Executive Order 12866

This rule has been determined to be not-significant for the purposes of Executive Order 12866 and, therefore, it has not been reviewed by the Office of Management and Budget.

Pursuant to the provisions of the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the collections of information in this rule have been approved by OMB under control number 0563-0053.

FCIC 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.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. This rule contains no Federal mandates (under the regulatory provisions of title II of the UMRA) for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.

It has been determined under section 1(a) of Executive Order 13132, Federalism, that this rule does not have sufficient implications to warrant consultation with the States. The provisions contained in this rule will not have a substantial direct effect on States, or on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.

This rule has been reviewed in accordance with the requirements of Executive Order 13175, Consultation and Coordination with Indian Tribal Governments. The review reveals that this regulation will not have substantial and direct effects on Tribal governments and will not have significant Tribal implications.

FCIC certifies that this regulation will not have a significant economic impact on a substantial number of small entities. Program requirements for the Federal crop insurance program are the same for all producers regardless of the size of their farming operation. For instance, all producers are required to submit an application and acreage report to establish their insurance guarantees and compute premium amounts, and all producers are required to submit a notice of loss and production information to determine the amount of an indemnity payment in the event of an insured cause of crop loss. Whether a producer has 10 acres or 1000 acres, there is no difference in the kind of information collected. To ensure crop insurance is available to small entities, the Federal Crop Insurance Act authorizes FCIC to waive collection of administrative fees from limited resource farmers. FCIC believes this waiver helps to ensure that small entities are given the same opportunities as large entities to manage their risks through the use of crop insurance. A Regulatory Flexibility Analysis has not been prepared since this regulation does not have an impact on small entities, and, therefore, this regulation is exempt from the provisions of the Regulatory Flexibility Act (5 U.S.C. 605).

This program is listed in the Catalog of Federal Domestic Assistance under No. 10.450.

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the Notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115, June 24, 1983.

This final rule has been reviewed in accordance with Executive Order 12988 on civil justice reform. The provisions of this rule will not have a retroactive effect. The provisions of this rule will preempt State and local laws to the extent such State and local laws are inconsistent herewith. With respect to any direct action taken by FCIC or action by FCIC directing the insurance provider to take specific action under the terms of the crop insurance policy, the administrative appeal provisions published at 7 CFR part 11, or 7 CFR part 400, subpart J for determinations of good farming practices, as applicable, must be exhausted before any action against FCIC for judicial review may be brought.

This action is not expected to have a significant economic impact on the quality of the human environment, health, or safety. Therefore, neither an Environmental Assessment nor an Environmental Impact Statement is needed.

This rule finalizes changes to the Common Crop Insurance Regulations (7 CFR Part 457), Pear Crop Insurance Provisions that were published by FCIC on April 11, 2014, as a notice of proposed rulemaking in the Federal Register at 79 FR 20110-20114. The public was afforded 30 days to submit comments after the regulation was published in the Federal Register .

A total of 107 comments were received from 4 commenters. The commenters were insurance providers and an insurance service organization.

The public comments received regarding the proposed rule and FCIC's responses to the comments are as follows:

Comment: A commenter stated that a number of the proposed changes appear to provide additional flexibility, as requested by the growers (according to the background in the proposed rule) and which appears to be part of a general trend (separate units, coverage levels and price election percentages by practice/type). The commenter stated that while such flexibility can be beneficial in many ways, they are concerned with the potential impact on loss ratios if the premium rates do not reflect the potential risk being added.

Response: FCIC is required by the Federal Crop Insurance Act to take actions, including the establishment of adequate premiums, as are necessary, to assure the actuarial soundness of the Federal crop insurance program. To maintain actuarial soundness in accordance with the Federal Crop Insurance Act, FCIC will adjust premium rates to reflect any additional risk associated with changes to the Pear Crop Provisions.

Comment: A few commenters stated that FCIC has made several changes to the Pear Crop Provisions that are similar to changes that have previously been made as a part of the 2011 Apple Crop Provisions. However, the commenters stated that some of the changes in the 2011 Apple Crop Provisions were not carried over and should be considered as well, as indicated in other specific comments provided. The commenters also asked that FCIC consider making some additional changes to other parts of the Pear Crop Provisions that were not published in order to minimize the number of problems or issues that could arise with implementing the proposed changes.

Response: FCIC believes the pear policy is distinctly different from the apple policy primarily because of the inherent differences in the industry. Therefore, not all of the provisions from the Apple Crop Provisions were proposed to be included in the Pear Crop Provisions. FCIC cannot make changes that were not proposed unless a flaw or vulnerability is identified. FCIC has made several changes in the final rule due to the suggestions of commenters.

Comment: A few commenters stated that the definition of “marketable” needs to be clarified. The commenters questioned exactly what it means to be “acceptable for processing or other human consumption even if failing to meet any U.S. or applicable state grading standard.” The commenters stated that a definition is needed that is simple, so that agents and growers can understand. The commenters stated the apple policy makes it clear that U.S. No. 1 processing grade is the standard for the basic policy and for actual production history (APH) purposes. A similar simple definition is needed for pears so it is clear exactly what to count for claim purposes as well as for APH purposes. A few commenters stated the grade standards for Summer and Fall, and Winter types have the lowest grade as U.S. No. 2. The only other grade these standards address is unclassified. Unclassified pears are defined as pears which have not been classified in accordance with any of the grades. The term unclassified is not a grade within the meaning of these standards, but is provided as a designation to show that no grade has been applied to the lot. The standards for grades of pears for processing includes a definition for culls and defines them as pears which do not meet the requirements of the grades. The commenters stated that from all of this language it is unclear exactly what we would count as production for APH or for loss adjustment. The commenters asked if growers delivered all of their production to a packing shed, and the packing shed did not pay them for their culls, would the culls still be counted as production since they were accepted, but not paid for. The commenter asked if the grower did not harvest, whether graders would grade the pears U.S. No. 2 grade since that is the lowest level addressed as marketable in the standards or would all pears be counted since everything makes cull grade according to the processing pear grade standards. The commenters stated it would appear that for pears the insurance providers should count all pears that meet the standard of U.S. No. 2 processing grade or any production sold for human consumption even if such production fails to meet the U.S. No. 2 processing grade. A few commenters stated that without a clear definition of “marketable,” insurance providers will not know how they are expected to handle the situations where growers deliver all of their production to a packing shed, and the packing shed discards, rather than pays for their culls. The commenters stated that without a specific definition of “marketable” the insurance providers will not have language to use to defend their determination of production to count in instances where growers do not harvest their crop.

Response: FCIC agrees that without specifying a grade standard in the definition of marketable, it is unclear what pears would be acceptable for processing or human consumption. FCIC also agrees that U.S. No. 2 processing is the lowest grade that would be acceptable for human consumption. While the definition of “marketable” was not included in proposed rule, the commenter has identified a vulnerability that needs to be addressed because without a clear definition of “marketable” there is the potential for producers to be treated disparately. FCIC has revised the definition of “marketable” to state that it means pear production that grades U.S. No. 2 processing or better, unless otherwise provided in the Special Provisions, or that is sold (even if failing to meet any U.S. or applicable state grading standard). This definition clearly identifies what pears are acceptable for human consumption, while also considering anything that is sold as marketable, even if the sold pears are not graded or fail to meet the specified grade. This change is consistent with the intent of the current policy and clarification should prevent confusion about what pears should be considered production to count. This change is also similar to the Apple Crop Provisions because a minimum grade used to determine production to count will be specified.

Comment: A few commenters stated the proposed rule does not include a definition of the term “type.” The commenters stated that perhaps it is sufficiently understood as used in the Crop Provisions and Special Provisions (actuarial documents), but perhaps there should be a definition such as the one in the Apple Crop Provisions: “A category of pears as designated in the Special Provisions.”

Response: A definition of type was not proposed because insurable types are specified in the actuarial documents. No change has been made in the final rule.

Comment: A few commenters asked if the new “types” will be the same as the existing “varietal groups” (Bartlett, and others, depending on the county/state).

Response: Insurable types will be specified in the actuarial documents. In most regions there will be a type for Summer and Fall pears and a type for Winter pears. However, some regions may have additional types depending on prices and data availability. The varieties that belong to the current types will be reorganized into the new types based on their maturity dates. The Special Provisions will identify which varieties will be included in each type. There will no longer be an “all other” type, so varieties that were previously insured as “all other” will now fall under either Summer and Fall or Winter.

Comment: The proposed rule background states that “FCIC proposes to revise section 2 to allow optional units by irrigated and non-irrigated practices” and “Optional units will also be available by type if specified in the Special Provisions” However, a few commenters stated the proposed language in section 2 also suggests another change is being made since the possibility of optional units by non-contiguous land or by type is “In addition to the provisions in section 34 of the Basic Provisions.” The current 2011 policy language allows for optional units by non-contiguous land only “instead of” the applicable optional unit provisions in section 34 of the Basic Provisions (section, section equivalent, or FSA farm number). Optional units by varietal group are “In addition to, or instead of” the other optional unit provisions so that is unchanged. The commenters stated that if this change is intended, it should be identified as such and that it could result in pear producers having a large number of optional units because of the combinations of legal description, non-contiguous land, and type, which could lead to complications in administration and loss adjustment. The commenters asked if this change is made, will the premium rates be reviewed for possible adjustment.

Response: FCIC did not intend to allow additional unit structure options with the exception of irrigated/non-irrigated and the change from varietal group to type. Section 2(b) in the current Pear Crop Provisions allows the producer to choose optional units by non-contiguous land instead of optional units by section, section equivalent, or FSA Farm Serial Number. The proposed language would eliminate this choice and allow optional units by non-contiguous land in addition to optional units by section, section equivalent, or FSA Farm Serial Number. FCIC agrees that the proposed change could result in pear producers having a large number of optional units, which could lead to complications in administration and loss adjustment. Therefore, FCIC has revised this section to clarify optional units may be established either: (1) In accordance with section 34(c) of the Basic Provisions (by section/section equivalent/FSA Farm Serial Number, irrigated/non-irrigated practices, and organic farming practices); or (2) by non-contiguous land. In addition, FCIC has revised the section to clarify that optional units are also available by type. As with any policy change, FCIC will evaluate such changes to determine whether they will have an impact on premium rates and make such adjustments as required.

Comment: According to the proposed rule background, “FCIC proposed to remove the definition of “varietal group” and replace it with the term “type,” the unit structure will be by type as specified in the Special Provisions.” A few commenters stated that the last phrase regarding unit structure is not as clear as the statement in the proposed rule background that states “Optional units will also be available by type if specified in the Special Provisions.”

Response: FCIC agrees the phrase “unit structure will be by type” could be misleading if taken out of context. FCIC did not intend to imply that the policyholder's unit structure options are limited to optional units by type. Unit structure is determined by the policyholder in accordance with the Basic Provisions, Crop Provisions and Special Provisions. FCIC has revised section 2 to allow the policyholder to elect optional units by type if allowed by the Special Provisions.

Comment: A few commenters stated that although the proposed language in section 2 makes it clear that separate optional units are now available by type, this language does not address situations where the types are interplanted on the same acreage. The commenters stated that this needs to be clarified, especially in light of allowing different coverage levels and percent of prices for different types. The Bartlett type is often interplanted with other types of pears, and if we cannot provide optional units by type in this situation, we could end up having to combine existing units resulting in different percent of prices and different coverage levels within a single unit. The commenters asked if it is the intent of FCIC to allow separate optional units by type if a Bartlett type is interplanted with another type on the same acreage.

Response: FCIC agrees that the issue with interplanted acreage needs to be addressed. Therefore, FCIC has retained the provision that nullifies section 34(b)(1) of the Basic Provisions. However, FCIC has reworded to specifically state that the requirements of section 34 of the Basic Provisions that require the crop to be planted in a manner that results in a clear and discernable break in the planting pattern at the boundaries of each optional unit are not applicable for optional units by type. This will allow separate optional units for types that do not have a clear and discernable planting pattern, such as situations where types are interplanted. However, it is important to note that separate records of production must still be maintained for each optional unit in accordance with section 11(a) of the Pear Crop Provisions.

Comment: FCIC is proposing to revise section 3(a) to allow different coverage levels and price election percentages by type. The proposed rule states that risks may not be the same for each type of pear, so this gives the producer an opportunity to tailor the coverage to the specific risks associated with each type. The commenters asked if this change is made in the Pear policy, has the FCIC considered the potential increased risk of adverse selection involved in allowing producers to vary the coverage levels and prices by type rather than by crop/county. A commenter asked, if current rates are not currently established to recognize these differences in risk, will they be revised accordingly.

Response: FCIC agrees that allowing different coverage levels and price election percentages by type may increase risk. As with any policy change, FCIC will evaluate such changes to determine whether they will have an impact on premium rates and make such adjustments as required.

Comment: A few commenters stated they are concerned with how allowing different coverage levels and price percentages by type, which may or may not be set up as separate optional units, will work. The commenters asked if it is determined that the different types do not qualify as separate optional units, what happens to the different coverage levels and prices. The comments asked if the provisions are intended to allow different coverage levels and prices within the same basic unit. The commenters asked whether it is intended to allow producers to elect basic units, but still choose different coverage levels and prices by type within a basic unit. The commenters also asked how FCIC plans to administer this provision when multiple types are interplanted on the same acreage.

Response: Many policies allow more than one type to be selected under a unit. When there is more than one type in a unit the guarantee is calculated separately for each type within the unit and then the guarantee for each type is added together to determine the guarantee for the unit. Therefore, allowing separate coverage levels and price election percentages to be selected for each type will simply require different values for coverage level and price election percentage to be used in the guarantee calculation. When production records contain comingled production, FCIC plans to develop procedures for determining how production will be allocated to each type within unit. The procedures will be similar to procedures for other APH crops that allow multiple types to be selected within a unit in that comingled production will be prorated using a method similar to the comingled production worksheet contained in the Crop Insurance Handbook. Even if it is determined that the policyholder does not qualify for separate optional units by type because they do not have separate production records for establishing their APH guarantee or the producer does not choose optional units by type, because the damaged crop must be appraised, it will still be possible to settle the claim with separate coverage levels and price elections by type.

Comment: A few commenters suggested revising the first sentence of section 3(a) to state, “You may select different coverage levels and percent of price elections for each type in the county as specified in the Special Provisions except if you elect Catastrophic Risk Protection (CAT) on any individual type.”

Response: FCIC agrees the phrase in section 3(a) should be revised to provide an exception if CAT is elected. The CAT Endorsement supersedes the Crop Provisions in order of precedence and, therefore, the Crop Provisions cannot override the CAT Endorsement. The CAT Endorsement applies to the entire crop in the county. FCIC has revised section 3(a) consistent with the commenter's recommendation.

Comment: A few commenters stated they acknowledge similar changes were made in the 2011 Apple Crop Provisions (allowing different coverage levels) and 2013 Peach Crop Provisions (different coverage levels and price percentages), but prior to these Crop Provisions being changed the general rule has been that only one coverage level and price percentage could be elected for all the acreage of the crop in the county unless separate types were treated as if they were separate “crops” (grapes in California, for example), in which case the insured also could choose whether to insure all or just some of those types (which is not proposed in this draft, and was not changed for Apples or Peaches).

Response: FCIC agrees that the general rule in section 3(b)(2) of the Basic Provisions allows the insured to select different coverage levels and price elections if the Crop Provisions allow the insured to separately insure an individual type, in which case these types are treated like separate crops and charged separate administrative fees. However, under the Pear policy, the types are not considered separate crops so they are not subject to the provision in section 3(b)(2) of the Basic Provisions.

Comment: A few commenters questioned using the word “bearing” in section 3(b)(2). The commenters stated that producers are required to report their uninsurable acres, and when trees are first planted, they will be non-bearing. The commenters asked if it is really the intent for producers to report zero trees on their uninsurable acres. The commenters stated that if the block consists of older trees and younger interplanted trees of the same variety, and only bearing trees are counted, then there will be inconsistencies with the acres, the tree spacing, and the density. If growers remove many older trees and replace them with younger trees, they will need to report them on the Producer's Pre-Acceptance Worksheet (PAW) as they have performed cultural practices that will reduce the yield from previous levels. Growers should be required to report all trees and this number should remain constant until they remove trees or plant new trees. The commenters concluded it should not be a requirement to track only the trees that are bearing and to revise this figure each year.

Response: No changes were proposed to this provision and the comment does not address a conflict or vulnerability in the provision. Therefore, FCIC cannot consider the recommended change because the public was not given an opportunity to provide comments. No change has been made to the final rule. However, in response to the concerns raised, the information that must be submitted in accordance with section 3(b) is required to establish the producer's APH approved yield and the amount of their coverage. While section 3(b)(2) only requires the bearing trees on insurable and uninsurable acreage to be reported, the number of bearing and non-bearing trees on insurable and uninsurable acreage must be reported on the producers pre-acceptance worksheet (PAW). Perennial crop policies contain provisions for “bearing trees” to identify such trees that meet the eligibility requirements for insurance coverage. Because premium and indemnity payments are based on the number of trees that meet eligibility requirements, insurance providers are required to track bearing trees as outlined in the Crop Provisions and the Crop Insurance Handbook (CIH). Requiring all trees be reported under section 3(b)(2) would create confusion regarding insurability and could result in the overstatement of premium and liability.

Comment: A commenter questioned the need to know the planting pattern as required in section 3(b)(3). The commenter stated that tree spacing and tree count is already captured and this is what is needed to determine if there have been tree removals or acreage reductions.

Response: No changes were proposed to this provision and the comment does not address a conflict or vulnerability in the provision. Therefore, FCIC cannot consider the recommended change because the public was not given an opportunity to provide comments. No change has been made to the final rule. However, with respect to the concerns expressed by the commenter, the planting pattern consists of tree spacing and arrangement. FCIC requires the producer to report the planting pattern so the insurance provider can use this information to determine if there is adequate tree spacing for the producer to carry out recommended good orchard management practices and to determine the number of trees per acre.

Comment: A few commenters questioned if it is possible to rewrite section 3(c) so the phrase “yield used to establish your production guarantee” does not have to be repeated seven times in this section.

Response: Section 3(c) contains three subparagraphs (1) through (3) to describe different scenarios during the insurance period. While the phrase is repetitive, it is necessary for the provision. This is standard language that has been added to most of the perennial APH Crop Provisions and to maintain consistency with other perennial APH policies, no change has been made in the final rule.

Comment: A few commenters stated that the proposed rule background refers to the addition of “subparagraphs (1) through (4)” but there are only three subparagraphs in section 3(c). The commenters stated that presumably this is a typo in the background, rather than the fourth subparagraph being left out.

Response: FCIC agrees with the commenters that the proposed rule background should have referenced paragraphs 3(c)(1) through (3). A subparagraph (4) was neither proposed nor intended to be included in the proposed rule.

Comment: The proposed rule states in section 3(c) that we will reduce the yield used to establish your production guarantee, as necessary, based on our estimate of the effect of any situation listed in sections 3(b)(1) through (b)(4). A few commenters asked how 3(b)(2) through (4) impacts yield as it relates to 3(c)(1) and (2). The commenters stated that they are using the information reported by the production reporting date in 3(b)(2) through (4) to establish the approved yield/guarantee. Only damage as referenced in (b)(1) would have a relationship to insured or uninsured causes. Removal of trees might affect both the insured acres and yield/guarantee depending on the trees removed. If old, poorly producing trees are removed, the yield/guarantee could actually increase. The commenters stated the relationship to insured and uninsured damage is unclear. A few commenters asked how the reductions in the proposed paragraphs 3(c)(2) and (3) are being coordinated with the loss adjustment procedure. The commenters stated that these provisions will be difficult to enforce (i.e. you may never know and if an insurable event occurs later in the season or at harvest, any prior uninsurable damage will be masked). The commenters stated that after insurance attaches, this all seems like a loss adjustment issue and not yield adjustment.

Response: Sections 3(b)(2) through (4) involve the reporting requirements that are necessary to track whether there are changes in the unit that could affect the guarantee. Sections 3(b)(2) through (4) refer to the number of bearing trees, the age of the trees, and interplanted trees. The number of trees can affect the yield because fewer trees will likely result in fewer pears per acre, although this is not always true, such as the case of overcrowded orchards. The age of trees also affects yield because the productive capacity of trees generally follow a bell shaped curve over the life of the tree. Interplanted acreage affects the production per acre because there are fewer trees per acre of a given crop to produce fruit. All of these variables have the potential to affect the productive capacity of the tree and can be caused by insured or uninsured causes. FCIC agrees that the damage occurring after insurance has attached appears to be a loss adjustment issue but these are the types of damage that are expected to affect the production capacity of the unit in the following year so for this reason the guarantee is adjusted to reflect the expected production capacity in the current year but only if the losses are result of uninsured causes. This will have the same effect as assigning production for uninsured causes for the year in which the damage occurred so there is no double counting, but the adjusted guarantee will be effective for the subsequent crop year. For insured causes of loss, the guarantee remains the same for the existing crop year and the losses measured. For the subsequent crop year, the procedures in section 3(c)(1) are applicable to adjust the guarantee to reflect the expected production capacity of the unit. Although FCIC agrees these variables can and often will be handled through acreage adjustments in accordance with FCIC approved procedures, the proposed provision allows for the possibility of adjusting the yield “as necessary.” FCIC will revise the Pear Loss Adjustment Handbook to ensure it is clear how to address situations that require an adjustment at the time of loss. No change has been made in the final rule.

Comment: A few commenters stated the Pear Crop Provisions provide continuous coverage for a carryover policyholder and, therefore, damage due to an insured cause that would have occurred within the prior crop year and should be reflected in current year actual production history and also in the number of insured acres in a situation where trees were damaged/destroyed. Example: For the 2014 crop year a policyholder has a one acre block composed of 109 trees. Lightning sparks a fire, destroying 22 trees and the production on the trees. Based on harvested records each tree (remaining) produced an average of 100 lbs., with a total loss of production for 22 trees equal to 2,200 lbs. This reduction in yield of 1.1 ton/acre will directly impact the APH for the 2015 crop year. Additionally, because of the destroyed trees, the percent of stand will reduce the insurable acres from 1.0 to 0.8. The commenter states this subsection implies the insurance provider would further reduce the APH yield by 1.1 tons/acre. This would appear to subject the insured to double reduction of his/her APH yield.

A few commenters stated that sections 3(c)(2) and (3) differ in the fact that in (2) the insured provides notice of a situation occurring after the beginning of the insurance period by the production reporting date, whereas in (3) the insured fails to provide notice of a situation during the same time period. If the same example above occurred during the 2015 crop year and the cause of loss was a small aircraft crashing and destroying the trees, then provisions imply the impact would be as such: In accordance with (c)(2) the APH yield would be reduced by 1.1 ton/acre and only 0.8 acres would be insurable; in accordance with (c)(3) for the 2015 crop year, the production guarantee would be assessed for the acreage for any indemnity claim (result: No indemnity paid) and the acreage would be reduced to 0.8 acres; and in accordance with the last sentence of section (c)(3) for the 2016 crop year, the APH yield would be reduced by 1.1 ton/acre. If these results are correct, the commenters ask if this is FCIC's intent with these provisions.

Response: FCIC disagrees with the commenters. A policyholder's APH is based on at least 4 years of yields building to 10 years. Therefore, a single years loss will have some effect of the APH, but would not have the same effect as if a situation arises that affects the future production capacity of the unit, such as the loss of trees. Section 3(c) is required to address this latter situation where instead of using the historical production to establish the guarantee, the guarantee is reset based on the best estimate of the effect of the loss on the production capacity of the unit. Therefore, there is no double counting because the adjustment effectively overrides the normal APH process. Further, the provisions in section 3(c) are not cumulative. Each is applicable depending on the timing of the notice of one of the conditions in section 3(b)(2) through (4). No change has been made in the final rule.

Comment: In section 3(c)(3), the last sentence states “We will reduce the yield used to establish your production guarantee for the subsequent crop year.” A few commenters asked what if the event that occurred was something that only affects the crop for the year in question and has no carryover effect on the yield into the next crop year. The commenters stated the word “will” should be changed to “may” to provide the flexibility to either reduce or not reduce the yield for the subsequent year depending on whether the effect of the damage will carry over to that year. This language needs to be revised to allow the insurance providers to have some flexibility in determining how much, if any, the approved APH yield should be reduced for the subsequent year. The commenter stated that FCIC responded to similar comments to the Peach proposed rule by saying that insurance providers already have that flexibility according to the opening statement in section 3(c) of the Pear Crop Provisions that refers to reducing the yield “as necessary, based on our estimate of the effect.” However, the commenters stated they still have a concern with this language as proposed. The specifics in subsection (1) refer to reducing the yield “any time we become aware”, and in (2) to “only if the potential reduction . . . is due to an uninsured cause,” so when (3) states flatly that “We will reduce the yield . . . for the subsequent crop year” with no qualifiers, it could be taken as not being subject to any determination of necessity.

Response: The stem in section 3(c) states that it is only applicable if the conditions in sections 3(b)(2) through (4) exist and the insurance provider determines that an adjustment is necessary. If the insurance provider determines that an adjustment is necessary because the yield capacity of the unit has been affected then the application of the adjustment must be required, otherwise there may be disparate treatment between policyholders and insurance providers.

Comment: Section 3(d) states “You may not increase your elected or assigned coverage level or the ratio of your price election to the maximum price election we offer if a cause of loss that could or would reduce the yield of the insured crop is evident prior to the time that you request the increase.” A few commenters stated that this is a difficult provision to administer and we would recommend that it be removed from the policy. The Producer's Pre-acceptance Worksheet (PAW) contains the following question: “Has damage (i.e. disease, hail, freeze) occurred to Trees/Vines/Bushes/Bog or have cultural practices been performed that will reduce the insured crop's production from previous levels?” If damage has occurred, and the question has been answered “Yes”, the approved APH yield will be adjusted accordingly to reflect the reduced potential production. This question on the PAW appears to address the issues that this section is intending to handle. In addition, the sales closing dates are generally established based on the precept that any applications taken by that date will not be subject to adverse selection. If the decision is made to retain this provision, we have the following comments: Might help to clarify what time frame is meant by “if a cause of loss . . . is evident prior to the time that you request the increase.” A cause of loss that occurred the previous crop year would be “prior to the time that you request the increase.” The commenters ask FCIC to consider rewriting something like: “Your request to increase the coverage level or price election percentage will not be accepted if a cause of loss that could or would reduce the yield of the insured crop is evident when your request is made.”

Response: No changes were proposed to this provision and the comment does not address a conflict or vulnerability in the provision. Therefore, FCIC cannot consider the recommended change because the public was not given an opportunity to provide comments. No change has been made to the final rule. However, with respect to the inquiry, the provision in section 3(d) already contains a timeframe that is identified by when the cause of loss occurred relative to when the insured requests the increase. According to the provision, if a cause of loss that could or would reduce the yield has occurred prior to the time the insured requests the increase, the policyholder is prohibited from increasing their coverage level or the ratio of the price election to the maximum price election. Therefore, even if the cause of loss occurred during the prior crop year, if the cause of loss could or would reduce the yield for the crop year in which the request is made, no increase is allowed.

Comment: A few commenters asked if the 5-ton minimum requirement in section 6(c) is appropriate for all types. A commenter asked if production varies by type, would it be more appropriate to provide the minimum production by type in the Special Provisions as opposed to providing a minimum in section 6(c). The commenter stated that if 5 tons covers most all types, then perhaps that is why the policy only need to provide for the exceptions.

Response: The 5-ton minimum is appropriate for most types of pears. The language in section 6(c) is drafted so as to provide an exception through the Special Provisions if the 5-ton minimum is determined to be inappropriate in certain areas or for certain varieties.

Comment: A commenter asked if approval in writing as referenced in section 6(c) infers a written agreement and if so, why not state “if allowed by written agreement.” A few commenters stated that the proposed rule background is clear that “This change is proposed to allow the approval of the level of production to be made without a written agreement,” but not so clear in the proposed policy language. It will need to be clearly stated in the underwriting procedures to avoid any confusion. The phrase “approval in writing” sounds similar to “agreement in writing,” which has sometimes been used to refer to written agreements. A few commenters asked if the intent of section 6(c) is to allow these situations to go through the RMA Regional Office determined yield process rather than the written agreement process. A few commenters stated that section 6(c) is a proposed change to allow insurance providers to accept coverage for production levels less than what the Crop Provisions require. The commenters state this language is vague without instruction provided. The commenters asked what the parameters are for such an agreement. The commenters stated that instruction should at least be referenced in the proposed rule in order for an insured to know if they are being treated equitably. A commenter asked if the determination of whether or not to allow a lower production level becomes the responsibility of the insurance provider instead of the RMA Regional Office, will this mean a change in which policy provisions regarding arbitration, mediation, etc, apply if the insured disagrees with that determination (if the insurance provider refused to allow the lower production level, for example).

Response: Although the current provision allows for an exception to the minimum production requirement through a written agreement, the written agreement handbook instructs the insurance provider to instead request a determined yield from the Risk Management Agency Regional Office. The proposed change in the Pear Crop Provisions from the term “written agreement” to “approval in writing” was intended to direct the insurance provider to the written agreement handbook without giving the impression that a written agreement was required. However, due to the number and nature of comments received it appears that this change will create more confusion than clarity. Therefore, no changes to section 6 have been made in the final rule.

Comment: A few commenters asked if there will be impacts to T-Yields and rates when an insurance provider elects to insure a lower production level than what is allowed under section 6(c) of the Crop Provisions. A commenter asked how many policy exceptions written agreements for producers who did not meet the minimum production requirement were requested in previous years, and how many of those requests were approved. Did any of them involve a different premium rate than what would apply if the AIP approves the lower production level? If so, the commenter stated this is another resulting change since AIPs would not have that authority.

Response: As stated in response to the previous comment, FCIC has retained the original language from the 2011 Pear Crop Provisions and does not intend to change current procedure. Because these exceptions are handled through determined yields, T-Yields and rates are not changed on a case by case basis. Because no change has been made, this provision will continue to affect county T-Yields and rates in the same manner that it has in the past. Because of the small number of producers that have historically been allowed to insure pears in this manner, this provision is expected to continue to have minimal effect on county T-Yields and rates.

Comment: A few commenters stated the language in section 8(a)(2) has been added to most, if not all, of the perennial Crop Provisions several years ago. The commenters stated they are in agreement with the concept of continuous coverage applying for renewal policyholders, but do have some concerns with language as it currently reads. The present language indicates that for each subsequent crop year the policy remains continuously in force, coverage begins on the day immediately following the end of the insurance period for the prior crop year. The commenters asked about damage that occurs to next year's buds prior to this year's end of the insurance period. The comments asks whether this is the damage that is intended to be covered by this language. For example, assume a grower is insured and a severe hail storm occurs in July. This damage may injure this year's crop as well as the buds that will produce next year's crop. However, this damage would be outside the current insurance period based on the current language. If the intent is to cover this damage for renewal policyholders, the language should be revised to something along the lines of the language in the Adjusted Gross Revenue handbook that states that the policy covers damage that occurred due to insurable causes during the previous crop year. The commenters stated they feel that it will be difficult to assess such damage and that it should be covered under the policy. If this is not the intent, it should be stated very clearly that the policy will not cover damage that occurs the previous crop year if such damage occurs prior to the end of the previous year's end of insurance period.

Response: Section 8 simply describes the period of insurance and clarifies that the pear policy is now a 12 month policy. Section 9 covers insurable causes of loss and makes it clear that to receive an indemnity any damage must result from an insurable cause of loss occurring within the insurance period. Therefore, no additional language is required and FCIC does not want to create any potential ambiguity by referencing insurable causes of loss and when they must occur to be indemnified in section 8. This means that the Pear Crop Provisions do not provide coverage for damage to fruit if the damage occurs outside of the insurance period and, in reference to the example provided, the policy does not cover any reduction in production that was caused by damage to the buds in a prior crop year. FCIC cannot consider the recommended change to the Pear Crop Provisions to provide coverage for damage that occurs outside of the insurance period because this change was not proposed, the comment does not address a conflict or vulnerability, and the public has not been given an opportunity to provide comments. No change has been made to the final rule.

Comment: A few commenters asked FCIC to consider removing the phrase “after an inspection” from section 8(b)(1). If damage has not generally occurred in the area, it should be up to the insurance provider's discretion as to whether or not an inspection is needed for them to “consider the acreage acceptable.” Because the acreage and production reporting dates are after insurance attaches, the insurance provider might not know if the acreage was acquired after coverage began, but before the acreage reporting date. The commenters stated the insurance providers should be able to inspect if they decide it is necessary, but it should not be a requirement. The commenters also asked FCIC to consider adding language to allow insurance providers the opportunity to inspect and insure any additional acreage acquired after the acreage reporting date if they wish to do so (similar to what is currently allowed for acreage that is not reported per section 6(f) of the Basic Provisions).

Response: No changes were proposed to this provision and the comment does not address a conflict or vulnerability in the provision. Therefore, FCIC cannot consider the recommended changes because the public was not given an opportunity to comment. No change has been made to the final rule. However, with respect to acreage acquired after the acreage report, section 6(f) of the Basic Provisions, which allows the insurance provider to determine by unit the insurable crop acreage, share, type and practice, or to deny liability if the producer fails to report all units, would apply. FCIC approved procedures allow the insurance provider to revise an acreage report to increase liability if the crop is inspected and the appraisal indicates the crop will produce at least 90 percent of the yield used to determine the guarantee or amount of insurance for the unit.

Comment: A commenter recommended the insured cause of loss be clarified as “Fire, due to natural causes, unless weeds . . .” (or “Fire, if caused by lightning, unless weeds . . .”).

Response: No changes were proposed to this provision and the comment does not address a conflict or vulnerability in the provision. Therefore, FCIC cannot consider the recommended changes because the public was not given an opportunity to comment. No change has been made to the final rule. However, section 12 of the Basic Provisions already states all insured causes of loss must be due to a naturally occurring event. In addition, the Federal Crop Insurance Act is clear that only natural causes can be covered under the policy.

Comment: The proposed rule states that 11(c)(3)(iii)(A) would be revised to size 165. A commenter asks if the revised section needs to be shown [in the settlement of claims example] or is listing in the section 11 revisions sufficient.

Response: FCIC did not include the adjustments that are applicable only to California in the example because it is intended to show the basic process for settling a claim as outlined in section 11(b). FCIC has added a phrase to indicate the example is for a state other than California.

Comment: A few commenters suggested adding the term “Fresh” in the heading prior to the phrase “Pear Quality Adjustment Endorsement.” A commenter stated that otherwise producers could make the case that this endorsement applies to both fresh and processing and this change would clarify that this is not true. A few commenters stated there are growers in the Northwest U.S. who generally grow pears for the fresh market. However, some of these growers may grow some Bartletts for the cannery and some Bartletts for fresh market usage. These Bartletts may be in the same optional unit, and attempting to break out fresh verses processing as separate type designations will not be possible administratively. The commenters asked how FCIC proposes that these situations be addressed for purposes of coverage under the Quality Adjustment Endorsement.

Response: Although the Pear policyholders are not currently required to report fresh and processing intended uses, the Pear Quality Adjustment Endorsement only applies to fresh pear acreage. Section 13(b) states, “If the fresh pear production is damaged by an insured cause of loss.” Accordingly, if production practices necessary to produce fresh pears are not applied to the entire unit, the unit will not qualify for the endorsement. To provide further clarification, FCIC has revised the heading of section 13 by adding the term “Fresh” and added language to clarify that the endorsement is only applicable to a unit if all trees in the unit are managed for the production of fresh market pears.

Comment: The proposed rule states that premium rating for the changes in the Pear Quality Adjustment Endorsement in section 13 will be reviewed to establish appropriate premium rates to maintain actuarial soundness. FCIC is proposing to revise the minimum size requirement in section 11(c)(3)(iii)(A) from 180 to 165 or smaller for California pear quality adjustment. A commenter stated that it appears any cull count back has also been eliminated. A few other commenters stated that the proposed rule proposes to cover damage due to all covered causes of loss in place of hail only; and the grade to meet has increased to U.S. No. 1 from U.S. No. 2 and, therefore, it would be reasonable to expect a significant rate increase for coverage under the Endorsement. The commenters asked if these changes are being considered in the new rating.

Response: FCIC agrees with the commenter that changing the minimum size for California pears should have an impact on indemnities. FCIC also agrees that eliminating the cull count back, expanding the causes of loss, and increasing the grade to U.S. No. 1 should affect frequency and severity of losses under the Quality Adjustment Endorsement. FCIC will revise premium rate factors for the Quality Adjustment Endorsement accordingly to cover the additional expected losses.

Comment: A few commenters stated that as this endorsement is in concept very similar to the Apple Quality Adjustment Endorsement, it would appear the likelihood exists that an insured could receive a greater indemnity under the base policy than under the endorsement in situations where damage caused a small percentage of the pears to meet the grade standard set in the endorsement. As such, the commenters stated that a statement such as found in section 14(a) of the Apple Crop Provisions should be added: “Insureds who select this option cannot receive less than the indemnity due under section 12.”

Response: Because policyholders will be charged a higher premium, it would not be appropriate if the policyholder received a smaller indemnity under the Quality Adjustment Endorsement than they would have received under the base policy. Therefore, FCIC has revised section 13 by adding a provision that clarifies that the policyholder cannot receive an indemnity less than due under section 11.

Comment: A few commenters stated that the Quality Adjustment Endorsement appears to now be available to pear producers in California. Under section 11(c)(3)(iii), California production may be reduced if a percentage of the pears are of a specific size or smaller. The commenters stated that because the Pear Quality Adjustment Endorsement provides for no such reduction, size is not a consideration for pear production under the endorsement.

Response: The Quality Adjustment Endorsement under 13(a)(1) states it is available in the states where coverage is provided for in the actuarial documents and for which there is a designated premium rate for the endorsement. A premium rate will be provided for only those states where the quality adjustment applies. There are no plans to include California under the Quality Adjustment Endorsement and, therefore, no premium rate will be provided for the endorsement in the actuarial documents for California. With respect to size requirements under the Quality Adjustment Endorsement, size is only a consideration to the extent that it is specified in the applicable grade standards.

Comment: A few commenters stated that it would seem prudent due to the similarities between the two crop endorsements to add the following statement from the Apple Crop Provisions: “Any pear production not graded or appraised prior to the earlier of the time pears are placed in storage or the date the pears are delivered to a packer, processor, or other handler will not be considered damaged pear production and will be considered production to count under this option.”

Response: FCIC agrees with the commenter that a statement such as the one included in the Apple Crop Provisions is needed to avoid a policy vulnerability. Because insurance ends at harvest, it is necessary to appraise the crop before it leaves the field. It could be difficult or impossible to determine if damage occurred before or after the pears were placed into storage or delivered to the packer or processer. Additionally, production could become comingled making it difficult or impossible to make an accurate determination of what unit the production came from. To avoid a potential vulnerability, FCIC has added a provision in section 11 stating that any pear production not graded or appraised prior to the earlier of the time pears are placed in storage or the date the pears are delivered to a packer, processor, or other handler will not be considered damaged pear production and will be considered production to count. This provision is applicable to both the Quality Adjustment Endorsement and the underlying policy.

Comment: A few commenters recommended FCIC reconsider the damage thresholds and triggers for coverage under this endorsement. The commenters stated this proposed rule has changed the grade trigger from U.S. No. 2 to U.S. No. 1, as well as allowed this coverage to apply due to damage from all perils rather than just hail, but yet the damage chart has remained the same. The commenters stated that based on their field knowledge and experience, they are concerned that keeping the damage trigger at 11 percent may be cost prohibitive for many growers. The commenters recommended FCIC consider having the damage chart trigger at 21 percent rather than 11 percent as a compromise between the rate impact and increased quality standards that are now being proposed. In addition, the commenters pointed out that the apple damage chart uses 65 percent as the point at which there is zero production to count while the pear chart uses 60 percent. The commenters recommended FCIC consider changing the 60 percent level for pears to 65 percent to be consistent with what is used for apples. The commenters stated this would also be more cost effective for the growers to use 65 percent for pears as well.

Response: No changes were proposed to this provision and the comment does not address a conflict or vulnerability in the provision. Therefore, FCIC cannot consider the recommended changes because the public was not given an opportunity to comment. No change has been made to the final rule. However, some of the changes to the Quality Adjustment Endorsement such as the elimination of the cull add-back and change in the grade trigger were requested by producers and industry personnel because of the diminished value of low quality pears. These changes will more accurately adjust production to count to represent the value of low quality pears. While FCIC agrees these changes are likely to result in increased premium rate factors for the Quality Adjustment Endorsement, it remains to be seen whether the cost for the coverage changes requested will be considered cost prohibitive by producers. FCIC will monitor and evaluate the performance of the Quality Adjustment Endorsement and consider potential changes that may be needed the next time the Pear Crop Provisions are revised.

Comment: Section 13(b)(3) states, “if you sell any of your fresh pear production as U.S. No. 1 or better.” A commenter stated that this language suggests that a less than No. 1 pear is being mis-graded as a No. 1 and sold as such. A few commenters asked if FCIC is trying to say that the pears are sold for the same price applicable to a No. 1 or better. A few commenters asked what it is sold for and why. The commenters asked if it would it be clearer if the disposition was specified.

Response: A different number of pears being sold as U.S. No. 1 or better than what was appraised does not necessarily mean the pears were mis-graded when appraised. The appraisal only utilizes a representative sample to extrapolate the estimated number of pears that meet the U.S. No. 1 grade. Because this is an estimate, there is a degree of error, which means the actual number of fruit that meet the U.S. No. 1 grade is likely to be somewhat more or less than what is determined in the appraisal. The provision is also intended to include any sold pears that receive a price greater than or equal to the value of a U.S. No. 1, regardless of grade. Additionally, pears on the ground during an appraisal would be considered unmarketable, but if these pears are later sold as U.S. No. 1 or better, they should be included as production to count.

Comment: A commenter stated that the language “all such sold production will be included as production to count” proposed to be included in section 13(b)(3) is very confusing and misleading. The apple handbook had to include an exhibit to show how to address this language. It would be so much more clear if the wording was rewritten to say “If you sell any of your fresh pear production as U.S. No. 1 or better, your production to count will be the greater of the production you sold as U.S. No. 1 or better, or your production determined under sections 13 (b)(1) and (2).”

Response: FCIC agrees that the proposed wording of this provision could be misleading because it is not clear if the pear production sold as U.S. No. 1 is included as production to count in addition to the quantity determined in the appraisal or instead of the quantity determined in the appraisal. FCIC has revised this provision to clarify that the quantity of pears sold as U.S. No. 1 or better that exceed the quantity of pears determined to grade U.S. No. 1 in the appraisal will be included as production to count.

Comment: A few commenters stated that the provision in 13(b)(3) has been in the Apple Crop Provisions for a number of years and has caused a significant amount of concern. If the provision is retained in the final rule, it is important that pear insureds, agents, insurance providers, etc., understand that losses under the endorsement cannot be finalized until the actual amount of production that was sold as U.S. No. 1 or better is known. The commenter stated that perhaps as an alternative, in situations where damage is such that 60 percent or more of the pears fail to meet grade (100 percent resultant damage) and the insured will be selling some production, the 15 percent cull add-back be utilized.

Response: FCIC agrees with the commenters that it is necessary to wait until the final deposition of the crop is known to settle a claim. However, the provision is necessary to allow FCIC to account for sold production. Not including the pears sold as U.S. No. 1 as production to count when the quantity of such pears exceeds the quantity determined in the appraisal could lead to a vulnerability. Section 13(b)(3) has been retained in the final rule, but revised for clarity as stated in response to the previous comment.

Comment: A few commenters stated it was very beneficial to have language in the policy that stated pears knocked to the ground by wind are not considered marketable production. The commenters recommended this language from section 13(c) be retained or the definition of harvest be revised to match that of apples in order to address this item. The commenters stated they often have growers who are not in a loss situation, but want their acreage appraised for APH purposes. The commenters stated it is very helpful to have a statement or definition to point to that clearly shows pears on the ground are not counted as a part of production for APH purposes.

Response: FCIC agrees with the commenters that pears on the ground should not be appraised as production to count. As stated in response to a previous comment, FCIC has made revisions to clarify the lowest grade standards that will be considered as production to count. The grade standards for U.S. No. 2 Pears require these pears to be “hand-picked” which means they cannot show any evidence of being on the ground. Therefore, pears on the ground during an appraisal clearly should not be counted as production to count. However, if the pears on the ground are picked up and sold they, should be counted against their guarantee. Therefore, FCIC has included pears that are sold (even if failing to meet any U.S. or applicable state grading standard) in the definition of “marketable.”

Comment: FCIC is proposing to add a new section 13(d) stating production to count under the Quality Adjustment Endorsement will not apply in determining the producer's APH. The proposed rule states that the APH will be based on all harvested and appraised marketable production from insurable acreage. The proposed rule also states this change is proposed in order to maintain consistency in APH reporting, as coverage is optional for the Quality Adjustment Endorsement and can be cancelled in writing on or before the cancellation date. Therefore, the APH can vary significantly from year to year. A commenter stated this would then suggest that the rate for the option would not be yield dependent relative the actual/approved APH yield.

Response: Premium is set to cover expected losses and a reasonable reserve. The premium rate factor for the Quality Adjustment Endorsement will be calculated using historical loss data under the endorsement adjusted for increased frequency and severity of losses due to the changes to the Quality Adjustment Endorsement.

Comment: A few commenters asked, if in fact 150 tons were graded No. 1 or better as stated in the Optional Coverage for Pear Quality Adjustment Example in section 13, then why weren't they sold as No. 1 and why should the graded No. 1 production be reduced for quality. The commenters asked if FCIC is suggesting that based on a sample grade, 75 percent of the 200 tons (i.e. 150 tons) would have graded No. 1 and that the No. 1s could not be separated, thus the entire 200 tons could not be marketed as fresh No. 1 pears and, therefore, the entire 200 tons is subject to quality adjustment.

Response: The production to count under the Quality Adjustment Endorsement is reduced because in theory, the cost to harvest the undamaged production increases exponentially as the percent of damage increases until you reach a point where it is no longer economically feasible to harvest the undamaged production. The Quality Adjustment Endorsement has a threshold set when 60 percent of the pears fail to grade U.S. No. 1, then it is considered uneconomical to harvest and at that point the entire crop would be eligible for quality adjustment. In the example, the amount of production that graded less than U.S. No. 1 did not meet this 60 percent threshold and, therefore, the entire crop is not eligible for quality adjustment.

In addition to the changes described above, FCIC has made minor editorial changes.

Accordingly, as set forth in the preamble, the Federal Crop Insurance Corporation amends 7 CFR part 457 effective for the 2015 and succeeding crop years as follows:

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to all Fokker Services B.V. Model F.28 Mark 0070 and 0100 airplanes. The NPRM published in the Federal Register on February 3, 2014 (79 FR 6109).

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued Airworthiness Directive 2012-0023, dated February 6, 2012 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for all Fokker Services B.V. Model F.28 Mark 0070 and 0100 airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2014-0007-0002.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (79 FR 6109, February 3, 2014) or on the determination of the cost to the public.

Since late 2006, we have included a standard paragraph titled “Airworthy Product” in all MCAI ADs in which the FAA develops an AD based on a foreign authority's AD.

The MCAI or referenced service information in an FAA AD often directs the owner/operator to contact the manufacturer for corrective actions, such as a repair. Briefly, the Airworthy Product paragraph allowed owners/operators to use corrective actions provided by the manufacturer if those actions were FAA-approved. In addition, the paragraph stated that any actions approved by the State of Design Authority (or its delegated agent) are considered to be FAA-approved.

In the NPRM (79 FR 6109, February 3, 2014), we proposed to prevent the use of repairs that were not specifically developed to correct the unsafe condition, by requiring that the repair approval provided by the State of Design Authority or its delegated agent specifically refer to this FAA AD. This change was intended to clarify the method of compliance and to provide operators with better visibility of repairs that are specifically developed and approved to correct the unsafe condition. In addition, we proposed to change the phrase “its delegated agent” to include a design approval holder (DAH) with State of Design Authority design organization approval (DOA), as applicable, to refer to a DAH authorized to approve required repairs for the proposed AD.

No comments were provided to the NPRM (79 FR 6109, February 3, 2014) about these proposed changes. However, a comment was provided for another NPRM, Directorate Identifier 2012-NM-101-AD (78 FR 78285, December 26, 2013). The commenter stated the following: “The proposed wording, being specific to repairs, eliminates the interpretation that Airbus messages are acceptable for approving minor deviations (corrective actions) needed during accomplishment of an AD mandated Airbus service bulletin.”

This comment has made the FAA aware that some operators have misunderstood or misinterpreted the Airworthy Product paragraph to allow the owner/operator to use messages provided by the manufacturer as approval of deviations during the accomplishment of an AD-mandated action. The Airworthy Product paragraph does not approve messages or other information provided by the manufacturer for deviations to the requirements of the AD-mandated actions. The Airworthy Product paragraph only addresses the requirement to contact the manufacturer for corrective actions for the identified unsafe condition and does not cover deviations from other AD requirements. However, deviations to AD-required actions are addressed in 14 CFR 39.17, and anyone may request the approval for an alternative method of compliance to the AD-required actions using the procedures found in 14 CFR 39.19.

To address this misunderstanding and misinterpretation of the Airworthy Product paragraph, we have changed that paragraph and retitled it “Contacting the Manufacturer.” This paragraph now clarifies that for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the FAA, the European Aviation Safety Agency (EASA), or Airbus's EASA DOA. Where necessary throughout this AD, we also replaced any reference to approvals of corrective actions with a reference to the Contacting the Manufacturer paragraph.

The Contacting the Manufacturer paragraph also clarifies that, if approved by the DOA, the approval must include the DOA-authorized signature. The DOA signature indicates that the data and information contained in the document are EASA-approved, which is also FAA-approved. Messages and other information provided by the manufacturer that do not contain the DOA-authorized signature approval are not EASA-approved, unless EASA directly approves the manufacturer's message or other information.

This clarification does not remove flexibility previously afforded by the Airworthy Product paragraph. Consistent with long-standing FAA policy, such flexibility was never intended for required actions. This is also consistent with the recommendation of the Airworthiness Directive Implementation Aviation Rulemaking Committee to increase flexibility in complying with ADs by identifying those actions in manufacturers' service instructions that are “Required for Compliance” with ADs. We continue to work with manufacturers to implement this recommendation. But once we determine that an action is required, any deviation from the requirement must be approved as an alternative method of compliance.

Other commenters to the NPRM discussed previously, Directorate Identifier 2012-NM-101-AD (78 FR 78285, December 26, 2013), pointed out that in many cases the foreign manufacturer's service bulletin and the foreign authority's MCAI might have been issued some time before the FAA AD. Therefore, the DOA might have provided U.S. operators with an approved repair, developed with full awareness of the unsafe condition, before the FAA AD is issued. Under these circumstances, to comply with the FAA AD, the operator would be required to go back to the manufacturer's DOA and obtain a new approval document, adding time and expense to the compliance process with no safety benefit.

Based on these comments, we removed the requirement that the DAH-provided repair specifically refer to this AD. Before adopting such a requirement, the FAA will coordinate with affected DAHs and verify they are prepared to implement means to ensure that their repair approvals consider the unsafe condition addressed in this AD. Any such requirements will be adopted through the normal AD rulemaking process, including notice-and-comment procedures, when appropriate. We also have decided not to include a generic reference to either the “delegated agent” or “DAH with State of Design Authority design organization approval,” but instead we have provided the specific delegation approval granted by the State of Design Authority for the DAH in the Contacting the Manufacturer paragraph of this AD.

We reviewed the relevant data and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (79 FR 6109, February 3, 2014) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (79 FR 6109, February 3, 2014).

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

We estimate that this AD affects 4 airplanes of U.S. registry.

We also estimate that it will take about 12 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts will cost about $10,000 per product. Based on these figures, we estimate the cost of this AD on U.S. operators to be $44,080, or $11,020 per product.

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

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

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

For the reasons discussed above, I certify that this AD:

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

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

3. Will not affect intrastate aviation in Alaska; and

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

You may examine the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2014-0007 ; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section.

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Bombardier, Inc. Model DHC-8-102, -103, -106, -201, -202, -301, -311, and -315 airplanes. The NPRM published in the Federal Register on December 6, 2013 (78 FR 73462).

Transport Canada Civil Aviation (TCCA), which is the aviation authority for Canada, has issued Canadian Airworthiness Directive CF-2013-17R1, dated June 27, 2013 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Bombardier, Inc. Model DHC-8-102, -103, -106, -201, -202, -301, -311, and -315 airplanes. The MCAI states:

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the NPRM (78 FR 73462, December 6, 2013) and the FAA's response to each comment.

An anonymous commenter requested that we extend the compliance times from 2,000 flight cycles or 12 months, to 4,000 flight cycles or 24 months, after the effective date of the AD, in order to coincide with their scheduled “C” checks.

We do not agree with the commenter's request to extend the compliance time. We have determined that the compliance time, as proposed, represents the maximum interval of time allowable for the affected airplanes to continue to safely operate before the modification is done. We have not changed this AD in this regard.

An anonymous commenter requested that we allow credit for actions accomplished using deHavilland Dash 8 Series 100 Task Card Number 5730/04B, dated February 6, 2012, if the actions were done before the date the final rule becomes effective.

We agree with the request. We have redesignated paragraph (j) of the proposed AD (78 FR 73462, December 6, 2013) as paragraph (j)(1) of this AD, and have added new paragraph (j)(2) to this AD to allow credit for actions accomplished prior to the effective date of this AD using deHavilland Dash 8 Series 100 Task Card Number 5730/04B, dated February 6, 2012.

Since late 2006, we have included a standard paragraph titled “Airworthy Product” in all MCAI ADs in which the FAA develops an AD based on a foreign authority's AD.

The MCAI or referenced service information in an FAA AD often directs the owner/operator to contact the manufacturer for corrective actions, such as a repair. Briefly, the Airworthy Product paragraph allowed owners/operators to use corrective actions provided by the manufacturer if those actions were FAA-approved. In addition, the paragraph stated that any actions approved by the State of Design Authority (or its delegated agent) are considered to be FAA-approved.

In the NPRM (78 FR 73462, December 6, 2013), we proposed to prevent the use of repairs that were not specifically developed to correct the unsafe condition, by requiring that the repair approval provided by the State of Design Authority or its delegated agent specifically refer to this FAA AD. This change was intended to clarify the method of compliance and to provide operators with better visibility of repairs that are specifically developed and approved to correct the unsafe condition. In addition, proposed to change the phrase “its delegated agent” to include a design approval holder (DAH) with State of Design Authority design organization approval (DOA), as applicable, to refer to a DAH authorized to approve required repairs for the NPRM.

No comments were provided to the NPRM (78 FR 73462, December 6, 2013) about these proposed changes. However, a comment was provided for an NPRM having Directorate Identifier 2012-NM-101-AD (78 FR 78285, December 26, 2013). The commenter stated the following: “The proposed wording, being specific to repairs, eliminates the interpretation that Airbus messages are acceptable for approving minor deviations (corrective actions) needed during accomplishment of an AD mandated Airbus service bulletin.”

This comment has made the FAA aware that some operators have misunderstood or misinterpreted the Airworthy Product paragraph to allow the owner/operator to use messages provided by the manufacturer as approval of deviations during the accomplishment of an AD-mandated action. The Airworthy Product paragraph does not approve messages or other information provided by the manufacturer for deviations to the requirements of the AD-mandated actions. The Airworthy Product paragraph only addresses the requirement to contact the manufacturer for corrective actions for the identified unsafe condition and does not cover deviations from other AD requirements. However, deviations to AD-required actions are addressed in 14 CFR 39.17, and anyone may request the approval for an alternative method of compliance to the AD-required actions using the procedures found in 14 CFR 39.19.

To address this misunderstanding and misinterpretation of the Airworthy Product paragraph, we have changed the paragraph and retitled it “Contacting the Manufacturer.” This paragraph now clarifies that for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the FAA, TCCA, or Bombardier's TCCA Design Approval Organization (DAO).

The Contacting the Manufacturer paragraph also clarifies that, if approved by the DAO, the approval must include the DAO-authorized signature. The DAO signature indicates that the data and information contained in the document are TCCA-approved, which is also FAA-approved. Messages and other information provided by the manufacturer that do not contain the DAO-authorized signature approval are not TCCA-approved, unless TCCA directly approves the manufacturer's message or other information.

This clarification does not remove flexibility previously afforded by the Airworthy Product paragraph. Consistent with long-standing FAA policy, such flexibility was never intended for required actions. This is also consistent with the recommendation of the Airworthiness Directive Implementation Aviation Rulemaking Committee to increase flexibility in complying with ADs by identifying those actions in manufacturers' service instructions that are “Required for Compliance” with ADs. We continue to work with manufacturers to implement this recommendation. But once we determine that an action is required, any deviation from the requirement must be approved as an alternative method of compliance.

Other commenters to the NPRM having Directorate Identifier 2012-NM-101-AD (78 FR 78285, December 26, 2013) pointed out that in many cases the foreign manufacturer's service bulletin and the foreign authority's MCAI might have been issued some time before the FAA AD. Therefore, the DOA might have provided U.S. operators with an approved repair, developed with full awareness of the unsafe condition, before the FAA AD is issued. Under these circumstances, to comply with the FAA AD, the operator would be required to go back to the manufacturer's DOA and obtain a new approval document, adding time and expense to the compliance process with no safety benefit.

Based on these comments, we removed the requirement that the DAH-provided repair specifically refer to this AD. Before adopting such a requirement, the FAA will coordinate with affected DAHs and verify they are prepared to implement means to ensure that their repair approvals consider the unsafe condition addressed in this AD. Any such requirements will be adopted through the normal AD rulemaking process, including notice-and-comment procedures, when appropriate. We also have decided not to include a generic reference to either the “delegated agent” or “DAH with State of Design Authority design organization approval,” but instead we have provided the specific delegation approval granted by the State of Design Authority for the DAH throughout this AD.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (78 FR 73462, December 6, 2013) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (78 FR 73462, December 6, 2013).

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

We estimate that this AD affects 94 airplanes of U.S. registry. We estimate the following costs to comply with this AD.

We also estimate that it would take about 107 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts would cost about $5,476 per product. Based on these figures, we estimate the cost of this AD on U.S. operators to be $1,369,674, or $14,571 per product.

We have received no definitive data that would enable us to provide a cost estimate for the repairs or replacements specified in this AD.

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

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

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

For the reasons discussed above, I certify that this AD:

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

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

3. Will not affect intrastate aviation in Alaska; and

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

You may examine the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2013-1024; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section.

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain The Boeing Company Model 747-100B SUD, 747-200B, 747-300, 747-400, 747-400D series airplanes. The NPRM published in the Federal Register on April 23, 2014 (79 FR 22596). The NPRM was prompted by an evaluation by the DAH indicating that the upper deck tension ties are subject to WFD. The NPRM proposed to require repetitive inspections for cracking in the upper deck tension ties, and related investigative and corrective actions if necessary; tension tie replacement; and post-replacement repetitive inspections for cracking in the upper deck tension ties, and related investigative and corrective actions if necessary. We are issuing this AD to detect and correct fatigue cracking of the upper deck tension ties. Severed or disconnected tension ties at multiple locations could result in rapid decompression and loss of structural integrity of the airplane.

We gave the public the opportunity to participate in developing this AD. We have considered the comment received. The Boeing Company supported the NPRM (79 FR 22596, April 23, 2014).

We reviewed the relevant data, considered the comment received, and determined that air safety and the public interest require adopting this AD as proposed except for minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (79 FR 22596, April 23, 2014) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (79 FR 22596, April 23, 2014).

We estimate that this AD affects 76 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

We have received no definitive data that would enable us to provide cost estimates for the on-condition actions specified in this AD.

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

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

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

For the reasons discussed above, I certify that this AD:

(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),

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

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

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Airbus Model A310-304, -322, -324, and -325 airplanes. The NPRM published in the Federal Register on February 25, 2014 (79 FR 10431).

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2013-0188, dated August 19, 2013 (referred to after this as the Mandatory Continuing Airworthiness Information to correct an unsafe condition on certain Airbus Model A310-304, -322, -324, and -325 airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov/#!documentDetail;D=FAA-2014-0055-0002.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (79 FR 10431, February 25, 2014) or on the determination of the cost to the public.

Since late 2006, we have included a standard paragraph titled “Airworthy Product” in all MCAI ADs in which the FAA develops an AD based on a foreign authority's AD.

The MCAI or referenced service information in an FAA AD often directs the owner/operator to contact the manufacturer for corrective actions, such as a repair. Briefly, the Airworthy Product paragraph allowed owners/operators to use corrective actions provided by the manufacturer if those actions were FAA-approved. In addition, the paragraph stated that any actions approved by the State of Design Authority (or its delegated agent) are considered to be FAA-approved.

In the NPRM (79 FR 10431, February 25, 2014), we proposed to prevent the use of repairs that were not specifically developed to correct the unsafe condition, by requiring that the repair approval provided by the State of Design Authority or its delegated agent specifically refer to this FAA AD. This change was intended to clarify the method of compliance and to provide operators with better visibility of repairs that are specifically developed and approved to correct the unsafe condition. In addition, we proposed to change the phrase “its delegated agent” to include a design approval holder (DAH) with State of Design Authority design organization approval (DOA), as applicable, to refer to a DAH authorized to approve required repairs for the proposed AD.

No comments were provided to the NPRM (79 FR 10431, February 25, 2014) about these proposed changes. However, a comment was provided for another NPRM, Directorate Identifier 2012-NM-101-AD (78 FR 78285, December 26, 2013), in which the commenter stated the following: “The proposed wording, being specific to repairs, eliminates the interpretation that Airbus messages are acceptable for approving minor deviations (corrective actions) needed during accomplishment of an AD mandated Airbus service bulletin.”

This comment has made the FAA aware that some operators have misunderstood or misinterpreted the Airworthy Product paragraph to allow the owner/operator to use messages provided by the manufacturer as approval of deviations during the accomplishment of an AD-mandated action. The Airworthy Product paragraph does not approve messages or other information provided by the manufacturer for deviations to the requirements of the AD-mandated actions. The Airworthy Product paragraph only addresses the requirement to contact the manufacturer for corrective actions for the identified unsafe condition and does not cover deviations from other AD requirements. However, deviations to AD-required actions are addressed in 14 CFR 39.17, and anyone may request the approval for an alternative method of compliance to the AD-required actions using the procedures found in 14 CFR 39.19.

To address this misunderstanding and misinterpretation of the Airworthy Product paragraph, we have changed that paragraph and retitled it “Contacting the Manufacturer.” This paragraph now clarifies that for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the FAA, the European Aviation Safety Agency (EASA), or Airbus's EASA DOA.

The Contacting the Manufacturer paragraph also clarifies that, if approved by the DOA, the approval must include the DOA-authorized signature. The DOA signature indicates that the data and information contained in the document are EASA-approved, which is also FAA-approved. Messages and other information provided by the manufacturer that do not contain the DOA-authorized signature approval are not EASA-approved, unless EASA directly approves the manufacturer's message or other information.

This clarification does not remove flexibility previously afforded by the Airworthy Product paragraph. Consistent with long-standing FAA policy, such flexibility was never intended for required actions. This is also consistent with the recommendation of the Airworthiness Directive Implementation Aviation Rulemaking Committee to increase flexibility in complying with ADs by identifying those actions in manufacturers' service instructions that are “Required for Compliance” with ADs. We continue to work with manufacturers to implement this recommendation. But once we determine that an action is required, any deviation from the requirement must be approved as an alternative method of compliance.

Other commenters to the NPRM discussed previously, Directorate Identifier 2012-NM-101-AD (78 FR 78285, December 26, 2013), pointed out that in many cases the foreign manufacturer's service bulletin and the foreign authority's MCAI might have been issued some time before the FAA AD. Therefore, the DOA might have provided U.S. operators with an approved repair, developed with full awareness of the unsafe condition, before the FAA AD is issued. Under these circumstances, to comply with the FAA AD, the operator would be required to go back to the manufacturer's DOA and obtain a new approval document, adding time and expense to the compliance process with no safety benefit.

Based on these comments, we removed the requirement that the DAH-provided repair specifically refer to this AD. Before adopting such a requirement, the FAA will coordinate with affected DAHs and verify they are prepared to implement means to ensure that their repair approvals consider the unsafe condition addressed in this AD. Any such requirements will be adopted through the normal AD rulemaking process, including notice-and-comment procedures, when appropriate. We also have decided not to include a generic reference to either the “delegated agent” or “DAH with State of Design Authority design organization approval,” but instead we have provided the specific delegation approval granted by the State of Design Authority for the DAH in the Contacting the Manufacturer paragraph of this AD.

We reviewed the relevant data and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (79 FR 10431, February 25, 2014) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (79 FR 10431, February 25, 2014).

We estimate that this AD affects 2 airplanes of U.S. registry.

We also estimate that it will take about 8 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts will cost $0 per product. Based on these figures, we estimate the cost of this AD on U.S. operators to be $1,360, or $680 per product.

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

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

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

For the reasons discussed above, I certify that this AD:

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

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

3. Will not affect intrastate aviation in Alaska; and

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

You may examine the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2014-0055 ; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section.

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

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 by adding an AD that would apply to certain Dassault Aviation Model FALCON 7X airplanes. The NPRM published in the Federal Register on April 4, 2014 (79 FR 18846).

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Community, has issued EASA Airworthiness Directive 2013-0195, dated August 27, 2013 (referred to after this as the Mandatory Continuing Airworthiness Information, or “the MCAI”), to correct an unsafe condition for certain Dassault Aviation Model FALCON 7X airplanes. The MCAI states:

You may examine the MCAI in the AD docket on the Internet at http://www.regulations.gov/#!documentDetail;D=FAA-2014-0177-0002 .

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (79 FR 18846, April 4, 2014) or on the determination of the cost to the public.

Since late 2006, we have included a standard paragraph titled “Airworthy Product” in all MCAI ADs in which the FAA develops an AD based on a foreign authority's AD.

We have become aware that some operators have misunderstood or misinterpreted the Airworthy Product paragraph to allow the owner/operator to use messages provided by the manufacturer as approval of deviations during the accomplishment of an AD-mandated action. The Airworthy Product paragraph does not approve messages or other information provided by the manufacturer for deviations to the requirements of the AD-mandated actions. The Airworthy Product paragraph only addresses the requirement to contact the manufacturer for corrective actions for the identified unsafe condition and does not cover deviations from other AD requirements. However, deviations to AD-required actions are addressed in 14 CFR 39.17, and anyone may request the approval for an alternative method of compliance to the AD-required actions using the procedures found in 14 CFR 39.19.

To address this misunderstanding and misinterpretation of the Airworthy Product paragraph, we have changed the paragraph and retitled it “Contacting the Manufacturer.” This paragraph now clarifies that for any requirement in this AD to obtain corrective actions from a manufacturer, the action must be accomplished using a method approved by the FAA, the European Aviation Safety Agency (EASA), or Dassault Aviation's EASA DOA.

The Contacting the Manufacturer paragraph also clarifies that, if approved by the DOA, the approval must include the DOA-authorized signature. The DOA signature indicates that the data and information contained in the document are EASA-approved, which is also FAA-approved. Messages and other information provided by the manufacturer that do not contain the DOA-authorized signature approval are not EASA-approved, unless EASA directly approves the manufacturer's message or other information.

This clarification does not remove flexibility previously afforded by the Airworthy Product paragraph. Consistent with long-standing FAA policy, such flexibility was never intended for required actions. This is also consistent with the recommendation of the Airworthiness Directive Implementation Aviation Rulemaking Committee to increase flexibility in complying with ADs by identifying those actions in manufacturers' service instructions that are “Required for Compliance” with ADs. We continue to work with manufacturers to implement this recommendation. But once we determine that an action is required, any deviation from the requirement must be approved as an alternative method of compliance.

We also have decided not to include a generic reference to either the “delegated agent” or “design approval holder (DAH) with State of Design Authority design organization approval,” but instead we have provided the specific delegation approval granted by the State of Design Authority for the DAH throughout this AD.

We reviewed the relevant data and determined that air safety and the public interest require adopting this AD with the changes described previously and minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (79 FR 18846, April 4, 2014) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (79 FR 18846, April 4, 2014).

We also determined that these changes will not increase the economic burden on any operator or increase the scope of this AD.

We estimate that this AD affects 42 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

We estimate the following costs to do any necessary replacement that would be required based on the results of the inspection. We have no way of determining the number of aircraft that might need this replacement:

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

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

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

For the reasons discussed above, I certify that this AD:

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

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

3. Will not affect intrastate aviation in Alaska; and

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

You may examine the AD docket on the Internet at http://www.regulations.gov/#!docketDetail;D=FAA-2014-0177; or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains this AD, the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone 800-647-5527) is in the ADDRESSES section.

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

The FAA's authority to issue rules on aviation safety is found in Title 49 of the United States Code. This rulemaking is promulgated under the general authority described in 49 U.S.C. 106(f) and 44701(a), and the specific authority set forth in section 306, Safety of Air Ambulance Operations, of the FAA Modernization and Reform Act of 2012 (Pub. L. 112-95), which is now codified at 49 U.S.C. 44730.

The FAA is adopting this direct final rule without prior notice and prior public comment as a direct final rule because this rule is not controversial, is not expected to result in the receipt of an adverse comment, and a notice of proposed rulemaking is not necessary. This change to the regulation provides greater opportunity for Helicopter Air Ambulance (HAA) operations to enter the National Airspace System (NAS) under Instrument Flight Rules (IFR) than previously permitted. Without this amendment, helicopter air ambulances will be unable to depart under IFR from landing sites lacking weather reporting, until Visual Flight Rules (VFR) appropriate to the class of airspace above prevail. The Regulatory Policies and Procedures of the Department of Transportation (DOT) (44 FR 1134; February 26, 1979) provide that to the maximum extent possible, operating administrations for the DOT should provide an opportunity for public comment on regulations issued without prior notice. Accordingly, the FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. The agency also invites comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting this final rule.

A direct final rule will take effect on a specified date unless the FAA receives an adverse comment or notice of intent to file an adverse comment within the comment period. An adverse comment explains why a rule would be inappropriate, or would be ineffective or unacceptable without a change. It may challenge the rule's underlying premise or approach. Under the direct final rule process, we do not consider the following types of comments to be adverse:

(1) A comment recommending another rule change, in addition to the change in the direct final rule at issue. We consider the comment adverse, however, if the commenter states why the direct final rule would be ineffective without the change.

(2) A frivolous or insubstantial comment.

If we receive an adverse comment or notice of intent to file an adverse comment, we will advise the public by publishing a document in the Federal Register before the effective date of the final rule. This document may withdraw the direct final rule in whole or in part. If we withdraw a direct final rule because of an adverse comment, we may incorporate the commenter's recommendation into another direct final rule or may publish a notice of proposed rulemaking.

If we do not receive an adverse comment or notice of intent to file an adverse comment, we will publish a confirmation document in the Federal Register , generally within 15 days after the comment period closes. The confirmation document tells the public the effective date of the rule.

See the “Additional Information” section for information on how to comment on this direct final rule and how the FAA will handle comments received. The “Additional Information” section also contains related information about the docket, privacy, the handling of proprietary or confidential business information. In addition, there is information on obtaining copies of related rulemaking documents.

This direct final rule will permit the pilot in command of a helicopter air ambulance to assess the weather at a departure point where current weather observations are not available and to depart if the pilot's observed ceiling and visibility is greater than certain weather minimums. Applicable weather minimums include minimums found in a published Obstacle Departure Procedure (ODP), or in the absence of such a procedure, when the pilot observed ceiling and visibility is greater than the minimum ceiling and visibility limitations required by specific HAA rules. This change to the current regulation will permit helicopter air ambulance flights to enter the NAS under IFR when visibilities and ceilings are below VFR based on pilot weather observations, thus increasing the safety of the flight. Without this action, helicopter air ambulances will be unable to depart under IFR from landing sites lacking weather reporting, until VFR appropriate to the class of airspace above prevail.

On February 21, 2014, the FAA published a final rule on Helicopter Air Ambulance, Commercial Helicopter, and Part 91 Helicopter Operations. 79 FR 9932 (Feb. 21, 2014). It contained a new provision, § 135.611, that allows HAA operators to conduct IFR operations at airports and heliports without a weather reporting facility if they can obtain weather reports from an approved weather reporting facility located within 15 nautical miles of the destination landing area and meet other pilot and equipment requirements.

The recently published final rule did not provide a means for HAA flights with IFR clearances to depart from airports not served with current weather observation reports. The current language in the rule would not allow a pilot to utilize the minimum takeoff visibilities depicted in published ODP when these are available. As a result, IFR capable departing flights are not able to gain direct access into the IFR system when weather conditions are worse than the Class G VFR minimums published in § 135.609, but are better than or equal to the published ODP takeoff minimums when the ODP depicts a “proceed visually” transition to the Initial Departure Fix (IDF).

The departing flight must be on an IFR Air Traffic Control (ATC) Clearance, which in accordance with the published ODP, contains takeoff minimums, and has a “proceed visually” segment between the takeoff location and the initial departure fix. When an ODP is not available or is not contained in the clearance, or the ODP depicts a “proceed VFR” segment instead of a “proceed visually” segment, the minimum visibility and ceiling reverts to that which is appropriate for the class of airspace involved. This revision to the rule text recognizes the improved safety margins and technologies available with ODPs and is consistent with the original intent of the rule, which is to encourage safe entry into the IFR System.

Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 and Executive Order 13563 direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96-354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96-39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this final rule.

Department of Transportation Order DOT 2100.5 prescribes policies and procedures for simplification, analysis, and review of regulations. If the expected cost impact is so minimal that a proposed or final rule does not warrant a full evaluation, this order permits that a statement to that effect and the basis for it to be included in the preamble if a full regulatory evaluation of the cost and benefits is not prepared. Such a determination has been made for this final rule. The reasoning for this determination follows:

The FAA is amending IFR operations at locations without weather reporting, in order to permit the pilot in command of a helicopter air ambulance to assess the weather at a departure point where current weather observations are not available and allow the pilot to depart if the observed ceiling and visibility is greater than certain weather minimums. This change to the regulation provides greater opportunity for HAA operations to enter the NAS under IFR than previously permitted. Without this action, helicopter air ambulances will be unable to depart under IFR from landing sites lacking weather reporting, until VFR minimums appropriate to the class of airspace above prevail.

This requirement will increase the use of IFR flight by HAA operators, which will result in more aircraft operating in a positively controlled environment and within the existing infrastructure resulting in unquantified net benefit gains, and a full regulatory evaluation was not prepared

The FAA has, therefore, determined that this direct final rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866, and is not “significant” as defined in DOT's Regulatory Policies and Procedures.

The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation.” To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.” The RFA covers a wide-range of small entities, including small businesses, not-for-profit organizations, and small governmental jurisdictions.

Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA.

However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear.

This direct final rule does not impose any additional costs on helicopter air ambulance operators. Therefore, as provided in section 605(b), the head of the FAA certifies that this rulemaking will not result in a significant economic impact on a substantial number of small entities.

The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards. The FAA has assessed the potential effect of this direct final rule and determined that it will have only a domestic impact and therefore no effect on international trade.

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $151 million in lieu of $100 million. This direct final rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply.

In keeping with U.S. obligations under the Convention on International Civil Aviation, it is FAA policy to conform to International Civil Aviation Organization (ICAO) Standards and Recommended Practices to the maximum extent practicable. The FAA has determined that there are no ICAO Standards and Recommended Practices that correspond to these proposed regulations.

Executive Order 13609, Promoting International Regulatory Cooperation, promotes international regulatory cooperation to meet shared challenges involving health, safety, labor, security, environmental, and other issues and to reduce, eliminate, or prevent unnecessary differences in regulatory requirements. The FAA has analyzed this action under the policies and agency responsibilities of Executive Order 13609, and has determined that this action would have no effect on international regulatory cooperation.

FAA Order 1050.1E identifies FAA actions that are categorically excluded from preparation of an environmental assessment or environmental impact statement under the National Environmental Policy Act in the absence of extraordinary circumstances. The FAA has determined this rulemaking action qualifies for the categorical exclusion identified in paragraph 312f and involves no extraordinary circumstances.

The FAA has analyzed this final rule under the principles and criteria of Executive Order 13132, Federalism. The agency determined that this action will not have a substantial direct effect on the States, or the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government, and, therefore, does not have Federalism implications.

The FAA analyzed this final rule under Executive Order 13211, Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Use (May 18, 2001). The agency has determined that it is not a “significant energy action” under the executive order and it is not likely to have a significant adverse effect on the supply, distribution, or use of energy.

The FAA invites interested persons to participate in this rulemaking by submitting written comments, data, or views. The agency also invites comments relating to the economic, environmental, energy, or federalism impacts that might result from adopting the rulemaking action in this document. The most helpful comments reference a specific portion of the rulemaking action, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit only one time.

The FAA will file in the docket all comments it receives, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking. Before acting on this rulemaking action, the FAA will consider all comments it receives on or before the closing date for comments. The FAA will consider comments filed after the comment period has closed if it is possible to do so without incurring expense or delay. The agency may change this rulemaking action in light of the comments it receives.

An electronic copy of rulemaking documents may be obtained from the Internet by—

1. Searching the Federal eRulemaking Portal ( http://www.regulations.gov );

2. Visiting the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies or

3. Accessing the Government Printing Office's Web page at http://www.gpo.gov/fdsys/.

Copies may also be obtained by sending a request to the Federal Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence Avenue SW., Washington, DC 20591, or by calling (202) 267-9680. Commenters must identify the docket or amendment number of this rulemaking.

All documents the FAA considered in developing this rulemaking action, including economic analyses and technical reports, may be accessed from the Internet through the Federal eRulemaking Portal referenced in item (1) above.

In consideration of the foregoing, the Federal Aviation Administration amends chapter I of title 14, Code of Federal Regulations as follows:

Background

This document contains final and temporary regulations that amend the Income Tax Regulations (26 CFR part 1) under section 36B relating to the premium tax credit and under section 162(l) relating to the deduction for health insurance costs for self-employed individuals. Section 36B was enacted by the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)), and the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)) (collectively, the Affordable Care Act). Section 36B provides a refundable premium tax credit to help individuals and families afford health insurance purchased through an Exchange.

To be eligible for a premium tax credit under section 36B, an individual must be an applicable taxpayer. Section 36B(c)(1) provides that an applicable taxpayer is a taxpayer (1) with household income for the taxable year between 100 percent and 400 percent of the federal poverty line for the taxpayer's family size, (2) who may not be claimed as a dependent by another taxpayer, and (3) who files a joint return if married (within the meaning of section 7703).

Section 7703(b) allows certain married individuals to be considered not married for purposes of the Internal Revenue Code. Under section 7703(b), a married taxpayer who lives apart from the taxpayer's spouse for the last six months of the taxable year is considered unmarried if he or she files a separate return, maintains as the taxpayer's home a household that is also the principal place of abode of a dependent child for more than half the year, and furnishes over half the cost of the household during the taxable year.

Section 36B(b)(2) provides that a taxpayer's premium tax credit is the lesser of the premiums for the plan or plans in which the taxpayer and the taxpayer's family enroll or the excess of the premiums for the second lowest cost silver plan covering the taxpayer's family (the benchmark plan) over the taxpayer's contribution amount. A taxpayer's contribution amount is the product of the taxpayer's household income and an applicable percentage that increases as the taxpayer's household income increases.

Under section 1412 of the Affordable Care Act, eligible taxpayers may receive advance payments of the premium tax credit (advance credit payments). Section 36B(f) provides that taxpayers must reconcile any differences between the taxpayer's advance credit payments for a taxable year and the taxpayer's premium tax credit for the year. If the taxpayer's advance credit payments exceed the allowed premium tax credit, the taxpayer owes the excess as a tax liability, subject to a repayment limitation in section 36B(f)(2)(B).

Under section 162(l), a taxpayer who is an employee within the meaning of section 401(c)(1)—generally, a self-employed individual—is allowed a deduction for all or a portion of the taxpayer's premiums paid during the taxable year for health insurance for the taxpayer, the taxpayer's spouse, the taxpayer's dependents, and any child of the taxpayer under the age of 27. The deduction allowed under section 162(l) is limited to the taxpayer's earned income from the trade or business with respect to which the health insurance plan is established. In addition, section 280C(g) provides that no deduction is allowed under section 162(l) for the portion of premiums for a qualified health plan equal to the amount of the premium tax credit determined under section 36B(a) with respect to those premiums.

Final regulations under section 36B (TD 9590) were published on May 23, 2012 (77 FR 30377). The final regulations provide that married taxpayers must file a joint return to claim the premium tax credit. However, the preamble to those regulations provided that Treasury and the IRS would propose additional regulations addressing domestic abuse, abandonment, or similar circumstances that create obstacles to filing a joint return. The preamble also requested comments on how to structure a rule to address these situations.

Several comments were received urging that such a rule be provided. Commenters suggested that the rule draw on the existing regime for innocent spouse relief. Commenters also suggested that relief should be allowed for up to three years.

Notice 2014-23, 2014-16 IRB. 942 (March 26, 2014), allows married victims of domestic abuse to claim a premium tax credit without filing a joint return in 2014. Under Notice 2014-23, for calendar year 2014, a married taxpayer will satisfy the joint filing requirement of section 36B(c)(1)(C) if the taxpayer files a 2014 tax return using a filing status of married filing separately and the taxpayer (i) is living apart from the individual's spouse at the time the taxpayer files his or her tax return, (ii) is unable to file a joint return because the taxpayer is a victim of domestic abuse, and (iii) indicates on his or her 2014 income tax return in accordance with the relevant instructions that the taxpayer meets the criteria under (i) and (ii). Notice 2014-23 also provides that the IRS and Treasury intend to propose regulations incorporating this rule.

Accordingly, the temporary regulations incorporate the rule in Notice 2014-23 for 2014 and subsequent taxable years to provide relief from the joint filing requirement for victims of domestic abuse. The temporary regulations also provide relief to victims of spousal abandonment. Consistent with the comments received, taxpayers may not qualify for relief from the joint filing requirement for a period that exceeds three consecutive years.

The temporary regulations define domestic abuse using a definition that is closely based on the definition of spousal abuse in Rev. Proc. 2013-34, 2013-2 CB 397, for innocent spouse relief. In particular, domestic abuse includes physical, psychological, sexual, or emotional abuse, including efforts to control, isolate, humiliate, and intimidate, or to undermine the victim's ability to reason independently and that all facts and circumstances are considered in determining whether an individual is abused. A taxpayer qualifies as a victim of spousal abandonment for a taxable year if the taxpayer is abandoned by his or her spouse and, taking into account all facts and circumstances, the taxpayer is unable to locate his or her spouse after reasonable diligence. It is expected that the instructions for the tax form taxpayers will use to compute the premium tax credit will provide further guidance on claiming this relief, including that a taxpayer must certify that the taxpayer meets the criteria for the relief.

On March 31, 2014, the Department of Health and Human Services (HHS) issued guidance on the application of Notice 2014-23 to advance credit payments and cost-sharing reductions. In accordance with the temporary regulations included here, it is anticipated HHS will extend its guidance beyond 2014 and to include victims of spousal abandonment.

Comments are requested on the appropriateness of the relief provided in the temporary regulations, and the appropriateness of the scope of relief, including the circumstances that would make a taxpayer eligible for relief.

To compute the premium tax credit, a taxpayer determines his or her contribution amount by multiplying an applicable percentage by the taxpayer's household income. The taxpayer uses the percentage table in section 36B(b)(3)(A)(i) to compute his or her applicable percentage. Section 36B(b)(3)(A)(ii) provides that, beginning in 2015, the percentages in the table are adjusted to reflect the excess of the rate of premium growth over the rate of income growth for the preceding calendar year. Similarly, section 36B(c)(2)(C)(iv) provides that the affordability percentage provided in section 36B(c)(2)(C)(i)(II) is updated in the same manner for plan years beginning in calendar years after 2014. The affordability percentage is used to determine whether an employer's offer of coverage to an employee is affordable to the employee. Under section 36B(c)(2)(C)(i), a taxpayer who is not offered affordable employer coverage may be eligible for a premium tax credit.

Section 36B(b)(3)(A)(ii) does not specify what measures should be used for premium growth and income growth. The temporary regulations provide that premium growth and income growth will be determined in accordance with further published guidance, see § 601.601(d)(2) of this chapter. Rev. Proc. 2014-37, which is being released simultaneously with these temporary regulations, provides further details on the measures to be used for premium growth and income growth. In particular, consistent with the factors used by HHS to define premium growth in indexing the required contribution percentage in section 5000A, Rev. Proc. 2014-37 provides that premium growth for the preceding calendar year is the projected per enrollee spending for employer-sponsored private health insurance for the preceding calendar year, divided by the projected per enrollee spending for employer-sponsored private health insurance for the calendar year two years prior. Income growth for the preceding calendar year will be the projected GDP per capita for the preceding calendar year divided by the projected GDP per capita for the calendar year two years prior. Projected per enrollee spending for employer-sponsored private health insurance and projected GDP per capita are published by the Office of the Actuary at the Centers for Medicare and Medicaid Services.

Section 36B(b)(3)(A)(ii) also does not make clear what it means to adjust the applicable percentages to “reflect the excess” of one rate “over” the other. Rates of growth are commonly compared by taking their ratio. In addition, the applicable percentages in section 36B(b)(3)(A)(i) and the affordability percentage in section 36B(c)(2)(C)(i)(II) represent shares of income that a taxpayer is expected to spend on health care premiums. The indexing of these measures in section 36B(b)(3)(A)(ii) appears designed to adjust these fractions to reflect changes in the observed share of overall income that is spent on health care premiums. Preserving this relationship requires that the applicable percentages be adjusted based on the ratio of the rate of premium growth to the rate of income growth. Accordingly, the temporary regulations provide that, for taxable years beginning after December 31, 2014, the applicable percentages in the table will be adjusted by the ratio of premium growth to income growth for the preceding calendar year.

In addition, the temporary regulations provide that adjustments may be made to reflect updates to the data used to compute this ratio for the 2014 calendar year or to reflect updates to data sources used to compute the ratio of premium growth to income growth. Such an adjustment may be necessary to avoid error propagation when making updates. In particular, in computing this ratio for a given calendar year, the computations rely on projected data for the prior year and the 2013 calendar year. To the extent that the final data for the prior calendar year prove different from the projected data, the projected data used in later years will automatically adjust for those differences. However, if the final data for the 2013 calendar year proves different from the projected data, projected data in later years will not adjust for these differences, so an additional adjustment will be needed. Similarly, if alternative data sources are used to compute the ratio in later years, an additional adjustment may be needed to avoid error that could result from transitioning from the prior data sources to the new ones. These adjustments will be made as part of the procedure by which the applicable percentages and affordability percentage are updated by the ratio of premium growth to income growth and will apply prospectively only. For example, if data for the 2013 calendar year data is finalized in early 2016, the additional adjustment will be made in determining the applicable percentages and affordability percentage in effect for the 2017 calendar year.

With respect to the affordability percentage, the final regulations under section 36B inadvertently refer to taxable years rather than plan years beginning after 2014. Consistent with the language in section 36B(c)(2)(C)(iv), the temporary regulations provide that, for plan years beginning in a calendar year after 2014, the affordability percentage will be adjusted by the same method used to adjust the applicable percentages.

The indexing methodology provided for in the temporary regulations is based on the same data sources as the methodology adopted by HHS for adjusting the required contribution percentage in section 5000A, which is used to determine eligibility for an exemption from the shared responsibility payment, and it will result in adjustments to the applicable percentages and affordability percentage that are consistent with the adjustments made by HHS to the required contribution percentage in section 5000A. See 79 FR 30240 (May 27, 2014).

Comments are requested on the methodology for indexing. In particular, comments are requested on whether this approach properly captures the rate of premium growth relative to the rate of income growth and whether alternative indices or data sources should be used.

The final regulations under section 36B provide that a taxpayer must reconcile all advance credit payments for coverage of any member of the taxpayer's family. A taxpayer's family includes the taxpayer, the taxpayer's spouse and the taxpayer's dependents. The final regulations, however, do not address how a taxpayer computes the premium tax credit and reconciles advance credit payments for coverage of a family member if the family member was enrolled in a qualified health plan by another taxpayer, especially in situations in which the family member is enrolled with others who are not in the taxpayer's family. For example, suppose Adult 1 enrolls herself and her three children in a qualified health plan and, based on a good faith assertion that she will claim the children as dependents, is approved for advance credit payments for coverage of the family. One of the children (Child), however, is not claimed by Adult 1 and instead is properly claimed by Adult 2 as a dependent for the taxable year. In this circumstance, the final regulations neither address how much of the premium for the plan purchased by Adult 1 each taxpayer should take into account in determining his or her premium tax credit, nor the amount of advance credit payments for Adult 1's plan that Adult 2 must reconcile for Child's coverage. In addition, the final regulations under section 36B require Adult 1 and Adult 2 to determine their adjusted monthly premium for the applicable benchmark plan (benchmark plan premium) in this circumstance using the rules that apply to taxpayers who do not have family members enrolled by another taxpayer.

The temporary regulations provide rules to address how taxpayers determine their premium tax credit and reconcile advance credit payments in cases in which an individual is enrolled by one taxpayer but another taxpayer claims a personal exemption deduction for the individual. In particular, the temporary regulations provide that if a taxpayer (the enrolling taxpayer) enrolls an individual in a qualified health plan, but another taxpayer (the claiming taxpayer) claims a personal exemption deduction for the enrollee (the shifting enrollee), then for purposes of computing each taxpayer's premium tax credit and reconciling any advance credit payments, the premiums and any advance credit payments for the plan in which the shifting enrollee was enrolled are allocated between the enrolling taxpayer and the claiming taxpayer using an allocation percentage. In addition, the temporary regulations provide an alternate calculation that is used to determine each taxpayer's benchmark plan premium when advance credit payments are allocated, using the same allocation percentage.

The enrolling taxpayer and claiming taxpayer may generally agree on any allocation percentage between zero and one hundred percent. For instance, Adult 1 and Adult 2 may determine that the premium attributable to Child is 20 percent of the total premium for Adult 1's family plan, and agree on an allocation percentage of 20 percent. If the claiming taxpayer and enrolling taxpayer do not agree on a percentage, the allocation percentage is equal to the number of shifting enrollees divided by the total number of individuals enrolled by the enrolling taxpayer in the same qualified health plan as the shifting enrollees. In the example above, if Adult 1 and Adult 2 did not agree on an allocation percentage, the allocation percentage would be 25 percent (one, the number of shifting enrollees, divided by four, the total number of individuals enrolled by Adult 1 in the same plan as the shifting enrollee).

In computing the premium tax credit, the claiming taxpayer is allocated a portion of the premiums for the plan in which the enrollee was enrolled equal to the premiums times the allocation percentage. The enrolling taxpayer is allocated the remainder of the premiums. Similarly, in reconciling advance credit payments, the claiming taxpayer is allocated a portion of the advance credit payments for the plan in which the shifting enrollee was enrolled equal to the advance credit payments times the allocation percentage. The enrolling taxpayer is allocated the remainder of these amounts. Advance credit payments are allocated to the claiming taxpayer only if advance credit payments are made for coverage of the shifting enrollee.

Finally, if advance credit payments are allocated under the rules above, the taxpayers, in computing their premium tax credit, must use an alternative calculation to determine their benchmark plan premium. The benchmark plan premium is generally the premium an issuer would charge for the applicable benchmark plan to cover all members of the taxpayer's coverage family, adjusted only for the age of each member of the coverage family. Under the alternative calculation, each taxpayer will first determine the allocable portion of the enrolling taxpayer's benchmark plan premium (allocable portion). The allocable portion is equal to the product of (1) the allocation percentage and (2) the benchmark plan premium for the enrolling taxpayer's coverage family had the enrolling taxpayer claimed a personal exemption deduction for the shifting enrollee or enrollees for the taxable year. If the enrolling taxpayer's coverage family is enrolled in more than one qualified health plan, the allocable portion is determined as if the enrolling taxpayer's coverage family includes only the family members who enrolled in the same plan as the shifting enrollee or enrollees. The benchmark plan premium for the claiming taxpayer is equal to this allocable portion plus the benchmark plan premium for the claiming taxpayer's coverage family excluding the shifting enrollee or enrollees. The enrolling taxpayer's benchmark plan premium is equal to the benchmark plan premium for the enrolling taxpayer's coverage family had the enrolling taxpayer claimed a personal exemption deduction for the shifting enrollee or enrollees, minus the allocable portion.

The temporary regulations clarify how taxpayers who legally separate or divorce allocate the benchmark plan premium, the premium for the plan in which the taxpayers or their dependents enroll, and the advance credit payments to compute their respective premium tax credit and excess advance credit payments. The final section 36B regulations provide that if just one of the taxpayers is enrolled in the qualified health plan for the married months, all of the items are allocated to that taxpayer, even if the taxpayer's former spouse had one or more dependents also enrolled in the same plan. The temporary regulations expand the circumstances in which the items are allocated between the former spouses to include dependent situations and limit the instances in which all of the items are allocated to just one of the spouses.

Under the temporary regulations, taxpayers who are married (within the meaning of section 7703) to each other during a taxable year but are not married to each other on the last day of the taxable year, and who are enrolled in the same qualified health plan, must allocate the benchmark plan premium, the premium for the plan in which the taxpayers and their dependents enroll, and the advance credit payments for the period the taxpayers are married during the taxable year. In addition, these items must be allocated for periods in which just one of the former spouses is enrolled if one or more dependents of the other former spouse is also enrolled in the plan. The taxpayers may allocate these items to each former spouse in any proportion but must allocate all items in the same proportion. If the taxpayers do not agree on an allocation that is reported to the IRS in accordance with the relevant forms and instructions, 50 percent of each item is allocated to each taxpayer. If a plan covers for a time period only one of the taxpayers and no dependents, only one of the taxpayers and one or more dependents of that same taxpayer, or only one or more dependents of just one of the taxpayers, then the benchmark plan premium, the premium for the plan in which the taxpayers or their dependents enroll, and the advance credit payments for that period are allocated entirely to that taxpayer.

The temporary regulations also amend the reconciliation rules for taxpayers who are married and file separate returns. The final regulations under section 36B provide that a married taxpayer who receives advance credit payments and files an income tax return as married filing separately has received excess advance payments. Under the temporary regulations, a taxpayer who uses a filing status of married filing separately may be allowed a premium tax credit if the taxpayer is a victim of spousal abuse or abandonment. Consequently, in these limited circumstances, a married taxpayer who receives advance credit payments and uses a married filing separately filing status will not have excess advance payments by reason of his or her filing status. The temporary regulations also clarify the manner in which taxpayers reconcile advance credit payments in situations in which the taxpayers indicate that they are married when applying for advance credit payments, but one or both file their tax return using the head of household filing status. Taxpayers who qualify to use the head of household filing status may be eligible for a premium tax credit. In particular, the temporary regulations provide that, in such cases, 50 percent of the advance credit payments for a period of coverage in a qualified health plan are allocated to each taxpayer. However, all of the advance credit payments are allocated to only one of the taxpayers for a period in which a qualified health plan covers only that taxpayer, only that taxpayer and one or more dependents of that taxpayer, or only one or more dependents of that taxpayer. Premiums for the plan in which the taxpayers or their dependents are enrolled are allocated in the same manner whether or not the taxpayers receive advance credit payments. These rules result in the advance credit payments and premiums being allocated in the same proportion to the two taxpayers.

Under section 162(l), a taxpayer who is an employee within the meaning of section 401(c)(1) (generally, a self-employed individual) is allowed a deduction for all or a portion of the taxpayer's premiums paid during the taxable year for health insurance for the taxpayer, the taxpayer's spouse, the taxpayer's dependents, and any child of the taxpayer under the age of 27. The section 162(l) deduction is allowed in computing adjusted gross income. The deduction allowed under section 162(l) may not exceed the taxpayer's earned income from the trade or business with respect to which the health insurance plan is established. In addition, section 280C(g) provides that no deduction is allowed under section 162(l) for the portion of premiums for a qualified health plan equal to the amount of the premium tax credit determined under section 36B(a) with respect to those premiums.

The temporary regulations provide rules for the interaction between the section 162(l) deduction and both the premium tax credit and the limitation on additional tax under section 36B(f)(2)(B). The temporary regulations provide that a taxpayer is allowed a deduction under section 162(l) for specified premiums not to exceed the lesser of (1) the specified premiums less the premium tax credit attributable to the specified premiums; and (2) the sum of the specified premiums not paid through advance credit payments and the additional tax imposed (if any) under section 36B(f)(2)(A) with respect to the specified premiums after applying the limitation in section 36B(f)(2)(B). Specified premiums means premiums for a specified qualified health plan or plans for which the taxpayer may otherwise claim a deduction under section 162(l). A specified qualified health plan is a qualified health plan, as defined in § 1.36B-1(c), covering the taxpayer, the taxpayer's spouse, or a dependent of the taxpayer (enrolled family member) for a month that is a coverage month within the meaning of § 1.36B-3(c) for the enrolled family member. If a specified qualified health plan covers one or more individuals other than enrolled family members, the specified premiums include only the portion of the premiums for the specified qualified health plan that is allocable to the enrolled family members under rules similar to § 1.36B-3(h), which provides rules for determining the amount under § 1.36B-3(d)(1) when two families are enrolled in the same qualified health plan.

Although a taxpayer's section 162(l) deduction is limited under section 280C(g) only to the extent of the taxpayer's premium tax credit, some taxpayers with advance payments in excess of their premium tax credit will not have to repay the entire excess because of the limitation on additional tax in section 36B(f)(2)(B). Because the taxpayer does not bear the cost of any portion of the premium that is paid through advance credit payments and that is not subject to repayment due to the limitations, any such amount is treated as an amount of premium tax credit for purposes of section 280C(g).

As a computational matter, the premium tax credit and the limitation on additional tax bear a circular relationship to the section 162(l) deduction that may create challenges for taxpayers. Specifically, the amount of the section 162(l) deduction affects a taxpayer's adjusted gross income, which affects both the premium tax credit and the limitation on additional tax. Conversely, both the premium tax credit and the limitation on additional tax affect the amount a taxpayer spends on health insurance premiums, which in turn affects the taxpayer's section 162(l) deduction.

A taxpayer may resolve the circularity between the section 162(l) deduction and the premium tax credit by taking any position that satisfies the requirements of section 36B, section 162(l) and other applicable tax law and the regulations issued under those sections, including the temporary regulations in this rulemaking.

To address the circularity between the section 162(l) deduction and the limitation on additional tax under section 36B(f)(2)(B) (limitation amount), the temporary regulations provide rules for determining which limitation amount, if any, a taxpayer may use. Taxpayers make this determination before calculating their section 162(l) deduction and premium tax credit. To determine the limitation amount, a taxpayer tests his or her eligibility for each of the limitation amounts that may apply, starting with the lowest, until the taxpayer either determines that he or she qualifies for one of the limitation amounts or exhausts them without qualifying for one. For each limitation amount, the taxpayer qualifies to use that limitation amount if the taxpayer's household income as a percentage of the Federal poverty line, determined by using a section 162(l) deduction equal to the sum of (1) specified premiums, as defined above, not paid through advance credit payments, (2) the limitation amount, and (3) premiums other than specified premiums for which the taxpayer may claim a section 162(l) deduction, is equal to or less than the maximum household income as a percentage of the Federal poverty line for which that limitation amount is available. For example, if a taxpayer's 2014 household income, using a section 162(l) deduction equal to the sum of the specified premiums not paid through advance credit payments and the $600 limitation amount, is less than 200 percent of the Federal poverty line, the taxpayer uses the $600 limitation amount in determining additional tax under section 36B(f)(2)(B). If a taxpayer is unable to qualify for any limitation amount under this rule, the limitation on additional tax under section 36B(f)(2)(B) does not apply to the taxpayer.

A taxpayer who deducts specified premiums under section 162(l) must use the limitation amount determined under this rule notwithstanding that household income as a percentage of the Federal poverty line would, but for this rule, result in a different limitation amount. After a taxpayer determines his or her limitation amount, if any, under this rule, the taxpayer then determines the section 162(l) deduction and premium tax credit under the other rules described above, except using the limitation amount determined under these rules when necessary. These rules apply only for purposes of determining the limitation amount; they do not affect eligibility for the premium tax credit. Thus, it is possible that a taxpayer with household income under 400 percent of the Federal poverty line for the taxpayer's family size may properly claim a premium tax credit but not qualify for a limitation on additional tax.

The temporary regulations further provide that Treasury and IRS may issue additional published guidance to address potential complexities arising from the interaction of the section 36B premium tax credit and the section 162(l) deduction. To provide additional assistance to taxpayers with addressing the circularity between the section 162(l) deduction and the premium tax credit, Rev. Proc. 2014-41 provides calculation methods that a taxpayer may use to determine amounts of the section 162(l) deduction and the premium tax credit. The IRS and Treasury request comments on other methods for simplifying these calculations.

For applicability dates, see §§ 1.36B-2T(d), 1.36B-3T(m), 1.36B-4T(c), and 1.162(l)-1T(c). The applicability of these regulations expires on or before July 24, 2017.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6) please refer to the cross-reference notice of proposed rulemaking published elsewhere in this issue of the Federal Register . Pursuant to section 7805(f), these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

The principal authors of these regulations are Arvind Ravichandran, Shareen Pflanz and Steve Toomey of the Office of the Associate Chief Counsel (Income Tax & Accounting). However, other personnel from the IRS and the Treasury Department participated in their development.

Accordingly, 26 CFR part 1 is amended as follows:

Paperwork Reduction Act

The collection of information contained in these regulations has been reviewed and approved by the Office of Management and Budget under control number 1545-2209. The collection of information in these final regulations is in §§ 51.2(f)(2) and 51.7. Section 51.2(f)(2) requires consents to be maintained, in the case of a controlled group that is not an affiliated group, by the designated entity and each member of the controlled group. Section § 51.7 requires a covered entity that chooses to dispute its preliminary fee calculation to provide certain information.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by section 6103 of the Internal Revenue Code.

This document contains final regulations that provide guidance under section 9008 of the Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)), as amended by section 1404 of the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)) (collectively the ACA). All references in this preamble to section 9008 are references to section 9008 of the ACA. Section 9008 did not amend the Internal Revenue Code (Code) but cross-references specified Code sections.

On November 29, 2010, the IRS released Notice 2010-71, 2010-50 IRB 822, which proposed an approach to implementing the section 9008 fee and requested comments on the proposed approach. The proposed approach included an opportunity to report certain information to the IRS relevant to the fee calculation and provided that the IRS would provide each covered entity with notice of a preliminary fee calculation. This notice was modified and superseded by Notice 2011-9, 2011-6 IRB 459, which was released on January 14, 2011.

On August 18, 2011, the Federal Register published temporary regulations relating to the fee on branded prescription drugs (TD 9544, 76 FR 51245). The Federal Register also published on the same day a notice of proposed rulemaking (REG-112805-10, 76 FR 51310) cross-referencing the temporary regulations (the proposed regulations).

In response to the proposed regulations, the Department of the Treasury (Treasury Department) and the IRS received a variety of comments from the public. All written comments are available at www.regulations.gov or upon request. The Treasury Department and the IRS held a public hearing on November 9, 2012. After considering the public comments and the hearing testimony, the final regulations adopted by this Treasury decision are generally consistent with the proposed regulations and also reflect certain minor changes as described in this preamble. The corresponding temporary regulations are removed. The final regulations and the new temporary regulations are discussed in this preamble.

All references to section 505 are references to section 505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 353(b)). Unless otherwise indicated, all other references to subtitles, chapters, subchapters, and sections in this preamble are references to subtitles, chapters, subchapters, and sections in the Code and related regulations. All references to “fee” in the final regulations are references to the fee imposed by section 9008 of the ACA.

The following publications are obsolete as of July 28, 2014:

Notice 2010-71, 2010-51 IRB 822, and Notice 2011-9, 2011-6 IRB 459.

Section 9008(d)(1) defines covered entity as any manufacturer or importer with gross receipts from branded prescription drug sales. Section 9008(e) defines branded prescription drug sales to mean sales of branded prescription drugs to any specified government programs or pursuant to coverage under such programs. These programs are the Medicare Part B program, the Medicare Part D program, the Medicaid program, any program under which branded prescription drugs are procured by the Department of Veterans Affairs, any program under which branded prescription drugs are procured by the Department of Defense, and the TRICARE retail pharmacy program (collectively, the Programs).

The temporary regulations defined a manufacturer or importer of a branded prescription drug as the person identified in the Labeler Code of the National Drug Code (NDC). The NDC is a unique identifier that is assigned to all drug products approved by the Food and Drug Administration (FDA), including a branded prescription drug. The Labeler Code is the first five numeric characters of the NDC or the first six numeric characters when the available five-character code combinations are exhausted.

Commenters asked the IRS to allocate drug sales to an entity other than the person identified in the Labeler Code of a drug's NDC when a covered entity transfers a drug to another covered entity during the sales year or engages in a transaction, such as a reorganization or a bankruptcy, that results in a different entity selling the drug. The final regulations do not adopt this request. A rule that uses the Labeler Code to identify the manufacturer or importer of a branded prescription drug provides certainty for both covered entities and the IRS. The FDA maintains a database that is available on the FDA Web site with information about each NDC, including its Labeler Code, which is assigned by the FDA. The IRS refers to this database to identify the person in the NDC's Labeler Code. The IRS encourages covered entities to review and update their NDC data with the FDA to reflect changes in the manufacturer or importer of a branded prescription drug.

To be a covered entity, a manufacturer or importer must have gross receipts from branded prescription drug sales. Section 9008(b)(1) requires the IRS to calculate each covered entity's fee each fee year using sales data from the preceding calendar year. Pursuant to section 9008(g), the Centers for Medicare and Medicaid Services of the Department of Health and Human Services (CMS), the Department of Veterans Affairs (VA), and the Department of Defense (DOD) (collectively, the Agencies) provide sales data to the IRS. For purposes of calculating the fee, the temporary regulations used the second calendar year preceding the fee year as the sales year. This rule is necessary because CMS cannot complete its data processing within the necessary time frame. The temporary regulations further provided that, because the use of the second preceding year as the sales year, rather than the immediately preceding year, may affect the amount of the fee paid by a covered entity, the annual fee due in every year after 2011 will include an adjustment amount. This amount will be added (or subtracted), as appropriate, to (or from) the fee otherwise payable by the covered entity in the fee year in which the adjustment is calculated. Because CMS cannot complete its data processing any earlier, the final regulations adopt this approach.

A commenter asserted that, under the temporary regulations, a former covered entity may not be eligible for an adjustment amount if the entity does not have any sales in subsequent years and is, therefore, no longer a covered entity. According to the commenter, if a covered entity owes a fee in 2013 based on 2011 sales, but has no sales in 2012 or later years, then that entity would not qualify as a covered entity in 2014 because the temporary regulations do not provide a mechanism for the entity to receive an adjustment amount for 2013. The commenter suggested that if an adjustment amount results in a net credit to the covered entity's fee, the IRS should treat the adjustment amount as an overpayment. The final regulations do not adopt this suggestion. However, the final regulations clarify that an entity is treated as a covered entity for any year in which the entity has branded prescription drug sales and for any year for which those sales must be taken into account in calculating the fee and determining the adjustment amount. Therefore, an entity's status as a covered entity begins in the first year it has branded prescription drug sales to the Programs even though the fee does not take those sales immediately into account, and continues until all sales for that entity have been taken into account for both fee calculation and adjustment amount purposes.

For example, assume that an entity had sales in 2011 with no sales in earlier or later years. The entity is a covered entity beginning in 2011. The entity is not liable for a fee in 2011 or 2012 since those fee years are based on 2009 and 2010 sales, respectively. In 2013, the entity is liable for the fee based on its 2011 sales. Furthermore, the entity is liable for the adjustment amount for the difference between the 2012 fee for the entity computed using 2010 sales, which is $0, and what the 2012 fee would have been using 2011 sales. Even though the entity does not have any sales in 2012 or later years, it will continue to be a covered entity in 2014 because its 2011 sales must be taken into account for purposes of determining the adjustment amount relating to the 2013 fee that applies to the 2014 fee year. The entity will not be a covered entity after 2014 because its 2011 sales will not be taken into account after 2014. The final regulations include this example.

In accordance with the statute, the temporary regulations provided that a covered entity includes a controlled group. The temporary regulations defined the term controlled group to mean a group of at least two covered entities that are treated as a single employer under section 52(a), 52(b), 414(m), or 414(o). Under the final regulations, this definition applies through December 31, 2014. Therefore, this definition applies for purposes of determining who is in the controlled group through the 2016 fee year because the fee for the 2016 fee year is based upon data from the 2014 sales year. In this Treasury decision, the Treasury Department and the IRS are also issuing new temporary regulations (the 2014 temporary regulations), that define the term controlled group to mean a group of two or more persons, including at least one person that is a covered entity, that are treated as a single employer under section 52(a), 52(b), 414(m) or 414(o). This new definition applies beginning on January 1, 2015. Therefore, this definition applies for purposes of determining who is in the controlled group beginning with the 2017 fee year because the fee for the 2017 fee year is based upon data from the 2015 sales year. The broader definition of controlled group in the 2014 temporary regulations is supported by the statutory language and is consistent with how controlled group rules with similar statutory language are applied, including how controlled group is defined in § 57.2(c)(1) for purposes of the health insurance providers fee under ACA section 9010. The Treasury Department and the IRS expect that the broader definition in the 2014 temporary regulations will primarily impact joint and several liability for the fee and will not otherwise affect the administration of the fee. The final regulations include conforming changes to the provision for joint and several liability to clarify that joint and several liability applies to all members of the controlled group under either definition of controlled group, whichever applies.

The temporary regulations required each controlled group that files a Form 8947, “Report of Branded Prescription Drug Information,” to have a designated entity. A designated entity is the person within the controlled group that acts on behalf of the controlled group with regard to the fee. The temporary regulations further provided that if the controlled group, without regard to foreign corporations included under section 9008(d)(2)(B), is also an affiliated group that files a consolidated return for federal income tax purposes, the designated entity is the common parent of the affiliated group identified on the tax return filed for the sales year. If the controlled group is not an affiliated group that files a consolidated return, the temporary regulations allowed the controlled group to select its designated entity. However, if the controlled group did not select a designated entity, the IRS would select a member of the controlled group as the designated entity.

The final regulations modify the temporary regulations to better coordinate with the consolidated return regulations. Specifically, the final regulations provide that the designated entity of a controlled group, without regard to foreign corporations included under section 9008(d)(2)(B), that is a consolidated group (within the meaning of § 1.1502-1(h)) is the agent for the group (within the meaning of § 1.1502-77).

The temporary regulations required the designated entity to state under penalties of perjury that all the covered entities that are members of the controlled group have consented to the selection of the designated entity. The final regulations adopt this requirement and further require each member of the controlled group to maintain a record of its consent. The final regulations also require the designated entity to maintain a record of all of the members' consents. Under the final regulations, this consent requirement does not apply to a controlled group that is a consolidated group (within the meaning of § 1.1502-1(h)). If a controlled group that is not a consolidated group does not select a designated entity, the final regulations provide that the IRS will select a designated entity and all covered entities in the controlled group will be deemed to have consented to the IRS's selection of a designated entity.

Section 9008(e)(3) provides that the term branded prescription drug sales does not include sales of any drug or biological product with respect to which a credit was allowed for any taxable year under section 45C. Section 9008(e)(3) also provides that this exclusion does not apply with respect to any such drug or biological product after the date on which such drug or biological product is approved by the FDA for marketing for any indication other than the treatment of the rare disease or condition with respect to which such credit was allowed. In accordance with the statute, the temporary regulations generally defined the term orphan drug to mean any branded prescription drug for which any person claimed a section 45C credit and that credit was allowed for any taxable year. The temporary regulations further provided that an orphan drug does not include any drug for which there has been a final assessment or court order disallowing the full section 45C credit taken for the drug. Additionally, in accordance with the statute, the temporary regulations provided that an orphan drug does not include any drug for any sales year after the calendar year in which the FDA approved the drug for marketing for any indication other than the treatment of a rare disease or condition for which a section 45C credit was allowed, regardless of whether a section 45C credit was allowed for the drug before, in the same year as, or after this FDA approval.

Commenters requested that the final regulations treat a drug as an orphan drug if the section 45C credit was “allowable”; that is, the section 45C credit could have been claimed, but was not actually claimed. Another commenter requested that the final regulations extend orphan drug treatment to any drug for which the section 45C credit was allowable but for which a research tax credit under section 41 was claimed with respect to a taxable year ending on or before December 31, 2010. Several commenters also reasoned that the statutory exception for orphan drugs should be extended to any drug that has been designated by the FDA as an orphan drug. Commenters also requested that the final regulations extend the orphan drug exclusion to drug sales for therapies that have only been approved to treat orphan diseases, and to all products that are FDA-approved for marketing solely for rare diseases and conditions. The final regulations do not adopt these suggestions because the plain language of section 9008(e)(3) requires that the drug be an orphan drug for which the section 45C credit was actually allowed rather than merely allowable. The terms “allowed” and “allowable” have separate and distinct meanings throughout the Code. For example, under section 1016(a)(2), a taxpayer may adjust basis to the extent the amount was “allowed” as a deduction in computing taxable income but not less than the amount “allowable.”  1 In addition, the overwhelming weight of authority under the case law interprets the term “allowed” in the Code to require the taxpayer to have actually taken the amount into account for tax purposes. 2 The FDA's mere classification of a drug as an orphan drug is not a determining factor because the plain language of section 9008(e)(3) applies the exclusion only to sales of drugs for which a section 45C credit was in fact allowed.

Commenters also requested that orphan drug status be given to a drug for which a section 45C credit was allowed, even though the drug had been subsequently approved by the FDA for marketing for an indication other than the treatment of a rare disease or condition for which a section 45C credit was allowed. The final regulations do not adopt this suggestion because the plain language of section 9008(e)(3) indicates that if a drug is ever approved for an indication other than the treatment of a rare disease or condition for which a section 45C credit was allowed, whether before, in the same year as, or after a section 45C credit was allowed for the drug, sales of that drug are not considered sales of an orphan drug beginning in the following sales year. However, a drug will retain its orphan drug status if the drug subsequently receives approval only for another indication for a rare disease or condition for which a section 45C credit was allowed.

Section 9008(e)(2)(A) defines the term branded prescription drug to include any prescription drug the application for which was submitted to the FDA under section 505(b). The final regulations track the statutory language in defining the term branded prescription drug. Neither the statute nor the final regulations specifically refer to or address the treatment of generic drugs.

On September 24, 1984, Congress enacted the Drug Price Competition and Patent Restoration Act of 1984, Public Law 98-417 (1984) (the 1984 Act). The 1984 Act added section 505(j) to provide an expedited approval process for generic drugs. Because an applicant submits an application for approval of a generic drug after the 1984 Act under section 505(j) rather than section 505(b), such a drug is not a branded prescription drug for purposes of the branded prescription drug fee.

It has come to our attention that, before the 1984 Act, an applicant submitted an application for approval of any prescription drug under section 505(b), and no separate statutory process existed for approval of a generic drug. The Treasury Department and the IRS request comments on whether a special rule is appropriate regarding the treatment of generic drugs for which applications were submitted under section 505(b) prior to the 1984 Act, including comments on how to distinguish generic drugs for which applications were submitted under section 505(b) prior to the 1984 Act from other prescription drugs for which applications were submitted under section 505(b) prior to the 1984 Act in a manner that is both administrable and consistent with section 9008. Any special rule regarding the treatment of these generic drugs would be prospective only.

Comments with regard to this issue should be submitted in writing and can be mailed to the Office of Associate Chief Counsel (Passthroughs and Special Industries), Re: REG-112805-10, CC;PSI:B7, Room 5314, 1111 Constitution Avenue NW., Washington, DC 20224. All comments received will be available for public inspection at http://www.regulations.gov (IRS REG-112805-10).

The temporary regulations gave each covered entity the opportunity to provide information relevant to the determination of the fee by annually submitting Form 8947, including information regarding rebates. Commenters asked that CMS include all rebate data in its reports to the IRS, rather than have the IRS collect rebate data from the covered entities on Form 8947. CMS now includes rebate data for Medicare and federal Medicaid in its reports. Therefore, the final regulations eliminate the provision for separate reporting of Medicare and federal Medicaid rebates by covered entities and Form 8947 no longer requests information on these rebates. However, CMS does not include Medicaid state supplemental rebate data. Until CMS can include Medicaid state supplemental rebate data in its reports to the IRS, covered entities will continue to have the opportunity to submit this rebate data on Form 8947. Therefore, the final regulations retain the provision that permits separate reporting of Medicaid state supplemental rebate data by covered entities.

A commenter asked whether to include state-only pharmaceutical program rebates on Form 8947 as Medicaid Drug Rebates. According to CMS, state-only pharmaceutical programs are not part of the Medicaid Drug Rebate Program or the federal Medicaid program. Therefore, the final regulations specify that the Medicaid Drug Rebate Program's calculated branded prescription drug fee does not include state-only pharmaceutical sales or rebates. Accordingly, a covered entity may not report on its Form 8947 or error report a rebate paid by the covered entity in connection with a state-only pharmaceutical program.

A commenter asked that the final regulations provide that a covered entity may submit an incomplete Form 8947. The final regulations do not adopt this suggestion. Submission of Form 8947 is voluntary. A covered entity that chooses to file Form 8947, however, must state, under penalties of perjury, that to the best of the filer's knowledge and belief, the information provided on Form 8947 is true, correct, and complete. As in the past, a covered entity may correct and supplement information it submitted on Form 8947, if necessary, by submitting one or more error reports as part of the dispute resolution process.

Section 9008(g) requires each Program to calculate and provide sales data based on the methodologies described in section 9008(g). Section 9008(b)(3) requires the IRS to use the data provided by the Programs to calculate the fee. In accordance with the statute, the temporary regulations required the Agencies to provide data to the IRS on branded prescription drug sales that occurred during the sales year by Program and NDC. The temporary regulations also set forth the methodologies used by the Agencies for calculating the sales amounts for each Program.

Commenters raised questions about the descriptions in the temporary regulations of the methodologies used by the Agencies, asked that these descriptions be clarified, suggested alternative methods of calculating Program sales data, and requested additional data. In response to these comments, the final regulations adopt certain suggestions to include revised descriptions of the data and computations the Agencies use to calculate branded prescription drug sales as described in the following sections for each Program. In addition, this preamble provides further background on the methodologies used by the Agencies as described in the following sections for each Program. Because the Agencies have the responsibility to compute and report the data described in the statute, the Treasury Department and the IRS coordinated extensively with the Agencies in preparing the additional background information in the preamble and the revised descriptions in the final regulations.

The temporary regulations provided that, to determine branded prescription drug sales amounts for Medicare Part D, CMS will aggregate the ingredient cost reported in the “Ingredient Cost Paid” field and the units reported in the “Quantity Dispensed” field of the Prescription Drug Event (PDE) records at the NDC level for each sales year. Section 9008(g)(1)(A) requires Medicare Part D sales amounts to be reduced by “any per-unit rebate, discount, or other price concession provided by the covered entity.”

Commenters asked that the final regulations clarify how CMS determines these net sales amounts. The final regulations adopt this suggestion. The final regulations clarify that CMS will aggregate the “Ingredient Cost Paid” field on the PDE records at the NDC level, reduced by discounts, rebates, and other price concessions provided by the covered entity. To obtain this information, CMS uses two main data sources to determine net sales amounts: the PDE records and the Detailed Direct and Indirect Remuneration (DIR) Report. CMS obtains information for these two data sources from Medicare Part D sponsors.

The final regulations specifically define “discounts, rebates, and other price concessions provided by the covered entity” to include, in part, DIR. DIR is any and all rebates, subsidies, or other price concessions from any source (including manufacturers, pharmacies, enrollees, or any other person) that serve to decrease the costs incurred by the Medicare Part D sponsor (whether directly or indirectly) for the Medicare Part D drug. See 42 CFR 423.308. Thus, DIR includes discounts, chargebacks, rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, and coupons. DIR also includes goods in kind, free or reduced-price services, grants, legal judgment amounts, settlement amounts from lawsuits or other legal action, and other price concessions or similar benefits. However, DIR does not include price concessions that CMS does not consider to directly or indirectly impact drug costs incurred by the Medicare Part D sponsor.

The final regulations further provide that DIR includes both DIR reported on the PDE records at the point of sale and DIR reported on the Detailed DIR Report. The temporary regulations provided that, if CMS does not have Medicare Part D rebate information for a sales year, then the IRS will reduce the branded prescription drug sales reported for Medicare Part D by rebates reported by covered entities on Form 8947. This procedure was necessary for fee year 2011 because CMS did not have the information necessary to report Medicare Part D sales data net of DIR. To provide this data to the IRS at the individual drug level as the statute requires, CMS began to collect DIR at the NDC level from Medicare Part D sponsors for use in the 2012 fee year, which Medicare Part D sponsors report to CMS on the Detailed DIR Report. Medicare Part D sponsors also report DIR on the PDE records at the point of sale, though these amounts tend to be nominal. Therefore, since fee year 2012, CMS has been reporting its Medicare Part D sales data to the IRS net of all DIR by deducting from the Ingredient Cost both DIR reported on the PDE records at the point of sale and DIR reported on the Detailed DIR Report. The final regulations reflect this approach. As stated earlier in this preamble, the final regulations also eliminate the provision for separate reporting of Medicare Part D rebates by covered entities on Form 8947.

A commenter requested that the final regulations clarify the treatment of coverage gap discount amounts. The final regulations adopt this suggestion effective for fee years beginning in 2014. The Medicare Part D coverage gap, also known as the “donut hole,” is a gap in prescription drug coverage that is being closed due to the Affordable Care Act. Part of closing the coverage gap is the Coverage Gap Discount Program described in section 1860D-14A of the Social Security Act, which requires a 50-percent manufacturer-paid discount on covered brand-name drugs in certain instances. For fee years 2012 and 2013, CMS did not deduct coverage gap discount amounts from the Ingredient Cost. This comment, however, prompted CMS to recharacterize coverage gap discount amounts as a type of rebate, discount, or other price concession for purposes of the fee calculation. Therefore, beginning with the final fee calculation for fee year 2014, CMS will report Medicare Part D sales data to the IRS that is net of coverage gap discount amounts. The final regulations reflect this change.

The final regulations also remove the reference to the “Quantity Dispensed” field of the PDE records. This field has no impact on sales because CMS totals the ingredient cost at the NDC level and determines DIR reported on the PDE records at the point of sale and DIR reported on the Detailed DIR Report at the NDC level. Thus, the unit of reference used by CMS is consistently at the NDC level.

Commenters suggested that the final regulations require CMS to exclude sales in Puerto Rico in determining sales amounts for Medicare Part D. The final regulations do not adopt this suggestion. Section 9008(g) requires each Agency to report to the IRS the total branded prescription drug sales for each covered entity for each Program. Section 9008 does not provide any exclusion for sales in Puerto Rico or any other territory. When calculating its branded prescription drug sales data for Medicare Part D, CMS includes sales, DIR reported on the PDE records at the point of sale, and DIR reported on the Detailed DIR Report for all sales in the United States and its territories, including the Commonwealth of Puerto Rico.

The temporary regulations provided that CMS will determine branded prescription drug sales under Medicare Part B using two data sources. First, CMS will use the data reported by manufacturers pursuant to section 1847A(c) of the Social Security Act (42 U.S.C. 1395w-3a(c)) to calculate the annual weighted average sales price (ASP) for each Healthcare Common Procedure Coding System code (HCPCS code) for the sales year. Second, CMS will use the Medicare Part B National Summary Data File located at http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/NonIdentifiableDataFiles/PartBNationalSummaryDataFile.html to obtain the number of allowed billing units per HCPCS code for claims incurred during the sales year. The temporary regulations further provided separate detailed methods for CMS to use this data to determine Medicare Part B sales amounts depending on whether (1) the HCPCS code consists solely and exclusively of branded prescription drugs manufactured by a single entity, (2) the HCPCS code consists of a mixture of branded prescription drugs made by different manufacturers and/or a mixture of branded prescription and generic drugs, or (3) CMS is unable to establish a reliable proportion of sales attributable to each NDC assigned to the HCPCS code.

Under the third method in the temporary regulations, if CMS is unable to establish a reliable proportion of sales attributable to each NDC assigned to the HCPCS code, CMS will calculate Medicare Part B sales by using Medicare Part D utilization percentages. A commenter requested that CMS develop a more accurate backup method. The final regulations do not adopt this suggestion. In CMS's view, the existing backup method is sufficiently reliable. Additionally, CMS did not anticipate frequent use of this approach and has not needed to use the backup method for any fee calculation to date. The final regulations do, however, include a more detailed explanation of how CMS uses HCPCS codes as well as an example.

Commenters also expressed concern about whether Medicare Part B is capturing complete data on what are sometimes referred to as non-separately payable drugs. Non-separately payable drugs may not be directly correlated with a single specific HCPCS code. Some non-separately payable drugs are associated with more than one HCPCS code or are bundled with services, such as dialysis. CMS recognizes this concern and makes extensive effort to gather as complete a data set as possible. CMS will continue to work with the data available to capture non-separately payable drugs.

The temporary regulations provided that CMS will determine branded prescription drug sales as the per-unit Average Manufacturer Price (AMP) less the Unit Rebate Amount (URA) that CMS calculates based on manufacturer-reported pricing data multiplied by the number of units reported billed by the states to manufacturers. Specifically, the temporary regulations provided that for any covered entity identified in the first five (or six) digits of an NDC during any of the four quarters of a sales year, CMS uses the following methodology to derive the branded prescription sales amounts that account for third-party payers:

Step 1. Report total dollars per NDC for AMP minus URA, multiplied by the units reported by a state or states;

Step 2. Determine the percentage of the total amount reimbursed that is the Medicaid amount of that reimbursement; and

Step 3. Multiply the percentage of the Medicaid amount of that reimbursement by the dollar figure from step 1 (AMP minus URA, multiplied by units) to get the new adjusted sales dollar totals.

The final regulations clarify that CMS will determine branded prescription drug sales as the per-unit AMP less the URA that CMS calculates based on manufacturer-reported pricing data multiplied by the number of units reported as paid by the states rather than as billed by the states.

Commenters requested that the final regulations require Medicaid to use the per-unit ingredient cost paid to pharmacies by the states as provided in section 9008(g)(3) instead of AMP in computing total branded prescription drug sales. The final regulations do not adopt this suggestion. Medicaid does not have the ability to use the per-unit ingredient cost paid to pharmacies by the states because Medicaid systems are not designed to track drug sales data in this manner or obtain this type of detailed information from the states. Instead, Medicaid systems track drug sales data using AMP. AMP is the best alternative that Medicaid systems permit and serves as a reasonable proxy for the per-unit ingredient cost paid to pharmacies by the states.

The temporary regulations provided that Medicaid branded prescription drug sales data will be based on the data reported to CMS during the sales year by covered entities and the states for drugs paid for by the states in the Medicaid Drug Rebate Program during the sales year. The final regulations clarify that the sales data is based on the data that covered entities report for the sales year rather than the data that covered entities report during the sales year because some reporting for a sales year may occur after that year ends.

Commenters requested that the final regulations clarify the meaning of the phrase “drugs paid for by the states in the Medicaid Drug Rebate Program” and whether it includes units paid for under managed care organization plans. In response to this request, the final regulations specify that “drugs paid for by the states in the Medicaid Drug Rebate Program” includes all branded prescription drug units for which the states bill rebates to covered entities under the Medicaid Drug Rebate Program. This program includes, but is not limited to, units paid for under various health care plans such as fee for service, managed care organizations, and drugs administered in a non-retail setting such as drugs administered in a physician's office, clinic, hospital or other setting. Under the Medicaid Drug Rebate Program, states provide the required utilization data. States report separate totals for each NDC for both fee-for-service and managed care organization utilization data. Also, as stated earlier in this preamble, the final regulations specify that the Medicaid Drug Rebate Program's calculated branded prescription drug fee does not include state-only pharmaceutical program sales or rebates.

Commenters asked how a covered entity can ensure that a state has updated its Medicaid data files to accurately reflect state rebates. This issue is beyond the scope of these regulations. However, since 2011, in the context of the dispute resolution process, CMS, IRS, and covered entities have devoted extensive resources to resolving discrepancies between a state's reported rebate data that CMS uses to compute Medicaid's branded prescription drug sales data for the IRS and the rebate data that covered entities receive from that state. To resolve these discrepancies on a timely basis, CMS has established a reconciliation process. To maximize the effectiveness of this reconciliation process, however, a covered entity must use the CMS reconciliation process in a timeframe that allows discrepancies to be resolved before CMS computes the branded prescription sales data that it sends the IRS for purposes of computing a covered entity's preliminary fee calculation. A covered entity's timely use of the CMS reconciliation process will help minimize, if not eliminate, the errors related to CMS's Medicaid data that a covered entity would otherwise include in its error report. The web address for this resource is http://medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Branded-Prescription-Drug.html. This CMS Medicaid Branded Prescription Drug Fee program Web page also has additional information regarding Medicaid sales data. Covered entities may email questions to CMS Medicaid regarding the data used in this program at MedicaidBPD@cms.hhs.gov with “BPD” in the email subject line.

The temporary regulations provided that VA will provide, by NDC, the total amount paid (net of refunds and rebates, when they are associated with a specific NDC) for each branded prescription drug procured by VA for its beneficiaries during the sales year. For this purpose, a drug is procured on the invoice (billing) date. The temporary regulations further provided that the basis of this information will be national procurement data reported during the sales year by VA's Pharmaceutical Prime Vendor to the VA Pharmacy Benefits Management Service and National Acquisition Center.

A commenter requested that the final regulations require that the amount of the IFF and CRF be excluded from VA sales either by requiring VA to exclude these amounts from its sales data or by allowing a covered entity to report these amounts on its Form 8947. The final regulations do not adopt this suggestion. According to VA, these amounts are part of the total price VA pays to its Pharmaceutical Prime Vendor and are properly included in the sales amount.

A commenter requested that the final regulations confirm that VA sales data does not include DOD, Coast Guard, Indian Health, or other purchases made under the Federal Supply Schedule. VA does not include in its sales data purchases made by other agencies. Because the methodology in the regulations is already limited to purchases made by VA, the final regulations do not need further clarification.

The temporary regulations provided that, for DOD programs other than TRICARE, DOD will provide, by Labeler Code, the manufacturer's name, the NDC, brand name, and the amount paid (net of rebates or refunds) for each branded prescription drug procured by DOD during the sales year. For this purpose, a drug is procured based upon the date it was ordered.

A commenter requested that the final regulations require that the amount of the Industrial Funding Fee (IFF) and the Cost Recovery Fee (CRF) be excluded from DOD sales, either by requiring DOD to exclude these fees from its sales data or by allowing a covered entity to report these fees on its Form 8947. The IFF and CRF are administrative fees that are added to the cost of purchasing under the Federal Supply Schedule and National Contract Service. The final regulations do not adopt this suggestion. According to DOD, these fee amounts are part of the total price DOD pays to procure a drug and are properly included in the sales amount.

The temporary regulations provided that DOD will provide, by Labeler Code, the manufacturer's name, the NDC, brand name, and the amount paid (net of rebates or refunds) for each branded prescription drug procured by DOD through the TRICARE retail pharmacy program (TRICARE) during the sales year. For TRICARE, a drug is procured based upon the date it was dispensed. The amount paid is based on the submitted ingredient cost paid, aggregated by NDC, for eligible TRICARE claims submitted during the program year, minus any refunds or rebates for the corresponding claims.

Commenters expressed concern that TRICARE's drug sales overlap with DOD and VA and asked that the final regulations address this perceived overlap. The final regulations do not adopt this suggestion. No overlap exists because TRICARE only reports sales from its retail pharmacy network, which is distinct from sales reported by DOD and VA. TRICARE, DOD, and VA separately maintain and report their own drug sales data.

Section 51.4T(f) described the TRICARE and DOD methodologies for calculating sales data. Section 51.4(f) continues to describe the DOD methodology. A new subsection, § 51.4(g), describes the TRICARE methodology.

As stated earlier in this preamble, because the use of the second preceding year as the sales year, rather than the immediately preceding year, may affect the amount of the fee paid by a covered entity, the temporary regulations provided that the annual fee due in every year after 2011 will include an adjustment amount. This adjustment amount will be added (or subtracted), as appropriate, to (or from) the fee otherwise payable by the covered entity in the fee year in which the adjustment is calculated.

A commenter asked that the final regulations provide for a separate dispute resolution process for the adjustment amount after the final fee calculation because errors reported in the dispute resolution process may not be resolved in time to be reflected in the final fee calculation. The final regulations do not adopt this suggestion. The adjustment amount is part of the preliminary fee calculation. Therefore, each covered entity has an opportunity to raise disputes regarding the adjustment amount during the existing dispute resolution process. Moreover, an adjustment to one covered entity's final fee calculation would necessitate a recalculation of each covered entity's prior final fee calculation because the fee is an allocated fee. The final regulations clarify that the IRS will not make adjustments to a final fee calculation.

Because the amount of the fee under the temporary regulations was based on sales from the second preceding year, commenters suggested that the final regulations allow a covered entity to reduce its fee liability in the same year that the covered entity experiences an event that would significantly reduce its sales to the Programs and make corresponding adjustments in future years. Such events may include a drug recall, a loss of patent exclusivity, or bankruptcy. The final regulations do not adopt this suggestion. The statute requires the IRS to determine each covered entity's branded prescription drug sales on the basis of reports submitted by the Agencies and to uniformly apply the fee determination rules to each covered entity's sales data. The methodology adopted in the final regulations ensures that the applicable fee amount is appropriately apportioned among the covered entities.

In accordance with section 9008(f)(1), the temporary regulations treated the fee as an excise tax for purposes of subtitle F. A commenter suggested that the final regulations provide for interest payments for adjustment amounts that are credited to a covered entity. The final regulations do not adopt this suggestion. Instead, the final regulations clarify that an adjustment amount itself is neither an overpayment nor an underpayment, but rather a component of the current year's fee. Thus, for purposes of section 6601, any increase in the current year's fee resulting from any adjustment amount, along with the remainder of the fee, is treated as due on the due date for the current year's fee. Conversely, for purposes of section 6611, any adjustment amount that decreases the current year's fee is treated as a payment towards the current fee amount made on the due date of the current fee year.

Commenters asked that the final regulations clarify whether a covered entity must file Form 843, “Claim for Refund and Request for Abatement,” to request that the IRS calculate an adjustment amount when a covered entity anticipates that it is entitled to a positive adjustment amount. As stated earlier in this preamble, a positive adjustment amount is not an overpayment. Accordingly, in response to this comment, the final regulations clarify that a covered entity does not file Form 843 to obtain an adjustment amount. The IRS automatically calculates adjustment amounts. Additionally, the final regulations clarify that if a covered entity's adjustment amount reduces the fee below zero and results in an amount due to the covered entity for the fee year, the IRS will automatically pay this amount due to the covered entity.

Another commenter suggested that the final regulations clarify whether the period of limitations on filing a claim set forth in section 6511 applies to the adjustment amount. Under the final regulations, section 6511 applies to the fee, but not separately to the adjustment amount, because the adjustment amount is merely a component of the fee. For purposes of section 6511, any adjustment amount that decreases the current year's fee is treated as a payment towards the current fee amount made on the due date of the current fee year.

The temporary regulations provided that, no later than August 31st of each fee year, the IRS will send each covered entity its final fee calculation for that fee year. Several commenters suggested that the IRS send the final fee notice in an electronic format. The final regulations do not adopt this suggestion because it is outside the scope of these regulations. However, the final regulations do not prohibit the IRS from using an electronic format for the final fee notice. Moreover, at the time these comments were submitted, the IRS was already sending a covered entity's sales data with its preliminary fee notice on a separate CD-ROM in Microsoft Excel format to each covered entity that timely requested it. After receiving these comments, the IRS began also sending a covered entity's sales data with its final notice on a separate CD-ROM in Microsoft Excel format if the entity had made a timely request for the CD-ROM to be sent with its preliminary fee notice. More information about the manner for notifying covered entities of their preliminary and final fee calculations is contained in Notice 2014-42.

In accordance with section 9008(a)(2), the temporary regulations provided that each covered entity must pay its final fee by September 30th of the fee year. A commenter suggested that the final regulations clarify whether section 7503 applies to the deadline for fee payment. Section 7503 provides that if the last day for performing an act required under the authority of the internal revenue laws falls on a Saturday, Sunday, or a legal holiday, the performance of the act is timely if the act is performed on the next succeeding day that is not a Saturday, Sunday, or a legal holiday. The final regulations do not provide a special rule because section 9008(f)(1) and the final regulations treat the fee as an excise tax for purposes of subtitle F. Therefore, section 7503 applies to the deadline for fee payment.

The temporary regulations provided for a dispute resolution process that allows a covered entity to submit error reports in response to the preliminary fee calculation for the IRS to consider before performing the final fee calculation. The temporary regulations described the information that covered entities must submit. The final regulations adopt these provisions with the following minor changes that will allow the IRS to more accurately process a covered entity's disputes.

The temporary regulations required that a Form 2848, “Power of Attorney and Declaration of Representative” must be filed with an error report. The final regulations clarify that a Form 2848 is required only when the representative is not an employee of the covered entity who is authorized under section 6103 or designated on Form 8947 to discuss the information reported on Form 8947.

The temporary regulations required the name, telephone number, and email address (if available) of one or more employees or representatives with whom errors may be discussed. The final regulations also require a fax number.

For Program errors, the temporary regulations required a covered entity to submit a separate error report for each Program with the asserted errors. For non-Program errors, the temporary regulations required a covered entity to submit one error report with all of the non-Program errors. To streamline the error reporting process, the final regulations require a covered entity to combine both Program and non-Program errors on a single error report, with each asserted error on a separate line.

The IRS notices, the revenue procedure, and the temporary regulations cited in this preamble are published in the Internal Revenue Bulletin and are available at www.irs.gov. The temporary regulations are also available in the Code of Federal Regulations.

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. It is hereby certified that the collection of information in these final regulations will not have a significant economic impact on a substantial number of small entities. This certification is based on the fact that the only collection burden imposed by these regulations is the requirement to maintain a record of consent to the selection of a designated entity, and this collection burden applies only to designated entities of controlled groups, which tend to be large corporations, and their members. Therefore, a Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. Pursuant to section 7805(f), the notice of proposed rulemaking was submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on small business, and no comments were received.

The principal author of these regulations is Celia Gabrysh, Office of the Associate Chief Counsel (Passthroughs and Special Industries). However, other personnel from the Treasury Department and the IRS participated in their development.

Accordingly, 26 CFR parts 51 and 602 are amended as follows:

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

On July 7, 2014, the Coast Guard published its annual technical amendment final rule (79 FR 38422) to make non-substantive changes to Title 33 of the Code of Federal Regulations.

In attempting to amend 33 CFR 151.66(c)(3)(iv)(C) to reflect the correct mail stop for Commandant (CG-OES), we mistakenly referred to paragraph (d)(3)(iv)(C) in amendatory instruction 106 on page 79 FR 38435 of that rule. This rule corrects that error by amending the correct paragraph.

Accordingly, 33 CFR part 151 is corrected by making the following correcting amendment:

The Coast Guard is issuing this temporary final rule without prior notice and opportunity to comment pursuant to authority under section 4(a) of the Administrative Procedure Act (APA) (5 U.S.C. 553(b)). This provision authorizes an agency to issue a rule without prior notice and opportunity to comment when the agency for good cause finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.”

Under 5 U.S.C. 553(b)(B), the Coast Guard finds that good cause exists for not publishing a notice of proposed rulemaking (NPRM) with respect to this rule because to do so would be impracticable due to the insufficient time available for notice and opportunity to comment prior to the dates of the actual event and the inability for the event to be rescheduled.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delayed promulgation would eliminate the safety zone's effectiveness and usefulness in protecting event participants and the maritime public during the scheduled event.

The legal basis for this temporary rule is 33 U.S.C. 1226, 1231; 46 U.S.C. Chapters 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05-1, 6.04-1, 6.04-6 and 160.5; Public Law 107-295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1 which collectively authorize the Coast Guard to define and establish regulatory safety zones.

The Marine Corps will be conducting an aerial and on-water demonstration in support of Marine Week. The event involves low flying aircraft, combat equipment, and other on-water displays, which will take place immediately offshore from the Seattle Seahawks training facility on Lake Washington, Seattle, WA. The safety zone is necessary to protect event participants and the maritime public from the safety hazards associated with this event.

The Coast Guard is establishing a safety zone on all waters encompassed by the following points: 47°32′19″ N, 122°12′14″ W, thence southeasterly to 47°32′11″ N, 122°11′56″ W, thence southwesterly along the shoreline to 47°31′58″ N, 122°12′11″ W, thence northwesterly to 47°32′01″ N, 122°12′29″ W, thence northeasterly back to the point of origin.

Vessels wishing to enter the safety zone must request permission for entry by contacting the Joint Harbor Operations Center at (206) 217-6175, or the on-scene patrol craft via VHF-FM Ch 13. If permission for entry is granted vessels must proceed at a minimum speed for safe navigation.

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, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders. This rule is not a significant regulatory action because it creates a safety zone that is minimal in size and short in duration.

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 will affect the following entities, some of which may be small entities: The owners or operators of vessels intending to transit through the established safety zones during the times of enforcement. This rule will not have a significant economic impact on a substantial number of small entities because the temporary safety zone is minimal in size and short in duration, maritime traffic will be able to transit around it and may be permitted to transit them with the permission from the Captain of the Port or a Designated Representative.

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

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

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.

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

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

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

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

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would 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 determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves the establishment of a temporary safety zone. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2-1 of the Commandant Instruction. An environmental checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under ADDRESSES . We seek any comments or information that may lead to the discovery of a significant environmental impact from this rule.

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

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

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

The legal basis for the rule is the Coast Guard's authority to establish regulated navigation areas and limited access areas: 33 U.S.C. 1231; 33 CFR 1.05-1, 160.5; Department of Homeland Security Delegation No. 0170.1.

This temporary safety zone is intended to restrict vessels from a portion of the Cuyahoga River during the installation operation for the new Columbus Road Bridge spanning the Cuyahoga River. This temporary safety zone is necessary to protect mariners and vessels and construction crews from the navigational hazards associated with blocking the river for the large scale heavy lift of the bridge structure and securing it to the towers on either side of the river. This rule is effective from 6 a.m. July 28, 2014, to 6 a.m. August 1, 2014.

During this effective period, there will be a continuous closure of a portion of the Cuyahoga River at MM 1.93 and resultant stoppage of any traffic beyond MM 1.93 south to the terminus of the maintained navigable channel. The Captain of the Port Buffalo has determined that these bridge installation operations will pose a significant risk to the maritime public. Such hazards include falling bridge structure, falling building materials, death, and serious bodily harm.

With the aforementioned hazards in mind, the Captain of the Port Buffalo has determined that this temporary safety zone is necessary to ensure the safety of mariners and vessels on the Cuyahoga River during the Columbus Road Bridge installation operation in Cleveland, OH.

This safety zone will be effective from 6 a.m. on July 28, 2014, to 6 a.m. on August 1, 2014. The safety zone will encompass waters of the Cuyahoga River in the vicinity of the Columbus Road Bridge on the Cuyahoga River at river mile marker 1.93. Specifically, the safety zone will cover an area 1000 feet upstream and 1000 feet downstream of the bridge from position 41°29′16.4″ N, 081°42′01.7″ W, (NAD 83).

Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port Buffalo or his designated on-scene representative. The Captain of the Port or his designated on-scene representative may be contacted via VHF Channel 16.

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

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

We conclude that this rule is not a significant regulatory action because we anticipate that it will have minimal impact on the economy, will not interfere with other agencies, will not adversely alter the budget of any grant or loan recipients, and will not raise any novel legal or policy issues. The safety zone created by this rule will be relatively small and enforced for a maximum of 4 days and will result in the reinstallation of critical local infrastructure crossing the Cuyahoga River. Under certain conditions, moreover, vessels may still transit through the safety zone when permitted by the Captain of the Port or his designated on-scene representative.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered the impact of this rule on small entities. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule will affect the following entities, some of which might be small entities: The owners or operators of vessels intending to transit a portion of the Cuyahoga River in Cleveland, OH from 6 a.m. July 28, 2014 to 6 a.m. August 1, 2014.

This safety zone will not have a significant economic impact on a substantial number of small entities for the reasons cited in the Regulatory Planning and Review section. Additionally, before the enforcement of the zone, we would issue local Broadcast Notice to Mariners so vessel owners and operators can plan accordingly.

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

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

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

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.

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

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

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

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

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

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

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

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

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

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

Purpose of Program: The purpose of the Research Fellowships Program is to build research capacity by providing support to experienced, highly qualified individuals, including those who are individuals with disabilities, to perform research on the rehabilitation of individuals with disabilities.

Fellows must conduct original research in an area authorized by section 204 of the Rehabilitation Act of 1973, as amended (the Act). Section 204 of the Act authorizes research, demonstration projects, training, and related activities, the purposes of which are to develop methods, procedures, and rehabilitation technology that maximize the full inclusion and integration into society, employment, independent living, family support, and economic and social self-sufficiency of individuals with disabilities, especially individuals with the most significant disabilities, and to improve the effectiveness of services authorized under the Act.

Applicable Program Regulations: 34 CFR part 350.

We published a notice of proposed priority (NPP) for this program in the Federal Register on June 03, 2014 (79 FR 31898). That notice contained background information and our reasons for proposing the particular priority.

There are no differences between the proposed priority and this final priority.

Public Comment: In response to our invitation in the NPP we did not receive any comments on the proposed priority.

Final Priority:

The Assistant Secretary for Special Education and Rehabilitative Services proposes a new priority for a Distinguished Residential Disability and Rehabilitation Policy Fellowship as part of NIDRR's Research Fellowship Program (also known as the Mary E. Switzer Research Fellowships). The goals of this proposed priority are: (1) To provide experienced disability and rehabilitation researchers with opportunities to enhance their knowledge and understanding of the public policy-making process and the effects of public policy on the outcomes of individuals with disabilities; (2) to enhance the capacity of disability and rehabilitation researchers to conduct and disseminate relevant disability policy research; (3) to increase the integration and use of research findings in shaping disability-related policy; and 4) to increase awareness of disability-related issues in public policy discussions, formulations, and reviews.

Consistent with the goals of this program, an applicant for a Distinguished Residential Disability and Rehabilitation Policy Fellowship must include:

(a) An Eligibility Statement that demonstrates that you meet the eligibility requirements in 34 CFR part 356.2(c)(1), including relevant publications and prior research experience; and that provides sufficient information in order to evaluate your qualifications consistent with 34 CFR part 356.30(a).

(b) A plan for how you will fulfill the full-time equivalent requirement for a Distinguished Residential Disability and Rehabilitation Policy Fellowship and the requirement to work a minimum of 50 percent of the time in an agency or office within the Executive or Legislative branches of the Federal government, in the Washington, DC metropolitan area.

(c) A letter of support from a potential mentor at an agency or office within the Executive or Legislative branches of the Federal Government where your fellowship will be based. The letter of support from the potential mentor should indicate the mentor's capacity and willingness to facilitate your fellowship placement should you be awarded the Distinguished Residential Disability and Rehabilitation Policy Fellowship.

(d) An assurance that you will commit to spending at least 50 percent of the time during the period of the fellowship at an agency or office within the Executive or Legislative branches of the Federal government in the Washington, DC metropolitan area, receiving orientation, conducting research, and providing expertise related to disability and rehabilitation research.

(e) A description of a proposed Distinguished Residential Disability and Rehabilitation Policy Fellowship research project that includes the following:

(1) A brief history or literature review of the disability issue, as appropriate; identification of the relevant recent legislative, regulatory, or administrative actions and the policy options related to this topic; and a rationale for the importance of the topic to improving the well-being of individuals with disabilities in one or more of NIDRR's primary outcome domains: Community Living and Participation, Employment, and Health and Function.

(2) Specific objectives and research questions or hypotheses that will guide the project, the methods you will use to conduct the research, and the proposed timeline for implementing the project.

(3) A plan for how the results of the project will be disseminated and used to influence policy.

Note: Fellows funded under this program are responsible for ensuring that their conduct does not violate Federal anti-lobbying requirements (see www.gpo.gov/fdsys/granule/USCODE-2011-title18/USCODE-2011-title18-partI-chap93-sec1913 ) during the period of their fellowship.

Types of Priorities:

When inviting applications for a competition using one or more priorities, we designate the type of each priority as absolute, competitive preference, or invitational through a notice in the Federal Register . The effect of each type of priority follows:

Absolute priority: Under an absolute priority, we consider only applications that meet the priority (34 CFR 75.105(c)(3)).

Competitive preference priority: Under a competitive preference priority, we give competitive preference to an application by (1) awarding additional points, depending on the extent to which the application meets the priority (34 CFR 75.105(c)(2)(i)); or (2) selecting an application that meets the priority over an application of comparable merit that does not meet the priority (34 CFR 75.105(c)(2)(ii)).

Invitational priority: Under an invitational priority, we are particularly interested in applications that meet the priority. However, we do not give an application that meets the priority a preference over other applications (34 CFR 75.105(c)(1)).

This notice does not preclude us from proposing additional priorities, requirements, definitions, or selection criteria, subject to meeting applicable rulemaking requirements.

Under Executive Order 12866, the Secretary must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—

(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities in a material way (also referred to as an “economically significant” rule);

(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;

(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or

(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.

This final regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866.

We have also reviewed this final regulatory action under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—

(1) Propose or adopt regulations only upon a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);

(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;

(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);

(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and

(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.

Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”

We are issuing this final priority only on a reasoned determination that its benefits justify its costs. In choosing among alternative regulatory approaches, we selected those approaches that maximize net benefits. Based on the analysis that follows, the Department believes that this regulatory action is consistent with the principles in Executive Order 13563.

We also have determined that this regulatory action does not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.

In accordance with both Executive orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.

The benefits of the Research Fellowships Program have been well established over the years. Projects similar to the Research Fellowships Program have been completed successfully, and the proposed priority will generate new capacity in the area of rehabilitation and disability policy research.

Accessible Format: Individuals with disabilities can obtain this document in an accessible format (e.g., braille, large print, audiotape, or compact disc) on request to the program contact person listed under FOR FURTHER INFORMATION CONTACT .

Electronic Access to This Document: The official version of this document is the document published in the Federal Register . Free Internet access to the official edition of the Federal Register and the Code of Federal Regulations is available via the Federal Digital System at: www.gpo.gov/fdsys. At this site you can view this document, as well as all other documents of this Department published in the Federal Register , in text or Adobe Portable Document Format (PDF). To use PDF you must have Adobe Acrobat Reader, which is available free at the site.

You may also access documents of the Department published in the Federal Register by using the article search feature at: www.federalregister.gov. Specifically, through the advanced search feature at this site, you can limit your search to documents published by the Department.

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

EPA is taking several actions related to the redesignation of the Bellefontaine area to attainment for the 2008 lead NAAQS. EPA is approving Ohio's lead maintenance plan for the Bellefontaine area as a revision to the Ohio SIP. EPA is approving the 2010 lead base year emission inventory which satisfies the requirement in section 172(c)(3) for a current, accurate and comprehensive emission inventory.

EPA also finds that Ohio meets the requirements for redesignation of the Bellefontaine area to attainment of the 2008 lead NAAQS under section 107(d)(3)(E) of the CAA. EPA is thus granting Ohio's request to change the designation of the Bellefontaine area from nonattainment to attainment for the 2008 lead NAAQS. EPA's analysis for these actions are discussed in Section V. of today's rulemaking.

Lead is a metal found naturally in the environment as well as in manufactured products. The major sources of lead emissions have historically been from fuels used in on-road motor vehicles (such as cars and trucks) and industrial sources. As a result of EPA's regulatory efforts to remove lead from on-road motor vehicle gasoline, emissions of lead from the transportation sector dramatically declined by 95 percent between 1980 and 1999, and levels of lead in the air decreased by 94 percent between 1980 and 1999.

Today, the highest levels of lead in the air are usually found near lead smelters. The major sources of lead emissions to the air today are ore and metals processing and piston-engine aircraft operating on leaded aviation gasoline.

On November 12, 2008 (73 FR 66964), EPA established the 2008 primary and secondary lead NAAQS at 0.15 micrograms per cubic meter (μg/m 3 ) based on a maximum arithmetic 3-month mean concentration for a 3-year period. See 40 CFR 50.16.

On November 22, 2010 (75 FR 71033), EPA published its initial air quality designations and classifications for the 2008 lead NAAQS based upon air quality monitoring data for calendar years 2007-2009. These designations became effective on December 31, 2010. 1 The Bellefontaine area was designated nonattainment for the 2008 lead NAAQS. See 40 CFR 81.336. OEPA submitted their redesignation request on October 29, 2013.

The CAA sets forth the requirements for redesignating a nonattainment area to attainment. Specifically, section 107(d)(3)(E) of the CAA allows for redesignation provided that: (1) The Administrator determines that the area has attained the applicable NAAQS based on current air quality data; (2) the Administrator has fully approved an applicable SIP for the area under section 110(k) of the CAA; (3) the Administrator determines that the improvement in air quality is due to permanent and enforceable emission reductions resulting from implementation of the applicable SIP, Federal air pollution control regulations, or other permanent and enforceable emission reductions; (4) the Administrator has fully approved a maintenance plan for the area meeting the requirements of section 175A of the CAA; and (5) the state containing the area has met all requirements applicable to the area for purposes of redesignation under section 110 and part D of the CAA.

EPA is approving the redesignation of the Bellefontaine area to attainment of the 2008 lead NAAQS and is also approving Ohio's maintenance plan and emissions inventory for the area. The bases for these actions follow.

In accordance with section 179(c) of the CAA, 42 U.S.C. 7509(c), EPA is determining that the Bellefontaine, Ohio area has attained the 2008 lead NAAQS. This determination is based upon complete, quality-assured, and certified ambient air monitoring data for the 2010-2012 monitoring period that show this area has monitored attainment of the lead NAAQS.

Under EPA regulations at 40 CFR 50.16, the 2008 primary and secondary lead standards are met when the maximum arithmetic 3-month mean concentration for a 3-year period, as determined in accordance with 40 CFR part 50, appendix R, is less than or equal to 0.15 µg/m 3 at all relevant monitoring sites in the subject area. In a rulemaking on November 5, 2011, EPA determined that the Bellefontaine air quality data was attaining the standard with a design value of 0.006 µg/m 3 for the period of 2010-2012, well below the standard of 0.15 µg/m 3 . See 78 FR 66280.

Although 2010 to 2012 data are still the most recent quality-assured and certified data, preliminary 2013 data indicate that the area continues to attain the standard. The 2013 data, complete, but not yet certified, show that the maximum value for the entire year was 0.005 µg/m 3 . Because 0.005 µg/m 3 was the highest 3-month rolling average in 2011 and 2012 ( Id. ), the design value for the 2011 to 2013 time period would not exceed 0.005 µg/m 3 , a concentration that is only 3.3% of the 0.15 µg/m 3 standard.

We have determined that Ohio has met all currently applicable SIP requirements for purposes of redesignation for the Bellefontaine area under section 110 of the CAA (general SIP requirements). We also find that the Ohio submittal meets all SIP requirements currently applicable for purposes of redesignation under part D of title I of the CAA, in accordance with section 107(d)(3)(E)(v). In addition, with the exception of the emissions inventory under section 172(c)(3), we are proposing to find that all applicable requirements of the Ohio SIP for purposes of redesignation have been approved, in accordance with section 107(d)(3)(E)(ii). As discussed below, in this action, EPA is approving Ohio's 2010 emissions inventory as meeting the section 172(c)(3) comprehensive emissions inventory requirement.

In making these determinations, we have ascertained which SIP requirements are applicable for purposes of redesignation, and concluded that the Ohio SIP includes measures meeting those requirements and that they are fully approved under section 110(k) of the CAA.

a. Ohio Has Met All Applicable Requirements for Purposes of Redesignation of the Bellefontaine Area Under Section 110 and Part D of the CAA

i. Section 110 General SIP Requirements

Section 110(a) of title I of the CAA contains the general requirements for a SIP. Section 110(a)(2) provides that the implementation plan submitted by a state must have been adopted by the state after reasonable public notice and hearing, and, among other things, must: include enforceable emission limitations and other control measures, means or techniques necessary to meet the requirements of the CAA; provide for establishment and operation of appropriate devices, methods, systems, and procedures necessary to monitor ambient air quality; provide for implementation of a source permit program to regulate the modification and construction of any stationary source within the areas covered by the plan; include provisions for the implementation of part C, Prevention of Significant Deterioration (PSD) and part D, New Source Review (NSR) permit programs; include criteria for stationary source emission control measures, monitoring, and reporting; include provisions for air quality modeling; and provide for public and local agency participation in planning and emission control rule development.

Section 110(a)(2)(D) of the CAA requires that SIPs contain measures to prevent sources in a state from significantly contributing to air quality problems in another state. EPA believes that the requirements linked with a particular nonattainment area's designation are the relevant measures to evaluate in reviewing a redesignation request. The transport SIP submittal requirements, where applicable, continue to apply to a state regardless of the designation of any one particular area in the state. Thus, we believe that these requirements should not be construed to be applicable requirements for purposes of redesignation.

Further, we believe that the other section 110 elements described above that are not connected with nonattainment plan submissions and not linked with an area's attainment status are also not applicable requirements for purposes of redesignation. A state remains subject to these requirements after an area is redesignated to attainment. We conclude that only the section 110 and part D requirements that are linked with a particular area's designation are the relevant measures which we may consider in evaluating a redesignation request. See 61 FR 53174-53176 (October 10, 1996) and 62 FR 24826 (May 7, 1997) (proposed and final redesignation for Reading, Pennsylvania ozone nonattainment area); 61 FR 20458 (May 7, 1996) (final redesignation for Cleveland-Akron-Lorain, Ohio ozone nonattainment area); and 60 FR 62748 (December 7, 1995) (final redesignation of Tampa, Florida ozone nonattainment area). See also 65 FR 37879, 37890 (June 19, 2000) (discussing this issue in final redesignation of Cincinnati, Ohio 1-hour ozone nonattainment area); 66 FR 50399 (October 19, 2001) (final redesignation of Pittsburgh, Pennsylvania 1-hour ozone nonattainment area).

We have reviewed the Ohio SIP and determined that it meets the general SIP requirements under section 110 of the CAA to the extent they are applicable for purposes of redesignation. EPA has previously approved provisions of Ohio's SIP addressing section 110 requirements (including provisions addressing lead), at 40 CFR 52.1870.

On October 12, 2011, and supplemented on June 7, 2013, Ohio made submittals addressing “infrastructure SIP” elements for the lead NAAQS required under CAA section 110(a)(2). EPA has not yet acted on this submittal, however, the requirements of section 110(a)(2) are statewide requirements that are not linked to the lead nonattainment status of the Bellefontaine area. Therefore, EPA believes that these SIP elements are not applicable requirements for purposes of review of the state's lead redesignation request.

EPA has determined that upon approval of the base year emissions inventories discussed in section V.B. of this rulemaking, the Ohio SIP will meet the applicable SIP requirements for the Bellefontaine area applicable for purposes of redesignation under part D of the CAA. Subpart 1 of part D, found in sections 172-176 of the CAA, sets forth the basic nonattainment requirements applicable to all nonattainment areas.

For purposes of evaluating this redesignation request, the applicable section 172 SIP requirements for the Bellefontaine area are contained in sections 172(c)(1)-(9). A thorough discussion of the requirements contained in section 172 can be found in the General Preamble for Implementation of Title I (57 FR 13498, April 16, 1992).

Section 172(c)(1) requires the plans for all nonattainment areas to provide for the implementation of all reasonably available control measure (RACM) as expeditiously as practicable and to provide for attainment of the primary NAAQS. EPA interprets this requirement to impose a duty on all states to consider all available control measures for all nonattainment areas and to adopt and implement such measures as are reasonably available for implementation in each area as components of the area's attainment demonstration. Because the Bellefontaine area has reached attainment, Ohio does not need to address additional measures to provide for attainment, and section 172(c)(1) requirements are no longer considered to be applicable as long as the area continues to attain the standard until redesignation. (40 CFR 51.918).

The reasonable further progress (RFP) requirement under section 172(c)(2) is defined as progress that must be made toward attainment. This requirement is not relevant for purposes of the Bellefontaine redesignation because the area has monitored attainment of the 2008 lead NAAQS. (General Preamble, 57 FR 13564). See also 40 CFR 51.918. The requirement to submit the section 172(c)(9) contingency measures is similarly not applicable for purposes of redesignation. Id.

Section 172(c)(3) requires submission and approval of a comprehensive, accurate and current inventory of actual emissions. Ohio submitted a 2005 and 2010 base year emissions inventory along with their redesignation request and via email on February 6, 2014, requested that the 2010 inventory be used as the most accurate and current inventory. As discussed below in section V.B., EPA is approving the 2010 base year inventory as meeting the section 172(c)(3) emissions inventory requirement for the Bellefontaine area.

Section 172(c)(4) requires the identification and quantification of allowable emissions for major new and modified stationary sources in an area, and section 172(c)(5) requires source permits for the construction and operation of new and modified major stationary sources anywhere in the nonattainment area. EPA approved Ohio's current NSR program on January 10, 2003 (68 FR 1366).

Section 172(c)(6) requires the SIP to contain control measures necessary to provide for attainment of the standard. Because attainment has been reached, no additional measures are needed to provide for attainment.

Section 172(c)(7) requires the SIP to meet the applicable provisions of section 110(a)(2). As noted above, we find that the Ohio SIP meets the section 110(a)(2) applicable requirements for purposes of redesignation.

Section 176(c) of the CAA requires states to establish criteria and procedures to ensure that Federally-supported or funded activities, including highway and transit projects, conform to the air quality planning goals in the applicable SIPs. The requirement to determine conformity applies to transportation plans, programs and projects developed, funded or approved under title 23 of the U.S. Code and the Federal Transit Act (transportation conformity) as well as to all other Federally-supported or funded projects (general conformity). In light of the elimination of lead additives in gasoline, transportation conformity does not apply to the lead NAAQS. See 73 FR 66964, 67043 n.120 . EPA approved Ohio's general conformity SIPs on March 11, 1996 (61 FR 9646).

Upon final approval of Ohio's comprehensive 2010 emissions inventories, EPA will have fully approved the Ohio SIP for the Bellefontaine area under section 110(k) of the CAA for all requirements applicable for purposes of redesignation. EPA may rely on prior SIP approvals in approving a redesignation request (See page 3 of the September 4, 1992, Processing Requests to Redesignate Areas to Attainment: Policy Memorandum (Calcagni memorandum)); Southwestern Pennsylvania Growth Alliance v. Browner, 144 F.3d 984, 989-990 (6th Cir. 1998); Wall v. EPA, 265 F.3d 426 (6th Cir. 2001) plus any additional measures it may approve in conjunction with a redesignation action. See 68 FR 25413, 25426 (May 12, 2003). Since the passage of the CAA of 1970, Ohio has adopted and submitted, and EPA has fully approved, provisions addressing various required SIP elements under lead standards.

Under section 172, states with nonattainment areas must submit plans providing for timely attainment and meeting a variety of other requirements. On April 19, 2013, the Ohio EPA, submitted a request to EPA to make a determination under the CAA that the Bellefontaine nonattainment area has attained the 2008 lead NAAQS. EPA made a final determination of attainment for the area (also known as a clean data determination) on November 5, 2013. See 78 FR 66280. Pursuant to 40 CFR 51.1004(c), EPA's determination that the area has attained the 2008 lead standards suspended the requirement to submit certain planning SIPs related to attainment, including attainment demonstration requirements, the Reasonably Available Control Technology (RACT)-RACM requirement of section 172(c)(1) of the CAA, the RFP and attainment demonstration requirements of sections 172(c)(2) and (6) and 182(b)(1) of the CAA, and the requirement for contingency measures of section 172(c)(9) of the CAA. As noted above, the area has continued to attain the standard, and preliminary data indicate the area will remain in attainment, since EPA made the final determination of attainment in 2013.

As a result, the only remaining requirement under section 172 to be considered is the emissions inventory required under section 172(c)(3). In this action, EPA is approving Ohio's 2010 emissions inventories for the Bellefontaine area as meeting the requirement of section 172(c)(3) of the CAA. No Bellefontaine area SIP provisions are currently disapproved, conditionally approved, or partially approved.

EPA believes that Ohio has demonstrated that the observed air quality improvement in the Bellefontaine area is due to permanent and enforceable reductions in emissions. The only stationary source of lead in the Bellefontaine area was the Daido facility. This source was permanently shutdown in June of 2009.

In conjunction with Ohio's request to redesignate the Bellefontaine nonattainment area to attainment status, Ohio has submitted a SIP revision to provide for maintenance of the 2008 lead NAAQS in the area through 2025.

Section 175A of the CAA sets forth the required elements of a maintenance plan for areas seeking redesignation from nonattainment to attainment. Under section 175A, the plan must demonstrate continued attainment of the applicable NAAQS for at least ten years after EPA approves a redesignation to attainment. Eight years after redesignation, the state must submit a revised maintenance plan which demonstrates that attainment will continue to be maintained for ten years following the initial ten year maintenance period. To address the possibility of future NAAQS violations, the maintenance plan must contain contingency measures with a schedule for implementation as EPA deems necessary to assure prompt correction of any future lead violations.

The September 4, 1992, Calcagni memorandum provides additional guidance on the content of a maintenance plan. The memorandum states that a maintenance plan should address the following items: the attainment emissions inventory, a maintenance demonstration showing maintenance for the ten years of the maintenance period, a commitment to maintain the existing monitoring network, factors and procedures to be used for verification of continued attainment of the NAAQS, and a contingency plan to prevent or correct future violations of the NAAQS.

Section 175A requires a state seeking redesignation to attainment to submit a SIP revision to provide for the maintenance of the NAAQS in the area “for at least 10 years after the redesignation.” EPA has interpreted this as a showing of maintenance “for a period of ten years following redesignation.” Calcagni memorandum at 9. Where the emissions inventory method of showing maintenance is used, its purpose is to show that emissions during the maintenance period will not increase over the attainment year inventory. Calcagni memorandum at 9-10.

As discussed in detail in the section below, the state's maintenance plan submission expressly documents that the area's emissions inventories will remain below the attainment year inventories through 2025, more than ten years after redesignation.

Ohio developed an emissions inventory for lead for 2010, one of the years in the period during which the Bellefontaine area monitored attainment of the 2008 lead standard. The attainment level of emissions is summarized in Table 1 below along with future maintenance projections.

Along with the redesignation request, Ohio submitted a revision to its lead SIP to include a maintenance plan for the Bellefontaine area, as required by section 175A of the CAA. Ohio's plan demonstrates maintenance of the 2008 lead standard through 2025 by showing that current and future emissions of lead in the area remain at or below attainment year emission levels. Section 175A requires a state seeking redesignation to attainment to submit a SIP revision to provide for the maintenance of the NAAQS in the area “for at least 10 years after the redesignation.” EPA has interpreted this as a showing of maintenance “for a period of ten years following redesignation.” Calcagni memorandum at 9. Where the emissions inventory method of showing maintenance is used, its purpose is to show that emissions during the maintenance period will not increase over the attainment year inventory. Calcagni memorandum at 9-10.

As discussed in the section below, the state's maintenance plan submission expressly documents that the area's emissions inventories will remain below the attainment year inventories through 2025.

Ohio's plan demonstrates maintenance of the 2008 lead NAAQS through 2025 by showing that current and future emissions of lead for the area remain at attainment year emission levels. When the Daido facility was operating, as shown in Table 1 as the 2005 baseline, the emissions were 0.0035 tons per year (tpy). Now that the facility is shut down, and given that the mobile source emissions of lead are approximately zero, the emissions level for the area is approximately zero tpy. No new sources of lead are projected for the area, so the remainder of the maintenance period is projected as zero tpy as well. Since the shut down of the Daido facility in 2009, the Bellefontaine area has shown monitored design value concentrations well below the NAAQS and, with no other significant sources of lead, is predicted to easily stay below the standard.

Ohio's maintenance plan includes additional elements. Ohio's plan includes a commitment to continue to operate its EPA-approved monitoring network, as necessary to demonstrate ongoing compliance with the NAAQS. Ohio currently operates one lead monitor in the Bellefontaine, Ohio area.

Ohio remains obligated to continue to quality-assure monitoring data and enter all data into the Air Quality System (AQS) in accordance with Federal guidelines. Ohio will use these data, supplemented with additional information as necessary, to assure that the area continues to attain the standard. Ohio will also continue to develop and submit periodic emission inventories as required by the Federal Consolidated Emissions Reporting Rule (67 FR 39602, June 10, 2002) to track future levels of emissions. Both of these actions will help to verify continued attainment in accordance with 40 CFR part 58.

The contingency plan provisions are designed to promptly correct or prevent a violation of the NAAQS that might occur after redesignation of an area to attainment. Section 175A of the CAA requires that a maintenance plan include such contingency measures as EPA deems necessary to assure that the state will promptly correct a violation of the NAAQS that occurs after redesignation. The maintenance plan should identify the contingency measures to be adopted, a schedule and procedure for adoption and implementation of the contingency measures, and a time limit for action by the state. The state should also identify specific indicators to be used to determine when the contingency measures need to be adopted and implemented. The maintenance plan must include a requirement that the state will implement all pollution control measures that were contained in the SIP before redesignation of the area to attainment. See section 175A(d) of the CAA.

Ohio's contingency plan defines a warning level and action level response. The warning level response will trigger when a lead monitor 3-month rolling average exceeds 0.135 µg/m 3 in the maintenance area. If a warning level response is triggered, Ohio will conduct a study to determine whether the lead values indicate a trend toward exceeding the standard and what control measure would be necessary to reverse the trend within 12 months of the conclusion of the calendar year. The action level response will be prompted by the determination of the warning level study that a reverse of the trend is needed, or by the 3-month rolling average exceeding 0.143 µg/m 3 . The action level response will require Ohio to work with the culpable entity to evaluate and implement the needed control measures to bring the area into attainment within 18 months of the conclusion of the calendar year that triggered the response.

Currently, no new sources of lead are projected for the Bellefontaine area, so all control measures would be determined after an analysis of the situation but could include control devices, secondary controls, or improves housekeeping and maintenance. Ohio commits to continue implementing SIP requirements upon and after redesignation.

EPA believes that Ohio's contingency measures, as well as the commitment to continue implementing any SIP requirements, satisfy the pertinent requirements of section 175A(d).

As required by section 175A(b) of the CAA, Ohio commits to submit to the EPA an updated lead maintenance plan eight years after redesignation of the Bellefontaine area to cover an additional ten year period beyond the initial ten year maintenance period.

For all of the reasons set forth above, EPA is approving Ohio's 2008 lead maintenance plan for the Bellefontaine area as meeting the requirements of CAA section 175A.

As discussed above, section 172(c)(3) of the CAA requires areas to submit a comprehensive emissions inventory including all lead sources in the nonattainment area. In an email dated February 6, 2014, Ohio clarified their request that their 2005 emissions inventory submitted on October 5, 2009, as part of their designation request documents be updated with their 2010 emissions inventory submitted to EPA as part of their redesignation request to more accurately represent the current emissions status of the area. By 2010, the only source of lead is shutdown so the emissions level for the entire Bellefontaine area is estimated to be zero tpy. EPA is approving the Ohio 2010 emissions inventory to fulfill this requirement. EPA believes that the 2010 emissions inventory is complete and accurate, and meets the requirement of CAA section 172(c)(3).

Approval of this redesignation request changes the official designation of the Bellefontaine, Ohio area for the 2008 lead NAAQS, found at 40 CFR part 81, from nonattainment to attainment. This action also approves as a revision to the Ohio SIP for the Bellefontaine area, the maintenance plan for the 2008 lead standard and finds that Ohio's 2010 emissions inventory for the Bellefontaine area satisfies the requirement of section 172(c)(3).

We are publishing this action without prior proposal because we view this as a noncontroversial amendment and anticipate no adverse comments. However, in the proposed rules section of this Federal Register publication, we are publishing a separate document that will serve as the proposal to approve the state plan if relevant adverse written comments are filed. This rule will be effective September 26, 2014 without further notice unless we receive relevant adverse written comments by August 27, 2014. If we receive such comments, we will withdraw this action before the effective date by publishing a subsequent document that will withdraw the final action. All public comments received will then be addressed in a subsequent final rule based on the proposed action. EPA will not institute a second comment period. Any parties interested in commenting on this action should do so at this time. Please note that if EPA receives adverse comment on an amendment, paragraph, or section of this rule and if that provision may be severed from the remainder of the rule, EPA may adopt as final those provisions of the rule that are not the subject of an adverse comment. If we do not receive any comments, this action will be effective September 26, 2014.

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

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

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

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

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

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

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

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

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

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

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

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 26, 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. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of today's Federal Register , rather than file an immediate petition for judicial review of this direct final rule, so that EPA can withdraw this direct final rule and address the comment in the proposed rulemaking. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

40 CFR parts 52 and 81 are amended as follows:

The information in the Supplementary Information section of this preamble is organized as follows:

Entities potentially affected by this final rulemaking include owners and operators of emission sources in all industry groups who hold or apply for a title V operating permit. Other entities potentially affected by this final rulemaking include federal, state, local and tribal air pollution control agencies who administer title V permit programs.

In addition to being available in the docket found on http://www.regulations.gov, an electronic copy of this document will also be available on the World Wide Web. Following signature by the EPA Administrator, a copy of this final rule will be posted on the EPA's title V Web page at http://www.epa.gov/nsr .

On March 29, 2013, the EPA proposed to restore a sentence that was inadvertently removed from the operating permits program rules (found in 40 CFR parts 70 and 71) due to an editing error. This error occurred in a June 27, 2003, final rule (68 FR 38517) amending the compliance certification requirements in 40 CFR 70.6(c)(5)(iii)(B) and 71.6(c)(5)(iii)(B). The final 2003 rule inadvertently removed the following sentence from the end of paragraph (c)(5)(iii)(B) of both sections: “If necessary, the owner or operator also shall identify any other material information that must be included in the certification to comply with section 113(c)(2) of the Act, which prohibits knowingly making a false certification or omitting material information.” The EPA proposed to restore this sentence to its former position in both paragraphs.

This sentence was originally added to the operating permits rules in the context of the 1997 Compliance Assurance Monitoring (CAM) rulemaking (62 FR 54900), which clarified the use of CAM monitoring data in compliance certifications. Specifically, this sentence was intended to clarify that “other material information (i.e., information beyond required monitoring that has been specifically assessed in relation to how the information potentially affects compliance status)” (62 FR 54937) known by the owner or operator must be identified and addressed in compliance certifications consistent with section 113(c)(2) of the Clean Air Act (CAA or Act) and the 1997 Credible Evidence Revisions rule (62 FR 8314). The 2003 rulemaking that erroneously removed the subject sentence was intended to address a court remand concerning other aspects of the annual compliance certification requirements of title V.

For the reasons discussed in this document, we are finalizing the regulatory language that we proposed without change.

As discussed in the preamble to the proposed rule (78 FR 19166), the substance of the regulatory preambles and rule text from the 2001  1 and 2003 rulemakings make it clear that the EPA did not intend to remove the missing sentence from 40 CFR 70.6(c)(5)(iii)(B) or 71.6(c)(5)(iii)(B). The EPA did not discuss or propose any revisions to these paragraphs in the 2001 direct final rulemaking or parallel proposal. 2 Similarly, while the EPA revised the text of 40 CFR 70.6(c)(5)(iii)(B) and 71.6(c)(5)(iii)(B) as part of the 2003 final amendments, it did not discuss any intent to remove this sentence. To the contrary, the EPA stated clearly that “[o]ther text within [sections] 70.6(c)(5)(iii)(B), 71.6(c)(5)(iii)(B), 70.6(c)(5)(iii)(C), and 71.6(c)(5)(iii)(C) remains as proposed in March 2001” (68 FR 38521). The EPA did not propose to remove the deleted sentence from paragraph (c)(5)(iii)(B) of 40 CFR 70.6 and 71.6 or to make any other changes to those paragraphs in that March 2001 rulemaking. Moreover, the EPA's response to comments on the 2001 proposed amendments reiterated the sentence's requirement that “responsible officials must identify in [their title V compliance certifications] other material information where failure to do so would constitute a false certification of compliance.”  3

Despite the inadvertent removal of the sentence in question on June 27, 2003, the EPA's actions since that time have remained consistent with the direction provided in the inadvertently removed “other material information” sentence, and with the Credible Evidence Revisions rule in general. For example, the Part 71 federal operating permits program administered by the EPA includes a form for sources to use for their annual compliance certifications, and the instructions for completing the form state the following:

Similarly, the instructions for the initial compliance certification form that the EPA issued shortly after the “other material information” sentence was added to parts 70 and 71 as part of the promulgation of the CAM rule in 1997 also discussed the consideration of “all available information or knowledge” in compliance status certification. 5 After the “other material information” language was inadvertently deleted from the part 71 rule in 2003, the EPA revised the annual compliance certification form and associated instructions in 2004 “to reflect policy decisions concerning monitoring and the data used for compliance certifications.”  6 Specifically, the form added the requirement for sources to certify whether compliance was continuous or intermittent, but the EPA did not revise the instruction for sources to consider “all available information and knowledge” and “credible evidence” when determining compliance status. 7 The retention of the instruction to consider all available information, including credible evidence, in the Annual Compliance Certification form clearly indicates that the EPA continues to believe that the title V rules should be implemented consistent with the “other material information” sentence that had been removed inadvertently. The EPA also has made revisions to the part 71 forms a number of times since 2003, providing ample opportunity to change this language if its policy had changed; however, the EPA has made no such changes. 8

Title V permits issued by EPA Regional Offices since 2003 also provide evidence of the EPA's ongoing practice of requiring sources to use “other material information” in compliance certifications. A review of a sample of recent part 71 permits reveals that they include language similar to the language in the inadvertently removed sentence. These permits include a permit issued by Region 2 in 2011, a permit issued by Region 8 in 2010, and a permit issued by Region 5 in 2012, and each permit requires the annual compliance certification to include “any other material information that must be included in the certification to comply with section 113(c)(2) of the Act, which prohibits knowingly making a false certification or omitting material information.”  9

Similarly, the EPA guidance to title V rule writers on an EPA Region 3 Web site concerning compliance and enforcement illustrates the EPA's commitment to the use of credible evidence. That Web site includes the following guidance:

As illustrated by these examples, following the mistaken removal of the “other material information” sentence on June 27, 2003, the EPA has clearly articulated a position consistent with the Credible Evidence Revisions rule under all circumstances, including the annual compliance certification. In light of the EPA's continued, consistent commitment to the use of credible evidence in compliance certifications and other title V contexts, the EPA has not previously devoted its limited resources to correcting the inadvertent deletion in the regulatory text through a formal rulemaking. Nonetheless, the EPA's Office of Inspector General (OIG) has indicated that the title V rules should be amended to restore the “other material information” language to the regulatory requirements in order to improve the content of annual compliance certifications. 11 In concurrence with the OIG recommendation, the EPA is now taking this action to restore the language currently missing in the part 70 and 71 rules.

The restored language reflects the general prohibition on knowingly making a false certification or omitting material information that exists in the CAA, independent of any EPA policy or previous rulemaking actions. As modified in the 1990 CAA Amendments, section 113(c)(2) of the Act states that any person who knowingly “makes any false material statement, representation, or certification in, or omits material information from, . . . any notice, application, record, report, plan, or other document required pursuant to this Act” (emphasis added) is subject to fine or imprisonment, upon conviction. The EPA believes that it is important to ensure that sources are on notice and understand the requirement to consider as part of their compliance status any material information determined by methods other than those identified in the permit. Moreover, for the sake of clarity, the EPA believes that this duty should be explicit in the part 70 and 71 compliance certification requirements.

The purpose of this final rulemaking is to restore language that was inadvertently deleted from the title V regulations, 40 CFR parts 70 and 71. 12 Given the passage of time, the EPA decided to make this change through a notice and comment rulemaking, rather than a correction notice. In the notice of proposed rulemaking for this action, the EPA requested comments only on whether, on the sole basis that the removal of the language in question was inadvertent, the language in question should or should not be restored. The EPA did not request comments on any other aspects of these provisions or on any other provisions of the part 70 and 71 rules. In the proposal, the EPA stated that if comments were submitted outside of this scope, the agency would not take them into consideration when finalizing the rule.

As stated in the previous section, the proposed rule provided an opportunity for comment on whether, on the sole basis that the removal of the language in question was inadvertent, the language in question should or should not be restored. The EPA provided a 60-day review and comment period on the proposed rulemaking, which closed on May 28, 2013. A total of seven comment letters (three industry comment letters, two citizen comment letters, one government agency comment letter, and one environmental group comment letter) were received on the proposed amendment to restore a sentence to the title V compliance certification requirements that had been inadvertently removed from the rules in June 27, 2003. Three of the commenters opposed the amendment, three were neutral about it, and one supported it. One commenter did not believe the removal was inadvertent, but provided no specific reasoning or evidence to support this general allegation; thus, we have no additional response to this comment beyond the explanation already provided here and in the proposal to support that the removal was inadvertent. Another commenter explained that they “assumed” that EPA had determined the “other material information” language was no longer necessary or appropriate and that the removal of the language was part of an overall effort to simplify rule language. However, as explained repeatedly in this preamble, as well as in the preamble to the proposal for this action, we provided no such explanation at the time the sentence was removed, nor did we even note that we were removing the sentence. In addition, the EPA's actions since the removal demonstrate the EPA's consistent implementation of the language restored in the rule. All these points support the EPA's position that the removal was inadvertent.

The EPA responded to comments on the substance of the inadvertently removed text when the text was first promulgated, see “Compliance Assurance Monitoring Rulemaking (40 CFR Parts 64, 70, and 71) Responses to Public Comments (Part III),” October 2, 1997, available at http://www.epa.gov/ttnatw01/cam/rtcpart3.pdf, page 285. The following discussion confirms our position on issues related to the substance of the “other material information” text as explained in prior response to comments, preambles to Federal Register documents, and various EPA forms, permits, and guidance documents, and is consistent with the restoration of the text we are finalizing.

Comment: One industry commenter states that it is not necessary or useful for the EPA to add this additional language to 40 CFR 70.6 and 71.6. In fact, the commenter believes that the inclusion of this language will be harmful in that it will create uncertainty and confusion.

The government agency commenter stated that the addition of the proposed language would be redundant and would not provide any additional clarification to the requirements under this section. The commenter claims that it would instruct the owner/operator to include items that are already required to be included by this section as currently written.

A citizen commenter was also concerned about the proposed language being redundant and stated that: (a) Most title V permits already have conditions that address this issue; (b) most state agencies have been using the language whether it was/was not inadvertently left out of the rule; and (c) the certifications required now by state agencies are sufficient without additional language.

The environmental group commenter supported the EPA's effort to remind permit owners of their obligations while cautioning that the disclosure duties discussed in the proposed rule exist independent of the EPA's implementing regulations.

Response: As stated earlier in this preamble, as well as in the preamble to the proposal for this action, the regulatory requirement to identify “any other material information . . .” was originally added to the annual compliance certification requirements of parts 70 and 71 and promulgated in the context of a Compliance Assurance Monitoring rulemaking on October 22, 1997 (62 FR 54900). Restoring the language at issue to the regulatory text through this action only seeks to correct what was an inadvertent error in the 2003 final rulemaking. As explained, the EPA has not reversed or weakened this position in subsequent actions. The restored language reflects the general prohibition on knowingly making a false certification or omitting material information that exists in the CAA, independent of any EPA policy or previous rulemaking actions. As modified in the 1990 CAA Amendments, section 113(c)(2) of the Act states that any person who knowingly “makes any false material statement, representation, or certification in, or omits material information from, . . . any notice, application, record, report, plan, or other document required pursuant to this Act” (emphasis added) is subject to fine or imprisonment, upon conviction. The EPA believes that it is important to ensure sources are on notice and understand the requirement to consider as part of their compliance status any material information determined by methods other than those identified in the permit. Moreover, for the sake of ensuring clarity, the EPA believes that this duty should be included explicitly in the part 70 and 71 compliance certification requirements.

As also discussed earlier in this preamble and in the preamble to the proposed rule, the EPA's OIG has indicated that the title V rules should be amended to restore the “other material information” language to the regulatory requirements in order to improve the content of annual compliance certifications. 13 Therefore, the decision to restore the regulatory text is responsive to the OIG's recommendation.

Comment: The environmental group requested that the agency clarify that “material” information includes information known to the permit-holder and pertinent to compliance status, “whether or not that information necessarily demonstrates a violation.” An industry commenter stated that including “other material information” in a certification does not constitute a concession that the information is “credible evidence” of a violation. An industry commenter requested that the agency acknowledge that nothing in the revised language prohibits a responsible official from disputing the relevance or “materiality” of any identified information or reserving all rights to challenge use of that information in an enforcement proceeding. Another industry commenter made a similar comment and stated that the EPA should acknowledge that companies may clarify the meaning of “other material information” included in a compliance certification document and may dispute its materiality in subsequent proceedings.

Response: In terms of the first and last comment, the agency agrees that material information is not limited to information that conclusively demonstrates a violation. The sentence restored states that “[i]f necessary, the owner or operator also shall identify any other material information that must be included in the certification to comply with section 113(c)(2) of the Act, which prohibits knowingly making a false certification or omitting material information.” As the EPA explained in the preamble to the final 1997 CAM rulemaking, any other material information known to the source owner/operator and relevant to the source's compliance status—“i.e., information beyond required monitoring that has been specifically assessed in relation to how the information potentially affects compliance status”—must be identified and addressed in the compliance certification submitted by the responsible official, and in providing this explanation, the EPA did not state that the information is limited to that which indicates non-compliance (62 FR 54937). As explained in the Response to Comments document accompanying the 1997 Compliance Assurance Monitoring Rule, the owner or operator of a source must consider any other material information in order to avoid submitting an incomplete, inaccurate, or false certification. 14 Thus, this other material information could help in documenting whether compliance was continuous or intermittent for the relevant certification period, consistent with §§ 70.6(c)(5)(iii)(C) and 71.6(c)(5)(iii)(C).

In response to industry commenters, the agency agrees that a responsible official may provide an explanation concerning the relevance of other material information when it is submitted as part of the compliance certification for the source. At the time of the submittal, the responsible official can explain the relevance of any such information, including, but not limited to, cases in which the responsible official believes the “other material information” may be seen as in conflict with his conclusion regarding whether compliance was continuous or intermittent. 15 For example, we have explained that the requirements of the Credible Evidence Revisions rule “continue[s] to rely on the established compliance method as the benchmark for measuring compliance with the standard. The use of other evidence to document a violation must take into account the averaging requirements related to the data collected by such method, the pollutant constituents measured by such method ( e.g., the definition of particulate matter included in Method 5), and any limitations as to the conditions under which such tests may be conducted.”  16

The agency further agrees that merely including other material information in a compliance certification does not constitute a concession that the information is credible evidence of a violation.

Comment: The government agency expressed concern that if the proposed sentence is readopted, the interpretation of what is additional information necessary for compliance—outside of what is required by the permit—becomes arbitrary and up to interpretation by the regulatory agency without recourse for the permitted entity. The commenter further states that any inadvertent omission of additional information (whether by oversight or not being aware of its relevance), even though not required by the permit, would subject the facility to enforcement action and imply the responsible official made a false certification, holding him/her both criminally and civilly liable.

A citizen commenter also expressed concern about the possibility of criminal prosecution and monetary penalties as a result of knowingly making a false certification.

Response: As explained in the 2013 proposal and throughout this preamble, the title V operating permits program functioned with this language in place for some time before it was inadvertently removed and has operated similarly since its removal. Moreover, the underlying statutory language in section 113(c)(2) of the CAA has not changed. Thus, restoring this language in the regulatory text does not change what is required of permitted entities.

Additionally, as previously explained in the 1997 Compliance Assurance Monitoring rulemaking, the requirement to consider other material information “does not impose a duty on the owner or operator to assess every possible piece of information that may have some undetermined bearing on compliance” (62 FR 54937). Under the existing title V regulations, any application form, report, or compliance certification is required to contain a certification by a responsible official. 17 This certification is required to state that based on information and belief formed after reasonable inquiry, the statements and information in the document are true, accurate, and complete. See 40 CFR 70.5(d) and 71.5(d). It is important to emphasize that, consistent with this requirement, the agency has already explained that it does not expect a certification to be based on absolute knowledge, but rather reasonable inquiry. For example, the EPA has stated that the compliance certification “will be based on available information, including monitoring and/or other compliance terms required in the permit.”  18

Nothing in the current regulations precludes the submission of material information discovered after a compliance certification is filed. Additionally, the responsible official is encouraged to include written explanations, graphs, and other information to clarify his/her conclusions regarding the source's compliance status.

In an explanation of the use of credible evidence in compliance certifications in the Credible Evidence Revisions rule, the agency emphasized that sources may not ignore obviously relevant information in developing their compliance certifications (62 FR 8320). However, in the same preamble, the agency also explained that it does not view compliance certification requirements as imposing a duty on a source to search out and review every possible document to determine its relevance to a source's compliance ( id ).

Comment: The environmental group requested that the agency confirm in the final rule that the compliance certification obligation applies to all applicable requirements under the CAA—not just the specific emissions limitations enumerated in a title V operating permit.

Response: As discussed earlier in this preamble and in the preamble to the proposal, the purpose of this rulemaking is to restore a sentence to the compliance certification requirements that was inadvertently removed from the rule language on June 27, 2003. The EPA requested comment on whether, on the sole basis that the removal of the language in question was inadvertent, the language in question should or should not be restored. The comment raises an issue that is beyond the scope of this rulemaking, and, consistent with the approach already described, the EPA did not take this comment into consideration when finalizing the rule. However, we note that the text restored is a part of the existing regulation requiring annual (or more frequent) certification addressing compliance of the source “with terms and conditions contained in the permit, including emission limitations, standards, or work practices.” 40 CFR 70.6(c)(5), 71.6(c)(5).

Comment: A citizen recommended that the proposed language be revised to be more specific as to the information that needs to be included.

Response: As discussed earlier in this preamble and in the preamble to the proposal, the purpose of this rulemaking is to restore a sentence to the compliance certification requirements that was inadvertently removed from the rule language on June 27, 2003. The EPA requested comment on whether, on the sole basis that the removal of the language in question was inadvertent, the language in question should or should not be restored. The comment raises an issue that is beyond the scope of this rulemaking, and, consistent with approach already described, the EPA did not take this comment into consideration when finalizing the rule. However, we note that the EPA provides guidance on the information to be included in compliance certification in several places, including in the instructions to the Annual Compliance Certification form  19 and as further summarized in the recently issued memo regarding annual compliance certification reporting. 20

On March 29, 2013, the EPA proposed to restore the “other material information” sentence that was inadvertently removed from the operating permits program rules (found in 40 CFR parts 70 and 71) due to an editing error. This error occurred in a June 27, 2003, final rule (68 FR 38517) amending the compliance certification requirements in 40 CFR 70.6(c)(5)(iii)(B) and 71.6(c)(5)(iii)(B). The final 2003 rule removed the following sentence from the end of paragraph (c)(5)(iii)(B) of both sections: “If necessary, the owner or operator also shall identify any other material information that must be included in the certification to comply with section 113(c)(2) of the Act, which prohibits knowingly making a false certification or omitting material information.” This final rule restores this sentence to its former position in both paragraphs.

This final rule implements a technical correction to the Code of Federal Regulations by adding a sentence that was inadvertently removed in a prior rulemaking. It will not otherwise impose or amend any requirements. The analysis below is consistent with the limited nature of this rulemaking.

This action is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011).

This action does not impose any new information collection burden. The EPA is simply correcting the CFR to reinstate a sentence that was inadvertently removed. However, the Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulations at 40 CFR parts 70 and 71 under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., and has assigned OMB control numbers 2060-0243 and 2060-0336, respectively. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9.

The Regulatory Flexibility Act generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedures Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations and small governmental jurisdictions.

For purposes of assessing the impacts of this final action on small entities, small entity is defined as: (1) A small business as defined in the U.S. Small Business Administration size standards at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; or (3) a small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its field.

After considering the economic impacts of this final rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. This final rule will not impose any requirements on small entities. As explained above, this final rule merely restores a sentence that was removed from the rules inadvertently, and that reflects a requirement of the CAA; thus, the final rule does not impose any new requirements on any entities, either large or small.

This final rule contains no federal mandates under the provisions of title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C. 1531-1538 for state, local or tribal governments or the private sector. This action imposes no enforceable duty on any state, local or tribal governments or the private sector; it simply restores a sentence removed from the rules because of erroneous amendatory language contained in the June 27, 2003, amendments. Therefore, this action is not subject to the requirements of sections 202 and 205 of the UMRA.

This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. The sentence restored in this action reflects a requirement of the CAA and was removed inadvertently and, therefore, it does not impose new regulatory requirements.

This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. As explained previously, this final rule merely restores a sentence removed from the rules inadvertently. Thus, Executive Order 13132 does not apply to this rule.

This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). As explained previously, this final rule merely restores a sentence that reflects a requirement of the CAA and was removed from the rules inadvertently. Thus, Executive Order 13175 does not apply to this action.

The EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5-501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety risks.

This action is not subject to Executive Order 13211 (66 FR 28355, May 22, 2001), because it is not a significant regulatory action under Executive Order 12866.

Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law 104-113, 12(d) (15 U.S.C. 272 note) directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards ( e.g., materials specifications, test methods, sampling procedures and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs the EPA to provide Congress, through the OMB, explanations when the agency decides not to use available and applicable voluntary consensus standards.

This final rulemaking does not involve technical standards. Therefore, the EPA did not consider the use of any voluntary consensus standards.

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and as permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies and activities on minority populations and low-income populations in the United States.

The EPA has determined that this final rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment. As explained previously, this final rule merely restores a sentence that reflects a requirement of the CAA and was removed from the rules inadvertently.

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 U.S. The EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the U.S. 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). This rule will be effective on August 27, 2014.

Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the District of Columbia Circuit within 60 days from the date this action is published in the Federal Register . Filing a petition for reconsideration by the Administrator of this final action 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 must be filed, and shall not postpone the effectiveness of this action.

Therefore, 40 CFR parts 70 and 71 are amended as follows:

The NFIP enables property owners to purchase Federal flood insurance that is not otherwise generally available from private insurers. In return, communities agree to adopt and administer local floodplain management measures aimed at protecting lives and new construction from future flooding. Section 1315 of the National Flood Insurance Act of 1968, as amended, 42 U.S.C. 4022, prohibits the sale of NFIP flood insurance unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed in this document no longer meet that statutory requirement for compliance with program regulations, 44 CFR Part 59. Accordingly, the communities will be suspended on the effective date in the third column. As of that date, flood insurance will no longer be available in the community. We recognize that some of these communities may adopt and submit the required documentation of legally enforceable floodplain management measures after this rule is published but prior to the actual suspension date. These communities will not be suspended and will continue to be eligible for the sale of NFIP flood insurance. A notice withdrawing the suspension of such communities will be published in the Federal Register .

In addition, FEMA publishes a Flood Insurance Rate Map (FIRM) that identifies the Special Flood Hazard Areas (SFHAs) in these communities. The date of the FIRM, if one has been published, is indicated in the fourth column of the table. No direct Federal financial assistance (except assistance pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act not in connection with a flood) may be provided for construction or acquisition of buildings in identified SFHAs for communities not participating in the NFIP and identified for more than a year on FEMA's initial FIRM for the community as having flood-prone areas (section 202(a) of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4106(a), as amended). This prohibition against certain types of Federal assistance becomes effective for the communities listed on the date shown in the last column. The Administrator finds that notice and public comment procedures under 5 U.S.C. 553(b), are impracticable and unnecessary because communities listed in this final rule have been adequately notified.

Each community receives 6-month, 90-day, and 30-day notification letters addressed to the Chief Executive Officer stating that the community will be suspended unless the required floodplain management measures are met prior to the effective suspension date. Since these notifications were made, this final rule may take effect within less than 30 days.

National Environmental Policy Act. This rule is categorically excluded from the requirements of 44 CFR Part 10, Environmental Considerations. No environmental impact assessment has been prepared.

Regulatory Flexibility Act. The Administrator has determined that this rule is exempt from the requirements of the Regulatory Flexibility Act because the National Flood Insurance Act of 1968, as amended, Section 1315, 42 U.S.C. 4022, prohibits flood insurance coverage unless an appropriate public body adopts adequate floodplain management measures with effective enforcement measures. The communities listed no longer comply with the statutory requirements, and after the effective date, flood insurance will no longer be available in the communities unless remedial action takes place.

Regulatory Classification. This final rule is not a significant regulatory action under the criteria of section 3(f) of Executive Order 12866 of September 30, 1993, Regulatory Planning and Review, 58 FR 51735.

Executive Order 13132, Federalism. This rule involves no policies that have federalism implications under Executive Order 13132.

Executive Order 12988, Civil Justice Reform. This rule meets the applicable standards of Executive Order 12988.

Paperwork Reduction Act. This rule does not involve any collection of information for purposes of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

Accordingly, 44 CFR Part 64 is amended as follows:

Table of Contents I. Background A. Amendments Made to the Early Warning Rule and Foreign Defect Reporting 1. Vehicle Type and Fuel and/or Propulsion System Type 2. New Component Categories for Light Vehicles, Buses, Emergency Vehicles, and Medium-Heavy Vehicles B. Amendments Made to Safety Recalls Reporting, Administration, and Execution II. Petitions for Reconsideration Summary and Agency Response A. Petitions Regarding the Early Warning Rule 1. Petitions for Reconsideration of the Effective Date for EWR Reporting 2. Petition for Reconsideration To Use the Attribution “UN” for Reporting Vehicle Type and Fuel/Propulsion Type Is Unknown B. Petitions Regarding Public Availability of Motor Vehicles Recall Information 1. Recall Completion Search Criteria 2. Requirement To Report the Part 573 Date 3. Requirement To Report the Defect or Noncompliance Description and Statement of Risk 4. Requirement To Report the Date of Available Recall Information 5. Request for Modification of Effective Date for the Manufacturer VIN Look-up Tool and Interface With NHTSA 6. Failures of Manufacturers To Provide VIN Look-up Services 7. Timing of NHTSA's Workshops C. Petitions Related to Amendments to Part 573 and Part 577 1. Requirement for Recall Notification Envelope Label 2. Requirement To Utilize NHTSA's Online Recalls Portal 3. Requirement To Notify Owners within 60 Days III. Technical Corrections A. Technical Correction for Submitting Recall Communications B. Technical Correction for Quarterly Reporting IV. Rulemaking Analyses and Notices I. Background A. Amendments to the Early Warning Rule and Foreign Defect Reporting

On August 20, 2013, NHTSA published a final rule amending certain provisions of the EWR regulations at 49 CFR Part 579 Subpart C “Reporting of Early Warning Information.” 78 FR 51382. In summary, the new provisions:

• Require light vehicle manufacturers to specify the vehicle type and the fuel and/or propulsion system type in their quarterly EWR reports.

• Add new component categories for reporting on light vehicles: Electronic stability control, forward collision avoidance, lane departure prevention, and backover prevention, foundation brakes, and automatic brake controls.

• Add one new component category for buses, emergency vehicles, and medium-heavy vehicle manufacturers: Electronic stability control/roll stability control.

• Require motor vehicle manufacturers to report their annual substantially similar vehicle list (SSVL) via the Internet.

The final rule stated that these new provisions will be effective August 20, 2014.

The EWR regulation requires light vehicle manufacturers producing 5,000 or more vehicles annually to submit production information including the make, the model, the model year, the type, the platform and the number of vehicles produced. 49 CFR 579.21(a). Manufacturers must provide the production as a cumulative total for the model year, unless production of the product has ceased. Id. While light vehicle manufacturers are required to provide the type of vehicle with their production, they are not required to provide the type of vehicle when they submit death and injury data pursuant to 49 CFR 579.21(b) or with aggregate data under 49 CFR 579.21(c). The final rule amended § 579.21(b) and (c) to require light vehicle manufacturers to provide the type of vehicle when they submit their death and injury data and aggregate data under those sections and amended the light vehicle reporting templates for the EWR death and injury and aggregate reports to reflect adding vehicle type.

In addition, the final rule amended the EWR regulation to add a requirement that light vehicle manufacturers identify the specific fuel or propulsion system used in their vehicles. 78 FR 51382, 51424-55. The new fuel and/or propulsion system types required to be reported under the final rule are: Compressed natural gas (CNG); compression ignition fuel (CIF); electric battery power (EBP); fuel-cell power (FCP); hybrid electric vehicle (HEV); hydrogen combustion power (HCP); plug-in hybrid (PHV); spark ignition fuel (SIF); and other (OTH).

The EWR regulation requires light and medium-heavy vehicle manufacturers to report the required information by specific component categories. 49 CFR 579.21(b)(2), (c), (d) and 579.22(b), (c), (d). The final rule amended the EWR regulation to add component categories for Electronic Stability Control (ESC), Roll Stability Control (RSC), Forward Collision Avoidance (FCA), Lane Departure Prevention (LDP), and Backover Prevention technologies. NHTSA added component codes for ESC, FCA, LDP and Backover Prevention to the EWR reporting for light vehicles and ESC/RSC for buses, emergency vehicles, and medium and heavy vehicles. 78 FR 51382, 51424-55. The agency also amended the EWR rule to add definitions for these components. 78 FR 51382, 51423-24. The final rule also divided the current “service brake system” category for light vehicles into two new categories: “foundation braking systems and “automatic brake controls” and provided definitions for those new categories. Id.

The August 20, 2013 final rule implemented a number of measures in our effort to improve the information the agency receives from recalling manufacturers concerning the products they are recalling and the plans for remedying those products, in addition to our distribution of that information to the affected public.

We added certain items of information in a manufacturer's Part 573 Information Report. These additional items include: An identification and description of the risk associated with the safety defect or noncompliance with a FMVSS, and, as to motor vehicle equipment recalls, the brand name, model name, and model number, of the equipment recalled. 78 FR 51382, 51421.

Pursuant to Section 31301(a) of MAP-21 (Pub. L. 112-141), the final rule added a requirement that motor vehicle manufacturers that manufacture 25,000 or more light vehicles annually, or 5,000 or more motorcycles annually provide a VIN-based safety recalls search mechanism available to the public on the Internet. Id. The final rule required a conspicuous link to the manufacturer's safety recalls search mechanism on the main page of the manufacturer's United States' Web page. Specifically, the safety recalls search function must: (1) Be available to the public on the Internet; (2) be searchable by vehicle make and model and VIN; (3) be in a format that preserves consumer privacy; and (4) includes information about each recall that has not been completed for each vehicle. It must also meet the requirements of new section 49 CFR 573.15.

In addition to certain light vehicle manufacturers hosting a safety recalls search function on their Web sites (or through redirects from those Web sites to a third party's Web site), the agency will offer a similar function to the public through its Web site, www.safercar.gov. In order for NHTSA to offer the public a safety recalls search function specific to VINs, manufacturers must allow secure electronic transfer of manufacturer recall data, for one VIN at a time, to NHTSA's public web server(s). As part of the final rule, NHTSA required the secure electronic transfer of the recall information and data required to be made publicly available by this section through a specific Application Programming Interface (API). See 78 FR 51382, 51422.

The final rule requires manufacturers to submit, through a secure, agency-owned and managed web-based interface or portal, www.safercar.gov, required Part 573 Information Reports and other recall-related reports, information, and associated documents. 78 FR 51382, 51421. In addition, manufacturers must supply new or missing Part 573.6 (b) Report Information within five working days of when the accuracy of the information has been confirmed. Id.

The final rule also amended certain provisions related to the notification letter manufacturers must send to owners and purchasers, under 49 CFR part 577, following the determination of the existence of a safety-related defect or noncompliance with a FMVSS. Pursuant to these amendments, the owner notification letters: (1) Must be sent within 60 days of the manufacturer's safety defect or noncompliance notification to the agency; (2) must include the phrase “IMPORTANT SAFETY RECALL” in all capital letters and in an enlarged font at the top of those letters; and (3) include the statements “This notice applies to your vehicle (including the specific VIN)” and then followed by an opening statement: “This notice is sent to you in accordance with the National Traffic and Motor Vehicle Safety Act.”

The final rule also required a specific label on the outside of the envelope forwarded to the owner or purchaser. See 78 FR 51422. The agency identified the label and provided a link to where the label was available for manufacturer use only.

Lastly, the final rule required that manufacturers notify the agency in the event they file for bankruptcy. Id. We required this so we can better preserve our ability to consider and take those measures necessary to protect options for ensuring recalling manufacturers continue to honor obligations to provide free remedies to owners of unsafe vehicle and equipment products.

For further information and a thorough discussion of these amendments, the reader is referred to the final rule, 78 FR 51382, and the prior notice of proposed rulemaking 77 FR 55606, September 10, 2012.

We received petitions for reconsideration from the Alliance of Automobile Manufacturers (the Alliance)  1 , the Association of Global Automakers (Global)  2 , and the Center for Auto Safety (CAS). We address the requests for reconsideration pertaining to the EWR rule first. Thereafter, we address the reconsideration requests related to amendments to the safety recall provisions.

The Alliance and Global filed petitions for reconsideration of two amendments made to the EWR.

Both petitioners seek clarification for the effective date of the new EWR requirements. The EWR rule requires manufacturers to submit EWR reports for each calendar quarter of the year and requires, in general, that manufacturers submit their reports within 60 days of the end of the quarter. 49 CFR 579.28(b). The final rule provided for an effective date of August 20, 2014, which is within the middle of the third calendar quarter. The Alliance and Global commented that having an effective date in the middle of the third quarter creates confusion for manufacturers regarding the appropriate report to submit at the end of the third quarter, i.e., to use the pre-final rule templates and component codes or the amended templates and component codes. In subsequent conversations with the Alliance, it pointed out that its members would need several months of lead time to implement and test the new EWR templates to ensure that their reporting systems would capture the new component categories.

The agency agrees that an effective date of August 20, 2014, creates confusion and does not provide clear instruction as to which template or component codes apply for third quarter reporting. We also agree that manufacturers need sufficient time to ensure that their amended EWR systems are capturing and reporting the information properly. The agency did not intend to begin using the new templates and component codes to report EWR data in the middle of the third quarter. Moreover, we do not want to create a situation where manufacturers have not completed their testing and implementation of their updated EWR reporting systems. Accordingly, we will amend the effective date to January 1, 2015, to clarify that manufacturers should use the new templates and component codes and minimize any undue burden to implement the amendments in a timely manner. Accordingly, these reports will be due no later than 60 days after the last day of the first quarter of 2015.

The Alliance also petitioned the agency to amend the regulatory text in 579.21(b)(2) and (c) to permit manufacturers to specify that the vehicle type or specific fuel or propulsion system associated with a specific claim or consumer complaint is unknown. The Alliance notes that while the preamble discussed the use of “UN” for unknown vehicle type the final rule did not add regulatory language addressing the use of the `UN' (sic) code in § 579.21. The Alliance requests NHTSA amend the text of § 579.21(b)(2) and (c) to specify the use of `UN' when the vehicle type and/or fuel/propulsion type is unknown.

As noted in the preambles to the final rule and the NPRM, the agency contemplated using the designation “UN” for vehicle type when the VIN of the vehicle is unavailable to determine the vehicle's type. See 78 FR 51388 and 77 FR 55606, 55612, respectively. We recognize that there may be instances where a manufacturer receives a notice or claim of a death or injury, or receives a consumer complaint that meets minimum specificity  3 to trigger reporting under EWR, but the VIN is not made available to the manufacturer. The make, model and model year are, therefore, available, but the manufacturer may not know whether the vehicle is two wheel drive or four wheel drive model to determine the appropriate type code. No commenter objected to the use of “UN” by manufacturers when the VIN is unavailable. In addition, in the preamble to the final rule, the agency responded to comments about how to report fuel and propulsion systems that are unknown by reporting “unknown.” See 78 FR 51389. Although in both these instances the agency discussed in the preamble how to report incidents when vehicle type and fuel/propulsion systems are unknown, we omitted to make the necessary amendments to the regulatory text. Accordingly, we will amend the regulatory text to be consistent with our previously stated intent. For consistency with the attributes permitted under the rule for reporting vehicle type, we will use the two-letter attribute “UN” for unknown vehicle type. For consistency with the attributes allowed for fuel and/or propulsion type in the August 20, 2013 final rule, we will use the three-letter attribute “UNK” when the fuel and/or propulsion type is not known.

The Alliance, Global and CAS submitted petitions for reconsideration related to 49 CFR 573.15, Public Availability of Motor Vehicles Recall Information.

The Alliance commented that the newly added recall information look-up requirements contained in § 573.15(b)(3) require manufacturers to offer recall search functionality by vehicle “make and model,” in addition to requiring the VIN. The Alliance noted that recall results applicable to a particular vehicle cannot be obtained by using only the vehicle's make and model information. Further, the Alliance stated that “there is no way for a manufacturer to know whether a recall has been completed on a particular vehicle in the absence of the VIN.” The Alliance requested that NHTSA verify that manufacturers must only offer recall results based on a specific VIN.

We confirm that the manufacturers subject to the requirements of § 573.15 need only to provide search utility based on a VIN. We concur that a search function based on only vehicle make and model is not typically sufficient to identify whether a recall applies to a particular vehicle within a make and model, since most recalls only address a portion of any particular make, model, and model year vehicle. In other words, it is rarely the case that a safety recall covers each and every vehicle manufactured within a particular make, model, and model year, and so any search function based on these minimal criteria is not capable of identifying whether a specific vehicle has an incomplete safety recall. The inability to identify a safety recall on a specific vehicle would not meet the intent behind MAP-21's requirement to provide recall information that has not been completed for each vehicle. 4

A VIN sequence, however, identifies not only the make, model, and model year of the vehicle, but a host of additional information specific to a vehicle that manufacturers use to keep a record of what technology, among other things, that the vehicle contains. In the event of a safety recall, manufacturers use this information to pinpoint the specific vehicles affected and to then notify the affected owners based on vehicle registration data. The make, model, and model year elements are incorporated within the VIN sequence, such that a search using those elements is redundant to the VIN level search required by the statute. MAP-21's requirement that uncompleted safety recall information be made publicly available online and searchable by vehicle make and model and VIN is met through the submission of a VIN. Accordingly, in the agency's view, incomplete recall information that is made publicly available and searchable by means of a VIN meets the statutory intent of MAP-21 and the regulatory requirements of § 573.15.

The Alliance petitioned NHTSA to remove the requirement for manufacturers to provide the Part 573 report date with recall results in their VIN look-up tools. See 49 CFR 573.15(b)(8). The Alliance contends this requirement was never proposed in the Notice of Proposed Rulemaking (NPRM) and the date is of minimal value to consumers. Also, the Alliance claims these dates are not typically found within a manufacturer's recall database. The Alliance requests that this requirement be deleted from Subsection (b)(8) of § 573.15.

We disagree that the Part 573 date is of minimal value to consumers. We believe the Part 573 date provides an important contextual reference to vehicle owners and prospective purchasers. This particular date is important as it marks the beginning of the safety recall process. NHTSA chose this particular date as it would inform an owner as to how long their vehicle has been subject to an important safety recall. We think it is reasonable that when advising consumers of an uncompleted safety recall that they also be made aware of how long the recall campaign has been open. It may provide consumers with added incentive to take the appropriate steps to have the vehicle remedied. While this data may or may not be located in a manufacturer's recall database, we understand it will require minimal effort to add these dates to a database, where needed.

Also, NHTSA is willing to assist any manufacturer with a list of Part 573 report dates applicable to their past safety recalls, should a manufacturer not already have these dates recorded electronically. Part 573 report dates, as well as other pertinent recall information, are located in an electronic database file found on NHTSA's safercar.gov Web site. This information is, therefore, accessible and a manufacturer may use it to supplement its own data files if incomplete.

The agency's original proposal contemplated providing recall information to a consumer to determine if his or her vehicle is subject to a recall and whether a recall has been launched. A subset of this information is the date the manufacturer submitted its notice to NHTSA. 77 FR 55619. We also stated in the preamble that any alternative manufacturer hosted Web site (as an alternative to NHTSA hosting a recall look-up tool) would need to post the same information as on NHTSA's Web site. 77 FR 55622. The preamble also noted that after reviewing comments the agency reserved the flexibility to develop and adopt the alternative approach to a NHTSA hosted recall look-up tool based upon logical outgrowths of the proposal and comments received. In our view, for the reasons stated above, this requirement is a logical outgrowth of our alternative proposal to require manufacturers to host VIN look-up tools on their own Web sites, subject to certain performance based criteria. Accordingly, we decline to accept the request to remove this requirement.

The Alliance petitioned NHTSA to change the regulatory text of 49 CFR 573.15(b)(8) regarding a description of the safety defect or noncompliance, and the safety risk, in a manufacturer's VIN look-up tool. Specifically, the Alliance requested that the phrase “manufacturer's information report” be modified to read “manufacturer's information report or owner notification letter.” The group explained that the language used in a manufacturer's Part 573 report is often technical in nature, as opposed to the more concise and plain language used in owner notification letters.

The Alliance also petitioned that the same modification be made to the description of the safety risk that is also required by 49 CFR 573.15(b)(8). Currently, paragraph (b)(8) requires manufacturers to provide a description of the risk to safety “in the terms required by parts 573 and 577.” A suggested change from the Alliance would have paragraph (b)(8) read, “manufacturer's information report or owner notification letter.”

Section 573.15(b)(8) requires manufacturers to provide “a brief description of the safety defect or noncompliance identified in the manufacturer's information report filed pursuant to this Part,” and to “describe the risk to safety consistent with the manufacturer's description given in the terms required by parts 573 and 577.” 49 CFR 573.15(b)(8). By using the language “brief description,” the agency intended to ensure that safety defect and noncompliance descriptions incorporated into each manufacturer's online search tool would be succinct and clear to the public. We agree, however, that it is common for Part 573 reports to contain more technical detail and use engineering and industry or trade terminology that may not be used or understood outside of the automotive industry.

Accordingly, we will grant the Alliance's petition and amend the relevant text of Part 573.15(b)(8) to read, “provide a brief description of the safety defect or noncompliance, including the risk to safety, identified in the manufacturer's information report or owner notification letter filed pursuant to this part.”

The Alliance requested clarification regarding the information required by 49 CFR 573.15(b)(10). Currently, § 573.15(b)(10) requires a manufacturer's recall look-up tool to “[s]tate the earliest date for which recall completion information is available, either on the search page or on the results page, and provide information for all owner notification campaigns after that date.” By way of context and background, the preceding paragraph, (b)(9), requires each manufacturer to provide online search capability of at least 15 years' worth of recall completion data. See 49 CFR 573.15(b)(9). The purpose of paragraph (b)(10) is to inform online users of how far back the manufacturer's recall look-up tool reaches. For example, a manufacturer may choose to comply with the minimum time period specified in paragraph (b)(9) that provides for an online search capability for recalls dating back fifteen (15) years. In that case, under paragraph (b)(10), the manufacturer would inform the customer that the recall search tool provides recall data for the last 15 years and provide all incomplete safety recalls from that point forward for the specific vehicle. On the other hand, if a manufacturer's recall look-up tool reaches back 50 years, it would specify as much.

Regardless of whether a particular manufacturer chooses to offer 15 years or 50 years' worth of search capability, or somewhere in between, paragraph (b)(10) requires the manufacturer to inform users either on the search page where the VIN is entered or on the results page (or on both) of how far back its search engine will search. This is so a user can quickly and easily understand any time limitations with respect to the results they receive. For example, by informing a user of how far back the manufacturer's search engine will go, users of that manufacturer's VIN search tool will be informed that safety recalls of an older vintage (15 years or more, manufacturer-dependent) will not be detected by the search engine. They will have the information that will tell them not to rely on the search to produce a trustworthy response as to their vehicle, particularly if the vehicle is older or a vintage product. And, of course, a manufacturer could also advise to contact it or a local dealer for more complete information.

Pursuant to the final rule, certain large volume light vehicle and motorcycle manufacturers have until August 20, 2014, to provide publicly accessible vehicle safety recall completion information on their Web sites (or through redirects from those Web sites to a third party's Web site). They also have until August 20, 2014, to ensure, through adherence with technical specifications NHTSA sets, the secure electronic transfer of that recall completion information to NHTSA for its use in upgrading its current safety recalls search function housed on www.safercar.gov to allow for VIN-based searching. The Alliance and Global Automakers petitioned NHTSA to change the effective date of these requirements from August 20, 2014, to one year from the date the NHTSA establishes and shares with covered manufacturers the technical specification for the NHTSA-manufacturer safety recall completion information interface.

In support of the petition for extension, the Alliance said that “some/many” manufacturers do not have a web-based API that provides all the information that NHTSA would require. It said the interface will need to be designed and built, but cannot be designed and built until the requirements are available to the manufacturers. According to the Alliance, these interfaces could take up to nine (9) months to build and then three (3) months of testing might be required, and said this is a comparable period of time for testing that was performed for NHTSA's Artemis system.

Global echoed a similar sentiment in their petition. That group said that some manufacturers, particularly the smaller ones, are likely to rely on third-party vendors to provide the VIN look-up tool required, and that they would need to develop the tool from the “ground up,” rather than making minor modifications to a current system. Ground up development will require significant time and money and, according to Global' s understanding, the third-party vendors that may be retained are not able to provide estimates of costs and time to those manufacturers without the technical specification from NHTSA.

We have considered the Alliance's and Global's arguments, but do not believe a change in the effective date is necessary. First, as to the manufacturers' safety recall completion look-up tools to be placed on their respective Web sites (or links to a tool on a third party site), and that do not concern an exchange of information between NHTSA and the manufacturer, all performance requirements were set forth in the final rule. Manufacturers have time to build out their systems to meet the recall look-up tool's requirements. Neither the Alliance nor Global argues that the requirements are so vague or unlimited that their member companies are unable to comply or start building or modifying the tools. Moreover, neither presents any details as to why it would take manufacturers with existing recall look-up tools longer than the year provided by the agency. Also, by August 20, 2014, every manufacturer will have had up to one year that the Alliance said its members would need to comply.

Turning to the requirements concerning the exchange of recall completion information with NHTSA, it is true that the agency did not publish the technical specification enumerating the specific, technical directions for a manufacturer to support and send completion information to our Web site at the time of the final rule. As we stated in the final rule, the agency would publish technical specifications after we published the final rule. Those specifications were published in December 2013. As noted above, however, we did enumerate each item of information a manufacturer would need to produce—whether on its Web site or to NHTSA. We also supplied more than sufficient technical detail as to how the transfer of information would need to occur so that a manufacturer (or its vendor) could reasonably initiate design and production of a system, even if from the ground up.

In our view, the enumerated information in the final rule about the exchange of information between NHTSA and manufacturers laid the foundation for which manufacturers could begin working towards meeting the August 20, 2014 deadline. While technical information was not provided in the final rule, certain information was not critical for a manufacturer to begin the process and work towards the deadline. Much of this information is information that we could not produce publicly. For example, we did not provide the location of the uniform resource identifier (URI) where an exchange of information with a manufacturer would occur. Nor did we define the identification and key combinations that NHTSA and a particular manufacturer would use to authenticate systems and ensure secure transfer of information. We do not believe manufacturers require these sorts of administrative details that relate strictly to the mechanics of transfer and not to the substance of the information itself—which was defined in the August 2013 Final Rule—an entire year in advance. Manufacturers were given and/or allowed access to the technical specification in December 2013, giving them almost nine months lead time. Also, a public workshop was held in January 2014 to discuss the technical requirements of the recalls information exchange. This workshop allowed manufacturers' staff to better understand the technical requirements, ask questions, and exchange ideas with NHTSA staff. In response to the workshop, NHTSA published updated technical specifications in March 2014. NHTSA continues to work closely with manufacturers to ensure systems are ready by the August 2014 deadline. Indeed, a number of the Alliance's members are actively engaged in testing exchanges with NHTSA at this time. Accordingly, we are denying the petitions to extend the effective date for the VIN look-up tool.

Global Automakers commented that a manufacturer's electronic reporting system or public Web site can experience temporary malfunctions, as with any electronic system. It noted that these disruptions could occur for any number of reasons, despite all reasonable efforts by a manufacturer to prevent a disruption. Accordingly, Global requested that we state affirmatively that such temporary system malfunctions that prevent compliance with our reporting or public information requirements will not be subject to civil penalties, provided that manufacturers take reasonable steps to minimize the occurrence of such events and respond expeditiously to any system malfunctions.

We understand the concern, but do not believe it is necessary to make an affirmative statement that temporary system malfunctions will not be subject civil penalties. As in the past, we intend to responsibly exercise our enforcement discretion concerning instances of manufacturer failures to comply and to conduct investigations, as necessary, to determine the facts of a particular situation. We plan to use the facts and circumstances of each matter to guide a decision whether to pursue an enforcement action, including one for penalties.

In the final rule, we committed to hosting workshops for both the recalls portal and the VIN-based safety recalls search tool to be housed on our Web site www.safercar.gov . For the latter, we indicated we anticipated hosting a workshop in early 2014. The Alliance requested we schedule the workshops as soon as possible and before the end of 2013.

We considered this request and scheduled the workshop to discuss the technical specification for the VIN-based safety recalls search tool for January 2014. Notice of this meeting was provided in a Federal Register Notice published December 26, 2013 (78 FR 248).

As to the recalls portal, we remain committed to hosting workshops and to providing advance notice of them. On May 27, 2014, we published a notice in the Federal Register announcing multiple training workshops to be held July 28, 2014, through August 8, 2014. Participants must register in advance and registration instructions are provided in the notice. 79 FR 30234. These workshops will offer robust, instructor-led remote training, as opposed to in-person training that may require considerable travel and expense for many. The recalls portal workshops will be more training-based, as opposed to design-based, and so there is not an immediate need for the industry workshops or their scheduling.

As part of the final rule, we amended the text of 49 CFR 577.5(a) to require that the envelope in which a manufacturer notifies owners and purchasers of a safety recall have imprinted on the front a label, one by three inches in size. 78 FR 51422. We specified in the regulatory text that the label would be available at a specific address and secure location on our Web site. NHTSA stated that in the event of a change or an update to the label, NHTSA would provide notice through the online Recall Portal. 78 FR 51409. The Alliance disagrees with this approach and contends that NHTSA must specify all the content and formatting for the label within the regulatory text of part 577 itself, or as an Appendix or Figure incorporated within part 577. In its view, changes or updates to the label would not be possible without providing notice and comment on the revisions, as well as modifying the regulatory text of part 577 accordingly.

After further consideration, we agree with the Alliance regarding an opportunity for notice and comment should we decide to amend the label. Accordingly, we are today incorporating an image of the required label, together with the specific color, text, and formatting requirements, into the regulatory text by adding new § 577.14. While the label will remain available to manufacturers for at least the near term online through the safercar.gov Web site, we are today removing the regulatory text specifying its online location. A specific online location is no longer necessary in view of the change to regulatory text and may become a housekeeping burden as online content changes and progresses over time.

In NHTSA's NPRM, we proposed the creation of a new, online recalls portal where a manufacturer would submit its information required under part 573. 77 FR 55638. Included with our proposal were examples of part 573 report form templates through which manufacturers would provide the required notification to NHTSA and supply information that is required pursuant to federal regulation, either in the first notification or in a subsequent report.

Our proposal was well received, with most commenters supporting the submission of part 573 information through an online portal. The Alliance agreed that electronic submission of part 573 information using standardized forms would better help NHTSA administer safety recalls. In addition, manufacturers submitted a number of constructive suggestions regarding the content and formatting of the form templates. We also received comments requesting that the agency make clear the difference between fields that were required to be completed, and those that were not required. In the final rule, we implemented a number of suggestions, including clearly indicating the required fields. We agreed that we would use an asterisk to denote mandatory information within a part 573 form, and attached an Appendix demonstrating this change. 78 FR 51404.

While not raised in its comments to the NPRM, the Alliance now petitions that NHTSA must include the templates themselves within the text of part 573 (or as an Appendix or Figure incorporated therein). It contends that the templates could be changed without opportunity for notice and comment. The Alliance argues that the agency is obligated to specify the mandatory elements of the template in the regulatory text (or as Appendix or Figure) and cannot change those mandatory elements without amending the regulatory text after notice and comment. It asserts this is a requirement of the Administrative Procedure Act (APA), as well as mandated by the Paperwork Reduction Act (PRA) that require OMB approval of any form, printed or online.

We note that this argument was not raised during the notice and comment period for this rulemaking. The idea of an online notification to NHTSA and reporting of information required pursuant to part 573 through the use of a template was detailed at length in the NPRM, together with proposed forms for several vehicle types and items of motor vehicle equipment. We received multiple industry comments supporting this approach and commenters provided constructive advice on how to improve the concept. As the Alliance acknowledges in its petition, it concurred with this approach.

In general, we agree that an agency must specify the mandatory elements of information to be provided to the agency (here, information required to be submitted in a Defect or Noncompliance Report pursuant to part 573), and must do so in regulatory text. We also agree that pursuant to the APA any changes to those mandatory elements must be made through notice and comment rulemaking. We also understand our PRA obligations require that we must submit for OMB's review and approval an analysis of the burdens associated with any new reporting requirements or changes to existing requirements.

We do not agree, however, that the agency is obligated to incorporate the templates into the regulatory text of part 573 when the information that is noted as “required” in the templates is merely reflective of information required to be submitted by the regulatory text of part 573. With respect to the templates, they are the mechanisms for a manufacturer to deliver the information required under part 573 to NHTSA, and nothing more. The delivery mechanism is no different than a letter or even an email from a manufacturer submitting a part 573 report. The information that is required to be reported does not change based on the vehicle for delivery. We note that we marked elements of the reporting templates as “required” in response to comments requesting that the agency differentiate between the elements that are required under Part 573 from those that are voluntary. We also note that some commenters requested that the agency provide greater flexibility with the templates to include voluntary information.

If we were to adopt the Alliance's view and make the template part of the regulatory text, we would arguably need to conduct a rulemaking and seek notice and comment on every adjustment to the form, no matter its relationship to content or format in order to bring to current the visual depiction. We do not agree that the APA is so restrictive.

With respect to OMB approval, the PRA is concerned about the burden placed upon the third party by collections of information. The definition of “collection of information” includes any form or format including electronic form. In the NPRM and final rule, NHTSA adequately addressed the information collection for the required templates. 77 FR 55635. OMB has issued a valid control number of 2127-0004.

Accordingly, we are denying the Alliance's petition. We understand, however, the Alliance's concern that dramatic changes to the templates may require manufacturers to change processes and incur costs. Outside of ministerial changes to the templates, NHTSA will not make wholesale changes to the templates without manufacturer input.

The Center for Auto Safety (CAS) petitioned the agency to modify the regulatory text concerning new changes to owner notifications. In the final rule, NHTSA amended 49 CFR 577.7 to require manufacturers to notify affected owners within sixty (60) days of notifying NHTSA of the defect or noncompliance. By amending this text, the phrase “within a reasonable time” was removed. The CAS notes that the omission of this phrase means that manufacturers might not be timely with their second owner notification in cases where only an interim notification was sent to owners within sixty (60) days. The Center believes this omission could “encourage foot dragging in the issuance of second 577 notices announcing availability of the remedy.”

We agree with the petitioner that the phrase “within a reasonable time” should be included in § 577.7, as it was included originally. We will amend § 577.7 to add this language so that notifications announcing the availability of the recall remedy are sent in a timely fashion.

Many aspects of the August 20, 2013 final rule amended the safety recall requirements found in parts 573 and 577. In making those amendments, we omitted amending related procedural provisions. The following two technical corrections will be made to ensure continuity between the existing regulation text and the newly introduced requirements.

As discussed above, the final rule requires that manufacturers submit all recall reports through a new, online Web site. See 49 CFR 573.9. However, we omitted to amend the language in § 573.6(c)(10) (submission of copies of notices bulletins and other communications related to the defect or noncompliance) to be consistent with the requirement to submit through the recall portal under § 573.9. In order to clarify that all documents required by § 573.6 must be submitted through the new recalls portal, we are amending § 573.6(c)(10) to ensure that all recall documentation be submitted through NHTSA's new recalls portal.

The August 2013 final rule established a 60-day timeframe, beginning from the date NHTSA is notified, for manufacturers to notify owners of a safety recall on their vehicle, even in cases where the remedy is not yet available. In finalizing this notification requirement, however, we overlooked an adjustment to the quarterly completion reporting requirement to make clear that recall completion reports were expected to start in the quarter that the manufacturer starts its remedy campaign, and not when it first notifies owners about the defect or noncompliance. As noted in the NPRM and our final rule, these two actions often do not occur simultaneously. In many cases, a manufacturer may experience parts delays or other circumstances which delay a prompt launch of its free remedy campaign.

Currently, § 573.7 requires manufacturers to start quarterly reporting on recalls “beginning with the quarter in which the campaign was initiated (i.e., the date of initial mailing of the defect or noncompliance notification to owners) or corrective action has been completed on all defective or noncomplying vehicles or items of replacement equipment involved in the campaign, whichever occurs first.” With the new requirement to notify consumers within 60 days of the filing of a part 573 report, even if a remedy is unavailable, the language in § 573.7 is inconsistent with the new notification requirement. Because the purpose of completion reporting is, of course, to monitor and assess the success of a manufacturer's recall campaign, it's logical to start that reporting and assessment only once the manufacturer has launched its remedy campaign.

Accordingly, we will correct § 573.7 to clarify that quarterly reporting begins with the quarter in which the remedy program is first made available to owners.

This rule responding to petitions for reconsideration makes several minor changes to the regulatory text of 49 CFR parts 573, 577 and 579, and does not increase the regulatory burden of manufacturers. The agency has discussed the relevant requirements of the Vehicle Safety Act, Executive Order 12866, Executive Order 13563, the Department of Transportation's regulatory policies and procedures, the Regulatory Flexibility Act, Executive Order 13132 (Federalism), Unfunded Mandates Reform Act, Executive Order 12988 (Civil Justice Reform), the Paperwork Reduction Act, Executive Order 13045, Executive Order 13609, and the National Environmental Policy Act in the August 2013 final rule cited above. Those discussions are not affected by these changes.

Please note that any one is able to search the electronic form of all documents received into any of our dockets by the name of the individual submitting the document (or signing the document, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the Federal Register published on April 11, 2000 (Volume 65, Number 70; Pages 19477-78), or you may visit http://www.dot.gov/privacy.html .

In consideration of the foregoing, NHTSA requests that 49 CFR parts 573, 577, and 579 be amended as set forth below:

This final rule amends the hired master regulations for management of the IFQ Program for the fixed-gear commercial fisheries for Pacific halibut and sablefish in waters off Alaska. NMFS published a proposed rule for this action in the Federal Register on April 26, 2013 (78 FR 24707). The 30-day comment period on the proposed rule ended May 28, 2013. NMFS received 15 comment letters on the proposed rule from 15 unique persons. A summary of these comments and NMFS' responses are provided in the “Comments and Responses” section of this preamble.

A detailed review of this action is provided in the proposed rule and a brief summary is provided here.

The IFQ Program is a limited access system for managing the fixed-gear halibut ( Hippoglossus stenolepis ) and sablefish ( Anoplopoma fimbria ) fisheries off Alaska. The IFQ Program was recommended by the North Pacific Fishery Management Council (Council) in 1992 and implementing rules were published by NMFS on November 9, 1993 (58 FR 59375). Fishing under the program began on March 15, 1995.

The IFQ Program for the halibut fishery is implemented by Federal regulations at 50 CFR part 300, subpart E, and 50 CFR part 679 under the authority of the Northern Pacific Halibut Act of 1982 (Halibut Act). Section 773(c) of the Halibut Act authorizes the Council to develop regulations that are in addition to, and not in conflict with, approved International Pacific Halibut Commission (IPHC) regulations. Such regulations may be implemented by NMFS only after approval by the Secretary of Commerce.

The IFQ Program for the sablefish fishery is implemented by the Fishery Management Plan for Groundfish of the Gulf of Alaska (GOA FMP), the Fishery Management Plan for Groundfish of the Bering Sea and Aleutian Islands Management Area (BSAI FMP), and Federal regulations at 50 CFR part 679 under the authority of the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act) (16 U.S.C. 1801 et seq. ). Regulations implementing the FMPs and general regulations governing the IFQ Program appear at 50 CFR part 679.

The IFQ Program was intended primarily to reduce excessive fishing capacity in the commercial halibut and sablefish fixed-gear fisheries. The Council and NMFS designed the IFQ Program to maintain the social and economic character of the fixed-gear fisheries and the coastal communities where many of these fisheries are based. Access to the halibut and sablefish fisheries is limited to those persons holding QS. The QS holder is the person authorized to exercise the harvesting privilege in specific regulatory areas. NMFS initially issued QS to qualified applicants (initial recipients) who owned or leased a vessel that made fixed-gear landings of halibut or sablefish during the qualifying period from 1984 to 1990 for halibut, and from 1985 to 1990 for sablefish. A person who received QS as an initial recipient was either (1) an individual or natural person, or (2) a non-individual entity or person, such as a corporation, partnership, or association. Initial recipients received QS allocations based on their harvest during the qualifying period, the area of the harvest, and the type of vessel used to land the harvest. Quota shares are individual harvesting privileges that are given effect on an annual basis through the issuance of IFQ permits. An annual IFQ permit authorizes the permit holder to harvest a specified amount of IFQ halibut or sablefish in a regulatory area.

All QS are categorized according to the size of the vessel (category B, C, or D, individually and collectively referred to as “catcher vessel QS”) from which IFQ halibut and sablefish may be fished and whether that IFQ halibut or sablefish may be processed on board the vessel (category A). The vessel categories were designed to ensure that the IFQ Program did not radically change the structure of the fleet in place at the time the IFQ Program was implemented. A description of the specific vessel size categories is provided in regulation at 50 CFR part 679 and is not repeated here.

Quota share is transferrable from one person to another. The Council recommended and NMFS implemented limits on the transfer (sale and purchase) and use of QS to limit consolidation and maintain diversity of the IFQ fleet. For example, the IFQ Program only allows persons who were originally issued catcher vessel QS (category B, C, and D halibut QS and category B and C sablefish QS), or persons who qualify as IFQ crew members, to hold and transfer catcher vessel QS.

As the IFQ Program developed, the Council recommended, and NMFS implemented, provisions such as QS use caps, vessel use caps, and blocks of QS to limit QS acquisitions. These provisions were intended to maintain a diverse owner-onboard fleet and to prevent excessive consolidation of QS. Further discussion of these program elements can be found in the proposed rule published on April 26, 2013 (78 FR 24707). The block provision has direct application in this final rule. All initially issued QS that yielded relatively small amounts of IFQ annually was “blocked” or issued as an inseparable unit. Quota share blocks preserve small amounts of QS in blocked units that are available at a relatively low cost to promote purchase of QS by crew members and new entrants to the IFQ fisheries. The block program also includes a “sweep-up” (consolidation) provision designed to minimize the number of very small blocks of QS that yield such small amounts of IFQ that they are economically disadvantageous to harvest. The consolidation provision allows small individual QS blocks to be permanently consolidated into larger QS blocks as long as the resulting QS block does not exceed consolidation limits specified in regulation.

The IFQ Program also requires IFQ holders to be on board the catcher vessel during harvest and offloading to promote a predominantly “owner-onboard” fishery with a narrow exemption for vessel category A QS holders and initial recipients of QS category B, C, and D QS. Vessel category A QS (catcher/processor QS) are not subject to the owner-onboard requirement. A primarily owner-onboard catcher vessel fleet was an initial fundamental objective of the IFQ Program.

The requirement that individual holders of catcher vessel QS (vessel categories B, C, or D) be on board the vessel during all IFQ fishing ensures that QS remain largely in the hands of active fishermen. However, the IFQ Program allows all initial recipients of QS, including individuals and non-individual entities, to hire masters to fish the IFQ derived from their QS. This exception was allowed because some individual fishermen had conducted their fishing businesses by hiring masters to skipper their fishing vessels prior to the implementation of the IFQ Program. The IFQ Program continues to allow initial recipients of catcher vessel QS to employ hired masters to fish their IFQ, but only if the initial recipient maintains a minimum 20% ownership interest in the vessel on which the IFQ halibut and sablefish are harvested. By limiting this exception to initial recipients, the Council anticipated that individual and non-individual initial recipients would eventually be replaced by new entrants. The Council anticipated that eventually catcher vessel QS would be transferred to new entrants required to be on board the vessel during IFQ fishing, resulting in an entirely owner-onboard fishery. An owner-onboard fishery is consistent with the Council's goal to promote stewardship by providing active fishermen with a vested interest in the long-term productivity of the halibut and sablefish resources. The owner-onboard requirement also supports the Council's goal to provide entry-level opportunities for new fishermen as initial recipients of catcher vessel QS leave the fishery.

In February 2010, the Council became aware that some QS initial recipients were increasingly using hired masters rather than continuing to be personally on board their vessels when fishing with QS. Increased use of hired masters was attributed to initial recipients purchasing increasing amounts of QS, and the IFQ derived from that QS was being fished by hired masters. The Council was concerned that initial recipients were consolidating QS to be fished by hired masters and were reducing opportunities for new entrants to the fishery. The Council determined that the transition to a predominately owner-onboard fishery has been unreasonably delayed because the ability to hire a master applies to the QS holder and not the QS itself. This allows initial recipients to hire masters to harvest IFQ derived not only from their initially issued QS, but also IFQ derived from any QS received by transfer after initial issuance. As a result, QS have become consolidated among fewer initial recipients of QS that use hired masters. Quota share are remaining in the hands of initial recipients who hire masters to fish the resulting IFQ instead of being transferred, which delays the progress toward the Program objective of an owner-onboard fishery and decreases opportunities for new entrants to the IFQ fishery.

At subsequent meetings, the Council examined IFQ Program data detailing the use of hired masters, changes in QS holdings of initial recipients, QS transfers, and the rate of new entry into the fishery. As discussed in detail in the proposed rule for this action, (78 FR 24707, April 26, 2013), the use of hired masters has increased significantly above levels that existed at the start of the IFQ Program. This is demonstrated by significant increases in the numbers of individual initial recipients who hire masters in the halibut and sablefish IFQ fisheries and the number of landings made in these fisheries by hired masters. Data analysis also shows that QS are being consolidated among fewer individual and non-individual initial recipients who hire masters to fish the resulting IFQ. In addition, some initial recipients that had not previously hired a master are now doing so, and some that had previously hired a master have increased the amount of QS they hold for use by a hired master or are using masters for a higher percentage of their landings. Finally, the rates at which initial recipients of halibut and sablefish QS are divesting themselves of QS and exiting the fishery have declined over the last 5 years.

After receiving public testimony and reviewing the analysis at its April 2011 meeting, the Council determined that it is likely that several factors are inhibiting new entrants from acquiring QS and slowing progress toward a predominantly owner-onboard fishery. These factors include the increased use of hired masters, increased holdings of QS by initial recipients who may use a hired master to harvest the resulting IFQ, and decreased numbers of initial QS recipients divesting their QS holdings. The Council determined that evolution to an owner-onboard program is occurring at a slower pace than was originally envisioned and is therefore inhibiting achievement of the Council's goals for the IFQ Program. The Council determined that the absence of a limitation on the use of hired masters could further delay this progress. To address this problem, the Council recommended, and this final rule implements, regulations that prohibit the use of a hired master to fish IFQ halibut or sablefish derived from catcher vessel category B, C, or D QS received by transfer after February 12, 2010, with some exceptions described later in this final rule.

The Council was concerned that QS purchases occurring before implementation of this final rule would hinder rather than support progress toward an owner-onboard catcher vessel fleet. Therefore, the Council chose February 12, 2010, as the date after which holders of QS received by transfer would not be able to hire a master to harvest the resulting IFQ because that is the date that the Council announced its interest in addressing this issue and adopted its problem statement for this action. The Council concluded that this date would reduce an initial recipient's incentive to purchase additional QS to be fished by hired masters prior to implementation of this final rule. The Council determined that the elapsed time between its recommendation and the implementation of this final rule would provide a sufficient grace period for initial QS recipients to make any necessary changes to their business plans.

The Council considered and rejected several alternative dates, such as the effective date of the final rule, because dates after February 12, 2010, could allow initial recipients to further consolidate their holdings of QS and exacerbate the problems the Council was addressing with this action. Additional acquisition of QS for harvest by hired masters obstructs the objective of the Council for a predominantly owner-onboard catcher vessel fleet. Instead, the Council wanted to prevent further increases in the amount of IFQ harvested by hired masters.

NMFS and the Council recognized that additional QS may be consolidated into blocks by both individual and non-individual initial recipients until this action takes effect. Tracking a new block of QS is administratively burdensome because NMFS cannot differentiate what portion of that QS block should be attributed to QS with the hired master privilege as opposed to that without the hired master privilege. To avoid the administrative burden of reversing these consolidations, this final rule affects catcher vessel QS transferred to an initial recipient and consolidated into a QS block after February 12, 2010, as follows:

• If catcher vessel QS are consolidated into a QS block between February 12, 2010, and the effective date of this final rule (see DATES ), the IFQ resulting from that consolidated QS block can be fished by a hired master, and

• If catcher vessel QS are consolidated into a QS block after the effective date of this final rule (see DATES ), the IFQ resulting from that consolidated QS block cannot be fished by a hired master, and the QS holder is required to be on board the vessel harvesting the IFQ derived from those QS.

Under this final rule, initial QS recipients have options for using QS received by transfer after February 12, 2010. As noted above, QS that is consolidated into blocks before the effective date of this rule may be fished by a hired master. Moreover, initial recipients who received catcher vessel QS after February 12, 2010, may sell those QS to other halibut and sablefish IFQ fishery participants, or to new entrants into the fishery. Other than selling the QS, the options and associated impacts differ between individual and non-individual initial recipients. An individual initial recipient who receives catcher vessel QS after February 12, 2010, may fish the IFQ derived from that QS as an owner-onboard. A non-individual initial recipient that received catcher vessel QS by transfer after February 12, 2010, may fish the resulting IFQ using a hired master, but only until the effective date of this final rule. After the effective date, a non-individual initial recipient will be prohibited from fishing QS received by transfer after February 12, 2010, using a hired master, but may, as noted above, sell those QS. Alternatively, a non-individual initial recipient may continue to hold that QS, but the resulting IFQ cannot be used because a non-individual entity must hire a master to harvest the IFQ.

The Council recognized that this rule may reduce the economic incentive for initial recipients to increase their QS holdings above the amount they held as of February 12, 2010. This supports the IFQ program objective of a predominantly owner-onboard catcher vessel fishery by (1) preventing further increase in the use of hired masters while minimizing disruption to operations of small businesses that have historically used hired masters, and (2) discouraging further consolidation of QS among initial recipients for harvest by hired masters. The Council did not expect this action to disrupt existing hired master arrangements because persons who currently qualify for the hired master exemption can continue to use a hired master for catcher vessel QS held on or before February 12, 2010.

This final rule will not apply under the following circumstances in the IFQ Program:

• Category A (catcher/processor) QS are excluded from this action because this vessel category of QS is not subject to owner-operator requirements.

• Individual (persons who, for example, are not corporations or partnerships) initial recipients in IPHC Area 2C (halibut) and the Southeast region (sablefish) are excluded from this action because existing regulations at § 679.42(i)(3) prohibit individuals who are initial recipients from using hired masters to harvest their IFQ halibut or sablefish in these areas.

• Allocations of halibut and sablefish issued to Community Development Quota (CDQ) groups are excluded from this action. CDQ groups are not subject to owner-operator requirements.

Three regulatory amendments are necessary to implement the Council's recommendation for final action. The first two amendments add regulations at § 679.42(i)(8) and (j)(10) to specify that a hired master cannot be used to fish IFQ halibut or sablefish derived from catcher vessel QS that was received by transfer after February 12, 2010, unless the QS was consolidated into a block prior to the effective date of this final rule. The third amendment adds regulations under § 679.41(c)(11) specifying that NMFS will not approve a transfer of catcher vessel QS to a corporation, partnership, association, or other non-individual entity at any time. These regulatory changes are consistent with the Council's intent to discourage further acquisition of catcher vessel QS by initial recipients for harvest by hired masters.

Under this final rule, IFQ derived from catcher vessel QS received by transfer after February 12, 2010, cannot be harvested by a hired master. Because a non-individual entity must hire a master to harvest its IFQ, the change to § 679.41(c)(11) prevents non-individual entities, such as corporations, from receiving additional catcher vessel QS by transfer after the effective date, with one exception. That exception, found at § 679.41(g)(3), provides that an individual initial catcher vessel QS recipient may transfer initially issued QS to a corporation that is solely owned by the same individual. Otherwise, individuals may not transfer QS received after initial issuance into a solely-owned corporation. NMFS makes no changes to this existing exception. This exception allows individuals to transfer initially received QS to a solely-owned corporation for tax purposes, limiting liability, or for other business purposes.

To implement this final rule, NMFS will redesignate catcher vessel QS as “eligible to be fished by a hired master” if the QS was (1) held by an initial recipient on or before February 12, 2010, or (2) received by transfer and consolidated into a QS block held by an initial recipient prior to the effective date of this final rule. All other catcher vessel QS that does not meet these requirements will be designated “not eligible to be fished by a hired master”, including (1) individual initial recipient QS designated for areas 2C (halibut) and Southeast (sablefish), (2) individual and non-individual QS not held by an initial recipient, (3) unblocked QS transferred to an initial recipient after February 12, 2010, and (4) blocked QS transferred to an initial recipient after the effective date of this final rule. Following the redesignation of QS, two types of annual IFQ permits will be issued by NMFS. Quota share designated as eligible to be fished by a hired master will yield IFQ that can be harvested by a hired master. Quota share designated as not eligible to be fished by a hired master will yield IFQ that cannot be harvested by a hired master. NMFS will redesignate QS and issue the new types of IFQ permits prior to the beginning of the IFQ fishing year following the date this final rule becomes effective and each year thereafter as transfers require.

NMFS received 15 comment letters during the public comment period for the proposed rule. Of the 15 comment letters received, one letter was from a representative of a fishing industry organization, one letter was from a non-profit organization, and the remaining letters were from individual IFQ fishery participants and members of the public. One letter recommended broad changes to fisheries management that are outside the scope of this action. The remaining 14 letters contained 24 unique comments. A summary of the comments and NMFS' responses follow.

Comment 1: Three commenters supported the proposed rule because the original intent of the IFQ Program was to maintain the owner-onboard character of the fixed-gear fleet and promote an equitable transition to an owner-onboard fishery through the use of vessel size categories, vessel IFQ use caps, and the hired master exemption only for initial recipients of QS.

Response: NMFS acknowledges the commenters' support of the proposed rule.

Comment 2: NMFS states that the proposed rule will further the owner-onboard IFQ fishery. However, the purpose of the original IFQ Program was to resolve problems that stemmed from the “open access” regulatory regime, not to promote an owner-onboard halibut and sablefish IFQ fishery.

Response. The Council and NMFS identified 10 objectives for the original IFQ Program. Section 2.3 of the IFQ Program FSEIS identifies and describes these objectives (see ADDRESSES ). NMFS agrees that one objective of the IFQ Program was to address the conservation and management problems associated with the “open access” management regime. The Council also identified an objective to maintain the existing business relationships among vessel owners, crews, and processors and ensure that those directly involved in the halibut and sablefish IFQ fishery benefit from the IFQ program by further ensuring that fishery is dominated by owner-onboard operations. However, the Council recognized the tension between many of its objectives, and therefore selected a set of program elements that provided a reasonable balance of competing objectives.

With respect to the objectives discussed above, the balance that the Council struck in the IFQ Program: (1) Established the owner-onboard requirement to further the objective of owner-onboard fisheries; and (2) exempted initial recipients of QS, many of whom actively participated in harvesting activities on board their vessels and some of whom employed hired masters, from the owner-onboard requirement. The purposes of the exemption were to further the objective of maintaining existing business relationships and to avoid sudden disruption of business operations to those fishermen who had hired masters to fish for them. Because initial recipients could not transfer their exemption from the owner-onboard requirement, the Council and NMFS expected that in the future all catcher vessel QS would be held by individuals that had to be on board their vessels for the harvest of their IFQ. NMFS stated in the final rule to implement the IFQ Program that eventually, as the individuals and firms that received initial allocations were replaced by new QS holders, all catcher vessel QS would be transferred to individuals in keeping with the Council's basic objective of requiring QS holders to be on board the vessels during fishing operations (58 FR 59375, November 9, 1993).

Contrary to the commenter's assertion, the record of the IFQ Program development confirms that an objective of the IFQ Program was for owners of catcher vessel QS to be on board in the IFQ fishery. For example, the Council noted in Section 2.3.6 of the IFQ Program FSEIS (see ADDRESSES ) that it desired that QS remain in the hands of active fishermen who would use them. That Analysis also explained that other restrictions on who may control or use catcher vessel QS and IFQ are intended to assure that those directly involved in the fishery benefit from the IFQ Program and that the fisheries continue to be dominated by owner-onboard operations. The Council intended that active harvesters, and not investment speculators, remain as the “stock holders” in the fishery under limited access IFQ management (57 FR 57130, December 3, 1992). In the final rule implementing the IFQ Program, NMFS noted in response to comment that the Council's basic policy is to require catcher vessel QS holders to be on board during fishing operations and sign required landing reports. The Council provided for an exception to this policy in its motion language and FMP amendment text for persons who receive initial catcher vessel QS except for holders of catcher vessel QS usable in Southeast Alaska and holders of catcher/processor QS. The Council noted that eventually, as the individuals and firms that received initial allocations are replaced by new ones, all catcher vessel QS would be transferred to individuals in keeping with the Council's basic objective of requiring QS holders to be on board the vessel during fishing operations (58 FR 59375, November 9, 1993).

Comment 3: NMFS states that a purpose of the proposed rule is to prevent consolidation of the ownership of QS by preventing initial recipients from acquiring additional QS that is not subject to the owner-onboard requirement. A fundamental purpose of the IFQ Program was to encourage consolidation because the fishery was overcapitalized. To say that a goal of the IFQ Program was to prevent consolidation is to ignore the history and intended purpose of the program.

Response: The commenter is correct that one problem the IFQ Program addressed was excess harvesting capacity in the IFQ fisheries (58 FR 59375, November 9, 1993). However, the Council and NMFS were concerned that the IFQ Program might result in too much consolidation in the ownership of QS. In addition to the objectives identified in response to Comment 2, the Council identified the objective in Section 2.3 of the IFQ Program FSEIS (see ADDRESSES ) to limit the concentration of QS ownership and IFQ usage that was expected to occur over time. Also, Section 2.3.3 of the IFQ Program FSEIS notes that the IFQ Program contained many features to prevent undue consolidation, including ownership caps on QS. The impetus for this final action to further restrict the owner-onboard exemption for initial QS recipients results from the Council's determination that allowing those initial recipients of QS who hire masters to acquire additional QS up to the ownership caps could impede the development of owner-onboard IFQ fisheries. Section 5.2 of the RIR/IRFA for this final action (see ADDRESSES ) recognizes that individual initial recipients may increase their QS holdings, for which they may hire masters, up to the use cap. It is this capacity to increase the use of hired masters, instead of a more timely transition to an owner-onboard fleet, which concerns the Council.

Comment 4: The proposed action violates the Administrative Procedure Act (APA) because NMFS did not publish a timely notice of proposed rulemaking in the Federal Register regarding the applicability of the February 12, 2010, date. Therefore, it would be unlawful to prohibit persons who purchased QS between February 12, 2010, and the date of publication of the proposed rule from hiring a master to fish that QS unless those persons had actual notice of the Council's action. Moreover, the rule has an effective date of February 12, 2010, which precedes publication of the final rule. Because the rule has an effective date preceding the final rule's publication, the rule violates the APA's requirement that rules take effect not less than 30 days after the final rule's publication.

Response: The APA does not require NMFS to have published a notice of the Council's action in the Federal Register prior to the notice of proposed rulemaking. NMFS published the notice of proposed rulemaking for this action on April 26, 2013 (78 FR 24707), with comments invited through May 28, 2013. This final rule will become effective 30 days following publication in the Federal Register (see DATES) consistent with the APA, and will apply to all persons participating in the sablefish and halibut IFQ fisheries.

The administrative record for this rule adequately describes the rationale for curtailing the hired master exemption for QS acquired after February 12, 2010:

• The supporting analysis notes that the Council acknowledged that a number of QS units were in the process of being transferred by NMFS, and more QS would continue to be transferred while the Council continued to work on the regulatory amendment;

• The supporting analysis states that the rule will only curtail further transfer of QS for use by hired masters, rather than eliminate the hired master provision altogether as had been suggested by stakeholders in previous program reviews;

• Under the Council's preferred alternative, QS transferred after February 12, 2010, would no longer be eligible to be used by hired masters in order to counter a trend of the increased use of hired masters;

• The objective of the Council's preferred alternative is to cap the potential use of hired masters by eligible initial QS recipients to levels in existence as of February 12, 2010, the date that the Council began developing this regulatory amendment to curtail the trend of increasing use of hired masters in the sablefish and halibut IFQ fisheries. The Council selected this date to discourage persons from rushing to acquire even more QS, thereby exacerbating the very problem the Council was trying to address with this action.

Comment 5: The proposed rule is arbitrary and capricious by taking away the privilege of initial recipients to hire masters to fish QS acquired after February 12, 2010. The commenter emphasizes that the original IFQ rule allowed initial recipients of QS to acquire additional QS by transfer and allowed initial recipients to be exempt from the owner-onboard requirement with respect to all QS that they acquired by transfer.

Response: The commenter is correct that the final rule to implement the IFQ Program included an exemption from the owner-onboard requirement for initial recipients of catcher vessel QS outside of Southeast Alaska. The commenter is also correct that the IFQ Program final rule expressly extended the exemption from the owner-onboard requirement to QS that initial recipients acquired by transfer after implementation of the IFQ Program. The commenter is also correct that this final rule amends the exemption such that QS acquired after February 12, 2010, are no longer exempt from the owner-onboard requirement. However, the regulatory amendment implemented in this final rule is not arbitrary and capricious. The purpose of this action is to promote the development of an owner-onboard IFQ fishery, which has been an objective of the IFQ Program since its inception. See NMFS's Response to Comment 2.

The RIR/IRFA for this final action demonstrates that the Council and NMFS evaluated a substantial amount of data on the IFQ Program (see ADDRESSES ). Tables 9-11 and 17-20 in the RIR/IRFA include the number of individual halibut and sablefish QS holders from 1995 to 2009, the number of non-individual QS holders over those years, and their use of hired masters to fish their IFQ. Tables 21-22 in the RIR/IRFA include the number of IFQ halibut and sablefish pounds held by persons who may hire masters. In addition, Tables 33-40 in the RIR/IRFA include information on annual prices for QS and transfer rates for QS.

Data from Tables 9 and 11 in the RIR/IRFA show that, although the number of initial recipients holding QS has decreased, the number of individual initial recipients who hire masters in the halibut fishery increased from 110 in 1998 to 210 in 2009 (a 91 percent increase), while in the sablefish fishery the number increased from 46 to 91 (a 98 percent increase). Table 16 in the RIR/IRFA shows the percentage of halibut IFQ landed by hired masters increased from 7.9 percent of the total IFQ landings in 1998 to 19.3 percent in 2009. Similarly, the percentage of sablefish IFQ landed by hired masters increased from 7.7 percent of the total IFQ landings in 1998 to 15.0 percent in 2009.

The Council and NMFS also recognized that without a change in regulations, initial recipients of QS could continue to increase their holdings of QS that are exempt from the owner-onboard requirement up to the QS ownership use caps in current regulation. This potential for increased consolidation of QS for harvest by hired masters was the crux of the problem the Council faced. The Council and NMFS have clearly explained their rationale for preventing initial recipients from acquiring more QS that would be exempt from the owner-onboard requirement. As noted in the responses to comments above, the Council has supported the objective of an owner-onboard fishery since the inception of the IFQ Program. This final rule furthers that objective by preventing initial recipients from acquiring more QS that can be fished without the QS holder being on board the vessel during the harvest of the IFQ. (see Response to Comment 2.)

The Council acknowledged that the use of hired masters is an existing practice in some halibut and sablefish business models and arrangements for both individual and non-individual initial recipients of QS. The Council considered and rejected an alternative to eliminate the hired master exemption from the IFQ Program. However, the Council determined, and NMFS agrees, that eliminating the hired master exemption would not sufficiently accommodate the existing business plans of hired masters or initial recipients that use a hired master to harvest IFQ (see Section 6 of the RIR/IRFA). Therefore, this action balances the interests of initial recipients of halibut and sablefish QS with the interests of new entrants to the fisheries, as well as furthering the Council's IFQ Program objective to move more expeditiously towards an owner-onboard catcher vessel IFQ fishery (see Section 5.2 of the RIR/IRFA).

Comment 6: It is arbitrary and capricious for NMFS to take action to increase the speed of transition to owner-onboard fisheries in the IFQ fisheries. First, the Council and NMFS did not establish a timetable for the transition when the original IFQ Program was established. Second, NMFS provides no evidence the proposed action will achieve the stated objectives to encourage new entrants to the fishery and hasten the transition to an owner-onboard fleet.

Response: Although the Council and NMFS did not originally establish a timetable for the complete transition to an owner-onboard IFQ fishery, the lack of a timetable does not prevent the Council and NMFS from taking action now to hasten progress toward the objective of an owner-onboard IFQ fishery. NMFS must examine the relevant data and articulate a satisfactory explanation for its action. As noted in response to Comment 5, the Council examined relevant data from the IFQ Program and concluded that, among the competing objectives of maintaining business relationships and promoting an owner-onboard fishery, it needed to modify the exemption of initial recipients from the owner-onboard requirement to improve progress toward the objective of a predominantly owner-onboard fishery and prevent further acquisition of QS by fishermen who would hire masters to fish the IFQ derived from that QS. Thus, the administrative record reflects a rational basis for increasing the pace of the transition to owner-onboard fishery. In short, the Council and NMFS have evaluated the IFQ Program as it has developed and have modified the program in light of experience with that program.

NMFS disagrees with the commenter's assertion that it has not provided evidence that this action will achieve the stated objectives to encourage new entrants to the fishery and hasten the transition to an owner-onboard fleet. The Council determined, and NMFS agrees, that QS consolidation among initial recipients and increased use of hired masters likely has reduced the opportunity for new entrants to purchase QS and enter the fishery. As discussed in Section 5.2 of the RIR/IRFA, this action is likely to encourage new entrants to the fishery in two ways. First, the action has the effect of placing an upper limit on the amount of IFQ that may be fished by a hired master. This likely will result in initial recipients transferring more QS than they would have if initial recipients were to retain the ability to hire a master for IFQ derived from QS received by transfer after February 12, 2010. It is difficult to predict with precision the impacts of this action on QS transfers or QS availability for new entrants because the response of each QS holder will be different. Some QS holders may be unable or choose not to purchase additional QS, some may choose to purchase more QS and be on board the vessel to harvest the IFQ, while others may finance QS purchases by crew or other eligible QS recipients who must be on board the vessel when the IFQ is harvested. However, it is likely that additional QS will be placed on the market and available for purchase by new entrants to the fishery and active fishermen who will be on board the vessel to harvest IFQ.

Second, this action reduces the incentive for initial QS recipients who use hired masters to purchase additional QS, which could alleviate some of this upward pressure on QS price and provide more opportunities for new entrants and active fishermen—including fishermen currently employed as hired masters—to purchase QS.

Comment 7: The proposed action violates section 504(a) the Rehabilitation Act of 1973, 29 U.S.C. 794(a), because it has a discriminatory impact on disabled persons. The comment is from a trade association that states that it has members who are initial recipients of QS that have acquired QS after February 12, 2010, or that wish to acquire additional QS, and who, because of a disability, cannot be on board a vessel during the harvest of this additional QS. The commenter claims that the rule has a discriminatory impact on disabled persons in violation of the Rehabilitation Act. The commenter observes that many individual initial recipients of QS can no longer serve on board a vessel due to disability, adding that the rule prevents these individuals from increasing their QS holdings and using a hired skipper. The commenter proposes that a reasonable accommodation for this rule would exempt initial individual QS holders who have disabilities, thus allowing these individuals to continue hiring masters to fish their QS indefinitely.

Response: The Rehabilitation Act provides that no disabled person, by reason of the disability, shall be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program conducted by any Executive agency. 29 U.S.C. 794(a). To prove a government violation of the Rehabilitation Act, an applicant to a government program must show that he or she is an individual with a disability as defined under the Act; that apart from the disability, the individual is otherwise qualified to receive the program benefit; that the individual is denied the benefit solely by reason of the disability; and that the program receives federal financial assistance. See Toney v. U.S. Healthcare, Inc., 840 F.Supp. 357 (E.D. Pa. 1993), aff'd. 37 F.3d 1489 (3d. Cir. 1994). If the above is shown, then the government must provide a reasonable accommodation to the disabled individual, thus allowing the individual to participate in the program. However, if providing the accommodation would undermine a fundamental purpose or goal of the program, there is no Rehabilitation Act violation and no accommodation need be provided. See Southwestern Community College v. Davis, 442 U.S. 397, 410, 413 (1979) (the Rehabilitation Act does not require fundamental, major or substantial program modifications).

The Department of Commerce (Department) published regulations implementing the Rehabilitation Act and prohibiting discrimination in its programs on the basis of handicap. 15 CFR part 8c. The regulations provide that handicapped individuals qualified for a Department program will not be excluded from the program on the basis of the handicap. 15 CFR 8c.30. The Rehabilitation Act and the Department regulations apply to the IFQ Program. 15 CFR 8c.2. The regulations protect an “individual with handicaps,” which is defined as a person who has a physical or mental impairment that substantially limits one or more major life activities, has a record of impairment, or is regarded as being impaired by the Department. 15 CFR 8c.3. Although the regulations protect an individual who is disabled and qualified for the program, such a person must demonstrate that he or she can achieve the purpose of the program “[w]ithout modifications in the program or activity that the agency can demonstrate would result in a fundamental alteration in its nature”. 15 CFR 8c.3.

NMFS has determined that the final rule is consistent with the Rehabilitation Act and Department regulations. Notwithstanding that some QS holders may be able to show they are qualified individuals with handicaps who, as a result of their disabilities, will be unable to be physically on board their vessels while fishing QS acquired after February 12, 2010, these persons would, under the regulations, have to show that they could meet or achieve the purposes of the IFQ Program without modifications in the program or activity that would result in a fundamental alteration in its nature. In this case, the record of the IFQ Program FEIS amply demonstrates that a fundamental objective of the IFQ Program was an owner-onboard IFQ fishery; that is, one of the program's fundamental purposes is that QS owners be on board vessels while fishing their QS. Further extending the exemption from the owner-onboard requirement would fundamentally alter that purpose. Therefore, neither the Rehabilitation Act nor Department regulations require that NMFS alter the owner-onboard provision to accommodate handicapped QS holders in this instance.

Comment 8: The proposed action is a prohibited retroactive application of law. Further, the Magnuson-Stevens Act does not expressly authorize the Council or NMFS to issue a retroactive rule; therefore, NMFS is prohibited from issuing this retroactive rule. Initial recipients of QS had entered into contracts for the transfer of QS that were binding before the Council adopted the retroactive date of February 12, 2010, in March of 2011. These legal contracts would be improperly changed by the proposed rule without NMFS having the express statutory authority to take such retroactive actions.

Response: A rule has impermissible retroactive effects when it changes the past legal consequences of past conduct without express statutory authority for such a rule. In contrast, a rule does not have impermissible retroactive effect merely because it applies to conduct preceding the rule's promulgation or upsets expectations based in prior law. NMFS has determined that this rule does not have an impermissible retroactive effect as that term has been defined in relevant jurisprudence. This rule does not change the past legal consequences of past conduct. The rule will not cancel or invalidate QS transfers occurring on or after February 12, 2010, or make those transfers illegal. While the rule may impact persons who contracted for QS on or after February 12, 2010, and upset investment expectations with respect to hiring masters to fish that QS, the rule does not invalidate those QS transfers.

Furthermore, this rule does not penalize the use of a hired master to harvest QS acquired on or after February 12, 2010, and before the effective date, nor does this rule invalidate, alter, or penalize the past use of QS and hired masters. The rule's effect is prospective; it affects and limits future hired master use, not past use. Moreover, even if the commenter were correct that the rule has retroactive effect, the Magnuson-Stevens Act expressly authorizes the Council and NMFS to revoke, limit, or modify QS at any time. 16 U.S.C. 1853a(b).

The Council evaluated alternative dates to February 12, 2010, in consideration of those initial QS recipients who may have been unaware of the Council's action in February 2010 and who acquired QS after that date for harvest by hired masters. However, the Council recognized that any date it selected would affect some persons who may have been unaware of the Council's action. The Council determined, and NMFS agrees, that it could not address every one of these circumstances by choosing a different date without compromising the intent of this action (see Section 5.2 of the RIR/IRFA).

Comment 9: The proposed regulatory amendments are arbitrary and capricious because they treat similarly situated persons differently. The proposed action would treat corporations holding catcher vessel QS differently than the corporations that participate in the halibut and sablefish fisheries through the Community Quota Entity (CQE) and Community Development Quota (CDQ) programs.

Response: As discussed in the final rule implementing the IFQ Program (58 FR 59375, November 9, 1993) and in the proposed rule for this action (78 FR 24707, April 26, 2013), the IFQ Program was developed to meet multiple objectives for different types of participants in the halibut and sablefish IFQ fisheries. As discussed in the response to Comment 6, the Council and NMFS have articulated a legitimate fishery objective for this action. Furthermore, as explained below, there are reasons supporting any differences in the way fishery participants, including corporations, may be treated.

The Council and NMFS have articulated legitimate objectives for the CDQ and CQE halibut and sablefish fisheries that are consistent with the overall goals of the IFQ Program. The CDQ Program was proposed and implemented in conjunction with the IFQ Program to help develop commercial fisheries in communities on the Bering Sea coast by allowing them exclusive access to specified amounts of halibut and sablefish in the Bering Sea and Aleutian Islands (57 FR 57141, December 3, 1992). The CDQ Program provides a long-term asset to use for the community's benefit. The CQE Program modified the IFQ Program to provide additional opportunities for residents of fishery dependent communities to participate in halibut and sablefish fisheries by allowing eligible Gulf of Alaska communities to establish non-profit entities to purchase and hold QS for use by community residents (69 FR 23681, April 30, 2004). CQE Program QS cannot be sold unless it improves the community's ability to enhance or expand its participation in the CQE Program. Thus, the CQE Program is for community benefit as well as individual benefit. The CDQ and CQE Programs are intended to insure that some level of QS access remains for community residents in the long term. In contrast, non-individual, for-profit, corporations could leave the community, sell their QS, or otherwise act in their own best interest, rather than in the best interest of the community.

Section 5.2 of the RIR/IRFA describes that the CDQ and CQE programs are premised on the concept of allowing harvest privileges to be held by a community entity and then leased to individual residents of the community. These programs do not include a vessel ownership requirement or owner-onboard provision because these are unnecessary for programs in which harvest privileges are non-transferable (CDQ program) or may be used only by the community fishery participants (CQE program) and are intended for long-term use by eligible communities. The concept of absentee ownership does not apply in the CDQ and CQE programs because QS are held by the community entity and tied to that community. These community-based programs are intended as stepping stones to individual ownership of QS, which, once acquired by individuals, will be subject to the owner-onboard requirement.

Comment 10: The proposed rule violates the fair and equitable test required by National Standard 4 of the Magnuson-Stevens Act and the Halibut Act. It is unfair to initial QS recipients who chose to purchase QS after February 12, 2010, and shows bias among the IFQ Program participants. Additionally, the proposed rule would impose significant disadvantages and hardships without offsetting the positive benefits of the existing IFQ Program.

Response: This action is consistent with National Standard 4 of the Magnuson-Stevens Act at 16 U.S.C. 1851(a)(4) and similar standards set forth in the Halibut Act at 16 U.S.C. 773c(c). National Standard 4 of the Magnuson-Stevens Act provides that conservation and management measures shall not discriminate between residents of different states. This action does not discriminate between residents of different states. Further, if it becomes necessary to allocate or assign fishing privileges among U.S. fishermen, such allocation shall be (1) fair and equitable to all such fishermen; (2) reasonably calculated to promote conservation; and (3) carried out in such a manner that no particular individual, corporation, or other entity acquires an excessive share of such privileges.

The Halibut Act at 16 U.S.C. 773c(c) states that if it becomes necessary to allocate or assign halibut fishing privileges among various U.S. fishermen, such allocation shall be fair and equitable to all such fishermen, based upon the rights and obligations in Federal law, reasonably calculated to promote conservation, and carried out in such a manner that no particular individual, corporation, or other entity acquires an excessive share of halibut fishing privileges. The “fair and equitable” requirement in the Halibut Act is substantially the same as the “fair and equitable” requirement found in National Standard 4 of the Magnuson-Stevens Act, the only difference being the addition of the word “halibut” before “fishing privileges.” Because of this similarity, the National Standard 4 guidelines promulgated by NMFS and found at 50 CFR 600.325 help to illustrate why this action meets the statutory requirement.

NMFS has determined that this action is not subject to the statutory provisions regarding the fair and equitable allocation of fishing privileges because it is not a direct and deliberate distribution of the opportunity to participate in the fishery among identifiable discrete user groups or individuals. Any management measure can have incidental allocative effects, but only those measures that result in direct distributions of fishing privileges will be judged against the allocation requirements of National Standard 4. (50 CFR 600.325(c)(1)). This action limits the use of hired masters to harvest a fishing privilege, which in this case is the QS that has been allocated or assigned to IFQ halibut and sablefish fishermen. Any distributional effect of this rule on IFQ fishermen and hired masters is an incidental allocative effect.

Even though this action does not result in the direct distribution of fishing privileges, this action is fair and equitable. As described in the response to Comment 6, the Council and NMFS have articulated a legitimate objective for this action—decreasing the use of hired masters by QS holders over time in order to hasten progress toward a predominantly owner-onboard catcher vessel halibut and sablefish IFQ fishery. Further, the guidelines to National Standard 4 (50 CFR 600.325(c)(3)(i)(A)) acknowledge that inherent in an allocation is the advantaging of one group to the detriment of another. The motive for any particular allocation should be justified in terms of fishery management objectives; otherwise, the disadvantaged user groups or individuals will suffer without cause. The fishery management objective of a predominantly owner-onboard catcher vessel fishery has been articulated by the Council and NMFS starting with the 1995 implementation of the IFQ Program and continuing through this final rule. As summarized in Section 1 of the RIR/IRFA and in Comment 2, the owner-onboard requirement is designed such that QS remains largely in the hands of active fishermen rather than absentee owners or investment speculators in order to maintain the social and economic character of the fixed-gear fisheries and the coastal communities where many of these fisheries are based. As previously noted, the Council and NMFS determined this action was necessary to prevent initial recipients of QS from continuing to acquire additional QS for harvest by hired masters, thereby prolonging the transition to an owner-onboard fishery.

The guidelines to National Standard 4 state that an allocation may impose a hardship on one group if it is outweighed by the total benefits received by another group or groups. “An allocation need not preserve the status quo in the fishery to qualify as `fair and equitable,' if a restructuring of fishing privileges would maximize overall benefits” (50 CFR 600.325(c)(3)(i)(B)). The Council and NMFS found that the total benefits to the IFQ halibut and sablefish fishery resulting from this action will be increased relative to the status quo as this action should result in additional QS placed on the market for purchase by new entrants (see Section 5.2 of the RIR/IRFA).

Comment 11: The proposed rule will likely prevent achievement of optimum yield and violate National Standard 1 of the Magnuson-Stevens Act because initial recipients of QS will be prevented from transferring QS to address IFQ Program harvest limitations resulting from vessel use caps and allocations by geographic area.

Response: National Standard 1 of the Magnuson-Stevens Act at 16 U.S.C. 1851(a)(1) states that conservation and management measures shall prevent overfishing while achieving, on a continuing basis, the optimum yield from each fishery for the United States fishing industry. The term “optimum”, with respect to the yield from a fishery, means in pertinent part the amount of fish which will provide the greatest overall benefit to the Nation, particularly with respect to food production and recreational opportunities, and taking into account the protection of marine ecosystems; is prescribed as such on the basis of the maximum sustainable yield from the fishery, as reduced by any relevant economic, social, or ecological factor; and in the case of an overfished fishery, provides for rebuilding to a level consistent with producing the maximum sustainable yield in such fishery. 16 U.S.C. 3(33). As described in the National Standard 1 guidelines promulgated by NMFS at 50 CFR 600.310(e)(3)(i)(B)(ii), optimum yield is the long-term average amount of desired yield from a stock, stock complex, or fishery. The determination of optimum yield should consider overall benefit to the nation, and any relevant economic, social, or ecological factors.

The Council considered the effects of this action on total harvest of halibut and sablefish IFQ and determined that it would not impede harvest of the total allowable catch. The Council determined, and NMFS agrees, that harvesting activities will not significantly change under this action. Section 5.2 of the RIR/IRFA notes that while it is unknown what portion of halibut and sablefish IFQ pounds would not be harvested by hired masters under this action, those IFQ pounds may be harvested and landed by (1) the current individual QS holder; (2) another individual initial recipient upon transfer of the QS; (3) a crew member upon transfer of the QS; or (4) a new entrant QS holder upon transfer of the QS. The Council recognized that this action will reduce the use of hired masters and prevent initial recipients of QS from acquiring additional QS for harvest by hired masters. As a result the action will have distributional effects on both QS holders who use hired masters and persons who work as hired masters. Given the number of options for initial QS recipients to maintain active and viable businesses in the halibut and sablefish fisheries, however, NMFS does not anticipate that this action will prevent participants from fully harvesting IFQ or the halibut and sablefish fisheries from achieving optimum yield.

Comment 12: The proposed rule is arbitrary and capricious because there is no analysis of the economic impact of the proposed rule on the initial recipients of QS that are directly affected by the proposal, as well as other fishery participants.

Response: Prior to recommending this action, the Council reviewed the RIR/IRFA, which used the best available information to analyze the impacts of the action on affected IFQ fishery participants. The RIR/IRFA included a significant amount of information to help the Council determine the likely economic impacts of the action, including discussions of (1) the kinds of business models and relationships that have developed around the use of the hired master provision; (2) changes in the way IFQ is harvested by all types of QS holders over time relative to the program goal of progress towards an owner-onboard fleet; (3) IFQ Program elements and factors outside the program that provide incentives or disincentives for QS holders to retire from the fishery; (4) changes in QS held over time by different types of QS holders; and (5) transfers of catcher vessel QS after February 12, 2010.

As noted in Section 5.2 of the RIR/IRFA, it is not possible to quantify the economic impacts or predict the outcomes of this action with certainty because the response of each QS holder to the action will be different. The Council acknowledged that this action could have negative economic impacts on some IFQ fishery participants, particularly for QS holders who use hired masters and persons who work as hired masters. The RIR/IRFA notes that while this action will require some businesses to change their business models, a number of options remain for initial recipients to maintain active and viable businesses in the halibut and sablefish fisheries without significant disruptions to existing business models. As described in the response to Comment 6, after reviewing the RIR/IRFA and receiving public testimony, the Council determined, and NMFS agrees, that this action is necessary to balance the interests of initial recipients of halibut and sablefish QS against the interests of new entrants to the fisheries and meet the original goals of the IFQ program to move towards an owner-onboard catcher vessel fishery.

Comment 13: Small businesses, corporations, partnerships, and limited liability companies should be exempt from the proposed rule because they are not individuals and cannot meet the owner-onboard requirement. It is unfair to treat non-individual QS holders differently than individual QS holders.

Response: As discussed in the response to Comment 6, the fishery management objective of a predominantly owner-onboard catcher vessel fishery has been articulated by the Council and NMFS since the inception of the IFQ Program in 1995. The Program requires catcher vessel QS holders to be on board the vessel when the resulting IFQ is harvested in order to promote an owner-onboard catcher vessel fishery, with a narrow exception for initial QS recipients. This requirement is intended to ensure that catcher vessel QS are held by professional, active fishermen, rather than absentee owners or investment speculators. The preamble to the proposed rule describes that by limiting this exception to initial recipients, the Council anticipated that individual initial recipients would eventually retire from fishing and that non-individual initial recipients would dissolve or change composition over time. Eventually, QS would be transferred to other qualified individuals and the IFQ fisheries would become almost entirely owner-operated.

As discussed in Section 5.2 of the RIR/IRFA, the Council considered the impacts of this action on affected participants, including small businesses, partnerships, corporations, and other non-individual QS holders. Based on the information in the RIR/IRFA and provided in public testimony, the Council and NMFS considered the effect of this action on non-individual initial recipients who must hire a master and individual initial recipients whose business model is to hire a master. As noted in Comment 10, NMFS has considered the distributional effect of this rule on IFQ fishermen and hired masters.

Comment 14: Several commenters opposed the owner-onboard objective for the IFQ Program. One commenter asserted that a person may be an active fisherman in the IFQ fishery without being on board the vessel. Instead, for example, persons can actively manage IFQ fishing operations from shore. Other commenters proposed that it would be more appropriate to rescind the hired master privilege for QS holders who have no ownership interest in a vessel.

Response: As described in the response to Comment 6, the fishery management objective of promoting a predominantly owner-onboard catcher vessel fishery has been articulated by the Council and NMFS since the inception of the IFQ Program in 1995. Revisions to the IFQ Program, such as those suggested in these comments, would substantially change policy adopted by the Council and approved by the Secretary of Commerce and outside the scope of this action.

Comment 15: The Council and NMFS fail to account for the fact that a significant number of QS units are held by corporations that must hire masters, many of whom hold and fish their own QS. Thus, when examining the total number of masters hired by corporations, the agency should remove from consideration those who independently hold their own QS.

Response: NMFS agrees that corporate or non-individual QS holders must hire masters to harvest their IFQ. The RIR/IRFA acknowledges that some of these hired masters hold QS/IFQ, some are part owners of the vessels on which they were hired to fish the non-individual's QS/IFQ, and some are shareholders or partners of shareholders of the owners of the non-individual QS holding entity that hires them. The RIR/IRFA considered whether to adjust the data on non-individual QS holders that hire masters that hold their own QS but, it wasn't feasible. Section 5.1 of the RIR/IRFA explains that ownership could only be examined to the “first level of affiliation” (i.e., principal corporate owners) because ownership relationships are often complex, spanning multiple levels of investment and ownership for any person and vessel NMFS does not collect the detailed data. As a result, vessel and entity ownership and hired master QS holdings are likely underestimated. The data underrepresent the number of hired masters that are second (shareholder), third (partner of shareholder), or lower level owners of the business that hired them, or of vessels on which they fished. Specifically, more hired skippers than can be documented are actually fishing their own IFQ because they are already part of the non-individual QS holders.

The Council and NMFS considered the information included in Section 5.1 of the RIR/IRFA. This information shows changes of QS holdings from 2000 through 2010, by type of QS holder, including individual initial recipients, hired masters who hold QS, and persons other than initial recipients who received their QS through purchase or other transfers. The Council and NMFS considered QS holdings by hired masters when determining that this action was needed to improve progress toward the objective of a predominantly owner-onboard catcher vessel halibut and sablefish IFQ fishery by preventing further increases in the amount of IFQ fished by hired masters.

Comment 16: The action would displace crew who want to become hired masters, hired masters who may have made investments in some amount of QS and vessel ownership, and hired masters who do not want to take on the financial responsibility and risk of owning QS and vessels. The action will result in more consolidation of QS, fewer vessels engaged in the fishery, loss of crew member and hired master jobs, and damage to the established fishery infrastructure. Contrary to the intent of the action, it would decrease involvement of second-generation participants in the IFQ fishery.

Response: After the effective date of this final rule (see DATES), initial recipients of QS may still hire masters to harvest IFQ derived from QS held on or before February 12, 2010. Thus, opportunities for crew members and new entrants to gain experience by being a hired master continue under this rule. Hired masters who currently participate in the IFQ fishery will not be removed from the IFQ fishery, but will be allowed to fish IFQ derived from QS that were (1) held by an initial recipient on or before February 12, 2010, or (2) transferred into a QS block between February 12, 2010, and the effective date of this rule. The Council and NMFS acknowledge that this action will require some QS holders and IFQ fishery participants to change their business models. NMFS anticipates that QS consolidation by initial recipients will decline and result in more opportunities for new entrants, hired masters, and crew members to purchase QS and participate in the IFQ Program. Data are not available to analyze the specific effects of this rule on these participants, but as discussed in the response to Comment 6, the Council and NMFS anticipate that this action will provide more opportunities for active fishermen and new entrants to purchase QS.

Comment 17: The proposed action is not needed because (1) the use of hired masters will eventually phase out as initial QS recipients leave the fishery, and (2) the IFQ Program already has a number of QS, IFQ, and vessel use caps that control consolidation.

Response: Section 5.1 of the RIR/IRFA notes that without this action, the use of hired masters to harvest catcher vessel IFQ will eventually be phased out as initial QS recipients retire from the fishery and are replaced by new entrants who are required by current regulations to be on board their vessels when the IFQ is harvested. Until that occurs, however, the Council was concerned that an increasing percentage of annual IFQ will be harvested by hired masters. Section 5.2 of the RIR/IRFA examined QS consolidation among individual and non-individual initial recipients and found that over the past 10 years the number of initial recipients has decreased while the average QS holding of those QS holders have increased. Thus, QS has consolidated among fewer QS holders who hire masters to fish their QS. As discussed in the response to Comments 5 and 6, this is contrary to the Council's objective for a predominantly owner-onboard catcher vessel IFQ fishery.

NMFS agrees that IFQ regulations at § 679.42(e), (f), and (g) include provisions for QS use caps, vessel use caps, and a block program to limit QS acquisitions and maintain a diverse owner-onboard fleet. However, as described in the response to Comments 5 and 6, the Council determined, and NMFS agrees, that the apparent QS consolidation among initial recipients and increased use of hired masters has delayed progress toward an owner-onboard fishery and likely has reduced the opportunity for new entrants to purchase QS and enter the fishery.

Comment 18: The proposed action adds another variable to the complicated IFQ Program by increasing the risks to lenders in the IFQ fishery and creating uncertainty about entry into the IFQ Program.

Response: NMFS does not anticipate this action will increase the risk to lenders for QS purchases. Currently, all persons who purchase catcher vessel QS and who are not initial recipients of QS may not hire masters and must be on board the vessels used to harvest the resulting IFQ. This action will prevent further increases in the portion of catcher vessel QS yielding IFQ that may be harvested by a hired master.

Section 5.1 of the RIR/IRFA discusses the bond, loan, and grant programs that may be used by new entrants in the IFQ fishery to purchase QS, equipment, and vessels, depending on their individual circumstances. The RIR/IRFA notes that due to the increased price of QS and other market realities, it has proven difficult for new entrants to obtain financing. However, as described above, NMFS does not anticipate that this action will increase the risk to lenders in the IFQ fishery or affect the ability of new entrants to use available financing programs.

Comment 19: The proposed restriction will have a number of negative economic impacts on QS holders. It would affect choices to buy and sell halibut and sablefish QS, reduce the value of QS, and impact investment choices and retirement and estate planning. The proposed action also would limit competition and result in financial impacts that could lead to a loss of investment in the IFQ fishing fleet.

Response: Section 5.2 of the RIR/IRFA indicated that this action is not likely to have a significant effect on QS supply or price. As discussed in the response to Comment 6, this action could alleviate some of the upward pressure on QS price by creating a more level playing field for QS purchases among initial recipients, active fishermen who hold QS but who were not initial recipients, crew members, and potential new entrants. Additionally, initial recipients of catcher vessel QS may continue to hire a master to harvest IFQ derived from QS held on or before February 12, 2010; therefore, NMFS does not anticipate the value of this QS is likely to decline and negatively impact investment choices and retirement and estate planning.

As noted in Section 5.2 of the RIR/IRFA and in the response to Comment 12, it is not possible to quantify the economic impacts or predict the outcomes of this action with certainty. The Council recommended this action based on the best available information in the RIR/IRFA on the use of hired masters, changes in QS holdings of initial recipients, QS transfers, and the rate of new entry into the fishery. Given the opportunities for initial recipients to continue to use hired masters for catcher vessel QS held before February 12, 2010, NMFS does not expect this action to significantly disrupt existing business operations. In addition, NMFS anticipates increased opportunities for new entrants to the catcher vessel fishery and, therefore, increased competition and potential for investment in the IFQ fishery.

Comment 20: Fishermen and investors should not be further restricted at this time when severe total allowable catch reductions are probable. The increase in costs of supplies such as bait, fuel, food, repairs, insurance, and the additional costs of vessel monitoring systems and human observers, combined with drops in fishery catch limits have created an even greater need for partnerships and expense sharing among fishermen than has transpired over time with the use of hired masters.

Response: NMFS acknowledges the cost and benefits of combining business plans to offset the expenses of supplies and monitoring. While this approach may be more desirable at lower IFQ fishery catch limits, the potential increase in the use of hired masters conflicts with the Council's objective for an owner-onboard catcher vessel fishery. As discussed in the response to Comments 5 and 6, the Council considered data from the RIR/IRFA evaluating impacts of this action on affected fishery participants. The Council determined, and NMFS agrees, that this action is necessary to meet the IFQ Program objective for a predominantly owner-onboard catcher vessel halibut and sablefish IFQ fishery.

Comment 21: The rule will be ineffective because an initial recipient of QS can place his or her QS in the name of another individual, place a lien on the QS, and then draw up an agreement to resolve the lien. In effect, the initial recipient would stay on shore while the IFQ is fished to satisfy the lien agreement.

Response: The transaction described in the comment would require the parties to apply to NMFS for a QS transfer. Under this final rule, catcher vessel QS that was transferred to another person after February 12, 2010, will require that the QS recipient be on board the vessel when the IFQ derived from the QS is fished, unless the QS are consolidated into a block before the effective date of this final rule (see DATES ).

Comment 22: The proposed rule indicates that category A QS and Community Development Quota (CDQ) allocations are not eligible to be fished by a hired master. This is incorrect; hired masters may be used to harvest category A IFQ and CDQ allocations under the IFQ Program. The proposed rule should have stated that category A QS and CDQ allocations are excluded from the proposed action.

Response: NMFS agrees. Page 24710 of the preamble to the proposed rule for this action correctly indicated that category A (catcher/processor) QS and CDQ allocations would be excluded from this action (78 FR 24707, April 26, 2013). However, a subsequent paragraph incorrectly stated that to implement the proposed action, NMFS would designate category A QS and CDQ allocations as not eligible to be fished by a hired master. NMFS has corrected this statement in the “Rationale for and Effects of This Final Rule” section in this final rule to clarify that this action does not affect category A QS and the halibut and sablefish allocation to CDQ groups.

Comment 23: The proposed action would create a new and separate category of QS in the IFQ Program with additional unknown administrative and enforcement burdens. NMFS must acknowledge the burden that will cause.

Response: The commenter is correct that NMFS will implement this action by redesignating catcher vessel QS as “eligible to be fished by a hired master” if the QS was (1) held by an initial recipient on or before February 12, 2010, or (2) received by transfer and consolidated into a QS block held by an initial recipient prior to the effective date of this final rule (see DATES ). All other catcher vessel QS that does not meet these requirements will be designated “not eligible to be fished by a hired master”.

Following the redesignation of catcher vessel QS, NMFS will issue two types of annual IFQ permits. Quota share designated as eligible to be fished by a hired master will yield IFQ that may be harvested by a hired master. Quota share designated as not eligible to be fished by a hired master will yield IFQ that may not be harvested by a hired master. NMFS will redesignate QS and issue the new types of IFQ permits prior to the beginning of the IFQ fishing year following the effective date of this final rule. If QS designated as eligible to be fished by a hired master is subsequently transferred, it will be redesignated as not eligible to be fished by a hired master. The designation task will not delay timely IFQ issuance by NMFS' Restricted Access Management Division. This change in QS and IFQ designation will not affect the recordkeeping and reporting burden for IFQ fishery participants. NMFS does not anticipate any appreciable additional burden on enforcement. As described in the proposed rule preamble and in section 5.2 of the RIR/IRFA, implementing the action at the beginning of the IFQ fishing season is necessary to avoid a large administrative and enforcement burden for NMFS and affected participants.

Comment 24: The proposed regulation revokes a non-individual QS holder's eligibility to receive catcher vessel QS by transfer. This transfer eligibility is as valuable as QS, and our business will cease to function without it.

Response: NMFS agrees that the regulation implemented by this rule at § 679.41(c)(11) will prohibit a non-individual QS holder from receiving catcher vessel QS by transfer after the effective date of this rule (see DATES ). As described in the response to Comment 13, the Council and NMFS considered the impacts of this action on affected participants, including small businesses, partnerships, corporations, and other non-individual QS holders. As discussed in the response to Comment 19, given the opportunities for initial recipients to continue to use hired masters for catcher vessel QS held before February 12, 2010, NMFS does not expect this action to significantly disrupt existing business operations.

NMFS made one minor change from the proposed rule to the final rule to accommodate revisions to § 679.42(i) that were approved under separate rulemaking prior to publication of this final rule. On February 20, 2014 (78 FR 9995), NMFS published a final rule adding § 679.42(i)(6) and (7) to the regulations. These regulatory additions revise vessel ownership requirements in the IFQ Program that apply to initial individual recipients of catcher vessel QS who want an exemption from the owner-onboard requirement. To accommodate the addition of § 679.42(i)(6) and (7) to the regulations under a separate rule, this final rule implements a regulation at § 679.42(i)(8) to prohibit an individual initial QS recipient from using a hired master to harvest IFQ derived from catcher vessel QS that they receive by transfer after February 12, 2010. NMFS did not change the text of the regulation implemented by this final rule at § 679.42(i)(8) from the text that was proposed at § 679.42(i)(6) on April 26, 2013 (78 FR 24707).

The Administrator, Alaska Region, NMFS, determined that this final rule is necessary for the conservation and management of the IFQ halibut and sablefish fisheries off Alaska and that it is consistent with the Magnuson-Stevens Act, Halibut Act, and other applicable laws.

Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996 states that, for each rule or group of related rules for which an agency is required to prepare a final regulatory flexibility analysis (FRFA), the agency shall publish one or more guides to assist small entities in complying with the rule, and shall designate such publications as “small entity compliance guides.” The agency shall also explain the actions a small entity is required to take to comply with a rule or group of rules. The preamble to the proposed rule and this final rule serve as the small entity compliance guide. This action does not require any additional compliance from small entities that is not described in the preamble. Copies of this final rule are available from the NMFS Alaska Region Web site at http://alaskafisheries.noaa.gov.

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

This FRFA incorporates the Initial Regulatory Flexibility Analysis (IRFA), a summary of the significant issues raised by the public comments in response to the IRFA, NMFS' responses to the comments, and a summary of the analyses completed to support the action. The IRFA was summarized in the “Classification” section of the preamble to the proposed rule. NMFS published the proposed rule on April 26, 2013 (78 FR 24707), with comments invited through May 28, 2013. NMFS received three comments on general economic impacts of the action on affected fishery participants (See Response to Comments 18-20). NMFS received two comments that addressed the impacts of this action on small entities. These comments and NMFS' responses are summarized in Comments 10 and 11 in the preamble to this final rule. The description of this action, its purpose, and its legal basis are described in the preamble to the proposed rule and are not repeated here.

The FRFA describes the impacts on small entities; these impacts are defined in the IRFA and proposed rule for this action and not repeated here. Analytical requirements for the FRFA are described in the Regulatory Flexibility Act, sections 604(a)(1) through (5), and summarized below.

The FRFA must contain:

1. A succinct statement of the need for, and objectives of, the rule;

2. A summary of the significant issues raised by the public comments in response to the initial regulatory flexibility analysis, a summary of the assessment of the agency of such issues, and a statement of any changes made in the proposed rule as a result of such comments;

3. A description and an estimate of the number of small entities to which the rule will apply, or an explanation of why no such estimate is available;

4. A description of the projected reporting, recordkeeping, and other compliance requirements of the rule, including an estimate of the classes of small entities which will be subject to the requirement and the type of professional skills necessary for preparation of the report or record; and

5. A description of the steps the agency has taken to minimize the significant economic impact on small entities consistent with the stated objectives of applicable statutes, including a statement of the factual, policy, and legal reasons for selecting the alternative adopted in the final rule and why each one of the other significant alternatives to the rule considered by the agency which affect the impact on small entities was rejected.

The “universe” of entities to be considered in a FRFA generally includes only those small entities that can reasonably be expected to be directly regulated by the final rule. If the effects of the rule fall primarily on a distinct segment of the industry, or portion thereof (e.g., user group, gear type, geographic area), that segment would be considered the universe for purposes of this analysis.

In preparing a FRFA, an agency may provide either a quantifiable or numerical description of the effects of a rule (and alternatives to the rule), or more general descriptive statements, if quantification is not practicable or reliable.

This final rule is necessary to amend regulations to prohibit the use of hired masters with initial recipient QS transferred after February 12, 2010. The objective of this action is to discourage any further consolidation of initial recipient QS for harvest by hired masters and meet the intent of the Council for an owner-onboard catcher vessel fishery.

The entities directly regulated by this action are individuals and non-individuals initially issued catcher vessel QS in the halibut and sablefish fisheries. There are a maximum of 1,447 entities holding halibut QS and sablefish QS that are eligible to hire masters. However, the actual number of such entities that may be directly regulated is expected to be much smaller because many of these participants fish their own IFQ without a hired master, and most have not and will not acquire additional QS.

The Small Business Administration has established size criteria for all major industry sectors in the United States, including fish harvesting and fish processing businesses. On June 20, 2013, the SBA issued a final rule revising the small business size standards for several industries effective July 22, 2013. (78 FR 37398, June 20, 2013). The rule increased the size standard for Finfish Fishing from $4.0 to 19.0 million, Shellfish Fishing from $4.0 to 5.0 million, and Other Marine Fishing from $4.0 to 7.0 million. Id. at 37400 (Table 1).

Pursuant to the Regulatory Flexibility Act, and prior to SBA's June 20 final rule, a final regulatory flexibility analysis was developed for this action using SBA's former size standards. NMFS has reviewed the analyses prepared for this action in light of the new size standards and determined that the new size standards do not affect the analyses prepared for this action. Under the former, lower, size standards, all entities subject to this action were considered small entities; thus they all would continue to be considered small under the new standards.

Small entities regulated by this action may be divided into two mutually exclusive groups to estimate their size relative to the $19 million threshold. There are operations that harvest both halibut and groundfish (sablefish is considered a groundfish species, while halibut is not) for which gross revenue data exist. There are also operations that harvest halibut, but not groundfish, for which gross receipts data exist. The analysis for this action estimates that in 2009 the total gross revenues for fixed-gear catcher vessels by entity, from all sources off Alaska, were not more than $4 million in gross revenues, which has been the case since 2003. The average gross revenue for the small fixed-gear catcher vessels has been about $500,000. Thus, all of the entities that harvest both halibut and groundfish are under the threshold. This includes all of the entities that harvest any sablefish. Since the IFQ Program limits the amount of annual IFQ that any single vessel may use to harvest halibut and sablefish and the maximum number of QS units an entity may use, NMFS believes that few vessels that harvest halibut, but not groundfish, would exceed the $19 million threshold, either. Based upon gross receipts data for the halibut fishery, and more general information concerning the probable economic activity of vessels in this IFQ fishery, no entity (or at most a de minimis number) directly regulated by these restrictions could have been used to land fish worth more than $19.0 million in combined gross receipts in 2010. Therefore, all halibut and sablefish vessels have been assumed to be “small entities” for purposes of this FRFA. This simplifying assumption may overestimate the number of small entities, since it does not take into account vessel affiliations, owing to an absence of reliable data on the existence and nature of these relationships in the halibut and sablefish IFQ fisheries.

No additional recordkeeping and reporting by directly regulated entities will be required by this action. NMFS will issue permit holders an annual permit that distinguishes their QS holding as eligible or not eligible to use a hired master.

A FRFA requires a description of any significant alternatives to the preferred alternative that accomplish the stated objectives, are consistent with applicable statutes and that would minimize any significant economic impact of the rule on small entities. The range of potential actions included Alternative 1, the status quo, and Alternative 2, the preferred alternative. A detailed description of these alternatives is provided in Section 4.0 of the analysis for this action (see ADDRESSES ).

The status quo alternative would have maintained the current regulations that allow all initial recipients of catcher vessel QS to hire masters to harvest their IFQ permits for any catcher vessel QS they hold. Current regulations enable initial QS recipients to continue to acquire QS up to IFQ Program use caps and harvest accumulated IFQ with a hired master. This has resulted in increased amounts of IFQ being consolidated by initial recipients and harvested by hired masters, which is contrary to the Council's goals and objectives for the IFQ Program.

Under the preferred alternative, initial QS recipients will not be allowed to use hired masters to harvest IFQ derived from catcher vessel QS that they received by transfer after February 12, 2010, with a limited exception for small amounts of QS. The Council considered alternative dates after which the use of hired masters would be prohibited. Although those alternative dates could have allowed more small entities to use hired masters, or to use hired masters for more of the QS they now hold or could acquire before another date, the use of hired masters is not necessary to harvest halibut and sablefish IFQ derived from QS held by individuals.

The preferred alternative may change fishing opportunities for hired masters in the IFQ fishery. There is potential that the demand for hired masters will decline once initial recipients are no longer allowed to use hired masters to harvest IFQ pounds. The alternative does not limit the ability of small entities to receive QS by transfer and fish the resulting IFQ as owner-onboard. Changes resulting from this alternative will have distributional effects on initial recipients and hired masters, but will not affect production from the fisheries. The preferred alternative may increase net benefits to the nation to the extent that the Council's objectives for an owner-onboard fishery are more fully realized through this action.

The Council also considered and rejected an alternative to eliminate the hired master exemption from the IFQ Program, but determined that it did not sufficiently accommodate the existing business plans of initial catcher vessel QS recipients that use hired masters to harvest IFQ or their hired masters. The Council did not identify any other significant alternatives that would have been substantially less burdensome and would have achieved the Council's objectives for the action. The Council chose to recommend, and this final rule implements, the preferred alternative because it best meets the goals and objectives of the IFQ Program and minimizes the potential negative impacts to directly regulated small entities. Based on the best scientific information, none of the alternatives to the preferred alternative appear to have the potential to accomplish the stated objectives of the Magnuson-Stevens Act and other applicable statutes (as reflected in this action), while minimizing any significant adverse economic impact on small entities beyond those achieved under this action.

This rule contains a collection-of-information requirement subject to the Paperwork Reduction Act (PRA) and which has been approved by the Office of Management and Budget (OMB) under control number 0648-0272. The IFQ Program requirements are mentioned in this final rule; however, the public reporting burden for this collection-of-information is not directly affected by this final rule. The public reporting burden includes the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate, or any other aspect of this data collection, including suggestions for reducing the burden, to NMFS (see ADDRESSES ) and by email to OIRA_Submission@omb.eop.gov, or fax to (202) 395-7285.

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

For the reasons set out in the preamble, 50 CFR part 679 is amended as follows: