Background

FSA has a long history of providing agricultural credit to the Nation's farmers and ranchers through its OL Program. The Consolidated Farm and Rural Development Act of 1972 (Pub. L. 92-419, CONACT), as amended, authorizes FSA's OL Program. FSA's OL Program is designed to finance the farm operating needs of family farms for operators who meet the program eligibility requirements. Among other things, eligible applicants must be unable to obtain sufficient credit from other sources; have sufficient applicable education, on-the-job training, or farming experience; have an acceptable credit history; and have adequate collateral for the proposed loan. (See 7 CFR 764.101 and 764.252 for a full explanation of OL eligibility requirements.) OL funds may be used for such things as annual or term operating purposes to refinance certain debts; pay normal farm operating and family living expenses; purchase livestock, equipment, and other materials essential to a farm operation; and may also be used for some minor improvements to farm real estate, such as wells and essential repairs to buildings. (See 7 CFR 764.251 for a complete list of OL funds uses.) Throughout this rule, any reference to “farm” or “farmer” also includes “ranch” or “rancher,” respectively; in this document, the word “operator” refers to farmers who operate a farm.

In on-going efforts to improve the OL Program, FSA evaluated the unique needs of small farm operations and identified unintended barriers to applying for OLs. As a result, FSA is simplifying the application process and adding flexibility for meeting both loan eligibility and security requirements to encourage their participation. FSA published the proposed rule on May 25, 2012 (77 FR 31220-31226). The proposed rule included provisions for streamlining and abbreviating the application process, modifying security provisions, and providing additional flexibility in meeting the experience eligibility requirement. Additionally, FSA proposed removing the Lo-Doc OL Program provisions from the CFR. As discussed below, this final rule makes a few changes from the proposed rule in response to comments.

The ML application process, or the ML process, is within the existing OL Program framework, and uses existing OL appropriations to focus on the financing needs of small farm operations. These small farms, including non-traditional farm operations, currently have limited financing options available.

ML has been designed to appeal to small family farm operations. The ML application process simplifies the information required to apply by reducing the level of documentation required to more appropriately align with the less complex structure and needs of small operations. Additionally, the eligibility requirement for managerial ability and the loan security requirements for the ML process have been modified from the OLrequirements to be more appropriate for small family farms.

In response to the proposed rule, FSA received 48 comments. Comments were from national and local organizations primarily with agricultural, financial, and socially disadvantaged group affiliations; the general public; and FSA employees. The issues in the comments and the FSA responses, including a discussion of any changes to the regulation are discussed below.

The majority of the comments received were positive and supportive of the proposed ML process and commended FSA for considering the needs of small farms and niche-type operations while designing the new application process. Many of the comments welcomed the proposed changes without reservation. Some comments included suggestions for fine-tuning the proposed ML process. Some opposing comments stated concerns with inexperienced borrowers, a lessened standard of loan underwriting, and potential losses for the government.

FSA is incorporating some changes to the regulation as discussed in this final rule. Some changes have been made to the farm assessment, security, eligibility, and farm operating plan requirements to accommodate the streamlined process for MLs. The changes in 7 CFR part 764, “Direct Loan Making,” add the loan application requirements for ML; alternatives for meeting the managerial ability eligibility requirement for ML; operating loan uses for ML; security requirements for ML; and several other minor amendments.

Comment:Include the work experience of migrant workers in the requirement for managerial experience.

Response:For FSA loans generally and for microloans, as specified in 7 CFR 764.101(i)(3), an applicant with experience as a migrant worker may meet the managerial requirement through their farm experience depending on the type of management responsibilities the migrant worker performed. Internal guidance was added earlier this year to incorporate this type of experience into FSA's handbook at paragraph 69(A) of 3-FLP. Additional handbook guidance will be added to further explain how this type of experience can be used to meet the requirements specified in the ML regulations. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:FSA should broaden the agriculture-related organizations beyond youth programs, such as 4-H Club or Future Farmers of America (FFA), to include groups such as farm incubator programs and community based organizations.

Response:FSA will not limit the experience with agriculture-related organizations to youth programs. FSA agrees and will clarify that there are acceptable organizations with agricultural emphasis that can provide similar benefits to participants. The applicant that demonstrates day-to-day management experience in an agriculture related field. Therefore, FSA is revising § 764.101(i)(4)(i) to include other acceptable agricultural organizations.

Comment:The proposed change to the management experience should not be implemented. An applicant gaining experience on future intent is problematic. There should be at least 1 year of farm experience prior to participating in the proposed apprenticeship. In addition, there should be some type of quality control for the mentors participating in the apprenticeship program.

Response:FSA agrees that an applicant should have some farm experience or small business experience to be determined eligible using proposed participation in the self-directed apprenticeship. FSA's intent was to create a farm management opportunity for applicants who are not able to meet the management ability eligibility requirement through traditional education, on the job training (as a farm laborer with farm management responsibilities), or managerial farm experience. FSA understands that there are applicants who want to farm, but who may not have had the traditional farm experience opportunities available to someone raised on a farm or in a farm or rural community where agriculture-affiliated organizations are within reach. Some applicants, due to a variety of circumstances, may have had only farm labor positions available to them. A self-directed apprenticeship was proposed for ML applicants to allow applicants an alternative means to gain farm management experience for one production cycle.

FSA has considered the suggestions to improve the apprenticeship option. FSA still requires that there be some farm experience. FSA will also consider small business experience of an applicant along with the self-guided apprenticeship as a means to meet the management ability eligibility requirement, if the applicant is unable to meet this requirement through the other options. This will assist applicants who have only farm labor experience by providing them the opportunity to gain farm management experience while working with a mentor during the first production and marketing cycle. FSA will make the relevant changes to the apprenticeship program. FSA will monitor the results of the apprenticeship option in the coming years to determine if it adequately meets the needs of the applicants we expect to help. Therefore, FSA is revising § 764.101(i)(4)(ii) to adjust the proposed alternatives to require sufficient prior experience working on a farm or small business management experience combined with participation in a self-directed apprenticeship.

Comment:Require the mentor to sign the loan application to prevent fraud and abuse of program.

Response:FSA will require that the mentor's full name and description of operation be provided on the application, but disagrees that the mentor should have to sign the application form. FSA believes requiring a signature on the application would make mentors wary of working with FSA applicants and borrowers. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:There should be qualifying criteria for mentors so that their suitability can be evaluated. Mentors should demonstrate appropriate technical and other capabilities to provide guidance to applicants, acknowledge the existence of a proposed mentor relationship, and provide documentation of their farm profitability.

Response:FSA has made adjustments to the regulatory text as proposed for 7 CFR 764.101(i)(4)(ii) to improve the self-directed apprenticeship option to assist applicants in meeting the management ability eligibility requirement. At this time, mentors will not be evaluated as part of the application process. An evaluation would cause the ML application to become cumbersome, and increase the process and burden on the applicant and mentor. As stated previously, FSA believes that this would cause mentors to be reluctant to work with FSA applicants and borrowers. Part of the intent of ML is to keep the process proportional to the loan amount, and to the small operations expected to frequently use ML funds. FSA will evaluate the effectiveness of the apprenticeship program in the coming years to determine if this tool is useful in helping applicants who cannot meet the management ability eligibility requirement in other ways. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Do not limit debt verification to the credit bureau reports; most of the farm creditors do not report to the credit bureaus.

Response:FSA understands that many farm creditors and local suppliers do not report to the credit bureaus. FSA considers the self-certification of debt on the application to be an acceptable risk that will contribute to streamlining efforts. Since applicants will still need to demonstrate credit-worthiness as specified in 7 CFR 764.101(d), among other OL eligibility criteria, any risks in this area are expected to be low. If deemed necessary by the loan official, additional information may be requested from the applicant; however, this should be in exceptional cases in order to keep ML a truly streamlined process. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:The non-itemized cash flow will lower the level of business analysis and supportive documentation that would be required. FSA should require a minimum of 3 years of tax returns plus other information completed in greater detail. The non-itemized cash flow with less experienced operators is a set up for failure in any business venture.

Response:FSA disagrees and will not be requiring an itemized cash flow or increased documentation for ML applicants, as the intent of ML is to keep the process proportional to the smaller loan amounts and to the small, simpler operations expected to seek this financing. For applicants new to FSA who may produce non-traditional crops or with production practices where yield per acre may be less important, other factors, such as the production capacity, the consistency of income and expenses, and the timely harvest and selling of produce, may be more appropriate measurements to use in establishing actual productivity and projected plans. In addition, FSA predicts that many ML borrowers will be existing OL borrowers that already borrow at the $35,000 threshold and below. In these cases, FSA will have information on file for many of these applicants through the normal course of business in past years (year end analysis (YEA), Farm Assessments, etc.). Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:New operations applying for ML should not be required to have yields or yield history.

Response:The proposed rule already allowed for circumstances where yield history or reporting is impractical, not relevant to the proposal submitted, or is not available. Some applicants meeting the managerial eligibility requirements will not have operated a farm in the previous year, and therefore will not be required to have yield history. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Any applicant having caused FSA a loss should be considered ineligible for ML. The documentation needed for the application would be beyond the intent for the simplified ML process; they should have to provide all of the documentation for an OL. The applicant would have the option to apply for OL through the regular process as specified in 7 CFR 764.252(c).

Response:MLs are direct program loans, and the general eligibility requirements for direct loans already state that an applicant who caused the Agency a loss by receiving debt forgiveness (defined in 7 CFR 761.2) may be ineligible (7 CFR 764.101(d)(2)).

Comment:MLs should not be secured by collateral worth only 100 percent of the loan amount; it should still be able to be secured with up to 150 percent, when available. The proposed change differs from the current regulation in § 764.104(c), which requires collateral worth up to 150 percent of the loan amount, if available, to secure the loan. Why decrease security requirements for MLs when these loans are riskier than regular OL loans or loans made to established producers? Additionally, the crops financed for direct sales involve added risk to loan security; it would be impractical for FSA to enforce a Uniform Commercial Code (UCC) filing on these commodities and, therefore, FSA would have no control over the produce sales income.

Response:FSA's intent for ML is to provide flexibility for financing and to prevent possible barriers to meeting loan security requirements: Specifically, requiring additional security to finance unfamiliar crops and production. As a clarification, for FSA's existing OL Program, all agricultural commodities, whether salad greens or corn, are considered eligible production for a family farm and are regularly financed by FSA with UCC filings. So long as the agricultural commodities are determined to have a security value of 100 percent of the amount loaned for annual operating and family living expenses these commodities can be used to secure the loan. FSA agrees that for MLs security of 100 percent should always be required, but the requirement for additional security up to 150 percent, when available, should be limited to MLs for annual operating purposes. FSA also believes that additional security from 100 percent to 150 percent should be limited to farm assets, and is not to include the personal residence. Therefore, FSA is revising § 764.255(c)(1), (2), (3), and (4) to limit collateral to farm property having a security value of at least 100 percent for MLs and up to 150 percent, if available, for MLs made for annual operating purposes. This adjusts the security requirements for crops and equipment separately to meet a balance between adequate collateral margin, the type of security, and security requirements that take into consideration the assets and collateral of the non-traditional, and new farm operations that FSA expects will be seeking ML funding.

Comment:The costs to legally obtain the collateral in cases where loans fail would be onerous and exceed the value FSA would recover.

Response:FSA agrees that in some cases, the costs to obtain the collateral could be onerous and exceed the value FSA would recover. FSA is required to service its loans, but can make the decision on how best to service delinquent loans on a case-by-case basis. This flexibility can limit the amount of loss to FSA. Treasury offsets are also applied to delinquent borrower accounts to recover amounts due. So, even when the loan balance exceeds the liquidated security FSA anticipates it will recover additional amounts through offsets. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Sound underwriting standards would require a second or junior mortgage placed on the property to cover the first mortgage.

Response:FSA is making some adjustments to the security requirements for annual MLs, requiring chattel collateral up to 150 percent when available, excluding personal residences. Therefore, FSA is revising § 764.255(c)(1), (2), and (4) to limit collateral to farm property having security value of at least 100 percent, and up to 150 percent, if available, for MLs made for annual operating purposes.

Comment:Allow a cosigner on the security requirement.

Response:FSA presently accepts a pledge of security from a third party or a cosigner under general security requirements. This option would also apply to MLs. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Do not remove the Lo-Doc OL application process; Lo-Docs still serve a purpose, particularly those that are above the ML maximum of $35,000.

Response:To continue providing streamlined financing for annual OL needs up to $300,000, FSA is implementing internal processing changes, which do not require changes to the regulations, for an OL application process for returning customers with no changes in their operation since their original loan application. This new process for a subsequent OL, along with ML, is expected to improve the overall application process for all levels of OLs; the Lo-Doc would then become obsolete once these proposed changes are implemented. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:The $35,000 maximum loan limit for ML should be a different amount. It should be $25,000 or lower to limit risk. FSA should assess any losses after a period of years, and then consider increasing the maximum. Alternately, the maximum amount should be greater than $35,000, with a limit up to $50,000.

Response:ML will initially have a $35,000 maximum amount. FSA's preliminary analysis predicts this amount will be sufficient to provide financing needs to a substantial group of operators, but still low enough to be a manageable risk. FSA will review the success of the program and will reevaluate the loan amounts periodically, and if any change is needed, it will be made through rulemaking. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:ML should be limited to individuals and husband and wife joint ventures only since this program is intended for more simplistic operations. The additional documentation required for entities does not lend itself to this type of simplified application.

Response:FSA disagrees. This suggestion would cause some entities to be excluded from the ML process that might otherwise benefit from the changes intended for small operations. In addition, one of the requirements of the Regulatory Flexibility Act (5 U.S.C. 603) is to consider alternatives to minimize any significant economic impact of the rule on small entities. Arbitrarily limiting applicants to certain entity compositions could be considered disparate treatment. Furthermore, initial analysis and applicant estimates for the program show that only a small number of ML applicants would be entity applicants. The ML process is intended to tie the dollar amount of risk involved to the level of paperwork and documentation needed, rather than the type of organization. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:ML should be limited to 4 of the 11 possible uses under the OL Program to avoid bringing more complex issues that would not fit a simplified loan application.

Response:FSA disagrees. The ML process is intended to tie the dollar amount and risk involved to the level of paperwork and documentation needed, rather than the use of the loan money. It would be disparate treatment, and unsound business practice, to tie paperwork requirements to the uses of loan funds. Limiting uses of funds to only a few of the normal OL loan uses would punish those who request small loans, and it would be potentially confusing. MLs were designed to be less complicated. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:There should be a limitation on use of balloon payments and terms to those that can be repaid within 7 years. The documentation needed to justify the longer terms requires additional paperwork by both the applicant and Farm Loan Programs (FLP) staff.

Response:Loan terms for MLs will be the same as FSA's regular OL Program, which does limit term loans to a 7-year term. All MLs will be serviced the same as regular OLs. FSA also realizes that the profitability of an operation is not directly tied to the amount of operating funds it borrows and therefore believes that many smaller operations whose loan needs can be accommodated through the new ML process can be quite successful and business savvy enough to easily handle any balloon payment. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:FSA should not require an ML applicant to submit additional information even if specifically needed to make a determination on the loan application. Asking for additional information may sound favorable to FSA; but it may make the process less palatable to the applicant after submitting what is believed to be a complete application.

Response:FSA will not be making this change, as there are situations, such as requesting a divorce decree document in order to determine whose signature is needed to secure a loan, in which additional information will be necessary. FSA believes that there is a responsibility to undertake adequate due diligence to protect loan funds. The intent of the ML process is that requiring additional information will be the exception, in keeping with a truly streamlined process for applicants. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:FSA should partner with agricultural groups to provide training and mentoring for ML applicants to include beginning farmers, sustainable agriculture, and specialty non-traditional operations.

Response:FSA does partner with agricultural groups to provide training and mentoring, and will do so for ML applicants, and all borrower training requirements will apply as with all other FSA loans. FSA is committed to working through outreach and marketing efforts in local Service Centers and State offices to continue to seek additional opportunities for applicants and borrowers to receive appropriate, accessible training and continuing education as they start and build their farm operations. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Outreach for MLs is important to Socially Disadvantaged Applicants (SDA), applicants with limited English proficiency, and various ethnic minority communities. Will MLs target funds for Beginning Farmer (BF) and SDA applicants?

Response:FSA has a strong commitment to Farm Loan Programs outreach and marketing at the Service Center and State Office levels, and anticipates strong demand for ML from SDAs. MLs are part of the OL Program and will be included in the outreach. Loan officials can locate interpreters on an as-needed basis if there is a language barrier with applicants. Loan applications and funding for SDA and BF customers are targeted, tracked, and monitored to ensure that these producers are reached within the communities FSA serves. ML will have the same BF and SDA loan funding goals as does the existing OL Program. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:For ML to effectively assist the non-traditional farmers with this streamlined process, staff will need to be trained at the local and State levels.

Response:Local offices will be provided training when the program is introduced, and further training will be provided on a periodic basis. Training on the new process, and the expected types of operations seeking MLs will be provided for a successful roll-out and implementation of this program. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Prioritize data and data collection to build information on nontraditional types of local markets.

Response:FSA State offices compile the prices and yields of agricultural commodities, and make them available to the Service Center staff for loan underwriting and projecting purposes. For States and regions that currently have more exposure to more non-traditional and direct sales types of operations, additional data has been added on a year by year basis depending on the consistency and availability of market and yield data. Additional guidance on organic and less traditional crops is also being provided and will be in handbook amendments. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:FSA should build in metrics to evaluate, monitor, track, and measure MLs separate from OLs.

Response:FSA is implementing the necessary changes in our system, so that the MLs can be isolated and evaluated. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:The ML application should be made available online with an improved application interface.

Response:Applications and forms are available online for printing; some forms are fillable and can be submitted electronically. FSA agrees that an online application process would be an efficient alternative to the present OL application process, but a regulatory change is not necessary to accomplish this. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:ML would be enhanced if payments could begin 3 years after establishing crops with longer production cycles versus requiring installments due prior to crop maturity.

Response:The suggested change is not necessary. In some circumstances FSA already allows OL (which include MLs) principal and interest payments to be adjusted, and deferred until the crop establishes and produces, including, for example, woody plants, vineyard plantings, asparagus, and cranberries. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Will ML be subject to the direct OL term limits?

Response:ML is a part of the direct OL Program and will be subject to the OL term limits set by law (see 7 U.S.C. 1941). Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Will the Limited Resource (LR) rates be used for ML?

Response:ML is a part of the direct OL Program, and LR rates can be used as appropriate as specified in 7 CFR 764.254. In this current low interest rate environment, the LR rate of 5 percent is above the regular OL rate. When the regular OL interest rate is above 5 percent, it will be appropriate to consider the impact of LR rates on the borrower's cash flow. Therefore, no change is necessary.

Comment:Allow borrowers to make payments when they sell their products.

Response:A change is not necessary because existing regulations already allow FSA borrowers to pay on their loans if receiving sales income throughout the year and prior to the annual due date. There are no prepayment penalties for any FSA direct loans. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:What is the projected annual number of new borrowers, and existing borrowers expected to receive ML funds?

Response:FSA's cost benefit analysis looked at the segment of existing direct OL customers borrowing $35,000 or less and estimates that with ML maximum rate of $35,000 there would be, at most, 3,340 existing borrowers in this group. The analysis provides the best possible information for borrower projections. No regulatory change is necessary.

Comment:FSA should wait for the next Farm Bill. What is FSA's authority for ML regulation?

Response:ML is a subset of OL. Therefore, all the requirements and provisions in 7 U.S.C. 1941 for OL apply to MLs. FSA believes that many of these changes provided through ML, which were overwhelmingly supported by the commenters, will be welcomed by FSA customers. There has been much anticipation for an OL process that is more proportional to the loan amount, and the smaller operations have been seeking this financing. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:This program, like other FLP loans, only applies to people with bad credit, what about people with good credit?

Response:Applicants must show creditworthiness to be eligible for a direct loan. While it is true that an applicant must be unable to obtain credit elsewhere, circumstances surrounding an applicant's inability to obtain credit may not be related to bad credit issues. Some lenders will not lend for certain agricultural loan purposes, for loan amounts or equity amounts below a minimum threshold, or for any agricultural purpose. Weather-related or economic-related conditions beyond the applicant's control may also prove to be a temporary setback for some operations. Statistically, small operations are more susceptible to these situations. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:Technical assistance or guidance from FSA to ML applicants should be required. What resources are available to provide this assistance?

Response:FSA officials will provide technical assistance to direct loan applicants, if needed, to complete FSA forms and gather information necessary for a complete application. This assistance to applicants includes explaining the application process; identifying sources of information, informing applicants of other technical assistance providers who may be of assistance at minimal or no charge (such as Cooperative Extension Service, USDA outreach grants, Service Corp of Retired Executives), and advising applicants of alternatives to help overcome barriers to being determined eligible for FSA assistance. Other resources are available on a regional basis and FSA State Offices and local Service Centers often provide additional information not available on a national basis. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:How will the definition of “family farm” relate to small agricultural production; for example, small family farms versus hobby farms? Will there be restrictions on farm size or gross income minimums?

Response:FSA is not changing the “family farm” definition with this rule; any definition is unlikely to anticipate and address every possible production financing request. Requests to finance unusual farm production will continue to be handled on a case-by-case basis. FSA will develop additional handbook guidance, and provide initial and ongoing training as needed to field staff that will highlight and review ML financing of small farm operations. The current “family farm” definition in 7 CFR 764.101(k) does not specify minimum farm size restrictions, or minimum gross income, and FSA does not believe that it is necessary to be more specific for MLs. Therefore, FSA is not making any change beyond the proposed rule changes.

Comment:When will ML be implemented?

Response:This final rule implements the changes required to start ML.

Other comments and recommended changes were out of scope or related to statutory requirements of the loanprograms other than MLs. Some of the comments falling under the category of statutory requirements or otherwise out of scope for the proposed ML concerned guaranteed ML lending, intermediary (or partnering) lending, elimination of OL term limits; and comments general to FLP and not specific to ML.

According to 5 U.S.C. 553(d), a rule is to be published in theFederal Register30 days prior to its effective date, unless, among other things, there is good cause found by the agency. (See 5 U.S.C. 553(d)(3).) FSA finds that good cause exists to implement this final rule immediately. At this time of year, a 30-day delay between publication and effective date of the final rule will adversely impact the very applicants it is intended to benefit. For ML to have the greatest impact, it is essential for it to be implemented as early in 2013 as possible. Growers need credit as soon as possible to pay land rent and crop expenses so they can plant their crops on time for optimum production and marketing. Many suppliers offer early season discounts for cash purchases of planting inputs; a 3-5 percent discount on seed, fertilizer, and chemicals will go straight to a grower's bottom line, a vital addition to profit margin. Early availability of MLs will allow FSA to provide credit to these small producers on a timely basis, enhancing their prospects for success. This final rule does not put any additional burdens on the FSA borrower. Instead, the rule makes the loan application less burdensome for applicants for MLs than for applicants for a standard OL. The proposed rule was straightforward and very well received by the public. The rule imposes no complex policies or program requirements that the public would need 30 days to analyze and understand prior to implementation.

Executive Order 12866, “Regulatory Planning and Review,” and Executive Order 13563, “Improving Regulation and Regulatory Review,” direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasized the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility.

The Office of Management and Budget (OMB) designated this rule as not significant under Executive Order 12866 and, therefore, OMB has not reviewed this final rule.

The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by the Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to the notice and comment rulemaking requirements under the Administrative Procedure Act (5 U.S.C. 553) or any other law, unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. FSA has determined that this rule will not have a significant impact on a substantial number of small entities for the reasons explained below. Consequently, FSA has not prepared a regulatory flexibility analysis.

The term small entities include small businesses, small organizations, and small governmental jurisdictions. For the purposes of assessing the impacts of this rule on small entities, a small business is based on the categories in the Small Business Administration's Table of Small Business Size Standards by North American Industry Classification System (NAICS) Category (13 CFR 121.201). All of the entities that would request a Microloan would be small businesses that produce crops and livestock in subsectors 111 and 112 listed in 13 CFR 121.201. These categories cover all primary agricultural production. Under the SBA Small Business Size Standard for these two NAICS subsector categories, the majority of businesses are considered small when they receive less than $750,000 in annual receipts; the threshold is higher for two subcategories of animal production. (See 13 CFR 121.201, subsectors 112112 and 112310.) This standard does not exclude any of the potential farm loan borrowers who will make use of the modifications to the OL Program. Nevertheless, even though the applicants under ML are considered small entities, there would not be a substantial number affected by the rule.

Overall, this rule creates a new application process and greater options for eligibility and security for small loans within the existing OL Program, so, theoretically, some of the loans could be made under the existing program. Therefore, small entities in two credit segments have to be considered for this analysis. One segment is the number of existing borrowers who might take advantage of the modifications in eligibility for future loans. The other segment is the number of new borrowers who might never have applied for an FSA operating loan without the modifications. The number of existing borrowers who might make use of the application, eligibility, and security modifications for future loans can be estimated using fiscal year 2011 direct operating loan data. Given that the maximum borrowing limit is $35,000 as set forth in the rule, it is estimated there would be at most 3,340 borrowers with $102.7 million in loans in this segment. However, since this estimate consists of existing borrowers with the same credit needs, this segment will have no additional economic impact. Only the demand by additional borrowers will have an incremental economic impact. This demand is more difficult to estimate. Preliminary estimates assume the new borrowers will be younger, below the age of 35, and have relatively low annual sales, less than $10,000 annually. Using data from the 2007 Census of Agriculture, this segment of producers consists of about 14,434 primary operators. Historically, FSA direct operating loans have captured only 2 percent of the agricultural credit market; so fewer than 300 borrowers will probably be added. Therefore, about 4,000 entities could be affected by this rule with an economic impact of only about $10.5 million (300 new borrowers times $35,000 in loans per borrower).

Furthermore, the minimal regulatory requirements will affect large and small businesses equally as part of the loan making process, since MLs are distinguished based on the size of the loan, not the size of the operation. ML applicants will have a lower paperwork burden that will be commensurate with the smaller loan amount, due to a reduction in documentation required for these loans. Therefore, in accordance with the Regulatory Flexibility Act, FSA is certifying that there would not be a significant economic impact on a substantial number of small entities. Due to the limited number of entities, the economic effects from any additional lending are unlikely to have a substantial impact on entities of any size.

The environmental impacts of this rule have been considered in a manner consistent with the provisions of the National Environmental Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council on Environmental Quality (40 CFR parts 1500-1508), and the FSA regulations for compliance with NEPA (7 CFR part 799 and 7 CFR part 1940, subpart G). FSAconcluded that simplifying the application process and adding flexibility for both meeting loan eligibility and security requirements to encourage small farm operation participation in its OL Program explained in this rule are administrative in nature and will not have a significant impact on the quality of the human environment either individually or cumulatively. The environmental responsibilities for each prospective applicant will not change from the current process followed for all FLP actions (7 CFR 1940.309). Therefore, FSA will not prepare an environmental impact statement on this rule.

Executive Order 12372, “Intergovernmental Review of Federal Programs,” requires consultation with State and local officials. The objectives of the Executive Order are to foster an intergovernmental partnership and a strengthened Federalism, by relying on State and local processes for State and local government coordination and review of proposed Federal Financial assistance and direct Federal development. For reasons set forth in the Notice to 7 CFR part 3015, subpart V (48 FR 29115, June 24, 1983), the programs and activities within this rule are excluded from the scope of Executive Order 12372.

This rule has been reviewed in accordance with Executive Order 12988, “Civil Justice Reform.” The provisions of this rule will not have preemptive effect with respect to any State or local laws, regulations, or policies that conflict with such provision or which otherwise impede their full implementation. The rule will not have retroactive effect.

This rule has been reviewed under Executive Order 13132, “Federalism.” The policies contained in this rule will not have any substantial direct effect on States, on the relationship between the Federal Government and the States, or on the distribution of power and responsibilities among the various levels of government. Nor would this rule impose substantial direct compliance costs on State and local governments. Therefore, consultation with the States is not required.

This rule has been reviewed for compliance with Executive Order 13175, “Consultation and Coordination with Indian Tribal Governments.” Executive Order 13175 imposes requirements on the development of regulatory policies that have Tribal implications or preempt Tribal laws. The USDA Office of Tribal Relations has concluded that the policies contained in this rule do not, to USDA's knowledge, preempt Tribal law. FSA held a series of tribal consultation sessions early in the rule making process. Representatives from all federally recognized tribes were invited to participate.

During the Tribal consultation, sessions were held to discuss ML, and FLP staff responded to the several comments and questions. The following summarizes the questions and responses discussed during Tribal consultation.

Comment:Will ML be targeting a certain group?

Response:MLs are designed to better serve small family farm operations. In addition, MLs may provide a bridge between Youth Loans and the traditional OL Program, and between the needs of smaller operations as they grow into larger farm operations.

Comment:What is the purpose of ML?

Response:ML will require less information to provide an application process more proportional to smaller loan amounts and operations in the growing segment of family farms engaged in organic farming and direct sales farming practices. Additionally, ML will provide financing at reasonable rates and terms, as some smaller operations often rely on credit cards, and dealer financing to finance their operations because they believe that paperwork requirements are often not worth the benefits.

Comment:Will financing operations raising rice in lakes owned by the Tribes be eligible for ML and other FSA loans?

Response:Operations using lakes managed by the Tribe can be eligible for FSA loans, including ML. FLP also welcomes the opportunity for future conversations to consider regulations that would permit financing operations that raise fish in bodies of water not fully controlled by the Tribe.

Comment:When will ML be implemented?

Response:FLP explained the steps of the rulemaking process, but could not provide an exact date for implementation. This final rule implements the changes required to start ML.

Title II of the Unfunded Mandate Reform Act of 1995 (UMRA, Pub. L. 104-4) requires Federal agencies to assess the effects of their regulatory actions on State, local, or Tribal governments or the private sector. Agencies generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with Federal mandates that may result in expenditures of $100 million or more in any 1 year for State, local, or Tribal governments, in the aggregate, or to the private sector. UMRA generally requires agencies to consider alternatives and adopt the more cost effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for State, local, or Tribal governments, or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of UMRA.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), FSA described the new information collection activities in the request for public comment in the proposed rule. Comments related to the Paperwork Reduction Act are discussed above and are in the supporting document that OMB reviewed. No change to the information collection was required based on the comments. After the final rule is published, the new information collection request will be merged with FSA existing information collection request approved under OMB control number 0560-0237.

FSA 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.

For reasons discussed above, FSA amends 7 CFR chapter VII as follows:

The Washington State Department of Transportation (WSDOT) has requested that the SR 529 Bridges across the Snohomish River remain closed to vessel traffic to facilitate heavy maintenance and equipment upgrades on the bridges. The SR 529 Bridges cross the Snohomish River at mile 3.6 and provide 38 feet of vertical clearance above mean high water elevation while in the closed position. Vessels which do not require a bridge opening may continue to transit beneath the bridges during this closure period. Under normal conditions the SR 529 Bridges crossing the Snohomish River operate in accordance with 33 CFR 117.1059(c) which requires advance notification of 1 hour when a bridge opening is needed. This deviation period is from 8 a.m. on January 21, 2013, through 6 p.m. March 15, 2013. The deviation allows the SR 529 Bridges crossing the Snohomish River to remain in the closed position and need not open for maritime traffic from 8 a.m. on January 21, 2013, through 6 p.m. March 15, 2013. The bridges shall operate in accordance to 33 CFR 117.1059 at all other times. Waterway usage on the Snohomish River includes vessels ranging from commercial tug and barge to small pleasure craft. Mariners will be notified and kept informed of the bridges' operational status via the construction contractor performing the maintenance as well as via the Coast Guard Notice to Mariners publication and Broadcast Notice to Mariners as appropriate. The bridges will not be able to open during this maintenance activity because the lifting mechanisms will be inoperable.

In accordance with 33 CFR 117.35(e), the drawbridges must return to their regular operating schedule immediately at the end of the effective period of this temporary deviation. This deviation from the operating regulations is authorized under 33 CFR 117.35.

The New Jersey Transit, owner and operator of the Shark River Railroad Bridge across the Shark River (South Channel), mile 0.9, at Avon, NJ, has requested a temporary deviation from the current operating regulations set out in 33 CFR 117.751, to accommodate machinery replacement for the Shark River Bridge.

The Shark River Railroad Bridge across the Shark River, mile 0.9, is a bascule lift Bridge, in Avon Township, NJ, and has a vertical clearance in the closed position of 8 feet, above mean high water.

Because the draw of the Shark River Bridge operates in unison with the S71 Bridge, mile 0.8 across Shark River at Avon Township, NJ, the draw of the S71 Bridge will also be restricted under this deviation. The S71 Bridge is also a bascule lift bridge and has a vertical clearance of 13 feet.

The current schedules for both the Shark River Railroad Bascule Bridge operating regulations are set out in 33 CFR 117.751. Under normal operating conditions, the draws of S71 bridge, mile 0.8 and the railroad bridge, mile 0.9, both at Avon, operate as one unit.

To facilitate machinery replacement, the above mentioned drawbridges will be maintained in the closed-to-navigation position from 12:01 a.m. Monday February 25, 2013, to 12:01 a.m. on Wednesday March 6, 2013. The bridges normally open several times a day for transiting vessels. Coordination with the waterway users has been completed.

The Coast Guard will inform all users of the waterway through our Local and Broadcast Notice to Mariners of the closure periods for the bridge so that vessels can arrange their transits to minimize any impacts caused by the temporary deviation. Vessels able to pass under the spans when closed may transit under the drawbridges while they are in the closed position. Mariners are advised to proceed with caution. There are no alternate routes for vessels and the bridge will not be able to open in the event of an emergency.

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

This is a summary of the Commission's Fifth Order on Reconsideration in WC Docket Nos. 10-90, 07-135, 05-337, 03-109; GN Docket No. 09-51; CC Docket Nos. 01-92, 96-45; WT Docket No. 10-208; FCC 12-137, adopted on November 13, 2012 and released on November 16, 2012. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th Street SW., Washington, DC 20554. Or at the following Internet address:http://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0514/FCC-12-52A1.pdf.

1. In this Order, we reconsider and clarify certain aspects of theUSF/ICC Transformation Order,76 FR 73830, November 29, 2011, in response to various petitions for reconsideration and/or clarification. TheUSF/ICC Transformation Orderrepresents a careful balancing of policy goals, equities, and budgetary constraints. This balance was required in order to advance the fundamental goals of universal service and intercarrier compensation reform within a defined budget while simultaneously providing sufficient transitions for stakeholders to adapt.

2. As a preliminary matter regarding our review of a number of the specific issues discussed below, we observe that, under Commission rules, if a petition for reconsideration simply repeats arguments that were previously considered and rejected in the proceeding, it will not likely warrant reconsideration.

3. With this standard in mind, we take several limited actions stemming from reconsideration petitions. Specifically, this Order grants in part petitions related to the financial reporting obligations of eligible telecommunications carriers (ETCs) that are privately-held rate-of-return companies. This Order also provides additional guidance and clarifications regarding the standard and process for requests for waiver of our universal service reforms.

4. In theUSF/ICC Transformation Order,the Commission required all privately-held rate of return carriers to provide a report on their financial condition and operations and provided two options for doing so: (1) File a copy of the carrier's audited financial statement; or (2) file a copy of the Department of Agriculture's Rural Utility Service (RUS) Form 479, a financial reporting requirement for carriers that borrow money from RUS. TheUSF/ICC Transformation Orderrequires this information to be filed with the Commission, the Universal Service Administrative Company (USAC), and the relevant state commission, relevant authority in a U.S. Territory, or Tribal governments, as appropriate. Only one party commented generally on the NPRM proposal to require audited financial statements certified by an independent CPA, and no privately held carrier opposed the proposal at that time.

5. The record on reconsideration indicates, however, that a number of rate-of-return carriers do not currently have audited financial statements. Several petitioners argue that the financial reporting requirement is unduly burdensome. For example, Comporium urges “the Commission to clarify and/or reconsider its decision and revise its rules by determining that companies with multiple study areas under common ownership or control may submit basic financial schedules * * * for regulated operations only, accompanied by an officer affidavit.” Another party requests that we replace the current financial reporting requirement with a requirement that “all privately held rate of return carriers file a form approved by the FCC that is based on the RUS Form 479.” Finally, several petitioners argue that the Commission should allow carriers to file these financial statements confidentially.

6. After reviewing the Petitions for Reconsideration, along with comments filed in the docket, we conclude that some adjustments in the financial reporting rule are appropriate for administrative efficiency and to lessen the potential burden on companies that are not audited in the ordinary course of business. Therefore, we grant in part the reconsideration requests and hereby revise new section 54.313(f)(2) of the Commission's rules.

7.RUS Borrowers.On reconsideration, we require that all privately held rate-of-return carriers that are RUS borrowers to file their RUS Operating Report for Telecommunications Borrowers with the Commission, USAC, and the relevant state commission, relevant authority in a U.S. Territory, or Tribal governments, as appropriate, as part of their annual § 54.313 filing. Requiring these ETCs to submit a copy of an existing RUS Operating Report for Telecommunications Borrowers should impose negligible burden on them, while helping the Commission monitor the impact of its reforms on this group of rate-of-return companies. As one commenter recognizes, one benefit of mandating that RUS borrowers submit information in the RUS format is that it will provide the Commission with readily accessible information in a consistent format. The RUS Operating Report for Telecommunications Borrowers is consolidated across all study areas and includes all operations, both regulated and non-regulated, of the borrowing entity. While the RUS Report itself is not audited, the underlying data are audited, and the borrower's auditor must review the information being reported to RUS. We further require that the ETC must make the underlying audit and related workpapers and financial information available upon request by the Commission, USAC, or the relevant state commission, relevant authority in a U.S. Territory, or Tribal governments, as appropriate.

8.Non-RUS Borrowers That Are Audited.For non-RUS borrowers that are audited in the ordinary course of business, we provide two options. Such carriers may either: (1) File their audited financial statements; or (2) provide their financial information in a form consistent with the RUS Operating Report for Telecommunications Borrowers and accompanied by a management letter from their auditors. For those carriers that already are audited in the ordinary course of business—whether as a condition of a loan from a bank or for other reasons, producing a copy of that audit report to the Commission should impose negligible burden. We agree with those parties that suggest it would be beneficial to the Commission to have all carrier financial reporting information in a consistent format, but also recognize that requiring submission of the information in a form similar to the RUS format would require additional effort for companies that are not RUS borrowers. We therefore provide the option of submitting the information in a format comparable to what is required by RUS for its borrowers, but do not make that mandatory for such filers. We further require that the ETC must make the underlying audit and related workpapers and financial information available upon request by the Commission, USAC, or the relevant state commission, relevant authority in a U.S. Territory, or Tribal government, as appropriate.

9.Carriers That Are Not Audited.With respect to privately held rate-of-return companies that are not audited in the ordinary course of business, we balance the relative costs and benefits of requiring carriers to comply with a financial reporting requirement that requires submission of an audited financial statement. We conclude on reconsideration that our core objectives can be met, while lessening regulatory burden, by revising new section 54.313(f)(2) to provide two options for privately held rate-of-return carriers that are not audited in the ordinary course of business: (1) File a financial statement that has been subject to review by a CPA or (2) file financial information in a format consistent with the RUS form. In the latter instance, the underlying information must be subject to a CPA review, with that review and related workpapers and financial information to be made available upon request by the Commission, USAC, or the relevant state commission, relevant authority in a U.S. Territory, or Tribal government, as appropriate. For either of these two options, the filing must be accompanied by an officer certification that: (1) The carrier is not audited in the ordinary course of business; and (2) the reported data are accurate.

10. We conclude that requiring the underlying financial information to be subject to a CPA review, rather than a CPA audit, provides sufficient assurance that we will obtain a reasonable understanding of the affected companies' financial picture. A financial review requires the auditor to make inquiries of management and perform analytical procedures to determine whether the financial statements conform with generally accepted accounting principles. An audit requires the auditor additionally to obtain an understanding of the internal controls environment for the company, which requires the development of certain documentation, such as internal controls procedures, that would not have been prepared but for the audit. Typically an audit will perform more in-depth testing of individual transactions posted to the general ledger. Both an audit and a review require the auditor to determine, however, whether the financial statements prepared by management are consistent with generally accepted accounting principles.

11. Because a review does not require the auditor to develop a detailed understanding of the internal controls environment, a CPA review generally is less costly than a full audit. Requiring a CPA review of the underlying information and an officer certification regarding the accuracy of the reported data still provides the accountability of an independent review, while minimizing the economic impact on these generally small carriers associated with an audit. In contrast, we are not persuaded by Comporium's proposal to allow privately-held rate-of-return carriers to provide the Commission with a financial report that has not been subject to any form of independent scrutiny by a CPA. We recognize that some state commissions allow carriers to file self-prepared financial reports only accompanied by an officer certification. Given our responsibility as stewards of the USF, however, we conclude that requiring a CPA review—which requires the CPA to determine whether any material modifications are required in order for the financial statements to be in conformity withgenerally accepted accounting principles—is necessary to fulfill our core objective of ensuring financial accountability by USF recipients. Based on the record on reconsideration, we therefore conclude that a review will be sufficient to meet our objectives of providing the Commission with an accurate picture of the financial condition of these privately held rate-of-return carriers, without imposing undue burdens on carriers whose financial statements are not already audited.

12.Fiscal Year 2011 Financial Statements.Once PRA approval is received for § 54.313(f)(2) as adopted in this Order, we require any privately held rate-of-return carrier to file with the Commission, USAC, the relevant state commission, relevant authority in a U.S. Territory, or Tribal government, as appropriate, pursuant to this rule within a reasonable time, as follows:

• If a carrier receives RUS loans, that carrier must file its 2011 RUS Operating Report for Telecommunications Borrowers.

• If a carrier does not receive RUS loans, but its financial statements for 2011 have been audited, that carrier must file a copy of the audited 2011 financial statement, or a financial report in a format comparable to RUS Operating Report for Telecommunications Borrowers accompanied by a copy of a management letter issued by the independent certified public accountant that performed the company's financial audit, with the Commission, USAC, the relevant state commission, relevant authority in a U.S. Territory, or Tribal government, as appropriate.

• If a carrier does not receive RUS loans, but its financial statements for 2011 have been subject to review by an independent certified public accountant, that carrier must file a copy of their reviewed 2011 financial statement, or a financial report in a format comparable to RUS Operating Report for Telecommunications Borrowers with the underlying information subjected to a review by an independent certified public accountant and accompanied by an officer certification the carrier was not audited in the ordinary course of business for the preceding fiscal year and that the reported data are accurate.

13. We find that there is not a significant additional burden for ETCs to file such information because these financial statements already exist. We determine that receiving some 2011 financial statements will assist the Commission and states with verifying whether these carriers are efficiently and appropriately using high-cost support for its intended purposes. Finally, we expectallprivately held rate-of-return carriers to file on July 1, 2013, pursuant to this rule and subject to PRA approval, Fiscal Year 2012 financial statements.

14.Submission of Consolidated Information.We clarify that privately held rate-of-return carriers are not required to submit the financial information on a study area basis. As pointed out in the record on reconsideration, audits of RUS borrowers are not done on a study area basis, and the RUS Operating Report for Telecommunications Borrowers is submitted by the borrowing entity, which could encompass multiple study areas. Several petitioners note that many companies with multiple study areas under common ownership or control prepare a consolidated audit report, which minimizes audit expenses. The Commission has already concluded that holding company level information for RUS borrowers is acceptable, when it concluded that such borrowers could submit the RUS Operating Report for Telecommunications Borrowers to meet the financial reporting requirement. Nothing in the codified rule requires that financial reporting be done on a study area basis. In fact, imposing a requirement that privately held rate-of-return carriers must be audited on a study-area basis would have an unreasonably disparate impact on the respective burdens associated with this reporting requirement for those privately held carriers that are non-RUS borrowers compared to RUS borrowers. We clarify that the language in paragraph 599 of the Order that directs non-RUS borrowers to submit “financial information as kept in accordance with Part 32” was not intended to require financial reporting by study area, but rather was focusing on the fact that companies are already required to maintain financial information by study area pursuant to existing Commission requirements. In response to the petitions for reconsideration and/or clarification, we clarify that the Commission did not intend to require financial information broken out by study areas for non-RUS borrowers, and such companies under common ownership or control may file financial reports on a consolidated basis.

15.Requirement That Financial Disclosures Be Publicly Available.In theUSF/ICC Transformation Order,we stated that the financial reporting information required to be filed by ETCS would be made publicly available. Some petitioners encourage the Commission to revisit that requirement. Upon reconsideration, we conclude that in some instances there could be a potential for competitors to use the submitted financial data of private rural rate-of-return carriers in an anti-competitive manner, and therefore, as several commenters suggested, we will allow privately held ETCs to file the financial data pursuant to § 54.313(f)(2) of the Commission's rules subject to a Protective Order.

16. As we stated in theUSF/ICC Transformation Order,recipients of high-cost and/or Connect Americasupportreceive extensive public funding, and therefore the public has a legitimate interest in being able to verify the efficient use of those funds. Moreover, as we stated, by making this financial information public, the Commission will be assisted in its oversight duties by public interest watchdogs, consumer advocates, and others who seek to ensure that recipients of support receive funding that is sufficient, but not excessive. On the other hand, we agree that, for example, small ETCs serving only one study area could face competitive harm if their financial data are made available to an overlapping or neighboring competitor. Where an ETC serving a large geographic area across multiple states files a consolidated financial statement, it is not possible to determine the revenues and, thus, profits associated with a particular study area. However, where a small ETC serves only one study area, all reported revenues and profits are attributable to that one study area, thus making it easier for competitors to craft business plans that capitalize on their knowledge of the small ETC's reported finances.

17. We conclude that the public interest would best be served by making the private financial data being requested from privately-held rate of return carriers available only subject to the provisions of the Protective Order, and we delegate authority to the Wireline Competition Bureau to adopt such an order consistent with this decision. In particular, as specified in more detail in the Protective Order, we restrict availability of this material as follows: (1) In the case of commercial entities having a competitive or business relationship with the company whose confidential information it seeks, to In-House Counsel not involved in competitive decision-making, and to their Outside Counsel of Record, their Outside Consultants and experts whom they retain to assist them in this and related proceedings, and employees of such Outside Counsel and Outside Consultants; (2) to employees and representatives of commercial entities having no competitive or businessrelationship with the company whose confidential information it seeks; and (3) to employees and representatives of non-commercial entities having no competitive or business relationship with the company whose confidential information it seeks. In sum, we recognize the need to balance the public's legitimate interest in being able to verify the efficient use of universal service high-cost support with the potential competitive harm of such financial data being publicly available. We conclude that adopting such procedures in a Protective Order will give appropriate access to the interested members of the public while protecting especially competitively sensitive information from improper disclosure, and that disclosure pursuant to the Protective Order thereby serves the public interest.

18. The National Exchange Carrier Association, Inc., the Organization for the Promotion and Advancement of Small Telecommunications Companies, and the Western Telecommunications Alliance (Rural Associations) seek reconsideration of the USF waiver standard articulated in theUSF/ICC Transformation Orderand ask that the Commission “discard the various hurdles specified in the Order and instead simply apply the `good cause' standard applicable to waiver requests generally under § 1.3 of the rules.” The Rural Associations request that a carrier continue to receive support pursuant to the prior, no-longer-in-effect rules while the carrier's petition for waiver of any new rule is pending. They also argue that the Commission should make the waiver process “less burdensome” and “more equitable and attainable” for small companies. In particular, the Rural Associations ask that the Commission: (i) Waive the filing fee applicable to USF-related waivers; (ii) exclude costs incurred in preparing a waiver request from corporate operations expenses counted toward the caps; (iii) permit carriers to submit information from intrastate earnings reviews and rate cases or Universal Service Administrative Company (USAC) audits in lieu of the financial information the Commission identified in theUSF/ICC Transformation Order;(iv) require carriers to only submit information that relates to the use of supported plant; (v) not require carriers to provide geographic data or data about end user rate plans to the extent the Commission already has such information in its possession; (vi) clarify that standard protective order procedures are available for waiver requests; (vii) clarify that carriers are not required to provide additional information about unused or spare capacity as long as they comply with Parts 32 and 36 of the Commission's rules; and (viii) not require carriers to provide additional information about corporate operations expenses except in cases where a carrier seeks a waiver specifically of the corporate operations expense cap.

19. We note that the Commission's intent in discussing waivers relating to reductions in USF support was not to replace the ordinary standard for granting waivers under § 1.3 of the Commission's rules, but rather to provide guidance in advance to potential applicants of the circumstances that would be persuasive and compelling grounds for grant of a waiver under that waiver standard to assist potential applicants in effectively formulating their waiver petitions. While we decline to “discard” this guidance, we modify it in several respects, and clarify it in others, based on specific concerns raised by petitioners.

20. In theUSF/ICC Transformation Order,the Commission stated that “[w]e envision granting relief only in those circumstances in which the petitioner can demonstrate that the reduction in existing high-cost support would put consumers at risk of losing voice services, with no alternative terrestrial providers available to provide voice telephony service using the same or other technologies that provide the functionalities required for supported voice service.” This language in the Order reflected the Commission's longstanding historical commitment to ensuring ubiquitous voice availability and a recognition that the supported service today remains voice telephony. At the same time, we recognize that for the first time, the Commission has now established as explicit goals the preservation and advancement of voice service and ensuring universal availability of voice and broadband, both fixed and mobile, at reasonably comparable rates to reasonably comparable services available in urban areas, while minimizing universal service contribution burdens on consumers and businesses. Accordingly, we now clarify that the Commission will consider the impact of reforms not only on voice service alone, but also on continued operation of a broadband-capable network and the effect on consumer rates.

21. Specifically, we envision granting relief to incumbent telephone companies only in those circumstances in which the petitioner can demonstrate that consumers served by such carriers face a significant risk of losing access to a broadband-capable network that provides both voice as well as broadband today, at reasonably comparable rates, in areas where there are no alternative providers of voice or broadband. To the extent carriers have already made the investment in such broadband-capable networks, reductions in support that would threaten their ability to continue to maintain and operate those existing networks offering service at reasonably comparable rates in areas where consumers have no alternatives would be a public policy concern. A waiver petition claiming that support reductions are substantial, by itself, would be insufficient. The petition must also establish that consumers will suffer loss of services with no alternativeorthat consumers in the relevant study area wouldnotbe paying reasonably comparable rates to urban consumers. We emphasize that support reductions do not necessarily translate into equivalent rate increases for consumers. Rather, we expect that carriers would look for ways to reduce costs and increase revenues—in addition to ensuring that consumer rates are reasonably comparable—in considering whether to pursue a petition for waiver.

22. In determining whether to provide full or partial relief to a waiver applicant, we also are mindful of the Commission's longstanding commitment to providing support that is “sufficient but not excessive.” An important component of the Commission's review of whether a carrier needs additional support is having an accurate picture of the financial operations of the waiver applicant. Information such as financial statements for the past three fiscal years and any outstanding loans should be readily available to any carrier. Such information is the sort of information that any company would maintain to manage its business, and would be part of any financial showing that a company would submit as part of any loan application process. Incumbent carriers are already required by Commission rules to comply with the Uniform System of Accounts specified in part 32, the affiliate transaction rules specified in § 32.27, and the cost allocation rules specified in §§ 64.901 through 64.902, so providing information regarding compliance with those rules should not be burdensome for any such carrier. Information regarding end user rates and the services provided to subscribers likewise should be readily available to any service provider. In keeping withthe focus on providing support that is sufficient but not excessive, Commission staff have asked for additional information from waiver applicants, such as annual compensation provided to the ten most highly paid employees, and the size and nature of payments made to affiliated companies. Again, this information should be readily available, and potential waiver applicants can expedite review of their requests by including such information when initially filing their waiver petitions. Such information can be relevant to a determination of whether there are opportunities for reductions in operating expenses that would lessen the burden on the Fund, and also to assessing whether carriers are complying with our affiliate transaction rules.

23. We decline the request that carriers should receive support under the Commission's previous rules until their waiver petitions are resolved. To the extent immediate or interim relief is necessary while a waiver petition is evaluated, such relief can be provided on a case-by-case basis, and such relief has been provided in one instance to date. But we do not typically permit carriers to excuse themselves from complying with our rules, even on a temporary basis, simply by filing a request for waiver, and we are not persuaded that such a blanket policy is warranted in this context when case-by-case relief may be available.

24.Filing Fee and Confidentiality.We also address the Rural Associations' specific suggestions regarding the Commission's fee for filing a waiver petition and the confidential treatment of the waiver process. As an initial matter, we issue a blanket waiver of the filing fee for carriers seeking a waiver of the high-cost loop support (HCLS) benchmark rule contained in § 36.621(a)(5) of our rules. We observe that § 1.1105 does not currently require a filing fee in connection with petitions for waiver of rules contained in part 54 of the Commission's rules. By codifying the benchmark rule in part 36 rather than part 54, the Commission inadvertently subjected applicants seeking a waiver of the benchmark rule to the part 36 filing fee, even though parties seeking a waiver of other universal service reforms, such as the $250 per line cap, are not subject to any filing fee. We conclude that this disparity in treatment does not serve the public interest, and we address the situation by issuing a blanket waiver of the fee for parties seeking a waiver of § 36.621(a)(5). We also clarify, as the Rural Associations request, that carriers filing waiver requests may seek confidential treatment pursuant to the Commission's existing rules.

25.Submission of Geographic Information.Based on our review of the waiver applications received to date, and consistent with the Rural Associations' request, we reconsider the language in theUSF/ICC Transformation Orderregarding submission of information regarding the geographic and other characteristics of the areas that contribute to its high costs. Paragraph 542 of theOrderstated that petitions should include, among other things, the following information: “Density characteristics of the study area or other relevant geographic area including total square miles, subscribers per square mile, road miles, subscribers per road mile, mountains, bodies of water, lack of roads, remoteness, challenges and costs associated with transporting fuel, lack of scalability per community, satellite and backhaul availability, extreme weather conditions, challenging topography, short construction season or any other characteristics that contribute to the area's high costs.”

26. On reconsideration, we conclude that this language in paragraph 542 should be viewed as illustrative examples of factors that could be relevant in the waiver analysis, to assist applicants in crafting well formulated waiver petitions in support of their requested relief. To the extent applicants choose to address such factors in their waiver petitions, we presume they would be providing information that is readily available, not requiring any additional expenditures or the devotion of substantial staff resources to compile.

27.Submission of Information Regarding Spare or Unused Equipment.On reconsideration, we also modify the language in paragraph 542 requesting information regarding spare or unused equipment. Paragraph 542 of the Order stated that petitions should include information regarding accounting for spare or unused equipment. We observe that waiver applicants to date have included a cursory recitation their waiver requests that they account for such equipment in accordance with the Commission's rules. On reconsideration, we conclude that it is not necessary for carriers to reaffirm that they are in compliance with existing accounting rules. To the extent there are questions about such issues, however, the Bureau still may request such information. At this time, we cannot conclude that additional information relating to unused or spare equipment would be unnecessary in all instances.

28.Submission of Audits and Information from State Rate Cases.We are not persuaded that waiver applicants should be permitted to file USAC audits in lieu of their financial statements. Compliance with the Commission's high-cost rules prior to theUSF/ICC Transformation Orderis not likely to be dispositive of whether there is an ongoing need for more support than the current rules would allow. As previously discussed, financial information is needed to ensure that support is sufficient, but not excessive, in granting additional support through the waiver process. A USAC audit does not provide such information and, therefore, is not an adequate substitute for a carrier's financial statements.

29. In contrast, information developed in intrastate earnings and rate cases is more likely to be of assistance when reviewing requests for waiver of support reductions, and could serve as a substitute for the submission of financial statements in some cases, depending on the specifics of the prior rate case or earnings review. We encourage carriers that would like to rely on such information, rather than financial statements, to bring it to staff's attention when preparing their waiver requests. We generally encourage staff to provide, and for potential waiver applicants to seek, guidance on the contents of a waiver request, and with respect to financial reviews by state commissions, we specifically encourage applicants to seek staff's input on the substitutability of such information for the company's financial statements.

30.Information About Corporate Operations Expenses.We decline to adopt the suggestion that carriers not provide information about their corporate operations expenses unless they are seeking a waiver specifically related to the corporate operations expense cap. As discussed above, a full understanding of a carrier's financial circumstances is necessary when considering a waiver seeking additional support in order to ensure that support overall is sufficient but not excessive. Corporate operations expenses, including expenses such as executive salaries, are relevant to the determination of overall support levels in the face of a claim that existing rules provide inadequate support.

31.Request to Exempt Costs of Waivers from Calculation of Caps.The record lacks sufficient detail for us to evaluate how we would exempt costs incurred in preparing a waiver request from the calculation of corporate operations expenses that would count toward any caps. Accordingly, wedecline to allow such exemption at this time.

32.Grounds for Waiver.Finally, we also clarify that we will generally not require a thorough financial review of carriers that seek a limited waiver of our rules, such as a temporary waiver of a deadline for meeting our reporting requirements or a waiver seeking to provide broadband that does not meet our upstream requirements (i.e.,768 kbps upstream instead of 1 Mbps upstream). In such cases, we would expect a waiver application would explain why waiver is warranted under § 1.3 of the Commission's rules. Likewise, to the extent a carrier seeks a waiver of the HCLS benchmark rule based on a showing that there is a factual error with respect to one or more input values that results in an inaccurate calculation of the cap value, we would not need to conduct a full review of that carrier's finances. Rather, we would undertake a thorough financial review in those circumstances where the waiver applicant is not seeking to correct an error, but is contending that absent waiver, support levels would be insufficient for the carrier to achieve the purposes of section 254.

33. This Fifth Order on Reconsideration contains new information collection requirements subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It has been or will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the new information collection requirements contained in this proceeding.

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

35. We hereby certify that the rule revisions in this Fifth Order on Reconsideration will not have a significant economic impact on a substantial number of small entities. This Order modifies certain of our reporting requirements. We conclude that these minor revisions, though they may possibly have some impact on some carriers, are not likely to have a significant economic impact on a substantial number of small entities. The Commission will send a copy of this Order, including this certification, to the Chief Counsel for Advocacy of the Small Business Administration. In addition, the Order (or a summary thereof) and certification will be published in theFederal Register.

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

37. Accordingly,it is ordered,pursuant to the authority contained in sections 1, 2, 4(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, and 403 of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 152, 154(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403, 1302, and §§ 1.1 and 1.429 of the Commission's rules, 47 CFR 1.1, 1.429, that this Fifth Order on Reconsiderationis adopted,effective February 19, 2013, except for those rules and requirements involving Paperwork Reduction Act burdens, which shall become effective immediately upon announcement in theFederal Registerof OMB approval.

38.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.331 and 1.429 of the Commission's rules, 47 CFR 0.331 and 1.429, that the Petition for Partial Reconsideration filed by the Blooston Rural Carriers on December 29, 2011is denied.

39.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.331 and 1.429 of the Commission's rules, 47 CFR 0.331 and 1.429, that the Petition for Reconsideration filed by NTCH, Inc. on December 29, 2011is denied in partto the extent described herein.

40.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and sections 0.331 and 1.429 of the Commission's rules, 47 CFR 0.331 and 47 CFR 1.429, that the Petition for Reconsideration filed by General Communications, Inc. on December 23, 2011is denied in partto the extent described herein.

41.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.331 and 1.429 of the Commission's rules, 47 CFR 0.331 and 1.429, that the Petition for Clarification or Partial Reconsideration filed by Townes Telecommunications, Inc. on December 29, 2011is denied.

42.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.291 and 1.429 of the Commission's rules, 47 CFR 0.291 and 1.429, the Petition for Reconsideration of National Exchange Carrier Association, Inc., Organization for the Promotion and Advancement of Small Telecommunications Companies, and Western Telecommunications Allianceis granted in partto the extent described herein, andis denied in partto the extent described herein.

43.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.291 and 1.429 of the Commission's rules, 47 CFR 0.291 and 1.429, the Petition for Reconsideration of Rock Hill Telephone Company d/b/a Comporium, Lancaster Telephone Company d/b/a Comporium, Fort Mill Telephone Company d/b/a Comporium, PBT Telecom, Inc. d/b/a Comporium, and Citizens Telephone Company d/b/a Comporiumis granted in partto the extent described herein, andis denied in partto the extent described herein.

44.It is further orderedthat, pursuant to the authority contained in section 405 of the Communications Act of 1934, as amended, 47 U.S.C. 405, and §§ 0.291 and 1.429 of the Commission's rules, 47 CFR 0.291 and 1.429, the Petition for Reconsideration of United States Telecom Associationis granted in partto the extent described herein, andis denied in partto the extent described herein.

45.It is further orderedthat the Commissionshall senda copy of this Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act,see5 U.S.C. 801(a)(1)(A).

46.It is further ordered,that the Commission's Consumer andGovernmental Affairs Bureau, Reference Information Center,shall senda copy of this Order, including the Final Regulatory Flexibility Certification, to the Chief Counsel for Advocacy of the Small Business Administration.

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

I. Background a. T-Type Spare Tires

NHTSA regulates “T-type” spare tires under FMVSS No. 109,New pneumatic and certain specialty tires.A “T-type” spare tire refers to a type of spare tire that is manufactured to be used as a temporary substitute by the consumer for a conventional tire that failed. For T-type spare tires, FMVSS No. 109 specifies tire dimensions and laboratory test requirements for bead unseating resistance, strength, endurance, and high speed performance. The standard also defines tire load ratings and specifies labeling requirements for the tires.

NHTSA amended FMVSS No. 109 to permit the manufacture of T-type (then known as “60-psi”) spare tires in 1977, describing them as “differ[ing] substantially in specification and construction from conventional tires. * * * [with] a higher inflation pressure (60 psi), different dimensions, and a shorter treadwear life than conventionaltires.”1 The agency also adopted endurance and high-speed performance tests, strength requirements, a resistance to bead unseating test, and a physical dimensions test, which were appropriate for the temporary use tires.

The purpose of the physical dimensions test is to measure the tire's growth under inflated conditions and to determine if it is within allowable growth limits. If a tire exceeds allowable growth limits in the physical dimensions test, that indicates that there could be a safety risk from that tire's not matching well with its rim, or not fitting well with the vehicle to which it is attached. Either of these mismatches could present safety risks.

All T-type tires must comply with growth limits as specified by S4.2.2.2 of FMVSS No. 109, which states that the tire's actual section width and overall width may not exceed the specified section width2 by more than 7 percent or 10 millimeters (0.4 inches), whichever is greater. The “section width” of a tire is defined in S3 of FMVSS No. 109 as “the linear distance between the exteriors of the sidewalls of an inflated tire, excluding elevations due to labeling, decoration, or protective bands.”

The test procedure for the physical dimensions test is specified in S5.1 of FMVSS No. 109. That section states that the tire is mounted on the appropriate test rim and inflated to the pressure listed in Table II of the standard, which for 60-psi tires is 52 psi. The tire is then conditioned at ambient temperature for 24 hours, at which point the inflation is checked and adjusted back to 52 psi if necessary, and then the tire is measured.

NHTSA requires tire manufacturers to specify both a “recommended” pressure and a “maximum permissible inflation pressure.” The recommended inflation pressure is the operational inflation pressure needed to support the weight of the vehicle when loaded to its gross vehicle weight rating. The maximum permissible inflation pressure, which is required to be molded on the tire's sidewall, is the maximum pressure beyond which the tire should not be inflated. Usually, a manufacturer's recommended inflation pressure is lower than the tire's maximum pressure labeled on the tire sidewall.

Since most tires have a recommended inflation pressure that is lower than the specified maximum pressure for the tire, the test pressure that NHTSA uses to test tires dynamically on a test wheel is generally lower than the maximum pressure labeled on the sidewall. Further, tires may be operated at some level of under-inflation during normal service. To reflect this real-world use, FMVSS No. 109's dynamic test procedures generally specify under-inflating a tire when testing the tire on the road-wheel. Moreover, dynamic tests are more stringent when the tire is tested at an inflation pressure lower than the pressure required to support the given test load. Under-inflating a tire eventually results in greater heat build-up due to over-deflection of a tire's sidewall, which increases the likelihood of tire failure.

Consistent with this approach, in the 1977 final rule, NHTSA determined that T-type (60 psi) tires should be tested in all of the FMVSS No. 109 tests at a test pressure lower than the tire's maximum permissible inflation pressure of 60 psi. For the physical dimensions test, the agency determined that a 52-psi value reflects an operational inflation pressure appropriate for use in the test. The 52-psi maximum permissible inflation pressure adopted in 1977 has not been changed since that final rule.

In a July 13, 2007 petition, the Tire & Rim Association (T&RA)3 requested that the agency make a “technical correction”4 to Table II of FMVSS No. 109 regarding T-type tires. Specifically, T&RA requested that “the inflation pressure for the measurement of physical dimensions in Table II be changed from 52 psi to 60 psi.” T&RA stated that “There is only one application inflation pressure for T-type tires, 60 psi,” and that therefore “this is the appropriate pressure for the subject measurement.” The petitioner also stated that the inflation pressure for the bead unseating, tire strength, and tire endurance test should remain at 52 psi.

In a notice of proposed rulemaking (NPRM) published on October 30, 2009,5 NHTSA proposed to grant T&RA's petition and increase the test pressure used for the physical dimensions test from 52 psi to 60 psi. Although we agreed that raising the inflation pressure for the physical dimensions test was appropriate, we did not agree with T&RA's reasoning. Instead, we proposed to raise the inflation pressure for two other reasons. First, we tentatively concluded that raising the inflation pressure makes engineering sense because doing so would raise the stringency of the test under conditions that are within the realm of real world use, since it was conceivable that the tires would be operated at 60 psi (which is the pressure assigned the tire by the tire manufacturer). Second, we tentatively concluded that raising the test pressure will align FMVSS No. 109 with the European and Japanese regulations that cover T-type tires. The European and Japanese regulations both specify an inflation pressure of 4.2 bar or 420 kPa (which is the metric equivalent of 60 psi)6 for the physical dimensions test.7

We believed that existing 60-psi T-type spare tires would be able to pass the amended physical dimensions test. Further, because the request to raise the test pressure for the physical dimensions test came from a tire manufacturer trade association, we believed that the amended test would be practical.

The October 2009 NPRM also proposed other minor changes to FMVSS No. 109:

• The agency proposed deleting references to CT tires.

• The agency proposed revising S4.4.1(b) to update the list of tire industry organizations to make the list consistent with that established in the upgrade of FMVSS No. 139,New pneumatic radial tires for light vehicles.

• The agency proposed to redesignate “Appendix A” as “Appendix” and move it to the end of the standard. Theagency also proposed removing references to tables that were no longer set forth in the appendix and updating the address of NHTSA.

The agency received three comments in response to the October 2009 NPRM. The comments were submitted by the Alliance of Automobile Manufacturers (Alliance),8 Advocates for Highway and Auto Safety (Advocates), and a private citizen (Jonathan David Korhonen).

The Alliance concurred with the proposals in the NPRM to increase the test pressure of T-type tires from 52 psi to 60 psi for the physical dimensions test, the deletion of references to CT type tires, the revisions to update the list of tire industry organizations, and the redesignation of “Appendix A” as “Appendix” and its relocation to the end of the standard. The Alliance also concurred with the proposed effective date.

Advocates stated that it supports NHTSA's proposal to raise the inflation pressure from 52 psi to 60 psi for the physical dimensions test on T-type tires. Advocates asserted that this will result in a more demanding test that could lead to increased tire quality and integrity during real-world use. Advocates also supported the continued use of a 52 psi inflation pressure for the bead unseating, tire strength, and tire endurance tests because those test pressures represented real-world conditions in which T-type tires would be used while underinflated.

However, Advocates recommended that NHTSA reconsider its continued use of a 58 psi inflation pressure for the high speed performance test. Advocates stated that T-type tires are often stored for long periods of time until an unexpected event leads to their use. Advocates also asserted that, although owners' manuals for passenger motor vehicles advise frequent checking and re-inflation of T-type tires, this is rarely performed, leading to the majority of T-type tires mounted on vehicles being in an underinflated condition. Advocates argued that this problem is further compounded by the majority of motorists who do not carry air pumps to inflate T-type tires to the recommended operating pressure or tire gauges to check the inflation of tired. Further, Advocates noted that the absence of a requirement that T-type tires be equipped with tire pressure monitoring systems (TPMS) further prevents drivers from being notified of underinflated tires. Advocates stated that, by lowering the inflation pressure for the high speed performance test, NHTSA could ensure that T-type tires were better able to withstand higher speeds while underinflated.

NHTSA is making no changes to the proposal in response to Advocates' comment. The agency considers the issues related to the inflation pressure of T-type tires for the high speed performance test to be outside the scope of this rulemaking action.

The agency also addressed the issue of TPMS on spare tires during the rulemaking establishing FMVSS No. 138,Tire pressure monitoring systems. 9 NHTSA decided not to require TPMS on spare tires (either T-type or full-sized) for two reasons. First, most drivers know that temporary tires are not intended for extended use. Second, T-type tires pose operational problems for both direct and indirect TPMS because the recommended inflation pressure for these tires is considerably different than the pressure for tires used in normal service. The agency also believed a TPMS requirement for spare tires would be a potential disincentive for a vehicle manufacturer to supply a spare tire.

The agency also received a comment from a private citizen, Jonathan David Korhonen. Mr. Korhonen questioned how the NPRM would affect the overall cost to manufacture vehicles. He recommended keeping the proposed changes as suggestions and concluded that the changes should not take the place of education for drivers.

In response to Mr. Korhonen's comment, the agency believes that the costs of implementing the proposed changes in the NPRM are near zero. We believe that existing T-type tires are likely to pass the upgraded physical dimensions test.

After careful consideration of all comments received and all issues relevant to the NPRM, the agency has decided to adopt the NPRM as proposed.10 Raising the test pressure for the physical dimensions test will raise the stringency of the test under conditions that are within the realm of real world use. Further, raising the test pressure is consistent with international harmonization. We believe that existing tires will be able to pass the amended physical dimensions test and that the new test will be practicable. We are also adopting the minor changes to FMVSS No. 109 discussed in the NPRM.

Finally, for consistency, we are making three changes to the regulatory text of FMVSS No. 109 that were not included in the NPRM. The agency finds that good cause exists for these amendments to be included in this final rule notwithstanding the fact that they were not included in the October 2009 NPRM because advance public notice would be unnecessary. The specific changes and the basis for the good cause finding are discussed below.

First, we are amending S4.2.2.2(b) to eliminate maximum tire pressures that were used only for the physical dimensions test for CT tires. This is consistent with the proposed amendments, which we are adopting today, to eliminate pressures used for CT tires in S4.2.1(b), S4.3.4, Table I-C, and Table II.

Second, we are further amending S4.2.2.2(b) to correct an error. Although 340 kPa is listed in the maximum tire pressures that are used for conducting the physical dimensions test in Table II, the pressure was inadvertently removed from the list of tire pressures in S4.2.2.2(b) in a prior rulemaking action.11 The inclusion of the 340 kPa maximum tire pressure in Table II and other similar sections that list the permissible maximum tire pressures shows that this omission was unintentional. Thus, advance notice of this correction is unnecessary.

Third, we are updating NHTSA's address in S4.4.1(a) to be consistent with the correction to NHTSA's address in Appendix A. This is a procedural amendment that will ensure that documents sent to the agency will be delivered to the agency.

Section 30111(d) of title 49, United States Code, provides that a Federal motor vehicle safety standard may not become effective before the 180th day after the standard is prescribed or later than one year after it is prescribed except when a different effective date is, for good cause shown, in the public interest. This final rule is effective 180 days after publication of this final rule in theFederal Register. However, wewill permit optional early compliance immediately.

The agency has considered the impact of this rulemaking action under Executive Orders 12866 and 13563 and the DOT's regulatory policies and procedures. This action was not reviewed by the Office of Management and Budget under Executive Order 12866. The agency has considered the impact of this action under the Department of Transportation's regulatory policies and procedures (44 FR 11034; February 26, 1979), and has determined that it is not “significant” under them.

This final rule increases slightly the stringency of an existing test applicable to T-type spare tires for passenger vehicles. The rulemaking will not affect the current costs of testing T-type tires to FMVSS No. 109's performance requirements. The minimal impacts of today's amendment do not warrant preparation of a regulatory evaluation.

Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq., as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996), whenever an agency is required, except as provided below, to publish a notice of rulemaking for any proposed or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effect of the rule on small entities (i.e., small businesses, small organizations, and small governmental jurisdictions). The Small Business Administration's regulations at 13 CFR part 121 define a small business, in part, as a business entity “which operates primarily within the United States.” (13 CFR 121.105(a)).

No regulatory flexibility analysis is required if the head of an agency certifies the rule will not have a significant economic impact on a substantial number of small entities. SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a rule will not have a significant economic impact on a substantial number of small entities.

NHTSA has considered the effects of this final rule under the Regulatory Flexibility Act. I certify that this final rule will not have a significant economic impact on a substantial number of small entities. The final rule will affect tire manufacturers who manufacture T-type tires, none of which, according to the agency's knowledge, are small businesses. Even if there were a substantial number of small businesses manufacturing T-type tires, these entities would not be significantly affected by this final rule since, to the agency's knowledge, all currently manufactured T-type tires meet the new requirement. The rulemaking does not affect costs of testing T-type tires to FMVSS No. 109's performance requirements.

The policy statement in section 1 of Executive Order 13609 provides, in part:

This final rule would harmonize the inflation pressure NHTSA uses for the physical dimensions test with European and Japanese regulations covering T-type tires.

NHTSA has examined today's final rule pursuant to Executive Order 13132 (64 FR 43255, August 10, 1999) and concluded that no additional consultation with States, local governments, or their representatives is mandated beyond the rulemaking process. The agency has concluded that the rule does not have sufficient federalism implications to warrant either consultation with State and local officials or preparation of a federalism summary impact statement. The rule does not have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and the responsibilities among the various levels of government.”

Further, no consultation is needed to discuss the issue of preemption in connection with today's final rule. The issue of preemption can arise in connection with NHTSA rules in two ways.

First, the National Traffic and Motor Vehicle Safety Act contains an express preemption provision: “When a motor vehicle safety standard is in effect under this chapter, a State or a political subdivision of a State may prescribe or continue in effect a standard applicable to the same aspect of performance of a motor vehicle or motor vehicle equipment only if the standard is identical to the standard prescribed under this chapter.” 49 U.S.C. 30103(b)(1). It is this statutory command that unavoidably preempts State legislative and administrative law, not today's rulemaking, so consultation is unnecessary.

Second, the Supreme Court has recognized the possibility of implied preemption: In some instances, State requirements imposed on motor vehicle manufacturers, including sanctions imposed by State tort law, can stand as an obstacle to the accomplishment and execution of some of the NHTSA safety standards. When such a conflict is discerned, the Supremacy Clause of the Constitution makes the State requirements unenforceable. SeeGeierv.American Honda Motor Co.,529 U.S. 861 (2000).

NHTSA has considered the nature (e.g., the language and structure of the regulatory text) and purpose of today's final rule and does not foresee any potential State requirements that might conflict with it. Without any conflict, there could not be any implied preemption of state law, including state tort law.

NHTSA has analyzed this rulemaking action for the purposes of the National Environmental Policy Act. The agency has determined that implementation of this action will not have any significant impact on the quality of the human environment.

Under the Paperwork Reduction Act of 1995 (PRA), a person is not required to respond to a collection of information by a Federal agency unless the collection displays a valid OMB control number. There is no information collection requirement associated with this final rule.

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

This final rule harmonizes FMVSS No. 109 with several voluntary consensus standards, including the T&RA 2008 Year Book standard,12 the ETRTO standard,13 and the JATMA standard,14 all of which specify 60 psi or 420 kPa (or 4.2 bar) as the inflation pressure for measuring T-type tire dimensions. This final rule also harmonizes FMVSS No. 109 with ECE Regulation 30 and Japanese Safety Regulations, which currently require the physical dimensions test for T-type tires to be conducted at the tire's maximum permissible inflation pressure, 4.2 bar (420 kPa or 60 psi).

With respect to the review of the promulgation of a new regulation, section 3(b) of Executive Order 12988, “Civil Justice Reform” (61 FR 4729, February 7, 1996) requires that Executive agencies make every reasonable effort to ensure that the regulation: (1) Clearly specifies the preemptive effect; (2) clearly specifies the effect on existing Federal law or regulation; (3) provides a clear legal standard for affected conduct, while promoting simplification and burden reduction; (4) clearly specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses other important issues affecting clarity and general draftsmanship under any guidelines issued by the Attorney General. This document is consistent with that requirement.

Pursuant to this Order, NHTSA notes as follows. The issue of preemption is discussed above. NHTSA notes further that there is no requirement that individuals submit a petition for reconsideration or pursue other administrative proceeding before they may file suit in court.

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) requires federal agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually (adjusted for inflation with base year of 1995). Before promulgating a NHTSA rule for which a written statement is needed, section 205 of the UMRA generally requires the agency to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, most cost-effective, or least burdensome alternative that achieves the objectives of the rule. The provisions of section 205 do not apply when they are inconsistent with applicable law. Moreover, section 205 allows the agency to adopt an alternative other than the least costly, most cost-effective, or least burdensome alternative if the agency publishes with the final rule an explanation of why that alternative was not adopted.

This final rule will not result in any expenditure by State, local, or tribal governments or the private sector. Thus, this final rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Executive Order 13045, “Protection of Children from Environmental Health and Safety Risks” (62 FR 19855, April 23, 1997), applies to any rule that: (1) Is determined to be “economically significant” as defined under Executive Order 12866, and (2) concerns an environmental, health, or safety risk that the agency has reason to believe may have a disproportionate effect on children. If the regulatory action meets both criteria, the agency must evaluate the environmental health or safety effects of the planned rule on children, and explain why the planned regulation is preferable to other potentially effective and reasonably feasible alternatives considered by the agency.

This final rule is not an economically significant regulatory action under Executive Order 12866. Consequently, no further analysis is required under Executive Order 13045.

The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.

Anyone is able to search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in theFederal Registerpublished on April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visithttp://www.regulations.gov.

In consideration of the foregoing, NHTSA hereby amends 49 CFR part 571 as follows:

Background

This action extends the Reconsideration of Allocation of Whiting, Delay of Relevant Regulations Rule, referred to as “RAW 1”. RAW 1 delayed or revised several provisions of the Pacific coast trawl rationalization program. Background on this rule was provided in the proposed rule, published on May 21, 2012 (77 FR 29955), and in the final rule, published on August 1, 2012 (77 FR 45508), and is not repeated here. This action would extend the effectiveness of the final rule, which:

(1) Delayed the ability to transfer QS and IBQ between QS accounts in the shorebased IFQ fishery in order to avoid complications that would occur if QS permit owners in the shorebased IFQ fishery were allowed to transfer QS percentages prior to completion of the whiting allocation reconsideration;

(2) Delayed the requirement to divest excess QS amounts for the shorebased IFQ fishery and the at-sea mothership fishery so that QS permit owners would have sufficient time to plan and arrange sales of excess QS, as originally recommended by the Council for this provision of the trawl rationalization program;

(3) Delayed the ability to change mothership catcher vessel (MS/CV) endorsement and catch history assignments from one limited entry trawl permit to another in order to avoid complications that would have occurred had permit owners been allowed to transfer ownership of catch history assignments prior to completion of the reconsideration; and

(4) Modified the issuance provisions for quota pounds (QP) for the beginning of fishing year 2013 to preserve NMFS' ability to deposit the appropriate final amounts into QS accounts based on any recalculation of QS allocations. In January 2013, NMFS deposited into accounts an interim amount of QP based on the shorebased trawl allocation multiplied by the lower end of the range of potential harvest specifications for 2013, as reduced by the amount of QP for whiting trips associated with the whiting QS issued based on the limited entry permit history that qualified for an initial allocation, and for species caught incidentally in the whiting fishery (including lingcod, Pacific cod, canary, bocaccio, cowcod, yelloweye, Pacific ocean perch, widow, English sole, darkblotched, sablefish N. of 36° N lat., yellowtail N. of 40°10′ N. lat., shortspine N. of 34°27′ N. lat., minor slope rockfish N. of 40°10′ N. lat., minor slope rockfish S. of 40°10′ N. lat., minor shelf rockfish N. of 40°10′ N. lat., minor shelf rockfish S. of 40°10′ N. lat., and other flatfish). The remainder of the interim QP will be deposited in QS accounts at the start of the whiting primary season.

NMFS is also advising the at-sea mothership fishery that the response to the court order may impact processor obligations and cooperative (coop) formation, if whiting catch history assignments are recalculated. NMFS will announce a process for correcting data, if necessary, following the public comment period for the RAW 2 proposed rule (78 FR 72, January 2, 2013).

NMFS advises the at-sea mothership fishery that the response to the court-ordered reconsideration may impact processor obligations and coop formation if whiting catch history assignments are recalculated. NMFS will announce any changes to the amount of catch history assignments associated with MS/CV-endorsed limited entry trawl permits by April 1, 2013. The mothership sector has until March 31, 2013, to submit their coop permit applications to NMFS for that fishing year. The coop permit application includes a list of the catch history amounts associated with specific MS/CV-endorsed limited entry permits and which MS permit those amounts are obligated to. Because coop permit applications may be submitted before NMFS has made its final determination on the 2013 catch history assignments associated with MS/CV-endorsed permits, participants in the mothership fishery should be aware that this proposal may potentially impact their processor obligations, coop formation, and coop permit application. NMFS does not anticipate a need for regulatory changes to address these potential impacts and will work with any MS coop permit applicants if there are changes in catch history assignments from that noted in the 2013 coop permit application. For example, in the initial administrative determination for any 2013 MS coop permit application, NMFS will notify the coop manager of any changes in catch history assignments for MS/CV-endorsed permits associated with that coop.

NMFS also considered whether to allow limited entry permit transfers (i.e., changes in permit ownership) for all limited entry trawl endorsed permits, except for those with a catcher/processor endorsement, for a period of time during the reconsideration. This allowance would simplify reissuance of QS permits in the shorebased IFQ fishery or catch history assignments on MS/CV-endorsed limited entry trawl permits in the at-sea mothership fishery. After assessing this step, NMFS has determined that it is not necessary because the reallocation rule likely will have no planned application process. The initial allocation had a lengthy application process that necessitated not allowing limited entry permit (LEP) transfers while NMFS reviewed applications. For any revised reallocation, NMFS likely will issue an initial administrative determination (IAD), but not an application; these details will be developed as part of the reallocation rulemaking, if necessary. Accordingly, there should not be a need to freeze LEP transfers. If NMFS reissues QS permits and/or catch history assignments on MS/CV-endorsed limited entry trawl permits, NMFS likely will issue those permits or catch history assignments to the QS account owner of record with NMFS at the time of reissuance. Because the RAW 2 rule (78 FR 72, January 2, 2013) is not proposing any reallocation, it did not include these additional details.

This emergency rule extension is published under the authority of the Magnuson-Stevens Act.

OMB has determined that this action is not significant for the purposes of Executive Order 12866.

This extension to an emergency/interim rule is exempt from the procedures of the Regulatory Flexibility Act because this extension rule is issued without opportunity for prior notice and opportunity for public comment.

The Assistant Administrator finds it is unnecessary and contrary to the public interest to provide for prior notice and an opportunity for public comment on this emergency rule extension. In the initial emergency rule published on May 21, 2012 (77 FR 29955), NMFS requested, and subsequently received, comments on the rulemaking. Therefore, the agency has the authority to extend the emergency action for up to 186 days beyond January 28, 2013. This would extend the emergency action to through August 2, 2013.

The measures of this emergency rule extension remain unchanged from the measures contained in the initial emergency rule that delayed or revised portions of the trawl program regulations pending completion of the reconsideration of the allocation of whiting for the shoreside IFQ and mothership sectors of the program. This extension must be in place during the 2013 whiting fishing season because the reconsideration is still underway and failing to extend the emergency rule would be counter to the NMFS and the Council's efforts to manage the fishery until the reconsideration has been completed. The emergency action authority under 305(c)(3) allows NMFS to extend the provisions of the emergency action rule if there was a public comment period and the Council is currently addressing the reconsideration. NMFS has met both of these provisions.

NMFS solicited public comment during the 30-day comment period on the measures contained in the initial emergency action and extended by this action. The comments received were considered and were addressed in the preamble of the emergency rule. Therefore, for the reasons outlined above, the Assistant Administrator finds it is unnecessary and contrary to the public interest to provide any additional notice and opportunity for public comment under 5 U.S.C. 553(b)(B) prior to publishing the emergency rule extension. Furthermore, NMFS finds good cause to waive the 30-day delay in effectiveness because any lapse in effectiveness of this temporary rule could potentially jeopardize NMFS' ability to comply with the Court order inPacific Dawn.

No Federal rules have been identified that duplicate, overlap, or conflict with this emergency rule extension. Public comment is hereby solicited, identifying such rules. A copy of this analysis is available from NMFS (seeADDRESSES).

NMFS issued Biological Opinions under the Endangered Species Act (ESA) on August 10, 1990, November 26, 1991, August 28, 1992, September 27, 1993, May 14, 1996, and December 15, 1999 pertaining to the effects of the Pacific Coast Groundfish Fishery Management Plan (PCGFMP) fisheries on Chinook salmon (Puget Sound, Snake River spring/summer, Snake River fall, upper Columbia River spring, lower Columbia River, upper Willamette River, Sacramento River winter, Central Valley spring, California coastal), coho salmon (Central California coastal, southern Oregon/northern California coastal), chum salmon (Hood Canal summer, Columbia River), sockeye salmon (Snake River, Ozette Lake), and steelhead (upper, middle and lower Columbia River, Snake River Basin, upper Willamette River, central California coast, California Central Valley, south/central California, northern California, southern California). These biological opinions have concluded that implementation of the PCGFMP for the Pacific Coast groundfish fishery is not expected to jeopardize the continued existence of any endangered or threatened species under the jurisdiction of NMFS, or result in the destruction or adverse modification of critical habitat.

NMFS issued a Supplemental Biological Opinion on March 11, 2006 concluding that neither the higher observed bycatch of Chinook in the 2005 whiting fishery nor new data regarding salmon bycatch in the groundfish bottom trawl fishery required a reconsideration of its prior “no jeopardy” conclusion. NMFS also reaffirmed its prior determination that implementation of the Groundfish PCGFMP is not likely to jeopardize the continued existence of any of the affected ESUs. Lower Columbia River coho (70 FR 37160, June 28, 2005) and Oregon Coastal coho (73 FR 7816, February 11, 2008) were recently relisted as threatened under the ESA. The 1999 biological opinion concluded that the bycatch of salmonids in the Pacific whiting fishery were almost entirely Chinook salmon, with little or no bycatch of coho, chum, sockeye, and steelhead.

On December 7, 2012, NMFS completed a biological opinion concluding that the groundfish fishery is not likely to jeopardize non-salmonid marine species including listed eulachon, green sturgeon, humpback whales, Steller sea lions, and leatherback sea turtles. The opinion also concludes that the fishery is not likely to adversely modify critical habitat for green sturgeon and leatherback sea turtles. An analysis included in the same document as the opinion concludes that the fishery is not likely to adversely affect green sea turtles, olive ridley sea turtles, loggerhead sea turtles, sei whales, North Pacific right whales, blue whales, fin whales, sperm whales, Southern Resident killer whales, Guadalupe fur seals, or the critical habitat for Steller sea lions.

As Steller sea lions and humpback whales are also protected under the Marine Mammal Protection Act, incidental take of these species from the groundfish fishery must be addressed under MMPA section 101(a)(5)(E). On February 27, 2012, NMFS published notice that the incidental taking of Steller sea lions in the West Coast groundfish fisheries is addressed in NMFS' December 29, 2010 Negligible Impact Determination (NID) and this fishery has been added to the list of fisheries authorized to take Steller sea lions (77 FR 11493, Feb. 27, 2012). NMFS is currently developing MMPA authorization for the incidental take of humpback whales in the fishery.

On November 21, 2012, the U.S. Fish and Wildlife Service (FWS) issued a biological opinion concluding that the groundfish fishery will not jeopardize the continued existence of the short-tailed albatross. The FWS also concurred that the fishery is not likely to adversely affect the marbled murrelet, California least tern, southern sea otter, bull trout, nor bull trout critical habitat.