Executive Order 13563 directs agencies to ensure that regulations are accessible, consistent, written in plain language, and easy to understand in order to foster economic growth and job creation. Executive Order 13563 provides that our regulatory system “mustidentify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.” (emphasis added). Executive Order 13563 further provides that “[t]o facilitate the periodic review of existing significant regulations, agencies shall consider how best to promoteretrospective analysisof rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and tomodify, streamline,expand, or repeal them in accordance with what has been learned.” (emphasis added). SBA has reviewed its regulations with regard to the loan programs and is proposing a number of amendments and revisions to accomplish this goal.

SBA's primary business loan programs are the 504 Loan Program (the “504 Loan Program”), authorized pursuant to Title V of the Small Business Investment Act of 1958, 15 U.S.C. 695et seq.,and the 7(a) Loan Program (the “7(a) Loan Program”) authorized pursuant to Section 7(a) of the Small Business Act, 15 U.S.C. 631et seq.(collectively referred to as the “504 and 7(a) Loan Programs”). A description of each loan program is set forth below.

The 504 Loan Program is an SBA financing program established to target companies in their growth cycle to create jobs, expand the tax base, and improve American communities. Specifically, the core mission of the 504 Loan Program is to provide long-term fixed asset financing to small businesses for the purchase or improvement of land, buildings, and major equipment purchases, in an effort to facilitate the creation of jobs and local economic development.

Under the 504 Loan Program, loans are made to small business applicants by Certified Development Companies (“CDCs”), which are SBA's community-based partners for providing 504 Loans. With the exception of several for-profit CDCs grandfathered into the 504 Loan Program, a CDC is a nonprofit corporation that promotes economic development within its community through 504 Loans. CDCs are certified and regulated by the SBA, and work with SBA and participating lenders (typically banks) to provide financing to small businesses, which in turn, accomplishes the goal of community economic development. There are over 260 CDCs nationwide each with a defined Area of Operations covering a specific geographic area. The Area of Operation for most CDCs is the state in which they are incorporated.

Transactions under the 504 Loan Program are typically structured with a CDC providing 40% of the total project costs (with SBA's guarantee assistance),a participating lender covering up to 50% of the total project costs, and the borrower contributing 10% of the project costs. Under certain circumstances, a borrower may be required to contribute up to 20% of the total project costs.

In sum, the 504 Loan Program is an economic development tool and its success is measured, in large part, by the number of jobs it preserves and creates. In FY 2012, the agency made 7,047 loans through the 504 Loan Program, for a total volume of $4.4 billion, which led to the creation and/or retention of almost 80,000 jobs. SBA estimates that the proposed regulation revisions, set forth in detail below, will result in approximately 140,000 additional jobs created/retained over a five-year period. These additional jobs created/retained are based on an estimated 47,000 loans being made between FY 2013 and FY 2017, with an estimated total dollar volume of almost $30 billion and the creation/retention of over 500,000 jobs over the five-year period. The changes proposed primarily with regard to the Personal Resources Test and affiliation will increase the number of eligible borrowers.

The 7(a) Loan Program's main purpose is to help eligible small businesses obtain credit when they cannot obtain “credit elsewhere.” In addition, the agency recognizes that the 7(a) Loan Program is also an important engine for job creation. The 7(a) Loan Program provides financing for general business purposes through the agency's guaranty of a loan made by an approved lender. Currently, there are approximately 4,500 lenders participating in the 7(a) Loan Program.

Below is a summary of the proposed changes to these business loan programs. The agency requests comments on all of the proposed regulatory revisions in this proposed rule, and on any related issues affecting the 7(a) Loan Program or the 504 Loan Program. SBA's intent is to revitalize the use of both loan programs as an engine of job retention and growth in an effort to use “the best, most innovative, and least burdensome tools for achieving regulatory ends * * * and seek to improve, the actual results of regulatory requirements” in accordance with Executive Order 13563.

Though SBA's business loan programs differ in mission and focus, these loan programs share fundamental eligibility criteria and overlapping objectives. The goal of the proposed rule is to reinvigorate the business loan programs by eliminating unnecessary compliance burdens and loan eligibility restrictions in an effort to make necessary adjustments to increase lender accessibility without sacrificing program integrity. The major changes that SBA is proposing are described below, including changes relating to affiliation principles, the personal resources test, the 9-month rule for the 504 Loan Program, and CDC operational and organizational requirements. Additional changes are described in the section-by-section analysis.

Under SBA's regulations, applicants for an SBA loan must be small under SBA's size requirements (including affiliates) to be eligible for an SBA business loan. 13 CFR 120.100. When an entity is determined to be affiliated with an applicant, the entity's receipts and employees are added to those of the applicant for purposes of determining its size. Thus, certain businesses are deemed to be ineligible for assistance because they are not deemed to be “small” for program purposes by virtue of their combined size with affiliated entities.

SBA's regulations, at § 121.103, set forth the agency's principles of affiliation. Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Control may arise through ownership, management, or other relationships or interactions between the parties. Affiliation is an important issue when determining size because SBA counts the receipts, employees, or other measure of the business, for all of a small business' domestic and foreign affiliates, regardless of whether the affiliates are organized for profit (13 CFR 121.103(a)(6)). SBA's affiliation rules generally apply to all Federal programs for which a business must qualify as “small,” including SBA's Government Contracting or Business Development programs, business loan programs and grant programs. Therefore, applicants for financing under the 504 Loan Program, 7(a) Loan Program or Microloan Program must qualify as “small businesses” taking into consideration the employees, receipts, and other measures of business of the applicant and all of the applicant's affiliates.

SBA believes that, in general, most of the principles of affiliation set forth in § 121.103 appropriately apply to the agency's business loan programs. However, SBA believes that certain affiliation principles—such as those concerning newly organized concerns—are not applicable to the 504 and 7(a) Loan Programs or the Microloan Program because assisting in the creation of new small businesses serves the purpose of the business loan programs. In addition, SBA is seeking to create a simple, bright-line test for business loan program applicants when determining eligibility with respect to size and affiliation. By eliminating or modifying certain affiliation principles, this proposed rule would also significantly reduce the burden on applicants of providing affiliation documentation. As described below, SBA is proposing to add a new § 121.302 to identify the principles of affiliation that should apply to the business loan programs in place of the affiliation principles set forth in § 121.103, and invites comments on these proposed changes.

With respect to determining affiliation based on ownership, the following principlescurrentlyapply to the business loan programs: (1) If the business concern's stock is widely held and no single block of stock is large as compared to others, the board of directors and Chief Executive Officer or President is deemed to have the power to control the business, absent evidence showing otherwise; (2) if two or more persons (including any individual, concern or other entity) each owns, controls or has the power to control less than 50% of the concern's voting stock, and the blocks of stock are equal or approximately equal in size and the blocks of stock are large in the aggregate as compared with any other stock holding, SBA presumes that each person controls or has the power to control the business concern whose size is at issue; or (3) if a person (including any individual, concern or other entity) owns, or has the power to control, 50 percent or more of a concern's voting stock, or a block of voting stock which is large compared to other outstanding blocks of voting stock, such person controls or has the power to control the business concern. It is also important to note that SBA's current affiliation rules (§ 121.103(a)(3)) may find affiliation based on “affirmative control” (e.g., owning more than 50% of the voting stock of a company) as well as “negative control” (e.g., owning less than 50% but still having the ability to block votes).

SBA is proposing to amend the principles described above for affiliation based on ownership in a manner similar to changes recently proposed by SBA for the Small Business Innovation Researchand Small Business Technology Transfer programs (77 FR 28520, May 15, 2012). Under these proposed changes, SBA would deem the Chief Executive Officer (CEO) or President of the concern (or other officers, managing members, partners, or directors who control the management of the concern) to control the concern when no one person owns or has the power to control more than 50% of the voting equity of the concern. SBA believes that for purposes of the agency's business loan programs, control in this situation would rest with the managing parties identified above since it is those parties that are truly running the concern. If one person does own or has the power to control more than 50% of the voting equity of the concern, that person is in control of the concern for purposes of determining affiliation. In addition, if two or more persons collectively own or have the power to control more than 50% of the voting equity of two or more concerns (the “collective owners”), then there would be affiliation between such concerns and between each concern and each collective owner. In addition, in this proposed rule, SBA refers to 50% ownership or equity without designating that it is “stock” ownership because not all business loan applicants are corporations with ownership determined through stock issuance. SBA is also proposing to not consider “negative control,” by itself, as a factor in determining affiliation.

SBA requests comments on this proposed rule as it relates to business loan applicants where no person owns a majority of the applicant, and whether SBA should: (1) Retain the current affiliation rule with respect to minority holdings and, if so, whether it should set forth a specific threshold by which it will find control and therefore affiliation (e.g., if a person owns 33% or more of the company) in order to create a bright-line test for applicants; (2) find affiliation, as proposed, if two or more persons or concerns collectively own more than 50% of the applicant, and the same persons or concerns collectively own more than 50% of any other company or entity; or (3) implement a rule setting forth both options (1) and (2) above.

In addition to incorporating the above principles of affiliation based on ownership, SBA is proposing to incorporate in § 121.302(c) and (e), respectively, the existing affiliation principles currently contained in § 121.103(c) (Affiliation arising under stock options, convertible securities, and agreements to merge) and § 121.103(i) (Affiliation based on franchise and license agreements). SBA is also proposing to incorporate in § 121.302(d), with slight modifications, the existing affiliation principles currently contained in § 121.103(e) (Affiliation based on common management).

In addition to the above proposed change, SBA proposes changing current affiliation principles relating to the following three areas: identity of interest; newly organized concerns; and joint ventures. First, with respect to affiliation based on identity of interest, SBA proposes to not apply the current affiliation principle relating to identity of interest set forth in § 121.103(f) to the 504 Loan Program, the 7(a) Loan Program or the Microloan Program. Affiliation through identity of interest often is found between business partners, family members, and employers. SBA is aware that an applicant may have relationships with former employers, business partners, friends, or family members which can be important to the business success of the applicant. These relationships often strengthen the creditworthiness of the applicant by providing the applicant with more resources from which to draw, thus lowering taxpayer risk while increasing the job creation and small business growth missions of the business loan programs. It is the agency's view that these relationships are common and, in the context of the business loan programs, should not prevent an applicant from independently operating and growing a business and creating jobs. Moreover, small businesses would have less of a financial incentive to use family members or former employees as business “fronts” to obtain a business loan than to obtain a grant or bid on a contract under a government set-aside program. Businesses would appear to have little incentive to incur debt through the use of such tactics because, unlike a grant or contract, the debt must eventually be repaid. Weighing all of these factors, the agency proposes to end application of the identity of interest affiliation rule to the business loan programs; however, it strongly encourages comment on this proposal especially as it relates to potential threats to business loan program integrity.

Second, with respect to affiliation based on a newly organized concern, SBA proposes to not apply the current affiliation principle relating to newly organized concerns set forth in § 121.103(g) to the 504 Loan Program, the 7(a) Loan Program or the Microloan Program. The agency proposes this change for substantially the same reasons it is proposing the change related to identity of ownership discussed above. If employees of a former employer form a new business and the former employer does not have ownership control of the new business, SBA believes that for purposes of the business loan programs the former employees will generally have sufficient independence and control of the newly formed business to not be affiliated with the former employer. The newly organized concern principle is needed in the agency's grant and contracting programs to prevent large companies from misrepresenting themselves as small through a shell company in order to obtain a grant or lucrative government contract intended as a small business set aside. However, the principle is not necessary in the business loan programs because larger companies have greater access to private sector capital sources than small businesses and would have little need to form a new concern to obtain a government loan. Thus, the agency is proposing to exempt agency business loan program applicants from application of the affiliation based on newly organized concern rule.

Finally, with respect to affiliation based on joint ventures, SBA proposes to not apply the current affiliation principle relating to affiliation based on joint ventures set forth in § 121.103(h) to the 504 Loan Program, the 7(a) Loan Program or the Microloan Program. Agency records indicate that applicants for assistance under agency business loan programs are rarely, if ever, joint ventures and, therefore, this provision is unnecessary for the business loan programs. This proposed change is being made in the interest of streamlining and simplifying business loan program rules, and to provide bright line eligibility criteria regarding affiliation determinations for the business loan programs.

In conjunction with proposing the above revisions to 504 Loan Program regulations to expand program accessibility, streamline complicated processes, and minimize burdens to applicants and lenders, SBA seeks to ensure program integrity and maintain proper oversight through the following means. First, to assist in ensuring compliance with the affiliation principles, SBA proposes to require applicants to sign an affidavit certifying that all persons affiliated with the applicant have been identified in the affidavit. It is the agency's view that applicants are expected to know and disclose these persons and requiring this disclosure under sworn statement to the Federal government should deter applicants from omitting importantinformation necessary for determining compliance with the applicable size requirements. An affidavit on affiliate certifications would enable participant lenders to improve consistency and would also expedite SBA's review of the size eligibility of potential applicants. Completing the affidavit to document affiliated business owners of 50% or less would be less burdensome on applicants than having to submit tax documents or financial statements. In fact, SBA estimates that the proposed revision would reduce the burden on participants in both loan programs (both borrowers and lenders) by a total of 26,402 hours and result in savings totaling $700,777. Based on estimates using FY 2012 loan approvals as a base, the annual savings to borrowers for both programs combined is estimated at $700,000 and $750,000 annually. Similarly, SBA estimates that the proposed revision will reduce burden to the government by a total of 2,666 hours and result in savings totaling $78,085. Based on estimates using FY 2012 approvals as a base, this burden reduction in loan review time combined for both loan programs, is estimated at between $80,000 and $100,000 annually. Thus, not only would the affidavit on affiliates be a control mechanism to ensure against abuse of SBA's guaranty and simplify and reduce potential mistakes in size standard decisions, but it would also be a critical time and cost saving measure, as demonstrated by the above data.

Second, and notwithstanding the agency's goal to provide bright line eligibility criteria regarding affiliation determinations for the business loan programs, the agency realizes that egregious cases of large entities benefiting from a small business loan program can threaten program integrity and public support. Thus, the agency proposes to add a provision applicable only to the business loan programs which would give the agency the discretion to prevent business loan program participation of an applicant if, after consideration of the totality of the circumstances, it determines that affiliation exists rendering the applicant ineligible, even when no single factor is sufficient to constitute affiliation. For example, a finding of affiliation may be appropriate if an applicant lists a minor child as a majority owner and CEO of a concern, but a parent of the child actually owns or has the power to control the business. The Agency would look beyond the fiction of the child's ownership and position to determine who actually controls the business, and consider the affiliates of the party in control.

The agency does not expect to use this discretionary provision often and intends to apply it only in egregious cases, one being the example identified above, that might threaten business loan program integrity or viability. SBA encourages comments and suggestions regarding this proposal and, specifically, regarding additional standards to prevent loans to ineligible applicants, which could endanger the viability of the loan programs.

In sum, the elimination of unnecessary affiliation tests from the business loan programs would expand program eligibility to independently owned and controlled small businesses that would have previously been considered ineligible. This is illustrated by the fact that the SBA 504 loan program has not exhausted its program authority in the last 6 years. From 2006 through 2011, approximately 32% of authorized funds have gone unused. In 2012, SBA had left unused 41% of its 504 loan program authorized funds. Therefore, SBA recognizes the need to expand access to the program to more small businesses.

Moreover, as a result, this proposed change would also significantly reduce the excessive burden that is imposed on all eligible small businesses and participating lenders to provide documentation for numerous affiliates to make size evaluations. Under the current regulations for both loan programs, SBA estimates that borrowers and lenders expend $7,274,657 and spend 274,448 hours on providing the documentation for numerous affiliates for SBA to make size determinations. Under the proposed revisions, the SBA estimates that lenders and borrowers would expend $6,573,880 and spend 248,046 hours on providing the necessary documents to SBA. Along those same lines, under current regulations, SBA estimates that the Agency expends approximately $1,567,246 and 53,549 hours on reviewing all of the documents in making size eligibility determinations. Under the proposed revisions, the SBA estimates expending $1,489,161 and 50,883 hours on reviewing the necessary documents.

By mitigating the burdens imposed by the current regulations and streamlining processes, the proposed rule would expand eligibility for the 504 and 7(a) Loan Programs, as well as SBA's Microloan Program authorized under section 7(m) of the Small Business Act (the “Microloan Program”), by redefining the permitted affiliations for borrowers for purposes of determining the applicant's size, but balancing that expansion by requiring an affidavit as to ownership and including a discretionary provision allowing the SBA to analyze the “totality of the circumstances” in egregious cases.

An applicant is ineligible for financing under the agency's business loan programs if it can obtain credit elsewhere. A brief history surrounding the current regulation is instructive here. The initial version of Section 7(a) of the Small Business Act authorized SBA to make loans to small businesses with the restriction that “no financial assistance shall be extended * * * unless the financial assistance applied for is not otherwise available on reasonable terms.” (Pub. L. 85-536, 72 Stat 388 (1958)). During the initial implementation of the 7(a) Loan Program in 1958, the agency interpreted the financial resources test to include the requirement that the funds applied for by the applicant “not appear to be obtainable without undue hardship through utilization of the personal credit or resources of the owner, partners, management, or principal shareholders of the applicant.” (23 FR 10513, December 31, 1958). Thus, the agency required documentation that obtaining the needed financing through use of personal credit or personal resources would create undue hardship before the applicant would be eligible for agency assisted financing.

As early as 1971, the agency received feedback from the U.S. General Accounting Office that loans or guarantees were being made on behalf of applicants in greater amounts than were necessary considering the personal credit and personal resources of those applicants. The recommendation at that time was that the agency create criteria that would specify to agency loan specialists when a loan should be disapproved or agency participation reduced because the personal resources or credit of principals were substantial enough to be used without undue hardship of the principals.

In response, SBA began to provide strict criteria including procedures for “careful review” of any person with 20% ownership in the company or engaged in active management of the company (and in tandem excusing from review persons with less than 5% ownership interest in the applicant with no active management role with the applicant). Still, there was no bright-line established for what would presumptively constitute an “undue hardship” or what contribution of personal resources was appropriate. Forexample, in the agency's standard operating procedures effective in 1985, guidance to loan specialists for the 7(a) Loan Program stated that “reasonable utilization of personal assets” of applicant principals applied to each principal's family as well, with exemptions for cash surrender of life insurance and IRAs, reasonable education expenses, and an additional exemption for each family equal to $50,000 or 25% of the loan amount, whichever was greater. (SBA SOP 50 10 2A (page 38, effective September 16, 1985) (available upon request.)) There was also guidance regarding the requirement that certain family real estate could be counted as personal resources to be used in lieu of program assistance (e.g., “refinancing or sale of real estate may be considered when a principal owner has funds readily available through sale or refinancing that would provide amajorityof the loan request” though owner occupied residences were generally exempted and there was an exemption when “these general rules appear to work as a hardship due to the circumstances of the individual case.”) (SBA SOP 50 10 2A (page 39, effective September 16, 1985) (available upon request.)) This history demonstrates the difficulty the agency had in establishing clear standards for determining when the use of personal resources would create undue hardship to the principals of a business. In 1996, the agency revised its regulations in an effort to create a more objective standard by quantifying the amount of personal resources that must be injected into the business. (61 FR 3226, January 31, 1996)

While there have been numerous amendments to Section 7(a), the credit elsewhere restriction has remained, with slight modifications. For instance, the phrase “credit elsewhere” was introduced in 1981 when the provision was changed to read that “[n]o financial assistance shall be extended pursuant to this subsection if the applicant can obtain credit elsewhere.” (The Small Business Budget Reconciliation and Loan Consolidation/Improvement Act of 1981, Pub. L. 97-35, title XIX, section 1902, 95 Stat. 767 (1981)). A definition for “credit elsewhere” was added at the same time. Section 3(h) of the Small Business Act defines “credit elsewhere” as the “availability of credit from non-Federal sources on reasonable terms and conditions taking into consideration the prevailing rates and terms in the community in or near where the concern transacts business, or the homeowner resides, for similar purposes and periods of time.” 15 U.S.C. 632(h).

Similarly, for the 504 Loan Program, section 503(b)(2) of the Small Business Investment Act of 1958 authorizes financing of applicants only when “necessary funds for making such loans are not available to such companies from private sources on reasonable terms.” Historically, to meet this requirement, the agency verified that private financing on reasonable terms was not available to the 504 applicant, but did not require a review of the personal resources of the applicant's principals and owners. As late as 1993, the agency issued standard operating procedures that instructed loan specialists that the availability of personal resources would not usually disqualify an applicant from receiving assistance under the 504 Loan Program because the primary focus of that program was economic development (job creation). (SBA SOP 50 22 3A (page 58, effective December 30, 1993) (available upon request)). In 1995, however, SBA published proposed regulations explaining that the agency had come to the conclusion that “there is no difference between the business loan programs regarding evidence of need [and that] SBA will consider the personal wealth and resources of the principals and owners in determining an applicant's need for SBA financial assistance in all business loan programs, and SBA may require the principals and owners of the applicant to use their personal resources before SBA will grant financial assistance” (60 FR 64362, December 15, 1995). This change was adopted as final in 1996, and the 504 Loan Program was made subject to the same personal resources test as the 7(a) Loan Program. (61 FR 3226, January 31, 1996).

Under the current personal resources test for the 7(a) and 504 Loan Programs, an assessment is required of the liquid assets of each owner of 20 percent or more of the equity of the applicant company to determine the overall dollar value of personal resources that do not have to be injected into the business (referred to as the “exemption”). The current allowable exemption is determined on the basis of the “total financing package.” The total financing package includes any SBA loans, together with any other loans, equity injection, or business funds used or arranged for at the same general time for the same project as the SBA loan. If the total financing package:

• Is $250,000 or less, the exemption is two times the total financing package or $100,000, whichever is greater;

• Is between $250,001 and $500,000, the exemption is one and one-half times the total financing package or $500,000, whichever is greater; or

• Exceeds $500,000, the exemption equals the total financing package or $750,000, whichever is greater.

The agency is proposing to eliminate this personal resources test from the regulations. SBA has become concerned, that even borrowers whose principals have significant personal resources may be unable to obtain long-term fixed asset financing from private sources at reasonable rates. The agency is now questioning whether the existence of personal resources directly correlates to the ability to obtain commercial credit on reasonable terms and is, therefore, rethinking the appropriateness of using personal resources as an indirect means of determining whether credit is available from private sources. The agency believes it is part of the agency's core mission regarding the assistance of small businesses to increase access to capital and that a personal resource test does not promote access to capital as it unnecessarily restricts the pool of potential investors for small businesses that participate in both loan programs. The agency notes that if the personal resources test is eliminated, more robust borrowers will be eligible to participate in the 504 and 7(a) Loan Programs, The agency is proposing to eliminate this personal resources test from the regulations thereby mitigating risk to the agency's portfolio of loans while facilitating job growth. Based on the agency's records, the number of loan approvals dropped by 42% in 1997, the year after the personal resource test was first instituted for the 504 Loan Program. As the recession has limited access to capital, eliminating the personal resource test would assist small businesses in attracting more types of investors.

For reasons set forth above, the agency believes that the core business loan program missions, including the core job creation mission of the 504 Loan Program (15 U.S.C. 695) and the small business credit support mission of the 7(a) Loan Program (15 U.S.C. 636), would best be served by focusing on the statutory requirement regarding the availability of credit on reasonable terms without attempting to document and enforce precise determinations regarding the appropriateness of personal resource contributions. The agency is therefore proposing toeliminate the personal resources test from the regulations for both loan programs.

The agency continues to believe, however, that the personal resources of the applicant should be taken into consideration in determining what equity injection, if any, should be required of the applicant's principals and owners. Prudent lending includes a determination that the business is adequately capitalized and, if not, that available personal resources be injected into the business. In addition, it is important to note that agency regulations require that persons with a 20% or more ownership interest in an applicant guarantee a business loan program financing (and other persons may also be required to provide personal guarantees). This means that if such guarantors have substantial personal resources, those resources will conditionally support the financing.

SBA invites comments on this specific issue and on the general issue of whether a personal resources test should be retained and, if so, in what form.

Under current 504 Loan Program regulations, § 120.882(a) permits financing of expenses toward a project only if they were incurred “within nine months prior to receipt by SBA of a complete loan application, unless the time limit is extended or waived by SBA for good cause.” SBA proposes to eliminate this nine month limitation and permit financings of expenses toward a project regardless of when they were incurred. Some general context related to this proposed revision follows.

Refinancing of debt unrelated to the 504 project is currently allowed in the 504 Loan Program only pursuant to statutorily limited circumstances as set forth in § 120.882(e) and (g). There are, however, circumstances when an applicant might incur short term debt to cover expenses directly attributable to a larger project that is eligible for financing under the 504 Loan Program. This is particularly true when building construction is part of the project. Acquisition of a building, and particularly the decision to construct from the ground-up, is the result of planning over months, if not years. Diligent small business owners approach the process in a series of steps based upon what is affordable and how the business is performing. Financing for these initial expenditures also is determined by what is cost-effective for the business. In such cases, the agency has under certain conditions allowed those expenses/debts to be included as part of a 504 Loan Program project. What follows is a short summary of the relevant history of how those conditions evolved under the program to its current criteria.

On July 5, 1985 (50 FR 27754), SBA proposed § 108.503-5(d), which allowed financing of expenditures made in anticipation of a financing under the 504 Loan Program if, among other conditions, the applicant filed a written notice to SBA within 60 days after the expenditure.

On June 6, 1986 (51 FR 20764), SBA finalized the above rule and, in response to comments, added that previously acquired land should be eligible to be included in project costs without regard to the timing of the acquisition. It was added as § 108.503-5(d)(2) and the rule above became (d)(1).

On January 31, 1996 (61 FR 3226), SBA published final regulations which essentially re-wrote the loan program regulations and in the process added what is now referred to as the “9-month rule” providing the following explanation in the preamble:

In practice, exceptions to the 9-month rule have been granted regularly because, generally speaking, the date the expense was incurred is a poor indicator as to whether the expense was directly attributable to the applicant's 504 project. For example, because of the weak economy, many businesses' expansion plans have been delayed or placed on hold. Now, in the post-recession recovery period, many small business owners are preparing to resume their plans only to discover that expenditures already made, or the method of financing those expenditures, results in those costs not being eligible for 504 financing. As a result, SBA receives about 6-8 rule exceptions requests on a weekly basis, for an approximate total of 312-416 such requests yearly. Out of those requests, SBA declines only 1-2 per week, for an approximate total of 52-100 denials yearly. Based on these estimates, in the last five years, SBA has declined about 19% of rule exception requests, while approving approximately 81% of such requests. This data confirms the agency's belief that determining whether an expense has been incurred by an applicant for a 504 project requires a fact specific analysis which appropriate agency personnel need to make regardless of when the expense was incurred. As it relates to loan processing, the agency will continue to review any expense that was incurred prior to the date of application to ensure that it is “directly attributable” to the project. Based on SBA's experience in the application of the 9-month rule and having, for the most part, approved requests from applicants that SBA make an exception to this policy, the agency believes that the 9-month restriction can and should be eliminated from the regulations.

SBA also proposes to revise regulations dealing with corporate governance including eliminating the requirement for CDC membership and emphasizing the responsibility of the board of directors. A detailed discussion of these proposed changes can be found in the section-by-section analysis below.

The proposed rule would make other technical corrections and changes resulting in simplification of some regulations for both the 504 Loan Program and the 7(a) Loan Program, and a discussion of these proposed changes can be found in the section-by-section analysis.

Section 120.102Funds not available from alternative sources, including personal resources of principals.SBA proposes to remove this regulation regarding the availability of personal assets of the principals of the Borrower. For the reasons described above under Background Information, SBA has determined that in order to better serve the small business community and economic development, the regulation should be removed for both the 504 Loan Program and the 7(a) Loan Program.

Section 120.816CDC nonprofit status and good standing.SBA proposes to redesignate the current § 120.820 as a new § 120.816. The content would remain unchanged.

Section 120.818Applicability to existing For-Profit CDCs.SBA proposes to add this new section to clarify that, unless expressly provided otherwise in the regulations, any Loan Program Requirement that applies to non-profit CDCs also applies to for-profit CDCs. This proposed change reflects current SBA practice.

Section 120.820CDC Affiliation.SBA proposes to substitute the current § 120.820 with a new § 120.820 that sets forth requirements regarding CDC affiliations. In paragraph (a), SBA proposes to require that a CDC be independent and not be affiliated with any Person (as defined in § 120.10) except as permitted under this section. In paragraph (b), SBA proposes to permit CDCs to be affiliated with non-profit economic development entities or State and local government political subdivisions (e.g., councils of government). In paragraph (c), SBA proposes to permit a CDC to continue to be affiliated with a 7(a) Lender if: (1) the affiliation was in effect as of the effective date of this regulation; and (2) the 7(a) Lender is either a state development company approved by SBA as of November 6, 2003, or a credit union. This proposed change will permit the continuation of existing relationships between CDCs and 7(a) Lenders that are credit unions or state development companies, but does not permit the creation of such relationships going forward. In paragraph (d), consistent with current policy, SBA proposes adding a provision prohibiting one CDC from affiliating with or investing in or financing, directly or indirectly, another CDC.

Section 120.822Membership.Currently, this section requires CDCs to have at least 25 members or stockholders, and also sets forth membership group requirements. SBA proposes to eliminate the requirement that a CDC have membership. Now that CDCs currently have authority to loan in a statewide (or multistate) area, the local membership board does not have the same impact as when CDCs represented a smaller service area. Maintaining both membership and a Board of Directors places an unnecessary burden on CDCs. Lessening this burden may encourage more entities to become CDCs, resulting in an expansion of the program and loans to small businesses. A CDC may continue to have membership but it is no longer an SBA requirement. Instead, SBA is emphasizing the responsibilities and duties of the CDC Board of Directors in the following section. Accordingly, SBA is proposing to remove § 120.822 from the regulations.

Section 120.823CDC Board of Directors.In paragraph (a), SBA proposes to revise the regulations to emphasize the authority and the responsibilities of the CDC Board of Directors. The proposed regulation provides that the initial board may be created as permitted by state law. It also outlines proposed requirements for the directors' backgrounds and areas of expertise. SBA proposes adding a requirement that the Board size shall be not less than 11 voting directors and not more than 25. SBA recommends that CDCs have an odd number of Directors to avoid tie votes, which is consistent with best practices of Boards generally. SBA has based this revision upon an extensive review of the average size of non-profit boards, not limited to CDCs, which typically ranges from 7-15 Board members. Based upon the mission and responsibilities of CDCs and the average size for both for-profit and non-profit CDCs in the 504 Loan Program, however, SBA is proposing a range of 11-25 Board members. While SBA supports limiting the number of directors on the Board for efficiency of operations, the agency also understands that an important function of the Board is to provide representation for the communities served by the CDC. Having an upper limit of 25 directors for the CDC Board would provide CDCs with the opportunity to convert existing membership (currently set at a minimum of 25) to directors if they choose to do so. To increase community representation, the CDC would still have the option to have a membership to which the CDC may admit as many members as it deems appropriate.

The Agency lists several proposed areas of expertise that it believes are essential to the successful operation of the CDC Board. SBA proposes to require that a CDC have, at a minimum, one director that is a representative from the economic, community or workforce development field and two directors that are representatives from the commercial lending field. This proposed change is intended to expand the pool of potential directors and to encourage more diversity and expertise on the Board. Retired individuals may represent the fields from which they retired, as the Agency recognizes the value of their knowledge and experience.

Paragraph (b) regarding commercial lending experience is language from the existing regulation except that SBA proposes to increase the minimum number of voting directors on the Board with commercial lending experience from one to two. Further, at least two directors with commercial lending experience must be present and vote when the Board is acting on SBA approvals or servicing actions. SBA believes that this requirement is prudent now that the maximum loan amount has been increased to $5,000,000 and, in some cases, $5,500,000.

Paragraph (c) outlines the proposed minimum requirements for Board meetings and explicitly establishes the Board's responsibilities for the actions of the CDC, its staff, and any committees established by the Board of Directors. The requirement in subparagraph (c)(1) does not reflect any changes to the current regulations. To ensure effective operation and oversight of the CDC by the Board, and to encourage maximum involvement by each Director, the Agency proposes requiring that a quorum of not less than 50% of the Board be present to conduct all business. Non-voting directors will not be included for the purposes of establishing a quorum. SBA is aware that some CDCs were requiring that a quorum be present only to begin a meeting; this practice would not comply with the proposed rule. In subparagraph (c)(3), SBA proposes that meetings may be held in any manner permitted by state law, recognizing that there are methods for meeting other than being physically present. Paragraph (c)(4) proposes to maximize diversity on the Board by limiting representation by commercial lenders to less than 50% of the Board of Directors. Paragraph (c)(5) proposes to limit the ability of an outside entity (including affiliates of that entity) to control the Board by restricting the entity's representation on the CDC Board to one member.

In paragraph (d), SBA proposes to require that the Board be responsible for ensuring that the structure and operation of the CDC, as set forth in the Bylaws, comply with SBA's Loan Program Requirements. Insubparagraphs (d)(1) and (2), SBA proposes to require that the Board be responsible for setting the mission and hiring, firing, supervising and evaluating the CDC manager. To emphasize the fiscal responsibility of the Board as it relates to salaries, subparagraph (d)(3) explicitly outlines the duties of the Board to set salaries for the CDC manager and to review all other salaries to provide greater transparency and accountability. SBA requires that a Report on Compensation be included in the Annual Report (see proposed § 120.830). SBA also proposes in subparagraph (d)(4) to provide the CDC with flexibility in determining whether to have committees, but addresses the requirements for Executive and Loan Committees, if established. Emphasis has been placed on the Board of Directors in this proposed rule. If a Board chooses to have an Executive Committee, then its members must be chosen from the Board as the Agency does not want this authority to be delegated to individuals who are not members of the Board. The Executive Committee must be chosen by and from the Board and meet the same requirements as the Board with the exception that the Executive Committee would be required to have no fewer than 5 voting members, and there must be a quorum of at least 5 voting members to conduct business. The proposed regulations also permit the Board to establish a Loan Committee and outline the requirements as to committee membership selection and background. As is provided in the current rule regarding the Loan Committee, no CDC staff may serve on the Loan Committee. Further, the regulation as proposed defines a quorum as five voting Loan Committee members. Subparagraph (d)(4)(ii)(D) additionally proposes that there be no actual or appearance of a conflict of interest. For example, a member of the Loan Committee must not participate in deliberations on a loan for which the Third Party Lender is the Committee member's employer.

Subparagraph (d)(5), as proposed, requires the Board to ensure that the CDC's expenses are reasonable and customary, and proposed subparagraph (d)(6) requires the Board to hire an independent auditor to ensure compliance with Loan Program Requirements.

The proposed provisions in subparagraphs (d)(7) and (8) emphasize the requirement that the Board monitor the portfolio and review the semiannual status report from the CDC to ensure that the Board provides appropriate oversight of the CDC's portfolio. SBA proposes to add requirements in subparagraph (d)(9) that the Board ensure that the CDC establishes and maintains adequate reserves to enable the CDC to operate.

As provided in current § 120.825, a CDC must invest in its Area of Operations. Subparagraph (d)(10) of § 120.823 proposes to require that the Board approve all investments of over $2,500 and that the CDC manager approve investments of $2,500 or less in order to ensure that the investments constitute appropriate economic development activity and that such investments do not compromise the adequacy of the reserves. Examples of economic development activities could include non-profit activities such as workforce development programs, lending programs or other like activities in the CDC's Area of Operations.

The Agency proposes to require in subparagraph (d)(11) that the Board establish a policy in the Bylaws of the CDC prohibiting an actual or apparent conflict of interest, and enforce such policy. The agency would expect that the policy would provide, among other things, that no director may participate in deliberations on a loan if the director is employed by or is otherwise associated with the Third Party Lender. Subparagraphs (d)(12) and (d)(13), as proposed, express the Board's retention of accountability for all actions of the CDC, and establishes the responsibility for establishing written internal control polices as set forth in § 120.826. SBA proposes to add subparagraph (d)(14) requiring the CDC's Board of Directors to establish commercially reasonable loan approval policies, procedures, and standards. The CDC's credit approval process and delegations of authority, if any, must be set forth in the Bylaws. In addition, the loan must be credit-approved before the application is submitted to SBA. The proposed rule would require that the Board of Directors, or the Executive Committee, if authorized by the Board, provide credit approval for loans greater than $2,000,000 prior to submission to the agency, as SBA believes that it is important that the Board, or Executive Committee, approve these larger loans. However, SBA recognizes that Boards may not meet frequently enough to provide the needed credit approval in a timely manner prior to submission of an application to SBA and that allowing approval of smaller loans by the Loan Committee would present minimal additional risk to the Agency. Therefore, SBA is proposing to allow Boards to delegate authority to the Loan Committee to provide credit approval of: (1) loans of less than $1 million, and (2) loans of $1 million to $2 million subject to ratification by the Board or the Executive Committee prior to debenture closing. SBA invites comment on this proposal. To further emphasize the responsibilities of the Board, in subparagraph (d)(15), SBA proposes an annual certification by all Board members acknowledging their responsibilities.

In paragraph (e), SBA proposes to add the requirement that the Board must maintain directors' and officers' liability and errors and omissions insurance to protect the CDC. The Agency requires at least $5,500,000 for each occurrence and $5,500,000 in the aggregate per year, as well as a deductible of not more than $50,000 for both directors' and officers' liability insurance and errors and omissions insurance. These coverage amounts correspond to the maximum loan amount. SBA invites comment on the amounts of both the insurance and the deductible.

Section 120.830Reports a CDC must submit.SBA proposes to revise the requirements for reporting by CDCs in order to improve transparency and accountability and for other purposes discussed in this paragraph. In paragraph (a), SBA proposes adding a requirement that copies of Federal tax returns be submitted in the Annual Report to assist the Agency in reducing risk by reviewing the financial condition of the CDC and compensation of CDC employees. The requirements for the audited or reviewed financial statements are set forth in subparagraph (a)(1) and remain unchanged. In addition, as a matter of practice, SBA does not require a CDC to submit an Annual Report for the year in which it was certified if the CDC is certified by SBA within 6 months of its fiscal year-end, and SBA proposes to reflect this practice in the regulations. In subparagraph (a)(2), SBA proposes to add a requirement for an annual compensation report covering all current and former officers and directors receiving compensation during the covered period, and any current and former employees and independent contractors with total compensation of more than $100,000 during the covered period. For this purpose, total compensation includes all compensation, including salary, bonuses and expenses. Additionally, in subparagraph (a)(3), the Agency proposes to require that the annual report include an annual certification by each of the directors that he or she has read and understands the requirements set forth in the proposed § 120.823. In subparagraph (a)(4), SBA is proposing to require that the CDC report on investments in economic developmentactivities in each State in which the CDC has an outstanding 504 loan. With the exception of the revisions noted above, the reporting requirements for CDCs remain the same.

Section 120.835Application to expand an Area of Operations.SBA proposes to incorporate subparagraph (c)(1) into paragraph (c) and remove subparagraph (c)(2), which currently requires the CDC to meet the requirements as to membership for each state in a Multi-state expansion, since the proposed revisions to § 120.822 make membership optional.

Section 120.882Eligible Project costs for 504 loans.SBA proposes to eliminate paragraph (a)(2) of § 120.882, which limits Project expenses eligible for 504 Loan Program financing to those incurred within 9 months prior to receipt by SBA of a complete loan application. (The cost of acquiring land to be used in the Project is not subject to the 9-month restriction.)

For the reasons described above under Background Information, SBA's proposal would permit prior expenses that are directly attributable to the 504 project to be considered eligible project costs regardless of when those expenditures were made. If financing was required for the costs incurred, SBA would determine whether the 504 loan should be made under § 120.882(e) as a 504 project that includes a refinancing component or under § 120.882(a) because the costs are directly attributable to the project.

Section 120.920Required participation by the Third Party Lender.SBA proposes revising this section to provide that if a Third Party Lender requires collateral in addition to that which the CDC takes, the Third Party Lender, in the event of liquidation, must first apply the proceeds from the sale of the additional collateral to the balance of the Third Party Lender's loan. This marshaling of assets would protect the CDC's position in the Common Collateral (as defined in the proposed revision to this section) and could lead to greater recovery for SBA

Section 120.925504 Preferences.SBA proposes removing this section, and addressing the concern with respect to the application of the proceeds from additional collateral held by the Third Party Lender in § 120.920 as described above.

Section 121.103How does SBA determine affiliation? SBA proposes to amend this section to provide that affiliation for 7(a), 504 and microloan loan applicants would be determined under a new § 121.302, as described below, and not under § 121.103.

Section 121.302What are the standards for determining affiliation for loan applicants?

SBA proposes to redefine “affiliation” for the purpose of the business loan programs. Proposed paragraph (a) of § 121.302 contains a statement of general principles of affiliation for business loan applicants and incorporates the exceptions to affiliation set forth in § 121.103(b). Proposed paragraph (b) sets forth the affiliation principles based on ownership. Proposed paragraph (c) describes the effect on affiliation of stock options, convertible securities, and agreements to merge. Proposed paragraph (d) outlines affiliation based upon common management. Proposed paragraph (e) incorporates § 121.103(i) regarding affiliation based on franchise and license agreements. Proposed paragraph (f) requires that each applicant for a 7(a) loan or a 504 loan submit with its application an Affidavit in which discloses all owners of the applicant and the percentage of ownership of each, and any affiliates as determined under this section.

The existing §§ 120.302 through 120.305 are proposed to be redesignated as §§ 120.303 through 120.306, respectively, without any further changes.

The Office of Management and Budget (OMB) has determined that this proposed rule is a “significant” regulatory action for the purposes of Executive Order 12866. Accordingly, the next section contains SBA's Regulatory Impact Analysis. However, this is not a major rule under the Congressional Review Act, 5 U.S.C. 800.

1. Is there a need for this regulatory action?

The agency believes it needs to reduce regulatory burdens and expand business loan program access to reinvigorate the programs and facilitate job creation.

2. What are the potential benefits and costs of this regulatory action?

As stated above, the potential benefits of this proposed rule are based on its elimination of unnecessary participation burdens and eligibility criteria. Specifically, the proposed rule would eliminate certain eligibility criteria related to the personal resources of certain people or companies associated with the applicant. It would also exempt the business loan program from certain rules that determine whether an entity is deemed affiliated with an applicant. When an entity is determined to be affiliated with an applicant, then that entity's receipts and employees are added to those of the applicant when determining its size. Thus, certain businesses are deemed to be ineligible for assistance because they are not deemed to be “small” for program purposes by virtue of their combined size with affiliated entities. By eliminating unnecessary affiliation tests from the business loan programs, independently owned and controlled small businesses that would otherwise be ineligible for business loan program assistance will become eligible. In addition, the excessive burden related to providing documentation for size evaluation for numerous affiliates now faced by lenders and borrowers would be significantly reduced by the proposed rule.

In the 504 Loan Program, SBA is proposing to eliminate what is commonly referred to as the “9-month rule”. The 9-month rule essentially states that costs incurred by an applicant that otherwise would be eligible for financing under the 504 Loan Program are presumptively deemed to be ineligible project costs if incurred more than 9 months prior to a complete loan application submitted by an applicant. Also pertaining only to the 504 Loan Program, the proposed rule would revise regulations dealing with corporate governance including eliminating the requirement for CDC membership and emphasizing the responsibility of the board of directors. CDCs participating in the 504 Loan Program would no longer need to maintain a membership, thus eliminating that program participation burden. Requirements for the CDC Board of Directors are clarified and detailed to compensate for the potential loss of oversight that might result from the lack of CDC membership participation. SBA could have allowed CDC Directors to operate without clearly articulated basic standards that are commonly accepted best practices that most CDCs already follow. SBA welcomes comments and suggestions on the benefit of allowing CDC Boards to operate without the basic governance standards and oversight proposed in this rule.

With respect to CDC Board requirements, the agency proposes to establish a minimum quorum of 50% of the Board and to require that the Board set the CDC manager's salary and reviewall CDC staff salaries. There are additional operational requirements which are discussed more fully in the section-by-section analysis of this proposed rule. It is the agency's view that these rules basically would codify best practices for CDC Board operation and would not significantly add to the burden of being a responsible CDC director. The agency encourages public comment on the Board requirements, especially with respect to any possible significant economic impact, as well as suggestions regarding how to ensure proper Board operations in a less burdensome way.

Finally, there are miscellaneous proposed revisions which clarify or slightly revise exiting regulations with very minor regulatory impact. For example, consistent with current policy, § 120.818 clarifies that CDC requirements apply to for-profit CDCs. Another example is § 120.830, which the agency believes would allow several CDCs to maintain existing affiliations and still qualify for expanded CDC status without impacting the operational requirements of other CDCs. With respect to any of the proposed revisions relating to CDC operational and organizational requirements, the agency welcomes any comments regarding potentially significant impact on CDC operations and views regarding how the agency can responsibly reduce CDC operational and organizational compliance burdens.

3. What alternatives have been considered?

One “alternative” would be to eliminate even more regulatory burdens and the agency enthusiastically encourages public comment and suggestions on how that can be done responsibly without substantially increasing the risk of waste, fraud, or abuse of the programs or otherwise threatening the integrity of the business loan program or taxpayer dollars. With respect to the proposed changes to CDC Board of Director requirements, the agency considered allowing CDC directors to operate with virtually no agency oversight or standards, relying on state non-profit corporation laws and state oversight to ensure proper Board performance. This idea was quickly rejected because SBA's review of actual state oversight of non-profit directors and the applicable state law requirements indicated that state oversight and laws would not provide the parameters and oversight necessary for a Federal loan program that potentially puts billions of taxpayer dollars at risk each year.

A description of the need for this regulatory action and benefits and costs associated with this action, including possible distributional impacts that relate to Executive Order 13563, are included above in the Regulatory Impact Analysis under Executive Order 12866.

The business loan programs operate through the agency's lending partners, which are 7(a) Lenders and CDCs. The agency has held public forums and meetings which allowed it to reach hundreds of its lending partners and gain valuable insight, guidance, and suggestions from many of them and the trade associations which represent many of them. The agency's outreach efforts to engage stakeholders before proposing this rule was extensive.

This action meets applicable standards set forth in Sections 3(a) and 3(b) (2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminates ambiguity, and reduce burden. The action does not have retroactive or preemptive effect.

SBA has determined that this proposed rule will not have substantial, direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. Therefore, for the purposes of Executive Order 13132, SBA has determined that this proposed rule has no federalism implications warranting preparation of a federalism assessment.

The SBA has determined that this proposed rule would impose additional reporting and recordkeeping requirements under the Paperwork Reduction Act (PRA), 44 U.S.C. Chapter 35. First, SBA proposes to amend the currently approved CDC Annual Report to require CDCs to report on executive compensation and economic development projects, and to submit a copy of the CDC's tax return. Under the proposed rule, each CDC director must certify that he or she has read and understands the requirements set forth in 13 CFR 120.823.

Second, SBA proposes to require each loan applicant to certify in an Affidavit (the “Applicant Affidavit on Affiliation”) as to the applicant's affiliation with any other entities. Requiring submission of this Affidavit would significantly reduce the burden on the small businesses and the CDCs as the small businesses applying for a 504 or 7(a) loan would be required to submit certain documentary evidence (e.g., credit reports, financial statements and tax returns) only with respect to their affiliates as defined in the proposed rule. In addition, applicants would be required to identify all owners of the applicant as opposed to each owner of 20% or more interest as is now required only on Form 4, Application for Business Loan.

As a result of these new requirements, SBA proposes to revise the information collections identified below:

1.Title and Description of Information Collection:The Certified Development Company (CDC) Annual Report (SBA Form 1253) is the method through which the CDC provides information to SBA on economic development, its financial condition, operations and employment impact. The additional information that would be required to be submitted with the Annual Report is a certification by each CDC director, a report on compensation, and a copy of the CDC's federal tax return. This information collection will also be revised to reflect changes in governance of CDC membership; composition of CDC board of directors and increases to insurance coverage.

OMB Control Number:3245-0074.

Description of and Estimated Number of Respondents:All CDCs must provide an annual report. Currently there are approximately 260 CDCs. There is 1 form per respondent. SBA has prepared an estimate based on the fact that respondents keep the information requested in the ordinary course of business (all the loan information including jobs created and retained.).

Estimated Number of Responses:260 (260 CDCs × 1 form per respondent = 260).

Estimated Time per Response:SBA estimates the time needed to complete this collection will average 28 hours.

Total Estimated Hour Burden:260 × 28 hours = 7,280 total annual burden hours. This is 168 hours less than the current OMB inventory (7,488).

2.Title and Description of Information Collection:Applicant Affidavit on Affiliation as to applicant's affiliation with any other entities. This new information collection, as described above, will be submitted with the following applications:

(i) Application for Section 504 Loan (SBA Form 1244).

OMB Control Number:3245-0071

Description of and Estimated Number of Respondents:The Applicant would execute this Affidavit which would be part of exhibit 12 to SBA Form 1244.Based upon FY 2011 loan totals, SBA estimates that 6,800 respondents will complete the Affidavit annually (4,625 ASM submission + 2,75 standard submissions = 6,800).

Estimated Number of Responses:6,800 based upon the FY 2011 loan totals.

Estimated Time per Response:SBA estimates that each applicant would require 15 minutes to complete the new proposed form, thereby decreasing the total estimated burden for this collection, which depending on the Lenders status, is currently 2.25 hours or 2.45 hours per application.

Total Estimated Burden:15,736 hours, which is identical to current OMB inventory.

(ii) Application for Business Loan (SBA Form 4-I and 4 Schedule A).

OMB Control Number:3245-0016.

Description of and Estimated Number of Respondents:17,300 Applicants for 7(a) loans based upon FY 2011 totals.

Estimated Number of Responses:32,130 based upon the FY 2011 totals.

Estimated Time per Response:SBA estimates that each applicant would require 15 minutes to complete the new proposed form, which would result in a corresponding reduction in the current burden for this collection.

Total Estimated Burden:206,340 hours (8.625 hours less than current OMB inventory).

(iii) SBA Express, Export, Express, Small Loan Advantage, PLP-CapLines, and Pilot Loan Programs (Patriot Express and Dealer Floor Plan) Borrower Information Form (SBA Form 1919, 1920SX (A, B & C) and 2237).

OMB Control Number:3245-0348.

Description of and Estimated Number of Respondents:4,450 Applicants for SBA Express, Export Express, Small Loan Advantage, PLP-Caplines and Pilot Loan Programs based upon FY 2011 totals.

Estimated Number of Responses:117.900.

Estimated Time per Response:12 minutes.

Total Estimated Burden:22,620 hours (36,236 hours less than current OMB inventory).

(iv) Lender Advantage (SBA Form 2301-A, B & C).

OMB Control Number:3245-0361.

Description of and Estimated Number of Respondents:15,900 Applicants for SBA's Lender Advantage Loan Initiative Program based upon a projection of program activity during FY 2013.

Estimated Number of Responses:15,900 respondents based upon a projection of program activity during FY 2013.

Estimated Time per Response:SBA estimates that each applicant would require 30 minutes to complete the new proposed form, which would result in a reduction in the current burden hours for this collection.

Total Estimated Burden:46,095 hours (2,895 hours less than current OMB inventory).

(v) PCLP Quarterly Loan Reserve Report and PCLP Guarantee Request (SBA Forms 2233 and 2234-A, B & C).

OMB Control Number:3245-0346.

Description of and Estimated Number of Respondents:19 PCLP Lenders.

Estimated Number of Responses:1,700 respondents based on an estimate of the loan volume.

Estimated Time per Response:SBA estimates that each applicant would require 50 minutes to complete the new proposed form, which would result in a reduction in the current burden hours for this collection.

Total Estimated Burden:1,402 hours less than current OMB inventory.

SBA has submitted these amended collections to the Office of Management and Budget (OMB) for review, and invites the public to comment on the proposed changes, particularly on: (1) Whether the proposed collection of information is necessary for the proper performance of the program, including whether the information will have a practical utility; (2) the accuracy of SBA's estimate of the burden of the proposed collections of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology. Please send comments by the closing date for comment for this interim final rule to SBA Desk Officer, Office of Management and Budget, Office of Information and Regulatory Affairs, 725 17th Street NW., Washington, DC 20503, and to Linda Reilly, Chief, 504 Program Branch, Office of Financial Assistance, Small Business Administration, 409 Third Street SW., Washington, DC 20416.

When an agency issues a rulemaking proposal, the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires the agency to “prepare and make available for public comment an initial regulatory analysis” which will “describe the impact of the proposed rule on small entities.” Section 605 of the RFA allows an agency to certify a rule, in lieu of preparing an analysis, if the proposed rulemaking is not expected to have a significant economic impact on a substantial number of small entities. Although the rulemaking will impact all of the approximately 4,500 7(a) Lenders (some of which are small) and all of the approximately 260 CDCs (all of which are small), SBA does not believe the impact will be significant. As stated above, the proposed rule will expand access to the business loan program but this will not increase the burden of the agency's lending partners because they choose their own level of program participation (i.e., 7(a) Lenders and CDCs are not required to process more loan applications simply because more small businesses are eligible to apply for a business loan). For those CDCs and lenders that process more businesses loans, the benefit of the increase in revenue will far exceed any increased burden. In addition, the proposed elimination of certain program participation requirements would not have a substantial economic impact or cost on the small business borrower, lender or CDC.

SBA believes that this rule is SBA's best available means for facilitating American job preservation and creation by removing unnecessary regulatory requirements. Since the main purpose of this proposed rule is to reduce unnecessary regulatory burdens and program eligibility criteria, a review of the preamble sections above will provide more detailed explanations regarding how and why this proposed rule will reduce regulatory burdens and responsibly increase program participation flexibility. For these reasons, SBA has determined that there is no significant impact on a substantial number of small entities. SBA invites comment from members of the public who believe there will be a significant impact either on CDCs, or their borrowers.

For the reasons stated in the preamble, SBA proposes to amend 13 CFR parts 120 and 121 as follows:

Comments Invited

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

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

Transport Canada (TC), which is the aviation authority for Canada, has issued TC AD No. CF-2012-14R1, dated May 9, 2012 (CF-2012-14R1), to correct an unsafe condition for the Dart high gear aft crosstube assembly, part number (P/N) D412-664-203, approved under TC Supplemental Type Certificate (STC) SH01-9, FAA STC SR01298NY, and European Aviation Safety Agency (EASA) STC IM.R.S.01304, and installed on Agusta Model AB412 and AB412 EP and Bell Model 412, 412EP, and 412CF helicopters. TC advises that they have received five reports of these crosstubes failing. According to TC, based on these reports, the affected crosstube requires a life limitation of 10,000 landings. As a result, TC issued CF-2012-14R1, which requires amending the instructions for continued airworthiness (ICA) to establish the new life limitation, and removing from service all crosstubes with more than 10,000 landings.

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

We reviewed Dart ICA No. ICA-D212-664, Revision 8, dated October 20, 2011, which contains the airworthiness limitations, inspection requirements, proper placards and markings, and maintenance procedures for crosstube P/N D212-664 and D412-664. Revision 8 establishes a life limit of 10,000 landings for crosstube P/N D412-664-203.

This proposed AD would require establishing a component history card for each crosstube, P/N D412-664-203; revising the airworthiness limitations of the maintenance manual to establish a life limit of 10,000 landings for each crosstube; and removing from service any crosstube with more than 10,000 landings.

We estimate that this proposed AD would affect 76 helicopters of U.S. Registry. Based on an average labor cost of $85 per hour, we estimate that operators may incur the following costs in order to comply with this AD. Creating a component history card and amending the ICA would require about 1 work-hour, for a cost per helicopter of $85 and a total cost to U.S. operators of $6,460. Replacing a crosstube that has exceeded its life-limit would require about 6 work-hours and required parts would cost about $10,351, for a total cost per helicopter of $10,861.

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

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

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

For the reasons discussed, I certify this proposed regulation:

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

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

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

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

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

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

Comments Invited

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

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

On June 2, 2011, we issued AD 2011-12-10, amendment 39-16717 (76 FR 35330, June 17, 2011) (AD 2011-12-10) for Robinson Model R22, R22A, R22 Beta, and R22 Mariner helicopters, with a blade, part number (P/N) A016-4; and Model R44 and R44 II helicopters, with a blade, P/N C016-2 or C016-5. Wecorrected a typographical error in AD 2011-12-10 on March 5, 2012 (77 FR 12991). AD 2011-12-10 requires a pilot check of the blade skin-to-spar joint area for any bare metal before the first flight of each day. That AD also requires, within 10 hours time-in-service (TIS), and thereafter at 100-hour TIS intervals or at each annual inspection, or if any bare metal is found during the pilot check, inspecting each blade for corrosion, separation, a gap, or a dent by following certain procedures in Robinson R22 Service Bulletin SB-103, dated April 30, 2010, for Model R22 series helicopters or Robinson R44 Service Bulletin SB-72, dated April 30, 2010, for Model R44 series helicopters. That AD also requires refinishing any bare metal before further flight and replacing any damaged blade with an airworthy blade.

AD 2011-12-10 superseded AD 2007-26-12, Amendment 39-15314 (73 FR 397, January 3, 2008) (AD 2007-26-12) which requires a one-time visual inspection for skin separation along the leading edge of the blade skin aft of the skin-to-spar bond line on the lower surface of each blade and in the tip cap area. AD 2007-26-12 also requires a “tap test” for detecting a separation or void in both bonded areas, repainting any exposed area of the blades, and replacing any blade if separation or a void occurs. That AD was prompted by 11 reports of blade debond, some occurring in flight and some found during routine maintenance.

Since we issued AD 2011-12-10, Robinson has developed replacement blades on both the R22 and R44 helicopters, and we have determined that replacing P/N A016-2 and -4 blades with P/N A016-6 blades for the Model R22 helicopter and P/N C016-2 and -5 blades with P/N C016-7 blades for the Model R44 helicopter will constitute terminating action for all requirements of that AD. We have also determined that it is in the interest of safety that all blades are replaced within 5 years. The actions of this AD are intended to detect debonding or a void in the blade, which could lead to failure of the blade and subsequent loss of control of the helicopter. These actions will also correct the unsafe condition by replacing the main rotor blades with new blades that do not require the AD inspection.

Also, since issuing AD 2011-12-10, we have received comments from 13 commenters and have given due consideration to each one. We have identified seven unique issues and addressed those issues as follows:

Three commenters stated that making a logbook entry each day showing the AD check for paint is unnecessary and burdensome. The commenters also stated it is the same importance as other pre-flight checks that are not documented. One commenter suggested replacing the daily check and logbook entry with a pre-flight check and no logbook entry. One commenter stated that “we need to trust the pilots and maintenance people to do their jobs and not add to this burden of it looks good on paper world.” We do not agree. FAA policy requires a logbook entry for checks performed pursuant to the directions of an AD.

Four commenters stated it is not necessary to shorten the retirement life of main rotor blades by AD. They stated the cost is high compared to the safety benefit, it could put small operators out of business, and the problem is caused by poor inspection practices. One commenter added that routine inspections are performed before flight and if any defects were discovered that operator would be aware of it and not attempt flight until repairs were made. If operated in an environment where none of the causal factors exist, reliance on continued inspections is an adequate and appropriate long term solution to blade replacement. We do not agree. AD 2011-12-10 does not decrease the retirement life of the affected blades. While this proposed AD supersedure would require blade life reduction and replacement, we are providing for public comment prior to adoption of the proposed AD.

Three commenters expressed concern that the cost estimates for older R44 Astro model helicopters is inaccurate, as these models must be refitted with hydraulic assisted controls before the new aluminum blades can be operated. They further stated that this modification can only be performed at the Robinson factory and the cost for shipping and overhaul is high. They question who will pay for the loss of income and state that mandating replacement of the -5 blade would have the unintended consequence of immediately grounding and placing an entire class of safe machines beyond economical repair. One of these commenters stated that replacing the blades on his R44 has been “financially devastating” due to both replacement costs and his loss of revenue, and believes Robinson should be responsible for these costs, not owners.

We do not agree. We are aware that the replacement blades for the R44 Astro are not compatible with a helicopter without hydraulic assisted controls, but we disagree that the R44 Astro will be beyond economical repair as many R44 Astros have been refitted with hydraulics, and conversions occur often. AD 2011-12-10 estimated costs for replacing one blade if debonding was present, and did not address any costs to modify the helicopter to accept the new part-numbered blades manufactured by Robinson. The FAA does not concur with the commenter's request that the FAA require the manufacturer to cover the cost of replacing the blades. The FAA recognizes that the general obligation of the operator to maintain aircraft in an airworthy condition is vital, but sometimes expensive. The FAA considers that, in the interest of maintaining safe aircraft, prudent operators would accomplish the required actions even if they were not required to do so by the AD. However, the manufacturer, not the FAA, determines if the manufacturer will cover the cost of implementing a particular action. Therefore, no change in this regard is necessary.

One commenter requested the immediate adoption of an airworthiness directive requiring replacement of the main rotor blades, and expressed concern that the FAA was giving more consideration to any financial impact on Robinson than to the risk to the flying public. We do not agree that immediately requiring replacement of the blades is necessary, as we have determined that proper inspection is adequate to protect the safety of the fleet for the short term. This proposed AD to terminate the inspections by mandating blade replacement after five years is intended to allow time for blade manufacture, distribution, and installation without causing undue hardship to operations, and to protect the long term safety of the fleet.

One commenter stated that the current method of detecting the debonding issue is acceptable provided the inspection is performed properly and repainted when necessary to prevent the bonding from being exposed to the elements. This commenter disagreed that the problem is not a manufacturing problem and expressed concern that the variance in design of the blades is contributing to the situation. The commenter questioned whether other manufacturers are having similar issues and whether the new -7 replacement blades are produced under a different manufacturing process to ensure the current problem will be eliminated. The FAA disagrees that the cause of the debond is a failure of the manufacturing process. The debonding is being caused by the basic blade design, which allows erosion of thebond line if left unprotected in an erosive environment. The replacement blades were redesigned using best practices, engineering integrity, and heightened oversight. While we believe the redesigned blades will correct the unsafe condition, the FAA cannot guarantee any design change will not, in the future, develop a problem that requires correction.

One commenter noted that a previous Civil Aviation Safety Authority (CASA) AD required a detailed inspection to determine blade airworthiness should any exposed blade skin aft of the skin-to-spar bond line be found, and that AD 2011-12-10 only requires refinishing the blade should the bond line be found to be exposed, without further inspection. The FAA agrees. Due to a typographical error in the AD, the requirement to skip further inspection prior to refinishing was caused by an incorrect reference to the refinishing paragraph instead of the inspection paragraph. A revision to AD 2011-12-10, Amendment 39-16717 (77 FR 12991, March 5, 2012) was issued on January 3, 2012, so that the AD language now refers to the correct paragraph.

We are proposing this AD because we evaluated all the relevant information and determined the unsafe condition described previously is likely to exist or develop in other products of these same type designs.

We have reviewed the following Robinson service information:

• Letter titled “Additional Information Regarding Main Rotor Blade Skin Debonding,” dated May 25, 2007, discussing blade skin debonding;

• Rotorcraft Flight Manual (RFM) changes to the Normal Procedures Section 4 and Systems Description Section 7, revised April 20, 2007, for each applicable model helicopter containing a “caution” about skin-to-spar bond line erosion;

• One Service Letter with two different Nos.: R22 SL-56B and R44 SL-32B, both revised April 30, 2010, specifying proper inspection and protection (refinishing) of bonded areas; and

• Service Bulletins SB-103 for the Model R22 and SB-72 for the Model R44, both dated April 30, 2010, specifying proper inspection and protection (refinishing) of bonded areas for certain affected blades.

• R44 Service Letter SL-37, dated June 18, 2010, specifying the required modifications for a carbureted R-44 to install P/N C016-7 blades.

This proposed AD would retain the pilot check, recurring inspection, and blade refinishing requirements of AD 2011-12-10. The pilot check may be performed by an owner/operator (pilot) holding at least a private pilot certificate and must enter compliance into the aircraft maintenance records in accordance with 14 CFR 43.11 and 91.417(a)(2)(v). This authorization is an exception to our standard maintenance regulations.

This proposed AD would add a requirement, within five years of the effective date, to replace both main rotor blades with the new part-numbered aluminum blades. Replacing the blades with the new part-numbered blades would constitute terminating action of the recurring inspection requirements.

We estimate that this proposed AD would affect 1,290 Model R22 helicopters and 1,353 Model R44 helicopters, for a total of 2,643 helicopters of U.S. Registry. We estimate that operators may incur the following costs in order to comply with this AD:

• Time to perform the before flight check each day is negligible.

• Inspecting both blades will require about three work hours at an average labor rate of $85 per hour, for a total cost per helicopter of $255 and a total cost to the U.S. operator fleet of $673,965.

• Replacing both blades on a Model R22 helicopter will require about 20 work hours at an average labor rate of $85 per hour and required parts will cost $29,808, for a total cost per helicopter of $31,508 and a total cost to the U.S. R22 operator fleet of $40,645,320 over a 5-year period.

• Replacing both blades on a Model R44 helicopter with hydraulically boosted flight controls installed (approximately 1053 helicopters) will require about 20 work hours at an average labor rate of $85 per hour and required parts will cost $43,783, for a total cost per helicopter of $45,483 and a total cost to the U.S. R44 operator fleet of $47,893,599 over a 5-year period.

• Replacing both blades on a Model R44 helicopter without hydraulically boosted flight controls installed (approximately 300 helicopters) will require modifying the aircraft with hydraulic flight controls, which will cost a flat rate (parts and labor) of $40,000, which includes the P/N C016-7 blades, and installing the required airframe provisions will require about 13 work-hours, at an average labor rate of $85 per hour, and required parts will cost $28,199, for a total cost per helicopter of $112,247, and a cost to U.S. operators of $33,674,100 over a 5-year period.

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

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

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

For the reasons discussed, I certify this proposed regulation:

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

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

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

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

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

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

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

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

On June 12, 2002, a T/R blade on an Agusta Model 119 helicopter failed and resulted in an autorotative landing. As a result of this failure, based on the commonality of the T/R blades on the model 109E helicopter, Agusta issued Alert Bollettino Tecnico (ABT) No. 109EP-30, dated June 21, 2002, for the Model 109E helicopter. The aviation authority for Italy, Ente Nazionale per L'Aviazione Civile (ENAC), issued Emergency AD No. 2002-340, dated June 28, 2002, for the Model 109E helicopters. On July 9, 2002, we issued Emergency AD 2002-14-51 to require a pilot-check before each flight, and initial and repetitive inspections of the T/R blades for a crack.

“As a precautionary measure,” Agusta issued Revision A, dated July 25, 2002, to ABT 109EP-30. On July 29, 2002, ENAC issued AD No. 2002-384, adopting the requirements of Revision A of this Agusta ABT. On October 17, 2002, we issued immediately adopted AD 2002-17-51 (67 FR 67510, November 6, 2002) to require a reduction in VNE, a pilot-check of each T/R blade before each start of the helicopter engines, and initial and recurring inspections of each T/R blade for a crack.

Following increased ground vibrations in a Model A 109E helicopter, another crack was discovered in a T/R blade, which prompted Agusta to issue Revision B, dated November 17, 2002, to ABT 109EP-30. Analysis and tests had shown that the fatigue failure of the T/R blade was caused by unanticipated loads on the T/R blade. Revision B to that ABT specified maintaining the VNEreduction until a new bushing was installed in the T/R grip assembly. Further, that ABT established, for T/R blade P/N 109-8132-01-111 on grip assembly P/N 109-8131-02-127, a retirement life of 200 hours TIS. ENAC adopted the provisions of Revision B of the Agusta ABT in ENAC AD No. 2002-592, dated November 28, 2002.

On February 14, 2003, we issued AD 2002-25-51, Amendment 39-13060 (68 FR 9504, February 28, 2003), to require:

For helicopters with T/R hub and blade assembly, part number (P/N) 109-8131-02-151 (the T/R hub and blade assembly consists of two T/R blades, P/N 109-8132-01-111, and one T/R hub and grip assembly, P/N 109-8131-02-127):

• Before further flight, installing a placard and marking the airspeed indicator to reduce the helicopter VNEby 28 knots-indicated air speed (KIAS) in addition to any additional reduction in VNEcaused by optional equipment.

• Before each start of the helicopter engines, allowing an owner/operator (pilot) to check the T/R blade for a crack so long as the pilot records that AD compliance in the maintenance records in accordance with 14 CFR 43.9(a)(1)-(4) and 91.417(a)(2)(v).

• Within 5 hours time-in-service (TIS), and thereafter at intervals not to exceed 5 hours TIS, and before further flight any time there is an increase in vibration levels, inspecting each T/R blade for a crack using a 5x or higher magnifying glass.

• Establishing a new life limit for T/R blade, P/N 109-8132-01-111, of 200 hours TIS and requiring T/R blades with 190 hours or more TIS to be replaced within 10 hours TIS.

• On or before May 31, 2003, modifying and re-identifying the T/R hub and grip assembly and the T/R hub and blade assembly, which removes the VNErestriction and restores the T/R blade life limit to 1,000 hours TIS.

For helicopters with T/R hub and blade assembly, P/N 109-8131-02-157 (the T/R hub and blade assembly consists of two T/R blades, P/N 109-8132-01-111, and one T/R hub and grip assembly, P/N 109-8131-02-159):

• Before each start of the helicopter engines, allowing an owner/operator (pilot) to check the T/R blade for a crack so long as the pilot records that AD compliance in the maintenance records in accordance with 14 CFR 43.9(a)(1)-(4) and 91.417(a)(2)(v).

• Within 25 hours TIS, and thereafter at intervals not to exceed 25 hours TIS, and before further flight any time there is an increase in vibration levels, inspecting each T/R blade for a crack using a 5x or higher magnifying glass.

• On or before accumulating 150 hours TIS on the T/R hub assembly, P/N 109-8131-02-159, and thereafter at intervals not to exceed 150 hours TIS, inspecting the bushings, P/N 109-8131-30-109, linings for wear, and replacing any unairworthy bushing.

Also, the existing AD states that T/R blades, P/N 109-8132-01-111, which have been operated as part of the T/R hub and blade assembly, P/N 109-8131-02-151, are considered unairworthy components of the T/R hub and blade assembly, P/N 109-8131-02-157, regardless of TIS.

Finally, AD 2002-25-51 requires replacing any unairworthy T/R blade before further flight.

Since we issued AD 2002-25-51, Agusta has issued Revision C, dated September 29, 2006, to ABT No. 109EP-30, and states that the service experience of T/R hub and blade assemblies with the newly-designed bushings that reduce T/R blade loading has shown improvement and has determined that increasing the amount of time between inspections is appropriate, based upon the service history and the results of the maintenance performed.

In response to Revision C of the ABT, the European Aviation Safety Agency (EASA), which is the Technical Agent for the Member States of the European Union, has issued EASA AD No. 2006-0353, dated December 4, 2006, which supersedes ENAC AD 2002-597 to extend the inspection interval “from 150 to 200 FH.” Subsequently, EASA AD No. 2007-0010, dated January 31, 2007, was issued to supersede AD No. 2006-0353 to restore the initial requirements of ABT 109EP-30, Revision C, which were unintentionally omitted from AD No. 2006-0353.

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

We reviewed ABT No. 109EP-30, Revision C, dated September 29, 2006, which describes procedures for checking/inspecting for cracks on both the upper and lower surfaces of T/R blades, P/N 109-8132-01-111; replacing each bushing, P/N 109-0132-55 and spacer P/N 109-0132-13, with bushing, P/N 109-8131-30-109, and instituting a recurring inspection of each bushing; and cancelling the VNElimitations when the newly-designed bushing is installed on each T/R grip assembly, P/N 109-8131-29-101, a “new” pair of T/R blades, P/N 109-8132-01-111, is installed, and the T/R hub-and-grip and hub-and-blade assemblies are re-identified.

This proposed AD would require:

• Before each start of the helicopter engines, visually checking both sides of each T/R blade for a crack. An owner/operator (pilot) may perform this check and must enter compliance into the aircraft records in accordance with 14 CFR 43.9 (a)(1)-(4) and 14 CFR 91.417(a)(2)(v). A pilot may perform this check because it involves only a visual check for a crack and can be performed equally well by a pilot or a mechanic. This procedure is an exception to our standard maintenance regulations.

• For helicopters with T/R hub and blade assembly, P/N 109-8131-02-151, before further flight, modifying each T/R hub and blade assembly by installing a new bushing in each grip assembly and two zero-TIS T/R blades; and re-identifying the hub and grip assembly and the T/R hub and blade assembly with different P/Ns.

• For helicopters with T/R hub and blade assembly, P/N 109-8131-02-157, within 25 hours TIS and thereafter at intervals not to exceed 25 hours TIS, and before further flight any time there is an increase in vibration levels, using a 5x or higher power magnifying glass, visually inspecting each T/R blade for a crack.

• On or before accumulating 200 hours TIS on the T/R hub and grip assembly, and thereafter at intervals not to exceed 200 hours TIS, inspecting the linings and measuring the internal diameter of the bushings. If the internal diameter of the bushing exceeds 41.35 millimeters, replacing the bushing.

• If there is a crack, before further flight, replacing the T/R blade.

• Revising the Airworthiness Limitations section of the maintenance manual to reflect that a T/R blade, P/N 109-8132-01-111, which has not been operated as part of T/R hub and blade assembly, P/N 109-8131-02-151, has a retirement life of 1,000 hours TIS.

We estimate that this proposed AD would affect 75 helicopters of U.S. Registry. Based on an average labor rate of $85 per hour, we estimate that operators may incur the following costs in order to comply with this AD:

• Visually inspecting the T/R blades would require about 0.5 work hours for a cost per helicopter of $43 and a total cost to U.S. operators of $3,225 per inspection cycle.

• Replacing a cracked T/R blade would require about 2 work hours, and required parts would cost about $25,320, for a total cost per helicopter of $25,490.

• Modifying the hub assembly with new T/R blades and bushings would require about 16 work hours, and required parts would cost about $58,690, for a total cost per helicopter of $60,050.

• Inspecting the T/R bushings would require about 7 work hours, for a cost per helicopter of $595 and a total cost to U.S. operators of $44,625 per inspection cycle.

• Revising the Airworthiness Limitations section of the maintenance manual would require about .25 work hour, for a cost per helicopter of $22 and a total cost to U.S. operators of $1,650.

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

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

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

For the reasons discussed, I certify this proposed regulation:

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

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

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

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

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

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

The preamble to this proposed rule is organized as follows:

On February 22, 2012, the President signed the Act. Section 2104 of the Act amends Title IX, SSA (42 U.S.C. 1101et seq.) by adding a new section 911, which requires the Department to issue rules, developed in consultation with an interagency workgroup established by the Office of Management and Budget (OMB), that establish data exchange standards for certain functions related to administration of the Unemployment Insurance (UI)1 program. Before enactment of this requirement for data exchange standardization, the Department had been a proponent of and strong advocate for the use of open source technologies and data exchange standards in the development of IT systems supporting critical UI functions (such as ICON and SIDES), and of SWAs' overall UI information technology modernization efforts. Section 911, SSA, contains two major subsections (a) and (b), each of which requires data exchange standards; these requirements are discussed in detail below.

Section 911(a)(1), SSA, requires that DOL “shall, byrule,designate a data exchange standard foranycategory of information required under title III [42 U.S.C. 501et seq.], title XII [42 U.S.C. 1401et seq.], or this title [IX].” (Emphasis added.) This allows the Department to identify “any” category of information under the specified titles to require, by rule, for which to establish a data exchange standard. Section 911(b)(1), SSA, requires that DOL “shall, by rule, designate data exchange standards to govern the reporting required under [the same specified titles].” The Department has chosen to establish data exchange standards for information required under section 303(a)(1), SSA, that meet the requirements of both sections 911(a)(1) and 911(b)(1), SSA.

Section 303(a)(1), SSA, commonly known as the “methods of administration” requirement, provides that State law, as a condition of the State receiving UC administrative grants, must include “such methods of administration…as are found by the Secretary of Labor to be reasonably calculated to insure full payment of unemployment compensation when due.” Section 303(a)(1), SSA, was chosen because it is the foundational statutory authority for the Department's guidance to States on the administration of the UI program, including guidance on program operations and reporting requirements.

The Department chose to establish data exchange standards for categories of information under Title III, SSA, because Titles IX and XII, SSA, provide fewer opportunities for establishment of data exchange standards that would benefit the UI system broadly, given that their focus is primarily on Unemployment Trust Fund (UTF) management issues. Title IX establishes the account structure for the UTF, and Title XII establishes the processes for States to obtain advances if their States' accounts in the UTF are depleted. While Titles IX and XII, SSA, relate to how money flows between accounts, there are no data exchange activities associated with these two titles.

While developing this proposed rule for data exchange standards, the Department considered and determined that it is neither feasible nor practicable to set standards for all reports under the three titles listed in Section 911(b), SSA. Imposing data exchange standards for certain reporting for the UI program is, in fact, counter-productive and would interfere with the Department's ability to use and analyze the data. For example, State UI agencies currently send data, such as weekly UI claims data, to the Department in a format that enables the Department to store the data in a relational database for purposes of analysis and performance management. If data were instead required to be received in eXtensible Markup Language (XML)2 format, pre-processing of the data would be required to store this information within a relational database, thus adding a layer of complexity for the analytical software. That approach would result in unnecessary inefficiency and there would be no benefit to any user of the data.

The Department did identify an area of reporting in which data exchange standardization is appropriate—SIDES. SIDES involves the type of data transactions that would benefit from a designated searchable, computer-readable and interoperable XML format standard. Therefore, the XML format is the designated data exchange standard for SIDES in this proposed rule. Nevertheless, we request comment on how the Department might apply the data exchange standards of Section 911(b), SSA, more broadly to the three listed titles.

Sections 911(a)(1) and 911(b)(1), SSA, both require consultation with an interagency work group established by OMB. The Department has participated in a work group convened by OMB for this purpose. The consultation included discussion of the standards proposed in this rulemaking as well as other possible standards that might be established in the future that impact multiple Federal programs. The work group provided the opportunity for multiple agencies to share their approaches to data exchange standardization, but to date, no cross-agency data exchange functions have been identified as being feasible, efficient and cost effective to implement data exchange standards as required by section 911, SSA. The Department will continue to work with OMB and other Federal agencies to identify additional data exchange standards that support interagency data exchange activities. Additional standards identified will be the subject of future regulations promulgated through advance notice and opportunity for public comment as required by section 553 of the Administrative Procedure Act (APA).

Sections 911(a)(1) and 911(b)(1), SSA, also both provide that the Department should consider State and employer perspectives. The Department consulted with States on the content of the rules required by section 911, SSA, through the National Association of State Workforce Agencies (NASWA), including NASWA's UI Committee and its Information Technology Support Center Steering Committee. The feedback provided from this consultation was that States continue to struggle with antiquated IT infrastructure and vary widely in their capacity to implement new technologies that support data exchange standardization. In addition, the limits of State IT capacity have been severely tested since the onset of the last recession through the present, as the economy slowly recovers. During this period, States experienced extraordinarily high claims loads and implemented a very complex Emergency Unemployment Compensation (EUC) program and extensions. EUC had multiple iterations over the course of the recession and during the recovery, requiring States to reprogram computers frequently to accommodate the changes to the program. In addition, the Act required implementation of a number of newreforms to the EUC program, also requiring computer programming and rapid implementation. States also identified lack of sufficient funding as a challenge to modernizing their IT systems. States recommended leveraging work to implement data exchange standards as a desirable approach to meeting the data exchange requirements of section 911, SSA.

The Department also considered employers' perspectives in the development of this regulation. The data exchange standards proposed in this rule to address the requirements of sections 911(a)(1) and 911(b)(1), SSA, support processes that will reduce the burden employers have in providing required information to the SWAs. The first data exchange standard will apply to ICON, which facilitates the sharing of employer reported wage information among the States. Efficiently sharing routinely reported wage data among the States prevents SWAs from having to contact employers through manual processes to provide the wage information again. The second standard mandated by this rule relates to SIDES. The Department is currently working with States to automate and standardize the flow of data between SWAs and employers and/or employer third-party administrators (TPAs). TPAs are organizations that contract with employers to act on their behalf with SWAs for processing the employers' UC claims-related activities, such as filing quarterly wage and tax reports, responding to requests for separation information, and managing UC accounts and costs. The goal of SIDES is to effectively automate and streamline the data exchange that occurs between SWAs and employers or their TPA so as to enable efficiencies. Both employers and TPAs have been involved in the development of all SIDES data exchange modules, including the choice of XML as the data exchange standard for SIDES. Employers and TPAs are represented on the SIDES operations committee. SIDES provides a method for SWAs, employers, and TPAs to improve timeliness and accuracy of UC claims processing, and reduce costs by creating an electronic exchange of information using a standardized, secure format with data validations that are strictly enforced to prevent the transfer of incomplete or incorrectly formatted data. Both ICON and SIDES are discussed in more detail below.

To meet the requirements of section 911, SSA, the Department is designating XML as the data exchange standard for two systems that support the reporting of data and information for two core UI administrative functions: (1) Employer reporting of information requested by SWAs to support eligibility determinations (SIDES); and (2) the reporting and exchange of wage information among the States that also supports determination of eligibility for benefits (ICON). XML is a markup language that defines a set of rules for encoding documents in a format designed to structure, store and transport data. XML data are stored in plain text format that is both human-readable and machine-readable. Use of XML also provides for a software- and hardware-independent method of exchanging data over incompatible applications or systems over the Internet.

Section 911(a)(2), SSA, requires that the data exchange standard implemented in this rulemaking “to the extent practicable, be nonproprietary and interoperable.” Section 911(b)(2), SSA, also requires that the data exchange standards implemented in this rulemaking “to the extent practicable incorporate a widely accepted, nonproprietary, searchable, computer-readable format,” and “be capable of being continually upgraded as necessary.” Section 911(b)(3), SSA, specifically requires that this rule, “to the extent practicable, incorporate existing nonproprietary standards, such as the eXtensible Markup Language.” The data exchange standards established in this proposed rule mandate the use of XML to meet the aforementioned requirements of sections 911(a) and (b), SSA.

XML3 provides an interoperable standard framework using common computer languages and standard formats and protocols to manage certain functions or communications. Gaining interoperability among the Department and 53 States and territories with different IT infrastructure and different program parameters (State UI programs have differing eligibility requirements and processes for supporting those requirements) is challenging. Therefore, the Department is focusing on core functions and reporting requirements that are truly common among the States to codify data exchange standards.

Finally, section 911(a)(3)(A), SSA, requires that for data exchange reporting standards, the rule, to the extent practicable, incorporate interoperable standards developed and maintained by an international voluntary consensus standards body. The XML standard herein designated meets this requirement as it is recognized by the World Wide Web Consortium, an international voluntary consensus standards body. The rule also meets the requirement of incorporating standards developed and maintained by intergovernmental partnerships like the National Informational Exchange Model (NIEM) referenced in section 911(a)(3)(B), SSA. XML is a data exchange standard recognized by NIEM. The standard to be considered under Section 911(a)(3)(C), SSA, requires incorporation, to the extent practicable, of “interoperable standards developed and maintained by Federal entities with authority over contracting and financial assistance, such as the Federal Acquisition Regulations Council.” This applies to contracting and procurement processes and is not applicable to UI processes.

In accordance with these provisions, the Department proposes the following in this rulemaking:

• Under section 911(a), SSA, designating XML as the data exchange standard for the real-time applications4 of ICON;

• Under section 911(a), SSA, designating XML as the standard for the SIDES data exchange modules;

• Under section 911(b), SSA, designating XML as the data exchange standard to govern reporting of information shared through SIDES; and

• Under section 911(a), SSA, designating XML as the data exchange standard for real-time applications of ICON and SIDES data exchange modules in association with major IT modernization project using Federal funds.

The Department is not ruling out the establishment of additional data exchange standards by regulation, promulgated through advance notice and opportunity for public comment, in the future. The Department intends to continue to explore other functions where data exchange standards would be valuable to the UI program and as it relates to shared data exchange with other Federal agencies.

ICON is used to implement sections 3304(a)(9)(A) and (B) of the Federal Unemployment Tax Act (FUTA), providing for interstate and combined-wageclaims.5 ICON enables States to request, submit, and receive much of the information necessary to establish claims and determine eligibility. The requirement to pay UC “when due” under section 303(a)(1), SSA, includes timeliness of these payments. Interstate and combined wage claims are more complex to administer since they require communication and transmission of information between States or between a State and a Federal agency. To ensure that these claims are paid “when due,” the Department supports development and maintenance of ICON. ICON is a secure multi-purpose telecommunications network that supports the transfer of data among the SWAs needed for critical program functions, including:

• Interstate Benefits/Combined-Wage Claims;

• Unemployment Compensation for Federal Civilian Employees and Unemployment Compensation for Ex-Servicemembers programs;

• The Wage Record Interchange System, which allows SWAs to obtain wage data for program performance purposes of individuals who have participated in workforce investment programs in SWAs;

• The UI Inquiry data exchange with the Social Security Administration (Social Security) that enables SWAs to validate Social Security Numbers (SSNs) with Social Security; and

• The Health Coverage Tax Credit that enables a SWA to transmit information to the Internal Revenue Service about individuals eligible for help paying for their health insurance coverage.

The Department proposes XML as the data exchange standard under section 911(a), SSA, for a subset of these functions due to both State and ICON capacity to adopt standards for some of these functions at this time. In relation to these chosen functions, ICON currently supports the following applications in real-time allowing for States to use XML standards for these functions. These are applications currently used by some SWAs to support the processing of all UC claims:

• Interstate Wages and Benefits Inquiries/Responses, which supports online transmission of interstate wages and benefits inquiries and responses between SWAs;

• Withdrawn/Invalid Claims, which allows for the posting and viewing of withdrawn or invalid claim information for SWAs; and

• State Identification Inquiry, which allows SWAs to inquire about wages reported to other SWAs by SSN.

Currently, seven SWAs are involved in modernizing some of their ICON applications and it is not practical to require all States to comply with this standard immediately. The Department contemplates providing SWAs lead time to adopt and implement the new data exchange standard for these applications. Since States need time to implement the real-time ICON applications, it is not feasible to designate a data exchange standard to govern the reporting of this information under section 911(b), SSA, at this time. Accordingly, as explained below, the Department proposes that all SWA's using real-time ICON applications comply with the XML data exchange standard no later than September 30, 2018. A SWA may request an extension of the September 2018 deadline if it demonstrates that resources are not available to meet this requirement. These requests must be submitted in writing to the Administrator of the Office of Unemployment Insurance no later than 6 months before the deadline; requests will be reviewed and decided within 30 days.

SIDES is necessary to effectuate the Standard for Claim Determinations—Separation Information, codified in regulation at 20 CFR part 625 Appendix B. This standard is based significantly on the “methods of administration” requirement in section 303(a)(1), SSA, and includes a requirement that a State promptly obtain information from the worker, employer, or other source that is sufficient to reasonably insure payment of UC when due. For this reason, the Department supports development and maintenance of SIDES, which enables States to exchange information with employers electronically, thereby markedly improving the timeliness and accuracy of the employer-provided information about the reasons individuals separated from employment.

SIDES is an automated information exchange and reporting system to standardize SWAs' delivery of information to employers and collection of information by SWAs from employers and TPAs. In FY 2010, the first format of SIDES for exchange of employee separation information was implemented. This exchange of information with employers or their TPAs on the circumstances underlying individual UC claimants' job separations will reduce UC payments to ineligible claimants, yield administrative cost savings to both employers and taxpayers, and promote more timely benefit determinations. Currently, 29 SWAs and 3 large TPAs are participating in the SIDES effort. In FY 2011, the SIDES exchange of data to verify claimant wages was implemented. The addition of the earnings verification exchange allows SWAs and employers to more quickly and accurately verify when UC claimants return to work, thus reducing the leading cause of UC overpayments: claimants' receipt of UC while employed.

SIDES is managed by NASWA which contracts with a vendor for its maintenance, support, and operations. The Department has provided specific funding to State consortia and SWAs for development, maintenance, and operations of SIDES. State consortia are groups of States collaborating to jointly establish a project team to oversee the design, development and implementation of an IT solution that will be shared across the States. The Department recently funded a consortium of States to oversee the development of new SIDES data exchanges modules to allow SWAs to notify employers and TPAs of benefits charges to their accounts and of non-monetary determinations. SWAs, participating in the SIDES consortia, identify and help prioritize new SIDES modules to be developed and direct these funds to NASWA for the development of these modules. All SWAs using SIDES modules provide administrative funding to NASWA for the continued operations of SIDES.

The Department continues to facilitate the expansion and enhancement of the functionality and use of SIDES as a vital tool for SWAs with respect to prevention and detection of improper payments, and has provided supplemental funding to a State consortium for the development of additional data exchange modules. These modules include:

•UC Benefit Charge Notices.This enhancement will make it possible for SWAs to provide employers notice of benefit charges to their accounts electronically rather than by paper and mail. This permits a quicker delivery and review by the employer and the ability to reply electronically if thecharges are questionable. This expedited information exchange can detect potential improper payments earlier, particularly those related to identity theft and employees that return to work and continue to collect benefits.

•Non-Monetary Determinations Exchange.This enhancement will notify employers electronically, rather than on paper, of SWA decisions on the eligibility of their former workers who quit or were let go for cause. This will improve the timeliness of employer appeals and allow for quicker appeal decisions, halting improper payments faster if the employer prevails in the appeal.

The proposed rule designates a data exchange standard under section 911(a), SSA, to apply to the SIDES data exchange modules and designates a standard under section 911(b), SSA, to govern reporting of information through SIDES data exchange modules.

For the purpose of this regulation, a major IT Modernization of UI Benefits and Tax systems includes conversion, re-engineering, rewriting, or transferring of an existing system to a modernized framework such as transferring a process from mainframe operations to web-based operations, converting to modern computer programming languages, or upgrading software libraries, protocols, or hardware platform and infrastructure. As the Department provides funding to States to modernize their information technology systems, the opportunity exists to use new data exchange standards that improve operations of the UI system as a whole and may further enable improved data exchanges with other States and Federal agencies.

The Department facilitates SWAs' efforts to modernize IT systems supporting their UI programs by providing funding for administration and operations, and appropriate technical assistance. While the Federal-State structure of the UI program places primary responsibility for its administration on the States, the Department provides periodic supplemental funding opportunities for IT modernization activities. In addition, Congress periodically provides special distributions of administrative UI funding to States.

Federal funds for UI modernization efforts come primarily from three sources: (1) Supplemental budget funds that are designated by the Department for State IT modernization efforts, (2) State UI administration funding, and (3) special distributions. State administration funding primarily consists of State UI operations funds (an administrative grant issued by the Department at the beginning of each fiscal year). Recent special distributions to States, pursuant to section 903, SSA, include those provided under the Job Creation and Worker Assistance Act of 2002 funds (distributed under the Reed Act, a mechanism by which the Federal government transfers surplus UI funds to States) and American Recovery and Reinvestment Act funds (an economic stimulus package enacted in February 2009). Also, since 2009, the Department has provided supplemental funding to State consortia to develop jointly functional requirements and development of modernized UI IT Benefits and/or Tax systems. One of the requirements was that the technology tools developed use open source components to the extent feasible, be transferable, and be capable of being shared by multiple SWAs. The goal is for multiple SWAs to share common systems/tools that accommodate each SWA's specific needs. Each of the consortia has its State leadership engaged in the process and soliciting vendors to assist with the system design and development efforts.

This proposed rule will require SWAs, when using Federal funds to modernize their UI systems, to use XML as a data exchange standard when developing the functionality to interface with ICON, to implement SIDES and the reporting of information through SIDES. This requirement will potentially further accelerate State adoption of this standard for both functions. The Department strongly encourages SWAs, to the extent feasible, to begin conforming to the XML standard for any major UI IT modernization projects already underway.

Section 2104(b)(1) of the Act requires that a proposed rule under section 911(a), SSA, be issued “within 12 months after the date of the enactment of this section,” and a final rule to be issued “after public comment, within 24 months after such date of enactment.” Section 2104(b)(2) of the Act requires that a proposed rule under section 911(b), SSA, will “become effective with respect to reports required in the first reporting period, after the effective date of the final rule referred to in paragraph (1) of this subsection.”

Accordingly, we propose that the data exchange standard for SIDES, under both sections 911(a) and (b), SSA, become effective 30 days after publication of the final rule, consistent with the APA as codified at 5 U.S.C. 553(d). States implementing new data exchange modules after that date will utilize XML as the data exchange standard.

Additionally, we propose that the date by which SWAs will be required to comply with the data exchange standard for ICON, proposed under section 911(a), SSA, to be September 30, 2018. This will allow States to begin implementing the standard as soon as practicable, while still providing enough advance time to account for the current technology capacity of States and the fact that many States will need to make substantial changes to their technology systems to implement XML for their ICON exchanges.

Finally, the effective date of designation of XML as the data exchange standard for SIDES data exchange modules and for the real-time ICON applications, proposed under section 911(a), SSA, is 30 days after publication of the final rule, consistent with the APA as codified at 5 U.S.C. 553(d).

This section proposes definitions of terms used in this rule. Most are self-explanatory; however, of particular note is paragraph (c), which defines XML, the standard we propose to use for data exchange. XML data are stored in plain text format that is both human-readable and machine-readable and provides for a software- and hardware-independent method of exchanging data over incompatible applications or systems over the internet. This definition includes any future upgrades, iterations, or releases of XML-based language.

Proposed paragraph (a) designates XML as the data exchange standard for the real-time ICON applications. These applications are: Interstate Wages and Benefits Inquiries/Responses; Withdrawn/Invalid Claims; and State Identification Inquiry. These applications, used by States, are currently supported by ICON in real-time using two data exchange formats—Extended Binary Coded Decimal Interchange Code (EBCDIC) and WebServices Description Language (WSDL), which is a XML-based language. As stated previously, the Department has selected this sub-set of the applications supported on ICON for applying a data exchange standards because they represent the applications which both ICON and States currently have capacity to implement. The Department will continue to consider ways to apply data exchange standards to the other ICON functions, but the technology solutions are currently not available. It may be over five years before these new technology solutions can be effectively applied in the ICON environment.

Proposed paragraph (b) requires that all SWAs using real-time ICON applications conform to the XML data exchange standard no later than September 30, 2018. The rule provides that a SWA may request an extension of this deadline if it demonstrates that resources are not available to meet the requirements. The request must be submitted to the Administrator of the Office of Unemployment Insurance no later than 6 months before the deadline and the request will be approved or denied within 30 days.

ICON is funded by a cooperative agreement between the Department and State of Maryland. The Maryland Department of Labor, Licensing and Regulation acts as the Department's agent to contract with a vendor for the maintenance, support, and operations of ICON. Beginning in FY 2007, the Department facilitated and later provided funding for the conversion of data exchange formats from EBCDIC to WSDL. EBCDIC is a format specifically used for mainframes and is not an interoperable standard. However, the migration of SWAs from EBCDIC to WSDL is still in its infancy requiring ICON to support a dual environment (Web Services and Mainframe).

A few SWAs currently are in the process of implementing some of the modernized, XML-based real-time applications in conjunction with their efforts to modernize their IT systems or replace outdated systems. The goal of this proposed section is to accelerate State adoption of XML-based real time applications in order to eventually eliminate the need for ICON to manage mainframe applications in addition to the XML-based applications.

The Department will continue to support SWAs' transition to modernized XML-based real-time ICON applications and expects that the proposed data exchange standard will accelerate SWAs' adoption of the XML exchange standard. The development of a single environment will result in improved efficiencies and cost savings and allow the Department to more effectively manage the development of future data exchanges and maintenance of resources.

Proposed paragraph (a) designates XML as the data exchange standard for SIDES. Proposed paragraph (b) requires that this standard apply to any Federally-funded SIDES consortium, and any future agents of the Department providing vendor services for the development, maintenance, support and operations of the SIDES. Paragraph (c) designates XML as the data exchange standard to govern the reporting of information through the SIDES data exchange modules. Paragraph (d) denotes when the standard set in paragraph (c) becomes effective.

SIDES uses Web services and the XML data format for the information exchange between the SWAs and employers. The Department is requiring that all SIDES exchanges (current and future), which are developed in whole or part with Department funds, continue to conform to the XML data exchange standard. Additionally, as States, employers, and TPAs chose to implement SIDES or new data exchange modules of SIDES, they must conform to this data exchange standard by application design.

SIDES offers two options for implementation for SWAs and employers: SIDES web services, and SIDES E-Response. Both systems are designed to meet the unique needs of businesses, large and small. For employers with a limited number of UC claims, the SIDES E-Response Web site provides an easy and efficient way to respond to information requests from SWAs. For employers and TPAs that handle a large volume of UC claims information requests, SIDES web services provides an automated, computer-to-computer interface between employers' and TPAs' IT systems and SWA networks.

Proposed paragraph (a) designates XML as the data exchange standard for the real-time ICON applications and SIDES data exchange modules associated with major IT modernization projects to upgrade UI Benefits and Tax Systems by SWAs using Federal funds. This proposed standard would improve the interoperability of State, Federal, and employer systems that collect and exchange information for UI administrative purposes. Linking data between these systems at the State level will allow for better service delivery and faster eligibility determinations, and should facilitate program integrity efforts.

Proposed paragraph (b) requires that, beginning on the effective date of this regulation, major IT modernization efforts funded by the Department must conform to the proposed XML data exchange standard for the implementation of the real-time ICON applications and the SIDES exchange modules.

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action” because, although not economically significant under section 3(f) of Executive Order 12866, it raises novel issues of law and policy. Therefore, the Department had the rule reviewed by OMB.

The Department anticipates that the changes in this NPRM would have limited, if any, direct impact on employers above and beyond any impact that would occur in the absence of the proposed rule. There will be an impact on SWAs in adopting the real-time ICON applications, but this impact may be mitigated because many States are likely to modernize their IT operations in any event, which will require implementing these interoperable real-time applications. This proposed rule also would result in several benefits that are discussed below. The Department is requesting comment on the benefits and costs of these policies.

Section 2104(b) of the Middle Class Tax Relief and Job Creation Act of 2012; (Pub. L. 112-96) requires the Department to issue a rule establishing data exchange standards for certain information-sharing and reporting processes. The Department is issuing this NPRM to fulfill its responsibility under the Act. As discussed earlier in this notice, these standards willimprove the interoperability of certain State, Federal, and employer-operated systems that collect and exchange information for UI administrative purposes.

The baseline for the analysis reflects the conditions that exist (or that would exist) in the absence of a standard.

Twenty-nine States already have implemented the SIDES Separation Information data exchange, and some have begun implementation of the SIDES Earning Verification exchanges with employers. Another 16 have agreed to implement SIDES. The Department has also provided funding for the development of other SIDES formats, including Benefit Charge Notices and Nonmonetary Determinations Exchange. Subject to the availability of funds, the Department intends to provide additional funding opportunities for States that have not yet committed to implementing SIDES. Existing SIDES formats were developed using an XML-based interface, and thus, there will be no incremental cost or benefit to current users. Furthermore, while additional States may adopt SIDES in the future, this proposed rule would not require them to do so. With respect to ICON, seven SWAs are in the process of implementing modernized, XML-based real-time applications. These SWAs are adopting the XML-based real-time ICON applications due to the need for modernizing their IT systems to replace outdated systems. The Department estimates that all SWAs would transition to the XML-based real-time in about 10 years. However, this proposed rule will require the SWAs to accelerate the transition to the XML-based real-time applications by September 30, 2018. A 6-year acceleration could increase the present value cost of the project by approximately 15-to-40 percent (depending on the assumed discount rate and on how far in the future the acceleration occurs,e.g.,from 2024 to 2018). The Department also expects the conversion to the XML-based real-time applications by all SWAs will be a significant step to consolidating ICON applications to a single environment and realizing cost savings in ICON operations. To facilitate this transition, subject to the availability of funds, the Department plans to provide funding opportunities for SWAs to modernize to using the real-time ICON applications.

For the IT modernization of UI Benefits and Tax systems, the Department expects many SWAs to begin re-engineering their IT systems with modern technologies to replace existing systems that have ceased to function cost effectively, subject to the availability of resources and expected availability of Federal funding to support their migration to newer systems.

As a result of the proposed rule, SWAs will adopt the XML standard as they implement the current and future data exchange modules of SIDES and adapt to XML-based real-time ICON applications, and will integrate these standards as they pursue overall modernization of their UI benefits and tax systems with Federal funds. The standardization of these systems is expected to result in a reduction in erroneous or fraudulent unemployment insurance payments. Economically, this reduction is properly classified as an economic “transfer” and consequently is discussed later (in Section d).

The proposed rule will improve the interoperability of State, Federal, and employer systems that collect and enhance information for UI administrative purposes by:

• Improving the efficiency and quality of the communications between SWAs and employers and/or their TPAs that are required to determine UC eligibility through the elimination of the need to create and mail hard copy documents;

• Increasing accuracy and reducing errors (in both directions), thereby enhancing program integrity (i.e.,transparency, consistency) and customer satisfaction (accuracy, flexibility);

• Improving the timeliness of information transferred between States, employers, TPAs and Federal agencies; and

• Helping large TPAs that serve employers in multiple States to train their employers in using uniform system interfaces, thereby improving efficiency, timeliness, and accuracy.

Costs to the Department

SIDES and real-time ICON applications using XML and XML-based languages have already been developed and implemented (though not by all SWAs). Consequently, the Department does not anticipate incurring any significant incremental costs as a result of the proposed rule when it is finalized. Any future data exchanges planned for SIDES or for ICON will conform to the standard proposed. However, there is no dedicated funding stream associated with assisting States with their IT modernization efforts. On occasion, when the economy is expanding and workloads fall below levels funded by the budget, remaining funds have been made available to States to support automation projects. (The Department expects to provide some funding, if available, to SWAs to help implement this proposed rule when it is finalized, as discussed in Section d.)

Costs to States

SIDES uses an XML-based interface. SWAs, employers and TPAs will incur one-time costs for the implementation of SIDES. Once a SWA, employer or TPA has implemented SIDES, they automatically conform to the XML data exchange standard. Therefore, there is no incremental cost to users for the implementation of the XML standard. SIDES is designed to offer two options for employers and TPAs, depending on their size. Large employers and TPAs can implement a version of SIDES that requires them to program their own systems to enable the communication with the SIDES applications. Large employers have an incentive to do this because it creates efficiencies in their processing of requests for information from SWAs creating a cost savings. Smaller employers who do not have sufficient numbers of claims to warrant reprogramming their computers have access to a web-based SIDES option that is also more efficient that paper processing, which also creates efficiencies and cost savings. SWAs are the users of ICON. Employers do not use ICON and so do not incur any incremental costs related to ICON.

As noted above, the Department estimates that the proposed rule when finalized will lead States to adopt the modernized XML-based real-time applications of ICON approximately 6 years sooner than they would in the absence of the proposed rule. This accelerated use of the modernized ICON applications results in up to 6 years' worth of improved performance with respect to erroneous or fraudulent unemployment insurance payments. This is properly referred to as an economic “transfer” from individualrecipients of payments to the States. The Department has estimated the total UC overpayments in 2011 alone to be $13 billion (Annual Report Rate6 ) and overpayments that SWAs should be expected to detect and establish for recovery to be $7 billion (Operational Rate7 ) (http://oui.doleta.gov/unemploy/improp_payrate.asp#). Therefore, any actions that reasonably can be expected to reduce the rate of erroneous or fraudulent payments, such as the expanded use of SIDES, which is expected to result from this proposed rule, could lead to a significant dollar-value reduction in UC payments.

In addition, subject to availability, the Department expects to provide supplemental funding opportunities to States to support implementation of the data exchange standards required by the rule when it is finalized.

The purposes of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501et seq.,include minimizing the paperwork burden on affected entities. The PRA requires certain actions before an agency can adopt or revise a collection of information, including publishing a summary of the collection of information and a brief description of the need for and proposed use of the information.

A Federal agency may not conduct or sponsor a collection of information unless it is approved by OMB under the PRA, and displays a currently valid OMB control number, and the public is not required to respond to a collection of information unless it displays a currently valid OMB control number. Also, notwithstanding any other provisions of law, no person shall be subject to penalty for failing to comply with a collection of information if the collection of information does not display a currently valid OMB control number (44 U.S.C. 3512).

While this NPRM is not imposing new information collections, §§ 619.2-619.4 would impose formatting requirements for the data exchanges of various UI applications that may impose a burden under the PRA.

The Department is filing an Information Collection Request with OMB to support the format changes. SIDES and ICON were developed by and for the use of the States through collaboration with States and NASWA, and with funding from the Department. SIDES interfaces have been designed using XML and the States and employers participating in SIDES automatically comply with the data exchange standard proposed. Therefore, there is no additional cost burden for SIDES due to this proposed regulation. However, for States currently using the EBCDIC format for ICON, there may be costs incurred to comply with this proposed regulation. The explanation of substantive provisions regarding these data exchange standards for information sharing can be found in the preamble discussion of §§ 619.2-619.4 of this proposed rule.

The Department estimates that the one-time added burden for States to conform to the new data exchange standards for ICON will be minimal. States differ considerably in terms of hardware platforms and software used to develop their ICON applications. Additionally, the Department estimates that some States may use in-house IT staff while others may contract with IT vendors to implement the proposed data exchange standard. The estimated costs associated with this burden, includes assessing current system status, planning and implementation of changes, and any necessary hardware and software needed to implement the proposed data exchange standard for the real-time ICON applications.

The burden for the information collection exchange can be summarized as follows:

Agency:DOL-ETA.

Title of Collection:Federal-State Unemployment Insurance Program Data Exchange Standardization.

OMB ICR Reference Number Control Number:201302-1205-003.

Affected Public:State Governments.

Total Estimated Number of Respondents:53.

Total Estimated Number of Responses:53.

Total Estimated Annual Burden Hours:6,360.

Total Estimated Annual Other Costs Burden:$1,057,329.

Section 6 of Executive Order 13132 requires Federal agencies to consult with State entities when a regulation or policy may have a substantial direct effect on the States or the relationship between the National Government and the States, or the distribution of power and responsibilities among the various levels of government, within the meaning of the Executive Order.

Section 3(b) of the Executive Order further provides that Federal agencies must implement regulations that have a substantial direct effect only if statutory authority permits the regulation and it is of national significance. This proposed regulation is specifically required by the Middle Class Tax Relief and Job Creation Act of 2012.

The proposed rule does not have a substantial direct effect on the current nature of the relationship between the National Government and the States, or the distribution of power and responsibilities among the various levels of Government, within the meaning of the Executive Order. The Department is exercising its existing authority to interpret Federal statutes with regard to States' administration of UI programs. In the Federal-State UI system, States have a great deal of flexibility to design their UC laws and operations as long as they comply with the broad Federal requirements in FUTA and the SSA. This regulation implements a new statutory requirement for a uniform data exchange and reporting standard and thus is no different from other UC regulations that interpret Federal law with regard to State requirements. It simply sets a new standard for data exchanges of information used in the administration of the UI program under Title III of the SSA. The Department consulted with the National Association of State Workforce Agencies' (NASWA) Information Technology Support Center (ITSC) and NASWA's UI Committee to discuss the impacts of this enactment and identify State application interfaces which will benefit by the implementation of the XML data exchange standard. NASWA agreed with the Department's approach to implement uniform data exchange standards in areas already identified as valuable to the UI system and for applications developed collaboratively with the States.

This regulatory action has been reviewed in accordance with the Unfunded Mandates Reform Act of 1995. Under the Act, a Federal agency must determine whether a regulation proposes a Federal mandate that would result in the increased expenditures by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more in any single year. The Department has determined this rule does not include any Federal mandate that may result in increasedexpenditure by State, local, and Tribal governments in the aggregate of more than $100 million, or increased expenditures by the private sector of more than $100 million. Most if not all of the costs of implementing this regulation will be covered by Federal funding.

The Department drafted this proposed rule in plain language.

The Department certifies that this proposed rule has been assessed under section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681) for its effect on family well-being. This provision will not adversely affect the well-being of the nation's families. Therefore, the Department certifies that this rule does not adversely impact family well-being as discussed under section 654 of the Treasury and General Government Appropriations Act of 1999.

We have notified the Chief Counsel for Advocacy, Small Business Administration, and made the certification according to the Regulatory Flexibility Act (RFA) at 5 U.S.C. 605(b), that this NPRM will not have a significant economic impact on a substantial number of small entities. Under the RFA, no regulatory flexibility analysis is required where the rule “will not * * * have a significant economic impact on a substantial number of small entities.” 5 U.S.C. 605(b). A small entity is defined as a small business, small not-for-profit organization, or small governmental jurisdiction. 5 U.S.C. 601(3)-(5).

This proposed rule establishes a data exchange standard that would be used in SIDES and ICON. ICON is used only by States and Federal entities, neither of which qualifies as small entities under the RFA. SIDES, however, is used by States and by employers, including TPAs, in the private sector. However, because SIDES already uses an XML-based interface, there is no incremental cost to current users. Furthermore, while additional employers and TPAs may adopt SIDES in the future, the rule would not require them to do so, nor would the rule affect their costs if they did. Consequently, the rule will not have a significant economic impact on a substantial number of small entities, and a Regulatory Flexibility Analysis is not required under the RFA.

In addition, this rule does not require review by the Congress under the Small Business Regulatory Enforcement Fairness Act of 1996 because it will not result in (1) an annual effect on the economy of $100,000,000 or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies, or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.

As discussed above, the most significant effect of the rule will be to accelerate action (e.g., the adoption of the real-time XML-based ICON applications) that the Department expects to occur even in the absence of the proposed rule. The noteworthy cost of the proposed rule is the cost of this acceleration. That is, the rule would change the timing—and therefore the present value—of nominal costs that would have been incurred even in the absence of the rule. These costs will be borne by the State and Federal governments, not by small entities.

For the reasons stated in the preamble, the Department proposes to amend 20 CFR chapter V by adding part 619 as set forth below:

FDA regulations for PMA of medical devices in part 814 (21 CFR part 814) permit the acceptance of data from clinical studies conducted outside the United States and submitted in support of a PMA application if certain conditions are met. Current § 814.15(a) states that a study conducted outside the United States submitted in support of a PMA and conducted under an IDE shall comply with part 812 (21 CFR part 812). The provision in § 814.15(a) further states that a study conducted outside the United States submitted in support of a PMA and not conducted under an IDE shall comply with the provisions in paragraph (b) or (c) of § 814.15, as applicable.

Under § 814.15(b), FDA will accept studies submitted in support of a PMA which have been conducted outside the United States and begun on or after November 19, 1986, if the data are valid and the investigator has conducted the studies in conformance with the Declaration of Helsinki or the laws and regulations of the country in which the research is conducted, whichever accords greater protection to the human subjects. If the standards of the country are used, the applicant must state in detail any differences between those standards and the Declaration of Helsinki and explain why they offer greater protection to the human subjects.

Under § 814.15(c), FDA will accept studies submitted in support of a PMA that have been conducted outside the United States and begun before November 19, 1986, if FDA is satisfied that the data are scientifically valid and that the rights, safety, and welfare of human subjects have not been violated.

Additionally, § 814.15(d) specifies criteria for acceptance of a PMA application for marketing approval based solely on foreign clinical data, and § 814.15(e) encourages applicants to meet with FDA officials prior to submission of a PMA application that will be based solely on foreign clinical data.

Currently, FDA regulations for premarket notification in part 807, subpart E (21 CFR 807, subpart E), commonly referred to as a “510(k) submission,” and investigational device exemptions in part 812 do not address the requirements for FDA acceptance of data from clinical studies conducted outside the United States.

FDA's PMA regulations require applications that include the results of clinical investigations involving human subjects to include a statement with respect to each study that: (1) It was conducted in compliance with the institutional review board regulations in part 56 (21 CFR part 56), or was not subject to those regulations under §§ 56.104 or 56.105, and it was conducted in compliance with the informed consent regulations in part 50 (21 CFR part 50); or (2) if the study was not conducted in compliance with those regulations, a brief statement of the reason for the noncompliance (see § 814.20(b)(6)(ii)(A)). The regulations also require a statement that each study was conducted in compliance with part 812 concerning sponsors of clinical investigations and clinical investigators, or if the study was not conducted in compliance with those regulations, a brief statement of the reason for the noncompliance (§ 814.20(b)(6)(ii)(B)).

Currently, FDA's 510(k) and IDE regulations do not address the requirements for FDA acceptance of data from clinical studies conducted inside the United States to support a 510(k) submission or IDE application.

FDA believes that the requirements for FDA's acceptance of data from clinical studies should be consistent regardless of the type of submission or application in which the data are submitted to FDA. For data from clinical studies conducted inside the United States, we propose to require statements in 510(k) submissions and IDE applications that are similar to those currently required for PMA applications, to help ensure the protection of human subjects and the quality and integrity of data obtained from these studies. For data from clinical studies conducted outside the United States, FDA believes that revision of the requirements for FDA acceptance of data from these clinical studies is needed for several reasons, described in this document.

The standards for protecting human subjects have evolved considerably since the issuance of the PMA regulations in 1986. Several notable documents have been published (examples listed in this document) identifying ethical and other principles that provide assurance of the quality and integrity of clinical data and adequate protection of human subjects. As a whole, these documents include principles important to the conduct of clinical trials such as adverse event reporting, sponsor monitoring, and training of study personnel.

• Several documents issued by the International Conference on Harmonisation (ICH) of Technical Requirements for Registration of Pharmaceuticals for Human Use, including the document entitled “Good Clinical Practice: Consolidated Guideline” (ICH E6);

• “Clinical Investigation of Medical Devices for Human Subjects—Good Clinical Practice,” issued by the International Organization for Standardization, ISO 14155:2011;

• “Guidelines for Good Clinical Practice (GCP) for Trials on Pharmaceutical Products,” issued by the World Health Organization, 1995;

• “Ethical and Policy Issues in International Research: Clinical Trials in Developing Countries,” published by the National Bioethics Advisory Commission, 2001;

• “International Ethical Guidelines for Biomedical Research Involving Human Subjects,” prepared by the Council for International Organizations of Medical Sciences in collaboration with the World Health Organization, 2002;

• “Good Clinical Practices: Document of the Americas,” issued by the Pan American Health Organization, 2004; and

• The 1989, 1996, 2000, 2002, 2004, and 2008 amendments to the “Declaration of Helsinki on Ethical Principles for Medical Research Involving Human Subjects,” adopted by the World Medical Association.

Many of these documents articulate ethical and policy standards for clinical trials, often referred to as GCP. Generally speaking, GCP is defined by research and regulatory communities as “a standard for the design, conduct, performance, monitoring, auditing, recording, analyses, and reporting of clinical trials that provides assurance that the data and reported results are credible and accurate, and that the rights, integrity, and confidentiality of trial subjects are protected.”1 GCP incorporates important ethical principles, such as review by an IEC; the need for freely given informed consent; conduct of clinical trials only by qualified individuals; and recognition that the rights, safety, and well-being of trial subjects take precedence over the interests of science and society. GCP enumerates specific roles and responsibilities of various parties, including monitoring of the trial and reporting adverse events.

Many of the principles underlying GCP have already been incorporated in FDA's regulations, including parts 50, 56, 812, and 814. For example, the regulations in subpart B of part 50 contain the requirements for obtaining the informed consent of human subjects in clinical investigations. Subparts C and E of part 812 describe the responsibilities of sponsors and investigators, respectively, regarding IDE studies, including conformance to parts 50 and 56 on the use of informed consent and institutional review boards (IRBs), respectively. FDA considers an IRB, as defined in § 56.102(g) and subject to the requirements of part 56, to be one type of IEC (see § 312.3 (21 CFR 312.3)).

We are proposing to revise § 814.15 and to amend parts 807 and 812 to incorporate GCP into the requirements for FDA acceptance of data from clinical studies conducted outside the United States to support an IDE or a device marketing application or submission (an application under sections 515 or 520(m) of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360e and 360j, respectively) or a premarket notification submission under section 510(k) of the FD&C Act (21 U.S.C. 360(k)). We believe that the proposed standard helps to ensure adequate human subject protection and the quality and integrity of data obtained from such studies, while also being sufficiently flexible to accommodate differences in how countries regulate the conduct of clinical research and obtain informed consent.

FDA believes that revising parts 807, 812, and 814 to expressly incorporate GCP will help provide greater assurance of the quality and integrity of the data obtained from clinical studies conducted outside the United States and submitted in support of an application or submission to FDA. It has become increasingly recognized that the development, recording, and reporting of data that are scientifically valid are critical responsibilities of investigators and sponsors and are part of a responsible relationship between these entities and study subjects. The proposed revisions to parts 807, 812, and 814 should help ensure data quality and integrity in several ways. These include: (1) Specifying that GCP includes providing assurance that study data and reported results are credible and accurate and (2) requiring that supporting information on a clinical study conducted outside the United States includes, as appropriate, a description of how the sponsor monitored the trial and ensured that the study was carried out consistent with the study protocol.

The informed consent provisions embodied in GCP also contribute to the integrity of data obtained in clinical studies. The informed consent process enables each subject to receive high-quality information about the implications of participation in the clinical trial. The process also provides an opportunity for the subject and investigator to discuss important information about the subject's condition, potential adverse events, and other factors (such as use of concurrent therapy, illegal drug use, or alcohol abuse) that could confound the study results if they remained undisclosed.

The current regulations under part 814 require that clinical studies outside the United States submitted in support of a PMA be conducted in conformance with the 1983 version of the Declaration of Helsinki or the laws and regulations of the country in which the research is conducted, whichever accords greater protection to the human subjects. If the standards of the country are used, the applicant is required to state in detail any differences between those standards and the 1983 version of the Declaration of Helsinki and explain why they offer greater protection to the human subjects.

Under the current regulations, in a study involving multinational investigational sites, several different standards may be followed leading to increased complexity in the conduct of the study. The proposal to require that clinical studies conducted outside the United States comply with GCP provides a unifying approach, which may simplify such trials and decrease the regulatory burden on sponsors.

The investigational new drug regulations in part 312 address FDA acceptance of foreign clinical studies not conducted under an investigational new drug application (IND) as support for an IND or marketing application for a drug or biological product. Effective October 27, 2008, foreign clinical studies not conducted under an IND are required to be conducted in accordance with GCP as defined in § 312.120. The proposed revisions to parts 807, 812, and 814 will provide greater consistency with the regulations for drugs and biological products regarding FDA acceptance of foreign clinical studies.

Clinical studies may be used to support a 510(k) submission or an IDE application; however, parts 807 and 812 currently do not address the requirements for FDA acceptance of data from such studies. The proposed revisions will identify the requirements for FDA acceptance of data from clinical studies under these regulations, whether the studies were conducted inside or outside the United States. This proposal is intended to ensure the quality and integrity of clinical data submitted to FDA in 510(k) submissions and IDE applications and to bring consistency in FDA requirements for acceptance of clinical data, whatever the application or submission type.

We propose to add a definition for an IEC to the IDE regulation under § 812.3. We propose to define an IEC as a “review panel that is responsible for ensuring the protection of the rights, safety, and well-being of human subjects involved in a clinical investigation and is adequately constituted to provide assurance of that protection.” Under the proposal, an adequately constituted IEC includes a reasonable number of members with the qualifications and experience to perform the IEC's functions. The proposed definition of an IEC also specifies that an IRB, as defined in § 56.102(g) and subject to the requirements of part 56, is one type of IEC.

We propose to amend the IDE regulations by adding a new section, proposed § 812.28, to address the requirements for FDA acceptance of data from clinical studies conducted outside the United States. An IDE is typically not issued for a clinical study conducted outside the United States; however, there is a small subset of trials conducted outside the United States where IDEs have been issued, for example, certain studies conducted by the Department of Defense. The use of the term “clinical studies conducted outside the United States” is intended to address studies not conducted under an IDE and does not indicate a change in overall policy for device studies conducted outside the United States.

The current requirements for FDA acceptance of data from clinical studies conducted outside the United States in support of a PMA application are located at § 814.15, in the PMA regulations. We are proposing to place the revised requirements primarily in the IDE regulations, in part because the requirements for device clinical studies are primarily located in these regulations and in part to create consistency with the drug regulations, which address requirements for FDA acceptance of foreign clinical data in the investigational new drug regulations in part 312. Additionally, similar to these drug regulations, which address requirements for FDA acceptance of foreign clinical data as support for an IND or marketing application for a drug or biological product, the proposed revised device regulations address requirements for FDA acceptance of foreign clinical data as support for not only a PMA but also an IDE or other device marketing application or submission, including a 510(k) or an HDE application.

Proposed § 812.28(a) would identify requirements for FDA acceptance of data from clinical studies conducted outside the United States to support an IDE or device marketing application or submission. It would rely upon conformance with GCP, including review and approval by an IEC and obtaining and documenting the freely given informed consent of study subjects. Under proposed § 812.28(a)(1), we would require a statement that the study was conducted in accordance with GCP. For purposes of this section, GCP would be defined as a standard for the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials in a way that provides assurance that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects are protected. Proposed § 812.28(a)(1) states that GCP includes review and approval (or provision of a favorable opinion) by an IEC before initiating a study, continuing review of an ongoing study by an IEC, and obtaining and documenting the freely given informed consent of a subject (or the subject's legally authorized representative if the subject is unable to provide informed consent) before initiating a study. Proposed § 812.28(a)(1) further states that GCP does not require informed consent in life-threatening situations when the IEC reviewing the study finds, before initiation of the study, that informed consent is not feasible and that either the conditions present are consistent with those described in §§ 50.23 or 50.24(a) of this chapter (concerning exemptions from informed consent requirements in life-threatening situations), or the measures described in the study protocol or elsewhere will protect the rights, safety, and well-being of subjects. This provision would be consistent with the Good Clinical Practice guidance,2 which recommends that a legally authorized representative provide informed consent or that the requirement of informed consent be waived under such circumstances.

Proposed § 812.28(a)(2) states the second condition for FDA's acceptance of data from a clinical study conducted outside the United States as support for an IDE or a device marketing application or submission to FDA. A statement would be required assuring the availability of the data from the study to FDA for validation through an onsite inspection if the Agency deems it necessary (and an inspection is otherwise authorized by law) or through other appropriate means. FDA may need to inspect records relating to data from a foreign study submitted in support of a PMA, for example, to resolve any uncertainties about whether the study was conducted in accordance with GCP.

Proposed § 812.28(b) describes the supporting information to be submitted, in addition to information required elsewhere in parts 807, 812, and 814, when data from clinical studies conducted outside the United States are submitted as support for an IDE or device marketing application or submission. Under proposed § 812.28(b)(1) through (b)(12), the description of the actions the sponsor or applicant took to ensure that the research conformed to GCP as described in § 812.28(a)(1) would include the following information:

• Names and addresses of investigators and research facilities (if an address has changed since the research was conducted, the address where records are maintained should be provided);

• The investigator's qualifications;

• A description of the research facility(ies);

• A detailed summary of the protocol and results of the study, and, should FDA request, certified copies of caserecords maintained by the investigator or additional background data such as hospital or other institutional records;

• Either a statement that the device used in the clinical study conducted outside the United States is identical to the device that is the subject of the submission or application, or a detailed description of the device and each important component (including materials and specifications), ingredient, property, and principle of operation of the device used in the clinical study conducted outside the United States and a comparison to the device that is the subject of the submission or application that indicates how the studied device is similar to and/or different from the device that is the subject of the submission or application;

• If the study is intended to support the safety and effectiveness of a device, a discussion demonstrating that the data and information constitute valid scientific evidence within the meaning of § 860.7 (21 CFR 860.7);

• The name and address of the IEC that reviewed the study and a statement that the IEC meets the definition in § 812.3(t). The sponsor or applicant must maintain records supporting such a statement, including records describing the qualifications of IEC members, and make these records available for Agency review upon request. Although the names of IEC members are required under § 312.120(b)(6) for foreign clinical studies used to support drug and biological product applications, we are proposing to require only the qualifications of the IEC members for device studies due to the reported difficulties of obtaining the names of IEC members in some countries;

• A summary of the IEC's decision to approve or modify and approve the study, or to provide a favorable opinion;

• A description of how informed consent was obtained;

• A description of what incentives, if any, were provided to subjects to participate in the study;

• A description of how the sponsor(s) monitored the study and ensured that the study was carried out consistent with the study protocol; and

• A description of how investigators were trained to comply with GCP (as described in § 812.28(a)(1)) and to conduct the study in accordance with the study protocol, and a statement on whether written commitments by investigators to comply with GCP and the protocol were obtained. Any written commitments by investigators to comply with GCP and the study protocol must be maintained by the sponsor or applicant and made available for Agency review upon request.

We believe that the proposed supporting information, combined with an onsite inspection, if necessary, would provide us with the ability to determine whether a particular clinical study conducted outside the United States had been conducted in accordance with GCP.

Proposed § 812.28(c) describes the retention requirements for records required by this section with regard to a clinical study conducted outside the United States. If the study is submitted in support of an IDE, the records must be retained for 2 years after the termination or completion of the IDE, as described in proposed § 812.28(c)(1). If the study is submitted in support of a premarket notification, premarket approval application, a notice of completion of a product development protocol, or a humanitarian device exemption application, the records must be retained for 2 years after an Agency decision on that submission or application, as described in proposed § 812.28(c)(2).

We propose to amend § 812.2 by removing current paragraphs (b)(2) and (e), which refer to requirements that are no longer necessary because the dates involved have passed. Specifically, paragraph (b)(2) indicated that investigations of a device, except as described in paragraph (e), that were begun on or before July 16, 1980, and were completed on or before January 19, 1981, would be considered to have approved applications for IDEs, unless FDA notified a sponsor under § 812.20(a) that approval of an application was required.

Paragraph (e) required a sponsor who had an IND application for a device in effect on July 16, 1980, and who wished to continue the investigation after 90 days after that date, to comply with paragraph (b)(1) if not a significant risk device or obtain FDA approval under § 812.30 of an IDE application.

To accommodate the proposed removal of paragraph (b)(2), paragraphs (b) and (b)(1) would be combined and proposed paragraph (b) states that unless FDA has notified a sponsor under § 812.20(a) that approval of an application is required, an investigation of a device other than a significant risk device is considered to have an approved application for IDE, if the device is not a banned device and the sponsor complies with paragraphs (b)(1) through (b)(7). Note that paragraphs (b)(1) through (b)(7) are the proposed redesignated paragraphs (b)(1)(i) through (b)(1)(vii).

The current IDE regulations identify varying requirements for clinical investigations of devices based on whether the study is of a significant risk or nonsignificant risk device or would meet the exemption requirements in § 812.2(c). We propose that requirements for clinical studies conducted outside the United States, which are to be submitted to FDA in support of an IDE or a device marketing application or submission, also be subject to varying requirements, depending on whether the study is of a significant risk device or nonsignificant risk device or would meet the exemption requirements in § 812.2(c).

Proposed paragraph (e) identifies these varying requirements. Proposed § 812.2(e)(1) requires studies of a significant risk device, as defined in § 812.3(m), to comply with the requirements of the principles of good clinical practice, as defined in § 812.28(a), maintenance of supporting information as described in § 812.28(b), and records retention as described in § 812.28(c). Proposed § 812.2(e)(2) requires studies of a device, other than a significant risk device, or clinical device investigations that would otherwise meet the exemption requirements in § 812.2(c), to comply with these same requirements concerning good clinical practice and records retention, but with lesser requirements concerning maintenance of the supporting information (i.e., only those requirements at § 812.28(b)(1), (4), (5), (7), (8), (9), and (11)), in recognition of their differing regulatory status compared to significant risk device investigations.

Current § 812.27(a) requires the report of prior investigations to include reports of all prior clinical, animal, and laboratory testing of the device but does not include specific requirements for reports of clinical testing. Proposed § 812.27(b)(4) would describe the specific requirements for reports of clinical testing conducted both inside and outside the United States.

Proposed (b)(4)(i) requires that, if information on clinical studies conducted in the United States is provided, the report of prior investigations shall include a statement that all such studies have been conducted in compliance with applicable requirements in the protection of human subjects regulations in part 50, the institutionalreview boards regulations in part 56, and the investigational device exemptions regulations in part 812, or if any such study was not conducted in compliance with such regulations, a brief statement of the reason for the noncompliance. It also provides that failure or inability to comply with these requirements does not justify failure to provide information on a relevant clinical study.

Proposed § 812.27(b)(4)(ii) states, if information on clinical studies conducted outside the United States is provided to support an IDE, the requirements under § 812.2(e) and § 812.28 of this chapter apply, where the requirements for such studies are detailed. If any such study was not conducted in accordance with GCP as described in § 812.28(a), the report of prior investigations shall include a brief statement of the reason for not conducting the study in accordance with GCP and a description of steps taken to assure that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects were protected. This description is necessary for studies conducted outside the United States because of the greater difficulty in conducting bioresearch monitoring inspections of foreign sites. It further states that failure or inability to comply with these requirements does not justify failure to provide information on a relevant clinical study.

We remind sponsors and applicants that they must submit all studies and other information required under applicable FDA regulations for medical devices. For example, as part of our review of an IDE, we consider all relevant data bearing on the safe use of the proposed medical device, including data obtained in any clinical studies conducted outside the United States—even data from studies that are not carried out in accordance with GCP.

The requirements for premarket notifications are described in part 807, subpart E. The information required in a premarket notification submission is detailed at § 807.87, but this section does not discuss the requirements relating to clinical data submitted, where applicable, to support a premarket notification submission. Most premarket notifications do not include clinical data and would not be affected by this proposed rule; however, we believe the requirements for FDA acceptance of clinical data should be the same for premarket notifications that do contain clinical data as for other device applications in order to achieve consistency in FDA's clinical data requirements. For 510(k) submissions relying upon literature only, the proposed requirements at new § 807.87(j) would not generally apply.

For the subset of premarket notifications that do contain clinical data, we propose to add a new paragraph (j) to describe requirements relating to clinical data submitted to support a premarket notification and to redesignate existing paragraph (j) as paragraph (k), existing paragraph (k) as paragraph (l), and existing paragraph (l) as paragraph (m).

For a premarket notification submission containing clinical data, proposed paragraph (j)(1) requires, if the data are from clinical studies conducted in the United States, a statement that each study was conducted in compliance with applicable requirements in parts 50, 56, and 812 of this chapter, or if the study was not conducted in compliance with those regulations, a brief statement of the reason for the noncompliance.

Proposed paragraph (j)(2) states that, if the data are from clinical studies conducted outside the United States, the requirements under § 812.2(e) and § 812.28 of this chapter apply. If any such study was not conducted in accordance with GCP as described in § 812.28(a), the submission must include a brief statement of the reason for not conducting the study in accordance with GCP and a description of steps taken to assure that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects were protected. This description is necessary for studies conducted outside the United States because of the greater difficulty in conducting bioresearch monitoring inspections of foreign sites. This proposal will help ensure consistency in FDA clinical data requirements, whatever the type of product application or submission at issue.

The requirements for premarket approval are described in part 814. The requirements for FDA acceptance of clinical data submitted in support of a PMA from studies conducted outside the United States are currently addressed in § 814.15. As previously indicated, we propose to address these requirements primarily in the IDE regulations. Therefore, removal of current paragraphs (a), (b), and (c) in § 814.15 is proposed. Proposed paragraph (a) will identify the general requirement that a study conducted outside the United States and submitted in support of a PMA shall comply with the relevant provisions of part 812 as set forth in § 812.2(e) and § 812.28. To accommodate this change, current paragraphs (d) and (e) will be redesignated as paragraphs (b) and (c) respectively.

To address the requirements for PMA applications that include data from clinical studies conducted outside the United States, we propose to amend § 814.20(b), the content requirements for a PMA application, specifically the requirements for technical sections containing results of clinical investigations in paragraph (6)(ii). We propose to add a new subparagraph (C) stating that, for clinical studies conducted outside the United States intended to support the PMA, the requirements under § 812.2(e) and § 812.28 of this chapter apply. Required information may be incorporated by cross-reference to another section of the application that contains such information. If any such study was not conducted in accordance with GCP as described in § 812.28(a), the application must include a brief statement of the reason for not conducting the study in accordance with GCP and a description of steps taken to assure that the data and reported results are credible and accurate and that the rights, safety, and well-being of trial subjects were protected. This description is necessary for studies conducted outside the United States because of the greater difficulty in conducting bioresearch monitoring inspections of foreign sites. We remind sponsors and applicants that failure or inability to comply with these requirements does not justify failure to provide information concerning investigations bearing on the safety or effectiveness of a device undergoing PMA review (see § 814.20(b)(8)(ii) and sections 515(c)(1)(A) and 515(c)(2)(A)(v) of the FD&C Act).

We also propose to amend the provisions in § 814.45 concerning denial of approval of a PMA application. We propose to revise paragraph (a)(5) to include as a reason for denial that any clinical investigation involving human subjects described in the PMA application, which was subject to GCP referenced in § 814.15(a) and described in § 812.28(a), was not conducted in compliance with those regulations such that the rights or safety of human subjects were not adequately protected or the supporting data were determined to be otherwise unreliable.

Further, we propose to amend § 814.46 regarding withdrawal of approval of a PMA application, specifically to revise paragraph (a)(4) to allow FDA to withdraw approval if FDAdetermines that any clinical investigation involving human subjects described in the PMA application, subject to GCP referenced in § 814.15(a) and described in § 812.28(a), was not conducted in compliance with those regulations such that the rights or safety of human subjects were not adequately protected or the supporting data were determined to be otherwise unreliable.

Finally, we propose to amend § 814.104 regarding the required contents of HDE applications. Although these applications remain subject to modified requirements for application contents compared to premarket approval applications, we propose that they would not be exempt from the new proposed requirement in § 814.20(b)(6)(ii)(C) regarding submission of data from clinical studies conducted outside the United States. The proposed language also clarifies that, in those situations where data from clinical studies conducted inside the United States are submitted in support of a HDE application, the requirements in § 814.20(b)(6)(ii)(A)-(B) apply.

Premarket approval is considered to include a PDP declared to be completed by FDA (see § 814.19 and section 515(f) of the FD&C Act). Although PDPs are rarely submitted, if a PDP is supported by data from clinical studies conducted outside the United States, the requirements in § 814.15 would apply.

When the regulations for premarket approval were amended to address HDE applications, the IDE regulations were not amended because at the time clinical studies supporting an HDE application were not anticipated (largely because of the small numbers of patients affected and the infeasibility of conducting large, randomized clinical trials). Experience has demonstrated that many HDE applications do include data from clinical studies (usually from small, non-randomized studies) in order to meet the required standard for approval. Therefore, we are proposing to revise § 812.140(d) regarding retention of records for clinical research conducted under an IDE to include records supporting an HDE application.

We are similarly proposing to revise § 812.140(d) regarding retention of records for clinical research conducted under an IDE to include records supporting a premarket notification submission, where applicable. Most premarket notification submissions do not include clinical data. For the subset that do contain clinical data, we are proposing that record retention requirements be the same as for other product applications and submissions that contain clinical data, to ensure consistency in FDA clinical data requirements and the integrity and reliability of clinical data submitted. This proposed revision to § 812.140(d) is also consistent with proposed § 812.28(c), described in this document, regarding retention of records for clinical research conducted outside the United States. Each of these proposed revisions would achieve consistency in FDA requirements for clinical data record retention regardless of the application or submission type.

We are proposing to issue this rule under the authority of the provisions of the FD&C Act that apply to medical devices (21 U.S.C. 301et seq.).

To permit devices to be shipped for investigational use, section 520(g) of the FD&C Act authorizes the exemption of investigational devices from otherwise applicable provisions of the FD&C Act relating to misbranding, registration, premarket notification, performance standards, premarket approval, banned devices, records and reporting requirements, good manufacturing practice requirements, and requirements relating to the use of color additives in devices. Under section 520(g) of the FD&C Act, the procedures and conditions that FDA3 is authorized to prescribe for granting an IDE include the requirement that an application be submitted to FDA, in such form and manner as the Agency shall specify, and other requirements necessary for the protection of the public health and safety. Section 520(g) also requires that the information submitted in support of an IDE application be “adequate to justify the proposed clinical testing.” In investigations involving human subjects, the person applying for the exemption (the sponsor) must comply with a number of requirements to assure that the rights and safety of subjects are adequately protected. To provide for flexibility in regulatory requirements, section 520(g) of the FD&C Act permits variations in the procedures and conditions governing IDEs, depending on the nature, scope, duration, and purpose of the study.

Section 515(c)(1)(A) of the FD&C Act requires that PMA applications contain, among other information, full reports of all information, published or known to or which should reasonably be known to the PMA applicant, concerning investigations bearing on the safety or effectiveness of the device for which premarket approval is sought. Section 515(d)(2) of the FD&C Act states that FDA shall deny approval of a PMA application if the Agency finds that “there is a lack of a showing of reasonable assurance that such device is safe under the conditions of use prescribed, recommended, or suggested in the proposed labeling thereof” or “there is a lack of a showing of reasonable assurance that the device is effective under the conditions of use prescribed, recommended, or suggested in the proposed labeling thereof,” among other reasons. Whether data from an investigation involving human subjects support the safety or effectiveness of a device depends, in part, on whether the study was conducted in accordance with ethical and other principles that provide assurance of the quality and integrity of clinical data and adequate protection of human subjects. Even if the data derive from improperly conducted clinical studies, the data must be submitted in a PMA application under section 515(c)(1)(A) of the FD&C Act.

Under section 513(i) of the FD&C Act (21 U.S.C. 360c(i)), determinations of substantial equivalence include some inquiry into the comparable safety and effectiveness of the device, where appropriate. For devices that have the same intended use as the predicate device but different technological characteristics, information submitted to demonstrate substantial equivalence must include “appropriate clinical or scientific data[,] if deemed necessary” by FDA, showing that “the device is as safe and effective as a legally marketed device” and “does not raise different questions of safety and effectiveness than the predicate device.” As described in this document, whether data from a clinical study support the safety or effectiveness of a device—or, in the context of some premarket notifications, the comparable safety and effectiveness of a device as part of a substantial equivalence demonstration—depends in part on whether the study was conducted in accordance with ethical and other principles that provide assurance of the quality and integrity of clinical data and adequate protection of human subjects.

Under section 520(m) of the FD&C Act, FDA may grant an HDE if FDA finds that: The device is designed to treat or diagnose a disease or condition that affects fewer than 4,000 individuals in the United States; the device wouldnot be available to a person with such disease or condition unless FDA grants the exemption and there is no comparable device, other than under this exemption, available to treat or diagnose such disease or condition; and the device will not expose patients to an unreasonable or significant risk of illness or injury and the probable benefit to health from the use of the device outweighs the risk of injury or illness from its use, taking into account the probable risks and benefits of currently available devices or alternative forms of treatment. Again, whether data from clinical studies submitted in an HDE application support that the probable benefits of the device outweigh its risks depends, in part, on whether the study was conducted in accordance with ethical and other principles that provide assurance of the quality and integrity of clinical data and adequate protection of human subjects.

Section 701(a) of the FD&C Act (21 U.S.C. 371(a)) authorizes the Agency to issue regulations for the efficient enforcement of the FD&C Act.

These statutory provisions authorize us to issue regulations describing when we may consider data from clinical trials, whether conducted inside or outside the United States, as reliable evidence supporting an IDE, PMA, 510(k), PDP, or HDE application or submission.

FDA has examined the impacts of the proposed rule under Executive Order 12866, Executive Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct Agencies to assess all costs and benefits of available regulatory alternatives and, when regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity). The Agency believes that this proposed rule is not a significant regulatory action as defined by Executive Order 12866.

The Regulatory Flexibility Act requires Agencies to analyze regulatory options that would minimize any significant impact of a rule on small entities. Because the requirements are likely to impose a burden on a substantial number of affected small entities, the Agency projects that the proposed rule, if finalized, will have a significant economic impact on a substantial number of small entities, and has conducted an Initial Regulatory Flexibility Analysis as required under the Regulatory Flexibility Act.

Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires that Agencies prepare a written statement, which includes an assessment of anticipated costs and benefits, before proposing “any rule that includes any Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more (adjusted annually for inflation) in any one year.” The current threshold after adjustment for inflation is $139 million, using the most current (2011) Implicit Price Deflator for the Gross Domestic Product. FDA does not expect this proposed rule to result in any 1-year expenditure that would meet or exceed this amount.

The proposed rule will require that clinical studies conducted outside the United States and used to support IDE applications, 510(k) submissions, PMA applications, HDE applications, or PDP applications comply with GCP. GCP standards include review and approval by an independent ethics committee and obtaining and documenting human subjects' informed consent. In addition, the proposed rule seeks to amend the 510(k), HDE, and IDE requirements for FDA acceptance of data from clinical studies conducted inside the United States to parallel existing FDA requirements for PMA applications. FDA has not quantified the benefits of the proposed rule that would come from increased collection of information that would provide FDA with greater assurance of clinical data quality and human subject protection, particularly as it pertains to clinical studies conducted outside the United States. Costs would arise from increased labor costs associated with obtaining, documenting, and maintaining records to meet the proposed requirements. The estimated costs of complying with these requirements range from $0.30 million to $24.03 million.

The full analysis of economic impacts is available athttp://www.fda.gov/AboutFDA/ReportsManualsForms/Reports/EconomicAnalyses/default.htm(See also Ref. 1).

The Agency has determined under 21 CFR 25.30(h) that this action is of a type that does not individually or cumulatively have a significant effect on the human environment. Therefore, neither an environmental assessment nor an environmental impact statement is required.

This proposed rule contains information collection provisions that are subject to review by the OMB under the PRA (44 U.S.C. 3501-3520). A description of these provisions is given in theDescriptionsection of this document with an estimate of the annual reporting and recordkeeping burden. Included in the estimate is the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing each collection of information.

FDA invites comments on these topics: (1) Whether the proposed collection of information is necessary for the proper performance of FDA's functions, including whether the information will have practical utility; (2) the accuracy of FDA's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques, when appropriate, and other forms of information technology.

Title:Human Subject Protection; Data Requirements for Medical Device Related Clinical Studies

Description:In this document is a discussion of the regulatory provisions we believe are subject to the PRA and the probable information collection burden associated with these provisions.

Description of Respondents:The reporting and recordkeeping requirements referenced in this document are imposed on a device sponsor or applicant.

Section 807.87 is being amended to address requirements for 510(k) submissions supported by clinical data. For clinical studies conducted in the United States, submitters will be required to submit a statement as described in § 807.87(j)(1). For clinical studies conducted outside the United States, submitters will be required to submit a statement as described in § 807.87(j)(2).

For any clinical studies conducted outside the United States to be submitted in support of: (1) An IDE, (2) a PMA, (3) a PDP, (4) an HDE or (5) a 510(k), the sponsor or applicant will be required to maintain supporting information and retain records as described in § 812.2(e).

Section 812.27 is being amended to address requirements for IDE applications supported by clinical data. For clinical studies conducted in the United States, sponsors will be required to submit a statement as described in § 812.27(b)(4)(i). For clinical studies conducted outside the United States, sponsors will be required to submit a statement as described in § 812.27(b)(4)(ii).

Section 812.28 is being proposed to address the requirements for acceptance of foreign clinical data to support an IDE or a device marketing application or submission. The sponsor or applicant will be required to submit statements as described in § 812.28(a)(1) and (a)(2); provide a description of the actions the sponsor or applicant took to ensure that the research conformed to GCP that includes the information in § 812.28(b)(1) through (b)(12) or a cross-reference to another section of the submission where the information is located; and retain the records as described in § 812.28(c).

Section 812.140 is being amended to address record retention requirements for investigators and sponsors. An investigator or sponsor will be required to maintain records as described in § 812.140(d).

Section 814.20 is being amended to address requirements for a PMA supported by data from clinical studies conducted outside the United States. The applicant will be required to submit a statement and information as required by § 814.20(b)(6)(ii)(C).

Section 814.104 is being amended to address submission of data from clinical studies in an HDE. To the extent the applicant includes clinical information, the applicant will be required to include the information and statements described in § 814.104(b)(4)(i).

It should be noted that while the information collection requirements referenced in this document are revisions to current approved information collections, these collection requirements are being submitted to OMB as a new information collection, with the expectation the currently approved requirements will be amended. As such the following collections of information will be amended and submitted to OMB for approval as revisions to currently approved information collections once the rule is finalized and the collections are due for renewal. The collections to be amended include: Investigational Device Exemptions Reports and Records—21 CFR part 812, OMB control number 0910-0078; Premarket Notification—21 CFR part 807, subpart E, OMB control number 0910-0120; Premarket Approval of Medical Devices—21 CFR part 814, OMB control number 0910-0231; and MedicalDevices: Humanitarian Use Device—21 CFR part 814, subpart H, OMB control number 0910-0332.

To ensure that comments on these new information collection requirements are received, OMB recommends that written comments be faxed to the Office of Information and Regulatory Affairs, OMB, Attn: FDA Desk Officer, FAX: 202-395-6974, or emailed tooira_submission@omb.eop.gov.All comments should be identified with the title “Human Subject Protection; Data Requirements for Medical Device Related Clinical Studies.”

In compliance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)), the Agency has submitted the information collection provisions of this proposed rule to OMB for review. These requirements will not be effective until FDA obtains OMB approval. FDA will publish a notice concerning OMB approval of these requirements in theFederal Register.

FDA has analyzed this proposed rule in accordance with the principles set forth in Executive Order 13132. FDA has determined that the proposed rule, if finalized, would not contain policies that would have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various levels of government. Accordingly, the Agency tentatively concludes that the proposed rule does not contain policies that have federalism implications as defined in the Executive order and, consequently, a federalism summary impact statement is not required.

We propose that any final rule based on this proposal become effective 180 days after the final rule is published in theFederal Register.

Interested persons may submit either electronic comments regarding this document tohttp://www.regulations.govor written comments to the Division of Dockets Management (seeADDRESSES). It is only necessary to send one set of comments. Identify comments with the docket number found in brackets in the heading of this document. Received comments may be seen in the Division of Dockets Management between 9 a.m. and 4 p.m., Monday through Friday, and will be posted to the docket athttp://www.regulations.gov.

The following reference has been placed on display in the Division of Dockets Management (seeADDRESSES) and may be seen by interested persons between 9 a.m. and 4 p.m., Monday through Friday, and are available electronically athttp://www.regulations.gov.

1. Preliminary Regulatory Impact Analysis of the Proposed Rule to Human Subject Protection; Acceptance of Data From Clinical Studies for Medical Devices, Docket No. FDA-2013-N-0080.

Therefore, under the Federal Food, Drug, and Cosmetic Act and under authority delegated to the Commissioner of Food and Drugs, FDA proposes that 21 CFR parts 807, 812, and 814 be amended as follows:

This rule is designed to increase efficiency and reduce the burden of regulations, since it extends the timeframes for lessees and operators to submit plans and makes it possible for a Right-of-Use and Easement (RUE) to be approved while a GAP is still pending.

This proposed rule would amend the timing requirements for submitting a Site Assessment Plan (SAP) or General Activities Plan (GAP) pursuant to the regulations governing renewable energy and alternate uses of existing facilities on the Outer Continental Shelf in 30 CFR part 585. Under the proposed rule, all OCS renewable energy leases and grants would have a preliminary term of 12 months in which the lessee or grantee must submit a SAP or a GAP. BOEM is proposing these changes because the current regulations specify timing requirements for submission of SAPs and GAPs that have proven to be impractical.

The current regulations require a lessee to submit a SAP or a GAP, and a grantee to submit a GAP, within six months of lease or grant issuance in cases where the lease or grant is issued following completion of a competitive process. In cases where a lease or grant is issued noncompetitively, the current regulations require the requestor to submit a SAP or GAP within 60 days after BOEM issues a determination of no competitive interest and before the issuance of either a grant or a lease. In communications with BOEM, prospective OCS renewable energy lessees and grantees have indicated that these timeframes—especially the 60-day requirement—are too short, and that most developers intend to request departures from the regulatory requirements pertaining to the timing of SAP and GAP submission. Moreover, seasonal weather conditions may exacerbate time constraints associated with the preparation of a SAP or GAP.

The proposed rule would create additional flexibility for the program by amending pertinent sections of the regulations at 30 CFR part 585 as follows:

(1) Deleting the requirement for submission of a SAP within 60 days ofa notice of a determination of no competitive interest and removing related references (§§ 585.212 and 585.231) to that requirement;

(2) Changing the preliminary lease term from six months to 12 months and deleting the statements that leases issued noncompetitively do not have a preliminary term (§§ 585.235 and 585.236); removing the current (a)(2) in § 585.235 and redesignating (a)(3) as (a)(2).

(3) Providing a preliminary grant term of 12 months (§ 585.303);

(4) Deleting the requirement for submission of a GAP within 60 days of a notice of determination of no competitive interest (§ 585.306);

(5) Deleting the requirement for approving a GAP before issuing a grant (§ 585.309);

(6) Replacing references to the six-month preliminary lease term with references to the 12-month preliminary term in the sections pertaining to payment of rent (§§ 585.500, 585.503, and 585.505); and

(7) Changing the deadline for SAP and GAP submission for leases and grants. Currently, for commercial leases issued competitively, there is a six months deadline after lease issuance to submit a SAP or a GAP. For a non-competitive lease, the current requirement is that a SAP or GAP be submitted 60 days after the determination of no competitive interest (DNCI). Both of these timeframes would be changed under this rule, which would provide that any lease or grant have a preliminary term of 12 months for submitting the required plan. In addition, some minor revisions or deletions of related references are made in §§ 585.601, 585.611, 585.612, 585.640, 585.646, and 585.647. Related provisions and references concerning compliance with Coastal Zone Management Act (CZMA) federal consistency requirements would be revised in these sections, as well as in §§ 585.230 and 585.305.

The original timing requirements were designed to encourage diligent development and to enable efficient review and approval processes for lease issuance and plan approval. The original timeframes and approaches still may be achieved under the amended regulations. Since lessees or grantees would have up to 12 months to submit a SAP or a GAP, any person who wishes to do so within the original timeframes may still do so. Likewise, if a prospective lessee or grantee desires and is able to take advantage of the efficiency associated with coupling review and approval of a lease or grant request with a SAP or GAP, by submitting the plan soon after a DNCI, in the case of a non-competitive lease, or upon lease execution, in the case of a competitive lease, it still may do so. The new timing requirements in this proposed rule are intended to strike a proper balance between promoting diligent activity on OCS renewable energy leases and grants and aligning with the needs and expectations of OCS renewable energy developers in planning and implementing their projects. Comments are requested as to whether the proposed amendments would provide adequate time for project planning and implementation, and, if not, how much time should be provided.

The proposed amendment to part 585, to provide a preliminary term of 12 months for all OCS renewable energy leases and grants, would affect many sections. Provisions in §§ 585.212, 585.230, 585.231, 585.235, and 585.236 would be changed to implement the universal 12-month preliminary lease term and to revise the related lease issuance process accordingly. Sections 585.303, 585.305, 585.306, and 585.309 would be changed to implement the universal 12-month preliminary grant term and revise the related grant issuance process accordingly. Sections 585.500, 585.503, and 585.505 would be changed to provide for the submission of rent payments in accordance with the new 12-month term. Sections 585.601, 585.611, 585.612, 585.640, 585.646, and 585.647 would be changed to reflect the effects of providing the universal 12-month preliminary term and to revise the related plan review and approval processes accordingly.

In addition to the changes described above, the proposed rule would make conforming changes to part 585 that would incorporate the Coastal Zone Management Act (CZMA) terminology included in part 500 to assure that BOEM coordinates with the appropriate State CZMA agencies. Sections affected would include: §§ 585.102, 585.203, 585.211, 585.238, 585.306, and 585.902.

The proposed rule would add a new definition of the term “CZMA State” to delineate more accurately which States can review an OCS activity for consistency with a State's approved coastal zone management program under the Coastal Zone Management Act, 16 U.S.C. 1451et seq.The proposed rule would provide that a “CZMA State” means any State in which a particular activity on the OCS would have a reasonably foreseeable direct or indirect effect on any coastal use or resource of that State. The definition would contain a cross reference to the National Oceanic and Atmospheric Administration (NOAA) regulation, 15 CFR 930.11(g), defining the term “effect on any coastal use or resource.”

The Federal consistency concept under the CZMA is different from the “Affected State” concept under the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. 1331et seq.The CZMA does not use the term “Affected State;” the phrase in the CZMA is “affects any land or water use or natural resource of the coastal zone,” 16 U.S.C. 1456(c). The proposed rule is based on CZMA regulations that use the phrase “effects on any coastal use or resource,” 15 CFR 930.11 and 930.33. Under the CZMA, only a State that demonstrates a reasonably foreseeable coastal effect from a particular activity can review an activity for consistency with its approved coastal management program (CMP) (this is the “effects test”). As NOAA stated in the preamble to its 2006 regulations, “[t]here are no geographical boundaries to the application of the effects test.” (71 FR 788 (2006)).

OCSLA, however, uses the term “Affected State” to identify which States are entitled to participate in BOEM's leasing program. OCSLA defines “Affected State” to include any State for which an activity would be within the State “if its boundaries were extended seaward to the outer margin of the outer Continental Shelf,” 43 U.S.C. 1331 and 1333(a)(2)(A). OCSLA uses the words “Affected State” whenever it intends to invoke that definition. But significantly, when OCSLA refers to compliance with the CZMA, it does not use the term “Affected State;” instead, it uses the language of the CZMA.See43 U.S.C. 1351(d).

BOEM's current regulations do not make clear the distinction between CZMA and OCSLA requirements. When the current BOEM regulations implement the sections of OCSLA that mention the CZMA, they use the term “Affected State” instead of the CZMA concept “affecting any land use or water use in the coastal zone of a State.” The dual usage of this term is seen, for example, in § 585.611 or § 585.628, because these sections attempt to implement 43 U.S.C. 1351(a)(3)—concerning sending a SAP or COP to an “affected State” under the OCSLA—and 43 U.S.C. 1351(d)—concerning sending consistency certifications to States when their land use or water use in the coastal zone is affected under the CZMA. Although BOEM is already required by statute to comply with the terms of the CZMA, adding conforming terminologyin these regulations is intended to provide clarity and avoid confusion.

In addition to proposing a new definition, we propose to substitute the newly defined term “CZMA State” for the term “Affected State” in a number of regulatory sections in part 585 that are intended to implement the CZMA requirements rather than OCSLA requirements.

The proposed rule would also revise the definition of the termsYouandyourto include contractors and subcontractors of the listed entities.

The proposed rule would revise § 585.500(a) by providing the correct Web site to the BOEMFees for Servicespage (application fees) for electronic payments.

The proposed rule would provide the correct Web site to the BOEMFees for Servicespage (application fees) for electronic payments.

The authority for this rulemaking is the broad rulemaking provision of OCSLA, as set forth in 43 U.S.C. 1334(a), that authorizes the Secretary of the Interior to prescribe and amend such rules and regulations as may be necessary to administer a leasing program, or necessary and proper in order to provide for the prevention of waste and conservation of natural resources of the OCS.

The authority for the portion of this rulemaking dealing with the production, transportation, or transmission of energy from sources other than oil and gas, and alternate uses of the OCS, is Section 8(p)(8) of OCSLA (43 U.S.C. 1337(p)(8)), which authorizes the Secretary to issue any necessary regulations to carry out Subsection 8(p) of OCSLA.

Executive Order 12866 provides that the Office of Information and Regulatory Affairs (OIRA) will review all significant rules. OIRA has determined that this rule is not significant.

Executive Order 13563 reaffirms the principles of E.O. 12866 while calling for improvements in the nation's regulatory system to promote predictability, to reduce uncertainty, and to use the best, most innovative, and least burdensome tools for achieving regulatory ends. The executive order directs agencies to consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public where these approaches are relevant, feasible, and consistent with regulatory objectives. E.O. 13563 emphasizes further that regulations must be based on the best available science and that the rulemaking process must allow for public participation and an open exchange of ideas. BOEM has developed this rule in a manner consistent with these requirements.

This proposed rule is not a significant rule as determined by the Office of Management and Budget (OMB) and is not subject to review under E.O. 12866. For the most part, this rule proposes administrative corrections and clarifications to the existing regulations. Other changes consist of the reorganization of selected renewable energy regulations.

Because this proposed rule otherwise does not propose to alter or change requirements for leasing, compliance, or enforcement from those set forth in existing regulations, no costs are estimated for this rulemaking. We welcome comments on any unidentified new compliance costs or benefits expected to be realized by this proposed rule.

(1) This proposed rule would not have an annual effect of $100 million or more on the economy. It would not adversely affect in a material way the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.

(2) This proposed rule would not create a serious inconsistency or otherwise interfere with an action taken or planned by another agency.

(3) This proposed rule would not alter the budgetary effects of entitlements, grants, user fees, or loan programs or the rights or obligations of their recipients.

(4) This proposed rule would not raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in E.O. 12866.

The Department of the Interior certifies that this proposed rule would not have a significant economic effect on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601et seq.). This rulemaking would affect large and small entities through the clarification of the existing regulatory requirements under the reorganized regulations of part 585.

Your comments are important. The Small Business and Agriculture Regulatory Enforcement Ombudsman and ten Regional Fairness Boards were established to receive comments from small businesses about Federal agency enforcement actions. The Ombudsman will annually evaluate the enforcement activities and rate each agency's responsiveness to small business. If you wish to comment on the actions of BOEM, call 1-888-734-3247. You may comment to the Small Business Administration without fear of retaliation. Allegations of discrimination/retaliation filed with the Small Business Administration will be investigated for appropriate action.

This proposed rule is not a major rule under the Small Business Regulatory Enforcement Fairness Act (5 U.S.C. 801et seq.). This proposed rule:

(a) Would not have an annual effect on the economy of $100 million or more.

(b) Would not cause a major increase in costs or prices for consumers, individual industries, Federal, state, or local government agencies, or geographic regions.

(c) Would not have significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S.-based enterprises to compete with foreign-based enterprises. The requirements apply to all entities operating to develop renewable resources on the OCS.

This proposed rule would not impose an unfunded mandate on state, local, or tribal governments, or the private sector, of more than $100 million per year. This proposed rule would not have a significant or unique effect on state, local, or tribal governments, or the private sector. A statement containing the information required by the Unfunded Mandates Reform Act (2 U.S.C. 1501et seq.) is not required.

Under the criteria in E.O. 12630, this proposed rule would not have significant takings implications. This proposed rule would not be a governmental action capable of interference with constitutionally protected property rights. A Takings Implication Assessment is not required.

Under the criteria in E.O. 13132, this proposed rule would not have federalism implications. This proposed rule would not substantially affect the relationship between the Federal and state governments. To the extent thatstate and local governments have a role in OCS activities, this proposed rule would not affect that role. A Federalism Assessment is not required.

This proposed rule would comply with the requirements of E.O. 12988. Specifically, this rule:

(a) Would meet the criteria of section 3(a) requiring that all regulations be reviewed to eliminate errors and ambiguity and be written to minimize litigation; and

(b) Would meet the criteria of section 3(b)(2) requiring that all regulations be written in clear language and contain clear legal standards.

Under the criteria in E.O. 13175, BOEM has evaluated this proposed rule and determined that it would have no substantial effects on federally recognized Indian tribes.

This proposed rule does not contain new information collection requirements, and a submission under the PRA is not required. Therefore, an information collection request is not being submitted to the Office of Management and Budget (OMB) for review and approval under 44 U.S.C. 3501et seq.The rule refers to, but does not change, the information collection requirements in 30 CFR 585. The OMB has approved the referenced information collection under OMB Control Number 1010-0176 (31,124 hours and $3,816,000 non-hour cost burden).

This rule does not constitute a major Federal action significantly affecting the quality of the human environment. BOEM evaluated this rule under the criteria of the National Environmental Policy Act, 43 CFR part 46 and 516 Departmental Manual 15. This rule would meet the criteria for categorical exclusion set forth in 43 CFR 46.210(i) in that this proposed rule is “ * * * of an administrative, financial, legal, technical, or procedural nature * * *” Furthermore, we have evaluated this proposed rule to determine if it involves any of the extraordinary circumstances that would require an environmental assessment or an environmental impact statement as set forth in 43 CFR 46.215. We concluded that this rule does not meet any of the criteria for extraordinary circumstances as set forth in 516 Departmental Manual 2 (Appendix 2).

In developing this rule, we did not conduct or use a study, experiment, or survey requiring peer review under the Data Quality Act (Pub. L. 106-554, app. C § 515, 114 Stat. 2763, 2763A-153-154).

This proposed rule is not a significant energy action under the definition in E.O. 13211. A Statement of Energy Effects is not required.

We are required by E.O. 12866, E.O. 12988, and by the Presidential Memorandum of June 1, 1998, to write all rules in plain language. This means that each rule we publish must:

(a) Be logically organized;

(b) Use the active voice to address readers directly;

(c) Use clear language rather than jargon;

(d) Be divided into short sections and sentences; and

(e) Use lists and tables wherever such lists or tables would be more helpful.

If you feel that we have not met these requirements, send us comments by one of the methods listed in theADDRESSESsection. To better help BOEM revise this rule, your comments should be as specific as possible. For example, you should tell us the numbers of the sections or paragraphs that you find unclear, which sections or sentences are too long, the sections where you feel lists or tables would be useful, etc.

Before including your address, phone number, email address, or other personal identifying information in your comment, you should be aware that your entire comment—including your personal identifying information—may be made publicly available at any time. While you can ask us in your comment to withhold your personal identifying information from public review, we cannot guarantee that we would be able to do so.

For the reasons stated in the preamble, the Bureau of Ocean Energy Management (BOEM) proposes to amend Chapter V as follows:

I. General Information A. Does this action apply to me?

You may be potentially affected by this action if you manufacture, import, process, or use the chemical substances in this proposed rule. The following list of North American Classification System (NAICS) codes is not intended to be exhaustive, but rather provides a guide to help readers determine whether this document applies to them. Potentially affected entities may include:

• Manufacturers, importers, or processors of one or more subject chemical substances (NAICS codes 325 and 324110), e.g., chemical manufacturing and petroleum refineries.

This action may also affect certain entities through pre-existing import certification and export notification rules under TSCA. Chemical importers are subject to the TSCA section 13 (15 U.S.C. 2612) import certification requirements promulgated at 19 CFR 12.118 through 12.127; see also 19 CFR 127.28. Chemical importers must certify that the shipment of the chemical substance complies with all applicable rules and orders under TSCA. Importers of chemicals subject to a final SNUR must certify their compliance with the SNUR requirements. The EPA policy in support of import certification appears at 40 CFR part 707, subpart B. In addition, any persons who export or intend to export a chemical substance that is the subject of a proposed or final SNUR are subject to the export notification provisions of TSCA section 12(b) (15 U.S.C. 2611(b)) (see § 721.20) and must comply with the export notification requirements in 40 CFR part 707, subpart D.

1.Submitting CBI.Do not submit this information to EPA through regulations.gov or email. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as CBI and then identify electronically within the disk or CD-ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2.

2.Tips for preparing your comments.When submitting comments, remember to:

i. Identify the document by docket ID number and other identifying information (subject heading,Federal Registerdate and page number).

ii. Follow directions. The Agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

iii. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

iv. Describe any assumptions and provide any technical information and/or data that you used.

v. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

vi. Provide specific examples to illustrate your concerns and suggest alternatives.

vii. Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

viii. Make sure to submit your comments by the comment period deadline identified.

These proposed SNURs would, when finalized, require persons to notify EPA at least 90 days before commencing the manufacture, import, or processing of the specific chemical substances identified in the PMNs for any activity designated by these SNURs as a significant new use. Receipt of such notices allows EPA to assess risks that may be presented by the intended uses and, if appropriate, to regulate the proposed use before it occurs. Additional rationale and background to these rules are more fully set out in the preamble to EPA's first direct final SNUR published in theFederal Registerof April 24, 1990 (55 FR 17376). Consult that preamble for further information on the objectives, rationale, and procedures for SNURs and on the basis for significant new use designations, including provisions for developing test data.

Section 5(a)(2) of TSCA (15 U.S.C. 2604(a)(2)) authorizes EPA to determine that a use of a chemical substance is a “significant new use.” EPA must make this determination by rule after considering all relevant factors, including the four bulleted TSCA section 5(a)(2) factors listed in Unit III. Once EPA determines that a use of a chemical substance is a significant new use, TSCA section 5(a)(1)(B) and 40 CFR part 721 require persons to submit a significant new use notice (SNUN) to EPA at least 90 days before they manufacture, import, or process the chemical substance for that use. Persons who must report are described in § 721.5.

General provisions for SNURs appear in 40 CFR part 721, subpart A. These provisions describe persons subject to the rule, recordkeeping requirements, exemptions to reporting requirements, and applicability of the rule to uses occurring before the effective date of the final rule. Provisions relating to user fees appear at 40 CFR part 700.

According to § 721.1(c), persons subject to these SNURs must comply with the same SNUN requirements and EPA regulatory procedures as submitters of PMNs under TSCA section 5(a)(1)(A). In particular, these requirements include the information submission requirements of TSCA section 5(b) and 5(d)(1), the exemptions authorized by TSCA section 5(h)(1), (h)(2), (h)(3), and (h)(5), and the regulations at 40 CFR part 720. Once EPA receives a SNUN, EPA may take regulatory action under TSCA section 5(e), 5(f), 6, or 7 to control the activities for which it has received the SNUN. If EPA does not take action, EPA is required under TSCA section 5(g) to explain in theFederal Registerits reasons for not taking action.

Section 5(a)(2) of TSCA states that EPA's determination that a use of a chemical substance is a significant new use must be made after consideration of all relevant factors, including:

• The projected volume of manufacturing and processing of a chemical substance.

• The extent to which a use changes the type or form of exposure of human beings or the environment to a chemical substance.

• The extent to which a use increases the magnitude and duration of exposure of human beings or the environment to a chemical substance.

• The reasonably anticipated manner and methods of manufacturing, processing, distribution in commerce, and disposal of a chemical substance.

In addition to these factors enumerated in TSCA section 5(a)(2), the statute authorized EPA to consider any other relevant factors.

To determine what would constitute a significant new use for the 37 chemical substances that are the subject of these proposed SNURs, EPA considered relevant information about the toxicity of the chemical substances, likely human exposures and environmental releases associated with possible uses, taking into consideration the four bulleted TSCA section 5(a)(2) factors listed in this unit.

EPA is proposing to establish significant new use and recordkeeping requirements for 37 chemical substances in 40 CFR part 721, subpart E. In this unit, EPA provides the following information for each chemical substance:

• PMN number.

• Chemical name (generic name, if the specific name is claimed as CBI).

• Chemical Abstracts Service (CAS) number (if assigned for non-confidential chemical identities).

• Basis for the TSCA section 5(e) consent order or, for TSCA non-section 5(e) SNURs, the basis for the SNUR (i.e., SNURs without TSCA section 5(e) consent orders).

• Tests recommended by EPA to provide sufficient information to evaluate the chemical substance (see Unit VIII. for more information).

• CFR citation assigned in the regulatory text section of this proposed rule.

This proposed rule includes 14 PMN substances whose reported chemical names include the term “carbon nanotube” or “carbon nanofibers.” Because of a lack of established nomenclature for carbon nanotubes, the TSCA Inventory names for carbon nanotubes are currently in generic form, e.g., carbon nanotube (CNT), multi-walled carbon nanotube (MWCNT), double-walled carbon nanotube (DWCNT), or single-walled carbon nanotube (SWCNT). EPA uses the specific structural characteristics provided by the PMN submitter to more specifically characterize the TSCA Inventory listing for an individual CNT. All submitters of new chemical notices for CNTs have claimed those specific structural characteristics as CBI. EPA is publishing the generic chemical name along with the PMN number to identify that a distinct chemical substance was the subject of the PMN without revealing the confidential chemical identity of the PMN substance. Confidentiality claims preclude a more detailed description of the identity of these CNTs. If an intended manufacturer, importer, or processor of CNTs is unsure of whether its CNTs are subject to this proposed SNUR or any other SNUR, the company can either contact EPA or obtain a written determination from EPA pursuant to the bona fide procedures at § 721.11. EPA is using the specific structural characteristics for all CNTs submitted as new chemical substances under TSCA to help develop standard nomenclature for placing these chemical substances on the TSCA Inventory. EPA has compiled a generic list of those structural characteristics entitled “Material Characterization of Carbon Nanotubes for Molecular Identity (MI) Determination & Nomenclature.” A copy of this list is available in the docket for these proposed SNURs under docket ID number EPA-HQ-OPPT-2012-0727. If EPA develops a more specific generic chemical name for these materials, that name will be made publicly available.

The regulatory text section of this proposed rule specifies the activities designated as significant new uses. Certain new uses, including exceeding production volume limits (i.e., limits on manufacture and importation volume) and other uses designated in this proposed rule, may be claimed as CBI.

This proposed rule includes 17 PMN substances for which EPA determined, pursuant to TSCA section 5(e), that uncontrolled manufacture, import, processing, distribution in commerce, use, and disposal may present an unreasonable risk of injury to human health or the environment. Accordingly, these substances are subject to “risk-based” consent orders under TSCA section 5(e)(1)(A)(ii)(I). Those consent orders require protective measures to limit exposures or otherwise mitigate the potential unreasonable risk. The so-called “section 5(e) SNURs” on these PMN substances are proposed pursuant to § 721.160, and are based on and consistent with the provisions in the underlying consent orders. The section 5(e) SNURs designate as a “significant new use” the absence of the protective measures required in the corresponding consent orders.

Where EPA determined that the PMN substance may present an unreasonable risk of injury to human health via inhalation exposure, the underlying TSCA section 5(e) consent order usually requires, among other things, that potentially exposed employees wear specified respirators unless actual measurements of the workplace air show that air-borne concentrations of the PMN substance are below a New Chemical Exposure Limit (NCEL) that is established by EPA to provide adequate protection to human health. In addition to the actual NCEL concentration, the comprehensive NCELs provisions in TSCA section 5(e) consent orders, which are modeled after Occupational Safety and Health Administration (OSHA) Permissible Exposure Limits (PELs) provisions, include requirements addressing performance criteria for sampling and analytical methods, periodic monitoring, respiratory protection, and recordkeeping. However, no comparable NCEL provisions currently exist in 40 CFR part 721, subpart B, for SNURs. Therefore, for these cases, the individual SNURs in 40 CFR part 721, subpart E, will normally state that persons subject to the SNUR who wish to pursue NCELs as an alternative to the § 721.63 respirator requirements may request to do so under § 721.30. EPA expects that persons whose § 721.30 requests to use the NCELs approach for SNURs are approved by EPA will be required to comply with NCELs provisions that are comparable to those contained in the corresponding TSCA section 5(e) consent order for the same chemical substance.

This proposed rule also includes SNURs on 20 PMN substances that are not subject to consent orders under TSCA section 5(e). In these cases, for a variety of reasons, EPA did not find that the use scenario described in the PMN triggered the determinations set forth under TSCA section 5(e). However, EPA does believe that certain changes from the use scenario described in the PMN could result in increased exposures, thereby constituting a “significant new use.” These so-called “non-section 5(e) SNURs” are promulgated pursuant to § 721.170. EPA has determined that every activity designated as a “significant new use” in all non-section 5(e) SNURs issued under § 721.170 satisfies the two requirements stipulated in § 721.170(c)(2), i.e., these significant new use activities, “(i) are different from those described in the premanufacture notice for the substance, including any amendments, deletions, and additions of activities to the premanufacture notice, and (ii) may be accompanied by changes in exposure or release levels that are significant in relation to the health or environmental concerns identified” for the PMN substance.

Chemical name:Substituted picolinate (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the substance will be used as an intermediate in the manufacture of agricultural chemicals. Based on ecological structure activity relationship (EcoSAR) analysis of test data on analogous esters, EPA predicts toxicity to aquatic organisms may occur at concentrations that exceed 90 parts per billion (ppb) of the PMN substance in surface waters. As described in the PMN, releases to surface water are not expected. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance resulting in surface water concentrations exceeding 90 ppb may cause significant adverse environmental effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(4)(ii).

Recommended testing:EPA has determined that the results of a fish acute toxicity test, freshwater and marine (OPPTS Test Guideline 850.1075); an aquatic invertebrate acute toxicity test, freshwater daphnids (OPPTS Test Guideline 850.1010); and an algal toxicity test (Office of Chemical Safety and Pollution Prevention (OCSPP) Test Guideline 850.4500) would help characterize the environmental effects of the PMN substance.

CFR citation:40 CFR 721.10637.

Chemical name:Lithium metal phosphate (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as an electrode material. Based on EcoSAR analysis of test data on analogous inorganic phosphates, EPA predicts toxicity to aquatic organisms may occur at concentrations that exceed 1 ppb of the PMN substance in surface waters. As described in the PMN, releases to water are not expected to exceed 1 ppb. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance presents an unreasonable risk. EPA has determined, however, that any use of the substance resulting in surface water concentrations exceeding 1 ppb may cause significant adverse environmental effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(4)(ii).

Recommended testing:EPA has determined that the results of a fish acute toxicity test, freshwater and marine (OPPTS Test Guideline 850.1075); an aquatic invertebrate acute toxicity test, freshwater daphnids (OPPTS Test Guideline 850.1010); and an algal toxicity test (OCSPP Test Guideline 850.4500) would help characterize the environmental effects of the PMN substance.

CFR citation:40 CFR 721.10638.

Chemical name:Siloxanes and Silicones, di-Me, polymers with Ph silsesquioxanes, hydrolyzed, reaction products with 2-[[3-(trimethoxysilyl)propoxy]methyl]oxirane.

CAS number:478823-10-8.

Basis for action:The PMN substance will be used as a binder for silicone coatings. Based on structure activity relationship (SAR) analysis of test data on analogous epoxides and alkoxysilanes, EPA identified concerns for mutagenicity, oncogenicity, reproductive toxicity, developmental toxicity, lung toxicity, and sensitization from dermal and inhalation exposures to the PMN substance. For the use described in the PMN, significant occupational dermal and inhalation exposures are not expected due to the use of impervious gloves and a National Institute for Occupational Safety and Health (NIOSH)-certified respirator with an assigned protection factor (APF) of at least 10, and consumer exposures are not expected as the substance is not used in consumer products. Therefore, EPA has not determined that manufacturing, processing, and use of the substance may present an unreasonable risk. EPA has determined, however, that use of the substance without impervious gloves where there is a potential for dermal exposure; any use of the substance without a NIOSH-certified respirator with an APF of at least 10; or any use of the substance in consumer products may result in serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170 (b)(1)(i)(C) and (b)(3)(ii).

Recommended testing:EPA has determined that the results of a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465), with attention to the pathology of the reproductive organs, and a carcinogenicity test (OPPTS Test Guideline 870.4200) would help to characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10639.

Chemical name:1,2-Cyclohexanedicarboxylic acid, 1-(2-ethylhexyl) 2-(2-methylpropyl) ester.

CAS number:252958-29-5.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as a compressor lubricant. Based on EcoSAR analysis of test data on analogous esters, EPA predicts toxicity to aquatic organisms may occur at concentrations that exceed 1 ppb of the PMN substance in surface waters. As described in the PMN, the substance is not released to surface waters. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance resulting in surface water concentrations exceeding 1 ppb may cause significant adverse environmental effects. There are two other chemical substances identified in the PMN that are already on the TSCA Inventory. The SNUR does not apply to those chemical substances. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(4)(ii).

Recommended testing:EPA has determined that the results of a fish early-life stage toxicity test (OPPTS Test Guideline 850.1400); a daphnid chronic toxicity test (OPPTS Test Guideline 850.1300); and an algal toxicity test (OCSPP Test Guideline 850.4500) would help to characterize the environmental effects of the PMN substance.

CFR citation:40 CFR 721.10640.

Chemical name:Phenol and vinyltoluene based hydrocarbon resin (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as a diluent for coatings. Based on EcoSAR analysis of test data on analogous neutral organics, EPA predicts toxicity to aquatic organisms may occur at concentrations that exceed 1 ppb of the PMN substance in surface waters. As described in the PMN, releases to water are not expected. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance resulting in surface water concentrations exceeding 1 ppb may cause significant adverse environmental effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(4)(ii).

Recommended testing:EPA has determined that the results of a fish early-life stage toxicity test (OPPTS Test Guideline 850.1400); a daphnid chronic toxicity test (OPPTS Test Guideline 850.1300); and an algal toxicity test (OCSPP Test Guideline 850.4500) would help to characterize the environmental effects of the PMN substance.

CFR citation:40 CFR 721.10641.

Chemical name:Modified polyisocyanates (generic).

CAS number:Claimed as confidential.

Basis for action:The consolidated PMN states that the generic (non-confidential) use of the substances will be as hardeners. Based on SAR analysis of test data on analogous isocyanates, EPA has identified concerns for sensitization and irritation from dermal and inhalation exposure to the PMN substances. For the use described in the PMN, significant occupational inhalation and dermal exposures are not expected due to no domestic manufacture, use of impervious gloves, and no use of the substances involving an application method that generates a vapor, mist, or aerosol. Further, consumer exposures are not expected as the substance is not used in consumer products. Therefore, EPA has not determined that the proposed processing or use of the substances may present an unreasonable risk. EPA has determined, however, that any domestic manufacture of the substances; any use of the substances without impervious gloves where there is a potential for dermal exposures; any use of the substance in consumer products; or any use of the substances involving an application method that generates a vapor, mist, or aerosol may result in serious health effects. Based on this information, the PMN substances meet the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization test (OPPTS Test Guideline 870.2600) and a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substances.

CFR citation:40 CFR 721.10642.

Chemical name:Diisocyanate terminated polycarbodiimide (generic).

CAS number:Claimed as confidential.

Effective date of TSCA section 5(e) consent order:February 1, 2006.

Basis for TSCA section 5(e) consent order:The PMN states that the generic (non-confidential) use of the substance will be as a crosslinking agent for solvent-based inks; a monomer for polymerization; and a water scavenger for producing anhydrous polymers. The PMN did not identify consumer uses for the PMN substance. Based on SAR analysis of test data on structurally similar diisocyanates, EPA identified concerns for dermal sensitization, respiratory sensitization, and pulmonary toxicity from exposure to the PMN substance by the inhalation and dermal routes. The order was issued under sections 5(e)(1)(A)(i) and 5(e)(1)(A)(ii)(I) of TSCA based on a finding that this substance may present an unreasonable risk of injury to human health. To protect against these risks, the order requires:

1. Use of personal protective equipment including impervious gloves (when there is potential dermal exposure) and either a NIOSH-certified respirator with an APF of at least 2,000, or compliance with a NCEL of 0.05 mg/m3as an 8-hour time-weighted average (when there is potential inhalation exposure).

2. Establishment and use of a hazard communication program. The SNUR would designate as a “significant new use” the absence of these protective measures and consumer use of the PMN substance.

Recommended testing:EPA has determined that data from worker exposure to the PMN substance (such as inhalation monitoring data generated according to the NCELs section of the consent order) or a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substance. The order does not require submission of the testing at any specified time or production volume. However, the order's restrictions on manufacture, import, processing, distribution in commerce, use, and disposal of the PMN substance will remain in effect until the order is modified or revoked by EPA based on submission of that or other relevant information.

CFR citation:40 CFR 721.10643.

Chemical name:Reaction product of aluminum hydroxide and modified alkoxysilane (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the substance will be used as a flame retardant. Based on SAR analysis of test data on analogous respirable, poorly soluble particulates, EPA identified concerns for lung toxicity from inhalation exposures to the PMN substance. At an annual production volume of 100,000 kilograms (kgs), significant occupational inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposure; or any increase of the annual 100,000 kg production volume may result in increased exposure to the PMN substance, which may cause serious human health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) with a 60-day holding period would help characterize the health effects of the PMN substance.

CFR citation:40 CFR 721.10644.

Chemical name:Multi-walled carbon nanotube (generic) (P-08-392).

CAS number:Claimed as confidential.

Effective date of TSCA section 5(e) consent order:November 14, 2008.

Basis for TSCA section 5(e) consent order:The PMN states that the generic (non-confidential) use of the substance will be as an antistatic, reinforcement additive. Based on test data on the PMN substance, and SAR analysis of test data on structurally similar respirable, poorly soluble particulates, EPA identified concerns for pulmonary toxicity, fibrosis, carcinogenicity, mutagenicity, and immunotoxicity. The order was issued under sections 5(e)(1)(A)(i) and 5(e)(1)(A)(ii)(I) of TSCA, based on a finding that the PMN substance may present an unreasonable risk of injury to human health. To protect against these risks, the order:

1. Requires use of personal protective equipment including impervious gloves and protective clothing (when there is a potential dermal exposure) and a NIOSH-certified air-purifying, tight-fitting full-face respirator equipped with N100 filters with an APF of at least 50 (when there is potential inhalation exposure).

2. Prohibits manufacture of the PMN substance in the United States.

3. Restricts processing and use of the PMN substance to those uses specified in the consent order.

The SNUR would designate as a “significant new use” the absence of these protective measures.

Recommended testing:EPA has determined that the results of a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465 or Organisation for Economic Co-operation and Development (OECD) Test Guideline 413) in rats with a post exposure observation period of up to 3 months, including bronchoalveolar lavage fluid (BALF) analysis and certain material characterization data, would help characterize possible effects of the substance. In the consent order, the PMN submitter has agreed to perform these tests within 18 months of commencing non-exempt commercial manufacture.

CFR citation:40 CFR 721.10645.

Chemical name:Multi-walled carbon nanotube (generic) (P-09-257).

CAS number:Claimed as confidential.

Effective date of TSCA section 5(e) consent order:August 11, 2009.

Basis for TSCA section 5(e) consent order:The PMN states that the generic (non-confidential) uses of the substance will be as an electric conductive filler to replace conventional material such as carbon black or carbon fiber in matrixes such as polymer resin for conductive applications, and an additive for elastomers, polymers, and resins to enhance mechanical properties. Based on SAR analysis of test data on analogous respirable, poorly soluble particulates and other CNTs, EPA identified concerns for pulmonary toxicity, fibrosis, carcinogenicity, mutagenicity, and immunotoxicity. Further, available data suggests that pulmonary deposition of some nanoparticles, including CNTs, may induce cardiovascular toxicity if inhaled. Although there are no environmental toxicity studies on CNTs available, EPA expects that some fraction of the CNTs, if released into the environment, will eventually be suspended in water. There have been sublethal effects observed for single walled CNTs in rainbow trout at levels as low as 100 ppb. The order was issued under section 5(e)(1)(A)(i) and (e)(1)(A)(ii)(I) of TSCA based on a finding that this substance may present an unreasonable risk of injury to human health and the environment. To protect against these risks, the order:

1. Requires use of personal protective equipment including impervious gloves and protective clothing (when there is a potential dermal exposure) and a NIOSH-certified air-purifying, tight-fitting full-face respirator equipped with N100 filters with an APF of at least 50 (when there is potential inhalation exposure).

2. Prohibits manufacture of the PMN substance in the United States.

3. Restricts processing and use of the PMN substance to those uses specified in the consent order.

4. Prohibits release to water during processing and use.

The SNUR would designate as a “significant new use” the absence of these protective measures.

Recommended testing:EPA has determined that the results of a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465 or OECD Test Guideline 413) in rats with a post exposure observation period of up to 3 months (including BALF analysis, a determination of cardiovascular toxicity (clinically-based blood/plasma protein analyses), and histopathology of the heart) and development of data on certain physical/chemical properties would help characterize possible effects of the substance. In the consent order, the PMN submitter has agreed not to exceed a specified production volume/time limit (whichever comes first) without performing the 90-day test on the PMN substance. In addition, in the consent order, the PMN submitter agreed to provide the physical/chemical properties data within a specified time limit.

CFR citation:40 CFR 721.10646.

Chemical name:Multi-walled carbon nanofibers (generic).

CAS number:Claimed as confidential.

Effective date of TSCA section 5(e) consent order:May 9, 2011.

Basis for TSCA section 5(e) consent order:The PMNs state that the uses of the substances will be as electrical and thermal conductivity additives, mechanical reinforcement additives, energy storage additives, and chemical intermediates. Based on SAR analysis of test data on analogous respirable, poorly soluble particulates and other CNTs, EPA identified concerns for pulmonary toxicity, fibrosis, carcinogenicity, mutagenicity, and immunotoxicity. Further, available data suggests that pulmonary deposition of some nanoparticles, including CNTs may induce cardiovascular toxicity if inhaled. Although there are no environmental toxicity studies on CNTs available, EPA expects that some fraction of the CNTs, if released into the environment, will eventually be suspended in water. There have been sub-lethal effects observed for single walled CNTs in rainbow trout at levels as low as 100 ppb. The order was issued under sections 5(e)(1)(A)(i) and 5(e)(1)(A)(ii)(I) of TSCA based on a finding that these substances may present an unreasonable risk of injury to human health and the environment. To protect against this risk, the order:

1. Requires use of personal protective equipment including impervious gloves and protective clothing (when there is a potential dermal exposure) and a NIOSH-certified air-purifying, tight-fitting full-face respirator equipped with N100 filters with an APF of at least 50 (when there is potential inhalation exposure).

2. Restricts use of the PMN substances to use only as electrical and thermal conductivity additives, mechanical reinforcement additives, energy storage additives, and chemical intermediates as specified in the consent order.

3. Restricts processing and use of the PMN substances to industrial settings.

4. Prohibits release of the PMN substances into the waters of the United States during processing and use activities.

The SNUR would designate as a “significant new use” the absence of these protective measures.

Recommended testing:EPA has determined that the results of certain physical/chemical properties data, workplace exposure monitoring and characterization testing, and a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465 or OECD Test Guideline 413) in rats would help characterize the human health effects of the PMN substances. The PMN submitter agreed to provide the physical/chemical properties data for the PMN substances within one year after submitting the notice of commencement. The consent order contains two additional production volume limits. The PMN submitter agreed not to exceed the first production volume limit without submitting workplace exposure monitoring and characterization testing (including byproducts) as well as quantification and characterization of substances that may be released during exposures typical during the use phase, such as handling, tearing and cutting the PMN substances. The PMN submitter has also agreed not to exceed the second production volume limit without performing two 90-day inhalation toxicity tests, with a post-exposure observation period of up to 3 months, BALF analysis, aggregation/agglomeration state, shape, size/size particle distribution and surface properties of materials as administered, aggregation/agglomeration state, shape, size/size particle distribution and surface properties of materials of thedelivered materials after administration, determination of cardiovascular toxicity, heart histopathology, and data on pulmonary deposition. One 90-day inhalation toxicity test will be conducted from a representative PMN substance in the group P-10-115, P-10-116, P-10-117, P-10-118, P-10-119, and the other 90-day inhalation toxicity test will be conducted from a representative PMN substance in the group P-10-120, P-10-121, P-10-122, P-10-123, P-10-124, P-10-125, and P-10-126.

CFR citation:40 CFR 721.10647.

Chemical name:Modified lithium iron phosphates (generic).

CAS number:Claimed as confidential.

Effective date of TSCA section 5(e) consent order:December 10, 2010.

Basis for TSCA section 5(e) consent order:The consolidated PMN states that the generic (non-confidential) use of the substances will be as battery electrode components, contained use. Based on test data on analogous respirable, poorly soluble particulates, there is potential risk for adverse lung effects including cancer, lung fibrosis, lung inflammation and systemic effects, including immunotoxicity. EPA has identified concerns for these health effects from exposures to the PMN substances. Based on EcoSAR analysis of test data on analogous phosphates, EPA predicts toxicity to aquatic organisms may occur at concentrations that exceed 2 ppb of the PMN substance in surface waters. The order was issued under sections 5(e)(1)(A)(i) and 5(e)(1)(A)(ii)(I) of TSCA based on a finding that these substances may present an unreasonable risk of injury to human health or the environment. To protect against these risks, the consent order:

1. Restricts manufacturing, processing, and use of the substances to a fully-enclosed and automated process, including all loading and unloading activities.

2. Restricts use of the PMN substances to use only as specified in the consent order.

3. Prohibits release of the PMN substances into the waters of the United States during processing and use activities.

The SNUR would designate as a “significant new use” the absence of these protective measures.

Recommended testing:EPA has determined that the results of a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) in rats with a post-exposure observation period of up to 3 months, including BALF analysis; an algal toxicity test (OCSPP Test Guideline 850.5400); and physical/chemical properties testing for: Water solubility (OECD Test Guideline 105); surface chemistry, particle size distribution of the PMN substances, dustiness test (European Standard 15051); and particle size distribution, aggregation state, and porosity would help characterize the human health and environmental effects of the PMN substances. The PMN submitter has agreed not to exceed the confidential production volume in the consent order without performing the 90-day inhalation toxicity test and the physical/chemical properties tests.

CFR citation:40 CFR 721.10648.

Chemical name:MDI modified polyalkylene glycol adipate polyester (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as an adhesive. Based on SAR analysis of test data on analogous diisocyanates, EPA identified concerns for respiratory and dermal sensitization. For the use described in the PMN, significant occupational dermal and inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10, and consumer exposures are not expected as the substance is not used in consumer products. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposures, or any use of the substance in consumer products may cause serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization test (OPPTS Test Guideline 870.2600) and a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10649.

Chemical name:Polyether substituted anthraquinone derivative (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be used as a colorant for cleaners and detergents. Based on EcoSAR analysis of test data on analogous aromatic amines and nonionic dyes, EPA predicts toxicity to aquatic organisms may occur at concentrations that exceed 2 ppb of the PMN substance in surface waters for greater than 20 days per year. This 20-day criterion is derived from partial life cycle tests (daphnid chronic and fish early life stage tests) that typically range from 21 to 28 days in duration. EPA predicts toxicity to aquatic organisms may occur if releases of the PMN substance to surface water, from uses other than as described in the PMN, exceed releases from the use described in the PMN. For the use described in the PMN, environmental releases did not exceed 1 ppb for more than 20 days per year.

Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance other than as a colorant for cleaners and detergents may cause significant adverse environmental effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(4)(ii).

Recommended testing:EPA has determined that the results of a fish acute toxicity test, freshwater and marine (OPPTS Test Guideline 850.1075) and an aquatic invertebrate acute toxicity test, freshwater daphnids (OPPTS Test Guideline 850.1010) would help characterize the environmental effects of the PMN substance.

CFR citation:40 CFR 721.10650.

Chemical name:Carbide derived nanocarbon (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as a sensor element in an electrochemical sensor. Based on SAR analysis of test data on respirable, poorly soluble particulates, EPA identified concerns for pulmonary toxicity, fibrosis, carcinogenicity, mutagenicity, and immunotoxicity if the substances were manufactured by a method other than described in the PMN. Further, available data suggests that pulmonary deposition of some carbon-based nanoparticles, may induce cardiovascular toxicity if inhaled. EPA identified concerns for lung toxicity to workers from inhalation exposures to the PMN substance. For the manufacture method described in the PMN, significant dermal and inhalation exposures are not expected. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present anunreasonable risk. EPA has determined, however, that manufacture of the substance by a method other than as described in the PMN may cause serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that inhalation monitoring data collected during the manufacturing process according to the EPA draft Inhalation Monitoring Data Collection Guidelines (located in the docket under docket ID number EPA-HQ-OPPT-2012-0727) would help characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10651.

Chemical names:(P-11-309) Hexanedioic acid, polymer with polyether polyol, 1,1′-methylenebis[4-isocyanatobenzene] and dihydroxydialkyl ether (generic); (P-11-311) Hexanedioic acid, polymer with .alpha.-hydro-.omega.-hydroxypoly[oxy(methyl-1,2-ethanediyl)],1,1′-methylenebis[4-isocyanatobenzene], dihydroxydialkyl ether and dialkanol ether (generic); (P-11-312) Hexanedioic acid, polymer with .alpha.-hydro-.omega.-hydroxypoly[oxy(methyl-1,2-ethanediyl)],1,1′-methylenebis[isocyanatobenzene], dihydroxydialkyl ether and dialkanol ether (generic); (P-11-313) Hexanedioic acid, polymer with .alpha.-hydro-.omega.-hydroxypoly[oxy(methyl-1,2-ethanediyl)],1,1′-methylenebis[4-isocyanatobenzene], dihydroxydialkyl ether, reaction products with dialkylcarbinol (generic); and (P-11-314) Hexanedioic acid, polymer with .alpha.-hydro-.omega.-hydroxypoly[oxy(methyl-1,2-ethanediyl)],1,1′-methylenebis[4-isocyanatobenzene], dihydroxydialkyl ether reaction products with dialkylcarbinol (generic).

CAS numbers:Claimed as confidential.

Basis for action:The PMNs state that the generic (non-confidential) use of the substances will be as industrial adhesives. Based on SAR analysis of test data on analogous isocyanates, EPA identified concerns for sensitization from dermal and inhalation exposure to the PMN substances. For the use described in the PMNs, significant occupational dermal and inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10, and consumer exposures are not expected. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substances may present an unreasonable risk. EPA has determined, however, that any use of the substances without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposures, or any use of the substances in consumer products may cause serious health effects. Based on this information, the PMN substances meet the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization test (OPPTS Test Guideline 870.2600) and a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substances.

CFR citations:40 CFR 721.10652 (P-11-309); 40 CFR 721.10653 (P-11-311); 40 CFR 721.10654 (P-11-312); 40 CFR 721.10655 (P-11-313); and 40 CFR 721.10656 (P-11-314).

Chemical name:Castor oil, polymer with hydrogenated vegetable oil, 1,1′-methylenebis[isocyanatobenzene] and isocyanate (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance is as an industrial adhesive. Based on SAR analysis of test data on analogous diisocyanates, EPA identified concerns for sensitization. For the use described in the PMN, significant occupational dermal and inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10, and consumer exposures are not expected as the substance is not used in consumer products. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposures, or any use of the substances in consumer products may cause serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization (OPPTS Test Guideline 870.2600) and a 90-day subchronic inhalation toxicity test (OPPTS Test Guideline 870.3465) in rodents would help characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10657.

Chemical name:2-Oxepanone, polymer with 1,6-diisocyanatohexane, 2,2″dimethyl-1;3-propanediol and 2,2′-oxybis[ethanol].

CAS number:1313708-90-5.

Basis for action:The PMN states that the substance will be used as a coating for wind craft wings. Based on SAR analysis of test data on structurally similar chemicals submitted under TSCA section 8(e), EPA identified concerns for oncogenicity and mutagenicity. Additionally, based on the isocyanate moiety, the Agency identified concerns for sensitization. For the use described in the PMN, significant occupational inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10, and consumer exposures are not expected as the substance is not used in consumer products. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposures, or any use of the substance in consumer products may cause serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization test (OPPTS Test Guideline 870.2600) and a 90-day inhalation toxicity study (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10658.

Chemical name:Poly(oxy-1,4-butanediyl), -hydro—hydroxy-, polymer with alkyldiisocyanates (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as a crosslinking resin. Based on SAR analysis of test data on analogous isocyanates, EPA identified concerns for sensitization from dermal and respiratory exposures to the PMN substance. For the use described in the PMN, significant occupational dermal and inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10, and consumer exposures are not expected as the substance is not used in consumer products. Therefore,EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposures, or any use of the substance in consumer products may cause serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization test (OPPTS Test Guideline 870.2600) and a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10659.

Chemical name:Aliphatic diisocyanate adduct with substituted amino alkyl silane (generic).

CAS number:Claimed as confidential.

Basis for action:The PMN states that the generic (non-confidential) use of the substance will be as an adhesive. Based on SAR analysis of test data on analogous isocyanates, EPA identified concern for sensitization from dermal and inhalation exposure to the PMN substance. Additionally, liquid and vapor contact with the eye can cause moderate to severe irritation. For the use described in the PMN, significant occupational dermal and inhalation exposures are not expected due to the use of a NIOSH-certified respirator with an APF of at least 10, and consumer exposures are not expected as the substance is not used in consumer products. Therefore, EPA has not determined that the proposed manufacturing, processing, or use of the substance may present an unreasonable risk. EPA has determined, however, that any use of the substance without a NIOSH-certified respirator with an APF of at least 10, where there is a potential for inhalation exposures; or any use of the substance in consumer products may cause serious health effects. Based on this information, the PMN substance meets the concern criteria at § 721.170(b)(3)(ii).

Recommended testing:EPA has determined that the results of a skin sensitization test (OPPTS Test Guideline 870.2600) and a 90-day inhalation toxicity test (OPPTS Test Guideline 870.3465) would help characterize the human health effects of the PMN substance.

CFR citation:40 CFR 721.10660.

During review of the PMNs submitted for the chemical substances that are subject to these proposed SNURs, EPA concluded that for 17 of the 37 chemical substances regulation was warranted under TSCA section 5(e) pending the development of information sufficient to make reasoned evaluations of the health or environmental effects of the chemical substances. The basis for such findings is outlined in Unit IV. Based on these findings, TSCA section 5(e) consent orders requiring the use of appropriate exposure controls were negotiated with the PMN submitters. The proposed SNUR provisions for these chemical substances are consistent with the provisions of the TSCA section 5(e) consent orders. These SNURs are being proposed pursuant to § 721.160.

In the other 20 cases, where the uses are not regulated under a TSCA section 5(e) consent order, EPA determined that one or more of the criteria of concern established at § 721.170 were met, as discussed in Unit IV.

EPA is proposing these SNURs for specific chemical substances which have undergone premanufacture review because the Agency wants to achieve the following objectives with regard to the significant new uses designated in this proposed rule:

• EPA would receive notice of any person's intent to manufacture, import, or process a listed chemical substance for the described significant new use before that activity begins.

• EPA would have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing, importing, or processing a listed chemical substance for the described significant new use.

• EPA would be able to regulate prospective manufacturers, importers, or processors of a listed chemical substance before the described significant new use of that chemical substance occurs, provided that regulation is warranted pursuant to TSCA sections 5(e), 5(f), 6, or 7.

• EPA would ensure that all manufacturers, importers, and processors of the same chemical substance that is subject to a TSCA section 5(e) consent order are subject to similar requirements.

Issuance of a SNUR for a chemical substance does not signify that the chemical substance is listed on the TSCA Chemical Substance Inventory (TSCA Inventory). Guidance on how to determine if a chemical substance is on the TSCA Inventory is available on the Internet athttp://www.epa.gov/opptintr/existingchemicals/pubs/tscainventory/index.html.

EPA is issuing these SNURs by notice and comment procedure, as described in § 721.170(d)(4). In accordance with § 721.170(d)(4)(ii)(A), persons are being given the opportunity to submit comments on or before April 26, 2013 on whether EPA should establish notification requirements.

To establish a significant “new” use, EPA must determine that the use is not ongoing. The chemical substances subject to this proposed rule have undergone premanufacture review. TSCA section 5(e) consent orders have been issued for 17 chemical substances and the PMN submitters are prohibited by the TSCA section 5(e) consent orders from undertaking activities which EPA is designating as significant new uses. EPA is soliciting comments on whether any of the uses proposed as significant new uses are ongoing.

As discussed in theFederal Registerof April 24, 1990 SNUR, EPA has decided that the intent of TSCA section 5(a)(1)(B) is best served by designating a use as a significant new use as of the date of publication of this proposed rule rather than as of the effective date of the final rule. If uses begun after publication of the proposed rule were considered ongoing rather than new, it would be difficult for EPA to establish SNUR notice requirements because a person could defeat the SNUR by initiating the significant new use before the rule became final, and then argue that the use was ongoing before the effective date of the final rule. Thus, persons who begin commercial manufacture, import, or processing of the chemical substances that would be regulated through these proposed SNURs will have to cease any such activity before the effective date of the rule if and when finalized. To resume their activities, these persons would have to comply with all applicable SNUR notice requirements and wait until the notice review period, including any extensions, expires.

EPA has promulgated provisions to allow persons to comply with these proposed SNURs before the effective date. If a person meets the conditions of advance compliance under § 721.45(h), the person would be considered exempt from the requirements of the SNUR.

EPA recognizes that TSCA section 5 does not require developing any particular test data before submission of a SNUN. The two exceptions are:

1. Development of test data is required where the chemical substance subject to the SNUR is also subject to a test rule under TSCA section 4 (see TSCA section 5(b)(1)).

2. Development of test data may be necessary where the chemical substance has been listed under TSCA section 5(b)(4) (see TSCA section 5(b)(2)).

In the absence of a TSCA section 4 test rule or a TSCA section 5(b)(4) listing covering the chemical substance, persons are required only to submit test data in their possession or control and to describe any other data known to or reasonably ascertainable by them (see 40 CFR 720.50). However, upon review of PMNs and SNUNs, the Agency has the authority to require appropriate testing. In cases where EPA issued a TSCA section 5(e) consent order that requires or recommends certain testing, Unit IV. lists those tests. Unit IV. also lists recommended testing for non-5(e) SNURs. Descriptions of tests are provided for informational purposes. EPA strongly encourages persons, before performing any testing, to consult with the Agency pertaining to protocol selection. To access the OCSPP test guidelines referenced in this document electronically, please go tohttp://www.epa.gov/ocsppand select “Test Methods and Guidelines.” The Organisation for Economic Co-operation and Development (OECD) test guidelines are available from the OECD Bookshop athttp://www.oecdbookshop.orgor Source OECD athttp://www.sourceoecd.org.To access the European Standard, EN 15051 method, issued by The European Committee for Standardization (CEN), please go tohttp://www.cen.eu/cen/products.

In the TSCA section 5(e) consent orders for several of the chemical substances regulated under this proposed rule, EPA has established production volume limits in view of the lack of data on the potential health and environmental risks that may be posed by the significant new uses or increased exposure to the chemical substances. These limits cannot be exceeded unless the PMN submitter first submits the results of toxicity tests that would permit a reasoned evaluation of the potential risks posed by these chemical substances. Listings of the tests specified in the TSCA section 5(e) consent orders are included in Unit IV. The SNURs contain the same production volume limits as the TSCA section 5(e) consent orders. Exceeding these production limits is defined as a significant new use. Persons who intend to exceed the production limit must notify the Agency by submitting a SNUN at least 90 days in advance of commencement of non-exempt commercial manufacture, import, or processing.

When physical/chemical properties of test material and/or material characterization tests are recommended for nanoscale substances that are the subject of this proposed rule, you should take into consideration the characterizations identified in the Guidance Manual for the Testing of Manufactured Nanomaterials: OECD's Sponsorship Programme, which is available athttp://www.oecd.org/officialdocuments/displaydocumentpdf/?cote=env/jm/mono(2009)20/rev&doclanguage=en.

The recommended tests specified in Unit IV. may not be the only means of addressing the potential risks of the chemical substance. However, submitting a SNUN without any test data may increase the likelihood that EPA will take action under TSCA section 5(e), particularly if satisfactory test results have not been obtained from a prior PMN or SNUN submitter. EPA recommends that potential SNUN submitters contact EPA early enough so that they will be able to conduct the appropriate tests.

SNUN submitters should be aware that EPA will be better able to evaluate SNUNs which provide detailed information on the following:

• Human exposure and environmental release that may result from the significant new use of the chemical substances.

• Potential benefits of the chemical substances.

• Information on risks posed by the chemical substances compared to risks posed by potential substitutes.

According to § 721.1(c), persons submitting a SNUN must comply with the same notification requirements and EPA regulatory procedures as persons submitting a PMN, including submission of test data on health and environmental effects as described in 40 CFR 720.50. SNUNs must be submitted on EPA Form No. 7710-25, generated using e-PMN software, and submitted to the Agency in accordance with the procedures set forth in 40 CFR 720.40 and § 721.25. E-PMN software is available electronically athttp://www.epa.gov/opptintr/newchems.

EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers, importers, and processors of the chemical substances subject to this proposed rule. EPA's complete economic analysis is available in the docket under docket ID number EPA-HQ-OPPT-2012-0727.

This proposed rule would establish SNURs for several new chemical substances that were the subject of PMNs, and, in some cases, TSCA section 5(e) consent orders. The Office of Management and Budget (OMB) has exempted these types of actions from review under Executive Order 12866, entitled“Regulatory Planning and Review”(58 FR 51735, October 4, 1993).

According to PRA (44 U.S.C. 3501et seq.), an agency may not conduct or sponsor, and a person is not required to respond to a collection of information that requires OMB approval under PRA, unless it has been approved by OMB and displays a currently valid OMB control number. The OMB control numbers for EPA's regulations in title 40 of the CFR, after appearing in theFederal Register, are listed in 40 CFR part 9, and included on the related collection instrument or form, if applicable. EPA would amend the table in 40 CFR part 9 to list the OMB approval number for the information collection requirements contained in this proposed rule, if the SNUR is subsequently issued as a final rule. This listing of the OMB control numbers and their subsequent codification in the CFR satisfies the display requirements of PRA and OMB's implementing regulations at 5 CFR part 1320. This Information Collection Request (ICR) was previously subject to public notice and comment prior to OMB approval, and given the technical nature of the table, EPA finds that further notice and comment to amend it is unnecessary. As a result, EPA finds that there is “good cause” under section 553(b)(3)(B) of the Administrative Procedure Act (5 U.S.C. 553(b)(3)(B)) to amend this table without further notice and comment.

The information collection requirements related to this action have already been approved by OMB pursuant to PRA under OMB control number 2070-0012 (EPA ICR No. 574). This action would not impose any burden requiring additional OMB approval. If an entity were to submit aSNUN to the Agency, the annual burden is estimated to average between 30 and 170 hours per response. This burden estimate includes the time needed to review instructions, search existing data sources, gather and maintain the data needed, and complete, review, and submit the required SNUN.

Send any comments about the accuracy of the burden estimate, and any suggested methods for minimizing respondent burden, including through the use of automated collection techniques, to the Director, Collection Strategies Division, Office of Environmental Information (2822T), Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460-0001. Please remember to include the OMB control number in any correspondence, but do not submit any completed forms to this address.

On February 18, 2012, EPA certified pursuant to RFA section 605(b) (5 U.S.C. 601et seq.), that promulgation of these SNURS would not have a significant economic impact on a substantial number of small entities where the following are true:

1. A significant number of SNUNs would not be submitted by small entities in response to the SNUR.

2. The SNUR submitted by any small entity would not cost significantly more than $8,300.

A copy of that certification is available in the docket for this proposed rule.

This proposed rule is within the scope of the February 18, 2012 certification. Based on the Economic Analysis discussed in Unit X. and EPA's experience promulgating SNURs (discussed in the certification), EPA believes that the following are true:

• A significant number of SNUNs would not be submitted by small entities in response to the SNUR.

• Submission of the SNUN would not cost any small entity significantly more than $8,300.

Therefore, the promulgation of the SNUR would not have a significant economic impact on a substantial number of small entities.

Based on EPA's experience with proposing and finalizing SNURs, State, local, and Tribal governments have not been impacted by these rulemakings, and EPA does not have any reasons to believe that any State, local, or Tribal government would be impacted by this proposed rule. As such, EPA has determined that this proposed rule would not impose any enforceable duty, contain any unfunded mandate, or otherwise have any effect on small governments subject to the requirements of UMRA sections 202, 203, 204, or 205 (2 U.S.C. 1501et seq.).

This action would not have a substantial direct effect on States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132, entitled “Federalism” (64 FR 43255, August 10, 1999).

This proposed rule would not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This proposed rule would not significantly nor uniquely affect the communities of Indian Tribal governments, nor would it involve or impose any requirements that affect Indian Tribes. Accordingly, the requirements of Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (65 FR 67249, November 9, 2000), do not apply to this proposed rule.

This action is not subject to Executive Order 13045, entitled “Protection of Children from Environmental Health Risks and Safety Risks” (62 FR 19885, April 23, 1997), because this is not an economically significant regulatory action as defined by Executive Order 12866, and this action does not address environmental health or safety risks disproportionately affecting children.

This action is not subject to Executive Order 13211, entitled “Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use” (66 FR 28355, May 22, 2001), because this action is not expected to affect energy supply, distribution, or use and because this action is not a significant regulatory action under Executive Order 12866.

In addition, since this action does not involve any technical standards, NTTAA section 12(d) (15 U.S.C. 272 note), does not apply to this action.

This action does not entail special considerations of environmental justice related issues as delineated by Executive Order 12898, entitled “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations” (59 FR 7629, February 16, 1994).

Therefore, it is proposed that 40 CFR part 721 be amended as follows:

On December 26, 2012, HHS/CDC published a Notice of Proposed Rulemaking (NPRM) amending 42 CFR part 70 to update the Scope and Definitions to reflect modern terminology and plain language used by private industry and public health partners. (77 FR 75936). On the same date, HHS/CDC simultaneously published a companion direct final rule that proposed identical updates in thisFederal Registerbecause it believed that the proposed revisions were non-controversial and unlikely to generate significant adverse comment. (77 FR 75880). In the NPRM, HHS/CDC indicated that if we did not receive any significant adverse comments on the direct final rule by January 25, 2013, we would publish a document in theFederal Registerwithdrawing this notice of proposed rulemaking and confirming the effective date of the direct final rule within 30 days after the comment period on the direct final rule ends. HHS/CDC received one public comment that was not a significant, adverse comment, but rather was in support of the companion NPRM. Because HHS/CDC did not receive any significant adverse comments to the NPRM within the specified comment period, we hereby withdraw this NPRM from rulemaking.

On December 26, 2012 HHS/CDC published a Notice of Proposed Rulemaking (NPRM) amending 42 CFR part 71 to update the Scope and Definitions to reflect modern terminology and plain language used globally by industry and public health partners. (77 FR 75939). On the same date, HHS/CDC simultaneously published a companion direct final rule that proposed identical updates in thisFederal Registerbecause it believed that the proposed revisions were non-controversial and unlikely to generate significant adverse comment. (77 FR 75885). In the NPRM, HHS/CDC indicated that if we did not receive any significant adverse comments on the direct final rule by January 25, 2013, we would publish a document in theFederal Registerwithdrawing this notice of proposed rulemaking and confirming the effective date of the direct final rule within 30 days after the comment period on the direct final rule ends. HHS/CDC received two comments to the companion NPRM. One comment pertained to food safety that raised issues unrelated to the companion NPRM and appears to have been submitted in error. The second comment was a general comment on immigration and was outside the scope of this rulemaking. HHS/CDC did not consider this comment to be a significant, adverse comment because it did not raise any issues that were relevant to the subject matter under consideration. Because HHS/CDC did not receive any relevant significant adverse comments within the specified comment period, we hereby withdraw this NPRM from rulemaking.

Background

On December 7, 2012, we published a proposed rule in theFederal Register(77 FR 73219) in response to a petition submitted by the Center for Biological Diversity to list 83 reef-building coral species as threatened or endangered under the ESA. We concluded that 12 of the petitioned coral species warrant listing as endangered (5 Caribbean and 7 Indo-Pacific), 54 coral species warrant listing as threatened (2 Caribbean and 52 Indo-Pacific), and 16 coral species (all Indo-Pacific) do not warrant listing as threatened or endangered under the ESA. We also determined that two Caribbean coral species currently listed warrant reclassification from threatened to endangered.

We subsequently received requests to extend the public comment period for an additional 90 days. We have determined that an extension of 30 days, until April 6, 2013, making the full comment period 120 days, will allow adequate time for the public to thoroughly review and comment on the proposed rule while still providing the agency with sufficient time to meet our statutory deadlines.

Joint Commerce-Interior ESA implementing regulations state that the Secretary shall promptly hold at least one public hearing if any person requests one within 45 days of publication of a proposed regulation to list a species or to designate critical habitat (see 50 CFR 424.16(c)(3)). We received a request for a public hearing to be held in the DC area. In addition to the 20 public hearings we held in Puerto Rico, the U.S. Virgin Islands, Florida, Hawaii, Guam, the Northern Mariana Islands, and American Samoa, we will hold an additional public hearing in Silver Spring, MD.

In past ESA rule-makings we have conducted traditional public hearings, consisting of recorded oral testimony from interested individuals. This format, although providing a means for public input, does not provide opportunities for dialogue and information exchange. We believe that the traditional public hearing format can be improved upon by also including a brief presentation on the results of the status review of 83 species of reef-building corals and other topics of interest.

The preferred means for providing public comment to the official record is via written testimony prepared in advance of the hearing which may also be presented orally. Blank “comment sheets” will be provided at the hearing for those without prepared written comments, and opportunity will also be provided for additional oral testimony. There is no need to register for this hearing.

In scheduling this additional public hearing, we have anticipated that many affected stakeholders and members of the public may prefer to discuss the proposed listing directly with staff during the public comment period. However, this public hearing is not the only opportunity for the public to provide input on this proposal. The public and stakeholders are encouraged to continue to comment and provide input to NMFS on the proposal (via the Federal e-Rulemaking Portalwww.regulations.gov,correspondence, or fax; seeADDRESSES) up until the scheduled close of the comment period on April 6, 2013.

Seagrasses in the EEZ off Puerto Rico and the USVI are managed under the Coral FMP. The Coral FMP was prepared by the Council and is implemented under the authority of the Magnuson-Stevens Act by regulations at 50 CFR part 622. The Magnuson-Stevens Act also requires that NMFS, upon receiving a plan or amendment, publish an announcement in theFederal Registernotifying the public that the plan or amendment is available for review and comment.

The Magnuson-Stevens Act requires the establishment of annual catch limits (ACLs) and accountability measures (AMs) to end overfishing and prevent overfishing from occurring. Annual catch limits are levels of annual catch of a stock or stock complex that are set to prevent overfishing from occurring. Accountability measures are management controls to prevent ACLs from being exceeded, and to correct or mitigate overages of the ACL if they occur.

To address the requirements of the Magnuson-Stevens Act, NMFS published a final rule to implement the 2011 Caribbean ACL Amendment on December 30, 2011 (76 FR 82414), which included Amendment 3 to the Coral FMP. However, ACLs and AMs for seagrasses, which are included in the Coral FMP, were not established at that time. In Amendment 4 to the Coral FMP, the Council considered whether to set an ACL for seagrasses, designate seagrasses as ecosystem component (EC) species, or remove seagrasses from the Coral FMP.

Amendment 4 to the Coral FMP proposes to modify the management of seagrass species included in the Coral FMP. The Coral FMP currently includes four individual species of seagrasses: turtle grass (Thalassia testudinum), manatee grass (Syringodium filiforme), shoal grass (Halodule wrightii), widgeon grass (Ruppia maritima), and one group of species, the sea vines (Halophilaspp., includingH. decipiens, H. baillonis, H. engelmannii,andH. stipulacea(exotic)), all of which occur in U.S. Caribbean waters. Seagrasses were included in 1994 as members of the coral reef resources fishery management unit (FMU) of the Coral FMP. The Coral FMP defined the coral reef resources FMU to include a vast array of plants and invertebrates that provide habitats that are essential to the growth, development, and survival of managed finfish and other marine organisms.

The location, presence, and distribution of seagrasses in the EEZ are not well known. The best available scientific information indicates that the vast majority of seagrasses occur in shallower waters of Puerto Rico and the USVI due to depth associated light limitations found in the EEZ. Both Puerto Rico and the USVI regulate activities involving seagrasses through their respective coastal zone management programs. Seagrasses have been identified as essential fish habitat (EFH) for stocks within the four Council FMPs (Reef Fish, Queen Conch, Spiny Lobster, and Coral). Essential fish habitat is defined by the Magnuson-Stevens Act as those waters and substrates necessary to fish for spawning, breeding, feeding or for growth to maturity. Additionally, seagrasses have also been identified as habitat areas of particular concern (HAPC) within special areas in Puerto Rico commonwealth and USVI territorial waters (state waters).

There is presently no known targeted or indirect harvest of any of the seagrass species included in the Coral FMP, either from the EEZ or from state waters, and future harvest is not anticipated.

In Amendment 4 to the Coral FMP, the Council considered whether to take no action, set an ACL for seagrasses, designate seagrasses as EC species, or remove seagrasses from the Coral FMP. The Magnuson-Stevens Act's National Standard 7 guidelines (50 CFR 600.340) require Councils to prepare FMPs only for overfished fisheries and other fisheries where regulation would serve some useful purpose, and where the present or future benefit of regulation would justify the costs. Because there is no known harvest of seagrass species, and these species occur predominantly in state waters, the Council determined that Federal management of seagrasses is unnecessary. Further, removing seagrasses from the Coral FMP would not affect the designation of seagrasses as EFH and HAPC for stocks within the Queen Conch Resources of Puerto Rico and the USVI FMP, Reef Fish Fishery of Puerto Rico and the USVI FMP, FMP for the Spiny Lobster Fishery of Puerto Rico and the USVI, and Coral FMP. Seagrasses would continue to be protected by these designations, which require, among other things, that FMPs to minimize to the extent practicable adverse effects on EFH caused by fishing. In addition, other management measures currently in place, such as gear restrictions and closed areas, would continue protection to these important habitats.

A proposed rule that would implement Amendment 4 to the Coral FMP has been drafted. In accordance with the Magnuson-Stevens Act, NMFS is evaluating Amendment 4 to the Coral FMP to determine whether it is consistent with the FMP, the Magnuson-Stevens Act, and other applicable law. If the determination is affirmative, NMFS will publish the proposed rule in theFederal Registerfor public review and comment.

The Council submitted Amendment 4 to the Coral FMP for Secretarial review, approval, and implementation. NMFS' decision to approve, partially approve, or disapprove Amendment 4 to the Coral FMP will be based, in part, on consideration of comments, recommendations, and information received during the comment period on this notice of availability.

Comments received by April 26, 2013, whether specifically directed to the amendment or the proposed rule, will be considered by NMFS in its decision to approve, disapprove, or partially approve the amendment. Comments received after that date will not be considered by NMFS in this decision. All comments received by NMFS on the amendment or the proposed rule during their respective comment periods will be addressed in the final rule.

Background

The U.S. Atlantic swordfish fishery is managed under the 2006 Consolidated Highly Migratory Species (HMS) Fishery Management Plan (FMP). Implementing regulations at 50 CFR part 635 are issued under the authority of the Magnuson-Stevens Act, 16 U.S.C. 1801et seq.,and ATCA, 16 U.S.C. 971et seq.The United States implements ICCAT recommendations under ATCA, through regulations as may be necessary and appropriate.

At the 2011 ICCAT meeting, Recommendation 11-02 was adopted, maintaining the North Atlantic swordfish total allowable catch (TAC) of 10,301 metric tons (mt) dressed weight (dw) (13,700 mt whole weight (ww)) through 2013. Of this TAC, the United States baseline quota is 2,937.6 mt dw (3,907 mt ww) per year. ICCAT Recommendation 11-02 also includes a 112.8 mt dw (150 mt ww) annual quota transfer from the United States to Morocco and limits allowable underharvest carryover to 25 percent of a contracting party's baseline quotas. Therefore, the United States may carry over a maximum of 734.4 mt dw (976.8 mt ww) of underharvest from the previous year (2012) to be added to the 2013 baseline quota. This proposed rule would adjust the U.S. baseline quota for the 2013 fishing year to account for the annual quota transfer to Morocco and the 2012 underharvest.

The 2013 North Atlantic swordfish baseline quota is 2,937.6 mt dw (3,907 mt ww). The preliminary North Atlantic swordfish underharvest for 2012 was 1,209.4 mt dw (1,608.5 mt ww) as of December 31, 2012, which exceeds themaximum carryover cap of 734.4 mt dw (976.8 mt ww). Therefore, NMFS is proposing to carry forward the maximum amount allowed per ICCAT Recommendation 11-02. The 2,937.6 mt dw (3,907 mt ww) baseline quota would be reduced by the 112.8 mt dw (150 mt ww) annual quota transfer to Morocco and increased by the underharvest carryover maximum of 734.4 mt dw (976.8 mt ww), resulting in 3,559.2 mt dw (4733.7 mt ww), which is the proposed adjusted North Atlantic swordfish quota for the 2013 fishing year. From that proposed adjusted quota, the directed category would be allocated 3,209.2 mt dw (4,268.2 mt ww), which would be split equally into two seasons in 2013 (January through June, and July through December). Fifty mt dw (66.5 mt ww) would be allocated to the reserve category for inseason adjustments and research, and 300 mt dw (399 mt ww) would be allocated to the incidental category, which includes recreational landings and catch by incidental swordfish permit holders, for the 2013 fishing season, per § 635.27(c)(1)(i)(B) (Table 1).

The landings and proposed quota for North Atlantic swordfish are based on commercial dealer reports and reports by anglers in the HMS Non-Tournament Recreational Swordfish and Billfish Landings Database and the Recreational Billfish Survey received as of December 31, 2012, and do not include dead discards. We will adjust the quotas in the final rule based on updated data, including dead discard data, if available. Thus, while the 2013 proposed North Atlantic swordfish quota is subject to further adjustments and we are notifying the public of that potential change, we do not expect the final quota to change from the proposed quota. The United States has carried over the full amount of underharvest allowed under ICCAT recommendations for the past several years, and we do not expect fishing activity to vary significantly from these past years. For the final quota to deviate from the proposed quota, the sum of updated landings data (from late reports) and dead discard estimates would need to reach or exceed 475 mt dw. In 2011, dead discards were estimated to equal 101.5 mt dw and late reports equaled 108.4 mt dw. Consequently, we do not believe updated data and dead discard estimates will change the adjusted quota.

In 2006, ICCAT Recommendation 06-03 established the South Atlantic swordfish TAC at 17,000 mt ww for 2007, 2008, and 2009. Of this, the United States received 75.2 mt dw (100 mt ww). As with the North Atlantic swordfish recommendation, ICCAT Recommendation 06-03 limited the amount of underharvest that can be carried forward. For South Atlantic swordfish, the United States may carry forward up to 100 percent of the base quota (75.2 mt dw). In 2009, Recommendation 09-03 reduced the South Atlantic swordfish TAC to 15,000 mt ww but maintained the U.S. quota share of 75.2 mt dw (100 mt ww) and underharvest carryover limit through 2012. Recommendation 09-03 also included a total of 75.2 mt dw (100 mt ww) of quota transfers from the U.S. to other countries. These transfers were 37.6 mt dw (50 mt ww) to Namibia, 18.8 mt dw (25 mt ww) to Côte d'Ivore, and 18.8 mt dw (25 mt ww) to Belize. In November 2012, ICCAT Recommendation 12-01 extended the U.S. baseline quota, underharvest carryover limit, and international quota transfer amounts and provisions through 2013.

In 2012, U.S. fishermen did not land any South Atlantic swordfish as of December 31, 2012. Therefore, 75.2 mt dw (100 mt ww) of underharvest is available to carry over to 2013 and can cover the entire 75.2 mt dw (100 mt ww) of annual international quota transfers outlined above. As a result, the 2013 adjusted quota for South Atlantic swordfish is 75.2 mt dw (100 mt ww) (Table 1).

The landings and proposed quota for South Atlantic swordfish are based on dealer reports received as of December 31, 2012, and do not include dead discards. We will adjust the quotas in the final rule based on updated data, including dead discard data, if available. Thus, the 2013 proposed South Atlantic swordfish quota is subject to further adjustments. However, the United States has only landed South Atlantic swordfish once in the past several years (0.2 mt dw in April 2010) and is unlikely to do so during the remainder of 2012. For this reason, we do not expect the final quota to change from the proposed quota.

Impacts resulting from the 2013 North Atlantic swordfish specifications are analyzed in the EA, RIR, and IRFA that were prepared for the 2012 Swordfish Quota Specifications Final Rule (July 31, 2012; 77 FR 45273). The impacts resulting from the 2013 South Atlantic swordfish specifications were analyzed in the EA, RIR, and IRFA that were prepared for the 2007 Swordfish Quota Specification Final Rule (October 5, 2007; 72 FR 56929). The proposed quota adjustments would not increase overall quotas and are not expected to increase fishing effort, protected species interactions, or environmental effects beyond those considered in the 2012 and 2007 EAs. Therefore, because there would be no changes to the North or South Atlantic swordfish management measures in this proposed rule, or the affected environment or any environmental effects that have not been previously analyzed, NMFS has determined that the North and South Atlantic swordfish specifications and impacts to the human environment as a result of the proposed quota adjustments do not require additional NEPA analysis beyond that discussed in the 2012 and 2007 EAs.

The monkfish fishery is jointly managed by the New England Fishery Management Council (NEFMC) and the Mid-Atlantic Fishery Management Council. The fishery extends from Maine to North Carolina out to the continental margin. The Councils manage the fishery as two stocks, with the Northern Fishery Management Area (NFMA) covering the Gulf of Maine (GOM) and northern part of Georges Bank (GB), and the Southern Fishery Management Area (SFMA) extending from the southern flank of GB throughthe Mid-Atlantic Bight to North Carolina. The monkfish fishery is primarily managed by possession limits, in conjunction with a yearly allocation of monkfish days-at-sea (DAS) calculated to enable vessels participating in the fishery to catch, but not exceed, the target total allowable landings (TAL) limit and the annual catch target (ACT, the TAL plus an estimate of expected discards) in each management area. Both the ACT and the TAL are calculated to maximize yield in the fishery over the long term.

Monkfish are often caught while fishing for Northeast (NE) multispecies (i.e., groundfish), particularly in the NFMA. Both monkfish and groundfish are bottom-dwelling species comingling in the same fishing locations and susceptible to gear types used in both fisheries. Because a majority of vessels operating in the NFMA are issued both monkfish and groundfish permits, the two fisheries are closely related, and influence one another in both the nature of fishing operations (which species to target and where to fish) and resulting economic and social impacts of applicable management measures.

Recent groundfish stock assessments indicate that substantial reductions in the fishing mortality rate for several groundfish stocks are necessary to prevent overfishing and rebuild overfished stocks, consistent with rebuilding plans required under the Magnuson-Stevens Fishery Conservation and Management Act (Magnuson-Stevens Act). Accordingly, the NEFMC developed Framework Adjustment (FW) 48 to the NE Multispecies Fishery Management Plan (FMP) to specify annual catch limits (ACLs) for several groundfish stocks based upon the updated stock assessments, among other measures. The NEFMC ultimately split FW 48 into two separate actions, with updated ACLs adopted as part of FW 50 at its January 2013 meeting. The proposed ACLs for several stocks, particularly those caught in the GOM and GB, are substantially reduced compared to ACLs specified for fishing year (FY) 2012 (see Table 1). A proposed rule to implement these proposed ACLs, along with other management measures, is expected to be published in theFederal Registershortly. If approved, such ACLs would likely become effective by the start of FY 2013 on May 1, 2013, and may result in substantial adverse economic impacts to vessels participating in the groundfish fishery. To help mitigate the adverse economic impacts of reduced fishing opportunities in the groundfish fishery during FY 2013, at its November 2012 meeting, the NEFMC requested that NMFS implement an emergency action to eliminate monkfish possession limits for groundfish sector vessels fishing under a groundfish DAS in the NFMA, an area that includes the entire GOM and northern portions of GB.

According to the latest monkfish stock assessment conducted in August 2010 (50th Stock Assessment Workshop), monkfish in the NFMA are neither overfished, nor subject to overfishing. Based on this assessment and an evaluation by the NEFMC Scientific and Statistical Committee, the Councils adopted FY 2011-2013 monkfish ACTs and TALs for the NFMA as part of FW 7 to the Monkfish FMP (October 26, 2011; 76 FR 66192). These catch limits were set below the overfishing level for NFMA monkfish to account for both scientific and management uncertainty, and to minimize the risk that overfishing will occur. In recent years, monkfish landings have fallen short of monkfish target total allowable catch amounts specified for the NFMA (see Table 2), with FY 2012 landings levels also projected to be below the TAL. As a result, monkfish landings could be increased as a means of providing additional fishing opportunities for groundfish vessels, with little risk of overfishing NFMA monkfish.

Section 305(c) of the Magnuson-Stevens Act authorizes the Secretary to promulgate emergency regulations to address an emergency for any fishery. NMFS policy guidelines for determining whether an emergency rule is justified were published on August 21, 1997 (62 FR 44421). The guidelines state that the implementation of an emergency action should be limited to special circumstances where substantial harm or disruption of the resource, fishery, or community would be caused in the time it would take to follow standard rulemaking procedures. The emergency action guidelines define the existence of an emergency as a situation that: “(1) Results from recent, unforeseen events or recently discovered circumstances; and (2) presents serious conservation or management problems in the fishery; and (3) if the opportunity for prior public notice and comment is being waived, can be addressed through emergency regulations for which the immediate benefits outweigh the value of advance notice, public comment, and deliberative consideration of the impacts on participants to the sameextent as would be expected under the normal rulemaking process.” The justifications described in the guidelines include the prevention of significant direct economic loss, or to preserve a significant economic opportunity that otherwise might be foregone, and the prevention of significant community impacts. This action meets the first two guidelines; the third guideline is not relevant because the opportunity for prior public comment is not being waived.

As discussed more thoroughly in the EA developed to support this action (seeADDRESSES), the combined effect of several issues facing the groundfish fishery for FY 2013 present recently discovered circumstances that would likely cause serious management problems and result in substantial economic and social harm for the groundfish and monkfish fisheries and associated communities. These issues include a series of recent groundfish stock assessment updates indicating the poor condition of some stocks and the need to reduce fishing mortality for these stocks starting in FY 2013, a late decision by the NEFMC to adopt substantially lower groundfish ACLs for certain stocks for FY 2013 as part of FW 48B to the NE Multispecies FMP, and the lack of time to develop additional measures to mitigate the economic and social impacts of reduced FY 2013 groundfish ACLs through the conventional fishery management council management process. These issues can, at least in part, be addressed through an emergency action to suspend existing monkfish possession limits for vessels issued both a limited access groundfish and monkfish permit in the NFMA.

An emergency action would provide additional fishing opportunities to help mitigate expected substantial adverse economic and social harm resulting from reduced groundfish ACLs in FY 2013, without significantly increasing the risk of overfishing monkfish in the NFMA. These measures can be developed and implemented by NMFS more swiftly than a Council action that is subject to procedural and other requirements not applicable to NMFS. Implementing such measures under emergency action would help to preserve an economic opportunity that otherwise might be foregone if the NEFMC attempted to implement such measures under the normal, slower Council process. Although some of the groundfish stock assessments were completed earlier in 2012, final ACLs were not formally adopted by the NEFMC until January 2013 following the completion of the stock assessment update for GOM and GB cod in December 2012. Thus, the full scope of potential adverse economic impacts for FY 2013 was not realized until very recently. Therefore, the potential impact of the proposed reductions in groundfish ACLs for several groundfish stocks combined represents recently discovered circumstances that could result in substantial harm to the groundfish fishery and associated fishing communities. Further, because the NEFMC needed to prioritize adopting ACLs before the start of FY 2013, there was not enough time to fully develop measures that would help mitigate expected economic impacts of reduced ACLs in FY 2013 as part of FW 48B. Accordingly, NMFS finds that this proposed emergency action, as further described below, is consistent with section 305(c) of the Magnuson-Stevens Act and NMFS guidance regarding the use of emergency actions.

Pursuant to section 305(c)(3) of the Magnuson-Stevens Act, the management measures proposed in this rule would remain in effect for 180 days, and are likely to be extended an additional 185 days, as allowed by this section of the Magnuson-Stevens Act, unless new information indicates that the NFMA monkfish TAL for FY 2013. If extended, these measures would be effective for the duration of FY 2013 (through April 30, 2014).

This emergency action would suspend existing monkfish possession limits for vessels issued a Federal limited access monkfish Category C or D permit (i.e., those also issued a Federal limited access NE multispecies permit) that are fishing under a groundfish DAS or both a groundfish and monkfish DAS in the NFMA during FY 2013. Vessels would still be required to declare a trip under a groundfish or monkfish DAS at the dock prior to starting a trip in order to be exempt from the monkfish possession limits; a vessel that does not declare a trip under a groundfish or monkfish DAS at the dock prior to starting a trip would not be exempt from the monkfish possession limits under this action. Existing monkfish possession limits for vessels issued a limited access monkfish Category A or B permit and fishing under only a monkfish DAS, or vessels issued an open access monkfish Category E permit (i.e., vessels that catch monkfish while targeting other fisheries) would remain the same, as specified in Table 3. In addition, the overfishing level, acceptable biological catch level, ACL, ACT, and TAL would remain as 19,557 mt, 7,592 mt, 6,567 mt, and 5,854 mt, respectively, as implemented in either Amendment 5 (May 25, 2011; 76 FR 30265) or FW 7 to the Monkfish FMP.

The Pacific Council has published its annual notice of availability of reports; public meetings, and hearings for the 2013 ocean salmon fisheries (77 FR 73987, December 12, 2012). The Pacific Council will adopt alternatives for 2013 ocean salmon fisheries at its meeting, March 6-11, 2013 at the Hotel Murano in Tacoma, Washington. Details of this meeting are available on the Pacific Council's Web site (www.pcouncil.org) and will be published in theFederal Registerin February 2013. On March 20, 2013, “Preseason Report II-Proposed Alternatives and Environmental Assessment Part 2 for 2013 Ocean Salmon Fishery Regulations” and public hearing schedule will be mailed to the public that have requested to receive these documents (seeADDRESSES) and posted on the Pacific Council Web site athttp://www.pcouncil.org.The report will include a description of the salmon management alternatives and a summary of their biological and economic impacts.

Comments on the alternatives the Pacific Council adopts at its March 2013 meeting, and described in Preseason Report II, may be submitted in writing or electronically as described under Addresses, above, or verbally or in writing at any of the public hearings held on March 25-26, 2013, or at the Pacific Council's meeting, April 5-11, 2013, at the Sheraton Portland Airport Hotel in Portland, Oregon. Written and electronically submitted comments must be received no later than 11:59 p.m. Pacific Time, March 31, 2013 in order to be included in the briefing book for the April Council meeting where they will be considered in the adoption of the Pacific Council's final recommendation for the 2013 salmon fishery management measures. All comments received accordingly will be reviewed and considered by the Pacific Council and NMFS.