Title III, Part C  1 of the Energy Policy and Conservation Act of 1975 (EPCA), Public Law 94-163 (42 U.S.C. 6311-6317, as codified), Public Law 95-619, Title IV § 441(a), sets forth various provisions designed to improve energy efficiency for consumer products and certain commercial and industrial equipment and established the “Energy Conservation Program for Certain Industrial Equipment” (hereafter referred to as “covered equipment”). 2 The Energy Policy Act of 1992 (EPACT 1992), Public Law 102-486, amended EPCA to add commercial packaged boilers as a type of covered equipment. (42 U.S.C. 6311(1)) The Energy Independence and Security Act of 2007 (EISA 2007), Public Law 110-140, further revised EPCA to require that not later than six years after issuance of any final rule establishing or amending a standard, 3 the Secretary of Energy must publish either a notice of determination that the standards for a given type of equipment do not need to be amended, or a notice of proposed rulemaking (NOPR) including new proposed standards. (42 U.S.C. 6313(a)(6)(C)(i)) Additionally, EPCA (as amended) requires DOE to update its test method each time the relevant industry test procedure is modified (42 U.S.C. 6314(a)(4)(B)) and to evaluate its test procedure for each covered class once every seven years (42 U.S.C. 6314(a)(1)(A)).

To fulfill these requirements set forth in EPCA, DOE has initiated a rulemaking to consider amended energy conservation standards for commercial packaged boilers, and, in parallel, DOE will evaluate the commercial packaged boilers test procedure found in the Code of Federal Regulations (CFR) at 10 CFR 431.86, Uniform test method for the measurement of energy efficiency of commercial packaged boilers. DOE issued a notice of public meeting and availability of the Framework Document on August 28, 2013, which was published in the Federal Register on September 3, 2013. 78 FR 54197. The Framework Document explains the issues, analyses, and process that DOE is considering for the development of energy conservation standards. Both in the Framework Document and in a public meeting held on October 1, 2013, DOE solicited public comment regarding its approach to the rulemaking process and identified particular issues for which DOE sought comment. The comments received included suggestions for the revision of the DOE test procedure.

In support of its test procedure rulemaking, DOE conducts in-depth technical analyses of publicly-available test standards and other relevant information. DOE continually seeks data and public input to improve its testing methodologies to more accurately reflect consumer use and to produce repeatable results. In general, DOE requests information, comment, and supporting data about representative and repeatable methods for measuring the energy use of commercial packaged boilers. In particular, DOE seeks comment and information about the topics below.

The DOE test procedure for commercial packaged boilers, set forth at 10 CFR 431.86, incorporates Hydronics Institute/Air-Conditioning, Heating, and Refrigeration Institute Standard BTS-2000 (Rev 06.07), Method to Determine Efficiency of Commercial Space Heating Boilers . This test procedure determines the steady-state efficiency of steam or hot water boilers operating at full load. 4 However, through a review of equipment available in the market, DOE understands that the commercial packaged boiler industry is increasingly utilizing modulating burners. Modulating burners are capable of reducing the fuel input rate to more closely match the space heating demand. Because the current test procedure at 10 CFR 431.86 only measures steady-state efficiency at maximum firing rate, it does not account for differences in efficiency when the boiler is operated at lower firing rates. Therefore, DOE is considering test procedure amendments that would adopt part-load test conditions and measurements to more accurately reflect the efficiency of commercial packaged boilers that use modulating burner technology.

In general, DOE requests comment, information, and data about adopting methodologies and measurements to determine part-load efficiency of commercial packaged boilers. Further, DOE particularly requests comment, information, and data about the following:

(1) Should DOE only consider adding a measurement of commercial packaged boiler efficiency at the minimum fuel input ratio in addition to the maximum fuel input? If not, then at what fuel input ratio(s)—fraction of maximum rated capacity—should the efficiency of a commercial packaged boiler be measured?

(2) What are the appropriate inlet and outlet water temperatures (or the appropriate mean temperature and temperature difference between the inlet and outlet water temperatures (ΔT)) for part-load testing conditions of hot water boilers. Should this temperature difference (ΔT) be the same as when testing at full capacity?

(3) How many hours can modulating burners be expected or designed to operate under part-load and full-load conditions, respectively, over the course of a year in a typical or average installation?

(4) What benefits and burdens are associated with a part-load efficiency rating and combining the different operating points into a single weighted metric? What are potential ways to combine them?

(5) When considering part-load operation, how would the measurement and inclusion of jacket, sensible, and infiltration losses be addressed in an annual weighted efficiency metric?

(6) What, if any, would be the added test burden of accounting for part-load operation and associated measurement of jacket, sensible, and infiltration losses?

DOE understands that current test conditions ( i.e., temperatures and pressures) required under 10 CFR 431.86 and BTS-2000 may differ from typical operating conditions in the field and/or the conditions for which a boiler was designed. While laboratory testing conditions cannot necessarily duplicate field performance, they are intended to provide a reasonable basis for comparison of boiler efficiency and to generate repeatable results, while approximating actual operating conditions to the extent possible. DOE understands that testing conditions prescribed by BTS-2000 may warrant revision. Accordingly, DOE seeks input and comment about:

(1) What are appropriate supply and return water temperatures for hot water boilers operating at full-load and the effect on steady-state efficiency (thermal or combustion) of this potential revision?

(2) What is appropriate steam pressure for steam boilers operating at full-load and the effect on steady-state efficiency (thermal or combustion) of this potential revision? What are concerns, if any, about the impacts on the amount of water carry over and the system operation?

(3) What design characteristics of boilers currently on the market would potentially prohibit testing (short-term operation) at the operating conditions currently prescribed by 10 CFR 431.86 and BTS-2000?

DOE invites all interested parties to submit in writing by the date specified previously in the DATES section of this RFI, comments and information on matters addressed in this document and on other matters relevant to DOE's consideration of amended test procedures for commercial packaged boilers.

DOE considers public participation to be a very important part of the process for developing test procedures. DOE actively encourages the participation and interaction of the public during the comment period at each stage of the rulemaking process. Interactions with and between members of the public provide a balanced discussion of the issues and assist DOE in the rulemaking process. Anyone who wishes to be added to the DOE mailing list to receive future notices and information about this rulemaking should contact Ms. Brenda Edwards at (202) 586-2945, or via email at Brenda.Edwards@ee.doe.gov .

On November 9, 2007, the Board, along with the other banking agencies  1 and the Federal Trade Commission (FTC) (collectively, the “Agencies”), published final rules and guidelines on identity theft “red flags” (“Red Flags rule”) to implement section 615(e) of the Fair Credit Reporting Act (FCRA) (15 U.S.C. 1681m(e)). 2 The final rules require each financial institution and creditor that holds any consumer account, or other account for which there is a reasonably foreseeable risk of identity theft, to develop and implement an identity theft prevention program in connection with new and existing accounts. The program must include reasonable policies and procedures for detecting, preventing, and mitigating identity theft. The Agencies also issued guidelines to assist financial institutions and creditors in developing and implementing a program, including a supplement that provides examples of red flags.

The Red Flags rule, implemented in the Board's Regulation V Subpart J, defines the terms “credit” and “creditor” by cross-reference to FCRA section 603(r)(5). 15 U.S.C. 1681a(r)(5). Section 603(r)(5) defines the terms “credit” and “creditor” by cross-reference to section 702 of the Equal Credit Opportunity Act (ECOA). ECOA section 702 defines “creditor” as “any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.” 15 U.S.C. 1691a(e). The ECOA defines “credit” as “the right granted by a creditor to a debtor to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.” 15 U.S.C. 1691a(d). Thus, the FCRA's red flags provisions have been broadly applied to banks, finance companies, automobile dealers, mortgage brokers, utility companies, and telecommunications companies. 12 CFR 222.90(b)(5).

The scope of the Board's Red Flags rule is set forth in § 222.90(a), which states that the Board's rule applies to financial institutions and creditors that are state member banks (other than national banks) and their respective operating subsidiaries, branches and agencies of foreign banks (other than federal branches, federal agencies, and insured state branches of foreign banks), commercial lending companies owned or controlled by foreign banks, and organizations operating under section 25 or 25A of the Federal Reserve Act. Financial institutions and creditors that are not covered by the Board's rule are covered by substantially identical rules issued by other federal agencies.

On December 18, 2010, Congress enacted the Red Flag Program Clarification Act of 2010 (the Clarification Act). 3 The Clarification Act amended section 615(e) of the FCRA (15 U.S.C. 1681m(e)) by adding a definition of the term “creditor” specific to section 615(e). The Clarification Act continues to define creditor by cross-reference to the ECOA's definition of creditor, but limits the application of the red flags provisions of the FCRA to only those creditors that regularly and in the ordinary course of business: (a) Obtain or use consumer reports, directly or indirectly, in connection with a credit transaction; (b) furnish information to consumer reporting agencies, as described in FCRA section 623, in connection with a credit transaction; or (c) advance funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person. 15 U.S.C. 1681m(e)(4)(A).

The Clarification Act's revised definition excludes, however, those creditors that advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person. 15 U.S.C. 1681m(e)(4)(B). The legislative intent of narrowing the definition of “creditor” in the Red Flags rule was to exclude from coverage those persons that sell a product or service for which the consumer can pay later, such as lawyers and doctors. 4

The Clarification Act also grants authority to the Board and the other agencies to determine, through a rulemaking, whether there are other creditors that offer or maintain accounts that are subject to a reasonably foreseeable risk of identity theft that should be subject to the Red Flags rule. 12 U.S.C. 1681m(e)(4)(C). The Board is not using its discretionary rulemaking authority at this time to extend the application of its Red Flags rule to additional creditors.

The Board is proposing to amend the definition of “creditor” in Regulation V (12 CFR 222.90) to conform the rule to the definition of “creditor” in FCRA as amended by the Clarification Act. As noted above, the existing definition of “creditor” in § 222.90(b)(5) makes a cross-reference to the general definition of “creditor” in section 603(r)(5) of the FCRA and provides a list of examples of lenders. The proposed revised definition of “creditor” in § 222.90(b)(5) would instead cross-reference the more limited definition of creditor in section 615(e) of the FCRA, which is specific to the statute's red flags provisions. Accordingly, proposed § 222.90(b)(5) provides that “creditor has the same meaning as in 15 U.S.C. 1681m(e)(4).”

As discussed above, the Red Flags rule requires each financial institution and creditor that holds any consumer account, or other account for which there is a reasonably foreseeable risk of identity theft, to develop and implement an identity theft prevention program. Under the revised definition, creditors that do not regularly and in the ordinary course of business: (a) Obtain or use consumer reports in connection with a credit transaction; (b) furnish information to consumer reporting agencies in connection with a credit transaction; or (c) advance funds to or on behalf of a person, would no longer be covered by the rule. The Board notes, however, that the Red Flags rule still covers all financial institutions, regardless of whether they meet the revised definition of creditor. 5

The Board is also proposing to update a citation in Supplement A to Appendix J of the Red Flags rule. Supplement A to Appendix J includes a cross-reference to the Board's definition of a “notice of address discrepancy” in Regulation V (12 CFR 222.82(b)). Pursuant to the Dodd-Frank Act, the Board's rulemaking authority for the notice of address discrepancy provisions of the FCRA (15 U.S.C. 1681c(h)) transferred to the Consumer Financial Protection Bureau (CFPB). Accordingly, the Board is proposing to update the cross-reference to the CFPB's definition of a “notice of address discrepancy” in the CFR's Regulation V § 1022.82(b). 6

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities. Based on its analysis, and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the need for, and objectives of, the proposed rule. As noted above, the Clarification Act amended the definition of “creditor” in the FCRA for purposes of the red flags provisions. The Board is proposing to amend the definition of “creditor” in its Red Flags rule to reflect the revised definition of that term in the Clarification Act. As also noted above, the Board is proposing to update a cross-reference in the Red Flags rule to reflect the CFPB's rulemaking authority for the notice of address discrepancy provisions in the FCRA.

2. Small entities affected by the proposed rule. The proposed rule would amend the definition of “creditor” in the Board's Regulation V Subpart J to conform to the revised definition of that term in the Clarification Act. The proposed definition continues to refer to the FCRA definition of “creditor,” which references the ECOA definition of “creditor,” but limits the application of the red flags provisions to only those creditors that regularly and in the ordinary course of business: (a) Obtain or use consumer reports in connection with a credit transaction; (b) furnish information to consumer reporting agencies in connection with a credit transaction; or (c) advance funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person. 12 U.S.C. 1681m(e)(4)(A). Creditors that advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person are excluded from the definition. Small entity creditors that do not meet this more limited definition would no longer be covered by the rule. However, small entities that are financial institutions would still be covered by the rule, regardless of whether they meet the revised definition of creditor.

The proposed rule would also update a cross-reference in the Red Flags rule to reflect the CFPB's rulemaking authority for the notice of address discrepancy provisions in the FCRA. This revision would have no effect on small entities because there is no substantive difference between the Board's definition of a “notice of address discrepancy” and the CFPB's definition.

3. Recordkeeping, reporting, and compliance requirements. The proposed rule does not impose any new recordkeeping, reporting, or compliance requirements on small entities. Small entities that no longer meet the narrower definition of “creditor” would not have to comply with the requirements of the Red Flags rule. However, small entity financial institutions would still be required to comply with the Red Flags rule, regardless of whether they meet the revised definition of creditor.

4. Other federal rules. The Board has not identified any federal statutes or regulations that would duplicate, overlap, or conflict with the proposed revision.

5. Significant alternatives to the proposed revisions. The proposed revisions to the definition of “creditor” and the cross-reference to the definition of a “notice of address discrepancy” reflect statutory changes. The Board does not believe there are significant alternatives to these revisions. Although the Board has authority to determine through a rulemaking that any other creditor that offers or maintains accounts that are subject to a reasonably foreseeable risk of identity theft is subject to the Red Flags rule, the Board does not believe it is appropriate to use its discretionary rulemaking authority at this time.

In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board reviewed the rule under the authority delegated to the Federal Reserve by the Office of Management and Budget (OMB). The proposed rule contains no requirements subject to the PRA.

For the reasons set forth in the preamble, the Board proposes to amend Regulation V, 12 CFR part 222, as set forth below:

The Truth in Savings Act (TISA), 12 U.S.C. 4301 et seq., historically has been implemented by the Board's Regulation DD, published at 12 CFR part 230. The purpose of the act and regulation is to assist consumers in comparing deposit accounts offered by depository institutions, principally through the disclosure of fees, the annual percentage yield, the interest rate, and other account terms. An official staff commentary interprets the requirements of the Board's Regulation DD (12 CFR part 230 (Supp. I)). Credit unions are governed by a substantially similar regulation issued by the NCUA at 12 CFR part 707.

Title X of the Dodd-Frank Act transferred rulemaking authority for a number of consumer financial protection laws from the Board to the Bureau, effective July 21, 2011. In connection with the transfer of the Board's rulemaking authority for TISA, the Bureau published an interim final rule to establish its own Regulation DD, 12 CFR part 1030, to implement TISA (Bureau Interim Final Rule). 2 The Bureau Interim Final Rule substantially duplicated the Board's Regulation DD and made only certain non-substantive, technical, formatting, and stylistic changes. The Bureau Interim Final Rule did not impose any new substantive obligations on regulated entities.

Under section 1029(a) of the Dodd-Frank Act, the Bureau may not exercise any rulemaking, supervisory, enforcement or any other authority over a motor vehicle dealer that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both, subject to certain exceptions. 3 Section 1029(c) of the Dodd-Frank Act further provides that nothing in the Dodd-Frank Act should be construed to modify, limit, or supersede the authority of the Board with respect to a motor vehicle dealer described in section 1029(a) of the Dodd-Frank Act. 4 Accordingly, to the extent that a motor vehicle dealer described in section 1029(a) of the Dodd-Frank Act was subject to one of the Board's consumer financial service regulations, the Board's regulation would continue to apply.

As noted above, Title X of the Dodd-Frank Act transferred rulemaking authority for TISA from the Board to the Bureau, effective July 21, 2011. Pursuant to Section 1029 of the Dodd-Frank Act, however, the Board retains rulemaking authority for consumer financial protection laws to the extent that such laws could cover motor vehicle dealers identified in Section 1029(a) of the Dodd-Frank Act.

TISA and the Board's Regulation DD apply only to depository institutions. See 12 U.S.C. 4301; 12 CFR 230.1(c). For this purpose, the term “depository institution” includes “an institution defined in Section 19(b)(1)(A)(i) through (vi) of the Federal Reserve Act (12 U.S.C. 461), except credit unions defined in Section 19(b)(1)(A)(iv).” 12 U.S.C. 4313(6); 12 CFR 230.2(j). Depository institutions are generally subject to restrictions on the types of activities in which they may engage as principal. See e.g., 12 U.S.C. 24 (Seventh) and 12 U.S.C. 1831a. These activities are restricted to those that are necessary to carry on the business of banking and other limited financial activities. Based on these restrictions, the Board believes that motor vehicle dealers, as defined in Section 1029(a) of the Dodd-Frank Act, that are predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both, could not also be depository institutions subject to TISA. Consequently, the Board is publishing a proposed rule for public comment to repeal the Board's Regulation DD, 12 CFR part 230. The Board, requests comment, however, on whether any motor vehicle dealers identified in Section 1029(a) of the Dodd-Frank Act are or could become depository institutions for purposes of TISA.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (RFA) generally requires an agency to perform an assessment of the impact a rule is expected to have on small entities. Based on its analysis, and for the reasons stated below, the Board believes that this proposed rule will not have a significant economic impact on a substantial number of small entities. A final regulatory flexibility analysis will be conducted after consideration of comments received during the public comment period.

1. Statement of the need for, and objectives of, the proposed rule. Title X of the Dodd-Frank Act transferred rulemaking authority for a number of consumer financial protection laws from the Board to the Bureau, effective July 21, 2011, including TISA. The Bureau issued the Bureau Interim Final Rule to implement TISA in connection with the transfer of TISA rulemaking authority to the Bureau. Pursuant to Section 1029 of the Dodd-Frank Act, however, the Board retains rulemaking authority for consumer financial protection laws to the extent that such laws could cover motor vehicle dealers identified in Section 1029(a) of the Dodd-Frank Act. The Board does not believe that any motor vehicle dealers identified in Section 1029(a) of the Dodd-Frank Act are or could become depository institutions subject to TISA. Consequently, the Board is proposing to repeal the Board's Regulation DD, 12 CFR part 230.

2. Small entities affected by the proposed rule. The Board does not believe that any motor vehicle dealers identified in Section 1029(a) of the Dodd-Frank Act are or could become depository institutions subject to TISA. Therefore, the Board believes the proposed rule would not affect any entity, including any small entity.

3. Recordkeeping, reporting, and compliance requirements. The proposed rule would repeal the Board's Regulation DD, 12 CFR part 230, and would therefore not impose any recordkeeping, reporting, or compliance requirements on any entities.

4. Other federal rules. The Board has not identified any federal rules that duplicate, overlap, or conflict with the proposed repeal of the Board's Regulation DD, 12 CFR part 230.

5. Significant alternatives to the proposed revisions. The Board is not aware of any significant alternatives that would further minimize any significant economic impact of the proposed rule on small entities, but solicits comment on this approach.

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

The objectives of this proposed rule are to:

• Clarify and strengthen the regulations in part 612, subpart A, regarding standards of conduct;

• Modify definitions;

• Clarify reporting requirements and prohibitions on the purchase of System institution acquired property and lending transactions;

• Strengthen responsibility and accountability requirements for System institution Standards of Conduct Officials, boards of directors (or board), employees, and agents; and

• Require each System institution to adopt a Code of Ethics.

The FCA has not made significant changes to its standards of conduct regulations since 1994, and we have determined that it is appropriate to strengthen and modernize the rule. The proposed rule would add new provisions, clarify and augment some of the current provisions and provide additional flexibility for others. The proposed rule is organized differently from the current rule. Sections on director and employee reporting and prohibited conduct are repositioned to improve the logical flow of the rule. The proposed rule adds a new § 612.2136 on conflicts of interest, a new § 612.2165(a) on Code of Ethics, a new § 612.2165(c) on allowing exceptions to certain rules if no conflict of interest exists, and new requirements in § 612.2180 addressing standards of conduct for agents. It also adds new standards of conduct responsibilities to System institutions (proposed § 612.2160) and to the Standards of Conduct Official (proposed § 612.2170). We solicit comments on our proposed amendments.

The proposed rule would have some new and some modified definitions:

Code of Ethics. The proposed rule would define “Code of Ethics” as a written set of standards, rules, values, and guidance that an institution uses to ensure the ethical conduct of those who sign it, and that reflects professionalism and discourages misconduct so the best interests of the institution are advanced.

Controlled entity and entity controlled by. The proposed rule would continue to provide that a controlled entity includes an interest in an entity in which the individual, directly or indirectly or acting through or in concert with one or more persons, owns 5 percent or more of the equity of the entity; owns, controls, or has the power to vote 5 percent or more of any class of voting securities of the entity; or has the power to exercise a controlling influence over the management of the entity. The FCA is aware that in other contexts the definition of “controlled entity” or “entity controlled by” may mean having an ownership interest with a greater threshold than 5 percent; however, the purpose of this rule is to ensure that institution directors and employees are completely objective in their decision-making, and are not in any way influenced by personal interests. The FCA believes that a reasonable person could conclude that a director or employee could be influenced to act favorably toward an entity in which he or she had an economic interest of 5 percent or more. Therefore, directors and employees should report these interests and should abstain from decision-making with regard to them. So, for the purpose of this rule only, a “controlled entity” or “entity controlled by” is defined as an entity in which the director or employee has an interest of 5 percent or more, alone or in concert with others, directly or indirectly.

Employee. The proposed rule would clarify the definition of “employee” to include non-salaried employees such as hourly wage earners.

Entity. The proposed rule would add unincorporated business entities to the definition of “entity”.

Family. The proposed rule would add to the current definition of “family” associations or relationships that are in the nature of a family relationship. This is intended to modernize the definition of family to include non-traditional relationships, and adoptions and other relationships where an adult who is not related to a child acts as a parent to a child living in the home. Each System institution is encouraged to provide more explanation and discussion of the regulatory definition in its standards of conduct policies and procedures.

Material. The proposed rule would not change the definition of “material.” However, each System institution must set specific parameters on what constitutes a material financial interest or transaction. The value of a material financial interest or transaction may change depending on the circumstances and, to some extent, the geographic location of the institution involved. The institution's determination of materiality would be subject to FCA examination.

The institution's policies and procedures may include de minimis values below which a financial interest is determined by the board not to be material. The de minimis amount is necessarily System institution-specific, and must be appropriate to the institution's size, location and risk tolerance. A de minimis amount is an amount or value representing an interest that is so insignificant that no reasonable person could conclude that it would influence a director or employee's ability to act impartially and in the best interests of the System institution. The institution would need to adequately support the values established in its determination of de minimis or not material, and this determination would be subject to FCA examination.

Officer. We propose to replace “secretary” with corporate secretary.

Ordinary course of business. We propose to remove “two” concerning transactions between persons and add “agents” to those for whom preferential treatment should be avoided.

Signed. We would add a definition of “signed” to have the same meaning as set forth in § 620.1 of the chapter, to provide for greater uniformity in our regulations and to clarify electronic signatures are acceptable.

Unincorporated business entities. We would add a definition of “unincorporated business entities” to have the same meaning as set forth in § 611.1151 of the chapter.

The section heading would be replaced with “responsibilities and conduct” but otherwise this section is not substantively changed. The words “and guidance” are added to paragraph (b) to make clear that in addition to regulations, policy statements, instructions and procedures, directors and employees must observe guidance of the FCA, to the best of their abilities.

The proposed rule would add a new § 612.2136 on conflicts of interest. This section is added to require directors, employees, and agents to take affirmative action to report conflicts of which they are aware. It is intended to compel them to take ownership of and invest in their ethical responsibilities. Paragraph (a) would specifically require directors, employees, and agents to disclose any conflicts of interests they may have in any matters, activities or transactions pending at the System institution to the Standards of Conduct Official. It would require immediate reporting of conflicts of interests and would supplement employee's and director's existing annual and periodic reporting requirements. Paragraph (b) would require recusal from any board action on, discussion of, or any other official action on or discussion of, those matters. For example, if a director or employee were to purchase farm equipment such as a combine harvester from a known borrower, the purchase should be reported and reviewed by the Standards of Conduct Official for conflicts. If the borrower has a matter or transaction pending at the institution, the director or employee would be recused from that matter. Note that if the purchase were financed it would be a lending transaction covered by §§ 612.2145 and 612.2155. Working together with other provisions of the rule, this section is intended to bolster the directors', employees', and agents' loyalty to the System institution and to reinforce personal responsibility and accountability in avoiding conflicts and acting ethically.

The requirements of disclosure and recusal in this section apply not only to directors, employees, and agents, but also those consultants, professionals or experts who are hired to give advice on a matter, transaction or activity but may not necessarily meet our definition of “agent”. If the consultant, professional or expert has an interest that may compromise his or her complete impartiality in a matter, transaction or activity for which his or her expertise is sought, paragraph (a) requires that he or she disclose that interest and paragraph (b) requires that he or she refrain from further discussion of System business with respect to that matter, transaction or activity.

System institutions must develop policies and procedures to implement this section. Such policies and procedures could include procedures for waiver of the recusal requirement if the Standards of Conduct Official determines in writing that the conflict would not interfere with the person's ability to perform impartially and in the best interest of the System institution. In the absence of such waiver procedures, recusal is required.

We would revise § 612.2140(b)(1) to require that each director report all “material” financial interests with other directors, employees, agents or borrowers of the employing, supervised, and supervising institution. We believe this section is necessary to help directors and Standards of Conduct Officials identify and avoid potential conflicts of interests. Because the proposed rule would require directors to report only material financial interests we believe the requirement will not be unduly burdensome or intrusive.

As discussed in the section-by-section analysis above, each System institution must develop policies and procedures that provide parameters for that which constitutes a “material” financial interest, and may develop policies and procedures that set forth a certain de minimis value that would not be considered material for reporting requirements. Reporting of material financial interests is intended to assist the Standards of Conduct Official in identifying and resolving conflict situations and to help a director identify areas of prohibited conduct. A material financial interest does not necessarily mean that a conflict of interest exists or that the interest would unduly influence the director in his or her position.

Like the current rule, the proposed rule would require directors to report the name of any relative or person residing in the director's household, any business partner, or any entity controlled by the director or such persons (alone or in concert) if the director knows or has reason to know that such individual or entity transacts business with the institution or any institution supervised by the director's institution. This rule does not require a director to solicit information from these persons or entities to determine whether they had or have transactions with the institution. However, the FCA presumes that a director would know or have reason to know whether or not a relative or other persons residing in the director's household had or has transactions with the institution.

In our current rule, director prohibited conduct and the related limited exceptions are included in the same discussion. In proposed § 612.2145(a), we set forth the basic rules for prohibited conduct. In proposed § 612.2145(b), we set forth the specific limitations and exceptions to the prohibitions. We believe this change is necessary to remove any possible ambiguity from the meaning of the prohibitions. Most of these changes are straightforward, but proposed § 612.2145(a)(6) and (b)(3) regarding acquired property and proposed § 612.2145(a)(7) and (b)(4) regarding lending transactions require special discussion.

The proposed rule would clarify the circumstances under which directors may and may not purchase property that a System institution has owned or acquired by foreclosure or similar action. These proposed changes are not substantive; they are clarifications of the rule. Proposed § 612.2145(a)(6) would provide that, among other things, a director may not knowingly acquire, directly or indirectly, property that was owned or acquired by the employing, supervising or supervised institution as a result of foreclosure or similar action. Proposed § 612.2145(b)(3) would set forth an exception to the acquired property prohibition in proposed § 612.2145(a)(6). The exception would apply only if the director did not participate in the deliberations or decision to foreclose, or to take similar action, or to dispose of the property or in establishing the terms of the sale, and (1) the director acquired the property through inheritance, or (2) the System institution did not own the property or an interest in the property at any time during the 12-month period before the director's acquisition of the property, or (3) the director acquired the property through public auction with open competitive bidding and the Standards of Conduct Official determined, before the director acquired the property, that the director does not have an advantage over other bidders as a result of the director's position and that no other conflict of interest or the appearance thereof exists.

By open competitive bidding, we mean bidding that is both competitive, allowing involvement of all interested parties, and that is open and unsealed. Open competitive bidding affords all interested parties an opportunity to counter-bid. The advantage to open bidding is that it discourages unethical behavior or favoritism. A public auction can be accomplished on-line as long as there is an opportunity for all who may be interested to bid.

The proposed language does not reflect a substantive change from the intent of this original regulatory provision regarding acquired property. However, we believe that because of the scope of misunderstanding and misapplication of the original provision, the revision is necessary.

Proposed § 612.2145(a)(7) would provide that a director must not directly or indirectly borrow from, lend to, or become financially obligated with or on behalf of a director, employee, or agent of the employing, supervising or supervised institution or a borrower or loan applicant of the employing institution. This section addresses lending and borrowing relationships. It prohibits a director from entering into a lending or borrowing transaction with those who may have a financial relationship with the System institution. Lending and borrowing relationships include providing guarantees or stand-by letters of credit and similar forms of financial obligation.

The FCA recognizes that there are many situations in which a director may enter into lending transactions or business relationships that involve financing with other directors, employees, agents, borrowers or loan applicants in the ordinary course of business. Therefore, to keep the provision from being unduly restrictive, proposed § 612.2145(b)(4) would set forth an exception to the proposed § 612.2145(a)(7) prohibition. The exception would apply if: (1) The transaction is with a relative or any person residing in the director's household; or (2) the transaction is undertaken in an official capacity in connection with the institution's discounting, lending or participation relationships with OFIs and other lenders; or (3) the Standards of Conduct Official determines, as authorized under board policy and in the manner outlined in the rule, that the potential for a conflict of interest is insignificant. The Standards of Conduct Official's determination must be in writing; document that the transaction is in the ordinary course of business or is not material in value or amount; document that the director did not participate in the determination of any matter affecting the financial interests of the other party to the transaction except those matters affecting all shareholders/borrowers in a nondiscriminatory way; and most importantly, the Standards of Conduct Official's determination be made before the director enters into the transaction. The Standards of Conduct Official must renew this determination annually, as applicable. For example, if a director and a borrower contemplate an ongoing business relationship by which the director purchases grain from a borrower on credit on a regular basis, the Standards of Conduct Official would have to review this relationship for conflicts. Once reviewed, to the extent this is an ongoing relationship in the ordinary course of business, the Standards of Conduct Official would not have to review each and every transaction, but would renew on an annual basis his or her determination that the ongoing relationship remains in the ordinary course of business and does not create a conflict.

The Standards of Conduct Official cannot ratify prohibited conduct after the fact. If the transaction has been entered into without a pre-existing Standards of Conduct Official determination, then the FCA could consider the director to have violated this provision of the regulation.

As discussed, each System institution must set specific parameters on what constitutes a material financial interest or transaction and also what is in the ordinary course of business in the local environment. Whether or not to establish a de minimis threshold for review would be left to the discretion of each System institution board; however, as discussed above, if the institution does establish a de minimis value, it must do so under policies and procedures subject to FCA examination. The institution's board must not establish the de minimis value to be so high or so ambiguous as to circumvent the intent of this rule.

This provision would require employees to report all “material” financial interests with directors, employees, agents or borrowers of the employing, supervised, and supervising institution. This change can be found in proposed § 612.2150(b)(1) and is parallel to the change for directors in proposed § 612.2140(b)(1).

This provision has been changed from the current § 612.2150 and the revisions are parallel to the changes for director prohibited conduct, where applicable.

This section, like the current rule, prohibits an officer of a Farm Credit Bank (FCB) or agricultural credit bank (ACB) from contemporaneously working as an employee at an association in its district. Also, this provision prohibits a non-officer employee of a FCB or ACB from serving as an officer of an association in its district. The FCA recognizes that occasionally the System may benefit from having a FCB or an ACB officer serve at an association. Therefore, this provision is modified from the original to allow joint employee relationships with the written approval of the Standards of Conduct Official if the bank board of directors agrees that the interests of both System institutions outweighs the potential for conflicts of interest or conflicts related to devotion of time to official duties. The bank must provide written notice to the FCA before the joint relationship begins, and the FCA may object within 10 calendar days of receiving the bank's notice.

The proposed rule would update this section to require new responsibilities and accountability of System institutions in overseeing the standards of conduct program.

Proposed § 612.2160(a)(1) would require the institution to dedicate appropriate resources to support the standards of conduct program. The Standards of Conduct Official has many duties and responsibilities, and depending on the size of the institution it may not be possible for one person to satisfactorily manage all of these responsibilities. Each System institution should dedicate personnel and resources as necessary to ensure that the standards of conduct program is carried out thoroughly and in compliance with this rule.

Proposed § 612.2160(a)(3) would require the institution to notify the FCA immediately of any known or suspected material standards of conduct violations. This notification can come directly from the board of directors, or from the Standards of Conduct Official as separately required in proposed § 612.2170(b)(7). The requirement is added here to make clear that the institution itself is accountable for notifying the FCA of known or suspected standards of conduct violations.

Proposed § 612.2160(e) would require the institution to ensure that directors and employees certify annually that they will adhere to the institution's standards of conduct policy and Code of Ethics. System institutions would be required under § 612.2160(f) to have documentation that agents (1) are subject to applicable industry or professional ethics standards, or (2) have certified to adhere to the provisions of the System institution's Code of Ethics applicable to agents. The certifications could be performed in various ways including electronic signatures.

Proposed § 612.2160(g) would require that System institutions make compliance with the standards of conduct program a component of the risk assessment process subject to periodic audit, as established by the audit committee, by a person or entity independent of the standards of conduct program. We would expect an institution to audit the standards of conduct program at least once every 3 to 4 years consistent with its risk assessment and audit planning process. The scope and depth of the audit would be determined and documented by the institution.

Proposed § 612.2160(h) would require institutions to establish an effective method of internal controls over the reporting, disclosing, and other requirements of this part, including controls for the confidentiality of information reported to and maintained by the Standards of Conduct Official. It would require institutions to establish an effective method of internal controls over the audit of the standards of conduct program.

Many of the provisions in proposed § 612.2165 would be the same as the provisions in current § 612.2165. However, each institution should have a strong sense of its role in the System's mission and should have a culture of corporate and personal responsibility to further that mission. Therefore, in addition to adopting internal standards of conduct policies and procedures, proposed § 612.2165(a) would require each System institution to adopt a Code of Ethics that applies to directors and employees and that includes a provision for the ethical conduct of agents. Each institution would be required to provide a copy of its Code of Ethics to directors, employees, and agents. Directors and employees would be required to sign the institution's Code of Ethics. Agents not subject to industry or professional ethics standards would be required to certify that they will adhere to the institution's Code of Ethics provision applicable to agents.

The proposed rule sets forth minimum specific guidelines that each System institution's Code of Ethics would be required to meet. The institution's Code of Ethics must promote honest and ethical conduct including the ethical handling of actual or apparent conflicts of interest; promote integrity and compliance with laws and regulations; prohibit dishonesty, fraud or deceit and discourage any conduct or act that would adversely reflect on the reputation, integrity or competency of the System; prohibit misuse of office and provide for the prompt reporting of any person or persons who violates the institution's Code of Ethics or engages in any activity that may require further investigation under § 612.2301, subpart B of the part, to the Standards of Conduct Official.

Proposed § 612.2165(a)(3) would require each institution's board to adopt policies and procedures concerning the use of unincorporated business entities (UBEs) that, at a minimum, ensure that all transactions between the UBE and System institution directors, employees, and agents are conducted at arm's length. These policies and procedures must ensure that System institution directors, employees, and agents comply with their employing institution standards of conduct policies and procedures and this rule in their interactions with the UBE. For example, System institution directors, employees, and agents cannot purchase acquired property from a UBE except in compliance with this rule and their institution's standards of conduct policies and procedures.

The FCA believes that each System institution must review and update its standards of conduct policies and procedures, as necessary, to strengthen them. The FCA expects each System institution to modernize and augment its existing standards of conduct policies and procedures to ensure the highest standards of honesty, ethics, integrity, impartiality and conduct. In doing this, each System institution should establish reasonable criteria for business relationships and transactions relevant to its business, geographic location, and customer base. The standards outlined in this rule serve as a minimum bar against which each System institution should build and develop stronger internal standards of conduct policies and procedures.

Proposed § 612.2165(b)(2) would require System institutions to outline authorities and responsibilities of the Standards of Conduct Official. Included in this requirement would be the authority and responsibility to review for compliance with this subpart all loans considered for approval by the supervisory bank under §§ 614.4460 and 614.4470, respectively. System institution loans to directors and employees and loans to FCA employees and others subject to §§ 614.4460 and 614.4470 present unique conflict of interest issues. The System institutions should ensure that credit decisions with respect to these loans are made without favoritism or special terms. These loans, which include insider loans, warrant a higher level of scrutiny for possible conflict or undue influence than non-insider loans.

Proposed § 612.2165(b)(14) would clarify the circumstances under which an institution's policies and procedures must prohibit the purchase and retirement of the institution's preferred stock. This section does not place a restriction on the issuance or retirement of borrower stock associated with a director or employee loan transaction.

Proposed § 612.2165(b)(16) would require the board in its policies and procedures to provide for annual training on standards of conduct. Training presents an opportunity to continually educate directors and employees on standards of conduct issues and the importance of ethical behavior.

Proposed § 612.2165(b)(17) would require the institution to report to the FCA exceptions authorized by the institution board under § 612.2165(c).

The FCA recognizes that some of the provisions of the rule may prohibit activity where no actual or apparent conflict of interest exists. Therefore, proposed § 612.2165(c)(1) would allow each System institution to adopt policies and procedures by which the System institution board of directors may grant a written exception to certain standards of conduct rules under this subpart. The FCA proposes that rules for which an exception may be granted on a case-by-case basis are a reporting requirement, an employee or director prohibition on disclosure of information not generally available to the public, an employee prohibition on serving as an officer of a non-System entity in the district or of a non-System financial institution, a restriction on an employee serving jointly at a bank and association as discussed in proposed § 612.2157, and the 5-percent threshold for defining a controlled entity. For example, under proposed § 612.2165(c)(1) a board could allow an exception to the prohibition with respect to an individual director's interest in a “controlled entity” where that director indirectly owns more than 5 percent of the equity and the Standards of Conduct Official determines based on the facts and circumstances that there is no potential for conflict of interest. As another example, this provision would allow the board to approve an exception to the prohibition on an employee serving as an officer or director of a non-System entity that transacts business with the System institution in its district (proposed § 612.2155(a)(4)), if the Standards of Conduct Official determines that there is no conflict of interest.

The exceptions under proposed § 612.2165(c)(1) would have to be approved on a case-by-case basis by the institution's board, based on a recommendation of the Standards of Conduct Official. The Standards of Conduct Official's recommendation would need to be strongly supported by a written determination that the prohibition is not necessary to avoid a conflict or appearance of a conflict or to ensure impartiality, objectivity and public confidence in the System institution. The determination would have to be documented in the institution's files and renewed at least annually. The institution board would impose appropriate conditions, as the circumstances may dictate. In addition, the board would provide for periodic review of the criteria to determine whether the board continues to support the Standards of Conduct Official's recommendation. The exceptions approved would be subject to FCA examination, and to its determination of whether the prohibition of the activity is necessary to avoid a conflict or appearance of a conflict or to ensure impartiality, objectivity and public confidence in the System institution.

The FCA specifically requests comment on whether the provisions proposed are appropriate for board waiver and whether other provisions should be considered. There are some transactions so susceptible to conflicts that the FCA would not consider permitting a waiver of the rule prohibiting them. The rules prohibiting directors, employees, and agents from acquiring property could not be waived. The rules prohibiting an employee from acting as a real estate agent or broker could not be waived, and the rule prohibiting an employee from acting as an agent or broker in connection with the sale and placement of insurance could not be waived. Finally the requirement to comply with the institution's standards of conduct policies and Code of Ethics could not be waived. As previously stated, there may be other rules for which an institution board may appropriately consider granting a waiver, and the FCA specifically requests comment on the waiver provisions of this proposal and what those rules may be.

Proposed paragraph (c)(2) of this section would allow the institution board to consider a standing exception to director and employee reporting requirements under proposed §§ 612.2140 and 612.2150, respectively. As an example, policies and procedures under proposed § 612.2165(c)(2) could allow an exception to the requirement that a director report the name and nature of a business or any entity on whose board the director sits, if the entity is a nonprofit organization such as a Chamber of Commerce, or a place of worship, and the Standards of Conduct Official determines that the potential for conflict is insignificant with respect to that category of entity.

Proposed paragraph (c)(2) would also permit the board to establish policies and procedures that provide for a standing exception to the restrictions in proposed §§ 612.2145(b)(4) and 612.2155(b)(6) on lending transactions, if the potential for conflict is insignificant because the transaction is not material, or it is in the ordinary course of business. An institution may identify certain lending transactions that fall under a certain dollar value and are de minimis or immaterial. Those transactions falling below such identified amounts would not have to be reported to or reviewed by the Standards of Conduct Official. In addition, an institution may identify certain types of transactions that are in the ordinary course of business. Directors and employees could enter into those ordinary course of business transactions without the prior review of the Standards of Conduct Official. However, where the ordinary course of business transaction exceeds the de minimis or immaterial threshold set by the institution, the directors and employees must report such transactions, by including them in regular reports to the Standards of Conduct Official, and the Standards of Conduct Official must review them. Putting the exceptions of proposed § 612.2165(c)(2) together, a transaction that is in the ordinary course of business and that also is de minimis or falls below the immaterial amount would require neither director or employee reporting nor Standards of Conduct Official review.

For example, the System institution may find that certain goods and services that are offered to the public in the ordinary course of business at a fixed price, such as diesel fuel, or equipment repairs, do not raise conflict of interest concerns, even if purchased from a System borrower with credit. Institution policies and procedures could provide that these transactions would not have to be reported or approved unless they reached a certain dollar amount or value threshold. By contrast, transactions involving price negotiation, such as purchasing a tractor or other heavy farm equipment, could raise issues of impartiality or favoritism and should be subject to more scrutiny.

In addition to transactions covered in the institution's policies and procedures under proposed § 612.2165(c)(2), proposed §§ 612.2145 and 612.2155 retain the existing flexibility for an institution's Standards of Conduct Official to review a transaction before it is entered into and make a case-by-case determination that there is no conflict. The exceptions in proposed § 612.2165(c)(2) are designed to be applied to all directors and employees and as such, must be set on a conservative basis. However, a particular lending transaction that does not fall within the institutions' § 612.2165(c)(2) exceptions may still be a transaction that the Standards of Conduct Official determines has little potential for conflict when applying the rules under §§ 612.2145 and 612.2155. Proposed § 612.2165(f) reminds each System institution that the FCA may determine that a transaction or activity constitutes a conflict of interest notwithstanding the System institution's board of director finding to the contrary. Section 612.2165(d) and (e) are included to prevent misuse of the requirements under this section to evade conflict of interest rules and situations. Finally, institution policies and procedures should provide for periodic review by the System institution board.

We would revise § 612.2170(a) to require that there must be an internal employee who also serves as the institution's Standards of Conduct Official and who would be accountable to the institution's board for all standards of conduct matters. The FCA believes that an in-house Standards of Conduct Official is in the best position to advise the board because they are in-tune with the day-to-day operations of the institution. In addition, in order to foster a culture of highest integrity and ethical conduct, it is important to have a Standards of Conduct Official who has a constant presence at, relationship with, and respect of, the employees of the institution. The proposed rule would require the institution's board of directors to provide for other employees to assist the Standards of Conduct Official as needed to ensure the effective operations of the institution's standards of conduct program.

Proposed § 612.2170(b) would enhance and clarify the responsibility and accountability of the Standards of Conduct Official. The Standards of Conduct Official must receive, actively review, and maintain the reports required by the rule. Proposed § 612.2170(b)(6) would require the Standards of Conduct Official to report to the board no less than annually on the effectiveness of the institution's standards of conduct policy and its implementation. This report should include an evaluation of the extent to which safeguards are in place to avoid conflicts of interest and standards of conduct policy violations and should present the opportunity to make improvements to the standards of conduct program.

The Standards of Conduct Official must also present any violations of the standards of conduct policy to the board for appropriate action. Section 612.2170(b)(7) would requires the Standards of Conduct Official to report to the institution's board and to the FCA all suspected criminal and, in addition, any standards of conduct violations that may have an adverse impact on continued public confidence in the System or any of its institutions.

Proposed § 612.2170(c) would provide that a Farm Credit bank may provide assistance to an affiliated association's board of directors and Standards of Conduct Official in complying with this part. Proposed § 612.2170(d) would provide that an institution may use an outside counsel or consultant to assist the institution in meeting standards of conduct requirements. However, the institution's in-house Standards of Conduct Official would be responsible for overseeing the outside counsel or consultant.

Proposed § 612.2170(e) would provide that the Standards of Conduct Official must coordinate appropriate training with the institution's board on an annual basis.

It is important for System institutions to hold their agents to the same high ethical standards held by their directors and employees. The proposed rule would require that institutions document that agents representing System institutions in contacts with third parties or who provide professional or consultant services such as legal, accounting, and appraisal, are subject to industry or professional ethics standards and that the institution provide each agent a copy of the institution's standards of conduct policy and Code of Ethics. The proposed rule would further require that an agent who is not subject to industry or professional ethics standards must certify to the System institution that the agent will adhere to the provisions of the institution's Code of Ethics applicable to agents. Agents play an important role in System institutions and this rule would help achieve high ethical standards at every level throughout the System.

To avoid the appearance of conflicts in the disposition or purchase of institution-owned or institution-acquired real or personal property, we propose that agents must agree to prohibitions similar to those that apply to employees. The proposed rule would prohibit agents from acquiring any interest in real or personal property if it was owned or acquired by the employing institution or any supervised or supervising institution as a result of foreclosure or similar action at any time during the agent's employment. The prohibition would apply for as long as the property is owned or acquired by the System institution, and for 12 months after the property is transferred out of the System institution or after the agency relationship is terminated, whichever occurs first.

We revised this section to clarify that directors and employees may not purchase any obligation of a System institution except as specifically stated.

Pursuant to section 605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq. ), the FCA hereby certifies that the proposed rule would not have a significant economic impact on a substantial number of small entities. Each of the banks in the Farm Credit System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Therefore, Farm Credit System institutions are not “small entities” as defined in the Regulatory Flexibility Act.

For the reasons stated in the preamble, part 612 of chapter VI, title 12 of the Code of Federal Regulations is proposed to be amended as follows:

We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the ADDRESSES section. Include “Docket No. FAA-2014-0092; Directorate Identifier 2014-CE-002-AD” at the beginning of your comments. We specifically invite comments on the overall regulatory, economic, environmental, and energy aspects of this proposed AD. We will consider all comments received by the closing date and may amend this proposed AD because of those comments.

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

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued AD No. 2014-0004, dated January 7, 2014 (referred to after this as “the MCAI”), to correct an unsafe condition for certain GROB-WERKE Models G115EG and G120A airplanes. The MCAI states:

GROB Aircraft has issued Service Bulletin No. MSB1078-194/1 and Service Bulletin No. MSB1121-140, both dated December 3, 2013. The actions described in this service information are intended to correct the unsafe condition identified in the MCAI.

This product has been approved by the aviation authority of another country, and is approved for operation in the United States. Pursuant to our bilateral agreement with this State of Design Authority, they have notified us of the unsafe condition described in the MCAI and service information referenced above. We are proposing this AD because we evaluated all information and determined the unsafe condition exists and is likely to exist or develop on other products of the same type design.

We estimate that this proposed AD will affect 6 products of U.S. registry. We also estimate that it would take about 1 work-hour per product to comply with the basic requirements of this proposed AD. The average labor rate is $85 per work-hour.

Based on these figures, we estimate the cost of the proposed AD on U.S. operators to be $510, or $85 per product.

In addition, we estimate that any necessary follow-on actions would take about 8 work-hours and require parts costing approximately $306 for the left hand (LH) elevator flange and $365 for the right hand (RH) elevator flange. We estimate a cost of $986 to replace the LH elevator flange per product and $1,045 to replace the RH elevator flange per product. We have no way of determining the number of products that may need these actions.

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 proposed AD would not have federalism implications under Executive Order 13132. This proposed AD would 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 proposed regulation:

(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),

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

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

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

The Social Security Act (Act) gives the Commissioner of Social Security broad rulemaking authority to issue regulations governing the production of evidence that we use to adjudicate disability claims under title II and title XVI. 1 Additionally, the Act provides that we will not find that an individual is disabled “unless [he or she] furnishes such medical and other evidence of the existence thereof as the Commissioner of Social Security may require.”  2

There has been recent public and media interest in what our regulations require regarding the submission of evidence in disability claims, particularly regarding the duty to submit unfavorable evidence. There have been allegations that when some representatives submit evidence to us, they deliberately withhold evidence they deem unfavorable to the claimant. We also know, based on our program experience, that we do not always receive complete evidence. This public and media interest has drawn congressional attention. 3 In particular, members of Congress have asked about the relationship between the Social Security Protection Act of 2004 (SSPA) and the duty to submit potentially unfavorable evidence in disability claims. The SSPA authorized us to penalize a person who withholds a fact, which the person knows or should know is material to the determination of any initial or continuing right to benefits. In light of congressional interest and our program experience, we have again reviewed our regulations that govern the submission of evidence.

Our current regulations describe a claimant's duty to submit medical and non-medical evidence in several ways. For example, in § 404.1512(a), we state that you “must bring to our attention everything that shows that you are blind or disabled,” which may only include evidence that is favorable to your claim. 4 In §§ 404.1512(c) and 416.912(c), however, we state that you “must provide evidence, without redaction, showing how your impairment(s) affects your functioning during the time you say that you are disabled,” which may include evidence that is unfavorable to your claim. Similarly, our current regulations governing the conduct of claimants' representatives describe their related duty to submit evidence in several ways. For example, in §§ 404.1740(b)(1) and 416.1540(b)(1), we require representatives to “obtain the information and evidence that the claimant wants to submit in support of his or her claim,” which may only include evidence that is favorable to the disability claim. In §§ 404.1740(b)(2) and 416.1540(b)(2), however, we require representatives to assist the claimant in complying “with our requests for information or evidence,” which may include evidence that is unfavorable to the claim.

In reviewing our regulations on the submission of evidence, we also considered Congress' actions in enacting the SSPA. When it enacted the SSPA, Congress authorized us to impose a civil monetary penalty against any person who omits from a statement or representation or otherwise withholds disclosure of a fact that is material to the determination of any initial or continuing right to benefits or payments, if the person knows or should know that omitting or withholding the fact is misleading. 5 The sheer volume of disability claims we decide each year makes the need for a complete case record imperative. In fiscal year 2012, for example, we completed more than 3.2 million initial disability claims and more than 820,000 hearing requests. 6 Clarifying our rules regarding a claimant's duty to submit all evidence that relates to the disability claim would enable us to obtain more complete case records and adjudicate claims more accurately.

As part of our reevaluation of the regulations governing the duty to submit evidence in disability claims, we also consulted with the Administrative Conference of the United States (ACUS)  7 and requested recommendations on how our regulations could better articulate the duty to submit all evidence that relates to the disability claim. ACUS issued its Final Report in October 2012. 8 Although the particular content of any regulation was beyond the scope of ACUS's Final Report, ACUS did identify several principles and options that have guided our efforts in this area.

First, ACUS recommended that any proposed regulation should place disclosure obligations directly on claimants rather than on their representatives (if any), just as Federal courts place discovery and other evidence-production obligations on civil litigants, not their counsel. Second, ACUS recommended that any proposed disclosure obligations should apply both to attorney and non-attorney representatives. Third, ACUS recommended that we should write any disclosure obligations so that they do not intrude on any established legal privileges, including the attorney-client privilege or (assuming it is applicable in this context) the work-product doctrine. The obligations should not, among other things, require a claimant (or his or her representative) to disclose his or her subjective opinions regarding the evidence. Finally, ACUS recommended that we should write any disclosure obligations in a way that would minimize the extent to which a claimant and his or her representative must make subjective judgments as to the legal relevance of particular evidence. We now propose to clarify our regulations regarding the submission of evidence, based in part on the recommendations and principles in ACUS's Final Report and mindful of the concerns that prompted Congress to amend section 1129 of the Act, 42 U.S.C. 1320a-8, as part of the SSPA. The modifications we propose to our regulations will provide more certainty about the duty to submit all evidence that relates to disability claims.

We propose to revise §§ 404.1512(a) and 416.912(a) to require you to inform us about or submit all evidence known to you that relates to whether or not you are blind or disabled. 9 This would include evidence that may be either favorable or unfavorable to your claim. As part of this proposal, we would remove our current requirement in sections 404.1512(a) and 416.912(a) that you “must furnish medical and other evidence that we can use to reach conclusions about your medical impairment(s).” The duty to inform us about or submit all evidence that relates to your disability claim would include all of the types of evidence we need to determine disability under our regulations and would remove the need for you to determine what evidence is “material” to the disability determination. In addition, by requiring you to inform us about or submit all evidence that relates to your disability claim, we would clarify that we are not shifting our responsibility for developing the record to you. Our disability system is non-adversarial, and we assist claimants in developing the medical and non-medical evidence we need to determine whether or not they are disabled. 10

We also propose to add a new paragraph to current §§ 404.1512(b) and 416.912(b), which would set forth two exceptions to what we mean by “evidence.”  11 First, in proposed §§ 404.1512(b)(2)(i) and 416.912(b)(2)(i), we would exclude oral and written communications between you and your representative that are subject to the attorney-client privilege, unless you voluntarily disclose the communication to us. The attorney-client privilege protects confidential communications between a client and his or her attorney in order to obtain and provide sound legal assistance. 12 Its purpose is to encourage attorneys and their clients to communicate fully and frankly. 13 This privilege does not apply to communications with non-attorney representatives, but we would also exclude from the definition of evidence communications between claimants and their non-attorney representatives that would be subject to the attorney-client privilege, if the non-attorney representative were an attorney. As recommended by ACUS in its Final Report, we believe that any proposed disclosure obligations “should apply both to attorney and non-attorney representatives.”  14

The attorney-client privilege “only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney.”  15 For example, if you write a letter to your representative disclosing the names of your medical source(s), the privilege would preclude disclosure of the letter, but not the names of your medical source(s).

Second, in proposed §§ 404.1512(b)(2)(ii) and 416.912(b)(2)(ii), we propose to exclude your representative's analysis of your claim, unless he or she voluntarily discloses it to us. By “analysis of your claim,” we generally mean the information that is subject to the attorney work product doctrine. 16 This doctrine protects an attorney's analysis, theories, mental impressions, and notes. 17 Its purpose is to provide an attorney with a degree of privacy within which to carefully and thoroughly prepare his or her client's case. 18

We do not intend, however, to incorporate into these proposed rules the full scope of the work product doctrine under Rule 26(b) of the Federal Rules of Civil Procedure. Rather, consistent with our broad authority under the Act to “adopt reasonable and proper rules and regulations to regulate and provide for the nature and extent of the proofs and evidence and the method of taking and furnishing the same in order to establish the right to benefits,”  19 these proposed rules incorporate a more limited version of the work product doctrine than would apply under the Federal Rules. Under these proposed rules, your representative's “analysis of your claim” does not include certain material that we may consider in determining whether or not you are entitled to or eligible for the benefits for which you have applied. For example, if your representative takes notes during a discussion with one of your medical sources about your condition, we would consider those notes your representative's analysis of your claim, and they would be protected from disclosure under these proposed rules. However, if your medical source sends your representative medical records or a written opinion about your condition, your representative could not withhold those records and that opinion based on the work product doctrine. Those documents would be subject to the duty of disclosure under these proposed rules.

To clarify this point, we provide in proposed §§ 404.1512(b)(2)(ii) and 416.912(b)(2)(ii) that your representative's “analysis of your claim” means information that is subject to the attorney work product doctrine, but does not include medical evidence, medical source opinions, or any other factual matter that we may consider in determining whether or not you are entitled to or eligible for benefits. We then provide a cross-reference to new paragraph (b)(2)(iv), where we further explain the scope of the privileges within the context of these proposed rules.

Although the work product doctrine applies only to attorneys, we also exclude from the definition of evidence documents that would be subject to the work product privilege, if the non-attorney representative were an attorney, to the same extent that we have discussed above.

We also propose revising §§ 404.1512(c) and 416.912(c) to clarify that it is your responsibility to inform us about or submit all evidence known to you that relates to whether or not you are blind or disabled. 20 In addition, when you submit evidence to us from another source, we would require you in proposed §§ 404.1512(c) and 416.912(c) to submit that evidence in its entirety. For example, if you obtain your patient file from one of your medical sources, we would require you to submit all of the medical records in that file. When we last revised §§ 404.1512(c) and 416.912(c) to require that you provide evidence “without redaction,” we explained at the time that this means, for example, you must not redact evidence from a medical report you submit to us. 21 As ACUS pointed out in its Final Report, however, we did not define “without redaction” or fully explain what we meant by this requirement. 22 Therefore, one could interpret “without redaction” to mean either within a document or among a group of documents. 23 We intend our proposed requirement for submission of evidence in its entirety to clarify that we mean both types of redaction.

Finally, in proposed §§ 404.1512(c)(1) and 416.912(c)(1), we would clarify that, if we ask you, you must inform us about your medical source(s). We currently request the names and addresses of all of your medical source(s) on the adult and child disability applications;  24 such information is within the scope of your current responsibility to submit evidence that shows you are blind or disabled. 25 However, as part of our clarification of your duty to inform us about or submit all evidence that relates to your disability claim, we believe we should expressly list this type of evidence with the other types referenced in current §§ 404.1512(c)(1)-(6) and 416.912(c)(1)-(6).

As stated above, we propose to place the duty to submit evidence directly on claimants, not their representatives, if represented. Therefore, we propose to revise §§ 404.1740(b)(1) and 416.1540(b)(1) to require that representatives help obtain the information or evidence that claimants must submit under our proposed regulations. By requiring representatives to help obtain the information or evidence that claimants must submit, we would clarify that we are not shifting our responsibility to develop the record to claimants' representatives.

We propose to make a number of other non-substantive changes to the current rules. We are proposing these changes for clarity and consistency and to correct minor grammatical errors. For example, we propose to revise some language from passive to active voice. We would also make conforming changes to §§ 404.900, 405.1, and 416.1400, which introduce and explain the nature of the administrative review process, and §§ 404.935, 405.331, and 416.1435, which pertain to a claimant's duty to submit evidence at the hearings level.

Executive Order 12866, as supplemented by Executive Order 13563, requires each agency to write all rules in plain language. In addition to your substantive comments on this proposed rule, we invite your comments on how to make it easier to understand.

For example:

• Would more, but shorter, sections be better?

• Are the requirements in the rule clearly stated?

• Have we organized the material to suit your needs?

• Could we improve clarity by adding tables, lists, or diagrams?

• What else could we do to make the rule easier to understand?

• Does the rule contain technical language or jargon that is not clear?

• Would a different format make the rule easier to understand, e.g., grouping and order of sections, use of headings, paragraphing?

We will not use this rule until we evaluate public comments and publish a final rule in the Federal Register . All final rules we issue include an effective date. We will continue to use our current rules until that date. If we publish a final rule, we will include a summary of relevant comments we received, responses to them, and an explanation of how we will apply the new rule.

We consulted with the Office of Management and Budget (OMB) and determined that this proposed rule meets the criteria for a significant regulatory action under Executive Order 12866, as supplemented by Executive Order 13563. Therefore, OMB reviewed it.

We certify that this proposed rule would not have a significant economic impact on a substantial number of small entities because it affects individuals only. Therefore, a regulatory flexibility analysis is not required under the Regulatory Flexibility Act, as amended.

This NPRM imposes no reporting or recordkeeping requirements subject to OMB clearance.

We consulted the references cited in the footnotes when we developed these proposed rules. We included these references in the rulemaking record for these proposed rules and will make them available for inspection by interested individuals who make arrangements with the contact person identified above.

For the reasons stated in the preamble, we propose to amend subparts J, P, and R of part 404, subparts A and D of part 405, and subparts I, N, and O of part 416 as set forth below:

In the Federal Register of July 6, 2012 (77 FR 39953), FDA issued a proposed rule to require the filing of a PMA or a notice of completion of a PDP for the class III preamendments device, SWD for all other uses. This device applies electromagnetic energy to the body in the radio frequency bands that are currently identified as 13.56 megahertz or 27.12 megahertz and is intended for the treatment of medical conditions by means other than the generation of deep heat within body tissues (also referred to as nonthermal SWD). It is not intended for treatment of malignancies. The Agency also summarized its proposed findings regarding the degree of risk of illness or injury designed to be eliminated or reduced by requiring the devices to meet the statute's approval requirements and the benefits to the public from the use of the devices. In addition, FDA announced the opportunity for interested persons to request that the Agency change the classification of any of the aforementioned devices based on new information.

On July 9, 2012, FDASIA was enacted. Section 608(a) of FDASIA (126 Stat. 1056) amended section 513(e) (U.S.C. 360c(e)) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) changing the process for reclassifying a device from rulemaking to an administrative order. Subsequent to the publication of the proposed rule, FDASIA's amendments to section 513 of the FD&C Act required FDA to hold a classification panel (an FDA advisory committee) meeting on the classification of this device. On May 21, 2013, FDA held a meeting of the Orthopedic and Rehabilitation Devices Panel (the Panel), to discuss the classification of nonthermal SWD devices. There was panel consensus that although the effectiveness data were very limited, nonthermal SWD devices did not fit the regulatory definition of a class III device. Coupled with the rationale that special controls could be established to reasonably demonstrate an assurance of safety and effectiveness, the Panel recommended class II (special controls) for nonthermal SWD devices (Ref. 1).

FDA provided an opportunity for interested parties to comment on the proposed rule for SWD for all other uses (77 FR 39953, July 6, 2012). FDA received over 240 comments to the docket in response to the 2012 proposed rule. Comments that expressed an opinion about the classification of nonthermal SWD devices were usually in favor of a class II designation. Some comments did not openly state an opinion, but included arguments against the proposed rule that could reasonably be interpreted as support for a class II designation. There were also comments that agreed with a class III designation. In addition to the comments, FDA received five separate submissions to request a change in the classification of nonthermal SWD from class III to class II. In response to these comments and findings at the Panel meeting, FDA is withdrawing the proposed rule to call for PMAs for these devices and is proposing reclassification to class II (special controls).

Elsewhere in this issue of the Federal Register , FDA is proposing to reclassify SWD for all other uses, currently a preamendments class III device, into class II (special controls), and to rename the device “nonthermal shortwave therapy.” FDA continues to review the merits of the submissions for requests for reclassification that meet the requirements under 21 CFR 860.123, submitted in response to the proposed rule.

The following reference has been placed on display in the Division of Dockets Management (see ADDRESSES ), and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday, and are available electronically at http://www.regulations.gov. (FDA has verified the Web site address, but we are not responsible for any subsequent changes to the Web sites after this document publishes in the Federal Register .)

I. Background—Regulatory Authorities

The Federal Food, Drug, and Cosmetic Act (FD&C Act), as amended by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L. 94-295), the Safe Medical Devices Act of 1990 (Pub. L. 101-629), the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105-115), the Medical Device User Fee and Modernization Act of 2002 (Pub. L. 107-250), the Medical Devices Technical Corrections Act of 2004 (Pub. L. 108-214), the Food and Drug Administration Amendments Act of 2007 (Pub. L. 110-85), and the Food and Drug Administration Safety and Innovation Act (FDASIA) (Pub. L. 112-144) established a comprehensive system for the regulation of medical devices intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c) established three categories (classes) of devices, reflecting the regulatory controls needed to provide reasonable assurance of their safety and effectiveness. The three categories of devices are class I (general controls), class II (special controls), and class III (premarket approval).

Section 513(a)(1) of the FD&C Act defines class II devices as those devices for which the general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness, but for which there is sufficient information to establish special controls to provide such assurance.

Under section 513 of the FD&C Act, devices that were in commercial distribution before the enactment of the 1976 amendments, May 28, 1976 (generally referred to as preamendments devices), are classified after FDA has: (1) Received a recommendation from a device classification panel (an FDA advisory committee); (2) published the panel's recommendation for comment, along with a proposed regulation classifying the device; and (3) published a final regulation classifying the device. FDA has classified most preamendments devices under these procedures.

Devices that were not in commercial distribution prior to May 28, 1976 (generally referred to as postamendments devices), are automatically classified by section 513(f) of the FD&C Act into class III without any FDA rulemaking process. Those devices remain in class III and require premarket approval unless, and until, the device is reclassified into class I or II or FDA issues an order finding the device to be substantially equivalent, in accordance with section 513(i) of the FD&C Act, to a predicate device that does not require premarket approval. The Agency determines whether new devices are substantially equivalent to predicate devices by means of premarket notification procedures in section 510(k) of the FD&C Act (21 U.S.C. 360(k)) and part 807 (21 CFR part 807).

On July 9, 2012, FDASIA was enacted. Section 608(a) of FDASIA amended section 513(e) of the FD&C Act, changing the process for reclassifying a device from rulemaking to an administrative order. Section 513(e) of the FD&C Act governs reclassification of classified preamendments devices. This section provides that FDA may, by administrative order, reclassify a device based upon “new information.” FDA can initiate a reclassification under section 513(e) of the FD&C Act or an interested person may petition FDA to reclassify a preamendments device. The term “new information,” as used in section 513(e) of the FD&C Act, includes information developed as a result of a reevaluation of the data before the Agency when the device was originally classified, as well as information not presented, not available, or not developed at that time. (See, e.g., Holland Rantos v. United States Department of Health, Education, and Welfare, 587 F.2d 1173, 1174 n.1 (D.C. Cir. 1978); Upjohn v. Finch, 422 F.2d 944 (6th Cir. 1970); Bell v. Goddard, 366 F.2d 177 (7th Cir. 1966).)

Reevaluation of the data previously before the Agency is an appropriate basis for subsequent regulatory action where the reevaluation is made in light of newly available regulatory authority (see Bell v. Goddard, supra, 366 F.2d at 181; Ethicon, Inc. v. FDA, 762 F.Supp. 382, 389-391 (D.D.C. 1991)) or in light of changes in “medical science” (see Upjohn v. Finch, supra, 422 F.2d at 951). Whether data before the Agency are past or new data, the “new information” to support reclassification under section 513(e) must be “valid scientific evidence,” as defined in 21 CFR 860.7(c)(2). (See, e.g., General Medical Co. v. FDA, 770 F.2d 214 (D.C. Cir. 1985); Contact Lens Mfrs. Assoc. v. FDA, 766 F.2d 592 (D.C. Cir.), cert. denied, 474 U.S. 1062 (1986)).

FDA relies upon “valid scientific evidence” in the classification process to determine the level of regulation for devices. To be considered in the reclassification process, the valid scientific evidence upon which the Agency relies must be publicly available. Publicly available information excludes trade secret and/or confidential commercial information, e.g., the contents of a pending PMA. (See section 520(c) of the FD&C Act (21 U.S.C. 360j(c)).) Section 513(e)(1) of the FD&C Act sets forth the process for issuing a final reclassification order. Specifically, prior to the issuance of a final order reclassifying a device, the following must occur: (1) Publication of a proposed reclassification order in the Federal Register ; (2) a meeting of a device classification panel described in section 513(b) of the FD&C Act; and (3) consideration of comments to a public docket.

In accordance with section 513(e)(1) of the FD&C Act, the Agency is proposing, based on new information that has come to the Agency's attention, to reclassify SWD for all other uses because general controls and special controls are sufficient to provide a reasonable assurance of safety and effectiveness. Therefore, this order proposes to reclassify SWD for all other uses into class II (special controls) and to rename the device nonthermal SWT; see Section III for more information on the name change. In addition, in this proposed order to reclassify the device to class II with special controls, FDA requires manufacturers of currently marketed SWD for all other uses to submit 510(k)s.

Section 510(m) of the FD&C Act provides that a class II device may be exempted from the premarket notification requirements under section 510(k) of the FD&C Act, if the Agency determines that premarket notification is not necessary to assure the safety and effectiveness of the device. FDA has determined that premarket notification is necessary to assure the safety and effectiveness of SWD for all other uses.

On November 23, 1983, in the Federal Register (48 FR 53047), FDA published a final rule for classification of SWD for all other uses as class III requiring premarket approval based on recommendations made by the Physical Medicine Device Classification Panel of 1979 (the 1979 Panel). The 1979 Panel made preliminary classification recommendations for physical medicine devices during a series of meetings: August 14 and 15, 1975, March 21 and 22, 1976, March 18, 1977, October 14, 1977, and March 17, 1978. Included in this group of devices were SWD devices. The 1979 Panel recommended splitting the classification for SWD devices: SWD devices that are capable of generating therapeutic heat in specific areas of the body were recommended to be class II. However, SWD devices for any use other than delivering therapeutic deep heat (also referred to as nonthermal SWD) were recommended to be class III.

In 1987, FDA published a clarification by inserting language in the codified language stating that no effective date had been established for the requirement for premarket approval for SWD devices for any use other than delivering therapeutic deep heat (52 FR 17732, May 11, 1987).

In 2009, FDA published an order in the Federal Register under section 515(i) of the FD&C Act (21 U.S.C. 360i) to call for information on the remaining class III 510(k) devices (74 FR 16214, April 9, 2009). In response to that order, FDA received submissions from five SWD device manufacturers suggesting that nonthermal SWD devices could be reclassified to class II. The manufacturers stated that safety and effectiveness of these devices may be assured by general and special controls. Prior to enactment of FDASIA, FDA published a proposed rule in the Federal Register (77 FR 39953, July 6, 2012) to require filing of PMAs for nonthermal SWD devices. FDA received over 240 comments to the docket in response to the 2012 proposed rule. Comments that expressed an opinion about the classification of nonthermal SWD devices were usually in favor of a class II designation. Some comments did not openly state an opinion, but included arguments against the proposed rule that could reasonably be interpreted as support for a class II designation. There were also comments that agreed with a class III designation. In addition to the comments, FDA received five separate submissions to request a change in the classification of nonthermal SWD from class III to class II.

Subsequent to the issuance of the proposed rule, FDASIA made amendments to section 513 of the FD&C Act that required FDA to hold a panel meeting on the classification of preamendment devices and publish an administrative order for reclassification of preamendment devices instead of rulemaking. On May 21, 2013, FDA held a meeting of the Orthopedic and Rehabilitation Devices Panel (the 2013 Panel), to discuss the classification of nonthermal SWD devices. There was panel consensus that although the effectiveness data were very limited, nonthermal SWD devices did not necessarily fit the regulatory definition of a class III device (life supporting, life sustaining, or of substantial importance to health). Coupled with the rationale that special controls could be established to reasonably demonstrate an assurance of safety and effectiveness, the 2013 Panel recommended the device be class II (special controls) for nonthermal SWD devices (Ref. 1). FDA is issuing this proposed order to comply with the procedural requirements created by FDASIA. As a result, elsewhere in this issue of the Federal Register , FDA is withdrawing the proposed rule issued on July 6, 2012, calling for PMAs and PDPs for this device pursuant to 515(b) of the FD&C Act. However, FDA continues to review the merits of the submissions for requests for reclassification that meet the requirements under 21 CFR 860.123, submitted in response to the proposed rule.

SWD devices intended for therapeutic use produce a radiofrequency (RF) signal that is generated by electronic circuitry at one of two frequencies designated by the U.S. Federal Communications Commission (FCC): 27.12 or 13.56 megahertz (MHz) to induce electrical currents and voltages in body tissues. The RF signal is delivered to an antenna or applicator that produces electromagnetic fields external to the applicator. Electric and magnetic fields are induced in body tissues by the applicator.

FDA has differentiated two types of SWD devices that have been cleared through the 510(k) process: thermal and nonthermal. Thermal SWD devices are designed to deliver therapeutic deep heat below the surface of the skin. Nonthermal SWD devices do not provide therapeutic deep heat and do not intend to demonstrate a sustained temperature increase within the tissue. Nonthermal SWD devices are intended to produce their effect in tissue only through means other than therapeutic deep heating.

Because the term diathermy refers to therapeutic elevation of temperature in the tissues, nonthermal diathermy is a misnomer. FDA is proposing in this order to modify the name of the identification from how it is presently written in § 890.5290(b) (21 CFR 890.5290(b)) for additional clarification. FDA is proposing to rename this class of devices from SWD for all other uses to SWT.

Equipment to deliver SWT can be designed to emit either a pulsatile (pulsed) or a continuous wave output and sometimes provides both types of output. Thermal SWD systems cleared by FDA provide continuous wave or pulsed output and achieve therapeutic deep heating of tissues as noted above. Nonthermal SWT devices cleared by FDA deliver RF energy only in a pulsatile fashion and do not provide therapeutic deep heat to the tissues.

FDA is proposing that SWD for all other uses be reclassified from class III to class II. FDA is also proposing to rename these devices from “shortwave diathermy for all other uses” to “nonthermal shortwave therapy.” In this proposed order, the Agency has identified special controls under section 513(a)(1)(B) of the FD&C Act that, if finalized, together with general controls (including prescription-use restrictions) applicable to the devices, would provide reasonable assurance of their safety and effectiveness. Absent the special controls identified in this proposed order, general controls applicable to the device are insufficient to provide reasonable assurance of the safety and effectiveness of the device.

Therefore, in accordance with sections 513(e) and 515(i) of the FD&C Act and § 860.130 (21 CFR 860.130), based on new information with respect to the devices and taking into account the public health benefit of the use of the device and the nature and known incidence of the risks of the device, FDA, on its own initiative, is proposing to reclassify this preamendments class III device into class II. FDA believes that this new information is sufficient to demonstrate that the proposed special controls can effectively mitigate the risks to health identified in Section V, and that these special controls, together with general controls, will provide a reasonable assurance of safety and effectiveness for nonthermal SWT devices.

Section 510(m) of the FD&C Act authorizes the Agency to exempt class II devices from premarket notification (510(k)) submission. FDA has considered nonthermal SWT devices in accordance with the reserved criteria set forth in section 513(a) of the FD&C Act and has determined that the device does require premarket notification (510(k)). Therefore, the Agency does not intend to exempt this proposed class II device from premarket notification (510(k)) submission as provided for under section 510(m) of the FD&C Act. As stated in Section I, FDA will also require manufacturers of currently marketed SWD for all other uses devices to submit 510(k)s.

FDA is also proposing a technical correction in the regulation for the carrier frequency for these devices from “13 MHz to 27.12 MHz” to “13.56 MHz or 27.12 MHz.” The FCC has allocated the shortwave frequencies of 13.56 MHz and 27.12 MHz for medical equipment (Ref. 2). This applies to both SWD devices for use in applying therapeutic deep heat for selected medical conditions (§ 890.5290(a)) and nonthermal SWT devices (§ 890.5290(b)).

After considering available information, including the recommendations of the panel meeting on nonthermal SWT devices held on May 21, 2013, FDA has reevaluated the risks to health associated with the use of nonthermal SWT and made revisions from those previously identified in a proposed rule issued in the Federal Register on July 6, 2012 (77 FR 39953). FDA has determined that the following risks to health are associated with the use of nonthermal SWT:

• Cellular or tissue injury: Nonthermal biological effects of nonionizing radiation may cause cellular or tissue injury.

• Electromagnetic interference: The electromagnetic fields generated by the device may interfere with the circuitry of other patient systems, causing adverse events in the patient, as well as adversely affecting the performance of the other patient systems, such as cardiac pacemaker and implantable defibrillator.

• Tissue necrosis (tissue death) and burns: Excessive energy deposition into the tissue may cause excessive heating that results in tissue damage.

• Electrical shock: Electrical shock hazards may pose a potential hazard to both operators and users. Excessive leakage current from the device could result in injury, or a malfunction of the device could result in electrical shock.

• Thermal injury from implanted leads and implanted systems with leads: Interaction of the RF energy with an implanted lead may cause excessive heating in the tissue surrounding the lead electrodes.

• Adverse tissue reaction: Device materials that are not biocompatible may either directly or through the release of their material constituents: (i) produce adverse local or systemic effects, (ii) be carcinogenic, or (iii) produce adverse reproductive and developmental effects. Although medical devices may have myriad biocompatibility issues, the biocompatibility concerns from nonthermal SWT devices are likely limited to skin reactions from contact with the materials from which the applicator is made.

• Adverse pregnancy outcome: Exposure to the device during pregnancy can lead to congenital anomalies.

• Risk to children: Exposure to the device can affect the growth plates in children if applied over the growth plates.

• Ineffective treatment: Ineffective treatments can result in increased morbidity, delayed discharge after ambulatory surgery, and hospital readmission.

The following additional risks to health were identified by the submitters and acknowledged by the 2013 Panel: Pain, bleeding, feeling chilly and cold in response to treatment, pins and needles sensation, gout attack in patients with pre-existing gout, mild numbness in the area of treatment, abdominal pain, chest wall sensation, malaise, and headache. Many of these are infrequent and related to pain (which is already present in this patient population), the underlying condition being treated, or to the surgical procedures that precede the use of the device. Therefore, FDA does not consider these additional risks to health as being associated with the use of nonthermal SWT. The 2013 Panel also acknowledged the risk of cancer progression and metastasis, although there was some disagreement among panel members on whether it should be included. This risk was primarily based on literature from in vitro test data, which associates device use with the upregulation of certain cytokines and proteases that play a role in metastasis. FDA is not aware of any animal data, clinical data, or adverse event reports that attribute cancer progression or metastasis to nonthermal SWT. Therefore, FDA does not consider this a risk as being associated with the use of nonthermal SWT.

Based on the comments from the 2013 Panel meeting, the comments received in response to FDA's prior proposed rule (77 FR 39953, July 6, 2012), and FDA's assessment of new, valid scientific data related to the health benefits and risks associated with nonthermal SWT, FDA is proposing that these devices should be reclassified from class III to class II because special controls, in addition to general controls, can be established to provide reasonable assurance of safety and effectiveness of the device, and because general controls themselves are insufficient to provide a reasonable assurance of its safety and effectiveness. In addition, there is now sufficient information to establish special controls to provide such assurance.

FDA has been reviewing these devices for many years, and their risks are well known. A review of the applicable clinical literature indicates that few relevant adverse events have been reported for these devices or related devices suggesting that the device has a long-term safety profile. If properly manufactured and used as intended, FDA believes that the special controls identified in this proposed order, if finalized, together with general controls (including prescription-use restrictions and 510(k) notification requirements), are adequate to provide a reasonable assurance of safety and effectiveness for this device.

FDA believes that the identified special controls, in addition to general controls, are sufficient to provide reasonable assurance of safety and effectiveness of these devices. Therefore, in accordance with sections 513(e) and 515(i) of the FD&C Act and § 860.130, based on new information with respect to the device and taking into account the public health benefit of the use of the device and the nature and known incidence of the risk of the device, FDA, on its own initiative, is proposing to reclassify this preamendments class III device into class II. The Agency has identified special controls that would provide reasonable assurance of their safety and effectiveness. FDA's review of the clinical literature has been previously summarized in the Executive Summary to the 2013 Panel meeting to discuss nonthermal SWT classification (Ref. 3).

In addition, the 2013 Panel reviewed and discussed recent information presented by FDA, manufacturers of SWT devices, and members of the public. This information included recent literature regarding the possible risks to health and a review of FDA's Manufacturer and User Facility Device Experience database.

The 2013 Panel agreed that nonthermal SWT devices are not “life-supporting or life-sustaining, or of substantial importance in preventing impairment of human health.” The 2013 Panel agreed on the potential risks to health identified by FDA and the additional risks to health identified in the comments received in response to the July 6, 2012, proposed rule (77 FR 39953). However, the 2013 Panel expressed uncertainty regarding “abnormal cell growth” as a risk to health, but suggested that cell membrane injury is also a potential risk to health. The 2013 Panel recommended that the following additional risks to health be included, as they were reported by those who submitted requests to change the classification: Adverse pregnancy outcome, cancer and tumor promotion, skin reactions, pain, bleeding, ineffective treatment, risk to children, feeling chilly and cold in response to treatment, sensation of localized warmth, pins and needles sensation, gout attack in patients with pre-existing gout, mild numbness in the area of treatment, abdominal pain, chest wall sensation, and headache. FDA acknowledges cellular or tissue injury, electromagnetic interference, tissue necrosis (tissue death) and burns, electrical shock, thermal injury from implanted leads and implanted systems with leads, adverse tissue reaction, adverse pregnancy outcome, risk to children, and ineffective treatment as risks to health for these devices. As explained in Section V, FDA does not believe valid scientific evidence supports the other additional risks identified by the 2013 Panel as being associated with the use of nonthermal SWT.

Regarding the benefits of nonthermal SWT devices, the 2013 Panel indicated that a certain subset of patients may benefit, but there were concerns about the veracity and the limitations of clinical trials reported in the literature. They further commented that there was limited clinical evidence presented to demonstrate effectiveness. The most compelling effectiveness evidence was presented for post-breast surgery. The 2013 Panel noted that the effect on edema was less convincing.

Regarding classification, there was general panel consensus that nonthermal SWT devices for adjunctive used in palliative treatment of postoperative pain and edema should be class II devices with special controls. There was also general consensus by the 2013 Panel that special controls that included labeling, biocompatibility testing, electrical safety testing, electromagnetic compatibility, nonclinical performance testing, and clinical performance data were appropriate. The 2013 Panel recommended that clinical data are necessary as a special control and also recommended studies should include the following basic study design elements:

• Randomization;

• Sham control group;

• Well-defined patient population, e.g. patients having a specific surgical procedure;

• Well-defined SWT treatment parameters and device settings;

• Clinically relevant validated measures of effectiveness;

• Adequate power and sample size;

• Appropriate predefined statistical methods;

• Predefined hypothesis and success criteria; and

• Systematic collection of adverse events.

No 2013 Panel member recommended leaving these devices in class III. Regarding the issue of general controls, the 2013 Panel agreed that general controls alone are not sufficient to provide reasonable assurance of the safety and effectiveness of nonthermal SWT devices.

FDA believes that the following special controls, in addition to general controls, are sufficient to mitigate the risks to health described in Section V:

1. Components of the device that come into human contact must be demonstrated to be biocompatible. These devices can contact users' skin directly; therefore, a demonstration of biocompatibility would mitigate the risks of skin reactions.

2. Appropriate analysis/testing must demonstrate that the device is electrically safe and electromagnetically compatible in its intended use environment. The requirement to demonstrate electromagnetic compatibility would, in concert with other special controls, help ensure the mitigation of discomfort, pain, and tenderness resulting from burns to the skin due to excessive energy deposition by preventing electromagnetic interference with device hardware and software. In addition, this requirement would ensure the device does not interfere with other electrical equipment and would also ensure that both operators and users are properly protected from electrical hazards such as electrical shock.

3. Non-clinical testing must demonstrate that the device performs as intended under anticipated conditions of use. Non-clinical performance testing must characterize the output waveform of the device and demonstrate that the device meets appropriate output performance specifications. This requirement would mitigate the risks of cellular or tissue injury, electromagnetic interference, tissue necrosis and burn, and thermal injury from implanted leads and implanted systems. The output characteristics and the methods used to determine these characteristics, including the following, must be determined:

• Peak output power;

• Pulse width;

• Pulse frequency;

• Duty cycle;

• Characteristics of other types of modulation that may be used;

• Average measured output powered into the RF antenna/applicator;

• Specific absorption rates in saline gel test load;

• Characterization of the electrical and magnetic fields in saline gel test load for each RF antenna and prescribed RF antenna orientation/position; and

• Characterization of the deposited energy density in saline gel test load.

4. Documented clinical performance testing must demonstrate safe and effective use of the device. This requirement would mitigate ineffective treatment.

5. The labeling must include a detailed summary of the clinical testing pertinent to the use of the device and a summary of the adverse events and complications. This requirement would help mitigate the risk of adverse pregnancy outcome, risk to children, thermal injury from implanted leads and implanted systems with leads, electromagnetic interference, electric shock, tissue necrosis and burn, adverse tissue reaction, and ineffective treatment.

Table 1 shows how FDA believes that the risks to health identified in Section V can be mitigated by the proposed special controls.

In addition, under 21 CFR 801.109, the sale, distribution, and use of these devices are restricted to prescription use. Prescription use restrictions are a type of general controls in section 513(a)(1)(A)(i) of the FD&C Act. Also, under 21 CFR 807.81, the device would continue to be subject to 510(k) notification requirements.

The Agency has determined under 21 CFR 25.34(b)) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This proposed order refers to currently approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The collections of information in part 807, subpart E, have been approved under OMB control number 0910-0120; the collections of information in 21 CFR part 814, subpart B, have been approved under OMB control number 0910-0231; and the collections of information under 21 CFR part 801 have been approved under OMB control number 0910-0485.

No burden shift is associated with the reclassification of the device. This is currently a class III device for which manufacturers must submit a premarket notification (510(k)). This order proposes to reclassify the device into class II, therefore, respondents would continue to submit a premarket notification.

Prior to the amendments by FDASIA, section 513(e) of the FD&C Act provided for FDA to issue regulations to reclassify devices. Although section 513(e) of the FD&C Act as amended requires FDA to issue final orders rather than regulations, FDASIA also provides for FDA to revoke previously issued regulations by order. FDA will continue to codify classifications and reclassifications in the Code of Federal Regulations (CFR). Changes resulting from final orders will appear in the CFR as changes to codified classification determinations or as newly codified orders. Therefore, under section 513(e)(1)(A)(i), as amended by FDASIA, in this proposed order we are proposing to revoke the requirements in § 890.5290(b)(1) related to the classification of shortwave diathermy devices for all other uses as class III devices and to codify the reclassification of nonthermal SWT devices into class II (special controls).

FDA is proposing that any final order based on this proposed order become effective on the date of its publication in the Federal Register or at a later date if stated in the final order. FDA proposes that nonthermal SWT devices must comply with the special controls and must submit a 510(k) within 60 days after the effective date of the final order. FDA requests comment on whether 60 days is an appropriate time to allow manufacturers to prepare and submit 510(k)'s for these devices.

Comments submitted to the previous docket (Docket No. FDA-2012-N-0378) have been officially noted and do not need to be resubmitted. FDA has considered previous docket comments before issuing this proposed order. Interested persons may submit either written comments regarding this document to the Division of Dockets Management (see ADDRESSES ) or electronic comments to http://www.regulations.gov . It is only necessary to send one set of comments. Identify comments with the docket number found in brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday, and will be posted to the docket at http://www.regulations.gov .

The following references have been placed on display in the Division of Dockets Management (see ADDRESSES ), and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday, and are available electronically at http://www.regulations.gov . (FDA has verified the Web site addresses, but we are not responsible for any subsequent changes to the Web sites after this document publishes in the Federal Register .)

Therefore, under the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321 et seq., as amended) and under authority delegated to the Commissioner of Food and Drugs, it is proposed that 21 CFR part 890 be amended as follows:

The Office recently published a notice of proposed rulemaking proposing to require the disclosure of ownership information about patents and applications and requesting comments about the voluntary reporting of licensing offers and commitments and making them available online. See Changes to Require Identification of Attributable Owner, 79 FR 4105 (Jan. 24, 2014). The Office is conducting two public hearings to discuss these proposed changes and receive feedback from the public. The Office also is extending the period for public comment on the proposed changes until April 24, 2014, to provide interested members of the public with additional time to submit written comments.

Members of the public who wish to provide oral testimony at either public hearing must submit a timely request ( i.e., must submit a request to provide oral testimony no later than February 28, 2014). Requests to provide oral testimony at either public hearing must indicate the following information: (1) The name of the person desiring to speak; (2) the person's contact information (telephone number and electronic mail address); (3) the organization(s) the person represents, if any; and (4) the hearing location where the person prefers to speak. A person must be physically present at the hearing location to provide oral testimony; virtual testimony via telephone or webcast is not available. Based on the requests received, an agenda of scheduled speakers will be sent to those speaking and posted on the Office's Internet Web site at http://www.uspto.gov. The number of speakers and time allotted to each speaker may be limited to ensure that all persons speaking will have a meaningful chance to do so.

Members of the public who wish to attend solely to observe need not submit a request to attend. The Office also plans to make the public hearings available via Web cast. Web cast information will be available on the Office's Internet Web site closer to the public hearing dates. A transcript of the public hearings will be available for viewing via the Office's Internet Web site at http://www.uspto.gov, and will be available for public inspection at the Office of the Commissioner for Patents, currently located in Madison East, Tenth Floor, 600 Dulany Street, Alexandria, Virginia 22314, upon request.

The public is welcome to submit written comments in response to the proposed changes in addition to, or lieu of, presenting oral testimony at these public hearings. The Office is extending the period for public comment on the proposed changes to provide interested members of the public with additional time to submit written comments. Written comments in response to the proposed changes must be received on or before April 24, 2014.

Under the proposed rulemaking, the Office plans to collect information on the “attributable owner” of a patent or application, which includes the titleholders, entities with rights to enforce the patent, and entities with effective control over anyone reported in the first two categories, called the “ultimate parent entities.” This information would be made available to the public under the proposed rulemaking at the same time a patent application is published or when a patent issues. The Office also seeks public comment on whether to permit patent applicants and owners to voluntarily report licensing offers and related information that the Office will make available to the public. The Office currently permits patent owners to request that their patents be listed in the Official Gazette as available for license or sale, and the Office would like public input on whether the Office should expand on this program to allow for the submission of more licensing information and make this information available in an accessible online format.

The Office welcomes comments on all aspects of the proposed rulemaking, but highlights the following areas (which are also highlighted in the notice of proposed rulemaking) for receipt of public input:

(1) The proposal sets forth a definition for attributable owner. The Office invites public comment on whether changes could be made to the scope of the information proposed to be collected while still achieving the objectives of the Office as set forth in the proposal.

(2) Part of the current proposed definition of attributable owner incorporates by reference the definition of ultimate parent entity set forth in 16 CFR 801.1(a)(3). The Office welcomes comments on how this definition might be modified for use at the Office. The Office recognizes that corporations sometimes transfer patents and patent applications within the corporation for legitimate reasons, such as tax savings purposes, and also welcomes comments on the impact of the proposed changes on this practice.

(3) The proposal sets forth when attributable owner information must be supplied to the Office. The Office invites public comments as to whether and when attributable owner information should be collected. For example, are there additional times during prosecution ( e.g., with each reply to an Office action) when the applicant should be required to update or verify attributable owner information? Is requiring updates on changes during prosecution within three months of any change in attributable owner the appropriate time frame ( i.e., should the time frame be more or less than three months?).

(4) The Office plans to work with its user community to implement the attributable owner information reporting system in a user-friendly manner and welcomes input on how this can best be accomplished. Subject to financial and resource constraints, for example, the Office would like to explore means to allow for the bulk processing of changes to attributable owner for portfolios of applications and patents. The Office also welcomes input on how the updating or verifying by the applicant or owner should be structured in conjunction with the payment of maintenance fees, particularly in light of the practice of outsourcing payment of maintenance fees to third parties.

(5) The Office further seeks comments on whether the Office should expand the current Official Gazette practice of allowing patent owners to list patents as available for license or sale to permit all patent applicants and owners to voluntarily report additional licensing information for the Office to make available to the public in an accessible online format. The Office welcomes input on what such licensing information should include ( i.e., willingness to license, as well as licensing contacts, license offer terms, commitments to license the patent, e.g., on royalty-free or reasonable and non-discriminatory terms) and the interface of the online system.

Executive Summary: Purpose: The proposed rules will benefit the public by providing more comprehensive and specific guidance regarding registering collective marks and certification marks. The current rules incorporate by reference the trademark and service mark application rules; however, wording in the trademark and service mark application rules sometimes may not be specifically suited to collective and certification mark applications. Therefore, the USPTO proposes to revise the rules in parts 2 and 7 of title 37 of the Code of Federal Regulations to codify current USPTO practice in TMEP sections 1302, 1303 et seq., 1304, and 1306, and to state clearly and provide sufficient detail regarding the requirements for collective and certification mark applications. The USPTO also seeks to harmonize registration maintenance requirements with application requirements where appropriate.

Further, proposed rule changes beyond those related to collective marks and certification marks will provide consistency with changes made regarding those marks and streamline the rules, by consolidating text and incorporating headings, for easier use.

To provide additional context for the ensuing discussion of the amended and revised rules regarding collective marks and certification marks, the following is a brief description of those types of marks.

There are two types of collective marks as defined by section 45 of the Trademark Act of 1946, as amended (“the Act”): (1) collective trademarks or collective service marks; and (2) collective membership marks. 15 U.S.C. 1127. A collective trademark or collective service mark is used by members of a collective organization to identify and distinguish their goods or services from those of nonmembers. TMEP section 1303. By contrast, collective membership marks are used by members of a collective organization to indicate membership in the collective membership organization. TMEP section 1304.02.

Certification marks are used by authorized users to indicate the following: (1) Goods or services have been certified as to quality, materials, or mode of manufacture; (2) goods or services have been certified to originate in a specific geographic region; and/or (3) the work or labor on goods or for services was certified to have been performed by a member of a union or other organization, or to certify that the performer meets certain standards. TMEP section 1306.01. A certification mark is similar to a collective trademark or collective service mark except that the users are not members of a collective organization. See TMEP section 1306.09(a). That is, a collective trademark or collective service mark is used by members of an organization who meet the collective organization's standards of admission, while a certification mark is used by parties whose products or services meet the certifying organization's established standards.

Summary of Major Provisions: As stated above, the USPTO proposes to revise the rules in parts 2 and 7 of title 37 of the Code of Federal Regulations to codify current USPTO practice in TMEP sections 1302, 1303 et seq., 1304, and 1306, and to state clearly, and provide sufficient detail regarding, the requirements for collective and certification mark applications, as well as to harmonize registration maintenance requirements with application requirements where appropriate. Further, the USPTO proposes to revise additional rules within these parts for consistency and clarity.

Costs and Benefits: This rulemaking is not economically significant under Executive Order 12866 (Sept. 30, 1993).

The USPTO proposes to amend the following rules: §§ 2.2, 2.20, 2.32-.34, 2.41-2.42, 2.44-2.45, 2.56, 2.59, 2.71, 2.74, 2.76, 2.86, 2.88-2.89, 2.146, 2.161, 2.167, 2.173, 2.175, 2.183, 2.193, 7.1, and 7.37.

The USPTO proposes to amend and add terms to § 2.2, regarding definitions, to delete repetitious wording elsewhere in the rules wherever possible. Specifically, the USPTO proposes to amend § 2.2(h) to clarify that the definition of “international application” is limited to an application for international registration seeking an extension of protection to the United States or a subsequent designation of an international registration to the United States. The USPTO also proposes to add § 2.2(i) through (n) to set forth the following new definitions: subsequent designation; holder; use in commerce; bona fide intention to use the mark in commerce ; bona fide intention, and is entitled, to exercise legitimate control over the use of the mark in commerce ; and verified statement, verify, verified, or verification.

The USPTO proposes to amend § 2.20, regarding declarations in lieu of oaths, to delete from the introductory text the term “verification,” to correspond with the definition of that term in § 2.2(n), and to add the term “declaration.”

The USPTO proposes to amend the rule title of § 2.32 to “Requirements for a complete trademark or service mark application.” In addition, the USPTO proposes to add § 2.32(f) to cross-reference § 2.44 for the requirements for collective mark applications, and to add § 2.32(g) to cross-reference § 2.45 for the requirements for certification mark applications.

The USPTO proposes to amend § 2.33, regarding verified statements for trademarks or service marks, to ensure the language corresponds with other proposed rules, including the proposed new definitions in § 2.2. Also, the USPTO proposes to add § 2.33(f) to set forth the type of verified statement required for concurrent use applications under § 2.42. Additionally, the USPTO proposes to amend the title of § 2.33 to “Verified statement for a trademark or service mark.”

The USPTO proposes to amend § 2.34, regarding filing bases for trademark or service mark applications, to ensure the language corresponds with other proposed rules, including the proposed new definitions in § 2.2, to delete the definition of “commerce” provided in § 2.34(c) as redundant of section 45 of the Act, and to correct a typographical error. The USPTO further proposes to amend the title to “Bases for filing a trademark or service mark application.” Additionally, the USPTO proposes to amend § 2.34(a)(1)(iv) to delete “actually” as a redundant term for consistency with proposed amendments to § 2.56(b)(2) and (c) regarding specimens, § 2.76(b)(2) regarding amendments to allege use, § 2.88(b)(2) regarding statements of use, and § 2.161(g)(1) regarding affidavits or declarations of use in commerce or excusable nonuse under section 8 of the Act. Lastly, the USPTO proposes to revise current § 2.34(b)(1)-(3) by condensing the text in § 2.34(b), and add the title “More than one basis.”

The USPTO proposes to revise § 2.41, regarding proof of distinctiveness under section 2(f) of the Act, to specify the type of proof required to establish such a claim for trademarks, service marks, collective marks, and certification marks, and to make other changes consistent with current USPTO practice. Specifically, the USPTO proposes to revise § 2.41 as follows: in § 2.41(a), add the title “For a trademark or service mark” and set forth in § 2.41(a)(1)-(3) the current text in existing § 2.41; in § 2.41(b), add the title “For a collective trademark or collective service mark” and set forth in § 2.41(b)(1)-(3) the requirements for collective trademarks or collective service marks. The USPTO also proposes to add the following to § 2.41: in § 2.41(c), set forth the requirements for collective membership marks; and in § 2.41(d), set forth the requirements for certification marks. Further, the USPTO proposes additional revisions to correspond with the proposed new definitions in § 2.2 and include subsections with subheadings that set forth the three types of proof that can be submitted to establish distinctiveness under 15 U.S.C. 1052(f). In addition, proposed § 2.41(a)(1), (c)(1), and (d)(1) add the term “active” to clarify and codify current USPTO practice, see TMEP section 1212.04(d), that evidence of distinctiveness must be based on ownership of an active prior registration on the Principal Register or under the Trademark Act of 1905. Further, proposed § 2.41(a)(1) and (d)(1) clarify that such registration must be for goods or services sufficiently similar to those in the application, and proposed § 2.41(c)(1) adds that the nature of the collective membership organization must be sufficiently similar to the prior registration, and such requirement in proposed § 2.41(a)(1), (d)(1), and (c)(1) codifies precedential case law and current USPTO practice, see In re Dial-A-Mattress Operating Corp ., 240 F.3d 1341, 1347, 57 USPQ2d 1807, 1812 (Fed. Cir. 2001), In re Rogers, 53 USPQ2d 1741, 1744 (TTAB 1999), TMEP sections 1212.04(c), 1212.09(a). Lastly, proposed § 2.41(e) excludes from § 2.41(d) geographic matter in certification marks that indicate regional origin, because 15 U.S.C. 1052(e)(2) explicitly excepts such terms in certification marks including indications of regional origin. See TMEP section 1306.02.

The USPTO proposes to revise § 2.42, regarding concurrent use requirements, to incorporate requirements for collective marks and certification marks, as well as to make other changes consistent with current USPTO practice. Specifically, the USPTO proposes to revise § 2.42 as follows: add § 2.42(a), to require an application for registration as a lawful concurrent user to assert use in commerce in accordance with current USPTO practice, see TMEP section 1207.04(b), and the USPTO's “Trademark Trial and Appeal Board Manual of Procedure” section 1101.01, to require an application for concurrent use be for a mark seeking registration on the Principal Register under the Act, in accordance with current § 2.99(g), and to include all relevant application requirements, including § 2.44 for collective marks or § 2.45 for certification marks, if applicable. In addition, the USPTO proposes to add § 2.42(b) to enumerate the additional requirements for concurrent use applications set forth in the existing second sentence of current § 2.42 and to modify such text to incorporate the requirements for collective marks and certification marks. Further, the USPTO proposes to add § 2.42(c) to cross-reference current § 2.73, pertaining to amending an application to recite concurrent use, and to add § 2.42(d) to cross-reference current § 2.99, pertaining to concurrent use proceedings at the Trademark Trial and Appeal Board.

The USPTO proposes to revise § 2.44, regarding collective marks, to include all requirements for a collective mark application in one rule. Specifically, the USPTO proposes to revise § 2.44 as follows: in § 2.44(a), enumerate the application requirements for a collective mark, incorporating the relevant application requirements from current § 2.32, regarding the requirements for a complete trademark or service mark application, current § 2.44, and current USPTO practice, see TMEP sections 1303.02 et seq. for collective trademarks and collective service marks, and TMEP section 1304.08(c)-(f) for collective membership marks; and in § 2.44(b), specify the requirements for a verified statement that was not filed within a reasonable time after signing or was omitted from the application to correspond with proposed § 2.33(c) and § 2.34(a)(1)(i), (a)(2), (a)(3)(i), and (a)(4)(ii). The USPTO also proposes to add the following to § 2.44: in proposed § 2.44(c), specify the requirements for claiming more than one filing basis in the application to correspond with proposed § 2.34(b); in proposed § 2.44(d), specify the requirements for the verification in a concurrent use application to correspond with proposed § 2.33(f); and in proposed § 2.44(e), cross-reference the multiple-class application requirements rule in proposed § 2.86 for consistency with proposed § 2.32(e). Further, the USPTO proposes additional revisions to correspond with the proposed new definitions in § 2.2. Also, the USPTO proposes to amend the title to “Requirements for a complete collective mark application” for consistency with the title in proposed § 2.32 regarding trademark and service mark application requirements.

The USPTO proposes to revise § 2.45, regarding certification marks, to include all requirements for a certification mark application in one rule, and to be consistent with the formatting of proposed § 2.44 for collective mark application requirements. Specifically, the USPTO proposes to revise § 2.45 as follows: in § 2.45(a), enumerate the application requirements for a certification mark, incorporating the relevant application requirements from current § 2.32, regarding the requirements for a complete trademark or service mark application, current § 2.45, and current USPTO practice, see TMEP sections 1306.06 et seq.; and in § 2.45(b), specify the requirements for a verified statement that was not filed within a reasonable time after signing or was omitted from the application to correspond with proposed § 2.33(c) and § 2.34(a)(1)(i), (a)(2), (a)(3)(i), and (a)(4)(ii) and proposed § 2.44(b). The USPTO also proposes to add the following to § 2.45: in proposed § 2.45(c), specify the requirements for claiming more than one filing basis in the application to correspond with proposed § 2.34(b) and proposed § 2.44(c); in proposed § 2.45(d), specify the requirements for the verification in a concurrent use application to correspond with proposed § 2.33(f) and proposed § 2.44(d); in proposed § 2.45(e), cross-reference the multiple-class application requirements rule in proposed § 2.86 for consistency with proposed § 2.32(e) and proposed § 2.44(e); and in proposed § 2.45(f), prohibit a single application from including both a certification mark and another type of mark, because the USPTO's databases preclude capturing different legal requirements for multiple types of marks in a single application, and also prohibit the registration of the same mark for the same goods and/or services as both a certification mark and another type of mark, in accordance with sections 4 and 14(5)(B) of the Act and current USPTO practice, see TMEP section 1306.05(a). Further, the USPTO proposes additional revisions to correspond with the proposed new definitions in § 2.2. Also, the USPTO proposes to amend the rule title to “Requirements for a complete certification mark application; restriction on certification mark application” for consistency with the title of proposed § 2.32 regarding trademark and service mark application requirements and proposed § 2.44 regarding collective mark application requirements.

The USPTO proposes to amend § 2.56(b)(2) and (c), regarding specimens, to delete the term “actually” as a redundant term and for consistency with similar proposed amendments to § 2.34(a)(1)(iv), § 2.76(b)(2), § 2.88(b)(2), and § 2.161(g). Additionally, the USPTO proposes to amend § 2.56(b)(5) to delete “to certify” and replace it with “to reflect certification of.” Lastly, the USPTO proposes to amend § 2.56(d)(3), to delete “audio or video cassette tape recording, CD-ROM” and replace it with “compact disc, digital video disc,” in accordance with current practice, see TMEP section 904.03(d), (f).

The USPTO proposes to amend § 2.59, regarding substitute specimens, to change existing text to “verified statement” to correspond with § 2.2(n). Additionally, the USPTO proposes to amend § 2.59(a) to reference substitute specimens for a collective membership mark.

The USPTO proposes to amend § 2.71(a), regarding amendments to the identification of goods and/or services, to reference amending the description of the nature of a collective membership mark. In addition, the USPTO proposes to amend § 2.71(b)-(d) to change existing text to correspond with § 2.2(n). Further, the USPTO proposes to add § 2.71(e) to set forth that an amendment that would materially alter a certification statement pursuant to proposed § 2.45(a)(4)(i)(A) and (a)(4)(ii)(A), is not permitted, which is consistent with proposed § 2.173(f) regarding such amendments after registration.

The USPTO proposes to amend § 2.74(b), regarding the form and signature of an amendment, to change existing text to “verification” to correspond with § 2.2(n).

The USPTO proposes to amend § 2.76, regarding amendments to allege use, to include the relevant requirements for collective marks and certification marks, and to be consistent with proposed § 2.88 for statements of use. Specifically, the USPTO proposes to amend § 2.76 as follows: in § 2.76(a), add the title “When to file an amendment to allege use;” in § 2.76(a)(1) and (a)(2), include the text from existing § 2.76(a) and (c), except delete the language regarding the USPTO returning an untimely filed amendment to allege use because under current practice the USPTO will not return or review such amendment; in § 2.76(b), add the title “A complete amendment to allege use” and include in § 2.76(b)(1)-(5) the text from existing § 2.76(b) and (c) and the requirements for collective marks and certification marks, in § 2.76(b)(6), require the title “Amendment to Allege Use” on the first page of the document for those documents not filed using the Trademark Electronic Application System (TEAS); in § 2.76(c), add the title “Minimum filing requirements for a timely filed amendment to allege use” and include the text from existing § 2.76(e) and change existing text to “verified statement” to correspond with § 2.2(n); in § 2.76(d), add the title “Deficiency notification” and include the text from existing § 2.76(g); in § 2.76(e), add the title “Notification of refusals and requirements” and include the text from existing § 2.76(f), except the last two sentences regarding the USPTO providing notification of acceptance of an amendment to allege use because current practice is that a notice of approval for publication provides such notice; in § 2.76(f), add the title “Withdrawal” and include the text from existing § 2.76(h); in § 2.76(g), add the title “Verification not filed within reasonable time,” and include the text from existing § 2.76(i) and change existing text to “verified statement” to correspond with § 2.2(n); in § 2.76(h), add the title “An amendment to allege use is not a response but may include amendments” and include the text from the last sentence of existing § 2.76(f) and clarify that an amendment to allege use may include amendments in accordance with § 2.59 and § 2.71 through § 2.75; in § 2.76(i), specify the requirements for the verification in a concurrent use application under § 2.42; and in § 2.76(j), add the title “Multiple-class application.”

The USPTO proposes to amend § 2.86, regarding multiple-class application requirements, to include the requirements for collective marks and certification marks, and to make other changes consistent with current USPTO practice. Specifically, the USPTO proposes to amend § 2.86 as follows: in § 2.86(a), set forth the requirements for a single trademark, service mark, and/or collective mark application for multiple classes, clarifying that such an application must satisfy either the trademark or service mark application requirements in § 2.32 or the collective mark application requirements in § 2.44, in addition to providing the applicable goods, services, or nature of the collective membership organization in each appropriate international or U.S. class, and providing a fee, dates of use, and a specimen for each class based on use in commerce or a bona fide intent statement for each class based on section 1(b), 44, or 66(a) of the Act; in § 2.86(b), set forth the requirements for a single certification mark application for goods and services, clarifying that such multiple class application must satisfy the certification mark application requirements in § 2.45, in addition to identifying the applicable goods and services in each appropriate U.S. class for applications filed under section 1 or 44 or in the international classes assigned by the World Intellectual Property Organization's International Bureau for applications filed under section 66(a) of the Act, and providing a fee, dates of use, and a specimen for each class based on use in commerce or a bona fide intent statement for each class based on section 1(b), 44, or 66(a) of the Act; and in § 2.86(c), amend to include the text in the last sentence of existing § 2.86(a)(3) regarding an applicant not claiming both section 1(a) and 1(b) of the Act for identical goods or services in a single application. The USPTO also proposes to add the following to § 2.86: in proposed § 2.86(d), restrict a single application from including goods or services in U.S. Classes A and/or B and either goods or services in any international class or with a collective membership organization in U.S. Class 200, for consistency with proposed § 2.45(f); in proposed § 2.86(e), add the text from existing § 2.86(b) regarding multiple-class requirements for amendments to allege use and statements of use; and in § 2.86(f), add the text in existing § 2.86(c) regarding issuing a single registration certificate for multiple-class applications. Additionally, the USPTO proposes to amend the rule title to “Multiple-class applications.”

The USPTO proposes to amend § 2.88, regarding statements of use, to include the relevant requirements for collective marks and certification marks, and to be consistent with proposed § 2.76 for amendments to allege use. Specifically, the USPTO proposes to amend § 2.88 as follows: in § 2.88(a), add the title “When to file a statement of use;” in § 2.88(a)(1) and (a)(2), include the text from existing § 2.88(a), except delete the language regarding the USPTO returning a premature statement of use filed prior to issuance of a notice of allowance because under current practice the USPTO will not return or review such amendment, and include the text from existing § 2.88(c), except for the last sentence; in § 2.88(b), add the title “A complete statement of use,” include in § 2.88 (b)(1)-(3) the text from existing § 2.88(b), in § 2.88(b)(1)(iii) additionally include the last sentence from existing § 2.88(c), in § 2.88(b)(1)(iv) additionally include the text from existing § 2.88(i)(1)-(2), in § 2.88 (b)(6) require the title “Statement of Use” on the first page of the document for those documents not filed using the TEAS, and in § 2.88(b) incorporate the requirements for collective marks and certification marks and change existing text to “verified statement” to correspond with § 2.2(n); in § 2.88(c), add the title “Minimum filing requirements for a timely filed statement of use,” include the text in existing § 2.88(e), and in § 2.88(c), change existing text to “verified statement” to correspond with § 2.2(n); in § 2.88(d), add the title “Deficiency notification” and include the text from existing § 2.88(g), except for the last sentence; in § 2.88(e), add the title “Notification of refusals and requirements” and include the text from existing § 2.88(f), except delete the language regarding the USPTO providing notification of acceptance of a statement of use because the registration certificate provides such notice; in § 2.88(f), add the title “Statement of use may not be withdrawn” and include the text in the last sentence of existing § 2.88(g); in § 2.88(g), add the title “Verification not filed within reasonable time,” include the text from existing § 2.88(k), and change existing text to “verified statement” to correspond with § 2.2(n); in § 2.88(h), add the title “Amending the application,” include the text from the second to last sentence of existing § 2.88(f), and specify that statements of use may include amendments in accordance with § 2.51, § 2.59, and § 2.71 through § 2.75, as the TEAS on-line statement of use form will now accept such amendments within the same form; in § 2.88(i), add the requirements for the verification in a concurrent use application under § 2.42; in § 2.88(j), add the title “Multiple-class application” and include the text from existing § 2.88(l); and in § 2.88(k), add the title “Abandonment” and include the text from existing § 2.88(h). Additionally, the USPTO proposes to amend the rule title to “Statement of use after notice of allowance.”

The USPTO proposes to amend § 2.89, regarding submitting a request for an extension of time to file a statement of use (“extension request”), to include the relevant requirements for collective marks and certification marks as well as to make other changes consistent with current USPTO practice. The USPTO proposes to amend § 2.89 as follows: in § 2.89(a), add the title “First extension request after issuance of notice of allowance;” in § 2.89(a)(3), change existing text to “verified statement” to correspond with § 2.2(n), and incorporate the requirements for collective marks and certification marks; in § 2.89(b), add the title “Subsequent extension requests” and a cross-reference in proposed § 2.89(b)(2) to proposed § 2.89(a)(2), as the fee requirements are the same for first and subsequent extension requests; in § 2.89(c), add the title “Four subsequent extension requests permitted;” in § 2.89(d), add the title “Good cause,” enumerate in proposed § 2.89(d)(1)-(3) the requirements for showing good cause for all marks, including collective marks and certification marks, and include the text from existing § 2.89(d) in (d)(1); in § 2.89(e), add the title “Extension request filed in conjunction with or after a statement of use” and amend the current text for clarity; in § 2.89(f), add the title “Goods or services” and incorporate the requirements for collective marks and certification marks; in § 2.89(g), add the title “Notice of grant or denial;” and in § 2.89(h), add the title “Verification not filed within reasonable time,” incorporate the requirements for collective marks and certification marks, and change existing text to “verified statement” to correspond with § 2.2(n).

The USPTO proposes to amend § 2.146(c), regarding petitions to the Director, to change existing text to “verified statements” to correspond with § 2.2(n). Additionally, the USPTO proposes to amend § 2.146(d) to specify that a petition regarding a cancelled or expired registration must be submitted to the Office within two months of the date when Office records are updated to show the registration as cancelled or expired, to ensure that all interested parties will be able to accurately determine the deadline for filing a petition under these circumstances.

The USPTO proposes to amend § 2.161, regarding affidavits or declarations of use in commerce or excusable nonuse under section 8 of the Act, to include the relevant requirements for collective marks and certification marks, to change existing text to correspond with § 2.2, and to make other changes consistent with current USPTO practice. The USPTO proposes to amend § 2.161(g) to cross-reference current § 2.56 regarding specimens and remove § 2.161(g)(1)-(3), as similar language appears in current § 2.56. The USPTO proposes to add § 2.161(i) and (j), as follows, to include requirements for collective marks and certification marks to harmonize the USPTO's post registration practice with current examination practice, and to be consistent with proposed § 7.37(i)-(j), regarding affidavits or declarations of use in commerce or excusable nonuse under section 71 of the Act: in § 2.161(i), add the title “Additional requirements for a collective mark” and the additional requirements for such marks, see TMEP sections 1303.01, 1303.02(c)(i), 1304.08(f)(i)-(ii); in § 2.161(j), add the title “Additional requirements for a certification mark” and the additional requirements for such marks, see TMEP section 1306.06(f)(i)-(iii), (f)(v). The USPTO also proposes to add § 2.161(k) to cross-reference to § 7.37 regarding the requirements for a complete affidavit or declaration of use in commerce or excusable nonuse for a registration with an underlying application based on section 66(a). The sunset provision in current § 2.161(h)(3), in which § 2.161(h)(2) will no longer be applied after June 21, 2014, to affidavits or declarations filed under section 8 of the Act, is not altered by this rulemaking.

The USPTO proposes to amend § 2.167, regarding an affidavit or declaration of incontestability under section 15 of the Act, to include the relevant requirements for collective marks and certification marks, to change existing text to “verified” to correspond with § 2.2(n), and to make other changes consistent with current USPTO practice. Specifically, the USPTO proposes to amend § 2.167(f) to delete the last sentence of the existing rule because, under current USPTO practice, notification acknowledging receipt of the affidavit or declaration only issues if the requirements of § 2.167(a) through (g) have been satisfied, consistent with proposed § 2.167(i). See TMEP section 1605. The USPTO also proposes to add § 2.167(h), (i), (j), and (k), as follows, to clarify current USPTO practice: in § 2.167(h), clarify that notification will be provided to an owner that an affidavit or declaration cannot be acknowledged if the affidavit or declaration fails to satisfy any requirements in paragraphs § 2.167(a) through (g), that the affidavit or declaration will be abandoned if a response is not received in the time specified in the notification; in § 2.167(i), clarify that a notice of acknowledgement will only issue if an affidavit or declaration satisfies § 2.167(a) through (g); in § 2.167(j), clarify that an affidavit or declaration may be abandoned by petitioning the Director under § 2.146 either before or after a notice of acknowledgement issues; and in § 2.167(k), clarify that a new affidavit or declaration with a new fee may be filed if an affidavit or declaration is abandoned. See TMEP section 1605.

The USPTO proposes to amend § 2.173, regarding an amendment to a registration, to include the relevant requirements for collective marks and certification marks, to change existing text to correspond with § 2.2, and to make other changes consistent with current USPTO practice. The USPTO proposes to make the following amendments to § 2.173: in § 2.173(b)(2), cross-reference § 2.193(e)(6), regarding trademark signature requirements, and delete the language in this subsection that is similar to wording in current § 2.193(e)(6); in § 2.173(d), clarify that an amendment that would materially alter the mark will not be permitted in accordance with section 7(e) of the Act; in § 2.173(e), amend the title to “Amendment of identification of goods, services, or collective membership organization,” and in the text of (e), add a reference to a description of the nature of the collective membership organization; and in § 2.173(f), amend the title to “Amendment of certification statement for certification marks” and set forth the prohibition regarding amending a certification statement, as specified in proposed § 2.45(a)(4)(i)(A) and (a)(4)(ii)(A), in accordance with section 7(e) of the Act and for consistency with proposed § 2.71(e). The USPTO proposes to redesignate current § 2.173(f) as § 2.173(g), and redesignate current § 2.173(g) as § 2.173(h). The USPTO also proposes to add § 2.173(i) with the heading “No amendment to add or delete a section 2(f) claim of acquired distinctiveness” to clarify that the USPTO will not permit an amendment seeking the addition or elimination of a claim of acquired distinctiveness, just as an owner cannot amend a registration from the Supplemental to the Principal Register. See TMEP section 1609.09.

The USPTO proposes to amend § 2.175(b)(2), regarding correcting an owner's mistake, to change existing text to “verified” to correspond with § 2.2(n).

The USPTO proposes to amend § 2.183(d), regarding requirements for a renewal application, to specify that a renewal application may cover less than all the classes in a registration, in addition to covering less than all the goods or services in a registration.

The USPTO proposes to amend § 2.193, regarding trademark correspondence and signature requirements, to correct a typographical error in § 2.193(c)(2), to change existing text in § 2.193(e)(1) to correspond with § 2.2(n), and to revise the final sentence of § 2.193(f) to delete reference to § 10.23(c)(15) and instead refer to § 11.804, as part 10 of this chapter has been removed and reserved and the content in § 11.804 corresponds with content previously set out in § 10.23.

The USPTO proposes to amend § 7.1, regarding definitions, to add § 7.1(f), which incorporates by reference the definitions in proposed § 2.2(k) and (n), to apply to filings pursuant to the Protocol relating to the Madrid Agreement concerning the international registration of marks.

The USPTO proposes to amend § 7.37, regarding affidavits or declarations of use in commerce or excusable nonuse under section 71 of the Act, to include the relevant requirements for collective marks and certification marks and to change existing text to correspond with § 2.2. Specifically, the USPTO proposes to add § 7.37(i) and (j) as follows, to include requirements for collective marks and certification marks so as to harmonize the USPTO's post registration practice with current examination practice, and to be consistent with proposed § 2.161(i)-(j), regarding affidavits or declarations of use in commerce or excusable nonuse under section 8 of the Act: in proposed § 7.37(i), add the title “Additional requirements for a collective mark” and the additional requirements for such marks, see TMEP sections 1303.01, 1303.02(c)(i), 1304.08(f)(i)-(ii), 1904.02(d); in proposed § 7.37(j), add the title “Additional requirements for a certification mark” and additional requirements for such marks, see TMEP sections 1306.06(f)(i)-(iii), (f)(v), 1904.02(d). The sunset provision in current § 7.37(h)(3), in which § 7.37(h)(2) will no longer be applied after June 21, 2014, to affidavits or declarations filed under section 71 of the Act, is not altered by this rulemaking.

Administrative Procedure Act: The changes in this proposed rulemaking involve rules of agency practice and procedure, and/or interpretive rules. See Nat'l Org. of Veterans' Advocates v. Sec'y of Veterans Affairs, 260 F.3d 1365, 1375 (Fed. Cir. 2001) (rule that clarifies interpretation of a statute is interpretive); Bachow Commc'ns Inc. v. FCC, 237 F.3d 683, 690 (D.C. Cir. 2001) (rules governing an application process are procedural under the Administrative Procedure Act); Inova Alexandria Hosp. v. Shalala, 244 F.3d 342, 350 (4th Cir. 2001) (rules for handling appeals were procedural where they did not change the substantive standard for reviewing claims).

Accordingly, prior notice and opportunity for public comment for the changes in this proposed rulemaking are not required pursuant to 5 U.S.C. 553(b) or (c), or any other law. See Cooper Techs. Co. v. Dudas, 536 F.3d 1330, 1336-37 (Fed. Cir. 2008) (stating that 5 U.S.C. 553, and thus 35 U.S.C. 2(b)(2)(B), does not require notice and comment rulemaking for “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice,” quoting 5 U.S.C. 553(b)(A)). The USPTO, however, is publishing these proposed rule changes for comment as it seeks the benefit of the public's views regarding collective and certification marks.

Regulatory Flexibility Act: As prior notice and an opportunity for public comment are not required pursuant to 5 U.S.C. 553 or any other law, neither a Regulatory Flexibility Act analysis, nor a certification under the Regulatory Flexibility Act (5 U.S.C. 601, et seq. ), is required. See 5 U.S.C. 603.

In addition, for the reasons set forth herein, the Deputy General Counsel for General Law of the United States Patent and Trademark Office (USPTO) has certified to the Chief Counsel for Advocacy of the Small Business Administration that rule changes proposed in this document will not have a significant economic impact on a substantial number of small entities. See 5 U.S.C. 605(b).

To the extent the rule changes proposed in this document primarily codify existing USPTO practice set forth in the TMEP and precedential case law regarding collective marks and certification marks, those proposed rule changes impose no new burdens on applicants and registration owners. Some rule changes have been proposed to harmonize registration maintenance requirements with current application requirements. The USPTO also has proposed to change existing practice regarding maintenance requirements regarding certification marks to require filers of the first affidavit of use after registration in registrations based on Trademark Act Sections 44 and 66(a) to submit certification standards, and to require that all filers of such affidavits submit updated standards if the standards have changed or a statement indicating they have not. The USPTO does not collect or maintain statistics in trademark cases on small versus large entity applicants, and this information would be required in order to precisely calculate the number of small entities that would be affected. However, these proposed rule changes will have no impact on the vast majority of trademark owners, and only a slight effect on the very small subset of certification mark registrations, where standards previously have not been provided, or change post registration. Certification marks account for approximately 0.2% of the total number of registered marks in the USPTO database (approximately 4,000 registrations out of a total of approximately 2,000,000 registrations). For fiscal year 2013, affidavits of use for all filers have totaled approximately 170,000 of which approximately 0.2%, or 340 affidavits, were submitted for certification mark registrations. Of those 340 affidavits, only a small subset will be required to include certification standards or revised standards. Even in the event that standards must be submitted, the burden is quite minimal, as it merely involves attaching an already existing document to a filing that must otherwise be made to maintain the registration. For these reasons, the proposed rule changes will not have a significant economic impact on a substantial number of small entities.

Executive Order 12866 (Regulatory Planning and Review): The proposed rulemaking has been determined to be not significant for purposes of Executive Order 12866 (Sept. 30, 1993).

Executive Order 13563 (Improving Regulation and Regulatory Review): The USPTO has complied with Executive Order 13563 (Jan. 18, 2011). Specifically, the USPTO has, to the extent feasible and applicable: (1) Made a reasoned determination that the benefits justify the costs of the proposed rule changes; (2) tailored the proposed rules to impose the least burden on society consistent with obtaining the regulatory objectives; (3) selected a regulatory approach that maximizes net benefits; (4) specified performance objectives; (5) identified and assessed available alternatives; (6) provided the public with a meaningful opportunity to participate in the regulatory process, including soliciting the views of those likely affected prior to issuing a notice of proposed rulemaking, and provided on-line access to the rulemaking docket; (7) attempted to promote coordination, simplification, and harmonization across government agencies and identified goals designed to promote innovation; (8) considered approaches that reduce burdens and maintain flexibility and freedom of choice for the public; and (9) ensured the objectivity of scientific and technological information and processes, to the extent applicable.

Executive Order 13132 (Federalism): This proposed rulemaking does not contain policies with federalism implications sufficient to warrant preparation of a Federalism Assessment under Executive Order 13132 (Aug. 4, 1999).

Congressional Review Act: Under the Congressional Review Act provisions of the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq. ), prior to issuing any final rule, the USPTO will submit a report containing the final rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the Government Accountability Office. The changes proposed in this document are not expected to result in an annual effect on the economy of 100 million dollars or more, a major increase in costs or prices, or significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets. Therefore, this document is not expected to result in a “major rule” as defined in 5 U.S.C. 804(2).

Unfunded Mandates Reform Act of 1995: The changes set forth in this proposed rulemaking do not involve a Federal intergovernmental mandate that will result in the expenditure by State, local, and tribal governments, in the aggregate, of 100 million dollars (as adjusted) or more in any one year, or a Federal private sector mandate that will result in the expenditure by the private sector of 100 million dollars (as adjusted) or more in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions are necessary under the provisions of the Unfunded Mandates Reform Act of 1995. See 2 U.S.C. 1501 et seq.

Paperwork Reduction Act: This proposed rulemaking involves information collection requirements which are subject to review by the U.S. Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ). The USPTO has determined that there would be no new information collection requirements or impacts to existing information collection requirements associated with this proposed rulemaking. The collections of information involved in this proposed rulemaking have been reviewed and previously approved by OMB under control numbers 0651-0009, 0651-0050, 0651-0051, 0651-0054, 0651-0055, 0651-0056, and 0651-0061.

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

For the reasons given in the preamble and under the authority contained in 15 U.S.C. 1123 and 35 U.S.C. 2, as amended, the USPTO proposes to amend parts 2 and 7 of title 37 as follows:

Table of Contents I. Purpose II. Background III. Current PM 10 levels in Ada County IV. The EPA's Evaluation of the Northern Ada County PM 10 Second Ten-Year Maintenance Plan V. The EPA's Evaluation of the February 2011 Exception Events Request VI. The EPA's Proposed Approval of Contingency Measures for the Pinehurst PM 10 Air Quality Improvement Plan VII. Proposed Action VIII. Statutory and Executive Order Reviews

Definitions: For the purpose of this document, we are giving meaning to certain words or initials as follows:

(i) The words or initials “Act” or “CAA” mean or refer to the Clean Air Act, unless the context indicates otherwise.

(ii) The words “the EPA,” “we,” “us” or “our” mean or refer to the Environmental Protection Agency.

(iii) The initials “NAAQS” mean National Ambient Air Quality Standard.

(iv) The initials “SIP” mean or refer to State Implementation Plan.

(v) The word “State” means the State of Idaho, unless the context indicates otherwise.

(vi) “PM 10 ” means particulate matter with an aerodynamic diameter less than or equal to ten micrometers.

(vii) “MOVES” refers to Motor Vehicle Emissions Simulator, the EPA's modeling system for mobile sources.

Section 175A of the CAA requires the submission of a second ten-year maintenance plan eight years after any nonattainment area is redesignated to attainment. This rulemaking proposes approval of the second ten-year maintenance plan submitted by IDEQ for the Northern Ada County PM 10 attainment/maintenance area, which demonstrates continued maintenance of the PM 10 NAAQS through 2023. In this revised maintenance plan, the State has updated mobile source PM 10 emission levels using the Motor Vehicle Emissions Simulator model (MOVES), updated the transportation projections and stationary source inventories, and revised the motor vehicle emissions budgets (MVEBs). As described below, the EPA has determined that the revised maintenance plan demonstrates continued maintenance of the PM 10 NAAQS and meets the requirements of sections 110 and 175A of the CAA. In addition, the EPA is approving the exclusion of data from the high wind event of February 15-16, 2011, and the Contingency Measures for the Pinehurst PM 10 Air Quality Improvement Plan.

Northern Ada County was identified as an area of concern for PM 10 with the promulgation of the PM 10 NAAQS in 1987, and was formally designated as a moderate PM 10 nonattainment area upon passage of the 1990 CAA. Idaho developed a SIP and submitted it to the EPA in November 1991, later submitting revisions in December 1994 and July 1995. The EPA finalized approval of the Northern Ada County PM 10 SIP on May 30, 1996 (61 FR 27019). Idaho submitted a maintenance plan and a request to redesignate the area to attainment on September 27, 2002, and provided supplemental information on July 10, 2003 and July 21, 2003. On October 27, 2003, the EPA approved the Northern Ada County PM 10 Maintenance Plan and redesignated the area to attainment status for PM 10 (68 FR 61106).

In actions dated August 25, 1994 (59 FR 43475) and May 26, 1995 (60 FR 27891), the EPA conditionally approved the SIP for the Pinehurst, Idaho PM 10 nonattainment area. The conditional approval concluded that IDEQ had not satisfied the requirement for contingency measures for both the City of Pinehurst and the Pinehurst Expansion area. The EPA set a deadline of July 20, 1995 for IDEQ to submit the required contingency measures. IDEQ met the established deadline with its submission “Contingency Measures for the Pinehurst PM 10 Air Quality Improvement Plan,” dated July 13, 1995.

On September 23, 2013, IDEQ submitted documentation in accordance with the Exceptional Events Rule (72 FR 13560) to show that the monitored PM 10 values on February 15-16, 2011 at the Boise monitor were due to a high wind event and resulting dust storm that originated in Nevada.

The national primary and secondary 24-hour ambient air quality standards for PM 10 are 150 micrograms per cubic meter (μg/m 3 ) based on a 24-hour average concentration. The standard is attained when the expected number of days per calendar year with a 24-hour concentration above 150 μg/m 3 is equal to or less than one per year over a three year period. The Northern Ada County PM 10 Second Ten-Year Maintenance Plan, submitted by IDEQ on March 11, 2013, relies on ambient air quality data from 2007 through 2011. In addition, we have reviewed ambient air quality data from 2000 through 2011. With the EPA's December 2013 concurrence on the exclusion of data associated with the high wind event of February 15-16, 2011 at the Boise Fire Station Monitor, Northern Ada County shows continuous attainment of the PM 10 NAAQS based on the most recent 2000-2012 data archived in the EPA's Air Quality System Database ( www.epa.gov/ttn/airs/airsaqs/detaildata/AQIindex.htm ).

The criteria EPA used to review and evaluate the maintenance plan are derived from the CAA, the General Preamble for State Implementation Plans (57 FR 13498), and the guidance memorandum from John Calcagni, Procedures for Processing Requests to Redesignate Areas to Attainment, September 4, 1992. The following are the key elements of a maintenance plan for PM 10 : Emissions Inventory, Maintenance Demonstration, Monitoring Network/Verification of Continued Attainment, Control Strategies, Contingency Measures, and the Motor Vehicle Emissions Budget for PM 10 as required for Transportation Conformity. Below, we describe our evaluation of these elements as they pertain to the Northern Ada County PM 10 Second Ten-Year Maintenance Plan.

A. Emissions Inventory: An emissions inventory was prepared for the entirety of Ada County for the base year of 2008. In addition to the base year 2008 inventory, emissions forecasts were prepared for future year projections for 2015 and 2023. Using an emissions inventory prepared for the entire county enabled IDEQ to capture emissions both within and outside of the North Ada County PM 10 Maintenance Area. The projections in Table 1 below show that direct primary emissions of PM 10 increase 27% from 2008 to 2023, while the chemical precursors to secondarily formed PM 10 significantly decrease. The largest source of primary PM 10 is fugitive dust from on-road mobile sources and the projected PM 10 increases are mostly from projected increases in on-road vehicle traffic. We find that IDEQ has prepared adequate recent and future year emission inventories for the area that meet Maintenance Plan requirements.

B. Maintenance Demonstration: The EPA-approved Northern Ada County First Ten-Year PM 10 Maintenance Plan used the CAMx photochemical transport model to demonstrate maintenance of the PM 10 standard. IDEQ used a photochemical transport model for the North Ada County First PM 10 Ten-Year Maintenance Plan because of concerns about secondary production of PM 10 from the chemical precursors nitrogen oxides (NO X ) and sulfur dioxide (SO 2 ) and the potential growth in these precursor emissions. However, future year emissions projections for 2015 and 2023 now indicate significant reductions in NO X and SO 2 from 2008 baseline values, and the PM 10 design values in Northern Ada County have been well below the standard over the past decade. The EPA has approved a more simplified roll-forward modeling approach appropriate for evaluating the effects of primary PM 10 emissions changes on ambient PM 10 values in Northern Ada County. Use of this more simplified roll-forward modeling approach is also a conservative approach because it does not allow credit to be taken for emissions reductions in the secondary PM 10 precursors NO X and SO 2. For the Northern Ada County PM 10 Second Ten-Year Maintenance Plan, the roll-forward model can be used to conservatively estimate whether the PM 10 concentrations can be maintained below the NAAQS in future years. With the exception of the high wind exceptional event on February 15-16, 2011 at the Boise Fire Station monitor, discussed in more detail below, a review of data from 2000-2011 shows that average PM 10 concentrations remain below the 24-hour PM 10 NAAQS.

C. Monitoring Network/Verification of Continued Attainment: PM 10 ambient air monitoring in Northern Ada County consists of one monitor, operated by IDEQ, located at Fire Station #5 at 16th and Front Streets in downtown Boise. The monitor is a tapered element oscillating microbalance (TEOM) monitor, which provides continuous, real-time direct measurement of PM 10 concentrations. The TEOM monitor is part of the approved IDEQ monitoring network and is operated in accordance with 40 CFR Part 58. In its submission, IDEQ commits that it will continue to operate an appropriate PM 10 air quality monitor in accordance with 40 CFR Part 58 to verify continued attainment of the PM 10 NAAQS. The EPA will continue its annual review of the monitoring network to ensure ongoing compliance with the EPA's air monitoring requirements and continued maintenance of the PM 10 NAAQS.

D. Control Strategies: The Northern Ada County PM 10 Second Ten-Year Maintenance Plan includes the following control strategies, which are the same as those used in the Northern Ada County PM 10 First Ten-Year Maintenance Plan (61 FR 27019): 1) the air quality index program through which IDEQ provides information on the measured and predicted ambient air pollution levels along with information on mandatory and voluntary open burning bans and indoor burning bans; 2) a residential wood burning program; 3) an open burning ban; and 4) stationary source controls. The stationary source controls include conditions in Tier II permits for eight facilities in the maintenance area, as well as The Amalgamated Sugar Company (TASCO) factory in Nampa, Idaho that is outside the maintenance area but was included within the original modeling domain. The eight facilities are:

• LP Wood Polymers—(now Fiber Composites)

• Mike's Sand and Gravel—(now Clement's Concrete)

• Crookham Company

• Plum Creek Lumber Company

• C. Wright Construction

• Idaho Concrete (3 separate facilities)

The Tier II permits for the eight facilities in the maintenance area include limits on the potential to emit. The Tier II permit for the TASCO facility required reductions in PM 10 emissions from the facility  1 . Retention of the Tier II permits maintains these control strategies in a manner that is consistent with applicable guidance. The EPA approved these control measures when approving the first Ten-Year Maintenance plan and they became federally enforceable at that time.

E. Contingency Measures: Section 175A(d) of the CAA requires that a maintenance plan include contingency measures to assure that any violation of the standard is promptly corrected. To meet this requirement, the State has identified appropriate contingency measures along with a schedule for the development and implementation of such measures. As stated in Section 8 of the Northern Ada County PM 10 Second Ten-Year Maintenance Plan, the contingency measures will be triggered by a violation of the PM 10 NAAQS. Such a violation will prompt IDEQ to implement one or more contingency measures, as appropriate, to correct the violation. Potential contingency measures include: (1) adopt local ordinances that require covering all loads of material that have the potential to contribute to particulate matter pollution; (2) adopt local ordinances that require no track-out onto paved roads; (3) adopt local ordinances that prohibit burning of outdoor trash; (4) eliminate local permits that allow any kind of uncontrolled outdoor burning not specifically allowed under state rules; (5) expand mandatory burning restrictions to include clean-burning woodstoves during air quality alerts; (6) adopt local ordinances that prohibit constructing any unpaved roads, driveways or parking lots; (7) revise street sweeping plans working with local highway districts and the Idaho Transportation Department, based on the latest traffic data so as to prioritize street sweeping efforts to reduce fugitive road dust; and (8) analyze the impacts from all industrial sources and develop potential emission reductions, if necessary to maintain attainment, in accordance with the rules. In addition, IDEQ indicates it may evaluate other strategies to address any future violations in the most appropriate and cost-effective manner possible. We find that the contingency measures contained in the Northern Ada County PM 10 Second Ten-Year Maintenance Plan are sufficient and meet the requirements of Section 175A(d) of the CAA. We note the contingency measures and methodology to implement the measures are the same as those we approved in the original SIP and the First Ten-Year Maintenance Plan.

F. Transportation Conformity Requirements: Motor Vehicle Emission Budget for PM 10 : Under Section 176(c) of the CAA, transportation plans, programs, and projects in nonattainment or maintenance areas that are funded or approved under the Federal Transit Act must conform to the applicable SIP. In short, a transportation plan is deemed to conform to the applicable SIP if the emissions resulting from implementation of that transportation plan are less than or equal to the motor vehicle emission level established in the SIP for the maintenance year and other analysis years. In this maintenance plan, procedures for estimating motor vehicle emissions are well documented. On-road mobile source emissions were calculated using the MOVES model. The motor vehicle emission budgets for on-road motor vehicle PM 10 emissions in Ada County for 2008, 2015, 2023 are shown in Table 2, below.

On June 6, 2013, the EPA published a notice of our finding that the MVEBs for PM 10 , NO X , and volatile organic compounds (VOC) for the years 2008, 2015 and 2023 in the Northern Ada County PM 10 Second Ten-Year Maintenance Plan were adequate for transportation conformity purposes. This adequacy determination became effective on June 21, 2013 (78 FR 34095).

The EPA is proposing to approve the State's request to exclude data from February 15-16, 2011 in determining PM 10 attainment as a high wind exceptional event. The EPA evaluated IDEQ's exceptional event demonstration for the flagged values of the 24-hour PM 10 NAAQS for February 15-16, 2011 at the monitor in Boise, Idaho, with respect to the requirements of the EPA's Exceptional Events Rule (40 CFR 50.14) and determined that IDEQ met each requirement. The EPA concurred on the exceptional event on December 13, 2013. For further information, refer to the State's Exceptional Event demonstration package and EPA's concurrence and analysis located in the docket.

As provided in section 172(c)(9) of the CAA, all nonattainment area SIPs that demonstrate attainment must include contingency measures. Contingency measures consist of other available measures that are not part of the area's control strategy but are included in the plan revision as measures to be undertaken if the area fails to make reasonable further progress or to attain by the applicable attainment date. These measures must take effect in any such case without further action by the state.

In response to the EPA's conditional approval of the Pinehurst PM 10 nonattainment SIP, IDEQ submitted its “Contingency Measures for the Pinehurst PM 10 Air Quality Improvement Plan,” specifying the contingency measures for the Pinehurst PM 10 nonattainment area. These contingency measures require implementation of additional emission control actions in the Pinehurst residential wood burning program, including wood stove replacements, voluntary wood stove curtailment, public awareness and home weatherization. The EPA believes that the implementation of these measures, if necessary, would provide additional reductions of PM 10 emissions and further attainment of the PM 10 NAAQS. The Pinehurst PM 10 nonattainment area has monitored attainment of the PM 10 NAAQS since IDEQ submitted the contingency measures for EPA's approval in 1995. The EPA is proposing to approve these measures as satisfying the section 172(c)(9) contingency measure requirement for the Pinehurst PM 10 attainment plan, finalizing our approval of the plan.

The EPA is proposing to approve the Northern Ada County PM 10 Second Ten-Year Maintenance Plan adopted by IDEQ to ensure maintenance of the NAAQS for PM 10 in Northern Ada County for a second ten-year maintenance period, to protect the health and welfare of the area citizens from adverse effects of degraded air quality levels. In addition, the EPA is proposing to approve the exclusion of data from the high wind event of February 15-16, 2011, and the Contingency Measures for the Pinehurst PM 10 Air Quality Improvement Plan.

Under the CAA, 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, the 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 the requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because this action does not involve technical standards; and

• does not provide the 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).

On February 25, 2013, the Pennsylvania Department of Environmental Protection (PADEP) submitted a revision to the Pennsylvania SIP by adopting revisions to 25 Pennsylvania Code ( Pa. Code ) Chapters 121, 123 and 139. This revision implements low sulfur fuel oil provisions that will reduce the amount of sulfur in fuel oils used in combustion units and amends associated definitions, sampling and test methods, and record keeping and recording provisions which will aid in reducing sulfates that cause decreased visibility.

Sulfur dioxide (SO 2 ) is one of a group of highly reactive gasses known as “oxides of sulfur.” The largest sources of SO 2 emissions are from fossil fuel combustion at power plants (73 percent) and other industrial facilities (20 percent). Smaller sources of SO 2 emissions include industrial processes such as extracting metal from ore and the burning of high sulfur-containing fuels by locomotives, large ships, and non-road equipment. Combustion of sulfur-containing commercial fuel oils releases SO 2 emissions, which contribute to the formation of regional haze and fine particulate matter (PM 2.5 ), both of which impact the environment and human health. Regional haze is pollution produced by sources and activities that emit fine particles and their precursors which impairs visibility through scattering and absorption of light. Regional haze affects urban and rural areas, including national parks, forests, and wilderness areas.

Fine particles may be emitted directly or formed from emissions of precursors, the most important of which includes SO 2 . SO 2 emissions oxidize in the atmosphere to form sulfate particles. Visibility impairment, including regional haze, is mostly due to an increase in sulfate particles in the atmosphere. SO 2 emissions also contribute to the formation of acid rain. Both acid rain and PM 2.5 contribute to agricultural crop and vegetation damage and degradation of the Chesapeake Bay. Combustion of low sulfur-content commercial fuel oil can contribute to a reduction in SO 2 emissions and in the incidences of adverse effects in the Commonwealth of Pennsylvania. The reduction of sulfur limits in commercial fuel oils used in residential and commercial combustion units is an appropriate measure for reducing regional haze and improving visibility.

This SIP revision to implement low sulfur fuel oil provisions applies to the owner and/or operator of the following: (1) Refineries; (2) pipelines; (3) terminals; (4) retail outlet fuel storage facilities and ultimate consumers; (5) commercial and industrial facilities; and (6) facilities with a unit burning regulated fuel oil to produce electricity and domestic home heaters. The amendments to Chapter 121, section 121.1—Definitions, add a new term “ultimate consumer” and amend the definitions of the following terms to provide clarity and support the amendments to Chapter 123: (1) “Commercial fuel oil;” (2) “Noncommercial fuel;” (3) “Carrier;” (4) “Distributor;” (5) “Retail outlet;” (6) “Terminal;” (7) “Transferee;” and (8) “Transferor.” The definitions for “Commercial fuel oil” and “Noncommercial fuel” are amended in order to synchronize them. The definition for “Carrier” is amended in order to expand the definition to apply to commercial fuel oil that is carried. The definition for “Distributor” is amended in order to establish applicability to commercial fuel oil that is distributed and to broaden the list of transferees. The definitions for “Retail outlet” and “Terminal” are amended in order to expand the definitions. The definitions for “Transferee” and “Transferor” are amended in order to provide more specificity by listing examples of the persons and/or entities required to comply with the regulation.

This SIP revision to Chapter 123, section 123.22—Combustion units, implements low sulfur fuel oil provisions that will reduce the amount of sulfur in fuel oils that are stored, offered for sale, delivered for use, sold or exchanged in trade for use in Pennsylvania. This SIP revision amends and adds two subsections to section 123.22. The following amendments are made to section 123.22(a), which applies to nonair basin areas: (1) Editorial revisions to express the new maximum allowable sulfur contents both in parts per million (ppm) by weight and percentage by weight; (2) amendments to the existing percent sulfur limits to be expressed as maximum allowable percentage sulfur by weight, through June 20, 2016; (3) reductions to the maximum allowable sulfur content for commercial fuel oil, expressed as ppm by weight or percentage by weight, for number 2 and lighter distillate oil to 0.05 percent sulfur content by weight (500 ppm), number 4 residual oil to 0.25 percent sulfur content by weight, and 0.5 percent sulfur content by weight for number 5 and number 6 and heavier commercial fuel oils by no later than July 1, 2016; (4) establish a provision that a person is not authorized to offer for sale, deliver for use, exchange in trade or permit the use of a noncomplying commercial fuel oil in a nonair basin on or after July 1, 2016; (5) establishment of two exceptions which allow commercial fuel oil stored by ultimate consumers prior to July 1, 2016 to be used after that date as long as the applicable maximum sulfur content identified through June 30, 2016 were met and allow for temporary suspension or increase in the applicable maximum allowable sulfur content limits; and (6) amendments to the equivalency provision to provide greater clarity.

Subsections (b), (c), (d), and (e) of section 123.22 are amended similarly to subsection (a); however, they establish applicability to specific areas. Section 123.22(b) establishes applicability to air basins in Erie, Harrisburg, York, Lancaster, Scranton, and Wilkes-Barre. Section 123.22(c) establishes applicability to air basins in Allentown, Bethlehem, Easton, Reading, Upper Beaver Valley, and Johnstown. Section 123.22(d) establishes applicability to air basins in Allegheny County, Lower Beaver Valley, and Monongahela Valley and adds maximum allowable sulfur content limits and the equivalency provision which never existed. Section 123.22(e) establishes applicability to air basins in Southeast Pennsylvania which are defined in section 121.1.

This SIP revision adds section 123.22(f) in order to establish sampling and testing requirements for refinery and terminal owners and operators to ensure compliance with the maximum allowable sulfur content for commercial fuel oil intended for use or used on or after July 1, 2016. This SIP revision also adds section 123.22(g) in order to establish recordkeeping and reporting requirements applicable to transferors and transferees in the manufacture and distribution chain for commercial fuel oil from the refinery owner or operator to the ultimate consumer.

This SIP revision amends Chapter 139 in order to update provisions in section 139.4 and section 139.16. The amendments to section 139.4—References update six of the applicable sulfur method references, add two new sulfur method references, and provide the address for requesting a temporary suspension or increase. Section 139.16—Sulfur in fuel oil, is amended in order to add cross references to the two new sulfur method references in section 139.4.

EPA has determined that the revisions made to 25 Pa. Code Chapters 121, 123, and 139 meet the SIP revision requirements of the CAA and is proposing to approve the amendments to Pennsylvania's regulations for commercial fuel oil sulfur limits for combustion units. By reducing the sulfur in the fuel oils, sulfur oxide emissions and fine particulate emissions will be reduced which will improve visibility and help to attain the PM 2.5 national ambient air quality standard. EPA believes these regulations strengthen the Pennsylvania SIP. EPA notes that existing provisions and the adoption of a low sulfur fuel oil strategy will lead to SO 2 emission reductions and provide additional emission reductions from Pennsylvania to achieve further reasonable progress towards reducing regional haze. EPA is soliciting public comments on the issues discussed in this document. These comments will be considered before taking final action.

Under the CAA, 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 proposed 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 CAA; 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 proposed rule to implement low sulfur fuel oil provisions that will reduce the amount of sulfur in fuel oils used in combustion units in Pennsylvania 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.

Table of Contents I. Public Participation and Request for Comments A. Submitting Comments B. Viewing Comments and Documents C. Privacy Act II. Executive Summary III. Background A. Legal Basis for the Rulemaking B. Current Regulations C. Discussion of the Proposed Rule 1. Clearinghouse for CDL Drivers' Drug and Alcohol Test Results 2. FMCSA Oversight of Motor Carrier Implementation of Drug and Alcohol Testing Programs IV. Section-by-Section Discussion of Regulatory Changes V. Regulatory Analyses and Notices I. Public Participation and Request for Comments

FMCSA encourages you to participate in this rulemaking by submitting comments, data, and related materials. All comments received will be posted without change to http://www.regulations.gov and will include any personal and/or copyrighted information you provide.

You may submit your comments and material online or by fax, mail, or hand delivery, but please use only one of these means. FMCSA recommends that you include your name and a mailing address, an email address, or a phone number in the body of your document so that FMCSA can contact you if there are questions regarding your submission.

To submit your comment online, go to http://www.regulations.gov and in the search box insert the docket number “FMCSA-2010-0031” and click the search button. When the new screen appears, click on the blue “Comment Now!” button on the right hand side of the page. On the new page, enter information required including the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. If you submit your comments by mail or hand delivery, submit them in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying and electronic filing. If you submit comments by mail and would like to know that they reached the facility, please enclose a stamped, self-addressed postcard or envelope.

We will consider all comments and material received during the comment period and may change this proposed rule based on your comments. FMCSA may issue a final rule at any time after the close of the comment period.

To view comments, as well as any documents mentioned in this preamble, To submit your comment online, go to http://www.regulations.gov and in the search box insert the docket number “FMCSA-2010-0031” and click “Search.” Next, click “Open Docket Folder” and you will find all documents and comments related to the proposed rulemaking.

Anyone is able to search the electronic form for all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review the USDOT Privacy Act system of records notice for the DOT Federal Docket Management System (FDMS) in the Federal Register published on December 29, 2010 (75 FR 82132) at http://www.gpo.gov/fdsys/pkg/FR-2010-12-29/pdf/2010-32876.pdf .

CDL drivers who use drugs or alcohol while operating a CMV pose a significant risk to public safety. Under the current drug and alcohol screening program, employers do not have the tools to identify CDL holders who have received positive drug or alcohol test results, have refused a drug or alcohol test, or have otherwise violated the drug and alcohol testing requirements and thus, are not qualified to operate a CMV. Employers must rely on information provided by the driver, who might not disclose prior positive drug or alcohol test results, or refusals to test. As a result, such drivers continue to operate CMVs after violating the drug and alcohol regulations without completing the required return-to-duty process.

This proposed rule would require employers and service agents to report information about current and prospective employees' drug and alcohol test results to a repository, the Drug and Alcohol Clearinghouse. It would also require employers and certain service agents to search the database for current and prospective employees' positive drug and alcohol test results, and refusals to test, as a condition of permitting those employees to perform safety-sensitive functions. This would provide FMCSA and employers the necessary tools to identify drivers who are prohibited from operating a CMV based on DOT drug and alcohol program violations and ensure that such drivers receive the required evaluation and treatment before performing safety-sensitive functions.

The Moving Ahead for Progress in the 21st Century Act (MAP-21), enacted on July 6, 2012, 1 mandates that the Secretary of Transportation (Secretary) establish a national clearinghouse for controlled substance and alcohol test results of commercial motor vehicle operators. The FMCSA also has authority to promulgate safety standards under the Motor Carrier Safety Act of 1984 (Pub. L. 98-554, Title II, 98 Stat. 2832, October 30, 1984) (the 1984 Act), which provides authority to regulate drivers, motor carriers, and vehicle equipment and requires the Secretary to prescribe minimum safety standards for CMVs.

The proposed rule would revise 49 CFR part 382, Controlled Substances and Alcohol Use and Testing to establish the Drug and Alcohol Clearinghouse. It would require employers and service agents to report information about current and prospective employees' positive drug and alcohol test results to the Clearinghouse. In addition, it would require employers to search the Clearinghouse for positive drug and alcohol test results, and refusals to test, on an annual basis for current employees and as a part of the pre-employment process for prospective employees. Finally, this proposal would require laboratories to provide FMCSA with annual summary reports on the testing activities of FMCSA-regulated motor carrier employers for whom they have provided testing services.

Reporting positive test results and refusals to test would create a database employers could check to determine whether current or prospective employees are prohibited from operating CMVs under the DOT drug and alcohol screening program. This would diminish or eliminate the problem of a currently-employed commercial-driver's-license (CDL) holder testing positive for illegal drug or alcohol use with a second employer or another potential employer while continuing to operate commercial motor vehicles (CMVs) under his or her current employment without the current employer knowing and acting on the positive test.

It would also diminish or eliminate the problem of a driver with previous positive tests seeking and obtaining work without prospective employers knowing and acting on that information. This could occur if a driver is fired for a positive test but does not inform prospective or future employers about the previous positive test result. This could also occur if a new driver entering the workforce tests positive for drugs or alcohol during a pre-employment test, waits for the drugs to leave his/her system, then takes and passes another pre-employment test and gets hired without the employer having any knowledge of the previously failed pre-employment test.

Currently motor carrier employers are required to implement DOT drug and alcohol testing programs for CDL holders and they must provide FMCSA with a summary of their annual drug and alcohol testing results. To improve employers' compliance, the proposed rule would require all laboratories performing DOT drug and alcohol testing for FMCSA-regulated employers to file annual summary reports identifying the motor carrier employers for whom they performed testing services. The FMCSA would use the data provided by the laboratories to identify employers of CDL drivers that do not have an active drug and alcohol testing program.

The Agency estimates about $187 million in annual benefits from increased crash reduction from the rule—$53 million from the annual queries and $134 million from the pre-employment queries. FMCSA also estimates that the rule would result in $186 million in total annual costs, which include costs for employers to complete the annual ($28 million) and pre-employment ($10 million) queries; employers to designate service agents and service agents to input information from drivers undergoing the return-to-duty process ($3 million); various entities to report positive tests and refusals ($1 million); various entities to register with the Clearinghouse, verify authorization, and become familiar with the rule ($5 million); for employers to obtain drivers' consent for release of their information ($35 million); for development of the Clearinghouse and management of records ($3 million); and the cost for drivers to go through the return-to-duty process ($101 million). The estimated costs are about equal to its benefits: Total net benefits of the rule are just $1 million annually. The ten-year projection of net benefits is $8 million when discounted at seven percent and $9 million when discounted at three percent. However, estimated benefits include only those associated with reductions in CMV crashes. FMCSA could not precisely quantify improved health, quality-of-life improvements, and increased life expectancy for CMV drivers. The Agency believes these non-quantified benefits are significant, and, if they were included in the benefits estimates, would clearly demonstrate the positive net benefits of this rule.

The Agency proposes to revise 49 CFR part 382, Controlled Substances and Alcohol Use and Testing, to establish a database, identified as the “Commercial Driver's License Drug and Alcohol Clearinghouse” or “Clearinghouse,” for reporting of verified positive, adulterated, and substituted drug test results, positive alcohol test results, test refusals, negative return-to-duty test results, and information on follow-up testing. The proposed rule would also require employers to report actual knowledge of traffic citations for driving a CMV while under the influence of alcohol or drugs. Under the proposed rule, motor carrier employers would be required to query the Clearinghouse for drug and alcohol test result information on current and prospective employees subject to FMCSA drug and alcohol testing requirements. The proposed rule is intended to increase compliance with these testing requirements.

Section 32402 of the Moving Ahead for Progress in the 21st Century Act (MAP-21) (Pub. L. 112-141, 126 Stat. 405), codified at 49 U.S.C. 31306a, directs the Secretary of Transportation (Secretary) to establish a national clearinghouse for controlled substance and alcohol test results of commercial motor vehicle operators. This proposed rule would implement that mandate.

In addition, FMCSA has general authority to promulgate safety standards, including those governing drivers' use of drugs or alcohol while operating a CMV. The Motor Carrier Safety Act of 1984 (Pub. L. 98-554, Title II, 98 Stat. 2832, October 30, 1984) (the 1984 Act), as amended, provides authority to regulate drivers, motor carriers, and vehicle equipment and requires the Secretary to prescribe minimum safety standards for CMVs. At a minimum, the regulations shall ensure that— (1) CMVs are maintained, equipped, loaded, and operated safely; (2) the responsibilities imposed on CMV operators do not impair their ability to operate the vehicles safely; (3) the physical condition of CMV operators is adequate to enable them to operate the vehicles safely; (4) CMV operation does not have a deleterious effect on the physical condition of the operators; and (5) CMV drivers are not coerced by a motor carrier, shipper, receiver, or transportation intermediary to operate a CMV in violation of regulations promulgated under 49 U.S.C. 31136 or under 49 U.S.C. chapters 51 or 313 (49 U.S.C. 31136(a)). Section 211 of the 1984 Act also grants the Secretary broad power, in carrying out motor carrier safety statutes and regulations, to “prescribe recordkeeping and reporting requirements” and to “perform other acts the Secretary considers appropriate” (49 U.S.C. 31133(a)(8) and (10)).

The FMCSA Administrator has been delegated authority under 49 CFR 1.87(e), (f) to carry out the functions vested in the Secretary by 49 U.S.C. chapter 313 and 49 U.S.C. chapter 311, subchapters I and III, relating to CMV programs and safety regulation. This proposed rule would implement, in part, the Administrator's delegated authority under the 1984 Act to ensure that the physical condition of CMV operators is adequate to enable them to operate vehicles safely by increasing compliance with drug and alcohol testing requirements. FMCSA believes that this proposed rule would likely have the effect of preventing employers from exercising coercive influence over drivers. The proposed rule would also exercise the broad recordkeeping and implementation authority under Section 211. The other subsections of Section 206(a) do not apply because this rulemaking would only address the physical condition of CMV drivers.

The Omnibus Transportation Employee Testing Act of 1991 (OTETA) (Pub. L. 102-143, Title V, 105 Stat. 917, at 952, October 28, 1991, codified at 49 U.S.C. 31306) mandated the alcohol and controlled substances (drug) testing program for DOT. OTETA required the Secretary to promulgate regulations for alcohol and drug testing for persons in safety-sensitive positions in four modes of transportation—motor carrier, airline, railroad, and mass transit. Those regulations, including subsequent amendments, are codified at 49 CFR part 40, “Procedures for Transportation Workplace Drug and Alcohol Testing Programs.” Part 40 establishes requirements for all DOT-regulated parties, including employers of drivers with CDLs subject to FMCSA testing requirements, for conducting drug and alcohol tests. Part 40 also defines the roles and responsibilities of service agents, including MROs, SAPs, and C/TPAs, who perform critical functions under DOT-wide drug and alcohol testing program requirements.

In 1994, FMCSA's predecessor agency published a final rule addressing the OTETA and creating regulations, including penalties, codified in 49 CFR part 382, “Controlled Substances and Alcohol Use and Testing.” In 2001, FMCSA revised its regulations in 49 CFR part 382 to make FMCSA's drug and alcohol testing procedures consistent with and non-duplicative of the revised regulations at 49 CFR part 40.

This proposed rule would incorporate many of the findings and recommendations contained in FMCSA's March 2004 report to Congress, which was required under section 226 of the Motor Carrier Safety Improvement Act of 1999 (Pub. L. 106-159, 113 Stat. 1748, December 9, 1999).

Agency regulations at 49 CFR part 382 apply to persons and employers of such persons who operate CMVs in commerce in the United States and who are subject to the CDL requirements in 49 CFR part 383 or the equivalent CDL requirements for Canadian and Mexican drivers (49 CFR 382.103(a)). Part 382 requires that employers conduct pre-employment drug testing, post-accident testing, random drug and alcohol testing, and reasonable suspicion testing, as well as return-to-duty testing and follow-up testing for those drivers who test positive or otherwise violate DOT drug and alcohol program requirements.

Motor carrier employers are prohibited from allowing an employee to perform safety-sensitive functions, which include operating a CMV, if the employee tests positive on a DOT drug or alcohol test, refuses to take a required test, or otherwise violates the DOT drug and alcohol testing regulations. The prohibition on performing safety-sensitive functions continues until the employee satisfies all of the requirements of the return-to-duty process prescribed in 49 CFR part 40, subpart O. Additionally, part 382 provides that an employer may not allow a covered employee to perform safety-sensitive functions when the employer has actual knowledge concerning the driver's use of alcohol or drugs while performing safety-sensitive functions. An employer has “actual knowledge” of drug or alcohol use while performing safety-sensitive functions based upon the employer's direct observation of employee drug or alcohol use, an admission by the employee of drug or alcohol use, information provided by a previous employer, or if the employee receives a traffic citation for driving a CMV while under the influence of drugs or alcohol. An employer may not use a driver under these circumstances until the driver has completed the return-to-duty process prescribed in 49 CFR part 40, subpart O. Positive test results or instances of employers having actual knowledge can lead to termination of the driver's employment without the opportunity to complete the return-to-duty process.

The Federal Motor Carrier Safety Regulations (FMCSRs) require that a motor carrier employer obtain information from job applicants that includes the names and addresses of the applicant's employers for the past 3 years, and whether or not the applicant was subject to the FMCSRs and to the drug and alcohol testing requirements under 49 CFR part 40 (49 CFR 391.21(b)). Interstate motor carrier employers are then required to investigate the applicant's history under the DOT drug and alcohol testing program by contacting the named DOT-regulated employers to determine whether the applicant has, within the past 3 years, violated the drug and alcohol prohibitions under part 382 or the testing requirements under part 40 (49 CFR 391.23(e)). A similar background check requirement exists in part 40. See 49 CFR 40.25 (DOT-regulated employers must contact all of the applicant's employers for the 2 years prior to the employee application and obtain drug and alcohol test information, including information that these employers obtained from previous employers).

Part 40 defines an “employee” as “any person who is designated in a DOT agency regulation as subject to drug testing and/or alcohol testing” including “applicants for employment subject to pre-employment testing” (49 CFR 40.3). Pursuant to this definition, an individual is an employee of any DOT-regulated employer for whom the individual takes a pre-employment drug test, regardless of whether the individual is subsequently hired by the employer. As a result, an individual would be required to list such employer, when applying for a new covered position ( see 49 CFR 40.25 and 391.21(b)).

In addition to pre-employment drug testing, the background check process detailed above is currently the primary means by which an employer determines whether a job applicant is qualified to perform a safety-sensitive function such as operating a CMV.

The current background check system does not provide employers with enough tools to accurately identify CDL holders who have received positive drug or alcohol test results or have otherwise violated the drug and alcohol testing requirements and who are, therefore, not qualified to operate a CMV prior to completing the return-to-duty process. Employers must rely on information provided by the driver, who might not list part-time driving jobs or a prior or prospective employer that has records of positive drug or alcohol tests or other related violations. Or, after testing positive with one prospective employer, the driver might wait until the substance is out of his or her system and apply with a different carrier. As a result, such drivers continue to operate CMVs after violating the drug and alcohol regulations without completing the required return-to-duty process.

CDL drivers who use drugs or alcohol while operating a CMV pose a significant risk to public safety. In 1999, a New Orleans bus crash resulted in 22 passenger fatalities. The motorcoach driver's post-accident drug test showed use of marijuana and a sedating anti-histamine prior to going on duty. The driver had also failed pre-employment drug testing when applying for previous positions, a fact not revealed or known to the current employer. The driver also failed to disclose on his employment application a previous employer who fired him after a positive drug test. As a result of the investigations of the 1999 New Orleans bus crash, the National Transportation Safety Board (NTSB) recommended that FMCSA “develop a system that records all positive drug and alcohol test results and refusal determinations resulting from the U.S. Department of Transportation (DOT) testing requirements, require prospective employers to query the system before making a hiring decision, and require certifying authorities to query the system before making a certification decision.” (“Highway Accident Report: Motorcoach Run-Off-The-Road, New Orleans, Louisiana, May 9, 1999,” NTSB Report Number: HAR-01-01, NTSB, Washington, DC, page 67 ( http://www.ntsb.gov/doclib/reports/2001/HAR0101.pdf .)). This rulemaking addresses the NTSB's recommendations.

Two 2008 Government Accountability Office (GAO) reports  2 also analyzed the issue of CMV drivers who test positive or refuse to submit to drug or alcohol testing for one employer and then fail to disclose this information to a subsequent employer. GAO identified 43 instances in which a CMV driver tested positive for illegal drugs, such as cocaine, marijuana, and amphetamines, with one employer and subsequently tested negative with another employer who was unaware of the prior positive test. In its recommendations to Congress, GAO proposed establishing a national database, as outlined in this rulemaking, as a possible solution to these “job hopping” scenarios.

Through MAP-21, Congress directed FMCSA to establish this clearinghouse to improve compliance with DOT's drug and alcohol testing program, as well as enhance safety by reducing accidents and injuries resulting from the misuse of alcohol and drugs by CDL holders. MAP-21 directed a number of specific requirements that FMCSA has incorporated into this proposed rule. For example, in accordance with the requirements of MAP-21, this proposed rule would require employers and service agents to report information about current and prospective employees' drug and alcohol test results to the Clearinghouse and would require employers and certain service agents to check current and prospective employees against the database. In addition, employers would only access data in the clearinghouse to determine whether an employment prohibition exists (e.g., a positive test result or a refusal for which an individual has not completed the return-to-duty requirements).

The proposed rule would provide FMCSA and regulated employers the necessary tools to identify drivers who are prohibited from operating a CMV based on DOT drug and alcohol program violations and ensure that such drivers receive the required evaluation and treatment before continuing to perform safety-sensitive functions. It would apply to persons and employers of such persons who operate CMVs in commerce in the United States and are subject to the CDL requirements in 49 CFR part 383 or the equivalent CDL requirements for Canadian and Mexican drivers. The proposed rule would not supersede an employer's obligation to comply with the current requirements of parts 40 and 382.The rule would also affect service agents, including MROs, C/TPAs and SAPs. MROs are licensed physicians responsible for independently receiving and reviewing laboratory drug test results generated by an employer's testing program. Under the proposed rule, MROs would report to the Clearinghouse all positive, adulterated, or substituted drug test results and refusals to test that require an MRO determination.

C/TPAs are consortia and third party administrators who coordinate testing services for regulated motor carrier employers. FMCSA regulations require any employer who employs only himself/herself as a driver to join a random test selection pool. Consortia are the entities that manage these pools (49 CFR 382.103(b)). Third party administrators, which often include consortia, are entities that regulated motor carrier employers contract with to implement drug and alcohol testing programs. Under the proposed rule, C/TPAs would be subject to the same reporting requirements as employers when they assume a regulated employer's drug and alcohol testing functions. Specifically, C/TPAs that are required by regulation to perform employer functions (e.g., for self-employed drivers) would be required to report positive alcohol tests, drug or alcohol test refusals, negative return-to-duty tests, and successful completion of all follow-up tests. Employers may contract with C/TPAs to perform reporting functions, but employers, in addition to their C/TPAs, remain responsible for meeting the reporting requirements.

SAPs evaluate, assess and refer drivers for education and/or treatment after a positive test or refusal as a part of the return-to-duty process (49 CFR part 40, subpart O). Under the proposed rule, SAPs would be required to report to the Clearinghouse the date that a driver began and successfully completed the return to duty process specified in 49 CFR part 40, subpart O, indicating driver eligibility for return-to-duty testing. The SAP would also be required to report information on the follow-up testing plan.

The requirements of this rule would also affect motor carriers employing owner-operators. The drug and alcohol testing regulations in part 382 impose requirements upon employers and drivers; owner-operators can function as both. Currently, when an owner-operator acts as a driver for another employer, FMCSA requires that the employer treat the owner-operator as if he or she were an employee for the purposes of the employer's DOT drug and alcohol testing program. As a result, the proposed rule would require motor carriers employing owner-operators to treat those drivers as employees for purposes of querying and reporting to the database.

FMCSA primarily monitors motor carrier compliance with DOT drug and alcohol test program requirements through motor carrier compliance reviews and new entrant safety audits. In 2010, the Agency and its State partners conducted new entrant audits and compliance reviews on approximately 50,000 motor carriers. Although FMCSA and its State partners have significantly increased the number of carriers that it reviews through enhanced new entrant rules and improved compliance programs, the Agency captures only a small percentage of the more than 520,000 motor carrier employers subject to the DOT drug and alcohol testing requirements. As a result, many motor carrier employers that do not have a testing program may go undetected. Based on the Agency's oversight activities, some motor carrier employers are not in compliance with the drug and alcohol program requirements. 3

Current regulations require motor carrier employers to implement DOT drug and alcohol testing programs for CDL holders and to provide FMCSA with a summary of their annual drug and alcohol testing results upon the Agency's request (49 CFR 382.403). Every year, FMCSA randomly selects and requires approximately 3,000 employers to submit a summary of testing program results through FMCSA's Drug and Alcohol Testing Survey. See Drug and Alcohol Testing Survey: 2008 Results, http://www.fmcsa.dot.gov/facts-research/research-technology/report/Drug_Alcohol_Survey_2008.pdf . The survey has been largely used to determine appropriate random testing rates for carriers and has not generally been used to monitor employer compliance with testing requirements. To improve employers' compliance with the requirement to implement a drug and alcohol testing program, the proposed rule would require all laboratories performing DOT drug testing for FMCSA-regulated employers to file annual summary reports identifying the motor carrier employers for whom they performed testing services. The FMCSA would use the data provided by the laboratories to identify employers of CDL drivers that do not have an active drug and alcohol testing program.

FMCSA is proposing to amend 49 CFR part 382 in the following ways.

Some of the proposed changes to 49 CFR part 382 in today's NPRM affect service agents. As a result, FMCSA proposes to amend existing § 382.103(a), “Applicability,” by adding an express statement that the rules codified in 49 CFR part 382 would apply to service agents.

FMCSA proposes to add a new definition, “Commercial Driver's License Drug and Alcohol Clearinghouse,” to existing § 382.107. The definition would explain that the Clearinghouse is a drug and alcohol testing information database to which this rule would require employers and service agents to report drug and alcohol testing information and that the rule would require employers and certain service agents to query for information on current and prospective employees' drug and alcohol test results. FMCSA proposes to add a definition for “positive alcohol test” to eliminate any confusion as to the type of alcohol test that constitutes a violation of the Agency's drug and alcohol program. As such FMCSA proposes to add a definition for “negative return to duty test result” to clarify that it is a negative drug test and/or an alcohol test with an alcohol concentration of less than 0.02.

FMCSA proposes to add a new § 382.123 that would require employers to provide specific information on the Alcohol Testing Form (ATF) and Federal Drug Testing Custody and Control Form (CCF) that identifies drivers by use of their CDL number and State of issuance. Recording CDL number and State of issuance as the primary method of identification serves a critical data quality function. Using CDLs along with State of issuance and their unique record numbers to identify drivers and their test information will prevent misidentification resulting from similar names or the use of nicknames or initials. This proposal would allow employers to shift from reliance on the use of Social Security numbers on the current ATF and CCF and to identify drivers by better utilizing other types of readily-available and reliable information. Paragraph (a) would require that the employer list the driver's CDL number and State of issuance in Step 1, section B of the ATF. Under this proposal, employers would not be permitted to record drivers' Social Security numbers, and the only permitted employee ID number would be the driver's CDL number and State of issuance. If the driver tests positive for alcohol in violation of 49 CFR parts 40 and 382, the employer or consortium responsible for reporting this information would use the driver's CDL number and State of issuance to report information to the Clearinghouse. Paragraph (a) would also require the employer to enter its USDOT or Internal Revenue Service (IRS)-issued Employer Identification Number (EIN) in Step 1, section C of the ATF, in addition to the information requested in that section of the ATF (i.e., employer name, street, city, State, and zip code). FMCSA would use the USDOT or EIN number as an employer identification to avoid confusion between similarly-named employers that enter information in the Clearinghouse. These numbers would be used to identify the employer for all aspects of the part 382 requirements, including reporting employers' drug and alcohol test results and the annual summary laboratory test reports that proposed § 382.404 would require.

Paragraph (b) would require the employer to record its USDOT number or EIN in Step 1, section A of the CCF. This provision would clarify that for FMCSA's purposes, the USDOT number or EIN fulfills the form's requirement for an employer “I.D. No.” Paragraph (b) would also require the employer to record the driver's CDL number and State of issuance in Step 1, section C of the CCF. This proposal would change the current requirement that permits employers to use Social Security numbers or employee ID numbers. Under this proposal, employers would not be permitted to record drivers' Social Security numbers, and the only permitted employee ID number would be the driver's CDL number and State of issuance. If the driver tests positive for drugs in violation of 49 CFR parts 40 and 382, the MRO responsible for reporting this information would use the driver's CDL number and State of issuance as employee identification to report information to the Clearinghouse.

FMCSA is aware that some self-employed drivers who are not required to have USDOT numbers use their Social Security numbers as their EINs for tax purposes. Any driver who is not comfortable using his or her Social Security number as an EIN could pursue one of two options. First, he or she could obtain a USDOT number. Drivers can get more information about obtaining USDOT numbers at http://www.fmcsa.dot.gov/registration-licensing/registration-licensing.htm . Second, he or she could change his or her EIN to a number that is different from his or her Social Security number. Drivers can get more information about changing their EINs by contacting the IRS.

FMCSA proposes to add a new § 382.217 that would provide that an employer must not allow a driver to operate a CMV if the Clearinghouse has a record that shows that a driver has not successfully completed the return-to-duty process required by 49 CFR 40.305. This section would implement that portion of MAP-21, codified at 49 U.S.C. 31306a(f)(3), that requires employers to use the Clearinghouse to determine whether any employment prohibitions exist for prospective CMV drivers.

FMCSA proposes to amend existing § 382.401(b)(1)(vi) to require employers to maintain records related to drivers' traffic citations that establish the employer's actual knowledge of an employee driving a CMV under the influence of drugs or alcohol in violation of §§ 382.205 and 382.213(b). This change clarifies that employers who have actual knowledge of these types of traffic citations must maintain a record of them, just as they must for other aspects of their drug and alcohol testing programs. As is currently required of all records that must be retained under § 382.401(b)(1), these records must be maintained for a minimum of 5 years.

FMCSA proposes to add a new § 382.404 to require each laboratory to submit to FMCSA an annual, aggregate statistical summary of test results for each motor carrier employer regulated under part 382 for which the laboratory performs DOT testing services. The reports would draw from the information laboratories are currently required to provide to employers under part 40, Appendix B, but would be limited to the annual number of drug tests conducted by type of test. This report would include all employers who are testing under the FMCSA and DOT requirements, and would be organized by employer's USDOT number or EIN. The filing date would coincide with the January filing date required under § 40.111(a). FMCSA proposes to require laboratories to file this information electronically. FMCSA envisions designating a specific format for filing, such as a commonly-available spreadsheet that the affected laboratories might already be using.

FMCSA would use this information to improve its enforcement efforts in identifying employers who are not in compliance with drug and alcohol testing requirements.

FMCSA seeks comments on what, if any, burden this reporting requirement would place on laboratories. Specifically, FMCSA would like comments on whether laboratories could use existing data collected as a part of existing business practices, or whether they would have to establish new processes and controls to collect and aggregate this information. In addition, FMCSA seeks comment on what type of electronic format would be the easiest and least burdensome method for reporting this information, or whether other less burdensome cost effective methods could be used to similarly identify employers who are not in compliance with drug and alcohol testing requirements.

Section 382.405(d) currently requires employers to make copies of all DOT drug and alcohol test results available to the Secretary, any DOT agency, or any State or local officials with regulatory authority over the employer. FMCSA proposes to extend these requirements to service agents who maintain records for an employer. This change is designed to make sure that the appropriate officials have access to all test results when employers use service agents to manage their drug and alcohol testing programs.

Section 382.405(e) currently authorizes the NTSB to require employers of CDL drivers involved in crashes under investigation to produce information on an employer's administration of post-accident alcohol and drug tests. FMCSA proposes to amend § 382.405(e) by adding a new paragraph authorizing FMCSA to provide the NTSB access to a CDL driver's records in the Clearinghouse when that driver is involved in a crash under investigation. This change would implement the statutory requirement, codified at 49 U.S.C. 31306a(i), that the Agency establish a process for NTSB access and would provide the NTSB with additional tools to help it fulfill its safety mission.

FMCSA proposes to amend § 382.409(c) by including the Clearinghouse in the list of entities to which an MRO or C/TPA is authorized to release a driver's drug test results. FMCSA also proposes to amend the title of § 382.409 to add the words “or consortium/third party administrator” so that it reads “Medical review officer or consortium/third party administrator record retention for controlled substances” to reflect more accurately the contents of the section.

FMCSA proposes to add a new § 382.415 that would require a driver to notify, in writing, all of his or her employers if he or she violates the drug and alcohol testing regulations in parts 40 or 382. Current regulations do not require drivers who work for more than one employer to report this information to their other employers. This change would place an affirmative obligation on drivers to report drug and alcohol violations to all current employers. The penalties in current § 382.507, which include civil and criminal penalties, would apply to all drivers who do not comply with this section.

Employers are reminded that, once each employer is notified that an employee has violated the drug and alcohol regulations, each employer must separately follow the return-to-duty provisions of Parts 40 and 382 before allowing an employee to serve in a safety-sensitive position. This includes the requirement that each employer needs to implement a follow-up test plan on its own for each employee.

Current § 382.601 requires employers to promulgate a policy on the misuse of drugs and alcohol and to provide educational materials on the subject to its new and current employees. FMCSA proposes to add a new § 382.601(b)(12), that would require employers to notify drivers that information about verified positive, adulterated, or substituted drug test results; positive alcohol test results; refusals to submit to any test required by subpart C of this part; employers' reports of actual knowledge that the driver received a traffic citation for driving a CMV while under the influence of alcohol or drugs; negative return-to-duty tests; employers' reports of completion of follow-up testing; and SAP reports will be reported to the Clearinghouse. Under this proposed requirement, employers must include all of this information in the educational materials they provide to their drivers, regardless of their internal employment policies regarding drivers violating drug and alcohol testing requirements. Employers may clarify internal employment policies pursuant to existing § 382.601(c).

FMCSA proposes adding a new subpart G, entitled “Requirements and Procedures for Implementation of the Commercial Driver's License Drug and Alcohol Clearinghouse,” to part 382. Subpart G would describe employers' and drivers' rights and responsibilities with respect to the Clearinghouse, including how employers and service agents become authorized to submit information to the Clearinghouse and to obtain information from the database. It also would establish procedures for correcting and/or updating information in the database. New subpart G would implement Congress's general mandate in MAP-21 that the Agency develop a Clearinghouse to track CDL holders' positive drug and alcohol test results, and refusals to submit to drug and alcohol tests.

New § 382.701 establishes employers' obligations to conduct pre-employment and annual queries of the database and prohibits them from using drivers in safety-sensitive positions when the queries return results showing certain violations of FMCSA's drug and alcohol program. The scope of the queries is covered later under proposed section 382.719.

Paragraph (a) would establish an employer's obligation to conduct pre- employment queries by prohibiting the employer from hiring drivers without first conducting a search of the Clearinghouse for drug and alcohol violations. Paragraph (a) would implement the requirement in MAP-21, codified at 49 U.S.C. 31306a(f)(3), that employers search the Clearinghouse for drug and alcohol violations prior to hiring an individual to drive a CMV. Paragraph (b) would establish an employer's obligation to conduct an annual query on all currently-employed drivers. Paragraph (b) would implement the requirement, codified at 49 U.S.C. 31306a(f)(4), that employers conduct annual searches of drivers' drug and alcohol test result histories using the Clearinghouse. These requirements, which would apply to all drivers subject to the drug and alcohol testing regulations at part 382, are designed to make all current and prospective employers aware of applicants' and employees' reported drug and alcohol violations. Paragraph (c) would implement the statutory provision, codified at 49 U.S.C. 31306a(b)(3)(A), that requires FMCSA to notify an employer if new information about a driver is entered into the Clearinghouse within seven days of an employer conducting a query under this section.

Paragraph (d) would allow employers to hire but would prohibit employers from allowing a driver to perform safety-sensitive functions if a query of the database shows any of the following violations of the drug and alcohol testing program: A verified positive, adulterated, or substituted drug test result; a positive alcohol test result; a refusal to submit to any test required by subpart C of this part; or an employer's report of actual knowledge that the driver received a traffic citation for driving a CMV while under the influence of alcohol or drugs. However, FMCSA does not propose to require employers and service agents to report all violations of subpart B.

Under current regulations, an employer may not allow a driver to perform safety-sensitive functions if the employer has actual knowledge that the driver has used drugs or alcohol. Actual knowledge is defined at § 382.107 to mean that an employer has actual knowledge of drug or alcohol use based on: Direct observation of an employee; information provided by the driver's previous employer(s); a traffic citation for driving a CMV while under the influence of drugs or alcohol; or an employee's admission of drug or alcohol use (except as provided in § 382.21). As a part of this proposed rule, employers would only be required to report to the Clearinghouse violations based on actual knowledge of employees receiving a citation for operating a CMV under the influence of drugs or alcohol. FMCSA proposes to require only this one category of actual knowledge violation because a traffic citation provides objective documentation on which to base a report to the Clearinghouse. In the case of direct observation or an employee's admission, the employer has the obligation to remove the employee from performing safety-sensitive functions until he or she completes the return-to-duty process, but there is no requirement to report the observation or admission to the Clearinghouse. In the case of information provided by a previous employer, current rules require the employer to report the information to prospective employers during the pre-employment background check required by §§ 40.25 and 391.23. If the background check reveals prior drug or alcohol violations for which the employee has not successfully completed the return-to-duty process, the employer is prohibited from hiring the employee to perform safety-sensitive functions, such as driving.

New § 382.701(d) would also provide that, if the database search revealed one of these violations, an employer could nonetheless allow a driver to perform safety-sensitive functions if the driver completed the return-to-duty process in subpart O of part 40. Under subpart O, a driver who has completed the return-to-duty process, but has not completed all follow-up tests, would also be able to perform safety-sensitive functions provided the current employer assumes responsibility for managing the follow-up testing process. Finally, an employer may allow a driver to perform safety-sensitive functions if, after the time for final adjudication has expired, a traffic citation for driving under the influence of drugs or alcohol does not result in a conviction (as defined at 49 CFR 383.5). This provision does not permit an employer to allow a driver to perform a safety-sensitive function after receiving a DUI traffic citation, prior to receiving a final adjudication. All of the above provisions of paragraph (d) would implement the employment prohibitions required by MAP-21, codified at 49 U.S.C. 31306a(f)(3) & (h)(1)(D).

In accordance with the statutory mandate codified at 49 U.S.C. 31306a(h)(1)(c), paragraph (e) would establish a record keeping requirement under which employers would be required to retain for three years a record of each query made under this section and the information received in response. However, FMCSA would also retain that information in the Clearinghouse for a minimum of three years for research and enforcement purposes. The Agency does not believe that it is necessary to burden employers with a redundant recordkeeping requirement. Accordingly, FMCSA will deem an employer to have satisfied this recordkeeping requirement if it conducts its query in accordance with a valid registration and the requirements of new subpart G.

In accordance with the requirements of 49 U.S.C. 31306a(h)(1)(A), new § 382.703 would prohibit disclosure of information in the Clearinghouse without a driver's consent. Paragraph (a) would require an employer to obtain consent from drivers before querying the database to determine if there is any information in the database on that driver. Paragraph (b) would require the employer to obtain written consent from the driver for access to information in the Clearinghouse.

These consents apply to the proposed requirement (§ 382.701) that employers conduct two types of queries: Pre-employment and annual. To reduce the burden on employers who would be required to conduct annual queries on multiple drivers at the same time, FMCSA envisions establishing two levels of queries. The first level, or “full query,” would grant employers or prospective employers access to the reportable information in a driver's record and would require the employer to obtain written consent from the driver for access to Clearinghouse information. FMCSA envisions using technology similar to that it currently uses in its Pre-Employer Screening Program (PSP) to verify a driver's identity. FMCSA would then allow the driver to designate which employer(s) or prospective employer(s) may view his or her record. All employers would be required to conduct a full query to satisfy the pre-employment query requirement.

The second level, or “limited query,” would not grant access to information in the Clearinghouse but would only indicate whether information exists in the database about a particular driver. Prior to conducting a limited query, an employer would have to obtain written consent from a driver. Employers would be required to retain this consent for 3 years after conducting a query and would be subject to audit.

Employers would only be able to use the limited query in connection with annual searches on currently employed drivers. If the query indicates that information exists in the Clearinghouse on a particular driver, then the employer would be required to conduct a full query, requiring the employer to obtain written consent from the driver to view the information in the Clearinghouse.

FMCSA envisions that employers would require drivers to give blanket consent to allow employers to conduct a limited query on an annual basis for the duration of their employment. However, no driver may give blanket consent for a full query of his or her information in the Clearinghouse. Drivers must give specific written consent each time they allow employers to view their personal information in the Clearinghouse.

Paragraph (c) would prohibit employers from using any driver who does not grant consent to search the Clearinghouse. If a driver refuses to grant consent for either the full or limited query, that driver could not perform any safety-sensitive function, including driving. Paragraph (d) would make clear that the consent granted under this proposed section would include consent for FMCSA to notify employers of information on a driver that was entered into the Clearinghouse within seven days of the employer conducting a query.

In accordance with Congress's mandate that drug and alcohol refusals and positive test results be reported to the Clearinghouse (codified at 49 U.S.C. 31306a(g)), new § 382.705 would establish reporting requirements, assigning responsibility for inputting and updating information to individuals and entities. Paragraph (a) would require MROs to report to the Clearinghouse within 1 business day all verified positive, adulterated, or substituted drug test results and refusals to test that require a determination by the MRO as specified in 49 CFR 40.191. In the event an MRO changes the outcome of a test in accordance with 49 CFR part 40, he or she would be required to report this change within 1 business day. This paragraph would also require the MRO to provide the reason for the test; the Federal Drug Testing CCF specimen ID number; the collection site name and address; the driver's name, date of birth, and CDL number, and the State that issued the CDL; the employer's name, city/State, and USDOT or EIN; the date of the test; the date of the verified result; and the test result. The test result would either be (1) positive; (2) refusal to test: Adulterated; (3) refusal to test: Substituted; or (4) refusal to provide a specimen. This information will allow tracking and identification of specific test results. Information about the driver (i.e., name, date of birth, CDL number, and issuing State) and the employer (i.e., name, address, and USDOT or EIN number) is intended to assist in making a positive identification of the driver in the Clearinghouse, because information about more than one driver with the same name may be present in the database.

FMCSA proposes to have MROs, rather than employers, report this information to the Clearinghouse. A large number of small motor carrier employers (approximately 86%) are responsible for administering drug and alcohol programs. Based on the Agency's observation that smaller employers have lower compliance rates with FMCSA's drug and alcohol testing program, due in part to the inherent business interests small companies have in retaining employees, the Agency believes that requiring MROs to report verified drug results would produce more accurate and comprehensive reporting to the Clearinghouse.

The above notwithstanding, under DOT rules, MROs do not verify alcohol test results. As a result, paragraph (b) would require employers to report the following information to the Clearinghouse: Alcohol test results with an alcohol concentration of 0.04 or greater; negative return-to-duty tests; drug and alcohol test refusals; reports that drivers have successfully completed all follow-up tests; and reports of actual knowledge that a driver received a traffic citation for driving a CMV under the influence of drugs or alcohol. This section would also require that employers report the reason for the test; the driver's name, date of birth, CDL number and the State that issued the CDL; the employer's name, address, and USDOT number or EIN; date of the test; date the result was reported; and test result. The test result would be one of the following: Negative (for return-to-duty tests only), positive, or refusal. This information is required so that information about drivers with similar or identical names is not erroneously posted to the wrong driver's record.

Employers would also be required to report each instance in which they have actual knowledge that an employee-driver received a traffic citation for driving a CMV under the influence of drugs or alcohol. The report would include the following information: The driver's name, date of birth, CDL number and State that issued the CDL; employer's name, address, and USDOT number or EIN; the date of the traffic citation; the date the employer became aware of the traffic citation; the name and State of the law enforcement agency issuing the traffic citation; the ticket or docket number associated with the citation; and the specific charge alleged in the traffic citation. This information is designed to ensure that a driver can identify any traffic citation reported to the database and verify that the information is correctly reported with the law enforcement agency that issued it. If the citation does not result in a conviction, a driver may request that FMCSA remove the employer's report from the Clearinghouse (see proposed § 382.719). In that circumstance, the information FMCSA proposes to require in this paragraph will be important for tracking the citation and its subsequent adjudication. To the extent an employer uses a TPA to comply with his or her reporting duties, the employer remains responsible for ensuring that the TPA makes the required reports.

Similar to the requirements in paragraph (b) that apply to employers, paragraph (c) would require C/TPAs acting on behalf of an employer who employs himself/herself, as required by 49 CFR 382.103(b), to report the following information to the Clearinghouse: Alcohol test results with an alcohol concentration of 0.04 or greater; negative return-to-duty tests; drug and alcohol test refusals; and reports that drivers have successfully completed all follow-up tests. This section would also require that C/TPAs report the reason for the test; the driver's name, date of birth, CDL number and the State that issued the CDL; the employer's name, address, and USDOT number or EIN; date of the test; date the result was reported; and test result. The test result would be one of the following: Negative (for return-to-duty tests only), positive, or refusal.

Paragraph (d) would require SAPs to report information to the Clearinghouse about drivers who begin the return-to-duty process. That would include information identifying the SAP and the driver; the date of the initial SAP assessment. The SAP would also enter the date the SAP determined that the driver successfully completed the education and/or treatment process and was eligible for return-to-duty testing; and the frequency, number, and type of required follow-up tests; the duration of the follow-up testing plan; and any subsequent modifications to the plan. This information is important to potential future employers so that they may require a negative return-to-duty test and comply with the follow-up testing requirements. SAPs would be required to report this information within 1 business day of determining that the driver has completed the return-to-duty requirements.

Paragraph (e) would require persons reporting information to the Clearinghouse to do so truthfully and accurately. FMCSA proposes to prohibit anyone from reporting false or inaccurate information. Anyone making an inadvertent error should make a correction immediately upon discovering the error. Anyone violating the provisions of this paragraph would be subject to the civil and criminal penalties set forth in current § 382.507, as well as any other applicable penalties.

In accordance with the statutory requirement, codified at 49 U.S.C. 31306a(g)(4), that requires the Agency to notify individuals about changes to their records in the Clearinghouse, new § 382.707 would require FMCSA to notify a driver when information about that driver is entered in, revised, or removed from the Clearinghouse. It would also require FMSA to notify a driver when information from the Clearinghouse is released to an employer and to state the reason for the release. The default method of notification would be to send a letter by U.S. Mail to the address on record with the SDLA that issued the driver's CDL. However, drivers would be able to provide an alternate address or method of communications, such as electronic mail. This section would require FMCSA to alert a driver each time a change occurred to his or her record in the Clearinghouse. The driver would then be able to access the Clearinghouse to review the new or revised data and request changes, if appropriate.

As mandated by MAP-21 and codified at 49 U.S.C. 31306a(j)(1), new § 382.709 would grant a driver the right to review information in the Clearinghouse about himself or herself, except as otherwise restricted by law, but reminds drivers that consistent with Part 40, drivers cannot obtain their follow-up testing plan.

New § 382.711, implements the statutory requirement, codified at 49 U.S.C. 31306a(h)(1) that the Agency establish a process for employers and/or their agents to request information from the Clearinghouse. This section would establish strict registration procedures for employers and service agents. Only employers and designated service agents—MROs, C/TPAs, and SAPs—would be authorized to submit information on a driver to the Clearinghouse. All Clearinghouse registrants would be required to provide their names, addresses, and telephone numbers, as well as any other information necessary to validate identity. In addition, employers would be required to submit their USDOT numbers or EINs and the name of the person or persons authorized to access the Clearinghouse. C/TPAs would also be required to identify the person or persons authorized to access the Clearinghouse. Employers and C/TPAs would be required to update annually the names of the people they authorize to access the Clearinghouse. MROs and SAPs would be required to provide a certification and evidence that they meet the DOT's qualifications and training requirements under 49 CFR part 40 in order to register.

DOT recognizes the uniqueness of “owner-operators” in the motor carrier industry. 49 CFR 40.355(f)(h) & (j) provide specific exceptions to enable service agents (e.g., SAPs, C/TPAs, and MROs) to better manage this situation where the employee is also the employer. Under 49 CFR 382.305, FMCSA requires owner-operators to participate in a consortium for random testing. New § 382.711(b) would expressly require employers that are owner-operators to identify the C/TPA that it uses for testing purposes and authorize that C/TPA to submit information on a driver, including themselves, to the Clearinghouse. This section would be mandatory for owner-operator and self-employed individuals and permissive for other employers that may use C/TPAs to perform testing services.

New § 382.713 would set forth the terms under which Clearinghouse registrations would remain active, or would be revoked or cancelled. The initial Clearinghouse registration term would be 5 years unless the Agency took action to revoke or cancel it. The Agency proposes to cancel any registrant that does not use the Clearinghouse to view or input information for 2 years. The Agency would also have the authority to revoke the Clearinghouse registration of entities who do not comply with Clearinghouse regulations.

If an entity's Clearinghouse privileges are revoked, they would still be obligated to perform all of the functions under this rule. If it was unable to do so because of revocation, then FMCSA staff would become involved and process the requests on behalf of the employers. There is no reason why an entity could not request reconsideration if its registration were revoked.

New § 382.715 would require employers to designate C/TPAs before the C/TPA could enter information relating to them into the Clearinghouse.

New § 382.717 would implement the statutory requirement, codified at 49 U.S.C. 31306a(j)(2), that the Agency provide a dispute resolution procedure to remedy administrative errors in an individual's Clearinghouse record. This section would establish procedures for drivers to petition FMCSA to correct inaccurate information in the Clearinghouse. Drivers would be required to submit a petition within 18 months of the date the information in question was reported to the Clearinghouse. Drivers would need to include information identifying themselves and the information they want to be corrected, the reasons they believe the information is inaccurate, and evidence supporting their challenge. Drivers would not be able to challenge the accuracy or validity of the alcohol or controlled substance test results under these new procedures. Nothing in this rule would change the limitation on a driver's ability to challenge the validity of a test result or a refusal.

The procedures that would be established under this section would be used to correct clerical errors, such as reporting results to the wrong driver's record; an incorrect name or CDL number; a misidentified test type, such as a pre-employment identified as a random test; or other inaccuracies in the reported data. These procedures could also be used to request that an employer's report of actual knowledge of a traffic citation for driving a CMV under the influence of drugs or alcohol be removed from the Clearinghouse if the citation did not result in a conviction. FMCSA would resolve petitions and notify the driver of its decision within 90 days of receiving a complete petition. The rule would also establish an expedited review to elevate those petitions seeking correction of critical information as opposed to those petitions addressing errors that do not impact an individual's ability to perform safety-sensitive functions. In this manner, the Agency will be able to provide the critical function served by this section and appropriately manage any number of petitions that seek less-critical, but nevertheless valid, requests for data correction. If resolution of the decision would affect the driver's ability to perform safety-sensitive functions, he or she could request expedited review. If FMCSA granted expedited review, it would inform the driver of its decision within 30 days of receiving a complete petition.

This section would also give drivers the opportunity to request administrative review of FMCSA's disposition of a petition to correct information in the Clearinghouse. A driver challenging FMCSA's decision would be required to present his or her request in writing to the Associate Administrator for Enforcement and Program Delivery, along with an explanation of the error he or she asserts FMCSA made and documentation to support his or her position. The Associate Administrator would make a decision within 60 days, and this would constitute final Agency action.

With respect to the administrative review procedures for denials of requests for data correction in 382.717(f), we would note that this is not an appeal of a factual or evidentiary nature it is a second level of review of a data correction system. The Agency based the procedures for administrative review in the NPRM on existing procedures in FMCSA regulations where the administrative review is similarly based on “agency error.” See 49 CFR 385.15 (administrative review of safety ratings), 385.113 (administrative review of Mexican carrier safety ratings), 385.327 (administrative review of new entrant safety audits), 385.423 (administrative review of hazmat safety permit denials). None of these existing processes include an explicit standard for review, explanation of how decisions will be made by the identified deciding official, or evidentiary standards. None of these sections have been deemed inadequate. The standard, as here, is whether the Agency erred in making its initial decision. In addition, all petitioners will have the right to obtain counsel if they so choose.

New § 382.719 would provide that an employer seeking to determine whether an employment prohibition exists would not have access to information about a particular violation once certain conditions are met. FMCSA proposes that once a driver successfully completes all aspects of the return-to-duty process, information about a positive test result or a refusal will remain accessible to employers for a period of either three or five years. FMCSA proposes both options based on two provisions in MAP-21 that can be interpreted to require employers to have access to this information for either a three or five-year period. Compare 49 U.S.C. 31306a(f) (requiring employers to determine whether a driver has had an employment prohibition for a three-year period prior to hiring), with 49 U.S.C. 31306(g)(6) (requiring the Secretary to retain records in the clearinghouse for five years, and remove records after five years, “unless the individual fails to meet a return-to-duty or follow-up requirement under title 49, Code of Federal Regulations”).

Based on this analysis, FMCSA proposes the following requirements to determine when records will no longer be available for review by employers conducting queries of the database: (1) The SAP reports that the driver has successfully completed the prescribed education and/or treatment as required by 49 CFR 40.305 and is eligible for return-to-duty testing; (2) the employer or C/TPA reports that the driver has received negative return-to-duty test results; (3) the driver's present employer or employer's consortium (for owner/operators) reports that the driver has successfully completed all follow-up tests as prescribed in the SAP report in accordance with §§ 40.307, 40.309, and 40.311; and (4) 3 years have passed since the date of the violation determination. As an alternate to subparagraph (4), FMCSA proposes to limit the time period during which an employer could access information about a violation that the driver has addressed by successful completion of the return to duty process to a period of five years from the date of violation instead of three years. FMCSA seeks comment on whether three or five years from the date of the violation is the appropriate amount of time to make this test result information available after a driver has completed the return-to-duty process.

Regardless of whether three years or five years has passed since the date of the violation determination, this section would also provide that violation information would remain in the Clearinghouse indefinitely and be available to employers conducting a query if a driver failed to complete the return-to-duty process. The above notwithstanding, FMCSA will remove information about a traffic citation for driving a CMV under the influence of drugs or alcohol within 2 business days of making the determination that it did not result in a conviction. This section would also make clear that FMCSA could continue to use data removed from the Clearinghouse for research, auditing, and enforcement purposes.

As authorized by 49 U.S.C. 31306a(e), new § 382.721 would establish the Agency's ability to collect reasonable fees from entities that are required to query the Clearinghouse. The Agency would be prohibited from collecting fees from drivers accessing their own records.

New § 382.723 would prohibit anyone from accessing the Clearinghouse except as authorized by this proposed rule. It would also prohibit anyone from reporting inaccurate or misleading information to the Clearinghouse. No one would be permitted to disclose or disseminate any information obtained from the Clearinghouse, except as otherwise authorized by law. As required by statute, codified at 49 U.S.C. 31306a(h)(1)(D), employers would be specifically prohibited from using information from the Clearinghouse for any purpose other than to assess or evaluate whether a driver is prohibited from operating a CMV. Employers would be further prohibited from divulging any such information to anyone not directly involved in that assessment or evaluation, as required by 49 U.S.C. 31306a(h)(1)(E)(ii). Anyone who violates this rule would be subject to the civil and criminal penalties established by existing § 382.507. In addition, employers and service agents remain subject to the requirements concerning “Confidentiality and Release of Information” found in 49 CFR part 40, subpart P. These provisions are incorporated and made applicable to motor carrier employers in 49 CFR 382.105. This section would not, however, prohibit FMCSA from accessing the information in the Clearinghouse for research or enforcement purposes. For example, FMCSA could use the information in the database to identify trends in testing data that could help the Agency focus its oversight activities.

In accordance with Congress's mandate in MAP-21 (codified at 49 U.S.C. 31306a(h)(2), new § 382.725 would grant each State chief commercial driver's license official the right to access information in the Clearinghouse about an applicant for a commercial driver's license for the purpose of determining whether that applicant is qualified to operate a CMV. The applicant is not required to grant prior consent; an applicant is deemed to have granted consent by virtue of applying for a commercial driver's license. The chief commercial driver's license officials are required to protect the privacy and confidentiality of the information they receive under this proposed section. Failure to comply with the terms of this proposed section would result in the official losing his or her right of access.

As directed by Congress in MAP-21 (codified at 49 U.S.C. 31306a(k), new § 382.727 would establish civil and criminal penalties for violations of the proposed Clearinghouse regulations. As stated above, 49 CFR 382.507 already establishes civil and criminal liability for employers and drivers that violate any provision of 49 CFR part 382. However, new § 382.727 would extend civil and criminal liability to all employees, medical review officers and service agents for violations of 49 CFR subpart G.

Table 1 summarizes the obligations of each entity responsible for reporting information to the Clearinghouse database.

Table 2 summarizes the conditions under which entities would be able to view information in the Clearinghouse.

Table 3 summarizes the types of queries that an employer is required to conduct.

This proposed rule is a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review. The Office of Management and Budget has reviewed it under that Order. It requires an assessment of potential costs and benefits under section 6(a)(3) of that Order. A draft Regulatory Impact Analysis (RIA) is available in the docket where indicated under the “Public Participation and Request for Comments” section of this preamble. A summary of the RIA follows:

All employers subject to the drug and alcohol testing regulations would be required to query the database (1) on an annual basis to examine each driver's positive test record and (2) as part of a prospective driver's pre-employment screening process.

Given the established, sizeable success of mandatory testing programs on crash reduction, 4 5 concrete improvements in the process of disseminating positive-test results and making them accessible to employers are expected to bring substantial benefits.

The Agency estimates about $187 million in annual benefits from increased crash reduction from the rule—$53 million from the annual queries and $134 from the pre-employment queries. FMCSA estimates about $186 million in total annual costs, which include costs for: Employers to complete the annual ($28 million) and pre-employment ($10 million) queries; employers and drivers to designate service agents and report driver information ($3 million); various entities to report positive tests ($1 million) and to register, verify authorization, and become familiar with the rule ($5 million); consent to release driver information ($35 million); clearinghouse development and records management ($3 million); and the cost for drivers to go through the return-to-duty process ($101 million). The estimated costs are about equal to its benefits: Total net benefits of the rule are just $1 million annually. The ten-year projection of net benefits is $8 million when discounted at seven percent and $9 million when discounted at three percent. However, estimated benefits include only those associated with reductions in CMV crashes. FMCSA could not precisely quantify improved health, quality-of-life improvements, and increased life expectancy for CMV drivers. The Agency believes these non-quantified benefits are significant, and, if they were included in the benefits estimates, would clearly demonstrate the positive net benefits of this rule. The table below summarizes these net-benefit estimates.

The RIA contains sections describing the benefits and costs associated with implementing the following provisions of the proposed rule:

a. Employers would be required to query the Clearinghouse annually for each of their drivers in order to ascertain if any of them failed drug or alcohol tests during the previous year.

b. Prospective employers would be required to query the Clearinghouse as part of their pre-employment screening process of potential hires in order to ascertain if a prospective employee failed a drug or alcohol test with a previous employer or prospective employer.

c. Employers would be required to designate (and submit authorization for) their C/TPAs and SAPs with the Clearinghouse.

d. MROs would report verified positive controlled-substances test results for CDL drivers to the Clearinghouse. Each test would be identified as pre-employment, post-accident, random, reasonable suspicion, return-to-duty, or follow-up. MROs would also be required to report certain drug test refusals to the Clearinghouse.

e. FMCSA would notify each driver testing positive that information about them has been reported to, revised or removed from the Clearinghouse. The drivers would also have the opportunity to review this information.

f. SAPs would report to the Clearinghouse information about the evaluation and treatment process as well as the number of required follow-up tests to be given after a return-to-duty test.

g. Employers or C/TPAs acting on the employer's behalf would report verified alcohol test results at or above 0.04 alcohol concentration for CDL drivers to the Clearinghouse, subsequent follow-up test results stemming from the initial test at or above 0.04 alcohol concentration, and refusals. Each test would be identified as pre-employment, post-accident, random, reasonable suspicion, return-to-duty, or follow-up. Employers or TPAs would also report negative return-to-duty test results.

h. All employers subject to 49 CFR part 382, or C/TPAs acting on the employer's behalf would report information on refusals to test.

i. Employers would be required to report actual knowledge of a driver's traffic citation for driving a CMV under the influence of drugs or alcohol).

j. Employers, C/TPAs, MROs, and SAPs would be required to register with the Clearinghouse.

k. Employers (and C/TPAs) would be required to verify, on an annual basis, the names of person(s) authorized to report and obtain information from the Clearinghouse.

l. Written consent must be obtained from the driver prior to release of information from the Clearinghouse.

m. All drug-testing laboratories would submit employer specific summary reports of test results directly to FMCSA annually.

The benefits to the rule derive from reductions in crashes due to the additional information on employee-failed and refused drug and alcohol tests disseminated to employers solely because of the annual and pre-employment queries. This represents information that employers would not otherwise know about and act on.

The current drug-testing program is estimated to generate $160 million in annual crash-reduction benefits from 35,145 annual positive tests, which averages to approximately $4,600 per positive drug test ($160 million/35,145, rounded to the nearest hundred). The mandated annual query in the proposed rule would result in 9,200 instances of employer alerts to positive drug tests of their drivers that current employers would not otherwise have known about. A requirement that disseminates additional information on 9,200 other positive testing drivers can be estimated to generate the same proportion of benefits that the 35,145 from the current program generates. If 35,145 positive tests and consequent alerts generate $160 million in benefits, then 9,200 additional alerts would generate $42 million in benefits (($160 million/35,145) = ($41.9 million/9,200), rounded to the nearest million).

The current alcohol testing program is estimated to generate $43 million in annual crash-reduction benefits from 3,465 annual positive alcohol tests, which averages to approximately $9,200 per positive alcohol test ($43 million/3,465, rounded to nearest hundred). The mandated annual query in the proposed rule would result in 900 instances of employer alerts to positive tests of their drivers that current employers would not otherwise have known about. A requirement that disseminates additional information on 900 other positive testing drivers can be estimated to generate the same proportion of benefits that the 3,465 from the current program generates. If 3,465 positive tests and consequent alerts generate $43 million in benefits, then 900 additional alerts would generate about $11 million in benefits (($43 million/3,465) = ($11.2 million/900), rounded to the nearest million).

With annual benefits to the drug-testing side of the annual queries estimated at $42 million and the alcohol-testing side at $11 million, total annual benefits to mandated annual queries are thus estimated at $53 million ($42 million + $11 million).

The mandated pre-employment query in the proposed rule would result in 23,100 instances of employer alerts to positive drug tests that prospective employers would not otherwise have known about. A requirement that disseminates additional information on 23,100 other positive drug testing drivers can be estimated to generate the same proportion of benefits that the 35,145 from the current program generates. If 35,145 positive tests and consequent alerts generate $160 million in benefits, then 23,100 additional alerts would generate $105 million in benefits (($160 million/35,145) = ($105.2 million/23,100), rounded to the nearest million).

The mandated pre-employment query in the proposed rule would result in 2,300 instances of employer alerts to positive alcohol tests of their drivers that prospective employers would not otherwise have known about. A requirement that disseminates additional information on 2,300 other positive testing drivers can be estimated to generate the same proportion of benefits that the 3,465 from the current program generates. If 3,465 positive tests and consequent alerts generate $43 million in benefits, then 2,300 additional alerts would generate $29 million in benefits (($43 million/3,465) = ($28.5 million/2,300), rounded to the nearest million).

With annual benefits to the drug-testing side of the pre-employment queries estimated at $105 million and the alcohol-testing side at $29 million, total annual benefits to mandated pre-employment queries are thus estimated at $134 million ($105 million + $29 million).

Given the $53 million in annual benefits from the information on positive tests disseminated because of the mandatory annual queries ($42 million drug and $11 million alcohol) and the $134 million in annual benefits from the information on positive tests disseminated because of the mandatory pre-employment queries ($105 million drug and $29 million alcohol), the total benefits to the proposed rule are $187 million annually . The table below presents these benefit totals.

Based on the annual benefits of $187 million, the 10-year benefit projection is $1.406 billion when discounted at 7 percent and $1.643 billion when discounted at 3 percent

By reducing drug and alcohol abuse by drivers, this rule could also lead to improved health, quality-of-life improvements, and increased life expectancy for drivers beyond those associated with reductions in vehicle crashes.

FMCSA estimates that the costs of the proposed rule total $186 million annually, which can be separated into nine categories. From the above descriptions of the requirements of the rule (a though m above): (a) The cost to employers to complete the annual queries of their drivers is estimated at $28 million annually; (b) the cost to prospective employers to complete pre-employment queries as part of the pre-employment screening process is $10 million annually; (c) the cost to employers to designate their C/TPAs and SAPs to input driver information is $3 million annually; (d, e, f, g, h, and i) the cost to MROs, SAPs, C/TPAs, and employers to report positive tests to the Agency totals $1 million annually; (j and k) the cost for employers, C/TPAs, MROs, and SAPs to register with the Agency, verify persons authorized to access, and become familiar with the new processes (this familiarization is not, per se, “required” by the rulemaking, but is an obvious result of it) is $5 million annually: (l) The cost to process access requests is $35 million annually, (m) the cost to FMCSA to develop the clearinghouse and manage driver records is $3 million annually, the cost for drivers to undergo the return-to-duty process is $101 million annually, and the cost for laboratories to submit annual reports of test results to FMCSA is insignificant (less than $1,500). These components of the cost estimate are presented in the table below and FMCSA seeks comment on the estimates summarized here and discussed further in the RIA.

Based on the annual cost of $186 million, the ten-year cost projection would be $1.398 billion when discounted at 7 percent and $1.634 billion when discounted at 3 percent.

The Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA), (5 U.S.C. 601-612), requires Federal agencies to consider the effects of the regulatory action on small business and other small entities and to minimize any significant economic impact. The term “small entities” comprises small businesses and 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. Accordingly, DOT policy requires an analysis of the impact of all regulations (or proposals) on small entities, and mandates that agencies shall strive to lessen any adverse effects on these businesses. The initial Regulatory Flexibility Analysis (IRFA) must cover the following topics:

A 1999 bus crash in New Orleans resulted in 22 passenger fatalities. The driver of the motor-coach had failed pre-employment drug testing when applying for previous positions. He had also failed to disclose on his employment application that a previous employer had fired him after he tested positive for a controlled substance. His employer at the time of the crash did not know about any of this.

As a result, the National Transportation Safety Board (NTSB) made recommendations to the Agency pertaining to the reporting of CMV driver drug and alcohol testing results. Specifically, the NTSB recommended that FMCSA “develop a system that records all positive drug and alcohol test results and refusal determinations that are conducted under the U.S. Department of Transportation (USDOT) testing requirements, require prospective employers to query the system before making a hiring decision, and require certifying authorities to query the system before making a certification decision.” This proposed rulemaking addresses the NTSB's recommendation.

Two recent Government Accountability Office (GAO) reports discuss “job hopping” by CMV drivers after failing, or refusing to submit to, drug or alcohol tests (see: GAO-08-600 and GAO-08-0829R). The GAO identified and verified 43 cases (based on insider information supplied by a third party to a Congressman) where CMV drivers had tested positive for illegal drugs (such as cocaine, marijuana, and amphetamines) with one employer and within 1 month tested negative with another employer. In its recommendations to Congress, the GAO advocated a national database and this rulemaking as possible methods to eliminate the job-hopping problems.

The purpose of this rule is to mandate that employers annually query the Clearinghouse to determine whether each of their drivers has tested positive for illegal drug or alcohol use in the previous year. Additionally, the rule mandates that employers query the Clearinghouse as part of their pre-employment screening process of prospective drivers.

The purpose of the annual query is to diminish or eliminate the problem of a currently-employed CDL holder testing positive for illegal drug or alcohol use with another or prospective employer, but then simply continuing to operate CMVs with his or her current employer without that employer knowing and acting on the positive test.

The purpose of the pre-employment query is to diminish or eliminate the problem of a driver with previous positive tests seeking and obtaining work without prospective employers knowing and acting on the information. This could occur if a driver is fired for a positive test—for example, failing a post-accident or reasonable-suspicion test—but does not inform future employers about the previous employer that fired her.

This could also occur if a new driver entering the workforce tests positive for drugs or alcohol during a pre-employment test, waits for the drugs to leave her system, then takes and passes another pre-employment test and gets hired without the employer having any knowledge of the previously failed pre-employment test.

The Agency proposes to revise 49 CFR part 382, Controlled Substances and Alcohol Use and Testing, to establish a database, identified as the “Commercial Driver's License Drug and Alcohol Clearinghouse,” for reporting of verified positive, adulterated, or substituted drug test results; positive alcohol test results; refusals; and negative return-to-duty test results. Under the proposed rule, motor carrier would be required to query the Clearinghouse for drug and alcohol test result information on employees and prospective employees. The proposed rule is intended to increase compliance with drug and alcohol testing requirements.

FMCSA has general authority to promulgate safety standards, including those governing drivers' use of drugs or alcohol while operating a CMV. The Motor Carrier Safety Act of 1984 (Pub. L. 98-554, Title II, 98 Stat. 2832, October 30, 1984) (the 1984 Act) provides authority to regulate drivers, motor carriers, and vehicle equipment and requires the Secretary to prescribe minimum safety standards for CMVs. The Omnibus Transportation Employee Testing Act of 1991 (OTETA) (Pub. L. 102-143, Title V, 105 Stat. 917, at 952, October 28, 1991, codified at 49 U.S.C. 31306) mandated the alcohol and controlled substances (drug) testing program for DOT. OTETA required the Secretary of Transportation to promulgate regulations for alcohol and drug testing for persons in safety-sensitive positions in four modes of transportation, motor carrier, airline, railroad, and mass transit.

Carriers are not required to report revenue to the Agency, but are required to provide the Agency with the number of CMVs they operate, when they register with the Agency, and to update this figure biennially. Because FMCSA does not have direct revenue figures for all motor carriers, CMVs serve as a proxy to determine the carrier size that would qualify as a small business given the SBA's revenue threshold. In order to produce this estimate, it is necessary to determine the average revenue generated by a CMV.

With regard to truck CMVs, the Agency determined in the Hours-of-Service Supporting Documents Rulemaking RIA  6 that a CMV produces about $173,000 in revenue annually (adjusted for inflation to 2012 dollars). 7 According to the SBA, motor carriers with annual revenue of $25.5 million are considered small businesses. 8 This equates to about 147 CMVs (147.4 = $25,500,000/$173,000). Thus, FMCSA considers motor carriers of property with 147 CMVs or fewer to be small businesses for purposes of this analysis. The Agency then looked at the number and percentage of property carriers with recent activity that would fall under that definition (of having 147 CMVs or fewer). The results indicate that at least 99 percent of all interstate property carriers with recent activity have 147 CMVs or fewer. 9 This amounts to 515,000 carriers (99 percent of 520,000 active motor carriers = 514,800, rounded to the nearest thousand). Therefore, an overwhelming majority of interstate carriers of property would be considered small entities.

To provide a conservative estimate on the impact of small entities, the Agency assumes that every active motor carrier would be subject to this regulation because under full participation all carriers would complete annual and pre-employment queries. Hence the rule applies to all (estimated) 515,000 motor carriers considered small entities.

Assuming there are 1.05 drivers per CMV  10 and a maximum of 147 CMVs per small entity, FMCSA estimates that at most 154 drivers (154.35 = 147 × 1.05) would be annually queried by a small entity. With an annual average of 1,876,000 drug pre-employment tests conducted on 4 million CDL drivers, the estimated rate of pre-employment tests per population would be 47 percent (0.469 = 1,876,000/4,000,000). With the assumption that this rate is proportionate to a 154-driver entity, it would result in about 72 pre-employment tests (47 percent of 154 drivers) and consequently 72 pre-employment queries per year, on average. In total, the maximum number of annual and pre-employment queries that a small entity may encounter would be 226 per year (154 annual + 72 pre-employment).

At ten minutes per query, 38 hours would be required to complete 226 queries (37.67 = 226 queries × 1/6 queries per hour). About another half-hour would be necessary to designate and verify a C/TPA (10 minutes), register with the Clearinghouse (10 minutes) and become familiar with the rule (10 minutes). In total, then, a 154-driver small entity would need to spend 38.5 hours (38 + 1/2 ) to comply with the rule.

The occupational salary of a bookkeeping, accounting, or auditing clerk is taken as the median of $16.91 per hour (BLS, May 2012). 11 Two adjustments are made to this hourly compensation estimate. First, employee benefits are estimated at 50 percent of the employee wage. 12 Second, the employee wage and benefits are increased by 27 percent to include relevant firm overhead. 13 Applying the estimated 50 percent of wages for employee benefits and 27 percent for overhead results in $32.21 in hourly compensation for the clerk ($32.21 = $16.91 × (1 + 0.50) × (1 + 0.27). Given $32.21 per hour for 38.5 hours, the annual cost of the queries incurred by a bookkeeping clerk would be $1,240 ($1,240.22 = 38.5 × $32.21, rounded to the nearest dollar) for a 154-driver small entity.

In addition, a fee would be required to access the Clearinghouse during the query process. A full query would cost $5 and a limited query would cost $2.50. Full queries are required by all pre-employment screening. Given 72 pre-employment queries for a 154-driver small entity, fees for access would be $360 (72 × $5). If an annual query indicates that information exists on a particular driver in the Clearinghouse, then a limited query would lead to a full query. As explained in Section 7.6, there are an estimated 512,000 full queries, annually. Given 4,000,000 drivers in the industry, there would be a 12.8 percent chance (512,000/4,000,000 = 0.128) that a driver would require a full query during an annual screening. Therefore, a 154-driver small entity is estimated to perform about 20 full queries annually (154 × 0.128 = 19.7). The amount of limited queries to be performed would be 134 (154 total queries—20 full queries). Accordingly, the cost of access requests for annual queries is $335 (134 × $2.50) for limited queries and $100 (20 × $5) for full queries. In sum, the annual cost of fees for access for pre-employment and annual queries is $795 ($360 + $335 + $100) for a 154-driver small entity.

The maximum possible cost to a small entity thus totals $2,035 annually ($1,240 + $795). This sets the maximum cost for a small entity as defined by the SBA Most motor carriers, however, employ significantly fewer drivers than the estimated 154 SBA limit. The Agency estimates that nearly 75 percent of motor carriers employ three drivers or less. 14 Under this proposed rule, a motor carrier would incur approximately $13.22 per driver ($2,035/154 drivers) annually. Accordingly, a motor carrier that employs four drivers—a more typical carrier in the industry—would pay less than $40 annually for this testing.

The table below summarizes the cost analysis.

There are an estimated 82,900 annual positive drug (75,800) and alcohol (7,100) test-results at full participation (including refusals). Each positive drug test result would be reported by an MRO. Each positive alcohol test would be reported by an employer or a C/TPA. Each driver's subsequent return-to-duty process for positive test results and test refusals would be reported by an SAP. Ninety-nine percent of motor carriers, MROs, C/TPAs, and SAPs are most likely small entities. FMCSA estimates that bookkeeping clerks would perform this reporting.

FMCSA is not aware of any other rules which conflict with the proposed action. The proposed rule would require laboratories to report summary test information on each motor carrier covered by FMCSA's drug and alcohol rules for which they perform tests. The purpose of this requirement is to help FMCSA identify motor carriers that do not comply with mandatory drug and alcohol testing requirements. Currently, there exists a DOT-wide requirement for laboratories to report summary information on testing services provided to DOT-regulated entities, but does not require the information to be broken down on a carrier-by-carrier basis. The DOT-wide report overlaps with the proposed rule in the sense that it contains some of the same aggregate information that would be required under the proposed rule. However, since the reports do not contain summary information specific to each motor carrier for which the laboratory provide services, FMCSA cannot use this information to identify non-compliant motor-carriers. In addition the Agency requests drug and alcohol testing summary reports from approximately 3,000 employers per year through FMCSA's Drug and Alcohol Testing Survey. This information is not collected from every covered motor carrier. Instead, the purpose of the survey is to produce nationally representative estimates for drug and alcohol usage rates among CDL drivers, in order to determine whether to increase or decrease random testing rates in accordance with 49 CFR 382.305(c).

The Agency did not identify any significant alternatives to the rule that could lessen the burden on small entities without compromising its goals or the Agency's statutory mandate. Because small businesses are such a large part of the demographic the Agency regulates, providing alternatives to small business to permit noncompliance with FMCSA regulations is not feasible and not consistent with sound public policy.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532, et seq. ) requires Agencies to evaluate whether an Agency action would result in the expenditure by State, local and tribal governments, in the aggregate, or by the private sector, of $151 million or more (as adjusted for inflation) in any one year, and if so, to take steps to minimize these unfunded mandates. The proposed rulemaking would result in private sector expenditures of $186 million, which is in excess of the $151 million threshold. The estimated costs are about equal to its benefits: Total net benefits of the rule are just $1 million annually. The ten-year projection of net benefits is $8 million when discounted at seven percent and $9 million when discounted at three percent. However, estimated benefits include only those associated with reductions in CMV crashes. FMCSA could not precisely quantify improved health, quality-of-life improvements, and increased life expectancy for CMV drivers. The Agency believes these non-quantified benefits are significant, and, if they were included in the benefits estimates, would clearly demonstrate the positive net benefits of this rule.

This proposed 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.

FMCSA has analyzed this proposed action under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. We have determined preliminarily that this rulemaking would not create an environmental risk to health or safety that would disproportionately affect children.

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

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. FMCSA recognizes that, as a practical matter, this rule may have an impact on the States. Accordingly, by letters sent March 28, 2011, the Agency sought advice from the National Governors Association (NGA), National Conference of State Legislators (NCSL), and the American Association of Motor Vehicle Administrators (AAMVA) on the topic of developing a database that the Agency believes may increase the effectiveness of its drug and alcohol testing program. (Copies of the letters are available in the docket for this rulemaking.) FMCSA offered NGA, NCSL, and AAMVA officials the opportunity to meet and discuss issues of concern to the States. FMCSA did not receive a response to this letter. State and local governments will also be able to raise Federalism issues during the comment period for this NPRM.

In addition, § 32402 of MAP-21 preempts State and local laws inconsistent with the Clearinghouse. Preemption specifically applies to the reporting of drug and alcohol tests, refusals and any other violation of FMCSA's drug and alcohol testing program. MAP-21 does not preempt State laws related to a driver's CDL or driving record.

The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities do not apply to this program.

Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520), a Federal agency must obtain approval from OMB for each collection of information it conducts, sponsors, or requires through regulations. FMCSA analyzed this proposal and preliminarily determined that its implementation would create a new information collection burden on CDL holders, motor carriers, and entities that provide services as part of the FMCSA's mandatory alcohol and controlled substances testing process under 49 CFR part 382. FMCSA will seek approval of the information collection requirements in a new information collection to be entitled “Commercial Driver's License Drug and Alcohol Clearinghouse.”

The collected information encompasses information that is generated, maintained, retained, disclosed, and provided to, or for, the Agency under a proposal for a database that will be entitled the “Commercial Driver's License Drug and Alcohol Clearinghouse” or Clearinghouse.

DOT currently has approval for two information collections for its alcohol and controlled substances testing programs: (1) The Federal Chain of Custody and Control Form, OMB control number 0930-0158, and (2) the U.S. Department of Transportation Alcohol and Controlled Substances Testing Program, OMB control number 2105-0529. Although the proposed Clearinghouse will obtain information from the forms covered by the two information collections, this proposal does not create any revisions or additional burden under those collections.

This proposal would create a new information collection to cover the requirements set forth in the proposed amendments to 49 CFR parts 382. These amendments would create new requirements for CDL drivers, carriers/employers of CDL drivers, MROs, SAPs, and C/TPAs to register with the new database, which would be created and administered by the FMCSA. Clearinghouse registration will be a prerequisite to both placing information in the database and obtaining information from the database. Access to information in the database will be strictly limited and controlled, and available only with the consent of the CDL holders about whom information is sought.

Prospective employers of CDL drivers would be required to query the Clearinghouse to determine if job applicants have controlled substance or alcohol testing violations that should preclude them, under existing FMCSA regulations in part 382, from carrying out safety-sensitive functions. Employers will also be required to query the database once annually for information about drivers whom they currently employ. Carriers, C/TPAs that perform testing and other services for carriers, MROs, and SAPs will place information into the database about alcohol and controlled substances testing violations. The proposed rule contains procedures for correcting information in the database and specifies that most interactions with the database will be carried out using electronic media.

The total burden to respondents for queries, designations, registration, familiarization, reporting, and recordkeeping to the Clearinghouse is estimated at about 1.86 million hours annually. The hours attributed to each activity are presented in the table below.

In addition to the NEPA requirements to examine impacts on air quality, the Clean Air Act (CAA) as amended (42 U.S.C. 7401 et seq.) also requires FMCSA to analyze the potential impact of its actions on air quality and to ensure that FMCSA actions conform to State and local air quality implementation plans. The additional reductions to air emissions from either of the alternatives are expected to fall within the CAA de minimis standards and are not expected to be subject to the Environmental Protection Agency's General Conformity Rule (40 CFR parts 51 and 93).

FMCSA has analyzed this proposed rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. While FMCSA's analysis shows a small reduction in fuel used due to eliminating traffic idling caused by CMV crashes, we have determined preliminarily that it would not be a “significant energy action” under that Executive Order because it would not be likely to have a significant adverse effect on the supply, distribution, or use of energy.

FMCSA conducted a privacy impact assessment of this rule as required by section 522(a)(5) of division H of the FY 2005 Omnibus Appropriations Act, Public Law 108-447, 118 Stat. 3268 (Dec. 8, 2004) [set out as a note to 5 U.S.C. 552a]. The assessment considers any impacts of the final rule on the privacy of information in an identifiable form and related matters. FMCSA has determined that this NPRM would impact the handling of PII. FMCSA has also determined the risks and effects the rulemaking might have on collecting, storing, and sharing PII and has examined and evaluated protections and alternative information handling processes in developing the proposal in order to mitigate potential privacy risks. The PIA for this proposed rulemaking is available for review in the docket for this rulemaking.

For the reasons discussed in the preamble, the Federal Motor Carrier Safety Administration proposes to amend 49 CFR part 382 as follows: