I. Background A. TILA and Regulation Z

Congress enacted the Truth in Lending Act (TILA) based on findings that economic stability would be enhanced and competition among consumer credit providers would be strengthened by the informed use of credit resulting from consumers' awareness of the cost of credit. One of the purposes of TILA is to provide meaningful disclosure of credit terms, to enable consumers to compare credit terms available in the marketplace more readily and avoid the uninformed use of credit.

TILA's disclosures differ depending on whether credit is an open-end (revolving) plan or a closed-end (installment) loan. TILA also contains procedural and substantive protections for consumers. TILA is implemented by the Board's Regulation Z. An Official Staff Commentary interprets the requirements of Regulation Z. By statute, creditors that follow in good faith Board or official staff interpretations are insulated from civil liability, criminal penalties, and administrative sanction.

In 1994, Congress amended TILA by enacting the Home Ownership and Equity Protection Act (HOEPA). The HOEPA amendments created special substantive protections for consumers obtaining mortgage loans with annual percentage rates (APRs) or total points and fees exceeding prescribed thresholds. In addition, TILA Section 129( l )(2)(A), as added by HOEPA, authorizes the Board to prohibit acts and practices the Board finds to be unfair and deceptive in connection with mortgage loans. 15 U.S.C. 1639( l )(2)(A).

In July of 2008, the Board adopted final rules pursuant to the Board's authority in Section 129( l )(2)(A). 73 FR 44522, July 30, 2008 (2008 HOEPA Final Rule). The 2008 HOEPA Final Rule defined a class of “higher-priced mortgage loans” and prohibited certain lending and servicing practices in connection with such transactions. Among other things, the Board prohibited extending a higher-priced mortgage loan secured by a first lien unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor. See § 226.35(b)(3).

Under the 2008 HOEPA Final Rule, a higher-priced mortgage loan is a consumer credit transaction secured by the consumer's principal dwelling with an APR that exceeds the average prime offer rate for a comparable transaction, as of the date the transaction's interest rate is set, by 1.5 or more percentage points for loans secured by a first lien, or by 3.5 or more percentage points for loans secured by a subordinate lien. See § 226.35(a)(1).

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was signed into law. 1 Section 1461 of the Dodd-Frank Act creates TILA Section 129D. 2 TILA Section 129D substantially codifies the requirement in Regulation Z that escrow accounts for taxes and insurance be established for first-lien higher-priced mortgage loans, adopted by the Board as part of the 2008 HOEPA Final Rule. As discussed above, the 2008 HOEPA Final Rule imposed the escrow requirement on first-lien mortgage transactions having an APR that exceeds the average prime offer rate for a comparable transaction by 1.5 or more percentage points. The Dodd-Frank Act incorporates this coverage test in new TILA Section 129D for loans that do not exceed the maximum original principal obligation for a mortgage to be eligible for purchase by Freddie Mac. TILA Section 129D(b)(3)(A) (to be codified at 15 U.S.C. 1639d(b)(3)(A)).

For loans with an original principal obligation that exceeds the applicable Freddie Mac maximum principal obligation, TILA Section 129D requires escrow accounts only if the APR exceeds the applicable average prime offer rate by 2.5 or more percentage points. TILA Section 129D(b)(3)(B) (to be codified at 15 U.S.C. 1639d(b)(3)(B)). The current maximum principal obligation for a mortgage loan to be eligible for purchase in 2011 by Freddie Mac is $417,000 for a single-family property that is not located in a designated “high-cost” area. 3 (Higher limits apply for mortgage loans secured by a property with two to four residential units.) Thus, if the original principal obligation for a mortgage loan secured by a single-family property in such an area is $415,000, the determination of whether the loan is subject to the escrow requirement in § 226.35(b)(3) would be made using an APR threshold of 1.5 percentage points over the applicable average prime offer rate; by contrast, if the original principal obligation is $420,000, the determination would be made using a threshold of 2.5 percentage points over the applicable average prime offer rate. Loans that are not eligible for purchase by Freddie Mac because their original principal obligation is too large are widely referred to in the mortgage market as “jumbo” mortgages. The term “jumbo” also is used in this final rule to refer to such loans.

On September 24, 2010, the Board published a proposed rule in the Federal Register to implement TILA Section 129D(b)(3)(B), as enacted by Section 1461 of the Dodd-Frank Act. See 75 FR 58505 (September 2010 Escrow Proposal). Accordingly, the Board proposed to raise the rate threshold for coverage by the escrow account requirement for first-lien, higher-priced “jumbo” mortgage loans. Specifically, the Board proposed to require escrows for “jumbo” loans whose APR exceeds the average prime offer rate for a comparable transaction, as of the date the transaction's interest rate is set, by 2.5 or more percentage points. The Board did not propose to implement other provisions of the Dodd-Frank Act related to escrow accounts under the September 2010 Escrow Proposal. The Board is proposing rules to implement other escrow-related provisions of the Dodd-Frank Act in a separate notice published elsewhere in today's Federal Register.

The comment period on the September 2010 Escrow Proposal closed on October 25, 2010. The Board received 15 comment letters in response to the proposed rule, from creditors, loan originators, banking trade associations, and state banking regulators. No comments were received from consumers or consumer advocates. Commenters generally supported the proposed increase in the coverage threshold for the escrow requirement, for “jumbo” loans.

Several commenters, however, requested that the Board clarify that only the dollar amount specified in the sixth sentence of Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (FHLMCA), 12 U.S.C. 1454(a)(2), should be used in determining whether or not a loan is a “jumbo” loan. (Currently, the amount specified in that sentence as the maximum principal obligation for a loan secured by a single-family residence is $417,000.) In particular, these commenters stated that the higher maximum principal obligation set for “high-cost” areas under Section 305(a)(2) should not be considered in determining whether a loan is a “jumbo” loan. For example, if the maximum principal obligation eligible for purchase by Freddie Mac in a particular “high-cost” area were $500,000 for a single-family residence, these commenters believe that a loan with a principal obligation between $417,000 and $500,000 secured by a single-family residence in that area should be classified as a “jumbo” loan subject to the higher rate threshold for classification as a higher-priced mortgage loan, even though Freddie Mac may purchase that loan.

Other commenters recommended exemptions from the escrow requirement for higher-priced mortgage loans. Recommended exemptions included for: (1) Loans a creditor holds in portfolio; (2) loans made by community banks; (3) loans made in rural areas; and (4) small retail loans that are first-lien loans because a consumer has paid off his larger mortgage. Such exceptions are outside the scope of this rulemaking. The Board is publishing elsewhere in today's Federal Register a proposed rule that addresses several of those proposed exceptions.

This final rule revises § 226.35(b)(3), as proposed, to provide a higher APR threshold for determining whether “jumbo” mortgage loans secured by a first lien on a consumer's principal dwelling are higher-priced mortgage loans for which an escrow account must be established. As revised, the threshold for coverage of the escrow requirement for “jumbo” loans is 2.5 percentage points (rather than 1.5 percentage points) in excess of the average prime offer rate for a comparable transaction, as of the date the transaction's rate is set. Raising the APR threshold applicable to “jumbo” loans eliminates the mandatory escrow requirement for loans with an APR above the existing threshold but below the new threshold. Creditors may, at their option, elect to continue to use the 1.5 percentage point threshold for “jumbo” loans. Section 226.35 and this final rule do not apply to open-end credit plans subject to § 226.5b or to loans to finance the initial construction of a dwelling, temporary or “bridge” loans with a term of 12 months or less, or reverse mortgages. See § 226.35(a)(3). This final rule is effective on April 1, 2011 for covered loans for which an application is received on or after that date, as discussed in detail below in Part VI of this SUPPLEMENTARY INFORMATION.

The Board amends § 226.35(b)(3) pursuant to its authority under TILA Section 105(a) to prescribe regulations to carry out the purposes of TILA and to provide for such requirements, adjustments, and exceptions as necessary or proper to effectuate the purposes of, to prevent circumvention of, and facilitate compliance with TILA, as discussed in detail below. See 15 U.S.C. 1604(a) (as revised).

Section 226.1(d) describes how Regulation Z is organized. Section 226.1(d)(5) describes Subpart E of Regulation Z, which this interim final rule amends by revising § 226.35(a)(1) and (b)(3)(v). Comment 1(d)(5)-1 is revised to add a new subpart 1(d)(5)-1.iii, stating that this final rule is effective on April 1, 2011, for covered transactions for which an application is received on or after April 1, 2011.

As discussed below, the Board revises § 226.35(b)(3) to provide a higher threshold for determining whether escrow accounts must be established for certain closed-end mortgage loans secured by a first lien on the consumer's principal dwelling, pursuant to the Dodd-Frank Act. As revised, the threshold for coverage of the escrow requirement for “jumbo” loans is 2.5 percentage points (rather than the 1.5 percentage points generally applicable under § 226.35(a)(1)) in excess of the average prime offer rate for a comparable transaction, as of the date the transaction's rate is set. The Board is making a conforming amendment to § 226.35(a)(1) to reflect this exception to the general coverage test for higher-priced mortgage loans.

The Board adds a new § 226.35(b)(3)(v) to implement TILA Section 129D(b)(3)(B), as enacted by Section 1461 of the Dodd-Frank Act. Section 226.35(b)(3)(v) provides a higher threshold for determining whether escrow accounts must be established for certain closed-end mortgage loans secured by a first lien on a consumer's principal dwelling. Currently, under § 226.35(a)(1), such a loan is considered a higher-priced mortgage loan and is subject to the escrow requirement if its APR exceeds the average prime offer rate for a comparable transaction, as of the date the transaction's rate is set, by 1.5 or more percentage points. Pursuant to TILA Section 129D(b)(3)(B), for a closed-end, first-lien mortgage loan whose original principal obligation exceeds the current maximum principal obligation for loans eligible for purchase by Freddie Mac, the applicable rate threshold is 2.5 percentage points or more above the average prime offer rate for a comparable transaction, as of the date the transaction's rate is set.

Comment 35(b)(3)(v)-1 clarifies that adjustments to the maximum principal obligation that are made by the Federal Housing Finance Agency (FHFA) pursuant to FHLMCA Section 305(a)(2) or by other federal law will apply in determining whether a mortgage loan is a “jumbo” loan subject to the higher APR threshold under § 226.35(b)(3)(v). Comment 35(b)(3)(v)-2 clarifies that the higher APR threshold applies solely in determining if a “jumbo” loan is subject to the escrow requirement. The determination of whether “jumbo” first-lien loans are subject to the other protections in § 226.35, such as the ability to repay requirements under § 226.35(b)(1) and the restrictions on prepayment penalties under § 226.35(b)(2), would continue to be based on the 1.5 percentage point threshold.

Adjustments pursuant to FHLMCA Section 305(a)(2). TILA Section 129D(b)(3)(B) provides that a separate, higher APR threshold applies to a first-lien mortgage loan that exceeds the applicable maximum principal obligation eligible for purchase by Freddie Mac, established pursuant to the sixth sentence of FHLMCA Section 305(a)(2) (the “general maximum principal obligation”). However, the sixth sentence of FHLMCA Section 305(a)(2), as revised by the Housing and Economic Recovery Act of 2008 (HERA), also provides that its principal obligation limitations are subject to other limitations in that paragraph. 4   See 12 U.S.C. 1454(a)(2). Other limitations in that paragraph include annual adjustments based on changes in the housing price index maintained by FHFA and adjustments to increase the maximum principal obligation for loans secured by property in “high-cost” areas. See 12 U.S.C. 1454(a)(2). The plain language of the sixth sentence of FHLMCA Section 305(a)(2) incorporates by reference limitations set by other sentences in Section 305(a)(2). The Board believes, therefore, that adjustments made pursuant to Section 305(a)(2) should apply in determining whether a loan is a “jumbo” loan subject to the higher APR threshold for classification as a higher-priced mortgage loan.

The Board believes this is also consistent with statutory intent, because taking into account adjustments to the maximum principal obligation will ensure similar treatment of all loans eligible for purchase by Freddie Mac. The higher threshold for “jumbo” loans reflects the higher price typically associated with loans that are not eligible for purchase by Freddie Mac (or by Fannie Mae, which is subject to the same limit on the maximum principal obligation). Using the higher APR threshold for loans that are eligible for purchase by Freddie Mac after adjustments to the maximum principal obligation pursuant to FHLMCA Section 305(a)(2) would not be consistent with the statutory intent.

Adjustments pursuant to other federal law. Legislation enacted by Congress in 2009 and 2010 provides for further adjustments to the maximum principal obligation eligible for purchase by Freddie Mac. In light of declines in home values in certain areas, Congress provided in that legislation that the maximum principal obligation eligible for purchase by Freddie Mac shall be the greater of: (1) The maximum principal obligation determined pursuant to FHLMCA Section 305(a)(2); and (2) the maximum principal obligation established for 2008 under Section 201 of the Economic Stimulus Act of 2008. 5 The Board believes such adjustments also should apply in determining if a loan is a “jumbo” loan for purposes of § 226.35(b)(3)(v). The Board believes such adjustments are made pursuant to Section 305(a)(2), because they incorporate FHLMCA Section 305(a)(2) in the formula used to determine the maximum principal obligation eligible for purchase by Freddie Mac.

Nevertheless, even if the adjustments made pursuant to this legislation are not deemed to be made pursuant to Section 305(a)(2), the Board believes it is appropriate to use its authority under TILA Section 105(a) to require consideration of such adjustments. 15 U.S.C. 1604(a). TILA Section 105(a) authorizes the Board to provide for such requirements, adjustments, and exceptions for all or any class of transactions as in the Board's judgment are necessary or proper to effectuate the purposes of, to prevent circumvention or evasion of, or to facilitate compliance with TILA. The Board believes it is necessary and proper, to effectuate the purposes of TILA Section 129D(b)(3)(B), to make adjustments consistent with the provisions of federal law other than FHLMCA Section 305(a)(2) to ensure all loans eligible for purchase by Freddie Mac are treated similarly for purposes of the escrow requirements. Further, considering the additional adjustments made by other federal laws is consistent with the language in TILA Section 129D(b)(3)(B), which states that the determination of whether or not a loan is a “jumbo” loan subject to a higher APR threshold shall be based on the maximum principal obligation “in effect” for Freddie Mac as of the date the transaction's rate is set. The maximum principal obligation in effect is the obligation FHFA establishes pursuant to both FHLMCA Section 305(a)(2) and other federal law.

The Board also believes those adjustments are necessary and proper to facilitate compliance with TILA Section 129D(b)(3)(B). Considering only adjustments made under FHLMCA Section 305(a)(2) would require creditors that sell loans to Freddie Mac to use one dollar limit to ascertain what rate threshold to apply in determining whether a loan is subject to the escrow requirements and a different limit to determine whether they may sell loans to Freddie Mac. The same burden would apply for creditors that sell loans to Fannie Mae, which is subject to the same maximum principal obligation limits. Considering adjustments under both FHLMCA Section 305(a)(2) and other applicable federal law would facilitate compliance by eliminating that burden.

For the reasons discussed above, and pursuant to its authority under TILA Section 105(a), the final rule provides that FHFA's adjustments to the general maximum principal obligation stated in FHLMCA Section 305(a)(2) which are made pursuant to other applicable federal law shall be considered in determining whether a loan is a “jumbo” loan subject to § 226.35(b)(3)(v). See comment 35(b)(3)(v)-1.

The Board is changing the escrow requirement's coverage threshold to implement the statutory amendment made by the Dodd-Frank Act, as discussed above. The amendment relieves mortgage creditors of compliance with the escrow requirement for certain “jumbo” loans. When relief is granted from Regulation Z's escrow requirement, the affected loans could become subject to any state or local laws that prohibit mandatory escrow accounts. As a result, some creditors might need time to make the system changes necessary to comply with state or local laws. Accordingly, the Board sought comment on the amount of time necessary for creditors to implement the change in their systems and procedures.

Almost all commenters that discussed the implementation period stated that the Board should allow creditors to immediately use the higher APR threshold for classification of a “jumbo loan” as a higher-priced mortgage loan. One banking trade association stated that creditors easily can adjust their systems to stop escrowing for such loans. Most of the commenters that addressed the effective date stated that compliance with the higher threshold should be optional until final rules are issued to implement other escrow-related requirements under the Dodd-Frank Act. Those commenters stated that creditors would prefer to adjust their training and systems to implement all escrow-related statutory and regulatory requirements at one time. Some of those commenters stated that, at a minimum, compliance should be optional for a period of time; the recommended periods ranged between six months and one year. An industry trade association and a bank stated that the effective date for the final rule should be delayed until other escrow-related requirements are implemented. The industry trade association suggested, in the alternative, at least a six-month delay. The industry trade association also stated that creditors should not have to adjust their systems to comply with state or local laws prohibiting mandatory escrow accounts and again subsequently to comply with Board regulations.

The Dodd-Frank Act does not provide an effective date specifically for rules implementing TILA Section 129D(b)(3)(B). The Riegle Community Development and Regulatory Improvement Act of 1994 requires that agency regulations that impose additional reporting, disclosure, and other requirements on insured depository institutions take effect on the first day of a calendar quarter following publication in final form. 12 U.S.C. 4802(b). Consistent with the Riegle Community Development Act, this final rule is effective on April 1, 2011, for covered loans for which an application is received by a creditor on or after that date. See comment 1(d)(5)-1.iii. The Board believes that this time period will afford creditors sufficient time to adjust their systems to eliminate escrow accounts for covered loans to comply with any applicable state or local laws that prohibit requiring an escrow account or imposing other escrow requirements.

Under this final rule, creditors can choose to continue to escrow for “jumbo” loans with an APR below the new threshold (subject to applicable state or local laws). This final rule does not require termination of any existing escrow account.

In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the final rule under the authority delegated to the Board by the Office of Management and Budget (OMB). The rule contains no collections of information under the PRA. See 44 U.S. C. 3502(3). Accordingly, there is no paperwork burden associated with the rule.

In accordance with Section 4 of the Regulatory Flexibility Act (RFA), 5 U.S.C. 604, the Board is publishing a final regulatory flexibility analysis for the amendments to Regulation Z. The RFA generally requires an agency to assess the impact a rule is expected to have on small entities. The RFA requires an agency either to provide a final regulatory flexibility analysis with a final rule or certify that the final rule will not have a significant economic impact on a substantial number of small entities. Under standards the Small Business Administration (SBA) sets, the threshold for an entity to be considered “small” is $175 million or less in assets for banks and other depository institutions and $7 million or less in revenues for non-bank mortgage lenders. 6

Congress enacted TILA based on findings that economic stability would be enhanced and competition among consumer credit providers would be strengthened by the informed use of credit resulting from consumers' awareness of the cost of credit. Congress enacted HOEPA in 1994 as an amendment to TILA. TILA is implemented by the Board's Regulation Z. HOEPA imposed additional substantive protections on certain high-cost mortgage transactions. HOEPA also charged the Board with prohibiting acts or practices in connection with mortgage loans that are unfair, deceptive, or designed to evade the purposes of HOEPA, and acts or practices in connection with refinancing of mortgage loans that are associated with abusive lending or are otherwise not in the interest of borrowers. The Board adopted the requirement to establish an escrow account for higher-priced mortgage loans under 2008 HOEPA Final Rule pursuant to this mandate.

The Dodd-Frank Act amended TILA to increase the threshold for coverage of the escrow requirement, for certain loans ineligible for purchase by Freddie Mac because their original principal obligation is too high (“jumbo” loans), as discussed above in the SUPPLEMENTARY INFORMATION . This final rule implements that change by amending Regulation Z. These amendments are made in furtherance of the Board's responsibility to prescribe regulations to carry out the purposes of TILA. The legal basis for the final rule is in Section 105(a) of TILA. 15 U.S.C. 1604(a).

In accordance with Section 3(a) of the RFA, 5 U.S.C. 603(a), the Board prepared an initial regulatory flexibility analysis (IRFA) in connection with the proposed rule. The IRFA stated that the Board believed the proposed rule would not have a significant economic effect on a substantial number of small entities. The Board requested comment on the IRFA and on any costs, compliance requirements, or changes in operating procedures arising from the application of the proposed rule to small businesses.

No commenter specifically addressed the Board's IRFA, but several commenters stated that compliance with recent statutory and regulatory changes to requirements for mortgage lending, including amendments to TILA and Regulation Z, is burdensome in the aggregate. Most commenters that discussed the effective date stated that creditors should be able to use the higher annual percentage rate threshold immediately, to provide relief in connection with “jumbo” loans that would be subject to the higher threshold for the escrow requirement. Those commenters generally recommended, however, that compliance with the final rule be optional until the Board implements other escrow-related requirements under the Dodd-Frank Act. An industry trade association and a bank opposed an immediate effective date for the final rule. Both commenters that recommended allowing creditors to use the higher threshold immediately and commenters that recommended delaying the effective date of the rule suggested that, at a minimum, the Board make compliance optional for a period of time. Recommended periods ranged from 6 months to one year.

As discussed above in Part VI of the SUPPLEMENTARY INFORMATION , the Board believes that the effective date of April 1, 2011, provides sufficient time for creditors to adjust their training and systems to apply the higher APR threshold for “jumbo” loans. The rule is effective on that date for loans where the creditor receives an application on or after April 1, 2011. Escrow accounts typically are established when the loan is consummated some time after the application is processed and approved. Further, creditors can choose to continue to escrow for “jumbo” loans with an APR below the new threshold, subject to applicable state or local laws prohibiting mandatory escrow or imposing other escrow requirements. If a creditor elects not to apply the higher APR threshold to such loans, it is likely that few or no training or systems changes will be necessary.

The final rule applies to all institutions and entities that engage in closed-end lending secured by a consumer's principal dwelling. TILA and Regulation Z have broad applicability to individuals and businesses that originate even small numbers of home-secured loans. See § 226.1(c)(1). Using data from Reports of Condition and Income (Call Reports) of depository institutions and certain subsidiaries of banks and bank holding companies and data reported under the Home Mortgage Disclosure Act (HMDA), the Board can estimate the approximate number of small entities that would be subject to the rules. For the majority of HMDA respondents that are not depository institutions, however, exact revenue information is not available.

Based on the best information available, the Board makes the following estimate of small entities that are affected by this final rule: According to September 2010 Call Report data, approximately 8,669 small depository institutions would be subject to the rule. Approximately 15,627 depository institutions in the United States filed Call Report data, approximately 10,993 of which had total domestic assets of $175 million or less and thus were considered small entities for purposes of the RFA. Of the 3,788 banks, 507 thrifts, 6,632 credit unions, and 66 branches of foreign banks that filed Call Report data and were considered small entities, 3,667 banks, 479 thrifts, 4,520 credit unions, and 3 branches of foreign banks, totaling 8,669 institutions, extended mortgage credit. For purposes of this Call Report analysis, thrifts include savings banks, savings and loan entities, co-operative banks and industrial banks. Further, 1,303 non-depository institutions (independent mortgage companies, subsidiaries of a depository institution, or affiliates of a bank holding company) filed HMDA reports in 2010 for 2009 lending activities. Based on the small volume of lending activity reported by these institutions, most are likely to be small entities.

The changes to compliance requirements that the final rule makes are described in the SUPPLEMENTARY INFORMATION . The effect of the revisions to Regulation Z on small entities is minimal because the revisions bring about burden relief; certain mortgage loans that otherwise would be subject to the escrow account requirement in § 226.35(b)(3) are relieved of that requirement. To take advantage of that relief, some small entities will need to modify their home-secured credit origination processes once to implement the revised coverage test. The precise costs to small entities of updating their systems are difficult to predict. These costs will depend on a number of unknown factors, including, among other things, the specifications of the current systems used by such entities to originate mortgage loans and test them for “higher-priced mortgage loan” coverage.

The final rule implements a specific numerical adjustment to an annual percentage rate (APR) threshold mandated by Section 1461 the Dodd-Frank Act for “jumbo” loans, which limits the Board's flexibility to establish alternative APR thresholds. The higher APR threshold may be used in connection with a “jumbo” loan, that is, a loan with an original principal obligation that exceeds the maximum principal obligation for loans eligible for purchase by Freddie Mac. As discussed above in Part V of the SUPPLEMENTARY INFORMATION , the Board believes that, under the Dodd-Frank Act, loans are “jumbo” loans for purposes of TILA Section 129D if they are “jumbo” loans ineligible for purchase by Freddie Mac because their original principal obligation is too high. Some commenters recommended that the Board construe Section 1461 of the Dodd-Frank Act narrowly to consider only the general maximum principal obligation for loans eligible for purchase by Freddie Mac, despite the fact that the maximum principal obligation is higher in certain high-cost areas.

The Board is not adopting that suggested alternative. As discussed in greater detail in Part V of the SUPPLEMENTARY INFORMATION , the Board believes that the Dodd-Frank Act requires consideration of adjustments to the general maximum principal obligation made by the Federal Housing Finance Agency (FHFA) pursuant to Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act (FHLMCA). Further, the Board believes that it is necessary to consider additional adjustments FHFA makes pursuant to other applicable federal law to effectuate the purposes of and facilitate compliance with TILA, as discussed above.

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

On October 23, 2008, we issued AD 2008-22-21, Amendment 39-15718 (73 FR 67372, November 14, 2008), for all Allied Ag Cat Productions, Inc. Models G-164, G-164A, G-164B, G-164B with 73″ wing gap, G-164B-15T, G-164B-34T, G-164B-20T, G-164C, G-164D, and G-164D with 73″ wing gap airplanes.

That AD supersedes AD 78-08-09, Amendment 39-3191 (43 FR 16699, April 20, 1978), and requires repetitively inspecting the interior and the exterior of the main tubular spar of the rudder assembly for corrosion, taking necessary corrective action if corrosion is found, and applying corrosion protection. That AD resulted from failure of the rudder main tubular spar on a Model G164B airplane not previously affected by AD 78-08-09.

AD 78-08-09 required a one-time inspection of the interior of the rudder main tubular spar for corrosion and 300-hour repetitive inspections of the exterior of the rudder main tubular spar for corrosion.

Since we issued AD 2008-22-21, we determined the compliance time of the initial inspection for Models G-164, G-164A, and G-164B airplanes (airplanes previously affected by AD 78-08-09) allows the interior of the rudder main tubular spar to remain unchecked for corrosion for up to an additional 5 years beyond the effective date of AD 2008-22-21. This compliance time does not adequately address the unsafe condition.

We are issuing this AD to detect and correct corrosion in the rudder main tubular spar, which could result in failure of the rudder main spar tube. This failure could lead to loss of directional control.

We are issuing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of the same type design.

This AD requires repetitively inspecting the interior and the exterior of the main tubular spar of the rudder assembly for corrosion, taking necessary corrective action if corrosion is found, and applying corrosion protection.

An unsafe condition exists that requires the immediate adoption of this AD. The FAA has found that the risk to the flying public justifies waiving notice and comment prior to adoption of this rule because failure of the rudder main tubular spar could lead to loss of directional control. Therefore, we find that notice and opportunity for prior public comment are impracticable and that good cause exists for making this amendment effective in less than 30 days.

This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments before it becomes effective. However, we invite you to send any written data, views, or arguments about this AD. Send your comments to an address listed under the ADDRESSES section. Include Docket Number FAA-2011-0149 and Directorate Identifier 2011-CE-001-AD at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this AD. We will consider all comments received by the closing date and may amend this AD because of those comments.

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

We estimate that this AD affects 2,700 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

We have no way of determining the cost of repairs, parts replacement, or the number of airplanes that may require repair or parts replacement based on the result of the proposed inspections.

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

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

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

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

(1) Is not a “significant regulatory action” under Executive Order 12866,

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

(3) Will not affect intrastate aviation in Alaska, and

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

Accordingly, under the authority delegated to me by the Administrator, the FAA amends part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows:

In a notice published in the Federal Register of April 28, 2010 (75 FR 22411), FDA announced that Fonterra (USA), Inc., c/o Burdock Group, 801 N. Orange Ave., suite 710, Orlando, FL 32801 filed a food additive petition (FAP 0A4781). The petition proposed to amend the food additive regulations in part 173— Secondary Direct Food Additives Permitted in Food for Human Consumption (21 CFR part 173) to provide for the safe use of hydrogen peroxide as an antimicrobial agent in the manufacture of modified whey by ultrafiltration methods. In ultrafiltration, the whey stream is directed under pressure against membranes that permit undesirable substances to pass through the membranes while retaining the whey protein.

Hydrogen peroxide is currently affirmed as generally recognized as safe (GRAS) for use as an antimicrobial agent in the preparation of modified whey by electrodialysis methods at a maximum treatment level of 0.04 percent in the whey (§ 184.1366 (21 CFR 184.1366)). As a condition of use, the regulation requires that residual hydrogen peroxide be removed from the whey during processing by appropriate chemical and physical means.

Under 21 CFR 184.1(b)(2), a substance affirmed as GRAS with specific limitations may be used in food only within such limitations, including the category of food, functional use, and level of use. Therefore, any additional uses of hydrogen peroxide in processing food beyond those limitations set out in § 184.1366 requires either a food additive regulation or an amendment of § 184.1366. The current petition proposes to amend the food additive regulations to provide for the use of hydrogen peroxide in the preparation of modified whey by ultrafiltration methods, as an alternative to electrodialysis methods, at a maximum use level of 0.001 percent by weight of the whey, providing that residual hydrogen peroxide is removed from the whey during processing by appropriate chemical and physical means.

FDA reviewed data in the petition and other available relevant material to evaluate the safety of the use of hydrogen peroxide as an antimicrobial agent in the production of modified whey prepared by ultrafiltration methods. Based on this information, the Agency concludes that the proposed use of the additive will accomplish the intended technical effect, and that, since the proposed use of hydrogen peroxide in the preparation of modified whey by ultrafiltration would be substitutional for its already-regulated use in the preparation of modified whey by electrodialysis under § 184.1366, the exposure to hydrogen peroxide will not increase and may potentially decrease due to a lower maximum use level than what is currently permitted in the manufacture of modified whey by electrodialysis. Based on this information, FDA concludes that the proposed use of the additive is safe and the additive will achieve its intended technical effect as an antimicrobial agent under the proposed conditions of use. Therefore, the regulations in 21 CFR part 173 should be amended as set forth in this document.

In accordance with § 171.1(h) (21 CFR 171.1(h)), the petition and the documents that FDA considered and relied upon in reaching its decision to approve the petition will be made available for inspection at the Center for Food Safety and Applied Nutrition by appointment with the information contact person ( see FOR FURTHER INFORMATION CONTACT ). As provided in § 171.1(h), the Agency will delete from the documents any materials that are not available for public disclosure before making the documents available for inspection.

The Agency has previously considered the environmental effects of this rule as announced in the notice of filing for FAP 0A4781 (75 FR 22411). No new information or comments have been received that would affect the Agency's previous determination that there is no significant impact on the human environment and that an environmental impact statement is not required.

This final rule contains no collection of information. Therefore, clearance by the Office of Management and Budget under the Paperwork Reduction Act of 1995 is not required.

Any person who will be adversely affected by this regulation may file with the Division of Dockets Management ( see ADDRESSES ) either electronic or written objections by ( see DATES ). Each objection shall be separately numbered, and each numbered objection shall specify with particularity the provisions of the regulation to which objection is made and the grounds for the objection. Each numbered objection on which a hearing is requested shall specifically so state. Failure to request a hearing for any particular objection shall constitute a waiver of the right to a hearing on that objection. Each numbered objection for which a hearing is requested shall include a detailed description and analysis of the specific factual information intended to be presented in support of the objection in the event that a hearing is held. Failure to include such a description and analysis for any particular objection shall constitute a waiver of the right to a hearing on the objection. It is only necessary to send one set of documents. It is no longer necessary to send three copies of all documents. Identify documents with the docket number found in brackets in the heading of this document. Any objections received in response to the regulation may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday.

FDA's review of this petition was limited to section 409 of the Federal Food, Drug, and Cosmetic Act (the FD&C Act). This final rule is not a statement regarding compliance with other sections of the FD&C Act. For example, the Food and Drug Administration Amendments Act of 2007, which was signed into law on September 27, 2007, amended the FD&C Act to, among other things, add section 301(ll) (21 U.S.C. 331(ll)). Section 301(ll) of the FD&C Act prohibits the introduction or delivery for introduction into interstate commerce of any food that contains a drug approved under section 505 of the FD&C Act (21 U.S.C. 355), a biological product licensed under section 351 of the Public Health Service Act (42 U.S.C. 262), or a drug or biological product for which substantial clinical investigations have been instituted and their existence has been made public, unless one of the exceptions in section 301(ll)(1) to (ll)(4) applies. In our review of this petition, FDA did not consider whether section 301(ll) of the FD&C Act or any of its exemptions apply to food containing this additive. Accordingly, this final rule should not be construed to be a statement that a food containing this additive, if introduced or delivered for introduction into interstate commerce, would not violate section 301(ll) of the FD&C Act. Furthermore, this language is included in all food additive final rules and therefore should not be construed to be a statement of the likelihood that section 301(ll) of the FD&C Act applies.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs and redelegated to the Director, Center for Food Safety and Applied Nutrition, 21 CFR part 173 is amended as follows:

The sponsors have requested that FDA withdraw approval of the three NADAs listed in table 1 of this document because the products are no longer manufactured or marketed:

Truow Nutrition, Inc., 1590 Todd Farm Dr., Elgin, IL 60123 (Truow) has informed FDA that it is the owner of five feed premix NADAs previously owned by milling companies which it has purchased. NADA 100-352 was owned by NutriBasics Co., last doing business at P.O. Box 1014, Wilmar, MN 56201. NADA 107-002 and NADA 123-000 were owned by Seeco, Inc., also last doing business at P.O. Box 1014, Wilmar, MN 56201. NADA 133-833 and NADA 135-243 were owned by Southern Micro-Blenders, Inc., last doing business at 3801 N. Hawthorne St., Chattanooga, TN 37406. Truow has requested that FDA withdraw approval of the five NADAs in table 2 of this document because they are no longer manufactured or marketed:

In a notice published elsewhere in this issue of the Federal Register , FDA gave notice that approval of NADA 48-647, 96-161, 100-352, 107-002, 119-062, 123-000, 133-833, and 135-243, and all supplements and amendments thereto, is withdrawn, effective March 14, 2011. As provided in the regulatory text of this document, the animal drug regulations are amended to reflect these withdrawals of approval.

Following these changes of sponsorship, Yoder Feed, Division of Yoder, Inc., Triple “F”, Inc., NutriBasics Co., Seeco, Inc., and Southern Micro-Blenders, Inc., are no longer the sponsor of an approved application. Accordingly, 21 CFR 510.600(c) is being amended to remove the entries for these firms.

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

Therefore, under the Federal Food, Drug, and Cosmetic Act and under the authority delegated to the Commissioner of Food and Drugs and redelegated to the Center for Veterinary Medicine, 21 CFR parts 510, 520, and 558 are amended as follows:

In the Federal Register of November 15, 2010 (75 FR 69586), FDA solicited comments concerning the direct final rule for a 75-day period ending January 31, 2011. FDA stated that the effective date of the direct final rule would be on March 30, 2011, 60 days after the end of the comment period, unless any significant adverse comment was submitted to FDA during the comment period. FDA did not receive any significant adverse comments.

Regulatory Information

Commander, Ninth Coast Guard District, published a temporary deviation from these regulations, with request for comments, on April 22, 2010, in the Federal Register (75 FR 20918). The temporary deviation was used to test a new bridge schedule during the 2010 navigation and tourist season. On December 8, 2010, we published a notice of proposed rulemaking (NPRM) entitled Drawbridge Operation Regulation; Duluth Ship Canal, Duluth-Superior Harbor, MN. in the Federal Register (75 FR 76324). We received two comments in response to the proposed rule. No public meeting was requested, and none was held.

The Duluth Aerial Bridge is located 0.25 miles from Duluth Harbor North Pier Light at the lakeward end of the Duluth Ship Canal. It is a vertical lift type bridge that provides 15 feet of vertical clearance in the down position and up to 141 feet in the open position. The bridge currently opens on signal for all vessel traffic that requires a bridge opening. Marine traffic on the waterway consists of both large and smaller commercial vessels, as well as both power and sail recreational vessels. Pursuant to 33 CFR 117.8 various entities in Duluth requested scheduled openings instead of opening on signal. The requesting entities included the City of Duluth, the Duluth Fire Department-Emergency Management, the Duluth Police Department, the Park Point Community Association, and the Canal Park Business Association. The scheduled drawbridge openings were requested during the peak navigation and tourist season to improve the flow of vehicular traffic over the bridge, relieve vehicular traffic congestion near the bridge and on city streets on both sides of the bridge (Park Point and Canal Park), improve access and response times for emergency response entities, and enhance pedestrian safety in the vicinity of the bridge. The test schedule allowed for scheduled bridge openings on the hour and half-hour for all vessels under 300 gross tons between the hours of 6 a.m. and 9 p.m., seven days per week, and on signal between 9 p.m. and 6 a.m., from May 3 to October 29, 2010. The bridge continued to open on signal at all times for all vessels over 300 gross tons and Federal, state, and local government vessels, vessels in distress, commercial vessels engaged in rescue or emergency salvage operations, vessels engaged in pilot duties, and vessels seeking shelter from severe weather. The City of Duluth collected data throughout the test period related to vehicular and vessel traffic counts, and the number of bridge openings. In addition to the data collected, each stakeholder had the opportunity to amplify their written comments and provide additional direct input to the Coast Guard during the October 20, 2010 meeting. During the stakeholder meeting it was generally agreed by all parties that the scheduled bridge openings appeared to improve the general flow of vehicular traffic on both sides of the bridge and reduced vehicular traffic congestion. Regarding the time of year and hours each day that the scheduled openings would apply, it was generally agreed during the stakeholders meeting that the scheduled openings would be beneficial and effective between Memorial Day and Labor Day each year between the hours of 7 a.m. and 9 p.m. The data below collected by the City of Duluth illustrates support for the times and dates:

In addition to the two scheduled openings per hour, vessels will continue to have access to the harbor through the alternate Superior, Wisconsin, Entry Channel, as well as passage thru the Aerial Bridge during unscheduled openings for commercial vessels. This rule will provide for the reasonable balance of all modes of transportation and effectively accomplish the requested goal of improving traffic congestion and safety in the area of the Duluth Aerial Bridge. This final rule also adjusts the current required advance notice requirement for vessels from 24-hours to 12-hours vessels between January 1 and March 15.

The Coast Guard received two comments regarding the NPRM, one that was successfully received by the Docket Management Facility, and the second by direct email. Both comments were from private citizens. The first comment cited that members of the Park Point Community Association were invited to the stakeholder meeting on October 20, 2010 described in the NPRM, however no representative from Park Point Community Association attended, that there was no provision in the proposed rule providing priority for emergency vehicles to cross the bridge, and that the proposed schedule should be extended to twelve months instead of providing only for the peak tourist season.

The October 20, 2010 stakeholders meeting was attended by a Duluth City Councilwoman, who stated at the meeting she was representing Park Point residents. Additionally, all Park Point residents had the opportunity to provide comments during the test deviation as well as during the comment period for the NPRM. Regarding priority for emergency vehicles, 33 CFR 117.31(a) states that upon receiving notification that an emergency vehicle is responding to an emergency situation, a drawtender must make all reasonable efforts to have the drawspan closed at the time the emergency vehicle arrives.

As described in the Basis and Purpose section above, all data, and all other comments, indicate that the dates and times in this final rule are the appropriate dates and times for scheduled drawbridge openings, and not throughout the whole year.

The second comment, received by direct email, was from a local recreational vessel operator. The comment stated no general objection to the schedule, but he also stated the schedule did not appear to improve general vehicular and pedestrian traffic congestion. All other accounts of the scheduled openings indicate that the schedule has helped reduce traffic congestion and improved safety for all modes of transportation.

The Coast Guard decided not to make any changes to the proposed rule.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. The rule will establish permanent scheduled openings and revise the advance notice time during winter seasons from twenty-four hours to twelve hours. The scheduled bridge openings are expected to improve vehicular traffic congestion and safety near the bridge while still providing for reasonable openings for vessel traffic.

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

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule would not have a significant economic impact on a substantial number of small entities. This rule continues to provide at least two drawbridge openings per hour between 7:00 a.m. and 9 p.m. each day, and openings at any time during all other hours, as well as during unscheduled transits of commercial vessels. The test schedule implemented this year resulted in only minor adjustments in schedules or operations for all entities. Additionally, all vessels that do not require bridge openings may transit the drawbridge at any time, and the alternate Superior, Wisconsin, Entry Channel may be used by all vessels at any time.

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

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

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

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

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

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

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

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

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01, and Commandant Instruction M16475.lD, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded under figure 2-1, paragraph (32(e), of the Instruction.

Under figure 2-1, paragraph (32)(e), of the instruction, an environmental analysis checklist and a categorical exclusion determination are not required for this rule.

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 117 as follows:

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the final details for this sampling were not received by the Coast Guard until February 7, 2011. Furthermore, the Coast Guard has reached out to potentially affected waterway users and has determined that potential impacts as a result of this safety zone will be minimal. Given the short time frame, low impact of the zone, and hazards associated with soil sampling, delaying the enactment of this rule would be contrary to the public interest.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . A 30-day notice period is not possible given the short time frame for enacting this regulation. Given the hazards created by soil sampling, delaying the effective date of this rule would be contrary to the public interest.

This temporary safety zone is necessary to protect vessels from the hazards associated with the soil sampling efforts. The use of the machinery associated in these soil sampling efforts pose serious risks of injury to persons and property. As such, the Captain of the Port, Sector Lake Michigan, has determined that the sampling effort does pose significant risks to public safety and property and that a safety zone is necessary.

The safety zone will encompass all U.S. navigable waters of the North Branch of the Chicago River in the vicinity of North Avenue and Fullerton Avenue between Mile Marker 328.0 and Mile Marker 329.5 of the North Branch of the Chicago River in Chicago, IL. [DATUM: NAD 83].

All persons and vessels shall comply with the instructions of the Coast Guard Captain of the Port, Sector Lake Michigan, or his or her on-scene representative. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port, Sector Lake Michigan, or his or her on-scene representative. The Captain of the Port, Sector Lake Michigan, or his or her on-scene representative may be contacted via VHF Channel 16.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order.

This determination is based on the minimal time that vessels will be restricted from the zone and the zone is an area where the Coast Guard expects insignificant adverse impact to mariners from the zones' activation.

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

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

This rule will affect the following entities, some of which may be small entities: The owners or operators of vessels intending to transit or anchor in a portion of the North Branch of the Chicago River between 7 a.m. until 5 p.m. on March 1st, 2nd, and 3rd, 2011.

This safety zone will not have a significant economic impact on a substantial number of small entities for the following reasons: This rule will only be enforced while unsafe conditions exist. Vessel traffic will be minimal due to the time of year that this closure will occur and because the location of the safety zone is in an area that typically does not experience high volumes of vessel traffic. Several commercial traffic entities have already been contacted concerning this closure and have confirmed that it will not affect them in a negative way.

In the event that this temporary safety zone affects shipping, commercial vessels may request permission from the Captain of The Port, Sector Lake Michigan, or his or her on scene representative to transit through the safety zone. The Coast Guard will give notice to the public via a Broadcast to Mariners that the regulation is in effect.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offer to assist small entities in understanding the rule so that they can better evaluate its effects on them and participate in the rulemaking process. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

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

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

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

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

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

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

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction. This rule involves the establishment of a safety zone and is therefore categorically excluded under paragraph 34(g) of the Instruction.

A final environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES .

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:

The Coast Guard will enforce the safety zone; 33 CFR 165.931—Chicago Harbor, Navy Pier Southeast, Chicago, IL for the following event:

(1) Navy Pier Fireworks; March 12, 2011 from 6:45 p.m. through 7:15 p.m.

All vessels must obtain permission from the Captain of the Port, Sector Lake Michigan, or his or her on-scene representative to enter, move within, or exit the safety zone. Vessels and persons granted permission to enter the safety zone shall obey all lawful orders or directions of the Captain of the Port, Sector Lake Michigan, or his or her on-scene representative. While within a safety zone, all vessels shall operate at the minimum speed necessary to maintain a safe course.

This notice is issued under authority of 33 CFR 165.931 Safety Zone, Chicago Harbor, Navy Pier Southeast, Chicago IL and 5 U.S.C. 552(a). In addition to this notice in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via broadcast Notice to Mariners or Local Notice to Mariners. The Captain of the Port, Sector Lake Michigan, will issue a Broadcast Notice to Mariners notifying the public when enforcement of the safety zone established by this section is suspended. If the Captain of the Port, Sector Lake Michigan, determines that the safety zone need not be enforced for the full duration stated in this notice, he or she may use a Broadcast Notice to Mariners to grant general permission to enter the safety zone. The Captain of the Port, Sector Lake Michigan, or his or her on-scene representative may be contacted via VHF Channel 16.

In the final regulations (NARA-07-0005) published in the Federal Register on Tuesday, June 17, 2008 (73 FR 34197) that are the subject of this correction, NARA adopted and incorporated by reference ANSI/BOMA Z65.1-1996 as the standard for measuring the square footage of a Presidential library facility and the value for calculating the endowment. The standard was incorrectly listed in § 1281.2(b)(1) as being referenced in §§ 1281.3 and 1281.8; the correct references are §§ 1281.3 and 1281.16.

Accordingly, 36 CFR part 1281 is corrected by making the following correcting amendment:

Under 38 U.S.C. 1710(h), VA is not required “to furnish care to a veteran to whom another agency of Federal, State, or local government has a duty under law to provide care in an institution of such government.” VA implemented this statute in 38 CFR 17.38(c)(5). Generally, § 17.38(c)(5) bars VA from providing “[h]ospital and outpatient care for a veteran who is either a patient or inmate in an institution of another government agency if that agency has a duty to give the care or services.” Typically, government agencies have a duty to provide medical care to inmates who have been released from incarceration in a prison or jail to a temporary housing program (such as a community residential re-entry center or halfway house).

This duty may exist even though the responsible government agency expects residents in these programs to arrange for their own medical care. Irrespective of whether a duty exists, however, VA wants to be able to provide hospital and outpatient care to eligible veterans in these programs. Under § 17.38(c)(5), VA cannot provide care to veterans in these programs if the other government agency has a duty to provide the care unless that agency is willing to pay VA for the care by contract.

In a proposed rule published May 12, 2010, we proposed to amend § 17.38 to establish that the exclusion in paragraph (c)(5) does not apply to any veteran who is released from incarceration to a temporary housing program. We explained that this amendment is necessary to authorize VA hospital and outpatient care for these veterans who often require additional assistance in successfully transitioning from incarceration.

VA wants to provide care to these veterans because VA has found that upon release from jail or prison these veterans are particularly at risk of not receiving adequate medical care, and in many cases become homeless, as a result of not receiving such care, after their release from temporary housing programs. Under 38 U.S.C. 2022(a), VA is charged with reaching out “to veterans at risk of homelessness, including particularly veterans who are being discharged or released from institutions after * * * imprisonment.” Outreach workers for the Veterans Health Administration report that veterans with acute or chronic medical or psychiatric problems who are treated while incarcerated, often have difficulty obtaining similar treatment during a transitional period. In particular, if mental health issues are not addressed during the transitional period, upon release, many of these veterans are rendered incapable of finding or maintaining appropriate housing.

In addition to being an important component of VA's duty to attempt to prevent veterans from becoming homeless, establishing that the exclusion in 38 CFR 17.38(c)(5) does not apply to veterans who are residents in temporary housing programs offers potentially significant public benefits and will further the success of other VA policies. For example, section 20 of VHA Handbook 1160.01 specifically requires VA to “engage with veterans being released from prison in need of care.” VHA Handbook 1160.01, section 20(a)(2). As significant numbers of veterans in these programs have difficulty obtaining medical treatment comparable to the treatment they received in prison, some begin to believe the only way they can obtain treatment is to violate the terms of their release and return to prison. A 2008 Urban Institute study of a large re-entry population cohort, found health care played a key role in the first months of community re-adjustment and reduced recidivism. Mallik-Kane, K, and Visher, C.A., Health and prisoner re-entry: How physical, mental, and substance abuse conditions shape the process of re-integration. Urban Institute Justice Policy Center: Washington, DC (2008). In particular, the study noted that access to medications for chronic health and mental health conditions is a low-cost powerful tool in preventing recidivism.

We received three comments on the proposed rule. All of the comments support the substance of the proposed rule. One commenter recommended that VA add a number of services to its medical benefits package, and made strategic recommendations for VA housing programs. This rulemaking simply removes a bar that prevented veterans, who are released from incarceration into temporary housing, from receiving outpatient and hospital care under the medical benefits package. Because the commenter suggested that additional services be added to this package, we do not believe that these comments are within the scope of this rulemaking. However, to the extent that the commenter seeks to connect veterans to needed care and support services, we note that VA currently provides a number of programs that provide housing and other support services to veterans. Nothing prevents formerly incarcerated veterans from taking advantage of any of the programs for which they qualify.

For the foregoing reasons, VA amends 38 CFR 17.38 to revise the exclusion in the VA medical benefits package for a veteran who is a patient or inmate in an institution of another government agency so that the exclusion does not apply to a veteran who is a resident of a temporary housing program. For purposes of this rule, a “temporary housing program,” includes community residential re-entry centers, halfway houses, and similar residential facilities.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in an expenditure by state, local and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any given year. This rule has no such effect on state, local and tribal governments, or on the private sector.

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives, and when regulation is necessary to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Order classifies a “significant regulatory action,” requiring review by the Office of Management and Budget (OMB), as a regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more, or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, state, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action planned or taken by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

The economic, interagency, budgetary, legal, and policy implications of this rule have been examined, and it has been determined not to be a significant regulatory action under Executive Order 12866.

This rule does not contain any collections of information under the Paperwork Reduction Act (44 U.S.C. 3501-3520).

The Secretary hereby certifies that this rule does not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This rule only affects individuals, not small entities. Therefore, pursuant to 5 U.S.C. 605(b), this rule is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.009, Veterans Medical Care Benefits; 64.011, Veterans Dental Care; 64.012, Veterans Prescription Service; 64.013, Veterans Prosthetic Appliances; 64.019, Veterans Rehabilitation Alcohol and Drug Dependence; and 64.022, Veterans Home Based Primary Care.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. John R, Gingrich, Chief of Staff, approved this document on February 24, 2011 for publication.

For the reasons stated in the preamble, VA amends 38 CFR part 17 as follows:

In a document published in the Federal Register on April 7, 2010 (75 FR 17644), VA proposed to amend 38 CFR 51.200, which governs the physical environment of facilities for which VA pays per diem to a state for providing nursing home care to eligible veterans. We proposed to update the regulation to require State Home facilities to meet certain provisions of the National Fire Protection Association's NFPA 101, Life Safety Code (2009 edition) (NFPA 101), and proposed to incorporate that edition by reference. We provided a 60-day comment period and received one comment.

The comment was from the National Fire Protection Association. The commenter noted that there are several differences between the 2006 and 2009 editions of NFPA 101. The commenter noted that the 2009 edition clarifies the circumstances in which a “change in occupancy” classification would be considered when an existing building is converted into a nursing home; clarifies the provisions for multiple and separate occupancy for nursing homes; enhances door locking provisions based on clinical need or specialized security measures; recognizes the use of aerosol-based alcohol hand rub dispensers; and clarifies latching provisions for certain doors that open into/onto corridors. In the proposed rule, we noted that we were not aware of any significant changes from the 2006 edition to the 2009 edition. The commenter acknowledged that the differences between the two editions are insignificant. Because none of the applicable updates to the 2009 edition of NFPA 101 require costly or significant changes to the facilities governed by this rule, we make no changes based on this comment.

This final rule amends § 51.200 as proposed without changes, and incorporates by reference NFPA 101, in accordance with 5 U.S.C. 552(a) and 1 CFR part 51.

The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 1532, that agencies prepare an assessment of anticipated costs and benefits before issuing any rule that may result in expenditure by state, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more (adjusted annually for inflation) in any year. This final rule will have no such effect on state, local, and tribal governments, or on the private sector.

This document contains no new collections of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521).

Executive Order 12866 directs agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Executive Order classifies a “significant regulatory action,” requiring review by the Office of Management and Budget (OMB) unless OMB waives such review, as any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.

VA has examined the economic, interagency, budgetary, legal, and policy implications of this final rule and has concluded that it does not constitute a significant regulatory action under the Executive Order.

The Secretary hereby certifies that this regulatory amendment will not have a significant economic impact on a substantial number of small entities as they are defined in the Regulatory Flexibility Act, 5 U.S.C. 601-612. This rulemaking will affect veterans and State Homes. The State Homes that will be subject to this rulemaking are state government entities under the control of state governments. All State Homes are owned, operated and managed by state governments except for a small number that are operated by entities under contract with state governments. These contractors are not small entities. Therefore, pursuant to 5 U.S.C. 605(b), this amendment is exempt from the initial and final regulatory flexibility analysis requirements of sections 603 and 604.

The Catalog of Federal Domestic Assistance numbers and titles for the programs affected by this document are 64.005, Grants to States for Construction of State Home Facilities; 64.007, Blind Rehabilitation Centers; 64.008, Veterans Domiciliary Care; 64.009, Veterans Medical Care Benefits; 64.010, Veterans Nursing Home Care; 64.011, Veterans Dental Care; 64.012, Veterans Prescription Service; 64.013, Veterans Prosthetic Appliances; 64.014, Veterans State Domiciliary Care; 64.015, Veterans State Nursing Home Care; 64.016, Veterans State Hospital Care; 64.018, Sharing Specialized Medical Resources; 64.019, Veterans Rehabilitation Alcohol and Drug Dependence; 64.022, Veterans Home Based Primary Care; and 64.026, Veterans State Adult Day Health Care.

The Secretary of Veterans Affairs, or designee, approved this document and authorized the undersigned to sign and submit the document to the Office of the Federal Register for publication electronically as an official document of the Department of Veterans Affairs. John R. Gingrich, Chief of Staff, Department of Veterans Affairs, approved this document on February 8, 2011, for publication.

For the reasons stated above, VA amends 38 CFR part 51 as follows:

You may be potentially affected by this action if you are a dairy cattle milk producer, food manufacturer, or beverage manufacturer. Potentially affected entities may include, but are not limited to:

• Dairy Cattle Milk Production (NAICS code 11212).

• Food manufacturing (NAICS code 311).

• Beverage Manufacturing (NAICS code 31212).

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. 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 40 CFR part 180 through the Government Printing Office's e-CFR site at http://www.gpoaccess.gov/ecfr.

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-2009-0996 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 May 2, 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-2009-0996, 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 Wednesday, January 12, 2011 (76 FR 2110) (FRL-8860-9), 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 tolerance petition (PP 0F7767) by Enviro Tech Chemical Services, Inc, Modesto, CA 95358. The petition requested that 40 CFR part 180 be amended to establish an exemption from the requirement of a tolerance for potassium hypochlorite in or on apple; artichoke; asparagus; brussel sprouts; carrot; cauliflower; celery; cherry; cabbage; lettuce; fruits, citrus; cucumber; onion, green; melon; peach; nectarine; plum; pear; pepper, bell; potato; radish; fruit, stone; and tomato. That notice referenced a summary of the petition prepared by Enviro Tech Chemical Services, Inc., the registrant, which is available in the docket, http://www.regulations.gov. There were no comments received in response to the notice of filing.

Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an exemption from the requirement for a tolerance (the legal limit for a pesticide chemical residue in or on a food) only if EPA determines that the exemption is “safe.” Section 408(c)(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. Pursuant to section 408(c)(2)(B) of FFDCA, in establishing or maintaining in effect an exemption from the requirement of a tolerance, EPA must take into account the factors set forth in section 408(b)(2)(C) of FFDCA, which 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(c)(2)(A) of FFDCA, and the factors specified in section 408(c)(2)(B) 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 Potassium hypochlorite, including exposure resulting from the exemption established by this action. EPA's assessment of exposures and risks associated with potassium hypochlorite 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. Specific information on the studies received and the nature of the adverse effects caused by potassium hypochlorite is available in the docket, http://www.regulations.gov.

The Agency conducted an in-depth review of the similarities between potassium hypochlorite and the existing registered active ingredients, sodium hypochlorite and calcium hypochlorite. Based upon this review, the Agency determined that the data available to support the registrations of these active ingredients are also applicable to potassium hypochlorite. No additional generic or product-specific acute, chronic or subchronic toxicological studies were required to be submitted in support of this application. All toxicology data were bridged from studies on sodium and calcium hypochlorite based on their chemical similarity.

Potassium hypochlorite is corrosive and can cause severe damage to the eyes and skin. Potassium hypochlorite has been assigned a Toxicity Category I, indicating the highest degree of toxicity for these acute effects. In the presence of oxygen, however, these compounds react easily with organic matter and convert readily into potassium chloride due to their simple chemical nature and structure. Exemptions from the requirement of a tolerance have been established for sodium and calcium hypochlorite used both as food contact surface sanitizers (40 CFR 180.940) and as antimicrobials used on raw agricultural commodities (40 CFR 180.1054 and 180.1235). Widely used in disinfecting water supplies for nearly a century, the hypochlorite class of chemicals has proven safe and practical to use provided that necessary precautions are taken by the user to prevent the eye and skin irritation which are inherent to all strong oxidizing agents. All documents related to this case can be found at http://www.regulations.gov in the document “Antimicrobial Pesticide Products; Registration Applications” page 16110 in docket ID number EPA-HQ-OPP-2009-0996.

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 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.

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to potassium hypochlorite, EPA considered exposure under the petitioned-for exemption. EPA assessed dietary exposures from potassium hypochlorite in food as follows:

Residues of potassium hypochlorite may remain on certain food crops as a result of their disinfectant uses. However, these residues pose no dietary risks of concern to human health based on data bridged from sodium hypochlorite. Therefore, a dietary risk assessment for potential exposures to residues in food is unwarranted.

2. Dietary exposure from drinking water. Residues of potassium hypochlorite that may remain in drinking water as a result of the use of this chemical are not expected to pose dietary risks of concern to human health based on data bridged from sodium hypochlorite.

3. Non-dietary exposure. The term “residential exposure” is used in this document to refer to non-occupational, non-dietary exposure ( e.g., textiles (clothing and diapers), carpets, swimming pools, and hard surface disinfection on walls, floors, tables). Potassium hypochlorite is currently registered for the following residential non-dietary sites: Swimming pools, spa and hot tubs, hard, non-porous and porous surfaces, and laundry.

Although residential exposure to mixer/loader/applicators is likely from the proposed uses of potassium hypochlorite, a quantitative risk assessment is not required because adverse systemic effects attributable to the dermal and inhalation routes of exposure to potassium hypochlorite are not expected based on toxicity data bridged from sodium hypochlorite.

Label precautionary statements and the requirement that applicators wear certain personal protective equipment (goggles or face shield and rubber gloves) are sufficient to protect users from the localized, irritation effects of exposure to potassium hypochlorite. In addition, the label states that users of swimming pools may not enter treated water until the residual chlorine is measured to be between 1 ppm and 3 ppm in order to prevent acute irritation effects.

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 potassium hypochlorite to share a common mechanism of toxicity with any other substances, and potassium hypochlorite does not appear to produce a toxic metabolite produced by other substances. For the purposes of this tolerance action, therefore, EPA has assumed that Potassium hypochlorite 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 chemical, see EPA's Web site at http://www.epa.gov/pesticides/cumulative.

Because potassium hypochlorite was of very low systemic toxicity, EPA did not use a safety factor analysis for assessing risk. For similar reasons, the additional safety factor for the protection of infants and children is not necessary.

Based on the toxicity profile and exposure scenarios for potassium hypochlorite, EPA believes that the risks from dietary exposures to this pesticide would be minimal and without consequence to human health. Although residential use of potassium hypochlorite poses potential risks for acute eye and skin injury, it is not appropriate to aggregate the exposure related to these surface irritation effects with systemic exposure from dietary ingestion. In any event, the Agency believes that these acute risks will be sufficiently mitigated by precautionary labeling requiring protection of eyes and skin while using this pesticide.

Based on the toxicological and exposure data discussed in this preamble, EPA concludes that potassium hypochlorite will not pose a risk under reasonably foreseeable circumstances. Accordingly, EPA finds that there is a reasonable certainty of no harm will result to the general population, or to infants and children, from aggregate exposure to potassium hypochlorite residues.

An analytical method is not required for enforcement purposes since the Agency is establishing an exemption from the requirement of a tolerance without any numerical limitation.

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. The Codex has not established a MRL for potassium hypochlorite.

Therefore, an exemption is established for residues of potassium hypochlorite.

This final rule establishes a tolerance 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), Pub. L. 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).

Therefore, 40 CFR chapter I is amended as follows:

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.

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-2009-0823 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 May 2, 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-2009-0823, 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 9E7573) by Syngenta Crop Protection, Inc., P. O. Box 18300, Greensboro, NC 27419. The petition requested that 40 CFR 180.475 be amended by establishing tolerances for residues of the fungicide, difenoconazole, [1-[2-[2-chloro-4-(4-chlorophenoxy)phenyl]-4-methyl-1,3-dioxolan-2-ylmethyl]-1H-1,2,4-triazole], in or on mango at 0.09 parts per million(ppm) and waxapple at 1.5 ppm. That notice referenced a summary of the petition prepared by Syngenta Crop Protection, Inc., the registrant, which is available in the docket, http://www.regulations.gov.

There were no comments received in response to the notice of filing.

Based upon review of the data supporting the petition, EPA has revised the proposed tolerance for mango, fruit from 0.09 ppm to 0.07 ppm to reflect the Agency's recommended tolerance level. Additionally, EPA corrected commodity definitions from “mango, fruit” to “mango” and “waxapple” to “wax jambu” to reflect prescribed terminology. The reasons for these changes are explained in Unit IV.D.

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 difenoconazole including exposure resulting from the tolerances established by this action. EPA's assessment of exposures and risks associated with difenoconazole follows.

EPA has evaluated the available toxicity data and considered their 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.

Difenoconazole possesses low acute toxicity by the oral, dermal and inhalation routes of exposure. It is not considered to be an eye or skin irritant and is not a dermal sensitizer.

In an acute neurotoxicity study in rats, reduced fore-limb grip strength was observed on day 1 in males and clinical signs of neurotoxicity in females at the limit dose of 2,000 milligrams/kilogram (mg/kg). This effect in males is considered as transient since it was not observed at later observation points and toxicity in females was observed only at doses exceeding the limit dose. In a subchronic neurotoxicity study in rats decreased hind limb strength was observed only in males, which was considered as nonspecific in nature.

Difenoconazole is not a developmental or reproductive toxicant. Chronic effects in mice and rat studies are seen as cumulative decreases in body weight gains.

Difenoconazole is not mutagenic. Evidence for carcinogenicity was seen only in the mice study, where liver tumors were induced at excessively high doses for carcinogenicity testing. Liver tumors were observed in mice at 300 ppm and higher. Based on excessive toxicity observed at the two highest doses of 2,500 and 4,500 ppm, the absence of tumors at two lower doses of 10 and 30 ppm, as well as, the absence of genotoxic effects, the Agency classified difenoconazole as a Group C, possible human carcinogen with a non-linear margin-of-exposure (MOE) approach for human risk characterization.

Specific information on the studies received and the nature of the adverse effects caused by difenoconazole as well as the no-observed-adverse-effects-level (NOAEL) and the lowest-observed-adverse-effects-level (LOAEL) from the toxicity studies can be found at http://www.regulations.gov in the document entitled, “Difenoconazole FQPA Human Health Risk Assessment to Support the Establishment of Import Tolerances on Mango and Waxapple (also known as Wax jambu),” at pages 28-35, dated January 28, 2010, Document No. EPA-HQ-OPP-2009-0823-003.

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 difenoconazole used for human risk assessment is shown in the following Table.

1. Dietary exposure from food and feed uses. In evaluating dietary exposure to difenoconazole, EPA considered exposure under the petitioned-for tolerances as well as all existing difenoconazole tolerances in 40 CFR 180.475. EPA assessed dietary exposures from difenoconazole 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.

Such effects were identified for difenoconazole. In estimating acute dietary exposure, EPA used food consumption information from the United States Department of Agriculture (USDA) 1994-1996 and 1998 Nationwide Continuing Surveys of Food Intake by Individuals (CSFII). As to residue levels in food, EPA assumed tolerance-level residues, 100 percent crop treated (PCT), and the available empirical or Dietary Exposure Evaluation Model (DEEM TM ) (ver. 7.81) default processing factors.

ii. Chronic exposure. In conducting the chronic dietary exposure assessment EPA used the food consumption data from the USDA 1994-1996 and 1998 CSFII. As to residue levels in food, EPA assumed tolerance-level residues for some commodities, average field trial residues for the majority of commodities, the available empirical or DEEM TM (ver. 7.81) default processing factors, and 100 PCT.

iii. Cancer. No evidence of carcinogenicity was seen in rats. Evidence for carcinogenicity was seen in mice, where liver tumors were induced at doses which were considered to be excessively high for carcinogenicity testing. Liver tumors were observed in mice at 300 ppm and higher; however, based on excessive toxicity observed at the two highest doses of 2,500 and 4,500 ppm (females terminated after 2 weeks due to excessive toxicity resulting in moribundity and death), the absence of tumors at two lower doses of 10 and 30 ppm and the absence of genotoxic effects, the Agency classified difenoconazole as a Group C, possible human carcinogen with a non-linear MOE approach for human risk characterization. A MOE approach in risk assessment was chosen utilizing the NOAEL of 30 ppm (4.7 and 5.6 mg/kg/day in males and females, respectively) and the LOAEL of 300 ppm (46 and 58 mg/kg/day in males and females, respectively) from the mouse study using only those biological endpoints which were relevant to tumor development ( i.e., hepatocellular hypertrophy, liver necrosis, fatty changes in the liver and bile stasis). However, EPA determined that a quantitative cancer exposure assessment is unnecessary since the NOAEL (4.7 and 5.6 mg/kg/day in males and females, respectively) to assess cancer risk is higher than the NOAEL (0.96 and 1.27 mg/kg/day in males and females, respectively) to assess chronic risks. Therefore, the chronic dietary risk estimate will be protective of potential cancer risk.

iv. Anticipated residues and percent crop treated (PCT) information. EPA did not use PCT information in the dietary assessment of difenoconazole. EPA used anticipated residues including average field trial residues for the majority of commodities, the available empirical or DEEM TM (ver. 7.81) default processing factors; and 100 PCT information in the chronic dietary assessment for difenoconazole.

Section 408(b)(2)(E) of FFDCA authorizes EPA to use available data and information on the anticipated residue levels of pesticide residues in food and the actual levels of pesticide residues that have been measured in food. If EPA relies on such information, EPA must require, pursuant to FFDCA section 408(f)(1), that data be provided 5 years after the tolerance is established, modified, or left in effect, demonstrating that the levels in food are not above the levels anticipated. For the present action, EPA will issue such data call-ins as are required by FFDCA section 408(b)(2)(E) and authorized under FFDCA section 408(f)(1). Data will be required to be submitted no later than 5 years from the date of issuance of these tolerances.

2. Dietary exposure from drinking water. Although the subject petition is for import tolerances and therefore does not result in drinking water exposure, there are existing uses of difenoconazole registered in the United States. The drinking water assessment was conducted for parent compound only. The fate and transport database for difenoconazole were sufficient to conduct the drinking water assessment.

The Agency used screening level water exposure models in the dietary exposure analysis and risk assessment for difenoconazole in drinking water. These simulation models take into account data on the physical, chemical, and fate/transport characteristics of difenoconazole. 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/Exposure Analysis Modeling System (PRZM/EXAMS) and Screening Concentration in Ground Water (SCI-GROW) models, the estimated drinking water concentrations (EDWCs) of difenoconazole for acute exposures are estimated to be 15.8 parts per billion (ppb) for surface water and 0.0128 ppb for ground water.

Chronic exposures for non-cancer assessments are estimated to be 10.4 ppb for surface water and 0.0128 ppb for ground water.

Modeled estimates of drinking water concentrations were directly entered into the dietary exposure model.

For acute dietary risk assessment, the water concentration value of 15.8 ppb was used to assess the contribution to drinking water.

For chronic dietary risk assessment, the water concentration of value 10.4 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).

Difenoconazole is currently registered for the following uses that could result in residential exposures: Ornamentals. EPA assessed residential exposure using the following assumptions: Adults may be exposed to difenoconazole from its currently registered use on ornamentals. Residential pesticide handlers may be exposed to short-term duration (1-30 days) only. The dermal and inhalation (short-term) residential exposure was assessed for “homeowners” mixer/loader/applicator wearing short pants and short-sleeved shirts as well as shoes plus socks using garden hose-end sprayer, “pump-up” compressed air sprayer, and backpack sprayer.

No post-application exposure is expected. 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.”

Difenoconazole is a member of the triazole-containing class of pesticides. Although conazoles act similarly in plants (fungi) by inhibiting ergosterol biosynthesis, there is not necessarily a relationship between their pesticidal activity and their mechanism of toxicity in mammals. Structural similarities do not constitute a common mechanism of toxicity. Evidence is needed to establish that the chemicals operate by the same, or essentially the same, sequence of major biochemical events. In conazoles, however, a variable pattern of toxicological responses is found. Some are hepatotoxic and hepatocarcinogenic in mice. Some induce thyroid tumors in rats. Some induce developmental, reproductive, and neurological effects in rodents. Furthermore, the conazoles produce a diverse range of biochemical events including altered cholesterol levels, stress responses, and altered DNA methylation. It is not clearly understood whether these biochemical events are directly connected to their toxicological outcomes. Thus, there is currently no evidence to indicate that conazoles share common mechanisms of toxicity and EPA is not following a cumulative risk approach based on a common mechanism of toxicity for the conazoles. For information regarding EPA's procedures for cumulating effects from substances found to have a common mechanism of toxicity, see EPA's Web site at http://www.epa.gov/pesticides/cumulative.

Difenoconazole is a triazole-derived pesticide. This class of compounds can form the common metabolite 1,2,4-triazole and two triazole conjugates (triazolylalanine and triazolylacetic acid). To support existing tolerances and to establish new tolerances for triazole-derivative pesticides, including difenoconazole, EPA conducted a human health risk assessment for exposure to 1,2,4-triazole, triazolylalanine, and triazolylacetic acid resulting from the use of all current and pending uses of any triazole-derived fungicide. The risk assessment is a highly conservative, screening-level evaluation in terms of hazards associated with common metabolites ( e.g., use of a maximum combination of uncertainty factors) and potential dietary and non-dietary exposures ( i.e., high end estimates of both dietary and non-dietary exposures). In addition, the Agency retained the additional 10X FQPA safety factor for the protection of infants and children. The assessment includes evaluations of risks for various subgroups, including those comprised of infants and children. The Agency's complete risk assessment is found in the propiconazole reregistration docket at http://www.regulations.gov, Docket Identification (ID) Number EPA-HQ-OPP-2005-0497.

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. EPA determined that the available data indicated no increased susceptibility of rats or rabbits to in utero and/or postnatal exposure to difenoconazole. In the prenatal developmental toxicity studies in rats and rabbits and the 2-generation reproduction study in rats, toxicity to the fetuses/offspring, when observed, occurred at equivalent or higher doses than in the maternal/parental animals. In the prenatal developmental toxicity study in rats, maternal toxicity was manifested as decreased body weight gain and food consumption at the LOAEL of 85 mg/kg/day; the NOAEL was 16 mg/kg/day. The developmental toxicity was manifested as alterations in fetal ossifications at 171 mg/kg/day; the developmental NOAEL was 85 mg/kg/day. In a developmental toxicity study in rabbits, maternal and developmental toxicity were seen at the same dose level (75 mg/kg/day). Maternal toxicity in rabbits were manifested as decreased body weight gain and decreased food consumption, while developmental toxicity was manifested as decreased fetal weight. In a 2-generation reproduction study in rats, there were decreases in maternal body weight gain and decreases in body weights of F 1 males at the LOAEL of 12.5 mg/kg/day; the parental systemic and off spring toxicity NOAEL was 1.25 mg/kg/day.

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 is adequate for conducting a FQPA risk assessment. At this time, an immunotoxicity study is not available. However, the toxicology database for difenocanazole does not show any evidence of treatment-related effects on the immune system. The overall weight of evidence suggests that this chemical does not directly target the immune system. An immunotoxicity study is now required as a part of new data requirements in the 40 CFR part 158 for conventional pesticide registration; however, the Agency does not believe that conducting a functional immunotoxicity study will result in a lower point of departure (POD) than that currently in use for overall risk assessment, and therefore, a database uncertainty factor (UFDB) is not needed to account for lack of this study.

ii. The acute and subchronic neurotoxicity studies in rats are available. These data show that difenoconazole exhibits some evidence of neurotoxicity in the database, but the effects are transient or occur at doses exceeding the limit dose. EPA concluded that difenoconazole is not a neurotoxic compound. Based on the toxicity profile, and lack of neurotoxicity, a developmental neurotoxicity study in rats is not required nor is an additional database uncertainty factor needed to account for the lack of this study.

iii. There is no evidence that difenoconazole results in increased susceptibility of rats or rabbit fetuses to in utero and/or postnatal exposure in the developmental and reproductive toxicity data.

iv. There are no residual uncertainties identified in the exposure databases. A conservative dietary food exposure assessment was conducted. Acute dietary food exposure assessments were performed based on tolerance-level residues, 100 PCT, and the available empirical or DEEM TM (ver. 7.81) default processing factors. Chronic dietary exposure assessments were based on tolerance-level residues for some commodities, average field trial residues for the majority of commodities, the available empirical or DEEM TM (ver. 7.81) default processing factors, and 100 PCT. These are conservative approaches and are unlikely to understate the residues in food commodities.

EPA also made conservative (protective) assumptions in the ground water and surface water modeling used to assess exposure to difenoconazole in drinking water. Post-application exposure of children as well as incidental oral exposure of toddlers is not expected. These assessments will not underestimate the exposure and risks posed by difenoconazole.

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. Cancer risk was assessed using the same exposure estimates as discussed in Unit III.C.1.ii., “chronic exposure.”

1. Acute risk. Using the exposure assumptions discussed in this unit for acute exposure, the acute dietary exposure from food and water to difenoconazole will occupy 16% of the aPAD for children 1 to 2 years old, the population group receiving the greatest exposure.

2. Chronic risk. Using the exposure assumptions described in this unit for chronic exposure, EPA has concluded that chronic exposure to difenoconazole from food and water will utilize 45% 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 difenoconazole is not expected.

3. Short-term risk. Short-term aggregate exposure takes into account short-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level).

Difenoconazole is currently registered for ornamentals that could result in short-term residential exposure, and the Agency has determined that it is appropriate to aggregate chronic exposure through food and water with short-term residential exposures to difenoconazole.

Using the exposure assumptions described in this unit for short-term exposures, EPA has concluded that the combined short-term food, water, and residential exposures result in aggregate MOEs of 180 or greater. Because EPA's level of concern for difenoconazole is a MOE of 100 or below, these MOEs resulting from short-termed exposure to difenoconazole are not of concern.

4. Intermediate-term risk. Intermediate-term aggregate exposure takes into account intermediate-term residential exposure plus chronic exposure to food and water (considered to be a background exposure level).

An intermediate-term adverse effect was identified; however, difenoconazole is not registered for any use patterns that would result in intermediate-term residential exposure. Intermediate-term risk is assessed based on intermediate-term residential exposure plus chronic dietary exposure. Because there is no intermediate-term residential exposure and chronic dietary exposure has already been assessed under the appropriately protective cPAD (which is at least as protective as the POD used to assess intermediate-term risk), no further assessment of intermediate-term risk is necessary, and EPA relies on the chronic dietary risk assessment for evaluating intermediate-term risk for difenoconazole.

5. Aggregate cancer risk for U.S. population. As discussed in Unit III.C.1.iii., the chronic dietary risk assessment is protective of any potential cancer effects.

6. 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 difenoconazole residues.

An adequate tolerance enforcement method, method AG-575B, is available to enforce the tolerance expression. The method determines residues of difenoconazole per se in or on crop commodities by gas chromatography with nitrogen-phosphorus detection (GC/NPD). The method's limits of quantitation (LOQs) are 0.01-0.05 ppm. A confirmatory GC method with mass-selective detection (MSD) is also available for crop commodities. Samples from the submitted crop field trials were analyzed for residues of difenoconazole using a high performance liquid chromatography method with tandem mass spectrometry detection (LC/MS/MS), Syngenta REM 147.08, or a similar method. The methods are adequate for data collection based on acceptable concurrent method recoveries. The LOQ was 0.01 ppm for difenoconazole in mango and wax jambu.

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.

The Codex has established a MRL for difenoconazole in or on mango at 0.07 ppm. This MRL is the same as the tolerance established by this action for difenoconzole in the United States. Canadian and Mexican MRLs have been established for difenoconazole; however, no MRLs have been established for mango. No Codex, Canadian, and Mexican MRLs have been established for residues of difenoconazole in or on wax jambu.

There were no public comments received on the Notice of Filing.

EPA has revised the tolerance levels proposed in the notice of filing for mango from 0.09 ppm to 0.07 ppm. The modification was made based on the available data supporting the use of difenoconazole on mango and to achieve harmonization with the established Codex MRL of 0.07 ppm residues in or on mango.

Also, the Agency corrected the commodities named in the notice from “mango fruit” to “mango” and “waxapple” to “wax jambu” to reflect EPA's prescribled terminology for these crops.

Therefore, tolerances are established for residues of difenoconazole, 1-[2-[2-chloro-4-(4-chlorophenoxy)phenyl]-4-methyl-1,3-dioxolan-2-ylmethyl]-1H-1,2,4-triazole, in or on mango at 0.07 ppm and wax jambu at 1.5 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).

Therefore, 40 CFR chapter I is amended as follows:

The portion of the site to be deleted from the NPL is: Northern 62-acre parcel of the AT&SF Albuquerque Superfund Site, located in Albuquerque, Bernalillo County, New Mexico. A Notice of Intent for Partial Deletion for this Site was published in the Federal Register on January 5, 2011 (76 FR 510).

The closing date for comments on the Notice of Intent for Partial Deletion was February 4, 2011. One anonymous public comment was received and supported the partial deletion of the Site. EPA, in conjunction with the NMED, believes the partial deletion action remains appropriate.

EPA maintains the NPL as the list of sites that appear to present a significant risk to public health, welfare, or the environment. Deletion of a site from the NPL does not preclude further remedial action. Whenever there is a significant release from a site deleted from the NPL, the deleted site may be restored to the NPL without application of the hazard ranking system. Deletion of portions of a site from the NPL does not affect responsible party liability, in the unlikely event that future conditions warrant further actions.

For reasons set out in the preamble, 40 CFR part 300 is amended as follows:

On May 7, 2010, the Federal Maritime Commission (FMC or Commission) issued a notice of proposed rulemaking (NPR), pursuant to its authority under sections 16 and 17 of the Shipping Act of 1984 (Shipping Act), 46 U.S.C. 40103 and 46 U.S.C. 42101, seeking comments on a proposal to exempt licensed non-vessel-operating common carriers (NVOCCs) from the rate publication requirements of the Shipping Act, subject to certain conditions. 1 The Commission found that it was within its statutory authority under Section 16 of the Shipping Act to grant such an exemption, subject to certain conditions, as doing so would not result in substantial reduction in competition or be detrimental to commerce, consistent with the Shipping Act. See 46 U.S.C. 40103(a). As proposed, the exemption would relieve licensed NVOCCs from their tariff rate publication obligations when entering into a “negotiated rate arrangement” (NRA). An NRA is defined as “a written and binding arrangement between a shipper and an eligible NVOCC to provide specific transportation service for a stated cargo quantity, from origin to destination, on and after the receipt of the cargo by the carrier or its agent (or the originating carrier in the case of through transportation).” Proposed Section 532.3(a). The use of NRAs would be subject to several conditions, including (1) NVOCCs who use NRAs would be required to continue publishing standard rules tariffs containing contractual terms and conditions governing shipments, including any accessorial charges and surcharges, and would be required to make their rules tariffs available to shippers free of charge; (2) NRA rates charged by NVOCCs must be mutually agreed and memorialized in writing by the date cargo is received for shipment; and (3) NVOCCs who use NRAs must retain documentation confirming the agreed rate and terms for each shipment for a period of five years, and must make such documentation promptly upon request available to the Commission pursuant to the Commission's regulations at 46 CFR 515.31(g).

Licensed NVOCCs, to the extent they enter into NRAs, would be exempt by regulation from the following provisions of the Shipping Act: Section 8(a), codified at 46 U.S.C. 40501(a)-(c) (obligation to publish an automated rate tariff); Section 8(b), codified at 46 U.S.C. 40501(d) (time volume rates); Section 8(d), codified at 46 U.S.C. 40501(e) (tariff rate increases may not be effective on less than 30 days notice but decreases may be effective immediately); Section 8(e), codified at 46 U.S.C. 40503 (carrier refunds due to a tariff error); and Section 10(b)(2)(A), codified at 46 U.S.C. 41104 (requiring adherence to published tariff rates).

The Commission also sought public comment on whether the exemption should be extended to the prohibitions of Section 10(b)(4), codified at 46 U.S.C. 41104(4) (prohibiting common carriers from unfair or unjustly discriminatory practices in services pursuant to a tariff), and Section 10(b)(8), codified at 46 U.S.C. 41104(8) (prohibiting common carriers from undue or unreasonable preference or advantage or undue or unreasonable prejudice or disadvantage for tariff service). Additionally, the Commission requested interested parties to submit comments on whether the exemption should be extended to foreign-based NVOCCs who are unlicensed but bonded pursuant to 46 CFR 515.21(a)(3), and on which elements, if any, qualify an NRA for a “safe harbor” that affords a presumption that the corresponding shipment is not subject to the tariff rate publication requirement.

The Commission received a total of forty-four public comments: one comment from two members of Congress; two comments from other federal agencies; nineteen from U.S.- based, licensed NVOCCs; seven from foreign unlicensed NVOCCs; four from U.S.-based trade associations; three from foreign-based trade associations; two from consultants; and six from tariff publishers and their employees. 2 On May 24, 2010, the Commission held a public meeting to receive oral comments. 3 The Commission considered all comments in developing this final rule. A discussion of significant comments and the Commission's response to those comments as well as minor modifications and clarifications made to the proposed rule is provided below.

The strong balance of the comments expressed general support for exempting NVOCCs who use NRAs from the tariff rate publication requirements of the Shipping Act and the Commission's regulations. Notably, the Department of Justice opined that the proposed elimination of the NVOCC tariff publication requirements would meet the Section 16 exemption authority standard and would be an appropriate exercise of the Commission's authority. Other commenters agreed with this analysis, further stating that the proposed exemption will allow NVOCCs to be more flexible and more responsive to their shippers, and will promote competition and commerce by eliminating substantial regulatory costs to NVOCCs, a savings that could be passed on to their customers. A number of commenters argued that the ability to enter into NRAs would allow them to quickly adjust service offerings and rates due to rapidly changing rates and surcharges imposed by ocean common carriers. Most commenters opined that the proposed rule would not result in a substantial reduction in competition or be detrimental to commerce and, in fact, would increase competition and promote commerce by making it easier and more efficient for NVOCCs to quote rates and to devote their resources to serving their customers. The NCBFAA argued that the issuance of the exemption for NVOCCs would increase, not decrease, competition in the NVOCC industry, and would not be detrimental to commerce, but would instead increase NVOCC efficiency, substantially reduce unnecessary costs, save jobs, permit NVOCCs to expend scarce resources in positive ways and allow NVOCC's to reduce rates for their shippers. Conversely, several commenters opined that the NPR did not meet these standards and was therefore beyond the Commission's current statutory authority.

The Commission issued the NPR pursuant to its authority under section 16 of the Shipping Act, which allows the Commission to exempt future activity from the requirements of the Shipping Act if the Commission finds that the exemption will not result in a substantial reduction in competition or be detrimental to commerce. 46 U.S.C. 40103. The Commission may attach conditions to such an exemption and may, by order, revoke an exemption. The Commission has granted exemptions in the past. For example, in 2004, the Commission used its authority under Section 16 to exempt NVOCCs who entered into negotiated service arrangements (NSAs) from the Shipping Act's tariff publication requirements.. The Commission has also denied such requests for exemption in the past. 4

The Commission, as previously stated, is authorized to grant an exemption under Section 16 when it finds that the exemption will not result in a substantial reduction in competition and, separately, will not be detrimental to commerce. The relevant competitive considerations in determining whether to grant the exemption and allow licensed NVOCCs to enter into NRAs were: competition among NVOCCs; competition between NVOCCs and VOCCs; competition among VOCCs; and competition among shippers.

With regard to competition among NVOCCs, the Commission's records show that as of February 10, 2011, there were 3,368 NVOCCs licensed in the United States and 1,125 foreign unlicensed NVOCCs, indicating that customers can choose among a wide array of competing service providers. Additionally, allowing licensed NVOCCs the ability to opt out of the tariff rate publishing requirements of the Shipping Act could reduce entry costs for additional potential competitors in the NVOCC market, thereby resulting in more service providers and even greater competition. The Commission believes that allowing licensed NVOCCs to opt out of the requirement to publish tariff rates will enhance competition, rather than result in a substantial reduction in competition among licensed NVOCCs.

One commenter voiced concerns that granting the exemption will put VOCCs at a competitive disadvantage to NVOCCs as not all cargo moves under VOCC service contracts. That lone commenter is not a transportation provider, either as an NVOCC or a VOCC. Such issues were not raised by any VOCC. Some commenters have argued that NVOCCs and VOCCs do not compete against each other, as NVOCCs tend to service small-to-medium sized shippers and VOCCs tend to serve larger customers that sign service contracts. The record demonstrated, however, that many shippers use both NVOCCs and VOCCs at one time or another, thereby creating a competitive market.

The Joint Commenters, citing generally accepted industry statistics, noted that since the implementation of the Ocean Shipping Reform Act of 1998 (OSRA), over 90% of shippers' dealings with ocean common carriers have been in the form of confidential service contracts, rather than through tariff rates. Thus, VOCCs would appear to have had a statutory competitive advantage over NVOCCs, an advantage that will be somewhat reduced by this rule. As a result, NVOCCs will likely become more competitive with VOCCs.

Providing NVOCCs the ability to opt out of tariff rate publishing is highly unlikely to reduce competition among VOCCs. All NVOCC cargo must eventually move with a VOCC which, in turn, competes with other VOCCs for NVOCC cargo. If NVOCCs were able to somehow increase their cargo share due to their ability to opt out of rate tariff publishing, then those VOCCs who are more reliant on NVOCC cargo could conceivably capture more cargo from VOCCs that do not rely as much on NVOCC cargo. This, however, is in the Commission's view extremely speculative and, if such a scenario actually came about, we believe that it would be more likely to lead to changed business models by affected VOCCs and ultimately lead to increased competition overall. Thus, the Commission finds that granting the exemption would not result in a substantial reduction in competition among VOCCs.

Finally, many commenters asserted that their customers do not inquire as to published tariff rates, making such published rates effectively useless. Other commenters stated that their customers consult with multiple carriers directly, by e-mail or phone, in search of the best quote and do not consult published tariffs. Several commenters stated that their shipper customers have never used a published tariff to review the marketability of an ocean freight rate. 5 Accordingly, the record demonstrates that shippers, for the most part, do not presently use published NVOCC tariffs for price information. Exempting such publication requirements, therefore, would have little effect on competition and, certainly, would not have a substantial impact. The Commission also notes that since the advent of confidential service contracts offered by VOCCs and, to some extent, NSAs offered by NVOCCs, it appears that pricing competition has increased rather than decreased. For these reasons, the Commission does not believe that allowing NVOCCs to opt out of the requirement to publish tariff rates will result in a substantial reduction in competition among shippers.

The Commission's authority under section 16 to grant exemptions from the statutory requirements of the Shipping Act, in whole or in part, requires the Commission to find not only that the exemption will not result in a substantial reduction in competition, but also that the exemption will not “be detrimental to commerce.”  6 Ensuring that any exemption granted by the Commission is not detrimental to U.S. commerce is of particular importance at this time, considering the goal of the Administration's National Export Initiative to double U.S. exports over the next five years. 7

Initially, it is significant that no shipper or carrier—NVOCC or VOCC—has appeared in this proceeding to object to granting the exemption or to allege economic harm resulting from providing NVOCCs the option of entering into NRAs, 8 a matter of significance in previous exemption cases. See, Petition for Exemption from Tariff Filing Requirements Previously Granted, etc., 22 S.R.R. 1040, 1043 (1984); Tariff Filing Notice Periods—Exemptions, 24 S.R.R. 1604, 1605-06 (1989). Indeed, the NIT League, a large organization of shippers in the United States, has submitted comments in support of the grant of the exemption.

Moreover, the Commission has already concluded in this proceeding that authorizing licensed NVOCCs to enter into NRAs, subject to the conditions imposed, will reduce NVOCC operating costs and increase competition in the U.S. trades. Consequently, the Commission believes that allowing NRAs as proposed will result in a benefit to commerce. Accordingly, after reviewing all of the comments received, and in light of the relief sought and the conditions proposed in the NPR, the Commission finds that permitting licensed NVOCCs the option of operating under NRAs would not be detrimental to commerce.

Numerous commenters argued that because shippers do not access NVOCC tariffs, the maintenance of such tariffs serves no purpose and imposes additional costs on NVOCCs. The Joint Commenters argued that the exemption, as proposed, will allow NVOCCs to eliminate unnecessary costs. In contrast, several commenters questioned whether any cost saving experienced by NVOCCs would be passed on to shippers and whether there will be a net gain in jobs since jobs could be lost as the function of coordinating rate filings and submitting them to a tariff publisher will no longer exist. However, with a highly competitive industry consisting of more than 3,300 licensed NVOCCs competing for cargo, the Commission believes it is likely any cost savings realized through use of NRAs will be passed through to shippers in the form of more competitive rates. Residual savings to NVOCCs, as well as savings from lower rates to shippers, will provide funds for reinvestment and growing their respective businesses. Accordingly, providing this exemption would likely result in economic growth that would ultimately increase jobs.

Notwithstanding the ability of NVOCCs to enter into NSAs, a number of commenters expressed the view that there remained a need for NRAs that would exempt NVOCCs from tariff rate publication. One NVOCC commented that while some shippers may wish to work under a contract/NSA basis and some NVOCCs may wish to issue an NSA to obtain a volume commitment, most small-to-medium enterprises work on a quotation basis, often for a variety of services, and these companies do not want or need to engage in a formal contract process. Although several commenters suggested the Commission revisit NSAs and their relatively infrequent usage by NVOCCs, the Commission does not believe it is necessary at this time to initiate such a proceeding, as NSAs were implemented to give NVOCCs and their customers additional flexibility to structure their shipping transactions and their usage is voluntary. NVOCCs' lack of widespread NSA usage does not bear on the question of whether the Commission should grant the instant exemption, except that it does tend to corroborate a point argued by supporters of the exemption—that NRAs are necessary because the business models of many NVOCCs are not conducive to using NSAs.

Several commenters questioned whether NVOCCS entering into NRAs would continue to be common carriers at all. The answer is clearly yes. Entering into an NRA with a shipper, as opposed to providing service at tariff rates, would not change the common carrier status of an NVOCC. 9 The publishing of a tariff is not what characterizes an entity as a common carrier, and NVOCCs would still be required to publish a rules tariff. 10 Rather, the existence of a common carrier triggers the requirement to publish a tariff.

As discussed by the TIA, common carriage existed from 1916 to 1961 under the Shipping Act of 1916 without a statutory requirement that common carriers file or publish tariffs. Congress added a filing requirement in 1961 at the time dual rate loyalty agreements were authorized for conferences and carriers. The tariff provision was intended to protect shippers against sudden and unannounced rate increases. H. Rep. No. 498, 87th Cong., 1st Sess. at 2-3 (1961); S. Rep. No. 860, 87th Cong., 1st Sess. at 10-19 (1961). Congress changed the filing requirement to a publication requirement in 1998 with the passage of the OSRA. The ability of an NVOCC to enter into NRAs with its shipper customers in lieu of moving cargo under a published tariff rate, and to assess different rates to different customers, does not disqualify an NVOCC as a common carrier. The responsibilities associated with common carriage remain and NVOCCs entering into NRAs continue to be subject to the applicable requirements and strictures of the Shipping Act, including oversight by the Commission. For example, NVOCCs will continue to be subject to requirements that they establish and observe “just and reasonable regulations and practices,” 46 U.S.C. 41102(c), and prohibitions against false billing, false classification, false weighing or measurement, retaliating against shippers, engaging in unfair practices, and unreasonably refusing to deal or negotiate, 46 U.S.C. 41104(1), (3), (4), and (10).

The Commission recognizes the rapidly changing nature of the current shipping environment and believes that the ability of NVOCCs to enter into NRAs may increase competition and promote commerce by allowing NVOCCs to better serve their shipper customers. Based on the comments received and the Commission's experience, it appears that a vast majority of shippers obtain information regarding rates directly from NVOCCs without consulting published tariffs. It also appears that the systems used by NVOCCs to generate rate quotations are duplicated by those necessary to comply with tariff publishing requirements and the continuing requirement to publish rate tariffs may result in unnecessary costs to NVOCCs and their shipper customers. The decision to enter into an NRA rests with each shipper and NVOCC and is purely voluntary. Those licensed NVOCCs who find it more advantageous to use published tariff rates for some or all of their business may continue to do so, while those licensed NVOCCs and shippers who believe it will be more advantageous to enter into negotiated rate arrangements may choose to do so, within the requirements of the NRA regulations.

Allowing licensed NVOCCs to enter into NRAs in lieu of publishing tariff rates will not result in substantial reduction in competition among NVOCCs, between NVOCCs and VOCCs, among VOCCs, or among shippers. The Commission has also found that use of NRAs by licensed NVOCCs will not be detrimental to commerce. It is, therefore, within the authority of the Commission to permit licensed NVOCCs to enter into NRAs with their customers subject to the terms and conditions set forth in this regulation.

The Commission received a large number of comments and questions concerning the scope of an NRA.

Commenters questioned the meaning of “cargo quantity” in the definition of rate, 11 specifically whether a single NRA could cover more than one shipment. Pursuant to Proposed Section 532.5(d), an NRA must clearly specify the rate and to which shipment  12 or shipments such rate will apply. Therefore, the term “cargo quantity” contemplates that an NRA may cover more than one shipment so long as all shipments are specified in the NRA.

A number of commenters questioned whether an NVOCC that elects to use NRAs may also move cargo pursuant to tariff rates. Under the final rule, NVOCCs are not required to choose to move all of their cargo under either NRAs or tariff rates. Eligible NVOCCs may choose to use NRAs on whatever basis best suits the market they serve. In order to ensure clarity as to whether an NVOCC is moving cargo under either an NRA or a tariff rate for a particular cargo quantity, Proposed Section 532.6(a)(1) has been modified to include a requirement that an NVOCC moving cargo pursuant to an NRA for a particular cargo quantity (either shipment or shipments), must place a prominent notice to that effect on its bills of lading or equivalent documents for that cargo quantity, in addition to the general notice in its rules tariff and its FMC-1 filed with the Commission. All licensed NVOCCs will need to access the Commission's FMC-1 form in order to make an initial choice  13 among (1) Moving all cargo pursuant to tariff rates; (2) moving all cargo pursuant to NRAs; or (3) moving cargo either via tariff rates or via NRAs. The Commission intends to modify the FMC-1 form to allow NVOCCs to notify the Commission of their intentions in advance of the effective date of the Final Rule and will make an announcement via its Web site when the ability to do so is available.

There were also numerous comments filed regarding the meaning of “rate” in an NRA and its relationship to surcharges, accessorials, and rules tariffs. A number of commenters recommended including in the NRA all components of the transportation costs and argued NVOCCs should have the flexibility to structure NRAs from one extreme of merely containing base rates (with all other terms left to the rules tariff) to inclusion in the NRA of all terms. Commenters recommended that the NRA include information as to which surcharges are to be added to the rate, either in the NRA itself or by reference to the NVOCC's rules tariff. The NIT League opined that parties to an NRA should be able to negotiate an all-inclusive rate or a base rate with itemized surcharges, or should be required to specifically incorporate and identify which surcharges or accessorials from the rules tariff will apply. In a related comment, NYNJFFF&BA questioned how an NVOCC would implement general rate increases in the context of an NRA.

The Commission believes that NVOCCs and their shipper customers should have flexibility in structuring NRAs. As is the case with respect to tariff rates, the rate stated in an NRA may specify the inclusion of all charges (an “all-in” rate) or specify the inclusion of only certain accessorials or surcharges. Without specifying otherwise, the NRA would only replace the base ocean freight rate or published tariff rate. If the rate contained in an NRA is not an all-in rate, the NRA must specify which surcharges and accessorials from the rules tariff will apply. To the extent surcharges or accessorials published in the NVOCC's rules tariff will apply, the NRA must state that the amount of such surcharges and accessorials is fixed once the first shipment has been received by the NVOCC, until the last shipment is delivered. Rates stated in an NRA may not be increased via a GRI.

The NCBFAA's petition and the Commission's proposed rule suggested an NRA accompanied by an exemption from the published tariff rate upon satisfaction of certain conditions. Neither proposed changes to rules tariffs, NSAs, or service contracts. One commenter on the proposed rule suggested that an NRA should be expanded to include such economic terms as credit and payment terms, late payment interest, freight collect or prepay, rate methodology, including minimum quantities, time/volume arrangements, penalties or incentives, the methods for implementation of rate changes, or provisions for arbitration, forum selection for disputes and variance of per-package liability limits. Commission Staff raised concerns that expanding the scope of the NRA beyond rates could cause overlap and confusion between NRAs and NSAs, which must be filed with the Commission. At this time, the Commissioners hold differing views on the commenter's proposal and the concerns raised by Commission Staff. Accordingly, the Commission will move forward with the current rule as proposed (and as requested in the Petition), under which an NRA is an alternative to a published rate and does not include other economic terms. Nor can an NRA under this final rule contain a volume commitment, minimum quantity commitment, or a penalty provision for failure to meet a minimum quantity. 14 The Commission will commence proceedings to obtain and consider additional public comments on potential modifications to the final rule, including possible expansion of the terms that can be included in an NRA. The record in this proceeding will be incorporated into a new Commission proceeding.

Although treatment of affiliates was not a focus of the commenters, the Commission finds no reason to treat affiliates differently under NRAs than they are treated under NSAs. Accordingly, a definition of affiliate has been added to Proposed Section 532.3. With the mutual concurrence of the NRA parties, affiliates of the shipper are entitled to access the NRA rates, in which case, the names and addresses of eligible affiliates shall be identified in the NRA. Proposed Section 532.5(b) has been modified accordingly.

The Commission received other comments regarding the scope of an NRA. One commenter, Mr. Levy, suggested that rates covering shipment of household goods and personal effects should not be exempted from tariff rate publication, citing the Surface Transportation Board's rules governing domestic household goods carriage which require the publication of tariffs. Without opining on the merits of this suggestion, in light of the Commission's ongoing Fact-Finding Investigation concerning household goods shipments, 15 the Commission has determined not to adopt the suggestion at this time as it may be more appropriate to revisit this issue after the Commission has the benefit of the Fact-Finding Officer's Final Report. Ms. Zack-Olson suggested that exemptions should be awarded on an individual basis based on certain criteria. The Commission notes that awarding the exemption on an NVOCC-by-NVOCC or customer-by-customer basis, based on specific criteria, would require an unnecessarily large expenditure of resources by both NVOCCs and the Commission and declines to adopt this suggestion.

The NPR proposed granting the exemption only to licensed NVOCCs, but requested comments on whether the exemption should be extended to foreign-based NVOCCs who are unlicensed, but bonded pursuant to 46 CFR 515.21(a)(3) (hereinafter “foreign unlicensed NVOCCs”). 16 A large number of comments were received by the Commission in response to its query, with the strong majority of commenters supporting extension of the exemption to foreign unlicensed NVOCCs. Commenters mainly alleged adverse effects on competition and fears of discrimination or retaliation by regulators in other countries.

Commenters argued that foreign unlicensed NVOCCs will be disadvantaged because they will continue to be required to publish rates. The Commission recognizes there are, and would continue to be, under this final rule, differences between licensed and foreign unlicensed NVOCCs, not just in tariff publication costs, but also licensing costs and bonding costs. However, the Commission does not believe that the balance of such differences would be of such a magnitude that it would lead to a substantial reduction in competition.

Commenters also argued that, if the exemption is limited to licensed NVOCCs, discrimination against United States-based NVOCCs operating in foreign countries will occur. Commenters cited these specific examples of possible discrimination: the levying of special retaliatory customs tariffs or duties on American products; a new requirement that United States-based NVOCCs file tariffs; a requirement for United States-based NVOCCs to hold bonds in higher amounts than currently required; and a requirement that United States-based NVOCCs be licensed in foreign countries. Commission Staff, however, provided the Commissioners their view that these predictions of discrimination against United States-based NVOCCs operating in foreign countries are speculative, because the path to licensure is readily available to foreign-based NVOCCs to the same extent as United States-based entities. Foreign unlicensed NVOCCs may apply for and, if qualified, obtain an NVOCC license. Not only would this provide the benefit of NRAs but also reduced bond costs. Currently, fifty-five foreign-based NVOCCs hold FMC-issued licenses.

Commission Staff raised concerns that extending the exemption to foreign unlicensed NVOCCs could hamper their ability to protect the shipping public, as the exemption is predicated, among other things, on the prompt availability of records. The Commission Staff reports that the ability of the Commission and some private disputants  17 to obtain NRA documentation from foreign unlicensed NVOCCs is likely to be adversely impacted by the foreign situs and unlicensed status of such companies. Presently, both the Commission and private litigants are able to access a foreign unlicensed NVOCC's rates and rules tariffs. If such foreign unlicensed NVOCCs are permitted to use NRAs, the Commission would have less timely access to the rate information for those cargo quantities moving pursuant to NRAs. The Commission could be reduced to obtaining such information only with the cooperation of the foreign unlicensed NVOCC or its customer, or through a Commission issued subpoena or order, 18 and those private parties without their own copies may only be able to obtain such information through the discovery process. 19

Commission Staff raised several other concerns about extending this exemption to foreign unlicensed NVOCCs in the absence of published tariff rates. For foreign unlicensed NVOCCs, there is no application and approval process as there is for United States-based NVOCCs. The licensing process for United States-based companies includes a detailed review of the experience and character of the application's Qualified Individual (QI) and the character, not only of the QI, but also of the major officers and shareholders. The QI must have a minimum of three years of qualifying NVOCC experience as verified by previous employers and personal references with knowledge of the QI's qualifications, who are interviewed by telephone or via e-mail by the Commission's Bureau of Certification and Licensing (BCL). BCL's review of applicants includes a thorough vetting of the Commission's complaint and enforcement records systems as well as commercial databases to analyze the applicant's financial background, including unsatisfied liens and judgments and any criminal history. Any information not consistent with that provided by the applicant is investigated and may result in denial of the application.

Accordingly, when the Commission approves a license for a United States- based applicant, it is acting upon substantive, verified information under the experience and character standards of Section 19 of the Shipping Act. By contrast, a foreign unlicensed NVOCC is not required to have a QI or anyone in its employ who has any experience shipping in the United States trades. Similarly, foreign unlicensed NVOCCs are not required to have the character necessary to provide NVOCC services to United States importers and exporters, as United States based companies do. The Commission knows little more than the name and address of such persons and the identity of their agent for service of process in the United States.

Commenters suggested various methods to address this concern, including requiring all participating NVOCCs to agree in writing to produce NRA records as reasonably requested by the Bureau of Enforcement; requiring that foreign unlicensed NVOCCs maintain their NRA files at the offices of their U.S. agents or a third party Web site; or requiring that all foreign based NVOCCs place a statement in their rules tariff regarding the location of records and contact information. Another commenter suggested that the exemption be extended to unlicensed NVOCCs that are affiliates with licensed NVOCCs in good standing. Alternatively, one commenter suggested that the tariff rate exemption be limited to exports from the United States.

These suggestions did not fully address the concerns raised by Commission Staff at this time. Congress, in providing for foreign-based companies to operate as NVOCCs, without being required to be licensed or vetted, recognized possible regulatory differences between United States and foreign-based NVOCCs. Congress directed the Commission to take into account that foreign-based unlicensed companies had not been reviewed as to experience and character and “to consider the difference in potential for claims against the bonds between licensed and unlicensed intermediaries when developing bond requirements.” Congress recognized the “diversity of activities” conducted by ocean transportation intermediaries and directed the Commission “to establish a range of licensing and financial responsibility requirements commensurate with the scope of activities conducted by different ocean transportation intermediaries and the past fitness of ocean transportation intermediaries in the performance of intermediary services.” S. R. Rep. No. 105-61, at 30-32 (1997). Accordingly, Congress recognized that not all NVOCCs were to be treated equally from a regulatory perspective and that the Commission was to take into account those factors necessary to ensure the public is protected.

Commission Staff has raised further concerns over its ability to protect the shipping public with respect to possible exempted operations of foreign unlicensed NVOCCs. The proposed rule provides that NRAs and associated records are subject to inspection and reproduction requests under 46 CFR 515.31(g). However that provision only applies to a “licensee.”

Absent that limitation, obtaining records located overseas can be difficult and may involve considerable delay. The Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters   20 (Convention) provides procedures for obtaining evidence from entities in certain countries, but those procedures are time consuming and uncertain, at best. Moreover, while the United States is a signatory to the Convention, many of our trading partners are not. 21 And, even among those nations party to the Convention, most have executed a “declaration” that they will not honor requests to obtain pre-trial discovery of documentary evidence. 22 The Commission Staff has raised concerns that Commission requests for documentation could be subject to delay due to the requirements of the Convention.

Schenkerocean Limited cited the requirement that foreign unlicensed NVOCCs may only provide ocean transportation intermediary services in the United States through a licensed ocean transportation intermediary as support for the proposition that the Commission would have regulatory access to the bonds of both entities. If the licensed OTI in the United States acts as an agent, however, it is likely only the bond of the foreign NVOCC would be available to satisfy any civil penalty or reparation awards, not the bond of the United States-based company acting in an agency capacity.

Commission Staff has raised concerns that the difficulties facing the Commission in compelling production of pertinent documentation and, what may be the inability of a private litigant to obtain documentation, could reduce the Commission's ability to protect the shipping public. At this time, Commissioners hold differing views on the concerns the Staff has raised, and on the relevance and weight those concerns should be given in the Commission's decision whether or not to extend the exemption to foreign unlicensed NVOCCs. Accordingly, the Commission will move forward with the current rule as proposed for licensed NVOCCs, but as noted above, will commence proceedings to obtain and consider additional public comment on potential modifications to the final rule, including possible extension of the exemption to include foreign unlicensed NVOCCs. The record in this proceeding will be incorporated into the new Commission proceeding.

Several commenters asked for clarification as to whether an NRA could consist of an electronic communication such as an e-mail or a facsimile with one commenter arguing that both methods of communication are internationally acceptable. It is the Commission's view that both may be satisfactory forms of NRA memorialization. 23 UPS objected to the requirement of Proposed Section 532.7(a) to retain associated records, and argued the regulation should require only the retention of those specific documents constituting the contract between the NVOCC and shipper and any document necessary to interpret and enforce the contract. The Commission notes that the wording in Proposed Section 532.7(a) is similar to that contained in the recordkeeping requirements for NSAs at 46 CFR 530.15(a) and believes the requirement that NVOCCs maintain original NRAs and associated records is appropriate. RateWave Tariff Services, Inc. sought guidance on what the Commission means in Proposed Section 532.7(a) by “associated records,” and recommended that the Commission provide a list of possible documents. Given the variety of documents which may be utilized by NVOCCs, it is impossible to provide a comprehensive list of documents and therefore, the Commission declines to do so.

UPS argued that the required retention period for documentation should be shortened to three years. The requirement to maintain documentation for five years is, however, consistent with the statute of limitations for violations of the Shipping Act found at 46 U.S.C. 41109(e). Therefore, the Commission believes it is necessary that documentation be available for five years. UPS also requested that the Commission clarify that the requirements of 46 CFR 515.33 do not apply to NRAs. That provision contains detailed requirements regarding the retention of financial data and shipment records by ocean freight forwarders. Since the requirements of 46 CFR 515.33 apply only to freight forwarders, they would not apply to any NVOCC.

Panalpina, Inc. recommended against a requirement for centralized record keeping and urged the Commission to model the NRA recordkeeping requirements on 46 CFR 515.33. Another commenter, Ms. Zack-Olson, argued that, for ease of access to documents by the Commission, the documents should be stored both in the shipping file and at a remote location such as a third-party Web site. Yet another commenter, Mr. Levy, also suggested that NRAs be filed with the Commission at no cost, arguing this would lead to better uniformity and access. The Commission declines to adopt these suggestions. Each NVOCC appears to be best able to determine the most suitable, efficient way for it to ensure compliance with the documentation, retention and access requirements of the Commission's regulations.

RateWave Tariff Services, Inc. requested that the Commission clarify when the five-year period for retaining NRAs and associated documents begins. CASA suggested the 5-year record keeping period be measured commencing from the date upon which the last shipment covered by an NRA is received by the NVOCC or its agent (including the originating carrier in the case of an NRA rate for through transportation). As discussed above, an NRA may cover a period of time and involve multiple shipments. In order to ensure availability of documentation, the Commission has determined that the 5-year record keeping period should commence from the completion date of performance of the NRA by an NVOCC, rather than the date when the initial shipment is received by the carrier or its agent. Proposed Section 532.7(a) is modified accordingly.

Mr. Levy recommended changing the wording of Proposed Section 532.7(b) to be consistent with the NSA regulations at 46 CFR 531.12(a), which state that records must be readily available and usable to the Commission. The Commission has modified Proposed Section 532.7(b) slightly in accord with this suggestion. Several commenters suggested that the Commission should specify that all NRA records be in English or contain a certified English translation. 24 While it may not be necessary to require that the documentation for all NRA shipments be in English, Proposed Section 532.7(b) is modified to include a requirement that any records produced in response to a Commission request must be in English or accompanied by a certified English translation.

Distribution Publications, Inc. asserted that, under Proposed Section 532.2 (Scope and Applicability), NVOCCs who satisfy the requirements of the proposed regulations are exempt from 46 CFR 520.6. The Commission notes that Proposed Section 532.2 exempts NVOCCs solely from the requirements of 46 CFR 520.6(e), which relates to rates, and not its other requirements. 25 Dart Maritime Services, Inc. expressed a concern that data may cease to become available if the NPR is adopted without the continued requirements of 46 CFR 520.10(a). The Commission notes that an NVOCC's rules tariff will continue to be subject to the history requirements of 46 CFR 520.10(a) and NRAs will be subject to these requirements. Therefore, all documentation should be covered and consistent as to recordkeeping.

RateWave Tariff Services, Inc. expressed concerns with the burden if an NVOCC had to recreate an NRA every time anything in the original NRA changes. The Commission notes that an NRA, by definition, is a written and binding arrangement between a shipper and an NVOCC to provide specific transportation service for a stated cargo quantity from origin to destination and therefore, an NVOCC must enter into a new NRA for each specific transportation service and cargo quantity. An NVOCC may use a form agreement for an NRA and, in as much as an NRA may not contain other contractual terms, the requirement to enter into a new NRA for each stated cargo quantity should not be a significant burden.

The NPR provided licensed NVOCCs offering NRAs the option of providing their rules tariff free of charge to the public or providing each prospective shipper with a copy of all the applicable terms set forth in its rules tariff. Upon further review and consideration of the comments received, which generally did not object to providing access to rules tariffs free of charge, Proposed Section 532.4 has been amended to require licensed NVOCCs, as a condition to offering NRAs, to provide their rules tariffs to the public free of charge. UPS expressed concerns that shippers moving cargo in the absence of a tariff rate could shop through an NVOCC's effective NRAs looking for the most advantageous rate. The rule only requires that access to an NVOCC's rules tariff be available to the public and does not require public access to an NVOCC's effective or proposed NRAs.

A number of commenters recommended that Proposed Section 532.5(d) be changed to allow modification of the rate in an NRA at any time, as long as it is clearly stated in writing that the party to whom the request was made agrees to the change. The commenters argued that what was important is that a shipper and consignee agree to the rate and the effective date. The Commission disagrees. While NRAs are defined as “written and binding” arrangements, they function more like tariff rates and, like tariff rates, they may not be amended by the parties once the subject cargo has been received. The Commission believes maintaining the integrity of NRA rates protects both the shipper and the NVOCC. Accordingly, the Commission declines to modify the rule to allow for amendment of an NRA after receipt of the cargo by the carrier or its agent. To address situations where an NRA may cover multiple “shipments,” the word “initial” is added to Proposed Section 532.5(e) to clarify that an NRA may not be modified after the time the initial shipment in an NRA is received by the carrier or its agent. RateWave Tariff Services, Inc. questioned whether an NRA may be canceled, (for example, if an NVOCC bases its NRA on the service of a specific VOCC which then changes its service level). By definition, an NRA is a written and binding arrangement between a shipper and an eligible NVOCC and therefore, could only be canceled by operation of law or by agreement of both parties prior to receipt of the cargo.

Several commenters recommended allowing an NRA to have an effective date. The definition of rate contained in the rule is “a price stated for providing a specified level of transportation service for a stated cargo quantity, from origin to destination, on or after a stated date or within a defined time frame. ” Proposed Section 532.3(b) (emphasis added). Accordingly, an NRA may have an effective date or cover a particular period of time.

Dart Maritime Services, Inc. questioned what methods or instruments will properly serve as acceptance by a shipper, given the use of generic e-mail addresses by NVOCC clients, and recommended that in order to have an “agreement” by both parties there must be some level of proof of identity from the authorizing party similar to that required in 46 CFR 531.6(b)(9). The Commission has modified Proposed Section 532.5 accordingly, requiring that an NRA contain the legal name and address of the parties and the names, title and addresses of the representatives of the parties agreeing to the NRA. RateWave Tariff Services, Inc. suggested that the Commission clarify that there is a requirement for a formal acceptance by the shipper before cargo begins moving under the NRA, noting that shippers often decide to use a rate quote before informing the NVOCC of their acceptance of the rate. This practice, they asserted, causes problems under current regulations and could also cause problems under the proposed regulation. While the Commission declines to specify in the rule what form the acceptance should take, as many processes can indicate acceptance, in order for a valid NRA to exist, Proposed Section 532.5(c) requires agreement by both shipper and NVOCC.

Dart Maritime Services, Inc. suggested that Proposed Section 532.5 be amended to include the filing requirements of 46 CFR 531.6(a) and selected requirements for NSA contents contained in 46 CFR 531.6(b) (46 CFR 531.6(b)(1), (2), (3), (6), (8), and (9)). Similarly, RateWave Tariff Services, Inc. provided an 11-point list of suggested items to require for inclusion in an NRA. The Commission has included in Section 532.5(a) the requirement in 46 CFR 531.6(b)(9) that the arrangement be in writing. The other requirements and suggestions are already included or adequately addressed in the rule.

Distribution Publications, Inc. contended that the exemptions in the Proposed Section 532.2 do not include 46 CFR 520.5, Standard Tariff Terminology or its Appendix A, and argued that these standards should also be used in NRAs. The Commission notes that the purpose of the use of Standard Tariff Terminology per 46 CFR 520.5 is to “facilitate retriever efficiency” which would not appear relevant for unfiled, unpublished NRAs.

Although not addressed by the commenters, the Commission wishes to make clear that it did not intend to preclude an eligible NVOCC from entering into an NRA with another NVOCC. Accordingly, the term “NRA shipper” has been added to Proposed Section 532.3—Definitions. An NRA shipper is defined as “a cargo owner, the person for whose account the ocean transportation is provided, the person to whom delivery is to be made, a shippers' association, or an ocean transportation intermediary, as defined in section 3(17)(B) of the Act (46 U.S.C. 40102(16)), that accepts responsibility for payment of all applicable charges under the NRA.” Additionally, the definition of NRA in Proposed Section 532.3(a) has been modified to read a written and binding arrangement between an NRA shipper and an eligible NVOCC and Proposed Section 532.5(c) is modified to require agreement by both the NRA shipper and the NVOCC (emphasis added). This definition is consistent with the Commission's NSA regulations at 46 CFR 531.2.

A number of commenters addressed the question of NRA disputes and the Commission's question of what rate should apply in the event of a dispute. CV International opined that the principles of contract law currently manage the relationship between shippers and NVOCCs and the proposed rule appropriately adopts that system. Several commenters argued that, because the NRA is a mutually agreed upon rate tailored to the requirements of both parties, it should take precedence over a tariff rate. Commenters suggested that the final rule should clarify that, in the event of a discrepancy between the terms set forth in the NRA and the NVOCC rules tariff, the terms of the NRA will govern.

The TIA and NCBFAA pointed out that Section 13(f) of the Act, now codified at 46 U.S.C. 41109(d), makes the “amount billed and agreed upon in writing” between the carrier and the shipper controlling, even if the tariff for whatever reason does not conform to that rate. Both argued that this section answers the question asked in the NPRM as to whether the lower rate should prevail if there is a conflict between the tariff rate and the NRA rate. The Commission agrees with the commenters that, in the event of a dispute, the NRA rate will apply. Also, as with tariffs, to the extent the language of an NVOCC-drafted NRA is found to be unclear, that language is to be interpreted in favor of the shipper.

With regard to disputes, commenters stated that most disputes are quickly resolved commercially between shipper and carrier, particularly when a long-term customer relationship is at stake, and disagreements under NRAs should be resolved like other commercial disputes, i.e., without the need for intervention by the Commission. Similarly, the NCBFAA did not believe there is a need to mandate that parties with NRA disputes bring them to the Commission's Office of Consumer Affairs and Dispute Resolution Services (CADRS), as most disputes are resolved quickly and it is possible that a dispute may not be a potential violation of the Act, leaving the Commission without jurisdiction. The NCBFAA also argued that while parties may elect to use the services of CADRS, it is more appropriate to leave the choice of forum to the parties. The TIA stated that, if a dispute is brought to the Commission because it involves an alleged violation of the Shipping Act, in accordance with Commission regulations which strongly encourage alternative dispute resolution (ADR) procedures, they would not object to continuing such a requirement for complaints involving NRAs.

The Commission concurs that the parties themselves are best able to resolve most disputes, quickly and without recourse to an outside party. Accordingly, the Commission does not impose, as some commenters appear to suggest, a requirement that all disputes be referred to CADRS. The Commission does note, however, that its current regulations, which allow disputes to be brought before the Commission at the discretion of the parties, and which encourage alternative dispute resolution, are equally applicable to NRAs. Some commenters, though, appear to misunderstand CADRS' role in dispute resolution. CADRS provides a variety of ADR services. Some of these services, such as mediation, are ideal in situations where parties have a longstanding, commercial relationship and it is in their interest to continue that relationship. The parties themselves, in consultation with CADRS, decide which process is best for their situation. Ultimately, the parties determine the terms of any resolution; CADRS merely assists them in arriving at agreement. CADRS' role is not limited to disputes involving possible violations of the Shipping Act. Rather, the full panoply of CADRS dispute resolution procedures, formal and informal, are available to assist the parties to resolve any dispute involving liner ocean transport, even when a Shipping Act violation is not involved.

The Commission requested comments as to which elements should be required to qualify the NRA for a “safe harbor” status that would afford a presumption that the corresponding shipment is not subject to the tariff rate publication requirement. In response, the NIT League stated they supported the incorporation of a “safe harbor” provision, noting that shippers may already be entitled to protection pursuant to 46 U.S.C. 41109(d), while acknowledging the possibility that the Commission could determine that an NRA is defective prior to the issuance of an invoice for a particular shipment. The TIA, on the other hand, argued it is unnecessary in their view to prescribe a “safe harbor” for the form and content of NRAs as NVOCCs need flexibility. In light of the comments, the Commission declines to incorporate a “safe harbor” provision in the final rule. The Commission intends that the parties should have flexibility in tailoring the NRA to their specific situation.

The Commission also sought public comment in the NPR as to whether the final rule should exempt NVOCCs entering into NRAs from the prohibitions contained in Sections 10(b)(4) and 10(b)(8). Section 10(b)(4), 46 U.S.C. 41104(4), prohibits a common carrier, for service pursuant to a tariff, from engaging in any unfair or unjustly discriminatory practice in the matter of rates or charges; cargo classifications; cargo space accommodations or other facilities, loading and landing of freight; or adjustment and settlement of claims. Section 10(b)(8), 46 U.S.C. 41104(8), prohibits a common carrier, for service pursuant to a tariff, from giving any undue or unreasonable preference or advantage or imposing any undue or unreasonable prejudice or disadvantage. Most commenters supported extending the exemption to both sections. As justification, some argued that the high level of competition between NVOCCs would make it difficult for them to discriminate and therefore these prohibitions were not necessary for NVOCCs entering into NRAs. Others argued that prohibiting NVOCCs from discriminating or providing preferences in NRAs would be inconsistent with the stated purpose of NRAs and contract-based shipping practices and NVOCCs entering into NRAs will by definition be discriminating.

As a preliminary matter, the Commission Staff point out that cargo moving pursuant to an NRA may properly be interpreted as service pursuant to a tariff; tariff rules will apply, as will the prohibitions contained in Sections 10(b)(4) and 10(b)(8). An NVOCC entering into an NRA is still a common carrier. As discussed above, an NRA is not a service contract or an NSA. An NRA merely replaces the requirement in the Commission's regulations that an NVOCC publish a tariff rate.

Commenters argue that, because an NVOCC may enter into NRAs with different shippers at different rates and will be discriminating, it needs to be exempt from Sections 10(b)(4) and 10(b)(8). Section 10(b)(4) does not prohibit an NVOCC from discriminating by entering into or offering an NRA with different rates to different shippers, but rather prohibits any unfair or unjustly discriminatory practice by a common carrier in the matter of rate or charges; cargo classifications; cargo space accommodations or other facilities, loading and landing of freight; or adjustment and settlement of claims. (emphasis added). The Commission Staff is concerned that these provisions apply to more matters than just rate level whereas only the requirement to publish the rate is relieved by this exemption. Similarly, Section 10(b)(8) does not prohibit all preferences or advantages but rather prohibits giving any undue or unreasonable preference or advantage or imposing any undue or unreasonable prejudice or disadvantage. (emphasis added). Neither of these prohibitions prevents an NVOCC from entering into an NRA with different shippers at different rates. The Commission Staff is concerned that, despite entering into an NRA, a shipper may still need the protections offered by the prohibitions contained in these two sections and, therefore, as common carriers, NVOCCs will still be subject to the prohibitions contained in them. At this time, Commissioners hold differing views on the concerns the Staff raised, and on the relevance and weight those concerns should be given in the Commission's decision. Accordingly, the Commission will move forward with the current rule as proposed, which will not exempt NVOCCs entering into NRAs from the prohibitions contained in section 10(b)(4) and 10(b)(8). However, as noted above, the Commission will commence proceedings to obtain and consider additional comments on potential modifications to the final rule, including whether to exempt NVOCCs entering into NRAs from the prohibitions contained in section 10(b)(4) and 10(b)(8). The record in this proceeding will be incorporated into the new Commission proceeding.

One commenter complained, with regard to the Regulatory Flexibility Act, 5 U.S.C. 601 et seq, that the Commission's explanation in the NPR was unclear as to whether small business entities meant importers and exporters, the companies who use NVOCCs or the NVOCCs themselves. The commenter further argued that the NPR's statement that the economic impact will be small, seems to contradict the NCBFAA's petition, which claimed that the regulatory cost is huge. The Regulatory Flexibility Act directs agencies to give particular attention to the potential impact of regulation on small businesses and other small entities and requires consideration of regulatory alternatives that are less burdensome to small entities. The Commission's comments on the Regulatory Flexibility Act in its NPR were directed to NVOCCs as the regulated entities affected by the rule. NVOCCs are free to choose whether or not to take advantage of this rulemaking. Therefore, the Commission concludes the economic impact of the rule will be minor and it will not have a significant economic impact on a substantial number of small entities (i.e. NVOCCs). To the extent there is substantial economic impact, it would improve the economic condition of NVOCCs.

In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., the Chairman of the Federal Maritime Commission has certified to the Chief Counsel for Advocacy, Small Business Administration, that the Final Rule will not have a significant economic impact on a substantial number of small entities. Although NVOCCs as an industry include small entities, the Final Rule establishes an optional method for NVOCCs to carry cargo for their customers to be used at their discretion. The rule would pose no economic detriment to small business entities. Rather, it exempts NVOCCs from the otherwise applicable requirements of the Act when such entities comply with the rules set forth herein and will have a positive impact.

This regulatory action is not a “major rule” under 5 U.S.C. 804(2).

In accordance with the Paperwork Reduction Act, 44 U.S.C. 3507, the Commission has submitted estimated burdens of collection of information authorized by this Final Rule to the Office of Management and Budget. The estimated annual burden for the estimated 3,242 annual respondents is $865,343.00. No comments were received on this estimate. The Commission has received OMB approval for this collection of information pursuant to the Paperwork Reduction Act of 1995, as amended. In accordance with that Act, agencies are required to display a currently valid control number. The valid control number for this collection of information is 3072-0071.

Accordingly, the Federal Maritime Commission amends 46 CFR part 520 and adds 46 CFR Part 532 as follows:

Section 815 of the National Defense Authorization Act for Fiscal Year 2009 (Pub. L. 110-417) impacts the acquisition planning process. Section 815, entitled “Preservation of Tooling for Major Defense Acquisition Programs,” mandates the publication of guidance requiring the “preservation and storage of unique tooling associated with the production of hardware for a major defense acquisition program through the end of the service life of the end item associated with such a program.” The statute states that the guidance must—

• Require that the milestone decision authority (MDA) approve a plan for the preservation and storage of “such tooling prior to Milestone C approval;”

• Require the MDA to periodically review the plan to ensure that it remains adequate and in the best interest of DoD; and

• Provide a mechanism for the Secretary of Defense to waive the requirement under certain circumstances.

DoD published a proposed rule in the Federal Register (75 FR 25159) on May 7, 2010, to address the new statutory requirements. The rule proposed to add a new paragraph (S-73) to DFARS 207.106, Additional requirements for major systems. The topic of subpart 207.1 is Acquisition Plans.

The public comment period closed July 6, 2010. Four respondents submitted comments on six issues. A discussion of the comments is provided in the following paragraphs.

Comment: A respondent generally agreed with the proposed rule, but noted that it implemented only two of the three requirements of section 815, omitting the key language requiring the “milestone decision authority (to) periodically review the plan required by (section 815(a)(1)) prior to the end of the service life of the end item, to ensure that the preservation and storage of such tooling remains adequate and in the best interest of the Department of Defense.” The respondent stated that the periodic review requirement should be included in the proposed rule.

In addition, the respondent believes that the proposed rule should require the contractor to develop adequate procedures for the preservation and storage of the special tooling and to document compliance.

Response: No changes have been made to the rule in response to these comments for several reasons. First, the DFARS has not been used to outline MDA determinations in the past. The appropriate location for requirements being placed on MDAs is in the DoD 5000 series regulations and/or directives from senior DoD leaders. Further, the requirement at section 815(a)(2) has been implemented in a Deputy Secretary of Defense memorandum dated August 3, 2009, entitled “Preservation and Storage of Tooling for Major Defense Acquisition Programs (MDAPs).” The preservation policy, according to the memorandum, will be included in the next update to DoDI 5000.02.

With regard to the second part of the respondent's comment, DoD notes that the clause at FAR 52.245-1, Government Property, requires the contractor to “have a system to manage (control, use, preserve, protect, repair, and maintain) Government property in its possession.” ( See FAR 52.245-1(b).)

Comment: One respondent commented that “(i)ndustry agrees with the concept to sustain capability and supportability to the extent needed under major weapons systems.” To that end, the respondent believes that this requirement should not be limited to special tooling, but should include “all property, i.e., special test equipment, ground support equipment, machine tools and machines and other intangibles to maintain capability.”

Response: DoD is fully compliant with section 815, which addresses only special tooling.

With regard to tangible property, DoD notes that major systems acquisition contracts are required to include the clause at FAR 52.245-1, Government Property, which incorporates a basic storage requirement applicable to more than just special tooling ( see FAR 52.245-1(f)(1)(viii)(A)). Further, in accordance with section 815, the MDA is required to “approve a plan, including the identification of any contract clauses, facilities, and funding required, for the preservation and storage of such tooling prior to Milestone C approval.” This requirement is fully addressed by the Deputy Secretary of Defense memorandum dated August 3, 2009, which states that “MDAP Program Managers shall include a plan for preservation and storage of unique tooling as an annex to the Life Cycle Sustainment Plan (LCSP) submitted for Milestone Decision Authority (MDA) approval at Milestone C. The unique tooling annex shall include the identification of any contract clauses, facilities, and funding required for the preservation and storage of such tooling and shall describe how unique tooling retention will continue to be reviewed during the life of the program.”

DoD considers “intangibles,” as the term relates to major systems acquisitions, to be a reference to technical data. A contractor's rights in technical data are fully addressed in FAR and DFARS parts 27 and 227 respectively, and need not be addressed with the section 815 coverage.

Comment: Two respondents noted that the statute and the August 3, 2009, implementing memorandum use the term “unique tooling,” not “special tooling.” Both recommended that DFARS 207.106(S-73) be revised to use the term “unique tooling” and to add a definition to that paragraph as follows: “For DoD purposes, unique tooling shall mean special tooling as defined in Federal Acquisition Regulation 2.101(b).”

Response: DoD has determined that the use of “special tooling” in 207.106(S-73) correctly implements the statute, and no change is necessary.

Respondents agree that “unique tooling” and “special tooling” have the same meaning. However, there is no reason to use “unique tooling” in the coverage and then define it using a reference to FAR 2.101. That would contravene the FAR drafting convention to use a single term consistently to express the same meaning.

Comment: One respondent correctly noted that section 815 requires the MDA to approve the special tooling preservation plan prior to Milestone C approval (section 815(a)(1)). The respondent is concerned, however, with the lack of specificity about when the plan must be approved, claiming that it “risks undermining the very purpose of the rule and its antecedent legislation.” The respondent recommended modifying DFARS 207.106 to require, or at least encourage, DoD to draft such plans before a program is given Milestone B approval.

Response: DoD has determined that DFARS is already fully compliant with the statute, and that no change is necessary. Further, while the plan must be approved prior to Milestone C approval, there is no limit in the regulations on how far in advance of Milestone C the special tooling preservation plan can be approved, as long as it is approved at a point in the system's life that is logical.

Comment: One respondent noted that section 815(a) requires that the special tooling be preserved “through the end of the service life of the end item associated with such a program.” The respondent believes that “end item” refers to a “component” of the major system, not the major system itself. As noted by the respondent, it is possible that one component of a system may be replaced over the course of the production of the system as a whole, and it would be wasteful to maintain the special tooling for the now-obsolete component until production ends for the major system.

Response: DoD agrees with the respondent that it is possible, even likely, that one or more individual components of a major system will be replaced over the life of the major system. However, DoD points out that DoD policies are focused at the system level, and the requirement in section 815 is for a plan for the preservation and storage of the tooling associated with the production of hardware for a major defense acquisition program. DoD thinks that any complete plan would include the possibility of replacement upgraded components and would not contemplate maintaining and storing any special tooling for components that are no longer a part of the major system end item.

Comment: A respondent stated its belief that “the final rule must allow contractors to reprice ongoing programs should the plans for preserving tooling for major defense acquisition programs add additional requirements on to existing programs.”

Response: The comment is outside the scope of this case. Further, whenever new or additional requirements are added to a contract, it can only be accomplished via a bilateral modification and with equitable consideration. This contract rule is not unique to MDAPs or tooling-preservation requirements. Therefore, this case need not address such a circumstance specifically with regard to the preservation of tooling. To do so would add inappropriate redundancy to the DFARS.

This is not a significant regulatory action and, therefore, was not subject to review by the Office of Management and Budget under Executive Order 12866, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

DoD certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule addresses internal DoD procedural matters. Specifically, this implementation of section 815 of the National Defense Authorization Act for Fiscal Year 2009, “Preservation of Tooling for Major Defense Acquisition Programs,” requires that—

1. The DoD Milestone Decision Authority (MDA) approve a plan for the preservation and storage of unique tooling associated with the production of hardware for a major defense acquisition program through the end of the service life of the end item; and

2. The MDA periodically review the plan to ensure that it remains adequate and in the best interest of DoD.

The rule does not impose information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

Therefore, 48 CFR part 207 is amended as follows:

Section 821 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84) was enacted October 28, 2009. Section 821 provides authority for certain types of Government support contractors to have access to proprietary technical data belonging to prime contractors and other third parties, provided that the technical data owner may require the support contractor to execute a non-disclosure agreement having certain restrictions and remedies.

The DFARS scheme for acquiring rights in technical data is based on 10 U.S.C. 2320 and 2321. Section 2320 establishes the basic allocation of rights in technical data, and provides, among other things, that a private party is entitled to restrict the Government's rights to release or disclose privately-developed technical data outside the Government. This restriction is implemented in the DFARS as the “limited rights” license, which essentially limits the Government's use of such data only for in-house use, which does not include release to Government support contractors.

Historically, the statutorily based scheme has included only two categorical exceptions to the basic non-disclosure requirements for such privately-developed data:

• A “type” exception, in which the Government is granted unlimited rights in certain types of “top-level” data that are considered not to provide a competitive advantage by being treated as proprietary ( e.g., form, fit, and function data; data necessary for operation, maintenance, installation, or training; publicly available data) (2320(a)(2)(C)); and

• A “special needs” exception for certain important Government activities that are considered critical to Government operations (e.g., emergency repair and overhaul; evaluation by a foreign government), and are allowed only when the recipient of the data is made subject to strict non-disclosure restrictions on any further release of the data. (2320(a)(2)(D))

Section 821 amends 10 U.S.C. 2320 to add a new third statutory exception to the prohibition on release of privately developed data outside the Government that provides—“notwithstanding any limitation upon the license rights conveyed under subsection (a), allowing a covered Government support contractor access to, and use of, any technical data delivered under a contract for the sole purpose of furnishing independent and impartial advice or technical assistance directly to the Government in support of the Government's management and oversight of the program or effort to which such technical data relates.”

The statute also provides a definition of “covered Government support contractor” to mean—

Due to the significant level of detail in section 821, the recognition that the subject matter involves important privately-held intellectual property rights, and that the apparent congressional intent is that the private parties will enter into a direct legal relationship ( e.g., a non-disclosure agreement) regarding protections for same, DoD decided to utilize the original statutory language and to preserve maximum flexibility for the private parties to reach mutual agreement—without unnecessary interference from the Government.

Section 821 can be characterized as establishing two new requirements regarding DoD's acquisition and exercise of rights in proprietary technical data. The statute—

• Provides an exception to the statutorily authorized restrictions on the Government's rights to release privately-developed technical data outside the Government. The Government is now authorized to make limited releases of otherwise-proprietary data to certain types of support contractors that are supporting directly the Government's management and oversight of programs—subject to certain protections.

• Mandates specific restrictions for the Government support contractors that will receive the proprietary technical data, to ensure that this use does not threaten the data owner's competitive advantage due to the proprietary information, and to provide the data owner with a more direct legal remedy against the support contractor for any breach of those use restrictions.

Section 821 amended 10 U.S.C. 2320, which applies to technical data, but not to computer software (which is expressly excluded from the definition of technical data). There is no parallel statute that establishes regulatory requirements for DoD acquisition of computer software. However, it is longstanding Federal and DoD policy and practice to apply to computer software the same or analogous requirements that are used for technical data, whenever appropriate. Many issues are common to both technical data and computer software, and in such cases, conformity of coverage between technical data and computer software is desirable.

For example, although the DFARS provides separate coverage for technical data and computer software (subparts 227.71 and 227.72, respectively), the policies and procedures are identical or analogous in most respects. Regarding the allocation of rights in privately-developed technologies, and the release restrictions and procedures used to protect such proprietary information against unauthorized release to Government support contractors (or any third party, for that matter), the DFARS adapts the detailed technical data procedures for application to noncommercial computer software ( see 227.7203), but does not apply those same detailed requirements to commercial computer software ( see 227.7202). Therefore, analogous revisions are made in this interim rule to the DFARS coverage for noncommercial software.

Section 821 creates a new exception to the statutory authorization for a private party to restrict the Government's ability to release or disclose privately-developed technical data outside the Government. See 10 U.S.C. 2320(c)(2). The Government is now authorized to release privately-developed technical data to any support contractors that meet the criteria for a “covered Government support contractor,” provided that the covered Government support contractor's access and use of the data is for the “sole purpose of furnishing independent and impartial advice or technical assistance directly to the Government in support of the Government's management and oversight of the program or effort to which such technical data relates.” 10 U.S.C. 2320(c)(2).

This interim rule incorporates the new exception into the definition of “limited rights” and adds a new definition for “covered Government support contractor” into the following primary rights-allocation clauses: 252.227-7013 (noncommercial technical data), 252.227-7014 (noncommercial software and software documentation), 252.227-7015 (commercial technical data), and 252.227-7018 (Small Business Innovation Research (SBIR)).

• The exception is inserted into the “limited rights” definition by adding “covered Government support contractors” to the existing lists of statutory exceptions to the prohibition against releasing limited rights data outside the Government. See 252.227-7013(a)(14) (formerly (13)); 252.227-7015(b)(2)(ii), which does not use the term “limited rights” but implements the same underlying statutory requirements; and 252.227-7018(a)(15) (formerly (14)). The revisions to 252.227-7013 and -7018 also required some minor restructuring of the listings of statutory exceptions.

• The new definition for “covered Government support contractor” is inserted into the cited clauses as new 252.227-7013(a)(5), 252.227-7014(a)(6), 252.227-7015(a)(2), and 252.227-7018(a)(6). In each case, the insertion of a new definition requires the renumbering of all subsequent definitions in the affected clauses. The term is defined using, nearly verbatim, the new statutory definition at 2320(f)—with one key modification: Rather than reproducing all of the required non-disclosure restrictions in the definition, the definition cross-references the implementation of those same restrictions at revised 252.227-7025.

In addition, the clauses are revised to incorporate specific additional requirements that are important to support and enable the implementation of the new exception. In particular, the new statutory exception establishes the basic requirement that the covered Government support contractor must execute a contract with the Government, in which the covered Government support contractor agrees and acknowledges that it “will” enter into a non-disclosure agreement directly with the owner of the proprietary data, and thus the clause must also implement this direct non-disclosure agreement requirement within the rights and obligations of the owner of the data. Since this direct non-disclosure agreement requirement is created with the intent of protecting the proprietary rights of the data owner, DoD has implemented this by providing the data owner the sole discretion to require such a direct non-disclosure agreement or waive the non-disclosure agreement requirement in writing in each individual case. The protection offered by the new direct non-disclosure agreement requirement should not be implemented in a manner that it becomes an unwanted and unnecessary burden on the party it is intended to protect. Thus, the data owner may determine that executing a direct non-disclosure agreement with every covered Government support contractor, in every individual case, is unnecessary; provided such determinations are made in view of the multi-layered protection scheme to ensure that the data owner's rights are protected regardless of whether the parties execute a direct non-disclosure agreement, including the data owner already having a direct legal remedy against the covered Government support contractor for any unauthorized use or release pursuant to 252.227-7025(c)(2).

Accordingly, the data owner is notified of its rights and obligations regarding covered Government support contractors in proposed new coverage at 252.227-7013(b)(3)(iv), 252.227-7015(b)(3), and 252.227-7018(b)(8). In each case, the new coverage acknowledges the newly authorized release to covered Government support contractors; confirms that the data owner will be notified of such release; provides the data owner the discretion to require the covered Government support contractor to execute a direct non-disclosure agreement; and acknowledges that the data owner and covered Government support contractor may include additional terms and conditions in such a non-disclosure agreement by mutual agreement, as long as the basic statutory requirements for the non-disclosure agreement are also addressed (these basic statutory requirements are provided at 252.227-7025).

In addition, these same requirements are also appropriate for adaptation to the corresponding DFARS coverage for noncommercial technical data. Thus, equivalent revisions are incorporated in 252.227-7014, including a new definition of “covered Government support contractor” at paragraph (a)(6), a revised definition of “restricted rights” (the computer software equivalent of limited rights for technical data) at (a)(15) (formerly (14)), and the supporting rights and procedures at new (b)(3)(iii). Because there is no current DFARS coverage for this subject matter in the context of commercial computer software, no revisions are made to 227.7202.

As discussed previously, section 821 allows covered Government support contractors to have access to third party proprietary technical data only when the covered Government support contractor is subject to specific prohibitions and requirements to protect that data. Although the statute incorporates these detailed protections within the definition of covered Government support contractor, DoD has implemented these protections within the existing DFARS coverage that implements use and non-disclosure requirements for recipients of Government-furnished information that is proprietary data or software, and has cross-referenced that implementation in the definition of covered Government support contractor.

This requires adaptation of the current DFARS coverage governing the Government's release to privately-owned proprietary data and software, found primarily at 227.7103-7, and in the clause at 252.227-7025. There are two key revisions to 252.227-7025:

• Paragraph (b)(1), regarding Government-furnished information marked with limited rights or restricted rights legends, is amended by adding new subparagraph (ii), which implements, nearly verbatim, the statutory requirements from 2320(f)(2), and also recognizes that the third party owner of the proprietary data or software has the sole discretion regarding whether a direct non-disclosure agreement will be required, and that the parties to the non- disclosure agreement may incorporate additional terms and conditions by mutual agreement, provided that the basic statutory requirements are addressed.

• New paragraph (b)(4) is added to cover the Government-furnished information marked with commercial restrictive legends, as necessary to implement the new statutory requirements, rights, and obligations related to technical data pertaining to commercial items, and to support the previously discussed revisions to 252.227-7015. This new language parallels the revisions discussed above for noncommercial data and software at new (b)(1)(ii).

The revisions also require the covered Government support contractor to provide to the contracting officer, upon request, a copy of—

• Any non-disclosure agreement executed by the covered Government support contractor and the proprietary data owner; or

• Waiver of the non-disclosure agreement requirement by the proprietary data owner.

Finally, to provide an appropriate link to these new requirements from the current FAR and DFARS coverage regarding non-disclosure agreement requirements for support contractors having access to third party proprietary information in performing advisory and assistance services, new DFARS 209.505-4 is added.

This rule was subject to Office of Management and Budget review under Executive Order 12866, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

DoD does not expect this rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., but has nevertheless prepared an initial regulatory flexibility analysis, which is summarized as follows:

The objective of the rule is to provide policy and procedures to allow certain types of Government support contractors to have access to proprietary technical data belonging to prime contractors and other third parties. Section 821 of the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. 111-84) provides the legal basis for the rule.

The rule affects small businesses that are Government support contractors that need access to proprietary technical data belonging to prime contractors and other third parties. It will also affect any small business that is the owner of “limited rights” technical data in the possession of the Government to which the support contractor will require access.

The statute provides that the support contractor must be willing to sign a non-disclosure agreement with the owner of the data. The rule has implemented this requirement in a way that preserves maximum flexibility for the private parties to reach mutual agreement without unnecessary interference from the Government. To reduce burdens, the rule permits the owner of the data to waive the requirement for a non-disclosure agreement, since the Government clauses already adequately deal with non-disclosure. Further, the rule provides that the support contractors cannot be required to agree to any conditions not required by statute. The Government support contractor must provide to the contracting officer, upon request, a copy of the non-disclosure agreement or the waiver of the requirement for a non-disclosure agreement (consistent with FAR 9.505-4(b)).

There are no known significant alternatives to the rule that would meet the requirements of the statute and minimize any significant economic impact of the rule on small entities. The impact of this rule on small business is not expected to be significant because the execution of a non-disclosure agreement is not likely to have a significant cost or administrative impact.

The Paperwork Reduction Act applies because the DFARS rule affects DFARS clauses 252.227-7013, 252.227-7014, 252.227-7015, and 252.227-7025, which contain reporting or recordkeeping requirements that require the approval of the Office of Management and Budget under 44 U.S.C., chapter 35. These clauses are covered by an approved OMB control number 0704-0369 in the amount of approximately 1.76 million hours. The requirement for Government support contractors to provide to the contracting officer a copy of a non-disclosure agreement or a waiver of the non-disclosure agreement requirement is only applicable if requested by the contracting officer. DoD has determined that the currently approved burden hours are sufficient to cover this minimal requirement. However, DoD will accept comments on how the interim rule would impact either the burden or other aspects of the approved information collection.

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment pursuant to 41 U.S.C. 1707 (formerly 41 U.S.C. 418b) and FAR 1.501-3(b). This interim rule implements section 821 of the National Defense Authorization Act for Fiscal Year 2010, enacted October 28, 2009. Section 821 provides authority for certain types of Government support contractors to have access to proprietary technical data belonging to prime contractors and other third parties, provided that the technical data owner may require the support contractor to execute a non-disclosure agreement having certain restrictions and remedies. Section 821 was effective upon enactment. This interim rule is necessary to provide the policies and procedures allowing a covered Government support contractor access to and use of any technical data delivered under a contract so that the contractor can furnish independent and impartial advice or technical assistance directly to the Government in support of the Government's management and oversight of the program or effort to which such technical data relates. DoD will consider public comments received in response to this interim rule in the formulation of the final rule.

Therefore, 48 CFR parts 209, 227, and 252 are amended as follows:

5 CFR part 1315 exempts from Prompt Payment Act compliance payments related to emergencies (defined in the Disaster Relief Act of 1974, Pub. L. 93-288, as amended (42 U.S.C. 5121, et seq. ); contingency operations (as defined in 10 U.S.C. 101(a)(13)); and the release/threatened release of hazardous substances (as defined in 4 U.S.C. 9606, Section 106). DoD requires the flexibility provided by 5 CFR part 1315, Exemption from the Prompt Payment Act, because of the potential for unstable environments during emergencies and contingency operations.

DoD published an interim rule in the Federal Register (75 FR 40712) on July 13, 2010, to implement the full authority granted by 5 CFR 1315.1 for payments covered by 5 CFR 1315.1(b)(2) that are either certified for payment in an operational area, or are contingent upon the receipt of necessary supporting documentation ( i.e., contract, invoice, receiving report) emanating from an operational area. The public comment period closed September 13, 2010.

One respondent provided comments on the interim rule. A discussion of the comments follows:

Comment. The respondent notes that DFARS 232.901, Applicability, states that FAR subpart 32.9 does not apply when the conditions therein are listed. However, DFARS 232.908, Contract clauses, states that the appropriate FAR Prompt Payment clause prescribed at FAR 32.908 should be included in the contract in addition to DFARS 252.232-7011, Payments in Support of Emergencies and Contingency Operations. Thus, FAR 32.908 still applies when the conditions at DFARS 232.901 are met. According to the respondent, the statement that “FAR subpart 32.9, Prompt Payment, does not apply when—” needs to be qualified to state that FAR 32.908 still applies.

Response. DoD concurs and the text has been revised accordingly.

Comment. The respondent states that it would be less confusing if the contract just contained either DFARS 252.232-7011, Payments in Support of Emergencies and Contingency Operations, or a FAR Prompt Payment clause. According to the respondent, if the environment became more stable or less stable, the contracting officer could bilaterally modify the contract to remove one clause and add the other. The respondent states that including both clauses and notifying the contractor which one applies by contract modification is an unusual, and unnecessary, way to administer a contract.

Response. DoD does not concur as the Government requires the maximum flexibility provided by DFARS subpart 232.9, Prompt Payment, in order to operate in such austere environments as Iraq and Afghanistan. This flexibility requires the ability to move from the appropriate FAR Prompt Payment clause when normal business conditions are possible, to the clause at DFARS 252.232-7011, Payments in Support of Emergencies and Contingency Operations, when an austere environment exists. The conditions described at 232.901, Applicability, provide guidelines for when austere operations are present. Contractors that operate in potential environments that may go back and forth from stable to unstable operations are given the opportunity to price such conditions into their proposals. The Government reserves the right to structure such contracts for this flexibility, and to convert the appropriate FAR or DFARS clause for the given situation, rather than depending upon a bilateral modification, to which the contractor might not agree, and which would require negotiation of consideration. As currently stated, the contracting officer can issue a unilateral contract modification notifying the contractor which clause is active.

This final rule provides DoD the needed flexibility in limited circumstances. The head of the contracting activity shall make subsequent determinations, after consultation with the cognizant comptroller, as the operational area evolves into a more stable business environment to enable the provisions of FAR 32.9 to apply.

This regulatory action was subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

DoD does not expect this final rule to have a significant economic impact on small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. However, DoD has prepared a final regulatory flexibility analysis consistent with 5 U.S.C. 604 which is summarized below. A copy of the analysis may be obtained from the point of contact.

On May 22, 2008, the DoDIG issued the results of an audit Report No. D-2008-098, entitled “Internal Controls Over Payments Made in Iraq, Kuwait, and Egypt.” The audit cited inconsistencies in FAR 32.9, DFARS 232.9, and 5 CFR in regard to compliance with the Prompt Payment Act for military contingency operations. The audit further recommended that DoD establish procedures to address contingency operations.

During emergencies and contingency operations, the operational area can be so fluid and dynamic that carrying out normal business practices can be extremely challenging. It is necessary for the Head of the Contracting Activity (HCA) to have the authority to appropriately respond to emergency and contingency operations accordingly whenever limited operational conditions exist. This includes the payment of contractors.

This final rule takes advantage of the exemption provided by OMB implementation of the Prompt Payment Act, which exempts military contingencies. This rule allows the HCA to make a determination of whether or not stable business operations exist in theater to allow the Prompt Payment Act to apply in an emergency and contingency operation. If stable conditions don't exist, then the HCA is authorized to apply the clause at 252.232-7011, Payments in Support of Emergencies and Contingency Operations. When this clause is invoked, it will be used instead of one of the payment clauses at FAR 52.232-25, 52.232-26, or 52.232-27. DFARS 232.901 will require the HCA to make subsequent determinations as the operational area evolves into a more stable environment to enable the provisions of the Prompt Payment Act to apply. It will also require the contracting officer to notify, by contract modification, each contractor that has a contract containing DFARS clause 252.232.7011, that it is no longer applicable, and the applicable FAR Prompt Payment clause in the contract applies.

No significant issues were raised by the public in response to the initial regulatory flexibility analysis.

This rule is expected to have a minimal economic impact on a relatively small number of small business entities. It is anticipated that the rule could initially be applied to contracts supporting Afghanistan. As of today, normal business operations are hindered in Afghanistan due to the uncertain environment and instability in the region. It may be impractical for U.S. forces to adequately match receipt of necessary supporting documentation ( i.e., contract, invoice, and receiving report) in such an operational area. It is expected the HCA for Afghanistan could exempt “payments made in the theater of operations” from Prompt Payment Act interest and interest penalties.

In the preparation of the interim rule, a review of Federal Procurement Data Systems data for FY08 showed that of the 140 awards made to U.S. firms, only 21 were made to small business entities. This total represents 15 percent of all awards made during this time period. Therefore, the overall impact of the rule is not expected to have a significant aggregate economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. However, a regulatory flexibility analysis was completed because there is an economic impact to consider.

There is no reporting requirement established by this rule. There are no significant alternatives which accomplish the stated objectives. This rule will allow DoD to utilize the exemptions provided by OMB implementation of the Prompt Payment Act, which exempts military contingencies.

The rule does not impose any information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

Therefore, the Defense Acquisition Regulations System confirms as final the interim rule published at 75 FR 40712, July 13, 2010, with the following changes:

Background

This amendment brings the Herring FMP into compliance with requirements of the reauthorization of the MSA in 2006, specifically ACLs and AMs. Because herring is not subject to overfishing, the MSA requires the Herring FMP to be in compliance with ACL and AM requirements by 2011. In addition to the public meetings at which Amendment 4 was developed, the Council held three public meetings on the draft Amendment 4 and its EA during January 2010. Following the public comment period that ended on January 12, 2010, the Council adopted Amendment 4 on January 26, 2010, and submitted the amendment to NMFS on April 22, 2010. The Notice of Availability (NOA) for Amendment 4 was published on August 12, 2010, with a comment period ending October 12, 2010. A proposed rule for Amendment 4 was published on October 18, 2010, with a comment period ending December 2, 2010. On November 9, 2010, NMFS approved Amendment 4 on behalf of the Secretary of Commerce.

Initially, the Council intended for Amendment 4 to also consider the issues of catch monitoring and reporting, interactions with river herring, access by midwater trawl vessels to groundfish closed areas, and interactions with the Atlantic mackerel fishery. In June 2009, the Council determined there was not sufficient time to develop and implement all the measures originally contemplated in Amendment 4 by 2011, so it decided that Amendment 4 would only address ACL and AM requirements and specification issues. The other issues (e.g., catch monitoring and reporting, interactions with river herring and Atlantic mackerel, access to groundfish closed areas) are currently being considered in Amendment 5 to the Herring FMP (Amendment 5). NMFS has the independent authority to revise reporting requirements, and has informed the Council that it will be developing a rulemaking to establish daily catch reporting for limited access herring vessels in 2011.

This rule implements management measures that: Revise current definitions and the specification-setting process to include ACLs and AMs; designate herring as a “stock in the fishery;” establish an interim ABC control rule; eliminate JVPt, including JVP and IWP, and reserve from the specifications process; and eliminate the Council's consideration of TALFF. The proposed rule includes detailed information about the Council's development of these measures, and that discussion is not repeated here.

Amendment 4 revises the specification-setting process for the herring fishery. This action establishes a process whereby an overfishing limit (OFL) may be set, which corresponds to a maximum sustainable yield (MSY). This action specifies that ABC is to be recommended by the Council's Scientific and Statistical Committee (SSC). During the setting of ABC, scientific uncertainty is to be considered, and ABC may be reduced from the OFL to account for scientific uncertainty. Scientific uncertainty includes, but is not limited to, uncertainty related to stock size estimates, variability around estimates of recruitment, and consideration of ecosystem issues. This action establishes a process whereby a stock-wide ACL may be set that is to be equal to or less than ABC. During the setting of the stock-wide ACL, management uncertainty is to be considered. The stock-wide ACL may be reduced from the ABC to account for management uncertainty, which includes, but is not limited to, uncertainty related to expected catch of herring in the New Brunswick weir fishery and discard estimates of herring caught in Federal and state waters.

The stock-wide ACL is specified to account for all herring catch. Estimates of discards are reported by harvesters, and provided by NMFS observers. The available information suggests that discards in the herring fishery are low, relative to the amount of landed herring. Therefore, this action does not establish a specific deduction between the ABC and stock-wide ACL, to account for management uncertainty related to discards at this time. However, if new information on discards becomes available, Amendment 4 provides the Council with flexibility to incorporate that information into the stock-wide ACL-setting process as appropriate.

This action revises the specifications authorized by the Herring FMP. The original FMP authorizes specifications for JVPt, JVP, IWP, reserve, and TALFF to be set for the herring fishery. Historically, JVPt (including JVP and IWP) was allocated to enable foreign processing operations to accept catch from U.S. vessels; TALFF was allocated to ensure fish were available to foreign processing vessels when U.S. vessels could not supply it. The U.S. herring fishery has experienced growth in both harvesting and processing capacity, accordingly, neither JVPt nor TALFF have been allocated since 2005. Because the U.S. herring industry is capable of harvesting and processing the entire available yield in the foreseeable future, and to maximize U.S. economic benefits, this action eliminates the annual specifications of JVPt, JVP, and IWP from the Herring FMP. Additionally, while TALFF could still be awarded consistent with the MSA, if the Secretary of Commerce determines there is inadequate domestic harvesting capacity and other requirements of section 201 of the MSA are satisfied, this action eliminates Council consideration of TALFF during development of the specifications.

Historically, the FMP included the reserve to buffer against such things as uncertainty in stock size estimates, uncertainty in Canadian catch, excess U.S. capacity entering the herring fishery, and fluctuations in import/export demand. With the implementation of limited access in 2007 and Amendment 4's proposed consideration of sources of scientific and management uncertainty in the setting of OFL, ABC, and ACL, the Council concluded that specifying a reserve is no longer necessary. Therefore, this action eliminates the specification of reserve from the Herring FMP.

With the implementation of Amendment 1 to the Herring FMP (72 FR 11252, March 12, 2007), the Council has the authority to set herring specifications for a period of 3 years. Amendment 4 maintains the current schedule of setting herring specifications for a period of 3 years.

The herring stock complex is considered to be a single stock, but it is comprised of inshore (Gulf of Maine (GOM)) and offshore (Georges Bank (GB)) stock components. These stock components segregate during spawning and mix during feeding and migration. Herring management areas were developed in recognition of these different stock components; each management area has a total allowable catch (TAC) to allow the fishing mortality of the stock components to be managed independently. Area 1 is located in the GOM and is divided into an inshore section (Area 1A) and an offshore section (Area 1B). Area 2 is located in the coastal waters between Massachusetts and North Carolina, and Area 3 is on GB. Because the inshore stock component has substantially less biomass than the offshore stock component, it is likely more vulnerable to overfishing. This action maintains the function of the herring management area TACs, but re-defines each area TAC as an area sub-ACL (i.e., each management area has its own sub-ACL). The Area 1A TAC is currently allocated to two seasonal periods. The first season extends from January 1 through May 31, and the second season extends from June 1 through December 31. This action maintains these seasons and allocates the Area 1A sub-ACL into the same two seasonal periods.

The specification of OY is required by the MSA and authorized in the current Herring FMP. OY is derived from MSY, as reduced by relevant economic, social, or ecological factors. This action specifies that OY remain part of the specification-setting process, that it is to be equal to or less than ABC, and that it address uncertainty related to economic, social, or ecological factors. For example, the Council may choose to allocate an OY that is reduced from ABC to address the role of herring as forage or the fishing mortality rate on the inshore stock component. If the Council allocates a reduced OY, it would be in addition to any consideration of scientific or management uncertainty and would be a specific reduction to address a specific issue.

The MSA requires that an FMP contain a description of the fish species in a fishery, and National Standard 1 guidelines task the Council with determining which specific target stocks and/or non-target stocks to include in the fishery. Target stocks are defined as stocks that fishers seek to catch for sale or personal use, and non-target stocks are fish caught incidentally during the pursuit of target stocks. In general, any stock managed through an FMP is considered to be in that fishery. While other species are caught incidentally when fishing for herring, herring is the target stock, and the only stock directly managed by the Herring FMP. This action establishes herring as a stock in the fishery. The Council retains the authority to designate additional stocks in the fishery in a future action. Bycatch in the herring fishery will continue to be addressed and minimized to the extent possible, consistent with other requirements of the MSA. Additionally, incidental catch in the herring fishery counts against the ACLs for incidental catch species if ACLs have been established in their respective Federal FMPs.

The ABC control rule is the specified method of setting the ABC, giving full consideration to scientific uncertainty. The ABC control rule is based on scientific advice from a Council's SSC and, when possible, considers the probability of overfishing. The ABC control rule should consider the scientific uncertainty associated with stock assessment results, including time lags in updating assessments, the degree of retrospective revision of assessment results, and the uncertainty of stock projections.

During development of the 2010-2012 herring specifications, the SSC identified two sources of scientific uncertainty in the 2009 herring assessment: (1) The assessment model has a strong retrospective pattern that reduces estimates of stock size when updated with new (2001-2007) data; and (2) biomass projections suggest the herring stock cannot rebuild to B MSY (biomass that would support MSY) using long-term projections at F MSY (fishing mortality rate for MSY). Given this magnitude of scientific uncertainty, the SSC determined that a permanent herring ABC control rule cannot be derived until a new benchmark assessment is conducted to address these issues. In the meantime, the Council recommended that Amendment 4 contain an interim ABC control rule based on the SSC's 2010-2012 herring ABC recommendation. This action establishes an interim control rule specifying that ABC be based on recent catch in the herring fishery, and that the Council determines the desired risk tolerance in setting the ABC. For example, recent catch could be the most recent catch data (single year) or an average of recent data (3-year or 5-year average). This interim ABC control rule will remain in effect until a new ABC control rule is developed. If a new ABC control rule can be developed following the 2012 benchmark stock assessment, it will be developed in the 2013-2015 herring specifications.

The MSA requires AMs to be developed in association with ACLs. AMs should minimize the frequency and magnitude of catch in excess of the ACLs (overages) and provide for subsequent harvest adjustments if ACLs are exceeded. This action designates two existing herring management measures as AMs, and establishes an additional AM that would require an overage deduction, if catch exceeds the stock-wide ACL or a sub-ACL. This action also specifies that these AMs can be modified, as necessary, through a framework adjustment to the Herring FMP or through the herring fishery specifications process.

Current herring regulations at § 648.201(a) state that, if NMFS determines catch will reach 95 percent of the TAC allocated to a management area or seasonal period, then NMFS shall prohibit vessels from fishing for, possessing, catching, transferring, or landing more than 2,000 lb (907.2 kg) of herring per trip from that area or period. The original FMP established the management area closure threshold (i.e., 95 percent of the management area TAC) to slow the herring fishery as catch approached the TAC for a management area, and intended the 5-percent buffer to account for the incidental catch of herring in other fisheries. In recognition that this measure functions as an AM, by slowing catch to prevent or minimize catch in excess of a management area or seasonal period TAC/sub-ACL, Amendment 4 designates this management area closure measure as an AM. Because the incidental catch of herring in other fisheries is typically low, if some herring discards were not accounted for in the vessel catch reports, the 5-percent buffer could also function to account for these discards. Therefore, the function of the 5-percent buffer is to account for the incidental catch of herring in other fisheries and, when appropriate, to buffer against the uncertainty associated with discard estimates.

Current Northeast multispecies regulations at § 648.86(a)(3)(ii) specify a haddock incidental catch cap to control haddock catch by herring vessels in the GOM/GB Herring Exemption Area. When the Regional Administrator has determined that the haddock incidental catch cap has been caught, all vessels issued a herring permit are prohibited from fishing for, possessing, or landing herring in excess of 2,000 lb (907.2 kg) per trip in the GOM/GB Herring Exemption Area. Additionally, the haddock possession limit for all vessels issued All Areas or Areas 2/3 Limited Access herring permits is reduced to 0 lb (0 kg) in all of the herring management areas. Amendment 16 to the Northeast Multispecies FMP (Amendment 16) designated haddock catch in the herring fishery as a sub-ACL for the Multispecies FMP (75 FR 18262, April 9, 2010). Consistent with Multispecies Amendment 16, this action designates the haddock incidental catch cap as an AM in the Herring FMP, with the clarification that the 0-lb (0-kg) haddock possession limit does not apply to herring vessels that also possess a Northeast multispecies permit and are operating on a declared groundfish trip.

As a way to account for ACL overages in the herring fishery, this action establishes an AM that would provide for overage deductions. Once the total catch of herring for a fishing year is determined, using all available information, any ACL or sub-ACL overage would result in a reduction of the corresponding ACL/sub-ACL the following year. For example, if final accounting of the 2010 total herring catch in Area 1A, which is generally available in the spring of 2011, indicated that the Area 1A sub-ACL was exceeded by 5 mt, then, in 2012, the sub-ACL for Area 1A would be reduced by 5 mt to account for the overage that occurred during 2010. All overage deductions will be announced by NMFS in the Federal Register prior to the start of the fishing year. NMFS understands that the size of an overage and the frequency of overages have the potential to affect the herring stock. In the event of multiple overages, Amendment 4 provides the flexibility to re-evaluate and modify, if necessary, the ACLs/sub-ACLs and AMs consistent with National Standard 1 guidelines, during the specifications process.

NMFS received five letters during the comment period relating to the NOA for Amendment 4; one letter was from a member of the public; two letters were from non-herring, fishing industry organizations (Coalition for the Atlantic Herring Fishery's Orderly, Informed, and Responsible Long-Term Development (CHOIR), Cape Cod Commercial Hook Fisherman's Association (CCCHFA)); and two letters were from environmental advocacy groups (Oceana, Herring Alliance). An additional four letters were received on the proposed rule for Amendment 4; one letter was from the Atlantic States Marine Fisheries Commission (ASMFC), two letters were from non-herring, fishing industry organizations (CHOIR, CCCHFA), and one letter was from an environmental advocacy group (Herring Alliance). Only the comments relevant to Amendment 4 are addressed below.

Comment 1: The Herring Alliance, CCCHFA, and CHOIR expressed concern about the sufficiency of the ACLs/sub-ACLs and AMs in the amendment. They believe that existing reporting and monitoring is not adequate to track catch against ACLs/ sub-ACLs and that AMs are not adequate to prevent ACLs/sub-ACLs from being exceeded. The commenters cited recent quota overages, specifically the quota overage in Area 1B, where 138 percent of the Area 1B quota was harvested (6,014 mt) in 2010, as evidence that, absent improvements to monitoring, measures in Amendment 4 are not sufficient to track catch against ACLs and prevent ACLs from being exceeded.

Response: While alternatives for modifications to the reporting and monitoring program for herring are being developed in Amendment 5, NMFS concludes that current reporting and monitoring is sufficient to monitor catch against ACLs/sub-ACLs. Herring vessels are required to report herring catch (landings and discards) weekly. These catch reports are verified by comparing them to herring landings reported by dealers. Herring is a high-volume fishery. When there is a pulse of fishing effort on a relatively small amount of unharvested quota, as occurred in Area 1B during September 2010, the chance of a quota overage exists, regardless of reporting or monitoring tools. Amendment 4 recognizes an existing measure as a preventative AM; the measure limits herring catch (2,000 lb (907.2 kg) per trip) when a specified percentage (95 percent) of an ACL/sub-ACL is projected to be harvested. The specified percentage is adjustable and, when it is set correctly, this AM is an appropriate measure to prevent ACLs/sub-ACLs from being exceeded.

NMFS has the authority to revise reporting requirements or make inseason adjustments to ACLs/sub-ACLs as necessary. Recognizing the importance of timely catch information, NMFS will be developing a rulemaking to establish daily catch reporting for limited access herring vessels for implementation in 2011.

Comment 2: The amendment contains a reactive AM that deducts any ACL/sub-ACL overages in the fishing year following total catch determinations, but the Herring Alliance, CCCHFA, and CHOIR believe that any overages should be paid back in the year immediately following the overage.

Response: The herring fishing year extends from January to December. The herring fishery can be active in December and, as explained in the amendment, information on the bycatch of herring in other fisheries is not finalized until the spring of the following year. For these reasons, and to provide sufficient notice to the industry when an ACL/sub-ACL is reduced due to an overage, NMFS concludes that it is appropriate that the amendment establishes a payback measure for the fishing year following the total catch determination (e.g., overages in 2010 would be determined in 2011 and paid back in 2012). (See also the response to Comment 3.)

Comment 3: The Herring Alliance commented that delaying overage deductions may transfer accountability for overages to those not responsible for causing overages, because active participation in the fishery can change over time, and that ecological harm could result from unnecessary “balloon payments” due to overage rollovers. The CCCHFA commented that delaying overage deductions may cause harm to the stock.

Response: Since the implementation of limited access in 2007, active participation in the herring fishery has been relatively stable. Market conditions and the availability of herring to the fishery drive participation in the herring fishery, but it is unlikely that, in a given year, these factors would prevent a portion of the fleet from participating in the fishery. Generally, there is no danger to the stock associated with “balloon payments” resulting from overage rollovers, because overages, if there are any, would be consistently deducted from ACLs/sub-ACLs for the fishing year following total catch determination. Herring is a relatively long-lived species (over 10 years) and multiple year classes are harvested by the fishery (typically ages two through six). These characteristics suggest that the herring stock may be robust to a single year delay in overage deductions (i.e., overage deduction in 2012 versus 2011). There is no evidence that a single year delay is more likely to affect the reproductive potential of the stock than an overage deduction in the year immediately following the overage, particularly since the herring stock is not overfished at this time. However, NMFS understands that the health of a stock, size of an overage, and the frequency of overages could combine to affect the stock in the future. In the event that these factors combine to create a negative impact on the stock, Amendment 4 provides the flexibility to re-evaluate and modify ACLs/sub-ACLs and AMs, consistent with National Standard 1 guidelines, during the specifications-setting process.

Comment 4: The Herring Alliance and CCCHFA expressed concern about the adequacy of the interim ABC control rule in the amendment. The Herring Alliance also believes the Council should have stated its policy on the risk of overfishing in the control rule, and that it is inappropriate to establish an updated control rule via the specifications process. Additionally, the Herring Alliance commented that, in the absence of a permanent ABC control rule, the final rule must specify a time frame and mechanism for replacing the interim control rule with a permanent control rule.

Response: Due to the scientific uncertainty associated with the 2009 herring stock assessment, the SSC determined that a permanent ABC control rule cannot be determined at this time. Therefore, Amendment 4 contains an interim ABC control rule (based on SSC recommendations) until the next herring benchmark assessment (currently scheduled for June 2012) determines if it can address the concerns with the last assessment. If a new ABC control rule can be developed following the 2012 benchmark stock assessment, it will be developed in the 2013-2015 herring specifications. The amendment does contain a default risk policy; the Council's default policy on the risk of overfishing is the amount of buffer between the Council's OFL and ABC recommendations for 2010-2012. This risk policy will be updated when the control rule is updated. Regarding the mechanism to update the control rule, the SSC makes ABC recommendations as part of the specifications process, and it is appropriate that this amendment provides the flexibility to update the control rule through that process.

Comment 5: The Herring Alliance, CHOIR, and CCCHFA all expressed concern about the accounting of herring discarded at sea. The commenters believe that the final rule must include protocols for quantifying herring discards as part of management uncertainty and a mechanism to offset the ACL from the ABC accordingly. Additionally, absent improved monitoring, the commenters doubt the credibility of the discard data and conclusions that herring discards are low.

Response: As described in the proposed rule, estimates of discards are reported by harvesters, and also provided by NMFS observers, on trips when observers are present. The available information suggests that discards in the herring fishery are low, relative to the amount of landed herring. Therefore, based on the best available information, Amendment 4 does not establish a specific deduction between the ABC and stock-wide ACL to account for management uncertainty related to discards at this time. However, if new information on discards becomes available, Amendment 4 provides the Council with flexibility to incorporate that information into the stock-wide ACL-setting process, as appropriate. Additionally, as described previously, the Council is in the process of developing Amendment 5, which considers revisions to catch monitoring and reporting requirements for the herring fishery.

Comment 6: Following up on their concern with the accounting of discards, CHOIR and CCCHFA commented on a perceived discrepancy between the amendment and the proposed rule. They commented that the amendment describes the buffer (i.e., 5 percent of a management area sub-ACL) associated with the management area closure measure as a measure to buffer against the uncertainty associated with discard estimates while the proposed rule describes the buffer as a measure intended to address incidental catch. The commenters then questioned how the 5-percent buffer was intended to function.

Response: Proposed regulations state that, if NMFS projects that catch will reach 95 percent of the annual sub-ACL allocated to a management area before the end of the fishing year, NMFS shall prohibit vessels, beginning the date the catch is projected to reach 95 percent of the sub-ACL, from fishing for, possessing, catching, transferring, or landing more than 2,000 lb (907.2 kg) of herring per trip per day for that area. The original FMP established the management area closure threshold (i.e., 95 percent of the management area sub-ACL) to slow the herring fishery as catch approached the TAC for a management area, and intended the 5-percent buffer to account for the incidental catch of herring in other fisheries. Amendment 4 maintains this function of the buffer, as described in both the proposed rule and the amendment. Additionally, because the incidental catch of herring in other fisheries is typically low, if some discards were not accounted for in the vessel catch reports, the 5-percent buffer could also function to account for these discards, as described in the amendment. Because the amendment describes that the intent of the 5-percent buffer is to account for the incidental catch of herring in other fisheries and to buffer against the uncertainty associated with discard estimates, this final rule clarifies that the buffer associated with the management area closure measure has both functions.

Comment 7: The Herring Alliance commented that Amendment 4 should establish ACLs and AMs for river herring and shad, and suggested a Federal FMP is necessary for these species.

Response: In June 2009, the Council focused Amendment 4 on bringing the Herring FMP into compliance the ACL and AM requirements by 2011. When considering the development of a Federal FMP for river herring and shad, the analysis would have to take into account the benefits of the FMP versus the costs and the need for a Federal plan, given that ASMFC has an Interstate FMP for river herring and shad. Because there was not time to conduct these types of analyses and implement Amendment 4 by 2011, creating a Federal FMP for river herring and shad was outside the scope of this amendment. Additionally, an ASMFC river herring stock assessment is currently scheduled for 2011. In advance of stock status information, it would be difficult for a Federal FMP to detail how it would prevent overfishing on river herring. In the absence of Federal management for river herring and shad, the MSA does not require ACLs and AMs for these species.

Comment 8: One member of the public and the Herring Alliance commented on the National Environmental Policy Act (NEPA) requirements and questioned the Council's decision to conduct an EA for Amendment 4. The Herring Alliance believes that ABCs, ACLs, and AMs need to be analyzed in an environmental impact statement (EIS), and that it is unlawful to separate Amendment 4 from Amendment 5 because single actions must be analyzed together so as to not obscure the true environmental impacts.

Response: The scope and effect of Amendment 4 is primarily administrative in nature, as it modifies the process for setting specifications, but does not implement the actual specifications (e.g., ABC, ACL). Therefore, for this reason and the analyses contained in the EA, the Finding of No Significant Impact was justified in determining that an EIS was not necessary or appropriate. Amendment 4 and Amendment 5 are separate actions; therefore, it is both appropriate and lawful to analyze them as separate actions, recognizing that Amendment 5 is considered in Amendment 4's cumulative effects analysis as a future action, and Amendment 4 will be considered in the cumulative effects analysis of Amendment 5 as a past action.

Comment 9: The CCCHFA commented that the analysis in the EA prepared for Amendment 4 was flawed because it concluded that exceeding 95 percent of a sub-ACL is unlikely, and it did not analyze the effects of not designating river herring as non-target stock in the fishery.

Response: Between 2001 and 2009, herring catch (reported by vessels) exceeded management area closure thresholds (i.e., 95 percent of the TAC for a management area) on eight occasions (less than 25 percent of the time). To explain, the 4 herring management areas were monitored over 9 years, for a total of 36 management area thresholds, and those thresholds were exceed 8 times. NMFS believes it is appropriate to consider an event that occurs less than 25 percent of the time unlikely. National Standard 1 guidelines specify that Councils are to reconsider their ACLs, if those ACLs are consistently exceeded. Amendment 4 provides the flexibility to re-evaluate and modify, if necessary, ACLs/sub-ACLs and AMs during the specification process. Additionally, as described previously, the amendment contains an AM that requires any ACL/sub-ACL overages to be deducted in the year following total catch accounting. Designating river herring as a stock in the fishery was not considered by the Council in Amendment 4 nor was it representative of status quo; therefore, it is not required to be analyzed in the EA.

Comment 10: Language in the proposed rule states that, if the amendment is effective prior to final catch accounting for 2010, any overage in 2010 would be deducted in 2012. The CCCHFA questioned whether or not 2010 overages would be deducted in 2012 if the amendment was not effective prior to final catch accounting for 2010.

Response: Catch accounting for 2010 will be finalized in 2011; therefore, any 2010 ACL/sub-ACL overages will be deducted from the corresponding ACL/sub-ACL in 2012.

Comment 11: CCCHFA commented that it is concerned with how the role of herring as forage is considered in Amendment 4. CHOIR commented that it was pleased that the proposed rule provides for the consideration of the role of herring as forage during the specifications-setting process, but that it is disappointed that this consideration is not required.

Response: This action provides for consideration of the role of herring as forage, as appropriate. NMFS believes it is sufficient that herring as forage can be considered by the SSC when it recommends ABC, and the Council has the ability to establish an additional buffer between ABC and OY to address herring as forage, and that a regulatory requirement is not necessary.

Comment 12: The Herring Alliance, CCCHFA, and Oceana all commented that Amendment 4 should have considered additional species to be designated as “non-target stocks in the fishery,” including river herring, shad, haddock, mackerel, and spiny dogfish. Oceana also commented that the bycatch analysis in Amendment 4 is insufficient.

Response: NMFS disagrees with these comments. National Standard 1 guidelines state that designations for non-target stocks in the fishery are at the Council's discretion, and the Council chose not to designate any species as “non-target stocks in the fishery” in this amendment. Amendment 4 includes NMFS observer information on all species caught and discarded on observer trips and considers the effects of this action on non-herring species. Incidental catch in the herring fishery counts against the ACLs established for these incidental catch species if they are managed under another Federal FMP. Additionally, as described previously, Amendment 5 is further considering interactions between the herring fishery and river herring.

Comment 13: The Herring Alliance, CCCHFA, and CHOIR commented that they support the proposed rule requirements to set sub-ACLs and AMs for the herring management areas.

Response: NMFS concurs.

Comment 14: The ASMFC commented that it supports measures in the proposed rule. ASMFC developed Addendum II to Amendment 2 to the Interstate FMP for Atlantic Herring to complement Amendment 4. ASMFC commented that any changes to the proposed rule may create inconsistent management between state and Federal management programs.

Response: NMFS concurs.

There are no substantive changes from the proposed rule, only clarifications to the possession limits associated with the management area closure AM (2,000 lb (907.2 kg)), limited access incidental catch permit (55,000 lb (25 mt)), and open access permit (6,600 lb (3 mt)).

The Administrator, Northeast Region, NMFS, determined that Amendment 4 is necessary for the conservation and management of the herring fishery and that it is consistent with the MSA and other applicable law.

This final rule has been determined to be not significant for purposes of Executive Orders 12866 and 13563.

A final regulatory flexibility analysis (FRFA) was prepared. The FRFA incorporates the IRFA, a summary of the significant issues raised by the public comments in response to the IRFA and NMFS responses to those comments, and analyses contained in Amendment 4 and its accompanying EA/RIR/IRFA. Copies of these analyses are available from the Council or NMFS ( see ADDRESSES ).

This action brings the Herring FMP into compliance with MSA requirements, specifically those requiring ACLs and AMs. A description of action, why it was considered, and the legal authority for the action is contained in the preamble and not repeated here.

Nine comment letters were received during the comment periods on the NOA and proposed rule, but none of the comments were specifically directed to the IRFA.

All participants in the herring fishery are small entities, as none grossed more than $ 4 million annually; therefore, there are no disproportionate economic impacts on small entities. This action will affect all participants in the herring fishery, as it revises current definitions and the specifications-setting process in the Herring FMP, but these measures are not anticipated to have direct economic impacts. In 2009, there were 41 vessels issued All Areas Limited Access Permits, 4 vessels issued Areas 2 and 3 Limited Access Permits, 54 vessels issued Limited Access Incidental Catch Permits, and 2,272 vessels issued Open Access Permits. Section 6.2 in Amendment 4 describes the vessels, key ports, and revenue information for the herring fishery; therefore, that information is not repeated here.

This action does not contain any new collection-of-information, reporting, recordkeeping, or other compliance requirements. It does not duplicate, overlap, or conflict with any other Federal rules.

The measures in this action are not anticipated to have direct economic effects on herring fishery participants. The scope and effect of Amendment 4 is primarily administrative in nature, as it modifies the process for setting specifications, but does not implement the actual specifications ( e.g., ABC, ACL). A detailed economic analysis of the measures, as well as the non-selected alternatives, is in Section 7.2 of Amendment 4. These measures bring the Herring FMP into compliance with new MSA requirements by revising current definitions and the specification-setting process to include ACLs and AMs. In addition, this action designates herring as a “stock in the fishery;” establishes an interim ABC control rule; and makes adjustments to the specification process by eliminating JVPt, including JVP and IWP, and reserve from the specifications process, and eliminating the Council's consideration of TALFF. The alternative to these measures is the status quo, which would retain all current definitions and the current specification process.

The current Herring FMP contains a specification-setting process and measures to prevent overfishing. This action re-defines: The specification-setting process to include OFL, ABC, and ACL; the allocating of OY; the management area TACs as sub-ACLs; and the management area closure measure and haddock incidental catch cap as AMs. Additionally, this action establishes an AM that provides for an overage deduction if total catch exceeded an ACL/sub-ACL. Because this action only makes minor adjustments to the existing specification-setting process and measures that prevent overfishing, this action has no direct economic effects. However, when the actual specifications are set, using the process implemented by this action, an economic analysis will be conducted. By revising the specifications-setting process to make the process, and the SSC's involvement in the process, more explicit and providing for overage deductions, this action has the potential to better prevent overfishing, as compared to the non-selected, status quo alternative.

Designating herring as the stock in the fishery is administrative. While other species are caught incidentally when fishing for herring, Atlantic herring is the only stock directly managed by the Herring FMP. National Standard 1 guidelines state that designations for non-target stocks in the fishery are at the Council's discretion, and the Council chose not to designate any species as “non-target stocks in the fishery” in this amendment. Because there may be non-target stocks that warrant consideration in the future, the Council retains authority to designate additional stocks in the fishery in a future action. Designating herring as the stock in the fishery will not change how the current FMP operates; therefore, there are no economic differences between this action and the non-selected, status quo alternative.

As described previously, the current Herring FMP contains a specifications-setting process and measures to prevent overfishing. Therefore, establishing an ABC control rule in this action is similar to the non-selected, status quo, alternative. However, making the ABC-setting process, and the SSC's involvement in that process, explicit has the potential to better prevent overfishing, as compared to the non-selected, status quo alternative.

This action eliminates JVPt, including JVP and internal waters processing IWP, and reserve from the specifications process. Because the U.S. herring fishery has experienced growth in both harvesting and processing capacity, and has sufficient capacity to harvest the available yield, JVPt, including JVP and IWP, has been allocated at zero since 2005. Accordingly, there are no economic differences between this action and the non-selected, status quo alternative. Historically, the reserve was specified to buffer against such things as uncertainty in stock size estimates, uncertainty in Canadian catch, excess U.S. capacity entering the herring fishery, and fluctuations in import/export demand. With this action's consideration of OFL, ABC, and ACL to account for sources of scientific and management uncertainty, specifying a reserve is redundant; therefore, there is no economic difference between this action and the non-selected, status quo alternative. Additionally, while TALFF could still be awarded, consistent with the MSA, by the Secretary of Commerce, this action eliminates Council consideration of TALFF during development of the specifications. Like JVPt, TALFF has been specified at zero since 2005. Because there is no functional difference between not considering TALFF and setting TALFF at zero, there are no economic differences between this action and the non-selected, status quo alternative.

For the reasons set out in the preamble, 50 CFR part 648 is amended as follows:

Electronic Access

This final rule is accessible via the Internet at the Office of the Federal Register's Web site at http://www.gpoaccess.gov/fr/index.html. Background information and documents are available at the Pacific Fishery Management Council's (the Council or PFMC) Web site at http://www.pcouncil.org/.

On December 31, 2008, NMFS published a proposed rule to implement the 2009-2010 specifications and management measures for the Pacific Coast groundfish fishery (73 FR 80516). The final rule to implement the 2009-2010 specifications and management measures for the Pacific Coast Groundfish Fishery was published on March 6, 2009 (74 FR 9874). The final rule was subsequently amended by inseason actions on the following dates: April 27, 2009 (74 FR 19011); July 6, 2009 (74 FR 31874); October 28, 2009 (74 FR 55468); February 26, 2010 (75 FR 8820); May 4, 2010 (75 FR 23620); July 1, 2010 (75 FR 38030); July 16, 2010 (75 FR 41386); August 23, 2010 (75 FR 51684); October 4, 2010 (75 FR 61102); and December 3, 2010 (75 FR 75417). Additional changes to the 2009-2010 specifications and management measures for petrale sole were made in two final rules on November 4, 2009 (74 FR 57117), and December 10, 2009 (74 FR 65480). NMFS also issued a final rule in response to a duly issued court order on July 8, 2010 (75 FR 39178). In addition, NMFS issued two final rules to implement Amendments 20 and 21 to the FMP on October 1, 2010 (75 FR 60868), and December 15, 2010 (75 FR 78344). The October 1, 2010, final rule, in part, re-organized the entire Pacific Coast Groundfish Fishery Regulations. Because of the restructuring, beginning on November 1, 2010, these specifications and management measures are found at 50 CFR part 660, subparts C through G.

In June 2010, the Council recommended, and NMFS is working to implement, specifications and management measures for the 2011-2012 biennium. Given the complexity of the biennial specifications and management measures, the need for adequate National Environmental Policy Act documents and public review periods, and competing workloads, NMFS did not have enough time to implement a final rule by January 1, 2011. Unless new management measures are implemented in a separate rulemaking, groundfish specifications and management measures that are in effect at the end of the previous biennial fishing period will remain in effect until they are modified, superseded, or rescinded. On December 30, 2010, NMFS issued an emergency rule to revise some harvest specifications and management measures, including several pieces necessary to sustainably manage the entire fishery and to begin the rationalized trawl fishery (75 FR 82296). Therefore, with the exception of changes implemented in the December 30, 2010, emergency rule, the 2009-2010 harvest specifications are in effect and the management measures that were in place at the end of the 2009-2010 biennium will remain in effect for the start of the 2011 fisheries ( e.g., January-February 2010 trip limits would remain in effect for January-February 2011).

NMFS raised these issues to the Council at its November 2-9, 2010, meeting in Costa Mesa, California. The Council recommended adjusting the groundfish management measures to respond to updated fishery information and other inseason management needs.

The Council considered the most recent 2010 fishery information, relative to 2010 specifications, and recommended inseason modifications appropriate for 2011 to start 2011 fisheries in a manner that would keep catches below 2010 OYs, but would allow harvest opportunities for species with catches tracking below projections during the 2010 fishery. The Council also considered adjustments to early 2011 groundfish management measures to respond to the upcoming new, lower sablefish harvest level for the area north of 36° N. lat. that was implemented by NMFS on December 30, 2010 (75 FR 82296). These changes include: Reduction to cumulative limits in the limited entry fixed gear primary sablefish fishery that operates in the area north of 36° N. lat.; reduction to trip limits for sablefish in the open access fisheries; increases to trip limits for sablefish in the limited entry fixed gear daily trip limit fisheries; and decreasing the groundfish bag limit and modifying the lingcod season start date in Washington recreational fisheries.

Management measures are designed to meet the FMP objective of achieving, to the extent possible, but not exceeding, OYs of target species, while fostering the rebuilding of overfished stocks by remaining within their rebuilding OYs. All of the fishery mortality early in 2011 will be taken into account during the rest of the year, and will count toward the final harvest specifications that will ultimately be implemented for 2011.

Changes to the groundfish management measures implemented by this action were recommended by the Council, in consultation with Pacific Coast Treaty Indian Tribes and the States of Washington, Oregon, and California, at its November 2-10, 2010, meeting in Costa Mesa, CA.

NMFS and the Council, therefore, developed management measures, to be implemented through a routine inseason adjustment, based on the most recent fishery information, to: Manage within the current OYs and the new, lower, sablefish harvest level north of 36° N. lat.

At the Council's November 2010 meeting, NMFS informed the Council that it intended to publish an emergency rule to lower the sablefish harvest level for the area north of 36° N. lat. beginning January 1, 2011 as an interim measure until the final harvest specifications and management measures for 2011 are implemented later in the year. The reduction in the sablefish harvest level was necessary to prevent conservation and management concerns with the issuance of trawl fishery quota pounds. Also, the interim reduction to the harvest level allows NMFS to calculate the fixed gear primary sablefish fishery tier limits for 2011 at a level that will reduce concerns for overfishing. NMFS and the Council developed management measures, to be implemented through this inseason rule based on the most recent fishery information, to manage within the new, lower, sablefish harvest level north of 36° N. lat. As a result, the Council recommended changes to sablefish daily trip limits (DTLs) in the limited entry fixed gear and open access fisheries north of 36° N. lat.

No changes to groundfish fishery harvest specifications, including acceptable biological catches (ABCs), optimum yields (OYs), and harvest guidelines (HGs) are made by this inseason action.

As described above, based on the lower interim harvest level for sablefish north of 36° N. lat. that is in place as of January 1, 2011, NMFS is implementing the following decrease in the annual tier limits for sablefish for 2011 and beyond: From Tier 1 at 56,081-lb (25,437 kg), Tier 2 at 25,492-lb (11,562 kg), and Tier 3 at 14,567-lb (6,648 kg); to Tier 1 at 41,379 lb (18,769 kg), Tier 2 at 18,809 lb (8,532 kg), and Tier 3 at 10,748 lb (4,875 kg).

As described above, based on the reduced sablefish harvest specification for the area north of 36° N. lat., the Council considered modifications to the 2011 sablefish trip limits for the limited entry fixed gear and open access DTL fisheries north of 36° N. lat. at their November 2010 meeting to keep projected impacts within the new, lower harvest specification. In addition to the new sablefish harvest specification, these modifications were also considered in light of the performance of the 2010 fishery, where trip limits were increased inseason because catches during 2010 were lower than anticipated north of 36° N. lat. (75 FR 51684, August 23, 2010). Projected catch of sablefish in the 2011 limited entry fixed gear and open access DTL fisheries north of 36° N. lat. are anticipated to be above their new, lower, 2011 sablefish allocations. Based on the most recent fishery information, if no action is taken the trip limits that were in place in 2010 are left in place for 2011, landings of sablefish through the end of the year are projected to be: 298 mt, or 106 percent of the limited entry fixed gear sablefish DTL fishery allocation of 282 mt; and 536 mt, or 115 percent of the open access fishery sablefish allocation of 464 mt. The Council considered options for trip limit decreases in the limited entry fixed gear and open access sablefish DTL fisheries north of 36° N. lat. to allow these fisheries to still attain their sablefish allocations, while keeping total projected catch below the new, lower 2011 sablefish harvest levels for the area north of 36° N. lat. For the limited entry fixed gear sablefish DTL fishery, the Council considered that weekly trip limits in this fishery appear to have a low impact on total landings, and that the primary control for total landings is tied to the bi-monthly cumulative trip limits. Therefore, the Council considered establishing a weekly limit at a level of no less than 25 percent of the bi-monthly cumulative trip limit so that four trips could achieve the bi-monthly limit. This would improve efficiency and could also improve safety by allowing attainment of the bi-monthly limit in fewer trips if weather is bad.

The overall harvest levels of sablefish in the limited entry fixed gear and open access fisheries north of 36° N. lat. are anticipated to decrease with the changes to the bi-monthly trip limits that are described below. Therefore, projected impacts to co-occurring overfished species in the limited entry fixed gear and open access fisheries are not anticipated to increase. The total projected impacts to darkblotched rockfish in the limited entry fixed gear and open access fisheries are very low.

Based on the considerations outlined above, the Council recommended and NMFS is implementing the following changes to trip limits in the limited entry fixed gear sablefish DTL fishery north of 36° N. lat.: An increase in the weekly limits north of 36° N. lat. from “1,750 lb per week” to “2,000 lb per week” beginning on March 1 through the end of the year; a decrease in the bi-monthly cumulative trip limits from “8,500 lb per week” to “8,000 lb per week” from July 1 through October 31. See these new limits in Table 2 (North) and 2 (South) to part 660, subpart E.

Based on the considerations outlined above, the Council also recommended and NMFS is implementing the following changes to the open access sablefish DTL fishery trip limits north of 36° N. lat.: Increase the weekly limit from “1 landing per week of up to 800 lb” to “1 landing per week of up to 950 lb” from March 1 through June 30; increase the weekly limit from “1 landing per week of up to 950 lb” to “1 landing per week of up to 1,200 lb” from July 1 through the end of the year; decrease the bi-monthly cumulative trip limit from “2,400 lb per 2 months” to “1,900 lb per 2 months” from March 1 through June 30; and decrease the bi-monthly cumulative trip limit from “2,750 lb per 2 months” to “2,250 lb per 2 months” from July 1 through the end of the year. See these new limits in Table 3 (North) and 3 (South) to part 660, subpart F.

During 2010, catch of sablefish in the limited entry fixed gear and open access DTL fisheries south of 36° N. lat. was higher than anticipated. In September and December 2010, the Council recommended and NMFS implemented decreases to sablefish trip limits in the limited entry fixed gear fishery, and more substantial decreases to the open access sablefish trip limits, including a closure of the sablefish fishery for December 2010 (75 FR 61102, October 4, 2010; 75 FR 75417, December 3, 2010). The changes were anticipated to lower the projected impacts and keep projected impacts within the sablefish OY south of 36° N. lat. At their November 2010 meeting, the Council considered the fishery performance in 2010 where increased effort and fishery participation was seen, particularly in the open access fishery. The Council considered the need for designing trip limits in both the limited entry fixed gear and open access sablefish DTL fisheries for 2011 that are anticipated to keep catch below the sablefish harvest level for south of 36° N. lat. The Council also considered designing trip limits for the two commercial non-trawl sectors that would be anticipated to allow slightly more overall harvest of sablefish by the limited entry fixed gear fishery. In light of the 2010 fishery performance, a restructuring of the sablefish trip limits for the non-trawl commercial fisheries south of 36° N. lat. was designed in an effort to: Balance the higher than anticipated harvest of sablefish by the open access fishery; prevent premature closure of fisheries in 2011 and prevent exceeding the OY.

West Coast Groundfish Observer data indicate that impacts to overfished species in the commercial fixed gear sablefish fisheries south of 36° N. lat. are extremely low. Therefore, decreases to trip limits to keep projected impacts below the 2011 sablefish harvest levels are not anticipated to result in changes to impacts to co-occurring overfished groundfish species.

Based on the considerations outlined above, the Council recommended and NMFS is implementing a restructured and slightly higher weekly trip limit in the limited entry fixed gear sablefish DTL fishery cumulative limits south of 36° N. lat. of “2,100 lb per week” beginning on March 1 through the end of the year.

Based on the considerations outlined above, the Council recommended and NMFS is implementing restrictions to the open access sablefish DTL fishery trip limits south of 36° N. lat. as follows: From “400 lb per day, or 1 landing per week of up to 1,500 lb, not to exceed 8,000 lb per 2 months” to “300 lb per day, or 1 landing per week of up to 1,200 lb, not to exceed 2,400 lb per 2 months” from March 1 through the end of the year.

In June 2010 the Council recommended that NMFS implement several changes to Washington, Oregon, and California's recreational fishery management measures for groundfish for the 2011 and beyond fishing seasons as part of the biennial harvest specifications and management measures process. The 2011-2012 harvest specifications and management measures have been delayed and will not be in place for the start of the 2011 recreational groundfish fisheries. As a result of this delay, the recreational fishery management measures that were implemented during 2010 will remain in place for the start of 2011, until NMFS takes action through a rulemaking to revise them. At their November 2010 meeting, the Council requested that NMFS consider implementing changes to recreational fishery management measures via NMFS' routine inseason management authority, where possible. Regulations at 50 CFR part 660.60(c) describe what types of changes to management measures are designated “routine” for the West Coast groundfish fishery. Not all changes to management measures that were requested by the Council at their November 2010 meeting are implemented in this rule. However, two changes to recreational groundfish fishery management measures are made in this rule and are described below.

During 2010, the Groundfish Management Team, an advisory body to the Council, conducted an analysis of recent Washington recreational fishery data and determined that very few recreational anglers were attaining the 15-fish bag limit for groundfish off the Washington coast. The analysis of 2008 and 2009 data showed that 99.9 percent of anglers were not retaining more than a 12-fish bag limit. To align the recreational groundfish bag limits with recent catches, the Council recommended reducing the recreational groundfish bag limit off Washington from 15 fish to 12 fish, beginning in 2011. Bag limits in the recreational groundfish fisheries are designated as a routine management measure and may be changed rapidly after a single Council meeting, and this change to management measures will maintain consistency with state regulations. Therefore, NMFS is implementing a reduction in the Washington recreational groundfish bag limit from 15 fish to 12 fish, beginning on March 1, 2011.

In recent years the Washington recreational fishery for lingcod in the area between Cape Alava (48°10′ N. lat.) and the Washington/Oregon border (46°16′ N. lat.) (e.g., Marine Areas 1-3) opens each year on the Saturday that falls closest to March 15. A majority of recreational fishing trips off the Washington coast occur on weekends during this time of year. Opening the fishery on a Saturday rather than on a Sunday allows an additional day of lingcod fishing when the seasons for salmon and Pacific halibut are not yet open. During the last three biennial harvest specifications and management measures cycles the season opening dates are simply updated so that the lingcod season opening dates in this area fall on the Saturday that falls closest to March 15. For 2010, the season opening date was March 13 and this is the date that continues to be in the Washington recreational fishery regulations for this area for 2011. Based on a Council recommendation to maintain the Washington recreational lingcod fishing opportunities, the Washington Department of Fish and Wildlife requested that NMFS update the lingcod season start dates for 2011 so that they fall on the Saturday closest to March 15. For 2011, this date is March 12. Changes to recreational fishery seasons are designated as a routine management measure and maybe changed rapidly after a single Council meeting. Therefore, NMFS is implementing a change in the season start date in the Washington recreational fishery for lingcod in Marine Areas 1-3 from March 13 to March 12, beginning on March 1, 2011.

This final rule makes routine inseason adjustments to groundfish fishery management measures based on the best available information and is taken pursuant to the regulations implementing the Pacific Coast Groundfish FMP.

These actions are taken under the authority of 50 CFR 660.60(c) and are exempt from review under Executive Order 12866.

These inseason adjustments are taken under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act), and are in accordance with 50 CFR part 660, subparts C through G, the regulations implementing the FMP. These actions are based on the most recent data available. The aggregate data upon which these actions are based are available for public inspection at the Office of the Administrator, Northwest Region, NMFS, ( see ADDRESSES ) during business hours.

For the following reasons, NMFS finds good cause to waive prior public notice and comment on the revisions to biennial groundfish management measures under 5 U.S.C. 553(b)(B) because notice and comment would be impracticable and contrary to the public interest. Also, for the same reasons, NMFS finds good cause to waive the 30-day delay in effectiveness pursuant to 5 U.S.C. 553(d)(3), so that this final rule may become effective as quickly as possible.

The recently available data upon which these recommendations were based was provided to the Council, and the Council made its recommendations, at its November 2-10, 2010, meeting in Costa Mesa, CA. The Council recommended that these changes be implemented by January 1, 2011 or as quickly as possible thereafter. There was not sufficient time after that meeting to draft this document and undergo proposed and final rulemaking before these actions need to be in effect. For the actions to be implemented in this final rule, affording the time necessary for prior notice and opportunity for public comment would prevent the Agency from managing fisheries using the best available science to approach, without exceeding, the OYs for federally managed species in accordance with the FMP and applicable laws. The adjustments to management measures in this document affect commercial fisheries off Washington, Oregon, and California and recreational fisheries off Washington.

Changes to sablefish trip limits for the remainder of the biennial period in the limited entry fixed gear and open access sablefish DTL fisheries and to sablefish cumulative limits in the primary fishery are needed to prevent the 2011 sablefish harvest specifications from being exceeded, coastwide. Changes to trip limits also reduce complexity of the cumulative limit structure and provide year round fishing opportunity. These changes must be implemented in a timely manner by March 1, 2011 because failure to implement trip limit restrictions by March 1, 2011 would risk continued higher than anticipated catch of sablefish in the fishery south of 36° N. lat. These revisions are needed to keep the harvest of groundfish species within the harvest levels in place at the beginning of 2011, while allowing fishermen access to healthy stocks. Without these measures in place, the fisheries could risk exceeding the 2011 sablefish harvest specifications if catch continues to be higher than anticipated, as it was in the open access sablefish DTL fishery south of 36° N. lat. in 2010. Without these measures in place, the fisheries could risk exceeding the 2011 sablefish primary season cumulative limits that are based on the new, lower sablefish harvest levels, which could require restrictions later in the year for fisheries that take sablefish, or risk exceeding the 2011 sablefish harvest specifications. Delaying these changes would keep management measures in place that are not based on the best available data and that could lead to exceeding OYs. Such delay would impair achievement of one of the Pacific Coast Groundfish FMP goals to prevent overfishing and rebuild overfished stocks.

Changes to lingcod season start dates in the Washington recreational fishery opens the lingcod fishery one day earlier and will allow fishermen additional harvest opportunities for lingcod. This change is necessary to relieve a restriction by allowing lingcod harvest opportunities, while staying within OYs. These changes must be implemented in a timely manner, as quickly as possible, so that fishermen are allowed increased opportunities to harvest available healthy stocks and meet the objective of the Pacific Coast Groundfish FMP to allow fisheries to approach, but not exceed, OYs. It would be contrary to the public interest to wait to implement these changes until after public notice and comment, because that would prevent fishermen from taking these fish at the time they are available, preventing additional harvest in fisheries that are important to coastal communities.

Changes to the Washington recreational fishery, management measures are necessary to have consistency between state and Federal regulations.

For the reasons set out in the preamble, 50 CFR part 660 is amended as follows:

NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

NMFS closed directed fishing for pollock in Statistical Area 630 of the GOA under § 679.20(d)(1)(iii) on January 21, 2011 (76 FR 4082, January 24, 2011).

As of February 24, 2011, NMFS has determined that approximately 4,141 metric tons of pollock remain in the directed fishing allowance for pollock in Statistical Area 630 of the GOA. Therefore, in accordance with § 679.25(a)(1)(i), (a)(2)(i)(C), and (a)(2)(iii)(D), and to fully utilize the A season allowance of the 2011 TAC of pollock in Statistical Area 630 of the GOA, NMFS is terminating the previous closure and is reopening directed fishing pollock in Statistical Area 630 of the GOA. The Administrator, Alaska Region (Regional Administrator) considered the following factors in reaching this decision: (1) The current catch of pollock in Statistical Area 630 of the GOA and, (2) the harvest capacity and stated intent on future harvesting patterns of vessels in participating in this fishery. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance will be reached after 24 hours. Consequently, NMFS is prohibiting directed fishing for pollock in Statistical Area 630 of the GOA effective 1200 hrs, A.l.t., March 1, 2011.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the opening of the pollock fishery in Statistical Area 630 of the GOA. Immediate notification is necessary to allow for the orderly conduct and efficient operation of this fishery, to allow the industry to plan for the fishing season, and to avoid potential disruption to the fishing fleet and processors. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of February 24, 2011.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

Without this inseason adjustment, NMFS could not allow pollock fishery in Statistical Area 630 of the GOA to be harvested in an expedient manner and in accordance with the regulatory schedule. Under § 679.25(c)(2), interested persons are invited to submit written comments on this action to the above address until March 17, 2011.

This action is required by § 679.25 and is exempt from review under Executive Order 12866.

NMFS manages the groundfish fishery in the GOA exclusive economic zone according to the Fishery Management Plan for Groundfish of the Gulf of Alaska (FMP) prepared by the North Pacific Fishery Management Council under authority of the Magnuson-Stevens Fishery Conservation and Management Act. Regulations governing fishing by U.S. vessels in accordance with the FMP appear at subpart H of 50 CFR part 600 and 50 CFR part 679.

The A season allowance of the 2011 TAC of pollock in Statistical Area 620 of the GOA is 11,895 metric tons (mt) as established by the final 2010 and 2011 harvest specifications for groundfish of the GOA (75 FR 11749, March 12, 2010) and inseason adjustment (76 FR 469, January 5, 2011).

In accordance with § 679.20(d)(1)(i), the Regional Administrator has determined that the A season allowance of the 2011 TAC of pollock in Statistical Area 620 of the GOA will soon be reached. Therefore, the Regional Administrator is establishing a directed fishing allowance of 11,595 mt, and is setting aside the remaining 300 mt as bycatch to support other anticipated groundfish fisheries. In accordance with § 679.20(d)(1)(iii), the Regional Administrator finds that this directed fishing allowance has been reached. Consequently, NMFS is prohibiting directed fishing for pollock in Statistical Area 620 of the GOA.

After the effective date of this closure the maximum retainable amounts at § 679.20(e) and (f) apply at any time during a trip.

This action responds to the best available information recently obtained from the fishery. The Assistant Administrator for Fisheries, NOAA (AA), finds good cause to waive the requirement to provide prior notice and opportunity for public comment pursuant to the authority set forth at 5 U.S.C. 553(b)(B) as such requirement is impracticable and contrary to the public interest. This requirement is impracticable and contrary to the public interest as it would prevent NMFS from responding to the most recent fisheries data in a timely fashion and would delay the closure of pollock in Statistical Area 620 of the GOA. NMFS was unable to publish a notice providing time for public comment because the most recent, relevant data only became available as of February 24, 2011.

The AA also finds good cause to waive the 30-day delay in the effective date of this action under 5 U.S.C. 553(d)(3). This finding is based upon the reasons provided above for waiver of prior notice and opportunity for public comment.

This action is required by § 679.20 and is exempt from review under Executive Order 12866.