[Federal Register Volume 78, Number 43 (Tuesday, March 5, 2013)]
[Proposed Rules]
[Pages 14238-14241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04955]


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DEPARTMENT OF COMMERCE

Minority Business Development Agency

15 CFR Part 1400

[Docket No. 121130667-2667-02]


Determination of Group Eligibility for MBDA Assistance

AGENCY: Minority Business Development Agency, Commerce.

ACTION: Response to petition.

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SUMMARY: On January 11, 2012, the Minority Business Development Agency 
(MBDA) received a petition from the American-Arab Anti-Discrimination 
Committee (ADC or Petitioner) requesting designation of the Arab-
American community as a socially or economically disadvantaged group 
whose members are eligible for MBDA assistance. This document announces 
MBDA's determination that the ADC Petition is not currently supported 
by sufficient evidence to establish social or economic disadvantage as 
required by the MBDA regulations and applicable legal precedent.

FOR FURTHER INFORMATION CONTACT: Kimberly Marcus, Associate Director 
for Legislation, Education, and Intergovernmental Affairs, Minority 
Business Development Agency, 1401 Constitution Ave., Room 5065, 
Washington, DC 20230, (202) 482-6272.

[[Page 14239]]


SUPPLEMENTARY INFORMATION: Pursuant to Executive Order 11625 (E.O. 
11625), MBDA provides management and technical assistance to minority 
business enterprises (MBEs) through its services and programs. A 
minority business enterprise for purposes of E.O. 11625 is defined as a 
business owned or controlled by one or more socially or economically 
disadvantaged individuals.\1\
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    \1\ 15 CFR 1400.1(b) (1984).
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    E. O. 11625 and subsequent MBDA regulations have designated the 
following groups whose members are currently considered socially or 
economically disadvantaged and therefore eligible to receive MBDA 
assistance: \2\ Blacks, Puerto-Ricans, Spanish-speaking Americans, 
American Indians, Eskimos and Aleuts, Hasidic Jews, Asian Pacific 
Americans, and Asian Indians.\3\ In order for a group to become 
eligible for MBDA's services, the group must submit a petition to MBDA 
demonstrating, by a preponderance of the evidence, that the group is 
socially or economically disadvantaged.\4\
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    \2\ See Executive Order 11625, sec. 6 (1971); 15 CFR 1400.1(b) 
and (c) (1984).
    \3\ 15 CFR 1400.1(b) and (c) (1984).
    \4\ Id. at Sec.  1400.4(a).
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    On May 30, 2012, MBDA published a notice of proposed rulemaking and 
a request for comments in the Federal Register announcing receipt of a 
petition from the ADC seeking designation of Arab-Americans as a 
socially or economically disadvantaged group and requesting public 
comment on this designation.\5\ In particular, the notice requested 
comment on and evidence concerning the extent to which Arab-Americans 
are economically disadvantaged. Comments were accepted from the public 
for a 30 day period until June 29, 2012, and were posted with the 
petition on MBDA's Web site.
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    \5\ Petition for Inclusion of the Arab-American Community in the 
Groups Eligible for MBDA Services, 77 FR 31,765-31,767 (May 30, 
2012). If the applicant has submitted a Petition for formal 
designation as a socially or economically disadvantaged group, ``the 
Department of Commerce will publish a notice in the Federal Register 
that formal designation of this group will be considered'' 
requesting comments that will help in making a final determination. 
See 15 CFR 1400.5. MBDA extended the deadline for making its 
decision until March 1, 2013. See Petition for Inclusion of the 
Arab-American Community in the Groups Eligible for MBDA Services, 77 
FR 72254 (December 5, 2012).
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    In response, the Agency received 37 comments. Of these comments, 19 
were in support of ADC's petition, while 13 expressed opposition, and 
five were disqualified for use of offensive or derogatory language. 
After careful review of the application and comments as well as 
independent research, MBDA has determined that the Petition is not 
currently supported by sufficient evidence to prove the necessary 
elements of social or economic disadvantage within the specific 
requirements of 15 CFR 1400.4(a) of the MBDA regulations and applicable 
case law.

Procedural Requirements for Determination of Group Eligibility for MBDA 
Assistance

    A group applying for designation as socially or economically 
disadvantaged within the meaning of the MBDA regulations must submit a 
written application to the Minority Business Development Agency 
containing a statement of request, a detailed description of the 
applicant group delineating sufficiently distinctive traits of its 
members, a brief summary of the submission, a narrative description of 
documentation in support of the claim, and a conclusion.\6\ Along with 
an adequate petition, MBDA must consider the comments received and may 
also consider any additional information gathered by the Agency from 
independent research.\7\
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    \6\ 15 CFR 1400.3 (1984).
    \7\ Id. at Sec.  1400.5.
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    On January 11, 2012, the ADC filed a petition on behalf of the 
Arab-American community, requesting that MBDA designate Arab-Americans 
as a socially or economically disadvantaged group. The Petition defines 
the Arab-American group as persons who can trace their ancestry to one 
of the Arabic-speaking countries or areas of the world categorized as 
Arab countries.
    According to the Petition, these countries include, but are not 
limited to: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, 
Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Somalia, Saudi 
Arabia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen.\8\ The 
Petition included Census data showing 1.2 million Americans who report 
Arab ancestry.\9\ The Petition also includes a description of unique 
cultural and ethnic traits such as common Arabic language, traditional 
music, unique food, as well as an Arab-American press catering to this 
community.
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    \8\ American-Arab Anti-Discrimination Committee Petition for 
Determination of Group Eligibility for MBDA Assistance (filed, 
January 11, 2012) at 3 (ADC Petition or Pet.). The Petition also 
includes Palestinian-Americans within this group.
    \9\ Pet. at 4 (citing Arab American Institute, Demographics: 
Religion (2002 Zogby International Survey), http://www.aaiusa.org/arabamericans/22/demographics (last visited December 30, 2011)). See 
also De la Cruz, G. Patricia and Brittingham, Angela. US Census 
Bureau Census 2000 Brief, The Arab Population: 2000 (December 2003) 
available at http://www.census.gov/prod/2003pubs/c2kbr-23.pdf.
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    As required by its regulations, MBDA published the Petition in the 
Federal Register for 30 days and requested general comments and 
comments on specific social and economic issues related to Arab-
Americans. This is the first time that MBDA has considered the 
inclusion of a group on the basis of racial or ethnic classification 
under the regulations set forth in 15 CFR 1400.1 through 1400.6 MBDA 
published several notices extending the time period for making a 
decision in order to consider fully the issues presented by the 
Petition, to conduct independent research, and to consider the 
implications of relevant legal precedent.\10\ These issues are 
addressed below.
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    \10\ Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995).
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Substantive Requirements for Group Eligibility

    For a group to become eligible for MBDA's services, it must submit 
a petition to MBDA demonstrating, by a preponderance of the evidence, 
that the group is socially or economically disadvantaged. The 
regulations at section 1400.2(b) define socially disadvantaged persons 
as ``persons who have been subjected to cultural, racial or ethnic 
prejudice because of their identity as members of a group without 
regard to their individual qualities.'' Section 1400.2(c) of the 
regulations defines economically disadvantaged persons as ``persons 
whose ability to compete in the free enterprise system has been 
impaired due to diminished capital and credit opportunities because of 
their identity as members of a group without regard to their individual 
qualities, as compared to others in the same line of business and 
competitive market area.'' The petition must prove that the social or 
economic disadvantage has produced impediments in the business world 
for members of the group which are not common to all business people in 
the same or similar business and marketplace.
    The regulations also set out several nonexclusive categories of 
evidence that will be considered including: national income level and 
standard of living statistical data; evidence of employment and 
educational discrimination; evidence of denial of access to 
educational, professional, and social organizations; the kinds of 
business opportunities available to members of the group; the 
availability of capital, technical, and managerial resources;

[[Page 14240]]

and any other evidence of denial of opportunity or access to those 
things that would enable successful participation in the American 
economic system.\11\ While the petitioner has the burden of providing 
sufficient evidence to meet the standard, MBDA as trier of fact may 
gather additional information which supports or refutes the group's 
request.\12\
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    \11\ 15 CFR 1400.4(b) (1984).
    \12\ Id. at Sec.  1400.5 (1984).
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    Since the promulgation of the MBDA regulations, the U.S. Supreme 
Court issued its opinion in Adarand v. Pena, which applied strict 
scrutiny to government programs that rely on racial 
classifications.\13\ To the extent that it applies, strict scrutiny 
analysis requires that in order to meet a constitutional challenge, the 
program must serve a compelling government interest and must be 
narrowly tailored to serve that interest. Courts have repeatedly found 
that the government has a compelling government interest in rectifying 
past discrimination caused by the government and in not passively 
participating in private systems of discrimination. To establish that 
compelling interest, the government must show a strong basis in 
evidence that a race based program is necessary to remedy racial or 
ethnic discrimination. Courts usually rely on a showing that includes 
statistical evidence of underrepresentation or underutilization in 
finding that the ``strong basis in evidence'' standard has been met. 
Therefore, to ensure that its programs meet constitutional standards as 
applicable, MBDA requires a group seeking eligibility for MBDA programs 
to provide substantial evidence of impediments in the business world to 
show a need for extending the program to that group.
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    \13\ Adarand Constructors, Inc. v. Pena, 515 U.S. 200 (1995).
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Social or Economic Disadvantage Evidentiary Standard

    In order to establish social or economic disadvantage for purposes 
of MBDA programs, a petition must present evidence of either social or 
economic disadvantage that meets each prong of the standard set out in 
the regulation.
    For social disadvantage, the petition must present evidence 
establishing that the group has been subjected to cultural, racial, or 
ethnic prejudice because of their identity as members of a group 
without regard to their individual qualities.\14\ The petition must 
show that the social disadvantage created by such prejudice is chronic, 
long standing, substantial, and beyond the control of the group's 
members. Finally, the evidence must demonstrate that the social 
conditions experienced by the group have produced impediments in the 
business world for members of the group that are not common to those 
faced by all business people in the same or similar businesses or 
marketplaces.\15\
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    \14\ 15 CFR 1400.2(b).
    \15\ Id. at Sec.  1400.4(a).
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    For economic disadvantage, the petition must present evidence 
demonstrating that members of the group have had their ability to 
compete in the free enterprise system impaired due to diminished 
capital and credit opportunities because of their identity as members 
of the group without regard to their individual qualities, as compared 
to others in the same line of business and competitive market areas. 
The evidence in the petition must establish that the economic 
disadvantage created by such prejudice is chronic, long standing, 
substantial, and beyond the control of the group's members, as compared 
to others in the same line of business or market area. Finally, the 
economic conditions must have produced impediments in the business 
world for the group that are not common to those faced by all business 
people in the same or similar businesses or marketplaces.\16\
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    \16\ Id. Sec.  1400.4(a).
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Application of Standard to Arab-American Petition

    MDBA has reviewed the evidence presented in the Petition and the 
comments, as well as its own recognition of barriers Arab-Americans 
have faced, and has determined that, while there is qualitative 
evidence that demonstrates that Arab-Americans have faced significant 
prejudice in numerous instances, there is insufficient evidence that 
this undeniable prejudice has impaired their ability to compete in the 
free enterprise system due to diminished capital and credit 
opportunities. In addition, the available evidence does not, for 
purposes of this program, adequately show chronic, long standing, and 
substantial bias that has produced impediments in the business world 
for members of the group that are not common to all business people in 
the same or similar business and market place.\17\
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    \17\ In the absence of sufficient evidence in the Petition and 
comments, the Agency searched sources available to it and was unable 
to locate the type of statistical or empirical studies necessary to 
establish this element both for purposes of the regulation and as 
required to meet constitutional standards under existing case law.
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    The Petitioner adduces evidence that Arab-Americans have faced 
significant prejudice in the form of hate crimes and other adverse 
treatment based on characteristics, distinct clothing, or self-
identification.\18\ The Petition illustrates a sharp increase in 
prejudice since 9/11 by citing the Senate testimony of Assistant 
Attorney General Thomas E. Perez, that ``more than 800 incidents 
involving violence, threats, vandalism, and arson against persons 
perceived to be Muslim or to be of Arab, Middle Eastern, or South Asian 
origin'' were investigated by the Department of Justice between 2001 
and 2011.\19\ The testimony also highlights a 1,600 percent increase in 
reports to the FBI of discrimination and harassment of Arab-Americans 
following 9/11. An ADC report submitted in support of the Petition 
demonstrates a rise in the level of employment discrimination 
complaints filed by Arab-Americans in the period following 9/11 and 
includes instances where employees were released without explanation or 
were called derogatory names in the workplace, which led to their 
subsequent resignation.\20\ This increase in prejudicial treatment is 
also suggested by evidence from the Equal Employment Opportunity 
Commission (EEOC) documenting 1,035 charges filed under Title VII 
alleging post-9/11 backlash employment discrimination.\21\
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    \18\ Pet. at 15-16, 18, 23-25.
    \19\ Id. at 17 (citing Statement of Thomas E. Perez, AAG Civil 
Rights Division before Senate Judiciary Subcommittee on the 
Constitution, Civil Rights, and Human Rights ``Protecting the Civil 
Rights of Muslim Americans'' March 29, 2011 available at http://www.judiciary.senate.gov/hearings/testimony.cfm?id=e655f9e2809e5476862f735da169475f&wit_id=e655f9e2809e5476862f735da169475f-1-0).
    \20\ Id. at 23 (citing 2003-2007 Report on Hate Crimes and 
Discrimination against Arab Americans, American-Arab Anti-
Discrimination Committee Research Institute at 34-38 (2008), 
available at  http://www.adc.org/PDF/hcr07.pdf).
    \21\ Id. at 25.
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    The Petition and supporting evidence demonstrates that, in too many 
instances, Arab-Americans have faced prejudice that has resulted in 
incidents of violence, assault, and other undeniably adverse 
treatment.\22\ But the Petition fails to connect this evidence to a 
showing of impediments in the business world for members of the group 
that are not common to all business people in the same or similar 
business and marketplace. Nor does the Petition establish that Arab-
Americans have had their ability to compete in the

[[Page 14241]]

free enterprise system impaired due to diminished capital and credit 
opportunities.
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    \22\ However, nothing in the forgoing discussion or any other 
part of this response to petition should be construed as MBDA's 
acceptance of the Petition's assertions that the federal government 
has discriminated against Arab-Americans.
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    Specifically, the Petition fails to provide evidence of the type 
MBDA requires to establish a relationship between any discriminatory 
treatment and business impediments experienced by Arab-American 
businesses as a group that are not common to all business people in the 
same or similar market place. Section III of the Petition states that:

    Arab-Americans suffer from discrimination, prejudice and 
cultural bias in the workplace. This employment discrimination has 
produced obstacles in the business world for Arab-Americans--both as 
employees and entrepreneurs. Members of the group have no control 
over such discrimination. Other entrepreneurs and individuals, 
outside of the group, do not suffer from such discrimination and 
bias.\23\
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    \23\ Id. at 21.

But, the Petition does not substantiate this assertion by providing 
evidence to support the statement, such as statistical measures of the 
impact that employment discrimination complaints have on Arab-American 
business success or workplace attainment. The EEOC complaints discussed 
above must be coupled with an analysis or study of the impact of 
discrimination on Arab-Americans in the business world.
    In addition, a 2008 Arab American Institute Foundation study 
produced results contrary to the Petitioner's arguments. This study 
found that Arab-American households' mean individual income is 27% 
higher than the national average and that the group shows higher than 
average educational attainment.\24\ These figures are not dispositive, 
but do suggest that prejudice Arab-Americans have faced may not have 
impacted their economic opportunities to the extent necessary to 
establish that Arab-Americans' businesses require the technical and 
outreach services that MBDA provides.
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    \24\ Comment of Nicholas Legendre, http://www.mbda.gov/sites/default/files/AAPetitioncomments_asof062912.pdf at 56 (citing Arab 
American Institute Foundation, Quick Facts About Arab Americans, 
http://aai.3cdn.net/afbc33810b07728c5a_oim6bx98f.pdf).
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    The Petition also does not establish with the necessary type of 
evidence that Arab-Americans have experienced diminished capital and 
credit opportunities. The descriptions of immigration controls, 
employment discrimination complaints, and post-9/11 programs that the 
Petition states target Arab-Americans do not demonstrate that Arab-
Americans are unable to compete in the free enterprise system due to 
diminished capital and credit opportunities. Statistical or empirical 
evidence demonstrating a relationship between the discrimination 
suffered by the group and business impediments, or impaired access to 
capital, credit, contracts, and other business opportunities 
experienced by the group is necessary to show the social or economic 
conditions required to qualify the Petitioners for eligibility for 
MBDA's programs that assist businesses in obtaining access to capital, 
credit, contracting, and other business opportunities. The comments 
submitted in support of the Petition similarly lack this supporting 
information.
    Accordingly, MBDA does not currently have sufficient evidence to 
recognize the Arab-American community as a minority group that is 
socially or economically disadvantaged within the specific meaning of 
the regulation because the Petition is not supported by sufficient 
evidence to meet the necessary elements of social or economic 
disadvantage as required by 15 CFR 1400.4(a) of the MBDA regulations 
and applicable case law. As such, MBDA has returned the Petition to ADC 
for further consideration consistent with this response to petition.

    Dated: February 27, 2013.
David Hinson,
Director.
[FR Doc. 2013-04955 Filed 3-4-13; 8:45 am]
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