This final rule is issued under Marketing Agreement and Order No. 930, both as amended (7 CFR part 930), regulating the handling of tart cherries produced in the States of Michigan, New York, Pennsylvania, Oregon, Utah, Washington and Wisconsin, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.”

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the order provisions now in effect, final free and restricted percentages may be established for tart cherries handled during the crop year. This final rule establishes final free and restricted percentages for tart cherries for the 2011-12 crop year, beginning July 1, 2011, through June 30, 2012.

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

This final rule establishes the final free and restricted percentages for the 2011-12 crop year. This action establishes the proportion of tart cherries from the 2011 crop which may be handled in commercial outlets at 88 percent free and 12 percent restricted. These percentages should stabilize marketing conditions by adjusting supply to meet market demand and help improve grower returns. The action was recommended by the Board at a meeting on September 15, 2011.

Section 930.51(a) of the order provides authority to regulate volume by designating free and restricted percentages for any tart cherries acquired by handlers in a given crop year. Section 930.50 prescribes procedures for computing an optimum supply based on sales history and for calculating these free and restricted percentages. Free percentage volume may be shipped to any market, while restricted percentage volume must be held by handlers in a primary or secondary reserve, or be diverted or used for exempt purposes as prescribed in §§ 930.159 and 930.162 of the regulations. These activities include, in part, the development of new products, sales into new markets, the development of export markets, and charitable contributions.

Under § 930.52, only those districts with an annual average production of at least six million pounds are subject to regulation and any district producing a crop which is less than 50 percent of its annual average is exempt. The regulated districts for the 2011-2012 crop year are: District 1—Northern Michigan; District 2—Central Michigan; District 3—Southern Michigan; District 4—New York; District 7—Utah; and District 8—Washington. Districts 5, 6, and 9 (Oregon, Pennsylvania, and Wisconsin, respectively) are not regulated for the 2011-12 season.

Demand for tart cherries and tart cherry products tends to be relatively stable from year to year. Conversely, annual tart cherry production can vary greatly. In addition, tart cherries are processed and can be stored and carried over from crop year to crop year, further impacting supply. As a result, supply and demand for tart cherries are rarely in balance.

Because demand for tart cherries is inelastic, total sales volume is not very responsive to changes in price. However, prices are very sensitive to changes in supply. As such, an oversupply of cherries would have a sharp negative effect on prices, driving down grower returns. The Board, aware of this economic relationship, focuseson using the volume control provisions in the order to balance supply and demand to stabilize industry returns.

Pursuant to § 930.50 of the order, the Board meets on or about July 1 to review sales data, inventory data, current crop forecasts and market conditions for the upcoming season and, if necessary, to recommend preliminary free and restricted percentages if anticipated supply would exceed demand. After harvest is complete, but no later than September 15, the Board meets again to update their calculations using actual production data, consider any necessary adjustments to the preliminary percentages, and determine if final free and restricted percentages should be recommended to the Secretary.

To assist in this process, the Board uses an optimum supply formula (OSF), a series of mathematical calculations using sales history, inventory, and production data to determine whether there is a surplus, and if so, how much volume should be restricted to maintain optimum supply. The optimum supply represents the desirable volume of tart cherries that should be available for sale in the coming crop year. Optimum supply is defined as the average free sales of the prior three years plus desirable carry-out inventory. Desirable carry-out is the amount of fruit needed by the industry to be carried into the succeeding crop year to meet marketing demand until the new crop is available. Desirable carry-out is set by the Board after considering market circumstances and needs. This figure can range from zero to a maximum of 20 million pounds.

To determine whether the industry would be in an oversupply situation for the coming year, the Board compares the optimum supply figure and the total anticipated supply for the coming year. Anticipated supply includes any inventory available at the beginning of the season (carry-in) and the current year's estimated production. The carry-in figure is subtracted from the optimum supply to determine the volume of cherries that would need to be produced in the current year to provide what is needed to meet the optimum supply. If estimated production is less than the optimum supply minus carry-in, the Board is required to establish a free percentage of 100 percent and a restricted percentage of zero. If production is greater than the optimum supply minus carry-in, the difference is considered surplus. To calculate the restricted percentage, this surplus tonnage is divided by the sum of production in the regulated districts.

The Board met on June 23, 2011, and computed an optimum supply of 174 million pounds for the 2011-12 crop year, using the free sales for the three previous seasons and setting the desirable carry-out at zero. The Board then subtracted the estimated carry-in of 57 million pounds from the optimum supply to calculate the production needed from the 2011-12 crop to meet optimum supply. This number, 117 million pounds, was subtracted from USDA's estimated 2011-12 production of 266 million pounds to calculate a surplus of 149 million pounds of tart cherries. The surplus was then divided by the expected production in the regulated districts (253 million pounds) to reach a preliminary restricted percentage of 59 percent for the 2011-12 crop year.

In discussing the results of the OSF calculations, members were in agreement that a restriction was necessary in order to avoid oversupplying the market. However, there was discussion that a 59 percent restriction may be too restrictive considering current market conditions. Board members recognized that the previous season, inventory had been tight, requiring two releases from reserves to meet sales needs. Further, it was stated that exports would likely remain strong in the coming season due to poor production in Europe. Consequently, the Board concluded market conditions justified making an economic adjustment, and the Board voted to add 30 million pounds to free supply, reducing the calculated surplus from 149 million pounds to 119 million pounds.

In addition, USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” specify that 110 percent of recent years' sales should be made available to primary markets each season before recommendations for volume regulation are approved. Accordingly, § 930.50(g) of the order specifies that in years when restricted percentages are established, the Board shall make available tonnage equivalent to an additional 10 percent of the average sales of the prior three years for market expansion (market growth factor). The Board complied with this requirement by adding 17 million pounds (174 million times 10 percent) to the free supply, further reducing the surplus to 102 million pounds. After these two adjustments, the preliminary restricted percentage was recalculated as 40 percent, as outlined in the following table:

The Board met again September 15, 2011, to consider establishing final volume regulation percentages for the 2011-12 season. The final percentages are based on the Board's reported production figures and the supply anddemand information available in September. The actual production for the 2011-12 season was 231 million pounds, 35 million pounds below USDA's June estimate. Concerned about having an adequate volume of cherries in the free market with actual production below the estimate, the Board voted to make a further adjustment of 40 million pounds in addition to the June adjustment. Using the actual production numbers, and accounting for the two adjustments, as well as the market growth factor, the restricted percentage was recalculated.

The Board used the same carry-in figure used in June of 57 million pounds, and subtracted it from the optimum supply of 174 million pounds, calculating the 2011-12 production volume required to meet the optimum supply of 117 million pounds. The 117 million pounds was subtracted from the actual production of 231 million pounds, resulting in a surplus of 114 million pounds of tart cherries. The surplus was then reduced by subtracting the two economic adjustments of 30 million pounds and 40 million pounds, and the market growth factor of 17 million pounds, resulting in an adjusted surplus of 27 million pounds. This surplus was then divided by the actual production in the regulated districts (218 million pounds) to calculate a restricted percentage of 12 percent with a corresponding free percentage of 88 percent for the 2011-12 crop year, as outlined in the following table:

The primary purpose of setting restricted percentages is an attempt to bring supply and demand into balance. If the primary market is oversupplied with cherries, grower prices decline substantially. Restricted percentages have benefited grower returns and helped stabilize the market as compared to those seasons prior to the implementation of the order. The Board believes the available information indicates that a restricted percentage should be established for the 2011-12 crop year to avoid oversupplying the market with tart cherries. Consequently, based on its discussion of this issue and the result of the above calculations, the Board recommended final percentages of 88 percent free and 12 percent restricted by a vote of 13 in favor and 4 against.

Of the four Board members who opposed the recommendation, one believed regulation was unnecessary for the current crop year, while the other three believed the recommended percentages were not restrictive enough. The member who believed the regulation was too restrictive cited strong sales in the previous season and moderate production volume for this crop year. In its discussion regarding the establishment of a restricted percentage for the 2011-12 crop year, the Board did recognize the strong sales in the previous season, as well as the fact that actual production had come in below the production estimate. In response, the Board voted to make two adjustments to make additional volume available. However, the majority of Board members still held that market conditions warranted some level of restriction. Further, the Board could meet and recommend the release of additional volume during the crop year, if warranted.

One of those who opposed the recommendation as not being restrictive enough stated that making the two adjustments and increasing the free volume this season could result in large inventories carrying over into the next season, which would require increased restrictions and dampen prices. Another stated that strong demand might not be sustained in the coming year and making additional fruit available at the onset of the season was premature and could result in an oversupply of the market. One opponent also stated that rather than making adjustments now, the Board could vote to release a portion of reserves later in the season to provide more fruit if necessary. However, most Board members believed that making more fruit available to the market was warranted. Board members cited the two releases from the previous season, sales volume from last year, and the smaller than anticipated crop in support of making more free tonnage available. It was also argued that increasing the volume of cherries available at the onset of the season could facilitate additional sales.

After reviewing the available data, and considering the concerns expressed, the majority of the Board determined that a 12 percent restriction meets sales needs without oversupplying the market. Thus, the Board recommended establishing final percentages of 88 percent free and 12 percent restricted.

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

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

There are approximately 40 handlers of tart cherries who are subject to regulation under the marketing order and approximately 600 producers of tart cherries in the regulated area. Small agricultural service firms have been defined by the Small Business Administration (SBA) as those having annual receipts of less than $7,000,000, and small agricultural producers are defined as those having annual receipts of less than $750,000 (13 CFR 121.201).

According to the National Agricultural Statistics Service, and Board data, the average annual grower price for tart cherries during the 2010-11 season was $0.221 per pound, and total shipments were around 270 million pounds. Therefore, average receipts for tart cherry producers were around $99,000, well below the SBA threshold for small producers. In 2010, The Food Institute estimated an f.o.b. price of $0.84 per pound for frozen tart cherries, which make up the majority of processed tart cherries. Using this data, average annual handler receipts were about $5.7 million, also below the SBA threshold for small agricultural service firms. Assuming a normal distribution, the majority of producers and handlers of tart cherries may be classified as small entities.

The tart cherry industry in the United States is characterized by wide annual fluctuations in production. According to the National Agricultural Statistics Service, tart cherry production in 2007 was 253 million pounds, 214 million pounds in 2008, 359 million pounds in 2009, and in 2010, production was 190 million pounds. Because of these fluctuations, the supply and demand for tart cherries are rarely in equilibrium.

Demand for tart cherries is inelastic, meaning changes in price have a minimal effect on total sales volume. However, prices are very sensitive to changes in supply, and grower prices vary widely in response to the large swings in annual supply, with prices ranging from a low of 7.3 cents in 1987 to a high of 46.4 cents in 1991.

Because of this relationship between supply and price, oversupplying the market with tart cherries would have a sharp negative effect on prices, driving down grower returns. The Board, aware of this economic relationship, focuses on using the volume control authority in the order in an effort to balance supply and demand in order to stabilize industry returns. This authority allows the industry to set free and restricted percentages as a way to bring supply and demand into balance. Free percentage cherries can be marketed by handlers to any outlet, while restricted percentage volume must be held by handlers in reserve, be diverted or used for exempted purposes.

This final rule establishes final free and restricted percentages for the 2011-12 crop year under the order for tart cherries. This action controls the supply of tart cherries by establishing percentages of 88 percent free and 12 percent restricted for the 2011-12 crop year. These percentages should stabilize marketing conditions by adjusting supply to meet market demand and help improve grower returns. This action regulates tart cherries handled in Michigan, New York, Utah, and Washington. The authority for this action is provided for in §§ 930.51(a) and 930.52 of the order. The Board recommended this action at a meeting on September 15, 2011.

As mentioned earlier, the USDA's “Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders” specify that 110 percent of recent years' sales should be made available to primary markets each season before recommendations for volume regulation are approved. The quantity available under this rule is 110 percent of the quantity shipped in the prior three years.

This action will result in some fruit being diverted from the primary domestic markets. However, there are secondary uses available for restricted fruit, including the development of new products, sales into new markets, the development of export markets, and being placed in reserve. While these alternatives may provide different levels of return than the sales to primary markets, they play an important role for the industry. The areas of new products, new markets, and the development of export markets utilize restricted fruit to develop and expand the market for tart cherries. Last season, these areas accounted for more than 50 million pounds in sales.

Placing tart cherries into reserves is a key part of balancing supply and demand. Although the industry must bear the costs of handling and storage for fruit in reserve, reserves warehouse supplies in large crop years in order to supplement supplies in short crop years. The reserves allow the industry to mitigate the impact of oversupply in large crop years, while allowing the industry to maintain and supply markets in years where production falls below demand. Further, the costs for storage, interest, and handling of the cherries are more than offset by the increase in price when moving from a large crop to a short crop year.

In addition, this action is less restrictive than in previous seasons and is the lowest restricted percentage since 2008. At this level of restriction, nearly all restricted fruit should be utilized by the end of the crop year. Consequently, it is not anticipated that this action will unduly burden growers or handlers.

While this action could result in some additional costs to the industry, these costs are more than outweighed by the benefits. The purpose of setting restricted percentages is to attempt to bring supply and demand into balance. If the primary market (domestic) is oversupplied with cherries, grower prices decline substantially. Without volume control, the primary market would likely be oversupplied, resulting in lower grower prices.

The three districts in Michigan, along with the districts in Utah, New York, and Washington are the restricted areas for this crop year with a combined total production of 218.4 million pounds. A 12 percent restriction means 192.2 million pounds is available to be shipped to primary markets from these four states. The 192.2 million pounds from the restricted districts, the 12.2 million pounds from the unrestricted districts (Oregon, Pennsylvania, and Wisconsin), and the 57 million pound carry-in inventory make a total of 261.4 million pounds available as free tonnage for the primary markets.

To assess the impact that volume control has on the prices growers receive for their product, an econometric model has been developed. Based on the model, the use of volume control should have a positive impact on grower returns for this crop year. With volume control, grower prices are estimated to be approximately $0.06 per pound higher, and total grower revenue from processed cherries is estimated to be $6.2 million higher than without restrictions. The without-restrictions scenario assumes that all tart cherries produced would be delivered to processors for payments.

Prior to the implementation of the order, grower price often did not come close to covering the cost of production. For the 2011-12 crop year, yield is estimated at approximately 6,470 pounds per acre. At this level of yield, the cost of production is estimated to be $0.33 per pound (costs were estimated by representatives of Michigan State University).

In addition, absent volume control, the industry could start to build large amounts of unwanted inventories. These inventories would have a depressing effect on grower prices. The econometric model shows for every 1 million-pound increase in carry-ininventories, a decrease in grower prices of $0.0037 per pound occurs.

Retail demand is assumed to be highly inelastic which indicates that changes in price do not result in significant changes in the quantity demanded. Consumer prices largely do not reflect fluctuations in cherry supplies. Therefore, this action should have little or no effect on consumer prices and should not result in a reduction in retail sales.

The free and restricted percentages established by this rule provide the market with optimum supply and apply uniformly to all regulated handlers in the industry, regardless of size. As the restriction represents a percentage of a handler's volume, the costs, when applicable, are proportionate and should not place an extra burden on small entities as compared to large entities.

The stabilizing effects of this action benefits all handlers by helping them maintain and expand markets, despite seasonal supply fluctuations. Likewise, price stability positively impacts all growers and handlers by allowing them to better anticipate the revenues their tart cherries will generate. Growers and handlers, regardless of size, should benefit from the stabilizing effects of this restriction.

One alternative to this action considered was to not regulate the volume of the 2011-12 crop. However, Board members believed that although sales have been strong, there is enough of a surplus to necessitate restricting a portion of the crop to keep prices stable.

Another alternative considered was setting the carry-out value at 10 or 20 million pounds in the OSF. Board members indicated that such a change would require further consideration by the Board, and did not receive sufficient support.

The Board also considered differing levels of adjustments under the OSF when considering supply. The alternative adjustments were deemed to be either too small to address industry needs, or so large that members were concerned with creating an oversupply. Therefore, these alternatives were rejected.

In accordance with the Paperwork Reduction Act of 1995, (44 U.S.C. chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0177, Tart cherries Grown in the States of MI, NY, PA, OR, UT, WA, and WI. No changes in those requirements as a result of this action are necessary. Should any changes become necessary, they would be submitted to OMB for approval.

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

As noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

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

In addition, the Board's meeting was widely publicized throughout the tart cherry industry and all interested persons were invited to attend the meeting and participate in Board deliberations on all issues. Like all Board meetings, the September 15, 2011, meeting was a public meeting and all entities, both large and small, were able to express views on this issue.

A proposed rule concerning this action was published in theFederal Registeron March 2, 2012 (77 FR 12748). Copies of the rule were mailed or sent via facsimile to all Board members and tart cherry handlers. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 30-day comment period ending April 2, 2012, was provided to allow interested persons to respond to the proposal. No comments were received.

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

After consideration of all relevant matter presented, including the information and recommendation submitted by the Board and other available information, it is hereby found that this rule, as hereinafter set forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the effective date of this rule until 30 days after publication in theFederal Register(5 U.S.C. 553) because handlers are already shipping tart cherries from the 2011-2012 crop. Further, handlers are aware of this rule, which was recommended at a public meeting. Also, a 30-day comment period was provided for in the proposed rule.

For the reasons set forth in the preamble, 7 CFR part 930 is amended as follows:

This rule is issued under Marketing Agreement and Order No. 983, both as amended (7 CFR part 983), regulating the handling of pistachios produced in California, Arizona, and New Mexico, hereinafter referred to as the “order.” The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the “Act.” The applicable rules of practice and procedure governing the formulation of marketing agreements and orders (7 CFR part 900) authorize amendment of the order through this informal rulemaking action.

The Department of Agriculture (USDA) is issuing this rule in conformance with Executive Order 12866.

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

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

Section 1504 of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) (Pub. L. 110-246) made changes to section 18c(17) of the Act, which in turn required the addition of supplemental rules of practice to 7 CFR part 900 (73 FR 49307; August, 21, 2008). The changes to section 18c(17) of the Act and additional supplemental rules of practice authorize the use of informal rulemaking (5 U.S.C. 553) to amend federal fruit, vegetable, and nut marketing agreements and orders if certain criteria are met.

AMS considered the nature and complexity of the proposed amendments, the potential regulatory and economic impacts on affected entities, and other relevant matters, and determined that amending the order as proposed by the Committee could appropriately be accomplished through informal rulemaking.

The proposed amendments were unanimously recommended by the Committee following deliberations at a public meeting on July 9, 2010. A proposed rule soliciting comments on the proposed amendments was issued on June 5, 2011, and published in theFederal Registeron June 13, 2011 (76 FR 34181). One comment was received in support of the proposed amendments. A proposed rule and referendum order was issued on September 12, 2011, and published in theFederal Registeron September 15, 2011 (76 FR 57001). This document directed that a referendum among pistachio producers be conducted during the period October 3 through October 14, 2011, to determine whether they favor the proposed amendments to the order. To become effective, the amendments had to be approved by at least two-thirds of the producers voting, or two-thirds of the volume of pistachios represented by voters in the referendum. All of the proposed amendments were favored by at least 97 percent of those voting in the referendum and by at least 98 percent of the volume represented in the referendum.

The amendments included in this final rule will:

(1) Provide authority to establish aflatoxin sampling, analysis, and inspection requirements for shipments of pistachios to export markets, including authority to establish different regulations for different markets;

(2) Provide authority to establish quality and inspection requirements for shipments of pistachios to export markets, including authority to establish different regulations for different markets;

(3) Change a related section of the order concerning substandard pistachios to conform to the proposed addition of export authority; and

(4) Correct an erroneous cross-reference to another section of the order.

An amended marketing agreement was subsequently provided to all pistachio handlers in the production area for their approval. The marketing agreement was approved by handlers representing more than 50 percent of the volume of pistachios handled by all handlers covered under the order.

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

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

There are approximately 900 producers and 25 handlers of pistachios in the production area encompassing California, Arizona, and New Mexico. The Small Business Administration (SBA) (13 CFR 121.201) defines small agricultural producers as those having annual receipts of less than $750,000, and small agricultural service firms aredefined as those having annual receipts of less than $7,000,000.

Based on Committee data, it is estimated that over 70 percent of the handlers ship less than $7,000,000 worth of pistachios and would thus be considered small business under the SBA definition. It is also estimated that over 80 percent of the growers in the production area produce less than $750,000 worth of pistachios and would thus be considered small businesses under the SBA definition.

The amendments will provide authority to establish aflatoxin sampling, analysis, and inspection requirements for shipments of pistachios to export markets, including authority to establish different regulations for different markets; provide authority to establish quality and inspection requirements for shipments of pistachios to export markets, including authority to establish different regulations for different markets; change a related section of the order concerning substandard pistachios to conform to the proposed addition of export authority; and correct an erroneous cross-reference to another section of the order.

These amendments were unanimously recommended at a public meeting of the Committee held on July 10, 2010. None of the amendments will have an immediate impact on handlers or producers because they will not establish any requirements or regulations on handlers. However, the amendments that will add authority to the order to regulate exports could impact growers and handlers in the industry if the authority is implemented. Therefore, the potential costs that may be associated with future regulation of exports is discussed below. In the event implementing regulations are subsequently recommended by the Committee, additional analysis of the potential costs and benefits will be conducted as part of the informal rulemaking process.

Under section 983.50 of the order and section 983.150 of the administrative rules and regulations, sampling, analysis, and inspection of pistachios for aflatoxin is required prior to shipment to domestic markets. Specific procedures and requirements for handlers to follow are prescribed. It is anticipated that any requirements recommended for export shipments would be similar to those in effect for domestic shipments. Thus, the associated costs would be similar.

The costs of complying with aflatoxin regulations can be broken into three basic elements: sampling of the product, the market value of the product samples that are used in testing, and the cost of the aflatoxin analysis performed by laboratories. These costs can vary among handlers depending on their particular operations. In recognition of this, the Committee provided estimates of the various cost elements for purposes of this discussion.

The cost of drawing samples from lots is estimated to range from $50.00 to $75.00 per lot. The variation in this cost can be attributed to factors such as the type of inspection program utilized by handlers. For purposes of this evaluation a cost factor of $70.00 per lot is utilized. The cost of the product used in sampling and testing varies depending upon the market price for pistachios. For purposes of this evaluation a value of $3.00 per pound as estimated by the Committee is utilized. At $3.00 per pound and a 44-pound sample, the cost of product used in sampling is $132.00 per lot. Laboratory costs for analyzing aflatoxin content are estimated to be $100.00 per test; with two tests per lot, the cost is $200.00 per lot.

Pistachio lots tested for aflatoxin can vary in size, but for purposes of this evaluation, a lot size of 50,000 pounds is used as that is a reasonable representative size for a typical handler operation. Applying the above cost estimates to a lot size of 50,000 pounds results in the following cost estimates on a per pound basis:

1.Sampling cost:$0.0014 per pound ($70.00 per lot divided by 50,000 pounds).

2.Value of product used in sampling:$0.0026 per pound ($132.00 per lot divided by 50,000 pounds).

3. Analytical cost of aflatoxin testing: $0.0040 per pound ($200 per sample divided by 50,000 pounds).

When compared to the market price for pistachios, the direct costs associated with an aflatoxin program are proportionately small. Utilizing a market price of $3.00 per pound as used in the above cost estimates, the costs of aflatoxin sampling and testing represent 0.27 percent of the market price. Even if the market price for pistachios was $1.00 per pound, the aflatoxin sampling and testing costs would be well below one percent of the price.

Most handlers who shipped pistachios to export markets in the past were signatories to a state marketing agreement that required aflatoxin sampling and analysis. That program was terminated in 2010. Since then, most handlers reportedly conduct aflatoxin testing and certification on export shipments to satisfy the requirements of the various markets. Therefore, the costs discussed above are already being borne by handlers.

While difficult to quantify, one of the primary benefits of an aflatoxin program is the reduced risk of a potential food incident. For example, in the late 1990's, high aflatoxin levels were detected in pistachios in European markets. This led to a 60 percent decrease in pistachio imports in Europe, and it took several years for the market to return to more normal levels. The U.S was not dominant in the European market at that time, but in recent years, Europe has become an increasingly significant market for U.S. pistachios. Regardless of the location of the market, this example demonstrates the devastating effect a food quality or food safety issue can have on the marketing of a product.

Another benefit of an aflatoxin testing program is the resulting reduction in the incidence of rejected shipments at their destination. Many countries test product prior to allowing its importation. Product that does not meet the importing country's standards can be rejected and returned to the shipper. It is estimated that the cost of handling or returning a rejected lot is between $12,000 and $15,000 per lot. Product that has been tested prior to shipment based on the requirements of its market destination is less likely to be rejected and would not incur the associated costs.

Avoiding a disruption in the marketing of pistachios in export markets is important in maintaining the viability of the industry. Shipments of open inshell pistachios increased dramatically in recent years; from 95,761,666 pounds in the 2004-05 shipping season to 192,436,136 pounds in the 2009-10 season, according to Committee data. Exports represented approximately 63 percent of total U.S. pistachio shipments during the 2009-10 season. According to statistics reported by the Committee, total acreage in California increased from 117,773 acres in 2004 to 215,336 acres in 2010, representing an 83 percent increase. Much of this newer acreage is non-bearing and will come into production in the near future. These statistics demonstrate that domestic production of pistachios will continue to increase in the future, and export markets must be maintained to accommodate the increased supplies.

Expanding order authority to include establishing aflatoxin requirements applicable to export shipments willprovide an additional tool to aid in the marketing of pistachios covered under the order. In the event the authority is implemented, the potential costs associated with a mandatory aflatoxin program for exports are expected to be more than offset by the potential benefits discussed above.

An analysis of the potential costs of adding authority to the order to establish quality regulations is not possible because no quality regulations are currently in effect under the order, and none are being contemplated. Quality regulations were in effect for domestic shipments from 2004 through 2007, but were suspended because they were no longer meeting the industry's needs. However, the order still contains broad authority for domestic quality regulations and the industry may desire to reinstate them if circumstances warrant. As a result of the increasing importance of the export market as demonstrated above, the Committee recommended adding authority to the order for quality regulation for export shipments in the event circumstances in the future warrant their implementation.

A unanimous action of the Committee will be required to recommend the establishment of any export quality regulations. In addition, informal rulemaking will be required for implementation, and an analysis of the potential costs and benefits will need to be conducted during that process.

The remaining amendments are administrative in nature and will have no economic impact on growers or handlers. One of the proposed amendments adds conforming language to another section of the order as a result of approval of other amendments, and another proposed amendment will correct an incorrect section reference in the order.

Alternatives to these proposals include making no changes at this time. However, the Committee believes it will be beneficial to have the means necessary to apply regulations to the export markets if circumstances warrant.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), the order's information collection requirements have been previously approved by the Office of Management and Budget (OMB) and assigned OMB No. 0581-0215, “Pistachios Grown in California”. No changes in those requirements as a result of this proceeding are anticipated. Should any changes become necessary, they will be submitted to OMB for approval.

As with all Federal marketing order programs, reports and forms are periodically reviewed to reduce information requirements and duplication by industry and public sector agencies.

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

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

The Committee's meeting, at which these proposals were discussed, was widely publicized throughout the pistachio industry. All interested persons were invited to attend the meeting and encouraged to participate in Committee deliberations on all issues. Like all Committee meetings, the meeting was public, and all entities, both large and small, were encouraged to express their views on these proposals.

A proposed rule concerning this action was issued on June 5, 2011, and published in theFederal Registeron June 13, 2011 (76 FR 34181). Copies of the rule were mailed or sent via facsimile to all Committee members and pistachio handlers. Finally, the rule was made available through the Internet by USDA and the Office of the Federal Register. A 30-day comment period ending July 13, 2011, was provided to allow interested persons to respond to the proposal. One comment was received in response to the proposal. The comment, submitted on behalf of a pistachio trade association, was supportive of the proposed amendments. No changes were made to the proposed amendments, based on the comment received.

A proposed rule and referendum order was then issued on September 12, 2011, and published in theFederal Registeron September 15, 2011 (74 FR 57001). This document directed that a referendum among pistachio producers be conducted during the period October 3 through October 14, 2011, to determine whether they favor the proposed amendments to the order. To become effective, the amendments had to be approved by at least two-thirds of the producers voting, or two-thirds of the volume of pistachios represented by voters in the referendum. All of the proposed amendments were favored by at least 97 percent of those voting in the referendum and by at least 98 percent of the volume represented in the referendum.

An amended marketing agreement was subsequently provided to all pistachio handlers in the production area for their approval. The marketing agreement was approved by handlers representing more than 50 percent of the volume of pistachios handled by all handlers covered under the order.

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

The findings hereinafter set forth are supplementary to the findings and determinations which were previously made in connection with the issuance of the marketing agreement and order; and all said previous findings and determinations are hereby ratified and affirmed, except insofar as such findings and determinations may be in conflict with the findings and determinations set forth herein.

1. The marketing agreement and order, as amended, and all of the terms and conditions thereof, will tend to effectuate the declared policy of the Act;

2. The marketing agreement and order, as amended, regulate the handling of pistachios grown in California, Arizona, and New Mexico in the same manner as, and are applicable only to, persons in the respective classes of commercial and industrial activity specified in the marketing agreement and order;

3. The marketing agreement and order, as amended, are limited in application to the smallest regional production area which is practicable, consistent with carrying out the declared policy of the Act, and the issuance of several orders applicable to subdivisions of the production area would not effectively carry out the declared policy of the Act;

4. The marketing agreement and order, as amended, prescribe, insofar as practicable, such different terms applicable to different parts of the production area as are necessary to give due recognition to the differences in the production and marketing of pistachios produced or packed in the production area; and

5. All handling of pistachios produced in the production area asdefined in the marketing agreement and order is in the current of interstate or foreign commerce or directly burdens, obstructs, or affects such commerce.

It is necessary and in the public interest to make these amendments effective not later than one day after publication in theFederal Register. A later effective date would unnecessarily delay implementation of the amendments. These amendments should be in place as soon as possible so that any regulations recommended as a result of these amendments can be in place prior to the next production year, which begins on September 1. In view of the foregoing, it is hereby found and determined that good cause exists for making these amendments effective one day after publication in theFederal Register, and that it would be contrary to the public interest to delay the effective date for 30 days after publication in theFederal Register. (Sec. 553(d), Administrative Procedure Act; 5 U.S.C. 551-559.)

It is hereby determined that:

1. The “Marketing Agreement Regulating the Handling of Pistachios Grown in California, Arizona, and New Mexico,” has been signed by handlers (excluding cooperative associations of producers who are not engaged in processing, distributing, or shipping pistachios covered under the order) who during the period September 1, 2010, through August 31, 2011, handled not less than 50 percent of the volume of such pistachios covered under the order; and

2. The issuance of this amendatory order, amending the aforesaid order, is favored or approved by at least two-thirds of the producers who participated in a referendum on the question of approval and who, during the period of September 1, 2010, through August 31, 2011, have been engaged within the production area in the production of such pistachios, such producers having also produced for market at least two-thirds of the volume of such commodity represented in the referendum.

It is therefore ordered,That on and after the effective date hereof, all handling of pistachios grown in California, Arizona, and New Mexico shall be in conformity to, and in compliance with, the terms and conditions of the said order as hereby amended as follows:

The provisions of the proposed marketing order amending the order contained in the proposed rule issued by the Administrator on September 12, 2011, and published in theFederal Registeron September 15, 2011 (76 FR 57001), shall be and are the terms and provisions of this order amending the order and are set forth in full herein.

For the reasons set forth in the preamble, 7 CFR Part 983 is amended as follows:

The FAA has determined that notice of, and opportunity for prior public comment on, these special conditions are impracticable because these procedures would significantly delay issuance of the design approval and thus delivery of the affected aircraft. In addition, the substance of these special conditions has been subject to the public comment process in several prior instances with no substantive comments received. The FAA therefore finds that good cause exists for making these special conditions effective upon issuance.

We invite interested people to take part in this rulemaking by sending written comments, data, or views. The most helpful comments reference a specific portion of the special conditions, explain the reason for any recommended change, and include supporting data.

We will consider all comments we receive by the closing date for comments. We may change these special conditions based on the comments we receive.

On March 30, 2006, Gulfstream Aerospace LP (hereafter referred to as “GALP”) applied for a type certificate for their new Model Gulfstream G280 (hereafter referred to as “Model G280”) airplane. The Model G280 is a two-engine jet transport airplane with a maximum takeoff weight of 39,600 pounds and an emergency exit arrangement to support a maximum of 19 passengers. Although the Model G280 design includes occupancy provisions for pilot and copilot only (no passengers), GALP requested issuance of these special conditions to support efficient design and certification of passenger cabin interiors through the supplemental type certification process.

Under the provisions of Title 14, Code of Federal Regulations (14 CFR) 21.17, GALP must show that the Model G280 meets the applicable provisions of part 25, as amended by Amendments 25-1 through 25-120, thereto, and Amendment 25-122. In addition, the certification basis includes certain special conditions, exemptions, and equivalent safety findings that are not relevant to these special conditions.

If the Administrator finds that the applicable airworthiness regulations (i.e., 14 CFR part 25) do not contain adequate or appropriate safety standards for the Model G280 because of a novel or unusual design feature, special conditions are prescribed under the provisions of § 21.16.

Special conditions are initially applicable to the model for which they are issued. Should the type certificate for that model be amended later to include any other model that incorporates the same novel or unusual design feature, the special conditions would also apply to the other model.

In addition to the applicable airworthiness regulations and special conditions, the Model G280 must comply with the fuel vent and exhaust emission requirements of 14 CFR part 34 and the noise certification requirements of 14 CFR part 36; and the FAA must issue a finding of regulatory adequacy under section 611 of Public Law 92-574, the “Noise Control Act of 1972.”

The FAA issues special conditions, as defined in 14 CFR 11.19, in accordance with § 11.38, and they become part of the type certification basis under § 21.17(a)(2).

The Model G280 will incorporate the following novel or unusual design features: Digital systems architecture composed of several connected networks. The proposed architecture and network configuration may be used for, or interfaced with, a diverse set of functions, including:

1. Flight-safety related control, communication, display, monitoring, and navigation systems (aircraft control functions);

2. Airline business and administrative support (airline information services);

3. Passenger information and entertainment systems (passenger entertainment services); and,

4. The capability to allow access to or by systems external to the airplane.

The Model G280 architecture and network configuration may allow increased connectivity to, or access by, external airplane sources, airline operations, and maintenance systems to the aircraft control functions and airline information services. The aircraft control functions and airline information services perform functions required for the safe operation and maintenance of the airplane. Previously these functions and services had very limited connectivity with external sources. The architecture and network configuration may allow the exploitation of network security vulnerabilities resulting in intentional or unintentional destruction, disruption, degradation, or exploitation of data, systems, and networks critical to the safety and maintenance of the airplane. The existing regulations and guidance material did not anticipate these types of airplane system architectures.Furthermore, 14 CFR regulations and current system safety assessment policy and techniques do not address potential security vulnerabilities, which could be exploited by unauthorized access to airplane systems, data buses, and servers. Therefore, these special conditions are issued to ensure that the security (i.e., confidentiality, integrity, and availability) of airplane systems is not compromised by unauthorized wired or wireless electronic connections.

As discussed above, these special conditions are applicable to the Model G280. Should GALP apply at a later date for a change to the type certificate to include another model incorporating the same novel or unusual design feature, the special conditions would apply to that model as well.

This action affects only certain novel or unusual design features on one model of airplane. It is not a rule of general applicability.

The substance of these special conditions has been subjected to the notice and comment period in several prior instances and has been derived without substantive change from those previously issued. It is unlikely that prior public comment would result in a significant change from the substance contained herein. Therefore, because a delay would significantly affect the certification of the airplane, which is imminent, the FAA has determined that prior public notice and comment are unnecessary and impracticable, and good cause exists for adopting these special conditions upon issuance. The FAA is requesting comments to allow interested persons to submit views that may not have been submitted in response to the prior opportunities for comment described above.

The authority citation for these special conditions is as follows:

Accordingly, pursuant to the authority delegated to me by the Administrator, the following special conditions are issued as part of the type certification basis for Gulfstream Aerospace LP, Model Gulfstream G280 airplanes.

1. Airplane Electronic System Security Protection from Unauthorized External Access. The applicant must ensure airplane electronic system security protection from access to or by unauthorized sources external to the airplane, including those possibly caused by maintenance activity.

2. The applicant must ensure that electronic system security threats are identified and assessed, and that effective electronic system security protection strategies are implemented to protect the airplane from all adverse impacts on safety, functionality, and continued airworthiness.

3. The applicant must establish appropriate procedures to allow the operator to ensure that continued airworthiness of the aircraft is maintained, including all post type certification modifications that may have an impact on the approved electronic system security safeguards.

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in theFederal Registeron March 9, 2012 (77 FR 14314). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (77 FR 14314, March 9, 2012) or on the determination of the cost to the public.

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

• Are consistent with the intent that was proposed in the NPRM (77 FR 14314, March 9, 2012) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (77 FR 14314, March 9, 2012).

We estimate that this AD will affect 448 products of U.S. registry. We also estimate that it would take about 1 work-hour per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts would cost about $35 per product.

Based on these figures, we estimate the cost of the AD on U.S. operators to be $53,760, or $120 per product.

According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

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

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

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

For the reasons discussed above, I certify this AD:

(1) Is not a “significant regulatory action” under Executive Order 12866,

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

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

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

You may examine the AD docket on the Internet athttp://www.regulations.gov;or in person at the Docket Management Facility between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM, the regulatory evaluation, any comments received, and other information. The street address for the Docket Office (telephone (800) 647-5527) is in theADDRESSESsection. Comments will be available in the AD docket shortly after receipt.

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

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in theFederal Registeron March 6, 2012 (77 FR 13228). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (77 FR 13228, March 6, 2012) or on the determination of the cost to the public.

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

• Are consistent with the intent that was proposed in the NPRM (77 FR 13228, March 6, 2012) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (77 FR 13228, March 6, 2012).

We estimate that this AD will affect 3 products of U.S. registry. We also estimate that it will take about 25 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Based on these figures, we estimate the cost of this AD to the U.S. operators to be $6,375, or $2,125 per product.

We have received no definitive data that would enable us to provide a cost estimates for the on-condition actions (repairing cracks, corrosion, and defects) specified in this AD.

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

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

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

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

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

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

3. Will not affect intrastate aviation in Alaska; and

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

We prepared a regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

You may examine the AD docket on the Internet athttp://www.regulations.gov;or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM (77 FR 13228, March 6, 2012), the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in theADDRESSESsection. Comments will be available in the AD docket shortly after receipt.

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM published in theFederal Registeron March 21, 2012 (77 FR 16490). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

You may obtain further information by examining the MCAI in the AD docket.

We gave the public the opportunity to participate in developing this AD. We received no comments on the NPRM (77 FR 16490, March 21, 2012) or on the determination of the cost to the public.

We reviewed the available data and determined that air safety and the public interest require adopting the AD as proposed.

We estimate that this AD will affect 409 products of U.S. registry. We also estimate that it will take about 78 work-hours per product to comply with the basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts will cost about $21,353 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these parts. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of this AD to the U.S. operators to be $11,445,047, or $27,983 per product.

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

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

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

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

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

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

3. Will not affect intrastate aviation in Alaska; and

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

We prepared a regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

You may examine the AD docket on the Internet athttp://www.regulations.gov;or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM (77 FR 16490, March 21, 2012), the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in theADDRESSESsection. Comments will be available in the AD docket shortly after receipt.

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

This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, we invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. We will consider all the comments we receive and may conduct additional rulemaking based on those comments.

On December 14, 2011, we issued AD 2011-26-10, amendment 39-16900 (77 FR 729, January 6, 2012) for Enstrom Model F-28C, F-28C-2, F-28F, 280C, 280F, 280FX, TH-28, 480, and 480B helicopters with a trim relay, part-number (P/N) KUP14D55-472, M83536/10-015M, or M83536/10-024M. That AD requires modifying the lateral and longitudinal trim actuator assemblies by replacing the actuator and limit switch bracket to provide a positive stop for the trim actuator. In the event of a trim actuator runaway, the new bracket will stop the actuator, causing the circuit breaker to trip before any significant loss of control occurs. After the trim actuator assemblies are modified, that AD requires performing operational (ground) and flight tests to determine that the trim relay is working correctly. That AD was prompted by reports of 4 failures in the cyclic trim system in the field, 2 that occurred on the Enstrom Model 480B helicopter and 2 that occurred on the Enstrom Model F28 helicopter. These failures resulted in reduced controllability of the helicopter. We issued that AD to prevent failure of the cyclic trim system and subsequent loss of control of the helicopter.

Since we issued immediately adopted AD 2011-26-10, we received one comment from Enstrom, the manufacturer, and Revision 4 to Enstrom Service Directive Bulletin No. 0110, dated January 23, 2012 (SDB 0110), for Model F-28C, F-28C-2, F-28F, 280C, 280F, and 280FX helicopters. In its comment, the manufacturer stated that the list of affected part numbers for the F-28 series and 280 series helicopter should include P/N KUP14D55-24 and that this P/N was erroneously left off of Enstrom's original Service Directive Bulletin. It stated that the same safety concerns also exist with this relay and that adding this P/N will not affect the cost analysis or fleet size as these aircraft were included in the initial calculations.

We agree with the commenter that the additional part numbered relay contained in Enstrom SDB 0110 should be added to the applicability section of the AD because it may contain the same unsafe condition. Also, we agree that the revised compliance instructions contained in SDB 0110 should be required.

We are issuing this AD because we evaluated all the relevant information, including the comment received and the revised service information, and determined the unsafe condition described previously is likely to exist or develop in other helicopters of these same type designs.

We reviewed Enstrom SDB No. T-039, Revision 3, dated July 6, 2011 (SDB T-039), for Model TH-28, 480, and 480B helicopters and Enstrom SDB 0110, for Model F-28C, F-28C-2, F-28F, 280C, 280F, and 280FX helicopters. SDB T-039 specifies, for helicopters with a trim relay, P/N M83536/10-024M, procedures for modifying the lateral and longitudinal trim actuator assembly using the cyclic trim assembly kit (modification kit), P/N 4230045-1, and specifies performing an operational check and flight test to determine if the trim is operating correctly after the modification. SDB 0110 specifies, for helicopters with a trim relay, P/N KUP14D55-24, KUP14D55-472, M83536/10-015M, or M83536/10-024M, procedures for modifying the lateral and longitudinal trim actuator assembly using the modification kit, P/N 28-01063-1, and specifies performing an operational check and flight test to determine if the trim is operating correctly after the modification. The SDBs state that the modification kits contain the upgraded bracket.

In addition to those part-numbered trim relays contained in the applicability section of the current AD 2011-26-10, this AD adds trim relay P/N KUP14D55-24. Also, this AD adopts the revised modification instructions for the Model F-28C, F-28C-2, F-28F, 280C, 280F, and 280FX helicopters contained in SDB 0110. Otherwise, this AD retains most of the requirements of AD 2011-26-10, which requires modifying the lateral and longitudinal trim actuator assembly, using modification kit, P/N 28-01063-1, for the Model F-28C, F-28C-2, F-28F, 280C, 280F, and 280FX helicopters and modification kit, P/N 4230045-1, for the Model TH-28, 480, and 480B helicopters, and verifying that the modification has been completed properly by performing an operational and flight test after the modification is complete.

The actions required by this AD are to be accomplished by following specifiedportions of the SDBs described previously.

The SDBs specify, before further flight, to insert a special addendum into the Emergency Procedures section of the Flight Manual, and this AD does not require this action.

We estimate that this AD will affect 207 helicopters of U.S. Registry. We estimate that operators may incur the following costs in order to comply with this AD. For Model 480, 480B, and TH-28, modifying the actuator assemblies will require 8 work hours at a cost of $85 per hour and parts will cost $327; the cost per helicopter will be $1,007. For Model 280C, 280F, 280FX, F-28C, F-28C-2, and F-28F, modifying the actuator assemblies will require 8 work hours at a cost of $85 per hour; parts will cost $383; and the cost per helicopter will be $1,063.

Providing an opportunity for public comments prior to adopting these AD requirements would delay implementing the safety actions needed to correct this known unsafe condition. Therefore, we find that the risk to the flying public justifies waiving notice and comment prior to the adoption of this rule because the required corrective actions must be accomplished within 5 hours time-in-service, a very short time period based on theaverageflight-hour utilization rate of these helicopters.

Since an unsafe condition exists that requires the immediate adoption of this AD, we determined that notice and opportunity for public comment before issuing this AD are impracticable and contrary to the public interest and that good cause exists for making this amendment effective in less than 30 days.

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

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

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

For the reasons discussed, I certify that this AD:

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

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

3. Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

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

We prepared an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede AD 2008-19-03, Amendment 39-15670 (73 FR 56958, October 1, 2008). That AD applies to the specified products. The NPRM published in theFederal Registeron November 28, 2011 (76 FR 72853). That NPRM proposed to continue to require repetitive external detailed inspections or non-destructive inspections to detect cracks in the fuselage skin along the chem-mill steps at stringers S-1 and S-2R, between station (STA) 400 and STA 460, and repair if necessary. That NPRM also proposed to add inspections for cracking in additional fuselage skin locations, and repair if necessary. That NPRM also proposed to reduce the inspection thresholds and repetitive intervals for certain airplanes.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the proposal (76 FR 72853, November 28, 2011) and the FAA's response to each comment.

The National Transportation Board supports the NPRM (76 FR 72853, November 28, 2011).

Boeing asked that we include Boeing Alert Service Bulletin 737-53A1293, Revision 1, dated July 7, 2010, in the exception to the service bulletinspecified in paragraph (j) of the NPRM (76 FR 72853, November 28, 2011). (Paragraph (j) of the NPRM is identified as paragraph (j)(1) in this final rule.) Boeing stated that the compliance times in paragraph 1.E. “Compliance” of Boeing Service Bulletin 737-53A1293, Revision 2, dated August 10, 2011, are based on the release date of Boeing Alert Service Bulletin 737-53A1293, Revision 1, dated July 7, 2010. Boeing added that paragraph (j) of the NPRM should be changed to reference Boeing Alert Service Bulletin 737-53A1293, Revision 1, dated July 7, 2010.

We agree with the commenter's request for the reason provided. We have changed paragraph (j)(1) of this AD accordingly.

Boeing asked that the language specified in paragraph (k) of the NPRM (76 FR 72853, November 28, 2011) be clarified. (Paragraph (k) of the NPRM is identified as paragraph (j)(2) in this final rule.) Boeing stated that the intent of paragraph (k) of the NPRM is “to specify an exception to the compliance time for accomplishing the next service bulletin inspection, being the effective date of the AD, for the condition addressed by the paragraph.” Boeing added that the language does not clearly describe that it is an exception to the compliance time; rather, it could be interpreted as an exception to the condition.

We agree to provide clarification. Paragraph (j)(2) of this AD is an exception to the conditions, and is provided to establish a date from which to determine if an inspection has been previously accomplished. Therefore, we have made no change to the AD in this regard.

This final rule has been changed to include an optional modification of the chem-milled steps at any location identified in Boeing Service Bulletin 737-53A1293, Revision 2, dated August 10, 2011, which would eliminate the need for the repetitive inspections required by paragraph (g) of this AD. We have determined that we can better ensure long-term continued operational safety by including this modification. Therefore, we have added a new paragraph (i) to this AD to include this modification, and reidentified subsequent paragraphs accordingly. In addition, we have indicated in the Costs of Compliance section of this AD that we do not have data regarding the cost of the optional terminating action.

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

• Are consistent with the intent that was proposed in the NPRM (76 FR 72853, November 28, 2011) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (76 FR 72853, November 28, 2011).

We consider this AD interim action. If final action is identified later, we might consider further rulemaking then.

We estimate that this AD affects 596 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

We have received no definitive data that would enable us to provide a cost estimate for the on-condition actions or the optional terminating action specified in this AD.

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

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

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

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

(1) Is not a “significant regulatory action” under Executive Order 12866,

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

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

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

This AD is a final rule that involves requirements affecting flight safety, and we did not provide you with notice and an opportunity to provide your comments prior to it becoming effective. However, we invite you to participate in this rulemaking by submitting written comments, data, or views. We also invite comments relating to the economic, environmental, energy, or federalism impacts that resulted from adopting this AD. The most helpful comments reference a specific portion of the AD, explain the reason for any recommended change, and include supporting data. To ensure the docket does not contain duplicate comments, commenters should send only one copy of written comments, or if comments are filed electronically, commenters should submit them only one time. We will file in the docket all comments that we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this rulemaking during the comment period. We will consider all the comments we receive and may conduct additional rulemaking based on those comments.

The European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD No. 2011-0226-E, dated December 2, 2011 (EASA AD 2011-0226-E), to correct an unsafe condition for the Agusta AW139 helicopters. EASA advises that an occurrence of incorrect installation of a collective control rod has been reported. This improper installation was identified on an in-service helicopter during the first annual inspection.

The subsequent investigation by the manufacturer led it to conclude that this discrepancy could affect other helicopters because the production quality control procedures did not require recording the applied torque on the bolt attaching the collective control rod to the torque tube. To address this unsafe condition, AgustaWestland issued Bollettino Tecnico (BT) No. 139-275, dated December 1, 2011, (BT 139-275) and EASA issued AD 2011-0226-E to require an inspection of the attaching point of the flight control rod to the torque tube and if improperly installed, reinstalling the parts.

This condition, if not detected and corrected, could lead to in-flight separation of the collective control rod from the torque tube, loss of control of the collective pitch, and subsequent loss of control of the helicopter.

These helicopters have been approved by the aviation authority of Italy and are approved for operation in the United States. Pursuant to our bilateral agreement with Italy, the EASA, its technical representative, has notified us of the unsafe condition described in the EASA AD. We are issuing this AD because we evaluated all information provided by the EASA and determined the unsafe condition is likely to exist or develop on other helicopters of the same type design.

We reviewed BT 139-275, which contains procedures to inspect for the proper installation of control rod C2 in the roof area and to ensure that the attaching hardware that connects the control rod to the torque tube is properly installed.

This AD requires:

• Within 5 hours time-in-service or 7 days, whichever occurs earlier, visually inspecting the connection betweencontrol rod C2 and torque tube C3 for the proper installation of the bolt, washers, self locking nut, and cotter pin.

• If the installed hardware is not as prescribed in this AD, before further flight, re-installing control rod C2 with the correct bolt, washers, self locking nut, and cotter pin.

We estimate that this AD will affect 1 helicopter of U.S. Registry. We estimate that this operator may incur the following costs in order to comply with this AD. Inspecting and reassembling the control rod will require about 8 work hours at an average labor rate of $85 per hour, for a total cost per helicopter of $680. Any required parts costs are minimal.

Providing an opportunity for public comments prior to adopting these AD requirements would delay implementing the safety actions needed to correct this known unsafe condition. Therefore, we find that the risk to the flying public justifies waiving notice and comment prior to the adoption of this rule because the required corrective actions must be accomplished within 5 hours time-in-service, a very short time period based on the average flight-hour utilization rate of these helicopters.

Since an unsafe condition exists that requires the immediate adoption of this AD, we determined that notice and opportunity for public comment before issuing this AD are impracticable and that good cause exists for making this amendment effective in less than 30 days.

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

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

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

For the reasons discussed, I certify that this AD:

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

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

3. Will not affect intrastate aviation in Alaska to the extent that it justifies making a regulatory distinction; and

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

We prepared an economic evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to supersede airworthiness directives AD 2004-09-09, Amendment 39-13598 (69 FR 23646, April 30, 2004); and AD 2009-16-14, Amendment 39-15987 (74 FR 38901, August 5, 2009). Those ADs apply to the specified products. The NPRM published in theFederal Registeron November 28, 2011 (76 FR 72858). The NPRM proposed to retain certain requirements of AD 2004-09-09 and AD 2009-16-14. The NPRM proposed to also add airplanes to the applicability for the high frequency eddy current (HFEC) inspection for cracking of the stop fittings at the shear web at the STA 348.2 frame; extend the repetitive interval for the HFEC inspection of the STA 348.2 frame for Model 737-200C airplanes; add an inspection to detect missing fasteners of the STA 348.2 frame inner chord; and update or add certain inspection and repair instructions.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the proposal (76 FR 72858, November 28, 2011) and the FAA's response to each comment.

Boeing concurs with the contents of the NPRM (76 FR 72858, November 28, 2011).

Southwest Airlines (SWA) asked that paragraph (r) of the NPRM (76 FR 72858, November 28, 2011) be removed, or revised to provide clarification. SWA stated that the exception specified in paragraph (r) of the NPRM does not allow the sequence of steps in the Work Instructions of Boeing Alert Service Bulletin 737-53A1240, Revision 1, dated June 29, 2010, to be changed. SWA added that it has serious concernsthat this paragraph effectively eliminates all flexibility when accomplishing open access, the order of which locations get inspected, and close access. SWA noted that this becomes very difficult in a maintenance environment where other activities may be worked concurrently. SWA asked if the intent of the exception in paragraph (r) of the NPRM is to make removing the windscreen before the lavatory and removing the fasteners identified in Circle Note 1 prior to removing the fasteners identified in Circle Note 2 conditions of compliance. SWA understands that certain steps contained in Boeing Alert Service Bulletin 737-53A1240, Revision 1, dated June 29, 2010, might have to be accomplished in a specific order. However, SWA noted that the umbrella restriction imposed by paragraph (r) of the NPRM goes beyond that intent and results in restrictions when performing maintenance.

Scandanavian Airlines Systems (SAS) asked that we include an option of removing the shear web before accomplishing the inspection specified in Boeing Alert Service Bulletin 737-53A1204, Revision 2, dated June 24, 2010, as part of the access procedures specified in the NPRM (76 FR 72858, November 28, 2011). SAS stated that it has previously accomplished the inspections as an alternative method of compliance (AMOC) to AD 2009-16-14, Amendment 39-15987 (74 FR 38901, August 5, 2009). SAS noted that it also received clarification from the manufacturer regarding the shear web removal step in Parts 1 and 2 of the Accomplishment Instructions of Boeing Alert Service Bulletin 737-53A1204, Revision 2, dated June 24, 2010. SAS stated that the shear web removal is not part of the inspection procedures specified in Boeing Alert Service Bulletin 737-53A1204, Revision 1, dated March 26, 2007.

We agree with the commenters for the reasons provided. We have revised paragraph (r) of this AD accordingly.

SWA asked that we include a reference to AMOCs approved for AD 2005-20-03, Amendment 39-14296 (70 FR 56361, September 27, 2005) in the NPRM (76 FR 72858, November 28, 2011). SWA pointed out that paragraph (m)(4) of AD 2009-16-14, Amendment 39-15987 (74 FR 38901, August 5, 2009), stated that “AMOCs approved previously in accordance with AD 2005-20-03 are approved as AMOCs for the corresponding provisions of this AD, provided the repetitive inspection intervals (if any) do not exceed 6,000 flight cycles.” SWA specified that paragraph (t)(5) of the NPRM can be interpreted to mean that an AMOC issued for AD 2005-20-03, which was approved as an AMOC to AD 2009-16-14, will be considered as an AMOC to the NPRM.

We agree with the commenter that AMOCs approved for AD 2005-20-03, Amendment 39-14296 (70 FR 56361, September 27, 2005), as specified in paragraph (m)(4) of AD 2009-16-14, Amendment 39-15987 (74 FR 38901, August 5, 2009), are still approved for the corresponding requirements of this AD. For clarity, we have added a new paragraph (t)(5) to this AD to include that information, and we reidentified the existing paragraph (t)(5) of the NPRM (76 FR 72858, November 28, 2011) as paragraph (t)(6) in this final rule.

We have clarified the compliance time in paragraph (q) of this AD by adding the phrase “whichever occurs later.”

We have updated certain headings throughout this AD.

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

• Are consistent with the intent that was proposed in the NPRM (76 FR 72858, November 28, 2011) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (76 FR 72858, November 28, 2011).

We estimate that this AD affects 581 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

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

According to the manufacturer, some of the costs of this AD may be covered under warranty, thereby reducing the cost impact on affected individuals. We do not control warranty coverage for affected individuals. As a result, we have included all costs in our cost estimate.

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

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

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

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

(1) Is not a “significant regulatory action” under Executive Order 12866,

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

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

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

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM published in theFederal Registeron January 19, 2012 (77 FR 2664). That NPRM proposed to require repetitive eddy current high frequency (ETHF) inspections for cracks on the aft face on the left and right rib hinge bearing lugs of the center section of the horizontal stabilizer; and crack measurement, repairs, post-repair repetitive inspections, and installation of a new center section rib if necessary.

We gave the public the opportunity to participate in developing this AD. The following presents the comments received on the proposal (77 FR 2664, January 19, 2012), and the FAA's response to each comment.

Boeing stated it supports the NPRM (77 FR 2664, January 19, 2012).

Kristianna Sciarraa requested we change the repetitive inspection interval in the NPRM (77 FR 2664, January 19, 2012) from every 10,500 flight cycles to every 18 months when no cracking is found after the initial inspection. The commenter stated that more frequent inspections would increase early detection of fatigue cracking and would be workable with operator schedules. The commenter also stated that the costs associated with the decreased inspection interval are minimal when compared to the cost to an operator if an accident occurs due to fatigue cracking.

We disagree with changing the repetitive inspection interval because the repetitive inspection interval is based on damage tolerance (crack growth) analysis of the hinge bearing lug of the horizontal stabilizer center section. The analysis accounts for the loading and stress in the specific location and considers worse case crack growth from detectable to critical size and allows for multiple opportunities to detect a crack. We have not changed the final rule in this regard.

Kristianna Sciarraa requested we include mandatory reporting of inspection results in the NPRM (77 FR 2664, January 19, 2012). The commenter stated that Boeing Alert Service Bulletin 717-55A0011, dated May 17, 2011, specifies reporting and that providing the manufacturer with such information would foster an important exchange of information with an end goal of creating safe and reliable aircraft to ensure passenger and operator protection.

We disagree with requiring mandatory reporting of inspection results. Boeing Alert Service Bulletin 717-55A0011, dated May 17, 2011, already specifies submitting information to the manufacturer. This final rule does not include that requirement because we understand the unsafe condition, and we do not want to add an additional burden on the operators. We require reporting of inspection reports if the unsafe condition is a result of quality control issues or if we are trying to understand the scope of the unsafe condition. We have not changed the final rule in this regard.

We reviewed the relevant data, considered the comments received, and determined that air safety and the public interest require adopting the AD as proposed.

We estimate that this AD affects 129 airplanes of U.S. registry.

We estimate the following costs to comply with this AD:

We have received no definitive data that would enable us to provide cost estimates for the on-condition labor costs specified in this AD. The estimated parts cost for a replacement rib is $16,387.

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

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

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

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

(1) Is not a “significant regulatory action” under Executive Order 12866,

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

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

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

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

Discussion

We issued a notice of proposed rulemaking (NPRM) to amend 14 CFR part 39 to include an AD that would apply to the specified products. That NPRM was published in theFederal Registeron November 7, 2011 (76 FR 68671), and proposed to supersede AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009). That NPRM proposed to correct an unsafe condition for the specified products. The MCAI states:

We gave the public the opportunity to participate in developing this AD. We have considered the comments received.

UPS requested that we extend the compliance time specified in paragraphs (h), (i), and (j) in the NPRM (76 FR 68671, November 7, 2011) to 60 months. UPS explained that the requested extended compliance time is to reduce the potential for special maintenance visits of its airplanes, and that a compliance period of less than 60 months will cause undue hardship on UPS and its operation, and result in significant negative economic impact.UPS reasoned that it has an existing tank entry program that is completed only during airplane major maintenance visits at a 5-year time interval, and that using the existing interval will reduce the costs to open, purge, close, and check out the tanks. UPS explained further, that materials will take a minimum of 6 months to receive, and due to the extensive time waiting for parts, this will force even more airplanes into a special visit program in a much shorter period of time than what the NPRM is proposing.

UPS expressed that it agrees with the FAA when the premise for establishing a timeline for completion of an SFAR (Special Federal Aviation Regulation) 88 project is based on a level of safety as determined by the NPRM (76 FR 68671, November 7, 2011) and that it believes there is a timeframe precedence that has previously been set by the FAA for a project of this type. UPS explained that the FAA released an earlier AD, which corrected similar actions to the NPRM (76 FR 68671, November 7, 2011), and that the earlier AD had a 5-year compliance requirement. UPS believes that the same level of safety is achieved with a 5-year compliance on the Model A300 airplanes fleet.

FedEx requested that we extend the compliance time in the NPRM (76 FR 68671, November 7, 2011) to 30 months, to allow for the accomplishment of the work to be performed at a scheduled heavy maintenance event. FedEx explained that it accomplishes a heavy maintenance check on its Model A300-600 and A310 airplanes every 30 months. FedEx reasoned that it would be 22 hours per airplane to accomplish the requirements of the service information and that it is a significant economic and operational hardship for it to “special visit” airplanes to accomplish fuel tank entry.

We do not agree to extend the compliance time in this final rule. In developing an appropriate compliance time for this action, we considered the urgency associated with the subject unsafe condition, the availability of required parts, and the practical aspect of accomplishing the required modification within a period of time that corresponds to the normal scheduled maintenance for most affected operators. Under the provisions of paragraph (m) of the final rule, we will consider requests for approval of an extension of the compliance time if sufficient data are submitted to substantiate that the new compliance time would provide an acceptable level of safety. We have not changed the AD in this regard.

UPS requested that we revise the Costs of Compliance section in the NPRM (76 FR 68671, November 7, 2011). UPS explained that it has determined that the required hours to complete the NPRM are greater than 150 hours and that the material kits that are required by Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010, are approximately $40,000 each, which is a total of $52,750 per airplane. UPS reasoned that the completion of the modification on the 53 UPS Model A300 airplanes will be approximately $2,795,750, which is a significant negative economic impact on UPS. UPS expressed that the proposed cost in the NPRM is only 7.5 percent of the actual cost that UPS will incur and that the actual costs will be greater than 13 times the cost estimates proposed in the NPRM.

FedEx requested that we acknowledge that there is an additional material cost and that our Costs of Compliance section in the NPRM (76 FR 68671, November 7, 2011) is underestimated in terms of financial impact to the operator. FedEx reasoned that the estimated parts cost for accomplishment of Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010, only includes the Airbus manufactured hardware kit (P/N 286095B01R01). FedEx explained that in order to complete the modification, a separate Intertechnique kit that includes the actual sensors and harness connectors must be procured, and that Airbus Mandatory Service Bulletin A300-28-6095, Revision 01, dated February 2, 2010, provides no warranty information or pricing for the additional required kit. FedEx expressed that it is in the process of obtaining price information for the additional required Intertechnique kits and will provide the data when it becomes available.

We agree to revise the Costs of Compliance section in this final rule for the reasons stated by the commenters. We have revised the Costs of Compliance section of the final rule to include the average costs of parts from Intertechnique.

We have revised the heading for and the wording in paragraph (k) of this AD and the wording of paragraph (g) of this AD; these changes have not affected the intent of those paragraphs.

We reviewed the available data, including the comments received, and determined that air safety and the public interest require adopting the AD with the changes described previously—except for minor editorial changes. We have determined that these minor changes:

• Are consistent with the intent that was proposed in the NPRM (76 FR 68671, November 7, 2011) for correcting the unsafe condition; and

• Do not add any additional burden upon the public than was already proposed in the NPRM (76 FR 68671, November 7, 2011).

We estimate that this AD will affect about 210 products of U.S. registry. The actions that are required by AD 2009-02-04, Amendment 39-15794 (74 FR 7792, February 20, 2009), and retained in this AD take about 5 work-hours per product, at an average labor rate of $85 per work-hour. Required parts cost about $0 per product. Based on these figures, the estimated cost of the currently required actions is $425 per product.

We estimate that it will take about 44 work-hours per product to comply with the new basic requirements of this AD. The average labor rate is $85 per work-hour. Required parts will cost about $39,000 per product. Where the service information lists required parts costs that are covered under warranty, we have assumed that there will be no charge for these parts. As we do not control warranty coverage for affected parties, some parties may incur costs higher than estimated here. Based on these figures, we estimate the cost of this AD to the U.S. operators to be $8,975,400, or $42,740 per product.

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

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

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

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

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

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

3. Will not affect intrastate aviation in Alaska; and

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

We prepared a regulatory evaluation of the estimated costs to comply with this AD and placed it in the AD docket.

You may examine the AD docket on the Internet athttp://www.regulations.gov;or in person at the Docket Operations office between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. The AD docket contains the NPRM (76 FR 68671, November 7, 2011), the regulatory evaluation, any comments received, and other information. The street address for the Docket Operations office (telephone (800) 647-5527) is in theADDRESSESsection. Comments will be available in the AD docket shortly after receipt.

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

The FTC's Trade Regulation Rule entitled “Disclosure Requirements and Prohibitions Concerning Franchising” (Franchise Rule or Rule)1 provides three exemptions based on a monetary threshold: the $500 “minimum payment exemption,”2 the $1 million “large franchise investment exemption”3 and the $5 million “large franchisee exemption.”4 The Rule requires the Commission to “adjust the size of the monetary thresholds every fourth year based upon the * * * Consumer Price Index for all urban consumers published by the Department of Labor.”5 This requirement, added by the 2007 amendments to the Rule, took effect on July 1, 2007, so that franchisors would have a one-year phase-in period within which to comply with the amended Rule's revised disclosure requirementsbefore the July 1, 2008, final compliance deadline.6

Between 2007 and 2011, the annual average value of the Consumer Price Index for all urban consumers and all items increased by 8.49 percent—from an index value of 207.342 to a value of 224.939.7 Applying the percentage increase to the three monetary thresholds increases the thresholds as follows:

Because the calculation of these thresholds is purely ministerial in nature and implements the Rule's mandatory adjustment mechanism, these adjustments are exempt from the rulemaking procedures specified in section 18 of the FTC Act.9 In addition, the Commission has determined that notice and comment are unnecessary under the Administrative Procedure Act (APA) for the same reason. The Commission, therefore, has omitted notice and comment for good cause as provided by section 553(b)(B) of the APA.10 For this reason, the requirements of the Regulatory Flexibility Act also do not apply.11 Accordingly, the adjusted thresholds will take effect on July 1, 2012.

For the reasons set out in the preamble of this document, the Federal Trade Commission amends 16 CFR Part 436 as follows:

Paperwork Reduction Act

The collection of information contained in these regulations has been reviewed and, pending receipt and evaluation of public comments, approved by the Office of Management and Budget under control number 1545-0015. Responses to this collection of information are voluntary to obtain the benefit of being able to elect portability or to take advantage of the special reporting requirements applicable to certain assets, and, for certain estates, to opt out of a deemed portability election.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number. For further information concerning this collection of information, and the address for the submission of comments on the collection of information and the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble of the cross-referencing notice of proposed rulemaking published in the Proposed Rules section of this issue of theFederal Register.

Books and records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

On December 17, 2010, in section 303 of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Public Law 111-312 (124 Stat. 3296, 3302) (TRUIRJCA), Congress amended section 2010(c) of the Internal Revenue Code (Code) to allow portability of the applicable exclusion amount between spouses, and it made conforming amendments to sections 2505(a), 2631(c), and 6018(a)(1) of the Code. Section 303 of TRUIRJCA directs the Secretary to issue such regulations as may be necessary or appropriate to carry out section 303(a) of TRUIRJCA.

This document contains amendments to the Estate Tax Regulations (26 CFR part 20) under sections 2001 and 2010 of the Code and to the Gift Tax Regulations (26 CFR part 25) under section 2505 of the Code. The temporary regulations address not only the amendments made to section 2010(c) by TRUIRJCA and the conforming amendment to section 2505(a), but also the entirety of sections 2010 and 2505 of the Code for which there are no existing regulations. Finally, the amendment to the Estate Tax Regulations under section 2001 of the Code clarifies the application of the rule in section 2010(c)(5)(B) to section 2001 of the Code.

Section 303(a) of TRUIRJCA amends section 2010(c) of the Code by striking paragraph (2) of section 2010(c) and adding new paragraphs (2) through (6) of section 2010(c). Section 2010(c)(2) now defines the applicable exclusion amount, used to determine the applicable credit amount, as the sum of the basic exclusion amount and, in the case of a surviving spouse, the DSUE amount. Section 2010(c)(3) provides that the basic exclusion amount is $5,000,000, to be adjusted for inflation in each year after calendar year 2011. Section 2010(c)(4) defines the DSUE amount to mean the lesser of (A) the basic exclusion amount or (B) the basic exclusion amount of the last deceased spouse of the surviving spouse, less the amount with respect to which the tentative tax is determined under section 2001(b)(1) on the estate of such deceased spouse.

Section 2010(c)(5) describes special rules relating to the portability of a DSUE amount. Section 2010(c)(5)(A) provides certain requirements that must be met to allow a surviving spouse to take into account a DSUE amount of a deceased spouse. In particular, the executor of the estate of the deceased spouse must file an estate tax return, compute the DSUE amount on such return, elect portability of the DSUE amount on such return, and ensure that such return is filed within the time prescribed by law (including extensions) for filing such return. Section 2010(c)(5)(B) allows the Secretary to examine a return of the deceased spouse to determine the DSUE amount, even after the expiration of the time provided under section 6501 for assessing a tax under chapter 11 or 12.

Section 2010(c)(6) directs the Secretary to prescribe regulations as may be necessary or appropriate to carry out section 2010(c).

On October 17, 2011, the Department of the Treasury (Treasury) and the IRS issued Notice 2011-82 (2011-42 IRB 516) which can be found onwww.IRS.gov.Notice 2011-82 alerts taxpayers to the requirements for the estate of a deceased spouse to elect portability of a DSUE amount. In addition, Notice 2011-82 announces that the estate of a deceased spouse will be deemed to elect portability of the DSUE amount by timely filing a complete and properly-prepared estate tax return, and that such return will be deemed to include a computation of the DSUE amount until such time as the IRS revises the estate tax return to expressly contain the DSUE amount computation. Notice 2011-82 also provides guidance to the estates of deceased spouses who choose not to make the portability election. Notice 2011-82 announces that Treasury and the IRS intend to issue regulations to implement section 303 of TRUIRJCA. Accordingly, Treasury and the IRS invited comments on a number of specific issues. Treasury and the IRS received comments on these issues, as well as additional issues identified by commenters. The comments are discussed in more detail in the “Explanation of Provisions” section of this preamble.

On March 3, 2012, Treasury and the IRS issued Notice 2012-21 (2012-10 IRB 450) (which can be found onwww.IRS.gov). Notice 2012-21 grants to qualifying estates a six-month extension of time for filing an estate tax return to elect portability of an unused exclusion amount provided that the qualifying estate files Form 4768, “Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes,” within 15 months of the decedent's death. A qualifying estate is the estate of a person who died, survived by a spouse, during the first half of calendar year 2011, and whose gross estate has a fair market value that does not exceed $5 million. With the extension granted by this notice, the estate tax return must be filed within 15 months of the decedent's death.

The temporary regulations in § 20.2010-1T(a) state the general rule of section 2010(a) that an applicable credit amount will be allowed to the estate of every decedent against the estate tax imposed by section 2001. The temporary regulations in § 20.2010-1T(b) incorporate the rule in section 2010(b) relating to an adjustment to the applicable credit amount for certain gifts made before 1977. Finally, as provided in section 2010(d), the temporary regulations in § 20.2010-1T(c) limit the amount of the allowable credit so that it does not exceed the amount of the estate tax imposed by section 2001.

The temporary regulations in § 20.2010-1T(d) define terms relevant to computing the credit amount allowable under section 2010. The relevant terms includeapplicable credit amount, applicable exclusion amount, basic exclusion amount, DSUE amount,andlast deceased spouse.

The temporary regulations in § 20.2010-2T(a) require an executor electing portability to make that election on a timely-filed estate tax return. The last return filed by the due date of the return, including extensions actually granted, will supersede any previously-filed return. Thus, an executor may supersede a previously-filed portability election on a subsequent timely-filed estate tax return if the executor satisfies the requirement in § 20.2010-2T(a)(3)(i). But see § 20.2010-2T(a)(6) when contrary elections are made by more than one person permitted to make the election. The temporary regulations in § 20.2010-2T(a)(4) provide that a portability election is irrevocable once the due date (as extended) of the return has passed.

For a valid portability election, section 2010(c)(5) requires the executor to make the election on an estate tax return filed within the “time prescribed by law” (including extensions) for filing that return. Section 6075(a) requires the filing of an estate tax return made under section 6018(a) within 9 months of the date of the decedent's death. Section 6018(a) requires an estate tax return to be filed when the gross estate of a citizen or resident exceeds the excess (if any) of the basic exclusion amount in effect under section 2010(c) in the calendar year of the decedent's death over the sum of the decedent's adjusted taxable gifts as defined in section 2001(b) and the amount allowed to the decedent as a specific exemption under section 2521 as in effect prior to its repeal by the Tax Reform Act of 1976.

A commenter on Notice 2011-82 noted that neither section 2010(c)(5)(A) nor any other section of the Code provides a “time prescribed by law” for filing an estate tax return on behalf of a decedent's estate when the basic exclusion amount exceeds the value of the decedent's gross estate. Accordingly, the commenter requested that the regulations clarify the meaning of “time prescribed by law” as it applies in section 2010(c)(5)(A).

For executors who are required to file an estate tax return under section 6018(a), section 6075(a) requires the executor to file the estate tax return within nine months after the decedent's date of death. When an executor is not required to file an estate tax return under section 6018(a), the Code does not specify a due date for a return filed for the purpose of making the portability election. The temporary regulations in § 20.2010-2T(a)(1) require every estate electing portability of a decedent's DSUE amount to file an estate tax return within 9 months of the decedent's date of death, unless an extension of time for filing has been granted. (See Notice 2012-21 providing for an extension of time to file an estate tax return for the estates of certain decedents who died in the first half of calendar year 2011.) This timing requirement for filing a return applies to all estates electing portability regardless of the size of the gross estate. The temporary regulations provide in § 20.2010-2T(a)(1) that an estate choosing to elect portability will be considered for purposes of Subtitle B and Subtitle F of the Code to be required to file a return under section 6018(a).

This rule will benefit the IRS as well as taxpayers choosing the benefit of portability because the records required to compute and verify the DSUE amount are more likely to be available at the time of the death of the first deceased spouse than at the time of a subsequent transfer by the surviving spouse by gift or at death, which could occur many years later. This rule also is consistent with the “Technical Explanation of the Revenue Provisions Contained in the `Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010' Scheduled for Consideration by the United States Senate,” J. Comm. On Taxation, 111th Cong., JCX-55-10 (Dec. 10, 2010) (Technical Explanation), which suggests that estates deciding to elect portability that are not otherwise required to file an estate tax return under section 6018(a) are intended to be subject to the same timely-filing requirements applicable to estates required to file an estate tax return under section 6018(a). The Technical Explanation states that the DSUE amount is available to a surviving spouse “only if an election is made on a timely filed estate tax return (including extensions) of the predeceased spouse * * * regardless of whether the predeceased spouse otherwise is required to file an estate tax return.” JCX-55-10, page 52; see also “General Explanation of Tax Legislation Enacted in the 111th Congress,” J. Comm. On Taxation, 111th Cong., JCS-2-11, pages 554-555 (March 2011) (General Explanation) (incorporating the same language from the Technical Explanation).

Notice 2011-82 provides that the estate of a decedent dying after December 31, 2010, will be deemed to make the portability election upon the timely filing of a “complete and properly-prepared” estate tax return. The temporary regulations in § 20.2010-2T(a)(2) provide that the estate of a decedent (survived by a spouse) makes the portability election by timely filing a complete and properly-prepared estate tax return for the decedent's estate.

Several commenters responding to Notice 2011-82 requested that Treasury and the IRS define what is meant by a “complete and properly-prepared” estate tax return. Commenters further requested that Treasury and the IRS consider the cost and burden associated with filing an estate tax return and establishing and substantiating the values reported on such return for those estates that are not required to file a return under section 6018(a) but are filing such a return solely to elect portability of the decedent's DSUE amount.

The temporary regulations in § 20.2010-2T(a)(7)(i) provide that an estate tax return prepared in accordance with all applicable requirements is considered a “complete and properly-prepared” estate tax return. The temporary regulations in § 20.2010-2T(a)(7)(ii), however, provide that executors of estates that are not otherwise required to file an estate tax return under section 6018(a) do not have to report the value of certain property that qualifies for the marital or charitable deduction. If an executor chooses to make use of this special rule in filing an estate tax return, the executor must estimate the total value of the gross estate (including the values of the property that do not have to be reported on the estate tax return under this provision), based on a determination made in good faith and with due diligence regarding the value of all of the assets includible in the gross estate. The instructions issued with respect to the estate tax return (“Instructions for Form 706”) will provide ranges of dollar values, and the executor must identify on the estate tax return the particular range within which falls the executor's best estimate of the total gross estate. An amount corresponding to this range will be included on line 1, part 2, of the estate tax return, along with an indication of whether the line 1 total includes an estimate under this special rule. By signing the return, the executor is certifying, under penalties of perjury, that the estimate falls within the identified range of values to the best of the executor's knowledge and belief. The inquiry required to determine the executor's best estimate is the same an executor of any estate must make under current law to determine whether the estate has a filing obligation pursuant to section 6018(a); that is, to determine whether the fair market value of the gross estate exceeds the excess of the basic exclusion amount over the sum of the decedent's adjusted taxable gifts and the amount allowed to the decedent as a specific exemption under section 2521.

If the executor of the estate of a decedent with a surviving spouse does not wish to make the portability election, the temporary regulations in § 20.2010-2T(a)(3) require the executor to make an affirmative statement on the estate tax return signifying the decision to have the portability election not apply. If no estate tax return is required for that decedent's estate under section 6018(a), not filing a timely return will be considered to be an affirmative statement signifying the decision not to make a portability election.

A commenter responding to Notice 2011-82 suggested that the temporary regulations allow a surviving spouse to file an estate tax return on behalf of a decedent independently of a duly-appointed executor if the surviving spouse notifies the executor of the intention to file and the executor does not, in fact, file a return. Section 2010(c)(5), however, permits only the executor of the decedent's estate to file the estate tax return and make the portability election. Section 2203 defines the term “executor” for purposes of the estate tax to mean “the executor or administrator of the decedent, or, if there is no executor or administrator appointed, qualified, andacting within the United States, then any person in actual or constructive possession of any property of the decedent.”

The temporary regulations in § 20.2010-2T(a)(6)(i) provide that an executor or administrator that is appointed, qualified, and acting within the United States for the decedent's estate (an appointed executor), may file an estate tax return to elect portability or to opt to have the portability election not apply. The temporary regulations in § 20.2010-2T(a)(6)(ii) provide that, if there is no appointed executor, any person in actual or constructive possession of any property of the decedent may file the estate tax return to elect portability or to opt to have the portability election not apply. The temporary regulations in § 20.2010-2T(a)(6)(ii) refer to such a person as a “non-appointed executor” and provide that a portability election made by a non-appointed executor cannot be superseded by a contrary election made by another non-appointed executor of that same decedent's estate.

The temporary regulations in § 20.2010-2T(b)(1) require that an executor include a computation of the DSUE amount on the estate tax return of the decedent to allow portability of that decedent's DSUE amount. A complete and properly-prepared return contains the information required to compute a decedent's DSUE amount. Accordingly, in a transitional rule consistent with Notice 2011-82, the temporary regulations in § 20.2010-2T(b)(2) provide that the IRS will deem the required computation of the decedent's DSUE amount to have been made on an estate tax return that is considered complete and properly-prepared. The temporary regulations further clarify that, once the IRS revises the prescribed form for the estate tax return expressly to include the computation of the DSUE amount, executors that previously filed an estate tax return pursuant to the transitional rule will not be required to file a supplemental estate tax return using the revised form.

Section 2010(c)(4) defines the DSUE amount as the lesser of (A) the basic exclusion amount, or (B) the excess of (i) the basic exclusion amount of the last deceased spouse of the surviving spouse, over (ii) the amount with respect to which the tentative tax is determined under section 2001(b)(1) on the estate of such deceased spouse.

The temporary regulations in § 20.2010-2T(c)(1)(i) confirm that the term “basic exclusion amount” referred to in section 2010(c)(4)(A) means the basic exclusion amount in effect in the year of the death of the decedent whose DSUE amount is being computed. Generally, only the basic exclusion amount of the decedent, as in effect in the year of the decedent's death, will be known at the time the DSUE amount must be computed and reported on the decedent's estate tax return. Because section 2010(c)(5)(A) requires the executor of an estate electing portability to compute and report the DSUE amount on a timely-filed estate tax return, and because the basic exclusion amount is integral to this computation, the term “basic exclusion amount” in section 2010(c)(4)(A) necessarily refers to such decedent's basic exclusion amount.

In responding to Notice 2011-82, several commenters also argued that the reference to “basic exclusion amount” in section 2010(c)(4)(B)(i) should be interpreted to mean “applicable exclusion amount,” citing to the computation of the DSUE amount inExample 3on page 53 of the Technical Explanation and to footnote 1582A that was added to the General Explanation by the “ERRATA—‘General Explanation of Tax Legislation Enacted in the 111th Congress'” (ERRATA). JCX-20-11, at page 1.Example 3computes the DSUE amount of a deceased spouse who was preceded in death by one spouse and was survived by another spouse. The deceased spouse's DSUE amount is computed using the applicable exclusion amount rather than the basic exclusion amount of the deceased spouse (as reduced by the amount of the deceased spouse's taxable estate).Example 3is reproduced verbatim in the General Explanation. See JCS-2-11 at page 555. The ERRATA acknowledges that section 2010(c)(4)(B)(i) uses the term basic exclusion amount, but notes that “[a] technical correction may be necessary to replace the reference to the basic exclusion amount of the last deceased spouse of the surviving spouse with a reference to the applicable exclusion amount of such last deceased spouse, so that the statute reflects intent.” JCX-20-11, at page 1, n. 1582A.

Treasury and the IRS have carefully considered this issue. Construing the language of section 2010(c)(4)(B)(i) as referring to the same number described in section 2010(c)(4)(A) would lead to an illogical result because it would effectively render the use of “basic exclusion amount” in section 2010(c)(4)(A) meaningless. Specifically, the basic exclusion amount (the amount referenced in section 2010(c)(4)(A)) cannot be less than that same number reduced by another number (the amount referenced in section 2010(c)(4)(B)). Under such an interpretation, the basic exclusion amount referenced in section 2010(c)(4)(A) could not limit or impact the DSUE amount, and thus it would serve no purpose as written. Based on the principle that a statute should not be construed in a manner that renders a provision of that statute superfluous and consistent with the indicia of legislative intent reflected in the Technical Explanation and the General Explanation, and in the exercise of the express authority granted by Congress in sections 2010(c)(6) and 7805, Treasury and the IRS have determined that the reference in section 2010(c)(4)(B)(i) to the basic exclusion amount is properly interpreted to mean the applicable exclusion amount. Thus, the temporary regulations adopt this interpretation.

Several commenters on Notice 2011-82 suggested that, for purposes of computing the DSUE amount under section 2010(c)(4), the amount referred to in section 2010(c)(4)(B)(ii), which is the amount on which the decedent's tentative tax is determined under section 2001(b)(1), be construed to take into account gift tax paid by such decedent. The commenters noted that, to avoid using exclusion for amounts on which gift tax was paid, this construction should apply in computing the DSUE amount of such a decedent if (1) gift tax was paid by a decedent on transfers that caused the total of his or her taxable transfers to exceed the applicable exclusion amount at the time of the transfer, and (2) the total adjusted taxable gifts of the decedent is less than the applicable exclusion amount on the date of his or her death. The temporary regulations in § 20.2010-2T(c)(2) provide that amounts on which gift taxes were paid by a decedent are excluded from adjusted taxable gifts for the purpose of computing that decedent's DSUE amount.

Commenters on Notice 2011-82 asked for clarification as to whether the DSUE amount is determined before or after the application of other available credits, such as the credit for tax on prior transfers (section 2013), the credit for foreign death taxes (section 2014), and the credit for death taxes on remainders(section 2015). The issue of the impact of the credits in sections 2013 to 2015 on computing the DSUE amount merits further consideration. The temporary regulations reserve § 20.2010-2T(c)(3) to provide future guidance on this issue. Treasury and the IRS request comments regarding appropriate rules to coordinate these credits with portability of the exclusion. For the manner of submitting these comments, see the notice of proposed rulemaking on this subject appearing elsewhere in this issue of theFederal Register.

Commenters on Notice 2011-82 asked for clarification on when the DSUE amount of a decedent is available to the surviving spouse or to the surviving spouse's estate for use in determining the surviving spouse's applicable exclusion amount. The temporary regulations in §§ 20.2010-3T(a) and 25.2505-2T(a) provide that, if the decedent is the last deceased spouse of the surviving spouse on the date of a transfer by the surviving spouse that is subject to gift or estate tax, the surviving spouse, or the estate of the surviving spouse, of that decedent may take into account that decedent's DSUE amount in determining the applicable exclusion amount of the surviving spouse when computing the surviving spouse's gift or estate tax liability on that transfer. This rule applies only if the decedent's executor elected portability. In addition, the temporary regulations in §§ 20.2010-3T(c)(1) and 25.2505-2T(d)(1) provide that a portability election made by the executor of a decedent's estate is effective as of the date of the decedent's death. Thus, the DSUE amount of a decedent survived by a spouse may be included in determining the applicable exclusion amount of the surviving spouse under section 2010(c)(2), subject to any applicable limitations, with respect to all transfers occurring after the death of the decedent, if the executor of the decedent's estate makes a portability election and the election is not superseded by the executor of the decedent's estate before the due date of the return, including extensions.

Some commenters responding to Notice 2011-82 suggested that the regulations clarify the scope of the last deceased spouse limitation in section 2010(c)(4)(B)(i). The temporary regulations in § 20.2010-1T(d)(5) explain that the term “last deceased spouse” referred to in section 2010(c)(4)(B)(i) means the most recently deceased individual who was married to the surviving spouse at that individual's death, except that an individual dying before calendar year 2011 cannot be considered the last deceased spouse of such surviving spouse. The temporary regulations in §§ 20.2010-3T(a)(3) and 25.2505-2T(a)(3) clarify that remarriage alone does not affect who will be considered the last deceased spouse and does not prevent the surviving spouse from including in the surviving spouse's applicable exclusion amount the DSUE amount of the deceased spouse who most recently preceded the surviving spouse in death. The temporary regulations further clarify that the identity of the last deceased spouse of the surviving spouse for purposes of portability is not affected by whether the estate of the last deceased spouse elects portability of the deceased spouse's DSUE amount or whether the last deceased spouse has any DSUE amount available. This is consistent with the statutory language, which refers to the “last deceased spouse of such surviving spouse” without further qualification, as well as with the Technical Explanation, which states that “[t]he last deceased spouse limitation applies whether or not the last deceased spouse has any unused exclusion or the last deceased spouse's estate makes a timely election.” JCX-55-10, at page 52, n. 57; see also General Explanation, JCS-2-11, at page 554, n. 1582.

For purposes of determining the applicable credit amount under section 2505(a)(1), a commenter asked Treasury and the IRS to clarify when one determines the identity of the last deceased spouse. Although section 2505(a)(1) refers to the applicable credit amount in effect under section 2010(c) as would apply if the donor died as of the end of the calendar year, this does not mean that the identity of the last deceased spouse is subject to change for purposes of computing the surviving spouse's applicable exclusion amount if the surviving spouse is preceded in death by a subsequent spouse after the gift transfer but before the end of the calendar year. Therefore, the temporary regulations provide in § 25.2505-2T(a) that for purposes of determining a surviving spouse's applicable exclusion amount when the surviving spouse makes a taxable gift, the surviving spouse's last deceased spouse is identified as of the date of the taxable gift. See § 20.2010-3T(a) for a comparable rule for estate tax purposes.

Some commenters responding to Notice 2011-82 requested that the regulations clarify the outcome when a surviving spouse is preceded in death by more than one spouse. In particular, commenters asked how the DSUE amount to be included in the applicable exclusion amount of a surviving spouse is affected when a decedent who is currently considered the last deceased spouse of such surviving spouse either has no DSUE amount or has a smaller amount of DSUE in comparison to a decedent who previously was considered the last deceased spouse of such surviving spouse. The temporary regulations clarify that, in either situation, the surviving spouse may not apply any remaining DSUE amount from a prior deceased spouse.

In addition, the temporary regulations address how to compute the DSUE amount included in the applicable exclusion amount of a surviving spouse who made gifts between the deaths of two decedents, each of whom were at separate times the last deceased spouse of such surviving spouse. First, the temporary regulations in § 25.2505-2T(b) create an ordering rule by providing that, when a surviving spouse makes a taxable gift, the DSUE amount of the decedent who is the last deceased spouse of such surviving spouse will be considered to apply against the amount of the surviving spouse's taxable gifts for that calendar year before the surviving spouse's own basic exclusion amount will apply.

Second, the temporary regulations, in §§ 25.2505-2T(c) and 20.2010-3T(b), compute the DSUE amount available to such a surviving spouse or to his or her estate, respectively, as including both: (i) The DSUE amount of the surviving spouse's last deceased spouse, and (ii) any DSUE amount actually applied to taxable gifts pursuant to the rule in § 25.2505-2T(b) to the extent the DSUE amount so applied was from a decedent who no longer is the last deceased spouse for purposes of section 2010(c)(4)(B)(i). Under the rules in § 25.2505-2T, a surviving spouse may use the DSUE amount of a predeceased spouse as long as, for each transfer, such DSUE amount is from the surviving spouse's last deceased spouse at the time of that transfer. Thus, a spouse who has survived multiple spouses may use each last deceased spouse's DSUE amount before the death of that spouse's next spouse, and thereby may apply theDSUE amount of multiple deceased spouses in succession. However, this does not permit the surviving spouse to use the sum of the DSUE amounts of those deceased spouses at one time, and a surviving spouse may not use the remaining DSUE amount of a prior deceased spouse following the death of a subsequent spouse.

Section 2010(c)(5)(B) confirms the IRS's authority to examine returns of each deceased spouse of the surviving spouse to determine the allowable DSUE amount even if the period of limitations on assessment under section 6501 has expired for the tax under chapters 11 or 12 with respect to such returns.

Section 7602(a) provides that the IRS may examine any books, papers, records, or other data which may be relevant or material to an inquiry for the purpose of ascertaining the accuracy of any return or determining the liability of any person for any internal revenue tax or liability. The returns of each deceased spouse whose executor elected portability are relevant or material to the determination of the allowable DSUE amount to be applied by the surviving spouse to a taxable transfer.

Accordingly, the temporary regulations confirm in §§ 20.2001-2T(a), 20.2010-2T(d), 20.2010-3T(d), and 25.2505-2T(e) that, in determining the allowable DSUE amount, the IRS may examine any one or more returns of each deceased spouse of the surviving spouse whose executor elected portability. Upon examination, the IRS may adjust or eliminate the DSUE amount reported on a return; however, the IRS may make an assessment of additional tax with respect to the deceased spouse's return only within the period of limitations under section 6501. The ability of the IRS to examine returns of a deceased spouse applies to each transfer by the surviving spouse to which a DSUE amount is or has been applied. The returns and return information of a deceased spouse may be disclosed to the surviving spouse or the surviving spouse's estate as appropriate under section 6103.

A commenter to Notice 2011-82 suggested that the regulations clarify whether the IRS's authority to examine returns even after the period of limitations on assessment has expired, as confirmed in section 2010(c)(5)(B), would suspend the substantive review and examination of the estate tax return of a decedent with a surviving spouse. Except to the extent provided in section 2010(c)(5)(B) with regard to the computation of the DSUE amount, the limitation in section 6501 continues to apply to the estate tax return so examination of the estate tax return will not be suspended solely because of the possibility of future reviews to determine the decedent's DSUE amount.

Several commenters requested that the regulations clarify the applicability of the rules in section 2010(c) to estates of nonresidents who are not citizens. In response to these comments, the temporary regulations provide in § 20.2010-2T(a)(5) that an executor of the estate of a nonresident decedent who was not a citizen of the United States at the time of death may not make a portability election on behalf of that decedent. The temporary regulations in §§ 20.2010-3T(e) and 25.2505-2T(f) provide that a nonresident surviving spouse who was not a citizen of the United States at the time of such surviving spouse's death may not take into account the DSUE amount of any deceased spouse of such surviving spouse, except to the extent allowed under a treaty obligation of the United States.

A commenter suggested that the regulations clarify how the portability rules apply when a qualified domestic trust (QDOT) (defined in section 2056A(a)) is created for the benefit of a surviving spouse who is a not a citizen of the United States. When property of a decedent passes to a QDOT, the decedent's estate is allowed a marital deduction under section 2056(d)(2) for the value of such property. Ultimately, however, estate tax is imposed on such property under section 2056A as distributions constituting taxable events are made from the QDOT. The estate tax imposed by section 2056A is the decedent's estate tax liability, and that tax generally equals the amount of additional estate tax that would have been imposed under section 2001 if the amount involved in the taxable event had been included in the decedent's taxable estate and had not been deductible under section 2056. See § 20.2056A-5(a). The estate tax that would have been imposed under section 2001 is computed by determining the net tax under section 2001 after the allowance of any credits, including the applicable credit amount determined under section 2010(c). Consequently, when a QDOT has been created for the benefit of a decedent's surviving spouse, the executor of the decedent's estate will compute a DSUE amount, on a preliminary basis, that may decrease as distributions constituting taxable events under section 2056A are made.

Commenters made several suggestions for applying portability to this situation. One proposal is to allow a decedent's DSUE amount to be computed and available to the surviving spouse as of the date of death of the decedent, without regard to the estate tax to be imposed by section 2056A. A second suggestion is to allow an executor of such an estate to elect portability with respect to only a portion of the DSUE amount so that an executor could reserve a portion of the decedent's DSUE amount for the estate tax to be imposed by section 2056A. A third proposal is to allow the decedent's applicable exclusion amount and the initially-determined DSUE amount to be applied on a chronological, or first come, first served, basis; that is, by applying the decedent's applicable exclusion amount on the occurrence of a taxable event subject to the estate tax imposed by section 2056A and at the time of a transfer by the surviving spouse subject to the gift tax imposed by section 2501, in each case, to the extent applicable exclusion amount or DSUE amount, respectively, is available at such times.

Each of the proposals raises issues of fairness, complexity, and administrability. The applicable exclusion amount first and foremost belongs to the decedent. Portability of a DSUE amount allows a surviving spouse to use a decedent's exclusion amount only to the extent it is not used by that decedent. Accordingly, the temporary regulations allow the decedent's estate full availability of the decedent's applicable exclusion amount until such time as the final estate tax liability of the decedent is computed. The temporary regulations in § 20.2010-2T(c)(4) provide that the executor of a decedent's estate claiming a marital deduction for property passing to a QDOT shall compute the decedent's DSUE amount on a preliminary basis on the decedent's estate tax return for the purpose of electing portability, although such amount subsequently will be reduced by the estate tax imposed by section 2056A. The temporary regulations further provide that the DSUE amount of such a decedent shall be redetermined upon the final distribution or other taxable event on which estate tax under section 2056A is imposed, which is generally upon the death of the surviving spouse or the earlier termination of all QDOTs created for that surviving spouse. The temporary regulations provide in§ 20.2010-3T(c)(2) that the earliest date such a decedent's DSUE amount may be included in determining the applicable exclusion amount available to the surviving spouse or the surviving spouse's estate is the date of the event that triggers the final estate tax liability of the decedent under section 2056A. Generally, this means that such a decedent's DSUE amount will be available for transfers occurring by reason of the surviving spouse's death, but generally will not be available to the surviving spouse during life. However, the decedent's DSUE amount will be available to apply to the surviving spouse's taxable gifts made in the year of the surviving spouse's death, or, if the event terminating the QDOT occurs prior to the surviving spouse's death, then in the year of that terminating event and/or any subsequent year during the surviving spouse's life. Treasury and the IRS request further comments on this issue. For the manner of submitting these comments, see the notice of proposed rulemaking on this subject appearing elsewhere in this issue of theFederal Register.

It has been determined that this Treasury decision is not considered a significant regulatory action as defined in Executive Order 12866, as supplemented by Executive Order 13563. Therefore, a regulatory assessment is not required. In addition, section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations because they are excepted from the notice and comment requirements of section 553(b) and (c) of the Administrative Procedure Act under the interpretive rule and good cause exceptions provided by section 553(b)(3)(A) and (B) of that Act. These regulations are necessary to provide immediate guidance to estates of a decedent with a surviving spouse and to spouses surviving such a decedent on the application of the portability rules of section 2010(c), which applies to estates of decedents dying and gifts made after December 31, 2010. These regulations provide necessary guidance to address fundamental issues concerning the portability election, the computation of the DSUE amount, the identity of the last deceased spouse, and the application of the DSUE amount by the surviving spouse. In addition, the issues addressed by the regulations have been publicly noticed and subject to comment through the publication of Notice 2011-82. For these reasons, good cause exists for dispensing with notice and public comment pursuant to section 553(b) and (c) of the Administrative Procedure Act. For the applicability of the Regulatory Flexibility Act (5 U.S.C. chapter 6), please refer to the Special Analyses section of the preamble to the cross-referenced notice of proposed rulemaking published in the Proposed Rules section in this issue of theFederal Register. Pursuant to section 7805(f) of the Code, these regulations have been submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on their impact on small business.

The principal author of these temporary regulations is Karlene Lesho, Office of the Associate Chief Counsel (Passthroughs and Special Industries). Other personnel from the IRS and the Treasury Department participated in their development.

Accordingly, 26 CFR parts 20, 25, and 602 are amended as follows:

Table of Contents I. What are the actions EPA is taking? II. What is the background for these actions? III. What comments were received on these actions and what are EPA's responses? IV. Final Actions V. Statutory and Executive Order Reviews I. What are the actions EPA is taking?

EPA is finalizing four separate and independent determinations for the New York-Northern New Jersey-Long Island (NY-NJ-CT) ozone nonattainment area (hereafter, “the NY-NJ-CT area”).

EPA is determining that the NY-NJ-CT one-hour ozone nonattainment area previously failed to attain the one-hour ozone National Ambient Air Quality Standard (NAAQS) by its applicable attainment deadline of November 15, 2007 (based on complete, quality-assured and certified ozone monitoring data for 2005-2007).

EPA is determining that the NY-NJ-CT one-hour ozone nonattainment area is currently attaining the one-hour ozone standard based on complete, quality-assured and certified ozone monitoring data for 2008-2010. Quality-assured ozone monitoring data for 2011 in the Air Quality System (AQS) indicate the area continues to attain the one-hour ozone standard.

EPA is determining that the NY-NJ-CT eight-hour ozone nonattainment area attained the 1997 eight-hour standard by the applicable deadline, June 15, 2010, based on complete, quality-assured and certified ozone monitoring data for 2007-2009.

EPA is determining that the area is currently attaining the 1997 eight-hour ozone standard based on complete, quality-assured and certified ozone monitoring data for 2008-2010. Quality-assured data available in the AQS for 2011 indicate that the area continues to attain the 1997 eight-hour ozone standard. Based on the determination that the area is currently attaining the 1997 eight-hour standard, 40 CFR 51.9181 of EPA's ozone implementation rule for the 1997 eight-hour ozone standard provides that the requirements for the States to submit certain reasonable further progress plans, attainment demonstrations, contingency measures and any other planning requirements of the Clean Air Act related to attainment of that standard shall be suspended for as long as the area continues to attain the standard. Quality-assured ozone monitoring data for 2011 in AQS indicate the area continues to attain the 1997 eight-hour ozone standard.2

In addition, EPA is withdrawing EPA's proposed disapprovals of Connecticut's and New Jersey's 1997 eight-hour ozone attainment demonstrations, which were previously published in theFederal Registeron May 8, 2009 (74 FR 21568 and 74 FR 21578).

In order to determine the areas' air quality status for purposes of this action, EPA reviewed ozone monitoring air quality data from the States, in accordance with 40 CFR 50.9, 40 CFR part 50 appendix H and appendix I, and EPA policy and guidance, as well as data processing, data rounding and data completeness requirements. EPA's review of the air quality data and related rationale for these determinations are explained in the Notice of Proposed Rulemaking (NPR) published in theFederal Registeron January 25, 2012 (77 FR 3720) and will not be restated here.

The boundaries for the NY-NJ-CT one-hour and the eight-hour ozone nonattainment areas are slightly different. For the one-hour ozone NAAQS of 0.12 parts per million (ppm), the area is composed of: Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, and Union Counties in New Jersey; Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk, Westchester Counties and part of Orange County in New York; and parts of Fairfield and Litchfield Counties in Connecticut. The 1997 eight-hour ozone nonattainment area is composed of many of the same counties as the one-hour ozone nonattainment area but does not include Ocean County in New Jersey, any part of Orange County in New York or any part of Litchfield County in Connecticut, and does include Warren County in New Jersey, and all of Fairfield, New Haven and Middlesex Counties in Connecticut. The one-hour ozone standard designations were established by EPA following the enactment of the Clean Air Act (CAA) Amendments in 1990. See 56 FR 56694 (November 6, 1991). Each area of the country that wasdesignated nonattainment for the one-hour ozone NAAQS was classified by operation of law as marginal, moderate, serious, severe, or extreme depending on the severity of the area's air quality problem. See CAA sections 107(d)(1)(C) and 181(a). The NY-NJ-CT one-hour ozone nonattainment area was designated nonattainment and classified as severe-17, with an attainment deadline of November 15, 2007.

On July 18, 1997, (62 FR 38856), EPA promulgated a new, more protective standard for ozone based on eight-hour average concentrations (the “1997 eight-hour ozone NAAQS”). EPA designated and classified most areas of the country under the eight-hour ozone NAAQS in an April 30, 2004 final rule (69 FR 23858). The NY-NJ-CT 1997 eight-hour ozone nonattainment area was designated nonattainment and classified as moderate with an attainment deadline of June 15, 2010.

On April 30, 2004, EPA also issued a final rule (69 FR 23951) entitled “Final Rule To Implement The 8-hour Ozone National Ambient Air Quality Standard—Phase 1,” referred to as the Phase 1 Rule. Among other matters, this rule revoked the one-hour ozone NAAQS in most areas of the country, effective June 15, 2005. See, 40 CFR 50.9(b); 69 FR 23996; and 70 FR 44470 (August 3, 2005). The Phase 1 Rule also set forth how anti-backsliding principles will ensure continued progress toward attainment of the eight-hour ozone NAAQS by identifying which one-hour ozone requirements remain applicable in an area after revocation of the one-hour ozone NAAQS.

Although EPA revoked the one-hour ozone standard (effective June 15, 2005), eight-hour ozone nonattainment areas remain subject to certain one-hour anti-backsliding requirements based on their one-hour ozone classification. Initially, EPA's rules to address the transition from the one-hour to the eight-hour ozone standard did not include one-hour nonattainment area contingency measures or major source penalty fee programs among the measures retained as one-hour ozone anti-backsliding requirements.3 However, on December 23, 2006, the United States Court of Appeals for the District of Columbia Circuit determined that EPA should not have excluded these requirements (and certain others not relevant here) from its anti-backsliding requirements.South Coast Air Quality Management Districtv.EPA,472 F.3d 882 (D.C. Cir. 2006) reh'g denied 489 F.3d 1245 (clarifying that the vacatur was limited to the issues on which the court granted the petitions for review). Thus, the Court vacated the provisions that excluded these requirements. As a result, states must continue to meet the obligations for one-hour ozone NAAQS contingency measures. EPA has issued a rule that, among other things, removed the vacated provisions of 40 CFR 51.905(e), and addressed the anti-backsliding requirement for contingency measures for failure to attain or make reasonable further progress toward attainment of the one-hour standard. See 74 FR 2936 (January 16, 2009) (proposed rule); 74 FR 7027 (February 12, 2009) (notice of public hearing and extension of comment period), and 77 FR 28424 (May 14, 2012) (final rule).

EPA received six distinct comments from three parties: the New Jersey Department of Environmental Protection (NJDEP), Public Service Enterprise Group, Inc. (PSEG) and Sierra Club. No adverse comments were directed at EPA's monitoring data-based air quality determinations, in and of themselves. One commenter (Sierra Club) submitted adverse comments concerning EPA's discussion of certain regulatory effects and consequences of these determinations. Below, EPA summarizes those comments and sets forth EPA's responses.

1. Two commenters (NJDEP and PSEG) urged EPA to determine that the section 185 fee requirement under the one-hour standard for the NY-NJ-CT nonattainment area is no longer applicable to the nonattainment area because the area attained the one-hour standard. One commenter (PSEG) alternatively suggested EPA issue a Termination Determination for the section 185 fee requirement based upon the complete, quality-assured monitoring data showing attainment with the one-hour ozone NAAQS in the area due to permanent and enforceable emission reductions implemented in the area. The commenter contended that such a Termination Determination would not be dependent upon the Agency's previous section 185 fee guidance, which was vacated by the D.C. Circuit Court, but would instead be consistent with the statutory objectives of section 185 and the reasoning of the Court inSouth Coast Air Quality Management Districtv.EPA,472 F.3d 882 (D.C. Cir. 2006) (South Coast). Sierra Club, in its comments, requested that EPA apply section 185 requirements for the period from 2007-2010.

Response:On January 29, 2011, April 29, 2011 and June 16, 2011, the Departments of Environmental Protection for the States of New Jersey, Connecticut and New York, respectively, requested that EPA make a determination that the NY-NJ-CT area has attained the 1-hour ozone standard due to permanent and enforceable emissions reductions, and that therefore the States should be relieved of any obligation to implement the penalty fees for that area under section 185. EPA is considering these requests and will take separate notice and comment rulemaking shortly to address them. EPA has not yet proposed any action on these requests and thus cannot take any final action with respect to them in this rulemaking.

EPA in this rulemaking is finalizing its determination that the area has attained the 1-hour ozone standard based on certified air quality data for 2008-2010, and continuing through 2011. No commenter has requested that EPA require the States to implement the section 185 penalty fee program in this area in the period subsequent to the area's attainment of the 1-hour standard in 2010. Below, EPA addresses one commenter's (Sierra Club) contentions with respect to requiring penalty fees for the period prior to 2010. EPA will be addressing any remaining issues with respect to terminating one-hour ozone section 185 penalty fee requirements in this area in future rulemaking actions.

2. A commenter (Sierra Club) contends that EPA has no authority to withdraw its proposed disapprovals of the 1997 eight-hour ozone attainment demonstration for the NY-NJ-CT eight-hour nonattainment area. The commenter cites 42 U.S.C. 7410(k)(2) and (3) as requiring EPA to act within 12 months of a finding of completeness. Also, commenter asserts that a determination of attainment (Clean Data Determination) does not and cannot suspend EPA's obligation to approve or disapprove a SIP submission after it has been submitted to EPA.

Response:Assuming that, in a situation where EPA has already conducted notice and comment rulemaking to determine that an area is in attainment of the standard, the Agency is nevertheless obliged to conduct additional rulemaking on a plan to accomplish what has been done, under section 110(k)(2), EPA is not obligated to finalize a prior version of a proposed rulemaking on the plan after circumstances have changed. In this case, EPA's determination, after notice and comment rulemaking, that the areaattained the 1997 eight-hour ozone NAAQS by its attainment date, eliminates the basis for the prior proposed disapproval. Under these circumstances, it is reasonable, proper and correct for EPA to withdraw the proposed disapproval. EPA may then proceed to take into account the determination that the area has attained, in a subsequent proposed action to approve the submitted attainment demonstration SIPs. Alternatively, in view of EPA's final determination of attainment for the area, the States of Connecticut and New Jersey may choose to withdraw their attainment demonstrations. Thus, the commenter's concerns are misplaced. Withdrawal of the proposed disapprovals is consistent with, and in no way prohibits further action with respect to the attainment demonstrations in accordance with the EPA's determination that the monitoring data show the area has attained the 1997 eight-hour standard since 2009.

3. A commenter (Sierra Club) argues that the NY-NJ-CT area's failure to attain the one-hour ozone NAAQS by its deadline of November 15, 2007 triggers penalty fees for 2007-2010 and contingency plan requirements under the Clean Air Act.

A. Sierra Club states that the NY-NJ-CT nonattainment area did not attain by its November 15, 2007 attainment date, and citesSouth Coast,472 F.3d at 903, in support of its position that EPA must enforce certain anti-backsliding requirements, including section 185 fees. The commenter complains that EPA in its proposed determination of nonattainment for the NY-NJ-CT area (see 77 FR 3724) did not require payment of fees for 2007-2010.

Response:First, we wish to emphasize, as EPA stated in its proposal, that the purpose of this rulemaking action is to make four specific air quality determinations regarding whether the NY-NJ-CT area attained the one-hour and 1997 eight-hour ozone standards. While EPA's proposal noted that these determinations bear on one-hour anti-backsliding requirements for contingency measures and section 185 penalty fees, this action does not attempt to address or resolve all the implementation issues regarding those requirements. Thus at the outset, Sierra Club's position that EPA's specific rulemakings on air quality determinations must also include resolutions of all anti-backsliding implementation issues that may flow from them is incorrect. While EPA recognizes that the anti-backsliding requirement for the one-hour contingency measures and section 185 fees are linked to the determination of failure to meet the attainment deadline for that standard, EPA's rulemakings here regarding those determinations do not, and are not required to, dispose of all implementation issues for those requirements or for others, such as those raised in Sierra Club's comments regarding milestones and additional planning.

In its comments, Sierra Club argues that EPA's determination that the NY-NJ-CT area failed to attain by its one-hour ozone attainment deadline also requires EPA to decide here that it must retroactively collect penalties under section 185 for the period before EPA made its determination.4 We disagree. Neither EPA's determination, nor theSouth Coastcase, compels EPA to reach this conclusion or even to decide that issue here. EPA intends to address issues regarding one-hour anti-backsliding requirements in future rulemakings on implementation of the section 185 requirements for the NY-NJ-CT area. Nevertheless, we wish to state our preliminary views on Sierra Club's comments below. EPA's preliminary views are set forth in the remainder of the response below, and are not necessary to and are independent of its air quality determinations of attainment contained in this final rulemaking.

Sierra Club's comments quote at length fromSouth Coast, 472 F.3d at 902-903.While EPA acknowledges that this decision established that section 185 fee requirements were to be included as anti-backsliding measures, the Court in that case did not direct any specific means of enforcement of these requirements, nor the method for determining whether an area failed to attain by its attainment date. That decision established only that the section 185 and contingency measure requirements were “applicable.” It did not establish or even address how those requirements were to be implemented.5

The D.C. Circuit, however, has previously upheld EPA's longstanding practice of making determinations of an area's failure to meet attainment deadlines solely through notice and comment rulemaking—Sierra Clubv.Whitman, 285 F.3d 63 (D.C. Cir. 2002). 6 In that case—which similarly arose from a determination of failure of a one-hour ozone nonattainment area to meet its attainment deadline, the D.C. Circuit rejected a litigant's7 demand to make the consequences of that determination retroactive to the time period before EPA made the determination. In that case, Sierra Club similarly argued that EPA's overdue determination that the St. Louis one-hour ozone nonattainment area failed to attain by its attainment deadline should apply retroactively, and that the Court should require retroactive reclassification of the area. The Court rejected Sierra Club's contention that EPA's rulemaking was not required to determine a failure to attain: “No matter what the Sierra Club thinks the Clean Air Act or the APA required of EPA, the fact remains that `EPA's established practice for making a final decision concerning nonattainment and reclassification is to conduct a rulemaking under the APA, not to issue a letter, a list, or some other informal document.' * * * [citations omitted.]” The Court concluded: “In other words, if there has not been a rulemaking there has not been an attainment determination.”285 F.3d at 66.

The Court also refused to accept Sierra Club's assertion that the Court should compel EPA to give retroactive effect to its determination, resulting in reclassification as of the area's attainment date. The Court stated: “Although EPA failed to make the nonattainment determination within the statutory time frame, Sierra Club's proposed solution only makes the situation worse. Retroactive relief would likely impose large costs on the States, which would face fines and suits for not implementing air pollution prevention plans [earlier], even though they were not on notice at the time.”285 F.3d at 68.

While it is true that the Clean Air Act provides that both reclassification and penalty fees are consequences of failure to attain the ozone standard, the D.C. Circuit inSierra Clubrecognized that these weighty consequences are not triggered until EPA makes a determination, after notice and comment rulemaking, of failure to attain. In that case the court also rejectsthe view that adverse consequences from the determination should be imposed retroactively, especially if they would, as here, subject the States to additional burdens caused by retroactive requirements that were not triggered prior to conclusion of the rulemaking process.

Several features of our rulemaking for the NY-NJ-CT area provide additional grounds for application of a position similar to that which the court took in the St. Louis Sierra Club case. In the case of St. Louis, when the question of retroactive application arose, the area remained in nonattainment of the one-hour standard, which was also still the only standard in effect. Here, unlike St. Louis, EPA has determined that the NY-NJ-CT area is currently attaining both the one-hour and eight-hour standards, and thus there is significantly less reason to consider imposing retroactive penalties that are intended to bring about the attainment that has already occurred.

Sierra Club here argues, unpersuasively, that theSouth Coastopinion supports retroactive imposition of penalties, quoting the Court's statement that, unless section 185 requirements were applicable, “a state could go unpenalized without ever attaining even the original NAAQS * * *.”472 F.3d at 903.Here, however, this possibility does not exist. EPA's final determinations in this rulemaking establish that the NY-NJ-CT area has in fact attained not only the original one-hour standard, but also the 1997 eight-hour NAAQS.

Sierra Club quotes the Court's statement inSouth Coastthat “Congress set the penalty deadline well into the future, giving states and industry ample notice and sufficient incentives to avoid the penalties.”372 F.3d at 903.Notice of the existence of penalty provisions, however, is not the same as notice that these provisions have been triggered. As the D.C. Circuit recognized inSierra Clubv.EPA,only when EPA issues a final notice determining that an area has failed to attain by the attainment date can that failure be definitively established. The case of the NY-NJ-CT area presents a particularly compelling context in which to apply this principle. The NY-NJ-CT area has been attaining the one-hour standard since 2010 and the eight-hour standard for the time period 2007-2010, and data for 2011 continues this trend. No incentives—and certainly no penalties—are required for the area to reach attainment,8 a goal that the area has met, preserved and exceeded. Under these circumstances, and based on the D.C. Circuit's and EPA's long held position on the issue of retroactive consequences of determinations of failure to attain, EPA cannot see a reason to impose penalties on sources in the NY-NJ-CT area. As explained above, EPA is determining that the area is currently, and has for some time been, attaining both the one-hour and eight-hour ozone standards. Thus no anti-backsliding purpose is served by retroactive imposition of fees for a failure to meet a deadline for a revoked standard—under circumstances that existed years ago, which have since been eclipsed by continuous attainment. EPA believes that compelling the States and sources to address old penalties now would also divert attention and resources from efforts to achieve current, forward-looking environmental goals, including the stricter 2008 ozone standard. In these circumstances, giving retroactive effect to EPA's determination of failure to attain the standard here would be unreasonable, and it would, as the Court held inSierra Clubv.Whitman,“only mak[e] the situation worse.”

B. Sierra Club asserts that the NY-NJ-CT nonattainment area is subject to contingency plan requirements for failure to attain the one-hour standard and that EPA failed to impose this requirement on the States. Sierra Club argues that EPA must ensure that the contingency measures approved for New York, New Jersey, and Connecticut in 67 FR 5170, 67 FR 5152, and 66 FR 63921 are implemented and enforced, and Sierra Club contends that EPA has improperly failed to carry out this obligation. Sierra Club asserts that EPA's determination that the area has attained the one-hour ozone standard (Clean Data Determination) does not allow removal of these contingency measures, which Sierra Club states became applicable in 2007 and which must remain in place to prevent backsliding.

Response:Contingency measures for the one-hour ozone standard were previously approved and have been implemented in the NY-NJ-CT nonattainment area. See for New York: 67 FR 5170 (February 4, 2002) and 40 CFR 52.1683(i)(3); for New Jersey: 67 FR 5152 (February 4, 2002) and 40 CFR 52.1582(h)(4); for Connecticut: 66 FR 63921 (December 11,2001) and 40 CFR 52.377. There is no need for EPA to require the states to implement the contingency measures, because all the identified measures are part of the applicable SIP and have already been implemented. The States have not requested removal of the contingency measures from their respective SIPs and therefore they continue in effect. EPA has never proposed to remove the measures approved as contingency measures in this area. The States would have to request a SIP revision if they wanted to remove these measures from their applicable SIP and would have to demonstrate compliance with section 110(l). Thus, the measures identified as contingency measures continue to remain in SIP. Moreover, as explained in EPA's Clean Data Policy,9 the purpose of contingency measures for failure to attain is linked to attainment. EPA in this rulemaking has determined that the area has already attained the one-hour ozone standard, and therefore no additional contingency measures are needed.

C. Sierra Club argues that the NY-NJ-CT ozone nonattainment area is subject to the milestone one-hour ozone anti-backsliding requirements of the Act. The commenter asserts that EPA errs in failing to impose rate of progress (ROP) or reasonable further progress (RFP) milestones on the nonattainment area. The commenter asserts that 42 U.S.C. 7511(d) requires the states to submit revised SIPs that incorporate updated ROP plans for the one-hour ozone standard.

Response:As stated in the proposed rulemaking, EPA has previously approved one-hour RFP and ROP plans for the NY-NJ-CT area. See for New York: 67 FR 5170 February 4, 2002 and 40 CFR 52.1683(i)(2); for New Jersey: 67 FR 5152 February 4, 2002 and 40 CFR 52.1582(h)(3); for Connecticut: 66 FR 63921 December 11, 2001 and 40 CFR 52.377. Nowhere in its January 25, 2012 proposal (77 FR 3720), did EPA propose to remove from the approved SIPs the measures that resulted in satisfying the ROP or RFP plan requirements for the area. Nor have the States requested removal of those provisions.

Sierra Club's comment relies on section 181(b)(4)(A), and quotes language providing that, if a severe area fails to attain, certain reductions continue ” until the standard is attained.” Here, EPA's determinations in this rulemaking establish that the area has attained the one-hour ozone standard, so any such obligation would now be at an end. And, as explained inComment 3A, no prior failure to attain was established until EPA's final determination in this rulemaking (see response to Comment 3A above). In this rulemaking, EPA is finalizing its determinations that the NY-NJ-CT nonattainment area is currently attaining both the one-hour and eight-hour ozone NAAQSs. Under 40 CFR 51.918 and the interpretation set forth in EPA's longstanding Clean Data Policy, these determinations suspend the obligations to submit any outstanding planning requirements, including ROP. Based on the monitoring data that show attainment of both ozone standards, there is no need to require the States to revise or submit new ROP plans or new RFP milestones for the one-hour ozone SIPs. Additional ozone reductions have resulted from implementation of the eight-hour ozone standard. EPA has approved ROPs for the 1997 ozone standard SIPs in Connecticut, New Jersey and New York, which function to further reduce ozone precursors to a greater extent than would be required by submission of an additional RFP for the one-hour ozone standard.

4. Sierra Club contends that the NY-NJ-CT ozone nonattainment area must submit a revised one-hour ozone SIP and asserts that EPA's failure to require a new SIP for the NY-NJ-CT area upon finalizing its proposed determination of nonattainment is improper and contrary to law.

Response:We disagree that EPA's determination here that the NY-NJ-CT area failed to attain the one-hour ozone standard triggers any CAA section 179(d) requirement to prepare and submit SIP revisions. A new section 179(d) ozone plan, triggered by section 179(c) is not an applicable anti-backsliding requirement under EPA's anti-backsliding regulations. As EPA has explained in other rulemakings, only those anti-backsliding requirements that were specifically retained are applicable, and the requirements of section 179(c) and (d) are not included. See 76 FR 82133 (December 30, 2011). As EPA stated in its proposal, the only anti-backsliding measures that pertain to this determination of failure to meet the one-hour deadline are one-hour contingency measures for failure to attain and section 185 penalty fees.

Moreover, under EPA's Clean Data Policy EPA's determination that the area is currently attaining the one-hour ozone standard obviates the need for submission of any planning requirements related to attainment of the standard.

EPA is making four separate and independent determinations related to the NY-NJ-CT one-hour and 1997 eight-hour ozone nonattainment areas. These determinations are based upon complete, quality-assured and certified ozone monitoring data. First, with respect to the one-hour ozone standard, and pursuant to EPA's authority to ensure implementation of one-hour ozone anti-backsliding requirements and CAA section 301, EPA is determining that data for 2005-2007 show that the NY-NJ-CT area previously failed to attain the one-hour ozone standard by its applicable November 15, 2007 attainment deadline. Second, and more importantly, EPA is determining that the NY-NJ-CT area is currently attaining the one-hour ozone standard, based on more recent complete, quality-assured and certified data for 2008-2010. Quality-assured ozone monitoring data in the AQS for 2011 indicate the area continues to attain the revoked one-hour ozone standard.

Third, with respect to the 1997 eight-hour ozone standard, in accordance with section 181(b) of the CAA, EPA is determining that complete, quality-assured and certified ozone monitoring data for 2007-2009 show the NY-NJ-CT eight-hour ozone nonattainment area attained the 1997 eight-hour ozone standard by its June 15, 2010 attainment deadline. Fourth, EPA is also determining that the NY-NJ-CT eight-hour ozone nonattainment area currently continues to attain the eight-hour ozone NAAQS, based on complete, quality-assured and certified data for 2008-2010. Quality-assured ozone monitoring data in the AQS for 2011 indicate the area continues to attain the 1997 eight-hour ozone standard.

As provided in 40 CFR 51.918, EPA's determination that the area has attained the eight-hour ozone standard suspends the requirements under section 182(b)(1) for submission of the attainment demonstration, reasonable further progress plan, contingency measures and any other planning SIP relating to attainment of the 1997 eight-hour NAAQS. This suspension of requirements is effective for so long as the area continues to attain the 1997 eight-hour ozone standard.

For the reasons stated in its proposed notice and response to comments here, EPA is also withdrawing the May 8, 2009 proposed disapprovals of Connecticut's and New Jersey's eight-hour ozone attainment demonstrations for the NY-NJ-CT eight-hour ozone nonattainment area.

These actions, make attainment determinations based on air quality and result in the suspension of certain Federal requirements, will not impose additional requirements beyond those imposed by state law, or will not impose any requirements beyond those required by Federal statute. For these reasons, these actions:

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

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

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

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

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

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

• Are not significant regulatory actions subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

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

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

In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.

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

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by August 17, 2012. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

Part 52, chapter I, title 40 of the Code of Federal Regulations is amended as follows:

I. Does this action apply to me?

You may be potentially affected by this action if you manufacture (including manufacture as a byproduct) or import chemical substances listed on the TSCA Inventory. Potentially affected entities may include, but are not limited to:

• Chemical manufacturers and importers (NAICS codes 325 and 324110, e.g., chemical manufacturing and processing and petroleum refineries).

• Chemical users and processors who may manufacture a byproduct chemical substance (NAICS codes 22, 322, 331, and 3344, e.g., utilities, paper manufacturing, primary metal manufacturing, and semiconductor and other electronic component manufacturing).

This listing is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be affected by this action. Other types of entities not listed in this unit could also be affected. The North American Industrial Classification System (NAICS) codes have been provided to assist you and others in determining whether this action might apply to certain entities. If you have any questions regarding the applicability of this action to a particular entity, consult the technical person listed underFOR FURTHER INFORMATION CONTACT.

In the August 16, 2011, final rule entitled, “TSCA Inventory Update Reporting Modifications; Chemical Data Reporting” (76 FR 50816, August 16, 2011) (FRL-8872-9), EPA designated the 2012 CDR submission period to be February 1, 2012 to June 30, 2012. EPA is issuing this amendment to extend the deadline for 2012 CDR submission reports until August 13, 2012.

The Agency is taking this action in response to concerns raised by the regulated community about their ability to submit the required information within the prescribed period. Written requests to extend the CDR submission period are included in the docket (seeADDRESSES). The compelling concerns raised by industry include the timing of responses to inquiries about regulatory interpretations, particularly for byproduct chemical substances, and issues associated with several aspects of electronic reporting.

EPA believes it is appropriate to extend the reporting period to allow the reporters associated with byproducts to understand and determine their reporting obligations and to allow the regulated community to adjust to electronic reporting and submit their reports.

With respect to the timing of this action, the need for the Agency to extend the deadline arose, in part, as a result of issues experienced by the regulated community with several aspects of electronic reporting that were brought to the Agency's attention only recently.

The CDR rule was issued pursuant to the authority of TSCA section 8(a), 15 U.S.C. 2607(a). Under section 553(b)(3)(B) of the Administrative Procedure Act (APA), 5 U.S.C. 553(b)(3)(B), the Agency may issue a final rule without a prior proposal if it finds that notice and public participatory procedures are impracticable, unnecessary, or contrary to the public interest. In this case, for the extension sought, the Agency does find that normal notice and public process rulemaking is impracticable. Given that the current reporting deadline is June 30, 2012, it is impracticable to follow notice and comment procedures on an extension of that deadline, because that process would not allow the rule to be finalized before the current reporting deadline. As discussed in this unit, the Agency only recently learned that the regulated community was having difficulty submitting their reports through the required electronic reporting mechanism. This action does not alter the substantive CDR reporting requirements in any way. The Agency also believes the one-time extension will not result in a significant delay in the processing and availability of CDR information to potential users. Further, this action is consistent with the public interest because it is designed to facilitate compliance with the CDR rule and to ensure that the 2012 collection includes accurate data on chemical manufacturing, processing, and use in the United States. Finally, any impact on the regulated community is expected to be beneficial given that the one-time extension provides additional time to submit accurate CDR reports to EPA.

Similarly, under APA section 553(d), 5 U.S.C. 553(d), the Agency may make a rule immediately effective “for good cause found and published with the rule.” For the reasons discussed in this unit, EPA believes that there is “good cause” to make this amendment effective upon publication in theFederal Register.

This action is classified as a final rule because it makes an amendment to the Code of Federal Regulations (CFR). The amendment to the CFR is necessary to allow for a one-time extension to the 2012 CDR reporting period. This action does not impose any new requirements or amend substantive requirements. This action is not a “significant regulatory action” and is therefore not subject to review by the Office of Management and Budget (OMB) under Executive Order 12866, entitled “Regulatory Planning and Review” (58 FR 51735, October 4, 1993) and Executive Order 13563 entitled “Improving Regulation and Regulatory Review” (76 FR 3821, January 21, 2011).

This final rule does not contain any information collections subject to OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. 3501et seq.

This final rule is not subject to the Regulatory Flexibility Act (RFA), 5 U.S.C. 601et seq.The RFA applies only to rules subject to notice and comment rulemaking requirements under the APA, 5 U.S.C. 553, or any other statute. This rule is not subject to notice and comment requirements under the APA because the Agency has invoked the APA “good cause” exemption.

This action will not have substantial direct effects on State or tribal governments, on the relationship between the Federal Government and States or Indian tribes, or on the distribution of power and responsibilities between the Federal Government and States or Indian tribes. As a result, no action is required under Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999), or under Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000). Nor does it impose any enforceable duty or contain any unfunded mandate as described under Title II of the Unfunded Mandates Reform Act, 2 U.S.C. 1531-1538.

This action is not a “significant regulatory action” as defined by Executive Order 12866. As a result, this action is not subject to Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997) and Executive Order 13211 entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001). In addition, this action also does not require any special considerations under Executive Order 12898 entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

This action does not involve any technical standards that would require Agency consideration of voluntary consensus standards pursuant to section 12(d) of the National Technology Transfer and Advancement Act, 15 U.S.C. 272 note.

Pursuant to the Congressional Review Act, 5 U.S.C. 801et seq.,EPA will submit a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in theFederal Register. This action is not a “major rule” as defined by 5 U.S.C. 804(2). Under CRA section 808, an agency may make a rule effective sooner than otherwise provided by the CRA if the agency makes a good cause finding under the APA that notice and public procedure is impracticable, unnecessary, or contrary to the public interest. This determination must be supported by a brief statement, 5 U.S.C. 808(2). As discussed in Unit II.B., EPA has made such a good cause finding for this rule and established the effective date that is identified underDATES.

Therefore, 40 CFR chapter I is amended as follows:

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

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

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

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

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

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

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

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

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

Accordingly, 44 CFR part 64 is amended as follows:

This document announces that, on April 27, 2011, OMB approved, for a period of three years, the revised information collections associated with the Commission'sOrder,FCC 11-181, published at 77 FR 3935, January 26, 2012. The OMB Control Numbers are 3060-0139 and 3060-0798. The Commission publishes this document as an announcement of the effective date of the rules.

As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507), the FCC is notifying the public that it received OMB approval on April 27, 2012, for the revised information collections required by modifications to the Commission's rules in 47 CFR Parts 1, 17, 22, 24, 25, 27, 80, 87, and 90.

Under 5 CFR 1320, an agency may not conduct or sponsor a collection of information unless it displays a current, valid OMB Control Number.No person shall be subject to any penalty for failing to comply with a collection of information subject to the Paperwork Reduction Act that does not display acurrent, valid OMB Control Number. The OMB Control Numbers for the revised collections are 3060-0139 and 3060-0798.The foregoing notice is required by the Paperwork Reduction Act of 1995, Public Law 104-13, October 1, 1995, and 44 U.S.C. 3507.

The total annual reporting burdens and costs for the respondents are as follows:

OMB Control Number:3060-0139.

OMB Approval Date:April 27, 2012.

OMB Expiration Date:April 30, 2015.

Title:Application for Antenna Structure Registration, FCC Form 854.

Form Number:FCC Form 854.Respondents:Individuals or households; Business or other for-profit; Not-for-profit institutions; and State, Local, or Tribal Government.

Number of Respondents and Responses:2,500 respondents; 47,500 responses.

Estimated Time per Response:.5 hour.

Frequency of Response:On occasion reporting requirement, recordkeeping requirement.

Obligation to Respond:Required to obtain or retain benefits.

Total Annual Burden:21,345.

Total Annual Cost:$975,725.

Nature and Extent of Confidentiality:Respondents may request materials or information submitted to the Commission be withheld from public inspection under 47 CFR 0.459 of the Commission's rules.

Needs and Uses:The purpose of FCC Form 854 is to register antenna structures (radio towers) that are used for wire or radio communication services which are regulated by the Commission; to make changes to existing registered antenna structures or pending applications for registration; and to notify the Commission of the completion of construction or dismantlement of such structures, as required by Title 47 of the Code of Federal Regulations, Chapter 1, Part 17. The Commission has revised Form 854 in accordance with the rule changes in theMigratory Bird Order on Remand,WTB Dockets 08-61 and 03-187, by adding questions that will facilitate the pre-application notification process. In addition, Form 854 is being revised to include several administrative questions that will enable the Commission to more efficiently process antenna structure registrations. The additional questions relate to replacement towers; requirements to post local and national notice so that the public may have a meaningful opportunity to comment on the environmental effects of a proposed structure that requires registration; determining if the structure is located on federal land; allowing the applicant to select the type of painting and/or lighting it will utilize on the structure being registered; and collecting additional administrative information such as the type of entity that owns the structure, Fax number, and county and zip code in which the structure is to be located.

OMB Control Number:3060-0798.

OMB Approval Date:April 27, 2012.

OMB Expiration Date:April 30, 2015.

Title:FCC Application for Radio Service Authorization: WTB and PSHSB.

Form Number:FCC Form 601.

Respondents:Individuals or households; Business or other for-profit; Not-for-profit institutions; and State, Local, or Tribal Government.

Number of Responses:253,120.

Estimated Time per Response:1.25 hour.

Frequency of Response:On occasion reporting requirement, third party disclosure requirement, Record Keeping & Other—10 year.

Obligation to Respond:Required to obtain or retain benefits.

Total Annual Burden:221,780.

Total Annual Cost:$55,410,000.

Nature and Extent of Confidentiality:In general there is no need for confidentiality. On a case by case basis, the Commission may be required to withhold from disclosure certain information about the location, character, or ownership of a historic property, including traditional religious sites.

Needs and Uses:FCC Form 601 is a consolidated, multi-part application form, or “long form,” that is used for general market-based licensing and site-by-site licensing for wireless telecommunications and public safety services filed through the Commission's Universal Licensing System (ULS). FCC Form 601 is composed of a main form that contains the administrative information and a series of schedules used for filing technical and other information. The Commission has revised FCC Form 601, Schedules D, I and M, to allow respondents the option to provide a File Number for a pending Antenna Structure Registration (ASR) application. Previously ULS would only accept a granted ASR registration number. This change has been made to allow applicants to file an FCC Form 601 application while the ASR application is going through the new environmental notice process as required by theMigratory Bird Order on Remand,WTB Dockets 08-61 and 03-187. The entries for structure type are changing as a result of the Order as well. There is no change to the number of respondents, burden or cost.

This is a summary of the Commission'sFifth Report and Order,FCC 12-59, adopted on June 11, 2012, and released on June 12, 2012. The full text of this document is available electronically via ECFS athttp://fjallfoss.fcc.gov/ecfs/ormay be downloaded athttp://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0612/FCC-12-59A1.doc. (Documents will be available electronically in ASCII, Word 97, and/or Adobe Acrobat.) The full text of this document is also available for public inspection and copying during regular business hours in the FCC Reference Center, FederalCommunications Commission, 445 12th Street SW., CY-A257, Washington, DC 20554. The complete text may be purchased from the Commission's copy contractor, 445 12th Street SW., Room CY-B402, Washington, DC 20554. Alternative formats are available for people with disabilities (Braille, large print, electronic files, audio format), by sending an email tofcc504@fcc.govor calling the Commission's Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

1. With this Fifth Report and Order (Fifth R&O) in the DTV cable carriage docket, we announce the sunset of the Commission's current “viewability” rule, which mandates that cable operators with hybrid systems1 carry digital must-carry signals2 in an analog format for the benefit of analog-service customers. As explained below, we believe the statutory viewability requirement is best read to give the operator of a hybrid system greater flexibility in deciding how to comply with the viewability mandate. In particular, while such an operator may continue to carry a must-carry signal in a format that is capable of being viewed by analog-service customers without the use of additional equipment, rapid changes in the marketplace and technology—in particular the widespread availability of small digital set-top boxes that cable operators are making available at low cost (or no cost) to analog customers of hybrid systems—provide alternative means by which must-carry television signals can be made viewable to all analog customers who are served by hybrid systems, as required by statute. Because a cable operator's exercise of this additional flexibility would involve operational changes that affect must-carry broadcast stations and viewers, we establish a six-month transitional period, until December 12, 2012, during which hybrid systems will continue to carry the signals of must-carry stations in analog format to all analog cable subscribers. In addition, we find it is in the public interest to extend for three more years the HD carriage exemption for eligible small cable system operators.

2. Pursuant to section 614(b)(4)(B) of the Communications Act of 1934, as amended (the “Act”),3 the Commission initiated this proceeding in 1998 to address the responsibilities of cable television operators with respect to carriage of digital broadcast stations in light of the nation's transition to digital television.4 After Congress selected a date certain for the digital transition of full-power broadcast television stations, the Commission, in 2007, adopted theViewability Orderwhich, among other things, established a rule to ensure that after the DTV transition, cable subscribers would continue to be able to view broadcast stations, as required by statute.5 The Commission was concerned that there would “continue to be a large number of cable subscribers with legacy, analog-only television sets after the end of the DTV transition.”6 In 2007, the Commission estimated that about 35 percent of all television homes, or approximately 40 million households, were analog-only cable subscribers.7 Although all cable systems were expected to eventually transition to all-digital systems, the Commission recognized that there may be two different types of cable systems in operation for some period of time after completion of the DTV transition.8 Some operators may choose to deliver programming in both digital and analog format (“hybrid systems”),i.e.,in addition to a digital tier, the operator would offer an analog tier and continue to provide local television signals and, in some cases, a subset of cable channels, to analog receivers in a format that does not require additional equipment.9 Other operators may choose to operate or transition to all-digital systems, providing cable service in only digital format.10 Thus, in anticipation of the approaching end of the digital television transition and in light of the state of technology and the marketplace, the Commission adopted a rule providing cable operators of hybrid systems two options to comply with the statutory viewability requirement for must-carry broadcast television stations: (1) Carry the digital signal in analog format to all analog cable subscribers in addition to any digital version carried, or (2) transition to an all-digital system and carry the signal only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content.11

3. The Commission did not make the viewability rule permanent. Instead, the Commission decided to have the rule remain in force for three years after the date of the digital transition, subject to review by the Commission during the last year of the three-year period.12 With respect to the viewability rule, the Commission stated that “[i]n light of the numerous issues associated with the transition, it is important to retain flexibility as we deal with emerging concerns.”13 The Commission explained that a three-year sunset “provides the Commission with the opportunity after the transition to review these rules in light of the potential cost and service disruption to consumers, and the state of technology and the marketplace.”14 The Commission identified certain factors it believed would be relevant to its later review, including digital cable penetration, cable deployment of digital set-top boxes with various levels of processing capabilities, and cable system capacity constraints.15

4. The full-power digital television transition was successfully completed on June 12, 2009, after Congress chose to delay it from the originally scheduled conclusion on February 17, 2009. Accordingly, under the terms of the 2007Viewability Order,absent Commission action, the viewability rule is scheduled to sunset on June 12, 2012.16

5. On February 10, 2012, we initiated the Fourth Further Notice of Proposed Rulemaking (“Fourth FNPRM”) in this docket to determine whether it would be in the public interest to retain the viewability rule, given the current stateof technology and the marketplace.17 We received four comments, five reply comments, and numerousex partesubmissions in response to ourFourth FNPRM.18 In their comments, broadcasters support retention of the viewability rule, while cable operators urge us to let it expire.19

6. Based on significant changes in the marketplace and technology that have occurred over the past five years, and our current understanding of the statutory viewability requirement as explained herein, we find it in the public interest to allow the viewability rule to sunset as scheduled, on June 12, 2012. Because we anticipate that our revised interpretation of the statutory viewability requirement will lead to the widespread deployment of small, affordable set-top boxes, we establish a transitional period of six months after expiration of the current rule—that is, until December 12, 2012—during which hybrid systems will continue to carry the signals of must-carry stations in analog format to all analog cable subscribers. This transitional period will give consumers, cable operators, and broadcasters that rely on must-carry access an opportunity to prepare for that deployment and to take other necessary steps resulting from changes in cable carriage.

7. Section 614(b)(7) of the Communications Act, which covers commercial stations, states that broadcast signals that are subject to mandatory carriage “shall be viewable via cable on all television receivers of a subscriber which are connected to a cable system by a cable operator or for which a cable operator provides a connection.”20 Similarly, section 615(h) for noncommercial stations states that “[s]ignals carried in fulfillment of the carriage obligations of a cable operator under this section shall be available to every subscriber as part of the cable system's lowest priced tier that includes the retransmission of local commercial television broadcast signals.”21 In the 2007Viewability Order,the Commission found that these statutory requirements “plainly apply” to cable carriage of digital broadcast signals, and, “as a consequence, cable operators must ensure that all cable subscribers—including those with analog television sets—continue to be able to view all commercial and non-commercial must-carry broadcast stations” after the DTV transition.22 The Commission interpreted the viewability mandate to require that a cable operator “ensure that the broadcast signals in question are actually viewable on their subscribers' receivers.”23 The Commission rejected cable commenters' argument that the viewability mandate is satisfied when a cable operator transmits broadcast signals and offers to sell or lease a set-top box to their customers that will allow those signals to be viewed on their receivers.24 The Commission found that argument “at odds with both the plain meaning of the statutory text as well as the structure of the provision,” explaining that “[t]o the extent that such subscribers do not have the necessary equipment, * * * the broadcast signals in question are not `viewable' on their receivers.”25 To implement the viewability mandate, the Commission concluded that cable operators that choose to operate a hybrid system—i.e.,operators that offer both analog and digital service tiers—were required to carry the must-carry stations' signals in analog format to their analog cable subscribers, while also ensuring the signals were viewable to digital subscribers.26

8. After consideration of the statutory arguments raised by the parties to this proceeding, and upon further review of the statute, we find that the language of the Act is less definitive than our earlier decision suggested. Nothing in the language of the statute plainly prohibits cable operators from offering equipment to satisfy the viewability requirement,i.e.,the statutory sections at issue do not state that a signal is not “viewable” if the consumer needs to use additional equipment. (We disagree with NAB's contention that theFourth FNPRMdid not ask for comment on the Commission's prior statutory analysis of the viewability requirement in section 614(b)(7) and that cable commenters, having failed to seek timely review or reconsideration of the 2007Viewability Order,are barred from reopening the issue now.27 To the contrary, theFourth FNPRMspecifically asked for parties to include a statutory analysis with any proposals for changing the viewability rule.28 As requested in theFourth FNPRM,cable operators provided a statutory analysis to support their alternative proposal for satisfying the viewability requirement.29 )Accordingly, we do not believe that section 614(b)(7) unambiguously requires that cable subscribers must be capable of viewing must-carry signals without the use of additional equipment. We instead conclude that “viewable” can reasonably be read to mean that the operator must make the broadcast signal available or accessible to its subscribers by an effective means, which may include offering the necessary equipment for sale or lease, either for free or at an affordable cost that does not substantially deter use of the equipment.30 We believe this interpretation is reasonable in light of marketplace changes that have occurred over the past five years. This reading ensures access to must-carry stations as a practical matter—rather than just a theoretical option if the customer is willing to incur significant additional expense.31 It is consistent with both the ordinary meaning of the word “viewable”—defined as “capable of being seen or inspected”32 —and also prior interpretations of the Communications Act.33 Accordingly, we disagree with broadcasters' sweeping arguments that requiring any sort of equipment use at all by subscribers would be “contrary to the statute” and “flatly inconsistent” with section 614(b)(7).34 Indeed, even NAB suggested that a cable operator could satisfy the statutory viewability requirement by providing “free equipment to subscribers that enables access to digital broadcast signals for a period of three years,” which acknowledges that the statute is not as inflexible as NAB otherwise argued.35 We thus agree with cable commenters that the term “viewable” does not unambiguouslyrequirethat must-carry stations must be capable of being seen without the use of additional equipment.36 In reaching this conclusion, we note that agencies may change their interpretation of an ambiguous statutory provision and that such a revised interpretation is entitled to deference.37

9. Broadcasters argue that allowing cable operators to satisfy the viewability requirement by requiring subscribers to purchase or lease equipment would “make the second sentence [in] section 614(b)(7) surplusage, and remove any meaning from the word `additional' in the third sentence of section 614(b)(7).”38 We disagree. The first sentence of section 614(b)(7) requires that each must carry signal “shall be provided to every subscriber to a cable system.”39 As the Commission has explained, this provision requires that every class of subscriber must receive all must carry signals.40 Cable operators have complied with this requirement through the use of a basic service tier,41 i.e.,a level of service to which subscription is required in order to be eligible for access to any other tier of service at additional charge.42 The second sentence of section 614(b)(7) is concerned with a subscriber's ability actually to “view” the must carry signals that have to be provided under the first sentence. The second and third sentences of section 614(b)(7) likewise are distinct mandates, as we observed in the 2007Viewability Order. 43 The second sentence covers “all television receivers of a subscriber which are connected to a cable system by a cable operator or for which a cable operator provides a connection,” whereas the third sentence covers the situation where a “cable operator authorizes subscribers to install additional receiver connections, but does not provide the subscriber with such connections, or with the equipment and materials for such connections.”44 Because of this difference, allowing cable operators to satisfy the viewability obligation of the second sentence either without the use of additional equipment or by making equipment available at no cost or anaffordable cost does not render the second sentence “irrelevant” or “surplusage” in light of the third sentence, which requires operators, in a more limited situation, to offer to sell or lease converter boxes to subscribers at regulated rates. In short, our interpretation of the term “viewable” in the second sentence is different in scope and substance from the requirement set forth in the third sentence, which requires cable operators to offer or sell converter boxes to certain subscribers “at rates in accordance with section 623(b)(3).”45

10. NAB further argues that allowing cable operators to satisfy the viewability requirement by providing equipment conflicts with the “signal quality” provision set forth in Section 614(b)(4)(A), and in particular the requirement that “the quality of signal processing and carriage provided by a cable system for the carriage of local commercial television stations will be no less than that provided by the system for carriage of any other type of signal.”46 NAB argues that reliance on set-top equipment “would allow cable operators to discriminate by, for example, offering non-broadcast programming in a viewable format but not local broadcast signals,” or to provide some local signals to analog subscribers, but not others.47 It is not clear, however, that this provision applies here. Section 614(b)(4)(A) speaks specifically to the issue of “nondegradation” and “technical specifications,” and does not address the issue of viewability. In any event, even if that provision were to apply, it is not clear that carrying must-carry signals only in a digital format would violate the terms of 614(b)(4)(A). From a technical standpoint, a must-carry signal carried in standard definition (SD) arguably has the same “quality of signal processing and carriage” as a signal carried in analog format because both versions received at the headend should have the same resolution—480i—and thus there should be no perceivable difference between them.48 Moreover, there is no evidence in the record to suggest that cable operators intend to use digital compression or other bandwidth saving techniques to “degrade” must-carry signals in such a way as to affect the subscriber's viewing experience.

11. Based on the foregoing, we agree with cable commenters that the statutory viewability requirement is ambiguous, and reasonably can be read in a manner to permit cable operators to require the use of equipment to view must-carry signals—although we emphasize that such equipment must be both available and affordable (or provided at no cost). We here choose a reasonable interpretation of the statutory text that best effectuates the statutory purpose in light of current marketplace conditions.49 Moreover, the doctrine of constitutional avoidance50 counsels us to interpret the Act as not imposing a rigid analog-carriage requirement on cable operators, where the record establishes a reasonable, less burdensome alternative that meets the statutory objectives.51 Specifically, we are persuaded by cable commenters' argument that the dramatic changes in technology and the marketplace over the past five years render less certain the constitutional foundation for an inflexible rule compelling carriage of broadcast signals in both digital and analog formats.52 (NAB observes that compliance with the viewability rule remains voluntary as operators have the option to convert their systems to all-digital operation, and thereby obviate the need to comply with the rule's analog carriage requirement.53 Cable commenters, on the other hand, maintain that forcing operators to carry must-carry signals in analog format unduly hampers the efforts of cable operators to manage their own gradual transition to all-digital service in a manner that attracts customers to digital services while retaining value for those customers who still choose to rely only on analog service.54 ) The current record lacks evidence that infringing on cable operators' discretion by requiring both digital and analog carriage of the same broadcast stations is necessary to protect the viability of over-the-air broadcasting where an affordable set-top box option, that will achieve the same viewability, is readily available to customers. Nor is there evidence showing that allowing the viewability rule to sunset where the cable operator makes the digital signal available to its analog subscribers by offering the necessary equipment at an affordable cost will diminish the availability or quality of broadcast programming. (We are not persuaded by broadcasters' argument that allowing the rule to sunset will threaten the viability of local broadcasters because their analysis assumes that elimination of the viewability rule will automatically result in the broadcaster's signal being unavailable to all analog subscribers.55 Their analysis fails to take into account that those analog customers who value must-carry channels may opt for equipment made available by the cable operator to continue accessing must-carry channels and other programming offered by the cable operator in a digital format.) We thus find that the burden placed on cable operators by the viewability rule is not justified on the current record, which demonstrates that a less burdensome alternative is available. Based on our analyses of current technology and marketplace conditions,56 set forth in detail below,we now find that the most reasonable interpretation of the statute is that an operator of a hybrid system may comply with the viewability mandate by carrying a must-carry signal in a format that is capable of being viewed by analog customers either without the use of additional equipment or alternatively with equipment made available by the cable operator at no cost or at an affordable cost that does not substantially deter use of the equipment.

12. Significant changes that have occurred in the marketplace and technology over the past five years confirm our determination that it is in the public interest to allow the 2007 viewability rule to sunset. At the time the rule was adopted, the Nation was preparing for the digital television transition, and a significant number of television viewers were unequipped to receive a digital signal.57 In 2007, about 58 percent of television households subscribed to cable service and 46 percent of these cable subscribers (40 million households) received analog service. Moreover, there was no low-functionality and/or low-cost digital set-top box option available to ensure analog cable subscribers could access digital must-carry signals.58 Consequently, the Commission faced the very real possibility that a significant number of cable customers could lose access to must-carry channels if hybrid cable systems were permitted to carry such signals only in digital format. Based on the state of the marketplace in 2007, the rule requiring hybrid cable systems serving analog subscribers to carry must-carry stations in analog format was a reasonable measure to ensure that must-carry signals were “viewable” and “available” to all subscribers as required by statute.59

13. The state of technology and the marketplace is significantly different now. About 50 percent of television households now subscribe to cable service (down from 58 percent in 2007), about 20 percent of these cable subscribers (about 12 million households) receive analog service (down from 40 million households in 2007), and the latter number is expected to drop to 16 percent (or fewer than 10 million households) by the end of 2012.60 We continue to expect most cable operators will eventually transition to all-digital systems.61

14. More importantly, unlike in 2007, low-functionality/low cost digital equipment is now readily available as an option to cable consumers.62 The cable industry has encouraged the development of small, low-cost set-top boxes, called “Digital Transport Adapters” (“DTAs”),63 to enable customers to view digital signals, without having to obtain full-featured digital set-top boxes.64 NCTA states that “some cable operators * * * are already providing digital transport adapters (DTAs) to some or all of their customers at minimal or no cost.”65 According to industry reports, about 27 million DTAs were already deployed by year-end 2011.66 In addition to DTAs, NCTA explains that “[o]ther operators * * * are providing other types of affordable digital set-top boxes, with lesser capabilities and/or at substantially reduced prices for basic-only customers.”67 Moreover, NCTA statesthat “the eight largest incumbent cable operators” have committed to “make available to analog-only households, upon request, low-cost set-top devices capable of displaying basic service tier signals on analog television sets.”68 Therefore, we expect that DTAs, or similar devices, will be made broadly available on cable systems throughout the country.69 The low cost set-top box offers reflected in our record will satisfy our new interpretation of the viewability requirement, permitting a cable operator to make the must-carry signals available by offering analog customers the necessary digital equipment at an affordable cost.70 Specifically, the record reflects that Comcast, for a period of time after migrating a system to all-digital, typically offers two or three free DTAs to customers at no cost, and charges less than $2 for additional boxes.71 Similarly, Time Warner Cable states that in transitioning one of its systems to digital it has offered subscribers “one or more” DTAs free of charge for the first two years and 99 cents per month thereafter.72 In addition, Bright House states that it offers set-top boxes to basic service tier subscribers for $1 a month.73 We find that this range of charges for DTAs and set-top boxes—i.e.,free or a monthly fee of no more than $2—would satisfy the requirement for affordable equipment because the minimal additional cost, if any, is unlikely to discourage use of this equipment.74 Materially higher leasing fees, however, could deter subscriber willingness to order the equipment needed to ensure viewability on a hybrid cable system.75 Accordingly, such fees would not meet the statutory viewability requirement as we interpret it.76

15. We are not persuaded by the broadcasters' analysis that allowing the current viewability rule to expire on schedule will threaten the viability of must-carry stations.77 According to the broadcasters, approximately 12.6 million households receive only analog cable service, representing approximately 11 percent of all U.S. television households, and removing that percentage of a station's audience “could well have a profound impact on affected stations.”78 As NCTA points out, however, the broadcasters' analysis overstates the impact on such stations because it assumes that elimination of the rule will automatically result in the broadcaster's signal being unavailable to all analog subscribers.79 To the contrary, our new statutory interpretation—which hinges on a cable operator making equipment available at no cost or anaffordable cost80 —will ensure that subscribers on hybrid systems may continue to access these signals at little or no additional expense.81 As cable commenters explain, a must-carry signal carried only in digital format would still be included in the basic service tier; analog cable subscribers would not be required to subscribe to an enhanced tier of service to view the digital version of a must-carry channel.82 We also expect this issue to diminish over time given that the number of analog cable subscribers is expected to continue to decrease as more cable customers choose to upgrade to full digital service and as more hybrid cable systems complete their transition to all-digital systems.83

16. The record further reflects that eliminating the rule will result in significant benefits to cable operators in meeting the increasing demands of the large majority of their customers,i.e.,those subscribing to digital services.84 NCTA explains that “cable operators face capacity demands from an increasing proliferation of HD programming services as well as from broadband video services” and need flexibility to “serve the needs of all their customers while transitioning from analog to digital service.”85 NCTA explains that there are currently more than 183 HD cable networks (including basic, premium, and regional sports channels), up from only 22 in September 2007 when the Commission adopted the viewability rule.86 According to staff review of the 2011 Annual Cable Operator Report data and the 2010 Cable Price Survey data, more than 96 percent of cable systems carry at least one must-carry station, and, on average, each system carries more than seven must-carry stations.87 Each must-carry station carried in analog occupies 6 MHz of bandwidth that the cable operator could otherwise use for 10-12 standard definition (“SD”) digital streams, 2-3 HD video streams, or significant broadband capacity.88 Thus, as cable commenters explain, elimination of the viewability rule will provide operators the needed flexibility to meet fast-changing consumer demands for HD cable services and high-speed broadband services.89

17. To facilitate a smooth transition, we adopt, for a six-month transition period following the sunset of our viewability rule,90 an interim requirement that operators of hybrid cable systems must continue to carry the signals of must-carry stations in analog format to all analog cable subscribers. Critical to our decision to allow the viewability rule to sunset is the availability of affordable set-top boxes to affected cable subscribers. A six-month transition period will provide cable operators an opportunity to acquire an adequate supply of equipment for subscribers impacted by any carriage change.91 It will also provide time forcable operators to comply with our existing rules requiring notification to broadcasters and customers about any planned change in carriage or service and the operator's equipment offerings, as well as allow consumers sufficient time to make any necessary arrangements.92 As part of the cable operators' required notification to their subscribers of any carriage changes, the cable operators have committed to inform affected subscribers that equipment is required to continue viewing the must-carry signal and how to obtain that equipment.93 We believe informing consumers about equipment is a critical part of a hybrid operator's viewability obligations in these circumstances and thus rely upon this commitment in rendering our decision today. Similarly, we rely upon the cable operators' commitment to give broadcasters a minimum of 90 days notice before undertaking any carriage changes.94 We believe that such advance notice will provide repositioned must-carry stations sufficient time to communicate with their viewers. Advance notice about planned carriage changes will allow must-carry stations to notify their viewers—through on-air messages, Web site postings, mailings or other forms of communications of their choosing—about the planned change in carriage, and about the viewers' options to ensure continued access to the station's programming.95 We believe effective consumer outreach, particularly during the six-month transition period, will greatly minimize the impact that sunset of our viewability rule may have on consumers and must-carry stations.

18. We remind cable operators that the sunset of our viewability rule does not otherwise affect the must-carry requirements of § 76.56 of our rules.96 Cable operators providing digital cable service must continue to carry local broadcast stations electing mandatory carriage, including in HD format when broadcast in such format, and cable operators providing only analog cable service (no digital service) must continue to carry local broadcast stations electing mandatory carriage in analog format.97 By allowing our current viewability rule to sunset, however, we provide hybrid cable system operators the flexibility to best meet the needs of their subscribers during their move to an all-digital system. Under our more flexible statutory interpretation, operators of hybrid systems may choose to comply with the statutory viewability mandate by continuing to down-convert digital must-carry stations to analog format in addition to carrying those stations in digital SD and/or HD format if that best suits their individual business plans. Alternatively, after December 12, 2012, an operator of a hybrid system may choose to satisfy the viewability mandate by making must-carry signals available to analog subscribers by offering the necessary equipment for sale or lease, either for free or at an affordable cost that does not substantially deter use of the equipment.98 Additionally, sunset of the current viewability rule allows hybrid cable system operators the flexibility to benefit from future marketplace and technology developments through possible methods of compliance not contemplated on the record now before us. We emphasize that, while we allow our viewability rule to sunset, the statutory viewability requirement remains in effect. Therefore, a must-carry station may file a complaint pursuant to § 76.61 of our rules if it believes a cable operator has failed to meet its statutory carriage obligations.99 In addition, we will consider informal consumer complaints when evaluating compliance with the statutory viewability requirement.100 If we receive a significant number of well-founded consumer complaints that an operator is not effectively making affordable set-top boxes available to customers in lieu of analog carriage of a channel, one of the possible remedies would be to require the operator to resume analog carriage of the channel.101

19. The Act requires that cable operators carry broadcast signals “without material degradation.”102 Inthe context of the carriage of digital signals, the Commission has interpreted this requirement to contain two parts: First, cable operators may not discriminate in their carriage between broadcast and non-broadcast signals, and, second, HD broadcast signals must be carried to viewers in HD.103 In response to concerns from small cable operators about cost and technical capacity, theFourth Report & Orderafforded a temporary exemption from the HD carriage requirement for certain small systems.104 Specifically, the Commission exempted small cable systems with 2,500 or fewer subscribers that are not affiliated with a cable operator serving more than 10 percent of all MVPD subscribers, and those with an activated channel capacity of 552 MHz or less. The exemption from the material degradation rules allows such systems to carry broadcast signals in standard definition (SD) digital and/or analog format, even if the signals are broadcast in HD, as long as all subscribers can receive and view the signal.105 The Commission provided that the exemption would expire three years after the conclusion of the DTV transition, but said it would consider whether to extend the exemption in the final year.106 TheFourth FNPRMundertook this review and tentatively concluded to extend the existing exemption for three more years, given small cable systems' apparent widespread reliance on it.107 In response to theFourth FNPRM,cable commenters support extension of the HD carriage exemption, while broadcasters suggest that the exemption should not apply if a system carries any signal in HD.108

20. We find that the small-system HD carriage exemption continues to serve the public interest and adopt our tentative conclusion to extend the exemption for three more years.109 The record shows that a significant number of small systems with financial or channel capacity constraints continue to rely on the HD carriage exemption and require additional time to come into compliance in a cost-effective way.110 For example, ACA reports that at least 52 of its members, representing more than 385 small systems, still rely on the exemption.111

21. We find that the same financial and capacity constraints that faced small cable operators when we initially adopted this exemption continue to exist today. For example, cable commenters persuaded the Commission in 2008 that, without an exemption from the material degradation rules, “small systems [would] be forced to absorb or impose significant and unsustainable price increases, or in some instances to shut down altogether.”112 This is because some small systems did not have the technical capability or system capacity to carry high definition digital signals, and in some cases had so few subscribers that per-subscriber costs to upgrade to that capacity would be so high as to make it not worthwhile to continue operating the system.113 The record shows that the challenges facing small systems have not diminished since the Commission adopted the exemption and that requiring small systems to comply with the HD carriage requirement would result in these systems dropping existing channels or shutting down.114 Thus, as ACA points out, the result for subscribers of these systems could include “increased rates, loss of desired channels, loss of not only video service, but the potential for broadband Internet access, and the loss of the benefits that flow from competition.”115 NCTA explains that eliminating the HD exemption would also impede small operators' “ability to offer new services like video-on-demand, deploy broadband, or introduce enhanced new speed tiers of broadband to more rural, smaller market customers.”116 ACA maintains that, for most capacity-constrained small systems, the unused channel capacity available has actually decreased over the past three years.117 In addition, ACA reports that, for most financially-constrained small systems, operation costs have increased more than revenues over the last three years, leaving these systems without the financial resources to purchase the necessary equipment to upgrade service.118 Notably, these small systems often serve rural and smaller market consumers, making the potential loss of such service particularly troubling.119 As noted in theFourth Report & Order,the loss of a small cable system could mean the effective loss of all MVPD service for some customers.120 Moreover, in some areas, due to poor over-the-air reception, the loss of a small cable system could mean the loss of any access to some or all broadcast signals as well. Accordingly, we find that the exemption remains necessary to protect the viability of small systems and their service to rural and smaller market consumers.121

22. This exemption will sunset on June 12, 2015, unless the Commission takes action to extend it in light of the potential cost and service disruption to consumers and the state of technology and the market at that time. We note that this exemption is not intended to be permanent and that its purpose is to provide small systems with additional time to upgrade and, where necessary, expand their systems to come into fullcompliance with the material degradation provisions of the carriage rules by carrying HD versions of all HD broadcast signals without having to make relatively large expenditures over a short period of time.

23. We decline, at this time, to further restrict the exemption for small systems by eliminating it for systems that carry any signal in HD, as suggested by NAB.122 The Commission has already crafted the exemption quite narrowly to excuse only a limited number of systems with particularly limited channel capacity or low subscribership.123 We agree with ACA that a small system's ability to offer some HD service does not refute an argument that it may be significantly burdensome to offer additional HD service.124 Further, we do not want to create a disincentive for these systems to take incremental steps toward offering more HD programming to their subscribers by using the carriage of any HD signals as a threshold for applying the HD must-carry requirement to small cable systems.125 Although we understand NAB's concern that small systems could possibly misuse the exemption of the HD carriage requirement to unfairly discriminate against must-carry HD signals in favor of other HD signals,126 broadcasters have not presented any evidence to suggest that this is, or ever has been, an issue. Moreover, to the extent that cable operators utilizing the exemption do start to carry a wide range of HD channels, broadcasters are free to bring such evidence to the Commission's attention, and we will then be able to evaluate whether the exemption's contours should be adjusted.

24. For the reasons stated above, we find the viewability rule is no longer necessary to ensure must-carry signals are viewable to all subscribers and therefore will allow the rule to sunset. As an interim measure, we require hybrid systems to continue to carry the signals of must-carry stations in analog format to all analog cable subscribers for six months after expiration of the viewability rule, until December 12, 2012. We extend for three more years the existing HD carriage exemption for eligible small cable system operators.

25. As required by the Regulatory Flexibility Act of 1980, as amended (“RFA”)127 an Initial Regulatory Flexibility Analysis (“IRFA”) was incorporated in theFourth FNPRMin this proceeding.128 The Commission sought written public comment on the proposals in theFourth FNPRM,including comment on the IRFA. The Commission received no comments on the IRFA. This present Final Regulatory Flexibility Analysis (“FRFA”) conforms to the RFA.129

26.Viewability Requirement.Sections 614(b)(7) and 615(h) of the Communications Act require cable operators to ensure that commercial and non-commercial must-carry broadcast stations are “viewable” or “available” to all cable subscribers. 47 U.S.C. 534(b)(7), 535(h). In the 2007Viewability Order,in anticipation of the approaching end of the digital television transition and in light of the state of technology and the marketplace, the Commission adopted a rule providing cable operators operating hybrid systems (i.e.,cable systems that provide both digital and analog cable service) two options to comply with the statutory viewability requirement: (1) Carry the digital signal in analog format to all analog cable subscribers in addition to any digital version carried, or (2) transition to an all-digital system and carry the signal only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content. Thus, the “viewability” rule required cable operators with hybrid systems to carry digital must-carry signals in both digital and analog format. The Commission, however, decided that the rule would remain in force for three years after the date of the digital transition, subject to review by the Commission during the last year of the three-year period. The Commission explained that a three-year sunset “provides the Commission with the opportunity after the transition to review these rules in light of the potential cost and service disruption to consumers, and the state of technology and the marketplace.” Therefore, absent Commission action, the viewability rule is scheduled to sunset on June 12, 2012. TheFourth FNPRMconsidered whether to retain the viewability rule or allow it to sunset, given the current state of technology and the marketplace.

27. TheFifth Report and Orderfinds it in the public interest to allow the viewability rule to sunset as scheduled, on June 12, 2012. TheFifth Report and Orderdetermines that the statutory term “viewable” is an ambiguous term. It then chooses a reasonable interpretation of the statutory text that best effectuates the statutory purpose in light of current marketplace conditions and technology developments that have occurred over the past five years (e.g.,80% of cable customers now subscribe to digital cable service and the widespread availability of small digital set-top boxes that cable operators are making available at low cost (or no cost) to analog customers of hybrid systems). TheFifth Report and Orderreinterprets the statutory viewability requirement to permit cable operators to require the use of set-top equipment to view must-carry signals, provided that such equipment is both available and affordable (or provided at no cost). Therefore, until it completes its transition to all-digital service, a hybrid system operator may comply with the statutory viewability requirement in two ways. The operator can carry a must-carry signal in a format that is capable of being viewed by analog customers either (1) without the use of additional equipment or (2) alternatively with equipment made available by the cable operator at no cost or at an affordable cost that does not substantially deter use of the equipment. TheFifth Report and Orderestablishes a transitional period of six months after expiration of the current rule—that is, until December 12, 2012—during which hybrid systems will be required to continue to carry the signals of must-carry stations in analog format to all analog cable subscribers. This post-sunset transitional period will give consumers, cable operators, and broadcasters that rely on must-carry access an opportunity to prepare for the widespread deployment of small, affordable set-top boxes and to take other necessary steps resulting from changes in cable carriage.

28.HD Carriage Exemption.Sections 614(b)(4)(A) of the Communications Act requires that cable operators carry broadcast signals “without material degradation.” Accordingly, at the same time the Commission adopted the viewability rule, it adopted a relatedrule prohibiting material degradation of broadcast signals when carried by cable systems. The rule requires that any signal broadcast in HD be carried by cable operators in HD. In response to concerns from small cable operators about cost and technical capacity, the 2008 Fourth Report & Order afforded a temporary exemption from this HD carriage requirement (“HD carriage exemption”) for certain small systems. Specifically, the Commission exempted small cable systems with 2,500 or fewer subscribers that are not affiliated with a cable operator serving more than 10 percent of all MVPD subscribers, and those with an activated channel capacity of 552 MHz or less. The exemption from the material degradation rules allows such systems to carry broadcast signals in standard definition (SD) digital and/or analog format, even if the signals are broadcast in HD, as long as all subscribers can receive and view the signal. The Commission, however, decided that the HD carriage exemption would remain in force for three years after the date of the digital transition, subject to review by the Commission during the last year of the three-year period. Therefore, absent Commission action, the HD carriage exemption is scheduled to sunset on June 12, 2012. TheFourth FNPRMconsidered whether to retain the HD carriage exemption or allow it to expire.

29. TheFifth Report and Orderconcludes that the small-system HD carriage exemption continues to serve the public interest and adopts theFourth FNPRM'stentative conclusion to extend the existing exemption for three more years. TheFifth Report and Orderfinds that a significant number of small systems with financial or channel capacity constraints continue to rely on the HD carriage exemption and require additional time to come into compliance with the material degradation rules in a cost-effective way. Accordingly, the HD carriage exemption will sunset on June 12, 2015, unless the Commission takes action to extend it in light of the potential cost and service disruption to consumers and the state of technology and the market at that time.

30. The Commission did not receive any comments in response to the IRFA.

31. The RFA directs the Commission to provide a description of and, where feasible, an estimate of the number of small entities that will be affected by the rules adopted.130 The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction”131 In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act.132 A “small business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA).133 The final rules adopted herein affect small television broadcast stations and small cable operators. A description of these small entities, as well as an estimate of the number of such small entities, is provided below.

32.Television Broadcasting.The SBA defines a television broadcasting station as a small business if such station has no more than $14.0 million in annual receipts.134 Business concerns included in this industry are those “primarily engaged in broadcasting images together with sound.”135 The Commission has estimated the number of licensed commercial television stations to be 1,387.136 According to Commission staff review of the BIA Kelsey Inc. Media Access Pro Television Database (BIA) as of January 31, 2011, 1,006 (or about 78 percent) of an estimated 1,298 commercial television stations137 in the United States have revenues of $14 million or less and, thus, qualify as small entities under the SBA definition. The Commission has estimated the number of licensed noncommercial educational (“NCE”) television stations to be 396.138 We note, however, that, in assessing whether a business concern qualifies as small under the above definition, business (control) affiliations139 must be included. Our estimate, therefore, likely overstates the number of small entities that might be affected by our action, because the revenue figure on which it is based does not include or aggregate revenues from affiliated companies. The Commission does not compile and otherwise does not have access to information on the revenue of NCE stations that would permit it to determine how many such stations would qualify as small entities.

33. In addition, an element of the definition of “small business” is that the entity not be dominant in its field of operation. We are unable at this time to define or quantify the criteria that would establish whether a specific television station is dominant in its field of operation. Accordingly, the estimate of small businesses to which rules may apply do not exclude any television station from the definition of a small business on this basis and are therefore over-inclusive to that extent. Also, as noted, an additional element of the definition of “small business” is that the entity must be independently owned and operated. We note that it is difficult at times to assess these criteria in the context of media entities and our estimates of small businesses to which they apply may be over-inclusive to this extent.

34.Cable and Other Program Distribution.Since 2007, these services have been defined within the broad economic census category of Wired Telecommunications Carriers; that category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video usingwired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies.”140 The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees.141 According to Census Bureau data for 2007, there were a total of 955 firms in the subcategory of Cable and Other Program Distribution that operated for the entire year.142 Of this total, 939 firms had employment of 999 or fewer employees, and 16 firms had employment of 1,000 employees or more.143 Thus, under this size standard, the Commission believes that a majority of firms operating in this industry can be considered small.

35.Cable Companies and Systems (Rate Regulation Standard).The Commission has also developed its own small business size standards, for the purpose of cable rate regulation. Under the Commission's rules, a “small cable company” is one serving 400,000 or fewer subscribers, nationwide.144 Industry data indicate that, of 1,076 cable operators nationwide, all but 11 are small under this size standard.145 In addition, under the Commission's rules, a “small system” is a cable system serving 15,000 or fewer subscribers.146 Industry data indicate that, of 6,635 systems nationwide, 5,802 systems have under 10,000 subscribers, and an additional 302 systems have 10,000-19,999 subscribers.147 Thus, under this second size standard, the Commission believes that most cable systems are small.

36.Cable System Operators.The Act also contains a size standard for small cable system operators, which is “a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1 percent of all subscribers in the United States and is not affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250,000,000.”148 The Commission has determined that an operator serving fewer than 677,000 subscribers shall be deemed a small operator, if its annual revenues, when combined with the total annual revenues of all its affiliates, do not exceed $250 million in the aggregate.149 Industry data indicate that, of 1,076 cable operators nationwide, all but 10 are small under this size standard.150 We note that the Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million,151 and therefore we are unable to estimate more accurately the number of cable system operators that would qualify as small under this size standard.

37.Open Video Services.Open Video Service (OVS) systems provide subscription services.152 The open video system (“OVS”) framework was established in 1996, and is one of four statutorily recognized options for the provision of video programming services by local exchange carriers.153 The OVS framework provides opportunities for the distribution of video programming other than through cable systems. Because OVS operators provide subscription services,154 OVS falls within the SBA small business size standard covering cable services, which is “Wired Telecommunications Carriers.”155 The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees. According to Census Bureau data for 2007, there were a total of 3,188 firms in this previous category that operated for the entire year.156 Of this total, 3,144 firms had employment of 999 or fewer employees, and 44 firms had employment of 1,000 employees or more.157 Thus, under this size standard, most cable systems are small. In addition, we note that the Commission has certified some OVS operators, with some now providing service.158 Broadband service providers (“BSPs”) are currently the only significant holders of OVS certifications or local OVS franchises.159 The Commission does not have financial or employment information regarding the entities authorized to provide OVS, some of which may not yet be operational. Thus, again, at least some of the OVS operators may qualify as small entities.

38. ThisFifth Report & Orderdoes not impose any reporting, record keeping, or other compliance requirements.

39. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.160

40.Viewability Requirement.In thisFifth Report & Order,the Commissionallows the viewability rule to expire, subject to a six-month post-sunset transition period (as described above in Section A of this FRFA), and revises its interpretation of the statutory viewability requirement to afford greater flexibility to cable operators, including small operators, for complying with the statute. Specifically, whereas hybrid cable operators were previously required to carry both the digital and analog versions of a must-carry broadcast station, hybrid operators may, instead, comply with the statute by carrying only the digital format and making set-top equipment available to their analog cable customers, at no cost or at an affordable cost that does not substantially deter use of the equipment, that will enable such customers to view the digital format. As a result, small hybrid cable system operators will have a choice for complying with the statutory viewability requirement. In addition, we do not believe the expiration of the viewability rule will have a significant impact on small broadcasters. We believe our new statutory interpretation of the viewability requirement—which hinges on a cable operator making equipment available at no cost or an affordable cost—will ensure that subscribers on hybrid systems may continue to access these signals at little or no additional expense, thereby mitigating any adverse impact on broadcasters. We note that a must-carry signal carried only in digital format will still be included in the basic service tier; analog cable subscribers would not be required to subscribe to an enhanced tier of service to view the digital version of a must-carry channel. We also expect this issue to diminish over time given that the number of analog cable subscribers is expected to continue to decrease as more cable customers choose to upgrade to full digital service and as more hybrid cable systems complete their transition to all-digital systems.

41.HD Carriage Exemption.The HD carriage exemption provides temporary regulatory relief to small cable systems with 2,500 or fewer subscribers that are not affiliated with a cable operator serving more than 10 percent of all MVPD subscribers, and those with an activated channel capacity of 552 MHz or less). ThisFifth Report & Orderextends this exemption for three more years. As noted in the IRFA, the HD carriage exemption does not impose a negative economic impact on any small cable operator, and, indeed, provides a positive economic impact to any operator of a system that chooses to take advantage of the exemption. In addition, the exemption does not impose any significant burdens on small television stations.

42. The Commission will send a copy of thisFifth Report & Order,including this FRFA, in a report to be sent to Congress pursuant to the SBREFA.161 In addition, the Commission will send a copy of thisFifth Report & Order,including the FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of thisFifth Report & Orderand the FRFA (or summaries thereof) will also be published in theFederal Register.162

43. This Report and Order has been analyzed with respect to the Paperwork Reduction Act of 1995 (“PRA”),163 and does not contain any new or modified information collection requirements. In addition, therefore, it does not contain any new or modified “information collection burden for small business concerns with fewer than 25 employees,” pursuant to the Small Business Paperwork Relief Act of 2002.164

44. The Commission will send a copy of this Report and Order in a report to be sent to Congress and the Government Accountability Office, pursuant to the Congressional Review Act.165

45. For more information on this proceeding, contact Steven Broeckaert,Steven.Broeckaert@fcc.gov,or Evan Baranoff,Evan.Baranoff@fcc.gov,of the Media Bureau, Policy Division, (202) 418-2120.

46. Accordingly,it is orderedthat pursuant to sections 4, 303, 614, and 615 of the Communications Act of 1934, as amended, 47 U.S.C. 154, 303, 534, and 535, theFifth Report and Order is adopted,and the Commission's rulesare hereby amendedby removing § 76.56(d)(3) through (d)(5), as set forth in the final rule changes in Appendix B of theFifth Report and Order.

47.It is further orderedthat, pursuant to 5 U.S.C. 553(d)(3) and 47 CFR 1.427(b), theFifth Report and Orderand the attached rule amendmentshall be effectiveimmediately upon publication in theFederal Register.166

48.It is further orderedthat, pursuant to the Congressional Review Act, 5 U.S.C. 801(a)(1)(A), the Commissionwill senda copy of theFifth Report and Orderin a report to Congress and the General Accounting Office.

49.It is further orderedthat the Commission's Consumer and Governmental Affairs Bureau, Reference Information Center,will senda copy of theFifth Report and Order,including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR part 76 as follows:

During annual public meetings, the NMFS Southwest Fisheries Science Center presents the estimated biomass for Pacific mackerel to the Pacific Fishery Management Council's (Council) CPS Management Team (Team), the Council's CPS Advisory Subpanel (Subpanel) and the Council's Scientific and Statistical Committee (SSC), and the biomass and the status of the fisheries are reviewed and discussed. The SSC (and the other teams) then present the estimated biomass to the Council along with the calculated overfishing limit (OFL), available biological catch (ABC), ACL and ACT (and/or HG) recommendations, and the Council listens to comments from the Team, Subpanel and SSC. Following review by the Council and after considering public comment, the Council adopts a biomass estimate and makes its catch level recommendations to NMFS.

This final rule will implement the 2011-2012 Pacific mackerel fishery ACL, HG, ACT and other annual catch reference points, including OFL and an ABC that takes into consideration uncertainty surrounding the current estimate of biomass, for Pacific mackerel in the U.S. EEZ off the Pacific coast. (The EEZ off the Pacific Coast encompasses ocean waters seaward of the outer boundary of state waters, which is 3 nautical miles off the coast, out to a line 200 nautical miles from the coast.) The CPS FMP and its implementing regulations require NMFS to set these annual catch levels for the Pacific mackerel fishery based on the annual specification framework in the FMP. This framework includes a harvest control rule that determines the maximum HG, the primary management target for the fishery, for the current fishing season. The HG is based, in large part, on the current estimate of stock biomass. The harvest control rule in the CPS FMP is HG = [(Biomass-Cutoff) * Fraction * Distribution] with the parameters described as follows:

1.Biomass.The estimated stock biomass of Pacific mackerel for the 2011-2012 management season is 211,126 mt.

2.Cutoff.This is the biomass level below which no commercial fishery is allowed. The FMP established this level at 18,200 mt.

3.Fraction.The harvest fraction (30%) is the percentage of the biomass above 18,200 mt that may be harvested.

4.Distribution.The average portion (currently 70%) of the total Pacific mackerel biomass that is estimated to be in the U.S. EEZ off the Pacific coast, based on the average historical larval distribution obtained from scientific cruises and the distribution of the resource according to the logbooks of aerial fish-spotters.

At the June 2011 Council meeting, the Council adopted the 2011-12 Pacific mackerel assessment and a Pacific mackerel biomass estimate of 211,126 mt. Based on recommendations from its SSC and other advisory bodies, the Council recommended, and NMFS is implementing, an OFL of 44,336 mt, an ABC of 42,375 mt, an ACL and maximum harvest guideline (HG) of 40,514 mt, and an ACT of 30,386 mt for the 2011/2012 Pacific mackerel fishing year. These catch specifications are based on the most recent stock assessment and the control rules established in the CPS FMP.

As of April 2012 the fishery had landed 1,120 mt of Pacific mackerel which is less than 2% of the current ACL. Although it is highly unlikely that the ACL will be reached, if the ACT is attained, the directed fishery will close, and the difference between the ACL and ACT (10,128 mt) will be reserved as a set-aside for incidental landings in other CPS fisheries and for other sources of mortality. In that event, for the remainder of the fishing year incidental harvest measures will be in place, including a 45% incidental catch allowance when Pacific mackerel are landed with other CPS (in other words, no more than 45% by weight of the CPS landed per trip may be Pacific mackerel), except that up to 1 mt of Pacific mackerel could be landed without landing any other CPS. Upon the fishery attaining the ACL/HG (40,514 mt), no vessels in CPS fisheries may retain Pacific mackerel. The purpose of the incidental set-aside and allowance of an incidental fishery is to allow for the restricted incidental landings of Pacific mackerel in other fisheries, particularly other CPS fisheries, when the directed fishery is closed to reduce bycatch and allow for continued prosecution of other important CPS fisheries. The NMFS Southwest Regional Administrator will publish a notice in theFederal Registerannouncing the date of any closure to either directed or incidental fishing.

On April 12, 2012, NMFS published a proposed rule for this action and solicited public comments (77 FR 21958). No comments were received. For further background information on this action please refer to the preamble of the proposed rule (77 FR 21958, April 12, 2012).

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

NMFS finds good cause pursuant to 5 U.S.C. 553(d)(3) to waive the 30-day delay in effectiveness for the establishment of the harvestspecifications for the 2011-2012 Pacific mackerel fishing season. Making this rule effective immediately upon publication is necessary to ensure the provisions of the CPS FMP for the conservation and management of Pacific mackerel are implemented this fishing year. Making this rule effective 30 days after publication would cause confusion among regulated parties and to the public because the specifications would not be in place during the relevant fishing year in which they apply. As such, the delay would undermine the very intention of this rulemaking.

This final rule is exempt from review under Executive Order 12866.

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