Effects.

Pursuant to Executive Order 12630, “Governmental Actions and Interference with Constitutionally Protected Property Rights,” 53 FR 8859 (March 15, 1988), DOE has determined that this rule would not result in any takings that might require compensation under the Fifth Amendment to the U.S. Constitution.

Under section 301 of the Department of Energy Organization Act (Pub. L. 95-91), the Department of Energy must comply with section 32 of the Federal Energy Administration Act of 1974 (Pub. L. 93-275), as amended by the Federal Energy Administration Authorization Act of 1977 (Pub. L. 95-70). (15 U.S.C. 788) Section 32 provides that where a proposed rule authorizes or requires use of commercial standards, the notice of proposed rulemaking must inform the public of the use and background of such standards. In addition, section 32(c) requires DOE to consult with the Department of Justice and the Federal Trade Commission concerning the impact of the commercial or industry standards on competition. This final rule to waive the provisions of 42 U.S.C. 6297(c) in certain circumstances is not a proposed rule and does not authorize or require the use of any commercial standards. Therefore, no consultation with either DOJ or FTC is required.

As required by 5 U.S.C. 801, DOE will report to Congress on the promulgation of today's rule. The report will state that it has been determined that the rule is not a “major rule” as defined by 5 U.S.C. 804(2).

The Secretary of Energy has approved publication of this final rule.

The Energy Policy and Conservation Act (EPCA), as amended by section 313(b)(1)(B) of the Energy Independence and Security Act (EISA 2007), requires each National Electrical Manufacturers Association (NEMA) Design B, general purpose electric motor with a power rating of more than 200 horsepower, but not greater than 500 horsepower, manufactured (alone or as a component of another piece of equipment) after December 19, 2010, to have a nominal full load efficiency that is not less than the values in NEMA Standard MG-1 (2006) Table 12-11. (42 U.S.C. 6313(b)(2)(D)) DOE codified this requirement at 10 CFR 431.25(f). 74 FR 12058 (March 23, 2009)

It was recently discovered that the efficiency levels under 10 CFR 431.25(f), for NEMA Design B, six-pole open motors rated 250, 300, and 350 horsepower are not consistent with the EISA 2007 levels as prescribed. Today's final rule conforms these efficiency levels with EPCA, as amended by EISA 2007, by replacing the nominal full load efficiency of “94.5” with “95.4.”

As published, the nominal full load efficiency table at 10 CFR 431.25(f) contains three values that deviate from the requirements established by EPCA, as amended by EISA 2007. To correct this error, DOE is amending 10 CFR 431.25(f) to replace the current table with a corrected table of values. In light of the statutory requirement, the change addressed by today's document is technical in nature. In addition, because DOE does not have the discretion to deviate from these statutorily-prescribed requirements, DOE finds that there is good cause under 5 U.S.C. 553(b)(B) to not issue a separate notice to solicit public comment on the changes contained in this document. Issuing a separate notice to solicit public comments would be impractical, unnecessary, and contrary to the public interest.

This AD, Amendment 39-16487 (75 FR 65222, October 22, 2010), requires replacing all servo-controls that are identified in the Applicability section, Table 1, of the AD.

As published, two part numbers shown in Table 1 on Federal Register page 65224, under item 2. of PART 39—AIRWORTHINESS DIRECTIVES section, are incorrect. The first incorrect part number (P/N) is “5084;” the correct P/N is “SC5084.” The second incorrect P/N is “5084-1;” the correct P/N is “SC5084-1.” The other P/Ns shown in Table 1 remain unchanged.

No other part of the preamble or regulatory information has been changed; therefore, only Table 1 of the final rule is being published in the Federal Register .

The effective date of this AD is November 26, 2010.

On September 20, 2010, BEA published a notice of proposed rulemaking that set forth revised reporting criteria for the BE-11, Annual Survey of U.S. Direct Investment Abroad (75 FR 57217-57220). No comments on the proposed rule were received. Thus the proposed rule is adopted without change. This final rule amends 15 CFR Part 806.14 to set forth the reporting requirements for the BE-11 annual survey of U.S. direct investment abroad.

BEA, U.S. Department of Commerce, conducts the BE-11 survey under the authority of the International Investment and Trade in Services Survey Act (22 U.S.C. 3101-3108), hereinafter, “the Act.” Section 4(a) of the Act (22 U.S.C. 3103(a)) requires that, with respect to United States direct investment abroad, the President shall, to the extent he deems necessary and feasible, conduct a regular data collection program to secure current information on international capital flows and other information related to international investment and trade in services, including (but not limited to) such information as may be necessary for computing and analyzing the United States' balance of payments, the employment and taxes of United States parent companies and their affiliates, and the international investment and trade in services position of the United States.

The BE-11 survey is a sample survey that collects information on a variety of measures of the overall operations of U.S. parent companies and their foreign affiliates, including total assets, sales, net income, employment and employee compensation, research and development expenditures, and exports and imports of goods. The sample data are used to derive universe estimates in nonbenchmark years from similar data reported in the BE-10, Benchmark Survey of U.S. Direct Investment Abroad, which is taken every five years. The data are needed to measure the size and economic significance of direct investment abroad, to measure the changes in such investment, and to assess their impact on the U.S. and foreign economies. The data are disaggregated by country and industry of the foreign affiliate and by industry of the U.S. parent. The BE-11 survey is a mandatory annual survey of U.S. direct investment abroad conducted by BEA under the Act. BEA sends survey forms to potential respondents in March of each year; responses are due by May 31.

The changes revise the regulations for the BE-11 survey and bring the BE-11 forms and instructions into conformity with the 2009 BE-10, Benchmark Survey of U.S. Direct Investment Abroad. These revisions include changes in reporting thresholds and data items collected, as well as changes in form design. Several of these revisions are part of a larger program to align the data collection program for multinationals with available resources. BEA will also expand the use of sampling to help align the data collection program with resources.

Beginning with the 2010 annual survey, U.S. Reporters will report data on all their foreign affiliates, regardless of industry, on one of four foreign affiliate forms—BE-11B, BE-11C, BE-11D, or BE-11E. Data on foreign affiliates of U.S. Reporters that are banks, bank holding companies, or financial holding companies will be collected on the same survey forms as data on other foreign affiliates. All U.S. Reporters will report data on all domestic operations, on a fully consolidated basis, on Form BE-11A, Report for U.S. Reporter. Also, U.S. Reporters with total assets, sales or gross operating revenues, or net income less than or equal to $300 million will be required to report only certain items on Form BE-11A.

Additionally, BEA will require U.S. Reporters to file reports annually for foreign affiliates in which they own a 10 to 20 percent voting interest. These affiliates, some of which are very large, fall under both U.S. and international definitions for foreign direct investment and must be represented in the statistics, but in the past they have been required to be reported in the annual survey only in the third year following a benchmark survey. Annual reporting will ensure that the activities of these affiliates are accurately reflected in the statistics derived from the survey.

The four foreign affiliate forms are—

(a) Form BE-11B—report for majority-owned foreign affiliates with total assets, sales or gross operating revenues, or net income greater than $60 million, positive or negative; filing of additional items would be required for affiliates with assets, sales, or net income greater than $300 million, positive or negative;

(b) Form BE-11C—report for minority-owned foreign affiliates with total assets, sales or gross operating revenues, or net income greater than $60 million, positive or negative;

(c) Form BE-11D—schedule for foreign affiliates established or acquired by the U.S. Reporter during the current reporting year with total assets, sales or gross operating revenues, or net income greater than $25 million, positive or negative, but for which no one of these items is greater than $60 million, positive or negative; and

(d) Form BE-11E—report for foreign affiliates selected by BEA to be reported on this form in lieu of Form BE-11B. BEA will statistically divide into panels, affiliates with total assets, sales or gross operating revenues, and net income (positive or negative) between $60 million and $300 million. At the direction of BEA, U.S. Reporters will alternate reporting these affiliates on Form BE-11B and Form BE-11E.

A Form BE-11B, BE-11C, or BE-11E must be filed for a foreign affiliate of the U.S. Reporter that owns another non-exempt foreign affiliate even if the foreign affiliate parent is otherwise exempt. That is, all affiliates upward in the chain of ownership must be reported.

In addition to the changes in the reporting criteria, BEA adds, combines, or deletes some items on the annual survey forms. BEA will no longer collect selected balance sheet items as separate items. BEA also will discontinue collecting a breakdown of the number of employees and amount of employee compensation by occupational classification; the composition of external finances; and wholesale and retail trade items (specifically, the cost of goods purchased for resale and inventory of goods purchased for resale).

BEA also adds several items to be collected in the surveys. First, BEA adds an item on Form BE-11C to collect information about respondents' total liabilities. BEA also adds an item on Form BE-11E to collect property, plant, and equipment expenditure information, and adds a schedule on Form BE-11B to collect a list of foreign affiliates in which the affiliate being reported has a direct equity interest, but which are not fully consolidated into the reported foreign affiliate. Completion of this list will be required only for foreign affiliates with total assets, sales or gross operating revenues, or net income greater than $300 million at the end of, or for, the fiscal year.

The changes to the BE-11A, U.S. Reporter annual survey form, largely parallel the above-described changes to the foreign affiliate forms. For the BE-11A, BEA will no longer collect the breakdown of number of employees and amount of employee compensation by occupational classification and no longer collect wholesale and retail trade items (specifically, the cost of goods purchased for resale and inventory of goods purchased for resale). BEA also adds a question to Form BE-11A asking if the Reporter is a bank, and will add questions to collect information on assets, liabilities, and interest receipts and payments that are related to banking activities.

This final rule has been determined to be not significant for purposes of E.O. 12866.

This final rule does not contain policies with Federalism implications sufficient to warrant preparation of a Federalism assessment under E.O. 13132.

The collection of information in this final rule has been submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act (PRA). OMB approved the information collection under control number 0608-0053.

Notwithstanding any other provisions of the law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with, a collection-of-information subject to the requirements of the PRA unless that collection displays a currently valid OMB control number.

The BE-11 survey is expected to result in the filing of reports from approximately 1,750 respondents, which is an increase from the 1,550 respondents that were required to file reports for the 2008 BE-11 annual survey. The respondent burden for this collection of information will vary from one company to another, but is estimated to average 86 hours per response, including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. The total respondent burden of the survey is estimated at 150,550 hours, which is a decrease from the 153,800 hours estimated for the 2008 BE-11 annual survey. The reduction in burden is due to a decrease in the estimated average hours per response that resulted from the changes in reporting requirements. Written comments regarding the burden-hour estimates or any other aspects of the collection-of-information requirements contained in the final rule should be sent both to the Bureau of Economic Analysis via mail to U.S. Department of Commerce, Bureau of Economic Analysis, Office of the Chief, Direct Investment Division, BE-50, Washington, DC 20230; via e-mail at David.Galler@bea.gov ; or by FAX at (202) 606-5311, and to the Office of Management and Budget, O.I.R.A., Paperwork Reduction Project 0608-0053, Attention PRA Desk Officer for BEA, via e-mail at pbugg@omb.eop.gov , or by FAX at (202) 395-7245.

The Chief Counsel for Regulation, Department of Commerce, has certified to the Chief Counsel for Advocacy, Small Business Administration (SBA), under the provisions of the Regulatory Flexibility Act, 5 U.S.C. 605(b), that this final rule will not have a significant economic impact on a substantial number of small entities. The factual basis for the certification was published in the proposed rule and is not repeated here. No comments were received regarding the certification or the economic impact of the rule more generally. No final regulatory flexibility analysis was prepared.

We are adopting an amendment to Rule 312  1 of Regulation S-T. 2

In December 2004, we adopted new and amended rules and forms to address the registration, disclosure and reporting requirements for asset-backed securities (“ABS”) under the Securities Act of 1933  3 (the “Securities Act”) and the Securities Exchange Act of 1934  4 (the “Exchange Act”). 5 As part of this rulemaking, we adopted Regulation AB, 6 a new principles-based set of disclosure items forming the basis for disclosure with respect to ABS in both Securities Act registration statements and Exchange Act reports. Compliance with the revised rules was phased in; full compliance with the revised rules became effective January 1, 2006. One of the significant features of Regulation AB is Item 1105, which requires, to the extent material, static pool information to be provided in the prospectus included in registration statements for ABS offerings. 7 While the disclosure required by Item 1105 depends on factors such as the type of underlying asset and materiality, the information required to be disclosed can be extensive. For example, a registrant may be required to disclose multiple performance metrics in periodic increments for prior securitized pools of the sponsor for the same asset type in the last five years. 8

1. On June 15, 2010, the Commission issued a Notice of Inquiry (NOI), 1 in which it proposed to continue using the Producer Price Index for Finished Goods plus 1.3 percent (PPI-FG+1.3) for the next five-year period beginning July 1, 2011. The Commission applies the index to existing oil pipeline transportation rates to establish new annual rate ceiling levels for pipeline rate changes. The NOI invited interested persons to submit comments on the continued use of PPI-FG+1.3 and to propose, justify, and fully support, any alternative indexing proposals. Comments and reply comments were due August 20, 2010, and September 20, 2010, respectively. Based upon full consideration of the comments and reply comments received, and for the reasons discussed below, the Commission finds that an index of PPI-FG plus 2.65 percent (PPI-FG+2.65) should be established for the five-year period commencing July 1, 2011.

2. Congress in the Energy Policy Act of 1992 (EPAct 1992) required the Commission to establish a “simplified and generally applicable” ratemaking methodology for oil pipelines  2 that was consistent with the just and reasonable standard of the Interstate Commerce Act (ICA). 3 On October 22, 1993, the Commission issued Order No. 561, 4 promulgating regulations pertaining to the Commission's jurisdiction over oil pipelines under the ICA and fulfilling the requirements of the EPAct 1992. In Order No. 561, the Commission developed an indexing methodology for the purpose of allowing oil pipelines to change rates without making cost-of-service filings. The Commission found that the indexing methodology adopted in the final rule simplified and expedited the process of changing rates. The Commission further determined that the indexing methodology would ensure compliance with the just and reasonable standard of the ICA by subjecting the chosen index to periodic monitoring and, if necessary, adjustment. After extensive analysis of proposals from interested parties, the Commission adopted an index of PPI-FG minus 1 percent (PPI-FG-1), which was supported by a methodology developed by Dr. Alfred E. Kahn (Kahn Methodology) on behalf of a group of shippers. The Commission also committed to review every five years the continued appropriateness of the index in relation to industry costs.

3. In the first five-year review, which established the index level for 2001-2006, the Commission deviated from the Kahn Methodology, and, based upon a different analysis, concluded that the index should be retained as PPI-FG-1. 5 The U.S. Court of Appeals for the District of Columbia (D.C. Circuit) reviewed and remanded the Commission's order because the Commission failed to justify a departure from the Kahn Methodology used in Order No. 561. 6 On remand, the Commission used the Kahn Methodology to set an index level of an unadjusted PPI-FG for the five-year period beginning July 2001. This order on remand was upheld by the D.C. Circuit. 7

4. In the second five-year review, the Commission proposed to retain the rate of an unadjusted PPI-FG. However, based upon the data presented during that proceeding, the Commission adopted an index of PPI-FG+1.3, which was again calculated using the Kahn Methodology. 8

5. The Kahn Methodology measures changes in operating and capital costs on a per barrel-mile basis using Form No. 6 data from the prior five-year period (for example, between 2004 and 2009 in this proceeding). 9 The Kahn Methodology does not include direct measures of the capital costs related to rate of return on investment or income taxes; as a proxy for this data, the Kahn Methodology relies upon changes over the five year period in net carrier property per barrel-mile.

6. The Kahn Methodology assigns a weight to the Form No. 6 operating expenses relative to the net plant using an “operating ratio.”  10 The weighted operating expense and the weighted net plant are then added together to establish the cumulative cost change for each pipeline. 11

7. Once these cumulative cost changes have been calculated for each pipeline with sufficient Form No. 6 data, the Kahn Methodology culls a data set consisting of pipelines with cumulative per-barrel-mile cost changes in the middle 50 percent of all pipelines. Later applications of the index also culled a data set consisting of pipelines with cumulative cost changes in the middle 80 percent of all pipelines. This trimming is done to remove statistical outliers, or spurious data points that could bias the sample in either direction.

8. For each of the two data sets (the middle 50 percent and the middle 80 percent), the Kahn Methodology considers three different measures of central tendency. One measure is the median of each data set. Another measure, the weighted mean, calculates an average barrel-mile cost change in which each pipeline's cost change is weighted by its barrel-miles. A third measure, the un-weighted average, calculates the simple average of the percentage cost change per barrel-mile for each pipeline. For each data set, a composite, is calculated by taking the simple average of the median, the weighted mean, and the un-weighted mean. Table 1 provides a description of the statistical values of central tendency used by parties to develop the index.

In the most recent index review, the industry-wide cost index differential was calculated by averaging the middle 50 composite and the middle 80 composite on Line D and then comparing that value to the PPI-FG index data over the same period. The index level was then set at PPI-FG plus (or minus) this differential.

9. The Kahn Methodology has evolved during the course of prior index reviews. In Order Nos. 561 and 561-A, the Commission only considered the middle 50 percent and did not consider the middle 80 percent. In the first and second five-year index reviews, the Commission considered both the middle 50 percent and the middle 80 percent. Also, in Order Nos. 561 and 561-A, as well as the first review, the Commission merely cited Kahn's Methodology to demonstrate that it produced index levels that were close, although not exactly the same as, the proposed index levels of PPI-FG-1 (in Order Nos. 561 and 561-A) and an unadjusted PPI-FG (in the first review). In the second five-year review, the Commission used the Kahn Methodology itself to set the precise index levels by averaging the middle 50 and middle 80 composites relative to PPI-FG over the prior five-year period.

10. Comments were filed by the American Trucking Associations, National Propane Gas Association (NPGA), Tesoro Refining and Market Company and Sinclair Oil Corporation (Sinclair/Tesoro, collectively), Air Transport Association of America (ATA), Society for the Preservation of Oil Pipeline Shippers (SPOPS), the Association of Oil Pipe Lines (AOPL), Valero Marketing and Supply (Valero), and Navajo Refining Company, L.L.C. (Navajo).

11. Reply Comments were filed by the Canadian Association of Petroleum Producers (CAPP), the Pipeline Safety Trust, Sinclair/Tesoro, Platte Pipe Line Company (Platte), ATA, Navajo, AOPL, and SPOPS.

12. On September 24, 2010, the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (PHMSA) filed a Motion for Leave to File Out-of-Time and Comments and NPGA filed late Reply Comments.

13. On October 8, 2010, Valero filed Supplemental Reply Comments and on October 20, 2010, AOPL filed a Response (October 20 Response).

14. In comments and reply comments, several parties proposed departures from existing index levels. AOPL proposes an index of PPI-FG plus 3.64 percent (PPI-FG+3.64) as the oil pipeline pricing index for the five-year period beginning July 1, 2011. AOPL states that its witness, Dr. Ramsey Shehadeh, applied the Kahn Methodology to a data set including an initial sample of 110 pipelines, 12 calculating the following data regarding pipeline cost changes for the 2004-2009 period:

On August 31, 2010, the FBI published notice of a new Privacy Act system of records entitled, “Data Integration and Visualization System (DIVS),” JUSTICE/FBI-021, which became effective on October 1, 2010. In conjunction with publication of the DIVS system of records notice, the FBI initiated a rulemaking to exempt DIVS from a number of provisions of the Privacy Act, in accordance with subsections 553a(j) and/or (k). On August 31, 2010, the FBI published at 75 FR 53262 a proposed rule exempting records in the DIVS from Privacy Act subsections (c)(3), and (4); (d)(1), (2), (3) and (4); (e)(1), (2) and (3); (e)(4)(G), (H) and (I); (e)(5) and (8); (f) and (g).

The FBI received one comment on the proposed rule. The commenter concurred with the exemptions cited but requested that the FBI provide more information explaining the FBI's “internal controls” in protecting the data itself from improper violations. The FBI determined that the public comment merited no change in the rule, as the commenter concurred with the exemptions claimed, and because an exemption rule does not provide an appropriate venue for the discussion requested.

This proposed rule relates to individuals as opposed to small business entities. Pursuant to the requirements of the Regulatory Flexibility Act, 5 U.S.C. 601-612, therefore, the proposed rule will not have a significant economic impact on a substantial number of small entities.

The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996, codified as a note to 5 U.S.C. 601, requires the FBI to comply with small entity requests for information and advice about compliance with statutes and regulations within FBI jurisdiction. Any small entity that has a question regarding this document may contact the person listed in FOR FURTHER INFORMATION CONTACT . Persons can obtain further information regarding SBREFA on the Small Business Administration's Web page at http://www.sba.gov/advo/archive/sum_sbrefa.html.

The Paperwork Reduction Act of 1995, 44 U.S.C. 3507(d), requires that the FBI consider the impact of paperwork and other information collection burdens imposed on the public. There is no current or new information collection requirements associated with this proposed rule. The records that are contributed to DIVS are created by the FBI or other law enforcement and intelligence entities and sharing of this information electronically will not increase the paperwork burden on the public.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, 109 Stat. 48, requires Federal agencies to assess the effects of certain regulatory actions on State, local, and tribal governments, and the private sector. UMRA requires a written statement of economic and regulatory alternatives for proposed and final rules that contain Federal mandates. A “Federal mandate” is a new or additional enforceable duty, imposed on any State, local, or tribal government, or the private sector. If any Federal mandate causes those entities to spend, in aggregate, $100 million or more in any one year, the UMRA analysis is required. This proposed rule would not impose Federal mandates on any State, local, or tribal government or the private sector.

Background. Under 29 CFR 1926.501(b)(13), workers engaged in residential construction six (6) feet or more above lower levels generally must be protected by conventional fall protection ( i.e., guardrail systems, safety net systems, or personal fall arrest systems). However, if an employer can demonstrate that such fall protection is infeasible or presents a greater hazard, it may implement a written fall protection plan meeting the requirements of § 1926.502(k).

After OSHA promulgated § 1926.501(b)(13) in 1994, representatives of the residential construction industry argued that they needed more compliance flexibility than the standard allowed. As a result, OSHA issued Instruction STD 3.1 on December 8, 1995. STD 3.1 set out an interim compliance policy that permitted employers engaged in certain residential construction activities to use specified alternative procedures instead of conventional fall protection. These alternative procedures could be used without a prior showing of infeasibility or greater hazard and without a written, site-specific fall protection plan.

On June 18, 1999, the Agency issued STD 3-0.1A (subsequently re-designated STD 03-00-001), which was a plain language replacement for STD 3.1. And shortly after issuing STD 03-00-001, OSHA published an Advanced Notice of Proposed Rulemaking (ANPR). (64 FR 38077, July 14, 1999). The Agency noted that publication of that notice marked the “begin[ning] [of its] * * * evaluation * * * of” STD 03-00-001. In the ANPR, the Agency noted that there had been “advances in the types and capability of commercially available fall protection equipment” since the promulgation of § 1926.501(b)(13) (64 FR at 38080), and stated that it “intend[ed] to rescind * * * [STD 03-00-001] unless persuasive evidence * * * [was] submitted * * * demonstrating that for most residential construction employers complying with * * * [§ 1926.501(b)(13)] is infeasible or presents significant safety hazards.” (64 FR at 38078).

Summary of Action. In Directive STD 03-11-002 OSHA rescinds STD 03-00-001. In the new directive, OSHA describes the comments it received in response to the ANPR and concludes that it did not receive “persuasive evidence” showing a continued need for STD 03-00-001. OSHA notes that there continue to be high numbers of fall-related fatalities in residential construction. Directive STD 03-11-002, also describes more recent developments, including recommendations from the Advisory Committee on Construction Safety and Health, the National Association of Home Builders, and the Occupational Safety and Health State Plan Association, that provide independent support for the Agency's decision to rescind STD 03-00-001.

Directive STD 03-11-002 sets forth OSHA's interpretation of “residential construction” for purposes of 29 CFR 1926.501(b)(13) and explains that existing compliance guidance referencing STD 03-00-001 will be withdrawn or revised as appropriate.

This document was prepared under the authority of David Michaels, PhD, MPH, Assistant Secretary of Labor for Occupational Safety and Health, U.S. Department of Labor, 200 Constitution Avenue, NW., Washington, DC 20210, pursuant to Sections 4, 6, and 8 of the Occupational Safety and Health Act of 1970 (29 U.S.C. 653, 655, and 657), and Secretary of Labor's Order 4-2010 (75 FR 55355).

On June 17, 2010, the Department of the Treasury (Treasury), Financial Management Service (FMS), published a notice of proposed rulemaking (NPRM) at 75 FR 34394, requesting comment on a proposed amendment to 31 CFR part 208 (Part 208), which implements the requirements of 31 U.S.C. 3332. Section 3332, title 31, United States Code, as amended by subsection 31001(x)(1) of the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) (Section 3332), generally requires that all Federal nontax payments be made by electronic funds transfer (EFT), unless waived by the Secretary. The Secretary must ensure that individuals required to receive Federal payments by EFT have access to an account at a financial institution “at a reasonable cost” and with “the same consumer protections with respect to the account as other account holders at the same financial institution.” See 31 U.S.C. 3332(f), (i)(2). Direct deposit is the primary method used to make EFT Federal payments.

The NPRM proposed to amend Part 208 to require all recipients of Federal nontax payments to receive payments by EFT, effective March 1, 2011, with a delayed effective date of March 1, 2013 for individuals receiving Federal payments by check on March 1, 2011, and for individuals who file claims for Federal benefits before March 1, 2011 and request check payments when they file. Recipients receiving payments by direct deposit prior to March 1, 2011, would continue to do so under the proposed rule.

Treasury's proposed rule stated that a Federal payment recipient could choose to have payments directly deposited to his or her own account at the recipient's financial institution. The NPRM stated that individuals who did not choose direct deposit of their payments to an account at a financial institution would be enrolled in the Direct Express®  1 Debit MasterCard® card program, a prepaid card program established pursuant to terms and conditions approved by FMS. The proposed rule contemplated that, beginning on March 1, 2013, all recipients of Federal benefit and other non-tax payments would receive their payments by direct deposit, either to a bank account or to a Direct Express® card account.

Treasury sought comment on all aspects of the proposed rule, and specifically requested comments regarding (1) exceptional circumstances where specific types of individual EFT waivers could be needed, (2) the costs to recipients for accessing their benefit payments received by paper check compared to those received by EFT, and (3) alternative phase-in approaches.

Treasury is finalizing the proposal in the NPRM to require, in general, that all Federal nontax payment recipients receive payments by EFT. The March 1, 2011 effective date has been changed to May 1, 2011. There remains a delayed effective date of March 1, 2013, for: (1) individuals receiving Federal payments by check on May 1, 2011; and (2) individuals who file claims for Federal benefits before May 1, 2011 and request check payments when they file. In addition, after consideration of the comments received, Treasury is modifying its proposed elimination of all individual waivers from the EFT requirement. Instead, Treasury will automatically waive the EFT requirement for: (1) A recipient born prior to May 1, 1921, who is receiving Federal payments by check on March 1, 2013; (2) a payment that is not eligible for deposit to a Direct Express® prepaid card account; and (3) a recipient whose Direct Express® card has been suspended or cancelled. Also, the final rule establishes the criteria under which a payment recipient may request a waiver if the EFT requirement creates a hardship due to his or her mental impairment or remote geographic location.

Part 208 sets forth the general rule requiring Federal payments to be made by EFT and the requirements for accounts to which Federal payments may be sent by EFT. “Federal payment” means any nontax payment made by an agency, including, but not limited to, Federal wage, salary, and retirement payments; vendor and expense reimbursement payments; benefit payments; and miscellaneous payments. See 31 CFR 208.2(g). Federal payments include payments made to representative payees and other authorized payment agents. See 31 CFR 210.5(b)(1). For Part 208 purposes, “agency” means any department, agency, or instrumentality of the United States Government, or a corporation owned or controlled by the Government of the United States. See 31 CFR 208.2(a).

As explained in the NPRM, Part 208 provides that any individual who receives a Federal benefit, wage, salary, or retirement payment is eligible to open an Electronic Transfer Account (ETA) at a financial institution that offers such accounts, and establishes the responsibilities of Federal agencies and recipients under the regulation. Part 208 also sets forth a number of waivers to the general requirement that Federal payments be delivered by EFT. See 31 CFR 208.4. Among the waivers previously included in the regulation were waivers for situations in which an individual determined that payment by EFT would impose a hardship due to a physical or mental disability or a geographic, language or literacy barrier, or would impose a financial hardship. See 31 CFR 208.4(a).

Treasury has reviewed the comments received in response to the NPRM, and, as described in more detail below, modified its proposal to eliminate all individual waivers from the EFT requirements. The Secretary's waiver authority remains unchanged, and Federal agencies continue to have the ability to waive payment by direct deposit or other EFT method in the circumstances described in paragraphs (b) through (g) of § 208.4, namely, for situations where the infrastructure in a foreign country does not support EFT, for certain disaster or military situations, for situations in which there may be a security threat or for valid law enforcement reasons, for non-recurring payments, and for unusual and/or urgent situations where the Government would be seriously injured unless payment is made by a method other than EFT. The final rule revises the criteria for the agency waiver related to non-recurring payments, as described below.

Treasury received 33 comment letters and 1,087 comments solicited by and sent to a consumer advocate organization via its Web site. Of the 33 comment letters, three were from consumer advocate groups. One of the groups submitted its comments on behalf of its low-income clients, another consumer advocate organization, and 23 national, state, and local advocates for low and moderate income recipients of Federal benefits. While the consumer advocate groups generally acknowledged the benefits of EFT, all three groups opposed the complete elimination of waivers for individuals for whom EFT might impose a hardship and suggested improvements to the Direct Express® card and changes to the Direct Express® card terms and conditions. In addition, the three groups recommended that Treasury issue consumer protection rules for individuals whose benefit payments are delivered electronically to prohibit predatory loans, the unlawful freezing or garnishing of benefit payments legally exempt from garnishment, and the offsetting of overdraft and other bank fees against benefit payments.

Three comment letters were from associations that represent financial institutions. One commenter supported Treasury's proposal, provided that payments would be delivered, by default, to a recipient's existing bank account and that recipients would be allowed to elect direct deposit to reloadable prepaid cards issued by insured depositary institutions. Another commenter supported Treasury's proposal, including the alternative debit card option, because of the potential cost savings to credit unions. The third association commenter also supported Treasury's proposal and urged Treasury not to include individual waivers in the final rule.

A national electronic payments association and one financial institution submitted comment letters supporting Treasury's proposal. The electronic payments association supported the Direct Express® card as a safe, convenient, and reasonably priced alternative for unbanked Federal benefit recipients. The financial institution urged Treasury to consider expanding its regulations to allow direct deposit of Federal payments to general purpose reloadable prepaid debit cards.

Fourteen attorneys and an association that represents Social Security claimants' representatives recommended that Treasury waive the EFT requirements for attorneys and other representatives who receive fee payments for representing Social Security claimants. The association and the attorneys stated that, when fee monies are electronically deposited into an attorney's account, the attorney does not receive adequate information to determine which client the fee payment is for. In addition, the association and the attorneys stated that many attorneys and other representatives, as associates or employees of a firm, are precluded from accepting direct deposit of representative fees into their own personal bank account. These fee payments must be deposited directly to accounts owned by their firms. This is problematic because the Social Security Administration will only make representative fee payments to individual attorneys or representatives, most of whom are not the owners of their firm's bank account, and therefore cannot accept or direct payments to them.

A national trade association representing neighborhood financial service providers, such as check cashers, remittance servicers, short-term lenders and bill payment providers, did not support Treasury's proposal. It viewed the proposal as depriving Americans of the right of choice with respect to the delivery of Federal nontax payments, disproportionately affecting low- and moderate-income individuals.

Treasury received six comment letters from individual or unidentified commenters with various concerns. One of these commenters, a coordinator of a local Volunteer Income Tax Assistance program, supported the proposed rule, encouraged Treasury to discontinue the ETA program, and suggested modifying the Direct Express® card program to provide at least one surcharge-free automated teller machine (ATM) withdrawal at any ATM. Another commenter, a certified public accountant, raised concerns about whether the proposed rule would create problems if nursing homes are unable to clearly identify the resident for whom a benefit payment has been directly deposited to the nursing home's trust account. Another individual suggested that Treasury clarify that it continues to support the ETA as an option for receiving Federal benefit payments by direct deposit. Another individual suggested that Treasury require financial institutions to allow recipients of Federal funds to obtain the full amount of their payment in one transaction with minimal charge. An individual attorney raised a concern that direct deposit of Social Security disability or SSI benefits could inadvertently lead to disqualification from Medicaid whereas an individual receiving a paper check payment can control when the payment is deposited into his or her account. An unidentified individual opposed the proposed rule primarily because the commenter believed that benefit recipients are entitled to choose to receive their payments by paper check, and did not agree with Treasury's underlying rationale for the proposed rule.

In addition to its own comment, one consumer advocate organization sent Treasury 1,087 comments it solicited and received through its Web site. Sixty-three of the Web site commenters expressed support for Treasury's proposed rule, but most of the commenters opposed the proposal for one or more of the following reasons: (1) 845 of the commenters cited a preference for allowing those who wish to continue to receive a paper check to do so (more than 140 of the commenters already receive their payments electronically, but were concerned for others who may choose not to do so); (2) 615 of the commenters cited an objection to bank fees, including Direct Express® card fees, with approximately 482 commenters objecting to requiring a benefit recipient to pay fees to receive a monthly paper statement; (3) 558 commenters cited concerns about requiring benefit recipients to bank online and/or discomfort with adapting to new payment technologies, especially for older benefit recipients; (4) 475 commenters cited concerns about whether electronic banking would lead to increased identity theft; (5) 410 commenters cited concerns about providing bank account information to the Social Security Administration or other Federal agencies; and (6) 134 commenters were concerned about the ability of elderly benefit recipients to change the way they receive their benefit payments. Approximately 125 of the commenters simply expressed general opposition to Treasury's proposal. Other miscellaneous reasons for opposing Treasury's proposal included preference for checks (65 commenters), concerns about EFT processing (13 commenters) and improper garnishment (6 commenters), opposition to prepaid cards (21 commenters), concerns about access to the banking system (35 commenters), need for access to a free account (18 commenters), and hardship (10 commenters).

Finally, three Federal government agencies submitted comments for Treasury's consideration. One agency expressed uncertainty about whether recipients of payments from that agency would qualify for the Direct Express® card. Two agencies raised concerns about making payments to recipients who reside in geographically remote areas with no access to electronic financial services.

In developing the final rule, Treasury has attempted to implement the requirements of Section 3332 on balance with concerns expressed by different commenters. The final rule essentially adopts the core provisions of the proposed rule, and also makes available several important waivers for individuals in circumstances in which Treasury finds that requiring EFT could create a significant hardship for those individuals. The final rule reflects the view of the commenters who generally agree that receiving payments by EFT is beneficial to recipients and taxpayers for the reasons described in the NPRM and this final rule. Treasury has addressed the concerns raised by those opposed to the EFT requirement, and will continue to monitor carefully whether recipients are subject to additional hardships in the future because of the requirements of this final rule. Treasury's responses to the NPRM comments are as follows.

Many commenters voiced a preference for Treasury to allow recipients the choice of a paper check as a way to receive their Federal payments. Treasury recognizes that the paper check has been an important Federal payment instrument for at least 150 years. Treasury also recognizes that choice, as expressed by many of the commenters, is an important American value. While Congress mandated that all non-tax payments be made electronically, Part 208 continues to offer payment recipients the choice of how to receive their payments in an electronic format. Payment recipients have many financial account options available to them, and in fiscal year 2010, more than 80% of all non-tax payment recipients selected their own accounts for the purpose of receiving payments by EFT. Further, Congress conditioned its mandate on Treasury making available to payment recipients an account at a financial institution “at a reasonable cost” and with “the same consumer protections with respect to the account as other account holders at the same financial institution.” See 31 U.S.C. 3332(f), (i)(2).

The Direct Express® card, which is now a nationwide option for most Federal benefit recipients, meets these statutory account requirements. There are no monthly fees and most services are free, so it is possible for an individual to use the Direct Express® card for free. There are no fees for cardholders to sign up for or activate the card; receive deposits; make purchases at retail locations, online or by telephone; get cash at retail locations and financial institutions; or check the card's balance at an ATM, by telephone or online. Transaction history and other account information are available at no cost online or by telephone, but if desired, a cardholder may receive a monthly paper statement for $ .75 per month. There are no fees for declined transactions and, in rare instances when overdrafts occur, there are no overdraft fees.

Cardholders can choose to receive free automated text, email or telephone “low balance” alerts or “deposit notifications” when money is deposited to their card account. Cardholders may close their Direct Express® card account at any time without a fee. There are no inactivity fees and there is no charge for bank teller cash withdrawals at MasterCard® member banks. The free services and minimal fees are fully disclosed on the Direct Express® Web site ( www.USDirectExpress.com ), in materials available to interested applicants, and in materials that are sent to new cardholders along with the card. Fee and features information are also available by calling the Direct Express® toll-free call center.

Cardholders may make purchases anywhere Debit MasterCard® is accepted, including millions of retail locations worldwide, online, or by telephone. The Direct Express® card provider does not impose any limits on the number of transactions a cardholder may conduct with a card. Similarly, cardholders may make cash withdrawals and check their account balances at ATMs. A cardholder is allowed one free ATM cash withdrawal for every Federal payment the cardholder receives, valid until the end of the month following the month of receipt. For subsequent ATM cash withdrawals, a cardholder pays a fee to the card issuer of $.90 per ATM withdrawal in the United States. ATM owners often charge ATM users additional fees, known as “surcharge fees;” however, a Direct Express® cardholder may make cash withdrawals at more than 53,000 Direct Express® card surcharge-free network ATMs without paying any surcharge fees. The Direct Express® card surcharge-free ATM network consists of ATMs owned by a variety of entities who have agreed to offer surcharge-free ATM access to Direct Express® cardholders. Cardholders are provided with information on how to recognize the various logos that identify a surcharge-free ATM, the Direct Express® card Web site has an ATM locator feature to assist cardholders in finding a surcharge-free ATM, and cardholders may call the customer service department with any questions on how to locate a surcharge-free ATM. The Direct Express® card provider does not impose a daily limit for ATM withdrawals, although many ATM owners do set limits on the maximum amount of cash that may be withdrawn by any debit cardholder. ATM owners' daily ATM withdrawal limits typically range from $200 to $1,000.

Direct Express® cardholders are protected by the Federal Reserve Board's Regulation E (12 CFR part 205, which implements the Electronic Funds Transfer Act (Regulation E)), which generally provides certain protections to a cardholder whose card is lost or stolen, subject to reporting requirements. In fact, Direct Express® cardholders have 90 days to report unauthorized transactions rather than the typical 60 days offered by most financial institutions. Card balances are covered by deposit insurance by the Federal Deposit Insurance Corporation (FDIC) to the extent allowed by law and Direct Express® cardholders are not at risk for an improper garnishment or the related freezing of funds in the card account. More information about the Direct Express® card, including a list of all fees and the terms and conditions of card use, can be found at www.USDirectExpress.com.

In light of the choices available to payment recipients, as well as the benefits of electronic payments to recipients and the Government, Treasury believes it is appropriate to make all Federal nontax payments electronically.

In its NPRM, Treasury requested comments about “examples of exceptional circumstances where specific types of individual EFT waivers could be needed, even with the availability of the Direct Express® card for Federal benefit recipients.” See 75 FR 34394, at 34395. After review and consideration of all of the comments, Treasury agrees with those commenters who urged Treasury to reconsider its proposed elimination of individual waivers from the EFT requirement for claims of hardships due to mental disability or geographic barriers. Treasury does not agree, however, that such reconsideration should be extended to the elimination of waivers related to physical disability, language or literacy barriers, or where payment by EFT would impose a financial hardship. None of the commenters provided specific examples of how physical disability or language or literacy barriers would make receiving payments by EFT more difficult than receiving payments by paper check and Treasury does not find any basis for maintaining a waiver for such conditions. In addition, although several commenters urged Treasury to consider that any fees charged for use of the Direct Express® card could create a financial hardship, the Direct Express® card is structured in such a way that it may be used at no cost to the payment recipient, thus minimizing a beneficiary's risk of incurring a financial hardship to receive and use his or her benefits. Treasury recognizes that more education regarding how to use the card for free is needed and is expanding its program to provide such information to Direct Express® cardholders in various ways, including direct mail, informational pictorial brochures, online videos, and more.

One consumer advocate organization urged Treasury to retain a paper check option for those who articulate a “legitimate” reason for receiving payments by paper check, including physical or mental disability that makes it difficult to use a debit card; difficulty accessing funds without incurring fees, costs, or inconvenience; availability of a less expensive and more beneficial alternative using a paper check; dispute with the participating financial provider of the debit card; concerns over privacy or financial security; literacy and technology barriers; and need to accommodate assistance provided by a representative payee or family member. This commenter proposed that Treasury accept individuals' statements about the need for a paper check without inquiry or review. Another consumer advocate organization similarly urged Treasury to reconsider its proposal to eliminate individual waivers with respect to people with mental disabilities, emotional disorders, or other disabilities making the use of the Direct Express® card difficult; people who live in rural areas, or even inner city areas, where there is not ready access to banks and automated teller machines (ATMs); and other hardships that make both a bank account and the Direct Express® card unusable for the payment recipient. This organization also suggested that Treasury not review waiver requests because the costs of policing a waiver process would far outweigh the costs associated with letting recipients who would not qualify for a waiver receive a paper check. Another consumer advocate organization also objected to the elimination of the provision allowing recipients to determine on their own whether they qualify for a waiver to obtain their Federal payments by paper check. Unlike the other two consumer advocate organizations, this organization urged Treasury to offer the broadest waiver possible to allow any individual who wants his or her payments by paper check to receive them that way.

After reviewing the comments, Treasury has reconsidered its proposed elimination of the waivers related to mental disability and geographic barriers. A consumer advocate organization commented on the need to provide a waiver for individuals who have mental or emotional disabilities, for example, someone with an anxiety disorder that makes it difficult to receive benefits electronically, but not by paper check. Another commenter cited his parents with poor memories stating that having their payments deposited electronically would simply add to their confusion and problems in taking care of their own finances. In recognition of individuals within the payment recipient population who may have mental impairments that do not hinder their ability to manage their financial transactions using checks or cash, but for whom EFT would present a significant hardship, Treasury is retaining a waiver from the EFT requirement for an individual payment recipient for whom EFT would impose a hardship because of his or her inability to manage a bank account or prepaid debit card due to a mental impairment. Treasury notes that, in those cases where a beneficiary suffers from a mental disability necessitating the appointment of a representative payee, the representative payee is the “recipient” of a Federal payment under this rule. In those cases, it is the condition of the representative payee and not the beneficiary that is the determining factor as to whether a waiver is appropriate.

Two Federal agencies cited the need to consider the inability of payment recipients who live in remote and less developed areas of the country to access their payments electronically. For example, according to one agency, many recipients of Individual Indian Money payments live in remote and less developed areas such as Alaska and on reservations throughout Indian Country in an environment lacking many amenities including public infrastructure such as roads and convenient access to providers of goods and services. The other agency noted that Regional Advisory Council members appointed under the Alaska National Interest Lands Conservation Act (ANILCA) travel to council meetings held in off-roadway bush villages where it is highly unusual for most village merchants to have the infrastructure to accept charge cards. These villages are cash economies with check cashing capabilities, but no ability to process electronic financial transactions. In its comment, one consumer advocate organization cited the lack of access to banks and ATMs in the majority of Montana, rural parts of Alaska, and some rural parts of Missouri. The fact that an area is rural or remote does not necessarily preclude the use of electronic financial services. As these examples demonstrate, it is the combination of being in an area that is rural or remote plus being in an area lacking the transportation or other infrastructure (for example, access to the Internet and online banking) necessary to access electronic financial services. Therefore, Treasury is including in the final rule a waiver from the EFT requirement for an individual recipient who lives in a remote area lacking the infrastructure to support electronic financial transactions.

Under this final rule, to assert one of these two waivers based on mental impairment or geographic barrier, a Federal payment recipient is required to provide to Treasury a written certification supporting his or her request, in such form as Treasury may prescribe. The individual is required to sign the certification before a notary public, or otherwise file the certification in such form that Treasury may prescribe. Treasury will publish guidance describing the waiver process.

In addition to the limited waivers from the EFT requirement for hardship claims due to mental impairment and geographic barriers, Treasury has added automatic waivers for: (1) A recipient born prior to May 1, 1921, who is receiving Federal payments by check on March 1, 2013; (2) a payment that is not eligible for deposit to a Direct Express® prepaid card account; and (3) a recipient whose Direct Express® card has been suspended or cancelled.

Many commenters were concerned about the ability of elderly check payment recipients to adapt to electronic money technologies. For example, one consumer advocate organization explained that “[p]eople who are older are more likely to be unaccustomed to or uncomfortable using the technology involved in electronic disbursements.” An individual commenter noted: “Many of us older people do not understand and get confused by this paperless society * * * ” On the other hand, another commenter believed that paper checks cause problems for older people noting that through her work as a coordinator of a Volunteer Income Tax Assistance program in Missouri, she has “witnessed firsthand the hardships that * * * elderly * * * individuals face when a Treasury Check is lost or misdirected through the mail.” Many senior citizens receive their benefit payments electronically, and are very capable of managing their finances electronically.

In recognition of the concerns raised by the commenters about the elderly, Treasury has established an automatic waiver from the EFT requirement for recipients born prior to May 1, 1921, who are receiving Federal payments by check on March 1, 2013. According to the Social Security Administration, almost 80% of Social Security recipients who will turn 80 years old in 2011 receive their payments electronically. By comparison, fewer than 72% of Social Security recipients who will turn 90 years old in 2011 receive their payments electronically. Further, for most of the population of elderly benefit recipients, the EFT requirement is not effective until March 2013, giving Treasury, Federal agencies, community organizations, and others more than two years to educate individuals so they may become comfortable with and adapt to the requirement. Between the publication of the final rule and the effective date for current check recipients, Treasury will work with Federal agencies and various organizations to educate all affected individuals, including the elderly and long-time check recipients, about how to use direct deposit or the Direct Express® debit card.

Treasury has also waived the EFT requirement for any payment that is not eligible for a Direct Express® card account and for those payment recipients whose Direct Express® card has been suspended or cancelled by the card issuer due to improper, fraudulent, or unauthorized use. The Direct Express® card program currently accepts Social Security, SSI, and Veterans compensation and pension benefit payments, as well as Railroad Retirement benefit, Black Lung benefit, and civil service retirement benefit payments. If a recipient receives a payment for which the Direct Express® card is unavailable (for example, an Individual Indian Money payment or a pension benefit payment), then the individual is automatically exempt from the EFT requirement for that payment type. Once the card becomes available for the payment type, then the recipient will be required to switch to an EFT payment option. If the individual also receives other types of Federal payments that are accepted by the Direct Express® card, those payments remain subject to the EFT requirement.

Further, under the terms and conditions of the Direct Express® card program, the card issuer reserves the right to suspend or cancel the Direct Express® card for reasons such as cardholder breach of the account terms and conditions, multiple cardholder claims of unauthorized transactions, a card being used for an unlawful purpose, or other similar reasons. Treasury agrees that the card provider needs to retain the right to suspend or cancel an individual's card account in these types of cases, and recognizes that in the few instances where suspension or cancellation occurs, the payment recipient may have no other way to receive his or her payment except by a paper check.

Given the availability of the Direct Express® card and Treasury's expansion of its public education campaign describing how to use the Direct Express® card, physical disability, language or literacy barriers, and fees no longer present hardships requiring waivers from the EFT requirement.

i. Physical Disability. As noted above, Treasury requested specific examples of the types of hardships that could make it difficult to use EFT as compared to a paper check, but none were cited by the many commenters. While Treasury recognizes that not all physical disability barriers have been eliminated, the Americans With Disabilities Act of 1990, Public Law101-336 (Jul. 26, 1990), and the advent of many services that benefit the physically disabled, such as accessible transportation, public accommodations, and online banking, have generally rendered receiving benefit payments by EFT no more difficult than receiving payments by paper check. In some cases, EFT payments may even be easier for the recipient. With the elimination of this waiver, Treasury recognizes that for those who are physically disabled, the ability to travel in remote and rural areas may be limited, but considers this to be more a hardship due to a geographic barrier, described above, than solely because of a physical disability. In addition, as suggested by two commenters, Treasury is working with the Direct Express® card provider to determine the feasibility of providing cardholders with an additional convenience card that could be loaded via the Internet or by telephone with a cardholder-determined amount of funds for use by a caregiver or relative to make purchases on behalf of the cardholder.

ii. Language Barriers. None of the commenters urged Treasury to continue the waiver from the EFT requirements based on hardship due to language barriers. All of the Direct Express® cardholder materials are in English and Spanish, and the Direct Express® card provider offers both English and Spanish support through its automated telephone service and its customer service representatives. Callers may choose to speak with a customer service representative in either language. In addition, the Direct Express® card provider offers real-time free interpreter services in virtually any language a caller requires. For example, in September 2010, the Direct Express® card provider handled customer service calls in 19 different languages in addition to English, including languages such as Mandarin, Urdu, Tagalog, and Tigrinya.

iii. Literacy Barriers. None of the commenters specifically urged Treasury to continue its waiver based on hardship due to literacy barriers, although several commenters alluded to the difficulties people have due to a lack of basic literacy skills. For example, one commenter noted that the constituents she works with in a poor, rural area of Georgia are often barely literate and deal with cash because they understand it. Treasury recognizes that lack of basic literacy skills hinders many in managing their financial affairs, and understands the challenges associated with moving some individuals to payment by EFT from payment by paper check. The delayed effective date of the rule for those currently receiving paper checks to March 2013, gives Treasury additional time to expand its public education efforts related to EFT options. Among other things, through its Go Direct ® campaign, Treasury will work with more than 1,800 partners who know their communities best to help educate check recipients about the benefits of direct deposit, the options for receiving payments electronically, and how to safely and cost-effectively use the Direct Express® card. With the assistance of its partners, Treasury is able to tailor its education efforts to meet the differing needs of local communities.

Treasury especially recognizes the need for and importance of expanded cardholder education for existing and new Direct Express® cardholders. While Treasury recognizes that the current pool of Direct Express® cardholders may not resemble future Direct Express® cardholders in either demographic characteristics or attitudinal variables, according to research conducted in March 2009 (Direct Express—Cardholder Satisfaction and Usage Survey, OMB Control No. 1510-0074), 95 percent of Direct Express® cardholders are satisfied with the card. 2 Eight in ten satisfied cardholders cite convenience, safety or immediate access to money as reasons for their satisfaction. Eighty-six percent of those surveyed said they would recommend the card to a friend or family member who receives Federal benefits. Despite this high satisfaction rate, Treasury believes that many Direct Express® cardholders may be unaware of important features that promote proper card usage and reduce fees, such as the availability of free text message alerts on their cell phones when a deposit is made or when their balance is low, the surcharge free ATM network, the ability to get cash back at point-of-sale (POS) locations for free, or even the ability to make purchases at retail locations for free. Using its research, including recent research conducted with respect to cardholder education materials sent to approximately 7,000 newly enrolled Direct Express® cardholders who receive Veterans compensation and pension benefit payments, Treasury will develop materials, such as informational pictorial brochures, and methods for further educating benefit recipients as necessary, and as suggested by several commenters.

In addition, Treasury continues to work with its Go Direct® partners to promote financial education. For example, through its partnership with the Federal Deposit Insurance Corporation (FDIC), the Go Direct® campaign is working to raise awareness of the value of financial education through the FDIC's award-winning Money Smart financial education program. The Money Smart program is a comprehensive financial education curriculum designed to help individuals outside the financial mainstream enhance their financial skills and create positive banking relationships. Many Go Direct® campaign partners have used the Money Smart curriculum in their financial education efforts, including banks, credit unions, law enforcement and crime prevention organizations, aging and senior organizations, library systems, and community and disability organizations.

iv. Financial Hardship. Many commenters suggested that the cost of receiving payments electronically is higher than receiving payments by paper check for many benefit recipients, and expressed concern that Treasury's EFT requirement will create a financial hardship for many of America's most vulnerable population. Treasury's goal is to provide Federal beneficiaries and other payment recipients with a low-cost option for receipt of Federal payments, which goes beyond the requirement in Section 3332 that Treasury make available an account at a “reasonable cost.” See 31 U.S.C. 3332(i)(2)(a). In addition to low-cost accounts available from financial institutions and other financial service providers around the country, Federal payment recipients have at least one low-cost option—the Direct Express® card—and many recipients potentially have a second option—the Electronic Transfer Account (ETA), an account developed by Treasury in 1999. Although the ETA is not available on a nationwide basis and does not include some of the more useful features that have become available with prepaid debit cards in recent years (thus making the Direct Express® card a more cost-effective and useful option in most cases), the ETA continues to meet the needs of some benefit recipients and will continue to be available.

The Direct Express® card offers a user-friendly low-cost option for Federal benefit payment recipients ( see Direct Express® card fee tables below). The account fees are structured so that even those cardholders without access to surcharge-free ATMs can use their cards for free because they can access their funds through free POS purchases either in-store or online, can get cash back for free at retail locations, and can get cash for free at any MasterCard® member financial institution. The Direct Express® surcharge-free ATM network has more than 53,000 surcharge-free ATMs, and the Direct Express® card program provider continues to identify opportunities to expand the network further.

While many commenters expressed concern about having to pay fees to the Direct Express® card provider, or pay fees to receive a paper statement, Treasury believes that these fees are generally lower than costs that could be imposed for cashing a Treasury check and managing financial transactions on a cash basis. The Direct Express® fee tables are as follows:

The low fees and nationwide availability of the Direct Express® card more than satisfy the statutory requirement of 31 U.S.C. 3332 for Treasury to make available an account at a financial institution “at a reasonable cost” and with “the same consumer protections with respect to the account as other account holders at the same financial institution.” See 31 U.S.C. 3332(f), (i)(2).

A recent report comparing fees for general purpose reloadable prepaid cards helps illustrate the low cost of using a Direct Express® card. A consumer advocate organization conducted a case study showing the wide variations in fee structures for four prepaid card products. See, “Prepaid Cards: Second-Tier Bank Account Substitutes,” Consumers Union (September 2010) ( http://www.defendyourdollars.org/pdf/2010PrepaidWP.pdf ). Using a sample consumer scenario, 3 the report stated that, for the four prepaid card products studied, monthly fees ranged from $15.45 to $43.75 for the first and second months of card use. In contrast, as shown in Figure 1, below, a Direct Express® cardholder under the same scenario would spend no more than $ .90 per month if using surcharge-free ATMs (one free ATM withdrawal per deposit, with a $ .90 per ATM withdrawal charge after that), and no more than $7.89 per month if no surcharge-free ATMs were used, assuming the average $2.33 surcharge fee per withdrawal cited in the 2010 checking study by bankrate.com ( http://www.bankrate.com/finance/checking/banks-taking-a-bigger-bite-with-atm-fees.aspx ). 4 There is no online bill paying service currently offered in the Direct Express® card program, so a cardholder would pay his or her own bills directly to the vendor or retailer, with no fee being charged by the provider. The Direct Express® card provider does not impose charges for POS purchases, balance inquiries, or for receiving a deposit.

In addition, the Direct Express® card does not have any monthly fees, fees for activating the card, or fees for customer service calls, which can drive up costs of other prepaid card products. By educating Direct Express® cardholders to learn how to avoid multiple ATM withdrawals, cardholders can quickly learn how to incur no monthly fees whatsoever.

The regulatory impact assessment, below, contains additional scenarios describing the Direct Express® card fees based on card usage.

Costs incurred to use the Direct Express® card can compare favorably to the cost of cashing a check and conducting necessary cash transactions. While some individuals may be able to cash government checks at no cost, there are often fees of up to $20 or more for cashing a check, according to Treasury's research in 2007 (SSA & SSI Check Recipient Survey, OMB Control No. 1510-0074). Check recipients may also incur money order and postage costs to pay bills that are not incurred with the Direct Express® card.

a. ATM Cash Withdrawal Fees. A few commenters suggested a range of ways to maximize a cardholder's ability to access his or her cash from an ATM for free. Suggestions ranged from providing cardholders with at least one surcharge-free ATM withdrawal to providing free unlimited ATM withdrawals and expanding the current surcharge-free network. Treasury's current Direct Express® card offers sufficient opportunities for a cardholder to access his or her cash without incurring a fee. The Direct Express® card program offers one free ATM withdrawal for each deposit received. The free withdrawal is valid until the last day of the month following the month of receipt of the deposit. Thus, if a cardholder receives two deposits in January 2011, the cardholder is entitled to two free ATM cash withdrawals that are good until February 28, 2011. In addition, cardholders may obtain cash at retail locations and bank tellers without incurring a fee. The Direct Express® card provider does not impose limits on the number of cash back or teller transactions a cardholder may conduct, although merchants may impose a limit on the amount of cash back a cardholder may receive.

After using available free withdrawals, Direct Express® cardholders who choose to withdraw additional cash from an ATM are charged a fee by the Direct Express® card provider of $ .90 per withdrawal. The card provider does not impose any limits on ATM withdrawals. If the cardholder withdraws cash from an ATM that is not in the Direct Express® network, the ATM owner may charge the cardholder an additional fee, known as a “surcharge,” which can range from $1.00 to $3.50 or more. If the cardholder uses one of the more than 53,000 Direct Express® surcharge-free ATMs, the cardholder can avoid a surcharge fee. The Direct Express® card provider continues to look for ways to expand the network, and Treasury will continue to educate current and new cardholders about alternative ways to get cash without paying a fee and how to use their card to pay for goods and services.

b. Free Monthly Paper Statements. Several commenters stated a preference for paper statements at no cost to the cardholder. Currently, Direct Express® cardholders may obtain transaction and balance information for free by calling a customer service number or visiting the Direct Express® secure Web site. Upon request, the Direct Express® card provider will send a cardholder a paper transaction history at no cost. In addition, cardholders may sign up for free text message, phone call, or email alerts when they receive a deposit or reach a low balance amount pre-determined by the cardholder. If a cardholder prefers a monthly paper statement, the provider charges a fee of $ .75 per month. Because not every cardholder desires or would use a paper statement, and because transaction and balance information is available via different mechanisms, Treasury has determined that the cost of paper statements should be borne by those who want them. While other bank accounts may offer free monthly paper statements, as one commenter noted, these bank accounts generally also require credit checks and minimum balances, and have other requirements that hinder the ability of recipients to obtain accounts, none of which are required to open a Direct Express® card account. Two commenters suggested that the Direct Express® card program at a minimum offer a free annual paper statement for those who do not elect to receive electronic or monthly paper statements. The Direct Express® card provider currently makes available a cardholder's complete transaction history, upon request and at no cost. Therefore, Treasury believes that it has adequately addressed concerns related to free monthly statements.

c. Encourage Opt In Election at Enrollment Time of Method for Receiving Transaction Information. One commenter suggested that cardholders who sign up for a Direct Express® card be given the opportunity at enrollment to elect to receive paper statements, text messages, or electronic mail messages with transactions and balance information. Treasury explored this suggestion, but determined that it is not feasible at this time given that many of the Direct Express® card enrollments are handled by the respective Federal benefit agency when the beneficiary is applying for his or her benefit. Treasury is exploring the use of additional mailings to cardholders to ensure that cardholders are aware of their options for receiving transaction and balance information.

d. Provide Additional Convenience Card. Two commenters suggested that the Direct Express® card program provide cardholders with the option of allocating a discrete amount of their funds to a second convenience card. The cardholder could then give this card to a caregiver or relative who could use it to make purchases for the cardholder. In this way, the cardholder would not have to turn over his or her primary card to the caregiver or relative and trust the caregiver or relative not to use all of the funds. Treasury supports this suggestion as a way to mitigate a cardholder's risks and is working with the Direct Express® card provider to determine the feasibility and cost of providing this option.

e. Provide Access to Checks. Two commenters suggested that the Direct Express® card program provide cardholders with the ability to write checks. Treasury has explored this suggestion, but is concerned that adding such an option could potentially increase fraud opportunities, add complexity to the card program, and increase costs to the cardholder. Instead, Treasury will educate cardholders on how to avoid the need to use checks by making purchases with the debit card, and if checks are necessary, where to find low-cost money orders. In addition, MasterCard has an initiative aimed at increasing acceptance of its card products by property managers. As part of this initiative, Treasury and MasterCard are working together to emphasize to property managers the importance of accepting the Direct Express® card for rent payments.

f. Ability to Reload Cards With Non-Federal Funds. Two commenters suggested that the Direct Express® card program be expanded to allow cardholders to deposit funds other than Federal payments to their card account. Treasury does not plan to implement this suggestion at this time because of the increased cost to the Direct Express® card program, increased opportunity for fraud, and added complexity for cardholders. Treasury has plans to expand the card program to include as many Federal payments as possible.

With respect to the broader need for more safe, low-cost financial account options, Treasury is exploring the feasibility of offering general purpose accounts to low- and moderate-income tax refund recipients and encouraging initiatives for financial products and services that are appropriate and accessible for millions of Americans who are not fully incorporated into the financial mainstream, as authorized by the “Improving Access to Mainstream Financial Institutions Act of 2010,” enacted as Title XII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 111-203, Jul. 21, 2010). The FDIC also is encouraging the banking industry to offer safe, low-cost transaction and basic savings account products for low- and moderate-income customers with its Model Safe Accounts Pilot ( http://www.fdic.gov/consumers/template/ ).

g. Changes to Terms and Conditions of the Direct Express® Card Program. Three commenters suggested changing some of the terms and conditions of the Direct Express® card program. One suggestion was to change the title of the Direct Express® card program provider's terms and conditions document to “Notice of Rights and Obligations.” Other suggestions were to prohibit terms that waive a cardholder's right to a jury trial or to bring a class action lawsuit; to allow disputes to be governed by the laws of the state in which the cardholder resides, rather than the State of Michigan, which is where the Direct Express® card provider is located; not to require that the recipient contact the merchant prior to cancelling a preauthorized transfer; to make clearer when the time to dispute a charge begins; make clearer that garnishments are not permitted, except as authorized by law (for example, to collect delinquent taxes or child support); and to improve the protections under Regulation E. Treasury will review the terms and conditions and, at a minimum, will ask the Direct Express® card provider to clarify the language regarding dispute time frames and garnishments. At this time, Treasury does not plan to implement the remaining suggestions, which would result in additional costs to the Direct Express® card program, and perhaps even preclude Treasury from offering a valuable low-cost account option for those beneficiaries who prefer a prepaid debit card over a bank account. For example, allowing lawsuits involving the Direct Express® card program to be based on various choice-of-law provisions would increase costs for the program to an unacceptable level, leaving a large number of Federal benefit recipients without any cost-effective option for enjoying the safety and convenience of direct deposit. Requiring the Direct Express® provider to cancel a preauthorized debit before the cardholder has contacted the merchant could leave cardholders vulnerable to cancellation of needed goods or services because of a lack of understanding about the need to make alternative payment arrangements for necessary services, such as utilities. The Direct Express® card provider follows standard industry practices, except that with respect to the protections afforded under Regulation E, the Direct Express® card provider offers an extended time period within which to dispute a transaction from the industry standard of 60 days to 90 days. Treasury believes it has obtained the best possible terms and conditions for an account that provides the most cost-effective, consumer-friendly terms available. Treasury will, however, continue to work closely with the Direct Express® card provider to identify and suggest improvements to the program. Even though satisfaction with the Direct Express® card program among current cardholders remains very high at 95% (Direct Express®—Cardholder Satisfaction and Usage Survey, March 2009, OMB Control No. 1510-0074), Treasury is committed to taking all feasible and cost-effective steps to improve the program because the agency recognizes that current users may be different than future users in their demographic characteristics or attitudes towards the use of prepaid debit cards. In addition, it should be noted that, at any time, benefit recipients may choose direct deposit to their bank account rather than the Direct Express® card.

h. Cardholder Education. Several commenters suggested that Treasury should do more to educate beneficiaries about their payment options, and specifically about the Direct Express® card features, fees, and terms. One commenter suggested that the Direct Express® card program customer service be improved to make it easier to reach an operator. Another commenter suggested that cardholders should be provided with a wallet size information card, noting that “[t]hough the information on the Direct Express® card is generally quite good, it could be improved.” As mentioned previously, Treasury will be launching its expanded cardholder education campaign immediately to ensure that information about the Direct Express® card and how to use it are easily accessible to the beneficiary population for whom the card is intended. As part of its education effort, Treasury is in the process of working with the Direct Express® card provider to develop a wallet size information card for cardholders and pictorial brochure with information on how to use the card. In addition, Treasury works continuously with the Direct Express® card provider to maximize and improve customer service. For example, when Treasury and the provider learned of the difficulties cardholders were having in reaching a live customer service representative, the provider modified its telephone system and automated messages to make contact with a live representative easier from a cardholder's perspective. Among other things, Treasury's plans for cardholder education include direct mail and other communications explaining how to use the card to make purchases, pay bills, get cash back, as well as information about how to check balances and transaction history. As appropriate, Treasury will work with its 1,800 Go Direct® partners to further enhance its cardholder education efforts.

4. Regulation of the Banking Industry and Prepaid Cards. Several commenters suggested that Treasury take steps to improve consumer protections associated with financial services products. One commenter suggested that Section 3332 requires Treasury to take steps to ensure that any account established by an individual to comply with the EFT requirement is available at a “reasonable cost” and stated that Treasury is not complying with the statutory mandate by providing access to one account at a reasonable cost. Treasury disagrees. The statute does not require Treasury to ensure than any account chosen by a Federal payment recipient's must comply with the Section 3332(i) requirements. The provision requires that Treasury regulations ensure that individuals “required * * * to have an account” have “access to such an account at a reasonable cost” and with “the same consumer protections with respect to the account as other account holders at the same financial institution” (emphasis added). The Direct Express® card account is an account that meets the statutory requirements.

Nonetheless, Treasury is committed to taking steps to resolve several concerns raised by commenters. With respect to protecting Federal beneficiaries from unlawful freezing and garnishment of protected benefits, Treasury and the four major benefit paying agencies—Office of Personnel Management, Railroad Retirement Board, Social Security Administration, and Department of Veterans Affairs—will soon publish a joint rule. See, Notice of Proposed Rulemaking, Garnishment of Accounts Containing Federal Benefit Payments, 75 FR 20299, Apr. 19, 2010. The rule will help ensure that garnishment-exempt benefit payments in an account are not improperly seized, by requiring financial institutions to exempt from freezing or seizure a defined amount equivalent to benefit payments deposited to an account prior to a financial institution's receipt of a garnishment order. This new rule will protect benefit recipients where benefit payments are directly deposited to an account at a financial institution.

In response to comments related to allowing Federal payments to be delivered to “safe” prepaid card accounts, Treasury is publishing, on this date, an interim rule amending 31 CFR part 210 (Part 210 Interim Rule), which generally requires that a Federal direct deposit payment be delivered to a deposit account at a financial institution in the name of the recipient, subject to certain exceptions. The Part 210 Interim Rule allows Federal payments to be deposited to an account accessed through a prepaid card or similar card that meets the following requirements, as more fully described in the interim rule: The account funds are insured by the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund to the extent permitted by law, the account does not have an attached line of credit or loan feature that triggers automatic repayment from the card account, and the issuer of the card account provides the cardholder with the same protections under Regulation E required to be provided for payroll card accounts (12 CFR 205.18).

Several other concerns raised by commenters relating to the regulation of bank overdraft fees, account advances offered by financial institutions, and setoff of fees owed by account holders are outside the scope of this rule.

5. Delay Effective Dates. Two commenters urged Treasury to delay the proposed effective dates for EFT payments under the NPRM. One consumer advocate organization suggested a delay “until there is a greater confidence that people are prepared to switch to electronic disbursements,” but did not specify a date for implementation. This commenter urged more time for education noting that some people shifting to electronic payments will need far more education or counseling than others. Another commenter suggested a delay to 2020. As explained in the NPRM, Treasury has accounted for the unique issues raised for converting current check recipients to electronic payments by delaying the implementation date for those individuals to March 1, 2013. Between now and 2013, Treasury plans a robust campaign to educate people about the EFT requirement, EFT options and costs, how to use EFT, and more. Treasury agrees with commenters who recommend a strong education campaign, and as noted above, plans to utilize and expand its existing network of Go Direct® partners in order to provide outreach and sufficient information to all affected beneficiaries. Therefore, Treasury does not believe that there is a need to further extend the effective dates proposed in the NPRM, except that Treasury is delaying the initial effective date from March 1 to May 1, 2011.

6. Provide Waiver for Attorney Fees for Social Security Cases. An organization that represents Social Security claimants' representatives and a number of attorneys who represent Social Security claimants recommended that Treasury exempt attorneys' fee payments from the EFT requirements for two main reasons. First, the individual attorneys or representatives receiving the fee payment are not the “owners” of their firm's bank account, and in some cases, are therefore precluded from electronically depositing their fee payment to the firm's account. This is problematic in these cases because the Social Security Administration does not currently make representative fee payments directly to the firm's account, nor does it currently recognize firms as representatives. Secondly, many attorneys state that their banks are unwilling or unable to provide all of the information needed to identify the client on whose account the deposit was made. This second point is also raised by an individual concerned that nursing homes would similarly be unable to identify the resident to whom a direct deposit payment belongs.

The Social Security Administration recently announced that it will include an “addenda record” to display identifying information with all direct deposit fee payments sent to representatives. See, Social Security Administration letter at http://fms.treas.gov/greenbook/ssarep.pdf. The Social Security Administration encourages receiving financial institutions to pass through to their account holders, as quickly as possible, pertinent information. In this way, attorneys and other representatives of Social Security claimants will be able to identify the purpose of the payments. In addition, the Social Security Administration may, in the future, recognize firms which might help address the difficulties in using EFT for representative fee payments.

In order to mitigate these difficulties, and until these issues are more fully addressed, Treasury recognizes the need to modify one of the waivers that may be exercised by a paying agency, rather than Treasury, in § 208.4(f) regarding non-recurring payments. As the commenters pointed out, some attorneys and representatives may receive multiple payments in a given year for the multiple clients they represent before the Social Security Administration, and thus do not meet the technical definition of a recipient of a non-recurring payment in § 208.4(f) (“Where the agency does not expect to make more than one payment to the same recipient within a one-year period, i.e., the payment is non-recurring”). To address this, Treasury is modifying § 208.4(f) to allow Federal paying agencies to waive the EFT requirement for payments made to the same recipient in a single year when these payments are not made on a regular, recurring basis and remittance data explaining the purpose of the payments is not readily available from the recipient's financial institution receiving the payment by EFT.

Treasury encourages paying agencies to contact Treasury, before invoking this waiver, to discuss various ways that remittance data can be made available to payment recipients, which may negate the need for a waiver. Treasury discourages the use of this waiver by agencies, and expects the waiver to be employed on an exception basis and only until expanded remittance data is more widely available to attorneys and other representatives. In addition, Treasury notes that there are many options for receipt of remittance data for vendors, and therefore does not expect agencies to use this waiver to exempt vendor payments from the EFT requirements.

Treasury is removing the requirement that agencies determine that the cost of making an EFT payment exceeds the cost of making a payment by check, as it may not be possible for an agency to make this determination.

7. Privacy and Identity Theft Concerns. Many commenters raised concerns about electronic banking leading to an increased risk of identity theft. Typically, the comments expressed concern about identity theft through online banking. This rule does not mandate any requirement to bank online. Many financial institutions, including the Direct Express® card provider, offer online banking services as a convenience, but account holders are not required to use these services.

None of the comments specifically articulated exactly how this rule would increase a payment recipient's risk of identity theft. Based on Treasury's experience with paper checks and electronic payments, receiving payments by direct deposit decreases rather than increases the risk of identity theft. As noted in the NPRM, in fiscal year 2009, more than 670,000 Social Security and SSI checks were reported lost or stolen. In fiscal year 2010, more than 540,000 checks were reported as lost or stolen. In fiscal year 2009, Treasury investigated more than 70,000 cases of altered or fraudulently endorsed checks, totaling $64 million in estimated value, and in fiscal year 2010, Treasury investigated almost 50,000 cases totaling $93 million in estimated value. People intent on committing fraud can use a stolen Treasury check, along with other stolen or fake identification documents, to open an account in the recipient's name or otherwise impersonate a check payee. A Treasury check that has been endorsed, but not cashed, offers further opportunities for identity theft.

In addition to identity theft concerns, many commenters expressed concern about their privacy and were opposed to having to disclose their banking information to the Federal Government. Federal agencies are subject to the Privacy Act of 1972, 5 U.S.C. 552a, which strictly governs the collection of personal information from individuals, as well as the maintenance and disclosure of the information. Among other things, Federal agencies are restricted in how they may use personal information, such as bank account information, and must ensure that the information is not disclosed in an unauthorized way. Except in limited circumstances or with proper consent, bank account information provided by individuals to agencies for the purpose of receiving payment by direct deposit may be used and disclosed only for that purpose. For an example of agency regulations implementing the Privacy Act of 1972, see Treasury's regulations at 31 CFR part 1, subpart C.

With respect to customer account information held by a financial institution, including Direct Express® card account information, the Government is precluded from receiving any customer-specific account information from a financial institution, and the financial institution is precluded from providing any customer-specific account information to the Government, without the account holder's consent or without first following a process that provides the account holder with an opportunity to object to any disclosure, generally for law enforcement purposes. See, Right to Financial Privacy Act, 12 U.S.C. 3401, et seq.

8. Continue to Offer the ETA. A couple of commenters urged Treasury to continue to offer the ETA option for those beneficiaries who opt for this account to receive their benefit payments by direct deposit. Treasury continues to offer the ETA as an alternative to the Direct Express® card. It is also an option for unbanked Federal benefit recipient seeking a safe, affordable banking relationship. Currently, the ETA is offered by 392 financial institutions with over 53,000 branch locations. The ETA program has over 121,000 account holders who receive Federal benefit payments. Although the ETA is not available on a nationwide basis and does not include some of the more useful features that have become available with prepaid debit cards in recent years, it continues to meet the needs of some benefit recipients in certain regions of the country. Treasury has no plans to eliminate the ETA option and continues to support the ETA through its call center and Web site. It should be noted, however, that Treasury is directing more of its resources to educating beneficiaries about the Direct Express® card since the card is available nationwide, provides more useful features than the ETA, and may be used more cost-effectively than an ETA. Information about ETAs may be found at http://www.eta-find.gov.

9. Require EFT to Existing Bank Accounts. An association that represents financial institutions suggested that when a recipient has an established banking relationship, the default election should be to convert the benefit payment to a direct deposit to that established bank account. Through its Go Direct® campaign, Treasury encourages financial institutions to work with their own customers who receive Federal benefit and other payments by paper check on converting to payment by direct deposit. The Go Direct® campaign communicates the many benefits to financial institutions that encourage their customers to convert to direct deposit, which include increasing a financial institution's customer base and customer loyalty, operational and transaction-based cost savings, and reduction of check fraud. See www.godirect.org. Absent clear instructions from a payment recipient, Treasury is unable to ascertain with certainty whether a payment recipient has a current bank account to which payments should be directed. Therefore, Treasury allows each recipient to have payments electronically delivered to an account at a financial institution of his or her choice since the recipient is in the best position to determine the most cost-effective and desirable account option for receipt of his or her Federal payments.

As explained above and in the regulatory impact assessment below, Treasury is revising its NPRM proposal to address the comments we received regarding elimination of all individual waivers from the EFT requirement. Under the final rule, the EFT requirement will not apply to (1) payment recipients born prior to May 1, 1921, who are receiving Federal payments by check on March 1, 2013; (2) payments that are not eligible for deposit to a Direct Express® prepaid card account established pursuant to terms and conditions approved by FMS; and (3) payment recipients whose Direct Express® card has been suspended or cancelled. In addition, an individual payment recipient may request a waiver from the EFT requirement if the EFT requirement would impose a hardship because of the inability of a recipient to manage an account at a financial institution or a Direct Express® card account due to a mental impairment or because a recipient lives in a remote geographic location lacking the infrastructure to support electronic financial transactions. Payment recipients requesting a waiver are required to provide to Treasury a written certification supporting their request, in such form as Treasury may prescribe. The certification requires a recipient to identify the basis for his or her request and provide a brief explanation of how the exception applies to his or her situation. The recipient shall sign the certification before a notary public.

New § 208.2(c) adds a definition for “Direct Express® card” as meaning the debit prepaid card issued to recipients of Federal benefits by Treasury's financial agent pursuant to requirements established by Treasury. The Direct Express® card features are explained in the NPRM, in this rulemaking, and on the Direct Express® card Web site at http://www.USDirectExpress.com.

Redesignated § 208.2(e) (formerly § 208.2(d)) clarifies that the definition of “electronic benefits transfer” includes disbursement through a Direct Express® card account. As has been the case, “electronic benefits transfer” (EBT) continues to include, but is not limited to, disbursement through an ETA SM and a Federal/State EBT program.

Section 208.4(a) is divided into two paragraphs (a)(1) and (a)(2). It is noted that, in cases where a representative payee has been designated by the benefit paying agency and is receiving payments on behalf of a beneficiary, the representative payee is the “individual” for purposes of § 208.4(a). Redesignated § 208.4(a)(1) is revised to allow waivers where an individual:

(i) Is receiving a Federal payment by check prior to May 1, 2011. In such cases, the individual may continue to receive those payments by check through February 28, 2013;

(ii) Files a claim for a Federal payment prior to May 1, 2011, and requests payment by check at the time he or she files the claim. In such cases, the individual may receive those payments by check through February 28, 2013;

(iii) Was born prior to May 1, 1921, and is receiving Federal payments by check on March 1, 2013;

(iv) Receives payments that are not eligible for deposit to a Direct Express® card account. In such cases, those payments are not required to be made by electronic funds transfer, unless and until such payments become eligible for deposit to a Direct Express® card account;

(v) Is ineligible for a Direct Express® card because of suspension or cancellation of the individual's card by the Financial Agent;

(vi) Has filed a waiver request with Treasury certifying that payment by electronic funds transfer would impose a hardship because of the individual's inability to manage an account at a financial institution or a Direct Express® card account due to a mental impairment, and Treasury has not rejected the request;

(vii) Has filed a waiver request with Treasury certifying that payment by electronic funds transfer would impose a hardship because of the individual's inability to manage an account at a financial institution or a Direct Express® card account due to the individual living in a remote geographic location lacking the infrastructure to support electronic financial transactions, and Treasury has not rejected the request.

New § 208.4(b) requires payment recipients requesting a waiver from the EFT requirement because of a mental impairment or remote geographic location to provide Treasury with a certification, in writing, supporting their request in such form that Treasury may prescribe. The individual shall attest to the certification before a notary public or otherwise file the certification in such form that Treasury may prescribe. A payment recipient requesting these types of waivers will be required to provide identifying information, such as name, address, and Social Security number, as well as a short statement supporting the reason for the waiver request. Unless Treasury rejects the request, the recipient will not be required to comply with the EFT requirement. As noted above, in cases where a representative payee receives payments on behalf of a beneficiary, the representative payee is the individual requesting the claim based on the representative payee's circumstances. Treasury will be publishing additional guidance regarding the waiver process.

The Secretary's waiver authority remains unchanged, and Federal agencies continue to have the flexibility to waive payment by direct deposit or other EFT method in the circumstances described in redesignated paragraphs (a)(2) through (a)(7) of § 208.4 (formerly paragraphs (b) through (g)), namely, for certain payments to payees in a foreign country where the infrastructure does not support EFT, for certain disaster or military situations, for situations in which there may be a security threat or for valid law enforcement reasons, for non-recurring payments, and for unusual and/or urgent situations where the Government would be seriously injured unless payment is made by a method other than EFT.

Treasury is revising redesignated paragraph (a)(6) of § 208.4 (formerly paragraph (f)) which previously allowed Federal paying agencies, rather than Treasury, to waive the EFT requirement for payments that are non-recurring, i.e., no more than one payment to the same recipient within a one-year period. Under the revised rule, the waiver exists for payments made to the same recipient in a single year when these payments are not made on a regular, recurring basis and remittance data explaining the purpose of the payments is not readily available from the recipient's financial institution receiving the payment by electronic funds transfer. As mentioned above, agencies should make limited use of this waiver and should use this waiver only after discussions with Treasury to rule out other ways in which remittance data can be made available.

Section 208.6 is revised to remove the provisions for the general account requirements for Federal payments made electronically to an account at a financial institution. These requirements are contained in 31 CFR 210.5 and do not need to be duplicated in Part 208. Revised § 208.6 states that any individual who receives a Federal benefit, wage, salary, or retirement payment will be eligible for a Direct Express® card account.

Section 208.7 is revised to state that agencies shall put into place procedures that allow recipients to provide the information necessary: (i) For the delivery of their payments by EFT to an account at a financial institution, or (ii) to enroll for a Direct Express® card account. Agencies no longer need to notify individuals about their right to invoke a hardship waiver. FMS will provide guidance and work with agencies to ensure that they have the information they need to effectively explain the rule, available waivers, direct deposit, and features and fees of the Direct Express® card.

Section 208.8 is revised to state that payment recipients are required to provide a Federal agency with the necessary information to receive payments electronically. To receive a payment by direct deposit to an account at a financial institution, a recipient will need to provide his or her account information. To enroll for a Direct Express® card account, a recipient will need to provide sufficient demographic information to allow for an account to be established, including information needed for identity verification purposes.

Section 208.11 is revised to conform to the technical revision and delete the reference to § 208.6.

Appendices A and B containing Model ETA SM Disclosure Notices are removed because they no longer apply. ETA SM accounts remain available from financial institutions that continue to offer them. For more information about ETA SM accounts, visit http://www.eta-find.gov.

It has been determined that this regulation is a significant regulatory action as defined in Executive Order 12866 in that this rule would have an annual effect on the economy of $100 million or more, and this rule raises novel policy issues arising out of the legal mandate in 31 U.S.C. 3332. Accordingly, this final rule has been reviewed by the Office of Management and Budget. The Regulatory Impact Assessment prepared by Treasury for this regulation is provided below.

As discussed in the Regulatory Impact Assessment in the NPRM, this rulemaking is necessary to expand compliance with the electronic funds transfer (EFT) provisions of section 3332, title 31 United States Code (Section 3332). In 1996, Congress enacted subsection 31001(x)(1) of the Debt Collection Improvement Act of 1996 (Pub. L. 104-134) (DCIA), which amended Section 3332 to generally require that all nontax Federal payments be made by EFT, unless waived by the Secretary of the Treasury (Secretary). The Secretary must ensure that individuals required to receive Federal payments by EFT have access to an account at a financial institution “at a reasonable cost” and with “the same consumer protections with respect to the account as other account holders at the same financial institution.” See 31 U.S.C. 3332(f), (i)(2).

To implement Section 3332 as Congress intended, Treasury promulgated 31 CFR part 208 (Part 208). Part 208 sets forth requirements for accounts to which Federal payments may be sent by EFT; provides that any individual who receives a Federal benefit, wage, salary, or retirement payment is eligible to open an Electronic Transfer Account (ETA) at a financial institution that offers such accounts; and establishes the responsibilities of Federal agencies and recipients under the regulation. Part 208 also sets forth a number of waivers to the general requirement that Federal payments be delivered by EFT. See 31 CFR 208.4.

In conjunction with the initial publication of Part 208, Treasury developed the ETA, a low-cost account offered by participating financial institutions for those individuals who wish to receive their Federal payments by direct deposit. The ETA was established with the intention that it would eventually become available nationwide, and thereby comply with the statutory mandate that any person required to receive payment by EFT have access to an account at a financial institution at a reasonable cost and with standard consumer protections. However, the ETA is not available nationwide, and, as a result, does not meet the statutory requirement related to account access.

Any financial institution that wishes to offer the ETA may do so by entering into a financial agency agreement agreeing to offer the ETA in accordance with the terms and conditions established by Treasury. See Notice of Electronic Transfer Account Features, 64 FR 38510 (July 16, 1999). A participating financial institution must open an ETA for any individual who requests one, with some limited exceptions, provided that the individual authorizes the direct deposit of his or her Federal benefit, wage, salary or retirement payments. A financial institution may charge an account fee of up to $3.00 per month, and may charge other account-related fees as usually and customarily charged to other retail customers. ETA cardholders must be allowed to withdraw funds at least four times per month without incurring fees. Checks are not offered with ETAs. Account holders access their funds through online debit at ATMs, commonly referred to as “PIN debit,” and through POS networks. Offline (signature) debit is not permitted. Treasury pays a participating financial institution a fee of $12.60 for each ETA account established.

The hardship waivers in Part 208 prior to this rulemaking were necessary because the ETA was not (and is not) available to all benefit recipients across the country. In addition, because the ETA does not permit signature debit and does not include bill payment capability as a required feature, the ETA cardholders have limited options in paying for goods and services with an ETA. They cannot use the ETA, for example, to make online and telephone purchases. The limited payment capability of the ETA resulted in a need for hardship exceptions for geographic, financial, and physical disability reasons, since individuals might not have convenient or feasible access to physical POS or ATM locations. Moreover, the ETA allows monthly and other fees which, although limited, could still pose a financial hardship for some benefit recipients. This meant that a waiver for financial hardship was also necessary.

Since its inception in 1999 through September 2010, only 251,941 ETA accounts have been opened, and, as of September 2010, there are only 121,191 active ETA accounts. Anecdotal evidence suggests that, with some exceptions, the ETA is not a cost-effective product for financial institutions. According to a 2002 report by the Government Accountability Office (GAO), although many financial institutions believed that the ETA was a good product for the target market, the financial institutions were reluctant to offer the account because they did not see the product as profitable. See, “Electronic Transfers: Use by Federal Payment Recipients Has Increased but Obstacles to Greater Participation Remain,” GAO-02-913, page 31 (Sept. 12, 2002) ( www.gao.gov/new.items/d02913.pdf ). From the consumer perspective, reasons for lack of interest include the inability to write checks, limited availability of ETAs, lack of awareness of ETAs, a difficult enrollment process, and a personal preference for doing business without a bank account. Id., at 35-36.

GAO has issued at least two reports on the Federal Government's efforts to increase the use of electronic payments rather than checks. See, for example, 2002 GAO report cited above, and “Electronic Payments: Many Programs Electronically Disburse Federal Benefits, and More Outreach Could Increase Use,” GAO-08-645 (June 23, 2008) ( http://www.gao.gov/new.items/d08645.pdf ). In these referenced reports, GAO recognizes the advantages of electronic payments, but also recognizes the two major historical obstacles to removing the Part 208 individual waivers. First, there are a high number of check recipients who do not have a bank account or who lack convenient access to an account at a reasonable cost with appropriate consumer protections. GAO-02-913, pages 16-24 (Sept. 12, 2002); GAO-08-645, pages 19-20, 33 (June 23, 2008). Second, consumer concerns about the improper freezing and seizure of Federal benefit funds typically exempt from garnishment has led to resistance to Treasury's efforts to remove the Part 208 individual waivers to EFT requirements. GAO-08-645, pages 20-22.

As discussed in the Regulatory Impact Assessment in the NPRM, the technological developments and widespread acceptance of debit and prepaid card products during the last decade have made it feasible and advantageous for Treasury to revise its existing implementing regulation to expand the scope of individuals subject to the EFT requirements. Specifically, the development and implementation of the Direct Express® card, a MasterCard ® prepaid debit card developed by Treasury exclusively for Federal benefit recipients, means that Treasury can now comply with the requirement of Section 3332 to ensure that individuals required to receive Federal payments by EFT have access to an account at a financial institution that is reasonably priced and subject to standard consumer protections.

Reloadable prepaid debit cards, which were a small specialty product in the 1990s, are now widely available and can be used at a vast number of merchant locations across the country, not only to purchase goods and services, but also to obtain cash through cashback transactions at POS locations. With the expansion of the Internet and other technological advances, consumers have the ability to make online purchases with a debit card, as well as the ability to pay for goods and services over the telephone, resulting in the mitigation of some past obstacles to electronic payment acceptance. Even for those without access to the Internet, or who buy goods and use services from vendors who do not accept debit card payments, debit cards can be used to purchase money orders, thereby eliminating the step of having to cash a check or carry large amounts of cash to complete necessary financial transactions.

The “2007 Federal Reserve Payments Study, Noncash Payment Trends in the United States: 2003-2006,” sponsored by the Federal Reserve System (released December 10, 2007) ( http://www.frbservices.org/files/communications/pdf/research/2007_payments_study.pdf ), highlights the growing acceptance of debit cards in the United States. According to the study, debit cards now surpass credit cards as the most frequently used payment type. The Federal Reserve noted that the highest rate of growth was in automated clearing house (ACH) payments, which grew about 19 percent per year, followed closely by debit card payments. The annual use of debit cards increased by about 10 billion payments over the survey period to 25.3 billion payments in 2006, an annual growth rate of transactions of 17.5% from 2003 to 2006. Many financial service providers offer general prepaid branded reloadable cards intended for recipients of wages, incentive or bonus payments, state benefits and child support payments, and other types of high volume or regularly recurring payments. Many states offer or require the use of electronic payment cards for those who receive state benefits, such as temporary assistance to needy families.

Treasury's experience with offering electronic payment card products dates back to 1989, and illustrates how Treasury's products have evolved and how acceptance of these products has grown. In 1989, Treasury offered a debit card product, known as the SecureCard, on a pilot basis in Baltimore, Maryland, at no cost to SSI recipients. The undeveloped nature of the POS system at that time presented the primary challenge in that pilot. To make the card useful, Treasury installed POS equipment at various local merchants, at a substantial cost to the Government. In 1992, Treasury initiated the Direct Payment Card pilot for Social Security and SSI recipients in Texas, which had a better developed POS infrastructure, and subsequently extended the pilot to Social Security recipients in Argentina. From 1992 through 1997, approximately 46,000 recipients enrolled, and the program was well-received by recipients. Building on the success of the Direct Payment Card pilot, in 1996, Treasury joined a Federal-State electronic benefits transfer (EBT) program known as the Benefit Security Card program. The Benefit Security Card was offered to Federal and/or state benefit recipients in eight southeastern states, known as the Southern Alliance of States, which included Alabama, Arkansas, Florida, Georgia, Kentucky, Missouri, North Carolina, and Tennessee. Treasury's Benefit Security Card program allowed benefit recipients to access their Federal and/or state benefits via a single debit card. When Treasury terminated the card program in January 2003, approximately 51,000 Federal benefit recipients were enrolled in the program. Although customers were pleased with the product, Treasury and most states were concerned about cardholder costs, which were scheduled to increase at the time Treasury terminated the program. At the end of 2006, Treasury initiated a small Direct Express® card program to gauge the market for a branded debit card, reloadable only with Federal benefit payments. As part of the pilot, Treasury sent letters to 35,000 Social Security and SSI check recipients in Chicago and southern Illinois, offering them the opportunity to sign up for a Direct Express® card to receive their Federal benefit payments electronically. In addition, Treasury included information about the program in check envelopes mailed to all Illinois Social Security and SSI check recipients. The card features offered for the pilot program were similar to the current Direct Express® card product, although the fees were slightly higher.

Treasury is implementing this rule in two phases. The first phase would require all new benefit recipients to sign up for direct deposit to a bank account of the recipients' choice or to a Direct Express® card account, beginning May 1, 2011. The second phase would begin on March 1, 2013, at which time all recipients of Federal benefit and other nontax payments would receive their payments by direct deposit, either to a bank account or to a Direct Express® card account.

Those receiving their benefit payments by check before May 1, 2011, could continue to do so through February 28, 2013, after which those recipients would convert to direct deposit. For Federal benefit recipients, this means that individuals who file claims for Federal benefits before May 1, 2011, and who request check payments when they file, would be permitted to receive payments by check through February 28, 2013. Individuals who file claims for benefits on or after May 1, 2011, would receive their payments by direct deposit. Individuals receiving their payments by direct deposit prior to May 1, 2011, would continue to do so.

In this final rule, Treasury waives the EFT requirement for recipients born prior to May 1, 1921 who are receiving Federal payments by check on March 1, 2013, for payments that are not eligible for deposit to a Direct Express® card account, and for recipients whose Direct Express® card has been suspended or cancelled. In addition, this rule allows a recipient to request a waiver from the EFT requirement on the basis that EFT would impose a hardship because of the recipient's inability to manage an account at a financial institution or a Direct Express® card account due to a mental impairment, or because the recipient lives in a remote geographic location lacking the infrastructure to support electronic financial transactions. The waiver request is considered effective unless Treasury rejects the request.

The baseline amount of Federal disbursement described in the NPRM is updated as follows. In fiscal year 2010, Treasury disbursed almost 85% of its nontax payments electronically, or more than 793 million payments. Despite the general requirement that Federal payments be made electronically, and Treasury's efforts to persuade check recipients to convert to direct deposit, Treasury nevertheless continues to print and mail many millions of checks each year, at a substantially higher cost to the Government than if those payments were delivered by EFT. For example, of the approximately 143 million checks disbursed for nontax payments, in fiscal year 2010, more than 130 million of them were Federal benefit checks mailed to almost 11 million benefit recipients, causing avoidable payment-related problems for many check recipients, and resulting in extra costs to taxpayers of more than $117 million that would not have been incurred had those payments been made by EFT. Social Security (retirement, disability, and survivors benefits) and SSI payments represent more than 92 percent, or approximately 120 million, of those benefit check payments. The remaining 10 million benefit check payments are made to recipients of civil service retirement, railroad retirement, Black Lung, and Veterans benefits. Although the direct deposit payments rate has increased since 1996, when it was 58%, the rate has climbed only slowly since fiscal year 2005 when it first reached 80%.

As noted above, in fiscal year 2010, Treasury disbursed 130 million checks to almost 11 million benefit recipients. Treasury estimates that approximately 4 million of those recipients do not have bank accounts.

Treasury recognizes the demographic differences between payment recipients who are more willing to accept direct deposit and those who are not. Treasury also recognizes that there are a variety of reasons why check recipients do not switch to direct deposit. Because the majority of its check payments are made to Social Security and SSI recipients, Treasury's research focuses on this population. During implementation of its rule, Treasury will continue its research efforts to ensure that the needs of all check recipients are adequately addressed and take appropriate action.

While recognizing that the results of the study is not generalizable to the U.S. population, Treasury's study, “Understanding the Dependence on Paper Checks—A Study of Federal Benefit Check Recipients and the Barriers to Boosting Direct Deposit” (2004), sheds some insight on individuals who choose to receive Federal benefits through paper checks (OMB Control No. 1510-0074). The average age of a Social Security check recipient was 66 years old. Sixty-one percent of the Social Security check recipients were female; 39% were male. Thirty-five percent of the Social Security check recipients had not completed high school, while 26% had some college education or beyond. Sixty percent of Social Security recipients were retired; 27% did not have bank accounts; 12% received some other form of government assistance; and, 27% had a disability.

Comparatively, the average age of a SSI check recipient was 50. Seventy percent of the SSI check recipients were female; 30% were male. Fifty-one percent of the SSI recipients had not completed high school, while 15% had some college education or beyond. Only 21% of SSI recipients were retired; 68% did not have a bank account; 42% received some other form of government assistance, and 42% had a disability.

According to Treasury research in 2007 (SSA & SSI Check Recipient Survey, OMB Control No. 1510-0074), the check recipient population demographics had not changed significantly. The 2007 survey found that 28% of Social Security check recipients did not have a bank account, but that 9% more SSI recipients had bank accounts than in 2004 (in 2007, 59% of SSI recipients did not have a bank account).

The above-referenced Treasury research shows that younger benefit recipients convert to direct deposit at a faster rate than older benefit recipients. Younger benefit recipients who have had their payments for less than a year are signing up for direct deposit at rates that far exceed their proportions in the population. Close to 50% of those Social Security and SSI check recipients who converted to direct deposit had been receiving their benefits for less than one year. Conversely, only 16% of Social Security check recipients and 15% of SSI recipients who had been receiving their payments nine (9) years or longer signed up for direct deposit.

Treasury and the Social Security Administration found that, in fiscal year 2010, 79.1% of new Social Security enrollees signed up for direct deposit either to an existing bank account or to a Direct Express® card account. Since September 2008, the Social Security Administration has been offering new Social Security and SSI recipients the option of signing up for a Direct Express® card, in addition to direct deposit at a financial institution, at the time they enroll for benefits. Social Security is also allowing individuals to sign up at local offices and by telephone. The Direct Express® card has been a major contributor in the decline of Social Security and SSI check payments over the last two years, but has had an especially significant impact on the SSI check payment volume. The average monthly payment amount for an SSI check recipient is $545, whereas the average monthly payment amount for a Social Security check recipient is $808 for beneficiaries who receive their payment on the third of the month, and $915 for all other Social Security check recipients. There has been a year-over-year decrease in SSI checks of 6.91% in March 2010, compared to March 2009, which is significantly greater than the 3.81% decline in March 2009, compared to March 2008. The number of all nontax checks decreased from 148 million in fiscal year 2009 to 143 million in fiscal year 2010.

There are potential short-term costs associated with the rulemaking. First, there are intangible emotional costs for individuals who are fearful or resistant to direct deposit. In its 2004 research, Treasury learned that there are some key differences among Social Security check recipients, SSI check recipients, and those that receive their benefit payments by direct deposit. Although these differences do not necessarily explain why certain individuals are more resistant than others to receiving payments by direct deposit, the data helps Treasury properly target its public education campaign. For example, because the data described below shows that Social Security check recipients are more likely than SSI check recipients to have a bank account, Treasury can direct its resources to informing Social Security check recipients about the benefits of directly depositing payments to an existing bank account. For SSI recipients who are less likely to have a bank account, Treasury can focus its Direct Express® card information to that population.

Compared to SSI check recipients, Social Security check recipients are older (average age 66), more likely to have a bank account, more likely to be male and retired, less likely to have a disability, less likely to receive some other form of government assistance, less likely to depend on their benefit as their sole source of income, and more likely to be Caucasian. SSI recipients are likely to be younger (average age 50), less likely to have a bank account, more likely to have a representative payee acting on their behalf, more likely to be African-American, more likely to be female, more likely to live in a city, more likely to receive some other form of benefit payment, and more likely to depend on others for assistance with daily chores and errands. Direct deposit recipients are more technologically savvy than either Social Security or SSI check recipients. They are more likely to own a cell phone or to use a personal computer and the Internet. Compared with check recipients, direct deposit beneficiaries responding to the survey were more likely to have confidence in banks, to believe that computers are secure, and to feel that ATMs are safe.

Despite these demographic differences, Treasury has found that the reasons for resistance to direct deposit among check recipients have remained fairly constant over the years. Many people express a desire to see the physical payment in check form. Others feel a greater sense of control when handling checks, and many, especially those receiving SSI, believe that receiving checks helps them to better manage their money and maintain their standard of living. Barriers that need to be overcome can be grouped into four general categories: informational (those who do not understand how direct deposit works); emotional (those who just prefer to receive checks); inertia (those who are receptive to electronic payments, but need to be motivated to sign up); and mechanical (those who do not have bank accounts, and in some cases, do not want bank accounts).

Treasury expects most recipients to pay less for EFT payments than for check payments. While some individuals may be able to cash government checks at no cost, there are often fees of up to $20 or more for cashing a check, according to Treasury's research in 2007 (SSA & SSI Check Recipient Survey, OMB Control No. 1510-0074). The Direct Express® card program is structured so that there are several ways for cardholders to access their funds and use their card without paying any fees. The Direct Express® card account fees compare favorably to those charged by financial service providers offering general purpose reloadable cards, which often charge fees for sign-up, monthly maintenance, ATM withdrawals, balance inquiries, and customer service calls. Cardholders may use their card to make purchases and get cash back at a POS location without paying a fee; obtain cash from any MasterCard® member bank teller window without paying a fee; and make one free ATM cash withdrawal for each benefit payment deposited to the card account (the free ATM cash withdrawal is available until the end of the month following the month of deposit). If the cardholder makes a withdrawal using an ATM within the Direct Express® surcharge-free ATM network, the cardholder will not pay a surcharge fee to an ATM owner. In addition, there are many other features that cardholders can access without paying a fee, including unlimited customer service calls (with or without live operators); optional automated low balance alerts or deposit notifications; and online or telephone transaction history and other account information. There is no fee to sign up for the card, close the account, or to obtain one replacement card per year. Importantly, there are no overdrafts, minimum balance requirements, or credit requirements to sign up for the card. The few fees that are charged for the card include $.90 for ATM transactions after free ATM transactions are used, $.75 per month for optional paper statements, fees for using the card outside the United States, and replacement cards beyond the free replacement card. By way of illustration, sample Direct Express® cardholder scenarios follow:

Even in Scenario 5, which is not the recommended way to use the Direct Express® card, a cardholder incurs less expense than what some beneficiaries pay to cash their Treasury checks. Treasury expects that, with its expanded cardholder education, fees incurred under Scenarios 1 through 4 would be more typical.

Treasury expects to continue to incur expenditures for the public education related to the implementation of the new rule and to temporarily expand its telephone and online direct deposit enrollment center to accommodate those converting from check payments to direct deposit to comply with the new rule, whether the conversion is to an account at a financial institution or to a Direct Express® card account. However, such expenditures will taper off after the new rule is fully implemented, since direct deposit enrollment in the future will occur at the time of benefit enrollment. Federal benefit agencies may incur costs to temporarily expand customer service centers to accommodate recipients' questions and enrollments until the new rules are fully implemented.

Treasury expects increased costs for its call center and Web site used to enroll check recipients into direct deposit, although these costs are expected to drop off after 2013, when the rule would be fully implemented. The education costs, estimated at $10 million over the next three years, are costs that Treasury would have incurred even without the rule, and for potentially longer than the next three to five years. Similarly, Treasury expects benefit paying agencies to incur some initial costs for customer service training for customer service representatives responsible for educating new enrollees and current check recipients about the new rules, but these costs are expected to be more than offset by the cost savings expected once customer service centers no longer have to respond to individual inquiries related to check problems. The one-time costs to increase customer service capacity at the Treasury enrollment center (both telephone and online) could total as high as $20 million from the effective date of the final rule through 2013. These costs include Treasury's costs for processing waiver requests. After 2013, Treasury expects these costs to drop off significantly.

The Go Direct® campaign, sponsored by Treasury and the Federal Reserve Banks, highlights the need for this educational program. Despite the success of the campaign with more than five million direct deposit enrollments achieved since 2005 as a result of the campaign's activities, an estimated 11 million Federal benefit recipients still receive checks each month. Treasury research shows that the likelihood of current check recipients switching to direct deposit remained generally unchanged from 2004 to 2007, with 55% of banked Social Security check recipients surveyed in 2007 being very unlikely to change to direct deposit, down from 59% in 2004. The percentage of banked Social Security check recipients likely to switch to direct deposit went from 27% in 2004 to 28% in 2007. Comparatively, 40% of banked SSI check recipients were likely to switch to direct deposit in 2007, up only one percentage point since 2004. While Treasury research shows that direct deposit education has a positive impact on the likelihood of a check recipient to switch to direct deposit, the effort is time consuming, administratively burdensome, costly, and resource-intensive. During the period July 2009 through June 2010, Treasury spent $4.5 million on its Go Direct® campaign, and expects to spend another $4 million during the period July 2010 through June 2011. Prior years' costs have ranged from $5 million to $10 million for Treasury to establish and sustain its presence in target markets to promote and encourage check recipients to convert to direct deposit.

Finally, and less directly, financial institutions may experience some costs associated with converting their check recipient customers to direct deposit, but Treasury does not expect this to be a significant burden since financial institutions already enroll a significant number of direct deposit recipients through Treasury's Go Direct® campaign.

The potential benefits of the rule to the Government and taxpayers are significant. As noted above, in fiscal year 2010, Treasury mailed more than 130 million Federal benefit checks to approximately 11 million benefit recipients, resulting in extra costs to taxpayers of more than $117 million that would not have been incurred had those payments been made by EFT. Without the rule change and given the current trends, the number of checks that Treasury prints and mails each year is expected to increase significantly over the coming years, primarily as a result of the aging of the baby boomer generation. Beginning in 2008, the first wave of 78 million baby boomers became eligible for Social Security benefits. Even as the more technologically-savvy baby boomers enter the rolls, while improving, the direct deposit rate for fiscal year 2010 climbed no higher than 79.1% for new Social Security enrollees. With the increase in retiring baby boomers, Treasury expects to issue approximately 60 million new payments each year to approximately 5 million newly enrolled recipients (based on Social Security Administration actuarial data). Of those 60 million payments, an estimated 9 million would be made by check based on the current overall direct deposit/check ratio (85 percent/15 percent) for Social Security payments. By 2020, the Social Security Administration projects there will be 18.6 million more Social Security beneficiaries than in fiscal year 2009, which would result in more than 223 million additional payments each year. At the current direct deposit/check ratio, this would mean 33.5 million additional checks each year beginning in 2020, at a cost of $31 million each year, leading to a total annual cost of more than $156 million more than if those payments were made by direct deposit.

These projected cost savings do not take into account future increased costs in postage, paper, and salaries; the cost of issuing benefit checks other than Social Security and SSI; or the costs agencies incur in handling inquiries and authorizing replacement checks. For example, the Social Security Administration expects administrative savings resulting from a drop in non-receipt and lost check actions. The Social Security Administration also expects to save money by eliminating the “Payment Delivery Alert System,” which is a joint effort among the Social Security Administration, Treasury, and the U.S. Postal Service to locate and deliver delayed Social Security and SSI checks.

Those who receive their payments by direct deposit do not have to worry about a lost or stolen check, or carrying around large amounts of cash that can be easily lost or stolen. Each year, approximately half a million individuals call Treasury to request claims packages related to problems with check payments. For example, in fiscal year 2009, more than 670,000 Social Security and SSI checks were reported lost or stolen, and in fiscal year 2010, more than 540,000 checks were reported lost or stolen. In fiscal year 2009, Treasury investigated more than 70,000 cases of altered or fraudulently endorsed checks, totaling $64 million, and in fiscal year 2010, Treasury investigated almost 50,000 cases, totaling $93 million. When checks are misrouted, lost in the mail, stolen, or fraudulently signed, Treasury must send replacement checks to the recipient. This can result in a delay in payment, especially if fraud or counterfeiting is involved, thereby creating a hardship for benefit recipients who rely on these payments for basic necessities such as food, rent, or medication. In contrast, individuals receiving Federal payments electronically rarely have any delays or problems with their payments. Nine out of ten problems with Treasury-disbursed payments are related to paper checks even though checks constitute only 19 percent of all Treasury-disbursed payments made by the Government.

These projected savings also do not account for the costs that would no longer be incurred by banks and credit unions for cashing checks and reimbursing the Government when there are alterations, forgeries, or unauthorized indorsements of Federal benefit checks. In fiscal year 2009, it cost the banking industry $69.3 million to reimburse the Treasury for checks that had been fraudulently altered or counterfeited, or contained a forged or unauthorized indorsement. In fiscal year 2010, these costs increased to $88 million.

Treasury considered three alternative approaches to achieving the benefits of direct deposit other than the approach described in this rulemaking notice.

First, Treasury could have eliminated the individual EFT waivers sooner for everyone, i.e., eliminate the waivers for all benefit recipients on the same effective date, but Treasury was concerned about the impact of such a rule on payment recipients if the amount of time to educate the public about the rule's requirements and benefits was inadequate. It is important for Treasury and benefit agencies to be prepared to respond to recipients' inquiries about the new rules, which requires sufficient time to train agency customer service representatives, educate those affected by the new rules, and to implement any process changes that may be required. Treasury will work closely with the agencies to ensure that implementation requirements are understood and can be addressed in the time frame in the rule.

Second, Treasury also considered phasing in the elimination of the individual EFT waivers over a longer period of time. Treasury is concerned that such a delay results in additional costs to individuals who will be delayed in realizing the benefits of direct deposit. Treasury intends to begin its public education campaign immediately upon the promulgation of this final rule. Treasury will monitor the progress of its campaign, and adjust the campaign as necessary to ensure maximum effectiveness. In addition, a delayed implementation results in additional costs to the Government and taxpayers. For every year that Treasury delays full implementation of the EFT rule, the Government spends at least $117 million more for check payments than it would otherwise spend if recipients were receiving EFT payments.

Finally, Treasury considered eliminating all EFT waivers, and whether to institute a formal application process for individuals seeking to invoke a waiver to the EFT requirement. Treasury is concerned that such an approach would require the unnecessary development of a new bureaucratic infrastructure to process the applications, and would impose administrative burdens on both Government agencies and benefit recipients. After reviewing comments received in response to the NPRM, Treasury retained waivers for recipients born prior to May 1, 1921 who are receiving Federal payments by check on March 1, 2013, for payments that are not eligible for deposit to a Direct Express® card account, and for recipients whose Direct Express® card has been suspended or cancelled. In addition, this rule allows a payment recipient to request a waiver from the EFT requirement on the basis that EFT would impose a hardship because of the recipient's inability to manage an account at a financial institution or a Direct Express® card account due to a mental impairment, or because the recipient lives in a remote geographic area lacking the infrastructure to support electronic financial transactions. Recipients requesting waivers are required to submit a certification with a short statement explaining why they need a waiver. The certification will be signed by the individual requesting the waiver before a notary public, or in such form that Treasury may prescribe. The waiver request is considered effective unless Treasury rejects the request.

The availability of the Direct Express® card negates the need for other individual waivers. Agencies retain the ability to waive EFT requirements for classes of payments for various reasons. Finally, in an unusual or exceptional circumstance, the Secretary has the authority to waive the EFT requirement, but Treasury does not anticipate invoking this authority except in rare situations.

Building on the “lessons learned” in previous programs and the Direct Express® card program pilot, Treasury issued an announcement in 2007 seeking a financial institution qualified to act as a Treasury-designated financial agent to provide debit card services for Federal benefit recipients nationwide, through the Direct Express® card program. Treasury has unique legal authority to designate a financial institution as its financial agent to disburse Federal benefit payments electronically, which includes the establishment of an account meeting certain requirements, maintenance of an account, the receipt of Federal payments electronically, and the provision of access to funds in the account on the terms specified by Treasury. See 12 U.S.C. 90; 31 CFR 208.2. Fifteen financial institutions responded, and after careful review of the applications, Treasury selected Comerica Bank as its agent based on various criteria, including the proposed cardholder fees. Treasury considered, but rejected, selecting multiple financial agents (although it has the option to do so in the future) primarily to ensure that the selected financial agent would be able to maintain a sufficient volume of active accounts in order to cost-effectively sustain a program with the lowest possible cardholder fees. The financial agent selection process used by Treasury enabled Treasury to obtain debit card services with the most value for benefit recipients, including, among other things, better consumer protections than those offered by most prepaid card products, a surcharge-free ATM network of more than 53,000 surcharge-free ATMs, free low balance alerts and deposit notification, unlimited free customer service calls, and the ability to use the debit card product to access Federal benefit payments without incurring a fee. Treasury provides oversight to confirm that its financial agent operates the Direct Express® card program to provide maximum value at a reasonable cost to cardholders. The card program is now available to recipients of Social Security, SSI, Veterans compensation and pension, civil service retirement, and railroad retirement benefit payments. This allows Federal payment recipients to receive multiple types of Federal payments to a single Direct Express® card account.

Treasury has also addressed the concerns about the improper freezing and seizure of benefit funds exempt from garnishment. Treasury and the four major benefit paying agencies—Office of Personnel Management, Railroad Retirement Board, Social Security Administration, and Department of Veterans Affairs—published a notice of proposed rulemaking and will soon publish a joint rule. The rule will help ensure that garnishment-exempt benefit payments in an account are not improperly seized, and will protect benefit recipients where benefit payments are directly deposited to an account at a financial institution.

It is hereby certified that the rule will not have a significant economic impact on a substantial number of small entities. The rule applies to individuals who receive Federal payments, and does not directly impact small entities. Accordingly, a regulatory flexibility analysis under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) is not required.

Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532 (Unfunded Mandates Act), requires that the agency prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. If a budgetary impact statement is required, section 205 of the Unfunded Mandates Act also requires the agency to identify and consider a reasonable number of regulatory alternatives before promulgating the rule. We have determined that the rule will not result in expenditures by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year. Accordingly, we have not prepared a budgetary impact statement or specifically addressed any regulatory alternatives.

On April 9, 2009, New Jersey submitted a proposed revision to the State Implementation Plan (SIP) that includes amendments to New Jersey Administrative Code, Title 7: Chapter 27 (NJAC 7:27)

For additional information, see the proposed rulemaking published on July 22, 2010 (75 FR 42672) or the Technical Support Document which is available on line at http://www.regulations.gov and entering the docket number EPA-R02-OAR-2010-0310.

EPA received comments from two individuals on the July 22, 2010 proposal. Comments supported the efforts that New Jersey and the EPA were making in improving the air quality and implementing new control strategies. One comment went further, recommending the need for measures that are necessary for good health and safe living.

The rules that EPA is approving fulfill New Jersey's commitment, made as part of the reasonably available control technology (RACT) analysis, and were used in the 8-hour ozone attainment demonstration to show that the SIP would attain the 8-hour ozone standard. These rule revisions and new rules became operative in the State on December 29, 2008 and have already started to produce VOC emission reductions.

Monitored air quality in New Jersey supports the progress New Jersey has made in reducing emissions and preliminary air quality data shows that the New York-Northern New Jersey-Long Island, NY-NJ-CT nonattainment area is in attainment of the 8-hour ozone standard. For the Philadelphia-Wilmington-Atlantic City, PA-NJ-MD-DE nonattainment area, quality assured air data for 2009 shows attainment, making the area eligible for a one year extension of the ozone attainment date. When EPA completes the reconsideration of the 2008 8-hour ozone standard, New Jersey like other States will need to reevaluate their SIP to determine if additional measures are necessary to meet the new standard.

EPA thanks the commenters for supporting this rulemaking. In this rulemaking EPA is only acting on the April 9, 2009 SIP revision request, which added the above rules to the SIP and was submitted to fulfill the commitments New Jersey made as part of the 1997 8-hour ozone attainment plan. When EPA completes the reconsideration of the 2008 8-hour ozone standard and depending on the monitored ozone air quality at that time, New Jersey may need to reevaluate its SIP to determine whether additional control measures are necessary to attain the reconsidered NAAQS for ozone. At this time New Jersey meets the Clean Air Act requirements for the ozone RACT SIP.

EPA has evaluated New Jersey's submittal for consistency with the Act, EPA regulations, and EPA policy. The new control measures will strengthen the SIP by providing additional VOC emission reductions that the State committed to achieve. Accordingly, EPA is approving the following rules as part of the SIP: Subchapter 23, “Prevention of Air Pollution From Architectural Coatings,” Subchapter 24, “Prevention of Air Pollution From Consumer Products,” Subchapter 25, “Control and Prohibition of Air Pollution by Vehicular Fuels,” Subchapter 26, “Prevention of Air Pollution From Adhesives, Sealants, Adhesive Primers and Sealant Primers,” and Subchapter 34, “TBAC Emissions Reporting,” of NJAC 7:27. These rules became operative on December 29, 2008. While the changes made to the VOC definition in the other rules included in this SIP revision are also acceptable, EPA will act on those rules in separate Federal Register actions at a later date. In addition, EPA finds that Subchapter 26 fully addresses the Control Techniques Guideline document for Miscellaneous Industrial Adhesives dated September 2008.

EPA is also fully approving New Jersey's RACT analysis as New Jersey has fulfilled its commitment to adopt the identified RACT rules, the last of which are being approved in this action. EPA will replace the conditionally approved RACT analysis in the SIP with a full approval (40 CFR 52.1582). These revisions meet the requirements of the Act and EPA's regulations, and are consistent with EPA's guidance and policy. EPA is taking this action pursuant to section 110 and part D of the Act and EPA's regulations.

On August 3, 2010, 75 FR 45483, EPA took final action approving a New Jersey SIP revision, which incorporated Subchapter 19, “Control and Prohibition of Air Pollution from Oxides of Nitrogen” along with two Administrative Corrections to Subchapter 19. 40 CFR 52.1570 and 52.1605 listed only the dates of the two administrative corrections, June 15, 2009 and July 6, 2009, but did not include the initial State effective date, April 20, 2009. This correction will be made to 40 CFR 52.1570 and 40 CFR 52.1605 by this action.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve State choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves State law as meeting Federal requirements and does not impose additional requirements beyond those imposed by State law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, this rule does not have Tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the State, and EPA notes that it will not impose substantial direct costs on Tribal governments or preempt Tribal law.

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by February 22, 2011. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. ( See section 307(b)(2)).

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you are an agricultural producer, food manufacturer, or pesticide manufacturer. Potentially affected entities may include, but are not limited to those engaged in the following activities:

• Crop production (NAICS code 111).

• Animal production (NAICS code 112).

• Food manufacturing (NAICS code 311).

• Pesticide manufacturing (NAICS code 32532).

This listing is not intended to be exhaustive, but rather to provide 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. If you have any questions regarding the applicability of this action to a particular entity, consult the person listed under FOR FURTHER INFORMATION CONTACT .

You may access a frequently updated electronic version of EPA's tolerance regulations at 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.gpoaccess.gov/ecfr. You may access Harmonized Guidelines referenced in this document at http://www.epa.gov/ocspp/pubs/frs/home/guideline.htm.

Under FFDCA section 408(g), 21 U.S.C. 346a, any person may file an objection to any aspect of this regulation and may also request a hearing on those objections. You must file your objection or request a hearing on this regulation in accordance with the instructions provided in 40 CFR part 178. To ensure proper receipt by EPA, you must identify docket ID number EPA-HQ-OPP-2009-0775 in the subject line on the first page of your submission. All objections and requests for a hearing must be in writing, and must be received by the Hearing Clerk on or before February 22, 2011. Addresses for mail and hand delivery of objections and hearing requests are provided in 40 CFR 178.25(b).

In addition to filing an objection or hearing request with the Hearing Clerk as described in 40 CFR part 178, please submit a copy of the filing that does not contain any CBI for inclusion in the public docket. Information not marked confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA without prior notice. Submit a copy of your non-CBI objection or hearing request, identified by docket ID number EPA-HQ-OPP-2009-0775, by one of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the on-line instructions for submitting comments.

• Mail: Office of Pesticide Programs (OPP) Regulatory Public Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania Ave., NW., Washington, DC 20460-0001.

• Delivery: OPP Regulatory Public Docket (7502P), Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only accepted during the Docket Facility's normal hours of operation (8:30 a.m. to 4 p.m., Monday through Friday, excluding legal holidays). Special arrangements should be made for deliveries of boxed information. The Docket Facility telephone number is (703) 305-5805.

In the Federal Register of January 6, 2010 (75 FR 864) (FRL-8801-5), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21 U.S.C. 346a(d)(3), announcing the filing of a pesticide petition (PP 9E7612) by the Interregional Research Project No. 4 (IR-4), 500 College Road East, Suite 201W, Princeton, NJ 08540. The petition requested that 40 CFR 180.484 be amended by establishing tolerances for residues of the fungicide flutolanil, N -(3-(1-methylethoxy)phenyl)-2-(trifluoromethyl)benzamide and its metabolites converted to 2-(trifluoromethyl) benzoic acid and calculated as flutolanil, in or on ginseng at 3.5 parts per million (ppm); vegetable, Brassica, leafy, group 5 at 0.11 ppm; and turnip, greens at 0.11 ppm. That notice referenced a summary of the petition prepared by Gowan Company, the registrant, which is available in the docket, http://www.regulations.gov. There were no comments received in response to the notice of filing.

IR-4 later withdrew their request to establish a tolerance on ginseng. Also, EPA has revised the tolerance levels proposed by IR-4. The reasons for these changes are explained in Unit IV.C.

Section 408(b)(2)(A)(i) of FFDCA allows EPA to establish a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the tolerance is “safe.” Section 408(b)(2)(A)(ii) of FFDCA defines “safe” to mean that “there is a reasonable certainty that no harm will result from aggregate exposure to the pesticide chemical residue, including all anticipated dietary exposures and all other exposures for which there is reliable information.” This includes exposure through drinking water and in residential settings, but does not include occupational exposure. Section 408(b)(2)(C) of FFDCA requires EPA to give special consideration to exposure of infants and children to the pesticide chemical residue in establishing a tolerance and to “ensure that there is a reasonable certainty that no harm will result to infants and children from aggregate exposure to the pesticide chemical residue. * * *”

Consistent with section 408(b)(2)(D) of FFDCA, and the factors specified in section 408(b)(2)(D) of FFDCA, EPA has reviewed the available scientific data and other relevant information in support of this action. EPA has sufficient data to assess the hazards of and to make a determination on aggregate exposure for flutolanil including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with flutolanil follows.

EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk. EPA has also considered available information concerning the variability of the sensitivities of major identifiable subgroups of consumers, including infants and children. The toxicology studies conducted on flutolanil demonstrate few or no biologically significant toxic effects. Liver effects in rats included increases in absolute and relative liver weight in the absence of clinical chemistry and/or histopathology findings. In dogs, there was an elevation in alkaline phosphatase and cholesterol levels together with dose-related increases in absolute and relative liver weights, slightly enlarged livers, and an increase in severity of glycogen deposition. The increased liver weights are considered to be an adaptive response to flutolanil treatment and not an adverse effect. Based on the lack of evidence of carcinogenicity and the lack of evidence of mutagenicity, flutolanil is classified as “not likely to be carcinogenic to humans.”

Flutolanil is not neurotoxic, and it is not a developmental or reproductive toxicant. No maternal, reproductive, or developmental toxicity was observed at the limit dose. There was no evidence for increased susceptibility of rat or rabbit fetuses to in utero exposure or rat pups to pre- and post-natal exposure to flutolanil. No toxic effects were observed in studies in which flutolanil was administered by the dermal route of exposure at the limit dose.

Specific information on the studies received and the nature of the adverse effects caused by flutolanil as well as the no-observed-adverse-effect-level (NOAEL) and the lowest-observed-adverse-effect-level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in docket ID number EPA-HQ-OPP-2009-0775 in the document titled “Flutolanil: Human Health Risk Assessment for Flutolanil on Brassica Leafy Vegetables (Crop Group 5) and Turnip Greens” on pages 27-30.

Once a pesticide's toxicological profile is determined, EPA identifies toxicological points of departure (POD) and levels of concern to use in evaluating the risk posed by human exposure to the pesticide. For hazards that have a threshold below which there is no appreciable risk, the toxicological POD is used as the basis for derivation of reference values for risk assessment. PODs are developed based on a careful analysis of the doses in each toxicological study to determine the dose at which no adverse effects are observed (the NOAEL) and the lowest dose at which adverse effects of concern are identified (the LOAEL). Uncertainty/safety factors are used in conjunction with the POD to calculate a safe exposure level—generally referred to as a population-adjusted dose (PAD) or a reference dose (RfD)—and a safe margin of exposure (MOE). For non-threshold risks, the Agency assumes that any amount of exposure will lead to some degree of risk. Thus, the Agency estimates risk in terms of the probability of an occurrence of the adverse effect expected in a lifetime. For more information on the general principles EPA uses in risk characterization and a complete description of the risk assessment process, see http://www.epa.gov/pesticides/factsheets/riskassess.htm.

A summary of the toxicological endpoints for flutolanil used for human risk assessment is discussed in Unit III.B., of the final rule published in the Federal Register of June 11, 2008 (73 FR 33013) (FRL-8365-6).

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to flutolanil, EPA considered exposure under the petitioned-for tolerances as well as all existing flutolanil tolerances in 40 CFR 180.484. EPA assessed dietary exposures from flutolanil in food as follows:

i. Acute exposure. Quantitative acute dietary exposure and risk assessments are performed for a food-use pesticide, if a toxicological study has indicated the possibility of an effect of concern occurring as a result of a 1-day or single exposure.

No such effects were identified in the toxicological studies for flutolanil; therefore, a quantitative acute dietary exposure assessment is unnecessary.

ii. Chronic exposure. In conducting the chronic dietary exposure assessment EPA used the food consumption data from the U.S. Department of Agriculture (USDA) 1994-1996 and 1998 Continuing Survey of Food Intake by Individuals (CSFII). As to residue levels in food, the chronic dietary analysis included tolerance level residues, 100% crop treated estimates and default processing factors.

iii. Cancer. Based on the data summarized in Unit III.A., EPA has concluded that flutolanil does not pose a cancer risk to humans. Therefore, a dietary exposure assessment for the purpose of assessing cancer risk is unnecessary.

iv. Anticipated residue and percent crop treated (PCT) information. EPA did not use anticipated residue and/or PCT information in the dietary assessment for flutolanil. Tolerance level residues and/or 100% CT were assumed for all food commodities.

2. Dietary exposure from drinking water. The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for flutolanil in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of flutolanil. Further information regarding EPA drinking water models used in pesticide exposure assessment can be found at http://www.epa.gov/oppefed1/models/water/index.htm.

Based on the Pesticide Root Zone Model and Exposure Analysis Modeling System (PRZM-EXAMs) and Screening Concentration in Ground Water (SCI-GROW) models, the estimated drinking water concentrations (EDWCs) of flutolanil for chronic exposures are estimated to be 8.5 parts per billion (ppb) for surface water and 0.7 ppb for ground water.

Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model. For chronic dietary risk assessment, the water concentration of value 8.5 ppb was used to assess the contribution to drinking water.

3. From non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure ( e.g., for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Flutolanil is currently registered for the following uses that could result in residential exposures: Turf grass and ornamental plants. Although there is a potential for residential (non-occupational) exposure, a quantitative exposure assessment was not conducted since no toxicological endpoint attributable to acute, short-term or intermediate-term exposure have been identified and the current use pattern does not indicate chronic or long-term exposure (6 or more months of continuous exposure) potential. Further information regarding EPA standard assumptions and generic inputs for residential exposures may be found at http://www.epa.gov/pesticides/trac/science/trac6a05.pdf.

4. Cumulative effects from substances with a common mechanism of toxicity. Section 408(b)(2)(D)(v) of FFDCA requires that, when considering whether to establish, modify, or revoke a tolerance, the Agency consider “available information” concerning the cumulative effects of a particular pesticide's residues and “other substances that have a common mechanism of toxicity.”

EPA has not found flutolanil to share a common mechanism of toxicity with any other substances, and flutolanil does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that flutolanil does not have a common mechanism of toxicity with other substances. For information regarding EPA's efforts to determine which chemicals have a common mechanism of toxicity and to evaluate the cumulative effects of such chemicals, see EPA's website at http://www.epa.gov/pesticides/cumulative.

1. In general. Section 408(b)(2)(C) of FFDCA provides that EPA shall apply an additional tenfold (10X) margin of safety for infants and children in the case of threshold effects to account for prenatal and postnatal toxicity and the completeness of the database on toxicity and exposure unless EPA determines based on reliable data that a different margin of safety will be safe for infants and children. This additional margin of safety is commonly referred to as the FQPA Safety Factor (SF). In applying this provision, EPA either retains the default value of 10X, or uses a different additional safety factor when reliable data available to EPA support the choice of a different factor.

2. Prenatal and postnatal sensitivity. There was no evidence of increased susceptibility of rat or rabbit fetuses to in utero exposure or rat pups to prenatal and postnatal exposure to flutolanil. Flutolanil is not a developmental or reproductive toxicant. No maternal, reproductive, or developmental toxicity was observed at the limit dose.

3. Conclusion. EPA has determined that reliable data show the safety of infants and children would be adequately protected if the FQPA SF were reduced to 1X. That decision is based on the following findings:

i. The toxicity database for flutolanil is complete except for acute and subchronic neurotoxicity and immunotoxicity studies. Recent changes to 40 CFR part 158 make acute and subchronic neurotoxicity testing (OPPTS Test Guideline 870.6200), and immunotoxicity testing (OPPTS Test Guideline 870.7800) required for pesticide registration. However, the available data for flutolanil do not suggest that the compound produces hematological or thymus/spleen organ effects indicative of immunotoxicity. Further, there is no evidence of neurotoxicity in any study in the toxicity database for flutolanil. Therefore, EPA does not believe that conducting neurotoxicity and immunotoxicity studies will result in a lower POD than currently used for overall risk assessment. Consequently, an additional database uncertainty factor (UF) does not need to be applied.

ii. There is no indication that flutolanil is a neurotoxic chemical and there is no need for a developmental neurotoxicity study or additional UFs to account for neurotoxicity.

iii. There is no evidence that flutolanil exposure results in increased susceptibility in in utero rats or rabbits in the prenatal developmental studies or in young rats in the 2-generation reproduction study.

iv. There are no residual uncertainties identified in the exposure databases. The dietary food exposure assessments were performed based on 100% CT and tolerance-level residues. EPA made conservative (protective) assumptions in the ground and surface water modeling used to assess exposure to flutolanil in drinking water. Residential exposure does not pose a concern for flutolanil because (1) chronic residential exposure is not expected; and (2) although short-term or intermediate-term residential exposure may occur, no relevant adverse effects were identified for dermal or incidental oral or inhalation exposure related to residential use. These assessments will not underestimate the exposure and risks posed by flutolanil.

EPA determines whether acute and chronic dietary pesticide exposures are safe by comparing aggregate exposure estimates to the acute PAD (aPAD) and chronic PAD (cPAD). For linear cancer risks, EPA calculates the lifetime probability of acquiring cancer given the estimated aggregate exposure. Short-, intermediate-, and chronic-term risks are evaluated by comparing the estimated aggregate food, water, and residential exposure to the appropriate PODs to ensure that an adequate MOE exists.

1. Acute risk. An acute aggregate risk assessment takes into account acute exposure estimates from dietary consumption of food and drinking water. No adverse effect resulting from a single oral exposure was identified and no acute dietary endpoint was selected. Therefore, flutolanil is not expected to pose an acute risk.

2. Chronic risk. Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to flutolanil from food and water will utilize 1.5% of the cPAD for children 1 to 2 years old, the population group receiving the greatest exposure. Based on the explanation in Unit III.C.3., regarding residential use patterns, chronic residential exposure to residues of flutolanil is not expected.

3. Short- and intermediate-term risk. Short- and intermediate-term aggregate exposure takes into account short- and intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level). Because no short- and/or intermediate-term adverse effects were identified, flutolanil is not expected to pose a short- or intermediate-term risk.

4. Aggregate cancer risk for U.S. population. Based on the lack of evidence of carcinogenicity in two adequate rodent carcinogenicity studies, flutolanil is not expected to pose a cancer risk to humans.

5. Determination of safety. Based on these risk assessments, EPA concludes that there is a reasonable certainty that no harm will result to the general population or to infants and children from aggregate exposure to flutolanil residues.

An adequate enforcement methodology, (Method AU/95R/04), a common moiety Gas Chromatography/Mass Spectrometry (GC/MS) method which determines residues of flutolanil and metabolites as 2-trifluoromethyl benzoic acid (2-TFBA) is available for enforcement.

The method may be requested from: Chief, Analytical Chemistry Branch, Environmental Science Center, 701 Mapes Rd., Ft. Meade, MD 20755-5350; telephone number: (410) 305-2905; e-mail address: residuemethods@epa.gov.

In making its tolerance decisions, EPA seeks to harmonize U.S. tolerances with international standards whenever possible, consistent with U.S. food safety standards and agricultural practices. EPA considers the international maximum residue limits (MRLs) established by the Codex Alimentarius Commission (Codex), as required by FFDCA section 408(b)(4). The Codex Alimentarius is a joint U.N. Food and Agriculture Organization/World Health Organization food standards program, and it is recognized as an international food safety standards-setting organization in trade agreements to which the United States is a party. EPA may establish a tolerance that is different from a Codex MRL; however, FFDCA section 408(b)(4) requires that EPA explain the reasons for departing from the Codex level. No Canadian, Mexican or Codex MRLs have been established for Brassica leafy vegetables and/or turnip greens.

The proposed tolerance level of 0.11 ppm for both Brassica leafy vegetable group 5 and turnip greens has been revised to 0.1 ppm. The level of 0.1 ppm is based on the sum of the demonstrated levels of quantitation of flutolanil and metabolite M4, each 0.05 ppm. The proposed tolerance of 0.11 ppm is based on one mustard green trial (of 10 trials) where flutolanil was quantitated at 0.05 to 0.06 ppm, and M4 was approximately 0.03 ppm. Because total residues were < 0.1 ppm, EPA is setting the tolerance level at 0.1 ppm.

Therefore, tolerances are established for residues of flutolanil, N -(3-(1-methylethoxy)phenyl)-2-(trifluoromethyl)benzamide, including its metabolites and degradates, in or on vegetable, brassica, leafy group 5 at 0.1 ppm, and turnip greens at 0.1 ppm.

This final rule establishes tolerances under section 408(d) of FFDCA in response to a petition submitted to the Agency. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled Regulatory Planning and Review (58 FR 51735, October 4, 1993). Because this final rule has been exempted from review under Executive Order 12866, this final 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) or Executive Order 13045, entitled Protection of Children from Environmental Health Risks and Safety Risks (62 FR 19885, April 23, 1997). This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501 et seq., nor does it require any special considerations under Executive Order 12898, entitled Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (59 FR 7629, February 16, 1994).

Since tolerances and exemptions that are established on the basis of a petition under section 408(d) of FFDCA, such as the tolerance in this final rule, do not require the issuance of a proposed rule, the requirements of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq. ) do not apply.

This final rule directly regulates growers, food processors, food handlers, and food retailers, not States or tribes, nor does this action alter the relationships or distribution of power and responsibilities established by Congress in the preemption provisions of section 408(n)(4) of FFDCA. As such, the Agency has determined that this action will not have a substantial direct effect on States or tribal governments, on the relationship between the national government and the States or tribal governments, or on the distribution of power and responsibilities among the various levels of government or between the Federal Government and Indian tribes. Thus, the Agency has determined that Executive Order 13132, entitled Federalism (64 FR 43255, August 10, 1999) and Executive Order 13175, entitled Consultation and Coordination with Indian Tribal Governments (65 FR 67249, November 9, 2000) do not apply to this final rule. In addition, this final rule does not impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Pub. L. 104-4).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, section 12(d) (15 U.S.C. 272 note).

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

The NFIP enables property owners to purchase flood insurance which is generally not otherwise available. In return, communities agree to adopt and administer local floodplain management aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage as authorized under the NFIP, 42 U.S.C. 4001 et seq.; unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. However, some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue their eligibility for the sale of insurance. A notice withdrawing the suspension of the communities will be published in the Federal Register .

In addition, FEMA has identified the Special Flood Hazard Areas (SFHAs) in these communities by publishing a Flood Insurance Rate Map (FIRM). The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may legally be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year, on FEMA's initial flood insurance map of the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment under 5 U.S.C. 553(b) are impracticable and unnecessary because communities listed in this final rule have been adequately notified.

Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days.

National Environmental Policy Act. This rule is categorically excluded from the requirements of 44 CFR part 10, Environmental Considerations. No environmental impact assessment has been prepared.

Regulatory Flexibility Act. The Administrator has determined that this rule is exempt from the requirements of the Regulatory Flexibility Act because the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits flood insurance coverage unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed no longer comply with the statutory requirements, and after the effective date, flood insurance will no longer be available in the communities unless remedial action takes place.

Regulatory Classification. This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

Executive Order 13132, Federalism. This rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This rule meets the applicable standards of Executive Order 12988.

Paperwork Reduction Act. This rule does not involve any collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

This is a summary of the Commission's Report and Order, ET Docket No. 10-152, FCC 10-194, adopted November 22, 2010 and released November 23, 2010. The full text of this document is available for inspection and copying during normal business hours in the FCC Reference Center (Room CY-A257), 445 12th Street, SW., Washington, DC 20554. The complete text of this document also may be purchased from the Commission's copy contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room, CY-B402, Washington, DC 20554. The full text may also be downloaded at: http://www.fcc.gov.

People with Disabilities: To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

1. The Satellite Television Extension and Localism Act of 2010 (STELA) reauthorizes the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA) by extending the statutory copyright license for satellite carriage of distant broadcast signals, as well as provisions in the Communications Act, and amending certain provisions in the Communications Act and the Copyright Act. To implement the new statutory regime, the STELA, inter alia, requires the Commission to “develop and prescribe by rule a point-to-point predictive model for reliably and presumptively determining the ability of individual locations, through the use of an antenna, to receive signals in accordance with the signal intensity standard in § 73.622(e)(1) of [its rules], or a successor regulation, including to account for the continuing operation of translator stations and low power television stations.” In this action, the Commission has adopted a point-to-point predictive model for determining the ability of individual locations to receive an over-the-air digital television broadcast signal at the intensity level needed for service through the use of an antenna as required by the STELA. The new digital ILLR model will be used as a means for reliably and presumptively determining whether individual households are eligible to receive the signals of distant network-affiliated digital television stations, including TV translator and low power television stations, from their satellite carrier. The predictive model the Commission adopts, which is based on the current model for predicting the intensity of analog television signals at individual locations, will allow such determinations to be made in a timely and cost effective manner for all parties involved, including network TV stations, satellite carriers and satellite subscribers. The Commission is also providing a plan for the model's continued refinement by use of additional data as it may become available. Under that plan, refinements based on additional data may be proposed by referencing the docket of this proceeding, which will be held open indefinitely for this purpose. Consistent with this intention to refine the model as new information becomes available, the Commission has also initiated a Further Notice of Proposed Rulemaking published elsewhere in this issue, in this proceeding to request comment on possible modifications to the methodology in the digital ILLR model to improve its predictive accuracy as suggested by one of the parties responding to the Notice of Proposed Rulemaking (NPRM), 75 FR 46885, August 4, 2010, in this proceeding.

2. As directed by Congress in the STELA, the Commission is adopting a new digital ILLR model for predicting the ability of individual locations to receive, through use of an antenna, an over-the-air digital television broadcast signal in accordance with the intensity standards specified in § 73.622(e)(1) of our rules. This new model will be established in the Commission's rules as the point-to-point model for presumptively determining the ability of individual locations to receive with an antenna the digital signals of full service television stations, low power television stations (including digital Class A stations) and TV translator stations. Consistent with the specifications in the STELA, the Commission is basing this new model on the SHVIA ILLR model that it adopted in CS Docket No. 98-201, Report and Order, 64 FR 7113, February 12, 1999, as revised previously, for use in predicting the signal strengths of analog television signals. The new digital ILLR model incorporates parameters and features appropriate for prediction of the signal strengths of digital television signals. The Commission also adopts a procedure for continued refinement of this model through use of additional data and information as it may become available. As part of that effort, the Commission requested comment on possible revisions to the digital ILLR model in the Further Notice of Proposed Rulemaking, published elsewhere in this issue, adopted November 22, 2010 in this proceeding.

3. In developing the new model, the Commission considered, in addition to the modifications necessary to enable the model to predict digital television signal strengths, three ways in which the STELA revises the definition of “unserved household”: (1) The definition now references an “antenna” without specifying the kind of antenna or where it is located; (2) the definition specifically recognizes both a “primary stream” and a “multicast stream” affiliated with a network; and (3) the definition now limits network stations whose signals are to be considered to those network affiliates in the same DMA as the subscriber. The new STELA digital ILLR model and its specifications are described in OET's new “OET Bulletin No. 73” in Appendix A of the Report and Order.

4. The Commission is adopting the methodology and parameters for describing the basic radiofrequency environment of the SHVIA ILLR model as proposed in the NPRM for the digital ILLR model. As indicated by the Broadcasters and CDE, the methodology in the ILLR model as modified over time has been time-tested and proven successful. The Commission expects that the new digital ILLR model will provide the same reliable and accurate predictions of signal availability as the analog SHVIA ILLR model. Like its predecessor, the new model incorporates features to account for the radio propagation environment through which television signals pass and the receiving systems used by consumers. These features are described in the “planning factors” that describe a set of assumptions for digital and analog television reception systems. Since digital and analog television signals are transmitted in the same frequency bands, the planning factors affecting basic propagation of signals using the two different modulation methods and the background noise level are the same. The Commission is not modifying in the digital ILLR model any of the parameters of the SHVIA ILLR model that describe basic propagation and the background noise levels. The planning factors that are different for digital and analog signals include antenna location (outdoor vs. indoor) and performance, time and location variability, and land use and land cover. The Commission's decisions on each of these features in the digital ILLR model are discussed. The Commission also observes that the planning factor differences for antenna location and performance and for time and location variability are incorporated into the threshold signal level for reception for digital television service, which the STELA directs to be set at the noise-limited levels specified in § 73.622(e)(1).

5. The Commission is not including adjustments to account for interference and multipath in the digital ILLR model. As the Commission observed in its 2005 Report to Congress, a receiver's ability to provide service in the presence of interfering signals is not relevant to the field strength needed to provide service. While the presence of other signals on the same or adjacent channels does have the potential for disrupting service, the effects of other signals are a separate matter from the basic functioning of a receiver in an interference-free environment that forms the basis for the Commission's field strength standards. With regard to multipath, in the 2005 Report to Congress, the Commission finds that while the sensitivity of television receivers may degrade to a small degree when they process multipath signals, the difficult multipath conditions under which degradation of as much as 2 dB could occur are not expected to be the norm. Moreover, the incidence of multipath varies significantly over very short distances and the level of multipath and its character is generally not a predictable factor. Further, the Commission sees no indication in the STELA that Congress intended that it add interference or multipath consideration to the signal strength standard. The Commission also observes that at locations where interference or multipath are present, consumers can often take steps such as repositioning or re-orienting their antenna to resolve the impact and achieve reception. Accordingly, the Commission finds no basis or need for including adjustments to the digital ILLR model for interference or multipath.

6. The Commission is not adopting the revisions to the estimating methodology proposed by Mr. Shumate as it has not had an opportunity to fully explore the changes he suggests. Therefore, the Commission is not addressing his proposals for improving the ILLR methodology in the Further Notice of Proposed Rulemaking herein. Nonetheless, the Commission believes there may be merit in the improvements he describes for the methodology for predicting digital television signal strengths at individual locations and perhaps more generally, and that they warrant further investigation as possible modifications to the digital ILLR model. The Commission will explore these improvements through a Further Notice of Proposed Rulemaking that is included in the instant action. It also is not acting on Adaptrum's suggestion that we allow optional use of the digital ILLR model for prediction of signal strengths for purposes of identifying unused spectrum in the TV bands where unlicensed devices could operate as it is beyond the scope of this proceeding.

7. Antenna Location and Performance. In the NPRM, the Commission proposed to use the current standard for an outdoor antenna as specified in the DTV planning factors in OET Bulletin No. 69 for predicting digital television signal strengths at individual locations, citing the information and conclusions regarding outdoor and indoor antennas in the 2005 Report to Congress. As set forth in the OET Bulletin No. 73, the prediction model would use an antenna at 6 meters (20 feet) for one-story structures and 9 meters (30 feet) for structures taller than one story. Consistent with Congress' modification of the specification of the receiving antenna to simply say an “antenna,” and its concern that using the outdoor antenna model may result in instances where a consumer who either cannot use an outdoor antenna or cannot receive service using an outdoor antenna and is not able to receive a station's service with an indoor antenna will be found ineligible for satellite delivery of a distant network signal, the Commission again requested comments, suggestions and new information that would provide a solution for satellite television subscribers in such circumstances. In this regard, it indicated that it was particularly interested in new ideas and information that have been developed in the time since the 2005 Report to Congress.

8. The Commission concludes that the current standard for an outdoor antenna as specified in the digital television planning factors in OET Bulletin No. 69 and on which the digital television signal strength standards in § 73.622(e)(1) are based, at the alternative heights proposed in the NPRM, should be used as the basis for predicting digital television signal strengths at individual locations in the digital ILLR model. As discussed in the NPRM, Congress's use of the term “antenna” in the STELA grants the Commission greater flexibility to take into account different types of antennas than was previously available, without requiring the Commission to incorporate any particular type of antenna into the model. The Commission is not persuaded by the Broadcasters' arguments that the omission of the word “outdoor” from the antenna description in the STELA has no significance and that the Commission is required to assume use of an outdoor antenna in predicting digital television signal strengths. While they are correct that the STELA directs the Commission to rely on the ILLR model recommended with respect to digital signals in the 2005 Report to Congress, which assumes use of an outdoor antenna, the Commission believes that STELA's use of the term “rely” provides us latitude in the manner in which the ILLR model is implemented. Their argument that the Commission must specify an outdoor antenna because the minimum signal strengths specified by the STELA are premised on use of an outdoor antenna (through the digital television planning factors), is similarly not persuasive in that, as DIRECTV/DISH observe, other specifications of parameters that include an indoor antenna are possible while still adhering to those signal strengths as the standard.

9. The Commission also is not persuaded by DIRECTV/DISH's arguments that Congress' deletion of the qualifiers specifying a “conventional, stationary, outdoor rooftop receiving antenna” from the definition of an “unserved household” from the STELA means that a household is now unserved if it cannot receive a signal of sufficient strength by means of a simple indoor antenna. Again, it believes that this change simply affords the Commission latitude to consider all types of antennas in implementing the digital ILLR model. Even assuming that DIRECTV/DISH are correct that more consumers are now using indoor antennas, their argument that Congress was responding to greater use of indoor antennas by consumers misses the fact that consumers are only using indoor antennas where such antennas provide service. As observed in the 2005 Report to Congress, the Commission has always assumed that households will use the type of antenna that they need to achieve service; if an indoor antenna is insufficient for a particular household, it generally will rely on a rooftop antenna. Nothing in the STELA reflects a Congressional intent for the Commission to abandon that assumption. Thus, the Commission disagrees that households that are not able to receive service with an indoor antenna should be considered unserved simply because they do not use an outdoor antenna. The Commission has considered the full range of antenna options in developing the digital TV ILLR prediction model.

10. Turning to the specification of antennas in the prediction model, the Commission finds that an approach that specifies an outdoor antenna at 6 meters above ground for one-story structures and 9 meters above ground for taller structures (household roof-top levels) with gain as specified in the digital television planning factors is most consistent with the directives for the digital TV signal strength prediction model set forth in the STELA. The Commission reached this conclusion for the following reasons. First, given that the STELA specifies use of the digital television signal strength standard in § 73.622(e)(1) of the rules as the threshold metric against which predictions are to be compared to make determinations of “served” and “unserved,” it is important and necessary that the signal strengths predicted by the model can be meaningfully compared to that standard. To provide for such comparisons, the signals whose strengths are predicted by the model must have the same qualities as the signal specified in the standard. This can occur only if the assumptions underlying the signal strength needed for reception as described by the standard are the same as the assumptions underlying the signal predicted by the model and their relationship is well defined, so that the two represent the same conditions of reception. The § 73.622(e)(1) digital television signal strength standard is derived from the assumptions in the digital television planning factors as described in OET Bulletin No. 69 and those assumptions include an outdoor antenna as described above. This signal strength standard is important under the Commission's rules because it serves to define the service boundary or “service contour” of a digital television station and the threshold at which a station's service is considered to be available in areas within that service contour. Congress specified this same signal strength standard for defining “served” and “unserved” locations for purposes of determining households' eligibility for satellite delivery of distant network signals in the STELA. For these reasons, the Commission agrees with the Broadcasters that it is appropriate to incorporate into the digital ILLR model the assumptions in the planning factors in OET Bulletin No. 69, including the specified outdoor antenna, to obtain predictions of signal strength for comparison to the standard specified in the STELA.

11. The Commission also rejects DIRECTV/DISH's proposed adjustments to the signal strength standard to account for differences in the expected signal level and in the gain of indoor and outdoor antennas. It finds that application of these adjustments would significantly alter the digital television service description as defined in the § 73.622(e)(1) signal strength standard by reducing the likelihood that a given location would be predicted to receive service. Under the plan they propose, between 36.7 dB and 46.7 dB (depending on whether the location is in an urban area), or more, would be subtracted from the prediction calculated by the ILLR model for locations that do not have an outdoor antenna. They do not offer any additional modifications to the model or its assumptions to compensate for this proposed change in the signal strength standard; nor are we aware of any modifications that would provide such compensation. In application, DIRECTV/DISH's proposal would raise the signal strength needed for reception of UHF signals from 41 dBμV/m to between 77.7 dbμV/m and 87.7 dBμV/m for households without outdoor antennas. Such a change could, as the broadcasters observe, drastically increase the number of households eligible for satellite delivery of distant network signals by allowing viewers to claim use of an indoor antenna when such viewers generally could in fact receive service using an outdoor antenna. Notwithstanding the difficulties in developing a model that would provide accurate and reliable indoor predictions, the Commission is concerned that many satellite subscribers who could use an outdoor antenna would have an incentive to take the “easy path” and simply report that they cannot use an outdoor antenna and thereby be evaluated under the indoor antenna standard, when in fact they could readily receive a station's service with outdoor antenna. For example, subscribers located within a station's service area but at distances from its transmitter where indoor reception is not possible could simply assert that they cannot use an outdoor antenna and thus be eligible to receive a distant network signal. This would remove large numbers of viewers from local stations potential audience. In view of Congress' selection of the § 73.622(e)(2) signal strength standard as the threshold for distant signal eligibility in the STELA, the Commission does not believe that Congress envisioned or contemplated such an increase in the numbers of satellite subscribers eligible for delivery of distant network signals.

12. In addition, as the Commission discussed in the 2005 Report to Congress and the NPRM, there are significant difficulties in achieving accurate and reliable estimates of digital television signal strengths in indoor environments, which make it very difficult if not impossible to obtain accurate and reliable predictions of digital television signal strengths indoors. The Commission is concerned that simplification of indoor antenna reception to a single set of circumstances as suggested by DIRECTV/DISH and Mr. Kurby would ignore the significant differences that exist in indoor reception scenarios, particularly with respect to attenuation of signals due to the materials with which a building is constructed, which vary substantially in the degree to which they absorb or reflect signals, and the antenna's location within the structure, which affects the number and pathways of structural features (walls or ground in the case of basements) that signals must penetrate to reach the antenna. In this regard, the Commission also observes that in the DTV transition, it advised consumers of the wide variability in the performance of antennas generally and indoor antennas in particular in materials provided to the public for the DTV transition. For example, the Commission noted that consumers having problems with indoor antennas needed to check the performance information for the antenna, move the antenna for best reception, place it near a window, as high as possible, away from electronic equipment and change the direction the antenna is facing. Further, the Commission advised that a roof-top antenna may be needed.

13. These differences in indoor reception scenarios are very difficult to account for properly in a model's input values and can also be challenging for a user of a model to assess so as to specify appropriate input values for any particular location. These factors together greatly reduce the reliability and accuracy of any indoor signal strength predictions that might be provided by a model. While the Commission understands that there are also variations in signal strength across outdoor receive locations due to terrain and the presence of man-made terrain features, including aspects of the structure on which an antenna is mounted, that variability is generally much less than the variability of signal strengths indoors which are affected by building materials and location within the building as well as the same terrain and man-made features that affect signals received outdoors. The Commission also expects that there would be an incentive for households in areas where service is not available with an indoor antenna to simply submit that they have an indoor antenna in order to be eligible for distant signal delivery when in fact they could receive that signal with an outdoor antenna under the standard specified in the STELA. This type of behavior would, to the extent it occurred, undermine broadcasters' coverage and complicate our administration of an indoor antenna standard. The Commission also is not persuaded that any of the options for modifying their proposed adjustments that DIRECTV/DISH have submitted in recent ex parte presentations would remedy the problems discussed. None of those suggestions would provide reliable and accurate estimates of indoor signal strengths; nor do they offer modifications that would compensate for the change their plan would make to digital signal strength standard set forth in the STELA. Accordingly, the Commission will use the current standard for an outdoor antenna as specified in the digital television planning factors in OET Bulletin No. 69 in the digital ILLR model.

14. Notwithstanding this decision, the Commission remains aware and concerned that using the outdoor reception model may result in instances where a consumer who either cannot use an outdoor antenna or cannot receive service using an outdoor antenna and is not able to receive a station's service with an indoor antenna will be found ineligible for satellite delivery of a distant network signal. This concern is mitigated by new local-into-local offerings by satellite carriers, which the Commission believes will significantly reduce the number of instances where satellite subscribers would need to consider requesting delivery of distant network signals. Dish Network now provides local network stations (local-into-local service) in all 210 DMAs. In addition, DIRECTV now provides local-into-local service in all but 60 relatively small markets. The Commission recognizes that DIRECTV/DISH will still have to qualify some distant signals even after they provide local-into-local service in all 210 DMAs. However, the locations that they will not reach with local-into-local service are likely to be in areas with relatively small populations that are at the edge of some DMAs that are served by satellite service “spot beams” that provide localized service to the major portion of a DMA, including its center of population. Those populations are served by their carrier's larger regional coverage signals that do not have the local signals carried on the spot beams. Moreover, the areas not reached by the spot beams will generally be in less densely populated areas where there are generally fewer residences that are not able to use an outdoor antenna. In concluding that the outdoor antenna standard remains appropriate, the Commission has also considered that most subscribers who will request distant signals from their satellite carriers are likely to be in rural areas where use of outdoor antennas is more common and practical than in urban areas. Dish now serves all 210 DMAs and only a small number of Dish subscribers are beyond the spot beams serving those DMAs and therefore potentially eligible for distant signals. Although DIRECTV does not offer local stations in 60 DMAs, these are small market areas and mostly in rural areas where outdoor antennas are likely to be more prevalent.

15. The Commission also observes that under section 339(a)(2)(E) of the Communications Act, satellite TV subscribers who are denied delivery of a distant network signal based on the signal strength predictive model or a measurement may request a waiver, through the subscriber's satellite carrier, from the station that asserts that such retransmission is prohibited. While the Commission does not know the extent to which stations have granted such waivers, the waiver process is available. It hopes that stations receiving such waiver requests will consider whether the subscriber is in an urban area or residing in a multiple dwelling unit, and therefore confined to reliance on an indoor antenna, and that the stations will act accordingly to grant the waiver request on a case-by-case basis in such circumstances. Finally, the Commission will remain open to consideration of new ideas, approaches and methods for identifying households that cannot use or receive service with an outdoor antenna that are predicted to be served by our digital ILLR predictive model. The Commission is holding this proceeding open for continued refinement of the digital TV ILLR Model, so parties may submit proposals for such new ideas, approaches and methods.

16. Time and Location Variability Factors. The field strength of radio signals, including television signals, at a given distance from a transmitter vary by location and with time due to factors affecting their propagation. The time and location (situational) variability factors are commonly represented using the notation “F(L,T),” where a signal of a specified strength level will be available at L percent of locations T percent of the time. The variations over time are also known as “fading.” In the NPRM, the Commission proposed to use 50% as the location variability factor and 90% as the time variability factor in the digital ILLR model, in accordance with the DTV planning factors. The SHVIA ILLR model applicable to analog stations uses 50% as the location variability and 50% as the time variability factor.

17. The Commission continues to believe that the F(50,90) specifications for time and location variability set forth in the digital television planning factors are the appropriate values for those factors in the digital ILLR model. While the Commission understands DIRECTV/DISH's position that viewers desire service to be available nearly all the time and that digital television service does not degrade gradually, the fact is that the propagation paths of terrestrial broadcast television signals are much different than those of sky-based satellite signals and this affects the practically achievable degree of broadcast signal availability. As observed in the NPRM, terrestrial signals follow paths that are close to the surface and are attenuated by the natural and man-made surface features they encounter along those paths. The attenuation caused by those features results in propagation conditions whereby signal strength varies statistically by location and time. The power and/or antenna height needed to improve broadcast television signal availability increase in a non-linear manner such that it is unrealistic to require such availability to approach 100%. These propagation conditions are much different than those faced by satellite signals, which travel over paths that are generally affected only by weather and other atmospheric conditions.

18. The F(50,90) values for digital television service availability were established based on an industry-Government consensus that relied on the traditional TV service model that worked well for analog TV service and that, as argued by the broadcasters, is also appropriate for digital TV service. Changing the time variability factor value to 99% reliability as requested by the satellite providers would greatly shrink the predicted local DTV service areas and would not reflect the capability of the vast majority of viewers to receive signals. Moreover, as pointed out by the Broadcasters and in MSW's Engineering Statement, the assumed 10% reduction in signal availability over time occurs at the outermost limit of a station's service area and is not the typical statistical figure for reliable reception across a station's entire service area. As the distance to a station's transmitter decreases, time availability of the signal above the noise-limited threshold value also increases. The Commission also observes that households at the edge of a station's service area can often improve their reception (and thereby reduce or eliminate periods when the station's signal is not available) by mounting their antennas higher, using higher gain antennas, or using low-noise pre-amplifiers at their antennas. In addition, it is more likely that a station's signal strength at a household that is located near the edge of its service area will be predicted to be below the threshold needed for reception and therefore eligible for delivery of a distant signal by its satellite provider. Accordingly, the Commission finds no basis for modifying the time variability factor for broadcast television signals for purposes of determining a household's eligibility for delivery of distant network signals and therefore will specify the time and availability factors in the digital ILLR model as F(50,90).

19. Land Use and Land Cover Factors. The land use and land cover (LULC) data provides information on building structures and other man-made terrestrial features and on land cover features such as forests and open land that can affect radio propagation. Inclusion of this data in the prediction methodology of the SHVIA ILLR TV computer model significantly enhanced the accuracy and reliability of its signal strength predictions. The method for considering these land cover factors is to assign certain signal loss values, in addition to those already factored in the model for terrain variation, as a function of the LULC category of the reception point. More specifically, the field strength predicted by the basic Longley-Rice model is reduced by the clutter loss value associated with the respective LULC category. Reception point environments at individual locations are classified in terms of the codes used in the LULC database of the United States Geological Survey (USGS). In the NPRM, the Commission proposed to apply the LULC categories and clutter loss values for describing land use and land cover features in the digital TV ILLR model in the same manner as currently incorporated into the SHVIA ILLR model. These values were specified in the SHVIA First Report and Order.

20. The Commission concludes that the LULC categories and clutter loss values for describing land use and land cover features in the digital TV ILLR model should be applied in the digital ILLR in the same manner as currently applied in the SHVIA ILLR model. While the Commission understands the seeming inconsistency of using no LULC corrections for VHF signals, it has found previously that the clutter loss values used in the current SHVIA ILLR model, including zero values for VHF signals, strike the correct balance. Analysis of the data on the model's performance shows that using the values used in the SHVIA ILLR model produce approximately an equal number of over-predictions as under-predictions. Thus, the Commission has found a range of clutter values, including zero, that correspond to different land cover types are valid. It sees no merit in DIRECTV/DISH's argument that the studies used by the Commission in determining that the LULC adjustment for VHF signals should be zero were conducted in some of the flattest states in the country. Rather, the Commission finds that the 5 markets examined have varied terrain characteristics that are sufficient to represent the terrain in television markets across the nation. Also, at this time, the Commission is not aware of any LULC database that would provide more refined or granular information on land use and land clutter than that provided by the USGS LULC database. In this regard, DIRECTV/DISH's suggestion to use Google Earth is not practical as that service provides does not provide data on terrain and surface clutter variation. The Commission also will not alter the LULC correction factors to add additional attenuation to account for lower antenna heights as the model will continue to use the same 30 foot (9 meters) and 20 foot (6 meters) antenna heights used in the SHVIA ILLR model. The Commission also finds that it would not be practical to introduce clutter height and density factors into the clutter calculations of the ILLR software at this time as suggested by Mr. Shumate. Also, there is no height and density information available for the current LULC data. Accordingly, the Commission will apply the land use and land cover categories and USGS cluttler loss values for describing land use and land cover features in the digital TV ILLR model in the same manner as these elements are currently incorporated into the SHVIA ILLR model.

21. Multicast program streams. In the NPRM, the Commission stated that it believes that the proposed digital signal strength prediction model would account for multicast as well as primary streams that are transmitted by a station and affiliated with one or more networks. Therefore, it proposed to provide no special adjustment in the model to predict the availability of network signals that are transmitted on multicast streams, rather than on a station's primary program stream. In their comments, the Broadcasters agree with the Commission's position in the NPRM that all multicast streams can be treated equally for purposes of both prediction and measurement of signal strength. They note that all of the streams arrive on the same signal and at the same strength and that the different programming on multicast channels simply consists of different packets within a station's transport stream.

22. The Commission finds that there is no need for adjusting predictions from the digital ILLR model to reflect the added reference to network affiliated multicast streams in the STELA. The prediction of signal strength for a digital television broadcast signal applies regardless of the content, including the presence of multicast program streams. If a household is predicted to receive a station, then all of that station's program streams would be received equally. Accordingly, the Commission will not provide any special adjustment or procedure in the model for network signals carried on multicast program streams.

23. Previous findings of eligibility. In the NPRM, the Commission proposed to uphold any previous findings of eligibility for delivery of distant signals based on the predictive model in the event that it were to update that model and a prediction from the updated model were to indicate that a previously unserved location could receive service from a local network station. In its comments, CDE observes that because of changes many television stations are still making to their digital operations, the potential situation arises for those stations that a lack-of-service determination under STELA may be rendered moot at a later date by an upgrade in their television facilities and improved off-the-air service. It asks that the Commission clarify how the predictive model is to be administered for those viewers who opted at one juncture to choose satellite service due to lack of off-the-air service but later are predicted to receive off-the-air service as a result of an upgrade to a stations facilities.

24. The Commission continues to believe that it is appropriate to “grandfather” the eligibility of households in cases where a location was predicted to be unserved by a local network station using an adopted version of the digital ILLR model and the household at that location is receiving a signal of that network from a distant station by its satellite provider. This provision will avoid disruption of the existing services to which households have been accustomed to receiving if the Commission updates the digital ILLR model or a station modifies its transmission facilities. This grandfathering will apply only in cases where the household already is receiving a distant signal from its satellite provider prior to a change in the digital ILLR prediction model or in the coverage of the local station.

25. Analog Low Power TV and TV Translator Stations. Although all full-service television stations converted fully to digital operation on June 12, 2009, TV translator and low power/Class A TV stations were not required to make that conversion and many of those stations continue to broadcast in analog format. In the NPRM the Commission, recognizing the provisions of Section 205 of the STELA and that many TV translators and low power TV stations continue to transmit analog signals, tentatively concluded that it would continue to apply the existing analog SHVIA ILLR model specified in OET Bulletin No. 72 for predicting signal strengths in distant network eligibility cases involving TV translator and low-power/Class A television stations that use the analog TV standard to broadcast their own programming or to retransmit the content of local digital network stations. In their comments, the Broadcasters support the Commission's proposal to continue to use the analog SHVIA ILLR model for LPTV, Class A, and translator stations that are still broadcasting using the analog transmission standard. They state that, to the extent such stations continue broadcasting in analog, it makes sense to continue to use the Commission's existing tools for predicting analog signal reception, including OET Bulletin 72. They state that those tools have worked well for years and there is no reason not to continue to employ them with this category of stations.

26. Consistent with Section 205 of the STELA, the Commission will continue to apply the methods in OET Bulletin No. 72 for predicting the signal strengths of TV translator and low power/Class A stations that operate using the analog TV standard. It sees no reason or basis for changing from the use of the SHVIA ILLR model for obtaining predictions of signal strength for determining eligibility for satellite delivery of distant network signals for those stations.

27. Procedure for Continued Refinement of the Digital TV ILLR Model. The STELA requires that the Commission establish procedures for continued refinement in the application of the digital TV ILLR model through use of additional data as it becomes available. In the NPRM, the Commission proposed to comply with this requirement by establishing a procedure under which it would consider possible changes to OET Bulletin No. 73 (which describes the model and is referenced in the rules) to implement improvements to the model. The commenting parties did not address our proposals for the procedures for continued refinement of the application of the digital TV ILLR model.

28. The Commission continues to believe the most efficient, effective, fair, transparent and timely approach for revising the digital TV ILLR model if new information becomes available is to hold open the docket in this proceeding and then conduct further rule making as proposed in the NPRM. This plan is consistent with the Commission's past action concerning the SHVIA model. Given that the digital ILLR model is being incorporated into its rules, the Commission believes that this plan also is consistent with the requirements of section 553 of the Administrative Procedures Act. Parties with new data, analysis or other information relating to improving the predictive model will be able to submit requests to modify the model in the instant docket. The Commission has instructed OET to evaluate such requests and, as appropriate, prepare a Notice of Proposed Rulemaking for consideration by the Commission. The Commission also could initiate rulemaking action on its own motion.

29. Stations to Consider for Distant Signals. Under the SHVIA and the SHVERA, the predicted signal strengths of all the stations affiliated with the same network were considered, regardless of those stations' DMAs. That is, if a satellite subscriber desired to receive the distant signal of the “XYZ” network, then the predicted results from any stations affiliated with the XYZ network would be analyzed for that subscriber's location. If one or more of those affiliated stations were predicted to deliver a signal of the requisite intensity, the subscriber would be predicted “served” by that network and not eligible for a distant signal from that network unless each of the stations predicted to serve the subscriber granted a waiver. Section 102 of the STELA changes this regime by specifying that only “local” stations are to be considered, i.e., stations that are located in the same DMA as the satellite subscriber. In the NPRM, the Commission proposed to address this statutory modification by changing the way the digital ILLR model's results are to be used, rather than through a change in the digital TV ILLR model itself that would limit the signals examined to those located in the same DMA as the subscriber. That is, instead of having the computer software for the model limit consideration of network stations to any such stations in the subscriber's DMA that the model predicts to be available, the Commission proposed to amend its rules to specify that satellite carriers are required to consider only the signals of network stations located in the subscriber's DMA in determining whether a subscriber is eligible for delivery of distant network signals. The commenting parties did not address this issue.

30. The Commission is adopting its proposal to address the statutory change to limit the network stations to be considered in satellite signal delivery eligibility cases to those stations that are located in the same DMA as the satellite subscriber by amending its rules to specify that eligibility determinations are to consider only the signals of network stations located in the subscriber's DMA. The Commission notes that this statutory change will also reduce the burden associated with distant network signal eligibility waiver requests by reducing the number of stations from which a waiver would need to be requested. In addition, this change will reduce the burden of on-site measurement of signal strengths where such tests are performed for the purpose of determining a satellite subscriber's eligibility to receive distant signals.

31. As required by the Regulatory Flexibility Act of 1980, as amended (RFA)  1 an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking ( NPRM ) to this proceeding. 2 The Commission sought written public comment on the proposals in the NPRM, including comment on the IRFA. The Commission received no comments on the IRFA. This present Final Regulatory Flexibility Analysis (“FRFA”) conforms to the RFA. 3

A. Need for and Objectives of the Report and Order. In this Report and Order, we are adopting a point-to-point predictive model for determining the ability of individual locations to receive an over-the-air digital television broadcast signal at the intensity level needed for service through the use of an antenna as required by the STELA. 4 The new digital ILLR model will be used as a means for reliably and presumptively determining whether individual households are eligible to receive the signals of distant network-affiliated digital television stations, including TV translator and low power television stations, from their satellite carrier. The predictive model we are adopting, which is based on the current model for predicting the intensity of analog television signals at individual locations, will allow such determinations to be made in a timely and cost effective manner for all parties involved, including network TV stations, satellite carriers and satellite subscribers. We are also providing a plan for the model's continued refinement by use of additional data as it may become available. Under that plan, refinements based on additional data may be proposed by referencing the docket of this proceeding, which will be held open indefinitely for this purpose. Consistent with this intention to refine the model as new information becomes available, we are also initiating a Further Notice of Proposed Rulemaking herein to request comment on possible modifications to the methodology in the digital Individual Location Longley-Rice (ILLR) model to improve its predictive accuracy as suggested by one of the parties responding to the NPRM in this proceeding.

B. Summary of Significant Issues Raised by Public Comments in Response to the IRFA: There were no comments filed that specifically addressed the rules and policies propose in the IRFA.

C. Description and Estimates of the Number of Small Entities to Which the Rules will apply: The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the rules adopted herein. 5 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.”  6 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. 7 A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). 8

Nationwide, there are a total of approximately 29.6 million small businesses, according to the SBA. 9 A “small organization” is generally “any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.”  10 Nationwide, as of 2002, there were approximately 1.6 million small organizations. 11 The term “small governmental jurisdiction” is defined generally as “governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.”  12 Census Bureau data for 2002 indicate that there were 87,525 local governmental jurisdictions in the United States. 13 We estimate that, of this total, 84,377 entities were “small governmental jurisdictions.”  14 Thus, we estimate that most governmental jurisdictions are small.

Cable Television Distribution Services. The “Cable and Other Program Distribution” census category includes cable systems operators, closed circuit television services, direct broadcast satellite services, multipoint distribution systems, satellite master antenna systems, and subscription television services. Since 2007, these services have been defined within the broad economic census category of Wired Telecommunications Carriers; that category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services; wired (cable) audio and video programming distribution; and wired broadband Internet services. By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.” The SBA has developed a small business size standard for this category, which is: All such firms having 1,500 or fewer employees. To gauge small business prevalence for these cable services the Commission must, however, use current census data that are based on the previous category of Cable and Other Program Distribution and its associated size standard; that size standard was: All such firms having $13.5 million or less in annual receipts. According to Census Bureau data for 2002, there were a total of 1,191 firms in this previous category that operated for the entire year. Of this total, 1,087 firms had annual receipts of under $10 million, and 43 firms had receipts of $10 million or more but less than $25 million. Thus, the majority of these firms can be considered small.

Direct Broadcast Satellite (DBS) Service. DBS service is a nationally distributed subscription service that delivers video and audio programming via satellite to a small parabolic “dish” antenna at the subscriber's location. Because DBS provides subscription services, DBS falls within the SBA-recognized definition of Wired Telecommunications Carriers. However, as discussed above, the Commission relies on the previous size standard, Cable and Other Subscription Programming, which provides that a small entity is one with $13.5 million or less in annual receipts. Currently, only two operators—DirecTV and EchoStar Communications Corporation (EchoStar)—hold licenses to provide DBS service, which requires a great investment of capital for operation. Both currently offer subscription services and report annual revenues that are in excess of the threshold for a small business. Because DBS service requires significant capital, the Commission believes it is unlikely that a small entity as defined by the SBA would have the financial wherewithal to become a DBS licensee. Nevertheless, given the absence of specific data on this point, the Commission acknowledges the possibility that there are entrants in this field that may not yet have generated $13.5 million in annual receipts, and therefore may be categorized as a small business, if independently owned and operated.

Television Broadcasting. The rules and policies apply to television broadcast licensees and potential licensees of television service. The SBA defines a television broadcast station as a small business if such station has no more than $14 million in annual receipts. 15 Business concerns included in this industry are those “primarily engaged in broadcasting images together with sound.”  16 The Commission has estimated the number of licensed commercial television stations to be 1,392. 17 According to Commission staff review of the BIA/Kelsey, MAPro Television Database (BIA) as of April 7, 2010, about 1,015 of an estimated 1,380 commercial television stations  18 (or about 74 percent) have revenues of $14 million or less and thus qualify as small entities under the SBA definition. The Commission has estimated the number of licensed non-commercial educational (NCE) television stations to be 390. 19 We note, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations  20 must be included. Our estimate, therefore, likely overstates the number of small entities that might be affected by our action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. The Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.

In addition, an element of the definition of “small business” is that the entity not be dominant in its field of operation. We are unable at this time to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimates of small businesses to which rules may apply do not exclude any television station from the definition of a small business on this basis and are therefore over-inclusive to that extent. Also as noted, an additional element of the definition of “small business” is that the entity must be independently owned and operated. We note that it is difficult at times to assess these criteria in the context of media entities and our estimates of small businesses to which they apply may be over-inclusive to this extent.

Class A TV, LPTV, and TV translator stations. The rules and policies adopted in this Report and Order include licensees of Class A TV stations, low power television (LPTV) stations, and TV translator stations, as well as potential licensees in these television services. The same SBA definition that applies to television broadcast licensees would apply to these stations. The SBA defines a television broadcast station as a small business if such station has no more than $14 million in annual receipts. 21 Currently, there are approximately 537 licensed Class A stations, 2,386 licensed LPTV stations, and 4,359 licensed TV translators. 22 Given the nature of these services, we will presume that all of these licensees qualify as small entities under the SBA definition. We note, however, that under the SBA's definition, revenue of affiliates that are not LPTV stations should be aggregated with the LPTV station revenues in determining whether a concern is small. Our estimate may thus overstate the number of small entities since the revenue figure on which it is based does not include or aggregate revenues from non-LPTV affiliated companies. We do not have data on revenues of TV translator or TV booster stations, but virtually all of these entities are also likely to have revenues of less than $14 million and thus may be categorized as small, except to the extent that revenues of affiliated non-translator or booster entities should be considered.

D. Description of Projected Reporting, Recordkeeping and Other Compliance Requirement for Small Entities. We are adopting the methodology and parameters for describing the basic radiofrequency environment of the SHVIA ILLR model as proposed in the NPRM for the digital ILLR model. As indicated by the Broadcasters and CDE, the methodology in the ILLR model as modified over time has been time-tested and proven successful. We expect that the new digital ILLR model will provide the same reliable and accurate predictions of signal availability as the analog SHVIA ILLR model. Like its predecessor, the new model incorporates features to account for the radio propagation environment through which television signals pass and the receiving systems used by consumers. These features are described in the “planning factors” that describe a set of assumptions for digital and analog television reception systems. 23 Since digital and analog television signals are transmitted in the same frequency bands, the planning factors affecting basic propagation of signals using the two different modulation methods and the background noise level are the same. We therefore have not modified in the digital ILLR model any of the parameters of the SHVIA ILLR model that describe basic propagation and the background noise levels. The planning factors that are different for digital and analog signals include antenna location (outdoor vs. indoor) and performance, time and location variability, and land use and land cover. We also observe that the planning factor differences for antenna location and performance and for time and location variability are incorporated into the threshold signal level for reception for digital television service, which the STELA directs to be set at the noise-limited levels specified in § 73.622(e)(1).

E. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities. 24

We are not adopting the revisions to the estimating methodology proposed by Mr. Shumate as we have not had an opportunity to fully explore the changes he suggests. 25 Nonetheless, we believe there may be merit in the improvements he describes for the methodology for predicting digital television signal strengths at individual locations and perhaps more generally, and that they warrant our further investigation as possible modifications to the digital ILLR model. We are therefore addressing his proposals for improving the ILLR methodology in the Further Notice of Proposed Rulemaking herein. We also are not acting on Adaptrum's suggestion that we allow optional use of the digital ILLR model for prediction of signal strengths for purposes of identifying unused spectrum in the TV bands where unlicensed devices could operate as it is beyond the scope of this proceeding. 26

32. Report to Congress: The Commission will send a copy of the Report and Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. 27 In addition, the Commission will send a copy of the Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA.

33. Paperwork Reduction Act Analysis: This document does not contain proposed information collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

34. Pursuant to sections 1, 4, 301, and 339(c)(3) of the Communications Act of 1934, as amended, 47 U.S.C. 151, 154, 301, 339(c)(3), and section 119(d)(10)(a) of the Copyright Act, 17 U.S.C. 119(d)(10)(a), this report and order is hereby adopted.

35. Part 73 of the Commission's rules is amended as specified in Appendix A and such rule amendment shall be effective January 21, 2011.

36. The Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this report and order, including the Initial Regulatory Flexibility Certification, and IRFA, to the Chief Counsel for Advocacy of the Small Business Administration.