I. Background

Section 5200 of the Revised Statutes, 12 U.S.C. 84, provides that the total loans and extensions of credit by a national bank to a person outstanding at one time shall not exceed 15 percent of the unimpaired capital and unimpaired surplus of the bank if the loan is not fully secured, plus an additional 10 percent of unimpaired capital and unimpaired surplus if the loan is fully secured. Section 5(u)(1) of the Home Owners' Loan Act (HOLA), 12 U.S.C. 1464(u)(1), provides that section 5200 of the Revised Statutes “shall apply to savings associations in the same manner and to the same extent as it applies to national banks.” In addition, section 5(u)(2) of HOLA, 12 U.S.C. 1464(u)(2), includes exceptions to the lending limits for certain loans made by savings associations. These HOLA provisions apply to both Federal and state-chartered savings associations.

OCC regulations at 12 CFR parts 32 and 160.93 implement these statutes for national banks and state and Federal savings associations, 1 respectively. Section 160.93 specifically applies 12 U.S.C. 84 and the lending limit regulations and interpretations promulgated by the OCC for national banks to Federal and state savings associations. Section 160.93 also implements specific statutory lending limit exceptions unique to Federal and state savings associations.

Section 610 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) (Dodd-Frank Act), amends section 5200 of the Revised Statutes  2 to provide that the definition of “loans and extensions of credit” includes any credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between a national bank and that person. This amendment is effective July 21, 2012. By virtue of section 5(u)(1) of the HOLA, this new definition of “loans and extensions of credit” applies to all savings associations as well as to national banks.

This interim final rule amends part 32 to consolidate the lending limit rules applicable to national banks and savings associations. Specifically, the interim final rule amends the authority section, § 32.1(a), to include relevant statutory citations for savings associations; amends the scope section, § 32.1(c), to include savings associations; inserts the term “savings association” elsewhere throughout the rule where necessary; and replaces “OCC” or “Comptroller” with “appropriate Federal banking agency,” as appropriate. The rule defines “appropriate Federal banking agency” as having the same meaning as in 12 U.S.C. 1813(q). For purposes of part 32, therefore, “appropriate Federal banking agency” means the OCC in the case of a national bank or Federal savings association, and the Federal Deposit Insurance Corporation (FDIC) in the case of a state savings association. The OCC also is removing 12 CFR 160.93 as no longer necessary in light of this consolidation. These changes will eliminate duplication and create efficiencies by establishing a single set of lending limit rules for national banks and savings associations, without substantially changing the requirements.

Certain statutory provisions apply only to savings associations, and the interim final rule amends part 32 by adding § 32.3(d) to account for these statutory exceptions, which are included in current § 160.93. First, 12 U.S.C. 1464(u)(2)(A)(i) permits a savings association to make loans to one borrower in an amount not to exceed $500,000, even if its limit as calculated under section 84 would be lower. Second, 12 U.S.C. 1464(u)(2)(A)(ii) prescribes a specific lending limit to develop domestic residential housing units provided certain conditions are met. This latter exception as included in the interim final rule differs from the provision in § 160.93 in that it incorporates a change made by section 404 of the Financial Services Regulatory Relief Act of 2006, which removed from 12 U.S.C. 1464(u)(2)(A)(ii) the requirement that the final purchase price of each single family dwelling unit not exceed $500,000.

To complement the inclusion of these exception, the interim final rule adds an appendix to part 32 that is substantively identical to the current appendix to § 160.93 and that provides further interpretation of the domestic residential housing unit development exception. The interim final rule also adds to § 32.2 the definition of “residential housing units,” a term used in this exception and included in § 160.93(b).

In addition, the interim final rule carries over in new § 32.3(d)(3) the provision now contained in § 160.93(d)(5), 3 which provides that notwithstanding the lending limit, a Federal savings association may invest up to 10 percent of unimpaired capital and unimpaired surplus in obligations of one issuer evidenced by commercial paper or corporate debt securities that are, as of the date of purchase, investment grade. 4

The interim final rule also deletes the current provision at § 160.93(h), which states that the OCC may impose more stringent restrictions on a Federal savings association's loans to one borrower if the agency determines that such restrictions are necessary to protect the safety and soundness of the savings association, since this provision simply repeats section 5(u)(3) of HOLA, 12 U.S.C. 1464(u)(3). The OCC also has authority to take action to prevent any type of unsafe or unsound lending practice by a savings association (or a national bank) on a case-by-case basis, and the OCC's broad authority under 12 U.S.C. 84(d)(1) to establish lending limits applicable to particular categories or classes of loans or extensions of credit broadly authorizes adjustments to the lending limits across types of loans and types of institutions. Furthermore, § 32.1(c)(4), as revised, provides that loans and extensions of credit made by national banks, savings associations, and their domestic operating subsidiaries must be consistent with safe and sound banking practices.

The treatment of financed sales of bank assets in part 32, § 32.2(k)(2)(iii), and the provision now contained in the savings association rule, § 160.93(e), addressing the financed sale of real property acquired in satisfaction of debts previously contracted (DPC property) are comparable. Specifically, current § 32.2(k)(2)(iii) provides that the financed sale of bank assets is not treated as a loan for purposes of the lending limit if the financing does not place the bank in a worse position than when the bank held title to the assets. Section 160.93(e) applies the same treatment to the financed sale of DPC property. The final rule incorporates savings associations into the part 32 provision, renumbered as § 32.2(q)(2)(iii) by this interim final rule. While the scope of the national bank rule is somewhat broader, covering the financed sale of all bank assets and not just DPC property, the financed sale of other bank assets, subject to the existing requirement that the sale not place the bank in a worse position, is consistent with safety and soundness considerations. OCC supervisory experience does not indicate that exempting the financed sale of all bank assets from the general lending limit, where the sale does not place the bank in a worse position, has been a problem at national banks, and therefore the interim final rule applies such treatment to the financed sale of a savings association's assets. Accordingly, under the interim final rule, financed sales of a savings association's own assets, including Other Real Estate Owned, do not constitute loans or extensions of credit if the financing does not put the institution in a worse position than when it held title to the assets. Financed sales that put the savings association in a worse position than when it held title to the assets are subject to the general combined limit set forth in § 32.3(a). This treatment is consistent with § 160.93(e).

The interim final rule also revises the scope provision in part 32. Current § 32.1(c) excludes loans made to affiliates, operating subsidiaries, or Edge Act or Agreement Corporation subsidiaries. The amendment incorporates the exclusion in § 160.93(a) of loans to certain savings association service corporations. It also broadens in some respects the exclusion for loans to certain subsidiaries of national banks. As amended, the exclusion also will apply to loans to any subsidiary consolidated with the bank under Generally Accepted Accounting Principles (GAAP).

Question 1: Has the OCC appropriately addressed the applicability of the lending limit to loans made to subsidiaries with respect to the amendments made to the scope section?

Under the interim final rule, savings associations are required to calculate their lending limits in accordance with the rules set forth in § 32.4. Although stated differently in § 160.93(f), the calculation rule for a national banks and savings associations lending limit produces the same result. Section 32.4 provides that a national bank shall calculate its lending limit as of (1) the most recent of the last day of the preceding calendar quarter (effective as of the earlier of the date on which the bank's Consolidated Reports of Condition and Income (Call Report) is submitted or the date it is required to be submitted) or (2) the date on which there is a change in the bank's capital category (effective when the lending limit is to be calculated.) The OCC may require more frequent calculations for safety and soundness reasons. The current rule for savings associations, set forth at § 160.93(f), provides for the savings association to calculate its lending limit as of the most recent periodic report required to be filed prior to the date of the loan unless the savings association knows or has reason to know of a significant change subsequent to filing the report. Under § 160.93(f), the most recent periodic report is the savings association's Call Report, which is filed, as with national banks, for each calendar quarter. A “significant change” would include a change in the savings association's capital category. Therefore, there is no substantive difference in how a savings association will calculate its lending limit under the interim final rule.

Part 32 and § 160.93 differ in certain respects and there are some differences that are not being incorporated into part 32. First, the scope of part 32 is narrower than that of § 160.93. Part 32 applies the lending limit restrictions to loans and extensions of credit made by national banks and their domestic operating subsidiaries. The lending limit restrictions in current § 160.93 apply to loans made by savings associations and all their subsidiaries.

Question 2: Has the OCC appropriately addressed the applicability of the lending limit to loans made by subsidiaries of savings associations by narrowing the scope of the rule to domestic operating subsidiaries?

Second, § 160.93(f) requires savings associations to document their lending limit compliance if the loan is greater than $500,000 or 5 percent of unimpaired capital and unimpaired surplus. The interim final rule does not include this unique documentation requirement in part 32. Consistent with safe and sound banking practices, institutions should always maintain documentation showing compliance with the lending limit.

The interim final rule also makes a clarifying change to § 32.7, Residential real estate loans, small business loans, and small farm loans, by amending the title of this section to reference the “Supplemental Lending Limits Program,” and by replacing the phrase “special lending limits” with “supplemental lending limits” throughout the section. This conforms § 32.7 to the terminology currently used by the OCC.

The interim final rule amends part 32 to implement section 610 of the Dodd-Frank Act. Section 610 amends section 5200(b) of the Revised Statutes  5 to provide that the definition of “loans and extensions of credit” includes any credit exposure to a person arising from a derivative transaction, repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction between a national bank and the person. Section 610 also amends section 5200(b) by adding a definition of “derivative transaction” to include any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets. These amendments are effective July 21, 2012, two years after enactment of the Dodd-Frank Act.

Section 610 adds to the scope and complexity of the lending limits. To implement these new requirements, the interim final rule amends the definition of “loans and extensions of credit” in § 32.2, to include certain credit exposure arising from a derivative transaction or a securities financing transaction. A securities financing transaction is defined as a repurchase agreement, reverse repurchase agreement, securities lending transaction, or securities borrowing transaction. The interim final rule also removes current § 32.2(k)(1)(iii), which excludes repurchase agreements for Type I securities from the definition of loan or extension of credit. Instead, it adds a provision, set forth at § 32.3(c)(11) and explained below, that exempts credit exposure arising from securities financing transactions involving Type I securities for all securities financing transactions. 6

The interim final rule also adds a definition of “derivative transaction” as new paragraph (k) of § 32.2 that mirrors the definition added to section 5200 of the Revised Statutes by section 610. To complement these changes, it amends the definition of “borrower,” redesignated as § 32.2(b), to include a party to whom the bank has credit exposure arising from a derivative transaction or a securities financing transaction. It also amends § 32.2 to add the definitions of “credit derivative,” “qualifying central counterparty,” and “qualifying master netting agreement,” all defined as in current 12 CFR part 3, as well as “effective margining arrangement,” “eligible credit derivative,” and “eligible protection provider.” These terms are used in new § 32.9, as described below.

Question 3: Are these terms adequately defined? Are there other terms we should define in part 32 to help implement section 610 of the Dodd-Frank Act?

Section 610 does not provide guidance on how to measure the fluctuating credit exposure of derivative transactions and securities financing transactions for purposes of the lending limit. In order to reduce the practical burden of such calculations, particularly for smaller and mid-size banks and savings associations, the OCC is providing different options for measuring the appropriate exposures in new § 32.9, as discussed below. The OCC believes these alternatives implement the statutory changes, consistent with safety and soundness and the goals of the statute, in a manner that seeks to reduce unnecessary new regulatory burden.

The “credit exposure” arising from a derivative transaction is commonly viewed as the sum of the current credit exposure on the contract or portfolio plus some measure of potential future exposure (PFE). Under the interim final rule, the “current credit exposure” is determined by the mark-to-market value (MTM) of the derivative contract. The current MTM is generally zero at execution of the contract. Subsequent to the execution of the contract, if the MTM value is positive, then the current credit exposure equals that MTM value. If the MTM value is zero or negative, than the current credit exposure is zero. This current credit exposure determination is the same as that included in the capital rules at 12 CFR part 3, Appendix A, § 3(b)(7)(A).

PFE, on the other hand, recognizes the possibility that the MTM amount may increase over time, based upon changes in market factors. The PFE, when added to the MTM amount, can be viewed as the anticipated ceiling of credit exposure at the execution of a derivative transaction.

The interim final rule provides three methods for calculating credit exposure of derivative transactions other than credit derivatives. Unless required to use a specific method by the appropriate Federal banking agency pursuant to § 32.9(b)(3), a national bank or savings association may choose which of these methods it will use. However, a national bank or savings association must use the same method for calculating credit exposure arising from all derivative transactions. Examples of these three approaches are reflected in the Explanatory Table that appears in section 4 of this preamble.

Question 4: Is the requirement to use the same method when calculating credit exposure for all non-credit derivative transactions appropriate? Should institutions be allowed to use a different method for different types of transactions or for the same transaction type but different parties?

Under the first method, the “Internal Model Method,” national banks and savings associations may model their exposures via an internal model approved by the OCC. Under this method, the counterparty credit exposure of a derivative transaction will be measured by a model that estimates a credit exposure amount, inclusive of the current MTM. A bank or savings association using this approach should calculate its exposure by using the internal model that it considers most appropriate in evaluating the risk associated with derivative transactions. The model must have been approved for purposes of section 53 of the Advanced Approaches Appendices of the appropriate Federal banking agencies' capital rules, 12 CFR part 3, Appendix C for national banks; 12 CFR part 167, Appendix C for Federal savings associations; and 12 CFR 390, subpart Z, Appendix A for state savings associations, or be another appropriate model approved by the appropriate Federal banking agency. A national bank or savings association that elects to calculate its credit exposure by using the Internal Model Method will be permitted to net credit exposure of derivative transactions arising under the same qualifying master netting agreement, thereby reducing the institution's exposure to the borrower to the net exposure under the master netting agreement.

Question 5: Would it be more appropriate to require that national banks and savings associations use other models instead of the one included in part 3?

Second, pursuant to § 32.9(b)(1)(ii), a national bank or savings association may choose to measure the credit exposure arising from a derivative transaction under the “Conversion Factor Matrix Method.” Under this method, the credit exposure will equal and remain fixed at the PFE of the derivative transaction, as determined at execution of the transaction by reference to a simple look-up table (Table 1). This table is similar to Table B included in the Risk-Based Capital Guidelines Appendix of 12 CFR part 3, but has been adjusted so that the table adequately reflects the absence of the current MTM component of the credit exposure of these transactions. This approach will be considerably less burdensome than the Internal Model Method because institutions would not have to establish statistical simulations of future PFE calculations.

Under the third method, the Remaining Maturity Method, as set forth in § 32.9(b)(1)(iii), the measurement of the credit exposure incorporates both the current MTM and the transaction's remaining maturity (measured in years) as well as a fixed add-on for each year of the transaction's remaining life. Specifically, this method measures credit exposure by adding the current MTM value of the transaction to the product of the notional amount of the transaction, the remaining maturity of the transaction, and a fixed multiplicative factor. These multiplicative factors differ based on product type and are determined by a look-up table (Table 2).

The credit exposure calculated under the Remaining Maturity Method accounts for the diminishing maturity of the transaction as well as the current MTM of the transaction. Institutions may find that any additional burden involved with determining the MTM under this optional method is balanced by the fact that, depending on the MTM, as the maturity decreases, the credit exposure also decreases, thereby permitting additional extensions of credit under the lending limit.

In addition, the Remaining Maturity Method incorporates the fact that a negative MTM for a bank offsets the positive contribution to exposure from the remaining life portion of the calculation, though the overall calculation has a floor of zero.

Question 6: Does the calculation under the Remaining Maturity Method adequately measure the credit exposures attributable to derivative transactions? For the Conversion Factor Matrix Method, has the OCC adjusted the numbers in the look-up table (Table 1) in a manner that adequately captures, overstates, or understates the credit exposures of these transactions? Similarly, for the Remaining Maturity Method, has the OCC calibrated the values included in Table 2 correctly so that they appropriately measure the credit risk?

In the case of credit derivatives, in which a national bank or savings association buys or sells credit protection against loss on a third-party reference entity, a special rule applies that is set forth in § 32.9(b)(2) of the interim final rule. Specifically, a national bank or savings association that uses the Conversion Factor Matrix Method or Remaining Maturity Method, or that uses the Internal Model Method without entering an effective margining arrangement with its counterparty as defined in § 32.2(l) of the interim final rule, calculates the counterparty credit exposure arising from credit derivatives by adding the net notional value of all protection purchased from the counterparty on each reference entity. For example, Bank A buys and sells credit protection from and to Bank B on Firms X, Y and Z. No effective margining arrangement exists between the banks. Bank A's net notional protection purchased from Bank B is $50 for Firm X and $100 for Firm Y. Bank A's net protection sold to Bank B is $35 for Firm Z. The lending limit exposure of Bank A to Bank B is $150.

In addition, a national bank or savings association calculates the credit exposure to a reference entity  7 arising from credit derivatives by adding the notional value of all protection sold on the reference entity. For example, Bank C buys and sells credit protection on Firms 1, 2 and 3. Bank C's notional protection sold is $100 for Firm 1, $200 for Firm 2 and $300 for Firm 3. The lending limit exposure of Bank C to Firm 1 is $100, to Firm 2 is $200 and to Firm 3 is $300.

However, the bank or savings association may reduce its exposure to a reference entity by the amount of any eligible credit derivative, as defined in § 32.2(m), purchased on that reference entity from an eligible protection provider, as defined in § 32.2(o). In the last example, if Bank C purchases protection on Firm 3 from an eligible protection provider in the amount of $25 via an eligible credit derivative, Bank C can reduce its $300 lending limit exposure to Firm 3 to $275.

Question 7: Has the OCC appropriately provided for exposure to both counterparties and reference entities?

Question 8: Should protection purchased from eligible protection providers by way of eligible credit derivatives be allowed to reduce other exposures under the lending limit, for example, loans traditionally covered by the lending limit and counterparty credit exposure arising from financial derivatives, at least where the protection contract maturity is as long as the maturity of the other exposure?

Although both the Internal Model Method, the Remaining Maturity Method, and the Conversion Factor Matrix Method will generally be available to all institutions, the interim final rule provides that the OCC, in the case of national banks and Federal savings associations, and the FDIC, in the case of state savings associations, may require use of a specific method to calculate credit exposure if it finds that such method is necessary to promote the safety and soundness of the bank or savings association.

The OCC is aware that, under the Conversion Factor Matrix Method, the actual MTM value at a given point in the life of a derivative contract may exceed the initially estimated PFE, and that it would be possible for a bank to make a new loan that, combined with the actual exposure (were such exposure based on current MTM value), could exceed the lending limit. The OCC believes that the risks in such case are limited and can be addressed in the supervisory process by examiners appropriately responding to unsafe and unsound concentrations, and that the certainty and simplicity of allowing non-complex banks and savings associations to “lock in” the attributable exposure at the execution of the contract balance the possible risks.

Question 9: Has the OCC properly reflected the different derivative transactions undertaken by community, mid-size, and large institutions for purposes of application of the lending limits? Does the rule adequately capture the actual risks of these transactions?

The interim final rule provides national banks and savings associations with two options for determining the credit exposure of securities financing transactions, defined as repurchase agreements, reverse repurchase agreements, securities lending transactions, and securities borrowing transactions. These methods recognize that the size of the institution and complexity and volume of the securities financing transactions engaged in by the institution may warrant different approaches. As with derivative transactions, unless required to use a specific method pursuant to § 32.9(c)(2), a national bank or savings association may choose which of the two methods it will use and must use this same method for calculating credit exposure arising from all securities financing transactions.

Question 10: Is the requirement to use the same method to calculate credit exposure for all securities financing transactions appropriate? Should institutions be allowed to use a different method for different types of securities financing transactions, or for the same transaction type but different parties?

The first option, the Internal Model Method, provides that an institution may calculate the credit exposure of a securities financing transaction by using an internal model approved by the appropriate Federal banking agency for purposes of § 32(d) of the Internal-Ratings-Based Appendices of the OCC or FDIC's capital rules, 8 as appropriate, or any other appropriate model approved by the appropriate Federal banking agency.

The calculation of the credit exposure under the second option, the Non-Model Method, is based on the type of securities financing transaction at issue. As with derivative transactions, the OCC finds that for non-complex institutions engaged in these transactions, the simpler approach to measuring credit exposure in the Non-Model Method adequately protects the safety and soundness of the institution while mitigating regulatory burden. The specific method for calculating credit exposure under the Non-Model Method for each type of securities financing transaction is set forth below.

Repurchase agreements and securities lending transactions. In a repurchase agreement, also known as a liability repo, an institution that owns securities borrows funds by selling the specified securities to another party under a simultaneous agreement to repurchase the same securities at a specified price and date. In a securities lending transaction, an institution lends securities to a counterparty (who may use them to cover a short sale or satisfy some other obligation). A securities loan is collateralized, usually by cash but sometimes by other securities. The economics of a securities lending transaction are identical to a repurchase agreement when the collateral received by the institution is cash. If the collateral is securities, the economics are slightly different because there is the risk of market price changes on both the securities loaned and the securities received as collateral. For example, the value of the security loaned could increase, and the value of the collateral received could decrease.

The interim final rule provides under the Non-Model Method, in §§ 32.9(c)(1)(ii)(A) and (ii)(B)( 1 ), that for a repurchase agreement or a securities loan where the collateral is cash, exposure under the lending limit will be equal to and remain fixed at the net current exposure, i.e., the market value at execution of the transaction of securities transferred to the other party, less cash received from the other party. For securities lending transactions where the collateral is other securities ( i.e., not cash), § 32.9(c)(1)(ii)(B)( 2 ) of the interim final rule provides that the exposure will be equal to and remain fixed at the product of the higher of the two haircuts associated with the securities, as determined by a look-up table included in the regulation (Table 3), and the higher of the two par values of the securities. The haircuts in Table 3 are consistent with the standard supervisory market price volatility haircuts in 12 CFR part 3, Appendix C.

Reverse repurchase agreements (asset repos) and securities borrowing transactions. In a reverse repurchase agreement, also known as an asset repo, an institution lends money to a counterparty by purchasing a security and agreeing to resell the security to the counterparty at a future date. For example, an institution may enter into an asset repo to invest excess liquidity or to obtain securities to use as collateral in other transactions, or an institution may need securities to cover short positions or to pledge against public funds to obtain a low-cost source of funding.

In a typical securities borrowing transaction, an institution needing to borrow securities obtains the securities from a securities lender and posts collateral in the form of cash and/or marketable securities with the securities lender (or an agent acting on behalf of the securities lender) in an amount that fully covers the value of the securities borrowed plus an additional margin, usually ranging from two to five percent. The economics of a securities borrowing transaction are identical to a reverse repurchase agreement (asset repo) when the collateral posted by the institution is cash.

Under the Non-Model Method, §§ 32.9(c)(1)(ii)(C) and (c)(1)(ii)(D)( 1 ) of the interim final rule provide that the credit exposure arising from a reverse repurchase agreement or a securities borrowing transaction where the collateral is cash will equal and remain fixed at the product of the haircut associated with the collateral received, as determined in Table 3, and the amount of cash transferred to the other party. Section 32.9(c)(1)(ii)(D)(2) provides that the credit exposure arising from a securities borrowed transaction where the collateral is other securities ( i.e., not cash) shall equal and remain fixed at the product of the higher of the two haircuts associated with the securities, as determined in Table 3, and the higher of the two par values of the securities.

Question 11: Are the look-up tables provided in the rule appropriate? Would another look-up table included in 12 CFR part 3 be more appropriate? Do the numbers included in Table 1 adequately capture the credit exposure of the transactions in question?

Provision applicable to all securities financing transactions—Type I securities. New § 32.3(c)(11) of the interim final rule excepts from the lending limit credit exposures arising from securities financing transactions in which the securities being financed are certain government securities, specifically, Type I securities, as defined in 12 CFR 1.2(j), in the case of national banks; or securities listed in section 5(c)(1)(C), (D), (E), and (F) of HOLA and general obligations of a state or subdivision as listed in section 5(c)(1)(H) of HOLA, 12 U.S.C. 1464(c)(1)(C), (D), (E), (F), and (H), in the case of savings associations. 9 This exception is appropriate because these transactions typically involve less risk and involve securities in which national banks and savings associations may invest under 12 U.S.C. 24 (Seventh) and section 5(c)(1) of the HOLA, as appropriate, without limit. This treatment follows the treatment of reverse repurchase agreements in current part 32, under which such transactions are treated as loans subject to an exception for transactions relating to Type I securities as defined in 12 CFR part 1. This exception may reduce regulatory burden for community and midsize institutions because it is relatively uncommon for these institutions to engage in a securities financing transaction involving non-type I securities and non-5(c)(1) securities. 10

(3) Mandatory use of model. Finally, as with derivative transactions, § 32.9(c)(2) provides that the OCC or FDIC, as appropriate, may require a national bank or savings association to use a specific method to calculate the credit exposure of securities financing transactions if the OCC or FDIC finds that this method is necessary to promote the safety and soundness of the bank or savings association.

Question 12: Has the OCC properly accounted for the different securities financing transactions in institutions of different size and complexity? Does the rule adequately capture the actual risks of these transactions?

Question 13: Please comment on the provision that provides the OCC and FDIC with authority to require modeling. Is this discretion appropriately described?

Unless described above, all provisions of part 32 will apply to credit exposures arising from a derivative transaction or a securities financing transaction, including the lending limit calculation rules of § 32.4 and the combination rules of § 32.5. In addition, the interim final rule adds the following provisions to part 32 that apply only to derivative transactions or securities financing transactions.

Exception. The interim final rule amends § 32.3(c) to add intraday credit exposures arising from a derivative transaction or securities financing transaction as an additional exception to the lending limits for national banks and savings associations. This exception will help minimize the impact of the interim final rule on the payment and settlement of financial transactions and is consistent with the current application of national bank lending limits to certain transactions. 11

Question 14: Is the intraday exception appropriate? Should the OCC exempt other types of intraday exposures? Should the OCC provide for other exemptions for credit exposures arising from derivative transactions or securities financing transactions? Why?

Nonconforming Loans and Extensions of Credit. The interim final rule adds a new paragraph (a)(3) to § 32.6 to provide that a credit exposure arising from a derivative transaction or securities financing transaction and determined by the Internal Model Method specified in § 32.9(b)(1)(i) or § 32.9 (d)(3), respectively, will not be deemed a violation of the lending limits statute or regulation and will be treated as nonconforming if the extension of credit was within the national bank's or savings association's legal lending limit at execution and is no longer in conformity because the exposure has increased since execution.

Question 15: The interim final rule does not address the applicability of the lending limit rules to a national bank's or savings association's contingent obligation under derivative clearinghouse rules to advance funds to a clearinghouse guaranty fund. Please comment on whether and to what extent part 32 should to apply to these obligations and if applicable, how the credit exposure of these obligations should be measured.

Question16: Should the lending limit calculation rules set forth at § 32.4 or the combination rules set forth at § 32.5 be adjusted or changed in any way given the addition of credit exposures arising from derivative and securities financing transactions to part 32 as new categories of extensions of credit?

The table below is provided to aid in understanding the interim final rule. It is not a substitute for the interim final rule itself.

This interim final rule is effective on July 21, 2012. Pursuant to the Administrative Procedure Act (APA), at 5 U.S.C. 553(b)(B), notice and comment are not required prior to the issuance of a final rule if an agency, for good cause, finds that “notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

The amendments made by section 610 of the Dodd-Frank Act are effective on July 21, 2012. 12 These amendments are not self-executing, however, in that they do not provide national banks and savings associations with the methodology necessary to comply with the new requirements they impose.

The OCC's approach to implementation of these standards is related to, and our rulemaking in this respect has been informed by, proposals made by other agencies to implement provisions of the Dodd-Frank Act raising similar issues and the comments received by other agencies in connection with such rulemakings. 13 Consideration of this information was appropriate in connection with the OCC's implementation of the amendments made by section 610 of the Dodd-Frank Act.

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in the Federal Register on February 21, 2012 (77 FR 9874). That NPRM proposed to correct an unsafe condition for the specified products. European Aviation Safety Agency AD 2011-0249 states:

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (77 FR 9874, February 21, 2012).

We reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

Based on the service information, we estimate that this AD will affect about two engines installed on helicopters of U.S. registry. We also estimate that it will take about one work-hour per engine to comply with this AD. The average labor rate is $85 per work-hour. Required parts will cost about $12,551 per engine. Based on these figures, we estimate the cost of the AD on U.S. operators to be $25,272. Our cost estimate is exclusive of possible warranty coverage.

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

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

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

For the reasons discussed above, I certify this AD:

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

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

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

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

You may examine the AD docket on the Internet at http://www.regulations.gov; or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (phone: (800) 647-5527) is provided in the ADDRESSES section. Comments will be available in the AD docket shortly after receipt.

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

I. Background of This Rulemaking

Prior to November 8, 2009, the Secretary of Labor had delegated her statutory authority to administer the Longshore and Harbor Workers' Compensation Act and its extensions (LHWCA) and the Black Lung Benefits Act (BLBA) to the Assistant Secretary for the Employment Standards Administration (ESA). Secretary's Order 13-71, 36 FR 8755 (May 12, 1971). The Assistant Secretary, in turn, delegated authority to administer both programs to the Office of Workers' Compensation Programs (OWCP), one of ESA's sub-agencies.

On November 8, 2009, the Secretary dissolved ESA into its constituent components. See Secretary's Order 10-2009, 74 FR 58834 (Nov. 13, 2009). The Secretary then delegated her authority to administer the LHWCA and the BLBA directly to the Director, OWCP. Id.

To reflect this transfer of administrative authority, the Secretary issued a final rule changing the heading of 20 CFR chapter VI, which contains regulations implementing the LHWCA and the BLBA, from “Employment Standards Administration” to “Office of Workers' Compensation Programs.” 75 FR 63379 (Oct. 15, 2010).

Numerous references to ESA remain in the regulatory text published in 20 CFR chapter VI. On January 18, 2011, the President issued Executive Order 13563, 76 FR 3821, calling upon agencies to review existing regulations and to revise outmoded provisions. In accordance with the Executive Order, this rule updates the regulations to reflect the Department's current organizational structure. The rule deletes all references to ESA and ensures that the regulations, in all respects, reflect that OWCP is the agency empowered to administer the LHWCA and the BLBA. The revisions do not change any substantive rule governing administration of these statutes.

ESA's dissolution has also necessitated revising several Internet addresses in these regulations, which previously included references to ESA in their URLs. This rule updates all Internet addresses in this chapter. In addition, this rule updates cross-references to other sections within Title 20 to correspond to changes in those other sections.

Section 39(a) of the LHWCA (33 U.S.C. 939(a)) and sections 411(b), 422(a), and 426(a) of the BLBA (30 U.S.C. 921(b), 932(a), and 936(a)) authorize the Secretary of Labor to prescribe rules and regulations necessary for the administration and enforcement of the LHWCA and the BLBA.

The Department has not published a notice of proposed rulemaking for this rule. Under Administrative Procedure Act (APA) section 553(b)(A), 5 U.S.C. 553(b)(A), the Department finds that this rule is exempt from notice and comment rulemaking requirements because these revisions involve rules of agency organization, procedure, or practice. In addition, the Department finds good cause under APA section 553(b)(B), 5 U.S.C. 553(b)(B), to publish this rule without notice and comment procedures because the rule only reflects the delegation of administrative authority within the Department and makes minor clerical updates, and does not alter any substantive standard. For these same reasons, the Department finds that good cause exists for making the rule effective upon publication under APA section 553(d)(3), 5 U.S.C. 553(d)(3).

This rule is not subject to the regulatory flexibility provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) because it is not subject to the APA's proposed rulemaking requirements.

This rule is not classified as a “rule” under SBREFA, because it is a rule pertaining to agency organization, procedure, or practice that does not substantially affect the right of non-agency parties ( see 5 U.S.C. 804(3)(C)).

This rule is not subject to sections 202 or 205 of the Unfunded Mandates Reform Act (UMRA, 2 U.S.C. 1501 et seq. ) because it is not subject to the APA's proposed rulemaking requirements. In addition, this action does not significantly or uniquely affect small governments or impose a significant intergovernmental mandate as described in sections 203 and 204 of the UMRA.

This rule does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. ).

This rule is not a “significant regulatory action” and is therefore not subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735).

The Department has reviewed this rule in accordance with Executive Order 13132 (64 FR 43255) regarding federalism, and has determined that it does not have “federalism implications.” The 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.”

This rule meets the applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform (61 FR 4729), to minimize litigation, eliminate ambiguity, and reduce burden.

For the reasons set forth in the preamble, amend 20 CFR parts 701, 702, 703, 725, and 726 as follows:

Chapter 52 of the Internal Revenue Code of 1986 (IRC) sets forth the Federal excise tax and related provisions that apply to manufacturers and importers of tobacco products, processed tobacco, and cigarette papers and tubes, and to export warehouse proprietors who hold such products, upon which tax has not been paid, pending export. The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers chapter 52 of the IRC pursuant to section 1111(d) of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary has delegated various authorities through Treasury Department Order 120-01 (Revised), dated January 21, 2003, to the TTB Administrator to perform the functions and duties in the administration and enforcement of this law.

Section 5701 of the IRC (26 U.S.C. 5701) sets forth the excise tax rates that apply to domestic and imported tobacco products and cigarette papers and tubes. Section 5702 of the IRC (26 U.S.C. 5702) defines tobacco products as cigars, cigarettes, smokeless tobacco, pipe tobacco, and roll-your-own tobacco and separately defines each of these terms. That section also defines other relevant terms, such as “manufacturer of tobacco products,” “importer,” and “export warehouse proprietor.”

Sections 5712 and 5713 of the IRC (26 U.S.C. 5712 and 5713) provide that manufacturers and importers of tobacco products and processed tobacco and export warehouse proprietors must obtain a permit to engage in such businesses. Section 5712 also allows for the promulgation of regulations to prescribe minimum manufacturing and activity requirements for such permittees. Sections 5721, 5722, and 5741 of the IRC (26 U.S.C. 5721, 5722, 5741) authorize the promulgation of regulations to require inventories, reports, and recordkeeping, respectively. Section 5723 of the IRC (26 U.S.C. 5723) includes authority to promulgate regulations regarding standards for packages, and for marks, labels, and notices on such packages of tobacco products, processed tobacco, and cigarette papers and tubes.

Regulations implementing the provisions of chapter 52 of the IRC are contained in 27 CFR parts 40 (manufacture of tobacco products, cigarette papers and tubes, and processed tobacco), 41 (importation of tobacco products, cigarette papers and tubes, and processed tobacco), 44 (exportation of tobacco products and cigarette papers and tubes, without payment of tax, or with drawback of tax), and 45 (removal of tobacco products and cigarette papers and tubes, without payment of tax, for use of the United States). These regulatory provisions are administered by TTB.

On February 4, 2009, the President signed into law the Children's Health Insurance Program Reauthorization Act of 2009, Public Law 111-3, 123 Stat. 8 (“CHIPRA”). Section 701 of CHIPRA amended the IRC to increase the Federal excise tax rates on tobacco products and cigarette papers and tubes. Section 701 also imposed a floor stocks tax on such articles held for sale on the effective date of the tax rate increases (April 1, 2009). On March 31, 2009, TTB published in the Federal Register (74 FR 14479) a temporary rule, T.D. TTB-75, to amend the TTB regulations to reflect the section 701 changes. On July 22, 2010, TTB published in the Federal Register (75 FR 42605) T.D. TTB-85 which adopted those temporary regulations as a final rule. The section 701 statutory and regulatory changes are not the subject of this document.

Section 702 of CHIPRA also made some significant changes to the IRC, some of which are reflected in the description of TTB's authority above. These changes were principally with regard to “roll-your-own tobacco” and “processed tobacco.” Section 702 amended the definition of “roll-your-own tobacco” in section 5702 of the IRC by including in its scope tobacco for making cigars and tobacco for use as wrappers of cigars and cigarettes. Section 702 of CHIPRA also set forth a statutory framework for regulating “processed tobacco” by:

• Amending section 5702 of the IRC to add a definition of “manufacturer of processed tobacco”;

• Amending sections 5712 and 5713 of the IRC to require that manufacturers and importers of processed tobacco, like manufacturers and importers of tobacco products, apply for and obtain a permit before commencing such businesses. Section 702 included a transitional rule under which manufacturers and importers of processed tobacco who were engaged in such a business on April 1, 2009, and who file a permit application with TTB on or before June 30, 2009, could continue in business pending final TTB action on the application;

• Amending sections 5721, 5722, and 5741 to make manufacturers and importers of processed tobacco subject to the inventory, reporting, and recordkeeping regulatory authority already applicable to manufacturers and importers of tobacco products; and

• Amending section 5723 of the IRC to make processed tobacco subject to the packaging (including mark, label, and notice) regulatory authority already applicable to tobacco products and cigarette papers and tubes.

The changes made by section 702 of CHIPRA clearly brought processed tobacco within the statutory and regulatory framework administered by TTB under chapter 52 of the IRC but did not establish processed tobacco as a commodity subject to excise tax. The regulatory actions taken by TTB in response to these statutory changes are outlined below.

On June 22, 2009, TTB published in the Federal Register (74 FR 29401) a temporary rule, T.D. TTB-78, setting forth amendments to parts 40, 41, 44, and 45 of the TTB regulations to reflect the changes made by section 702 of CHIPRA; those temporary regulations went into effect on the date of publication. On the same day, TTB published in the Federal Register (74 FR 29433) a notice of proposed rulemaking, Notice No. 95, that invited comments from the public on the amendments contained in that temporary rule.

The principal regulatory changes contained in the T.D. TTB-78 temporary rule are as follows:

• Numerous provisions within parts 40, 41, and 44 were amended by the inclusion of references to “processed tobacco” to reflect the entry of that commodity into the regulatory framework administered by TTB.

• A new subpart L was added to part 40 and a new subpart M was added to part 41, setting forth qualification, operation, and related requirements for manufacturers and importers of processed tobacco. These provisions included permit application, recordkeeping, reporting, and minimum activity requirements. Inventory requirements also were included for manufacturers of processed tobacco.

• Definitions of “manufacturer of processed tobacco” and of “processed tobacco” were added to §§ 40.11 and 41.11 to assist in distinguishing between activities related to farming and the handling of processed tobacco, which do not fall under the regulatory provisions, and activities related to the processing of tobacco, which must be undertaken in compliance with statutory and regulatory requirements.

• The definition of “roll-your-own tobacco” in §§ 40.11 and 41.11 was amended to reflect the expanded definition of that term in section 5702 of the IRC, and corresponding changes were made to the notice requirements for roll-your-own tobacco specified in §§ 40.216b and 41.72b.

• In §§ 40.11 and 41.11 the definition of “package” was revised, and a definition of “packaging” was added, in order to make clear that “processing of tobacco” does not include placing processed tobacco in consumer packaging. A manufacturer of processed tobacco may not place processed tobacco in a consumer package because to do so would result in a product that fits the definition of a taxable commodity. Accordingly, such packaging may not occur on the premises of a person who is qualified only as a manufacturer of processed tobacco but may only be undertaken on the bonded premises of a tobacco product manufacturer.

• Sections 40.25a and 41.30, which specify the tax rates that apply to pipe tobacco and roll-your-own tobacco, were amended by the addition of standards for distinguishing between these two classes of tobacco products on the basis of their packaging and labeling, including rules under which a product is deemed to be (and thus subject to the tax rate applicable to) roll-your-own tobacco.

• The notice requirements for pipe tobacco in §§ 40.216a and 41.72a were amended by removing “Tax Class L” as a specified designation on a pipe tobacco package, thus leaving “pipe tobacco” as the only specified designation.

• The notice requirements for roll-your-own tobacco in §§ 40.216b and 41.72b were amended by removing “Tax Class J” as a specified designation on a roll-your-own tobacco package (thus leaving “roll-your-own tobacco” and “cigarette tobacco” as specified designations) and, to reflect the expanded definition of “roll-your-own tobacco” mentioned above, by adding “cigar tobacco,” “cigarette wrapper,” and “cigar wrapper” as specified designations.

• Sections 40.216c and 41.72c were revised to set forth a use-up period, until August 1, 2009, for the removal of pipe tobacco and roll-your-own tobacco in packages that bore the “Tax Class L” and “Tax Class J” designations.

On July 29, 2009, TTB published in the Federal Register (74 FR 37551) a temporary rule, T.D. TTB-80, to correct several inadvertent errors that appeared in the T.D. TTB-78 temporary rule; these corrections were effective on the date of publication. Subsequently, on August 25, 2009, TTB published in the Federal Register (74 FR 42812) a notice of proposed rulemaking, Notice No. 98, to reopen the comment period specified in Notice No. 95 in order to extend that comment period for an additional 60 days, that is, until October 20, 2009.

During the initial Notice No. 95 comment period, TTB received three comments requesting an extension of the package use-up period beyond the August 1, 2009, date specified in T.D. TTB-78. One commenter also pointed out that the temporary regulations set forth additional factors related to the packaging of the pipe tobacco and roll-your-own products that bears on the classification of those products, but those provisions were not subject to a use-up period in the temporary regulations. The commenter asked that TTB provide a use-up provision that applied to both the classification and the notice-related packaging provisions. On September 24, 2009, TTB published in the Federal Register (74 FR 48650) a temporary rule, T.D. TTB-81, which: (1) Further amended §§ 40.216c and 41.72c, discussed above, in order to extend the specified use-up period for packages bearing the “Tax Class L” and “Tax Class J” designations to March 23, 2010; (2) amended §§ 40.25a and 41.30, discussed above, in order to delay application of the new standards for distinguishing between pipe tobacco and roll-your-own tobacco, also to March 23, 2010; and (3) corrected two minor errors of omission in the T.D. TTB-78 regulatory texts. These regulatory amendments took effect on the date of publication. Also on September 24, 2009, TTB published in the Federal Register (74 FR 48687) a notice of proposed rulemaking, Notice No. 99, inviting the submission of public comments, until November 23, 2009, on the additional regulatory amendments contained in T.D. TTB-81.

TTB received 19 responses to the solicitation of comments regarding the temporary regulations contained in T.D. TTB-78 and 1 response to the solicitation of comments regarding the regulatory amendments contained in T.D. TTB-81. TTB had also received 2 comments to an earlier temporary rule (T.D. TTB-75, implementing the new tax rates and floor stocks tax imposed by CHIPRA) that are relevant to the issues raised in T.D. TTB-78.

The 19 responses to the publication of T.D. TTB-78 included comments submitted by or on behalf of the following industry members, trade organizations, consulting firms, and law firms: R.J. Reynolds Tobacco Co. (R.J. Reynolds), John Middleton Co., National Tobacco Co. LP (National Tobacco), Altadis USA, Inc., Universal Leaf Tobacco Co., Inc., Schweitzer-Mauduit International, Inc. (Schweitzer-Mauduit), the Pipe Tobacco Council, Inc., Customs Advisory Services, Inc., Venable, LLP, the law offices of Barry Boren, and the companies of the Altria Group, Inc., consisting of John Middleton Co., Philip Morris USA, Inc. and U.S. Smokeless Tobacco Manufacturing Co. LLC (the Altria Group). The comment received in response to T.D. TTB-81 was submitted on behalf of the Campaign for Tobacco-Free Kids. The two comments received in response to T.D. TTB-75 and referenced below were submitted on behalf of Domestic Tobacco Co., and National Tobacco.

Two individuals submitted comments that were not pertinent to the regulations at issue and therefore are outside the scope of this final rule. One comment discussed techniques for quitting smoking and the other discussed subsidies for health insurance. These comments are not discussed further in this document. Descriptions of the remaining comments, along with TTB's responses, are set forth below, with the exception of the comments on the package use-up period that were addressed in T.D. TTB-81.

The Altria Group commented that TTB should, in the future, consult with industry through roundtable discussions, or stakeholder meetings, prior to issuing ”this type of broad regulatory program.” National Tobacco commented that TTB should consider establishing an advisory committee, consisting of a panel of industry experts, for providing TTB with industry input on a variety of issues, including distinguishing between pipe tobacco and other tobacco products and simplifying the recordkeeping requirements.

TTB response: Because of the short time period between enactment of CHIPRA and the effective date of its provisions, expedited adoption of the implementing regulations was necessary and precluded advanced consultation with industry. Moreover, publication of the notice inviting comments on the temporary provisions is an effective means to obtain public input to be taken into account at the final rule stage.

With regard to the suggestion that TTB set up an advisory group, TTB agrees that obtaining input from the regulated industry as well as other members of the public, prior to rulemaking, is valuable. TTB often receives and considers information from industry members, State and Federal regulators, and other interested parties, which assists in the development of policy positions. TTB is also currently evaluating additional ways of obtaining input from all interested parties beyond notice and comment rulemaking and ad hoc communications.

Specifically in regard to the distinction between pipe tobacco and roll-your-own tobacco, TTB has found that the publication of an advance notice of proposed rulemaking (Notice No. 106, 75 FR 42659, published in the Federal Register on July 22, 2010) and the reopening of the comment period for that rulemaking (in Notice No. 120, 76 FR 52913, published in the Federal Register on August 24, 2011) has been an effective method of receiving thoughtful and substantive written comments from industry members and other interested parties.

National Tobacco requested that TTB amend the definition of “processed tobacco” in §§ 40.11 and 41.11 in such a way that the permit requirement would not apply when processed tobacco is used in the flavoring industry, in ceremonial Native American and other religious activities, in chemical extractive industries, in pharmaceuticals, and in agricultural pesticides and fertilizer.

TTB response: TTB believes that the legislation is concerned with processed tobacco that could be used to make a tobacco product. At this point, TTB has no regulatory standard that would distinguish the “processed tobacco” that could be used to make a tobacco product from “processed tobacco” that could not be used to make a tobacco product. However, TTB does make a determination on a case-by-case basis, considering the particular circumstances of a processing operation and consistent with the statutory language. TTB will consider future amendments to the regulations in this matter.

R.J. Reynolds expressed concern that the definition of “package” treats all packages of processed tobacco weighing 10 pounds or less as a taxable product. R.J. Reynolds asserted that this does not account for the “legitimate needs” companies have of shipping small samples of processed tobacco and proposed that TTB amend the definitions of the terms “package” and “processed tobacco” to better accommodate such shipments. Specifically, R.J. Reynolds proposed that the second sentence of the definition of package in § 40.11 be revised to read as follows: “For purposes of this definition, a container of processed tobacco, the contents of which weigh 10 pounds or less, that is removed within the meaning of this part and offered for sale or delivery to the ultimate consumer is deemed to be a taxable tobacco product as referenced with this part.” [Emphasis in the original.] R.J. Reynolds also suggested that TTB consider package graphics (that is, markings and designations) and the way that the product is marketed and offered for sale.

TTB response: The issue R.J. Reynolds raised of shipping small samples of processed tobacco is addressed below in the recordkeeping and reporting requirements section of this comment discussion. With regard to the specific language proposed by R.J. Reynolds, TTB believes that adopting the proposal would be problematic as it would only recognize a container as a “package,” and therefore, a taxable commodity, if the container is actually offered for sale or delivery to the consumer by the manufacturer. This would be inconsistent with the statutory language for pipe tobacco and roll-your-own tobacco which only requires that the packaging of a product make it suitable for use and likely to be offered to, or purchased by, consumers.

With regard to the proposal that TTB consider package graphics and marketing in determining when processed tobacco is deemed a taxable product, TTB believes that the consideration of package graphics, along with physical characteristics, is appropriate for further consideration and notice and comment in a separate rulemaking action. Setting forth specific, potentially limiting, standards for package graphics in this final rule without providing the general public, including other industry members, an opportunity to comment on such standards would not be appropriate. Similarly, how a product is marketed and offered for sale also warrants further consideration and notice and comment.

The Altria Group requested clarification of the last sentence of 27 CFR 40.61(c), which states: “For the purposes of this section, the activity of packaging processed tobacco may be sufficient to qualify as a manufacturing activity.” The emphasis was added by the commenter who asserted that this phrase is vague and discretionary, both for those who seek to obtain permits and for those who might contract with such entities for packaging services. The Altria Group expressed concern that, as written, § 40.61(c) “could be interpreted to allow a permit for the packaging of pipe tobacco or snuff (loose tobacco that could be called processed tobacco), but not the packaging of cigarettes or cigars (clearly fashioned into an actual product).” The commenter stated that if TTB intended for the tobacco to be considered processed tobacco until it is put into a package, then the Bureau should clarify that intent in the regulations.

TTB response: The regulatory text at § 40.61(c), as amended by T.D. TTB-78, states that the activity of packaging processed tobacco may be sufficient to qualify as a manufacturing activity, for the purposes of requiring the packager to obtain a permit as a tobacco product manufacturer. The text is not ambiguous as to whether it applies to cigars and cigarettes. It should be noted that the activity of packaging cigars and cigarettes is not sufficient to qualify a person as a manufacturer of tobacco products as both cigars and cigarettes already clearly meet all the considerations in the applicable statutory definitions (at 26 U.S.C. 5702(a) and (b), respectively) prior to their packaging. A cigar or cigarette is distinguishable as a roll of tobacco wrapped in paper, tobacco, or a substance not containing tobacco, before the products are put up in consumer packages.

Two industry members (National Tobacco and Schweitzer-Mauduit) and Customs Advisory Services Inc. suggested that TTB allow a single legal entity to operate multiple factories under a single permit for the manufacture of processed tobacco. National Tobacco argued that “[r]equiring separate permits for each location is anachronistic in an age when central recordkeeping and global information sharing are the norm.” National Tobacco further suggested that the “person” who must qualify for a permit under § 40.61(a) should refer to an individual, company, corporation, partnership, or other legal entity, rather than to a location. Schweitzer-Mauduit requested clarification of its understanding that the TTB regulations require “one application for permit and one monthly report from each corporation that manufactures processed tobacco at more than one facility.” R.J. Reynolds asked whether a manufacturer of tobacco products could store processed tobacco in warehouse facilities not located in the vicinity of its manufacturing facilities or whether those facilities had to be located in the vicinity of the factory. Customs Advisory Services Inc. asserted that “[c]onfusion exists in the trade regarding the number of permits required and the tobacco reporting requirements for companies operating multiple factories for the manufacture of processed tobacco,” and that the reporting requirements for intercompany movements of tobacco between factories and storage warehouses operated by the same legal entity are not clearly described by the regulations. The commenter recommended that the regulations be clarified to allow a single legal entity to operate multiple facilities under a single permit.

Finally, National Tobacco extended the suggestion of a single permit to cover multiple locations to also apply to manufacturers of tobacco products. Specifically, National Tobacco suggested that TTB also amend §§ 40.61 and 40.62 to allow each manufacturer of tobacco products to obtain a single permit covering multiple locations, as well as the importation of tobacco products, to eliminate any duplication of records that results from operating under multiple permits.

TTB response: The issue of allowing the permit of a manufacturer of tobacco products to cover multiple manufacturing locations and also importation is not an issue appropriate for resolution in this final rule document because it was not raised in, and goes beyond the scope of, T.D. TTB-78. With regard to the comment that a person, rather than a location, must qualify for a permit, TTB points out that the IRC at 26 U.S.C. 5712 and 5713 requires that the determination of whether an applicant is qualified to obtain a permit depends on, among other factors, consideration of the premises. In very general terms, section 5712 requires that an application for a permit be evaluated on three factors: (1) The premises upon which business will occur, (2) the proposed business activities, and (3) the person intending to engage in such business. Specifically, section 5712 provides that an application for a permit may be rejected and the permit denied if the Secretary finds that “the premises on which it is proposed to conduct the business are not adequate to protect the revenue.” This provision obligates TTB to evaluate the premises upon which business is proposed to be conducted in order to determine whether to issue a permit. Similarly, an existing permit may be revoked or suspended under 26 U.S.C. 5713 if the permittee has failed to maintain the premises in such manner as to protect the revenue. As a result, a permit authorizes a person to engage in business only at a specific location. The location where business may take place under the permit may be changed, where authorized under the TTB regulations, but the permit continues to be tied to a specific location under the statute.

TTB agrees with the comments that point out that TTB needs to address the activities that may be undertaken on, and the boundaries of, the physical premises delineated by the permit of a manufacturer of processed tobacco. In considering this matter, TTB reviewed the regulations that apply to the premises of manufacturers of tobacco products to determine whether and to what extent those provisions may be appropriate to the activities of manufacturers of processed tobacco. The regulations at § 40.72(a) specifically prescribe the scope and use of a tobacco product manufacturer's premises. Under that section, the premises used by a manufacturer of tobacco products for the factory are to be used exclusively for the purposes of manufacturing and storing tobacco products; storing materials, equipment, and supplies related thereto or used or useful in the conduct of the business; and carrying on activities in connection with business of that manufacturer. Further, § 40.69 addresses premises that incorporate portions of buildings and multiple non-contiguous buildings, and when diagrams of such premises must be submitted to TTB. Under that section, the premises used by a manufacturer of tobacco products may consist of more than one building, or portions of buildings, which need not be contiguous but must be located in the same city, town, or village. Where not so located, the appropriate TTB officer may authorize the inclusion of buildings, or portions of buildings, that are so conveniently and closely situated to the general factory premises as to present no jeopardy to the revenue or hindrance to the administration of the regulations. The buildings or portions of buildings must be described in the application for permit and the regulations require the submission of a diagram in certain circumstances. If the factory premises are to be changed to an extent that will make inaccurate the description of the factory set forth in the last application, § 40.114 requires that a manufacturer of tobacco products submit an application for an amended permit before changes are made to the premises.

The current regulations described above speak to the delineation of the factory premises of a manufacturer of tobacco products but the temporary regulations do not, as the commenters point out, address issues regarding the factory premises of a manufacturer of processed tobacco. In addition, since publication of the temporary regulations, TTB has fielded a number of questions from industry members regarding whether the existing concepts applicable to the premises of manufacturers of tobacco products apply to the premises of manufacturers of processed tobacco.

TTB believes that the provisions of § 40.72(a) regarding the activities that may take place on the factory premises of a manufacturer of tobacco products are appropriate to apply to the factory premises of manufacturers of processed tobacco, with some modification. Similar to the provisions set forth for manufacturers of tobacco products, for manufacturers of processed tobacco, the premises must be used for the manufacturing and storing of, in this case, processed tobacco; storing materials, equipment, and supplies related to the processing of tobacco or used or useful in the conduct of the business; and carrying on activities in connection with business of the manufacturer of processed tobacco. Just as with the manufacturing of tobacco products, TTB believes that any activity related to the business of processing tobacco must be undertaken only on premises delineated by a TTB permit. The physical premises delineated by the permit must include all buildings or portions of buildings in which such activities take place. TTB believes that in the context of a manufacturer of taxable tobacco products, it is necessary and appropriate to require that only buildings in close proximity to the factory be included as part of the factory in which such products are manufactured. In that context, extending the factory premises to include buildings not within geographic proximity would allow for the inappropriate deferral or “downstreaming” of the payment of tax beyond the point of manufacture. The same consideration does not apply to processed tobacco, and in that context TTB believes that extending the factory premises to allow for it to include all buildings, even those not within geographic proximity, would allow for more efficient recordkeeping and reporting, as described in several comments, without any readily-apparent revenue or administrative burden consequence. Therefore, this final rule provides that the factory premises of a manufacturer of processed tobacco may consist of more than one building, or portions of buildings, which need not be contiguous nor must they be located in the same city, town, village, or State. The manufacturer of processed tobacco in its permit application must identify and describe all buildings or portions of buildings where any activity related to the processing of tobacco, as described under § 40.11, takes place and also where any processed tobacco is stored pending removal for transfer to another entity. The manufacturer must also designate a central location as a repository of records sufficient to incorporate all activities involved under the permit.

As a result, TTB sets forth in this final rule a new section, § 40.502, which in paragraph (a) is similar to the regulations at § 40.72 regarding what buildings and activities are to be covered by the factory premises and what location information must be submitted with the permit application. Section 40.502 differs from § 40.69 in that it provides that the buildings that make up a factory for manufacturing processed tobacco need not be within a certain proximity to each other; and, in paragraph (b), mirrors the regulations at § 40.114 regarding changes (extensions and curtailment) of factory premises. A paragraph (b) is added to require that manufacturers of processed tobacco operating under a permit issued prior to the effective date of this final rule submit the required location information within 180 days of the effective date. In addition, the requirements set forth at § 40.521 regarding the records that a manufacturer of processed tobacco must keep are amended to include records of transfers between buildings that are covered under the same permit but that are not located in the same city, town, village, or State.

TTB believes that this new section, § 40.502, provides a result consistent with that requested by the commenters, and adds clarification with regard to the point at which TTB F 5250.2 (Report of Removal, Transfer, or Sale of Processed Tobacco) must be submitted, that is, when a “removal,” for purposes of the reporting requirement, takes place.

Similar considerations also apply to importers of processed tobacco. Under the IRC at 26 U.S.C. 5702(k), an importer of processed tobacco is any person in the United States to whom any processed tobacco manufactured in a foreign country, Puerto Rico, the Virgin Islands, or a possession of the United States is shipped or consigned. An importer of processed tobacco may obtain release from customs custody of processed tobacco and store the tobacco until it is sold or transferred to another entity. Such a sale or transfer must be reported on TTB F 5250.2, in accordance with § 41.262(d). As a result, this final rule amends the TTB regulations at §§ 41.237 and 41.253 to specifically require that the application for a permit to be an importer of processed tobacco set forth the location to be used as the principal business office and the locations in which the importer stores processed tobacco and that any change in the designated locations be submitted to TTB as an amendment to the importer's permit. This final rule also adds a new § 41.264 to specify that the importer of processed tobacco is subject to inventory requirements at the same times as those required of manufacturers of processed tobacco under § 40.523, that is, at the time of commencing business, at the time of transferring ownership, at the time of changing the location, at the time of concluding business, and at such other time as any appropriate TTB officer may require. These new provisions provide that an importer of processed tobacco holding a permit issued prior to the effective date of the final rule has 180 days to submit to TTB the information regarding the location and inventory now required. The recordkeeping requirements applicable to importers of processed tobacco, set forth at § 41.261, are also amended to require that the records of an importer of processed tobacco include information on transfers between buildings that are covered under the same permit but that are not located in the same city, town, village, or State.

National Tobacco suggested that TTB amend 27 CFR 40.47 and 40.72 to authorize the storage and manipulation of non-tobacco smoking products such as tobacco-free herbal hookah/shisha on the premises of tobacco product manufacturers. National Tobacco commented that tobacco-free herbal hookah/shisha is typically marketed and distributed through the same channels as tobacco products, and thus is an appropriate adjunct to a line of smoking products. National Tobacco stated that TTB's regulations are not clear as to whether herbal hookah/shisha would be regarded as materials or supplies related to a permit holder's tobacco business.

TTB response: TTB believes this issue is beyond the scope of the temporary rule, as it does not relate to the CHIPRA-related regulatory changes. However, TTB notes that § 40.47(a) provides that a TTB-permitted manufacturer of tobacco products that wishes to engage in any other business on the premises of a tobacco factory may apply to TTB to do so. TTB frequently receives requests from manufacturers of tobacco products to operate varied businesses on their premises. These requests are evaluated on an individual, case-by-case basis. This process eliminates the need for TTB to amend the regulations to authorize each type of “other business.” The process set forth at § 40.47(a) is appropriate and adequate to address the scenario described in the comment. A specific regulatory amendment is unnecessary.

R.J. Reynolds, Universal Leaf Tobacco Co. Inc., and Schweitzer-Mauduit all suggested that TTB consider accepting reports electronically.

TTB Response: TTB recognizes the value of accepting reports electronically, and we intend to do so as resources and logistics allow.

Altadis USA, Inc. proposed that the records required under §§ 40.182 and 40.521 should be monthly records, rather than daily records. According to the commenter, daily reconciliation of processing runs is impossible, and monthly, rather than daily, recordkeeping “makes sense in light of current monthly reporting requirements already in place for manufacturers with respect to shipped tobacco products, and is consistent with the good business practices endorsed by TTB in the temporary rule.” Additionally, Altadis USA, Inc. asserted that the recordkeeping requirements in §§ 40.182 and 40.521 should only apply to leaf tobacco that is received at a facility and that leaves the facility in the form of a tobacco product, or, under § 40.521, is otherwise removed from the facility. Altadis USA, Inc. stated that “the requirements of the temporary rule will not achieve the intended result; indeed the information will be either misleading or meaningless,” explaining in this regard that it is not technologically feasible to measure quantities of processed tobacco at every stage of the manufacturing process because no product exists during the intermediate steps of processing.

The Altria Group similarly argued that the §§ 40.182 and 40.521 daily recordkeeping requirements for manufacturers of tobacco products who also process tobacco are unduly burdensome, although, beyond that, the incremental addition of a monthly report and documentation of transfers from the permitted facility are not significantly onerous. They suggested that it would be appropriate, and would impose a more reasonable burden, to require recordkeeping for all transfers of processed tobacco from the permitted facility by the manufacturer but only require submission of the reports to TTB for shipments to unpermitted facilities. The Altria Group asserts that jeopardy to the revenue comes when processed tobacco is transferred to a nonpermitted manufacturer in an untracked manner.

According to R.J. Reynolds and National Tobacco, TTB F 5250.2 (Report of Removal, Transfer, or Sale of Processed Tobacco) imposes a significant administrative burden on industry members. To remedy this, R.J. Reynolds recommended that TTB exempt from the TTB F 5250.2 reporting requirements both shipments of processed tobacco to government agencies and export shipments of processed tobacco. Additionally, the commenter suggested that TTB change the reporting deadline in § 40.522(d) from the close of business the day after the transfer to one week after the transfer.

Schweitzer-Mauduit and Universal Leaf Tobacco Co. Inc. requested that TTB eliminate the requirement to provide details on export shipments of processed tobacco. In support of this, Universal Leaf Tobacco Co. Inc., asserted the following: Exports are non-taxable; permitted manufacturers of processed tobacco maintain export records on their premises that provide sufficient information regarding export movement; and processed tobacco movements are tracked through other TTB forms as well as by other Federal agencies. These two commenters recommended that TTB require submission of TTB F 5250.2 on a monthly, rather than daily, basis. Universal Leaf Tobacco Co. Inc., further suggested amending TTB F 5250.2, and the related regulations, to allow for aggregate reporting of multi-container shipments to a single recipient within any 10 business day period. Customs Advisory Services Inc. also proposed that recordkeeping related to shipments of processed tobacco for export should be done on a daily basis, with summary reporting on a monthly basis. In addition, they proposed that TTB accept commercial records, such as invoices and bills of lading in lieu of the recordkeeping requirements specified in §§ 40.521(b) and 41.261(b), and the reporting requirements specified in §§ 40.522 and 41.262.

TTB response: Based on these comments, TTB has concluded that it would be appropriate to revise the recordkeeping requirements in §§ 40.182 and 40.521 to remove the requirement that tobacco product manufacturers and processed tobacco manufacturers maintain daily processed tobacco records. Tobacco product manufacturers will be required to account for processed tobacco on hand at the beginning and end of each month and will also be required to account for, and provide dates for, receipts of processed tobacco, use of processed tobacco in the manufacture of tobacco products, and any loss or destruction of processed tobacco. Manufacturers of processed tobacco and manufacturers of tobacco products who are required to obtain authorization to engage in another business within the factory under §§ 40.47(b) and 40.72(b) will also still be required to maintain records of the date on which processed tobacco is received at the factory, removed from the factory, or lost or destroyed. The records of removals must still be made for each day by the close of the business day following the day on which the removal occurs. TTB believes that these changes address the concerns of the commenters regarding the recordkeeping burden, without jeopardizing the revenue.

In addition, TTB has reinstituted in this final rule a requirement that was removed by T.D. TTB-78 that manufacturers of tobacco products maintain records of tobacco received and disposed of. Prior to CHIPRA, the requirement set forth at § 40.182 regarding records of “tobacco,” would have included records of what would now be considered “processed tobacco” as well as of tobacco that had not yet been processed. In T.D. TTB-78, TTB amended § 40.182 to reflect the new category of “processed tobacco” by replacing references to “tobacco” with the term “processed tobacco.” Records of tobacco (unprocessed) were no longer required. However, TTB experience since the publication of the temporary rule has shown that the absence of such records hinders TTB's ability to determine whether the volume of products manufactured in a factory is consistent with the amount of tobacco received, used, and disposed of by the manufacturer. As a result, this final rule amends the recordkeeping requirements set forth at § 40.182 to require that the records of manufacturers of tobacco products include the quantity of tobacco (unprocessed) on hand at the beginning of each month and the quantity received, used, removed, lost, and destroyed during the month. Section 40.521 is also amended to extend this requirement to manufacturers of processed tobacco.

TTB does not concur with the suggestion by Altadis USA, Inc. that recordkeeping should only apply to leaf tobacco that is received in the factory and that is removed from the factory in the form of a tobacco product. TTB believes that the type of recordkeeping recommended by the commenters is the same recordkeeping that was in place prior to the statutory amendments of CHIPRA, that is, before TTB was mandated by Congress to regulate processed tobacco. The regulation of processed tobacco consistent with the goals of CHIPRA, that is, to prevent its being provided to entities operating illicit manufacturing operations, requires that manufacturers of tobacco products who remove processed tobacco for shipment to other entities be required to keep records of such shipments and that those records be made available to TTB. Thus, records of the movement of processed tobacco from a tobacco product manufacturer's facility, and not only records related to tobacco products, are necessary. However, TTB believes that changing the recordkeeping requirements as described above, from a daily to a monthly or situation-specific accounting of certain processed tobacco, may also address the concerns raised in this comment to the extent that it reduces the burden of accounting for processed tobacco within a continuous manufacturing process.

With regard to exports of processed tobacco, TTB agrees that submission of the TTB F 5250.2 may not be necessary in some cases. We are amending the regulations at §§ 40.522 and 41.262 to provide that manufacturers and importers that remove processed tobacco for export may, in lieu of submitting the TTB F 5250.2 by the close of business the day after the removal, submit a monthly summary report of removals upon written approval of the appropriate TTB officer. A manufacturer or importer that wishes to operate under such an alternative must apply for authorization to do so by submitting a written request to the appropriate TTB officer. The request must be accompanied by an example of the format intended for the monthly summary report. Such exporters are still required to maintain on their premises records of all export shipments, including records of the circumstances surrounding those shipments. At this time, we believe that if manufacturers and importers of processed tobacco maintain records related to export transactions on their premises, which must be made available to TTB for review upon request, TTB will have sufficient access to information related to exports to follow potential leads for diversion and thus protect the revenue. We note that manufacturers and importers of processed tobacco will, except in certain cases discussed below, still be responsible for submitting TTB F 5250.2 for all other (domestic) removals by the close of the business day following the removal, sale, or transfer. We believe that to do otherwise, such as to delay reporting by one week or longer to allow for aggregate reporting to a single recipient, would remove an important enforcement tool, that is, timely and detailed information about shipments of processed tobacco to entities not operating under a TTB permit.

With regard to recordkeeping, as is general practice, TTB will consider requests for alternate methods or procedures related to records of processed tobacco, provided that the proposed alternate method or procedure is consistent with the effect intended by the required procedure and it provides equivalent protection of the revenue. However, for clarity, a new sentence is added to §§ 40.521(c) and 41.261(c) specifically providing industry members with the option of applying for an alternate method or procedure with regard to recordkeeping related to shipments using commercial carriers.

TTB received comments from the Altria Group and Customs Advisory Services Inc. requesting clarification of whether importers of processed tobacco may receive domestic processed tobacco and, if so, how such receipts should be reflected in the required records and reports. The Altria Group also asked TTB to clarify the recordkeeping and reporting requirements for importers of processed tobacco who are also manufacturers of tobacco products.

Customs Advisory Services Inc. requested clarification of the meaning of the recordkeeping requirements at § 41.261(a)(2) that apply to importers of processed tobacco. That paragraph requires importers of processed tobacco to maintain records of the date and quantity of processed tobacco received “otherwise than through importation.” Customs Advisory Services Inc. asserts that, when that section is viewed alongside the monthly report form (TTB F 5220.6), it is unclear whether Line 8 of TTB F 5220.6, which requires accounting of tobacco products and processed tobacco “received from other sources,” would cover processed tobacco received from a domestic manufacturer or processed tobacco received from another importer. Customs Advisory Services Inc. recommended that TTB expand and clarify the scope of § 41.261(a)(2) and provide separate lines on TTB F 5220.6 “to show imported tobacco received from other importers of processed tobacco and processed tobacco received from domestic producers of processed tobacco.” Finally, Customs Advisory Services Inc. recommended that TTB modify the removals section of the monthly report required of the domestic manufacturer of processed tobacco (TTB F 5250.1) to provide a specific line for reporting removals of processed tobacco shipped to an importer of processed tobacco. The commenter believes that the failure to account for these removals would result in substantial quantities of processed tobacco not being reported.

With regard to the issue of an importer of processed tobacco also being a manufacturer of tobacco products, the Altria Group states that it is unclear whether the recordkeeping and reporting requirements for an importer of processed tobacco that is also a manufacturer of tobacco products apply with regard to the imported tobacco consumed in the company's manufacturing operations. According to the Altria Group, to the extent that the temporary regulations are intended to apply to such internal consumption, they are unduly burdensome for the importer, stating in this regard as follows: “Where a large volume of tobacco is imported and the vast majority is consumed in the manufacturing process of the importer, it is an onerous requirement to record and report each and every transaction of transfer to the manufacturing facility.” The Altria Group further asserts that the TTB regulations, presumably in § 41.261, do not clearly state whether records must be maintained for the transfer of imported processed tobacco from storage to the manufacturing facility, suggesting that TTB require recordkeeping and reporting only of transfers of imported processed tobacco outside the company.

Finally, R.J. Reynolds stated that, like manufacturers of processed tobacco, importers of processed tobacco should be required to complete the TTB F 5250.2 (Report of Removal, Transfer, or Sale of Processed Tobacco).

TTB response: Regarding the transfer of domestic processed tobacco to an importer of processed tobacco, we agree that the regulations in question are ambiguous and, therefore, in this final rule we are amending §§ 40.521(a)(4) and (a)(5) and 40.522(d) setting forth recordkeeping and reporting requirements to specifically incorporate language showing that a manufacturer of processed tobacco may transfer domestic processed tobacco to an importer of processed tobacco. Such transfers are recorded and reported in the same way that transfers of processed tobacco are made from a manufacturer of processed tobacco to another manufacturer of processed tobacco or to a manufacturer of tobacco products or an export warehouse proprietor. In addition, in response to Customs Advisory Services Inc.'s suggestion, we intend to amend TTB F 5250.1 to specifically provide for the reporting of removals of processed tobacco shipped to an importer of processed tobacco.

We do not believe at this time that § 41.261(a)(2) needs to be amended to clarify its scope with regard to an importer of processed tobacco receiving processed tobacco from a domestic manufacturer of such tobacco. The regulatory text currently requires that records be maintained reflecting the date and quantity of processed tobacco “received otherwise than through importation,” and that phrase includes any receipt such as the type in question. Similarly, we do not believe that TTB F 5220.6 needs immediate amendment to provide for receipts from domestic manufacturers of processed tobacco or from other importers, as it currently requires accounting of processed tobacco “received from other sources” and this phrase also includes any receipt that is not a direct importation. However, we do intend to provide clarifying instructions to TTB F 5220.6 after publication of this final rule.

In addition, TTB acknowledges that there is no line on the monthly report of importers of processed tobacco (TTB F 5220.6) specifically dedicated to reporting the amount of imported processed tobacco consumed in the manufacturing process, as noted in the Altria Group's comments. TTB regulations consider importing and manufacturing to be two distinct businesses whose operations are covered by two separate permits, with their own respective recordkeeping and reporting requirements. Accordingly, where processed tobacco is imported by the same entity that uses it in the manufacture of tobacco products, to create a complete record, the importation must be reflected in the records and on the monthly report of the importer, under that importer's permit number, and such report and records also must show the processed tobacco as transferred to the records associated with the permit of the manufacturer, even if the entity that holds the importer permit and the manufacturing permit are the same entity.

In response to the Altria Group's comments that this is an “unreasonable burden” on importers of processed tobacco who are also manufacturers of tobacco products, we note that the recordkeeping and reporting requirements for manufacturers of tobacco products who import tobacco for use in such manufacture are similar in scope to the requirements that were in effect prior to the amendments made in response to CHIPRA. Previous regulations at §§ 40.181-40.183 required that a manufacturer of tobacco products maintain records of the date and quantity of all tobacco other than tobacco products received, together with the name and address of the person from whom received. The new provisions require accounting for processed tobacco, but also require records that connect the processed tobacco imported under an importer's permit to that transferred to and used by a manufacturer of tobacco products under a different permit. We believe this tracking of processed tobacco between the importation and the use in manufacture is necessary to regulate processed tobacco as required by CHIPRA.

In response to R.J. Reynolds' suggestion that TTB require importers of processed tobacco to submit TTB F 5250.2 when they make shipments to entities that do not possess a permit, we note that the regulations already require such submissions. Section 41.262(d) requires an importer who transfers or sells processed tobacco to someone other than a person holding a TTB permit to report such sale or transfer on TTB F 5250.2 by the close of the business day on the day following the transfer or sale.

We received five comments from industry members requesting that TTB revise the regulations to allow an exemption from certain reporting and recordkeeping requirements related to shipments of processed tobacco as samples or for experimental and other small quantity purposes, or allow an exemption from the requirement that a manufacturer of tobacco products must obtain authorization to operate as a manufacturer of processed tobacco if that manufacturer removes processed tobacco for purposes other than destruction. A few comments addressed in particular that portion of the definition of “package” in § 40.11 that provides that a container of processed tobacco weighing 10 pounds or less (including any non-tobacco ingredients or constituents), that is removed within the meaning of that term in the regulations, is deemed to be a package for sale or delivery to the ultimate consumer.

Schweitzer-Mauduit and R.J. Reynolds both asserted that the “10 pounds or less” weight specified in the § 40.11 definition is unduly restrictive because manufacturers ship small amounts of processed tobacco that are samples for testing or analysis and thus are not intended to be used as roll-your-own tobacco, pipe tobacco, or any other taxable tobacco product. Similarly, National Tobacco asserted that most shipments of processed tobacco are “of a limited noncommercial nature, such as test samples to labs, batch samples for export, batch samples from new importers, samples direct from farmers for evaluation.” National Tobacco recommended that TTB require weekly rather than daily reporting of such transfers, or, as an alternative, that TTB create an exception to the reporting requirement for sample shipments of a certain weight, for example, two pounds.

In addition to the transfer of samples of processed tobacco for experimental purposes, Universal Leaf Tobacco Co. Inc., commented that “the sale of processed tobacco is often carried out through the delivery of a representative sample of the processed tobacco to a prospective buyer” as a “slice” of processed tobacco, which typically weighs between 5 and 10 pounds. Universal Leaf Tobacco Co. Inc., explained that the samples are extremely small portions of the processed tobacco being sold and are not fit for direct consumption in the marketplace; they therefore requested that the regulations be amended to exclude samples from the reporting requirements on TTB Forms 5220.6, 5250.1, and 5250.2. R.J. Reynolds alternatively suggested that TTB add lines to the monthly report, TTB F 5250.1, to report tobacco shipped as samples to potential customers or government agencies not intended for sale and tobacco shipped off of the premises for experimental purposes.

In its comments, the Altria Group claimed that because there is no tax on processed tobacco, there is no immediate jeopardy to the revenue related to the transfer of processed tobacco unless the processed tobacco is transferred to an unpermitted facility. Accordingly, the comment suggested that TTB exempt manufacturers of tobacco products that also manufacture processed tobacco from the requirement to obtain authorization to engage in either the removal of processed tobacco for experimental purposes or the transfer of processed tobacco between permitted facilities, by providing manufacturers of processed tobacco with exceptions similar to those provided for manufacturers of tobacco products, such as the experimental purposes provision in § 40.232, and the exemption for transfer in bond (between permitted facilities) provided for in § 40.233. The Altria Group stated that these provisions provide an opportunity for a manufacturer to test machinery using tobacco products, conduct testing of tobacco products, and transfer tobacco products among permitted facilities for product development or other legitimate business purposes without payment of tax so long as certain records are maintained. With regard to removals for experimental purposes, the Altria Group suggested that the manufacturer of tobacco products be exempt from the requirement to obtain authorization to operate as a manufacturer of processed tobacco under 27 CFR 40.72(b) if that manufacturer removes processed tobacco for experimental purposes or for transfers between permitted facilities. The comment recommended requiring recordkeeping of all such transfers and also requiring that the processed tobacco either be destroyed in the testing process or be returned to the manufacturer for documented destruction. The Altria Group also proposed that a manufacturer submit to TTB an initial notice that the manufacturer intended to engage in such transfer activities.

TTB response: TTB believes that the basic point made by these commenters is valid. Accordingly, in this final rule document we have amended § 40.72(b) to provide that a manufacturer of tobacco products that processes tobacco on the factory premises solely for use in the manufacture of tobacco products under that permit and that removes the processed tobacco from those premises only for purposes related to the business of a manufacturer of tobacco products, and not for purposes related to the business of a manufacturer of processed tobacco, may engage in those operations without obtaining prior authorization from TTB. Under the new text of § 40.72(b)(2), removals of processed tobacco that are considered removals for purposes related to the business of a manufacturer of tobacco products, and therefore do not require TTB authorization, include removals of samples for soliciting orders of tobacco products and removals of processed tobacco for destruction, for scientific testing or testing of equipment, and for transfer between permitted premises of the same manufacturer. A manufacturer of tobacco products who engages in any of these removals and who maintains adequate records of the disposition of such processed tobacco may engage in such removals without first obtaining authorization from TTB. Any removal not adequately supported by records and any other type of removal other than those listed will be treated as a removal related to the business of a manufacturer of processed tobacco, for which the manufacturer of tobacco products must first obtain authorization to engage in another business within the factory under § 40.47 and keep records and submit reports under §§ 40.521 and 40.522, unless the manufacturer can show to the satisfaction of the appropriate TTB officer that the removal is connected with the business of a manufacturer of tobacco products. In this final rule TTB has amended §§ 40.47(b), 40.202(b), and 40.491 to conform to the changes made in § 40.72(b).

TTB also amended § 40.522(d) to provide exceptions from the reporting of certain removals on TTB F 5250.2. TTB F 5250.2 is used by a manufacturer or importer to report certain removals of processed tobacco; the form must be submitted to TTB by the close of the business day on the day following the removal. Under the temporary regulations, § 40.522(d) requires manufacturers to report on TTB F 5250.2 any removals of processed tobacco for shipment to any person not holding a TTB permit as a manufacturer of processed tobacco, a manufacturer of tobacco products, or an export warehouse proprietor. The final regulations no longer require manufacturers of tobacco products to report removals of processed tobacco to entities not holding such permits if those removals are for purposes related to the business of a manufacturer of tobacco products, such as removals for destruction, for scientific testing or testing of equipment, for soliciting orders of tobacco products, or for transfer between permitted premises of the same manufacturer. These exceptions to the reporting requirement are described in § 40.72(b)(2). In addition, manufacturers of processed tobacco will not be required to report on TTB F 5250.2 any removals of processed tobacco for destruction, scientific testing, or testing of equipment that result in the destruction of the processed tobacco or the return of the tobacco to the factory premises. Similarly, TTB has added a new paragraph § 41.262(d)(3) stating that an importer of processed tobacco that ships or transfers processed tobacco for scientific testing which results in the destruction of the processed tobacco is not required to report such shipment or transfer on TTB F 5250.2. Manufacturers and importers must still report such removals on their respective monthly reports.

We received two additional comments from R.J. Reynolds regarding recordkeeping and reporting requirements for manufacturers of processed tobacco. R.J. Reynolds requested confirmation that physical possession (and not ownership) of processed tobacco is the primary criterion used to identify the permit holder responsible for reporting the associated activity. Additionally, R.J. Reynolds asked that TTB acknowledge the likelihood of variations in the weight of processed tobacco as it is blended with other ingredients and as it gains and loses moisture due to the atmospheric conditions of the manufacturing process. R.J. Reynolds asks that TTB provide guidance on how these variations are to be reported.

TTB response: In response to the first point, as a general principle, TTB agrees that physical possession and control over the removal of the processed tobacco triggers the recordkeeping and reporting requirements, rather than only legal ownership of the processed tobacco. The permittee is responsible for the physical movement of the processed tobacco and the permittee who removes the processed tobacco from its factory is responsible for reporting the transfer. With regard to the second point, we acknowledge that there can be significant variations in the weight of processed tobacco. Because the variation in the weight of processed tobacco is specific to each industry member's manufacturing process, any standardized guidance by TTB would be too limiting on industry members to include in this final rule or too general to account for individual variations. Accordingly, manufacturers of processed tobacco should maintain records supporting any variations in weight throughout their manufacturing process.

Universal Leaf Tobacco Co. Inc., requested that TTB remove the signature requirement from TTB F 5250.2 because no signature is required under the pertinent regulatory provisions at § 40.521. Schweitzer-Mauduit and Universal Leaf Tobacco Co. Inc., requested that TTB remove the requirement for personal information about the person picking up the processed tobacco for delivery, that is, lines 16, 17 and 18 of TTB F 5250.2. These lines require the person be identified by name, address, and government-issued identification number (such as a driver's license number) and that the vehicle be identified by license tag number. According to Universal Leaf Tobacco Co. Inc., “this requirement infringes on certain privacy matters.” Schweitzer-Mauduit asserts that such collection of information is burdensome for its employees, while the drivers about whom information is collected find the inquiry intrusive and objectionable.

TTB response: With regard to the requirement that TTB F 5250.2 bear a signature, the IRC at section 6061 provides that any return, statement, or other document required to be made under any provision of the internal revenue laws or regulations shall be signed in accordance with forms or regulations prescribed by the Secretary of the Treasury. The TTB regulations at 27 CFR 40.41 provide that the appropriate TTB officer is authorized to prescribe all forms required by part 40 and that all of the information called for in each form shall be furnished as indicated by the headings on the form and by the instructions on or pertaining to the form. In addition, § 40.41 states that information called for in each form shall be furnished as required by part 40 and that, when a return, form, claim, or other document called for under part 40 is required by part 40, or by the document itself, to be executed under penalties of perjury, it shall be executed under penalties of perjury. The same provisions apply to part 41, with regard to importers, under § 41.21. The form itself is required under §§ 40.522(d) and 41.262(d), which state, in pertinent part, that the TTB F 5250.2 must be submitted “in accordance with the instructions on the form.” Accordingly, the signature requirement need not be specifically restated in the regulations.

Also, information about the driver and vehicle involved in the removal of processed tobacco from the regulated premises provides TTB with information that has been found effective in tracking processed tobacco and preventing diversion to illegal manufacturers. TTB believes that the information we require at that point is the minimum necessary to ensure protection of the revenue by tracking processed tobacco. It remains the position of TTB that both importers and manufacturers must provide TTB with certain information regarding the person involved in the delivery of the processed tobacco to a person who does not have the appropriate TTB permit. The information that we are requiring is consistent with similar recordkeeping required under the Contraband Cigarette Trafficking Act (CCTA), 18 U.S.C. chapter 114, which deals primarily with contraband cigarettes and smokeless tobacco and is administered by the Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). However, in considering these comments, TTB has determined that, rather than the personal address of the person picking up the shipment, a more appropriate requirement would be the business address of the company for which the driver works. As a result, in the final rule, the word “business” is added in §§ 40.521(b)(2) and 41.261(b)(2) to clarify that records of the business address of the driver picking up the processed tobacco must be kept, rather than the driver's personal address. Further, in this final rule both §§ 40.521 and 41.261 have been amended to specify that an alternate method may be approved for the collection of such information in the case of shipments by common carrier. Section 41.261 has also been amended to incorporate some technical changes for clarity and for consistency with the language contained in § 40.521.

Customs Advisory Services Inc. recommended that the inventory reporting requirement be clarified, specifically with regard to how often TTB F 5210.9 (Inventory—Manufacturer of Tobacco Products or Processed Tobacco) must be submitted. The commenter points to the temporary regulations at 27 CFR 40.523 that require a manufacturer to make an inventory “at the time of commencing business, at the time of transferring ownership, at the time of changing location of the factory, at the time of concluding business, and at such other time as any appropriate TTB officer may require,” and asserts that reporting of inventory only upon the opening and closing of business operations “could be meaningless reporting for companies with ongoing operations” but that the phrase “* * * and at such other time as any appropriate TTB officer may require” is vague and undefined.

R.J. Reynolds asserted that there are “major inconsistencies” within the proposed regulations regarding the reporting of inventories. Under § 40.523, a manufacturer of processed tobacco operating under the transitional rule set forth in § 40.493 must make a true and accurate inventory on TTB F 5210.9 within 10 days of the date of TTB's written acknowledgement of the receipt of the application filed under § 40.492. R.J. Reynolds points out that importers of processed tobacco are not required to provide a similar inventory and, as these entities could easily have inventory in their possession, a similar reporting should be required. In addition, R.J. Reynolds believes that, because the date of the initial inventory and the dates that must be covered by a manufacturer's first monthly reports do not correspond, the relationship between the two types of reports is unclear.

TTB response: With regard to the comments from Customs Advisory Services Inc., under § 40.523, the phrase “at such other time as any appropriate TTB officer may require” provides TTB with the authority to require an inventory when necessary, for example, in connection with an audit or investigation of an industry member, which is the most common use by TTB of the authority to require an inventory. The same language appears in § 40.201 which sets forth inventory requirements for manufacturers of tobacco products and has been an effective tool for TTB in regulating the industry without the burden of monthly inventories. Neither the regulatory text at § 40.523 nor the form TTB F 5210.9 mentions a requirement to submit to TTB an inventory monthly and none is deemed necessary for TTB purposes.

In response to R.J. Reynolds' comments, we agree that for the same reasons a manufacturer of processed tobacco must perform an inventory at specified times, an importer of processed tobacco should also perform an inventory. The omission of this requirement was an oversight. Importers of tobacco products are not currently required to submit inventories because the products that they store and ship could only be taxpaid tobacco products, the tracking of which has been seen as needing less regulatory oversight. However, importers of processed tobacco must account for all processed tobacco imported and also must report on the TTB F 5250.2 processed tobacco shipped to a non-permittee. The inadvertent omission of an inventory requirement for importers of processed tobacco in the temporary regulations is corrected in this final rule through the addition of a new section 27 CFR 41.264 that mirrors the inventory requirement applicable to manufacturers of processed tobacco appearing at § 40.523. TTB authority to require such inventories is set forth in the Internal Revenue Code of 1986 at 26 U.S.C. 5721, and applies equally to manufacturers and importers of processed tobacco.

With regard to the other comments related to TTB F 5250.1 and TTB F 5210.9, we have addressed issues relating to the use of those forms with individual industry members, on a case-by-case basis, since the publication of T.D. TTB-78, and we do not believe that any further regulatory action is necessary on these points.

Two commenters suggested that we amend our regulations to address whether, and to what extent, TTB will consider specific factors when evaluating a tobacco processor's permit application.

The Law Offices of Barry Boren asserted that the regulations addressing “Investigation of Applicant” at 27 CFR 40.498(b) and 41.238(b) imply a life-time ban from obtaining a permit for applicants with a felony conviction. The commenter stated that, in the past, TTB has determined that a felony conviction should not necessarily be a life-time ban to obtaining a permit and that, rather than a life-time ban, five years is a “reasonable ban” in such cases so long as the agency does not have other reasons for denying an application for a permit.

Venable, LLP requested that TTB amend its regulations to clarify that we will only deny a permit to an applicant based on the conduct of an officer, director, or principal stockholder of a company, and only if that person is actively involved in the day-to-day management or operations of the applicant. Venable, LLP referenced two Federal cases from the 1930s to demonstrate that TTB's predecessors, such as the Internal Revenue Service, “primarily based their decisions to deny a permit to an applicant on the level of involvement of the officer, director, or principal stockholder at issue in the day-to-day management or operations of the applicant.” Venable, LLP also described the standards for denial of permits applied by other Federal agencies. Venable, LLP suggested that TTB adopt a “present responsibility” standard, in which “[t]he government frequently finds that companies are `presently responsible' so long as the officer does not control or manage the day-to-day operations of the company, or where the company has instituted sufficient controls to prevent the officer from becoming involved in future government contracts.” In evaluating an officer's conduct, Venable, LLP recommended that TTB consider mitigating factors, including: (1) The nexus between the activity for which the officer, director, or principal stockholder is under indictment and the applicant's business operations; (2) whether the officer, director, or principal stockholder is involved in the day-to-day management or operations of the applicant; (3) the applicant's cooperation with TTB and willingness to take actions to address TTB's concerns; (4) the applicant's willingness to implement remedial or monitoring measures determined necessary by TTB; (5) whether the applicant has, or will shortly, implement policies to prevent the future occurrence of offenses; and (6) the likelihood that any legal proceedings against an officer, director, or principal stockholder are likely to be resolved in the person's favor.

Venable, LLP also requested that TTB consider extending the transitional rule under § 40.493, which provides that manufacturers and importers of processed tobacco already in operation who applied to TTB for a permit by June 30, 2009, could continue to engage in that business pending final action by TTB on the permit application. Venable, LLP stated that the purpose of transitional rule was “to ensure that long-standing manufacturers and processors that have operated successfully and in compliance with the law are not unfairly denied the right to continue their business.” The commenter suggested an extension to this rule to stay denial of any processed tobacco manufacturer's or importer's permit application until there is a final administrative and/or judicial review of their application, or a final resolution of any judicial proceedings involving an officer, director, or principal shareholder of the company.

TTB response: First, the regulations at §§ 40.498(b) and 41.238(b) repeat the standards of review that TTB may use to deny a permit under 26 U.S.C. 5712; the regulatory and statutory texts state that a permit may be denied if TTB finds that the applicant is, by reason of his business experience, financial standing or trade connections or by reason of previous or current legal proceedings involving a felony violation of any other provision of Federal criminal law related to tobacco products, processed tobacco, cigarette paper, or cigarette tubes, not likely to maintain operations in compliance with the provisions of title 26, United States Code, chapter 52, or has been convicted of a felony violation of any provision of Federal or State criminal law relating to tobacco products, processed tobacco, cigarette paper or cigarette tubes, or has failed to disclose any material information required or made any material false statement in the application for permit. The fact that a permit may now be denied for reasons related to a felony conviction does not imply that the permit will necessarily be denied for such a conviction or that such a conviction will result in a life-time ban from obtaining a TTB permit. Rather, as has been the case historically, TTB believes that an individual, case- by-case determination is necessary for each applicant, given the variability of circumstances. TTB will apply these provisions, as it has applied the provisions related to determining qualification for a permit, by considering all relevant factors. A five-year limitation, as suggested by Mr. Boren, would eliminate TTB's flexibility to individually evaluate each applicant's particular situation. With regard to the mitigating factors suggested by Venable, LLP, although it would not be appropriate to include specific mitigation standards in the regulations, those suggested by Venable, LLP are factors that TTB could reasonably consider when evaluating an application for a permit.

Section 702 of CHIPRA merely adds manufacturers and importers of processed tobacco to the list of persons in sections 5712 and 5713(a) of the IRC who must apply for and obtain a permit from TTB in order to engage in business, while it amends sections 5721, 5722, 5723, and 5741 to add references to processed tobacco with regard to requirements for making inventories, keeping records, packaging and labeling, and reporting. As a result, the same regulatory authority in these areas applies to activities involving tobacco products and processed tobacco.

As for the request that TTB stay the denial of any processed tobacco manufacturer or importer permit application, TTB has no authority to extend the statutory transitional rule reflected in § 40.493. However, TTB does have an administrative process in place in 27 CFR part 71, consistent with Federal administrative law, through which an applicant for a permit may contest TTB's denial of a permit application. Under 27 CFR 71.59, an applicant may request a hearing before an administrative law judge, within 15 days of receipt of notice of the contemplated disapproval of the application. Thus, TTB's regulations already provide an appropriate administrative process for all permits administered under TTB's authority under the IRC.

John Middleton Co. asserted that the regulations addressing the packaging of pipe tobacco, specifically 27 CFR 40.25a(b)(3)(i), are not authorized by CHIPRA because CHIPRA only mentions pipe tobacco in reference to its tax rate increase. That section deems a product to be roll-your-own tobacco rather than pipe tobacco if the package does not bear the declaration “pipe tobacco” in a specified manner everywhere on the package that the brand name appears. These comments were made in the context of a request for an extension of the time manufacturers and importers could use up existing packaging before being required to come into compliance with the new packaging standards. John Middleton Co., along with the rest of the Altria Group companies, further argued that the temporary regulations place an onerous burden on pipe tobacco products because “the focus on regulation of the pipe tobacco industry is not anticipated, authorized or required by the CHIPRA legislation nor is there anything in CHIPRA that would have alerted manufacturers of pipe tobacco that such requirements would be forthcoming.”

TTB response: First, TTB notes that the package use-up period was extended from the original date of August 1, 2009, until March 23, 2010 (see T.D. TTB-81, 74 FR 48650). With regard to the certain points made about the classification of pipe tobacco and roll-your-own tobacco based on package statements, although CHIPRA did not specifically highlight pipe tobacco beyond the section 701 tax rate increase, as noted in T.D. TTB-78, TTB determined that because of the revenue implications resulting from the tax rate changes made by CHIPRA, there was a need for more regulatory detail to clarify the difference between the two products. Further, as described above, the statutory definitions of pipe tobacco and roll-your-own tobacco both require consideration of the packaging and labeling of the product—specifically, whether the packaging or labeling causes it to be “suitable for use and likely to be offered to, or purchased by, consumers as” tobacco to be smoked in a pipe or as tobacco for making cigarettes or cigars or for use as wrappers thereof. In T.D. TTB-78, TTB set forth regulations regarding how that statutory language would be applied. Those regulations were promulgated under 26 U.S.C. 5723(a) and (b), which provide the authority to prescribe regulations regarding the packaging and labeling of tobacco products, and under 26 U.S.C. 7805(a), which confers on the Secretary of the Treasury the broad authority to prescribe “all rules and regulations as may be necessary by reason of any alteration of law in relation to internal revenue.”

TTB received two comments that requested that we define “conspicuousness” as it is used in § 40.25a(b)(3)(i). That regulatory provision refers to a package that does not bear the “pipe tobacco” declaration “in substantially the same conspicuousness of type and background as the brand name,” the result of which is that the package would be deemed roll-your-own tobacco rather than pipe tobacco for tax purposes.

The Law Offices of Barry Boren suggested that, because the term “conspicuousness” is not defined in TTB's regulations, TTB should adopt the definition of conspicuousness used in the U.S. Customs and Border Protection (CBP) regulations, noting in this regard that in 19 CFR 134.1(k), “conspicuous” is defined as “capable of being easily seen with normal handling of the article or container.” By adopting the same conspicuous standard as CBP, TTB would “help manufacturers and importers better understand their obligations under the statute and promote compliance and enforcement,” and prevent confusion and unintentional noncompliance, which would result from agencies adopting different definitions and policies for the same term. Further, TTB should adopt a policy that articles need not be marked in the most conspicuous place but must be marked in any conspicuous place. Finally, the commenter suggested that TTB adopt provisions from the CBP regulations at 19 CFR 134.41 regarding the methods and manner of marking.

National Tobacco suggested that, due to the inherently ambiguous nature of the “conspicuousness” standard in § 40.25a(b)(3)(i), TTB should set up a process allowing tobacco companies to get prompt, advance TTB approval of new packaging designs. Under this approval process, packaging designs submitted to TTB for review would be deemed approved if TTB did not specify any objections within a 15-day time period. Alternatively, TTB should further define “conspicuousness” by specifying a minimum font size for the term “pipe tobacco” relative to the font size of the product brand name each time the brand name appears on the packaging.

National Tobacco also suggested that TTB clarify § 40.25a(b)(3)(ii), under which processed tobacco removed from a factory in a package is deemed to be roll-your-own tobacco if the package or accompanying materials bear any representation that would suggest a use other than as pipe tobacco. National Tobacco asks that TTB state that the term “accompanying materials” used in that section includes any point of sale advertising and all other printed product communications issued by the manufacturer of pipe tobacco products.

TTB response: TTB does not believe that it is appropriate to define the word “conspicuousness” in this final rule because any attempt to do so without first going through a period of public notice and comment could prove to be unnecessarily limiting. The current regulatory text in § 40.25a(b)(3)(i) allows for sufficient flexibility depending on the design and size of the package, and TTB believes this is the preferable approach at this time. In this regard, TTB notes that, after the enactment of CHIPRA, Congress passed and the President signed the Family Smoking Prevention and Tobacco Control Act (Pub. L. 111-31) affecting the graphics and warning statements required to appear on certain tobacco products. These additional issues now faced by the tobacco industry regarding packaging and labeling requirements underscore our belief that a flexible approach, particularly with regard to size and placement of certain information on a tobacco product package, is necessary for the near future. Rather than establishing a new process of review and prior approval by TTB of each tobacco product package, TTB will consider whether clarifying the conspicuousness standard in future guidance is needed.

With regard to the request that TTB amend § 40.25a to specify what may be “accompanying materials,” we agree with the comment. The final regulations at § 40.25a(b)(3)(ii) and § 41.30(b)(3)(ii) provide that “accompanying materials” includes, but is not limited to, any point of sale advertising or other printed product communications issued by the manufacturer or importer of pipe tobacco products. In addition, the inclusion of cigarette papers or tubes in a package bearing a “pipe tobacco” declaration will suggest a use other than pipe tobacco.

We received a comment from Geoffrey Ranck of Domestic Tobacco Co., recommending that TTB add a line to the monthly report required of importers of tobacco products or processed tobacco (TTB F 5220.6) to account for cigar tobaccos (filler, binder, and cigar wraps) separately from roll-your-own tobacco. Mr. Ranck noted that, although CHIPRA amended the definition of roll-your-own tobacco so that cigar tobacco must now be included in the accounting of roll-your-own tobacco, cigar tobacco is still considered to be distinct from traditional roll-your-own cigarette tobacco by the U.S. Department of Agriculture (USDA) in its implementation of the Fair and Equitable Tobacco Reform Act (commonly referred to as the “Tobacco Buyout”) and by the various states in their implementation of the Master Settlement Agreement.

TTB response: Although the categories on TTB F 5220.6 correspond directly to the types of tobacco products recognized under the IRC definitions (small cigarettes, large cigarettes, small cigars, large cigars, snuff, chewing tobacco, pipe tobacco, and roll-your-own tobacco), we recognize that other Federal agencies have different definitions of these tobacco products. Mr. Ranck's suggestion has merit and, when updating TTB F 5220.6, TTB will explore the extent to which such a change would meet the needs of industry members and be consistent with and facilitate reporting required by other Federal agencies or the Master Settlement Agreement.

Two commenters addressed the designations that must appear on tobacco product packages, under § 40.216b and 41.72b, to identify those products for tax purposes. National Tobacco noted that the temporary regulations removed “Tax Class L” and “Tax Class J” as approved designations for packages of pipe tobacco and roll-your-own tobacco, respectively, and suggested that TTB also eliminate all “Tax Class” designations for the other tobacco products in favor of accurate descriptive terms. This would remove “Class A” and “Class B” as alternatives for the term “small cigarette” and “large cigarette,” “Tax Class C” as an alternative for the term “chewing tobacco” and “Tax Class M” as an alternative designation for “snuff”. National Tobacco and the Law Offices of Barry Boren requested that TTB also authorize the use of a number of designations for roll-your-own tobacco in addition to those prescribed in § 40.216b and 41.72b. The Law Offices of Barry Boren stated that the labeling requirements proposed for cigar wrappers are unduly restrictive; that cigar wrappers have been known throughout the industry and the general public under names such as “cigar wrappers,” “cigar wraps,” “blunts,” “leaf wraps” and “flat wraps;” and that any of these names should be acceptable for marking purposes. National Tobacco proposed adding “tobacco cones” and “cigar tubes” as designations, stating that the use of the term “roll-your-own tobacco” to designate such products may cause confusion between products used for making cigars and products used for making cigarettes, particularly because roll-your-own tobacco used for making cigarettes is subject to State excise taxes and the payment obligations of the Master Settlement Agreement.

TTB Response: First, TTB notes that the designations required on tobacco product packages are intended to identify the product for purposes of Federal excise tax. The designation indicates the tax category under which the taxpayer removed the product domestically or obtained release of an imported product. The regulations have traditionally allowed industry members a choice between using a descriptive term and using a “Tax Class” reference. For example, under the previous version of § 40.216a, a package of pipe tobacco had to bear either the designation “pipe tobacco” or the designation “Tax Class L.” Although we agree that descriptive terms for all tobacco products may be preferable in some regards, the removal of the options to use “Tax Class L” to designate pipe tobacco and “Tax Class J” to designate roll-your-own tobacco was specific to those products and to the ways those products are defined by statute. The designations “Tax Class L” and “Tax Class J” were removed as authorized designations because the IRC definitions, as discussed above, require consideration of the packaging and labeling of pipe tobacco and roll-your-own tobacco—specifically as to whether packaging, labeling, appearance, or type of the tobacco, cause the product to be “suitable for use and likely to be offered to, or purchased by, consumers” as either of those products. The statutory definitions of the other products do not require a similar consideration of the packaging and labeling. Accordingly, because TTB does not have a compelling reason to adopt the requested change within the scope of administration and enforcement of the Federal excise tax, and because the alternative notices are currently in use by industry members, it would not be appropriate to adopt the proposed changes in this final rule without notice to, and opportunity for comment by, industry members.

With regard to the designations authorized for roll-your-own tobacco, under the temporary regulations, the following terms may be used: “roll-your-own tobacco,” “cigarette tobacco,” “cigar tobacco,” “cigarette wrapper,” and “cigar wrapper.” TTB believes these alternative designations are sufficient for administering and enforcing the Federal excise tax provisions. The designations are used for tax purposes and are not intended to reflect the scope of terms used for marketing the product. TTB notes that the regulations do not prohibit additional terms from appearing on tobacco product packages that also bear one of the prescribed designations. Such additional information may appear so long as it does not contradict or conflict with the tax designation.

TTB received additional comments that relate to pipe tobacco and roll-your-own tobacco issues, particularly with regard to distinguishing between the two products for tax purposes. Comments from the South Dakota Attorney General's Office, National Tobacco, the Law Offices of Barry Boren, Altadis USA, Inc., and the Campaign for Tobacco-Free Kids suggested that TTB clarify the characteristics that distinguish pipe tobacco from roll-your-own tobacco to prevent mislabeling of roll-your-own tobacco as pipe tobacco. Altadis USA, Inc. expressed concern about “massive tax cheating in the form of misclassification of RYO tobacco as pipe tobacco” and submitted a “Draft Revision of Temporary/Proposed Regulation on Classification of Pipe Tobacco and Roll-Your-Own Tobacco.”

The Pipe Tobacco Council, National Tobacco, and Altadis USA, Inc. requested that TTB “grandfather” pipe tobacco brands that were on the market prior to the enactment of CHIPRA in 2009. Although various “grandfather” proposals have been suggested to TTB, they differ in details. In general, under those various proposals, brands that were marketed as pipe tobacco prior to a certain date, for example, April 1, 2009, would continue to be deemed pipe tobacco after that date so long as the product remained sufficiently similar to the product that was produced under that brand name before April 1, 2009. As a result, under the various proposals, any standards that TTB might find to distinguish between pipe tobacco and roll-your-own tobacco would not be applied to “grandfathered” brands.

The Pipe Tobacco Council also expressed concern about the importation of cut tobacco that was not put up into consumer packages, specifically that there would be a disparity in treatment between packaged and unpackaged imported tobacco. The Pipe Tobacco Counsel recommended that cut tobacco imported under a certain subheading of the Harmonized Tariff Schedule of the United States (HTSUS) be categorized as roll-your-own tobacco, with excise tax due upon release from customs custody. That subheading (2403.10.30.90) applies, in general terms, to smoking tobacco that is to be used in products other than cigarettes and that is not prepared for marketing to the ultimate consumer in the form and package in which it's imported.

The issues involved in distinguishing between pipe tobacco and roll-your-own tobacco merit separate treatment. To obtain public input specifically on those issues, TTB published in the Federal Register on July 22, 2010 (75 FR 42659), an advance notice of proposed rulemaking, Notice No. 106, referred to earlier in this comment discussion. After the close of the Notice No. 106 comment period, TTB received a request to meet with an industry member and its legal representation to present TTB with a proposal to use certain physical characteristics to distinguish between pipe tobacco and roll-your-own tobacco that differ from the standards proposed by the other commenters. That new proposal, which was submitted as a slide presentation, is now posted with the comments on Notice No. 106 as Comment 23 and may be viewed at the Regulations.gov Web site ( www.regulations.gov ) within Docket No. TTB-2010-0004. Through publication in the Federal Register of Notice No. 120 on August 24, 2011 (76 FR 52913), TTB reopened the public comment period for Notice No. 106, until October 24, 2011, in order to provide an opportunity for public feedback to the new proposal. TTB is currently reviewing the comments and determining the appropriate rulemaking action in response.

In addition to those changes noted in the above discussion of comments, this final rule document makes the following changes to the temporary regulations published in T.D. TTB-78 and T.D. TTB-81:

• In §§ 40.11 and 41.11, the definition of “package” is amended to provide for several exceptions to the statement that “[a] container of processed tobacco, the contents of which weigh 10 pounds or less (including any non-tobacco ingredients or constituents), that is removed within the meaning of this part, is deemed to be a package offered for sale or delivery to the ultimate consumer.” Those exceptions are provided to recognize that manufacturers and importers of processed tobacco may remove processed tobacco in small amounts for purposes related to the business of a manufacturer or importer of processed tobacco; the exceptions allow the removal of such small amounts without that removal being deemed a removal of a taxable product and thus triggering the tax. The exceptions are similar to those provided to manufacturers of tobacco products who remove tobacco products without payment of tax for specified purposes. The definition of “package” is also amended to add references to § 40.25a and 41.30, respectively, to direct the reader to the tax rates that apply to processed tobacco that is placed into a package and removed. Also, in §§ 40.11 and 41.11, TTB is amending the definition of “packaging” to clarify that, when used in the context of an action, the term “packaging” refers to the activity of placing processed tobacco or a tobacco product in a package. This differentiates the use of the verb form of “packaging” from that of the noun form, as both appear in the regulatory text.

• In §§ 40.25a(b)(2) and 41.30(b)(2), a sentence has been added that mirrors text in the definition of “package” in §§ 40.11 and 41.11 described in the first bullet above. Specifically §§ 40.25a(b)(2) and 41.30(b)(2) now state that a container of processed tobacco, the contents of which weigh 10 pounds or less (including any added non-tobacco ingredients or constituents), that is removed within the meaning of this part, is deemed to be a package offered for sale or delivery to the ultimate consumer. The same exceptions are provided in those regulatory sections to recognize that manufacturers and importers of processed tobacco may remove processed tobacco in small amounts for purposes related to the business of a manufacturer or importer of processed tobacco; the exceptions allow the removal of such processed tobacco without that removal being deemed a removal of a taxable product and triggering the tax. The added text in §§ 40.25a(b)(2) and 41.30(b)(2) is for ease of reference.

• In § 40.256, the reference to “§ 40.61(b)” is corrected, so that it reads “§ 40.61(c).”

• In § 40.521(a), TTB is removing the requirement to keep records showing the quantity of processed tobacco processed, because we believe this requirement could result in counting the same tobacco multiple times where the tobacco is subject to more than one processing activity.

• In § 40.521, paragraphs (b)(6) and (b)(7) are removed, thereby removing the requirement that manufacturers of processed tobacco obtain a declaration by the purchaser of the processed tobacco of the specific purposes for the purchase and a declaration by the purchaser of the name and address of the principal if the purchaser is acting as an agent. TTB has not to date obtained any useful information from such requirements. Corresponding changes are made to the recordkeeping requirements applicable to importers of processed tobacco at §§ 41.261(b)(6) and (b)(7).

• In § 40.531, which concerns approvals of alternate methods or procedures for manufacturers of processed tobacco, TTB is amending paragraph (a)(2) by adding a reference to affording equivalent security to the revenue, as an additional condition for TTB approval.

• A new § 41.203a is added to correct an oversight. Importers of tobacco products are subject, under 26 U.S.C. 5713(b), to the same permit suspension and revocation provisions as those in the regulations applicable to manufacturers of tobacco products and processed tobacco and to importers of processed tobacco, at 27 CFR 40.332, 40.528, and 41.273 respectively. However, no such provision mirroring this statutory text appears in the current regulations applicable to importers of tobacco products. The new section sets forth permit suspension and revocation provisions for importers of tobacco products that mirror the permit suspension and revocation provisions for importers of processed tobacco in § 41.273.

• In 27 CFR 41.232, TTB is adding language to clarify that, although the permit of an importer of tobacco products can be amended to allow for the importer to import processed tobacco under the same permit, that importer qualifies to do so only when TTB authorization of the amendment is received in response to the application.

• Finally, TTB has made several non-substantive editorial changes to improve the readability and the clarity of the regulatory texts that appear in this document.

Based on the foregoing, TTB has determined that the temporary regulations published in T.D. TTB-78 and T.D. TTB-81 should be adopted as a final rule with the changes discussed above.

We certify that these regulations will not have a significant economic impact on a substantial number of small entities. The regulatory obligations and relevant collections of information which are the subject of this rule derive directly from the Internal Revenue Code of 1986, as amended, and the regulations in this rule concerning these obligations and collections merely implement and provide necessary standards for complying with the statutory requirements. Likewise, any secondary or incidental effects, and any reporting, recordkeeping, or other compliance burdens flow directly from the statute. Accordingly, a regulatory flexibility analysis is not required.

TTB has provided estimates of the burden that the collection of information contained in these regulations imposes, and the estimated burden has been reviewed and approved by the Office of Management and Budget (OMB) in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507) and assigned control numbers 1513-0024, 1513-0032, 1513-0033, 1513-0035, 1513-0068, 1513-0070, 1513-0078, 1513-0106, 1513-0107, and 1513-0130. TTB notes that this final rule contains a number of amendments to the regulations that alleviate the recordkeeping and reporting required by the temporary rule that this document replaces. In several provisions, alternate procedures are provided that allow for monthly summary reporting rather than daily or per-shipment reporting, and in two provisions, the requirement to record certain information has been removed. In addition, this final rule allows manufacturers of processed tobacco to submit one permit application to cover all locations at which they conduct business, rather than one application for each location. This final rule does, however, add an additional requirement that manufacturers and importers of processed tobacco submit location information to TTB as part of the permit application. This information was not previously specifically required under the regulations but could have been required by TTB under its authority to require submission of any “additional information” required to determine whether an applicant is entitled to a permit. (Set forth at 27 CFR 40.497 and 41.237.). This final rule reinstitutes recordkeeping of certain unprocessed tobacco and also extends certain inventory requirements to importers of processed tobacco.

Under the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a valid OMB control number. Comments concerning suggestions for reducing the burden of the collections of information in this document should be directed to Mary A. Wood, Alcohol and Tobacco Tax and Trade Bureau, using any of these points of contact:

• P.O. Box 14412, Washington, DC 20044-4412;

• 202-453-2686 (facsimile); or

• formcomments@ttb.gov (email).

This document finalizes temporary regulations that were effective on June 22, 2009, which implemented changes made to the Internal Revenue Code of 1986 by the Children's Health Insurance Program Reauthorization Act of 2009. Because industry members have been operating for almost three years under the temporary regulations finalized in this document, and because many of the final regulations set forth in this document lessen reporting and recordkeeping burdens for industry members, TTB finds good cause under 5 U.S.C. 553(d)(3) to dispense with the effective date limitation in 5 U.S.C. 553(d). This final rule will be effective on June 21, 2012.

It has been determined that this rule is not a significant regulatory action as defined in E.O. 12866. Therefore, it requires no regulatory assessment.

This document was drafted by several members of the Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, with assistance from personnel in other divisions within TTB.

For the reasons discussed in the preamble, the temporary regulations published in the Federal Register at 74 FR 29401 on June 22, 2009, as T.D. TTB-78, the temporary regulations published in the Federal Register at 74 FR 37551 on July 29, 2009, as T.D. TTB-80, and the temporary regulations published in the Federal Register at 74 FR 48650 on September 24, 2009, as T.D. TTB-81, are adopted as final, with the changes as discussed above and set forth below:

We did not publish a notice of proposed rulemaking for this rule. Under 5 U.S.C. 553(b)(A), the Coast Guard finds this rule is exempt from notice and comment rulemaking requirements because these changes involve rules of agency organization, procedure, or practice. In addition, the Coast Guard finds notice and comment procedures are unnecessary under 5 U.S.C. 553(b)(B) as this rule consists only of corrections and editorial, organizational, and conforming amendments and these changes will have no substantive effect on the public. Under 5 U.S.C. 553(d)(3), the Coast Guard finds that, for the same reasons, good cause exists for making this rule effective upon publication in the Federal Register .

Each year, the printed edition of title 33 of the Code of Federal Regulations (CFR) is recodified on July 1. This rule, which is effective June 21, 2012, makes technical and editorial corrections throughout title 33. This rule does not create any substantive requirements.

This rule amends 33 CFR part 1 to reflect changes in agency organization by adding the authority for District Commanders to establish inland waterways navigation regulations within their areas of responsibility. In 1999, the Commandant delegated the authority to promulgate regulations under 33 U.S.C. 162, Inland Waterways Navigation Regulations, to District Commanders without further redelegation. This amendment codifies this Commandant delegation.

Additionally, in 33 CFR part 1, the authority section in subpart 1.07 is updated to reflect current authorities. The following citations are being removed since these are citations with authorities under the Department of Transportation (DOT), which no longer apply to the Coast Guard: Sec. 6079(d), Public Law 100-690, 102 Stat. 4181, and 49 CFR 1.46. The following citations are added to the authorities since these citations are more relevant to the current civil penalty process: 14 U.S.C. 92(e), 33 U.S.C. 1321(b)(6)(B), 46 U.S.C. 2103, and Department of Homeland Security Delegation No. 0170.1.

This rule amends § 2.30(b) to reflect the correct citation to article 55 of the 1982 United Nations Convention on the Law of the Sea. We are removing the citation to article 56 because it speaks to the rights, jurisdiction, and duties of the coastal state in the exclusive economic zone, but does not reference the definition of exclusive economic zones. Article 55 sets out the definition of an exclusive economic zone, and is the article relevant to this section.

This rule revises 33 CFR part 27 to remove all references to 33 U.S.C. 1319. This statute does not govern the Coast Guard so we may not authorize a civil monetary penalty under it. This section also informs the public of the maximum civil monetary penalties authorized under 33 U.S.C. 3852 and 46 U.S.C. 70506.

This rule revises 33 CFR parts 40 and 45 to reflect changes in agency organization by removing 49 CFR 1.46(b) from the authority sections in these parts. Because the Coast Guard is no longer a component of DOT, delegations from the Secretary of DOT no longer apply. The regulation at 49 CFR 1.46(b) currently addresses delegations to the Administrator of the Research and Innovative Technology Administration, which is a DOT office.

This rule revises § 66.01-1 by moving current paragraph (a) to paragraph (a) of § 66.10-1, which is the proper location. Due to a clerical error, the current § 66.01-1 paragraph (a) mistakenly replaced the former paragraph (a) in that section. We are now correcting that error and restoring the former paragraph (a) to § 66.01-1 and moving current paragraph (a) in § 66.01-1 to its correct location as paragraph (a) of § 66.10-1.

This rule amends § 80.825 by removing paragraphs (d) and (e) from this section. In 1990, the boundary lines of the Mississippi Passes, Louisiana were redrawn. The coordinates now located in paragraphs (d) and (e) are encompassed by the new boundary lines found in paragraphs (a) through (c) so we are removing these superfluous coordinates in paragraphs (d) and (e).

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 83. In § 83.10, a space has been removed between the heading of the paragraph and the body of the paragraph. In § 83.27, a space has been added between “mine” and “clearance” to make them two separate words.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 84. In § 84.01, to avoid any printing confusing, cubic meters is replacing meters 3 . Paragraphs and subparagraphs in § 84.03 and § 84.07 use the incorrect Office of the Federal Register (OFR) numbering scheme. The incorrect numbering scheme is being replaced. In § 84.15, there is a formula for intensity of lights. Following this formula, each letter in the formula is defined. A colon is being inserted after each letter representation and a hard return is added following each colon. The word “two” is incorrectly spelled as “tow” in § 84.17 so the word “two” is being corrected.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 85. Paragraphs and subparagraphs in § 85.1 use the incorrect OFR numbering scheme. The incorrect numbering scheme is being replaced.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 100. Table 1 in § 100.901 identifies Buffalo as a “Group” not a “Sector.” This is an incorrect identification so this section is being revised to reflect “Sector.” “Bell” and “Russel” are incorrectly spelled in §§ 100.912 and 100.916, respectively. The correct spellings of “Belle” and “Russell” are being inserted.

This rule revises 33 CFR part 101 to remove a reference to an outdated assessment tool. On May 16, 2012, the Transportation Security Administration (TSA) announced that the TSA Maritime Self-Assessment Risk Module, developed to support the Coast Guard's regulatory efforts promulgated pursuant to the Maritime Transportation Security Act of 2002, will no longer be available. Since this assessment tool will no longer be available, the reference to this tool in section 101.510(a) must be removed.

This rule amends 33 CFR part 110 to reflect changes in geographic coordinates and command boundaries. Based on a previous technical amendment, several geographic coordinates were updated in § 110.60. Several notes in § 110.155 refer back to § 110.60. Therefore, since several geographic coordinates changed in § 110.60, the notes in § 110.155 also need to reflect that change. Additionally, in 1996, the command boundaries for the Captain of the Port Long Island were redrawn. Because of this, the anchorage areas in Randall Bay, Freeport, and Long Island were redrawn under the command of the Captain of the Port Long Island. Section 110.156 is being updated to reflect this command change.

The authority section in 33 CFR part 110 is also revised to correct a citation. The delegation of rulemaking authority to establish anchorages is cited incorrectly as 33 CFR 1.05-1(g). The citation is being changed to reflect that 33 CFR 1.05-1 is the correct authority.

This rule revises the definitional section in § 114.05 to reflect the format in the definitions in § 117.4. The letter designations, including the period after each word, are removed. The definitions will now read as sentences beginning with the word to be defined. The format used in the definitional section in § 117.4 is preferred and this change will create format consistency in the two sections.

Additionally, this rule revises § 114.20(a) to replace the words “a tracing” with the words “as-built plans.” This change does not change the substance of the regulation but replaces a term of art with an updated, more accurate term of art.

This rule revises 33 CFR part 115 to correct grammatically incorrect or passive phrases. In § 115.01, the phrase “for construction of or modification to” is replaced with active language, “to construct or modify.” The grammar in § 115.05 is corrected by replacing the word “be” with “is.”

In § 115.40, we are replacing the words “approval of” with “a formal permit action from”. This section addresses the fact that bridge repairs do not require permitting if they only replace worn or obsolete parts of an already-approved bridge. “Approved” is already used in the short paragraph and “a formal permit action” is a more accurate description of the Coast Guard's role. Therefore, this section has been changed to incorporate permit instead of approval.

In § 115.50, we are changing the word “referred” to “refer” as it is grammatically correct.

In § 115.60, the word “construction” is removed from the heading. This section focuses on applications for permits to construct, modify, or replace bridges. The word “construction” in the title does not accurately indicate the breadth of the regulation so the word is being removed. Also, in paragraph (d) of this section, we are removing a comma after the word “disapproval” since the comma makes the sentence grammatically incorrect.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 116. In § 116.15(a), we are replacing “Bridge Administration Program” with the correct office designation of “Office of Bridge Programs.”

This rule amends 33 CFR part 117 to correct the current names of the following bridges with their accurate names: Main Street (U.S. 17) Bridge; Baltimore Harbor-Patapsco Bridge; Debbie's Creek Bridge; SR#543 Bridge; Beaufort Channel, NC Bridge; and Rancocas River (Creek) Bridge. Because we are changing existing bridge names to the accurate names, the headings in §§ 117.325(a), 117.541, 117.715, 117.719, 117.745, 117.822, and 117.823 are changed accordingly, and the sections are redesignated to follow the alphabetical order of state waterways set out in this subpart. Also, in § 117.571, “4.0” is changed to “0.4” to reflect the correct mile marker. In § 117.965, “Bay City” is changed to “Bridge City” to reflect the correct location.

The rules in new §§ 117.566 and 117.823 are rewritten to clarify bridge operation and appropriate bridge contacts. Although the substance of the regulations is unchanged, the revisions make them easier to understand.

The rule amends § 118.160 to include the following language in paragraph (b): “(in the closed to navigation position for drawbridges)”. This language will follow the phrase “the bridge channel span”. The substance of the rule is not changing, but inserting the additional language makes the regulation clearer.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 136. There are commas missing from the following sections in part 136: 136.3, 136.5, and 136.101. We are adding commas in the appropriate places in these sections. In § 136.305, we are correcting the spelling of the word “regarding”, and in that same section, we are replacing “of” with “and”, which is the appropriate conjunction.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 138. In § 138.20, we are adding missing commas in the appropriate places. Also in that section, we are adding a space between the end of the sentence and the beginning of the next sentence.

This rule corrects non-substantive typographical and spelling errors in 33 CFR part 162. In § 162.120, we are correcting the spelling of two cities' names.

This rule amends 33 CFR 165.941 by removing the word “fireworks” from the section heading. This section speaks to safety zones for annual events in the Captain of the Port Detroit Zone. The word “fireworks” in the heading does not accurately indicate the breadth of the regulation, which applies to any annual event requiring a safety zone. We are also removing paragraph (a)(5) titled “Alpena Fireworks, Alpena, MI” in its entirety, as it is no longer under the responsibility of the Captain of the Port Detroit Zone, and this event was moved to another section by a previous rulemaking. This rule also rewords the notification section in paragraph (f) to clarify already-established Coast Guard practice, stating that the Captain of the Port “may” issue, “if deemed necessary,” a notice cancelling a safety zone, instead of mandating that he or she issue a notice of cancellation.

We are revising an authority in 33 CFR part 177.09(b)(2) to reflect a correct citation. There is currently a reference to 46 U.S.C., pointing out the authority under which certain civil penalties are assessed. Currently, paragraph (b)(2) makes a general reference to this title but immediately following that, it incorrectly lists title 43 instead of 46. We are changing the misquoted reference to 46 U.S.C.

This rule amends §§ 1.05-1(j), 114.50, 165.920(b), and 100.901 in title 33 to update internal Coast Guard office designations as well as certain personnel titles. Changes in personnel titles included in this rule are only technical revisions reflecting changes in agency procedures and organization, and do not indicate new authorities.

Finally, this rule amends §§ 114.50, 118.3(b), and 66.01-5 in title 33 to update various physical addresses for Coast Guard offices as well as Web site addresses and contact information.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 14 of these statutes or executive orders.

Executive Orders 12866 (“Regulatory Planning and Review”) and 13563 (“Improving Regulation and Regulatory Review”) direct agencies to assess the costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866 and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. Because this rule involves non-substantive changes and internal agency practices and procedures, it will not impose any additional costs on the public.

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

There is no cost to this rule and we do not expect it to have an impact on small entities because the provisions of this rule are technical and non-substantive. It will have no substantive effect on the public and will impose no additional costs. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that this final rule will not have a significant economic impact on a substantial number of small entities.

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 the rule so that they can better evaluate its effects on them and participate in the rulemaking. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please consult Leo Huott by phone at 202-372-1565 or via email at Leo.S.Huott@uscg.mil. 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.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

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

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

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

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

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

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

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

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

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded under section 2.B.2, figure 2-1, paragraphs (34)(a) and (b) of the Instruction. This rule involves regulations that are editorial, procedural, or concern internal agency functions or organizations. An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES .

For the reasons discussed in the preamble, the Coast Guard amends 33 CFR parts 1, 2, 27, 40, 45, 66, 80, 83, 84, 85, 100, 101, 110, 114, 115, 116, 117, 118, 136, 138, 162, 165, and 177 as follows:

The Long Beach Bridge, across Reynolds Channel, mile 4.7, at Nassau, New York, has a vertical clearance in the closed position of 20 feet at mean high water and 24 feet at mean low water. The existing drawbridge operation regulations are listed at 33 CFR 117.799(g).

The owner of the bridge, Nassau County Department of Public Works, requested a temporary deviation to facilitate safe traffic management for the Town of Hempstead Annual Salute to Veterans Fireworks Display scheduled for Saturday, June 30, 2012. If the fireworks display is postponed due to inclement weather, the event will take place on Sunday, July 1, 2012.

Under this temporary deviation the Long Beach Bridge may remain in the closed position from 9:30 p.m. through midnight on July 1, 2012. If the fireworks display is postponed due to inclement weather, the Long Beach Bridge may remain in the closed position from 9:30 p.m. through midnight on July 2, 2012.

The waterway has commercial and seasonal recreational vessels of various sizes. The Coast Guard contacted all known commercial waterway users regarding this deviation and no objections were received. Vessels that can pass under the bridge without a bridge opening may do so at all times.

In accordance with 33 CFR 117.35(e), the bridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Event Director for the Neuse River Bridge Run, with approval from the North Carolina Department of Transportation, owner of the drawbridge, has requested a temporary deviation from the current operating schedule to accommodate the Neuse River Bridge Run.

The Alfred C. Cunningham Bridge operating regulations are set out in 33 CFR 117.843(a). The Alfred C. Cunningham Bridge across the Trent River, mile 0.0, a double bascule lift Bridge, in New Bern, NC, has a vertical clearance in the closed position of 14 feet, above mean high water.

Under this temporary deviation, the drawbridge will be allowed to remain in the closed-to-navigation position from 6:30 a.m. to 9:30 a.m. on Saturday, October 20, 2012 to accommodate the Neuse River Bridge Run.

Vessels able to pass under the closed span may transit under the drawbridge while it is in the closed position. Mariners are advised to proceed with caution. The Coast Guard will inform users of the waterway through our local and broadcast Notices to Mariners of the limited operating schedule for the drawbridge so that vessels can arrange their transits to minimize any impacts caused by the temporary deviation. There are no alternate routes for vessels and the bridge will be able to open in the event of an emergency.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period.

This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Washington State Department of Transportation has requested that the draw span of the SR 520 Bridge remain closed to vessel traffic to facilitate safe passage of participants of the Seafair Rock and Roll Marathon. The Rock and Roll Marathon is the largest distance running event in the Pacific Northwest. This event includes over 26,000 participants running a marathon (26.2 miles) or half marathon (13.1 miles). The race course passes over the SR 520 Lake Washington Bridge. The SR 520 Bridge provides three navigational openings for vessel passage, the movable floating span, subject to this closure, and two fixed navigational openings; one on the east end of the bridge and one on the west end. The fixed navigational opening on the east end of the bridge provides a horizontal clearance of 207 feet and a vertical clearance of 57 feet. The opening on the west end of the bridge provides a horizontal clearance of 206 feet and a vertical clearance of 44 feet. Vessels that are able to safely pass through the fixed navigational openings are allowed to do so during this closure period. Under normal conditions, during this time frame, the bridge operates in accordance with 33 CFR 117.1049(a) which states the bridge shall open on signal if at least two hours notice is given. This deviation period is from 10 a.m. on June 23, 2012 through 4 p.m. June 23, 2012. The deviation allows the floating draw span of the SR 520 Lake Washington Bridge to remain in the closed position and need not open for maritime traffic from 10 a.m. through 4 p.m. on June 23, 2012. The bridge shall operate in accordance to 33 CFR § 117.1049(a) at all other times. Waterway usage on the Lake Washington Ship ranges from commercial tug and barge to small pleasure craft. Mariners will be notified and kept informed of the bridge's operational status via the Coast Guard Notice to Mariners publication and Broadcast Notice to Mariners as appropriate. The draw span will be required to open, if needed, for vessels engaged in emergency response operations during this closure period.

In accordance with 33 CFR 117.35(e), the drawbridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Rocks Village Bridge, across the Merrimack River, mile 12.6, between Haverhill and West Newbury, Massachusetts, has a vertical clearance in the closed position of 17 feet at mean high water and 23 feet at mean low water. The drawbridge operation regulations are listed at 33 CFR 117.605(c).

The waterway is predominantly transited by small recreational vessels at the location of the Rocks Village Bridge.

The bridge is required to open upon a two hour advance notice as a result of infrequent requests to open the draw.

The owner of the bridge, Massachusetts Department of Transportation, requested a temporary deviation from the regulations to facilitate bridge rehabilitation repairs, replacement of operating machinery, structural steel, and highway deck on the swing span.

Under this temporary deviation the bridge may remain in the closed position from 7 a.m. on July 9, 2012 through 7 a.m. on July 12, 2012. Vessels that can pass under the closed draw may do so at all times.

In accordance with 33 CFR 117.35(e), the bridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The Coast Guard will enforce the Safety Zone for the annual Fourth of July Celebration event listed in 33 CFR 165.801 Table 1, Table No. 146; Sector Mobile, No. 5 on July 4, 2012 from 9 p.m. until 10 p.m.

Under the provisions of 33 CFR 165.801, entry into the safety zone listed in Table 1, Table No. 146; Sector Mobile, No. 5 is prohibited unless authorized by the Captain of the Port or a designated representative. Persons or vessels desiring to enter into or passage through the Safety Zone must request permission from the Captain of the Port or a designated representative. If permission is granted, all persons and vessels shall comply with the instructions of the Captain of the Port or designated representative.

This notice is issued under authority of 5 U.S.C. 552(a); 33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. In addition to this notice in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via Local Notice to Mariners and Marine Information Broadcasts.

If the Captain of the Port Mobile or Patrol Commander determines that the Safety Zone need not be enforced for the full duration stated in this notice of enforcement, he or she may use a Broadcast Notice to Mariners to grant general permission to enter the regulated area.

The Coast Guard will enforce the Safety Zone for the annual Sound of Independence event listed in 33 CFR 165.801 Table 1, Table No. 147; Sector Mobile, No. 6 on June 29, 2012 from 9 p.m. until 9:30 p.m.

Under the provisions of 33 CFR 165.801, entry into the safety zone listed in Table 1, Table No. 147; Sector Mobile, No. 6 is prohibited unless authorized by the Captain of the Port or a designated representative. Persons or vessels desiring to enter into or passage through the Safety Zone must request permission from the Captain of the Port or a designated representative. If permission is granted, all persons and vessels shall comply with the instructions of the Captain of the Port or designated representative.

This notice is issued under authority of 5 U.S.C. 552 (a); 33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05-1, 6.04-1, 6.04-6, and 160.5; Pub. L. 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1. In addition to this notice in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via Local Notice to Mariners and Marine Information Broadcasts.

If the Captain of the Port Mobile or Patrol Commander determines that the Safety Zone need not be enforced for the full duration stated in this notice of enforcement, he or she may use a Broadcast Notice to Mariners to grant general permission to enter the regulated area.

Table of Acronyms DHS Department of Homeland Security FR  Federal Register NPRM Notice of Proposed Rulemaking A. Regulatory History and Information

This fireworks display event is regulated at 33 CFR 165.506, Table to § 165.506, section (d.) line 4. The Coast Guard plans to permanently amend the regulation at 33 CFR 165.506 at a later date to reflect this change.

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because immediate action is needed to minimize potential danger to the public during the event. For this reason, it would be impracticable to publish an NPRM for this rule.

Recurring fireworks displays are frequently held on or adjacent to the navigable waters within the boundary of the Fifth Coast Guard District. For a description of the geographical area of each Coast Guard Sector—Captain of the Port Zone, please see 33 CFR 3.25.

The regulation listing annual fireworks displays within the Fifth Coast Guard District and safety zones locations is 33 CFR 165.506. The Table to § 165.506 identifies fireworks displays by COTP zone, with the COTP North Carolina zone listed in section “(d.)” of the Table.

The township of Elizabeth City, North Carolina, sponsors an annual fireworks display held on July 4th over the waters of Pasquotank River at Elizabeth City, North Carolina. The Table to § 165.506, at section (d.) event Number “4”, describes the enforcement date and regulated location for this fireworks event.

The location listed in the Table has the fireworks display originating from position latitude 36°18′00″ N, longitude 076°13′00″ W, a location on land on the southwest corner of Machelhe Island at Elizabeth City, North Carolina. However, this event changes the fireworks launch location on July 4, 2012, to a position on the Pasquotank River at latitude 36°17′47″ N, longitude 076°12′17″ W.

A fleet of spectator vessels is anticipated to gather nearby to view the fireworks display. Due to the need for vessel control during the fireworks display vessel traffic will be temporarily restricted to provide for the safety of participants, spectators and transiting vessels. Under provisions of 33 CFR 165.506, during the enforcement period, vessels may not enter the regulated area unless they receive permission from the Coast Guard Patrol Commander.

The Coast Guard will temporarily suspend the regulation listed in Table to § 165.506, section (d.) event Number 4, and insert this temporary regulation at Table to § 165.506, at section (d.) as event Number “15”, in order to reflect that the fireworks display will originate from a barge in the Pasquotank River and therefore the regulated area is changed. This change is needed to accommodate the sponsor's event plan. No other portion of the Table to § 165.506 or other provisions in § 165.506 shall be affected by this regulation.

The regulated area of this safety zone includes all water of the Currituck Sound within a 300 yards radius of latitude 36°17′47″ N, longitude 076°12′17″ W.

This safety zone will restrict general navigation in the regulated area during the fireworks event. Except for persons or vessels authorized by the Coast Guard Patrol Commander, no person or vessel may enter or remain in the regulated area during the effective period. The regulated area is needed to control vessel traffic during the event for the safety of participants and transiting vessels.

The enforcement period for this safety zone does not change from that enforcement period listed in § 165.506(d) line 4. Therefore, this safety zone will be enforced from 5:30 p.m. on July 4, 2012 through 1 a.m. on July 5, 2012.

In addition to notice in the Federal Register , the maritime community will be provided extensive advance notification via the Local Notice to Mariners, and marine information broadcasts so mariners can adjust their plans accordingly.

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

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 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 rule prevents traffic from transiting a portion of the Pasquotank River during the specified event, the effect of this regulation will not be significant due to the limited duration that the regulated area will be in effect and the extensive advance notifications that will be made to the maritime community via marine information broadcasts, local radio stations and area newspapers so mariners can adjust their plans accordingly. Additionally, this rulemaking changes the regulated area for the Pasquotank River fireworks demonstration for July 4, 2011 only and does not change the permanent regulated area that has been published in 33 CFR 165.506, Table to § 165.506 at portion “d” event Number “4”. In some cases vessel traffic may be able to transit the regulated area when the Coast Guard Patrol Commander deems it is safe to do so.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule would affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit or anchor in the Pasquotank River where fireworks events are being held. This regulation will not have a significant impact on a substantial number of small entities because it will be enforced only during the fireworks display event that has been permitted by the Coast Guard Captain of the Port. The Captain of the Port will ensure that small entities are able to operate in the regulated area when it is safe to do so. In some cases, vessels will be able to safely transit around the regulated area at various times, and, with the permission of the Patrol Commander, vessels may transit through the regulated area. Before the enforcement period, the Coast Guard will issue maritime advisories so mariners can adjust their plans accordingly.

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 rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT , above.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a 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 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 INTFORMATION 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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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

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

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

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

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of safety zones. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES . We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

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

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the final details for this event were not known to the Coast Guard until there was insufficient time remaining before the event to publish an NPRM. Thus, delaying the effective date of this rule to wait for a comment period to run would be impracticable because it would inhibit the Coast Guard's ability to protect vessels from the hazards associated with recovery of possible munitions waste, which are discussed further below.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . For the same reasons discussed in the preceding paragraph, waiting for a 30 day notice period to run would also be impracticable and contrary to the public interest.

From July 16th, 2012 to August 6th, 2012, the Tug Champion (O.N. 55 6Z93)/Barge Kokosing (O.N. 1144055) will recover and test barrels suspected to contain munitions waste materials dumped offshore in a portion of Lake Superior approximately 50 years ago.

The following area is a temporary safety zone: All waters within a 700 foot radius of the Tug Champion (O.N. 55 6Z93)/Barge Kokosing (O.N. 1144055) as it conducts recovery and testing of barrels suspected of containing munitions waste materials in the area between Stoney Point and Brighton Beach, up to approximately 4 miles offshore on Lake Superior, Duluth, MN. This safety zone will be in effect and enforced 24 hours a day from on or around July 16th, 2012, to August 6th, 2012.

This rule is deemed necessary in order to protect vessels transiting Lake Superior in close proximity to the Tug Champion (O.N. 55 6Z93)/Barge Kokosing (O.N. 1144055) from exposure to possible unknown hazards as it conducts recovery and testing of barrels containing munitions parts and product line debris. This zone does not have specific coordinates because the Tug Champion (O.N. 55 6Z93)/Barge Kokosing (O.N. 1144055) will be recovering barrels in several locations over the course of the effective period and a safety zone encompassing the entire recovery area would have a negative impact on recreational vessel traffic.

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

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 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 rule will have minimal impact on economic interests due to the safety zone being outside commercial shipping lanes, having little impact on recreational vessel traffic and being in effect for a limited period of time.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

(1) This rule would affect the following entities, some of which might be small entities: the owners or operators of recreational vessels intending to transit or anchor in a portion of Lake Superior between Stoney Point and Brighton Beach from July 16th, 2012 to August 6th, 2012.

(2) This safety zone would not have a significant economic impact on a substantial number of small entities for the following reasons. This safety zone would be activated, and thus subject to enforcement, in areas where vessel traffic is low and not subject to commercial traffic. Recreational vessel traffic could pass safely around the safety zone due to its relatively small size. This safety zone will be announced in the Local Notice to Mariners and via Broadcast Notice to Mariners before activation of the zone and throughout the enforcement period.

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 rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section, above.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a 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 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 so that the Coast Guard may consider the degree to which it may accommodate such activities while also providing for the safety and security of people, places and 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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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

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

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

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

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishing a safety zone surrounding Tug Champion (O.N. 55 6Z93)/Barge Kokosing (O.N. 1144055) as it conducts recovery and testing of barrels containing munitions parts and product line debris. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES . We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

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

Table of Acronyms DHS Department of Homeland Security FR  Federal Register NPRM Notice of Proposed Rulemaking A. Regulatory History and Information

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because the final details for this event was not provided to the Coast Guard until May 30, 2012. As such, it is impracticable to provide a full comment period due to lack of time. In addition, given the high risks of injury and damage that will be created during the filming of the movie, a delay in enacting this safety zone would be contrary to public interest.

The temporary safety zone is necessary to protect vessels from the hazards associated with the stunts that will be performed during the filming of a major motion picture. The filming will involve fast-paced, multi-vessel, highly choreographed stunts, with multiple water and air platforms interacting. The Captain of the Port, Sector North Carolina, has determined that the stunts associated with the filming of this motion picture do pose significant risks to public safety and property and that a safety zone is necessary.

The Coast Guard is establishing a temporary safety zone on the Cape Fear River at Wilmington, NC. This safety zone will be enforced at night, between 7:30 p.m. and 7:00 a.m. from August 2, 2012 until August 24, 2012 and encompasses all navigable waters from latitude 34°11′14″ North, longitude 077°57′26″ West to latitude 34°12′42″ North, 077°57′24″ West. [DATUM: NAD 83]

While the enforcement periods are scheduled for approximately 12 hour blocks, filming and execution of the stunts will not take place continuously during those periods. There will be periods of setup, breakdown, preparation, et cetera. It is anticipated that actual filming will take place in 20 minute increments throughout the enforcement periods and that, in some cases, the filming may end prior to the 7 a.m. enforcement deadlines. All persons and vessels shall comply with the instructions of the Captain of the Port, Sector North Carolina, or his or her on-scene representative. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port, Sector North Carolina, or his or her on-scene representative. The Captain of the Port, Sector North Carolina, or his or her on-scene representative may be contacted via VHF-FM channel 16.

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

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 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.

Although this regulation will restrict access to the area, the effect of the rule will not be significant since this rule will only be enforced while unsafe conditions exist. The Coast Guard also expects that traffic will generally be very low based on the time of night that this closure will occur.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule may affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit or anchor in this portion of the Cape Fear River from 7:30 p.m. to 7:00 a.m. between August 2, 2012 and August 24, 2012.

The safety zone will not have significant economic impact on a substantial number of small entities for the following reasons: This rule will only be enforced while unsafe conditions exist. Traffic will only be prohibited from passing through the zone when actual filming is being conducted. Traffic will only be stopped for a short duration not to exceed twenty minutes during any one closure. In the event that the safety zone affects shipping, commercial vessels may request permission from the Captain of the Port, Sector North Carolina, or his or her on-scene representative to transit through the safety zone. The Coast Guard will give notice to the public via a Broadcast Notice to Marines that the regulation is in effect.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding this rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT , above.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule will not call for a 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 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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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

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

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

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

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of safety zones. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES . We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

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

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because doing so would be impracticable. The final details for this event were not received by the Coast Guard with sufficient time for a comment and period to run before the start of the event. Thus, delaying this rule to wait for a notice and comment period to run would be impracticable because it would inhibit the Coast Guard's ability to protect the public from the hazards associated with maritime fireworks displays.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . For the same reasons discussed in the preceding paragraph, waiting for a 30 day notice period to run would be impracticable.

On the evening of July 13, 2012, fireworks will be launched from a point on Lake Huron to commemorate the Grand Hotel's 125th anniversary. The Captain of the Port, Sector Sault Sainte Marie, has determined that the Grand Hotel Celebration Fireworks Display will pose significant risks to the public. The likely congested waterways in the vicinity of a fireworks display could easily result in serious injuries or fatalities.

To mitigate the risks associated with the Grand Hotel 125th Anniversary Fireworks Celebration, the Captain of the Port, Sector Sault Sainte Marie will enforce a temporary safety zone in the vicinity of the launch site. This safety zone will encompass all waters of Lake Huron approximately 1,000 yards west of Round Island Passage Light, within the arc of a circle with a 500ft radius from the fireworks launch site located on a barge positioned 45°50′34.92″ N, 085°37′38.16″ W [DATUM: NAD 83]. The safety zone will be effective and enforced from 10:00 p.m. until 11:30 p.m. on July 13, 2012.

Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port, Sector Sault Sainte Marie, or his or her on-scene representative. The Captain of the Port, Sector Sault Sainte Marie, or his or her on-scene representative may be contacted via VHF channel 16.

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

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, 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 that Order or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under these Orders. It is not “significant” under the regulatory policies and procedures of the Department of Homeland Security (DHS). We conclude that this rule is not a significant regulatory action 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. The safety zone will be relatively small and will exist for only a minimal time. Under certain conditions, moreover, vessels may still transit through the safety zone when permitted by proper authority.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit or anchor in a portion of Lake Huron between 10:00 p.m. and 11:30 p.m. on July 13, 2012.

This safety zone will not have significant economic impact on a substantial number of small entities for the following reasons: this rule will only be enforced for a short period of time. Vessels may safely pass outside the safety zone during the event. In the event that this temporary safety zone affects shipping, commercial vessels may request permission from the Captain of the Port, Sector Sault Sainte Marie, to transit through the safety zone. The Coast Guard will give notice to the public via a Broadcast to Mariners that the regulation is in effect.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we want to assist small entities in understanding the rule. If the rule would affect your small business, organization, or governmental jurisdiction and you have questions concerning its provisions or options for compliance, please contact the person listed in the FOR FURTHER INFORMATION CONTACT section above.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on 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 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 INTFORMATION 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 rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

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

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

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

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

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

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction because it involves the establishment of a safety zone. A final environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES . We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

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

Throughout this document whenever “we,” “us,” or “our” is used, we mean EPA. This supplementary information section is arranged as follows:

On March 2, 2012, Indiana submitted for parallel processing replacement budgets based on MOVES2010a for the Central Indiana area. On April 5, 2012, EPA proposed approval in the Federal Register of the Indiana SIP submittal (77 FR 20577). The primary background for today's action is contained in EPA's April 5, 2012, proposal. The SIP revision replaces MOBILE6.2 based approved budgets in the 1997 8-hour ozone maintenance plan for Central Indiana with MOVES2010a based budgets.

Indiana submitted the final SIP revision request on April 16, 2012. The April 16, 2012, submittal letter with the state public comment documentation completed the requirements for the SIP submittal.

The MOVES model is EPA's state-of-the-art tool for estimating highway emissions. The model is based on analyses of millions of emission test results and considerable advances in EPA understanding of vehicle emissions. MOVES incorporates the latest emissions data, more sophisticated calculation algorithms, increased user flexibility, new software design, and significant new capabilities relative to those reflected in MOBILE6.2.

States that revise their existing SIPs to include MOVES budgets must show that the SIP continues to meet applicable requirements with the new level of motor vehicle emissions contained in the budgets. The transportation conformity rule (40 CFR 93.118(e)(4)(iv)) requires that “the motor vehicle emissions budgets(s), when considered together with all other emissions sources, is consistent with applicable requirements for reasonable further progress, attainment, or maintenance (whichever is relevant to the given implementation plan submission).”

EPA has determined, based on its evaluation, that the area's maintenance plan continues to serve its intended purpose with the MOVES2010a-based budgets and that the budgets themselves meet the adequacy criteria in the conformity rule at 40 CFR 93.118(e)(4). The basis for this conclusion is contained in the proposed approval (77 FR 20577) and is also based on the final submittal and completion of the public comment period. The final submittal letter and public comment documentation completed the items needed for adequacy.

The Central Indiana area has three Metropolitan Planning Organizations (MPOs) in the maintenance area (Indianapolis, Anderson and a portion of the Columbus, Indiana MPO). These three MPOs are required by the conformity rule to conduct conformity determinations together because they are all part of the same maintenance area with one set of ozone budgets for that area (there are not separate budgets for each MPO). The budgets are being updated, not only to accommodate the use of MOVES2010a, but also because of the updated planning assumptions for mobile sources. The April 16, 2012, submittal letter with the public comment documentation completed the requirements for the SIP submittal.

Once EPA approves the submitted budgets, they must be used by local, state and Federal agencies in determining whether transportation activities conform to the SIP as required by section 176(c) of the Clean Air Act (CAA).

The State public comment period was from March 1, 2012, until March 30, 2012. A public hearing was offered but was not requested. No public comments were received by Indiana during the comment period.

The Federal Register proposing approval was published on April 5, 2012, and the public comment period closed on May 7, 2012.

No comments were received during the public comment period.

EPA is approving new MOVES2010a-based budgets for the Central Indiana 1997 ozone maintenance area because the submitted budgets will continue to keep emissions below the attainment level and maintain air quality. On the effective date of this rulemaking, the submitted MOVES2010a budgets will replace the existing, MOBILE6.2-based budgets in the state's 1997 8-hour ozone maintenance plan and will be used in future transportation conformity analyses for the area. The previously approved MOBILE6.2 budgets will no longer be applicable for transportation conformity purposes.

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

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

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

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

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

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

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

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

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

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

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

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

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 20, 2012. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

40 CFR part 52 is amended as follows:

The reef fish fishery of the Gulf is managed under the Fishery Management Plan for the Reef Fish Resources of the Gulf of Mexico (FMP). The FMP was prepared by the Gulf of Mexico Fishery Management Council (Council) and is implemented through regulations at 50 CFR part 622 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act).

The Magnuson-Stevens Act requires NMFS and regional fishery management councils to prevent overfishing and achieve, on a continuing basis, the optimum yield from federally managed fish stocks. These mandates are intended to ensure that fishery resources are managed for the greatest overall benefit to the nation, particularly with respect to providing food production and recreational opportunities, and protecting marine ecosystems. To further this goal, the Magnuson-Stevens Act requires fishery managers to end overfishing of stocks and to minimize bycatch and bycatch mortality to the extent practicable. To accomplish this, the Magnuson-Stevens Act implemented new requirements that annual catch limits (ACLs) and AMs be established to end overfishing and prevent overfishing from occurring. AMs are management controls to prevent ACLs from being exceeded, and to correct or mitigate overages of the ACL if they occur. One of the AMs established for gray triggerfish is an ACT (quota) that is less than the ACL. The ACT is intended to address management associated with monitoring landings of the reduced quota. The ACT is intended to better ensure the ACL is not exceeded.

In 2011, a Southeast Data, Assessment, and Review (SEDAR) update stock assessment for gray triggerfish determined that the gray triggerfish stock was still overfished and was additionally undergoing overfishing. At the request of the Council, on May 14, 2012, NMFS published a final temporary rule to reduce overfishing of gray triggerfish on an interim basis (77 FR 28308) while the Council developed more permanent measures to end overfishing and rebuild the gray triggerfish stock in Amendment 37 to the FMP. The final temporary rule set the commercial ACT (commercial quota) at 60,900 lb (27,624 kg), round weight.

The regulations at 50 CFR 622.49(a)(17)(i), contain both in-season and post-season AMs. The in-season AM closes the commercial sector after the commercial ACT (commercial quota) is reached or projected to be reached. Based on the most recent information available through the quota monitoring system of the Southeast Fisheries Science Center, the 2012 commercial ACT for Gulf gray triggerfish will be met by July 1, 2012. Therefore, NMFS implements the in-season AM and closes the commercial sector for Gulf gray triggerfish at 12:01 a.m., local time, July 1, 2012. The commercial sector will remain closed through December 31, 2012. This closure is intended to reduce overfishing of Gulf gray triggerfish and increase the likelihood that the 2012 ACL will not be exceeded.

On June 4, 2012, NMFS published a notice in the Federal Register to close the recreational sector for Gulf gray triggerfish on June 11, 2012, and it will remain closed through December 31, 2012 (77 FR 32913). Therefore, beginning 12:01 a.m., local time on July 1, 2012, until 12:01 a.m., local time on January 1, 2013, all harvest, possession, sale, or purchase of gray triggerfish in or from the Gulf EEZ is prohibited. The prohibition on sale or purchase does not apply to sale or purchase of gray triggerfish that were harvested, landed ashore, and sold prior to 12:01 a.m., local time, July 1, 2012, and were held in cold storage by a dealer or processor.

The commercial sector for gray triggerfish will reopen on January 1, 2013, the beginning of the 2013 commercial fishing season. The 2013 commercial quota for gray triggerfish will be the quota specified at 50 CFR 622.42(a)(1)(vii) unless a reduced quota is specified through notification in the Federal Register , or subsequent regulatory action is taken to adjust the quota.

This action responds to the best scientific information available. The Regional Administrator, Southeast Region, NMFS, has determined this temporary rule is necessary for the conservation and management of Gulf gray triggerfish and is consistent with the Magnuson-Stevens Act and other applicable laws.

This action is taken under 50 CFR 622.49(a)(17)(i) and is exempt from review under Executive Order 12866.

These measures are exempt from the procedures of the Regulatory Flexibility Act because the temporary rule is issued without opportunity for prior notice and comment.

Pursuant to 5 U.S.C. 553(b)(B), there is good cause to waive the requirements to provide prior notice and opportunity for public comment on this temporary rule. As specified in 50 CFR 622.49(a)(17)(i), the AMs state that NMFS will file a notification with the Office of the Federal Register to close the commercial sector after the commercial quota (commercial ACT) is reached or projected to be reached. All that remains is to notify the public of the closure of Gulf gray triggerfish for the remainder of the 2012 fishing year. Additionally, there is a need to immediately implement the closure of gray triggerfish for the 2012 fishing year, to prevent further commercial harvest and prevent the ACL from being exceeded, which will protect the gray triggerfish resource in the Gulf. Also, providing prior notice and opportunity for public comment on this action would be contrary to the public interest because many of those affected by the closure need as much time as possible to adjust business plans to account for the reduced commercial fishing season.

For the aforementioned reasons, the Assistant Administrator, NMFS, also finds good cause to waive the 30-day delay in the effectiveness of this action under 5 U.S.C. 553(d)(3).