This rule is issued under Marketing Agreement and Order No. 906, as amended (7 CFR part 906), regulating the handling of oranges and grapefruit grown in the Lower Rio Grande Valley in Texas, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Orders 12866, 13175, and 13563.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

This rule relaxes the minimum size and grade requirements for grapefruit prescribed under the order. This rule relaxes the minimum size requirement for grapefruit from 3 5/16 inches to 3 inches in diameter and reduces the minimum grade requirement for small-sized grapefruit. This rule will provide additional grapefruit to meet market demand and will help maximize fresh shipments. These changes were unanimously recommended by the Committee at a meeting on December 11, 2013.

Section 906.40 of the order provides, in part, authority to establish minimum grade and size requirements for Texas citrus. Section 906.340 of the rules and regulations includes Table II that specifies the numerical size designations and diameters used to delineate the available pack sizes for grapefruit. Section 906.365 specifies the minimum grade and size requirements for fresh shipments of Texas grapefruit.

At its meeting, the Committee discussed the impact the recent freeze in California had on the citrus crop and agreed the freeze had reduced the amount of fruit available for shipment to the fresh market. They also discussed the decline in citrus production in Florida caused by citrus greening and other diseases. The Committee believes this creates a shortage of fruit available to supply the fresh fruit market, which the Texas citrus growers and handlers should fill. The Committee noted that additional fruit was available from the Texas citrus industry. However, the fruit is smaller in size and would not meet the order's current size and grade requirements. The Committee also recognized that consumers are now showing a preference for smaller-sized fruit. The Committee believes relaxing the requirements would make more fruit available to fill the market shortfall caused by the decline in production from other growing regions and provide smaller-sized fruit to meet consumer demand.

Consequently, to make more fruit available for shipment to the fresh market and to meet consumer demand, the Committee recommended a relaxation of the size and grade requirements for grapefruit. This rule changes the minimum size requirement for grapefruit from 3 5/16 inches (size 56) to 3 inches (size 64) in diameter and adds size 64 to the available pack sizes for grapefruit listed under Table II in § 906.340, as well as adding language concerning pack and sizing requirements.

Currently, fruit sized 48 (3 9/16 inches) and larger must meet a minimum grade requirement of a “Texas Choice” as defined in § 906.137 of the order, while size 56 fruit must meet the more restrictive grade of a U.S. No. 1. This rule relaxes the minimum grade for a size 56, establishing a minimum grade of “Texas Choice” for both size 56 and size 64 grapefruit. This makes the minimum grade consistent for all available sizes.

The Committee believes relaxing these size and grade requirements will make more fruit available to meet market demand, helping to maximize fresh shipments and increasing returns to growers and handlers.

The Committee also recommended a relaxation in the minimum size requirement for oranges covered under the order. This change is being considered under a separate action.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf.

There are 13 registered handlers of Texas citrus who are subject to regulation under the marketing order and approximately 150 producers of grapefruit in the regulated area. Small agricultural service firms, which include handlers, are defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201).

According to National Agricultural Statistics Service data, the average f.o.b. price for Texas grapefruit during the 2012-13 season was $24.10 per box, and total fresh shipments were approximately 3 million boxes. Using the average f.o.b. price and shipment data, and considering a normal distribution, the majority of Texas grapefruit handlers could be considered small businesses under SBA's definition. In addition, based on production data, grower prices, and the total number of Texas citrus growers, the average annual grower revenue is below $750,000. Thus, the majority of handlers and producers of grapefruit may be classified as small entities.

This rule relaxes the size and grade requirements for grapefruit prescribed under the order. This rule relaxes the minimum size requirement for grapefruit from 3 5/16 inches (size 56) to 3 inches (size 64). This action also relaxes the minimum grade requirement for size 56 fruit from a U.S. No. 1 to a “Texas Choice” and establishes the minimum grade for a size 64 as a “Texas Choice.” These changes are expected to make additional fruit available for shipment to the fresh market, maximize shipments, provide additional returns to handlers and growers, and respond to consumer demand for small-sized fruit. Authority for these changes is provided in § 906.40. This rule amends the provisions in §§ 906.340 and 906.365. The Committee unanimously recommended these changes at its December 11, 2013, meeting.

This rule is not expected to increase costs associated with the order's requirements. Rather, it is anticipated that this action will have a beneficial impact. Reducing size and grade requirements will make additional fruit available for shipment to the fresh market. The Committee believes this will provide additional fruit to fill the shortage caused by the reduced amount of fruit available from other growing regions and will provide the opportunity to fulfill growing consumer demand for smaller-sized fruit. This action will also provide an outlet for fruit that may otherwise go unharvested, maximizing fresh shipments and increasing returns to handlers and growers. The benefits of this rule are expected to be equally available to all fresh grapefruit growers and handlers, regardless of their size.

An alternative to this action would be to maintain the current minimum requirements for domestic shipments of grapefruit. However, leaving the requirements unchanged would not make any additional fruit available nor would it provide smaller-sized fruit to meet consumer demand. Therefore, this alternative was rejected.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189, Generic Fruit Crops. No changes in those requirements as a result of this action are necessary. Should any changes become necessary, they would be submitted to OMB for approval.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large Texas citrus handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

AMS is committed to complying with the E-Government Act, to promote the use of the internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

In addition, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Further, the Committee's meeting was widely publicized throughout the Texas citrus industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the December 11, 2013, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue. Finally, interested persons are invited to submit comments on this interim rule, including the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about the compliance guide should be sent to Jeffrey Smutny at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

This rule invites comments on changes to size and grade requirements currently prescribed for grapefruit under the marketing order for oranges and grapefruit grown in Lower Rio Grande Valley in Texas. Any comments received will be considered prior to finalization of this rule.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that this interim rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) The shipping season for grapefruit has already started; (2) this action relaxes current size and grade requirements; (3) the Committee unanimously recommended this change at a public meeting and interested parties had an opportunity to provide input; and (4) this rule provides a 60-day comment period and any comments received will be considered prior to finalization of this rule.

For the reasons set forth in the preamble, 7 CFR part 906 is amended as follows:

This rule is issued under Marketing Agreement and Order No. 906, as amended (7 CFR Part 906), regulating the handling of oranges and grapefruit grown in the Lower Rio Grande Valley in Texas, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

This rule is also issued under section 8e of the Act, which provides that whenever certain specified commodities, including oranges, are regulated under a Federal marketing order, imports of these commodities into the United States are prohibited unless they meet the same or comparable grade, size, quality, or maturity requirements as those in effect for the domestically produced commodities.

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Orders 12866, 13175, and 13563.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is not intended to have retroactive effect.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with USDA a petition stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with law and request a modification of the order or to be exempted therefrom. A handler is afforded the opportunity for a hearing on the petition. After the hearing, USDA would rule on the petition. The Act provides that the district court of the United States in any district in which the handler is an inhabitant, or has his or her principal place of business, has jurisdiction to review USDA's ruling on the petition, provided an action is filed not later than 20 days after the date of the entry of the ruling.

There are no administrative procedures which must be exhausted prior to any judicial challenge to the provisions of import regulations issued under section 8e of the Act.

This rule relaxes the minimum size requirement for oranges prescribed under the order. This rule relaxes the minimum size requirement for oranges from 2-6/16 inches to 2-3/16 inches in diameter. This rule will provide additional oranges to meet market demand and will help maximize fresh shipments. This change was unanimously recommended by the Committee at a meeting on December 11, 2013.

Section 906.40 of the order provides, in part, authority to establish minimum size requirements for Texas citrus. Section 906.340 of the rules and regulations includes Table I that specifies the numerical size designations and diameters used to delineate the available pack sizes for oranges. Section 906.365 specifies the minimum size requirement for fresh shipments of Texas oranges. Minimum grade and size requirements for oranges imported into the United States are currently in effect under § 944.312.

At its meeting, the Committee discussed the impact the recent freeze in California had on the orange crop and agreed the freeze had reduced the amount of fruit available for shipment to the fresh market. They also discussed the decline in citrus production in Florida caused by citrus greening and other diseases. The Committee believes this creates a shortage of fruit available to supply the fresh fruit market, which the Texas citrus growers and handlers should fill. The Committee noted that additional fruit was available from the Texas citrus industry. However, the fruit is smaller in size and would not meet the order's current size requirements. The Committee also recognized that consumers are now showing a preference for smaller-sized fruit. The Committee believes relaxing the requirements would make more fruit available to fill the market shortfall caused by the decline in production of oranges from other growing regions and provide smaller-sized fruit to meet consumer demand.

Consequently, to make more fruit available for shipment to the fresh market and to meet consumer demand, the Committee recommended a relaxation of the size requirements for oranges. This rule changes the minimum size requirement for oranges from 2-6/16 inches (size 138) to 2-3/16 inches (size 163) in diameter. This rule also adds size 163 to the available pack sizes for oranges listed under Table I in § 906.340, as well as adding language concerning pack and sizing requirements as appropriate.

The Committee believes relaxing the size requirement will make more fruit available to meet market demand, helping to maximize fresh shipments and increasing returns to growers and handlers.

Section 8e of the Act provides that when certain domestically produced commodities, including oranges, are regulated under a Federal marketing order, imports of that commodity must meet the same or comparable grade, size, quality, and maturity requirements. Since this rule changes the minimum size requirement under the domestic handling regulations for oranges, a corresponding change to the import regulations must also be considered.

Minimum grade and size requirements for oranges imported into the United States are currently in effect under § 944.312. Section 944.312(i) of the Fruit Import Regulations specifies that oranges imported into the United States are in most direct competition with oranges produced in the area covered by Marketing Order No. 906. This change relaxes the minimum size requirement for imported oranges from 2-6/16 inches to 2-3/16 inches. The relaxation in the minimum size requirement also has a beneficial impact for importers of oranges. This change allows a smaller-sized orange to be shipped to the United States, thereby increasing the amount of fruit available for shipment to the fresh market, thus benefiting importers.

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of businesses subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and the rules issued thereunder, are unique in that they are brought about through group action of essentially small entities acting on their own behalf. Import regulations issued under the Act are based on those established under Federal marketing orders.

There are 13 registered handlers of Texas citrus who are subject to regulation under the marketing order and approximately 150 producers of oranges in the regulated area. There are approximately 220 importers of oranges. Small agricultural service firms, which include handlers and importers, are defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201).

According to data from the National Agricultural Statistics Service and the industry and Committee, the average f.o.b. price for Texas oranges during the 2012-13 season was $25.30 per box, and total fresh orange shipments were approximately 1.5 million boxes. Using the average f.o.b. price and shipment data, the majority of Texas orange handlers could be considered small businesses under SBA's definition. In addition, based on production data, grower prices, and the total number of Texas citrus growers, the average annual grower revenue is below $750,000. Information from the Foreign Agricultural Service, USDA, indicates that the dollar value of imported fresh oranges ranged from approximately $71.2 million in 2008 to $107.4 million in 2012. Using these values, most importers would have annual receipts of less than $7,000,000 for oranges. Thus, the majority of handlers, producers, and importers of oranges may be classified as small entities.

Chile, South Africa, Mexico, and Australia are the major orange-producing countries exporting oranges to the United States. In 2012, shipments of oranges imported into the United States totaled around 119,000 metric tons. Of that amount, 51,510 metric tons were imported from Chile, 35,960 metric tons were imported from South Africa, 17,421 metric tons were imported from Mexico, and 11,100 metric tons arrived from Australia.

This rule relaxes the minimum size requirement for oranges covered under the order from 2-6/16 inches (size 138) to 2-3/16 inches (size 163) and makes a corresponding change to the orange import regulation. This change is expected to make additional fruit available for shipment to the fresh market, maximize shipments, provide additional returns to handlers and growers, and respond to consumer demand for small-sized fruit. Authority for this change is provided in § 906.40. This rule amends the provisions in §§ 906.340, 906.365, and 944.312. The Committee unanimously recommended this change at its December 11, 2013, meeting. The change in the import regulation is required under section 8e of the Act.

This action is not expected to increase the costs associated with the order's requirements or the orange import regulation. Rather, it is anticipated that this action will have a beneficial impact. Reducing the size requirement will make additional fruit available for shipment to the fresh market. The Committee believes that this will provide additional fruit to fill the shortage caused by the reduced amount of fruit available from other growing regions and will provide the opportunity to fulfill growing consumer demand for smaller sized fruit. This action will also provide an outlet for fruit that may otherwise go unharvested, maximizing fresh shipments and increasing returns to handlers and growers. The benefits of this rule are expected to be equally available to all fresh orange growers, handlers, and importers, regardless of their size.

An alternative to this action would be to maintain the current minimum requirements for domestic shipments of oranges. However, leaving the requirements unchanged would not make any additional fruit available nor would it provide smaller-sized fruit to meet consumer demand. Therefore, this alternative was rejected.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0189, Generic Fruit Crops. No changes in those requirements as a result of this action are necessary. Should any changes become necessary, they would be submitted to OMB for approval.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large citrus handlers. As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

AMS is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

In addition, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

Further, the Committee's meeting was widely publicized throughout the Texas citrus industry and all interested persons were invited to attend the meeting and participate in Committee deliberations. Like all Committee meetings, the December 11, 2013, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue. Finally, interested persons are invited to submit comments on this interim rule, including the regulatory and informational impacts of this action on small businesses.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/MarketingOrdersSmallBusinessGuide . Any questions about the compliance guide should be sent to Jeffrey Smutny at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

This rule invites comments on changes to the size requirements for oranges currently prescribed under the marketing order for oranges and grapefruit grown in Lower Rio Grande Valley in Texas and imported oranges. Any comments received will be considered prior to finalization of this rule.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that this interim rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

In accordance with section 8e of the Act, the United States Trade Representative has concurred with the issuance of this interim rule.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register because: (1) The shipping season for oranges has already started; (2) this action relaxes current size requirements; (3) the Committee unanimously recommended this change at a public meeting and interested parties had an opportunity to provide input; and (4) this rule provides a 60-day comment period and any comments received will be considered prior to finalization of this rule.

For the reasons set forth in the preamble, 7 CFR Parts 906 and 944 are amended as follows:

On October 11, 2013, the OCC published in the Federal Register the Basel III final rule (Basel III Capital Framework), 1 which revised the OCC's regulatory capital rules for national banks and Federal savings associations. The Basel III Capital Framework revised the capital framework at 12 CFR part 3 applicable to national banks, which included adding a new common equity tier 1 ratio requirement, revising the definitions of tier 1 and tier 2 capital, adopting a new standardized approach for certain banks, revising the advanced approaches, revising the market risk requirements, and integrating Federal savings associations into part 3. In addition, the Basel III Capital Framework amended the prompt corrective action rules at part 6 and integrated Federal savings associations into part 6.

As part of the process of implementing the Basel III Capital Framework, the OCC restructured the regulatory capital rules in part 3, which included redesignation of the risk-based capital rules, market risk requirements, and the advanced approaches, codified at appendixes A, B and C, as new subparts to part 3. Accordingly, this interim final rule makes technical, clarifying, and conforming amendments to the OCC's rules applicable to national banks and Federal savings associations, by providing new cross-references to parts 3 and 6, where necessary, and by deleting obsolete references to tier 3 capital, which was eliminated in the market risk rule. 2 In addition, this interim final rule makes various substantive and technical changes to the subordinated debt rules to clarify the applicable requirements, processes and procedures. Finally, the OCC notes that one consequence of revising the cross-references to the definitions of tier 1 and tier 2 capital in the new Basel III Capital Framework is that new definitions of tier 1 and tier 2 capital will be applicable with respect to the calculation of various statutory and regulatory limits in other rules that referenced the risk-based capital requirements in part 3. As part of the revisions to those cross-references, the OCC has looked at the effect that the changes in the risk-based capital would have on numerical limits in other regulations that are based on regulatory capital. As discussed in greater detail below, the OCC believes that the new definitions of capital in the Basel III Capital Framework are appropriate measures for the calculation of other various statutory and regulatory limits. However, the OCC is aware of the possibility of indirect effects of these regulatory changes and requests comment on this aspect of the new definition of capital.

The mandatory compliance date for the Basel III Capital Framework is January 1, 2014, for advanced approaches national banks and Federal savings associations, 3 and January 1, 2015, for all other national banks and Federal savings associations. In order to accommodate these different compliance dates, the OCC has retained the existing regulatory capital rules for calendar year 2014 for non-advanced approaches national banks and Federal savings associations. Therefore, the existing risk-based capital requirements and the market risk requirements will stay in place as 12 CFR part 3, appendixes A and B for non-advanced approaches national banks and 12 CFR part 167 for non-advanced approaches Federal savings associations, until January 1, 2015. Thereafter, the OCC may initiate a rulemaking to remove then-obsolete provisions of the rule.

The Basel III Capital Framework includes major revisions to the capital adequacy rules applicable to national banks and Federal savings associations. Apart from its role in establishing minimum regulatory capital requirements for the purposes of capital adequacy, regulatory capital historically also has served as a useful measure for numerous statutory and regulatory limits used as supervisory tools for safety and soundness purposes. Examples of such measures are the legal lending limits (12 CFR part 32) and limits on investment securities (12 CFR part 1).

While conforming amendments typically are straightforward, the Basel III Capital Framework introduced an additional level of complexity. As described above, the Basel III Capital Framework provided different mandatory compliance dates for advanced approaches national banks and Federal savings associations and non-advanced approaches national banks and Federal savings associations. As a result, from January 1, 2014, through December 31, 2014, the current regulatory capital rules at 12 CFR part 3, appendixes A and B and 12 CFR part 167 will apply to non-advanced approaches national banks and Federal savings associations, respectively. Accordingly, this interim final rule amends the OCC's rules to replace cross-references to the current regulatory capital rules with cross-references to both the Basel III final rule and the current regulatory capital rules, where appropriate.

The Basel III Capital Framework also integrated Federal savings associations into part 6, “Prompt Corrective Action.” Accordingly, this interim final rule replaces cross-references in various regulations to part 165, the Prompt Corrective Action rule formerly applicable to Federal savings associations, with cross-references to part 6, which applies to both national banks and Federal savings associations effective January 1, 2014. Finally, this interim final rule makes other non-substantive technical corrections.

This interim final rule clarifies and revises the OCC's rules governing subordinated debt to make those rules consistent with the Basel III Capital Framework. Unlike the current regulatory capital rules, the Basel III Capital Framework does not identify specific types of instruments that are included in regulatory capital. Instead, the Basel III Capital Framework lists criteria that an instrument must satisfy to be included in regulatory capital. While the OCC acknowledges that a national bank or Federal savings association may want to issue subordinated debt for liquidity or reasons other than raising regulatory capital, the OCC expects that most subordinated debt generally would qualify as tier 2 capital. A list of the criteria for an instrument to qualify as tier 2 capital can be found at 12 CFR 3.20(d):

• The instrument is issued and paid-in;

• The instrument is subordinated to depositors and general creditors of the national bank or Federal savings association;

• The instrument is not secured, not covered by a guarantee of the national bank or Federal savings association or of an affiliate of the national bank or Federal savings association, and not subject to any other arrangement that legally or economically enhances the seniority of the instrument in relation to more senior claims;

• The instrument has a minimum original maturity of at least five years. At the beginning of each of the last five years of the life of the instrument, the amount that is eligible to be included in tier 2 capital is reduced by 20 percent of the original amount of the instrument (net of redemptions) and is excluded from regulatory capital when the remaining maturity is less than one year. In addition, the instrument must not have any terms or features that require, or create significant incentives for, the national bank or Federal savings association to redeem the instrument prior to maturity; and

• The instrument, by its terms, may be called by the national bank or Federal savings association only after a minimum of five years following issuance, except that the terms of the instrument may allow it to be called sooner upon the occurrence of an event that would preclude the instrument from being included in tier 2 capital, a tax event, or if the issuing entity is required to register as an investment company pursuant to the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq. ). In addition, with respect to any call option:

○ The national bank or Federal savings association must receive the prior approval of the OCC to exercise a call option on the instrument.

○ The national bank or Federal savings association does not create at issuance, through action or communication, an expectation the call option will be exercised.

○ Prior to exercising the call option, or immediately thereafter, the national bank or Federal savings association must either: Replace any amount called with an equivalent amount of an instrument that meets the criteria for regulatory capital under § 3.20; or demonstrate to the satisfaction of the OCC that following redemption, the national bank or Federal savings association would continue to hold an amount of capital that is commensurate with its risk.

• The holder of the instrument must have no contractual right to accelerate payment of principal or interest on the instrument, except in the event of a receivership, insolvency, liquidation, or similar proceeding of the national bank or Federal savings association.

• The instrument has no credit-sensitive feature, such as a dividend or interest rate that is reset periodically based in whole or in part on the national bank's or Federal savings association's credit standing, but may have a dividend rate that is adjusted periodically independent of the national bank's or Federal savings association's credit standing, in relation to general market interest rates or similar adjustments.

• The national bank or Federal savings association, or an entity that the national bank or Federal savings association controls, has not purchased and has not directly or indirectly funded the purchase of the instrument.

• If the instrument is not issued directly by the national bank or Federal savings association or by a subsidiary of the national bank or Federal savings association that is an operating entity, the only asset of the issuing entity is its investment in the capital of the national bank or Federal savings association, and proceeds must be immediately available without limitation to the national bank or Federal savings association or the national bank's or Federal savings association's top-tier holding company in a form that meets or exceeds all the other criteria for tier 2 capital instruments under this section.

• Redemption of the instrument prior to maturity or repurchase requires the prior approval of the OCC.

• For an advanced approaches national bank or Federal savings association, the governing agreement, offering circular, or prospectus of an instrument issued after the date on which the advanced approaches national bank or Federal savings association becomes subject to 12 CFR part 3 under § 3.1(f) must disclose that the holders of the instrument may be fully subordinated to interests held by the U.S. government in the event that the national bank or Federal savings association enters into a receivership, insolvency, liquidation, or similar proceeding.

The OCC currently has separate rules for subordinated debt issued by national banks and Federal savings associations (12 CFR 5.47 and 12 CFR 163.81, respectively). In order to minimize confusion, this interim final rule does not integrate those rules. Instead, integration of those rules into a single subordinated debt rule applicable to both national banks and Federal savings associations may occur as part of a future rulemaking.

A national bank's issuance and prepayment of subordinated debt and inclusion of subordinated debt in tier 2 capital is governed by 12 CFR 5.47, Subordinated debt as capital. Section 5.47 provides procedural and substantive requirements applicable to subordinated debt. Under paragraph (b) of the current rule, an eligible national bank  4 is required to obtain prior OCC approval to issue or prepay subordinated debt only if: (1) The bank will not be an eligible bank after the transaction; (2) the OCC has previously notified the bank that prior approval is required; or (3) prior approval is required by law. All other national banks must receive prior OCC approval to issue or prepay subordinated debt. The major provisions of § 5.47 are summarized below.

Paragraph (e) provides that in order to qualify for inclusion in tier 2 capital, subordinated debt must meet the requirements in the OCC's regulatory capital rules (12 CFR part 3, appendix A, section 2(b)(4)) and must comply with the “OCC Guidelines for Subordinated Debt” in the OCC's Licensing Manual.

The regulatory capital rules in 12 CFR part 3, appendix A, limit the amount of subordinated debt that a bank may include in tier 2 capital, provide that in each of the last five years of the life of the instrument the amount eligible to be included in tier 2 capital is reduced by 20 percent of the original amount of that instrument, and require that subordinated debt included in tier 2 capital must meet the requirements of 12 CFR 3.100(f)(1) (2013). 5 By cross-reference, § 3.100(f)(1) (2013) further requires that issues of subordinated debt must: (1) Have original weighted average maturities of at least five years; (2) be subordinated to the claims of depositors; (3) state on the face of the instrument that it is not a deposit and is not insured by the FDIC; (4) be unsecured; (5) be ineligible as collateral for a loan by the issuing bank; (6) provide that once any scheduled payments of principal begin, all scheduled payments shall be made at least annually and the amount repaid in each year shall be no less than in the prior year; and (7) provide that no prepayment (including payment pursuant to an acceleration clause or redemption prior to maturity) shall be made without prior OCC approval unless the bank remains an eligible bank after the prepayment.

Paragraphs (f), (g), and (i) generally address automatic approval, information requested to be included in the after-the-fact notice, and compliance with securities offering disclosure rules.

In order to accommodate the different compliance dates for an advanced approaches bank and a non-advanced approaches bank, this interim final rule retains the current provisions of § 5.47 and makes amendments to clarify that the current rules will continue to apply to a non-advanced approaches bank prior to January 1, 2015. In addition, this interim final rule adds new paragraphs (j) through (p) that are based on the Basel III Capital Framework and provides that those paragraphs will be applicable to an advanced approaches bank beginning on the effective date of this interim final rule and to a non-advanced approaches bank on January 1, 2015. The OCC notes that these changes will apply to an advanced approaches bank when it files the Call Report for the first quarter of 2014. The OCC further notes that while paragraphs (b) through (i) and paragraphs (j) through (p) seem duplicative, this structure is intended to be temporary. Section 5.47 has been designed so that the paragraph numbering in the current rules remains unchanged until January 1, 2015. After January 1, 2015, when paragraphs (b) through (i) are no longer necessary, the OCC intends to delete them, along with all references to advanced approaches banks and non-advanced approaches banks.

Because the Basel III Capital Framework requires prior OCC approval for prepayment of subordinated debt, the interim final rule reorganizes paragraphs (j) through (p) by transaction type. As described in more detail below, the interim final rule retains current procedures for the issuance of subordinated debt, including the distinction between eligible and non-eligible banks, while the OCC adds new procedures for prepayment of subordinated debt included in tier 2 capital and prepayment in the form of a call option.

As mentioned above, paragraphs (b) through (j) represent the current version of § 5.47, which needs to be retained until January 1, 2015. With respect to those provisions, the OCC makes minimal technical and clarifying changes.

A new paragraph (a)(2), “Applicability,” explains which banks are subject to which set of rules, and when they are subject to the rules. Specifically, an advanced approaches bank will be required to use the new set of rules reflecting the new Basel III Capital Framework for tier 2 capital beginning as of the effective date of this interim final rule. Non-advanced approaches banks (generally speaking, standardized approach banks) will not be subject to the new rules until January 1, 2015. In the meantime, standardized approach banks will continue to use the current rules (in paragraphs (b) through (i)).

Consistent with the Basel III Capital Framework, an advanced approaches bank is defined as a national bank that is subject to 12 CFR part 3, subpart E; a non-advanced approaches bank is defined as a national bank that is not subject to 12 CFR part 3, subpart E.

Based on a review of §§ 5.47 and 3.100(f) (2013), the OCC believes the current rules will benefit from clarifications regarding what, if any, requirements apply to subordinated debt that is not included in tier 2 capital. While § 5.47 itself does not specifically apply any requirements to such subordinated debt, through § 3.100(f) (2013) the OCC's longstanding practice has been to apply those requirements to all subordinated debt. From a safety and soundness perspective, the OCC believes that it is important to apply certain basic requirements to all subordinated debt, regardless of whether it is included in tier 2 capital. Accordingly, new paragraph (l)(1) clarifies the list of requirements applicable to all subordinated debt. The interim final rule carries over the requirements in § 3.100(f) (2013) into paragraph (l)(1), with one minor change. Section 3.100(f) (2013) requires that subordinated debt must have an “original weighted average maturity” of at least five years. In order to be consistent with the Basel III Capital Framework, this interim final rule, in paragraph (l)(1)(i), adopts the phrase “minimum original maturity” of at least five years. 6 This interim final rule carries over in paragraph (l)(1)(vi) the requirement in § 3.100(f)(1)(v) (2013) that once any scheduled payments of principal begin, all scheduled payments shall be made at least annually and the amount repaid in each year shall be no less than in the prior year. This requirement appears to have been intended to ensure that an instrument that counted as secondary capital would have a sufficient degree of permanence and predictability to justify including it in secondary capital. 7 The OCC is considering whether to delete this requirement as no longer necessary from a supervisory perspective.

Question 1: The OCC invites comment on whether this payment requirement designed to ensure that a subordinated debt instrument has a sufficient degree of permanence and predictability is necessary, especially in light of the five year minimum maturity requirement.

Finally, the OCC notes that this interim final rule also carries over, in new paragraph (l)(1), the requirement in paragraph (i) of the current rule that a national bank must comply with the Securities Offering Disclosures Rules in 12 CFR part 16 when issuing subordinated debt.

Question 2: Given the clarifications in this interim final rule, are there any other requirements that the OCC should include?

New paragraph (l) clarifies the substantive requirements for subordinated debt to qualify as tier 2 capital. Specifically, paragraph (l)(2)(i) requires subordinated debt included in tier 2 capital to meet the requirements set forth in 12 CFR 3.20(d) of the Basel III Capital Framework and comply with applicable OCC guidance for subordinated debt. The requirements in 12 CFR 3.20(d) are described in II.B.1. of this Supplementary Information.

By virtue of the cross-reference to 12 CFR 3.20(d), the interim final rule makes clear that any subordinated debt intended to count as tier 2 capital must satisfy the Basel III Capital Framework. While the interim final rule does not enumerate each and every requirement, the new requirements related to acceleration and prepayment are worth noting. Under the tier 2 capital requirements in the Basel III Capital Framework, the holder of a subordinated debt instrument must have no contractual right to accelerate principal or interest on the instrument, except in the event of a receivership, insolvency, liquidation, or other similar proceeding of the bank. Thus, the interim final rule makes clear that subordinated debt that the bank does not intend to count as tier 2 capital may have broader acceleration clause triggers, while subordinated debt included in tier 2 capital may provide for acceleration only in the event of receivership, insolvency, liquidation, or similar proceedings.

With respect to call options, the Basel III Capital Framework provides that any exercise of a call option in the first five years following issuance is limited to: (1) A change in the applicable regulatory capital rules or policies that would preclude the instrument from being included in tier 2 capital; (2) the occurrence of a tax event; or (3) if the issuing entity is required to register as an investment company pursuant to the Investment Company Act of 1940. A bank may exercise a call option at any time after five years following issuance of the instrument. In addition, under the Basel III Capital Framework, prior to exercising a call option, or immediately thereafter, the bank must either: (1) Replace any amount called with an equivalent amount of an instrument that meets the criteria for tier 1 or tier 2 capital under 12 CFR 3.20; or (2) demonstrate to the satisfaction of the OCC that following redemption, the bank would continue to hold an amount of capital commensurate with its risk. The Basel III Capital Framework further clarifies in a footnote that a bank may replace tier 2 capital instruments concurrent with the redemption of existing tier 2 capital instruments. 8 In order to remain consistent with the Basel III Capital Framework, the interim final rule incorporates this interpretation as footnote 1 in new paragraph (n)(2)(ii).

Assuming that the subordinated debt satisfies the substantive requirements in paragraph (l), paragraph (m) sets out the procedural requirements that a bank must follow in order to issue or prepay subordinated debt. Specifically, as to prior OCC approval, these procedural requirements reflect, to a large extent, the requirements of the current subordinated debt rule and the approval requirements in the Basel III Capital Framework.

Under the current subordinated debt rule, prior OCC approval generally is required for the issuance and prepayment of all subordinated debt, except in limited instances where the bank qualifies as an “eligible bank.” The Basel III Capital Framework also explicitly requires prior OCC approval for the exercise of a call option, redemption prior to maturity, and repurchase of subordinated debt.

This interim final rule attempts to reconcile these varying approval requirements while carrying forward the existing exception for eligible banks. Consequently, this interim final rule clarifies that, while prior approval generally is required for the issuance and prepayment of all subordinated debt, in certain areas where the bank is an eligible bank, this requirement may be satisfied by an after-the-fact notice. One important qualification to the eligible bank exception, however, concerns the prepayment of subordinated debt. The prior approval requirements for such prepayments are set out in paragraph (m)(2), which distinguishes between prepayments on subordinated debt included in tier 2 capital and subordinated debt not included in tier 2 capital.

With respect to prepayment of subordinated debt that is not included in tier 2 capital, paragraph (m)(2)(i) adds a new threshold requirement, which provides that even if a bank is an eligible bank, prior OCC approval is required to prepay subordinated debt that is not included in tier 2 capital if the amount of the proposed prepayment is equal to or greater than one percent of the bank's total capital, as defined in 12 CFR 3.2. The OCC is adding this threshold because of a concern that, even in the case of an eligible bank, from a safety and soundness perspective the subordinated debt being prepaid may be significant enough, as a percentage of the bank's total capital, that the OCC should have a prior opportunity to review the prepayment.

Question 3: Is the new threshold appropriate? Should the percentage of total capital be higher or lower? Is there a different threshold that would serve the same purpose?

With respect to prepayment of subordinated debt that is included in tier 2 capital, consistent with the Basel III Capital Framework, the interim final rule requires all national banks to obtain prior OCC approval to prepay subordinated debt in accordance with the procedures in paragraph (n). New paragraph (n)(1)(i) sets forth the information that a bank must include in an application to issue or prepay subordinated debt. The information is nearly identical to the OCC current application requirements to issue or prepay subordinated debt, except for additional submission requirements necessary to implement the substantive Basel III Capital Framework requirements on the exercise of call options. Specifically, in addition to the general information required to be submitted under paragraph (n)(1)(ii)(A), paragraph (n)(1)(ii)(B) requires a national bank to submit either: (1) A statement explaining why the bank believes that following the proposed prepayment the bank would continue to hold an amount of capital commensurate with its risk; or (2) a description of the replacement capital instrument that meets the criteria for tier 1 or tier 2 capital under 12 CFR 3.20, including the amount of such instrument and the time frame for issuance.

New paragraph (n)(1)(iii) provides that the OCC retains the right to request additional relevant information as appropriate. Although there is no similar provision in the current rule, this right to request additional relevant information is consistent with the OCC's current licensing authority.

New paragraph (n)(2)(i) carries over the current automatic 30-day approval provisions which provide that an application is deemed approved by the OCC as of the 30th day after the filing is received by the OCC, unless the OCC notifies the bank prior to that date that the filing presents a significant supervisory or compliance concern, or raises a significant legal or policy issue. This is identical to the procedure in the current rule, with the addition of procedures to address call options set out in new paragraph (n)(2)(ii). A special procedure is required because, as described above, the Basel III Capital Framework requires a bank exercising a call option either to replace the instrument or satisfy the OCC that following redemption the bank would continue to hold an amount of capital commensurate with its risk. Therefore, the “deemed approved” procedure in paragraph (n)(2)(i) applicable for all other applications for prepayment is not consistent with the Basel III Capital Framework when call options are involved. Accordingly, new paragraph (n)(2)(ii) states that the bank must receive affirmative approval to exercise the call option and, if the OCC requires the bank to replace the subordinated debt, requires the bank to receive affirmative approval that the replacement capital instrument meets the criteria for tier 1 or tier 2 capital under 12 CFR 3.20. In addition, consistent with the Basel III Capital Framework, paragraph (n)(2)(ii) further requires that the bank must issue the replacement instrument prior to exercising the call option, or immediately thereafter, and clarifies in footnote 1 that a bank may replace tier 2 capital instruments concurrent with the redemption of existing tier 2 capital instruments. 9

New paragraph (n)(2)(iv) carries over the current transaction timing requirements, which provide that approval expires if a national bank does not complete the sale of the subordinated debt within one year of approval. This provision is generally the same as the current rule, with the addition of clarifying language necessary to address the issuance of replacement capital instruments.

The OCC notes that, consistent with longstanding practice, this interim final rule does not require the bank to notify the OCC or receive OCC prior approval to redeem subordinated debt in accordance with the stated maturity in the instrument.

Question 4: Do commenters agree with this approach? Are there any circumstances where the OCC should require notice or prior approval to redeem a subordinated debt instrument at maturity?

A Federal savings association's issuance of subordinated debt and mandatorily redeemable preferred stock (collectively referred to as “covered securities”) to be included in supplementary (tier 2) capital is governed by § 163.81, “Inclusion of subordinated debt securities and mandatorily redeemable preferred stock as supplementary capital.” This interim final rule amends § 163.81 to make it consistent with the Basel III Capital Framework and to make other non-substantive technical amendments. The Basel III Capital Framework's requirements for tier 2 capital are set forth at 12 CFR 3.20(d) and listed above in Section II.B.1. of the Supplementary Information . The OCC notes that this interim final rule does not create a single subordinated debt rule applicable to both national banks and Federal savings associations. The OCC may integrate the two rules into a single subordinated debt rule applicable to both national banks and Federal savings associations as part of a future rulemaking.

To comply with the Basel III Capital Framework, this interim final rule makes structural changes to § 163.81 that mirror the structural changes to the national bank rules for subordinated debt in § 5.47 described in Section II.B.3.ii. of the Supplementary Information . Specifically, this interim final rule retains the current structure of § 163.81 and makes amendments to clarify that the current rule will continue to apply to a non-advanced approaches savings association prior to January 1, 2015. In addition, this interim final rule adds new paragraphs (h) through (q) that comply with the Basel III Capital Framework and provides that those paragraphs are applicable to an advanced approaches savings association beginning on March 31, 2014, and a non-advanced approaches savings association on January 1, 2015. The OCC notes that, similar to the amendments to § 5.47, the amendments to § 163.81 are intended to be temporary. Section 163.81 has been structured in a manner so that the paragraph numbering in the current rules will remain unchanged, and after January 1, 2015, when paragraphs (a) through (g) are no longer necessary, the OCC intends to delete those paragraphs, along with all references to advanced approaches and non-advanced approaches savings associations. After paragraphs (a) through (g) are deleted, paragraphs (h) through (q) will be redesignated as paragraphs (a) through (j).

Because the Basel III Capital Framework requires prior OCC approval for prepayment of subordinated debt and imposes additional requirements when the prepayment is in the form of a call option, neither of which are included in the current § 163.81, this interim final rule adds new provisions requiring prior approval for prepayment of covered securities included in tier 2 capital. As described in more detail below, the interim final rule retains current procedures for the issuance of covered securities included in tier 2 capital and the distinction between expedited and standard processing, while new procedures are being added for prepayment of subordinated debt included in tier 2 capital and prepayment in the form of a call option.

For a non-advanced approaches savings association prior to January 1, 2015, the OCC retains the current rule with no substantive changes. The interim final rule revises paragraph (a) by renaming it “Applicability and scope” and adding a new paragraph (a)(1), “Applicability.” New paragraph (a)(1)(i) defines an advances approaches savings association as a Federal savings association that is subject to 12 CFR part 3, subpart E, and a non-advanced approaches savings association as a Federal savings association that is not subject to 12 CFR part 3, subpart E. New paragraph (a)(1)(ii) provides that an advanced approaches savings association must comply with new paragraphs (h) through (q) of this section beginning on March 31, 2014. New paragraph (a)(1)(iii) provides that a non-advanced approaches savings association, prior to January 1, 2015, must comply with paragraphs (a) through (g) of this section, and beginning on January 1, 2015, must comply with paragraphs (h) through (q) of this section. This interim final rule redesignates the scope section as paragraph (a)(2) and amends it to clarify that paragraphs (a) through (g) of § 163.81 apply to a non-advanced approaches savings association prior to January 1, 2015. In addition, this interim final rule adds a sentence at the end of paragraph (a)(2) clarifying that covered securities not included in tier 2 capital are subject to the requirements of § 163.80, “Borrowing limitations.” The OCC is adding this sentence, which appears in the thrift supervision applications handbook, 10 to clarify that there are some requirements that apply to covered securities not included in tier 2 capital. Finally, the interim final rule makes non-substantive, technical amendments to the current rule.

To comply with the requirements of the Basel III Capital Framework, this interim final rule adds new paragraphs (h) through (q), which are applicable to an advanced approaches savings association beginning on March 31, 2014, and a non-advanced approaches savings association beginning on January 1, 2015. Under new paragraph (h), “Scope,” a new paragraph (h)(1) provides the relevant dates on which advanced approaches and non-advanced approaches savings associations must comply with paragraphs (h) through (q) and, in order to comply with the Basel III Capital Framework, adds that those paragraphs also apply to the prepayment of covered securities included in tier 2 capital. In addition, this interim final rule adds the identical sentence described in Section II.B.4.iii.a. of the Supplementary Information, at the end of paragraph (h)(2) clarifying that covered securities not included in tier 2 capital are subject to the requirements of § 163.80, “Borrowing limitations.” This interim final rule adds new paragraph (h)(3) that carries over the definition of mandatorily redeemable preferred stock from the current regulatory capital rules for savings associations. 11 This is necessary because the Basel III Capital Framework does not define this term and the current regulatory capital rules for savings associations will sunset after the Basel III Capital Framework becomes effective for all savings associations.

To comply with the Basel III requirement that Federal savings associations must obtain prior OCC approval to prepay instruments included in tier 2 capital, this interim final rule adds new paragraph (i). Paragraph (i) provides that a savings association must obtain prior OCC approval to prepay covered securities included in tier 2 capital. Consistent with Basel III, paragraph (i) further provides that, for the purposes of this requirement, the term “prepayment” includes acceleration of a covered security, repurchase of a covered security, redemption of a covered security prior to maturity, and exercise of a call option in connection with a covered security.

New paragraph (j), “Application and notice procedures,” is divided into two parts: (1) An application or notice to include covered securities in tier 2 capital, and (2) an application to prepay covered securities included in tier 2 capital. The requirements for an application to prepay covered securities included in tier 2 capital contain general rules, and rules that apply if the prepayment is in the form of a call option. The requirements in paragraph (j)(1) for an application or notice to include covered securities in tier 2 capital remain the same as the requirements in the current rule. The final rule adds a new paragraph (j)(2), “Application to prepay covered securities included in tier 2 capital.” Because the Basel III Capital Framework requires OCC prior approval to prepay all instruments included in tier 2 capital, paragraph (j)(2)(i), “General,” provides that such a filing is subject to standard treatment under 12 CFR part 116, subpart E. Paragraph (j)(2)(ii)(A) implements the Basel III Capital Framework requirement that, prior to exercising a call option, or immediately thereafter, a Federal savings association must either: Replace any amount called with an equivalent amount of an instrument that meets the criteria for regulatory capital under 12 CFR 3.20, or demonstrate to the satisfaction of the OCC that following redemption, the savings association would continue to hold an amount of capital that is commensurate with its risk. The language in this provision mirrors the new language in the subordinated debt rule applicable to national banks. When the prepayment is in the form of a call option, paragraph (j)(2)(ii)(B) provides a special requirement that, if the OCC conditions its approval of repayment in the form of a call option on a requirement that a savings association must replace the covered security with a covered security of an equivalent amount that satisfies the requirements for a tier 1 or tier 2 instrument, the savings association must file an application to issue the replacement covered security and must receive prior OCC approval.

This interim final rule adds a new paragraph (k), “General requirements,” which provides that a covered security issued under this § 163.81 must satisfy the requirements for tier 2 capital in 12 CFR 3.20(d).

This interim final rule adds new paragraph (l), “Securities requirements for inclusion in tier 2 capital,” which addresses the form of a certificate evidencing a covered security and the disclosure of certain information. This interim final rule carries forward the disclosures required under the current rule, with an amendment to the requirement that a certificate must disclose that the savings association is required to obtain OCC approval before the acceleration of payment of principal on subordinated debt securities. In addition to acceleration, the Basel III Capital Framework requires prior OCC approval in the case of redemption prior to maturity, repurchase, or exercising a call option. Accordingly, this interim final rule adds those transactions to the disclosure. Also, since not all subordinated debt may include the ability to prepay in those circumstances, this interim final rule also adds the phrase, “where applicable” to clarify that the disclosure should include only those transactions that are provided for in the subordinated debt security.

New paragraph (l) carries over two provisions under the securities requirements of the current rule in paragraph (c)(2) and (3). The first requirement that is being removed is a requirement that covered securities must have an original weighted average maturity or original weighted average period to required redemption of at least five years. The OCC is removing this requirement because the Basel III Capital Framework already requires that an instrument included in tier 2 capital must have a minimum original maturity of at least five years. The second requirement we are removing addresses mandatory prepayment and provides the circumstances under which covered securities may provide for events of default or contain other provisions that could result in a mandatory prepayment of principal. This provision is being removed because it is inconsistent with the requirement in the Basel III Capital Framework that the holder of an instrument included in tier 2 capital must have no contractual right to accelerate payment of principal or interest on the instrument, except in the event of a receivership, insolvency, liquidation, or other similar proceeding of the Federal savings association.

This interim final rule carries over with no substantive changes the provisions that address review by the OCC, amendments, sale of covered securities, and reports as new paragraphs (m), (n), (o), and (q), respectively.

In order to comply with the Basel III Capital Framework, this interim final rule adds new paragraph (p), “Issuance of a replacement regulatory capital instrument in connection with exercising a call option.” Paragraph (p) provides that when a Federal savings association seeks prior approval to exercise a call option in connection with a covered security included in tier 2 capital, the OCC may require the savings association to issue a replacement covered security of an equivalent amount that qualifies as tier 1 or tier 2 capital under 12 CFR 3.20. If the OCC imposes such a requirement, paragraph (p) requires the savings association to complete the sale of the covered security prior to, or immediately after, the prepayment. As discussed in Section II.B.3.iv. of the Supplemental Information, consistent with the Basel III Capital Framework and amendments to the subordinated debt rule for national banks, the interim final rule adds a footnote clarifying that a savings association may replace tier 2 capital instruments concurrent with the redemption of existing tier 2 capital instruments.

The OCC's rules currently cross-reference the part 3 definitions of tier 1 and tier 2 regulatory capital as the basis for limits in other regulations that are based on capital. Examples of such limits are the lending limit and the limit applicable to investment securities. One consequence of this final rule, which revises cross-references to the definitions of tier 1 and tier 2 capital to pick up the definitions in the new Basel III Capital Framework, is that the new definitions of tier 1 and tier 2 capital will be applicable with respect to the calculation of these other regulatory limits for advanced approaches banks and advanced approaches savings associations on the effective date of this interin final rule and for non-advanced approaches banks and savings associations on January 1, 2015. In determining to revise the cross-references, the OCC looked at the potential effect of the changes in capital on numerical limits that are based on regulatory capital.

The OCC has reviewed the effect of cross-referencing the Basel III Capital Framework on other OCC limits based on the amount of a bank's or savings association's capital and surplus. 12 Our overall assessment of the effect of these changes is that for most FDIC-insured institutions, we do not expect reliance on the Basel III Capital Framework to have a significant impact on lending limits or other components of a bank's or savings association's activities that are linked to the amount of a bank's or savings association's capital and surplus. While the Basel III rule is tightening the definition of what may count towards a bank's or savings association's capital and surplus, we expect that banks and savings associations generally will increase the amount of capital rather than reduce the amount of assets, in order to comply with minimum capital requirements under the capital rules. In addition, we further anticipate that banks and savings associations generally will choose to hold an additional 2.5 percent of total risk-weighted assets, for a total of 10.5 percent of total risk-weighted assets, in order to remain “well capitalized” and avoid limitations on distributions and discretionary bonus payments imposed by the new capital conservation buffer. Therefore, the OCC believes that under the Basel III Capital Framework, banks and savings associations holding capital at minimum required amounts generally will be holding more capital than under current rules, and thus, their lending limits and other limits tied to the amount of their capital and surplus will be unambiguously higher.

Even with respect to national banks and Federal savings associations that experience decreasing capital-linked limits because of the Basel III changes, the OCC does not expect this to be a problem for most institutions. First, based on our analysis, most banks and savings associations will experience little change in capital and surplus under the Basel III Capital Framework relative to current rules. Second, most banks and Federal savings associations typically hold capital in excess of regulatory minimums. The Basel III changes could cause capital amounts to decrease or increase for these institutions. 13 Banks that encounter lower limits on capital-linked activities because of the Basel III changes can increase these activity limits by increasing the amount of capital they hold, which is generally the intent of capital-linked activity regulations. Finally, a number of banks and savings associations have internal limits on activities far below the statutory limit; for those institutions, there would be no impact on their level of activity. However, even if the reduced statutory limit becomes a binding constraint, those institutions can make appropriate adjustments to their capital.

In addition, we note that, due to differing compliance dates in the Basel III Capital Framework, non-advanced approaches banks and savings associations will not experience any impact on the limits based on capital until January 1, 2015. Furthermore, the Basel III Capital Framework provides various transitions for the capital conservation and countercyclical capital buffers, regulatory capital adjustments and deductions, and non-qualifying capital instruments, which provides institutions an opportunity to adjust their capital and surplus levels to accommodate desired levels of any capital-linked activities. Nevertheless, we advise any banks or savings associations that have concerns about the potential negative impact of these conforming amendments, particularly advanced approaches banks during 2014, to discuss those concerns with their supervisors.

While the OCC does not anticipate that the definitional changes to capital in the Basel III Capital Framework will have a material impact on a significant number of national banks and Federal savings associations, the OCC is sensitive to potential concerns about the impact of these changes on limitations based on capital. To address these concerns, the OCC intends to closely monitor and assess the impact of the implementation of the Basel III Capital Framework on such limitations. As part of this process, the OCC may issue a separate notice of proposed rulemaking if the OCC sees specific safety and soundness or other supervisory concerns.

Question 5: To assist the OCC in information gathering, we are requesting comments on the impact of changes in the definition of capital on a bank's or savings association's limits based on capital.

In addition to the specifically enumerated questions in the preamble, the OCC requests comment on all aspects of this interim final rule. The OCC requests that, for the specifically enumerated questions, commenters include the number of the question in their response to make review of the comments more efficient.

Pursuant to sections 553(b) and (d) of the Administrative Procedure Act (APA), 14 the OCC finds that there is good cause for issuing this interim final rule. The Basel III Capital Framework made major revisions to the capital adequacy rules applicable to national banks and Federal savings associations, including the substantive criteria and approval process for instruments included in tier 2 capital. All of those revisions to the OCC's capital adequacy rules were adopted through the notice and comment procedure in accordance with the APA. As described in the preamble to the Basel III Capital Framework, the agencies revised their regulatory capital requirements to promote safe and sound banking practices and implement Basel III and other aspects of the Basel III Capital Framework by adopting, among other things, rules intended to improve both the quality and quantity of a banking organization's capital.

This interim final rule revises §§ 5.47 and 163.81 to be consistent with those rules and makes other necessary clarifying and technical amendments to various regulations that impose regulatory limits based on capital. Because the mandatory compliance date for the Basel III Capital Framework is January 1, 2014, for advanced approaches nationals banks and Federal savings associations, such institutions will be required to comply with the Basel III Capital Framework when they file their Call Report for the first quarter of 2014. It is necessary to publish this interim final rule in order to clarify for banks and savings associations which capital rules are applicable with respect to subordinated debt and the various limits based on capital. For these reasons, the OCC has determined that issuing a notice of proposed rulemaking would be impracticable, unnecessary, or contrary to the public interest. Accordingly, the OCC finds good cause to issue this interim final rule.

The Riegle Community Development and Regulatory Improvement Act of 1994 requires that the effective date of new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on insured depository institutions shall be the first day of a calendar quarter that begins on or after the date the regulations are published in final form. 15 For the reasons described above, the OCC finds good cause to make this interim final rule effective March 31, 2014.

The Regulatory Flexibility Act (RFA)  16 generally requires an agency that is issuing a proposed rule to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. The RFA does not apply to a rulemaking where a general notice of proposed rulemaking is not required. 17 For the reasons described above, the OCC has determined, for good cause, that it is unnecessary to publish a notice of proposed rulemaking for this interim final rule. Accordingly, the RFA's requirements relating to an initial and final regulatory flexibility analysis do not apply.

Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1532, requires that an agency prepare a budgetary impact statement before promulgating any rule likely to result in a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector of $100 million or more, as adjusted for inflation, in any one year. The Unfunded Mandates Reform Act only applies when an agency issues a general notice of proposed rulemaking. Because the OCC is not publishing a notice of proposed rulemaking, this final rule is not subject to section 202 of the Unfunded Mandates Reform Act.

Under the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501, et seq. ), the OCC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid Office of Management and Budget (OMB) control number. The OCC has submitted the information collection requirements contained in this rule to OMB.

This interim final rule amends a number of regulatory provisions that have currently approved collections of information under the PRA. 18 The amendments adopted today do not change the rules in a way that substantively modifies the collections of information that OMB has approved. Therefore, the changes to these collections will be limited to adjustments in the number of responses or frequency of response.

One new collection of information is introduced by the interim final rule. In order to prepay subordinated debt in the form of a call option, in addition to the general information required to be submitted by a national bank under § 5.47(n)(1)(ii)(A) and by a Federal savings association under 12 CFR part 116, subpart A, a bank or savings association must submit either a statement explaining why it believes that, following the proposed prepayment, it would continue to hold an amount of capital commensurate with its risk, or a description of the replacement capital instrument that meets the criteria for tier 1 or tier 2 capital under § 3.20, including the amount of such instrument and the time frame for issuance.

Title: Prepayment of Subordinated Debt in the Form of a Call Option.

Frequency of Response: Event generated.

Affected Public: Businesses or other for-profit organizations.

Total Burden for § 5.47 after issuance of interim final rule:

Number of Respondents: 184.

Burden per Respondent: 1.30 hours.

Total Burden: 239 hours.

The OCC requests comment on:

a. Whether the information collection is necessary for the proper performance of the OCC's functions, and how the instructions can be clarified so that information gathered has more practical utility;

b. The accuracy of the OCC's estimates of the burdens of the information collection, including the validity of the methodology and assumptions used;

c. Ways to enhance the quality, utility, and clarity of the information to be collected;

d. Ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology; and

e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.

For the reasons set forth in the preamble, the Office of the Comptroller of the Currency amends 12 CFR Chapter I as follows:

On October 31, 2013, the FAA published in the Federal Register a notice of proposed rulemaking (NPRM) to establish controlled airspace at Eagle Airport, Eagle, AK (78 FR 65238). Interested parties were invited to participate in this rulemaking effort by submitting written comments on the proposal to the FAA. No comments were received. Subsequent to publication the FAA's Aeronautical Products discovered the legal description did not contain the statement that the airspace begins at 700 feet above the surface. The Docket Numbers entered in error in the ADDRESSES section also are corrected.

Class E airspace designations are published in paragraph 6005, of FAA Order 7400.9X dated August 7, 2013, and effective September 15, 2013, which is incorporated by reference in 14 CFR 71.1. The Class E airspace designations listed in this document will be published subsequently in that Order.

This action amends Title 14 Code of Federal Regulations (14 CFR) part 71 by establishing Class E airspace extending upward from 700 feet above the surface within a 2.5-mile radius of Eagle Airport, Eagle, AK, with a segment extending from the 2.5-mile radius to 8.5 miles west of the airport. Controlled airspace is needed to accommodate the new RNAV (GPS) standard instrument approaches and departures developed for the airport and enhances the safety and management of aircraft operations. This action adds a statement to the regulatory text to include that airspace extending upward from 700 feet above the surface. Additionally, the Docket numbers in the Addresses section are changed from FAA Docket No. FAA-2013-0017; Airspace Docket No. 13-AAL-1, to FAA Docket No. FAA-2013-0777; Airspace Docket No. 12-AAL-16. The Docket numbers in the Title block are correct. Except for administrative changes, and the changes listed above, this rule is the same as that proposed in the NPRM.

The FAA has determined this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. The FAA's authority to issue rules regarding aviation safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106 discusses the authority of the FAA Administrator. Subtitle VII, Aviation Programs, describes in more detail the scope of the agency's authority. This rulemaking is promulgated under the authority described in Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the FAA is charged with prescribing regulations to assign the use of airspace necessary to ensure the safety of aircraft and the efficient use of airspace. This regulation is within the scope of that authority as it establishes controlled airspace at Eagle Airport, Eagle, AK.

The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.

In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:

NASA has determined that this rulemaking meets the criteria for a direct final rule because it makes nonsubstantive changes to correct citations and titles. No opposition to the changes and no significant adverse comments are expected. However, if NASA receives significant adverse comments, it will withdraw this direct final rule by publishing a notice in the Federal Register . A significant adverse comment is one that explains: (1) Why the direct final rule is inappropriate, including challenges to the rule's underlying premise or approach; or (2) why the direct final rule will be ineffective or unacceptable without a change. In determining whether a comment necessitates withdrawal of this direct final rule, NASA will consider whether it warrants a substantive response in a notice and comment process.

Subpart 5 of part 1204, promulgated March 13, 1995 [30 FR 3378], establishes delegations and designations for NASA officials and other Government agencies acting on behalf of the Agency to carry out functions related to real estate and related matters, granting easements, leaseholds, permits, and licenses in real property, executing certificates of full faith and credit, and taking actions on liquidated damage. Sections 1204.501, 1204.503-1204.504, 1204.509 will be amended to correct citations and titles.

The National Aeronautics and Space Act (the Space Act), 51 U.S.C. 20113 (a), authorizes the Administrator of NASA to make, promulgate, issue, rescind, and amend rules and regulations governing the manner of its operations and the exercise of the powers vested in it by law.

Executive Orders 13563 and 12866 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). EO 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated as “not significant” under section 3(f) of EO 12866.

The Regulatory Flexibility Act (5 U.S.C. 601 et seq. ) requires an agency to prepare an initial regulatory flexibility analysis to be published at the time the proposed rule is published. This requirement does not apply if the agency “certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities” (5 U.S.C. 603). This rule removes one section from Title 14 of the CFR and, therefore, does not have a significant economic impact on a substantial number of small entities.

This direct final rule does not contain any information collection requirements subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq. ).

EO 13132, “Federalism,” 64 FR 43255 (August 4, 1999) requires regulations be reviewed for Federalism effects on the institutional interest of states and local Governments and, if the effects are sufficiently substantial, preparation of the Federal assessment is required to assist senior policy makers. The amendments will not have any substantial direct effects on state and local Governments within the meaning of the EO. Therefore, no Federalism assessment is required.

Accordingly, under the authority of the National Aeronautics and Space Act, as amended, U.S.C. 20113, NASA amends 14 CFR part 1204 as follows:

The Wantagh State Parkway Bridge has a vertical clearance in the closed position of 16 feet at mean high water and 20 feet at mean low water. The existing drawbridge operation regulations are listed at 33 CFR 117.5.

The waterway has seasonal recreational vessels and fishing vessels of various sizes. We contacted the New York Marine Trades Association and no objections were received.

The New York Department of Transportation requested a temporary deviation to facilitate public safety by allowing the anticipated large volume of vehicular traffic to safely evacuate the area following the annual Jones Beach Air Show on Saturday, May 24, 2014 and Sunday, May 25, 2014, over Memorial Day weekend.

Under this temporary deviation the Wantagh State Parkway Bridge at mile 15.4, across Sloop Channel, may remain in the closed position between 2:30 p.m. and 4 p.m. on Saturday, May 24, 2014 and Sunday, May 25, 2014.

Vessels that can pass under the bridge during the closed periods without a bridge opening may do so at all times. There are no alternate routes for vessel traffic.

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

A member of the Louisiana State Legislature requested a temporary deviation from the operating schedule on the SR 23 vertical lift span bridge, also known as the Judge Perez Bridge, across the Gulf Intracoastal Waterway (Algiers Alternate Route), mile 3.8, at Belle Chasse, Plaquemines Parish, Louisiana. The deviation requested allows the bridge to remain closed to navigation for an additional one hour in the evening, Monday through Friday, for two months.

The Louisiana Legislature makes this request to support and assist in the safe movement of increased vehicular traffic across the bridge during the evening hours, resulting from a change in the work schedule and increased work force related to a major plant reconstruction at the Conoco/Phillips Refinery in Alliance. This temporary deviation will also help to minimize the effects of the additional traffic on local residents.

Presently, in accordance with 33 CFR 117.451(b), the draw shall open on signal; except that, from 6 a.m. to 8:30 a.m. and from 3:30 p.m. to 5:30 p.m. Monday through Friday, except Federal holidays, the draw need not open for the passage of vessels.

This temporary deviation allows the vertical lift bridge to remain closed to navigation for one additional hour in the afternoon to extend the afternoon curfew hours from 3:30 p.m. to 6:30 p.m. Monday through Friday from Wednesday, March 5, 2014 through Wednesday, April 30, 2014. In case of an emergency, the bridge will be able to open for the passage of vessels.

The SR 23 vertical lift span drawbridge across the Gulf Intracoastal Waterway (Algiers Alternate Route), mile 3.8, at Belle Chasse, Louisiana has a vertical clearance of 40 feet above mean high water in the closed-to-navigation position and 100 feet above mean high water in the open-to-navigation position. Navigation on the waterway consists primarily of tugs with tows, commercial fishing vessels, and occasional recreational craft. Mariners may use the Gulf Intracoastal Waterway (Harvey Canal) to avoid unnecessary delays. The Coast Guard has coordinated this closure with the Gulf Intracoastal Canal Association (GICA). The GICA representative indicated that the vessel operators will be able to schedule transits through the bridge such that operations will not significantly be hindered. Thus, it has been determined that this closure will not have a significant effect on these vessels.

In accordance with 33 CFR 117.35, the draw bridge must return to its regular operating schedule immediately at the end of the effective period of this temporary deviation.

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

The Greenpoint Avenue Bridge, across Newtown Creek, mile 1.3, at New York City, New York, has a vertical clearance in the closed position of 26 feet at mean high water and 31 feet at mean low water. The existing drawbridge operation regulations are listed at 33 CFR 117.801(g).

The waterway is transited by commercial and seasonal recreational vessels of various sizes.

The bridge owner, New York City Department of Transportation, requested approval to allow the Greenpoint Avenue Bridge to remain in the closed position for up to six consecutive days followed by four days of full operation to facilitate bridge sandblasting and painting operations. The bridge painting closures can only be implemented between May and September in order to minimize impacts to commercial barge traffic carrying home heating oil upstream. The Coast Guard contacted all known commercial waterway users regarding this deviation and no objections were received.

Under this temporary deviation the draw of the Greenpoint Avenue Bridge may remain in the closed position at various times during this deviation for up to six consecutive days followed by four days of full bridge operation.

Each six day closure will be announced two weeks in advance in the Local Notice to Mariners (LNTM) along with a Broadcast Notice to Mariners (BNTM) to help facilitate marine transportation system planning.

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

Table of Acronyms DHS Department of Homeland Security FR Federal Register NPRM Notice of Proposed Rulemaking SNPRM Supplemental Notice of Proposed Rulemaking RNA Regulated Navigation Area A. Regulatory History and Information

The Coast Guard collaborated with the Hawaii Ocean Safety Team, the Industry Advisory Board and other industry partners in the initial development of this rule. On May 14, 2013, the Coast Guard published an NPRM in the Federal Register (78 FR 28170). The Coast Guard received a number of comments which, after careful consideration, prompted the Coast Guard to make significant changes to the originally proposed rule. On October 3, 2013, the Coast Guard published an SNPRM in the Federal Register (78 FR 61223), under the same docket number, which reflected changes from the original rule proposed based on comments received on the NPRM. The Coast Guard received a total of one comment on the SNPRM. That comment, along with the comments received during the initial NPRM state, are posted, without change, at http://www.regulations.gov. To view the comments in full go to http://www.regulations.gov, insert USCG-2012-0080 in the “SEARCH” box, and then click “SEARCH.” The following link will take you directly to the docket: http://www.regulations.gov/#!docketDetail;D=USCG-2012-0080.

The purpose of this rule is to provide vessels with an off-shore area to loiter in the event of a tsunami warning for Southern Oahu. In the event of a tsunami threat, both recreational vessels and commercial vessels may desire or be mandated to leave port to avoid potential damage to their vessel and the port. The creation of an off-shore area for vessels to loiter in an organized fashion is important to decrease confusion and unsafe conditions during the tsunami threat. This regulated navigation area is also crafted to decrease potentially dangerous off-shore traffic congestion between commercial and recreational vessel traffic by separating these classes of vessels.

The Coast Guard has met with industry partners, commercial mariners, and recreational boaters in the creation of this rule.

The statutory basis for this rulemaking is 33 U.S.C. 1231, which gives the Coast Guard, under a delegation from the Secretary of Homeland Security, regulatory authority to enforce the Ports and Waterways Safety Act. A regulated navigation area is a water area within a defined boundary for which regulations for vessels navigating within the area have been established to mitigate potentially hazardous conditions, such as vessel congestion, deemed to exist in that area. The purpose of this rulemaking is to provide greater safety for vessels and maritime commerce in the event of a tsunami threat.

The Coast Guard received a total of one comment on the SNPRM published on October 3, 2013, in the Federal Register .

The commenter suggested changes to the rule to more accurately reflect use of the 50-fathom curve as a point of reference. The coordinates of the RNA and staging areas have been modified to reflect a more accurate use of the 50-fathom line as the northern-most border for the RNA. Other non-substantive edits, intending only to simplify the language, were made to the final rule.

Honolulu Harbor has only one entrance for large commercial vessels and is the principle harbor of Hawaii's hub and spoke maritime commerce system. If, during an emergency, a marine incident were to occur off the southern shore of Oahu, especially near the entrance of Honolulu Harbor, the results could be devastating to Hawaii's economy and the maritime commerce system and the constituencies that rely heavily upon the system's viability.

Earthquakes off Chile and Japan in February 2010 and March 2011, respectively, resulted in tsunami threats to the Main Hawaiian Islands. These incidents emphasized the need to establish heightened safety measures, to ensure an orderly and organized evacuation plan, in order to protect the infrastructure of the southern coast of Oahu, Hawaii, including Honolulu Harbor.

In response to this risk, the Coast Guard is establishing a regulated navigation area designated as the Southern Oahu Tsunami Evacuation zone.

In the event of a tsunami warning, the Coast Guard Captain of the Port (COTP) for Honolulu will notify the public that an enforcement period is in effect for the duration of the emergency. At the conclusion of the threat, the COTP will notify the public when the RNA enforcement period is suspended or terminated. The COTP will use all available means to notify the public about the enforcement and suspension of the RNA. Methods of communication include, but are not limited to, radio broadcasts via VHF-HF, Marine Safety Information Broadcasts (MSIB's), telephone and email.

During the enforcement period, the COTP intends to deploy Coast Guard assets, if feasible, to ensure participating commercial and recreational vessels move to and stay within separate staging areas. Paragraph (b)(5) of § 165.1413 identifies an exclusionary area that will separate staging areas. This exclusionary area will measure 3.7 nautical miles long by one (1) nautical mile wide, centering lengthwise and along a line running seaward at 208 degrees southwest of the Honolulu Harbor Range light. When the RNA is being enforced, all vessels are required to remain outside the exclusionary area except for during transiting.

Three staging areas, outside of the exclusionary area, will be established. There will be one recreational vessel staging area to the west of the exclusionary area. This recreational staging area is intended for recreational vessels departing from and returning to the Keehi Lagoon area or other areas to the west of Honolulu Harbor. The staging area east of the exclusionary area is divided into two areas; a commercial staging area and a second recreational vessel staging area. This eastern recreational vessel staging area is intended for use by recreational vessels departing from and returning to the Ala Wai Small Boat harbor and Kewalo Basin. Recreational vessels can use either the east or west staging area. The mariner's decision for which staging area to use should be based on which staging area is the easiest to transit to so as to avoid crossing the path of other vessels. The commercial vessel staging area is intended for use by all commercial vessels departing from and returning to Kewalo Basin and Honolulu Harbor.

All vessels wishing to remain within this RNA while it is being enforced must stage in accordance with this rule. However, there is no requirement that any vessel, commercial or recreational, must remain in the RNA.

A graphic of the regulated navigation area is posted on the United States Coast Guard Sector Honolulu Homeport Web page ( https://homeport.uscg.mil/mycg/portal/ep/portDirectory.do?tabId=1&cotpId=27 ) under the Waterways Management tab and is also posted in the docket for this rulemaking. The graphic shows how we expect to separate commercial and recreational vessels when the RNA is being enforced, but under actual enforcement conditions local commanders may vary their response as conditions warrant.

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

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, because it would have an effect on the regulated public only in the rare circumstances of a tsunami threat, while at other times vessels will be able to transit the area freely. Therefore, it does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order.

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule would affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit and remain in the exclusionary zone during a tsunami threat, or owners or operators of vessels otherwise intending to operate in a fashion not compatible with this rule. This rule would not have a significant impact on a substantial number of small entities because the RNA would only be activated, and thus subject to enforcement, when a tsunami warning has been issued by the Pacific Tsunami Warning Center.

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

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

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

This rule will not call for a new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520).

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

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

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

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

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

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

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

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

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

We have analyzed this rule under Department of Homeland Security Management Directive 023-01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have made a preliminary determination that this action is one of a category of actions which do not individually or cumulatively have a significant effect on the human environment. This rule is categorically excluded from further review under paragraph (34)(g) of Figure 2-1 of the Commandant Instruction. An environmental analysis checklist and a categorical exclusion determination are available in this docket.

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

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 EPA, we, us or our mean or refer to the United States Environmental Protection Agency.

(iii) The initials PM 10 mean or refer to particulate matter with an aerodynamic diameter of less than or equal to 10 micrometers (coarse particulate matter).

(iv) The initials PM 2.5 mean or refer to particulate matter with an aerodynamic diameter of less than or equal to 2.5 micrometers (fine particulate matter).

(v) The initials SIP mean or refer to State Implementation Plan.

(vi) The words State or Utah mean the State of Utah, unless the context indicates otherwise.

(vii) The initials UAC mean or refer to the Utah Administrative Code.

Utah's September 20, 1999 submittal revised the numbering and format of the UAC rules within Utah's SIP. The purpose was to provide for a more consistent numbering system and a coherent structure allowing provisions to be located more easily within Utah's rules.

On February 14, 2006 (71 FR 7679), we approved many of the re-numbered rules from the September 20, 1999 submittal, but we deferred action on others or explained why no action on the rules was necessary. 1 In subsequent rulemaking actions, we acted on other rules from the September 20, 1999 submittal, or on later versions of the rules that superseded the version submitted on September 20, 1999.

On August 14, 2013, we proposed to act on those rules from the September 20, 1999 submittal that still required EPA action. See 78 FR 49400. Specifically, we proposed to approve R307-110-16, “Section IX, Control Measures for Area and Point Sources, Part G, Fluoride,” and we proposed to disapprove R307-110-29, “Section XXI, Diesel Inspection and Maintenance Program.” In conjunction with our proposed disapproval of R307-110-29, we also proposed to disapprove the Utah Diesel Inspection and Maintenance Program (Section XXI of the Utah SIP), which Utah submitted to EPA as a SIP revision on February 6, 1996 and which R307-110-29 of the September 20, 1999 submittal incorporated by reference.

Our August 14, 2013 notice of proposed rulemaking invited comment on our proposal and provided a 30-day comment period. The comment period ended on September 13, 2013. We received no comments. Accordingly, we are finalizing our actions as proposed.

In the docket for this final rule we have included a table that lists the rules from the September 20, 1999 submittal that are not addressed by today's action and explains why no action on such rules is required.

We are approving the renumbering of R307-110-16, “Section IX, Control Measures for Area and Point Sources, Part G, Fluoride.” This provision incorporates by reference Utah SIP Section IX, Part G, as amended by the Utah Air Quality Board on December 18, 1992, into the UAC.

In our October 13, 2005 proposed rule on Utah's September 20, 1999 submittal (70 FR 59681), we did not propose to act on the renumbering of R307-110-16. As our reason, we stated: “Utah repealed this rule from the federally approved SIP in their June 17, 1998 SIP submittal that EPA approved on May 20, 2002 (67 FR 35442).” (70 FR 59687) That statement was incorrect. The May 20, 2002 action did not remove R307-110-16 (under its previous numbering) or associated Utah SIP section IX, Part G from the SIP. Instead, that action removed R307-1-4.11, “Regulation for the Control of Fluorides from Existing Plants” from the SIP, in part based on the dismantling of the only facility to which the provision applied. In fact, on June 25, 2003 (68 FR 37744), we approved the renumbering of Utah SIP Section IX, Part G, and this section remains in the SIP. However, we have not acted on the corresponding renumbering of R307-110-16 in the September 20, 1999 submittal. As R307-110-16 merely incorporates by reference SIP Section IX, Part G, which itself is currently in the SIP, we are approving the renumbering of R307-110-16.

We are disapproving R307-110-29, “Section XXI, Diesel Inspection and Maintenance Program.” R307-110-29 incorporated by reference the Utah Diesel Inspection and Maintenance Program (Section XXI of the SIP), as adopted by the Utah Air Quality Board on July 12, 1995 (and submitted to EPA on February 6, 1996), which we have not acted on previously. In our October 13, 2005 notice of proposed rulemaking (70 FR 59681), we stated that we would not act to approve R307-110-29 because the rule incorporated by reference Utah's February 6, 1996 SIP submittal. We noted that we would address the February 6, 1996 SIP submittal at a later date (70 FR 59687). We restated our intentions in our final rule of February 14, 2006 (71 FR 7679) in which we noted that we would act on R307-110-29 when we acted on Utah's February 6, 1996 SIP submittal (71 FR 7681). With this final rule, we are disapproving the State's February 6, 1996 submittal of its Diesel Inspection and Maintenance Program (see section II.C. below). Therefore, EPA is also disapproving R307-110-29 because it incorporates by reference the State's Diesel Inspection and Maintenance Program that we are disapproving.

We are disapproving Utah's Diesel Inspection and Maintenance (I/M) Program contained in Section XXI of the Utah SIP, which Utah submitted on February 6, 1996 (hereafter, the “I/M Program”). The Program requires the inspection of diesel-powered vehicles by means of an emissions opacity test. The opacity of vehicle emissions is measured, using what is known as a snap-idle opacity test, to determine the need for vehicle repair and maintenance. Utah adopted the Program with the goal of reducing particulate emissions from diesel vehicles in the PM 10   2 nonattainment areas along the Wasatch Front—namely, Davis, Salt Lake, and Utah Counties.

Our disapproval is based on several issues. First, relevant literature and studies indicate that there is not an accepted correlation between opacity and particulate matter mass emissions in diesel vehicles. Given this lack of correlation between opacity and PM mass emissions, it is unlikely that the snap-opacity test is a good predictor of PM emissions, and the State has not provided data to support a different conclusion. Second, the Governor's February 6, 1996 submittal of the Program did not specify a number of critical parameters, such as the relevant opacity limits or specifications for test equipment. While many of the missing parameters were included in revisions to Davis, Salt Lake, and Utah Counties' inspection and maintenance ordinances that the Utah Division of Air Quality forwarded to us on April 12, 2006, the State did not amend Section XXI of the SIP to include the revised ordinances, and the Governor did not submit such an amendment to us to replace the version submitted on February 6, 1996. Therefore, the Program as submitted is not enforceable as a practical matter. Finally, relevant literature and studies suggest that adjusting diesel vehicles to reduce the opacity of emissions may result in an increase in emissions of nitrogen oxides (NO X ), which are precursors to the formation of PM 2.5 , 3 PM 10 , and ground level ozone. It is possible, therefore, that repairing vehicles to meet the opacity test could exacerbate PM emissions in Utah, and the State has not provided data to contradict this possibility. We note that on November 13, 2009, Davis, Salt Lake, and Utah Counties were designated nonattainment for the 2006 24-hour PM 2.5 NAAQS (74 FR 58688). Also, both Salt Lake and Utah Counties retain their original legal designation of nonattainment for PM 10 .

We are unable to conclude that approval of the I/M Program would strengthen the SIP or would be consistent with the requirements of CAA section 110(l). Section 110(1) states that a SIP revision cannot be federally-approved if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress towards attainment of a NAAQS or any other applicable requirement of the CAA. The potential increase in NO X emissions from the I/M Program could interfere with attainment or reasonable further progress towards attainment of the PM 2.5 NAAQS in the relevant counties. We have no conclusive data to show that the potential benefits of the I/M Program outweigh the potential emission increases with respect to pollutants of concern. Furthermore, the State has not provided data that would support the benefits it ascribes to the I/M Program. Instead, it references a 1988 study that attempts to indirectly infer a level of emission reductions resulting from fixing a statistically insignificant number of old-technology diesel vehicles to reduce exhaust opacity, but without conducting the type of before-and-after-repair mass-emission transient testing on the contemporary fleet of diesel vehicles needed to actually quantify any potential impacts on emissions.

For the foregoing reasons, we are disapproving Section XXI of the SIP, “Diesel Inspection and Maintenance Program,” as submitted by the State on February 6, 1996.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act 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 Clean Air Act. Accordingly, this action merely approves state law that meets federal requirements and disapproves state law that does not meet federal requirements; this action does not impose additional requirements beyond those imposed by state law. For that reason, this action:

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

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

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

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

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

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

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

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

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

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by April 29, 2014. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See CAA section 307(b)(2).)

This is a summary of the Commission's Report and Order in WC Docket No. 10-90; FCC 14-5, adopted on January 30, 2014 and released on January 31, 2014. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW., Washington, DC 20554. Or at the following Internet address: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-14-5A1.pdf . The Further Notice of Proposed Rulemakings (FNPRM's) that were adopted concurrently with the Report and Order are published elsewhere in this issue of the Federal Register .

1. The Commission's Orders, Report and Orders, Further Notices of Proposed Rulemaking, and Proposal for Ongoing Data Initiative (Order) kickstarts the process for a diverse set of experiments and data collection initiatives that will allow the Commission and the public to evaluate how customers are affected by the historic technology transitions that are transforming our nation's voice communications services—from a network based on time-division multiplexed (TDM) circuit-switched voice services running on copper loops to an all-Internet Protocol (IP) network using copper, co-axial cable, wireless, and fiber as physical infrastructure. Americans have come to expect secure, reliable, and innovative communications services. The purpose of these experiments is to speed market-driven technological transitions and innovations by preserving the core statutory values as codified by Congress—public safety, ubiquitous and affordable access, competition, and consumer protection—that exist today. The experiments and initiatives will collect data that will permit service providers and their customers, and independent analysts and commentators—as well as the federal, State, local, and Tribal officials charged with oversight—to make data-driven decisions about these technology transitions. By using an open and deliberative process to identify and address challenges, all stakeholders will benefit as we together learn how we may ensure that our values flourish as providers implement new technologies at scale and, ultimately, seek to discontinue legacy services and facilities.

2. The Commission adopts a targeted experiment in it which will solicit proposals to bring advanced services to rural Americans, including residents of Tribal lands, with support from the Connect America Fund, which will allow the Commission to examine different approaches to ensuring universal access to these advanced services in an all-IP world.

3. These targeted experiments will be guided by basic principles. They are not intended to resolve legal or policy questions arising from the transition. Rather, they are intended to help the Commission gather a factual record of information to inform such decisions. As the Commission pursues these initiatives, the Commission will work collaboratively with other governmental and non-governmental entities to leverage expertise and experience where appropriate. These processes will be transparent, open, and responsive. They will allow for broad public input from all interested parties and yield data and information that will be publicly available, subject to appropriate privacy protections.

4. These efforts are not exhaustive. The Commission welcomes ideas from other interested parties on ways the Commission can engage in targeted experiments and cooperative research to learn about and anticipate the impacts of transitioning technologies.

5. Preserving universal access to communications during these historic technology transitions is one of the Commission's core values. In the last several years, the Commission has undertaken major reforms to each of its universal service programs to modernize those programs in light of marketplace changes and technological advancements.

6. The Commission recognizes that such reforms, along with ongoing efforts of existing providers in rural, high-cost areas, have already resulted in the deployment of new technologies and IP-based networks in some areas, and the Commission expects technology transitions will continue to occur organically. At the same time, consistent with the statutory principles set forth in section 254 of the Act, it is critical that the Commission takes steps to ensure that all Americans benefit from the technology transitions, and that the Commission gain data on the impact of technology transitions in rural areas, including Tribal lands, where residential consumers, small businesses and anchor institutions, including schools, libraries and health care providers, may not have access to advanced broadband services. As networks transition, the Commission needs to make sure that rural Americans are not left behind.

7. The Commission recognizes that rural America poses particular challenges for the deployment of next generation communications services. By definition, rural areas are geographically dispersed, with lower population density. Often they are in areas with geological and topographical challenges; in addition, some rural areas experience particularly extreme seasonal and meteorological conditions. For various reasons, rural areas have lower broadband adoption rates than urban areas. For instance, rural areas have a higher percentage of elderly residents, who tend to have lower broadband adoption. Since the 1960's, when poverty rates were first officially recorded, rural areas have been home to a disproportionate number of low-income Americans. In 2012, 17.7 percent of the population, or about 8.5 million people, living in nonmetropolitan (nonmetro) areas were poor as compared to a poverty rate of 14.5 percent in metro areas. And this gap between nonmetro and metro poverty rates has widened in recent years, from 2.4 percentage points in 2011 to 3.2 percentage points in 2012. All of these factors, taken together, can make the economics of building out broadband-capable infrastructure in rural areas more challenging.

8. In addition, the circumstances described above are frequently exacerbated on Tribal lands. Tribal Nations face unique problems in acquiring communications services, with substantial barriers to deployment prevalent throughout Tribal lands. The resulting digital divide that persists between Tribal Nations and the rest of the country is well-documented.

9. The Commission understands that some providers have proposed wireless products as the only service offering for some rural areas following the retirement of legacy PSTN services and facilities. The Commission notes that there are a range of fixed wireless offerings in the marketplace today, offering differing speeds and usage allowances at price points that are typically higher than what are available from wireline offerings. One of the critical questions the Commission seeks to explore is under what conditions will consumers prefer next generation wireless services over wireline alternatives. In addition, the Commission wants to better understand the viable business models that could support the deployment of fiber or other next generation wired technology in rural areas despite the challenges we have described. The Commission is committed to exploring ways to ensure that, as networks transition, the access of rural American customers, including customers living on Tribal lands, is not just preserved, but enhanced, in all areas of the country.

10. The Commission welcomes ideas about how to structure experiments that will inform its policy decisions regarding the deployment of next generation networks in rural, high-cost areas. To this end, we plan to hold a workshop on rural broadband experiments in March 2014. The Commission welcomes innovative ideas that would coordinate actions across its various support programs, consistent with the statutory framework set forth in section 254. The Commission looks forward to an ongoing dialogue with a diverse group of interested stakeholders.

11. The Commission adopted one possible experiment to test how tailored economic incentives can advance the deployment of next generation networks, both wireline and wireless, in rural, high-cost areas of the country, including Tribal lands. In this experiment, Connect America funding will be available to entities to deploy high-speed, scalable, IP-based networks. The Connect America Fund is a key element of the Commission's universal service reforms to ensure that rural consumers, businesses, and anchor institutions have access to next generation networks. Consistent with the Commission's goals of bringing robust, scalable broadband networks to rural, high-cost communities across America, and gaining experience and data on how to ensure universal access as networks transition, this experiment is designed to help inform our policy decisions in various proceedings pending before the Commission. For example, it is important to understand what providers would be willing to offer what type of service in price cap areas in the event that a current incumbent Eligible Telecommunications Carrier (ETC) chooses not to participate in Connect America Phase II.

12. Below, the Commission invites expressions of interest for such experiments in areas served by price cap carriers and areas served by rate-of-return carriers. The Commission's focus is on proposals to build robust last-mile broadband to offer service to a wide range of end users in rural communities, rather than proposals for middle mile projects. The Commission also is focused on conducting these experiments in rural areas lacking Internet access service that delivers 3 Mbps downstream/768 kbps upstream. For both types of territories, funding could be made available in 2014 for discrete technology transition experiments within the existing Connect America budget. In the Further Notice of Proposed Rulemaking (FNPRM) that accompanies this R&O, the Commission seeks comment on making available unallocated Connect America funding to support these structured technology transition experiments across a diverse cross section of rural America. The Commission could make a limited amount of funding available for such experiments without increasing the overall size of the Connect America Fund, and without increasing the contribution burden on consumers.

13. Useful information that could be developed through such experiments will help address four sets of interrelated questions. First, from these experiments, the Commission seeks to test the assumption among certain providers that the geographic and demographic characteristics of certain rural areas, including Tribal lands, economically preclude the deployment of high-capacity fiber-based services that deliver higher speeds to those communities, absent some level of governmental support. The Commission seeks to address the extent of interest among non-incumbent service providers to deploy high-speed, scalable, IP-based networks to serve consumers, businesses, and community-based institutions such as schools, libraries and healthcare providers in rural areas where broadband is lacking, potentially with assistance from the Connect America Fund, and to learn what specific measures to streamline the ETC designation process will encourage such entry by non-incumbent providers. Likewise, the Commission seeks to learn whether providers are willing and able to deliver services with performance characteristics well in excess of the minimum standards that price cap carriers accepting model-based support are required to offer to all locations in funded areas, for the same amount or less support than that calculated by the forward-looking cost model. The Commission hopes these experiments will generate “best practices” that will allow others to replicate experimental successes in other rural areas. The Commission will explore how they can maximize the deployment of robust, future-proof networks most efficiently within our finite $4.5 billion Connect America budget.

14. Second, based on the proposals submitted, the Commission seeks to develop a greater understanding of the geographic and demographic characteristics of areas where service providers (both incumbents and non-incumbents) would choose to offer wireless services at pricing reasonably comparable to urban wireline offerings. The Commission seeks to identify the likely features of such wireless services and the characteristics of wireless services that residential consumers would find to be an acceptable substitute for fiber-based broadband service.

15. Third, the Commission seeks to develop a greater understanding through these targeted experiments of how these transitions will impact anchor institutions and the people they serve. The Commission is interested in learning more about the types of services that will be offered to schools, libraries, health care providers, and other anchor institutions that are served by next generation networks financed in part with Connect America support, and at what price. The Commission seeks to explore how the transitions will best ensure the provision of high quality broadband connectivity appropriate to the needs of rural health care providers and enable remote health monitoring at home, which is critical to consumers in rural areas who otherwise would have to travel great distances to have access to health care. The Commission seeks to examine whether and how the business case for deployment in rural areas, including Tribal lands, can be improved by securing the participation of anchor institutions to serve as key customers of the next generation networks. Through these experiments, the Commission hopes to identify strategies to ensure that community-based institutions in rural areas, such as schools, libraries and health care providers, have access to next generation services.

16. Finally, the Commission seeks to work cooperatively with other governmental agencies to advance our shared objectives of ensuring that consumers, businesses and anchor institutions have access to next generation services. Under section 254, universal service is a joint federal and State responsibility. The Commission is particularly interested in how States, localities, Tribal governments, and other non-federal governmental bodies can provide assistance, through matching funding, in-kind contributions or other regulatory approvals and permits, to improve the business case for deployment of next generation networks.

17. The Commission's intention here is not to delay any decisions regarding implementation of any universal service reforms, but rather to leverage whatever knowledge can be developed quickly through such experiments to inform our judgment on an ongoing basis as the Commission addresses critically important policy issues in several of our pending universal service rulemaking dockets. Implementation of Phase II of the Connect America Fund will not be delayed by these experiments. Work on the forward-looking cost model that will be used to determine Phase II support amounts to be offered to price cap carriers is nearing completion, and the Commission expects the Wireline Competition Bureau will be in a position to implement the Phase II challenge process and finalize the list of eligible census blocks in the months ahead. The Commission expects to implement the offer of model-based support to price cap carriers before the end of 2014. The Commission also is committed to resolving by the end of 2014 how the Connect America Fund will address the challenges of providing service to the most remote, difficult to serve areas of the country.

18. One critical step to advancing technology transitions in rural America, including on Tribal lands, is to implement Phase II of the Connect America Fund. In the USF/ICC Transformation Order, 76 FR 73830, November 29, 2011, the Commission concluded it would use a competitive bidding mechanism for Phase II of the Connect America Fund to award support in price cap territories in those areas where price cap carriers decline to make a state-level commitment in exchange for model-based support, and it sought comment on how to design this mechanism. At various points in the Connect America proceeding, a number of parties have suggested that we implement a market-based mechanism in the form of a competitive application process as opposed to a reverse auction. Others have focused on the mechanics and design of a reverse auction. To date, the Commission has implemented one reverse auction and shortly will conduct another.

19. The Commission reaffirms its commitment to using competitive bidding to award support to the extent the price cap carriers decline to accept the offer of model-based support. That bi-partisan decision was the culmination of efforts over a decade to reform universal service, and the Commission remains firmly committed to completing implementation of the universal service reform framework previously adopted by the Commission.

20. One of the key questions remaining in the Connect America proceeding, however, is the specific form of the competitive bidding mechanism that will occur to the extent price cap carriers decline to elect model-based support: A reverse auction or some other form of competitive bidding. The Commission does not resolve that question in the R&O.

21. The Commission concluded that it would be desirable to test, on a limited scale, the use of an application-based competitive bidding process with objective selection criteria on a limited scale before finalizing decisions regarding the competitive bidding mechanism for full-scale implementation in WC Docket No. 10-90 to award support in price cap territories where the incumbent declines the offer of model-based support. The Commission fully recognizes that conducting nationwide competitive bidding—whatever form it ultimately takes—to award recurring support to preserve voice service and expand broadband service is a significant undertaking that has never been implemented in this country. The Commission takes seriously its fundamental obligation to preserve and advance universal service. Even though the Commission has solicited multiple rounds of comment on issues relating to competitive bidding mechanisms, there is no substitute for real world experience to inform our policy decisions. Service to potentially millions of consumers, businesses and anchor institutions may be impacted by the particular design of the competitive bidding process. For that reason, the Commission wishes to gain experience and data by experimenting with an application-based competitive bidding process with defined selection criteria that could inform our judgment regarding how to structure the Phase II competitive bidding mechanism. The Commission therefore adopted a Phase II experiment and describes below the application process for this experiment.

22. The Commission concluded that soliciting and reviewing applications in the near term as a part of this Phase II experiment will assist it in making critical decisions in a future order regarding the objective evaluative criteria that should be applied more broadly in the competitive bidding process for Connect America Phase II, such as whether funding should be awarded solely based on cost per location, or whether the Commission should give additional weight or bidding credits in defined circumstances. The Commission agreed with commenters that a competitive bidding process will be most successful if it is focused on clear goals, is transparent, and is based on objective, relatively straightforward, well-defined, and measurable criteria. In short, the Commission expects this experiment will help it design a more effective nationwide competitive bidding mechanism, whether that ultimately takes the form of a reverse auction or some other form of competitive bidding with a limited number of objective, defined selection criteria. This experiment also will provide an opportunity to consider how better to ensure that all of universal service programs are working together effectively to ensure that residential consumers, small businesses, and anchor institutions have access to evolving services delivered over scalable networks.

23. To assist entities willing to conduct experiments to deploy high-speed, scalable, IP-based networks, using either wireline or wireless technologies, or a combination of technologies, in rural, high-cost areas (including on Tribal lands) with Connect America funding, the Commission describes in further detail elements of proposals that would assist the Commission in learning from these experiments. The technology transitions proposals that invited in the R&O are not limited to proposals from incumbent providers. The Commission encourages proposals from a wide range of entities and consortia of entities, including State and regional authorities, research and education networks, municipalities, Tribal governments, cable operators, competitive local exchange carriers, incumbent local exchange carriers, fixed and mobile wireless providers, wireless Internet service providers, utilities, and others.

24. The Commission's invitation for Phase II experiment proposals will be conducted in two stages: A non-binding expression of interest stage and a formal proposal stage. The Commission requests expressions of interest to be filed by letter in WC Docket No. 10-90 by March 7, 2014, although the Commission also will consider additional expressions of interest on a rolling basis after that date. All expressions of interest must be filed electronically. Information to be included in an expression of interest might include, but not be limited to:

• The nature of the submitting entity or entities (e.g., incumbent LEC, municipality, utility, cable operator, wireless provider)

• Identification of the proposed service area for the experiment, including census block number, with any relevant information regarding the number of locations that could be served, including schools, libraries, and other anchor institutions

• The broadband technology or technologies to be deployed

• Contemplated service offerings (e.g., description of voice service, broadband speed tiers, nature of video service, if any) and pricing of such offerings

• If known, expected State and/or local or Tribal governmental participation in and/or support for the project (e.g., expedited permitting, access to rights of way, matching funds, etc.)

• Whether the proposal is expected to require one-time or continuing funding and a high-level estimate of the amount of funding requested

25. The formal proposal stage will follow the expression of interest stage. Submitting an expression of interest is not a precondition for submitting a formal proposal in the second stage.

26. The USF/ICC Transformation Order adopted a goal of “ensur[ing] universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions” and adopted a framework for the Connect America Fund to achieve these goals by extending broadband to millions of unserved locations over a five-year period, including connecting community anchor institutions. The Commission directed the Wireline Competition Bureau to invite input on the unique needs of community anchor institutions as it developed the forward-looking model, and it included reporting obligations on incumbent LECs to track the number of community anchor institutions that were connected. In seeking comment in the FNPRM on the competitive bidding process to be implemented, to the extent price cap carriers declined to make a state-level commitment for model-based support, the Commission sought comment on how to leverage the budget to achieve these goals and “extend[] services to as many consumers, businesses, and community anchor institutions as possible.”

27. The Commission is particularly interested in projects that achieve the goals of the USF/ICC Transformation Order and demonstrate whether, and how, the competitive bidding process under Phase II of the Connect America Fund might be structured. The Commission also is interested in learning how to best leverage the support available from all of the Commission's universal service programs to comprehensively serve the needs of rural communities, including their educational and health care needs. Experiments to fund modern networks in rural, high-cost areas from the Connect America Fund may serve to provide important information on the potential benefits and burdens of the technology transitions on health care providers and their patients, and on educational institutions and their patrons, in rural areas, while informing the Commission's policy decisions in implementing the Phase II competitive bidding process and more broadly, as well.

28. The Commission plans to adopt a budget for these rural broadband experiments and will announce the selection criteria prior to the solicitation of formal proposals. In the FNPRM, the Commission seeks comment on what amount of Connect America funding should be made available for this experiment and the objective selection criteria for the experiments. The Commission anticipates that once the Commission takes action in response to the FNPRM, applications will be due within a relatively short time frame, such as 60 days. The Commission therefore encourages potential applicants to consider how they might begin to structure their proposals early in the process. The Commission expects a relatively small number of projects, reflecting a diversity of technologies (both wireline and wireless) in different geographic areas, will be selected for funding.

29. In the USF/ICC Transformation FNPRM, 76 FR 78384, December 16, 2011, the Commission proposed to use the same areas that are identified by the Connect America cost model as eligible for support in the competitive bidding process. It proposed to use census blocks as the minimum size geographic unit as eligible for competitive bidding and sought comment on whether to adopt a rule that would aggregate eligible census blocks into census tracts for bidding, or to allow bidder-defined aggregation of census blocks.

30. The Commission concluded that proposals in this rural broadband experiment in price cap territories will be entertained at the census tract level. Making a county the minimum geographic area for an experimental proposal potentially could deter participation in this experiment from smaller providers. The Commission therefore concludes that the minimum geographic area to be made available in the Phase II experiment is the census tract, with funding provided only for locations in eligible census blocks within that census tract. The Commission concludes any census blocks lacking broadband where the average cost per location is equal to or exceeds the likely funding threshold in the forward-looking cost model should be eligible for the rural broadband experiment. The Commission thus does not exclude from eligibility those census blocks where the average cost, as calculated by the model, exceeds the likely extremely high cost threshold. In other words, potential applicants should be free to seek funding to serve census tracts that contain census blocks where the average cost per location, as determined by the forward-looking cost model, exceeds the extremely high-cost threshold. The Commission makes this decision recognizing that the actual cost for a particular provider to serve the area may vary from the cost estimated by the cost model. To the extent parties can economically serve areas that fall above the extremely high-cost threshold with terrestrial voice and broadband with the assistance of support, the Commission does not want to preclude those areas from being eligible in the Phase II experiment. The Commission hopes that this experiment will provide the Commission with useful data that could inform future decisions regarding the treatment of hard-to-serve remote areas of the country.

31. As noted above, one of the Commission's objectives in conducting this experiment is to determine how the Commission can use targeted funding most efficiently to expand the availability of voice and broadband-capable infrastructure within the defined $4.5 billion budget for the Connect America Fund. For purposes of the experiment, the Commission expects that the amount of funding to be made available for any applicant will not exceed the amount of model-calculated support associated with the relevant geographic area, either a census tract or aggregation of census tracts. This will enable us to test in the experiment the use of the cost model for purposes of setting reserve prices for future implementation of the Phase II competitive bidding process.

32. The Commission is focused on using this experiment to deploy robust, scalable networks in rural areas lacking Internet access that delivers 3 Mbps downstream/768 kbps upstream. In the USF/ICC Transformation Order, the Commission adopted a policy that support not be provided to areas served by an unsubsidized competitor. The Commission remains committed to ensuring that Connect America funding is not used in areas where other providers are offering voice and broadband meeting the Commission's requirements. The Commission does not think it would be efficient to conduct a challenge process to the eligibility of census blocks within a census tract when formal proposals are initially submitted; depending on the volume of proposals received, that could place a burden both on outside parties and Commission staff. Rather, the Commission concludes that challenges to the eligibility of areas proposed for experiments are more appropriately entertained after the project has otherwise been tentatively selected for funding. To the extent a challenge is granted in whole or in part, funding for those locations would be adjusted appropriately. The Commission expects that the Wireline Competition Bureau and the Wireless Telecommunications Bureau to conduct the challenge process in a fashion similar to the process that the Wireline Competition Bureau has adopted, but not yet implemented, for determining eligible areas for model-based support.

33. The Commission recognizes that there may be situations where the extent of competitive overlap for broadband services in a proposed project is de minimis. If a particular applicant proposes to serve an area where a current recipient of high cost support already provides broadband, the Commission would need to understand specifically why a deviation from its general policy of not supporting two or more providers in an area is justified and in the public interest. Likewise, to the extent an applicant proposes to include in its project locations that are served by an unsubsidized competitor, the Commission would be interested in why deviation from its policy is justified and in the public interest. The Commission seeks comment in the FNPRM on how to define a de minimis overlap and what measures the Commission should implement in the experiment to ensure that funds in the experiment are focused on unserved areas.

34. In the USF/ICC Transformation FNPRM, the Commission proposed to require applicants for support to be designated an ETC at the time they applied to participate in the competitive bidding process, with a limited exception for Tribally-owned or controlled entities. The Commission proposed that all applicants be required to certify that they are financially and technically capable of providing the required service within the relevant geographic area. The Commission indicated that it anticipated that price cap ETCs that decline model-determined support would be eligible to participate in the competitive bidding process, and it sought comment on the advantages and disadvantages of such an approach.

35. The Commission seeks to encourage the participation in this experiment from as many different entities as possible. The Commission emphasizes that they welcome applications from a wide range of entities, including cable operators, incumbent price cap carriers, competitive local exchange carriers, affiliates of neighboring incumbent providers, utilities, fixed and mobile wireless providers, wireless Internet service providers, State and regional authorities, research and education networks, municipalities, Tribal governments, and others.

36. Timing of ETC Designation. The Commission concludes that entities selected to receive funding in an experiment must obtain ETC designation from either a State commission pursuant to section 214(e)(2) or the Commission pursuant to section 214(e)(6) of the Act. Therefore, entities must offer voice telephony service at reasonably comparable rates as part of the experiment. The Commission declines at this time to adopt the suggestion of certain parties that it either forbears from ETC designation requirements, or that it preempts States from issuing ETC designations. Rather, the Commission adopts a more liberal process for the timing of ETC designation. The Commission's experience in implementing this rule in the Phase II experiment will help it determine whether other measures are necessary regarding the ETC designation process when implementing the Connect America Phase II competitive bidding process more broadly.

37. The Commission concludes that potential applicants in this rural broadband experiment need not be ETCs at the time they initially apply for funding at the Commission. Rather, the Commission is persuaded that they should permit entities to obtain ETC designation after being selected for the award of Connect America funding, which the Commission believes will encourage greater participation in the experiment by a wider range of entities. ETC status must be confirmed before funding awarded through the experiment is disbursed. The Commission expects this confirmation would occur within 90 days of funding award.

38. The Commission recognizes that the Commission declined to take that approach for the Mobility Fund Phase I and Tribal Mobility Fund Phase I, instead requiring entities to have obtained an ETC designation prior to filing the short form application, with an exception for Tribally-owned or controlled entities if they had an ETC application pending. Those requirements were adopted in part to ensure that applicants filing to participate in the auction were serious bidders. Based on our experience with the Mobility Fund Phase I and our review of the record, the Commission now concludes that it would be appropriate to allow Connect America Phase II experiment applicants to obtain ETC designation after a preliminary determination has been made to award funding, rather than before filing an application with the Commission. The Commission assumes that applicants that submit formal proposals would seek to demonstrate their financial and technical capabilities throughout their application and will submit well-developed proposals that could be implemented quickly if selected. Based on the Commission's experience with the experiment, it can revisit this decision if necessary before implementing a competitive bidding process for Connect America Phase II more generally.

39. In the Mobility Fund Phase I, the Commission expressly permitted potential bidders to obtain conditional ETC designation prior to filing the short-form application. Given the Commission's decision to permit entities to seek ETC designation after notification of tentative selection for funding award, the Commission does not anticipate many parties would seek conditional ETC designation prior to applying for funding through this experiment. To the extent a party chooses to do so, however, and a State or this Commission issues a conditional ETC designation prior to selection for funding, the Commission expects that the ETC designation in such situations will be finalized quickly as a pro forma matter after notification of selection for funding. The Commission's experience with the experiments will inform its ultimate decisions of whether additional federal rules are necessary to ensure that the ETC designation process does not erect unnecessary barriers to competitive entry.

40. The Commission also addresses the role of ETC designation in situations where there is a multi-stakeholder group working together to bring broadband-capable infrastructure to unserved communities. The Commission welcomes participation in the Connect America Phase II experiment from a wide variety of entities, including partnerships or consortia of entities that may include service providers, vendors, governmental agencies, and others. Indeed, in other contexts, the Commission has recognized the value of consortia bulk purchasing in driving down service rates, increasing bandwidth, and reducing administrative overhead.

41. For the Connect America Phase II experiment, the Commission concludes that the requirement to be an ETC is met if one entity that is part of the group, partnership or consortia obtains ETC designation from the relevant State or this Commission. Thus, for instance, the entity that is designated as the ETC could be a competitive local exchange carrier that offers the telecommunications services eligible for support pursuant to section 254(c)(1) of the Act in partnership with another entity that constructs and operates the broadband-capable network. Comparable to the requirements adopted by the Commission for consortia leaders in the Healthcare Connect Fund, the Commission requires that the ETC be legally and financially responsible for providing the section 254(c)(1) supported telecommunications service; serve as the point of contact for the Commission, USAC, the relevant State, and Tribal governments, as appropriate; be responsible for submitting required forms and certifications to the Commission, USAC, the relevant State, and Tribal governments, as appropriate; receive funding disbursements; and be responsible for recordkeeping and coordinating any audits for members of the group.

42. In the USF/ICC Transformation FNPRM, the Commission proposed that the term of support for the Phase II competitive bidding process would be the same as that adopted for providers that accept the state-level model-determined support, but it also sought comment on whether a longer time period, such as ten years, would be appropriate for recipients of support awarded through a competitive bidding process.

43. The Commission solicits proposals in this Phase II experiment from entities seeking either one-time support or recurring support. The Commission previously offered two rounds of Phase I incremental support to price cap carriers to extend broadband-capable infrastructure in unserved areas. The Commission now wishes to explore the possibility of providing one-time support on a competitive basis to extend broadband-capable networks in areas where providers expect to cover their ongoing operating costs with end user and other sources of revenue. The experiment will help the Commission determine the extent to which parties may be willing to build out broadband in certain areas with one-time rather than recurring support.

44. The Commission concludes that support provided through the Phase II experiment may be provided for up to ten years, subject to existing requirements and the availability of funds. The Commission is persuaded that it is appropriate to provide support for up to ten years to those providers that commit to deploy high-speed, scalable, IP-based networks that will provide residential consumers, small businesses and anchor institutions with an evolving level of service. The Commission acknowledges the possibility that over time marketplaces may change, and it is possible that some funded areas may see new competitors at some point in the future. At the same time, the Commission also recognizes that some entities may be unwilling to make the necessary long-term investments to build robust future-proof networks in areas that are uneconomic to serve absent continued support beyond a five-year term.

45. The Commission is not persuaded by those who argue that the term of support should be the same for all recipients of Connect America support, regardless of whether they receive support based on the forward-looking cost model or through competitive bidding. There is no inherent reason that the terms of the competitive offer need to be identical to the offer of model-based support. Indeed, having different terms of support in different areas may provide us with valuable information regarding the impact of different rules that will help inform future policy decisions regarding universal service reforms. In particular, in those areas where price cap carriers elect model-based support for a term of five years, the Commission will need to decide whether and if so how recurring support should be provided after the end of the five-year period. By allowing parties submitting proposals for the rural broadband experiment to indicate the length of time (up to ten years) for which they seek, the Commission hopes to gain real world experience that will enable the Commission to evaluate whether providers are more willing to deploy future-proof infrastructure when assured of a funding stream over a ten-year period as opposed to a five-year period. As is true for all high-cost recipients, ETCs that receive Phase II support for ten years will be subject to annual reporting, including updates on their progress towards meeting their planned targets, as well as audits, allowing the Commission to monitor the projects during the term. Balancing these considerations, the Commission concludes that providing a longer term of support in the experiment could provide the Commission with valuable information regarding how to elicit greater participation in the Connect America Phase II competitive bidding process in price cap territories, which will help ensure that funding is targeted efficiently to expand broadband-capable infrastructure throughout the country.

46. The Commission remains committed to the principle of not providing duplicative funding in a given geographic area. In the FNPRM, the Commission seeks comment on how the selection of projects through the competitive bidding experiment should affect the inclusion of those areas in the offer of model-based support to price cap carriers or in the Connect America Phase II competitive bidding process and can ensure that public funds do not substitute for private capital.

47. The availability of Connect America funding for technology transition experiments is subject to the applicable requirements of sections 214 and 254 of the Act and will be conditioned on complying with all relevant universal service rules that the Commission has adopted or may adopt in the future in the relevant rulemaking proceedings, including but not limited to ETC requirements to the extent that they apply to recipients of high-cost and Lifeline support, reporting requirements, audits, and enforcement mechanisms for non-compliance with rules. In the FNPRM, the Commission seeks comment on any additional rules or requirements the Commission should adopt in the context of such experiments.

48. To the extent applicants believe compliance with a specific requirement is not necessary in the context of an experiment, they should identify with specificity those rules that should be waived or modified. Funding also may be conditioned on compliance with any additional commitments made by the applicant in conjunction with its application to participate in the Phase II experiment.

49. The Commission welcomes experiments regarding technology transitions in areas served by incumbent rate-of-return carriers as well as price cap carriers, as such experiments would provide us with valuable information from a variety of geographic areas. As a complement to experiments in price cap territories, the Commission therefore invites proposals on a competitive basis in geographic areas where the incumbent provider is a rate-of-return carrier. The Commission intends to implement rural broadband experiments in areas served by rate-of-return carriers before the end of 2014, which will provide a potential pathway to longer term reforms regarding support for broadband-capable infrastructure in such areas.

50. The Commission recognizes that historically the Commission has implemented different universal service mechanisms for the larger price cap carriers than for the smaller companies, which are typically rate-of-return regulated carriers. In the USF/ICC Transformation Order, the Commission recognized that smaller rate-of-return carriers “operate in many of the country's most difficult and expensive areas.” The Commission largely preserved the existing support mechanisms, with some modifications, rather than implementing the same reforms for both price cap carriers and rate-of-return carriers. Instead of the approach adopted for price cap carriers—which are required to serve 100 percent of locations in specific census blocks deemed eligible for support—it implemented a more flexible approach under which rate-of-return carriers are required to offer broadband service meeting the initial requirement of at least 4 Mbps downstream and 1 Mbps upstream upon reasonable request, in recognition of “the economic challenges of extending service in the high-cost areas of the country served by rate-of-return carriers.”

51. At the same time, the Commission also concluded that “all universal service high-cost support should ultimately be distributed through [Connect America Fund] for all recipients.” A number of parties have specifically urged the Commission to adopt a Connect America Fund to support the expansion of broadband in areas served by rate-of-return carriers. The Commission wishes to explore the possibility of making funding available in such areas in a way that would assist the Commission in deciding how to provide targeted and efficient support over the longer term. Such a mechanism could functionally replace a high-cost mechanism that the Commission decided to eliminate and phase out in the USF/ICC Transformation Order, safety net additive, which was originally adopted to encourage new investment in modern networks. These experiments would not prejudge any future actions regarding modifications to the current universal service mechanisms available to incumbent rate-of-return carriers.

52. In implementing any experiments in areas served by rate-of-return carriers, the Commission recognizes the statute expressly contemplates a different process for ETC designation in areas served by rate-of-return carriers than it does in areas served by incumbent price cap carriers. Section 214(e)(2) specifies that before designating an additional eligible telecommunications carrier for an area served by a rural telephone company, the State commission shall find that the designation is in the public interest. The relevant State and the Commission must agree on any service area redefinition that would create a service territory for a new ETC that is different than the incumbent's service area. In implementing Phase I of the Mobility Fund, the Commission adopted a limited forbearance from requiring that the service area of an ETC conform to the service area of any rural telephone company serving the same area, but only with respect to conditional ETC designations for participating in the Mobility Fund Phase I auction. The Commission concluded that forbearance in that situation advanced “the Act's and the Commission's goals of promoting access to mobile service over current and next generation wireless networks in areas currently without such service by reducing barriers to participation in Phase I of the Mobility Fund.”

53. The Commission is interested in assessing the level of interest among rate-of-return carriers in participating in a rural broadband experiment, but also are interested in expressions of interest from others as well. As with the Phase II experiment, interested parties may file a letter in WC Docket No. 10-90 no later than March 7, 2014, expressing their interest in conducting a rural broadband experiment in rate-of-return territories with Connect America funding. The Commission also will consider additional expressions of interest on a rolling basis after that date. All expressions of interest must be filed electronically. Consistent with the approach adopted for experiments in price cap territories, experimental funding would only be provided to entities in rate-of-return areas that are ETCs, and therefore to the extent a non-ETC is tentatively selected for the award of funding, it would then need to obtain ETC designation. As an ETC, it would be required to provide the supported service—voice telephony—at rates reasonably comparable to rates for similar services in urban areas.

54. The Commission emphasizes that participation in this experiment will not alter existing universal service obligations and receipt of support by current rate-of-return ETCs, regardless of whether a competitive ETC receives experimental support in the same service area. Any Connect America funding awarded in such a rural broadband experiment would be additive to current support for ETCs.

55. The Commission seeks comment in the FNPRM on a number of issues, including whether to implement a staggered implementation schedule for formal proposals in rate-of-return areas and whether to modify the process for experiments in rate-of-return study areas compared with how the Commission implements experiments in price cap territories.

56. The Commission now amends the Code of Federal Regulations to eliminate current section 54.309 (which described the non-rural support mechanism that the Commission eliminated in the USF/ICC Transformation Order ) and replace that section with a new section 54.309 and 54.310 to address Phase II. The new rule sections codify decisions previously made by the Commission in the USF/ICC Transformation Order regarding the offer of model-based support to price cap carriers, the deployment schedule for Phase II, and the Phase II service obligations.

57. The Report and Order contains modified information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the new or modified information collection requirements contained in this proceeding. In addition, the Commission notes that pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees.

58. In this present document, the Commission has assessed the effects of modifying reporting rules, and find that doing so does not change the burden on small businesses with fewer than 25 employees.

59. The Commission will send a copy of this Report and Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act.

60. The Regulatory Flexibility Act (RFA) requires that agencies prepare a regulatory flexibility analysis for notice-and-comment rulemaking proceedings, unless the agency certifies that “the rule will not have a significant economic impact on a substantial number of small entities.” The RFA generally defines “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.

61. This Report and Order codifies rules adopted by the Commission in USF/ICC Transformation Order. This action does not create any burdens, benefits, or requirements that were not addressed by the Final Regulatory Flexibility Analysis attached to USF/ICC Transformation Order. Therefore, we certify that the action taken in this Report and Order will not have a significant economic impact on a substantial number of small entities. The Commission will send a copy of the Order, including a copy of this final certification, in a report to Congress pursuant to SBREFA. In addition, the Report and Order and this certification will be sent to the Chief Counsel for Advocacy of the SBA, and will be published in the Federal Register .

62. Accordingly, it is ordered, that pursuant to the authority contained in sections 1, 2, 4(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403 of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 152, 154(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403, and 1302, and sections 1.1 and 1.421 of the Commission's rules, 47 CFR 1.1, 1.421, this Report and Order in WC Docket No. 10-90 is adopted, effective thirty (30) days after publication of the text or summary thereof in the Federal Register , except for those rules and requirements involving Paperwork Reduction Act burdens, which shall become effective immediately upon announcement in the Federal Register of OMB approval, and except for the solicitation of non-binding expressions of interest in rural broadband experiments specified in paras. 24 and 53, which are effective upon release. It is our intention in adopting these rules that, if any of the rules that we retain, modify or adopt today, or the application thereof to any person or circumstance, are held to be unlawful, the remaining portions of the rules not deemed unlawful, and the application of such rules to other persons or circumstances, shall remain in effect to the fullest extent permitted by law.

63. It is further ordered, that part 54 of the Commission's rules, 47 CFR part 54, is amended as set forth in Appendix A of the order, and such rule amendments shall be effective March 31, 2014, except § 54.313(e)(1) through (3) which contain new or modified information collection requirements that will not be effective until approved by the Office of Management and Budget. The Federal Communications Commission will publish a document in the Federal Register announcing the effective date for those sections.

64. It is further ordered, that the Commission shall send a copy of this Report and Order in WC Docket No. 10-90 to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

65. It is further ordered, that the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order in WC Docket No. 10-90, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 54 as follows:

This final rule finalizes an interim rule that revised the DFARS to implement section 827 (except paragraph (g)) of the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112-239, enacted January 2, 2013). Section 827, entitled “Enhancement of Whistleblower Protections for Contractor Employees,” made extensive changes to 10 U.S.C. 2409, entitled “Contractor employees: Protection from reprisal or disclosure.” Paragraph (g) of section 827, which amended paragraph (k) of 10 U.S.C. 2324, entitled “Allowable costs under defense contracts,” is addressed under a separate DFARS case, 2013-D022, Allowability of Legal Costs for Whistleblower Proceedings.

Section 827 of the NDAA for FY 2013 created a standalone statute for DoD that is independent of the FAR coverage.

DoD published an interim rule in the Federal Register at 78 FR 59851 on September 30, 2013, to implement statutory amendments to the whistleblower protections for contractor and subcontractor employees. One respondent submitted a public comment in response to the interim rule.

DoD reviewed the public comment in the development of the final rule. A discussion of the comment is provided below.

Comment: The respondent recommended reinstating the clarifying statements at DFARS 203.903 and 203.905 that “The following policy applies to DoD instead of the policy at FAR 3.903/3.905.”

Response: In the final rule, DoD has inserted a statement in section 203.900, Scope, to indicate that DFARS subpart 203.9 is to be used in lieu of FAR subpart 3.9. DFARS contractor whistleblower policies are based on 10 U.S.C. 2409, which is no longer implemented in the FAR (see FAR 3.900).

DoD has incorporated other non-substantive editorial changes in the final rule. In addition to redesignation of some paragraphs to conform to DFARS numbering conventions and minor wording changes for clarity, DoD has relocated DFARS 203.907, Classified information, to DFARS 203.903(2), because section 3.907 in the FAR is titled “Whistleblower Protections Under the American Recovery and Reinvestment Act of 2009 (the Recovery Act).” DoD cannot assign a new title to the corresponding section in the DFARS.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows:

The Department of Defense (DoD) is amending the Defense Federal Acquisition Regulations Supplement (DFARS) to implement changes to existing protections for contractor whistleblower employees in accordance with section 827 of the National Defense Authorization Act for Fiscal Year 2013. Section 827 amends 10 U.S.C. 2409 and 10 U.S.C. 2324(k), making the changes applicable to DoD and NASA. Each agency is amending its FAR supplement. This analysis pertains only to the DFARS final rule. DFARS is revising subpart 203.9, “Whistleblower Protections for Contractor Employees.” The subpart covers the policy, procedures for filing and investigating complaints, remedies, and the prescription for the clause at DFARS 252.203-7002, entitled “Requirement to Inform Employees of Whistleblower Rights.”

The rule applies to all entities, small as well as large, at the prime contract and subcontract level. However, not all entities will have a situation that requires an employee to use the whistleblower provisions, and there is no way to predict the potential number of whistleblowers in advance. However, a small entity could be impacted by a whistleblower employee either as a Government prime contractor or subcontractor. In addition, the impact on an entity is directly related to the seriousness of the alleged wrongdoing.

No comments were received from the public on the Regulatory Flexibility analysis. No comments were received from the Chief Counsel for Advocacy of the Small Business Administration.

There are no reporting requirements associated with this rule. However, a firm accused of retaliating against an employee whistleblower is likely to be required to furnish human resources documentation to disprove the accusation. This documentation, however, would only be required in the course of an investigation of the accusation, not as a result of a contract clause.

There are no alternatives to this rule. Because of the terms used in the statute, DoD is unable to exempt small entities or establish a dollar threshold for coverage. Regardless of the size of the business, a whistleblower employee must be protected from retaliation by his/her employer.

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

Accordingly, the interim rule amending 48 CFR parts 203 and 252, which was published in the Federal Register at 78 FR 59851 on September 30, 2013, is adopted as a final rule with the following changes:

Section 802 of the National Defense Authorization Act for Fiscal Year 2012 is a successor to section 801 of the National Defense Authorization Act for Fiscal Year 2011 (Pub. L. 111-383), which amended 10 U.S.C. section 2320 to authorize DoD “covered litigation support contractors” to have access to and use of any technical, proprietary, or confidential data delivered under a contract for the sole purpose of providing litigation support. Section 802 amended 10 U.S.C. to add section 129d, repealed section 801 of the National Defense Authorization Act for Fiscal Year 2011, and expanded the basic coverage first established in section 801 to cover a significantly broader class of “sensitive information,” which is defined as “confidential commercial, financial, or proprietary information, technical data, or other privileged information.”

The basic objective of the rule is to expressly authorize DoD to provide its litigation support contractors with access to certain types of non-public information, provided that the litigation support contractors are required to protect that information from any unauthorized disclosure, and are prohibited from using that information for any purpose other than providing litigation support services to DoD.

New DFARS subpart 204.74, Disclosure of Information to Litigation Support Contractors, along with its associated new clauses, provides the policy governing the new subpart in a two pronged implementation approach:

• DoD is authorized to release litigation information, including sensitive information, to its litigation support contractors provided that the litigation support contractors are subject to appropriate requirements and restrictions that comply with the requirements of 10 U.S.C. section 129d.

• Although not required by the statute, DoD will, to the maximum extent practicable, ensure that offerors and contractors submitting information to DoD under solicitations and contracts will be notified that the submitted information may be disclosed to DoD's litigation support contractors under the aforementioned conditions.

The new clause at 252.204-7014, Limitations on the Use or Disclosure of Information by Litigation Support Contractors, is the mechanism through which the requirements and restrictions of 10 U.S.C. section 129d are applied to litigation support contractors. Furthermore, new DFARS clause 252.204-7015, Disclosure of Information to Litigation support Contractors, requires litigation support contractors to treat any and all information provided to, or obtained by, the litigation support contractor as sensitive information, regardless of whether that information is marked with a restrictive legend. While not obviating the need, desire, or value of using restrictive legends on sensitive information, this approach ensures the protection of all sensitive information, even when inadvertent error or oversight results in a restrictive legend being omitted from the information.

The new solicitation provision at 252.204-7013, Limitations on the Use or Disclosure of Information by Litigation Support Solicitation Offerors, sets forth the same limitations and notifications in 252.204-7014 for litigation support solicitation offerors.

The new clause at 252.204-7015, Disclosure of Information to Litigation Support Contractors, implements the second of the two-prong policy approach by providing notice to all offerors and contractors that information they may submit to DoD may be disclosed to litigation support contractors. The notice clarifies that such releases to litigation support contractors are authorized notwithstanding any other provision of the contract. This notice is not required by the statute, nor is it otherwise required as a condition of DoD being authorized to make the disclosures covered by 10 U.S.C. section 129d. The notice is provided as a desired best practice when DoD will be receiving potentially sensitive information from its offerors or contractors, to ensure that the submitters are aware of this potential, statutorily authorized release in connection with litigation support services.

The term “litigation information” is created to capture all information that is generated or obtained by the litigation support contractor in providing the litigation support services to DoD, including but not limited to sensitive information. The creation of the new term “litigation information” was particularly important for the implementation of this approach. The foundation of litigation support services is based in large part on the understanding that any or all information involved in providing these services must be treated as sensitive, official use only information, which cannot be shared with any unauthorized persons or used for any other purpose without careful review and approval by the appropriate Government officials.

To avoid any potential confusion regarding the application of requirements for “covered Government support contractors” to “litigation support contractors,” a parenthetical exclusion of litigation support contractors from such requirements is added at: 227.7103-6(c) and 227.7203-6(d); and 252.227-7013(a)(5), 252.227-7014(a)(6), 252.227-7015(a)(2), and 252.227-7018(a)(6).

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

DoD has prepared an initial regulatory flexibility analysis consistent with 5 U.S.C. 603. A copy of the analysis may be obtained from the point of contact specified herein. The analysis is summarized as follows:

The objective of the rule is to implement authority for DoD to allow its litigation support contractors to have access to sensitive information, provided that the litigation support contractor is subject to certain restrictions on using and disclosing such information.

DoD does not expect this interim rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because DoD activities using litigation support contractors are generally already using very restrictive nondisclosure agreements to govern any sensitive information that may be provided to, or developed or discovered by, the litigation support contractors in providing litigation support services for DoD. These DoD activities will likely review their current practices and make any necessary modifications to ensure that there are no inconsistencies with the new requirements. However, at this time DoD is unable to estimate the number of small entities to which this rule will apply. Therefore, DoD invites comments from small business concerns and other interested parties on the expected impact of this rule on small entities.

DoD will also consider comments from small entities concerning the existing regulations in subparts affected by this rule in accordance with 5 U.S.C. 610. Interested parties must submit such comments separately and should cite 5 U.S.C. 610 (DFARS Case 2012-D029) in correspondence.

The rule contains no new information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).

A determination has been made under the authority of the Secretary of Defense that urgent and compelling reasons exist to publish an interim rule prior to affording the public an opportunity to comment. Section 802 amends title 10, United States Code (U.S.C.), by adding section 129d to authorize an exception to the statutory scheme that would otherwise prohibit Government litigation support contractors from accessing or using sensitive information, defined as “confidential commercial, financial, or proprietary information, technical data, or other privileged information,” belonging to prime contractors and other third parties, provided that the support contractor is subject to appropriate non-disclosure and use restrictions. Additionally, 10 U.S.C. 129d mandates specific restrictions for the litigation support contractors that will receive the sensitive information, to ensure that this use does not threaten the data owner's competitive advantage due to the proprietary information, and to provide the data owner with a legal remedies against the support contractor for any breach of those use restrictions. Failure to issue this rule as an interim rule will severely impact the Government's ability to obtain administrative, technical or professional services, including expert or technical consultation, in support of the Government during or in anticipation of litigation, thereby adversely affecting the Government's ability to successfully engage in legal proceedings. However, pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b), DoD will consider public comments received in response to this interim rule in the formation of the final rule.

Therefore, 48 CFR parts 204, 212, 227, 237, and 252 are amended as follows:

This final rule amends the DFARS as follows:

1. Correct 204.1105 and 252.204-7004 to conform to the FAR by changing “clause” to “provision”.

2. Correct a cross reference at 204.7103-1(d).

3. Redesignate 225.004 as 225.070 and revise the text.

4. Correct 252.225-7029 clause title in the eCFR.

Therefore, 48 CFR parts 204, 225, and 252 is amended as follows:

DoD published an interim rule to implement sections 826 and 842 of the National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2013 (Pub. L. 112-239).

Section 826 requires compliance with 10 U.S.C. 2533a (the Berry Amendment) in the case of any textile components supplied by DoD to the Afghan National Army or the Afghan National Police for purposes of production of uniforms. The law further states that no exception or exemptions under that section shall apply.

Section 842 modifies section 886 of the NDAA for FY 2008 (Pub. L. 110-181), which provided enhanced authority to acquire products and services from Iraq and Afghanistan in support of operations in Iraq or Afghanistan. Section 842 eliminates application of the enhanced authority to acquisition of products and services from Iraq.

One respondent submitted a public comment in response to the interim rule.

DoD reviewed the public comment in the development of the final rule. A discussion of the comment is provided below. No changes are made to the final based on this comment, however, one change is being made to correct the electronic Code of Federal Regulations.

Comment: The respondent stated that under the interim rule, DFARS 225.7703-4(f) and (g) state that certain provisions and clauses prescribed in DFARS subpart 225.11 should not be used when certain provisions and clauses prescribed in 225.7703-4 are included. The respondent asserts that the prescriptions for the affected provisions and clauses in DFARS subpart 225.11 should contain these exceptions, but do not.

Response: Paragraphs (f) and (g) of DFARS 225.7703-4 were not added by the interim rule but were just redesignated from prior paragraphs (e) and (f). The prescriptions for the provisions and clauses addressed in 225.7703-4(f) and (g) do contain the appropriate exceptions, which are summarized below.

• 252.225-7000 is prescribed at 225.1101(1) for use only when the clause at 252.225-7001 is used.

• 252.225-7001 is prescribed at 225.1101(2). Paragraph (i)(C) of the prescription provides an exception if all line items will be acquired using a procedure specified in 225.7703-1(a). Use of the procedures at 225.7703-1(a) requires use of provisions and clauses 252.225-7023, 252.225-7024, or 252.225-7024.

• 252.225-7002 is prescribed at 225.1101(3) for use only when 252.225-7001, 252.225-7021, or 252.225-7036 are used. Since an exception is provided for the use of 252.225-7001 and 252.225-7036 when using the procedures at 225.7703-1(a), and 252.225-7021 is not included if 252.225-7026 is included, these exceptions also apply to the use of 252.225-7002.

• 252.225-7020 is prescribed at 225.1101((5) for use only when 252.225-7021 is used.

• 252.225-7021 is prescribed for use at 225.1101(6). Paragraph (iii)(B) of the prescription provides an exception if the clause at 252.225-7026 is included in the solicitation and contract.

• 252.225-7035 is prescribed at 225.1101((9) for use only when 252.225-7036 is used.

• 252.225-7036 is prescribed for use at 225.1101(10). Paragraph (iii)(C) of the prescription provides an exception if using the procedures specified in 225.7703-1(a).

• 252.225-7045 and 252.225-7046 are prescribed for use at 225.7503, unless the entire acquisition is exempt from the Balance of Payments program. The policy at 225.7501(a)(5) exempts acquisitions when use of a procedure specified in 225.7703-1(a) is authorized for an acquisition in support of operations in Afghanistan.

Section 225.1101(6)(i) is being revised to correct the electronic Code of Federal Regulations. In the prescription for clause 252.225-7021, the phrase “instead of the clause at FAR 52.225-5, Trade Agreements,” which had been inadvertently omitted, is reinstated.

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is not a significant regulatory action and, therefore, was not subject to review under section 6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

A final regulatory flexibility analysis has been prepared consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., and is summarized as follows:

This rule implements sections 826 and 842 of the National Defense Authorization Act for Fiscal Year 2013 (Pub. L. 112-239). The objective of the rule is to (1) require compliance with domestic source restrictions in the case of any textile components supplied by DoD to the Afghan National Army or the Afghan National Police for purposes of production of uniforms, and (2) eliminate the application of the enhanced authority to acquire products and services from Iraq. The legal basis is the above-cited statutes.

The number of small entities to be affected by the rule is not known. The rule has the potential to impact entities that manufacture textile components, if purchased by DoD to supply to the Afghan National Army or the Afghan National Police for purposes of production of uniforms. Any impact is expected to be beneficial, because it will require purchase from a domestic source.

No comments were received from the public on the Regulatory Flexibility analysis. No comments were received from the Chief Counsel for Advocacy of the Small Business Administration.

There are no projected reporting, recordkeeping, or other compliance requirements.

DoD was unable to identify any significant alternatives consistent with the stated objectives of the statute. DoD does not anticipate any significant economic impact on small entities. Any impact is expected to be beneficial.

The rule contains information collection requirements that require the approval of the Office of Management and Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35); however, these changes to the DFARS do not impose additional information collection requirements to the paperwork burden previously approved under OMB Control Number 0704-0229, entitled Defense Federal Acquisition Regulation Supplement; Part 225 and Related Clauses (Total approved burden hours—57,135).

Therefore, DoD amends 48 CFR parts 206, 212, 225, and 252 as follows:

This final rule changes the start date of the 12-month Pacific sardine fishery from January 1 to July 1, thus changing the fishing season for Pacific sardine from one based on the calendar year to one beginning on July 1 and continuing through June 30th of the following year. The purpose of this change is to better align the timing of the research and science used in the annual stock assessments with the annual management schedule, as the present schedule imposes substantial challenges in terms of survey data availability relative to the timing of stock assessments.

Because the 2013 fishing season ended on December 31, 2013, this rule also establishes a one-time interim harvest allocation period from January 1, 2014 through June 30, 2014 to allow for continued fishing during the transition from a January to July start of the fishing season. At the November 2013 Pacific Fishery Management Council (Council) meeting, the Council took action on setting the quota for the January 2014 through June 2014 period. The harvest specifications for this interim allocation period are being implemented through a separate rulemaking action, for which a proposed rule published on February 4, 2014. (79 FR 6527) Although the interim harvest specifications will include an Overfishing Limit (OFL), Acceptable Biological Catch (ABC) and Annual Catch Limit (ACL) for calendar year 2014, those specifications are expected to be replaced based on the new stock assessment and Council action in April 2014.

On December 23, 2013, a proposed rule was published for this action and public comments solicited (78 FR 77413). NMFS received no comments on the proposed rule. For further background about this rule, please refer to the proposed rule.

Pursuant to section 304(b)(1)(A) of the Magnuson-Stevens Fishery Conservation and Management Act, the Assistant Administrator, NMFS, has determined that this final rule is consistent with the CPS FMP, other provisions of the Magnuson-Stevens Fishery Conservation and Management Act, and other applicable laws.

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

The Chief Counsel for Regulation of the Department of Commerce certified to the Chief Counsel for Advocacy of the Small Business Administration during the proposed rule stage that this action would not have a significant economic impact on a substantial number of small entities. The factual basis for the certification was published in the proposed rule and is not repeated here. No comments were received regarding this certification. As a result, a regulatory flexibility analysis was not required and none was prepared.

This action does not contain a collection-of-information requirement for purposes of the Paperwork Reduction Act.

For the reasons set out in the preamble, NMFS amends 50 CFR part 660 as follows: