On January 18, 2011, the President issued Executive Order 13563, “Improving Regulation and Regulatory Review,” to ensure that Federal regulations seek more affordable, less intrusive means to achieve policy goals, and that agencies give careful consideration to the benefits and costs of those regulations. To that end, the Executive Order requires, among other things, that:

• Agencies propose or adopt a regulation only upon a reasoned determination that its benefits justify its costs; and that agencies tailor regulations to impose the least burden on society, consistent with obtaining the regulatory objectives, taking into account, among other things, and to the extent practicable, the costs of cumulative regulations; and that, consistent with applicable law, agencies select, in choosing among alternative regulatory approaches, those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity).

• The regulatory process encourages public participation and an open exchange of views, with an opportunity for the public to comment.

• Agencies coordinate, simplify, and harmonize regulations to reduce costs and promote certainty for businesses and the public.

• Agencies consider low-cost approaches that reduce burdens and maintain flexibility.

• Regulations be guided by objective scientific evidence.

Additionally, the Executive Order directs agencies to consider how best to promote retrospective analyses of existing rules. Specifically, agencies were required to develop a plan under which the agency will periodically review existing regulations to determine which should be maintained, modified, strengthened, or repealed to increase the effectiveness and decrease the burdens of the agency's regulatory program. DOE's plan can be accessed at http://www.whitehouse.gov/21stcenturygov/actions/21st-century-regulatory-system .

The Department is committed to maintaining a consistent culture of retrospective review and analysis. DOE will continually engage in review of its rules to determine whether there are burdens on the public that can be avoided by amending or rescinding existing requirements. To that end, DOE is publishing today's RFI to again explicitly solicit public input. In addition, DOE is always open to receiving information about the impact of its regulations. To facilitate both this RFI and the ongoing submission of comments, DOE has created a link on the Web page of DOE's Office of the General Counsel to an email in-box at Regulatory.Review@hq.doe.gov , which interested parties can use to identify to DOE regulations that may be in need of review.

While the Department promulgates rules in accordance with the law and to the best of its analytic capability, it is difficult to be certain of the consequences of a rule, including its costs and benefits, until it has been tested. Because knowledge about the full effects of a rule is widely dispersed in society, members of the public are likely to have useful information and perspectives on the benefits and burdens of existing requirements and how regulatory obligations may be updated, streamlined, revised, or repealed to better achieve regulatory objectives, while minimizing regulatory burdens. Interested parties may also be well-positioned to identify those rules that are most in need of review and, thus, assist the Department in prioritizing and properly tailoring its retrospective review process. In short, engaging the public in an open, transparent process is a crucial step in DOE's review of its existing regulations.

The following list of questions is intended to assist in the formulation of comments and not to restrict the issues that may be addressed. In addressing these questions or others, DOE requests that commenters identify with specificity the regulation or reporting requirement at issue, providing legal citation where available. The Department also requests that the submitter provide, in as much detail as possible, an explanation why a regulation or reporting requirement should be modified, streamlined, expanded, or repealed, as well as specific suggestions of ways the Department can better achieve its regulatory objectives.

(1) How can the Department best promote meaningful periodic reviews of its existing rules and how can it best identify those rules that might be modified, streamlined, expanded, or repealed?

(2) What factors should the agency consider in selecting and prioritizing rules and reporting requirements for review?

(3) Are there regulations that are or have become unnecessary, ineffective, or ill advised and, if so, what are they? Are there rules that can simply be repealed without impairing the Department's regulatory programs and, if so, what are they?

(4) Are there rules or reporting requirements that have become outdated and, if so, how can they be modernized to accomplish their regulatory objectives better?

(5) Are there rules that are still necessary, but have not operated as well as expected such that a modified, stronger, or slightly different approach is justified?

(6) Does the Department currently collect information that it does not need or use effectively to achieve regulatory objectives?

(7) Are there regulations, reporting requirements, or regulatory processes that are unnecessarily complicated or could be streamlined to achieve regulatory objectives in more efficient ways?

(8) Are there rules or reporting requirements that have been overtaken by technological developments? Can new technologies be leveraged to modify, streamline, or do away with existing regulatory or reporting requirements?

(9) How can the Department best obtain and consider accurate, objective information and data about the costs, burdens, and benefits of existing regulations? Are there existing sources of data the Department can use to evaluate the post-promulgation effects of regulations over time? We invite interested parties to provide data that may be in their possession that documents the costs, burdens, and benefits of existing requirements.

(10) Are there regulations that are working well that can be expanded or used as a model to fill gaps in other DOE regulatory programs?

The Department notes that this RFI is issued solely for information and program-planning purposes. Responses to this RFI do not bind DOE to any further actions related to the response. All submissions will be made publically available on. http://www.regulations.gov .

Title III, Part B of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6291−6309, as codified), established the Energy Conservation Program for Consumer Products Other Than Automobiles, a program covering most major household appliances, including the residential room air conditioners, residential dishwashers, and residential clothes washers that are the focus of this notice. 1 (42 U.S.C. 6292(2), (6) and (8))

Under EPCA, the program consists of four activities: (1) Testing; (2) labeling; (3) Federal energy conservation standards, and (4) certification, compliance, and enforcement. The testing requirements consist of test procedures that manufacturers of covered products must use as the basis for certifying to DOE that their products comply with applicable energy conservation standards adopted pursuant to EPCA and for representing the efficiency of those products. (42 U.S.C. 6293(c); 42 U.S.C. 6295(s)) Similarly, DOE must use these test procedures in any enforcement action to determine whether covered products comply with these energy conservation standards. (42 U.S.C. 6295(s))

DOE's existing test procedures for residential room air conditioners, residential dishwashers, and residential clothes washers adopted pursuant to these provisions appear under Title 10 of the Code of Federal Regulations (CFR) part 430, subpart B, appendices F (“Uniform Test Method for Measuring the Energy Consumption of Room Air Conditioners”), C (“Uniform Test Method for Measuring the Energy Consumption of Dishwashers”), and J1 (“Uniform Test Method for Measuring the Energy Consumption of Automatic and Semi-Automatic Clothes Washers”). DOE also recently published a new test procedure for residential clothes washers (Appendix J2—“Uniform Test Method for Measuring the Energy Consumption of Automatic and Semi-Automatic Clothes Washers”), the use of which is not required until compliance with any amended standards is required. These procedures establish the currently permitted means for determining energy efficiency and annual energy consumption of these products.

DOE has received inquiries regarding the appropriate interpretation of various provisions of the current DOE test procedures. DOE has issued guidance documents on certain aspects of testing room air conditioners, residential dishwashers, and residential clothes washers. See http://www1.eere.energy.gov/guidance/default.aspx?pid=2&spid=1 for additional information.

The Department is holding this public meeting and webinar to gather information regarding the current practices of manufacturer-run and private testing facilities. The Department seeks to understand how interested parties have interpreted test procedures provisions that they believe to be ambiguous absent DOE guidance. DOE plans to issue guidance, as needed and appropriate, to provide better consistency in the application of the test procedures and better clarity regarding how DOE conducts testing.

Discussion at the public meeting should focus on current test procedures (Appendices C, F, J1 and J2). Furthermore, while DOE seeks the views of all interested parties, this public meeting is not an appropriate forum for consensus building. The Department will take the information provided in the course of the public meeting into consideration when drafting DOE interpretive guidance.

In 2011, DOE launched a new Web site dedicated to DOE guidance: http://www1.eere.energy.gov/guidance/default.aspx?pid=2&spid=1 . All test procedure guidance is now published through a public process. DOE publishes guidance in draft form on the guidance Web site. DOE accepts public comment on the draft guidance. After considering comments, DOE may take one of three courses: Publishing final guidance, publishing revised draft guidance, or withdrawing the guidance. If the Department publishes revised draft guidance, interested parties have another opportunity to provide comments.

DOE will conduct the public meeting in an informal, conference style. There shall be no discussion of proprietary information, costs or prices, market shares, or other commercial matters regulated by U.S. antitrust laws. A court reporter will record the meeting, after which a transcript will be placed on the DOE Web site and made available for purchase from the court reporter.

Anyone who wishes to participate in the public meeting, receive meeting materials, or be added to the DOE mailing list to receive future notices and information about room air conditioners, residential dishwashers, or residential clothes washers should contact Ms. Brenda Edwards at (202) 586-2945.

On July 22, 1982, Congress enacted and the President signed into law the Small Business Innovation Development Act of 1982, Public Law 97-219 (codified at 15 U.S.C. 638), which established the Small Business Innovation Research (SBIR) Program. The statutory purpose of the SBIR Program is to stimulate technological innovation by strengthening the role of innovative small business concerns in Federally-funded research and research and development (R/R&D).

In 1992, Congress enacted the Small Business Technology Transfer Act of 1992 (STTR Act), Public Law 102-564 (codified at 15 U.S.C. 638). The STTR Act initially established the Small Business Technology Transfer (STTR) program as a pilot program that requires Federal agencies with extramural budgets for R/R&D in excess of $1 billion per fiscal year to enter into funding agreements with small business concerns that engage in a collaborative relationship with a research institution. The purpose of the STTR program is to stimulate a partnership of ideas and technologies between innovative small business concerns and research institutions. Congress amended the Small Business Act (Act) in 2001 and changed the status of the STTR program from a pilot program to a permanent one.

On December 31, 2011, the President signed into law the National Defense Authorization Act for Fiscal Year 2012 (Defense Reauthorization Act), Public Law 112-81. Section 5001, Division E of the Defense Reauthorization Act contains the SBIR/STTR Reauthorization Act of 2011 (SBIR/STTR Reauthorization Act), which extends both the SBIR and STTR programs through September 30, 2017, increases the percentage of each participating agency's extramural budget allocated for the programs, and increases the SBIR and STTR Phase I and Phase II award levels. In addition to the above, the SBIR/STTR Reauthorization Act contains several provisions relating to businesses majority-owned by venture capital operating companies (VCOCs), hedge funds or private equity firms. Specifically, the SBIR/STTR Reauthorization Act provides that businesses majority-owned by VCOCs, hedge funds or private equity firms may participate in the SBIR Program, under certain conditions.

At the present time, SBA's size regulations, which address ownership and affiliation of SBIR participants, do not permit business concerns majority-owned by multiple venture operating companies, hedge funds or private equity firms to participate in the program. Consequently, the SBIR/STTR Reauthorization Act requires that SBA issue a proposed rule, within 120 days of enactment of the Act, amending 13 CFR 121.103 (relating to determinations of affiliation applicable to the SBIR Program) and 13 CFR 121.702 (relating to ownership and control and size for the SBIR Program) to address ownership, control, and affiliation for businesses that are owned in majority part by VCOCs, private equity firms or hedge funds. According to the statute, the regulations must also address domestic ownership of program participants.

As a result of the abbreviated time frame set forth in the SBIR/STTR Reauthorization Act by which SBA must issue a proposed rule, the Agency was unable to conduct public outreach prior to drafting and issuing this proposed rule. However, in addition to soliciting public comments on the proposed rule, SBA plans to conduct public outreach sessions following publication of the rule, such as town hall meetings and webinars, to gather additional input on these statutory provisions and SBA's proposed implementation. SBA will release more information about these public sessions later. The information will be available at www.SBIR.gov and www.sba.gov .

SBA is proposing to amend its regulations to address affiliation, ownership, and control of participants in the SBIR and STTR programs. Because these issues affect various parts of SBA's size regulations, SBA must propose amendments to several sections. In drafting these regulations, the SBA took into consideration recent Executive Orders issued by the President, including Executive Order 13563, issued on January 18, 2011. Executive Order 13563 explains that when drafting regulations, agencies must consider approaches that reduce burdens, maximize benefits and maintain flexibility; promote coordination, simplification, and harmonization; identify and assess available alternatives; and consider the costs of the regulations on the public.

SBA believes this proposed rule simplifies and streamlines the current ownership and affiliation criteria for the SBIR and STTR programs, while also ensuring that only domestic small businesses receive the benefits of these programs. Specifically, SBA's proposed rules provide a clear set of guidelines for small businesses to understand and a bright-line test by which small businesses can easily determine whether they meet the ownership, size and affiliation requirements of the programs.

When drafting the regulations, SBA considered the fact that the statutory provisions relating to majority ownership by VCOCs, hedge funds or private equity firms specifically apply to the SBIR Program. However, § 5104 of the SBIR/STTR Reauthorization Act permits a small business concern that received a Phase I award under the SBIR or STTR program to receive a Phase II award in either the SBIR or STTR program. Therefore, an SBIR Phase I awardee may be able to receive an STTR Phase II award. If that is the case, the eligibility rules of both programs should be the same and consistent. As a result, SBA's proposed amendments apply to both the SBIR and STTR programs.

The proposed amendments are set forth in a section-by-section analysis below. In each section, SBA has requested comments on specific issues. However, SBA welcomes comments on all issues arising from this proposed rule, including whether there are additional ways to simplify the current requirements, maximize benefits and increase flexibility for small businesses.

SBA is proposing to amend § 121.701, which states that the SBIR Programs of the agencies are subject to SBA's size determinations, to make it clear that the regulations apply to both the SBIR and STTR programs. In addition, SBA has added definitions applicable to the programs and set forth in statute to this section.

Section 5107(c)(3)(A) of the SBIR/STTR Reauthorization Act states that SBA's regulations addressing the participation of applicants majority-owned by multiple VCOCs, hedge funds, or private equity firms in the SBIR Program should address whether the applicant is owned by domestic business concerns. SBA therefore has proposed to define the term “domestic business concern.” In defining the term, SBA looked first at its regulations, which define the term “business concern or concern.” A “business concern or concern” eligible for SBA's programs is one that is for profit, has a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor. SBA proposes that a domestic business concern meet this definition.

However, SBA has proposed additional criteria that a “domestic business concern” must meet. SBA has proposed that for purposes of the SBIR and STTR programs, the domestic business concern must also be created or organized in the United States, or under the law of the United States or of any State. SBA believes that this proposed definition not only meets statutory requirements set forth in the Act but is straightforward and easy to understand.

When drafting the proposed definition of domestic business concern, SBA reviewed other regulations, such as those implementing the Buy American Act and Berry Amendment, to determine whether they define the term. We note that the Department of Defense Federal Acquisition Regulations Supplement (DFARS) defines the term “domestic concern” to mean a concern incorporated in the United States (including a subsidiary that is incorporated in the United States, even if the parent corporation is a foreign concern) or an unincorporated concern having its principal place of business in the United States. See 48 CFR 225.003. SBA did not propose this definition for the SBIR and STTR programs because we do not believe it is sufficiently restrictive—the DFARs definition does not appear to require an incorporated concern to have a place of business in the United States.

In addition, SBA also considered whether it should include a requirement that to be considered a domestic business concern, more than 50% of the business must either directly or indirectly be owned by U.S. citizens, permanent resident aliens, or domestic corporations, partnerships or limited liability companies (LLCs). SBA did not propose this requirement in the definition of domestic business concern because we believe it adds an extra burden on the small business and an added complexity that is not necessary.

The definition proposed for the term “domestic business concern” has generally been utilized for SBA's programs for many years, and has ensured that domestic small business concerns receive the benefits of SBA's programs. However, SBA welcomes comments on whether the proposed definition of domestic business concern should include additional criteria to ensure that the business is truly a domestic concern. SBA also welcomes comments on whether it should adopt the more simplified definition of domestic concern used in the DFARS, which is discussed above.

In addition, the SBIR/STTR Reauthorization Act defines the terms VCOC, hedge fund and private equity firm. SBA has proposed incorporating those statutory definitions into the regulations.

SBA has also proposed to define the term “portfolio company” because the SBIR/STTR Reauthorization Act uses that term when referring to VCOCs, hedge funds and private equity firms, but does not define it. SBA is proposing to define the term “portfolio company” to mean any company owned by the VCOC, hedge fund or private equity fund. SBA reviewed the U.S. Department of Labor's definition for venture capital investment set forth in 29 CFR 2510.3-101(d)(3)(i), which defines the term as an investment in an operating company as to which the investor has or obtains management rights. However, SBA believes that the definition it has proposed is a simpler and easier definition to understand.

SBA welcomes comments on these proposed amendments.

SBA is proposing to amend 13 CFR 121.702 to address many of the amendments to the Small Business Act set forth in the SBIR/STTR Reauthorization Act of 2011. Specifically, SBA is proposing amendments to address ownership and control of SBIR and STTR participants.

The SBIR/STTR Reauthorization Act specifically permits, in certain instances, SBIR and STTR applicants that are majority-owned by multiple VCOCs, hedge funds or private equity firms to participate in the SBIR Program. Therefore, SBA has proposed amending its regulations to address this new statutory requirement.

In addition, when drafting the proposed rule, SBA reviewed its current regulations regarding eligibility for the programs. The current regulations state that an SBIR awardee must be a business concern that is at least 51% owned and controlled by U.S. citizens or permanent resident aliens or at least 51% owned and controlled by another business that is at least 51% owned and controlled by U.S. citizens or permanent resident aliens. SBA considered retaining this ownership and eligibility criterion since it clearly ensures that there is domestic ownership and control of SBIR and STTR participants. However, SBA believes this eligibility criterion may be too restrictive and fails to provide sufficient flexibility to small businesses when creating their ownership structure.

As a result, SBA has proposed that an SBIR and STTR applicant must be:

• More than 50% owned and controlled by U.S. citizens, permanent resident aliens, or domestic business concerns (the proposed definition of domestic business concern is explained above); or

• Majority-owned by multiple domestic VCOCs, hedge funds or private equity firms.

As set forth in the SBIR/STTR Reauthorization Act, no one domestic business concern that is a VCOC, hedge fund or private equity firm may own more than 50% of the SBIR or STTR participant. Further, if the SBIR or STTR participant is majority-owned by multiple VCOCs, hedge funds or private equity firms, then it would trigger certain statutory requirements.

The SBIR/STTR Reauthorization Act also requires SBA to consider whether an applicant should be a domestic entity itself as well as a direct or indirect subsidiary of a domestic entity. In other words, this statutory provision requires SBA to consider that while an applicant could be organized and located in the United States and therefore be domestic, it might be necessary to ensure that the applicant is also owned by U.S. citizens or domestic companies.

SBA believes that the ownership requirements proposed in this rule—that the SBIR and STTR participant must be more than 50% owned by U.S. citizens, permanent resident aliens or domestic business concerns—addresses the statutory recommendation concerning domestic-owned applicants. SBA also believes that its proposed definition of domestic business concern, discussed in the section above, addresses these statutory recommendations.

In sum, when determining eligibility for the program, the proposed rule would require the applicant to consider the following (in addition to the requirements relating to size and affiliation, etc.):

1. Is the concern more than 50% owned by a single domestic business concern that is a VCOC, hedge fund or private equity firm? If yes, then it is not eligible for the SBIR or STTR program.

2. Is the concern more than 50% owned by one or more U.S. citizens, permanent resident aliens, or domestic business concerns? If yes, then it may be eligible for the SBIR or STTR program, unless it answered yes to Question No. 1.

3. Is the concern more than 50% owned by multiple domestic business concerns that are VCOCs, hedge funds, or private equity firms? If yes, then it may be eligible for the SBIR or STTR program unless answered yes to Question No. 1.

SBA believes that this proposed rule satisfies the requirements for ownership set forth in statute and, at the same time, provides a straight-forward and simplified method for determining eligibility. It also provides small business with the flexibility needed in structuring their business and obtaining capital and will ensure that innovation in the United States continues to grow and flourish.

However, SBA understands that there may be alternatives to the proposal and seeks comments, including the following: (1) Whether the eligibility criteria meets the statutory purpose of the programs with respect to domestic ownership of the applicant; (2) whether the eligibility criteria meets the statutory purpose of the programs with respect to ownership by other-than-small businesses; and (3) whether the proposed rule should address other issues besides the above with respect to ownership.

Moreover, § 5107(c)(3)(B) of SBIR/STTR Reauthorization Act requires that under the already existing authority for SBA to establish size standards, 15 U.S.C. 632(a), SBA shall establish size standards for applicants that are majority-owned by VCOCs, hedge funds or private equity firms. The current size standard for SBIR and STTR applicants is 500 employees. This means that an applicant, including its affiliates, cannot have more than 500 individual employees on a full-time, part-time or other basis, and includes employees obtained from a temporary employee agency, professional employer organization and leasing concern. SBA uses the average number of the business concern's employees based upon the number of employees for each of the pay periods for the preceding completed 12 calendar months ( see 13 CFR 121.106(b)(1)).

SBA has reviewed the 500-employee size standard and is not proposing any changes. The 500 employee size standard is the current size standard for all R&D North American Industry Classification System (NAICS) codes, including SBIR and STTR. For example, both NAICS 541711, Research and Development in Biotechnology, and NAICS 541712, Research and Development in the Physical, Engineering and Life Sciences (except Biotechnology) have 500 employee size standards.

SBA welcomes comments on these proposed amendments to the ownership and control regulations in § 121.701.

SBA's regulations, at § 121.103, address the principles of affiliation. Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Control may arise through ownership, management, or other relationships or interactions between the parties. Affiliation is an important issue when determining size because SBA counts the receipts, employees, or other measure of the business, and includes those of all its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit (13 CFR 121.103(a)(6)).

SBA's affiliation rules generally apply to all Federal programs for which a business must qualify as small, including SBA's Government Contracting or Business Development programs, small business loan programs and grant programs. Therefore, for purposes of the SBIR and STTR programs, an applicant for a Phase I and Phase II award must meet the 500 employee size standard, taking into consideration the employees of the applicant and all of the applicant's affiliates.

Section 5107(c)(3)(D) of the SBIR/STTR Reauthorization Act sets forth an outline for affiliation with respect to those applicants that are majority owned by VCOCs, hedge funds, or private equity firms, as well as any other business that the VCOC, hedge fund, or private equity firm has financed. After reviewing these statutory provisions, the purpose of the amendments to the SBIR and STTR programs, the purpose of the SBIR and STTR programs, and the overall goal of simplification and maximization of benefits for small businesses, SBA has proposed certain amendments to the current affiliation rules, solely with respect to these programs. As a result, SBA has proposed to address size and affiliation for the SBIR and STTR programs in § 121.702, and not in § 121.103, to avoid any confusion.

SBA believes that, in general, the principles of affiliation set forth in § 121.103 apply to the SBIR and STTR program. However, SBA believes that certain affiliation principles—such as those concerning minority stock holdings—are not necessarily applicable to SBIR or STTR applicants as a result of the general business structure and purpose of such business concerns. In addition, SBA sought to create a simple, bright-line test for SBIR and STTR applicants to apply when determining eligibility with respect to size and affiliation.

SBA's current principles of affiliation explain that if a business concern's stock is widely held and no single block of stock is large as compared to others, then the board of directors and President or Chief Executive Officer are deemed to control the business concern, unless they can present evidence showing otherwise. In addition, SBA's general principles of affiliation explain that if two or more persons own, control or have the power to control less than 50% of the concern's voting stock, but the blocks of stock are equal or approximately equal in size, then SBA presumes each person to control the business concern.

In this proposed rule, SBA has amended those principles solely for purposes of the SBIR and STTR program. Consequently, SBA's proposed rule explains that where an SBIR or STTR applicant's voting stock is widely held or two or more persons hold large blocks of voting stock but no one person owns more than 50% of the stock, then the board of directors controls the applicant. SBA believes that in these two instances (minority holdings are equal in size and voting stock is widely held), the investments are diffused. As a result, we believe that for purposes of the SBIR and STTR programs, control would rest with the board of directors since it is that body that is truly running the business.

SBA welcomes comments on this proposed rule as it relates to SBIR and STTR applicants where no one stockholder owns a majority of the applicant. For example, SBA welcomes comments on whether it should: (1) Retain the current affiliation rule with respect to minority stock holdings and if so, whether it should set forth a specific threshold by which it will find control and therefore affiliation ( e.g., if a person owns 33% or more of the company) in order to create a bright-line test for applicants; (2) find affiliation if two or three persons or businesses collectively own more than 50% of the applicant, and the same two or three persons or businesses collectively own more than 50% of any other company or entity; or (3) implement a rule setting forth both options (1) and (2) above.

SBA has also proposed to amend the current affiliation rules relating to identity of interest, for purposes of the SBIR and STTR programs only. Specifically, the proposed rule explains that SBA will presume affiliation based on an identity of interest between family members with identical or substantially identical business or economic interests.

SBA may also presume affiliation based on an identity of interest between business concerns that are economically dependent through contractual or other arrangements. For example, affiliation based on an identity of interest may arise if a business earns 70% of its revenues as a result of doing business with one other business concern. Affiliation based on an identity of interest may also arise where one business concern is dependent on loans supplied by another business, and the loans are made outside of arm's length transactions. Because it is not clear how often these types of situations arise for SBIR and STTR applicants, SBA requests comments on whether the identity of interest rule relating to economic dependency should be retained for purposes of the SBIR and STTR programs.

We note that § 5107(c)(3)(D) of the SBIR/STTR Reauthorization Act states that SBA may not determine that a portfolio company of the VCOC, hedge fund, or private equity firm is affiliated with an SBIR or STTR applicant based solely on one or more shared investors. Therefore, SBA has proposed that it will not find affiliation for an SBIR or STTR applicant with a portfolio company solely because of shared investors.

Consequently, SBA's proposed rule explains that it may find affiliation for SBIR or STTR applicants in one or more of the following situations:

1. Control of more than 50% of voting stock. A person (individual, entity, or business concern) is an affiliate of the SBIR or STTR applicant if the person owns or controls, or has the power to control, more than 50% of the concern's voting stock.

2. Control of less than 50% of voting stock. If two or more persons (including any individual, concern or other entity) each owns, controls, or has the power to control less than 50% of an SBIR or STTR applicant's voting stock, the board of directors controls the SBIR/STTR applicant.

3. Stock options, convertible securities, and agreements to merge. SBA treats stock options, convertible securities, and agreements to merge as though the rights granted have been actually exercised. SBA gives present effect to an agreement to merge (including an agreement in principle) or to sell stock. If these rights have been granted and they confer the power to control, affiliation exists.

4. Common management. If one or more officers, managing members, general partners, or the board of directors of an SBIR or STTR applicant also controls the management of another business concern, the concerns are affiliates.

5. Identity of interest between individuals or businesses, including family members, except for common investments. Individuals or firms that have identical (or substantially identical) family or economic interest may be treated as one party unless they can demonstrate otherwise. Family members or firms that are economically dependent through contractual or financial relationships, are among those treated this way.

6. Newly Organized Concern. SBA may find that an SBIR or STTR applicant is affiliated with another business concern when: (1) The former officers, directors, principal stockholders, managing members, or key employees of one concern organize a new concern; (2) the new concern is in the same or related industry or field of operation; (3) the persons who organized the new concern serve as the new concern's officers, directors, principal stockholders, managing members, or key employees; and (4) the one concern is furnishing or will furnish the new concern with contracts financial or technical assistance, indemnification on bid or performance bonds and/or other facilities, whether for a fee or otherwise. This could include SBIR “spin-offs” or “spin-outs.”

7. Joint Ventures. Business concerns submitting offers for an SBIR or STTR award as joint venturers are affiliated with each other with regard to that award, unless an exception to affiliation applies for the joint venture.

8. Ostensible Subcontractor. An applicant and its subcontractor are treated as joint venturers and therefore affiliates if the ostensible subcontractor will perform primary and vital requirements of the funding agreement or the applicant is unusually reliant upon the subcontractor. To determine whether a subcontractor performs primary and vital requirements of a funding agreement, SBA will consider whether the applicant is meeting the statutorily required percentages of work for the funding agreement.

9. License Agreements. There must be a license agreement concerning a “critical operation” of the licensee. SBA will look at this license agreement to see if the licensee possesses the right to profit or bear the risk of loss.

If SBA does find affiliation based upon one of the above with a VCOC, hedge fund, or private equity firm that owns a minority interest in the SBIR or STTR applicant, then § 5107(c) of the SBIR/STTR Reauthorization Act provides that the portfolio companies of the VCOC, hedge fund, or private equity firm will not be affiliated with the SBIR or STTR applicant unless: (1) the VCOC, hedge fund, or private equity firm owns a majority of the portfolio company; or (2) the VCOC, hedge fund, or private equity firm holds a majority of the seats on the board of directors of the portfolio company. SBA's proposed regulations set forth this statutory exception to affiliation for portfolio companies.

SBA specifically requests comments on these proposals for determining affiliation, including whether the proposed rules sufficiently prevent other-than-small businesses from controlling SBIR and STTR applicants and any other issues relating to affiliation not addressed by the proposed rule.

SBA's current regulations for the SBIR Program state that size and eligibility are determined at the time of award for both Phase I and Phase II awards. In drafting the proposed rule, SBA considered whether it should retain this current requirement or require the SBIR or STTR applicant to meet the size and eligibility requirements at the time of submission of the application, or at both time of application and award. SBA notes that for its government contracting programs, size is determined at the time of submission of an offer (which is equivalent to the time of application for the SBIR and STTR programs). SBA uses that date because it is a date certain—the small business knows when it will submit an offer and can therefore determine with some accuracy whether it will be small at that time.

SBA has proposed that for its SBIR and STTR programs it will determine size and eligibility of the concern at the time it submits an application in response to the SBIR or STTR solicitation or announcement and at the time of award. SBA believes that this would ensure that only eligible small businesses are considered for award and actually receive the award and it will help prevent fraud, waste and abuse of the program. SBA welcomes comments on the timing of size and eligibility determinations, and specifically on the requirement that SBA determine size and eligibility of a small business concern at the time it submits an application in response to the SBIR or STTR solicitation or announcement and at the time of award.

SBA welcomes comments on any impact the proposed change may have on the SBIR and STTR programs.

Section 5107 of the SBIR/STTR Reauthorization Act requires that all small business concerns that are majority-owned by multiple VCOCs, hedge funds, or private equity firms and qualified for participation must register with SBA prior to or on the date that it submits an application in response to an SBIR solicitation or announcement. In addition, the new statutory provisions require that such small businesses indicate in any SBIR proposal that they have completed this registration. SBA has proposed to amend this section of the regulations to address these new requirements.

SBA notes that, at this time, it is considering at least two options with respect to the registration requirement. SBA will need to either maintain a separate registration for purposes of the SBIR and STTR programs only, or it will amend its current Dynamic Small Business Search (DSBS) system to see whether it can use DSBS as its registry. SBA is studying the anticipated costs and timelines for completion of this registry, but welcomes comments on these and other possible options.

Section 5107 (a) of the SBIR/STTR Reauthorization Act states that certain “covered small business concerns” are eligible to receive SBIR awards, without regard to whether the covered small business concern meets the requirements for receiving an award under the SBIR Program at the time of award if an agency took longer than 9 months from the date applications were due to issue an award. A covered small business concern is one that was not majority-owned by a VCOC, hedge fund, or private equity firm at the time of submission of a Phase I or Phase II application (and therefore did not register), but that was majority-owned on the date of award.

The proposed regulations address covered small business concerns and explain that if a small business concern did not register as majority-owned by VCOCs, hedge funds or private equity firms at the time of application, it must notify the funding agreement officer if, on the date of award, the concern is more than 50% owned by multiple VCOCs, hedge funds, or private equity firms.

The SBA notes that the funding agency needs this information because the statute states that if the agency made its award on or after the date that is 9 months from the end of the period for submitting applications under the SBIR or STTR solicitation, that small business concern would be eligible to receive the award without regard to the fact that it is more than 50% owned by multiple VCOCs, hedge funds, or private equity firms at the time of award.

In addition to registration requirements, § 5143 of the SBIR/STTR Reauthorization Act requires each applicant that receives SBIR or STTR funding to certify that it is in compliance with the laws relating to the program. SBA's Administrator is required to develop, in consultation with the Council of Inspectors General on Integrity and Efficiency, the procedures and requirements for this certification after providing notice of and an opportunity for public comment on such procedures and requirements. SBA is therefore requesting public input on whether the current self-certification requirement set forth in § 121.705 is sufficient, i.e., —that the business merely self-certify it meets the requirements of the program.

Further, as discussed above, SBA has proposed that the certification on eligibility (size and ownership) will occur at the time of submission of the offer or application and at the time of award. However, some have argued that these representations are necessary throughout the life of the SBIR or STTR award. As a result, SBA requests specific comment on whether the small business should also be required to represent its status at certain points in time after award, including at the time of final payment or final award allotment.

For example, with respect to small business status for government contracting (other than the SBIR Program), a small business represents its status at the time of offer only and size is determined at that time. The small business is permitted to grow to be other than small during the life of the contract and there is no need for it to re-represent its status on a particular contract. There are two exceptions to this general rule: (1) A small business must recertify its status if it has been acquired by or merged with another business concern; or (2) the contract is greater than five years. At those times, the small business must recertify its status and if it is no longer small, the contracting officer cannot count any options exercised or orders issued against the contract as an award to a small business. SBA requests comments on whether this policy and the procedures should be extended to the SBIR Program.

Section 121.1001(a)(4) sets forth who may initiate a size protest or request a formal size determination. For purposes of the SBIR Program and STTR Program, the regulations state that a prospective offeror, the funding agreement officer, the responsible SBA Government Contracting Area Director or the Division Chief, Office of Innovation may file a protest. SBA has proposed amending this section to state that a current offeror and the Associate Administrator, Investment Division may file a protest. These proposed changes correspond to the proposed change for when an applicant must be eligible for an award (at the time of submission of offer or application and at time of award) and the move of SBA's Office of Innovation to its Investment Division. SBA welcomes comments on these proposed changes.

SBA is proposing to amend this section to address when a protest may be filed by the contracting officer/funding agreement officer or SBA with respect to an SBIR or STTR award. The current regulations state that the contracting officer or SBA may file a protest in anticipation of an award. SBA proposes to amend this regulation to state that SBA or the contracting officer/funding agreement officer may file a protest at any time, as long as it is not premature. This means that SBA will not accept a size protest until the awardee has been selected and notified of the award, which is consistent with current practice for its contracting programs. SBA welcomes comments on this proposed change.

The SBIR/STTR Reauthorization Act has set forth specific provisions relating to affiliation, ownership and control of SBIR and STTR participants. These provisions open the door for more small businesses by providing them access to these programs. SBA has proposed amendments to its current regulations to implement these provisions (some amendments will have to be made to the policy directive, and not necessarily SBA's regulations). As such, SBA requests comments on each proposed amendment to the rule. We have noted above specific issues on which the agency would like to receive comments. However, SBA seeks comments on all aspects of this proposed rule.

OMB has determined that this rule is a significant regulatory action under Executive Order 12866; however this is not a major rule under the Congressional Review Act (CRA). The Regulatory Impact Analysis is set forth below.

This regulatory action implements the SBIR/STTR Reauthorization Act. Specifically, it implements § 5107 of the SBIR/STTR Reauthorization Act of 2011, which requires SBA to issue proposed regulations to amend 13 CFR 121.103 (relating to determinations of affiliation applicable to the SBIR Program) and 13 CFR 121.702 (relating to ownership and control and size for the SBIR Program) within 120 days of passage of the Reauthorization Act.

SBA's current regulations address affiliation, ownership and control for participants in the SBIR Program. However, the regulations do not provide specific guidance for the STTR program. In addition, the regulations must be amended to address the new statutory provisions relating to majority ownership by VCOCs, hedge funds or private equity firms; otherwise, the regulations and statute would conflict. Moreover, the SBIR/STTR Reauthorization Act requires that SBA issue a proposed, and then a final or interim final rule.

SBA considered numerous alternatives when drafting this regulation. SBA considered an alternative approach with respect to ownership by U.S. citizens. For example, SBA's current regulations state that to be eligible for the SBIR Program, the business must be 51% owned and controlled by U.S. citizens or permanent resident aliens, or 51% owned and controlled by another business that is 51% owned and controlled by U.S. citizens. The SBIR/STTR Reauthorization Act requires that SBA consider whether participants to the program are at least 51% owned and controlled by U.S. citizens, domestic VCOCs, hedge funds or private equity firms. SBA considered retaining its current regulation but believes the current regulation may be too restrictive. SBA's proposed regulation permits ownership and control by U.S. citizens, permanent resident aliens and domestic business concerns, including domestic VCOCs, hedge funds or private equity firms.

In addition, SBA considered whether the statutory provisions relating to majority ownership by VCOCs, hedge funds, or private equity firms should also apply to STTR participants and not just SBIR participants. The SBIR/STTR Reauthorization Act is not clear on this point. However, the SBIR/STTR Reauthorization Act does permit participants in the STTR program to receive SBIR awards, and vice versa. As a result, it would seem necessary to apply the same rules for the SBIR Program to the STTR program.

Other examples of alternatives considered are discussed in the preamble above ( e.g., affiliation, definitions).

One potential benefit of the rule is to increase participation in the SBIR and STTR program by providing more businesses access to these programs. SBA believes this will increase competition, which will ultimately increase the quality of proposals and spur innovation. For example, in Fiscal Year (FY) 2010, agencies awarded 6,931 SBIR and STTR Phase I and Phase II awards for a total of over $2 billion. In FY 2003, however, agencies funded 7,419 awards for a total of over $1.8 billion. If you adjust the dollar figures for inflation, it would seem that there has been a decrease in SBIR and STTR Phase I and Phase II awards and funding. Likewise, in FY 2010, agencies awarded 4,777 Phase I SBIR and STTR awards for a total of over $596 million. In FY 2003, however, agencies funded 5,561 awards for a total of over $508 million. If you adjust the dollar figures for inflation, it would seem that there has been a decrease in Phase I SBIR and STTR awards and funding. Again, SBA anticipates that increasing competition will increase the number of awards and funding, as a result of higher quality proposals submitted.

There are a few anticipated costs with this proposed rule. The statute requires SBA to maintain a registry of businesses that are majority-owned by VCOCs, hedge funds or private equity firms. SBA will need to either maintain a separate system or will amend its current DSBS system and use it as its registry. This will result in a cost to SBA. Further, as a result of the anticipated increase in proposals for the SBIR/STTR program, we believe the agencies will have a need for additional staff. In addition, we anticipate there may be an increase in size protests, which will increase SBA's size specialists' current workload.

The SBIR/STTR Reauthorization Act of 2011 imposes a specific statutory deadline by which SBA must issue a proposed and a final regulation. Specifically, SBA is required to issue a proposed rule by April 29, 2012. Given the time needed to comply with various administrative rulemaking requirements, it was not practicable for SBA to hold public forums prior to issuing a proposed rule, as the executive order recommends, and still be able to meet the April 29th statutory deadline. However, SBA is considering holding such public forums ( e.g., town hall meetings, webinars) once it issues the proposed rule to afford the public an opportunity to participate in the rulemaking process as envisioned by this executive order. SBA has also provided for a 60-day comment period and has requested comments on not just the entire rule, but specific parts of the rule where SBA considered several alternatives or options for implementation. As indicated above in the ADDRESSES section of this rule, the public is provided with the link to the online rulemaking Web site and is encouraged to use this medium to submit comments and view the comments of others. Where applicable, the outcome of all of these efforts will be addressed when this rule is finalized.

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

For the purposes of Executive Order 13132, SBA has determined that this proposed rule will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, SBA has determined that this proposed rule has no federalism implications warranting preparation of a federal assessment.

For purposes of the Paperwork Reduction Act (PRA), 44 U.S.C. Chapter 35, SBA has determined that this proposed rule will impose new reporting or recordkeeping requirements. Specifically, business concerns that are majority-owned by VCOCs, hedge funds or private equity firms must register their status in a database, as required by statute. However, because the detailed procedures for meeting this requirement will be outlined in the SBIR Policy Directive, and not the rule, SBA believes it would be more meaningful and less confusing for the small business community if SBA submits the information collection to OMB when the Policy Directives are submitted for review.

SBA has determined that this proposed rule may have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601, et seq. Accordingly, SBA has prepared an Initial Regulatory Flexibility Analysis (IRFA) addressing the impact of this Rule. The IRFA examines the objectives and legal basis for this proposed rule; the kind and number of small entities that may be affected; the projected recordkeeping, reporting, and other requirements; whether there are any Federal rules that may duplicate, overlap, or conflict with this proposed rule; and whether there are any significant alternatives to this proposed rule.

This regulatory action implements several sections of the SBIR/STTR Reauthorization Act. These sections of the SBIR/STTR Reauthorization Act address affiliation, ownership and control of SBIR and STTR program participants.

The objective of the rule is to implement these statutory changes by further defining terms and expanding on the concepts set forth in the SBIR/STTR Reauthorization Act.

The legal basis for this rule is the National Defense Authorization Act for Fiscal Year 2012, Section 5001, Division E (cited as the SBIR/STTR Reauthorization Act of 2011 or Reauthorization Act), Public Law 112-81.

In FY 2009, for the SBIR Program, agencies received 22,444 Phase I proposals and 3,352 Phase II proposals. In FY 2009, for the STTR program, agencies received 2,804 Phase I proposals and 467 Phase II proposals. Some of the proposals submitted were by the same small business. However, using these numbers, SBA estimates that approximately 24,000 businesses could be impacted by this proposed rule. This includes those businesses that are currently not eligible under SBA's existing regulations and will become eligible as a result of implementation of the SBIR/STTR Reauthorization Act, if this rule is adopted as proposed.

The proposed rule does provide that businesses will need to represent their size status at the time of initial offer and award. If there is a size protest, the small business will need to ensure it has business records that verify their small business status. These are the same documents that a business would keep in the normal course of its activities (stock certificates, by-laws etc.). The SBA has explained that there is a new reporting requirement for those businesses that are majority-owned by VCOCs, hedge funds or private equity firms. However, the SBA intends to address this reporting requirement and the database used for the reporting, when it amends the SBIR policy directive.

This proposed rule will conflict with current provisions in SBA's SBIR and STTR Policy Directives. As a result, those directives will need to be amended.

SBA discussed several alternatives in the preamble as well as the Regulatory Impact Analysis.

For the reasons stated in the preamble, SBA proposes to amend 13 CFR part 121 as follows:

Comments Invited

We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.

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

On February 15, 2011, Tamarack Aerospace Group applied for a supplemental type certificate for installation of winglets and an Active Technology Load Alleviation System (ATLAS) on the Cirrus Model SR 22 (serial numbers 0002-2333, 2335-2419, and 2421-2437). The Cirrus model SR22 is a certified, single reciprocating engine, four-passenger, composite airplane.

The installation of winglets, as proposed by Tamarack, increases aerodynamic efficiency. However, the winglets by themselves also increase wing static loads and the wing fatigue stress ratio, which under limit gust and maneuver loads factors may exceed the certificated wing design limits. The addition of ATLAS mitigates the negative effects of the winglets by effectively aerodynamically turning off the winglet at elevated gust and maneuver loads factors.

The ATLAS functions as a load-relief system. This is accomplished by measuring aircraft loading via an accelerometer, and by moving a small aileron-like device called a Tamarack Active Control Surface (TACS) that reduces lift at the tip of the wing. Because the ATLAS compensates for the increased wing root bending at elevated load factors, the overall effect of this modification is that the winglet can be added to the Cirrus wing without the traditionally required reinforcement of the existing structure. This is the first application of an active loads alleviation system on a part 23 aircraft and the applicable airworthiness regulations do not contain adequate or appropriate safety standards for this design feature.

Under the provisions of § 21.101, Tamarack Aerospace Group must show that the Cirrus Model SR22, as changed, continues to meet the applicable provisions of the regulations incorporated by reference in Type Certificate Data Sheet A00009CH or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The regulations incorporated by reference in Type Certificate Data Sheet A00009CH (Serial Numbers (S/Ns) 0002 through 2333, 2335 through 2419, and 2421 through 2437) are as follows:

If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 23) do not contain adequate or appropriate safety standards for the SR22 because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate to incorporate the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.

In addition to the applicable airworthiness regulations and special conditions, the SR22 must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36.

The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type-certification basis under § 21.101.

The SR22 will incorporate the following novel or unusual design features:

Winglets with an Active Technology Load Alleviation System (ATLAS) that incorporates a small aileron-like device called a Tamarack Active Control Surface (TACS).

Tamarack has applied for a Supplemental Type Certificate to install a winglet and ATLAS. The ATLAS is not a primary flight control system, a trim device, or a wing flap. However, there is definite applicability to ATLAS for several regulations under part 23, Subpart D—Control Systems, which might otherwise be considered “Not Applicable” under a strict interpretation of the regulations. Other conditions may be developed, as needed, based on further FAA review and discussions with the manufacturer.

Special conditions are also necessary for the effect of ATLAS on structural performance. These special conditions are intended to provide an equivalent level of safety for ATLAS as intended by part 23, Subpart C—Structure, and portions of part 23, Subpart D—Design and Construction.

As discussed above, these special conditions are applicable to the SR22 (S/Ns 0002 thru 2333, 2335 thru 2419, and 2421 thru 2437). Should Tamarack Aerospace Group apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate Data Sheet A00009CH to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well.

This action affects only certain novel or unusual design features on one model of airplane. It is not a rule of general applicability and it affects only the applicant who applied to the FAA for approval of these features on the airplane.

The authority citation for these special conditions is as follows:

Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for Cirrus Model SR22 airplanes (S/Ns 0002 through 2333, 2335 through 2419, and 2421 through 2437) modified by Tamarack Aerospace Group.

(A) The following special conditions apply to airplanes equipped with load alleviation systems that either directly, or as a result of failure or malfunction, affect structural performance. These special conditions address the direct structural consequences of the system responses and performances and cannot be considered in isolation but should be included in the overall safety evaluation of the airplane. Any statistical or probability terms used in the following special conditions apply to the structural requirements only and do not replace, remove, or supersede other requirements, including those in part 23, subpart E. These criteria are only applicable to structure whose failure could prevent continued safe flight and landing.

(B) In addition to the requirements in 14 CFR part 23, § 23.301 Loads, comply with the following:

(a) Failures of the load alleviation system, including the annunciation system, must be immediately annunciated to the pilot or annunciated prior to the next flight. Failure of the load alleviation system, including the annunciation system, must be no greater than 1 × 10 −5 per flight hour.

(b) If failure of the load alleviation system, including the annunciation system, is greater than 1 × 10 −8 per flight hour, an independent system functional test must be accomplished at a periodic interval to limit time exposure to an undetected failed system. The time interval for the system functional test must be selected so that the product of the time interval in hours and the failure of the load alleviation system, including the annunciation system, is no greater than 1 × 10 −5 per hour.

(c) Failures of the load alleviation system, including the annunciation system, must be reported to the FAA in a manner acceptable to the Administrator.

(C) In place of the requirements in 14 CFR part 23, 23.303 Factor of Safety, comply with the following:

The airplane must be able to withstand the limit and ultimate loads resulting from the following scenarios:

(a) The loads resulting from 14 CFR 23, 23.321 through 23.537, as applicable, corresponding to a fully operative load alleviation system. A factor of safety of 1.5 must be applied to determine ultimate loads.

(b) If an independent system functional test is required by SC 23.301(b), the loads resulting from 14 CFR 23, 23.321 through 23.537, as applicable, corresponding to the system in the failed state without additional flight limitations or reconfiguration of the airplane. A factor of safety of 1.0 must be applied to determine ultimate loads.

(c) The loads corresponding to the time of occurrence of load alleviation system failure and immediately after the failure. These loads must be determined at any speed up to V NE , starting from 1g level flight conditions, and considering realistic scenarios, including pilot corrective actions. A factor of safety of 1.5 must be applied to determine ultimate loads.

(d) For airplanes equipped with “before the next flight” failure annunciation systems, the loads resulting from 14 CFR 23, 23.321 through 23.537, as applicable, corresponding to the system in the failed state without additional flight limitations or reconfiguration of the airplane. A factor of safety of 1.25 must be applied to determine ultimate loads.

(e) For airplanes equipped with “immediate” failure annunciation systems, the loads resulting from 14 CFR 23, 23.321 through 23.537, as applicable, corresponding to the system in the failed state with additional flight limitations or reconfiguration of the airplane. A factor of safety of 1.0 must be applied to determine ultimate loads.

(D) In addition to the requirements in 14 CFR 23, 23.571 through 23.574, comply with the following:

If any system failure would have a significant effect on the fatigue or damage evaluations required in §§ 23.571 through 23.574, then these effects must be taken into account. If an independent system functional test is required by SC 23.301(b), the effect on fatigue and damage evaluations resulting from the selected inspection interval must be taken into account.

(E) In addition to the requirements in 14 CFR 23, 23.629 Flutter, comply with the following:

(a) With the load alleviation system fully operative, compliance to 14 CFR 23, 23.629 must be shown. Compliance with § 23.629(f) must include the ATLAS control system and control surface.

(b) At the time of occurrence of load alleviation system failure and immediately after the failure, compliance with 14 CFR 23, 23.629 (a) and (e) must be shown up to V D /M D without consideration of additional operating limitations or reconfiguration of the airplane.

(c) For airplanes equipped with “before the next flight” failure annunciation systems and the load alleviation system in the failed state, compliance to 14 CFR 23, 23.629 Flutter, paragraphs (a) and (e), must be shown up to V D /M D without consideration of additional operating limitations or reconfiguration of the airplane.

(d) For airplanes equipped with “immediate” failure annunciation systems and the load alleviation system in the failed state, compliance to 14 CFR 23, 23.629 Flutter, paragraphs (a) and (e), must be shown with consideration of additional operating limitations or reconfiguration of the airplane at speeds up to V D = 1.4 × maximum speed limitation selected by the applicant.

(A) In place of 14 CFR part 23, § 23.672 Stability augmentation and automatic and power-operated systems requirement, comply with the following:

The load alleviation system must comply with the following:

(a) A warning, which is clearly distinguishable to the pilot under expected flight conditions without requiring the pilot's attention, must be provided for any failure in the load alleviation system or in any other automatic system that could result in an unsafe condition if the pilot was not aware of the failure. Warning systems must not activate the control system.

(b) The design of the load alleviation system or of any other automatic system must permit initial counteraction of failures without requiring exceptional pilot skill or strength, by either the deactivation of the system or a failed portion thereof, or by overriding the failure by movement of the flight controls in the normal sense.

(c) It must be shown that, while the system is active or after any single failure of the load alleviation system—

(1) The airplane is safely controllable when the failure or malfunction occurs at any speed or altitude within the approved operating limitations that is critical for the type of failure being considered;

(2) The controllability and maneuverability requirements of this part are met within a practical operational flight envelope (for example, speed, altitude, normal acceleration, and airplane configuration) that is described in the Airplane Flight Manual (AFM); and

(3) The trim, stability, and stall characteristics are not impaired below a level needed to permit continued safe flight and landing.

(B) In place of 14 CFR part 23, 23.677 Trim systems requirement, comply with the following:

(a) Proper precautions must be taken to prevent inadvertent, improper, or abrupt Tamarack Active Control Surface (TACS) operation.

(b) The load alleviation system must be designed so that, when any one connecting or transmitting element in the primary flight control system fails, adequate longitudinal control for safe flight and landing is available.

(c) The load alleviation system must be irreversible unless the TACS is properly balanced and has no unsafe flutter characteristics. The system must have adequate rigidity and reliability in the portion of the system from the tab to the attachment of the irreversible unit to the airplane structure.

(d) It must be demonstrated that the airplane is safely controllable and that the pilot can perform all maneuvers and operations necessary to effect a safe landing following any probable powered system runaway that reasonably might be expected in service, allowing for appropriate time delay after pilot recognition of the system runaway. The demonstration must be conducted at critical airplane weights and center of gravity positions.

(C) In place of 14 CFR part 23, 23.683 Operation tests requirement, comply with the following:

(a) It must be shown by operation tests that, when the load alleviation system is active and operational and loaded as prescribed in paragraph (b) of this section, the system is free from—

(1) Jamming;

(2) Excessive friction; and

(3) Excessive deflection.

(b) The prescribed test loads are, for the entire system, loads corresponding to the limit airloads on the appropriate surface.

(D) In place of 14 CFR part 23, 23.685 Control system details requirement, comply with the following:

(a) Each detail of the Tamarack Active Control Surface (TACS) must be designed and installed to prevent jamming, chafing, and interference from cargo, passengers, loose objects, or the freezing of moisture.

(b) There must be means in the cockpit to prevent the entry of foreign objects into places where they would jam any one connecting or transmitting element of the system.

(c) Each element of the load alleviation system must have design features, or must be distinctively and permanently marked, to minimize the possibility of incorrect assembly that could result in malfunctioning of the control system.

(E) In place of 14 CFR part 23, 23.697 Wing flap controls requirement, comply with the following:

(a) The Tamarack Active Control Surface (TACS) must be designed so that, when the surface has been placed in any position, it will not move from that position unless the control is adjusted or is moved by the automatic operation of a load alleviation system.

(b) The rate of movement of the TACS in response to the automatic device must give satisfactory flight and performance characteristics under steady or changing conditions of airspeed, engine power, and attitude.

(F) In place of 14 CFR part 23, 23.701 Flap interconnection requirement, comply with the following:

(a) The load alleviation system and related movable surfaces as a system must—

(1) Be synchronized by a mechanical interconnection between the movable surfaces; or by an approved equivalent means; or

(2) Be designed so that the occurrence of any failure of the system that would result in an unsafe flight characteristic of the airplane is extremely improbable; or

(b) The airplane must be shown to have safe flight characteristics with any combination of extreme positions of individual movable surfaces.

We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.

We will consider all comments we receive on or before the closing date for comments. We may change these special conditions based on the comments we receive.

On December 16, 2010, Lufthansa Technik AG, Weg Beim Jaeger 193, 22335 Hamburg Germany applied for a supplemental type certificate for the installation of large non-structural glass items in the cabin area of the executive interior occupied by passengers and crew in a Boeing Model 737-800. The Boeing Model 737-800, approved under Type Certificate No. A16WE, is a large transport category airplane that is limited to 189 passengers or less, depending on the interior configuration. This specific Boeing Model 737-800 configuration includes seating provisions for 34 passengers.

Under the provisions of Title 14, Code of the Federal Regulations (14 CFR) 21.101, Lufthansa Technik must show that the Boeing Model 737-800, as changed, continues to meet the applicable provisions of the regulations incorporated by reference in Type Certificate No. A16WE or the applicable regulations in effect on the date of application for the change. The regulations incorporated by reference in the type certificate are commonly referred to as the “original type certification basis.” The regulations incorporated by reference in Type Certificate No. A16WE are as follows: 14 CFR part 25 as amended by Amendments 25-1 through 25-77 with exceptions for the Boeing Model 737-800. In addition, the certification basis includes certain special conditions, exemptions, or later amended sections of the applicable part that are not relevant to these proposed special conditions.

If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for the Boeing Model 737-800 because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

Special conditions are initially applicable to the model for which they are issued. Should the applicant apply for a supplemental type certificate to modify any other model included on the same type certificate to incorporate the same or similar novel or unusual design feature, the special conditions would also apply to the other model under § 21.101.

In addition to the applicable airworthiness regulations and special conditions, the Boeing Model 737-800 must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36.

The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type-certification basis under § 21.101.

The Boeing Model 737-800 will incorporate the following novel or unusual design features: The installation of large non-structural glass items, typically in the form of glass sheets in the cabin area of an executive interior occupied by passengers and crew.

These installations would be for aesthetic purposes, not for safety, in components other than windshields or windows. For these special conditions, a large glass item is 4 kg (approximately 10 pounds) and greater in mass. This limit was established as the mass at which a glass component could be expected to potentially cause widespread injury if it were to shatter or break free from its retention system.

The proposed special conditions address the novel and unusual design features for the use of large non-structural glass in the passenger cabin. These large glass items would be installed in occupied rooms or areas during taxi, take off, and landing, or rooms or areas that occupants do have to enter or pass through to get to any emergency exit. The installations of large non-structural glass items may include, but are not limited to, the following items:

• Glass partitions.

• Glass attached to the ceiling.

• Wall/door mounted mirrors/glass panels.

The existing part 25 regulations only address the use of glass in windshields, instrument or display transparencies, or window applications. The regulations treat glass as unique for special applications where no other material will serve and address the adverse properties of glass.

Section 25.775, “Window and windshields,” provides for the use of glass in airplanes but limits glass to windshields and instrument or display transparencies. Furthermore, except for bolted-in windshields, there is limited experience with either adhesive or mechanical retention methods for large glass objects installed in an airplane subject to high loads supported by flexible restraints.

The FAA has accepted the following uses of glass in the passenger cabin under the current regulations:

1. Glass items installed in rooms or areas in the cabin that are not occupied during taxi, take off, and landing, and occupants do not have to enter or pass through the room or area to get to any emergency exit.

2. Glass items integrated into a functional device whose operation is dependent upon the characteristics of glass, such as instrument or indicator protective transparencies, or monitor screens such as liquid crystal display (LCD) or plasma displays. These glass items may be installed in any area in the cabin regardless of occupancy during taxi, take-off, and landing. Acceptable means for these items may depend on the size and specific location of the device.

3. Small glass items installed in occupied rooms or areas during taxi, take off, and landing, or rooms or areas that occupants do have to enter or pass through to get to any emergency exit. For the purposes of these special conditions, a small glass item is less than 4 kg in mass or a group of glass items weighing less than 4 kg in mass.

The glass items in numbers one, two, and three (above) have been restricted to applications where the potential for injury is either highly localized (such as instrument faces) or the location is such that injury due to failure of the glass is unlikely (e.g., mirrors in lavatories). These glass items are subject to the inertia loads contained in § 25.561 and maximum positive differential pressure for items like monitors, but are not subject to these special conditions. They have been found acceptable through project specific means of compliance requiring testing to meet the requirement in § 25.785(d) and by adding a protective polycarbonate layer that covers the glass exposed to the cabin.

The use of glass in airplanes utilizes the one unique characteristic of glass—its capability for undistorted or controlled light transmittance, or transparency. Glass, in its basic form as annealed, untreated sheet, plate, or float glass, when compared to metals, is extremely notch-sensitive, has a low fracture resistance, has a low modulus of elasticity, and can be highly variable in its properties. While reasonably strong, it is not a desirable material for traditional aircraft applications because, as a solo component, it is heavy (about the same density as aluminum). In addition, when glass fails, it can break into extremely sharp fragments that have the potential for injury above and beyond simple impact and have been known to be lethal.

The proposed special conditions address installing glass in much larger sizes than previously accepted and in a multitude of locations and applications, instead of using more traditional aircraft materials. In most, if not all cases, the glass will not be covered with a polycarbonate layer. Additionally, the retention of glass of this size and weight is not amenable to conventional techniques currently utilized in airplane cabins.

The proposed special conditions consider the unusual material properties of glass as an interior material that have limited or prevented its use in the past, and address the performance standards needed to ensure that those properties do not reduce the level of safety intended by the regulations. They address the use of large glass items installed in occupied rooms or areas during taxi, take off, and landing, or rooms or areas that occupants do have to enter or pass through to get to any emergency exit.

The proposed special conditions define a large glass component threshold of 4 kg, which is based on an assessment of the mass dislodged during a high “g” level (as defined in § 25.562) event. Groupings of glass components that total more than 4 kg would also need to be included. The applicable performance standards in the regulations for the installation of these components also apply and should not adversely affect the standards provided below. For example, heat release and smoke density testing should not result in fragmentation of the component.

For large glass components mounted in a cabin occupied by passengers or crew that are not otherwise protected from the injurious effects of failure of the glass component, the following apply:

Material. The glass used must be tempered or otherwise treated to ensure that when fractured, it breaks into small pieces with relatively dull edges. This must be demonstrated by testing to failure. Tests similar to ANSI/SAE Z26.1 section 5.7, Test 7 would be acceptable.

Fragmentation. The glass component construction must control the fragmentation of the glass to minimize the danger from flying glass shards or pieces. Impact and puncture testing to failure must demonstrate this. Tests similar to ANSI/SAE Z26.1 section 5.9, Test 9 adjusted to ensure cracking the glass would be acceptable.

Strength. The glass component, as installed in the airplane, must be strong enough to meet the load requirements for all flight and landing loads and all of the emergency landing conditions in subparts C and D of part 25. In addition, glass components that are located such that they are not protected from contact with cabin occupants must be designed for abusive loading without failure, such as impact from service carts, or occupants stumbling into, leaning against, sitting on, or performing other intentional or unintentional forceful contact. This must be demonstrated by static structural testing to ultimate load except that the critical loading condition must be tested to failure. The tested glass component must have all features that affect component strength, such as etched surfaces, cut or engraved designs, holes, and so forth.

Retention. The glass component, as installed in the airplane, must not come free of its restraint or mounting system in the event of an emergency landing. Based on the characteristics of a large glass component, dynamic tests should be performed to demonstrate that the occupants would be protected up to the load levels required by the certification basis of the airplane. A single test for the most critical loading for the installed component would be sufficient. This may be accomplished by using already accepted methods for dynamic testing.

Analysis may be used in lieu of testing if the applicant has validated the strength models and dynamic simulation models used against static tests to failure and dynamic testing to the above requirements and can predict structural failure and dynamic response and inertial load. The glass material properties must meet § 25.613, “Material strength properties and material design values.” The effect of design details, such as geometric discontinuities or surface finish, must be accounted for in the test/analysis.

As discussed above, these special conditions are applicable to the Boeing Model 737-800. Should Lufthansa Technik apply at a later date for a supplemental type certificate to modify any other model included on Type Certificate No. A16WE to incorporate the same novel or unusual design feature, the special conditions would apply to that model as well.

Certification of the Boeing Model 737-800 is currently scheduled for June 2012. The substance of these special conditions has been previously subject to the notice and public-comment procedure. Therefore, because a delay would significantly affect both the applicant's installation of the system and certification of the airplane, we are shortening the public-comment period to 20 days.

This action affects only certain novel or unusual design features on one model of airplanes. It is not a rule of general applicability, and it affects only the applicant who applied to the FAA for approval of these features on the airplane.

The authority citation for these special conditions is as follows:

Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for Boeing Model 737-800 airplanes modified by Lufthansa Technik AG. For these special conditions, a large glass component is 4 kg (approximately 10 pounds) and greater in mass, or a grouping of glass components that total more than 4 kg.

1. Boeing Model 737-800 Airplane; Large Non-Structural Glass in the Passenger Compartment. The airplane is not operated for hire or offered for common carriage. This provision does not preclude the operator from receiving remuneration to the extent consistent with 14 CFR parts 125 and 91, subpart F, as applicable.

2. Material Fragmentation. The glass used to fabricate the component must be tempered or treated to ensure that, when fractured, it breaks into small pieces with relatively dull edges. In addition, it must be shown that fragmentation of the glass is controlled to reduce the danger from flying glass shards or pieces. This must be demonstrated by testing to failure.

3. Component Strength. The glass component must be strong enough to meet the load requirements for all flight and landing loads including any of the applicable emergency landing conditions in subparts C and D of part 25. Abuse loading without failure, such as impact from occupants stumbling into, leaning against, sitting on, or performing other intentional or unintentional forceful contact, must also be demonstrated. This must be demonstrated by static structural testing to ultimate load, except that the critical loading condition must be tested to failure in the as-installed condition. The tested glass must have all features that affect component strength, such as etched surfaces, cut or engraved designs, holes, and so forth. Glass pieces must be non-hazardous.

4. Component Retention. The glass component, as installed in the airplane, must not come free of its restraint or mounting system in the event of an emergency landing. A test must be performed to demonstrate that the occupants would be protected from the effects of the component failing or becoming free of restraint under dynamic loading. The dynamic loading of § 25.562(b)(2) is considered an acceptable dynamic event. The applicant may propose an alternate pulse; however, the impulse and peak load may not be less than that of § 25.562(b)(2). As an alternative to a dynamic test, static testing may be used if the loading is assessed as equivalent as or more critical than a dynamic test, based upon validated dynamic analysis. Both the primary directional loading and rebound conditions need to be assessed.

5. Instructions for Continued Airworthiness. The instructions for continued airworthiness will reflect the fastening method used and will ensure the reliability of the methods used (e.g., life limit of adhesives, or clamp connection). Inspection methods and intervals will be defined based upon adhesion data from the manufacturer of the adhesive or actual adhesion test data, if necessary.

On February 14, 2012, the President signed the Federal Aviation Administration Modernization and Reform Act of 2012, Public Law 112-095 (FAA Reauthorization) into law. The FAA Reauthorization contained, inter alia, several amendments to the RLA. The changes contained in these amendments impact the Board's current Rules relating to run-off elections, showing of interest requirements, and rulemaking. These Rules are being revised to comply with the statutory language. As discussed below, the Board invites commenters to address specific questions below, along with any other matters they consider relevant to the changes wrought by the amended statutory language. The Board is particularly interested in receiving comments regarding the effect of the amendments on the Board's policies and practices with respect to representation disputes in mergers. The NMB may incorporate any comments in a Final Rule in this proceeding. The NMB will hold an open public hearing during the comment period. A notice will be published containing the dates of the open public hearing and related information.

Prior to the enactment of the FAA Reauthorization, under its previous practice in representation elections, the Board aggregated all votes cast for representation, including write-in votes. 1 Where a majority of employees have cast valid ballots for representation but no individual or organization received a majority of the ballots cast, the issue to be determined was which of the individuals or organizations would be the representative. Thus, the run-off election, once authorized, would be between the two individuals or organizations that received the highest number of votes. 29 CFR 1206.1. The amendments to the RLA now require that the Board no longer aggregate votes for representation and that any run-off election will be between the two ballot options that receive the most votes. This can include the “no” option.

The Board's Rules also required that a participant initiate a run-off election with a written request. 29 CFR 1206.1. The amended language now requires the Board to “arrange for” a second election when no ballot option receives a majority of the ballots cast.

Prior to these amendments, the showing of interest requirements needed to support an application under Section 2, Ninth of the RLA invoking the Board's services to investigate a representation dispute among a carrier's employees were established by the exercise of the Board's discretion under Section 2, Ninth, and by the NMB's Rules. 29 CFR 1206.2, 1206.5. The showing of interest requirements were not defined by statute. The NMB's Rules provided that an individual or organization needed to support their application with authorization cards from thirty-five percent of the craft or class if those employees were unrepresented and authorization cards from more than fifty percent of the craft or class if those employees were already represented. 29 CFR 1206.2. An intervening individual or organization needed a thirty-five percent showing of interest to get on the ballot. 29 CFR 1206.5. The amended statutory language provides that a showing of interest of not less than fifty percent is required to support an “application requesting that an organization or individual be certified as the representative of any craft or class of employees.” 45 U.S.C. 152, Twelfth.

The amended language is silent with regard to mergers. Courts have long recognized that the NMB, under Section 2, Ninth, has the authority to resolve representation disputes arising from a merger involving a carrier or carriers covered by the RLA. Air Line Employees Ass'n, Int'l v. Republic Airlines, Inc., 798 F.2d 967 (7th Cir. 1986). An organization or individual initiates this process by filing an application supported by evidence of representation or a showing of interest. After the NMB determines that a single transportation system exists, the Board's investigation will proceed to address the representation of the craft or class. The Board's current policy in mergers requires that “[i]ncumbent organizations or individuals on the affected carrier(s) must submit evidence of representation or a showing of interest from at least thirty-five (35) percent of the employees in the craft or class.” NMB Representation Manual (Representation Manual) Section 19.601. 2 The Representation Manual further states that the “rules regarding percentage of valid authorizations in NMB Rule 1206.2 (29 CFR 1206.2) and bar rules in NMB Rule 1206.4 (29 CFR 1206.4) do not apply to applications” in merger situations. Representation Manual Section 19.6. The amended RLA, however, now requires at least a fifty percent showing of interest for applications to certify a representation of any craft or class. The Board's merger procedures include the filing of an application to certify a representative of the newly merged craft or class. The Board seeks comments regarding the impact of the amended language on the Board's policies and procedures with regard to mergers.

The FAA Reauthorization also amends the RLA to specifically provide rulemaking under the Administrative Procedure Act (APA) with the added requirement of a hearing in addition to the notice and comment provisions of Section 553 of the APA.

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

The NMB certifies that this rule will not have a significant impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ). The proposed rule affects only the Board's election process, the method used by the NMB to determine the outcome of a self-organization vote by employees, and internal NMB procedures. The proposed rule imposes no requirements upon carriers or derivative carriers subject to the RLA. The proposed rule would not directly affect any entities that are small businesses under the Regulatory Flexibility Act. Accordingly, the National Mediation Board certifies that it will not have a significant impact on a substantial number of small entities.

This proposal will not have any significant impact on the quality of the human environment under the National Environmental Policy Act (42 U.S.C. 4321 et seq. ).

Accordingly, as set forth in the preamble, the NMB proposes to amend 29 CFR part 1206 as follows:

Public Participation and Request for Comments

We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted without change to http://www.regulations.gov and will include any personal information you have provided.

If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online at http://www.regulations.gov , or by fax, mail, or hand delivery, but please use only one of these means. If you submit a comment online, it will be considered received by the Coast Guard when you successfully transmit the comment. If you fax, hand deliver, or mail your comment, it will be considered as having been received by the Coast Guard when it is received at the Docket Management Facility. We recommend that you include your name and a mailing address, an email address, or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.

To submit your comment online, go to http://www.regulations.gov , type the docket number in the “SEARCH” box and click “SEARCH.” Click on “Submit a Comment” on the line associated with this rulemaking.

If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period and may change the rule based on your comments.

To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov , type the docket number in the “SEARCH” box and click “SEARCH.” Click on Open Docket Folder on the line associated with this rulemaking. You may also visit the Docket Management Facility in Room W12-140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

Anyone can search the electronic form of comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008, issue of the Federal Register (73 FR 3316).

We do not now plan to hold a public meeting. But you may submit a request for one using one of the four methods specified under ADDRESSES . Please, explain why you believe a public meeting would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register .

The Port Huron to Mackinac sail race (currently titled the “Bell's Beer Bayview Mackinac Race”) is an annual regatta that has taken place since 1925. The race occurs in July of each year with a starting point in Port Huron, MI. It is typical for more than 200 sailboats to take part in this annual event. The Coast Guard's Ninth District Commander has determined that the high concentration of participants and spectators at the race's starting point poses extra and unusual hazards to the boating public. The likely combination of recreational vessels and sailing vessels gathered together in high concentrations within a congested area known to have fast currents could lead to serious boating injuries or fatalities.

In light of the extra and unusual hazards likely to occur at the starting point of the Port Huron to Mackinac sail race, the Coast Guard proposes to establish permanent Special Local Regulations. These Special Local Regulations will be enforced in July of each year, and the exact times and dates of enforcement will be published in the Federal Register annually via a Notice of Enforcement. This proposed Special Local Regulation will apply to the starting area of the race in the vicinity of Port Huron, MI. Specifically, this proposed regulated area will include all U.S. navigable waters of the Black River, St. Clair River and lower Lake Huron starting at: Latitude 042°58′47″ N, longitude 082°26′0″ W; then easterly to latitude 042°58′24″ N, longitude 082°24′47″ W; then northward along the International Boundary to latitude 043°2′48″ N, longitude 082°23′47″ W; then westerly to the shoreline at approximate location latitude 043°2′48″ N, longitude 082°26′48″ W; then southward along the U.S. shoreline to latitude 042°58′54″ N, longitude 082°26′1″ W; then back to the beginning [DATUM: NAD 83].

In order to ensure the safety of spectators and those vessels participating in the race, the Coast Guard will patrol the regulated area under the direction of a designated Coast Guard Patrol Commander (PATCOM). Vessels desiring to transit the regulated area may do so but only with prior approval of the PATCOM and only when so directed by that individual. The PATCOM may be contacted on Channel 16 (156.8 MHZ) by the call sign “Coast Guard Patrol Commander.” Vessels allowed within the regulated area will be operated at a no wake speed and in a manner that will not endanger participants in the event or any other craft. These proposed Special Local Regulations shall not apply to vessels participating in the event or government vessels patrolling the regulated area.

In the event these proposed Special Local Regulations affect shipping, commercial vessels may request permission from the PATCOM to transit the area of the event by hailing call sign “Coast Guard Patrol Commander” on Channel 16 (156.8 MHZ).

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

This proposed rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders.

This proposed rule is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS) because we anticipate that it will have minimal impact on the economy, will not interfere with other agencies, will not adversely alter the budget of any grant or loan recipients, and will not raise any novel legal or policy issues.

This proposed rule will be enforced for only seven hours on a single day in July. Also, the regulated area will be a relatively small and only in effect at the race's starting point. Additionally, it is expected that during the annual enforcement of these proposed Special Local Regulations the majority of vessel traffic in the vicinity of the regulated area will be recreational in nature. Furthermore, some vessel traffic will be allowed to pass, albeit with caution and at a reduced speed, through the regulated area with the permission of the Coast Guard Patrol Commander. Finally, the Coast Guard expects that public awareness of this event, along with the Coast Guard's regulation of it, is particularly high. As mentioned above, this race has recurred regularly since 1925, and the Coast Guard has regulated it for many years with both permanent and temporary regulations. Despite the race's long history, the Coast Guard still intends to issue maritime advisories to current users of the affected waterways. On the whole, local maritime interests are already well familiar with the effects of this event and this proposed rulemaking.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this proposed 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 proposed rule would not have a significant economic impact on a substantial number of small entities.

This proposed 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 Black River, St. Clair River and lower Lake Huron during the month of July each year.

These proposed Special Local Regulations will not have a significant economic impact on a substantial number of small entities for the same reasons discussed in above Regulatory Planning and Review section.

If you think that your business, organization, or governmental jurisdiction qualifies as a small entity and that this proposed rule would have a significant economic impact on it, please submit a comment (see ADDRESSES ) explaining why you think it qualifies and how and to what degree this rule would economically affect it.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this proposed rule so that they can better evaluate its effects on them and participate in the rulemaking process. If this proposed rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please email or call Frank Jennings, Jr., Auxiliary and Boating Safety Branch, Ninth Coast Guard District, 1240 East 9th Street, Cleveland, OH, via email at: frank.t.jennings@uscg.mil or by phone at: (216) 902-6094. 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 proposed 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 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. We have analyzed this proposed rule under that Order and determined that this rule does not have implications for federalism.

The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the FOR FURTHER INFORMATION CONTACT section to coordinate protest activities so that your message can be received without jeopardizing the safety or security of people, places or vessels.

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 proposed rule will not result in such an expenditure, we do discuss the effects of this proposed rule elsewhere in this preamble.

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

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

This proposed rule is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.

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

We have analyzed this proposed 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). We have concluded this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This proposed rule involves the establishment of Special Local Regulations and is therefore categorically excluded under figure 2-1, paragraph (34)(h), of the Instruction. During the annual permitting process for this event an environmental analysis will be conducted to include the effects of these proposed Special Local Regulations. Thus, no preliminary environmental analysis checklist or Categorical Exclusion Determination (CED) are required for this proposed rulemaking action. We seek any comments or information that may lead to the discovery of a significant environmental impact from this proposed rule.

For the reasons discussed in the preamble, the Coast Guard proposes to amend 33 CFR part 100 as follows:

1. Background Information

Patent applicants are currently required to submit biological sequence data in a standardized electronic format in accordance with World Intellectual Property Organization (WIPO) Standard ST.25, both within the framework of the Patent Cooperation Treaty (PCT) (Annex C of the Administrative Instructions) and under most national and regional provisions. The Rules of Patent Practice in the United States (37 CFR 1.821-1.825) are substantively consistent with WIPO ST.25.

WIPO ST.25, which became effective in 1998 and has not been revised since that time, requires a flat file structure of numeric identifiers using a limited set of character codes. In October 2010, the Committee on WIPO Standards (CWS) established a Task Force, designating the European Patent Organization (EPO) as the lead, to propose a revised standard for the filing of nucleotide and/or amino acid sequence listings in XML format (hereinafter referred to as “the XML standard”). The work of the Task Force is accomplished through online collaboration, restricted to Task Force members only, via the WIPO Web site. The XML standard (tentatively designated WIPO ST.26) is composed of three documents, namely, the main body of the standard, a first annex setting forth the controlled vocabularies for use with the sequence part of the standard, and a second annex setting forth the Document Type Definition (DTD) for the standard. Five rounds of comment/revision have taken place since March 2011, and discussion of the documents is ongoing.

It is expected that the XML standard will be adopted at a meeting of the CWS in early 2013. However, no decision has been made as to when it will enter into force for PCT purposes, and consequently, for national and regional offices. The work of the Task Force and issues pertaining to transitioning to the XML standard were discussed at the Nineteenth Session of the Meeting of International Authorities (MIA)(February 8-10, 2012). The Meeting agreed that the Task Force will look at the feasibility of developing a tool that would allow for the easy and complete conversion of sequence listings filed in one format (ST.25 or XML) into the other. Thereafter, the appropriate PCT bodies should commence a discussion on the most appropriate mechanism for transition from ST.25 to the XML standard. See the Meeting Summary available at http://www.wipo.int/edocs/mdocs/pct//en/pct_mia_19/pct_mia_19_13.pdf.

The Office, leading the negotiations for the United States, is seeking public comment on the current version of the main body of the standard and its two annexes. The text of the current draft of the proposed main body of the sequence listing standard, with its associated Annexes, is available via the Office's Web site at http://www.uspto.gov/patents/law/comments/sequence_listings.jsp. The documents are: Recommmendation for the disclosure of sequence listings using XML (Proposed ST.26); Annex B.1. Controlled vocabularies; and ST26SequenceListing-v1-0.

In light of the likely adoption of this standard in early 2013, the Office desires to ensure that the XML standard is disseminated as widely as possible and the opportunity to provide comments is correspondingly comprehensive. Written comments may be offered on any aspect of the proposed standard or Annexes, transition issues, or expected implementation in the United States. Comments are specifically requested on the following issues:

(1) Comprehensiveness and Clarity. One goal of the development of a WIPO Standard for sequence listings is to allow patent applicants to draw up a single sequence listing in a patent application that would be acceptable for the purposes of both international and national or regional prosecution. Any new standard should represent the maximum requirements for any sequence listing submission, and each national and regional office requiring compliance with the XML standard should have consistent interpretations of the standard.

The Office invites comments on whether the main body of the standard is sufficiently comprehensive and clear to achieve this goal, and in particular welcomes suggestions to add details or clarify the language as appropriate.

(2) Absence of PCT Procedure. Currently, ST.25 includes both substantive and procedural requirements for sequence listings because it fully incorporates PCT Adminstrative Instructions Annex C. The XML standard will be limited to substantive requirements, consisting of a general information part (to include information sufficient to identify the application of which it is a part) and a sequence data part (to include technical information pertaining to each sequence in the listing). It is expected that the PCT Administrative Instructions will be revised to separately specify procedural requirements pertaining to sequence listings filed under the XML standard in international applications. As an example, the XML standard itself will not require translation of free text that is in a non-English language to be included within the text of the application disclosure. However, international, national and regional offices would be free to make such a requirement.

The Office invites comments as to whether the XML standard includes any unnecessary procedural requirements or excludes any procedural requirements that should be retained.

(3) Feature Keys and Qualifiers. ST.25 uses a controlled vocabulary of feature keys to describe nucleic acid and amino acid sequences, with a very limited set of controlled vocabulary to further describe certain features. The XML standard includes, in addition to feature keys, a significant number of the qualifiers for the description of nucleotide sequences agreed upon by the International Nucleotide Sequence Database Collaboration (INSDC). Note that the XML standard does not include feature keys and qualifiers that are not relevant for patent data purposes. The XML standard also includes four qualifiers for amino acids. These feature keys and qualifiers form part of Annex B.1.

The INSDC revises feature keys and qualifiers on an occasional basis (i.e., there is no set schedule). While the goal of requiring INSDC feature keys and qualifiers is to improve compatibility with the public sequence database providers, it is not clear how often the international, national, and regional offices will be able to update submission software and procedures or rules to accommodate such changes.

Public comment is invited with regard to any feature keys or qualifiers that are not clear, or that are optional and should be mandatory (or vice versa). Comments are also welcome regarding how frequently WIPO should consider updating these feature keys and qualifiers, recognizing the impact this will have on the Office rules.

(4) Definition of a Sequence for which a Sequence Listing is Required. The XML standard revises the definition of a sequence for which a sequence listing is required. The following list sets forth the more significant differences from ST.25.

(a) Prohibited sequences. ST.25 describes sequences for which a sequence listing is not required, but does not specifically prohibit the presentation of such sequences. In contrast, the XML standard (paragraph 4) prohibits the inclusion of any branched nucleotide or amino acid sequences or any sequences with fewer than ten specifically defined nucleotides or fewer than four specifically defined amino acids.

(b) Modified nucleotides. ST.25 specifies that sequences comprising nucleotides other than those listed in Appendix 2, Tables 1 and 2, are specifically excluded from the definition of sequences for which a sequence listing must be provided. In contrast, the XML standard (paragraph 5) does not contain this exclusion, and specifies inclusion of sequences containing any nucleotides that can be represented using any of the symbols set forth in Annex B.1, paragraph 1, Table 1. This includes nucleotides that may contain, inter alia, a modified or synthetic purine or pyrimidine base; a modified or synthetic ribose or deoxyribose, or a modified or synthetic 3′ to 5′ internucleotide linkage, i.e., any chemical moiety that provides the same structural function as the phosphate moiety of DNA or RNA.

(c) D-amino acids. ST.25 specifies that sequences containing at least one D-amino acid are specifically excluded from the definition of sequences for which a sequence listing must be provided. In contrast, pursuant to the XML standard (paragraph 6), any unbranched sequences containing four or more specifically defined amino acids would be required to be included in a sequence listing, regardless of whether that sequence contains any D-amino acids.

(d) Variants. ST.25 does not specifically address how variants are to be represented in a sequence listing. The XML standard specifies how variants are to be represented. See paragraph 58 which reads as follow:

The Office requests comments on whether these changes as set forth in paragraphs (a) through (d) above are desirable, and what difficulties, if any, are likely to be faced in complying with the definition in the XML standard.

(5) Publications (references). ST.25 provided for the inclusion of publication information ( i.e., references to relevant prior publications) in numeric identifiers <300>-312>. The XML standard does not provide for such references.

The Office invites comments as to whether there is any perceived detriment due to the non-inclusion of such publications or references in the sequence listing.

(6) Transition Issues. Transition to the XML standard will require Office analysis of the time frame required to update systems to receive, process, and search sequence listings filed under the standard. The date of entry into force may be as long as two or three years after adoption of the new standard; however, as noted above, discussions within the Task Force and WIPO are continuing. Current thinking in the Office is that it would be preferable to have a clean transition from current WIPO Standard ST.25 to the XML Standard. This would be accomplished by having the XML Standard enter into force for PCT purposes (and correspondingly, for US applications at the same time) at a particular date in the future ( e.g., after such date, all sequence listings filed for the first time in an application (including a continuation, continuation-in-part, and a divisional) would have to be filed in compliance with that new standard).

(a) The Office invites comments regarding how much time is likely to be needed for applicants to transition to the XML standard (with the assumption that sequence listing authoring software will be publicly available).

(b) Given the divergent requirements of the proposed XML standard and ST.25 as described above, the Office invites comments on what difficulties an applicant should anticipate if national or regional offices required compliance with different standards ( i.e., ST.25 and XML). Will the existence of separate authoring tools for each of the standards mitigate such difficulties?

For further information, please see the information provided in the direct final action, also entitled “Approval and Promulgation of Air Quality Implementation Plans; Maryland; Permit to Construct Exemptions,” that is located in the “Rules and Regulations” section of this Federal Register publication.

Acronyms and Abbreviations ACO Accountable Care Organization ARRA American Recovery and Reinvestment Act CDA Clinical Document Architecture CEHRT Certified EHR Technology CTEs Conditions for Trusted Exchange DURSA Data Use and Reciprocal Support Agreement EHR Electronic Health Record FIPPS Fair Information Practice Principles HIPAA Health Insurance Portability and Accountability Act of 1996 HIT Health Information Technology HITECH Health Information Technology for Economic and Clinical Health IEC International Electrotechnical Commission IIHI Individually Identifiable Health Information ISO International Organization for Standardization NVEs Nationwide Health Information Network Validated Entities NCVHS National Committee on Vital and Health Statistics NPRM Notice of Proposed Rulemaking PHSA Public Health Service Act PHI Protected Health Information OCR Office for Civil Rights OIG Office of the Inspector General ONC Office of the National Coordinator for Health Information Technology RFI Request for Information RFP Request for Proposal RLS Record Locator Services S&I Standards and Interoperability S/MIME Secure/Multipurpose Internet Mail Extensions SMTP Simple Mail Transport Protocol XDM Cross-Enterprise Document Media Interchange XDR External Data Representation Table of Contents I. Background A. Introduction B. Governance Mechanism Overview C. Historical Context 1. Statutory Authority 2. Overview of Existing Federal Health Information Privacy and Security Standards 3. Health Information Exchange and the Nationwide Health Information Network in Brief a. 2001-2004: Conceptualization and Request for Information b. 2005-2008: Nationwide Health Information Network Exchange—Prototypes and Trial Implementations c. 2009-Present: Nationwide Health Information Network Limited Production and Governance d. Private Sector Electronic Exchange e. The Direct Project f. The Health Information Technology Policy and Standards Committees' Work on the Nationwide Health Information Network II. Request for Information A. Establishing a Governance Mechanism B. Roles, Responsibilities, and Processes 1. ONC 2. The Accreditation Body and Validation Bodies 3. Eligible Entities for Validation a. Eligible Entities b. Eligibility Criteria 4. Stakeholders C. Monitoring and Transparent Oversight D. Conditions for Trusted Exchange 1. Safeguard CTEs 2. Interoperability CTEs 3. Business Practice CTEs E. Request for Additional CTEs F. CTE Processes and Standards and Implementation Specification Classifications 1. CTE Lifecycle 2. Interoperability Conditions for Trusted Exchange—Technical Standards and Implementation Specifications Classification Process G. Economic Impact I. Background A. Introduction

Electronic health information exchange (referred to as “electronic exchange” in the text that follows) addresses a critical need in our healthcare system and provides the foundation for improved care coordination and quality improvement. However, absent a common set of rules to guide its development and nationwide expansion, electronic exchange has been governed by a patchwork of contractual relationships, procurement requirements, State and Federal laws, and industry self-regulation through accreditation and certification. Consequently, this ad-hoc governance approach has led to asymmetries in the policies and technical standards, which are evident in the various local, regional and State electronic exchange activities. Because of the expected increase in demand for electronic exchange capacity to support innovative care and payment models now underway as well as proposed meaningful use Stage 2 objectives and measures, stakeholders have communicated to the Office of the National Coordinator for Health Information Technology (ONC) that a consistent, baseline set of “rules of the road” for electronic exchange is desirable, and perhaps necessary.

We believe that this is an opportune time to solicit input on how the governance mechanism for the nationwide health information network should be shaped and how we could effectively use our statutory authority to complement existing Federal regulations to support and enable nationwide electronic exchange. We also believe that a properly crafted governance mechanism could yield substantial public benefits, including: reduced burden and costs to engage in electronic exchange; added protections for consumers and health care providers; and, in the long-run, a more innovative, and efficient electronic exchange marketplace that would ultimately create an environment where electronic exchange is commonplace and “worry-free.”

For individual consumers, one of the governance mechanism's potential benefits could be the establishment of additional safeguards specific to electronic exchange that are not addressed by other Federal laws, such as the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules, or State laws. For example, the governance mechanism could include more prescriptive and/or more stringent policies for entities that facilitate electronic exchange than are included in the HIPAA Privacy and Security Rules. From a health care provider's perspective, we anticipate that the governance mechanism could provide assurances to all electronic exchange parties that a specified set of requirements have been met. In turn, we believe these assurances could help spur greater trust and confidence in electronic exchange among providers and ease concerns associated with sharing patient information. Finally, for the entities that facilitate electronic exchange, we believe that the governance mechanism could enable a more competitive and open electronic exchange market and make it more efficient for these entities to exchange electronic health information.

This request for information (RFI) reflects ONC's current thinking regarding the approach ONC should take to establish a governance mechanism for the nationwide health information network. It frames many of the draft proposals and concepts ONC is considering, and depending on comments ONC receives, many of these concepts could be included in a future notice of proposed rulemaking. We seek public comment on whether it is timely for ONC to act to establish a governance mechanism; the advantages, disadvantages, and anticipated market impact of the potential proposals we discuss; and whether we should consider any alternatives in place of, or in combination with, the proposals discussed in this RFI.

Overall, we believe that it would be impracticable and imprudent to establish through regulation a “one-size fits all” approach to governance. Given the constantly evolving technical and policy landscape applicable to electronic exchange, it would be onerous and perhaps unachievable to specify up front all forms of electronic exchange to which the governance mechanism could apply. Rather, we view the nationwide health information network as a continually expanding ecosystem of electronic exchange activities for which stakeholders would be able to select the appropriate set of standards, services, and policies to meet their electronic exchange needs. This ecosystem would encompass many forms of electronic exchange, ranging from simple forms (such as when the electronic exchange of health information is planned and sent to a known destination) to more sophisticated forms (such as when the electronic exchange is unplanned meaning the data source is unknown beforehand and query and response techniques are utilized). It would also accommodate emerging exchange activities as they gain policy and technical maturity, such as the use cases being proven by the participants in the nationwide health information network Exchange initiative. 1 Thus, just as the nationwide health information network is defined by the evolving set of standards, services, and policies of which it is comprised, so too, we believe, should its governance mechanism.

In rulemaking, we would seek to launch the structures, processes, and initial requirements that would be necessary for the governance mechanism to operate. In subsequent rulemakings, we anticipate addressing evolving electronic exchange requirements and the standards and policies necessary to effectively govern new and perhaps more complex forms of electronic exchange. Below, we briefly summarize the proposals this RFI covers and provide more detailed explanations for each proposal in the sections that follow.

• Adoption of “conditions for trusted exchange” (CTEs). CTEs would reflect the nationwide health information network's portfolio of standards, services, and policies and would be incrementally added to and refined over time. The initial set of CTEs included in this RFI conceptually represent many of the CTEs that we believe are foundational for enabling trusted nationwide electronic exchange to occur, regardless of the form of electronic exchange in which one engages. CTEs would be established under three categories: interoperability; safeguards; and business practices. We believe that CTEs generally would constitute “standards” and “implementation specifications” as described in the HITECH Act for purposes of conducting electronic exchange under the auspices of the nationwide health information network.

• Establishment of a voluntary framework for entities that facilitate electronic exchange to be validated to CTEs adopted for the electronic exchange services or activities they are capable of supporting. This framework would be similar to the health information technology (HIT) certification programs ONC has already established via regulation (76 FR 1262), 2 but would focus on the services and activities the entities perform in facilitating electronic exchange and not exclusively on HIT itself. Upon successful validation to adopted CTEs an entity would be recognized as a nationwide health information exchange network validated entity (NVE) and thus become responsible for performing electronic exchange services in accordance with the adopted CTEs.

• Approaches for monitoring and transparent oversight. Such approaches would seek to ensure the integrity of the governance mechanism by protecting consumer rights, instilling industry-wide confidence in the services performed by NVEs, and provide a way to receive and address complaints as well as a process to revoke an NVE's validation status.

• Establishment of processes that could be used to adopt, revise, and retire CTEs that are no longer appropriate. This would entail developing a CTE maturity lifecycle process to identify, modify, and retire CTEs over time.

• Establishment of a process to classify the readiness for nationwide adoption and use of technical standards and implementation specifications to support interoperability related CTEs. Due to their rapidly evolving nature, we believe an annual review process to assess and classify the maturity and adoptability of technical standards and implementation specifications would be beneficial.

We have intentionally presented many details of our considerations in this RFI. We hope that this level of detail will generate more specific and insightful comments and a more comprehensive dialogue. In establishing a governance mechanism, ONC is committed to obtaining ongoing public input, and we are consequently also relying heavily on the HIT Policy Committee  3 and HIT Standards Committee recommendations related to governance of the nationwide health information network. 4 Our overall objectives for establishing a governance mechanism for the nationwide health information network are, among others, to improve the efficiency of electronic exchange among providers, reduce provider implementation costs (such as the cost of interfaces), and assure the privacy and security of the data being exchanged. Furthermore, we anticipate that an entity's validation to the CTEs could be leveraged by others to accomplish other policy and programmatic objectives. For example, Federal programs that participate in electronic exchange could require the use of entities that are validated in accordance with the CTEs adopted as part of the nationwide health information network governance mechanism.

The Health Information Technology for Economic and Clinical Health (HITECH) Act, Title XIII of Division A and Title IV of Division B of the American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. L. 111-5), was enacted on February 17, 2009. The HITECH Act amended the Public Health Service Act (PHSA) and established “Title XXX—Health Information Technology and Quality” to improve health care quality, safety, and efficiency through the promotion of HIT and the electronic exchange of health information. More specifically, section 3001(c)(8) of the PHSA, requires the National Coordinator for Health Information Technology (National Coordinator) to “establish a governance mechanism for the nationwide health information network.” Thus we interpret section 3001(c)(8) of the PHSA with sufficient breadth to enable the National Coordinator to establish a mechanism for governing the nationwide health information network, which we define as the set of standards, services, and policies that enable secure health information exchange over the Internet. 5

We note that Congress in section 3001(b) of the PHSA directed the National Coordinator to perform his duties under section 3001(c) in a manner “consistent with the development of a nationwide health information technology infrastructure that allows for the electronic use and exchange of information” and that accomplishes the eleven outcomes specified in PHSA section 3001(b) for which the National Coordinator is responsible. Moreover, we believe the authority granted to the National Coordinator at section 3001(c)(1)(A) to “review and determine whether to endorse each standard, implementation specification, and certification criterion for the electronic exchange and use of health information that is recommended by the HIT Standards Committee under section 3003 for purposes of adoption [by the Secretary] under section 3004” as well as the National Coordinator's authority to consider policy recommendations from the HIT Policy Committee as described in section 3002(b) of the PHSA would support the approach we are considering to establish for the nationwide health information network governance mechanism.

Section 3002(b)(2)(A) of the PHSA authorizes the HIT Policy Committee to “recommend the areas in which standards, implementation specifications and certification criteria are needed for the electronic exchange and use of health information for purposes of adoption under section 3004 and [to] recommend an order of priority for the development, harmonization, and recognition of standards, specifications, and certification criteria * * *.” Section 3002(b)(3) states “[t]he HIT Policy Committee shall serve as a forum for broad stakeholder input with specific expertise in policies relating to the matters described in paragraphs (1) and (2).”

Section 3003(b)(1)(A) of the PHSA states that “[t]he HIT Standards Committee shall recommend to the National Coordinator standards, implementation specifications, and certification criteria described in subsection (a) that have been developed, harmonized, or recognized by the HIT Standards Committee * * *.” Section 3003(b)(2) directs the HIT Standards Committee to “serve as a forum for the participation of a broad range of stakeholders to provide input on the development, harmonization, and recognition of standards, implementation specifications, and certification criteria necessary for the development and adoption of a nationwide health information technology infrastructure that allows for the electronic use and exchange of health information.”

Lastly, section 3004 of the PHSA in turn identifies a process for the adoption of HIT standards, implementation specifications, and certification criteria and authorizes the Secretary to adopt such standards, implementation specifications, and certification criteria.

The success of electronic exchange under the auspices of the nationwide health information network depends, in large part, on assurances that personally identifiable health information will remain confidential and secure. Existing Federal standards governing the privacy and security of health information establish an essential baseline of protection on which we anticipate building through nationwide health information network governance.

The Privacy and Security Rules issued under HIPAA established the first generally applicable Federal protections for health information maintained by certain key segments of the health care industry: health care providers who transmit health information electronically in connection with a transaction for which the Secretary has adopted a standard, health plans, and health care clearinghouses (collectively called “covered entities”). The HIPAA Privacy Rule sets the standards and implementation specifications for the use and disclosure of individually identifiable health information (IIHI) held by these covered entities (called protected health information or PHI). It is notable that the HIPAA Privacy Rule was not intended to establish best practices with which covered entities could voluntarily comply; rather, it establishes a baseline of enforceable Federal regulatory protections upon which the States or covered entities (as a matter of organizational policy) are free to expand. 6

The HIPAA Security Rule requires covered entities to establish specific administrative, physical, and technical safeguards  7 for electronic protected health information (as such term is defined at 45 CFR 160.103). The HIPAA Security Rule is scalable and flexible to account for the varying size, resources, technology and security risks faced by covered entities as they protect the electronic health information for which they are responsible. 8 The HIPAA Security Rule includes both standards and implementation specifications, which provide instructions for implementing certain of the standards. The implementation specifications set out in the Security Rule fall into two categories: Those that are “required” and those that are “addressable.” An entity must implement a “required” implementation specification. In contrast, an entity has some flexibility in implementing an “addressable” implementation specification based on a variety of factors, such as, among others, the entity's risk analysis, risk mitigation strategy, what security measures are already in place, and the cost of implementation. 9 Encryption, for example, is an addressable implementation specification.

Subtitle D of the HITECH Act (sections 13400-13424) expanded the protections afforded by HIPAA by requiring, among other things, business associates (generally, persons or entities that create, receive, maintain, or transmit PHI on behalf of, or in the provision of certain services to, a covered entity) to comply with certain HIPAA Privacy Rule provisions and the standards and implementation specifications of the Security Rule.

Over the past decade the nationwide health information network has been conceptualized in several different ways. The following provides a brief history of the major activities, events, and milestones that have shaped our understanding and conceptualization of the nationwide health information network.

In 2001, the National Committee on Vital and Health Statistics (NCVHS) issued recommendations on nationwide electronic health information exchange within a report titled “Information for Health, A Strategy for Building the National Health Information Infrastructure.” In this report, NCVHS outlined three dimensions of health information infrastructure (Personal Health; Healthcare Provider; and Population Health) that would be important for “conceptualizing the capture, storage, communication, processing, and presentation of information.” NCVHS also recognized that ensuring the confidentiality and security of personal health information was paramount in developing the infrastructure to enable nationwide electronic health information exchange. Noting that the HIPAA Privacy Rule provided strong protections for individually identifiable health information, the NCVHS also forecasted that additional protections would be needed to extend across all the users, technologies, and functions envisioned by the nationwide health information network.

Since 2004, when the Office of the National Coordinator for Health Information Technology (ONC) was created under Executive Order 13335, ONC has supported the development of standards, services, and policies to support nationwide electronic exchange. ONC's first formal step was the publication of a request for information in November 2004 which sought public input on the development of the nationwide health information network which was originally characterized as a “network of networks.” ONC received 512 comments in response to the RFI and published a report summarizing the comments the following year. 10 Comments addressed a number of issues such as governance, financing, and how the nationwide health information network could be coordinated along with local and regional health information exchange projects. With respect to governance, comments indicated that “a well-built governance model was needed to develop, set policies and standards for, operate, and promote the adoption of a nationwide health information network” and discussed the merits of governance options that ranged from significant Federal involvement to a State government-sponsored approach to an approach that involved public-private collaboration.

In June 2005, ONC took another step forward toward the development of the nationwide health information network when it issued a request for proposals (RFP) for the development of nationwide health information network prototype architectures. The prototypes sought to test a range of services including the capabilities to query and retrieve health information from health information exchange organizations; the delivery of new data to appropriate recipients; patient identification and matching; information locator services; and user authentication, access control and other security protections. 11 The prototypes also explored the feasibility and scalability of potential nationwide health information network models. In fall 2005, ONC awarded four organizations contracts based on the RFP. 12

In October 2006, NCVHS issued recommendations to ONC on a minimum, but critical, set of functional requirements for nationwide electronic health information exchange to take place. These recommendations sought to accommodate diverse architectures across networks and systems  13 and followed a report issued by NCVHS earlier in the year regarding privacy and confidentiality considerations for the nationwide health information network. 14

In fall 2007 and spring 2008, building on the experiences gained and lessons learned in the prototype phase, ONC awarded contracts and grants to organizations to conduct nationwide health information network trial implementations. 15 Among these organizations' accomplishments in the context of the trial implementations was the development of data and interface specifications, testing materials, and a draft model data use and reciprocal support agreement (DURSA). 16 The DURSA, a single, multi-party agreement, specified the rules of engagement and obligations to which all participants in the trial implementations agreed to adhere. It also underscored a framework for broad-based information exchange among a set of trusted entities, reflecting consensus (among the signatories) on policies such as: Privacy and security obligations; duties of requesting and responding participants; responding participants' legal requirements; and the allocation of liability risk.

Also during this time, NCVHS published informative reports with recommendations related to how entities engaged in electronic exchange activities but who are not covered by HIPAA should be treated and the policy issues associated with consent and secondary uses of IIHI. 17 18 19

The prototype and trial implementation phases produced important insights. Most significantly, they identified areas where further technical and policy work would be needed to enable query and retrieve-based electronic health information exchange and they highlighted the potential limitations of a single, multi-party data use agreement. As a result of these insights, ONC shifted its approach from a singular vision focused on the establishment of a network of networks to one in which the Federal government could serve as the facilitator of diverse approaches to electronic exchange through the specification of nationally-accepted standards, services, and policies. This transition was based in part on the recognition that there could be multiple types of electronic exchange networks all built on the same foundational building blocks of standards, services, and policies.

Beginning in 2009, Federal and non-Federal entities participating in the trial implementations began securely exchanging health information bound by the parameters established in a “production DURSA.” This confederation of entities is referred to as the “Nationwide Health Information Network Exchange” or “the Exchange,” and relies on the DURSA to help structure a governance framework. To become a participant in the Exchange, an organization must sign the DURSA and also must pass an “onboarding”  20 test to demonstrate capacity to meet the DURSA's technical interoperability requirements.

Presently, a growing number of organizations are exchanging health information as part of the Exchange. Participants in the Exchange are engaged in production activities that include: The exchange of summary patient records for care coordination, including health information that is part of the Virtual Lifetime Electronic Record and which is jointly sponsored by the Departments of Defense and Veterans Affairs; the exchange of summary patient records for Social Security Administration disability determination purposes; and biosurveillance and case reporting to the Centers for Disease Control and Prevention. These use cases have helped to define and evolve a set of specific standards, services, and policies included in the nationwide health information network's growing electronic exchange portfolio.

Many lessons can be learned from the Exchange's production activities. For instance, the Exchange identified one type of governance model for nationwide electronic health information exchange with the DURSA, which relies upon a “Coordinating Committee” and “Technical Committee,” to develop exchange policies and technical interoperability requirements for the participants. Another important lesson learned was that the member organizations identified a need for more specific policies and greater consistency in implementing the HIPAA Privacy and Security Rules in order to engender sufficient trust among parties with which data would be shared. The Exchange's efforts have aided in the early identification and resolution of policy and technical challenges and helped tee up issues that require broad stakeholder dialogue, such as the policy and technical requirements related to matching patients to their health information.

Payment and delivery reforms—from accountable care organizations (ACOs)  21 to bundled payments and medical homes—are creating a compelling business case for electronic exchange. As a result, innovative approaches to electronic exchange are emerging, including private networks advanced by hospital systems pursuing ACO status, exchange services offered by electronic health record (EHR) vendors, and regional and state-level health information exchange initiatives. According to a recent KLAS survey, the number of active private health information exchange entities tripled from 52 in 2009 to 161 in 2010. 22

Stage 1 of the Medicare and Medicaid EHR Incentive Programs included several objectives and measures that required or encouraged electronic exchange as an efficient means for an eligible professional, eligible hospital, or critical access hospital to satisfy the objective and measure (e.g., “exchange key clinical information;” “incorporate clinical lab test results;” and “submission to immunization registries”). As we reviewed our standards portfolio in terms of its ability to support meaningful use Stage 1, we determined that we were missing a simple and easily adoptable approach to enable electronic exchange to occur. While many HIT vendors supported some kind of planned electronic exchange capability prior to meaningful use Stage 1, many did not follow a common set of standards or included a proprietary mechanism that would make it difficult for providers using different systems to easily exchange clinical information to support patient care.

In March 2010, after public meetings held by the HIT Policy Committee, ONC coordinated the launch of the “Direct Project” to identify the standards, services, and policies necessary to enable a simple, secure, scalable, standards-based way for participants to send authenticated, encrypted health information directly to known, trusted recipients over the Internet. The Direct Project focused on what would be necessary to transport health information regardless of the clinical content of the information to be exchanged. A primary goal of the Direct Project was to support secure, efficient, and low cost exchange of health information and to make it possible for eligible health care providers to satisfy some of the meaningful use Stage 1 objectives and associated measures that require electronic exchange.

Unlike the Exchange, the Direct Project cannot rely on a governance framework provided by the DURSA and “onboarding” procedures. While both initiatives are considered part of ONC's nationwide health information network activities, each was established to address different electronic exchange requirements and contribute different standards, services, and policies to the nationwide health information network's portfolio. A basic analogy that may help explain the relationship between the nationwide health information network, the Exchange, and the Direct Project is as follows: The nationwide health information network is akin to the “Internet”—an electronic environment in which the use of a common set of standards, services, and policies will allow a group of entities to exchange information. The nationwide health information network comprises multiple approaches that one could use to electronically exchange electronic health information among a variety of stakeholders. The Exchange could be compared to a consortium using a secure “Intranet,” in which only approved members can gain access after receiving the appropriate security credentials and agreeing to the Intranet's terms of use. Continuing this analogy, the Direct Project is like secure email or even secure instant messaging, whereby two entities that already share a trust relationship with each other can use relatively simple technical means to electronically exchange health information.

f. The Health Information Technology Policy and Standards Committees' Work on the Nationwide Health Information Network.

In September 2010, the HIT Policy Committee, which is one of two statutorily established Federal Advisory Committees that provide advice to the National Coordinator, formed the nationwide health information network Governance Workgroup (Governance Workgroup) and charged it with “draft[ing] a set of recommendations on the scope and process of governance for nationwide health information exchange, including measures to ensure accountability and oversight.”  23 When developing its recommendations for the HIT Policy Committee, the Governance Workgroup held a series of public meetings and received testimony from diverse stakeholders. 24 After receiving the Governance Workgroup's recommendations, the HIT Policy Committee deliberated on them, concurred with them, and formally transmitted them to the National Coordinator for consideration in December 2010. 25 The following bullets summarize the recommendations to the National Coordinator. The recommendations:

• Identified nine core principles according to which the nationwide health information network should be governed. These principles included: transparency and openness; inclusive participation and adequate representation; effectiveness and efficiency; accountability; federated governance and devolution; clarity of mission and consistency of actions; fairness and due process; promote and support innovation; and finally, evaluation, learning and continuous improvement.

• Emphasized that the nationwide health information network should be considered a preferred approach for nationwide health information exchange.

• Identified the responsibilities for the Federal government in governance of the nationwide health information network. These should include: (1) Leading the development of fundamental “conditions” to facilitate greater trust and interoperability in an electronic health information exchange environment and promote the adoption of those conditions through various policy levers; (2) Recognizing existing state authorities across all relevant domains and facilitating coordination and harmonization with states and other entities as needed; (3) Requiring exchange with Federal agencies to be conditioned on compliance with the conditions; and (4) Sharing the responsibility of governance with other entities to reflect a “governance of governances.”

• Optimize broad stakeholder input, including consumers, to facilitate the conditions needed for greater trust and interoperability in electronic exchange.

• Establish an initial set of conditions and a process to incrementally add to or modify the conditions over time. Establish a process to validate  26 the adopted conditions accounting for the cost and burden, and to leverage existing validation methods, processes, and entities where appropriate.

• Ensure accountability through oversight.

Most recently, the HIT Standards Committee established a subcommittee, the nationwide health information network Power Team, in June 2011. 27 The Power Team was charged with: (1) Creating a draft set of criteria for evaluating standards, including factors such as adoptability and scalability: (2) evaluating the specifications developed for the Exchange and Direct Project initiatives with respect to their ability to support nationwide health information exchange; and 3) recommending those specifications that could be integrated and deployed to support the secure transport and exchange of electronic health information on a national scale, and identifying where further work may be needed. The Power Team held a series of public meetings and drafted a set of recommendations  28 for the HIT Standards Committee, noting that while neither the Exchange nor the Direct Project's specifications have been proven at scale, there was minimal risk in adopting transport mechanisms based on the Direct Project specifications. They also recommended simplifying existing specifications for the Exchange and investing in pilots for representational state transfer (REST) or “RESTful” approaches to electronic exchange. On September 28, 2011, the HIT Standards Committee transmitted a letter to the National Coordinator reflecting the analysis conducted by the Power Team.

As we consider how best to implement our statutory authority to establish a governance mechanism for the nationwide health information network, we believe it would be critical to adopt a suite of conditions for trusted exchange (CTEs) to serve as the “rules of the road” for trusted, secure, and interoperable electronic exchange, nationwide. We believe that the CTEs could serve as a foundational set of requirements that could be used in one or more combinations to support many different forms of electronic exchange. CTEs appear to best be grouped into three categories: safeguards, interoperability, and business practices.

• Safeguards CTEs would focus on the protection of IIHI to promote its confidentiality, integrity, and availability and to prevent unauthorized or inappropriate access, use, or disclosure.

• Interoperability CTEs would focus on the technical standards for the exchange and integration of electronic health information so that it is useful for the recipient.

• Business Practices CTEs would focus on the operational and financial practices or standards to which NVEs would need to adhere in support of trusted electronic exchange.

Question 1: Would these categories comprehensively reflect the types of CTEs needed to govern the nationwide health information network? If not, what other categories should we consider?

An important component of the governance mechanism we are considering would be the establishment of a voluntary framework for entities that facilitate electronic exchange to be validated to CTEs adopted for the exchange services or activities they are capable of supporting. Upon successful validation to the CTEs, an entity would be recognized as a NVE and thus would be recognized as an entity that would be accountable for the electronic exchange services or activities it performs in accordance with the CTEs. Given the incremental CTE adoption approach we expect to take, we also anticipate that the recognition of NVEs would incrementally expand along with the diversity of the electronic exchange services or activities they are able to perform. Thus, we could see providing NVEs or new entities with other categorical recognition(s) for the electronic exchange services or activities they are capable of supporting in accordance with subsequently adopted CTEs. Additionally, this validation process would support an evolution, in the U.S. and internationally, towards engaging accountability agents as a supplemental means for ensuring that organizations and providers involved in the management, storage, and transport of IIHI adhere to policies and practices that protect the privacy and security of information.

It is also our expectation that validation would be voluntary. In other words, the validation process established as part of the governance mechanism would not be mandatory and would only apply in so far as an entity deciding that there would be value (e.g., prestige, competitive advantage) in seeking validation. That said, once the validation process is established, much like other government programs on which subsequent policy objectives could be leveraged, it would be possible for other public and private organizations to specify NVE recognition as a condition in awarding contracts, procurements and/or in other situations where validation would be beneficial.

Question 2: What kind of governance approach would best produce a trusted, secure, and interoperable electronic exchange nationwide?

Question 3: How urgent is the need for a nationwide governance approach for electronic health information exchange? Conversely, please indicate if you believe that it is untimely for a nationwide approach to be developed and why.

Question 4: Would a voluntary validation approach as described above sufficiently achieve this goal? If not, why?

Question 5: Would establishing a national validation process as described above effectively relieve any burden on the States to regulate local and regional health information exchange markets?

Question 6: How could we ensure alignment between the governance mechanism and existing State governance approaches?

Question 7: What other approaches to exercising our authority to establish a governance mechanism for the nationwide health information network should we consider?

We intend to use notice and comment rulemaking to establish the structures, processes, and initial requirements that would be necessary for the governance mechanism to operate. Under the governance mechanism we are considering, ONC would retain certain responsibilities to ensure the governance mechanism's proper implementation, but would also seek to delegate, where possible and appropriate, certain other responsibilities that we believe can best be performed by the private sector.

Generally speaking, we anticipate that the National Coordinator's and ONC's responsibilities as part of the governance mechanism would include:

• Endorsing and adopting CTEs, in accordance with the National Coordinator's authority at section 3001(c)(1)(A) and processes identified at section 3004 under the PHSA, and publishing interpretative guidance on the means to comply with adopted CTEs;

• Facilitating the receipt of input from the HIT Policy and Standards Committees and other interested parties on revisions to CTEs, new CTEs, and the appropriate retirement of CTEs in accordance with processes identified at sections 3002(b)(3) and 3003(b)(2) of the PHSA;

• The selection and oversight processes for an accreditation body that would be responsible for accrediting organizations interested in becoming validation bodies;

• Authorizing and overseeing validation bodies which would be responsible for validating that eligible entities have met adopted CTEs;

• Administering a process to classify the readiness for nationwide adoption and use of technical standards and implementation specifications to support interoperability related CTEs; and

• Overall oversight of all entities and processes established as part of the governance mechanism.

Question 8: We solicit feedback on the appropriateness of ONC's role in coordinating the governance mechanism and whether certain responsibilities might be better delegated to, and/or fulfilled by, the private sector.

Similar to the roles and responsibilities we established under the permanent certification program for HIT (76 FR 1262), we could see establishing a process by which the National Coordinator would approve a single body to accredit and oversee “validation bodies.” The process considered in this RFI, however, would differ from the HIT certification programs in that validation would evaluate an entity's conformance to adopted CTEs as opposed to a particular product's ( e.g., EHR technology) certification to certification criteria. We could envision, however, certified HIT (in other venues referred to as commercial off-the-shelf software) being used by an entity as a way to demonstrate conformance with certain adopted CTEs. For this to occur, we anticipate that we would have to adopt specific certification criteria that could be used to subsequently certify other types of HIT through our already established HIT certification program. The accreditation body would be expected to conform to internationally accepted standards for accreditation bodies, and in particular, the standard ISO/IEC 17011: 2004, jointly published by the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC), which specifies requirements for assessing and accrediting certification bodies. The validation bodies (upon accreditation by the accreditation body and authorization from the National Coordinator) would subsequently perform the validation of entities' conformance to adopted CTEs. Ultimately, we believe that validation could encompass many different methodologies (e.g., self-attestation; laboratory testing for standards conformance; certification; and accreditation) and could vary depending on the type of CTE and the potential burden the validation methodology would impose.

Question 9: Would a voluntary validation process be effective for ensuring that entities engaged in facilitating electronic exchange continue to comply with adopted CTEs? If not, what other validation processes could be leveraged for validating conformance with adopted CTEs? If you identify existing processes, please explain the focus of each and its scope.

Question 10: Should the validation method vary by CTE? Which methods would be most effective for ensuring compliance with the CTEs? (Before answering this question it may be useful to first review the CTEs we are considering to adopt, see section “VI. Conditions for Trusted Exchange.”)

Question 11: What successful validation models or approaches exist in other industries that could be used as a model for our purposes in this context?

Question 12: What would be the potential impact of this accreditation/validation body model on electronic health information exchange, in particular, on the volume and efficiency of exchange in local health care markets and provider confidence? What is the best way to maximize the benefit while minimizing the burden on providers or other actors in the market?

We anticipate that potential NVEs could include, but would not be limited to, the following types of entities that provide services to facilitate electronic health information exchange: EHR developers; regional, state, local or specialty-based health information exchanges; health information service providers; State agencies; Federal agencies, and integrated delivery networks.

In order to provide a baseline level of trust in NVEs, we think that it could be helpful to establish upfront eligibility criteria such as the ones discussed below. We are considering that entities interested in becoming NVEs would need to:

• Meet all solvency and financial responsibility requirements imposed by the statutes and regulatory authorities of the State or States in which it, or any subcontractor performing some or all of its functions, would serve. We are considering requiring a prospective NVE make some type of financial disclosure filing as well as provide evidence that it has a surety bond or some other form of financial security.

• Have the overall resources and experience to fulfill its responsibilities in accordance with the CTEs when performing health information exchange services. We are considering whether an entity would need to have at least one year of experience.

• Serve a sufficient number of providers to permit a finding of effective and efficient administration. Under this criterion, however, no prospective NVE would be deemed ineligible if it only served providers located in a single State.

• Have to be a valid business or governmental entity operating in the United States.

• Have not had civil monetary penalties, criminal penalties, or damages imposed, or have been enjoined for a HIPAA violation (by HHS, the Department of Justice, or State Attorneys General) within two years prior to seeking validation.

• Not be listed on the Excluded Parties List System maintained by the General Services Administration which includes information regarding entities debarred, suspended, proposed for debarment, excluded or disqualified under the non-procurement common rule, or otherwise declared ineligible from receiving Federal contracts, certain subcontracts, and certain Federal assistance and benefits.

• Not be listed on the List of Excluded Individuals and Entities maintained by the Office of Inspector General (OIG). The OIG has the authority to exclude individuals and entities from Federally funded health care programs pursuant to sections 1128 and 1156 of the Social Security Act and maintains a list of all currently excluded individuals and entities called the List of Excluded Individuals and Entities.

We include the HIPAA civil money penalty criterion as we expect that most entities that would qualify as NVEs would be business associates of covered entities as defined in the HIPAA Rules, or in some cases covered entities themselves, and therefore, would be directly subject to the requirements and standards of the HIPAA Privacy, Security and Breach Notification Rules. Additionally, we do not believe that it would be appropriate to have an eligibility criterion that limits eligible entities to only those that are tax-exempt under section 501(c)(3) of the Internal Revenue Code (IRC). Finally, in the case of Federal or State governmental entities seeking to become an NVE, we anticipate that some of the eligibility criteria we are considering may be inapplicable.

Question 13: Should there be an eligibility criterion that requires an entity to have a valid purpose (e.g., treatment) for exchanging health information? If so, what would constitute a “valid” purpose for exchange?

Question 14: Should there be an eligibility criterion that requires an entity to have prior electronic exchange experience or a certain number of participants it serves?

Question 15: Are there other eligibility criteria that we should also consider?

Question 16: Should eligibility be limited to entities that are tax-exempt under section 501(c)(3) of the IRC? If yes, please explain why.

Throughout the history of the nationwide health information network, a strong emphasis has been placed on ensuring broad stakeholder participation in the network's development and governance.

Question 17: What is the optimum role for stakeholders, including consumers, in governance of the nationwide health information network? What mechanisms would most effectively implement that role?

As the HIT Policy Committee and stakeholder feedback over time have indicated, any governance mechanism established for the nationwide health information network would need to include some method for monitoring and transparent oversight. To mitigate confusion in the marketplace, protect consumer rights, and help ensure health care provider satisfaction, we believe a process to receive and address complaints as well as a process to revoke an NVE's status would need to exist. While the revocation of an NVE's status may be the most severe “penalty” ONC could impose, we also realize that when a penalty is so substantial there can be a tendency to pursue other measures to correct an identified issue except in the case of severe violations.

We also anticipate that monitoring and transparent oversight could be conducted by different stakeholders as part of nationwide health information network governance. While ONC could retain overall authority for monitoring and oversight, we also believe that the accreditation body and validation bodies involved in determining compliance with the adopted CTEs could also play oversight roles. For example, validation bodies would be responsible for monitoring and overseeing the NVEs they have validated. Furthermore, other modes of monitoring and enforcement could also play a role, such as: voluntary industry self-policing, a complaint/ombudsman role for a non-governmental entity, civil lawsuits. That said, we do not believe that some of these enforcement or monitoring methods would necessarily be effective, particularly in light of the voluntary validation framework we are considering. Moreover, Federal agencies including the Federal Trade Commission (FTC) and the HHS Office for Civil Rights (OCR) have enforcement authority within their regulatory jurisdictions and can already act on complaints of certain improper conduct. For instance, the FTC could investigate alleged misconduct related to validation status through the Federal Trade Commission Act (15 U.S.C. 45(a) and 52). A negative determination could lead to revoking an NVE's public representation of conformance to the adopted CTEs. Similarly, OCR, which enforces the HIPAA Privacy and Security Rules, could investigate alleged violations of the HIPAA Rules, the outcome of which could impact an NVE's validation of conformance to certain CTEs.

Question 18: What are the most appropriate monitoring and oversight methods to include as part of the governance mechanism for the nationwide health information network? Why?

Question 19: What other approaches might ONC consider for addressing violations of compliance with CTEs?

If we were to pursue a validation approach, we believe that entities that have been successfully validated in accordance with the CTEs should be able to publicly represent themselves in some manner as complying with the adopted CTEs. We think this public representation could stimulate market demand for NVE services in the health information exchange marketplace.

We assume that NVEs would need to conform to some CTEs regardless of the specific electronic health information exchange service(s) or activities provided. We believe this approach could create a core trust baseline for all NVEs and that such commonality could strengthen the public's trust of NVEs and NVEs' trust of other NVEs. Finally, we assume that some NVEs could perform services or activities unrelated to adopted CTEs. In such cases, we believe it would be necessary for there to be a clear distinction between the recognition an NVE receives under the governance mechanism and the other services or activities it supports but for which validation has not been provided.

Question 20: What limits, if any, would need to be in place in order to ensure that services and/or activities performed by NVEs for which no validation is available are not misrepresented as being part of an NVE's validation? Should NVEs be required to make some type of public disclosure or associate some type of labeling with the validated services or activities they support?

Question 21: How long should validation status be effective?

We recognize and expect that electronic health information exchange capacity will continue to accelerate over the coming years. With this additional capacity, new ways for individuals to fully participate in their health care, and activities to harness this capacity to improve population health and develop a “learning health care system” will be available. As we closely watch other activities in the public and private sectors, we anticipate that the CTEs we are considering in this first rulemaking will need to be revised, that other CTEs will need to be retired to reflect the changing electronic health information exchange landscape, and that new CTEs will be needed. Our goal in discussing this initial set of CTEs is to identify a starting point, and then eventually support as broad a range of electronic exchange activities as practicable given the maturity of technical standards and policies for electronic exchange. The following discussion reflects ONC's current thinking regarding a first set of CTEs that could be adopted to support a variety of electronic exchange activities, nationwide.

A Code of Fair Information Practice was first articulated by an Advisory Committee to the Secretary of the US Department of Health, Education, and Welfare in a 1973 report, Records, Computers, and the Rights of Citizens. The Code is well accepted as a foundation for protecting the privacy of individually identifiable information, and many privacy laws are based on it, both in the United States and abroad. The principles that underlie the Code also served in part as the bases on which HHS developed its 2008 Nationwide Privacy and Security Framework for Electronic Exchange of Individually Identifiable Health Information (Privacy and Security Framework). 29 The Privacy and Security Framework includes eight principles that are expected to guide the actions of all persons and entities that participate in a network for the purpose of electronic exchange of IIHI. Wherever applicable, we have endeavored to represent these principles within the Safeguard CTEs we discuss. We have also attempted to reflect principles underlying the HIT Policy Committee recommendations in the relevant CTEs.

We assume that most NVEs will perform services involving the use or disclosure of IIHI on behalf of health plans and health care providers. Accordingly, we believe that nearly all NVEs would be HIPAA business associates of health plans and health care providers and, pursuant to the HITECH Act, subject to the use and disclosure standards and implementation specifications of the HIPAA Privacy Rule as well as the security standards and implementation specifications in the HIPAA Security Rule. We expect these NVEs would comply with these rules.

Although the HIPAA Privacy and Security Rules would apply to nearly all NVEs in some way, the governance mechanism and specifically the CTEs would, in part, serve to address limited instances of electronic exchange not covered under the privacy and security protections afforded by the HIPAA Privacy and Security Rules. First, the CTEs would extend privacy and security requirements to non-HIPAA-covered entities and non-HIPAA-business associates that engage in nationwide electronic exchange. Second, the CTEs would establish additional requirements not currently addressed by the HIPAA Privacy and Security Rules. Finally, the HIPAA Privacy Rule sets required baseline protections and was not necessarily intended to reflect best practices  30 and the HIPAA Security Rule is scalable and flexible to account for the varying size, resources, technology and security risks faced by covered entities. 31 However, given the nature of the services NVEs will be performing, we believe that it would be appropriate and justified in the context of electronic exchange for NVEs to be held to a more uniform set of practices and policies than those that may be adopted to comply with the HIPAA Privacy and Security Rules.

• Condition [S-1]: An NVE must comply with sections 164.308, 164.310, 164.312, and 164.316 of title 45 of the Code of Federal Regulations as if it were a covered entity, and must treat all implementation specifications included within sections 164.308, 164.310, and 164.312 as “required.”

For most health care organizations in the United States, the HIPAA Security Rule is the preeminent framework for securing electronic health information. Published in February 2003, the HIPAA Security Rule sets forth a flexible and scalable approach to apply to a broad range of HIPAA covered entities, including covered provider practices (large and small), payers, and health care clearinghouses, all of which have different needs and resources with respect to securing electronic health information in their environments. In providing this flexibility, the HIPAA Security Rule provides both “required” and “addressable” implementation specifications. Covered entities must meet the “required” implementation specifications, but are permitted to take equivalent, alternative approaches to “addressable” implementation specifications if the covered entity has determined that such implementation specifications would not be reasonable or appropriate for the entity's particular environment. In 2009, with the enactment of the HITECH Act, Congress specified that sections 164.308, 164.310, 164.312, and 164.316 of title 45 of the Code of Federal Regulations shall apply to business associates in the same manner as they apply to covered entities. Accordingly, and because we believe that nearly all NVEs will be business associates of covered entities (or covered entities themselves), we believe that mirroring this statutory requirement is the best starting point for NVEs' overall security practices. That being said, one of our main goals in establishing a governance mechanism for the nationwide health information network is to establish a consistent trust baseline for electronic exchange. Thus, we believe that in order to strengthen the public's trust of NVEs and NVEs' trust of other NVEs that all of the HIPAA Security Rule's “addressable” implementation specifications should be required for all NVEs. We believe that this approach provides greater certainty and more uniformity with respect to the security practices NVEs would need to follow.

Question 22: Are there HIPAA Security Rule implementation specifications that should not be required of entities that facilitate electronic exchange? If so, which ones and why?

Question 23: Are there other security frameworks or guidance that we should consider for this CTE? Should we look to leverage NISTIR 7497 Security Architecture Design Process for Health Information Exchanges?  32 If so, please also include information on how this framework would be validated.

• Condition [S-2]: An NVE must only facilitate electronic health information exchange for parties it has authenticated and authorized, either directly or indirectly.

We believe that it is important for an NVE to offer the parties for which it facilitates exchange a high degree of certainty that only authorized parties are able to use its exchange services. The requirement to authenticate and authorize the parties for which the NVE facilitates exchange could be accomplished either directly or indirectly by the NVE. In the case of the latter, the NVE would need to require the party for which it facilitates electronic exchange to perform authentication and authorization in order to be in compliance with this CTE. We believe that if an NVE cannot directly authenticate and authorize the parties for which it facilitates exchange (which could be at an organizational level), that it would be critical for the NVE to “flow down” these responsibilities and obtain reasonable assurance from the party(ies) for which it facilitates exchange that only authenticated and authorized personnel are able to access electronic exchange services it facilitates. For example, if the NVE were to facilitate an electronic exchange for a hospital, it would be able to satisfy this CTE (indirectly) by ensuring that the hospital had a process in place to authenticate and authorize its own personnel's use of the exchange services provided by the NVE. In proposing the adoption of this CTE, we would also look to NIST SP800-63(v1.02) “Electronic Authentication Guideline” and any other best practices available to determine the appropriate authentication requirements NVEs would need to satisfy in facilitating electronic exchange.

Question 24: What is the most appropriate level of assurance that an NVE should look to achieve in directly authenticating and authorizing a party for which it facilitates electronic exchange?

Question 25: Would an indirect approach to satisfy this CTE reduce the potential trust that an NVE could provide? More specifically, should we consider proposing specific requirements that would need to be met in order for indirect authentication and authorization processes to be implemented consistently across NVEs?

Question 26: With respect to this CTE as well as others (particularly the Safeguards CTEs), should we consider applying the “flow down” concept in more cases? That is, should we impose requirements on NVEs to enforce upon the parties for which they facilitate electronic exchange, to ensure greater consistency and/or compliance with the requirements specified in some CTEs?

• Condition [S-3]: An NVE must ensure that individuals are provided with a meaningful choice regarding whether their IIHI may be exchanged by the NVE.

In considering the recommendations that we received from the HIT Policy Committee, 33 we believe that individuals should be able to exercise meaningful choice with respect to how their electronic health information is exchanged. The HIT Policy Committee explained that “meaningful choice” could be either an opt-in or opt-out model, 34 or more granular consents so long as individuals or their legal designees are adequately and clearly informed about how and why their information will be exchanged, in advance of making a decision whether to participate in electronic exchange. The HIT Policy Committee also stated that the process of providing meaningful choice should include communicating to an individual the following: 1) that choice is not a condition of receiving medical treatment; 2) that the choice will be commensurate with the circumstances for why IIHI is being exchanged; 3) that the choice is consistent with reasonable patient privacy, health, and safety expectations; and 4) that the choice is revocable—that is it can be retracted.

In terms of providing meaningful choice, we believe that an NVE should be required to do the following to satisfy this CTE, either: directly provide the patient with meaningful choice regarding the exchange of their IIHI; or ensure (with some means of verification) that the health care provider for which it facilitates electronic exchange has provided individuals with meaningful choice regarding the exchange of their IIHI.

Mindful that the HIT Policy Committee's recommendations are premised on the belief that different means of exchange may invoke different privacy and security concerns, we are considering, within the context of Interoperability CTE I-1, 35 what exceptions to the provision of meaningful choice would be prudent. We are considering the following three situational exceptions within this specific context: (1) When the NVE is engaging in the exchange of IIHI for purposes of medical treatment; (2) when information exchange is mandatorily required under law; or (3) the NVE is acting solely as a conduit and not accessing or using IIHI beyond what is required to encrypt and route it to its intended destination. For example, if we were to adopt a CTE that excluded those purposes it would mean that no patient choice would be required when one provider purposefully elects to electronically exchange health information directly with another provider for treatment purposes (e.g., sending a referral to a specific provider, transmitting a prescription) beyond what is required in current law or what has been customary practice. The HIT Policy Committee has yet to assess and provide recommendations to the National Coordinator on the circumstances under which meaningful choice should be required for other electronic exchange purposes. We note, however, that the HIPAA Privacy Rule sets a baseline that requires express authorization (an opt-in approach) for certain purposes, such as marketing with very limited exceptions.

Question 27: In accommodating various meaningful choice approaches (e.g., opt-in, opt-out, or some combination of the two), what would be the operational challenges for each approach? What types of criteria could we use for validating meaningful choice under each approach? Considering some States have already established certain “choice” policies, how could we ensure consistency in implementing this CTE?

Question 28: Under what circumstances and in what manner should individual choice be required for other electronic exchange purposes?

Question 29: Should an additional “meaningful choice” Safeguards CTE be considered to address electronic exchange scenarios (e.g., distributed query) that do not take place following Interoperability CTE I-1?

Question 30: The process of giving patients a meaningful choice may be delegated to providers or other users of NVE services (as opposed to the patient receiving the choice from the NVE directly). In such instances, how would the provision of meaningful choice be validated?

• Condition [S-4]: An NVE must only exchange encrypted IIHI.

Encryption is often regarded as a best practice for maintaining the confidentiality of IIHI transmitted across networks. To satisfy this condition, we believe that an NVE would need to be able to either (1) exchange already encrypted IIHI, (2) encrypt IIHI before exchanging it, or (3) establish and make available encrypted channels through which electronic exchange could take place (or do any combination of the above). We would expect NVEs to implement industry best practices for doing so. In order to provide some degree of flexibility, we would establish a general CTE for encryption of data in motion and publish more specific guidance on best practices. These requirements and guidelines would be consistent with the guidance provided by HHS' OCR related to breach notification and standards for rendering unsecured protected health information unusable, unreadable, or indecipherable to unauthorized individuals. 36

Question 31: Should there be exceptions to this CTE? If so, please describe these exceptions.

• Condition [S-5]: An NVE must make publicly available a notice of its data practices describing why IIHI is collected, how it is used, and to whom and for what reason it is disclosed.

Under the HIPAA Privacy Rule (45 CFR 164.520), individuals have the right to adequate notice of the uses and disclosures of their protected health information, a right which a covered entity fulfills by furnishing a notice of privacy practices (NPP). Generally speaking, the HIPAA Privacy Rule NPP must include a description of the types of uses and disclosures a HIPAA covered entity is permitted to make for treatment, payment, and health care operations, as well as a description of other uses and disclosures which are permitted without the individuals' written authorization.

The type of notice contemplated by this CTE would differ in certain aspects from a HIPAA Privacy Rule NPP. First, rather than a notice directed only to consumers whose health information is being used or disclosed, we believe that NVEs should clearly give advance notice to those who use their services, as well as to the general public, why they collect IIHI, how it is used, and to whom and for what reason it is disclosed. Second, with the goal of increasing public trust and enabling electronic exchange, we believe that an NVE should give notice about what it actually does do, rather than what it is legally permitted to do, with the IIHI for which it is responsible for exchanging. Third, we believe a NVE should give explicit and specific notice about certain uses and disclosures of health information, such as the specific circumstances when it will de-identify health information and provide it to third parties. For example, if the NVE de-identifies IIHI and then provides such de-identified information to pharmaceutical or research companies, it would need to include a description of this action in its notice to satisfy the CTE described above. This would address the concerns of some stakeholders, including certain members of the HIT Policy Committee, that certain persons and organizations may not be fully aware that an entity transmitting data on their behalf may de-identify their data and then share such de-identified data with third parties. We also believe this CTE is consistent with the privacy and security “core values” recommended by the HIT Policy Committee on September 1, 2010.

Question 32: Are there specific uses or actions about which we should consider explicitly requiring an NVE to be transparent?

Question 33: Would an NVE be able to accurately disclose all of the activities it may need to include in its notice? Should some type of summarization be permitted?

Question 34: What is the anticipated cost and administrative burden for providing such notice?

Question 35: Should this CTE require that an NVE disclose its activities related to de-identified and aggregated data?

Question 36: Should this CTE require that an NVE just post its notice on a Web site or should it be required to broadly disseminate the notice to the health care providers and others to which it provides electronic exchange services?

• Condition [S-6]: An NVE must not use or disclose de-identified health information to which it has access for any commercial purpose.

As noted above, some stakeholders, as well as the HIT Policy Committee, have expressed concern that certain persons may not be fully aware that someone transmitting data on their behalf may use de-identified data for profit seeking opportunities. This scenario appears to have raised two concerns: the potential that certain recipients of de-identified data possess their own established databanks and may be able to re-identify the data by comparing it to existing data; and providers' losing trust in a system in which the data for which they are responsible, although de-identified, is monetized. We recognize that under the HIPAA Privacy Rule, a provider could prohibit a business associate in its business associate agreement from de-identifying data and then subsequently using the de-identified data. However, we are aware of circumstances where certain business associates have drafted business associate agreements that allow for such de-identification of data for the business associates' purposes. Additionally, smaller covered entities may lack the economic resources and expertise necessary to effectively negotiate business associate agreements, in particular with respect to preventing the commercialization of health information. We believe that having a CTE prohibiting NVEs from using or disclosing de-identified health information for economic gain would alleviate the concerns that have been raised about potential re-identification of the data. 37 We also believe that such a prohibition would increase providers' trust in exchanging their data through an NVE.

Question 37: What impact, if any, would this CTE have on various evolving business models? Would the additional trust gained from this CTE outweigh the potential impact on these models?

Question 38: On what other entities would this have an effect?

• Condition [S-7]: An NVE must operate its services with high availability.

We are considering requiring NVEs to demonstrate that the systems and processes they have in place can assure users that its services will be available when needed. We consider high availability to mean near 24 hours a day, 7 days a week availability. In other words, to demonstrate compliance with this CTE, an NVE would need to ensure its services would be available at all times, except for very limited, scheduled periods of time. We believe such a requirement is necessary because the need to engage in electronic exchange may occur at any time. In cases where two or more NVEs are necessary to route health information from the source to its ultimate destination, NVEs should have reasonable assurances that the other parties on which they depend to route health information will be available for electronic exchange.

Question 39: What standard of availability, if any, is appropriate?

• Condition [S-8]: If an NVE assembles or aggregates health information that results in a unique set of IIHI, then it must provide individuals with electronic access to their unique set of IIHI.

The HIPAA Privacy regulations at 45 CFR 164.524 provide individuals with a right to access information maintained in a Designated Record Set (as defined at 45 CFR 164.501). However, this right may not extend to all IIHI that is used or assembled by NVEs to facilitate electronic exchange. Consistent with the “Access” principle expressed in the Privacy and Security Framework, we are considering adopting a CTE that would require an NVE to provide individuals with access to any information the NVE creates that results in a unique set of IIHI. In this context, and for the purpose of this CTE, we consider the IIHI that an NVE assembles or aggregates itself and retains on an individual to constitute a “unique set of IIHI” because the NVE would be the only party through which this information could be accessed (i.e., the individual would not be able to readily recreate the NVE's unique set of IIHI by requesting access to the information held by each of his or her providers that have a relationship with the NVE). For example, if multiple health care providers seek to electronically exchange health information for a given patient, then the NVE facilitating these exchanges would be in a position to aggregate the patient data it receives thus generating a unique set of IIHI. This CTE would require that an individual have access to this unique set of IIHI if he or she is unable to access the same set of information through some other singular channel (e.g., by making a standard HIPAA access request to a single health care provider).

Question 40: What further parameters, if any, should be placed on what constitutes a “unique set of IIHI”?

• Condition [S-9]: If an NVE assembles or aggregates health information which results in a unique set of IIHI, then it must provide individuals with the right to request a correction and/or annotation to this unique set of IIHI.

Building on the Safeguard CTE [S-8] above and consistent with the “Correction” principle in the Privacy and Security Framework, we believe that any NVE that must provide an individual with the right to access the unique set(s) of IIHI it maintains, should also be required to provide individuals with the right to request a correction and/or annotation to this unique set of IIHI.

Question 41: If an NVE were to honor an individual's request for a correction to the unique set of IIHI that it maintains, what impact could such a correction have if the corrected information was accessible by health care providers and not used solely for the NVE's own business processes?

Question 42: Are there any circumstances where an NVE should not be required to provide individuals with the ability to correct their IIHI?

• Condition [S-10]: An NVE must have the means to verify that a provider requesting an individual's health information through a query and response model has or is in the process of establishing a treatment relationship with that individual.

The HIPAA Privacy Rule does not set specific requirements for when a health care provider may request information maintained by other providers for treatment purposes. The duty to protect health information is placed almost exclusively on the discloser, and the requester bears little responsibility. 38 More specifically, the HIPAA Privacy Rule permits providers to request and disclose information about a patient “to carry out treatment” without qualifying that the information must be for the treatment of that particular patient. This means that providers who may participate in health information exchange through an NVE based on the query and response model are permitted by HIPAA to disclose an individual's information for treatment purposes, and to have the NVE make the disclosure on their behalf, even if the recipient is treating a patient that is not the subject of the record.

In theory, a query and response model would allow a provider to seek records of unknown individuals by querying on a particular diagnosis or demographic information and retrieve all records responsive to the query. 39 If the provider had any treatment purpose for such a query, even if she lacked an actual treatment relationship with each patient whose record she received, there would not be a violation of the HIPAA Privacy Rule. We believe that in order to ensure trust in the query and response model, that: (1) As a business practice, the NVE should restrict access to patient data for treatment purposes to providers who have or are in the process of establishing a treatment relationship with the patient; and (2) that as a safeguard CTE, the NVE be required to have mechanisms in place to verify that such a relationship exists.

Question 43: What method or methods would be least burdensome but still appropriate for verifying a treatment relationship?

Question 44: Are there circumstances where a provider should be allowed access through the NVE to the health information of one or more individuals with whom it does not have a treatment relationship for the purpose of treating one of its patients?

As previously described, Interoperability CTEs would focus on the technical conditions for electronic exchange. This would include the standards and implementation specifications needed to ensure that electronic health information can be exchanged in a manner that allows for consistent and meaningful interpretation across systems. While this initial set of Interoperability CTEs primarily focuses on transport standards and conditions needed to support planned electronic exchange, we believe that they could also include, where appropriate or necessary for electronic exchange to take place, additional specificity in the form of content exchange standards and vocabulary/code set standards.

Condition [I-1]: An NVE must be able to facilitate secure electronic health information exchange in two circumstances: (1) When the sender and receiver are known; and (2) when the exchange occurs at the patient's direction.

This Interoperability CTE would address “planned” electronic exchange scenarios when the sender and receiver are known ( e.g., public health reporting, transitions of care) and scenarios when the exchange occurs at the patient's direction or with the patient's knowledge. An NVE seeking validation to facilitate planned electronic exchange would need to be able to do so according to secure specifications. We anticipate that this first governance rulemaking would focus solely on the specifications NVEs would need to be able to use to transport electronic health information for planned electronic exchange and would not focus on content exchange or vocabulary standards which we have largely addressed through our regulations related to EHR technology certification.

To satisfy this CTE, we are considering requiring an NVE to implement and use one of two types of transport specifications. The first type includes the transport specifications developed under the Direct Project, which are the Applicability Statement for Secure Health Transport, and the Cross-Enterprise Document Reliable Interchange (XDR) and Cross-Enterprise Document Media Interchange (XDM) for Direct Messaging. The second type includes the transport specification developed under the Exchange, SOAP-Based Secure Transport RTM version 1.0. 40 41

The Applicability Statement for Secure Health Transport specification describes how electronic health information can be securely transported using simple mail transport protocol (SMTP), Secure/Multipurpose Internet Mail Extensions (S/MIME), and X.509 certificates. The XDR and XDM for Direct Messaging specification describes the use of XDR and XDM as a means to transport electronic health information and would serve as a bridge between entities using/following web services and SMTP transport methods. We believe these two options would make it possible for a majority, if not all, interested entities who facilitate planned electronic exchange to satisfy this CTE.

Question 45: What types of transport methods/standards should NVEs be able to support? Should they support both types of transport methods/standards (i.e., SMTP and SOAP), or should they only have to meet one of the two as well as have a way to translate (e.g., XDR/XDM)?

Question 46: If a secure “RESTful” transport specification is developed during the course of this rulemaking, should we also propose it as a way of demonstrating compliance with this CTE?

• Condition [I-2]: An NVE must follow required standards for establishing and discovering digital certificates.

Digital certificates are used to create a high-level assurance that an organization exchanging electronic health information is the entity it claims to be. Therefore, having common baseline expectations for establishing digital certificates and making the public keys discoverable are foundational elements for rapid, scalable electronic exchange. In this regard, in April 2011, the HIT Standards Committee approved and transmitted a set of recommendations on digital certificates for the National Coordinator to consider. Digital certificates are used both as part of the transport specifications developed under the Direct Project as well as the Exchange to authenticate entities involved in electronic exchange. For the purposes of this CTE, we are considering adopting as requirements the recommendations expressed by the HIT Standards Committee, specifically its recommendations on the requirements and evaluation criteria for digital certificates. We are also considering its second recommendation with respect to cross-certifying with the Federal Bridge Certificate Authority (the Federal Bridge).

Question 47: Are the technical specifications (i.e., Domain Name System (DNS) and the Lightweight Directory Access Protocol (LDAP)) appropriate and sufficient for enabling easy location of organizational certificates? Are there other specifications that we should also consider?

Question 48: Should this CTE require all participants engaged in planned electronic exchange to obtain an organizational (or group) digital certificate consistent with the policies of the Federal Bridge?   42

• Condition [I-3]: An NVE must have the ability to verify and match the subject of a message, including the ability to locate a potential source of available information for a specific subject.

The intent of this CTE is to provide guidance for NVEs to verify and match message subjects ( i.e., patients) using a record locater services, master patient index, or another approach. In February 2011, the Privacy and Security Tiger team issued a set of recommendations to the HIT Policy Committee regarding patient matching. The recommendations centered on standardizing demographic data fields, evaluating matching consistency, accountability, developing and disseminating best practices, and supporting the role of the individual patient. Subsequently, the HIT Standards Committee formed the Patient Matching Power Team to further explore these recommendations. The Patient Matching Power Team focused specifically on the use case of near time, direct patient care. 43

Before exploring the specifications for patient matching, the Power Team first developed a set of baseline assumptions around the appropriate levels of specificity and sensitivity. For this use case, the Power Team assumed that specificity was more critical than sensitivity and that specificity of at least 99.9% and sensitivity of 95% would be an appropriate range for ensuring a high level of matching accuracy and accountability. These levels were used because sensitivities lower than 95% could result in incomplete views of the patient's record and specificities lower than 99.9% could result in incorrect matching, putting both the patient and the inappropriately matched individual at risk.

In August 2011, the Patient Matching Power Team presented several recommendations relating to patient matching to the HIT Standards Committee, which were considered, adopted and submitted to the National Coordinator. Its recommendations included a general principle regarding matching sensitivity and specificity and suggested that a base set of patient attributes should be selected based on demonstrated achievement of those levels. The HIT Standards Committee also recommended that health care providers give patients more of a role in verifying attributes used for matching and that HIT developers should provide a method for identifying missing or unavailable data to be identified and further, that basic validity checks be performed on patient attributes (such as only accepting dates in the past for dates of birth, no more than six 9s or six 0s in a row in the Social Security Number). Finally, the HIT Standards Committee recommended that patient query patterns should follow the “Exchange patient query implementation guide” and that the CDA R2 header formats should be used to represent patient attributes. It was also noted that responses to patient queries should not return any patient attributes that were not included in the original query, but that it may be appropriate for the response to indicate other data that could be useful in matching this patient.

Question 49: Should we adopt a CTE that requires NVEs to employ matching algorithms that meet a specific accuracy level or a CTE that limits false positives to certain minimum ratio? What should the required levels be?

Question 50: What core data elements should be included for patient matching queries?

Question 51: What standards should we consider for patient matching queries?

The third category of CTEs we are considering would focus on an NVE's business practices, including the operational and financial practices to which an NVE would need to adhere. We believe this category of CTEs would be necessary in order to ensure electronic exchange among NVEs takes place unimpeded.

• Condition [BP-1]: An NVE must send and receive any planned electronic exchange message from another NVE without imposing financial preconditions on any other NVE.

Generally speaking, this CTE expresses our belief that any health care provider using an NVE should be able to engage in unimpeded, planned electronic health information exchange with another health care provider using a different NVE. We believe that requiring NVEs to meet this CTE would instill greater confidence in planned electronic health information exchange and among health care providers who would rely on NVEs. In satisfying this CTE, an NVE could not impose business requirements on other NVEs, such as fees that would otherwise prevent another NVE from exchanging electronic health information on behalf of its customer ( e.g., a doctor). We believe this CTE would be especially relevant in preventing instances where an NVE with a significant share of the market would try to leverage their market dominance to impose an economic “rent” on other NVEs (e.g., excessive fees), resulting in market distortions. It would also prevent an NVE from making it difficult for their customers—those using the services offered by the NVE—to conduct electronic exchange with another NVE.

Question 52: Should this CTE be limited to only preventing one NVE from imposing a financial precondition on another NVE (such as fees), or should it be broader to cover other instances in which an NVE could create an inequitable electronic exchange environment?

Question 53: Should this CTE (or another CTE) address the fees an NVE could charge its customers to facilitate electronic exchange or should this be left to the market to determine?

Question 54: Under what circumstances, if any, should an NVE be permitted to impose requirements on other NVEs?

• Condition [BP-2]: An NVE must provide open access to the directory services it provides to enable planned electronic exchange.

In order for planned electronic exchange to take place, and to satisfy this CTE, NVEs would need to make openly available to other NVEs or NVE customers certain services they offer. For example, for electronic exchange to take place following the Direct Project specifications, it would be necessary for an NVE to make openly available a directory of addresses of potential recipients and locatable public keys. While we recognize that the industry is still building its capacity to address this CTE, we believe that it is achievable.

• Condition [BP-3]: An NVE must report on users and transaction volume for validated services.

In order to assess our progress towards nationwide availability and use of health information exchange, it would be useful to have data about the use of NVE services, the types of users, and transaction volume for their validated services. The data should be collected and made available at the aggregate level so as not to expose information about specific customers or patients.

Question 55: What data would be most useful to be collected? How should it be made available to the public? Should NVEs be required to report on the transaction volume by end user type (e.g., provider, lab, public health, patient, etc)?

Stakeholders are encouraged to provide feedback on this initial set of CTEs and in submitting comments suggest other CTEs that we should also consider. The following table summarizes the CTEs as presented in this RFI.

One approach for implementing nationwide electronic exchange can be observed through the Nationwide Health Information Network Exchange. As we described in the background section of this RFI, the Exchange is a confederation of trusted entities that have passed certain requirements for participation. One such requirement includes signing the DURSA, which serves as a legal framework for sharing electronic health information among participants in the Exchange. The DURSA includes “performance and service specifications” which the participating members agree to use in implementing secure electronic exchange. The most recent specifications used by participants in the Exchange can be found on ONC's Web site. 44 These specifications focus on a range of different electronic exchange activities, including specifications for: “Patient Discovery;” “Query for Documents;” “Retrieve Documents;” “Authorization Framework;” “Web Services Registry;” “Access Consent Policies;” and other such specifications with a yet to be determined effective date.

Question 56: Which CTEs would you revise or delete and why? Are there other CTEs not listed here that we should also consider?

Question 57: Should one or more of the performance and service specifications implemented by the participants in the Exchange be included in our proposed set of CTEs? If so, please indicate which one(s) and provide your reasons for including them in one or more CTEs. If not, please indicate which one(s) and your reasons (including any technical or policy challenges you believe exist) for not including them in one or more CTEs.

Question 58: In the notice of proposed rulemaking (NPRM) we intend to subsequently issue, should the above CTEs as well as any others we consider for the NPRM be packaged together for the purposes of validation? In other words, would it make sense to allow for validation to different bundles of safeguard, interoperability, and business practice CTEs for different electronic exchange circumstances?

Question 59: Should we consider including safe harbors for certain CTEs? If so, which CTEs and what should the safe harbor(s) be?

Assuming we were to pursue an approach that includes the adoption of CTEs as part of a governance mechanism for the nationwide health information network, we expect that additional CTEs and revisions to CTEs would be necessary to accommodate policy maturity and technical changes over time. We believe that an inclusive and transparent process to identify, modify, and retire CTEs would be needed to engage stakeholders and would result in more refined and widely accepted CTEs. The purpose of this process would be to identify and assess current electronic exchange needs and to provide a path for determining how best to address them through the CTEs. We envision that rulemaking could be necessary every two years, most likely on years that would alternate with regulations published for EHR Incentive Programs, to keep the CTEs up-to-date and to permit entities to seek validation to new CTEs for other more complex forms of electronic exchange.

We believe that an approach to a CTE maturity life cycle could start with the identification of “emerging” CTEs, followed by the identification of “pilot” CTEs, followed by “national” candidate CTEs which we would consider sufficiently mature to propose for adoption. We believe that the “pilot” stage could empower greater stakeholder participation in governance and could permit the direct submission of best practices to ONC or through one of our advisory committees. It could also potentially enable validation bodies to provide for validation to pilot CTEs which would provide further input in terms of the CTEs' readiness to be identified as national candidate CTEs. We could see using the HIT Policy Committee and HIT Standards Committee to provide a forum to solicit public input on identifying best practices and piloting CTEs in a manner consistent with their statutory authority. We would further envision that this process would follow the procedures and comport with the requirements of section 3004 and other relevant sections of the PHSA, for the development and adoption of standards, implementation specifications, and certification criteria.

Question 60: What process should we use to update CTEs?

Question 61: Should we expressly permit validation bodies to provide for validation to pilot CTEs?

Question 62: Should we consider a process outside of our advisory committees through which the identification and development to frame new CTEs could be done?

We believe that it would benefit the industry to include as part of the governance mechanism, a formal and transparent process to classify technical standards and implementation specifications that could ultimately be adopted within the Interoperability category of CTEs. 45 This process would be informed by the priorities set by ONC based in part on recommendations from the HIT Policy and Standards Committees through an annual review and assessment process.

Through this process, technical standards and implementation specifications could be assigned to one of three classifications:

• “ Emerging” —This classification would refer to the technical standards and implementation specifications that still require additional specification and vetting by the standards development community, have not been broadly tested, have no or low adoption, and have only been implemented within a local or controlled setting.

• “ Pilot” —This classification would refer to the technical standards and implementation specifications that have reached a level of specification maturity and adoption by different entities such that some entities are using them to exchange health information either in a test mode or in a limited production mode.

• “ National” —This classification would refer to the technical standards and implementation that have reached a high-level of specification maturity and adoption by different entities such that most entities are using or are readily able to adopt and use them to exchange health information to conduct business. These technical standards would also be candidates for inclusion in applicable regulations, such as being referenced in an Interoperability CTE.

We believe the governance mechanism can and should be used to promote innovation in the health information exchange market. Therefore, we believe with the identification of the Emerging and Pilot standards and implementation specifications, the governance mechanism could encourage groups of HIT stakeholders to test, learn about, and provide feedback on those standards and implementation specifications and their readiness to be promoted to the next classification.

Question 63: What would be the best way(s) ONC could help facilitate the pilot testing and learning necessary for implementing technical standards and implementation specifications categorized as Emerging or Pilot?

The following figure generally illustrates the classifications discussed above. The upper right hand corner of the figure denotes standards classified as “National,” indicating readiness for national adoption. We highlight the fact that a technical standard could be considered highly mature, albeit, not very adoptable (upper left portion of the figure), or conversely, a standard could also be determined to be highly adoptable, but not very technically mature (lower right portion of the figure). In such instances we would task the HIT Policy and Standards Committees with providing advice on policy and technical justifications for whether a standard with these characteristics should be put on a path toward national adoption.

Coupled with the annual process to identify, review, and assess standards and implementation specifications, we assume that a discrete set of objective criteria would be necessary to assess whether and when a technical standard or implementation specification should be classified differently. We believe the HIT Policy Committee would have a key role in prioritizing technical standards and implementation specifications needs and the HIT Standards Committee could have an integral role in advising ONC about how to classify such technical standards and implementation specifications. The HIT Standards Committee has had initial discussions on what classification criteria could look like, such as: maturity; market adoption, need; deployment complexity; and the maturity of the underlying technology for a given standard.

Question 64: Would this approach for classifying technical standards and implementation specification be effective for updating and refreshing Interoperability CTEs?

Question 65: What types of criteria could be used for categorizing standards and implementation specifications for Interoperability CTEs? We would prefer criteria that are objective and quantifiable and include some type of metric.

As part of an NPRM, we would perform a regulatory impact analysis consistent with Executive Order 12866 and other applicable requirements. The focus of the RFI is to obtain public comment on what would be necessary to launch the structures, processes, and initial requirements to establish a governance mechanism for the nationwide health information network, but also interested in public comment on any publicly available data that we could subsequently use in a future NPRM's regulatory impact statement to determine the costs and benefits of such a governance mechanism.

Question 66: We encourage comment and citations to publicly available data regarding the following:

1. The potential costs of validation;

2. The potential savings to States or other organizations that could be realized with the establishment of a validation process to CTEs;

3. The potential increase in the secure exchange of health information that might result from the establishment of CTEs;

4. The potential number of entities that would seek to become NVEs; and

5. The NVE application and reporting burden associated with the conceptual proposals we discuss.

The spiny lobster fishery of the Gulf of Mexico (Gulf) and the South Atlantic is managed under the FMP. The FMP was prepared by the Councils and implemented through regulations at 50 CFR parts 622 and 640 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).

The ESA requires analyses to determine whether, and to what extent, fishing operations impact threatened species including threatened staghorn and elkhorn corals. A 2009 biological opinion on the continued authorization of the spiny lobster fishery contained specific terms and conditions required to implement the prescribed reasonable and prudent measures ( http://sero.nmfs.noaa.gov/pr/esa/Fishery%20Biops/Final%20SL%20BO.pdf ). The 2009 biological opinion requires NMFS and the Councils to work together to protect areas of staghorn and elkhorn coral. Required measures in the 2009 ESA biological opinion include (1) the creation of new or expansion of existing closed areas for lobster trap fishing where colonies of these threatened species are present, and (2) implementing spiny lobster trap line marking requirements. These actions were originally included in Amendment 10 to the FMP. However, in Amendment 10 to the FMP, the Councils chose to take no action on these measures to allow for additional stakeholder input.

This rule proposes to prohibit spiny lobster trap fishing in 60 closed areas that cover a total of 5.9 mi 2 (15.3 km 2 ), distributed throughout the South Atlantic EEZ off the Florida Keys. Staff from the Councils and NMFS worked with various stakeholders to develop the proposed areas that would be closed to lobster trap gear. These areas were chosen to protect coral colonies with high conservation value and areas of high coral density. The proposed closed areas are intended to protect threatened coral species and meet the applicable requirements of the 2009 biological opinion.

Amendment 11 also contains an action to consider a spiny lobster trap line marking requirement. The Councils considered alternatives under this management action but chose to take no action at this time to allow time for additional testing of line marking methods. The Florida Fish and Wildlife Conservation Commission is currently conducting a study of various methods for marking lobster trap lines that should be completed during 2013. The Councils intend to revisit the requirement to mark spiny lobster trap gear when the results of that study are available. The biological opinion, as amended, requires implementation of the terms and conditions regarding lobster trap line marking by August 6, 2017.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Act, the NMFS Assistant Administrator has determined that this proposed rule is consistent with the amendment, other provisions of the Magnuson-Stevens Act, and other applicable law, subject to further consideration after public comment.

This proposed rule has been determined to be not significant for purposes of Executive Order 12866.

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration that this proposed rule, if adopted, would not have a significant economic impact on a substantial number of small entities. The factual basis for this determination is as follows.

The purpose of this proposed rule is to implement conservation measures to help protect threatened coral species in a manner that complies with measures established in the 2009 biological opinion on the spiny lobster fishery. The 2009 biological opinion was prepared in accordance with the ESA. The Magnuson-Stevens Act and the ESA provide the statutory basis for this proposed rule. No duplicative, overlapping, or conflicting Federal rules have been identified. This rule would not establish any new reporting or record-keeping requirements.

This proposed rule, if implemented, would be expected to affect all vessels that engage in commercial trap fishing for spiny lobster in certain parts of the South Atlantic EEZ off Monroe County, Florida, as managed under the FMP. Landings of spiny lobster occur predominantly in the Florida Keys (Monroe County) and elsewhere in south Florida. A relatively small amount of spiny lobster landings have been reported for other states in the Gulf and South Atlantic since 1977. Fishing for spiny lobster in Florida is managed cooperatively by the Councils and the State of Florida. Florida collects the data used to analyze spiny lobster activity in the commercial and recreational sectors.

Commercial and for-hire fishing vessels that fish for spiny lobster in state and Federal waters off Florida must have the applicable Florida permits/licenses. For commercial vessels that want to tail lobster in Federal waters, a Federal lobster tailing permit is additionally required. On average, during 2006-2010, 776 vessels per year landed spiny lobster commercially in Florida. These 776 vessels averaged $47,274 per vessel annually in gross revenue for all species landed, with $28,489 for spiny lobster, while the remainder of their revenue came from the harvest of other species including stone crab, snapper-grouper, king mackerel, and shrimp. Among the 776 vessels, 271 landed spiny lobster from the EEZ. Out of the 271 vessels landing spiny lobster from the EEZ, there were 128 vessels that landed spiny lobster from the Florida Keys within the South Atlantic EEZ using trap gear, and they averaged $98,845 in gross revenue per vessel.

The Small Business Administration has established size criteria for all major industry sectors in the U.S. including fish harvesters. A business involved in commercial shellfish harvesting is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $4.0 million (NAICS code 114112, shellfish fishing) for all its affiliated operations worldwide. A for-hire business involved in fish harvesting is classified as a small business if it is independently owned and operated, is not dominant in its field of operation (including its affiliates), and has combined annual receipts not in excess of $7.0 million (NAICS code 713990, recreational industries). Based on the average revenue estimates provided above, all commercial and for-hire fishing vessels expected to be directly affected by this proposed rule are determined for the purpose of this analysis to be small business entities.

This proposed rule, if implemented, would prohibit the commercial harvest of spiny lobster using trap gear in certain areas of the South Atlantic EEZ off Florida (off Monroe County) to protect threatened species of coral. The commercial harvest of spiny lobster utilizing types of gear other than traps, notably diving gear, would not be prohibited through this proposed rule; however, the commercial harvest of spiny lobster using diving gear is estimated to be minimal in the proposed lobster trap gear closed areas. For-hire fishing for spiny lobster in the affected areas of the EEZ has not been quantified. For-hire activity is not subject to these proposed regulations; however, this activity could increase in the proposed closed areas as a result of the absence of commercial trap fishing.

For the approximately 128 vessels that land spiny lobster from the Florida Keys within the South Atlantic EEZ using trap gear, the proposed closure would reduce their gross revenue by an estimated 0.19 to 0.35 percent, annually. A reduction in gross revenue of .35 percent or less is generally not considered a significant economic impact. Because the reduction in gross revenue is the only anticipated economic impact from this action, the proposed closure would therefore not be expected to have a significant economic impact on the approximately 128 vessels that land spiny lobster from the Florida Keys within the South Atlantic EEZ using trap gear.

Because this action is not expected to have a significant impact on a substantial number of small entities, an initial regulatory flexibility analysis is not required and none has been prepared.

For the reasons set out in the preamble, 50 CFR part 640 is proposed to be amended as follows: