[Federal Register Volume 71, Number 51 (Thursday, March 16, 2006)]
[Rules and Regulations]
[Pages 13686-13706]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-2323]



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Part II





Department of Agriculture





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Office of Energy Policy and New Uses



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7 CFR Part 2902



Designation of Biobased Items for Federal Procurement; Final Rule

Federal Register / Vol. 71, No. 51 / Thursday, March 16, 2006 / Rules 
and Regulations

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DEPARTMENT OF AGRICULTURE

Office of Energy Policy and New Uses

7 CFR Part 2902

RIN 0503-AA26


Designation of Biobased Items for Federal Procurement

AGENCY: Office of Energy Policy and New Uses, USDA.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Agriculture (USDA) is amending 7 CFR 
part 2902, Guidelines for Designating Biobased Products for Federal 
Procurement, to add six sections to designate the following six items 
within which biobased products will be afforded Federal procurement 
preference, as provided for under section 9002 of the Farm Security and 
Rural Investment Act of 2002: Mobile equipment hydraulic fluids; roof 
coatings; water tank coatings; diesel fuel additives; penetrating 
lubricants; and bedding, bed linens, and towels. USDA also is 
establishing minimum biobased content for each of these items. Once 
USDA designates an item, procuring agencies are required generally to 
purchase biobased products within these designated items where the 
purchase price of the procurement item exceeds $10,000 or where the 
quantity of such items or of functionally equivalent items purchased 
over the preceding fiscal year equaled $10,000 or more. However, USDA 
is deferring the effective date for two items (water tank coatings and 
bedding, bed linens, and towels) until such time that more than one 
manufacturer of products in these two items is identified. USDA 
additionally is revising section 2902.2 to add definitions for 
``biodegradability,'' ``EPA-designated recovered content product,'' and 
``functional unit'' and section 2902.8 to adopt applicable ASTM 
International performance tests to verify biodegradability.

DATES: This rule is effective April 17, 2006. However, as to water tank 
coatings and bedding, bed linens, and towels, Federal agencies will not 
be required to grant those items a preference until USDA learns of the 
availability of two or more manufacturers of products within that item 
and announces that availability in a future Federal Register notice.

FOR FURTHER INFORMATION CONTACT: Marvin Duncan, USDA, Office of the 
Chief Economist, Office of Energy Policy and New Uses, Room 4059, South 
Building, 1400 Independence Avenue SW., MS-3815 Washington, DC 20250-
3815; e-mail: mduncan@oce.usda.gov; phone (202) 401-0461. Information 
regarding the Federal Biobased Products Preferred Procurement Program 
is available on the Internet at http://www.biobased.oce.usda.gov.

SUPPLEMENTARY INFORMATION: The information presented in this preamble 
is organized as follows:

I. Authority
II. Background
III. Discussion of Comments
IV. Regulatory Information
    A. Executive Order 12866: Regulatory Planning and Review
    B. Regulatory Flexibility Act (RFA)
    C. Executive Order 12630: Governmental Actions and Interference 
with Constitutionally Protected Property Rights
    D. Executive Order 12988: Civil Justice Reform
    E. Executive Order 13132: Federalism
    F. Unfunded Mandates Reform Act of 1995
    G. Executive Order 12372: Intergovernmental Review of Federal 
Programs
    H. Executive Order 13175: Consultation and Coordination with 
Indian Tribal Governments
    I. Paperwork Reduction Act
    J. Government Paperwork Elimination Act Compliance

I. Authority

    These items are designated under the authority of section 9002 of 
the Farm Security and Rural Investment Act of 2002 (FSRIA), 7 U.S.C. 
8102 (referred to in this document as ``section 9002'').

II. Background

    On July 5, 2005, USDA published in the Federal Register (70 FR 
38612) a proposed rule to designate the following six items for the 
biobased products preferred procurement program: Mobile equipment 
hydraulic fluids; roof coatings; \1\ water tank coatings; diesel fuel 
additives; penetrating lubricants; and bedding, bed linens, and towels. 
USDA has determined that each of these six items meets the necessary 
statutory requirements; that they are being produced with biobased 
products and that their procurement will carry out the following 
objectives of section 9002: To improve demand for biobased products; to 
spur development of the industrial base through value-added 
agricultural processing and manufacturing in rural communities; and to 
enhance the Nation's energy security by substituting biobased products 
for products derived from imported oil and natural gas.
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    \1\ At proposal, this item was identified as ``urethane roof 
coatings,'' based on the specific formulation of the biobased 
product available at that time. USDA believes limiting this item to 
urethane-based roof coating is unnecessarily restrictive, especially 
in the light of another biobased product that has become available 
that is not urethane-based. Therefore, USDA is designating the more 
generic ``roof coatings'' as the item for preferred procurement 
under this program.
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    When USDA designates by rulemaking an item (a generic grouping of 
products) for preferred procurement under the Federal Biobased Products 
Preferred Procurement Program (FB4P), manufacturers of all products 
under the umbrella of that item that meet the requirements to qualify 
for preferred procurement can claim that status for their products. To 
qualify for preferred procurement, a product must be within a 
designated item and must contain at least the minimum biobased content 
if one has been established for the designated item. When the 
designation of specific items is finalized, USDA will invite the 
manufacturers of these qualifying products to post information on the 
product, contacts, and performance testing on its FB4P Web site, http:/
/www.biobased.oce.usda.gov. Procuring agencies will be able to utilize 
this Web site as one tool to determine the availability of qualifying 
biobased products under a designated item.
    Some of the biobased items designated for preferred procurement may 
overlap with products designated under the Environmental Protection 
Agency's (EPA) Comprehensive Procurement Guidelines program for 
recovered content products. Where that occurs, an EPA-designated 
recovered content product (also known as ``recycled content products'' 
or ``EPA-designated products'') has priority in Federal procurement 
over the qualifying biobased product. In situations where USDA believes 
there may be an overlap, it plans to ask manufacturers of qualifying 
biobased products to provide additional product and performance 
information to Federal agencies to assist them in determining whether 
the biobased products in question are, or are not, the same products 
for the same uses as the recovered content products. This information 
will be available on USDA's Web site with its catalog of qualifying 
biobased products.
    In cases where USDA believes an overlap with EPA-designated 
recovered content products may occur, manufacturers will be asked to 
indicate the various suggested uses of their product and the 
performance standards against which a particular product has been 
tested. In addition, depending on the type of biobased product, 
manufacturers may also be asked to provide other types of information, 
such as whether the product contains petroleum-based components and 
whether the product contains recovered

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materials. Federal agencies may also ask manufacturers for information 
on a product's biobased content and its profile against environmental 
and health measures and life cycle costs (the Building for 
Environmental and Economic Sustainability (BEES) analysis or ASTM 
Standard D7075 for evaluating and reporting on environmental 
performance of biobased products). Such information will permit 
agencies to determine whether or not an overlap occurs.
    Where a biobased item is used for the same purposes and to meet the 
same requirements as an EPA-designated recovered content product, the 
Federal agency must purchase the recovered content product. For 
example, if a biobased hydraulic fluid is to be used as a fluid in 
hydraulic systems and because ``lubricating oils containing re-refined 
oil'' has already been designated by EPA for that purpose, then the 
Federal agency must purchase the EPA-designated recovered content 
product, ``lubricating oils containing re-refined oil.'' If, on the 
other hand, that biobased hydraulic fluid is to be used to address 
certain environmental or health requirements that the EPA-designated 
recovered content product would not meet, then the biobased product 
should be given preference, subject to cost, availability, and 
performance.
    This final rule designates three items for preferred procurement 
for which there may be overlap with EPA-designated recovered content 
products. These items are: (1) Mobile equipment hydraulic fluids, (2) 
roof coatings, and (3) penetrating lubricants. Qualifying products 
under these three items may overlap with lubricating oils containing 
re-refined oil and recovered content roofing materials, depending on 
how these products are to be used.
    Since publication of the proposed rule to designate items for the 
FB4P, section 9002 was amended by section 943 of the Energy Policy Act 
of 2005, Pub. L. 109-58 (Energy Policy Act). Section 943 of the Energy 
Policy Act amended the definitions section of FSRIA, 7 U.S.C. 8101, by 
adding a definition of ``procuring agency'' that includes both Federal 
agencies and ``any person contracting with any Federal agency with 
respect to work performed under that contract.'' The amendment also 
made Federal contractors, as well as Federal agencies, expressly 
subject to the procurement preference provisions of section 9002 of 
FSRIA. However, because this program requires agencies to incorporate 
the preference for biobased products into procurement specifications, 
the statutory amendment makes no substantive change to this program. 
USDA intends to further amend the Guidelines to incorporate the new 
definition of ``procuring agency'' by publishing a notice of final rule 
at a later date.
    In making future designations, USDA will continue to conduct market 
searches to identify manufacturers of products within items. USDA will 
then contact the identified manufacturers to solicit samples of their 
products for voluntary submission for biobased content testing and for 
the BEES analytical tool. Based on these results, USDA will then 
propose new items for designation for preferred procurement.
    USDA plans to create and chair an ``interagency council,'' with 
membership selected from among Federal stakeholders to the FB4P. USDA 
will use this council to provide consultation in identifying the order 
of item designation, manufacturers producing and marketing products 
that fall within an item proposed for designation, performance 
standards used by Federal agencies evaluating products to be procured, 
and warranty information used by manufacturers of end user equipment 
and other products with regard to biobased products.
    Finally, USDA plans to identify approximately 10 items in each 
future rulemaking. USDA has developed a preliminary list of items for 
future designation. This list is available on the FB4P Web site. While 
this list presents an initial prioritization of items for designation, 
USDA cannot identify with any certainty which items will be presented 
in each of the future rulemakings. Items may be added or dropped and 
the information necessary to designate an item may take more time to 
obtain than an item lower on the prioritization list.

III. Discussion of Comments

    USDA solicited comments on the proposed rule for 60 days ending on 
September 6, 2005. USDA received comments from 31 commenters by that 
date. The comments were from private citizens, individual companies, 
industry organizations, one foreign government, and various Federal 
agencies. With few exceptions, the commenters supported the goals of 
section 9002 and the designation of the six items. Most of the 
commenters, however, had specific questions, concerns, or 
recommendations regarding some aspect of the designation of these 
items. Several comments related to the process USDA has established for 
designating items, and other comments were relevant to the January 11, 
2005, Guidelines for Designating Biobased Products for Federal 
Procurement.
    Several procuring agencies expressed concerns in their comments 
that the effect of designating an item for which only one manufacturer 
of a biobased product is currently available would result in a sole 
source situation that would diminish competition. The two items of 
concern are water tank coatings and bedding, bed linens, and towels. 
Accordingly, while USDA is designating these items for preferred 
procurement, it is deferring specifying the date by which agencies must 
give preferred procurement to these two items under this program. For 
both items, a preferred procurement effective date will be identified 
when two or more manufacturers of products within the item have been 
identified. USDA actively seeks additional manufacturers of biobased 
products under these two items so that the items can be re-proposed for 
preferred procurement quickly.
    Specific comments, and the USDA responses to them, are addressed 
below.

General Comments

    Comment: A number of commenters stated that the Federal Register 
notice lacks detail on the names, manufacturers of the products, the 
performance tests, and, in the case of bedding, bed linens, and towels, 
the names of the biobased fibers, and that the information is not 
available on the Web site. Three of the commenters expressed concern 
over the lack of technical information in the preamble (e.g., lack of 
information on availability, relative price, performance and 
performance standards, BEES results, and environmental and public 
health benefits of products, as required by section 9002) and on the 
Web site and that, without this information, it is not possible to 
evaluate the effects of the proposed designations and to ascertain the 
technical performance of these products. One commenter stated that the 
preamble does not discuss how well the product performs when compared 
to what is available as a non-biobased alternative and, if Federal 
agencies cannot determine the performance characteristics of biobased 
products, they cannot reasonably call for them to be purchased. Another 
commenter was concerned that the lack of information on performance 
tests could lead to duplication of effort by agencies separately 
testing products to determine suitability and conformance with their 
specifications.
    Response: USDA agrees that the information the commenters are 
requesting (names, manufacturers of the products, and performance 
tests) is useful and much of it is needed to make

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decisions concerning the purchase of products within a designated item. 
Therefore, USDA will provide information on the standards and 
performance tests for those products that have been tested for purposes 
of designation on its FB4P Web site at the time of publishing future 
proposed rules, and will at the same time make that information 
available in the proposed rules. However, USDA has reached an agreement 
with manufacturers not to publish their names in the Federal Register 
when designating items. This agreement was reached to encourage 
manufacturers to submit products for testing to support the designation 
of an item. Once an item has been designated, the manufacturers of 
products within the designated item may elect to post their names and 
other contact information on the USDA FB4P Web site. USDA will also 
link its Web site to Defense Standardization Program and GSA-related 
standards lists used as guidance when procuring products. Instructions 
on accessing these lists on USDA's FB4P Web site will be included in 
its designation rules.
    Further, USDA also will invite and actively encourage manufacturers 
of qualifying products within a designated item to post, on USDA's 
password-protected Web site, performance standards by which qualifying 
products' performances have been evaluated.
    Comment: One commenter stated that USDA should encourage 
manufacturers to submit all relevant health and environmental data (key 
environmental attributes, environmental standards met, etc.) and post 
this information on the Web site.
    Response: USDA agrees with the commenter that the posting of such 
information on the FB4P Web site is important. Among the information 
that section 2902.6 of the Guidelines requests manufacturers to post to 
the FB4P Web site are environmental and health benefits. Sections 
2902.6 and 2902.8 additionally state that manufacturers and vendors are 
to provide relevant information to a procuring agency upon the agency's 
request concerning product characteristics, life cycle costs, and 
environmental and health benefits. Both the BEES analytical tool and 
ASTM D7075, which a manufacturer may use in lieu of the BEES analytical 
tool, take the environmental and health impacts, as well as other 
parameters, of biobased products into account.
    USDA is working with manufacturers and vendors to post all this 
information on the FB4P Web site before a procuring agency asks for it, 
in order to make the preferred program more efficient. Steps USDA has 
implemented, or will implement, include: Making direct contact with 
submitting companies through email and phone conversations to encourage 
completion of product listing; coordinating outreach efforts with 
intermediate material producers to encourage participation of their 
customer base; conducting targeted outreach with industry and commodity 
groups to educate stakeholders on the importance of providing complete 
product information; participating in industry conferences and meetings 
to educate companies on program benefits and requirements; and 
communicating the potential for expanded markets beyond the Federal 
government, to include State and local governments, as well as the 
general public markets. All of these efforts are intended to educate 
the manufacturers and other stakeholders on the benefits of this 
program and the need to post this information to make it available to 
procurement officials.
    Comment: One commenter stated that it is illogical to require 
Federal agencies to purchase items, when it is only voluntary for the 
vendors to furnish the information for agencies to use in making the 
key purchase decision about the items. The commenter stated that the 
Web site USDA is developing to contain information on the availability, 
relative price, performance, and environmental and public health 
benefits of such products will be a useful tool for Federal agencies, 
but its efficacy depends on the voluntary submittal of product 
information by the manufacturers. The commenter, therefore, recommended 
that it be mandatory that manufacturers place relevant information on 
the Web site if the manufacturers are to participate in the preferred 
procurement program.
    Response: USDA agrees that there appears to be an ``illogical'' 
aspect between ``requiring'' agencies to purchase biobased products 
within designated items, while the manufacturers ``voluntarily'' post 
on the FB4P Web site information that is needed in making purchasing 
decisions. USDA points out that procuring agencies are not required to 
purchase products if one of three conditions exist, including the 
inability of a product to meet performance standards. If a manufacturer 
fails to make this information available to a procuring agency, then 
the procuring agency may choose not to purchase the manufacturer's 
product. Thus, it is in the best interest of manufacturers and vendors 
to make all product performance information available to procuring 
agencies, whether through the FB4P Web site or through some other 
means.
    Comment: Two commenters requested that manufacturers and consumers 
be provided with more information on the selection of the proposed 
items and the process used to determine which items are likely to be 
designated next. One of the commenters stated that the designation 
process appears to be somewhat arbitrary and that manufacturers have 
little idea as to which products will be designated, how they will be 
categorized, or how they will be selected. This commenter stated that 
the current proposal provides little information on why USDA selected 
these six items, as opposed to other items currently available that 
will satisfy the procurement requirements. This commenter believes that 
manufacturers and consumers would be better served by a more 
transparent process.
    The other commenter also stated that the process and criteria for 
product designation have not been communicated, which results in 
industry and start-up companies not knowing which products will be 
selected next for designation. This commenter also stated that there is 
very little background or rationale on why these six products were 
selected.
    Response: USDA agrees that it has not provided enough information 
on the selection process used or the order in which USDA intends to 
pursue designation. USDA will correct this problem by placing 
information on the model used by USDA and its contractor, Iowa State 
University, to select items for designation on the FB4P Web site. In 
general, the items were developed and prioritized for designation by 
evaluating them against program criteria established by USDA and by 
gathering information from other government agencies, private industry 
groups, and independent manufacturers. These evaluations begin by 
asking the following questions about the products within an item:
     Are they cost competitive with non-biobased products?
     Do they meet industry performance standards?
     Are they readily available on the commercial market?
    In addition to these primary concerns, USDA then considers the 
following points:
     Are there manufacturers interested in providing the 
necessary test information on products within a particular item?
     Are there a number of companies producing biobased 
products in this item?

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     Are there products available in this item?
     What level of difficulty is expected when designating this 
item?
     Is there a Federal demand for the product?
     Are Federal procurement personnel looking for biobased 
products?
     Will an item create a high demand for biobased feed 
stocks?
     Does manufacturing of products within this item increase 
potential for rural development?
    As noted earlier, USDA will also identify the latest set of items 
being considered for designation and the order in which USDA plans to 
pursue their designation. However, the list may change, with items 
being added or dropped, and the order in which items are proposed for 
designation is likely to change because the information necessary to 
designate an item may take more time to obtain than an item lower on 
the list. Further, as noted earlier, USDA plans to create and chair an 
interagency council, made up of Federal agencies, to consult with USDA 
with respect to identifying the order of items for future designations.
    With regard to the comment concerning why these six items were 
selected first for designation, the preamble to the proposed rule for 
these six items noted that they were selected because ``USDA was able 
to expeditiously identify and analyze these items.'' USDA will continue 
to make every effort to target those items most used by the Federal 
procurement sector. USDA will attempt to follow the model in 
prioritizing the order in which items are proposed for designation, 
but, to some extent, all future sets of items proposed for designation 
will depend on when sufficient information is made available by 
manufacturers of products within a designated item.
    Comment: One commenter stated that the time frame for designating 
these first items has been too long, the process is overly complex and 
burdensome, and the paperwork burden required for manufacturers is 
unduly burdensome, especially for smaller manufacturers. The commenters 
urged USDA to quickly designate other items that will have the greatest 
impact on the biobased marketplace and to streamline the designation 
process.
    A second commenter also stated that the program is taking too long 
in its implementation and that additional products with big marketplace 
impacts must be designated immediately. The commenter also stated 
generally that the implementation seems to be rather complex, time 
consuming, and expensive.
    Response: USDA agrees that it has taken longer than planned to 
propose the first set of items for preferred procurement. Because 
information required to designate items is being submitted on a 
voluntary basis, USDA is working with manufacturers, as discussed 
earlier, to facilitate obtaining the information required to designate 
items more quickly.
    USDA is also working with manufacturers to facilitate the process 
by which items are designated for preferred procurement and is striving 
to reduce, where feasible, the cost and burden to manufacturers 
associated with designating items. Efforts to accomplish this include, 
but are not necessarily limited to, developing a simplified BEES survey 
to encourage company input; funding the development of basic production 
data for several common agricultural feed stocks; providing assistance 
to manufacturers submitting BEES information to support item 
designation, including identifying potential sources for questionnaire 
data and helping manufacturers calculate specific inputs; contacting 
and urging material suppliers to provide necessary life-cycle, 
environmental, and human health data not typically maintained by end-
product manufacturers; and considering the potential benefit of 
intermediate material BEES analysis as a means of reducing further a 
manufacturer's input burden (e.g., a BEES analysis on a biobased 
polymer could possibly reduce the burden on manufacturers using that 
polymer to produce water bottles, thereby making the bottle 
manufacturer only responsible for reporting on their specific process). 
In addition to these actions, USDA is covering the costs of both the 
biobased content testing and the actual BEES analyses used in the 
designation of items.
    USDA welcomes suggestions for further reducing the burden to 
manufacturers, while providing the level of information necessary to 
designate items.
    Comment: One commenter stated that USDA should judge the 
performance of biobased materials against their intended application 
and avoid performance criteria that discriminate against biobased 
alternatives. According to the commenter, industry performance criteria 
may frequently discriminate against biobased alternatives when such 
criteria are designed in the absence of a biobased alternative. The 
commenter, therefore, urged USDA to consider alternative criteria when 
such discrimination is evident.
    Response: USDA agrees with the commenter that the performance of 
biobased materials should be judged against their intended applications 
and that performance criteria should not be biased against biobased 
alternatives. To assist procurement agencies in evaluating products 
within designated items against their intended applications, USDA is 
providing a forum on its FB4P Web site for manufacturers to publish all 
performance standards for their products. USDA will also be providing 
information on its Biobased Affirmative Procurement Program (APP), 
which is USDA's preferred procurement program. In the APP, USDA will 
provide guidance to procuring agencies on how to structure their 
preferred procurement program in order to carry out section 2902.4 of 
the Guidelines, which requires procuring agencies to reexamine their 
performance requirements and specifications to ensure they are not 
unfair against the procurement of biobased products and that they are 
still necessary and relevant.
    Comment: One commenter stated that USDA needs to provide 
clarification on how the FB4P will take into account the international 
obligations of the U.S. under NAFTA and the World Trade Organization 
(WTO) Agreement on Government procurement. Two other commenters stated 
that, under NAFTA and the WTO Agreement on Government Procurement, the 
treatment of Canadian-sourced goods shall be no less favorable than 
that of U.S.-sourced goods and, therefore, no U.S. domestic preference 
is permitted. The commenters proposed that USDA cancel the proposed 
designation of these items, give preference to goods produced by 
signatories of NAFTA and the WTO, or modify the application of the 
preference so that it only applies to procurements that fall below the 
thresholds of NAFTA and the WTO agreement.
    Response: Section 9002 requires Federal agencies to develop 
procurement programs that ensure the purchase of designated biobased 
products to the maximum extent practicable and that are ``consistent 
with applicable provisions of Federal procurement law.'' In making such 
purchases, Federal agencies are to give a preference to the procurement 
of items ``composed of the highest percentage of biobased products 
practicable, consistent with maintaining a satisfactory level of 
competition.'' A procurement program that treats biobased products from 
designated countries (as that term is defined in the Federal 
Acquisition Regulation (FAR) Sec.  25.003)) no less favorably than 
U.S.-sourced biobased products: (1) Maintains a preference for biobased

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products over non-biobased products; (2) maintains a satisfactory level 
of competition; and (3) ensures consistency with Federal procurement 
law, including Part 25 of the FAR. FAR part 25 sets out the policies 
and procedures for acquiring foreign products and services and 
implements the Buy American Act, trade agreements, and other laws and 
regulations regarding the acquisition of foreign products and services. 
Accordingly, biobased products from any designated country would 
receive the same preference extended to U.S.-sourced biobased products. 
In order to clarify and make this policy applicable to all biobased 
designations, USDA plans to propose a broad-based revision to the USDA 
biobased procurement guidelines (7 CFR part 2902) in its next proposed 
rule designating additional items.
    Comment: One commenter stated that USDA should explain how it 
intends to be sure that biobased products are made from domestic and 
not imported feedstocks. The commenter provided an example in which 
janitorial cleaners commonly have a linear alcohol ethoxylate 
surfactant that can be made from plant or petrol. However, the plant-
derived material is from palm kernel or coconut oil, neither of which 
is a U.S. domestic product. Thus, the commenter asked: (1) How will 
USDA verify that the organic molecules come from U.S. grown material? 
and (2) how will USDA be certain that, when a product can be made from 
a U.S. crop, it is indeed being made with a U.S. crop and not imported 
material (e.g., D-limonine can come from the U.S., Brazil, and other 
citrus growing countries)? The commenter concludes by stating that the 
real intent of the law is not being met by the present testing outlined 
in the proposed rule.
    Response: USDA intends that manufacturers will self-certify that 
each product being offered as a biobased product for preferred 
procurement contains qualifying feedstock. As noted in the response to 
the previous comment, qualifying feedstocks for biobased products can 
be from ``designated countries'' as well as from the United States.
    Comment: Two commenters stated that USDA should publish its model 
Biobased Products Procurement Preference Program so that agencies can 
understand the recommended acquisition strategy. One of the commenters 
stated that understanding the acquisition strategy is necessary to 
enable evaluation of the effects of the proposed designations on 
Government procurement processes or general operations.
    Response: USDA agrees with the commenters and is continuing to 
develop its policies and its Biobased APP for designated items to 
support its own procurement practices. USDA is also working to develop 
outreach and education programs, based on the USDA Biobased APP, to 
assist other procuring agencies in complying with the requirements of 
this program. USDA has issued the first generation of its Biobased APP, 
which includes several procurement tools, such as sample contract 
language for biobased procurement. As additional documents become 
available, USDA will publish them to the biobased Web site at http://
www.usda.gov/biobased.
    Additionally, USDA will continue to work with OFPP and the Office 
of the Federal Environmental Executive (OFEE) to coordinate and 
implement Federal biobased procurement policies.
    Comment: One commenter urged USDA to work aggressively to bring all 
Federal agencies on board to implement the program within the one-year 
transition period indicated in the proposed rule.
    Another commenter expressed concern that the one-year effective 
date may not be adequate, especially where product testing is needed 
and in particular for coatings, including roofing system coatings. The 
commenter recommended that USDA lengthen the implementation period to 
18 months, at least for the first set of designated items, and up to 5 
years for product testing and revision of performance specifications. 
The commenter pointed to the following as reasons for the need to 
extend the implementation period: The timeline for availability clauses 
in the FAR that are in development for biobased products; the process 
lengthening or even being stopped due to vendor protests, depending on 
the language in the FAR; the time for vendors to incorporate biobased 
provisions in a logical way, without the pressure to take shortcuts 
that could negatively affect agencies; product testing of coatings that 
could take several years if the procedures include corrosion or 
durability testing; revision of procurement specifications may require 
additional years to pass through various reviews and be finalized; and 
changes in specifications would lead to new product verifications, 
which require money to be allocated through the Planning, Programming, 
and Budgeting System process that may take several years.
    Response: In response to the first commenter, USDA's Departmental 
Administration is working with OFEE and OFPP, and through the 
interagency council, to assist all Federal agencies in accomplishing 
the goal of implementing the program in a timely manner.
    The second commenter expressed concerns about the implementation 
period not being long enough. Agencies have one year from the effective 
date of the Guidelines to implement procurement preference programs for 
designated items. This is consistent with the legislative requirement 
found in Section 9002(d) of FSRIA, which states that ``Federal agencies 
shall, within one year after the date of publication of applicable 
guidelines under subsection (e), or as otherwise specified in such 
guidelines, assure that such specifications require the use of biobased 
products consistent with the requirements of this section.''
    USDA proposed the one-year time frame in the proposed Guidelines 
(69 FR 70730, December 19, 2003, proposed section 2902.5), but in the 
Guidelines (70 FR 1792, January 11, 2005, section 2902.4(c)), USDA 
indicated each designated-item rulemaking would specify the time frame 
for each item. In the proposed designated-item rulemaking (70 FR 38612, 
July 5, 2005), USDA proposed a one-year time frame for each of the six 
items. Once the final rule is published, Federal agencies have up to 
one year to comply with these requirements (i.e., revise their 
procurement requirements and specifications for implementing the 
preferred purchasing of biobased products within these six items).
    At the time these items are promulgated for designation, Federal 
agencies will have had a minimum of 18 months (from when these 
designated items were proposed) up to 27 months (from when the 
Guidelines were first proposed and these requirements were first laid 
out) available to them to implement these requirements. This time frame 
is at minimum equivalent to or longer than that requested by the 
commenter for this first set of designated items. It is USDA's position 
that this is a sufficient time frame for procuring agencies to identify 
biobased items meeting agency performance standards and to take the 
actions necessary for incorporating designated items into their 
preferred procurement program. USDA also notes that, from the time the 
Guidelines were first proposed, agencies will have longer time frames 
to implement these requirements for items proposed for designation in 
future rulemakings.
    In response to the commenter's concerns about the amount of time 
required for product testing, USDA reemphasizes that procuring agencies

[[Page 13691]]

are not required to purchase biobased products that do not meet the 
reasonable performance requirements of the agency. In cases where 
biobased products have not undergone the necessary performance testing 
within the one-year implementation period, procuring agencies would not 
be expected to purchase the products. USDA will post to its FB4P Web 
site information on performance standards against which products have 
been tested. In addition, USDA will identify what tests appear to be 
relevant and, through working with OFEE and OFPP, what standards 
procuring agencies require for a given item. To help manufacturers 
conduct performance testing, USDA is making funds available through 
section 2902.9 of the Guidelines.
    In conclusion and for these reasons, USDA continues to believe that 
a one-year effective date for the implementation of the procurement 
preference for the items designated in this final rulemaking is 
reasonable and is not extending the time frame for these requirements.
    Comment: One commenter pointed out that the Federal Register notice 
is silent with regard to how Federal agencies should treat existing 
contracts, and stated that the cost of terminating contracts would make 
the cost for the biobased products unreasonable.
    Response: Agencies have one year from the effective date of the 
Guidelines to implement procurement preference programs for designated 
items and the products within those designated items. Therefore, 
agencies should have sufficient time to plan for upcoming procurements. 
Agencies are not expected to terminate or modify existing contracts; 
however, they are encouraged to add requirements for the purchase of 
biobased products when options are exercised, especially to long-term 
contracts. This is consistent with other green procurement preference 
programs.
    Comment: One commenter stated that, because the intent of section 
9002 of FSRIA is largely to stimulate the production of new biobased 
markets and to energize emerging markets, USDA should establish a 
periodic review of biobased product qualification criteria and market 
availability of each listed item to determine when they have achieved 
market ``maturity.''
    Response: USDA believes that the intent of section 9002 is not only 
to stimulate new biobased markets, but to maximize the use of biobased 
substitutes for petroleum-based products on a continuing basis. Given 
this intent, USDA believes it is unnecessary to reevaluate the status 
of designated items that have reached market maturity.
    Comment: One commenter stated that information on current usage 
statistics and specific potential markets for biobased products are 
essential to establish a baseline for an annual review of the 
effectiveness of agencies' preference programs.
    Response: USDA agrees with the comment and, as owner of this 
program, is committed to working with OFPP and OFEE in developing a 
system, including reporting requirements, to monitor the effectiveness 
of the biobased preferred procurement program. Additionally, each 
agency is required to develop baselines, as appropriate, and assess the 
effectiveness of their individual-based preference procurement program.
    Comment: One commenter stated that USDA should add ``number or 
dollar value of biobased products purchased'' to the Resource 
Conservation and Recovery Act (RCRA) or similar reports as a way to 
track FB4P.
    Response: To this end, USDA has worked with OFPP and OFEE personnel 
to insert biobased data elements into the RCRA Data Call starting in 
fiscal year 2005. USDA will continue to work with OFPP and OFEE to 
identify methods to collect data on the dollar value of biobased 
products purchased.
    Comment: One commenter stated that the Federal Register notice does 
not provide any information on the enforcement of the rules and on the 
possibility of citizen suits against the government. The commenter 
explained that punitive measures for noncompliance and the possibility 
of citizens' complaints and lawsuits would be problematic for agencies.
    Response: Section 9002 does not provide USDA or anyone else with 
the authority for the ``enforcement'' of the procurement preference or 
for suits against the government by citizens. Without such statutory 
authority, USDA cannot add enforcement requirements to the preferred 
procurement program. However, OFPP will report to Congress on the 
progress, or lack thereof, that agencies are making in purchasing 
biobased products. This report could provide an indirect boost in 
encouraging procuring agencies to give the necessary preferred 
procurement to biobased products.
    Further, given the experience of the EPA program under RCRA, which 
the language of section 9002 almost completely duplicates, USDA 
foresees little likelihood of litigation brought by the public.
    Comment: One commenter suggested that USDA clarify whether the 
preferred procurement requirement is applicable to just singular high-
dollar amount, agency-wide purchases. (According to the commenter, 
there is little incentive to small procuring agencies because they do 
not have large-scale purchases.)
    Response: The Guidelines were revised to clarify that ``[t]he 
$10,000 threshold applies to Federal agencies as a whole rather than to 
agency subgroups such as regional offices or subagencies of a larger 
Federal department or agency.'' (See section 2902.3(a).) Thus, small 
purchases by subagencies are included in the $10,000 cutoff.
    Comment: One commenter requested that USDA provide an exception for 
``incidental purchases;'' that is, purchases that are incidental to the 
purpose of Federal funding. The commenter referred to EPA's original 
procurement guidelines (48 FR 4230) and believes the same 
interpretation should be made for the biobased products purchasing 
program. To illustrate, the commenter stated that, under the incidental 
purchases rule, a construction contractor would not have to purchase 
biobased hydraulic fluid for use in its equipment because hydraulic 
fluid is incidental to the purpose of the construction contract, but 
that a contractor maintaining equipment for Federal agencies would be 
required to use biobased hydraulic fluids in the maintenance of the 
equipment. The commenter, therefore, suggested that USDA provide an 
exception for incidental purchases in the final rule.
    Response: USDA agrees that ``incidental purchases'' are not covered 
by the definition of ``procuring agency.'' The definition of 
``procuring agency'' in FSRIA section 9001, as amended by the Energy 
Policy Act of 2005, makes it clear that the requirements of section 
9002 apply to ``indirect purchases;'' i.e., purchases by contractors. 
However, the requirements to purchase biobased products do not apply to 
such purchases if they are unrelated to or incidental to the purpose of 
the Federal contract. For example, when a construction contractor 
purchases hydraulic fluid for maintenance service of construction 
equipment being used in the performance of a Federal building 
construction contract, that purchase is incidental to the purpose of 
the construction contract. The hydraulic fluid purchase would not be 
subject to the requirements of section 9002 or the guidelines issued 
today, even though some of the monies received under the contract might 
be used to finance the purchase.
    USDA will propose an amendment to the Guidelines at 7 CFR part 2902 
to clarify that incidental purchases are excepted. Agencies may, 
however,

[[Page 13692]]

encourage contractors to purchase or test biobased products in order to 
further develop markets for these products.
    Comment: One commenter stated that USDA should provide definition 
or guidance for what constitutes a price that is ``not reasonable'' 
compared to the cost of a non-biobased product.
    Response: It is the responsibility of each procurement agency to 
establish, through its policies, cost reasonableness for any products 
procured under Federal contract. While the law provides the 
``unreasonable price'' exemption, ``unreasonableness'' could be based 
on a comparison of product price, life-cycle costs, and other benefit 
information. USDA encourages procuring agencies to consider all facets 
of a product when evaluating prices.
    Additionally, through the FB4P Web site and other initiatives, USDA 
will provide as much relevant information as possible to the 
individuals responsible for purchasing items and to the program 
officials who are developing specifications for the procurement of 
products and services. For example, information from the BEES 
analytical tool provides information on the first cost of a product and 
on the product's life-cycle cost. The BEES results also provide 
information on the environmental and health benefits of the products, 
which will assist procuring agents in assessing the benefits of a 
product when determining the reasonableness of costs. Similar 
information will also be provided if the ASTM standard D7075 for 
evaluating and reporting on the life-cycle assessment and costs of 
biobased products is used.
    Comment: One commenter questioned whether Federal agencies will be 
expected to provide proof if they determine that biobased alternatives 
do not meet established performance standards.
    Response: Procuring agencies should follow their procurement rules 
and OFPP guidance on buying non-biobased products when biobased 
products exist and should document exceptions taken for price, 
performance, and availability.

Designation of ``Single Product'' Items and Limited Number of 
Manufacturers

    Comment: Three commenters expressed concerns regarding the 
designation of items for which only one product has been identified or 
where a limited number of manufacturers have been identified. The 
issues and questions raised by the commenters are as follows:
     USDA needs to explain what constitutes a ``sufficient'' 
number of products to be ``adequate'' for designation and how 
sufficient competition can be maintained where only one product is 
identified;
     Designating single source products would place the 
Government, at least initially, in a position of sole source 
procurements and it could place the manufacturer in the position of not 
being able to meet demand; and
     With a limited number of manufacturers of biobased 
products, there is a possibility that competition will be limited and 
Federal agencies will pay more for biobased alternatives.
    Response: USDA agrees that designating items for which there is 
only one manufacturer of a biobased product under this item is 
problematic for the reasons discussed previously. Of the six biobased 
items proposed for designation, two (water tank coatings, and bedding, 
bed linens, and towels) are currently known to have a single 
manufacturer. USDA believes that the best way to address the problem of 
a single-known manufacturer of a biobased product within an item is to 
designate that item for preferred procurement, but to defer the 
effective date that procurement agencies would be required to give 
procurement preference until such time that there are two or more 
manufacturers of products within the item. Therefore, USDA is 
designating all six items, including items for which there is a single 
known manufacturer, but determination of the effective date for the 
single source items will be deferred indefinitely. USDA believes that 
it is beneficial to proceed with the designation of these two items, 
despite the delayed effective date, because it will encourage more 
manufacturers to produce products within these two items and alerts 
manufacturers of these items to an opportunity to sell their products. 
These effects, in turn, further the statutory goals of the program.
    With respect to those items for which preferred procurement is 
being deferred, USDA will specify the item's effective date in a future 
document in the Federal Register when it identifies two or more 
manufacturers of products within the item. Until such a document is 
published in the Federal Register, USDA will not permit manufacturers 
to post product, performance, and contact information on the FB4P Web 
site for those items with only one manufacturer. In future proposed 
designation rules under the FB4P, USDA intends to propose for 
designation only items for which there is more than one manufacturer.

Relationship to Other Federal Programs

    Comment: One commenter requested that USDA and EPA work together to 
identify items (or products) that may be covered by section 9002 of 
FSRIA and by section 6002 (Comprehensive Procurement Guideline) of the 
Resource Conservation and Recovery Act, Pub. L. 94-580 (RCRA). The 
commenter pointed out that roofing materials, hydraulic fluids, and 
penetrating lubricants all may be qualified for procurement preference 
under both section 9002 of FSRIA and under section 6002 of RCRA. The 
commenter requested that if overlap is identified, USDA work with the 
Office of Federal Procurement Policy at the Office of Management and 
Budget (OMB), OFEE, and EPA to resolve any conflict.
    Another commenter stated that USDA needs to provide additional 
clarification on how these two sections relate to each other, 
indicating that the language in the Guidelines (section 2902.3(b)) is 
vague.
    Response: USDA agrees that procurement agents might find themselves 
in the position of having to choose between giving procurement 
preference to a product that qualifies for preferred procurement under 
section 9002 of FSRIA or to a competing product that qualifies for 
preferred procurement under section 6002 of RCRA and that guidance is 
required. USDA plans on working with the interagency council (discussed 
earlier in this preamble) to determine product choices amongst the 
various preferred procurement programs for future procurements.
    To the extent that products within items designated in this notice 
and in future notices under section 9002 of FSRIA are alternatives to 
products that are to be given preferred procurement under section 6002 
of RCRA, USDA acknowledges that the comprehensive procurement 
guidelines under section 6002 of RCRA take precedent. That is, 
everything else being equal about a product that qualifies for 
preferred procurement under section 9002 of FSRIA and a competing 
product that falls under section 6002 of RCRA, a procurement agent 
would give preference to section 6002 of RCRA when making a purchase 
decision between the two products. USDA believes the language in 
section 2902.3(b) is sufficient to determine when section 9002 yields 
to section 6002.
    However, for performance reasons, a biobased product might be more 
appropriate for a given use. USDA offers the following example: If a 
procurement agent has the choice of purchasing

[[Page 13693]]

either an EPA-designated recovered content product (in this case, 
lubricating oil containing re-refined oil) for use as a fluid in a 
hydraulic system or a competing biobased mobile equipment hydraulic 
fluid, where both fluids are used for the same purposes and meet the 
same requirements, the procurement agent must give procurement 
preference to the EPA-designated recovered content product. If, on the 
other hand, a biobased hydraulic fluid can meet certain environmental 
or health requirements that the EPA-designating recovered content 
product would not meet, then the procuring agent should give purchase 
preference to the biobased hydraulic fluid, subject to cost, 
availability, and performance.
    Additionally, designation of items under this program not only 
qualifies the item for a Federal procurement preference, but also makes 
biobased products under that item eligible to use the biobased label in 
the commercial marketplace, as authorized by FSRIA. USDA currently is 
developing the labeling program. Thus, duplicate designation of items 
under this program and the RCRA program is not inappropriate.
    In conclusion, USDA does not see the need to modify the designation 
of items in this notice, even when products within an item would be 
subject to both sections. However, USDA has added language in the final 
rule for mobile equipment hydraulic fluids, roof coatings, and 
penetrating lubricants requesting manufacturers to provide information 
to help procuring agents identify overlap between the two programs. 
USDA will work with the interagency council to help identify potential 
overlap between the two programs in future rules.
    Comment: One commenter stated that USDA has not provided sufficient 
guidance to avoid potential conflicts in implementing both the biobased 
and the Energy Star program for roof coatings. The commenter was 
specifically concerned that there is no guidance on biobased content 
when one is purchasing Energy Star roofing material and requested that 
USDA provide guidance in the final rulemaking, including information on 
whether the minimum biobased content changes for Energy Star roofing 
material. The commenter recommended that this information be provided 
in both the preamble and in the regulatory text.
    Response: With the new Energy Star preferred procurement program, 
USDA agrees that there might be Energy Star products that procurement 
officials now will have to consider alongside biobased products in 
their procurements. Roof coatings is an example. USDA has information 
on two biobased roof coating products, one of which does not meet the 
requirements to qualify for the Energy Star rating and one that does. 
Where a product does meet the Energy Star rating, it does not mean, 
however, that procurement officials must give preference to Energy Star 
products over biobased products. To the extent that procurement 
officials have to choose between products under different preferred 
procurement programs, procurement officials should look to the FAR part 
23 for guidance regarding the relative priority of the various 
preference programs. USDA will consider whether it is appropriate to 
establish biobased content levels for Energy Star products that differ 
from those for non-Energy Star products.

BEES Analysis

    Comment: Two commenters requested that BEES analyses be done for 
the materials that are to be replaced by the biobased products so that 
a meaningful comparison of the impacts can be performed. According to 
one commenter, without making such a comparison, USDA cannot claim to 
have fully evaluated the extent to which the products proposed for 
procurement preference actually contribute to the objectives of section 
9002 of FSRIA. Using bedding, bed linens, and towels as an example, the 
commenter states that by encouraging Federal procurement of, for 
example, towels made of ``unknown'' biobased fibers, cotton may be 
displaced; and, without making a comparison of the fossil energy inputs 
(i.e., coal, oil, natural gas) needed to grow, harvest, and process 
cotton as compared to alternative ``unknown'' biobased fiber, USDA 
cannot know that substituting the biobased alternative for cotton will 
contribute to reducing national use of imported oil and natural gas, 
one of the stated goals.
    Response: USDA received similar comments during the development of 
the Guidelines, although those comments focused on replacing petroleum-
based products. As noted then, USDA agrees that it would be quite 
useful to be able to make a point-by-point comparison, using the same 
standards of measure, between a biobased and a non-biobased product 
prior to making a procurement decision. USDA also agrees that it would 
be quite useful to make a comparison between a biobased product given 
preferred procurement and a cotton or wool product that might not be 
purchased. However, under section 9002, USDA has neither the authority 
to require, nor the funding for, testing of non-biobased or other 
products that do not qualify for preferred procurement.
    Further, USDA does not believe such a comparison would make any 
difference in the implementation of the FB4P. The purpose of the FB4P 
is to open new markets for new emerging biobased products. It is 
possible that, in achieving this purpose for some of the designated 
items, biobased products may displace some products that are not 
qualifying biobased products (such as cotton shirts), as indicated by 
the commenter.
    Comment: One commenter suggested that USDA reconsider the candidate 
biobased product in any case where it does not compare on an equal or 
better basis to existing products on key attributes, such as fossil 
fuel depletion or on the overall BEES score.
    Response: The purpose of the BEES analysis is to provide 
information to procuring agencies to make informed decisions among 
biobased products within a designated item, not to disqualify biobased 
products from a designated item. The commenter is suggesting USDA use 
the overall BEES score for determining whether or not a product can be 
afforded preferred procurement over an existing product that scores 
better when analyzed using BEES. The criteria used by USDA to designate 
items (groups of products) are identified in FSRIA. The overall BEES 
score is not one of those criteria. Therefore, USDA declines the 
commenter's request.
    Comment: Two commenters recommended that the BEES input data be 
verified by an independent party. One commenter stated that USDA 
appears to have relied solely on product manufacturers to supply the 
basic data from which the BEES score is derived, and does not appear to 
have performed an independent verification. The other commenter 
inquired as to how the quality of the data inputs to the BEES life 
cycle assessment tool were assessed.
    Response: The commenters are correct in that USDA has not verified 
the information submitted by the manufacturers on the products 
submitted for the BEES analysis. That information was, and will 
continue to be, provided directly to a third party for analysis.
    The quality of data submitted to the BEES analytical tool should be 
consistent with relevant and applicable ASTM or other industry test 
standards. In addition, USDA contractors, when requested, assist 
manufacturers in preparing the data to be submitted to the BEES 
analytical tool. Those running the BEES analytical tool are certified 
by the

[[Page 13694]]

International Organization for Standardization (ISO) (i.e., they are 
ISO-certified). As such, they provide a check on the reasonableness of 
the data submitted. USDA does not otherwise independently verify data 
submitted by the manufacturers.
    Comment: One commenter pointed out that the BEES analysis provides 
a general assessment of environmental benefit and does not particularly 
focus on fossil fuel use, which is one of the principal goals of 
section 9002 of FSRIA. The commenter therefore recommended that 
consideration be given to modifying the weighting used in the BEES 
analysis so that the results will consistently select products that 
meet the program objective of substituting biobased products for fossil 
energy-based products.
    Response: The BEES analytical tool includes ``fossil fuel 
depletion'' as one of its metrics. This metric looks at the amount of 
fossil fuel consumed in the production of a biobased product. By 
looking at this metric's score between products within an item, 
procuring agencies can choose those products that use less fossil fuel. 
Thus, USDA does not believe it necessary to change the weighting scheme 
in the BEES analytical tool to achieve the outcome desired by the 
commenter. To help procuring agencies interpret the BEES results, USDA 
is coordinating with the National Institute of Standards and Technology 
(NIST) to develop additional information concerning the interpretation 
and usefulness of BEES scores and will post this information on the 
FB4P Web site.
    Comment: One commenter expressed concern that the BEES analysis is 
inherently limited in that it focuses on the material rather than the 
functionality of the material or cost of reapplying the material. For 
example, with coatings, BEES takes the life-cycle of the coating 
material into consideration, but not the impact of shorter life-cycles 
on the asset being protected by the coating. There is no cost 
consideration for shorter recoat cycles or impact on users. BEES also 
does not attempt to account for cost incurred if the coating, or a 
lubricant or hydraulic fluid, does not perform as effectively and the 
equipment it is protecting does not last as long.
    Response: USDA believes that the BEES analytical tool provides 
useful information, even in the areas of concern identified by the 
commenter as discussed below, and provides USDA with the information 
necessary to assess products within a designated item.
    First, with regard to re-applying coatings and the impact to users 
of such re-applications, BEES takes into consideration the costs of 
``initial investment, replacement, operation, maintenance and repair, 
and disposal.'' Included in ``maintenance and repair'' are 
consideration of re-applications and the impact to users of such re-
applications.
    Second, the commenter states that BEES does not take into account 
the ``functionality'' of the product (i.e., whether it performs as 
effectively as a non-biobased product when used as directed). However, 
the effectiveness of a biobased product is determined using industry 
performance standards. Further, USDA is neither using the BEES 
analytical tool as a method to determine the effectiveness of a product 
nor to promote a product as being effective because it has been 
subjected to BEES.
    Third, the commenter states that BEES does not take into account 
the shorter life-cycles on the asset (i.e., the equipment it is 
protecting does not last as long) being protected by the coating. The 
functional unit for products takes into account products used in 
different amounts in ``equivalent service.'' By equating comparisons of 
products to ``equivalent service,'' there is no shortening of life-
cycles for the asset being coated. Thus, if a biobased coating does not 
last as long (i.e., frequency of repainting is higher), the functional 
unit accounts for that.
    Fourth, the commenter states that there is no cost consideration 
for shorter recoat cycles. The functional unit developed under the BEES 
analysis accomplishes the goal of ``unitizing'' different recoating 
cycles by incorporating a time frame. For example, if differences in 
the useful lives of alternative products have been identified, the 
functional unit will include a time dimension to account for the 
frequency of product replacement.
    Comment: One commenter stated that USDA needs to recognize the 
inherent limitations of the BEES analysis in predicting real-world 
effects of selection of these products, and should consider 
implementing a follow-up effort to gather performance information based 
on use of these products.
    Response: USDA acknowledges that BEES, and any other similar 
analytical tool, will have certain inherent limitations in predicting 
real-world effects. For the biobased preferred procurement program, the 
goal of the BEES analytical tool is to enable comparisons between 
products within an item. Given this goal, inaccuracies within any one 
metric when compared to real-world effects are of lesser significance 
to this program than would be other uses of the results.
    NIST, who is responsible for the BEES analytical tool, is striving 
to provide the best model possible. While USDA believes NIST should 
take the lead in making any and all improvements to the BEES analytical 
tool, USDA will work with them by bringing the commenter's concerns to 
their attention.
    Comment: One commenter stated that the use of BEES is potentially a 
barrier to entry into the marketplace because of its cost and 
questioned the utility of ``requiring'' a BEES analysis for the 
biobased material. The commenter also noted that it is an additional 
cost that is not borne by standard petroleum-based products.
    Response: A BEES analysis is only required when USDA is obtaining 
information for proposing an item for designation for preferred 
procurement. As provided for in the Guidelines, USDA will provide some 
funding for BEES and performance testing of individual products with 
biobased content, with priority being given to products of small and 
emerging private business enterprises. This helps offset the cost of 
the BEES analysis.
    USDA is requiring the BEES analysis on products because it provides 
important information on the cost, life-cycle cost, environmental, and 
human health impacts of specific products. BEES can be used across a 
wide variety of products and provides a means to compare products. The 
information it provides will be useful to procuring agencies when 
making procurement decisions on biobased products and for determining 
whether such products are available at a reasonable cost. The USDA, 
thus, considers the BEES analytical tool as an important component in 
designating items for preferred procurement.
    Once an item has been designated, procuring agencies may request 
information from a manufacturer on the environmental and life-cycle 
costs of a specific product. In this situation, the manufacturer may 
elect to use either BEES or ASTM D7075, which is less expensive than 
BEES, to provide this information.
    Lastly, USDA concurs with the commenter that the cost of BEES or 
the alternative is not also borne by petroleum-based products. However, 
the statute does not authorize USDA to require petroleum-based product 
manufacturers to provide the same information as is being required of 
biobased product manufacturers. The overall purpose of the statute 
implementing the preferred procurement program for biobased

[[Page 13695]]

products is to open new markets to new emerging biobased products. In 
doing so, it is necessary to develop environmental and life-cycle cost 
information to provide procuring agents with additional information 
when making their purchasing decisions. USDA believes that the effort 
required to obtain this information in exchange for procurement 
preference is reasonable.
    Comment: One commenter recommended that USDA provide additional 
information on how BEES scores are developed and how they should be 
interpreted, including a discussion of the key concepts and metrics 
such as ``functional unit'' and ``per capita impact'', a discussion on 
uncertainties and limits to interpretation, as well as some guidance on 
determining significant differences between scores. The commenter 
requested this because most users of this information are not likely to 
have had extensive experience with life-cycle impact assessment.
    A second commenter had similar concerns, stating that publishing 
the results of the BEES analysis without a frame of reference or 
guidance on how to use this information will only confuse potential 
users. Questions that are raised by the current presentation of the 
information include: (1) How were the functional units selected?, (2) 
How much lower does a score have to be for one product to be better 
than another product?, (3) How are these numbers used to make a 
procurement decision?, (4) What is the environmental significance of, 
for example, for hydraulic fluids, a total environmental score of 2.84 
versus 3.22?, and (5) For items with one product, such as water tank 
coatings, what does a BEE's total environmental performance of 0.0083 
mean?
    A third commenter states that simply providing agencies with tables 
summarizing BEES analyses does not satisfy the statutory requirement 
that USDA provide agencies with information on the public health and 
environmental benefits of biobased products. The commenter points out 
that the summary tables included in the preamble do not provide useful 
information to agencies because the information is not provided in the 
context of comparisons with non-biobased goods. Examples of information 
that could help make a ``best value'' determination include the absence 
of toxic or hazardous constituents that are found in competing non-
biobased products, biodegradability, neutral pH, and whether the 
product must be handled as a hazardous or non-hazardous waste at the 
end of its useful life. Therefore, the commenter recommends that USDA 
provide narrative information and comparative reference points on the 
environmental and public health benefits of the designated products.
    Response: USDA agrees that most users of the information are likely 
not to have had extensive experience with life-cycle impact 
assessments. The commenter, therefore, is requesting that USDA include 
in the preamble information that addresses how BEES works and how to 
use the BEES results. Rather than using the preamble as the tool for 
conveying such information, USDA believes the best way is for users to 
access the BEES Web site (http://www.bfrl.nist.gov/oae/software/
bees.html) to obtain information about the technical details of and the 
interpretations used in the BEES analytical tool.

Minimum Biobased Content

    Comment: One commenter was concerned about USDA setting a minimum 
biobased content based on a single product within an item. The 
commenter pointed to the Competition in Contracting Act, which 
prohibits agency requirements based on a particular brand name, 
product, or feature of a product peculiar to one manufacturer, unless 
it is essential to the Government's requirements. The commenter then 
stated that USDA needs to explain why the specified minimum content is 
essential to the Government's requirements or lower it so that 
additional sources can compete. The commenter then stated that USDA 
could revisit the minimum requirements in the future if and when new 
sources arise.
    Another commenter stated that USDA should not set a minimum 
biobased content for an item until a representative number of products 
are available, because to do so could hinder other biobased products in 
the same product category from achieving the preferential procurement 
designation. This commenter recommended that a provisional designation 
status could be given until enough data are available on a 
representative number of products to set a defensible minimum biobased 
content. This commenter also recommended that USDA have a process for 
adding future products to an item after it has been designated for 
preferred procurement, including a mechanism for reassessing and 
changing the minimum biobased content for the item.
    Response: USDA agrees that setting the minimum biobased content for 
a designated item based on more than one product is in principle 
preferable to setting it based on a single product. However, USDA does 
not believe that setting a minimum biobased content based on a single 
product should stop the Department from designating an item as long as 
there are two or more manufacturers of products within the item. As 
more information on biobased content on products within an item becomes 
available, USDA will consider revising the minimum biobased content as 
appropriate for each item through a rulemaking process. Therefore, USDA 
is promulgating minimum biobased contents for each of the six items.
    Because USDA believes it is preferable to base the minimum biobased 
content for an item on more than one product, USDA is taking steps to 
identify and test additional products. These steps include contacting 
manufacturers directly through email and phone conversations, 
conducting outreach to intermediate material producers to encourage 
their customers to participate in the program, and participating in 
industry conferences and meetings to educate companies on the program's 
benefits and the potential for expanded markets beyond the Federal 
government. Through these and other efforts, USDA is encouraging the 
submission of more products for biobased content testing.
    Comment: Two commenters recommended that minimum biobased content 
be specified as a range or, if expressed as a single number, as the 
lower end of a range that reflects the analytical variability of the 
ASTM test method, which is plus or minus 3 percentage points. The 
commenters pointed out that by not doing so, even the product used to 
define the designated minimum biobased content for that item may itself 
not be able to qualify in the future due to no fault of its own.
    Response: After reviewing the ASTM method, USDA agrees with the 
commenters that the variability within the method needs to be accounted 
for in setting the minimum biobased content for a designated item. USDA 
believes the clearest way of setting the minimum biobased content is to 
provide a single value rather than a range. The variability associated 
with the test method is identified as plus or minus 3 percentage 
points. Therefore, USDA has revised the proposed minimum biobased 
contents for five of the six proposed items in the final rule by 
subtracting 3 percentage points from the value proposed. By using this 
method, the concern expressed by the commenter that the product used to 
set

[[Page 13696]]

the minimum biobased content may fail ``due to no fault of its own'' is 
resolved.
    The minimum biobased contents for these five items in the final 
rule are:
     Mobile equipment hydraulic fluids--44 percent;
     Roof coatings--20 percent; \2\
---------------------------------------------------------------------------

    \2\ With regard to roof tank coatings, USDA had proposed a 
minimum biobased content of 62 percent based on a urethane-based 
roof coating. Since then, USDA has obtained information on another 
biobased roof coating with a biobased content of 23 percent. USDA 
believes that, based on these two products, it is reasonable and 
appropriate to set the minimum biobased content for this item at 20 
percent (23 percent minus the 3 percentage points to account for 
test method variability).
---------------------------------------------------------------------------

     Water tank coatings--59 percent;
     Diesel fuel additives--90 percent; and
     Penetrating lubricants--68 percent.
    For the sixth designated item (bedding, bed linens, and towels), 
the proposed minimum biobased content was 18 percent. This value was 
calculated using the tested biobased content of 37 percent for the 
qualifying biobased feedstock and multiplying it by the 50/50 blend in 
which it is used. After proposal, USDA received additional biobased 
content test data showing that the qualifying biobased content of the 
product was 28 percent rather than the 37 percent used in developing 
the proposed rule. USDA has, therefore, recalculated the minimum 
biobased content by using the 28 percent and then removing 3 percentage 
points to account for the test method's variability. The resulting 25 
percent was then multiplied by 0.5 to account for the 50/50 blend in 
the final product. The result is a minimum biobased content of 12.5 
percent, which USDA rounded to 12 percent and has used in the final 
rule for this designated item.
    Comment: One commenter suggested that, in addition to considering 
the  3 percent variability, the minimum level be rounded 
down to the nearest 5 or 10 percent. The commenter was concerned that 
basing the minimum biobased content on a limited number of products, or 
in some cases on a single product, could lead to the perception that 
Federal agencies are giving unfair competitive advantage to the 
manufacturers of those products. To illustrate this point, the 
commenter stated that the single product used for roof coatings 
immediately has a ``monopoly'' on preferred procurement of biobased 
products within that product designation. Thus, by rounding down to the 
nearest 5 or 10 percent, the commenter stated that the value would not 
be specifically attached to a single product and the product(s) used to 
determine the minimum biobased content for the item would not be 
adversely affected by the designated minimum content requirement for 
that item. Also, rounding down would avoid logical legal arguments of 
Federal agencies providing a specific product or manufacture with an 
unfair competitive advantage. This commenter recommended minimum 
biobased content levels for each of the six proposed items as follows:
     Mobile equipment hydraulic fluids--20%
     Roof coatings--55%
     Water tank coatings--55%
     Diesel fuel additives--90%
     Penetrating lubricants--20% (or 65%)
     Bedding, bed linens, and towels--15%
    Response: As noted in the previous response, USDA agrees that it is 
appropriate to take the variability of the test method into account and 
reduce the minimum biobased contents accordingly. Because, as discussed 
previously in this preamble, USDA is deferring the effective date for 
preferred procurement for items with only one manufacturer identified, 
it is unnecessary to reduce further the minimum biobased content by 
rounding down to the nearest 5 to 10 percent value in order to separate 
the value from any one manufacturer.
    Comment: One commenter recommended that the minimum biobased 
content level for penetrating lubricants be lowered so as not to 
exclude the product that contains 26 percent biobased content. The 
commenter acknowledged that excluding the 26 percent product would not 
necessarily work contrary to the stimulus directive of the statute, but 
the commenter preferred to let the marketplace drive the increased 
biobased content for the item. The commenter noted that if USDA finds 
that the suggested 20 percent value for penetrating lubricants is not 
warranted, then a minimum of 65 percent is recommended based on the 
precision limitations.
    Response: USDA agrees with the commenter about the desirability of 
letting the marketplace drive the use of higher biobased content 
products within an item. To that effect, USDA believes that it is 
reasonable to set minimum biobased content requirements higher than the 
lowest biobased content identified when (1) there are no known 
technical reasons to differentiate the product with the lowest biobased 
content from those with higher biobased content; and (2) the minimum 
biobased content of that product is sufficiently lower than the group 
of minimum biobased contents of the other tested products that the 
product can be viewed as an ``outlier.'' This is the case for 
penetrating lubricants. First, USDA found no technical reason to 
differentiate this product from those with the higher biobased 
contents. Second, the biobased content of this product is 26 percent 
compared to the other four products' biobased content of 71 percent or 
higher. USDA believes that this large difference (26 versus the next 
lowest content of 71 percent) qualifies the product as an ``outlier.'' 
Therefore, USDA is basing the minimum biobased content for penetrating 
lubricants on the product with the 71 percent biobased content. As 
discussed in previous responses, this value was lowered to 68 percent 
in the final rule to account for test method precision and was not 
rounded down to the nearest 5 or 10 percentage level (i.e., to 65 
percent).

Biodegradability

    Comment: Eight commenters supported including the use of ASTM 
biodegradability standards and three of the commenters recommended 
specific revisions for incorporating the ``percent biodegradation,'' 
``within a certain timeframe,'' and ``in a specific disposal 
environment'' into the definition of ``biodegradability.'' Two of the 
commenters stated that this was needed in order to make the definition 
consistent with the ASTM standards on biobased products and to ensure 
that manufacturers' claims are consistent with the guidelines developed 
by the Federal Trade Commission (FTC), which require that manufacturers 
qualify, to the extent necessary, the product's ability to degrade in 
the environment where it is customarily disposed and the rate and the 
extent of degradation.
    Response: USDA believes that, within the context of section 2902, 
the definition of biodegradability is appropriate and the requirements 
specified in the proposal are sufficient. The FB4P does not relieve in 
any way a manufacturer from complying with the FTC guidelines. A 
biobased product included in the FB4P must follow the FTC guidelines to 
the same extent as any other product. Nothing in the implementation of 
the Guidelines for the FB4P or in the designation of items implies 
otherwise. Further, it is not USDA's intent to define an acceptable 
level of biodegradability for biobased products.
    USDA believes that, where manufacturers claim biodegradability as a 
feature of their product under the FB4P, such claims should be 
supported

[[Page 13697]]

using ASTM methods because it is important to ensure that procurement 
agents have access to reliable information regarding the products they 
purchase. As with other performance specifications referenced in the 
designation of items, there may be numerous test methods or procedures 
available as measures of biodegradability. However, because of the 
potential impact on the environment, USDA chose to limit the 
verification of biodegradability claims to the use of ASTM methods. 
Each of the ASTM standards listed in the proposed rule includes the 
types of qualifiers (``percent biodegradation,'' ``within a certain 
timeframe,'' and ``in a specific disposal environment'') recommended by 
the commenter. USDA believes that, rather than incorporating such 
qualifiers into the definition of biodegradability, it is appropriate 
to require the use of the applicable ASTM standards and then let the 
purchasing agents apply their discretion in selecting the product that 
best meets their needs.

Comments Related to Specific Designated Items--Mobile Equipment 
Hydraulic Fluids

    Comment: One commenter stated that the mobile equipment hydraulic 
fluids item should be divided into two levels, one for specialized uses 
(the 24 percent biobased product), and one for general uses (with a 
biobased content of possibly over 80 percent). The commenter stated 
that they had conducted ``fairly extensive'' market research in the 
product area and found that the majority of ``standard'' use hydraulic 
fluids to be in the 90 percentile of biobased content and that the 
lower level biobased content products were found in more specialized 
applications. The commenter then stated that to ensure the greatest 
value to the government and to the environment, the proposed rule 
should emphasize the higher level content fluids to minimize the use of 
petroleum content.
    Response: USDA agrees with the commenter that it is reasonable to 
develop two minimum biobased content requirements for this designated 
item. However, rather than subdividing the current designated item, 
USDA is revising the designated item in the final rule to apply to 
general purpose, or standard, mobile equipment hydraulic fluids only. 
USDA will ``reserve'' as an item for future designation mobile 
equipment hydraulic fluids for high performance, low pour-point 
markets. USDA is doing this, in part, because there is only one product 
in this newly created designated item and the Department does not have 
BEES results for the product.
    Based on the data available to it, USDA has determined that the 
minimum biobased content should be based on a product with a biobased 
content of 47 percent. After the 3 percent adjustment for precision, 
the minimum biobased content for this item is 44 percent. Therefore, 
USDA is promulgating 44 percent as the minimum biobased content for 
mobile equipment hydraulic fluids in general purpose applications.
    Comment: Two commenters stated that USDA should include a specific 
exemption for hydraulic fluids, penetrating lubes, diesel fuel 
additives, and other items that are used in tactical vehicles and 
equipment. One of the commenters also stated that biobased hydraulic 
fluid should not be required in systems where failure could have 
catastrophic results or where high levels of cleanliness are required 
(cleanliness maintained below 15 microns) until more operating 
experience has been gained with biobased fluids in less critical 
applications.
    The other commenter stated that it does not believe it is 
appropriate to apply the biobased purchasing requirement to tactical 
equipment unless the Department of Defense has documented that these 
products can meet the performance requirements for such equipment and 
are available in sufficient supply to meet domestic and overseas 
deployment needs. Therefore, the commenter recommended that USDA revise 
the designations of both the hydraulic fluids and the penetrating 
lubricants to make clear that they are for non-tactical applications 
only.
    Response: USDA believes that the situations described by the 
commenters are of sufficient concern that it is appropriate to provide 
specific exemptions for certain designated items on an item-by-item 
basis. Therefore, USDA is exempting from the preferred procurement 
program the use of mobile equipment hydraulic fluids, penetrating 
lubricants, and diesel fuel additives when used in military equipment 
in combat or combat-related missions and for spacecraft systems and 
their launch support equipment where failures could have catastrophic 
consequences.

Comments Related to Specific Designated Items--Water Tank Coatings

    Comment: Two commenters expressed concern over designating water 
tank coatings as an item for preferred procurement. One commenter asked 
whether the use of biobased water tank coatings had been reviewed by 
industry and Government organizations responsible for public water 
supplies. This commenter stated that the viability of the biobased 
product proposed for coating water storage tanks needs to be adequately 
tested and approved by appropriate Government and industry groups 
(including obtaining NSF International (NSF) certification) to ensure 
that the product will not deteriorate over time and result in 
contamination of drinking water supplies. The second commenter stated 
that USDA should ensure that NSF-certified products are available 
before finalizing the designation of water tank coatings as a biobased 
procurement item.
    Response: USDA agrees with the commenters that a water tank coating 
must be formulated in a manner that meets relevant and appropriate 
performance specifications. Therefore, USDA will work with 
manufacturers to allow posting of all performance tests on its FB4P Web 
site and with the interagency council to understand Federal purchasing.
    In designating items for preferred procurement, the statute 
requires USDA to consider two items: (1) The availability of the item 
and (2) the economic and technologic feasibility of using such items, 
including life-cycle costs. USDA considers an item economically and 
technologically feasible for designation if products within that item 
are being offered and used in the marketplace. USDA does not consider 
certification of a product prior to the designation of an item a 
prerequisite for designation. Thus, USDA has determined that a water 
tank coating product within this designated item exists that meets 
these criteria and that this item qualifies for designation for 
preferred procurement.
    In order for a procurement agent to give preferred procurement to a 
biobased water tank coating, the biobased water tank coating must 
comply with all relevant performance standards. Many Federal and State 
authorities require products that come into contact with drinking water 
to be certified to American National Standards Institute/NSF (ANSI/NSF) 
Standard 61 by an ANSI accredited certifier. Thus, water tank coatings 
would be certified against the (ANSI/NSF) Standard 61, if the coating 
is used for potable water.
    With regard to the biobased water tank coating used as the basis 
for designation water tank coatings as an item eligible for preferred 
procurement, the coating in question has been certified against ANSI/
NSF Standard 61. This coating was tested by the Underwriters Laboratory 
(UL), which is

[[Page 13698]]

accredited by ANSI to certify drinking water system products and 
components to ANSI/NSF Standard 61. Because both certification programs 
are accredited by ANSI, the UL's drinking water product certifications 
are equivalent to NSF's drinking water product certifications.

Comments Related to Specific Designated Items--Diesel Fuel Additives

    Comment: One commenter questioned whether USDA intent for the 
``diesel fuel additive'' item was to include biodiesel sold separately 
as a fuel additive or to include already-blended fuel such as B20. The 
commenter stated that further definition of the item when it is used 
strictly as a fuel additive is needed in terms of required properties 
and performance characteristics.
    Another commenter stated that USDA should clarify that the 
designation of diesel fuel additive as a biobased product is not 
intended to address the use of biobased diesel when the biodiesel is 
used as a blendstock and recommended that section 2903.13 be clarified 
that this designation of diesel fuel additives is not intended to 
include biodiesel when used for the purposes of extending fuel 
supplies.
    Response: The item being designated for preferred procurement is 
the diesel fuel additive and not the blended biodiesel fuel itself. 
USDA believes that as long as the diesel fuel additive itself is 
biobased and meets the minimum biobased content, it qualifies as a 
biobased product eligible for preferred procurement.
    With regard to biodiesel (that is, neat biodiesel, often referred 
to as B100), USDA recognizes that the most prevalent use of B100 by far 
is to mix it with diesel fuel to create a blended fuel stock (e.g., 
B20). However, USDA does not believe this should preclude biodiesel 
(i.e., neat biodiesel), when used as an additive, from being a biobased 
product eligible for preferred procurement under this program.
    USDA points out that the designation of diesel fuel additive as a 
product eligible for preferred procurement in no way affects the 
purchase of biodiesel fuel (even neat biodiesel when used as a fuel) as 
a means of complying with the Energy Policy Act of 1992 or with 
Executive Order 13149.
    Comment: Two commenters disagreed with the designation of diesel 
fuel additives because they consider biodiesel to be a fuel rather than 
a fuel additive. One of the commenters stated they have concerns with 
the handling and use of biodiesel as a fuel component. This commenter 
also stated that biodiesel fuel blends are physically different in 
nature than conventional diesel fuels and as such have different 
storage, handling, and use concerns from diesel fuel, and are not 
universal drop-in replacement fuels for conventional diesel. Lastly, 
this commenter stated that biodiesel is not a true additive and in fuel 
industry practices it is not treated as such.
    The other commenter pointed out that ASTM standards for biodiesel 
are for its use as a fuel and do not address technical or chemical 
considerations for using it as an additive. This commenter also noted 
that biobased diesel products registered as fuel additives contain only 
one percent biodiesel and, therefore, if the Federal agencies purchased 
biobased diesel additives, they would not create a notable increase in 
market share for biodiesel compared to the markets created through 
their fuel purchases.
    On the other hand, two commenters supported the designation of 
diesel fuel additives. One of the commenters noted that EPA recognizes 
biodiesel as both a fuel and a fuel additive and that several 
organizations have received fuel additive registrations for biodiesel. 
The commenter recommended that USDA clarify that the designation of 
diesel fuel additives will not prevent agencies that are currently 
using B20 from continuing to use B20 as a means of complying with the 
Energy Policy Act of 1992 and Executive Order 13149. The other 
commenter pointed to fuel tests to determine fuel lubricity and the 
effectiveness of small amounts of biodiesel to achieve large increases 
in lubricity and its flexibility in achieving increases in lubricity.
    Response: As noted in the previous response, USDA intends for 
``diesel fuel additives,'' and not diesel fuels (including biodiesel 
fuels), to be afforded preferred procurement. The definition of 
``diesel fuel additive'' in the proposed rule essentially defined 
biodiesel. USDA believes that definition is the primary cause of 
confusion as to what products were intended to be included in the 
proposed designated item. In the final rule, USDA has revised the 
definition of ``diesel fuel additive'' to make clear what is to be 
considered an additive and to make clear that biodiesel fuels are not 
part of the definition.
    The revised definition contains three parts. The first part defines 
``diesel fuel additive'' using the basic definition from EPA's fuel and 
fuel additive registration regulation. USDA believes that the 
definition of ``additive'' for the purposes of EPA registration is 
appropriate for defining ``diesel fuel additives'' under the FB4P 
program.
    The second part of the revised definition explicitly includes neat 
biodiesel (B100) when used as an additive. USDA believes this is useful 
to make clear that there are some instances in which purchases of neat 
biodiesel qualify as a diesel fuel additive. In those instances where 
neat biodiesel is purchased to be used as an additive, it meets the 
requirements for a biobased diesel fuel additive within the context of 
this designated item. USDA believes that the purchase and use of neat 
biodiesel as a fuel, while obviously consistent with the goals of the 
FB4P program, are outside the scope of the FB4P program.
    The third part of the revised definition explicitly excludes 
blended biodiesel fuel, such as B20, and neat biodiesel when used as a 
fuel. USDA believes this is also useful to make clear that the purchase 
of such fuels does not constitute the purchase of diesel fuel 
additives.
    USDA believes that the revised definition sufficiently clarifies 
the commenters' concern about what is being given preferred procurement 
and that blended fuel stocks are not in any way affected by this 
designated item.
    Comment: One commenter recommended that, if USDA decides to 
designate diesel fuel additive, the final guidance include the 
following elements: (1) Applicability to non-tactical vehicles and 
equipment only, (2) definition of diesel fuel additive, including a 
percentage of biodiesel content (e.g., B1, B2, or B5), (3) statement 
that the use of B20 fuel to meet the alternative fuel requirements 
under the Energy Policy Act of 1992 and Executive Order 13149 satisfies 
the requirement to purchase biobased diesel fuel additives, and (4) 
resolution of all performance issues, including biodiesel stability 
concerns, raised by the Federal agencies in their comments on this 
proposed rulemaking.
    Response: As noted in a previous response, USDA has agreed to 
exclude the preferred purchase requirement for diesel fuel additives 
when used in military equipment for combat or combat-related missions.
    With regard to the definition of diesel fuel additive, we have 
revised the definition to make clear which products fall within the 
designated item. The product itself must be used as an additive and, to 
qualify for preferred procurement as a biobased product, must have a 
biobased content of at least 90 percent. The resulting concentration 
once the biobased additive is mixed with the diesel fuel is not 
relevant to the determination of whether or not the

[[Page 13699]]

biobased product is to be treated as an additive.
    The commenter's third recommendation relates to the interaction 
between the biobased preferred procurement program and the Energy 
Policy Act of 1992 and Executive Order 13149. USDA does not have the 
authority under section 9002 to give procurement preference to motor 
vehicle fuels. The purchase of B20 as an alternative fuel under the 
Energy Policy Act of 1992 and Executive Order 13149, while consistent 
with the overall goals of the FB4P program, would have no effect on a 
procuring agency's responsibility to purchase biobased diesel fuel 
additives, if they purchase diesel fuel additives. The item designated 
for preferred procurement by today's final rule is diesel fuel 
additives and not blended diesel fuel. Only if an agency buys a diesel 
fuel additive and mixes it with diesel fuel would there be a 
requirement that the additive be a biobased product.
    With regard to the commenter's request that USDA resolve all 
performance issues, including biodiesel stability concerns, USDA has 
determined that demonstrating that certain products, such as diesel 
fuel additives, have achieved market penetration and are used in 
certain applications is a sufficient basis for designating items, and 
it is unnecessary for USDA to demonstrate that such products can be 
used in all applications prior to designating the item.
    Comment: One commenter recommended that any product designated for 
preferred procurement in the diesel fuel additive category should have 
been tested using ASTM D6751 standards.
    Response: USDA agrees with the commenter that, whether used as a 
fuel or as an additive, biodiesel should be tested using ASTM D6751 to 
ensure its quality. However, USDA points out that, in the final rule, 
the diesel fuel additive item not only includes neat biodiesel when 
used as a fuel additive, but also ``any substance, other than one 
composed solely of carbon and/or hydrogen, that is intentionally added 
to diesel fuel.'' In the latter case, ASTM D6751 would not be 
appropriate.

Comments Related to Specific Designated Items--Bedding, Bed Linens, and 
Towels

    Comment: One commenter noted that USDA specifically solicited 
comments on the appropriateness of creating this broader item 
designation based only on the availability of blankets that are being 
produced by one manufacturer using qualifying biobased content at a 
relatively low level. The commenter stated that they do not believe 
that this is appropriate, maintaining that the credibility of the 
biobased preference program is degraded when item categories are 
designated for which there are no products commercially available to 
the consumer.
    Another commenter recommended that the designated item ``bedding, 
bed linens, and towels'' should be subdivided because it is too broad. 
The commenter recommended that designated items be narrowly focused on 
groups of products with similar functions. To illustrate, the commenter 
pointed out the diversity of functions within the ``bedding, bed 
linens, and towels'' item. According to the commenter, this diversity 
could result in differences in composition of the products and the 
selection of a ``functional unit'' that is not appropriate for all 
products.
    Response: Section 9002(e)(1)(A) of FSRIA provides, in part, for the 
designation of ``those items which are or can be produced with biobased 
products.'' USDA does not interpret this as a carte blanche charge to 
assume anything and everything can be made with biobased products and 
thus open the entire program to all products the Federal government 
procures. Based on conversation with industry, USDA believes in the 
instance of towels and bed linens there is sufficient evidence that the 
same biobased fibers currently used to manufacture blankets can be 
incorporated into bed linens and towels to produce biobased versions of 
these products. Today, USDA knows of two biobased fibers that can and/
or are used in these products. One has a biobased content of 28 percent 
and the other has a biobased content of 100 percent.
    USDA recognizes that the three types of products within this 
proposed designated item serve different basic functions. One of the 
key factors in achieving these different basic functions is how the 
product is woven; that is, the style of weave. For example, is the 
product a broad loop or a tight loop? Sheets, for example, would have a 
tight weave with no broad loops. While the weaves may vary, USDA 
believes the key point for including these products within the same 
item is that they are or can be made with the same basic types of 
biobased fibers. Furthermore, USDA does not believe it reasonable to 
project an outcome that a procuring agency would be put in the position 
of buying towels that have a higher biobased content instead of the 
blankets with a lower biobased content because towels and blankets have 
different performance characteristics.
    With regard to the functional unit, the functional unit identified 
for the tested product is ``one blanket'' of certain dimensions. As 
BEES information is developed on bed linens and towels, USDA will 
identify different functional units for these products as appropriate 
(e.g., one towel, one sheet). USDA does not believe procuring agencies 
would try to compare blankets with towels based on the functional unit 
of ``one blanket.''
    For these reasons, USDA believes it is reasonable and appropriate 
to designate bed linens and towels for preferred procurement and has 
decided not to subdivide this item, as requested by the commenter, into 
three separate categories.
    Comment: Two commenters supported the designation of ``bedding, bed 
linens, and towels.'' Three other commenters stated that USDA needs to 
provide more information about whether the biobased fibers used in the 
``bedding, bed linens, and towels'' designated item meet the 
precautions and infection control procedures established by the Centers 
for Disease Control (CDC) and, if they do not, the designation should 
exclude applications in healthcare facilities. The commenters stated 
that more information on the cost and durability of these products is 
also needed. One commenter pointed out that if blankets made with 
biobased fibers are heavier than those currently used, the cleaning 
costs could be significantly increased. One of the commenters also 
pointed out the lack of information about what fibers are available for 
these uses.
    Response: The commenters are seeking a categorical exemption for 
these products when used in healthcare facilities if the products do 
not meet certain precautionary and infectious disease requirements of 
the CDC. USDA will not provide a categorical exemption for these 
products when used in specific situations for the four reasons 
discussed below.
    1. The statutory requirements of FSRIA require USDA to designate 
items for preferred procurement and to make available to the 
procurement agencies information on the designated items, including 
information on the performance characteristics of products offered 
within a designated item. It is still the responsibility of the 
procurement agent to determine whether a biobased product, or any other 
product, meets the performance requirements of the procuring agency for 
which the product is being bought and its intended use.
    2. The statute requires procuring agencies to give preference to 
biobased

[[Page 13700]]

products in designated items, but does not require the agency to 
purchase biobased products if one of three conditions exist, one of 
which addresses the performance, or lack thereof, of the biobased 
product. Specifically, the statute allows a procuring agency not to buy 
a biobased product within a designated item if the biobased product 
fails to meet the performance standards set forth in the applicable 
specifications or fails to meet the reasonable performance standards of 
the procuring agencies (see section 9002(c)(2)(B)). For example, 
polylactic acid (PLA) fibers currently are not tolerant of high heat 
and bleach, and products produced using these PLA fibers are not likely 
to meet CDC performance requirements. Thus, procuring agencies, such as 
the Veterans Administration, using products that need to meet CDC 
performance requirements would not be required, or even expected, to 
buy such products. Because the statute already provides the relief 
sought by the commenters, there is no need to include such exemptions 
in the rule.
    3. Providing a categorical exemption could have the effect of 
discouraging manufacturers from developing biobased products within a 
designated item such as new biobased products that could meet the CDC's 
performance requirements, at some point in the future. USDA believes 
this would have an unnecessary dampening effect on potential markets 
for acceptable biobased products in the future.
    4. Finally, USDA urges manufacturers to note the concerns raised by 
these commenters and recognize that extra effort on the part of 
manufacturers may be necessary to provide procurement agents with 
evidence that the manufacturer's products meet the agency's 
requirements. This may require manufacturers to test their products 
against all applicable standards and requirements for the markets 
(e.g., healthcare facilities) in which they wish to market their 
products. In addition, because procuring agencies are not required to 
purchase biobased products if they fail any one of the criteria that 
allow an agency to not purchase a biobased product within a designated 
item, USDA is actively working to identify and publicize relevant 
performance standards so that manufacturers can understand how to make 
their products more desirable. In addition, to make information on the 
performance characteristics of biobased products more accessible to the 
procuring agencies, USDA is working with manufacturers to post product 
performance information on the FB4P Web site or to provide a link to 
the manufacturer's Web page where such information can readily be 
obtained.
    While manufacturers have the responsibility to test their products 
against applicable agency performance requirements and specifications, 
in order to comply with section 2902.4 of the Guidelines, procuring 
agencies will have to reexamine their performance requirements and 
specifications to ensure that they are not biased against biobased 
products, that they are still necessary and relevant, and that they are 
not redundant.
    With regards to the commenter's concern about the lack of 
information on what fibers are available for bedding, bed linens, and 
towels, information, including performance information, would be posted 
by the manufacturers of such fibers once the designation of the item 
has been finalized. Currently, USDA knows of two biobased fibers 
available for these uses.
    Comment: One commenter requested clarification on how the biobased 
content of fibers is to be determined: Is it based on content mix after 
the item is manufactured or on the weight of fibers prior to 
manufacturing?
    Response: In the example presented by the commenter, the biobased 
content is based on the content mix after the item is manufactured; 
that is, based on the content mix of the finished product. For bedding, 
bed linens, and towels, the biobased content would be calculated based 
on the content mix of the blanket, sheet, or towel after it is 
manufactured, but the biobased content must be based on qualifying 
biobased material. For this item, cotton, wool, linen, and silk are not 
qualifying material and would not be used in determining the amount of 
biobased material in the finished product.
    Unless otherwise specified in the designation of an item, biobased 
content of a product within a designated item would be based on the 
finished product. USDA will specify the calculation to be used for each 
designated item within each rulemaking. For the other five items in 
today's rulemaking, the biobased contents are calculated based on the 
finished product.
    Comment: Two commenters objected to the exclusion of natural fibers 
(wool and cotton) from the qualifying feedstocks that can be used in 
producing ``bedding, bed linens, and towels.''
    One commenter stated that the preferred procurement program 
legislation was intended to substitute plant-derived products for 
fossil fuel-derived products, not to substitute one set of plant-
derived products for another set of plant-derived products. The 
commenter acknowledges that the statute does urge USDA to develop a 
program that encourages new biobased products and that the overall 
intent was to expand the use of plant matter as an industrial and fuel 
material, but not to substitute one type of plant matter with another.
    The commenter refers to USDA statements concerning the objectives 
of the preferred procurement program to increase the demand for 
biobased products, which would in turn increase the demand for many 
agricultural products. The commenter then states that it is doubtful 
that those who wrote the legislation intended the USDA to develop 
programs that resulted in either the substitution of corn-derived 
products for cotton or wool products or the preference of synthetic 
fibers of any kind over natural fibers.
    The commenter, therefore, recommended that either the designation 
of ``bedding, bed linens, and towels'' be withdrawn at this time or 
USDA abandon its insistence that biobased products are not necessarily 
plant-derived products (preferring the latter approach), because 
synthetic fibers made from plants should have to compete with natural 
fibers without a preference. The commenter noted that, given synthetic 
fibers' performance advantages, they could still be attractive even at 
a slightly higher price. By making such a change, the commenter 
maintained that the rule would focus on substituting synthetic fibers 
for petroleum-derived fibers, which was clearly the legislation's 
principal objective.
    In a similar request, the second commenter wants cotton fiber to be 
provided equal consideration as a qualifying biobased material as other 
fibers. This commenter agrees that such products as bedding, bed 
linens, and towels made with cotton fiber can be considered mature 
products. The commenter then points out that these same textiles made 
with other natural fiber and most synthetic/man-made fibers (citing 
polyester, nylon, polypropylene, synthetic cellulosics, and most 
traditional man-made fibers) should also be considered mature products. 
The commenter states that to consider these products made from cotton, 
wool, and silk as mature products and not mature products when made 
with other fibers is an arbitrary distinction that is not justified. 
The commenter, therefore, concludes that if other fibers are considered 
acceptable biobased materials for this category, then cotton fiber also 
should be an acceptable qualifying biobased material. The commenter 
recommends that cotton

[[Page 13701]]

fiber be considered a qualifying biobased material if other natural 
fibers and man-made fibers that are also mature products are considered 
acceptable biobased materials.
    A third commenter stated that USDA should establish a much higher 
total biobased product content for bedding, bed linens, and towels, 
including cotton and wool.
    Response: The legislative history of Title IX of FSRIA identified 
three primary objectives associated with section 9002:
    1. To improve demand for biobased products;
    2. To spur development of the industrial base through value-added 
agricultural processing and manufacturing in rural communities; and
    3. To enhance the Nation's energy security by substituting biobased 
products for fossil energy-based products derived from imported oil and 
natural gas.
    In addition, the conference report accompanying FSRIA indicated 
that the intent of section 9002 ``is to stimulate the production of new 
biobased products and to energize emerging markets for those 
products.'' It is in response to this intent that USDA continues to 
believe that it is appropriate to exclude mature markets from the 
preferred procurement program.
    USDA acknowledges that the concerns expressed by the first 
commenter may occur; that is, as written, the preferred procurement of 
biobased bedding, bed linens, and towels may displace cotton and wool 
products with, for example, corn-derived products. To the extent they 
do, USDA recognizes that the program is not fully achieving the third 
primary objective stated for the program; that is, substituting 
biobased products for fossil energy-based products derived from 
imported oil and natural gas. Nevertheless, USDA believes that 
designating cotton and wool as non-qualifying biobased feedstocks is 
appropriate for this designated item because it will encourage other 
biobased products to enter this market, stimulating the production of 
new biobased products and creating for these new biobased products a 
new market. Further, USDA stresses that similar opportunities exist for 
new cotton and wool products to enter markets within other designated 
items and strongly encourages such manufacturers to seek out these 
other opportunities.
    With regard to the basis presented by the second commenter that 
other materials used to manufacture bedding, bed lines, and towels 
should also be considered mature markets, but their materials are not 
excluded as being qualifying biobased material, USDA agrees that it is 
reasonable and desirable to treat ``mature'' natural or plant-derived 
fibers in these products equally. In revisiting this issue, USDA has 
decided to add linen and silk as mature fibers that will also be 
treated as non-qualifying biobased material for this designated item. 
Both linen and silk are natural fibers that have been in widespread use 
for many years and their use in products within this designated item 
are considered to be equal to that of cotton and wool in terms of their 
being ``mature'' materials. While linen was not specifically addressed 
along with cotton, wool, and silk in the Guidelines' discussion of 
``mature markets,'' it is one of the oldest known fibers, and the 
rationale for excluding cotton, wool, and silk also would apply to 
linen. Designating these fibers as ``mature'' and excluding them ``as 
qualifying biobased materials'' does not preclude their use in products 
that can receive preferred procurement. Products manufactured by 
blending qualifying biobased fibers with non-qualifying fibers (cotton, 
wool, linen, or silk) will be eligible for preferred procurement if the 
qualifying biobased fibers make up 12 percent or more of the final 
product.
    Lastly, the third commenter requested that USDA set a higher 
minimum biobased content that included consideration of cotton and 
wool. For the reasons stated above, USDA has not changed its position 
on the inclusion of cotton and wool and, therefore, USDA has not 
changed the basis on which it has established the minimum biobased 
content for this designated item.
    Comment: One commenter suggested that any final designation should 
clearly indicate which biobased fibers are included rather than 
designating only by exclusion. The commenter stated that understanding 
what specific fibers are included would allow for better assessment of 
environmental benefits, cost, and health-based issues, such as possible 
allergic reactions.
    Response: USDA believes that it is more appropriate to identify 
those materials that are excluded in a designated item rather than 
those that are included. First, the intent of the preferred procurement 
program is to encourage new markets for biobased products. This means 
that one expects that new biobased materials would be used to develop 
biobased products in this item. USDA has no way to forecast what those 
new biobased materials would be and thus simply cannot develop a list 
of materials to be included as qualifying materials. The only option is 
to identify those materials that are excluded. Second, materials that 
are being excluded are those that were ``mature'' in 1972. This is a 
finite set of materials that USDA can identify. For these reasons, the 
USDA identifies in the final designation those materials to be excluded 
as qualifying biobased materials.
    Comment: One commenter noted that the life-cycle costs were 
computed based on a blanket weighing 4 pounds, but no information on 
the initial cost of the blanket was provided to allow the commenter to 
compare to what they currently pay for blankets. The commenter also 
noted that where there is a greater difference in blanket weight (the 
commenter typically uses blankets that weigh 2.5 to 3 pounds), the 
biobased substitute could potentially add more than $40,000 to cleaning 
costs per year at any one of the commenter's hospitals.
    Response: The initial cost of the tested biobased blanket is 
$139.99, which was identified in Table 6 to the preamble under ``first 
cost.''
    The blanket tested for biobased content weighed 4 pounds. USDA 
expects that manufacturers of biobased blankets will be able to provide 
blankets of less weight to meet the commenter's needs.
    Finally, the commenter may find that the cost of purchasing 
biobased blankets is unreasonable and, as allowed under section 9002, 
would not be required to purchase such blankets.
    Comment: One commenter expressed concern that the future voluntary 
labeling program could result in an organic cotton or wool bedspread 
not being able to carry the U.S.D.A. Certified Biobased Product label, 
but a corn- or wood-derived bedspread would be able to carry this 
label. The commenter stated that such an outcome would create 
widespread consumer confusion and result in people seeing the label, 
not as one signifying that the product is derived from plants, but that 
it is a synthetic fiber rather than a natural fiber.
    Response: USDA appreciates the concern expressed by the commenter 
and will address this concern in the development of the proposed 
voluntary labeling program rule.
    Comment: One commenter requested USDA to include cotton fiber when 
used to make other than mature textile products and cotton by-products 
and cottonseed oil, protein, and refining by-products when used to make 
biobased items as qualifying biobased materials for those biobased 
items afforded Federal procurement preference. The

[[Page 13702]]

commenter, for example, pointed out that cottonseed oil and refining 
by-products can be used to make hydraulic fluids and diesel fuel 
additives, and that cottonseed protein can be used to make roof 
coatings and water tank coatings.
    Response: The rule, as proposed and as promulgated, does what the 
commenter is requesting; that is, cotton by-products and cottonseed 
oil, protein, and refining by-products when used to make biobased items 
are qualifying biobased materials, and cotton fiber when used to make a 
product other than mature textile products is a qualifying biobased 
material. As USDA designates additional items for preferred 
procurement, USDA will make determinations of whether mature markets 
existed in 1972 and, if so, identify those materials that do not 
qualify as biobased material. Unless a material is specifically 
identified as a material not qualifying as a biobased feedstock, such 
as cotton fiber has been for bedding, bed linens, and towels, the 
material may be used in any designated item and will be considered a 
qualifying biobased feedstock. Therefore, USDA does not see the need to 
revise the rule to address the commenter's request because the rule 
already accommodates the request.

Warranties and Performance Specifications

    Comment: One commenter noted that the preamble does not address the 
issue of maintenance warranties and asked whether manufacturers of 
equipment in which biobased hydraulic fluids or diesel fuel additives 
are used have agreed, or will agree, to specifically state that use of 
these products will not void maintenance warranties.
    Response: As time and resources allow, USDA will work with 
manufacturers on the issue of maintenance warranties. At this time, 
however, USDA does not have information available as to whether or not 
the manufacturers will state that the use of these products will void 
maintenance warranties. As information is available on warranties, USDA 
will make such information available on its FB4P Web site.
    USDA encourages manufacturers to test their products against all 
relevant standards, including those that would affect maintenance 
warranties, and to work with original equipment manufacturers (OEMs) to 
ensure that the biobased products will not void maintenance warranties 
when used. USDA is willing to assist manufacturers of the biobased 
products, if they find that existing performance standards for 
maintenance warranties (or any other aspect) are not relevant or 
appropriate for biobased products, in working with the appropriate OEMs 
to develop tests that are relevant and appropriate for the end uses in 
which the biobased products are intended.
    In spite of these efforts, if there is insufficient information 
regarding the performance of a biobased product, including its effect 
on equipment maintenance warranties where applicable, USDA notes that 
the procurement agent would not be required to buy such a product.

Designation of Materials Other Than Products

    Comment: Two commenters recommended that, because plastic products 
contain colorants, additives, resins, and other materials, USDA create 
a list of approved raw materials for plastic products. If a list of 
approved raw materials were created, manufacturers could use that list 
to create products that would be approved for procurement preference.
    Response: Under section 9002 of FSRIA, USDA is required to 
designate ``products,'' not raw materials, for preferred procurement. 
Section 9001 of FSRIA defines ``biobased products'' as ``a product 
determined by the Secretary to be a commercial or industrial product 
(other than food or feed) that is composed, in whole or in significant 
part, of biological products or renewable domestic agricultural 
materials * * * or forestry materials.'' Based on this definition of 
``biobased products,'' USDA does not believe it has the statutory 
authority to designate ``raw materials'' for preferred procurement. 
Therefore, USDA will not create a list of approved raw materials for 
plastic products or any other biobased product that is designated for 
preferred procurement.
    Comment: Two commenters requested that USDA designate qualifying 
feedstocks (fibers, resins, and other inputs) rather than, or in 
addition to, individual items manufactured from biobased intermediates. 
One of the commenters stated that this was particularly important with 
the extension of the FB4P to Federal contractors (as required by the 
recently enacted Energy Policy Act of 2005), because businesses that 
contract with Federal agencies to produce finished products would be 
subject to the FB4P requirements.
    Response: USDA previously considered extending preferred 
procurement designation to feedstocks in response to industry comments 
as USDA was initially developing this program. USDA determined that the 
best policy would be to maintain a much tighter control on the 
characteristics of products, such as the environmental and health 
effects and biobased content of products that would qualify for 
preferred procurement through the process of designation item by item. 
By opening the designation process up to feedstocks, a wider 
variability of product characteristics would result. Therefore, USDA 
considers it to be undesirable to open the preferred procurement 
program to feedstock groupings and has not done so.

IV. Regulatory Information

A. Executive Order 12866: Regulatory Planning and Review

    Executive Order 12866 requires agencies to determine whether a 
regulatory action is ``significant.'' The Order defines a ``significant 
regulatory action'' as one that is likely to result in a rule that may: 
``(1) Have an annual effect on the economy of $100 million or more or 
adversely affect, in a material way, the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities; (2) Create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency; (3) Materially alter 
the budgetary impact of entitlements, 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 set forth in this Executive 
Order.''
    It has been determined that this rule is not a ``significant 
regulatory action'' under the terms of Executive Order 12866. The 
annual economic effect associated with this final rule has not been 
quantified because the information necessary to estimate the effect 
does not exist. As discussed in the preamble to the proposed rule, USDA 
made extensive efforts to obtain information on the Federal agencies' 
usage of the six designated items. These efforts were largely 
unsuccessful. Therefore, attempts to determine the economic impacts of 
this rule would necessitate estimating the anticipated market 
penetration of biobased products, which would entail many assumptions 
and, thus, be of questionable value. Also, the program allows procuring 
agencies the option of not purchasing biobased products if the costs 
are deemed ``unreasonable.'' Under this program, the determination of 
``unreasonable'' costs will be made by individual

[[Page 13703]]

agencies. USDA knows these agencies will consider such factors as 
price, life-cycle costs, and environmental benefits in determining 
whether the cost of a biobased product is determined to be 
``reasonable'' or ``unreasonable.'' However, until the program is 
actually implemented by the various agencies, it is impossible to 
quantify the impact this option would have on the economic effect of 
the rule. Therefore, USDA relied on a qualitative assessment to reach 
the judgment that the annual economic effect of the designation of 
these six items is less than $100 million, and likely to be 
substantially less than $100 million. This judgment was based primarily 
on the offsetting nature of the program (an increase in biobased 
products purchased with a corresponding decrease in petroleum products 
purchased) and, secondarily, on the ability of procuring agencies not 
to purchase these items if costs are judged unreasonable, which would 
reduce the economic effect.
1. Summary of Impacts
    Today's rulemaking is expected to have both positive and negative 
impacts to individual businesses, including small businesses. USDA 
anticipates that the biobased preferred procurement program will 
provide additional opportunities for businesses to begin supplying 
biobased materials to manufacturers of mobile equipment hydraulic 
fluids, roof coatings, water tank coatings, diesel fuel additives, 
penetrating lubricants, and bedding, bed linens, and towels and to 
begin supplying these products made with biobased materials to Federal 
agencies and their contractors. In addition, other businesses, 
including small businesses, that do not directly contract with 
procuring agencies may be affected positively by the increased demand 
for these biobased materials and products. However, other businesses 
that manufacture and supply only non-qualifying products and do not 
offer a biobased alternative product may experience a decrease in 
demand for their products. Thus, this rule will likely increase the 
demand for biobased products, while decreasing the demand for non-
qualifying products. It is anticipated that this will create a largely 
``offsetting'' economic impact.
    USDA is unable to determine the number of businesses, including 
small businesses, that may be adversely affected by this rule. If a 
business currently supplies mobile equipment hydraulic fluids, roof 
coatings, water tank coatings, diesel fuel additives, penetrating 
lubricants, or bedding, bed linens, and towels to a procuring agency 
and those products do not qualify as biobased products, the rule may 
reduce that company's ability to compete for future contracts. However, 
the rule will not affect existing purchase orders, nor will it preclude 
businesses from modifying their product lines to meet new 
specifications or solicitation requirements for these products 
containing biobased materials. Thus, many businesses, including small 
businesses, that market to Federal agencies and their contractors have 
the option of modifying their product lines to meet the new biobased 
specifications.
2. Summary of Benefits
    The designation of these six items provides the benefits outlined 
in the objectives of section 9002: To increase domestic demand for many 
agricultural commodities that can serve as feedstocks for production of 
biobased products; to spur development of the industrial base through 
value-added agricultural processing and manufacturing in rural 
communities; to enhance the Nation's energy security by substituting 
biobased products for products derived from imported oil and natural 
gas; and to substitute products with a possibly more benign or 
beneficial environmental impact, as compared to the use of fossil 
energy-based products. By purchasing these biobased products, procuring 
agencies can increase opportunities for all of these benefits. On a 
national and regional level, this rule can result in expanding and 
strengthening markets for biobased materials used in these six items. 
However, because the extent to which procuring agencies will find the 
performance and costs of biobased products acceptable is unknown, it is 
impossible to quantify the actual economic effect of the rule. USDA, 
however, anticipates the annual economic effect of the designation of 
these six items to be substantially below the $100 million threshold. 
In addition, this rule does not: Create serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
Executive Order 12866.

B. Regulatory Flexibility Act (RFA)

    When an agency issues a final rule following a proposed rule, the 
Regulatory Flexibility Act (RFA, 5 U.S.C. 601-612) requires the agency 
to prepare a final regulatory flexibility analysis. 5 U.S.C. 604. 
However, the requirement for a final regulatory flexibility analysis 
does not apply if the head of the agency certifies that the rule will 
not, if promulgated, have a significant economic impact on a 
substantial number of small entities. 5 U.S.C. 605(b).
    USDA evaluated the potential impacts of its designation of these 
six items to determine whether its actions would have a significant 
impact on a substantial number of small entities. Because the Federal 
Biobased Products Preferred Procurement Program in section 9002 of 
FSRIA applies only to Federal agencies and their contractors, small 
governmental (city, county, etc.) agencies are not affected. Thus, this 
rule will not have a significant economic impact on small governmental 
jurisdictions. USDA anticipates that this program will affect entities, 
both large and small, that manufacture or sell biobased products. For 
example, the designation of items for preferred procurement will 
provide additional opportunities for businesses to manufacture and sell 
biobased products to Federal agencies and their contractors. Similar 
opportunities will be provided for entities that supply biobased 
materials to manufacturers. Conversely, the biobased procurement 
program may decrease opportunities for businesses that manufacture or 
sell non-biobased products or provide components for the manufacturing 
of such products. However, this rule will not affect existing purchase 
orders and it will not preclude procuring agencies from continuing to 
purchase non-biobased items under certain conditions relating to the 
availability, performance, or cost of biobased items. This rule will 
also not preclude businesses from modifying their product lines to meet 
new specifications or solicitation requirements for these products 
containing biobased materials. Thus, the economic impacts of this rule 
are not expected to be significant.
    The intent of section 9002 is largely to stimulate the production 
of new biobased products and to energize emerging markets for those 
products. Because the program is still in its infancy, however, it is 
unknown how many businesses will ultimately be affected. While USDA has 
no data on the number of small businesses that may choose to develop 
and market products within the six items designated by this rulemaking, 
the number is expected to be small. Because biobased products represent 
a small emerging market, only a small percentage of all manufacturers, 
large or small, are expected to develop and market biobased products. 
Thus,

[[Page 13704]]

the number of small businesses affected by this rulemaking is not 
expected to be substantial.
    After considering the economic impacts of this rule on small 
entities, USDA certifies that this action will not have a significant 
economic impact on a substantial number of small entities.
    While not a factor relevant to determining whether the rule will 
have a significant impact for RFA purposes, USDA has concluded that the 
effect of the rule will be to provide positive opportunities to 
businesses engaged in the manufacture of these biobased products. 
Purchase and use of these biobased products by procuring agencies 
increase demand for these products and result in private sector 
development of new technologies, creating business and employment 
opportunities that enhance local, regional, and national economies. 
Technological innovation associated with the use of biobased materials 
can translate into economic growth and increased industry 
competitiveness worldwide, thereby, creating opportunities for small 
entities.

C. Executive Order 12630: Governmental Actions and Interference With 
Constitutionally Protected Property Rights

    This rule has been reviewed in accordance with Executive Order 
12630, Governmental Actions and Interference with Constitutionally 
Protected Property Rights, and does not contain policies that would 
have implications for these rights.

D. Executive Order 12988: Civil Justice Reform

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. This rule does not preempt State or local 
laws, is not intended to have retroactive effect, and does not involve 
administrative appeals.

E. Executive Order 13132: Federalism

    This rule does not have sufficient federalism implications to 
warrant the preparation of a Federalism Assessment. Provisions of this 
rule will not have a substantial direct effect on States or their 
political subdivisions or on the distribution of power and 
responsibilities among the various government levels.

F. Unfunded Mandates Reform Act of 1995

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA), 2 U.S.C. 1531-1538, for State, local, and tribal governments, 
or the private sector. Therefore, a statement under section 202 of UMRA 
is not required.

G. Executive Order 12372: Intergovernmental Review of Federal Programs

    For the reasons set forth in the Final Rule Related Notice for 7 
CFR part 3015, subpart V (48 FR 29115, June 24, 1983), this program is 
excluded from the scope of the Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. This 
program does not directly affect State and local governments.

H. Executive Order 13175: Consultation and Coordination With Indian 
Tribal Governments

    Today's rule does not significantly or uniquely affect ``one or 
more Indian tribes, * * * the relationship between the Federal 
Government and Indian tribes, or * * * the distribution of power and 
responsibilities between the Federal Government and Indian tribes.'' 
Thus, no further action is required under Executive Order 13175.

I. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 through 3520), the information collection under this rule is 
currently approved under OMB control number 0503-0011.

J. Government Paperwork Elimination Act Compliance

    The Office of Energy Policy and New Uses is committed to compliance 
with the Government Paperwork Elimination Act (GPEA) (44 U.S.C. 3504 
note), which requires Government agencies in general to provide the 
public the option of submitting information or transacting business 
electronically to the maximum extent possible. USDA is implementing an 
electronic information system for posting information voluntarily 
submitted by manufacturers or vendors on the products they intend to 
offer for preferred procurement under each designated item. For 
information pertinent to GPEA compliance related to this rule, please 
contact Marvin Duncan at (202) 401-0461.

List of Subjects in 7 CFR Part 2902

    Biobased products, Procurement.

0
For the reasons stated in the preamble, the Department of Agriculture 
is amending 7 CFR chapter XXIX as follows:

CHAPTER XXIX--OFFICE OF ENERGY POLICY AND NEW USES, DEPARTMENT OF 
AGRICULTURE

PART 2902--GUIDELINES FOR DESIGNATING BIOBASED PRODUCTS FOR FEDERAL 
PROCUREMENT

0
1. The authority citation for part 2902 continues to read as follows:

    Authority: 7 U.S.C. 8102.


0
2. Add in alphabetical order definitions for ``biodegradability,'' 
``EPA-designated recovered content product,'' and ``functional unit'' 
to Sec.  2902.2 to read as follows:


Sec.  2902.2  Definitions.

* * * * *
    Biodegradability. A quantitative measure of the extent to which a 
material is capable of being decomposed by biological agents, 
especially bacteria.
* * * * *
    EPA-designated recovered content product. A product, designated 
under the Resource Conservation and Recovery Act, that is subject to 
Federal procurement as specified in section 6002 of the Solid Waste 
Disposal Act (42 U.S.C. 6962), whereby Federal agencies must give 
preferred procurement to those products composed of the highest 
percentage of recovered materials practicable, subject to availability, 
cost, and performance.
* * * * *
    Functional unit. A measure of product technical performance that 
provides a common reference to which all environmental and economic 
impacts of the product are scaled. This reference is necessary to 
ensure comparability of performance results across competing products. 
Comparability of results is critical when competing product 
alternatives are being assessed to ensure that such comparisons are 
made on a common basis. For example, the functional unit for competing 
interior paint products may be defined as ``protecting one square foot 
of interior wall surface for 50 years.''
* * * * *

0
3. Add paragraph (c) to Sec.  2902.8 to read as follows:


Sec.  2902.8  Determining life cycle costs, environmental and health 
benefits, and performance.

* * * * *
    (c) Biodegradability information. If biodegradability is claimed by 
the manufacturer of a qualifying biobased product as a characteristic 
of that product, USDA requires that, if requested by procuring 
agencies, these claims be verified using the appropriate, product-
specific ASTM biodegradability

[[Page 13705]]

standard(s). Such testing must be conducted by an ASTM/ISO-compliant 
laboratory. The procuring official will decide whether biodegradability 
data must be brand-name specific in the case of products that are 
essentially of the same formulation. ASTM biodegradability standards 
include:
    (1) D5338 ``Standard Test Method for Determining Aerobic 
Biodegradation of Plastic Materials Under Controlled Composting 
Conditions'';
    (2) D5864 ``Standard Test Method for Determining the Aerobic 
Aquatic Biodegradation of Lubricants or Their Components'';
    (3) D6006 ``Standard Guide for Assessing Biodegradability of 
Hydraulic Fluids'';
    (4) D6400 ``Standard Specification for Compostable Plastics'' and 
the standards cited therein;
    (5) D6139 ``Standard Test Method for Determining the Aerobic 
Aquatic Biodegradation of Lubricants or Their Components Using the 
Gledhill Shake Flask'';
    (6) D6868 ``Standard Specification for Biodegradable Plastics Used 
as Coatings on Paper and Other Compostable Substrates''; and
    (7) D7081 ``Standard Specification for Non-Floating Biodegradable 
Plastics in the Marine Environment.''
* * * * *

0
4. Add Sec. Sec.  2902.10 through 2902.15 to subpart B to read as 
follows:


Sec.  2902.10  Mobile equipment hydraulic fluids.

    (a) Definition. Hydraulic fluids formulated for general use in non-
stationary equipment, such as tractors, end loaders, or backhoes.
    (b) Minimum biobased content. The minimum biobased content is 44 
percent and shall be based on the amount of qualifying biobased carbon 
in the product as a percent of the weight (mass) of the total organic 
carbon in the finished product.
    (c) Preference effective date. No later than March 16, 2007, 
procuring agencies, in accordance with this part, will give a 
procurement preference for qualifying biobased mobile equipment 
hydraulic fluids. By that date, Federal agencies that have the 
responsibility for drafting or reviewing specifications for items to be 
procured shall ensure that the relevant specifications require the use 
of biobased mobile equipment hydraulic fluids.
    (d) Determining overlap with an EPA-designated recovered content 
product. Qualifying biobased products that fall under this item may, in 
some cases, overlap with the following EPA-designated recovered content 
product: Re-refined Lubricating Oils. USDA is requesting that 
manufacturers of these qualifying biobased products provide information 
on the USDA Web site of qualifying biobased products about the intended 
uses of the product, whether or not the product contains petroleum-
based ingredients, re-refined oil, and/or any other recovered material, 
and performance standards against which the product has been tested. 
This information will assist Federal agencies in determining whether or 
not a qualifying biobased product overlaps with EPA-designated 
lubricating oils containing re-refined oil and which product should be 
afforded the preference in purchasing.
    (e) Exemptions. The following applications are exempt for the 
preferred procurement requirement for this item:
    (1) Military equipment: Product or system designed or procured for 
combat or combat-related missions.
    (2) Spacecraft systems and launch support equipment.


Sec.  2902.11  Roof coatings.

    (a) Definition. Coatings formulated for use in commercial roof deck 
systems to provide a single-coat monolith coating system.
    (b) Minimum biobased content. The minimum biobased content is 20 
percent and shall be based on the entire product.
    (c) Preference effective date. No later than March 16, 2007, 
procuring agencies, in accordance with this part, will give a 
procurement preference for qualifying biobased roof coatings. By that 
date, Federal agencies that have the responsibility for drafting or 
reviewing specifications for items to be procured shall ensure that the 
relevant specifications require the use of biobased roof coatings.
    (d) Determining overlap with an EPA-designated recovered content 
product. Qualifying biobased products that fall under this item may, in 
some cases, overlap with the following EPA-designated recovered content 
product: Roofing Materials. USDA is requesting that manufacturers of 
these qualifying biobased products provide information on the USDA Web 
site of qualifying biobased products about the intended uses of the 
product, whether or not the product contains any type of recovered 
material, and performance standards against which the product has been 
tested. This information will assist Federal agencies in determining 
whether or not a qualifying biobased product overlaps with recovered 
content roofing materials and which product should be afforded the 
preference in purchasing.


Sec.  2902.12  Water tank coatings.

    (a) Definition. Coatings formulated for use in potable water 
storage systems.
    (b) Minimum biobased content. The minimum biobased content is 59 
percent and shall be based on the entire product.
    (c) Preference effective date. Determination of the effective date 
for this item is deferred until USDA identifies two or more 
manufacturers of biobased water tank coatings. At that time, USDA will 
publish a document in the Federal Register announcing that Federal 
agencies have one year from the date of the publication to give 
procurement preference to water tank coatings.


Sec.  2902.13  Diesel fuel additives.

    (a) Definition. (1) Any substance, other than one composed solely 
of carbon and/or hydrogen, that is intentionally added to diesel fuel 
(including any added to a motor vehicle's fuel system) and that is not 
intentionally removed prior to sale or use.
    (2) Neat biodiesel, also referred to as B100, when used as an 
additive. Diesel fuel additive does not mean neat biodiesel when used 
as a fuel or blended biodiesel fuel (e.g., B20).
    (b) Minimum biobased content. The minimum biobased content is 90 
percent and shall be based on the amount of qualifying biobased carbon 
in the product as a percent of the weight (mass) of the total organic 
carbon in the finished product.
    (c) Preference effective date. No later than March 16, 2007, 
procuring agencies, in accordance with this part, will give a 
procurement preference for qualifying biobased diesel fuel additives. 
By that date, Federal agencies that have the responsibility for 
drafting or reviewing specifications for items to be procured shall 
ensure that the relevant specifications require the use of biobased 
diesel fuel additives.
    (d) Exemptions. The following applications are exempt for the 
preferred procurement requirement for this item:
    (1) Military equipment: Product or system designed or procured for 
combat or combat-related missions.
    (2) Spacecraft systems and launch support equipment.


Sec.  2902.14  Penetrating lubricants.

    (a) Definition. Products formulated to provide light lubrication 
and corrosion resistance in close tolerant internal and external 
applications including frozen

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nuts and bolts, power tools, gears, valves, chains, and cables.
    (b) Minimum biobased content. The minimum biobased content is 68 
percent and shall be based on the amount of qualifying biobased carbon 
in the product as a percent of the weight (mass) of the total organic 
carbon in the finished product.
    (c) Preference effective date. No later than March 16, 2007, 
procuring agencies, in accordance with this part, will give a 
procurement preference for qualifying biobased penetrating lubricants. 
By that date, Federal agencies that have the responsibility for 
drafting or reviewing specifications for items to be procured shall 
ensure that the relevant specifications require the use of biobased 
penetrating lubricants.
    (d) Determining overlap with an EPA-designated recovered content 
product. Qualifying biobased products that fall under this item may, in 
some cases, overlap with the following EPA-designated recovered content 
product: Re-refined Lubricating Oils. USDA is requesting that 
manufacturers of these qualifying biobased products provide information 
on the USDA Web site of qualifying biobased products about the intended 
uses of the product, whether or not the product contains petroleum-
based ingredients, re-refined oil, and/or any other recovered material, 
in addition to biobased ingredients, and performance standards against 
which the product has been tested. This information will assist Federal 
agencies in determining whether or not a qualifying biobased product 
overlaps with EPA-designated lubricating oils containing re-refined oil 
and which product should be afforded the preference in purchasing.
    (e) Exemptions. The following applications are exempt for the 
preferred procurement requirement for this item:
    (1) Military equipment: Product or system designed or procured for 
combat or combat-related missions.
    (2) Spacecraft systems and launch support equipment.


Sec.  2902.15  Bedding, bed linens, and towels.

    (a) Definition. (1) Bedding is that group of woven cloth products 
used as coverings on a bed. Bedding includes products such as blankets, 
bedspreads, comforters, and quilts.
    (2) Bed linens are woven cloth sheets and pillowcases used in 
bedding.
    (3) Towels are woven cloth products used primarily for drying and 
wiping.
    (b) Minimum biobased content. The minimum biobased content is 12 
percent and shall be based on the amount of qualifying biobased carbon 
in the finished product as a percent of the weight (mass) of the total 
organic carbon in the finished product. The 12 percent biobased content 
must be of a qualifying biobased feedstock. Cotton, wool, linen, and 
silk are not qualifying biobased feedstocks for the purpose of 
determining the biobased content of bedding, bed linens, and towels.
    (c) Preference effective date. Determination of the effective date 
for this item is deferred until USDA identifies two or more 
manufacturers of biobased bedding, bed linens, and towels. At that 
time, USDA will publish a document in the Federal Register announcing 
that Federal agencies have one year from the date of the publication to 
give procurement preference to bedding, bed linens, and towels.

    Dated: March 7, 2006.
Keith Collins,
Chief Economist, U.S. Department of Agriculture.
[FR Doc. 06-2323 Filed 3-15-06; 8:45 am]
BILLING CODE 3410-GL-P