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Federal Retirement Thrift Investment Board.
Final rule.
The Federal Retirement Thrift Investment Board (Agency) amends its regulations to provide that a beneficiary designation form is valid only if it is received by the TSP record-keeper not more than one year after the date of the participant's signature.
This rule is effective on July 14, 2014.
Laurissa Stokes at 202–942–1645.
The Agency administers the Thrift Savings Plan (TSP), which was established by the Federal Employees' Retirement System Act of 1986 (FERSA), Public Law 99–335, 100 Stat. 514. The TSP provisions of FERSA are codified, as amended, largely at 5 U.S.C. 8351 and 8401–79. The TSP is a tax-deferred retirement savings plan for Federal civilian employees and members of the uniformed services. The TSP is similar to cash or deferred arrangements established for private-sector employees under section 401(k) of the Internal Revenue Code (26 U.S.C. 401(k)).
Prior to 1995, active Federal employees submitted TSP beneficiary designation forms to the personnel office at their employing agency. Upon a participant's death or separation from service, the employing agency would forward the participant's beneficiary designation form to the TSP record-keeper.
Beginning on January 1, 1995, the Agency required all TSP participants to mail or fax beneficiary designation forms directly to the TSP record-keeper. In addition to requiring all participants to submit beneficiary designation forms directly to the TSP record-keeper, the new policy of direct receipt by the TSP record-keeper required employing agencies to search their personnel records and forward all beneficiary designation forms then in their possession to the TSP record-keeper immediately. The TSP communicated the new policy in two bulletins sent to agency representatives and in three separate mailings sent directly to participants.
The TSP codified the policy of direct receipt by the TSP record-keeper in regulations on June 13, 1997 (62 FR 32426). All beneficiary designation forms in an employing agency's possession should have been forwarded to the TSP record-keeper before June 13, 1997. Nevertheless, employing agencies continue to forward to the TSP record-keeper beneficiary designation forms that are sometimes decades old.
These aged forms often do not reflect the participant's current intent. Under the current regulations, the Agency must honor these aged forms if they are otherwise valid. When the Agency processes these forms, participants often become confused and believe their accounts have been accessed fraudulently. Further, if a participant passes away after the Agency has received an aged beneficiary designation form but prior to clarifying his/her current intent, the Agency must honor the old form even though it may not reflect the participant's current intent.
On September 20, 2013, the Agency published a proposal to amend its regulations to provide that a beneficiary designation form is valid only if it is received by the TSP record-keeper not more than 365 calendar days after the date of the participant's signature on the form. 78 FR 57807 (September 20, 2013). The Agency received no comments. Therefore, the Agency is publishing the proposed rule as final without change except for a minor clarification. The Agency is clarifying that, in the event that a beneficiary designation form contains multiple participant signatures with different dates, the TSP will rely on the most recently dated signature to determine whether 365 days have passed since the participant signed the form.
I certify that this regulation will not have a significant economic impact on a substantial number of small entities. This regulation will affect Federal employees and members of the uniformed services who participate in the Thrift Savings Plan, which is a Federal defined contribution retirement savings plan created under the Federal Employees' Retirement System Act of 1986 (FERSA), Public Law 99–335, 100 Stat. 514, and which is administered by the Agency.
I certify that these regulations do not require additional reporting under the criteria of the Paperwork Reduction Act.
Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 632, 653, 1501–1571, the effects of this regulation on state, local, and tribal governments and the private sector have been assessed. This regulation will not compel the expenditure in any one year of $100 million or more by state, local, and tribal governments, in the aggregate, or by the private sector. Therefore, a statement under § 1532 is not required.
Pursuant to 5 U.S.C. 810(a)(1)(A), the Agency submitted a report containing this rule and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States before publication of this rule in the
Claims, Government employees, Pensions, Retirement.
For the reasons stated in the preamble, the Agency amends 5 CFR chapter VI as follows:
5 U.S.C. 8351, 8433, 8434, 8435, 8474(b)(5), 8474(c)(1), and Sec. 109,
(c) * * *
(8) Be received by the TSP record-keeper not more than 365 calendar days after the date of the participant's most recent signature.
Food and Nutrition Service (FNS), USDA.
Final rule.
This final rule amends the regulations for the Commodity Supplemental Food Program (CSFP) to phase out the eligibility of women, infants, and children, in accordance with the amendments made by the Agricultural Act of 2014 (the 2014 Farm Bill). Under amendments made to the Agriculture and Consumer Protection Act of 1973 by Section 4102 of the 2014 Farm Bill, women, infants, and children who apply to participate in CSFP on February 7, 2014, or later cannot be certified to participate in the program. Under these amendments the population served by CSFP will only be low-income elderly persons at least 60 years of age. However, Section 4102 also included amendments for a phase-out provision, which requires State and local agencies to continue providing assistance to all women, infants, and children who were certified and receiving CSFP benefits as of February 6, 2014. Those individuals can continue to receive assistance until they are no longer eligible under the program rules in effect on February 6, 2014.
Erica Antonson, Program Analyst, Policy Branch, Food Distribution Division, Food and Nutrition Service, 3101 Park Center Drive, Room 500, Alexandria, Virginia 22302, or by telephone (703) 305–2662.
The Food and Nutrition Service (FNS) is amending CSFP regulations at 7 CFR part 247 to incorporate the requirements of the Agricultural Act of 2014 (Pub. L. 113–79, the 2014 Farm Bill). Prior to enactment of the 2014 Farm Bill on February 7, 2014, the Agriculture and Consumer Protection Act of 1973, 7 U.S.C. 612c note, provided for the eligibility of women, infants, and children in CSFP.
Amendments made by Section 4102 of the 2014 Farm Bill phase out the participation of women, infants, and children in CSFP and transition it to a low-income, elderly-only program. The participation of elderly persons in CSFP began as a pilot program at limited sites in the early 1980s, following which the Food Security Act of 1985 (Pub. L. 99–198) provided for the provision of benefits to the elderly at all CSFP sites, provided that all eligible women, infants, and children were already served. The Food, Conservation, and Energy Act of 2008 (Pub. L. 110–246), eliminated the priority status given to women, infants, and children effective October 1, 2008.
FNS issued a policy memorandum on March 10, 2014, implementing the amendments made by Section 4102; the memorandum is available on the FNS Web site at
The number of women, infants, and children participating in CSFP has declined steadily in recent years. In Fiscal Year (FY) 1998, 34 percent of CSFP participants were women, infants, or children and 66 percent were low-income elderly persons. In FY 2013, only three percent of CSFP participants were women, infants, or children and 97 percent of participants were elderly. At the same time, with WIC serving as an alternative to CSFP for eligible women, infants, and children, and due to greater demand for WIC benefits nationally, WIC participation increased by approximately 1.3 million over that same period.
The 2014 Farm Bill amendments recognize the participation trend and the fact that most women, infants, and children who are eligible to participate in CSFP could alternatively participate in WIC, which provides nutrition services to eligible pregnant, post-partum and breastfeeding women, infants, and children up to the age of five. WIC operates in all areas that CSFP serves and provides nutrition assistance benefits, as well as nutrition education and health referrals.
In this final rule, we amend several sections of 7 CFR part 247 to establish that new applications from women, infants, and children are not eligible for certification on or after February 7, 2014. References to women, infants, and children are removed from the regulations, except where they are necessary for the continued provision of benefits to those individuals still eligible for CSFP under the phase-out provision. Conforming amendments are made where necessary to clarify that these remaining regulatory provisions apply only to this limited group of women, infants, and children.
Amendments to 7 CFR part 247 are summarized as follows:
1. Section 247.2 describes the purpose and scope of CSFP. This section is revised to state that the population served by CSFP is elderly, low-income individuals 60 years of age or older, but includes a limited group of women, infants, and children who were certified for CSFP and receiving benefits as of February 6, 2014.
2. Sections 247.5 and 247.19 describe State and local agency responsibilities and dual participation, respectively. These sections are amended to clarify that coordination between CSFP State and local agencies and State WIC agencies on the detection and prevention of dual participation is required only when women, infants, or
3. Section 247.6 describes the requirements for State Plans. This section is amended to remove the recommendation that State agencies collaborate with WIC agencies in the development of State Plans. This recommendation is no longer relevant because women, infants, and children will not be served by States who join CSFP in the future. Existing State Plans are considered permanent. These plans will already reflect needed collaboration and will continue to apply in States with women, infant, or children participants until they are phased out of the program. This section is additionally amended to clarify that several requirements specific to women, infant, and children participants only pertain where applicable.
4. Section 247.9 describes the eligibility requirements for participation in CSFP. The eligibility requirements for women, infants, and children are retained in this rulemaking as they will continue to be necessary for the administration of the program until the Section 4102 phase-out is complete. However, language is added to this section to clarify that the eligibility requirements for women, infants, and children apply only to individuals who were certified and receiving CSFP benefits as of February 6, 2014.
5. Section 247.16 describes certification periods. This section is amended to clarify that the certification period for women, infants, and children applies only to the recertification of individuals who remain eligible under the Section 4102 phase-out provision.
6. Sections 247.8, 247.12, 247.14, 247.18, 247.20, 247.21, 247.30 and 247.33, are amended to make conforming revisions to wording specific to women, infants and children.
A correction is made to the regulatory citation in § 247.9(e)(3) and outdated reporting requirements are updated in § 247.29.
This final rule has been determined to be not significant and was not reviewed by the Office of Management and Budget (OMB) in conformance with Executive Order 12866.
This rule has been designated as not significant by the Office of Management and Budget, therefore, no Regulatory Impact Analysis is required.
This final rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601–612). It has been certified that this action will not have a significant impact on a substantial number of small entities. Although State and local agencies administering CSFP will be affected by this rulemaking, the economic effect will not be significant.
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104–4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local and tribal governments and the private sector. Under Section 202 of the UMRA, the Department generally must prepare a written statement, including a cost benefit analysis, for proposed and final rules with “Federal mandates” that may result in expenditures by State, local or Tribal governments, in the aggregate, or the private sector, of $100 million or more in any one year. When such a statement is needed for a rule, Section 205 of the UMRA generally requires the Department to identify and consider a reasonable number of regulatory alternatives and adopt the most cost effective or least burdensome alternative that achieves the objectives of the rule.
This final rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) for State, local and Tribal governments or the private sector of $100 million or more in any one year. Thus, the rule is not subject to the requirements of Sections 202 and 205 of the UMRA.
CSFP is listed in the Catalog of Federal Domestic Assistance under 10.565. For the reasons set forth in the final rule in 7 CFR part 3015, Subpart V and related Notice (48 FR 29114, June 24, 1983), the donation of foods in such programs is included in the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials.
Executive Order 13132 requires Federal agencies to consider the impact of their regulatory actions on State and local governments. Where such actions have federalism implications, agencies are directed to provide a statement for inclusion in the preamble to the regulations describing the agency's considerations in terms of the three categories called for under Section (6)(b)(2)(B) of Executive Order 13121. FNS has considered the impact of this rule on State and local governments and has determined that this rule does not have federalism implications.
This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have a preemptive effect with respect to any State or local laws, regulations, or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted.
FNS has reviewed this final rule in accordance with the Department Regulation 4300–4, “Civil Rights Impact Analysis,” to identify and address any major civil rights impacts the rule might have on minorities, women, and persons with disabilities. While this rule does impact the eligibility of women, a protected group, for CSFP, the rule's intention is not to exclude, limit, or otherwise disadvantage any group or class of person in one or more of the prohibited bases from receiving federal nutrition assistance. This change is mandated by statute.
After a careful review of the rule's intent and provisions, the Department has determined that this final rule will not otherwise limit or reduce the ability of participants to receive the benefits of USDA Foods in food distribution programs on the basis of an individual's or group's race, color, national origin, sex, age, political beliefs, religious creed, or disability. The Department found no factors that would negatively affect any group of individuals.
The Programs affected by the provisions in this final rule are all State or Tribally administered federally funded programs. FNS' national and regional offices have formal and informal discussions with State agency officials and representatives on an ongoing basis regarding program issues relating to CSFP. Additionally, FNS meets periodically throughout the year with the National CSFP Association to discuss issues relating to the program. The changes in this final rulemaking are required by federal law. This rulemaking was the subject of formal consultation in May 2014. Reports from the consultation session will be made part of the USDA annual reporting on Tribal Consultation and Collaboration.
The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR part 1320) requires the Office of Management and Budget (OMB) approve all collections of information by a Federal agency before they can be implemented. Respondents are not required to respond to any collection of information unless it displays a current valid OMB control number. This rule does not contain new information collection requirements subject to approval by OMB under the Paperwork Reduction Act of 1995. Existing information collection requirements associated with this rule have been approved by OMB under OMB #0584–0025, 0584–0067, and 0584–0293.
The Food and Nutrition Service is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.
This action is being finalized without prior notice or public comment under the authority of 5 U.S.C. 553(a)(2). Section 4102 of the 2014 Farm Bill amends Section 5 of the Agriculture and Consumer Protection Act of 1973 (7 U.S.C. 612c note) to phase out the eligibility of women, infants, and children in CSFP. Existing CSFP regulations are therefore inconsistent with Section 5 of the Agriculture and Consumer Protection Act of 1973. The 2014 Farm Bill language is clear and mandatory, leaving no room for discretion.
Education, Food assistance programs, Grant programs-health, Grant programs—social programs, Indians, Infants and children, Investigations, Maternal and child health, Nutrition, Reporting and recordkeeping requirements, Surplus agricultural commodities, Women.
Accordingly, 7 CFR part 247 is amended as follows:
Sec. 5, Pub. L. 93–86, 87 Stat. 249, as added by Sec. 1304(b)(2), Pub. L. 95–113, 91 Stat. 980 (7 U.S.C. 612c note); sec. 1335, Pub. L. 97–98, 95 Stat. 1293 (7 U.S.C. 612c note); sec. 209, Pub. L. 98–8, 97 Stat. 35 (7 U.S.C. 612c note); sec. 2(8), Pub. L. 98–92, 97 Stat. 611 (7 U.S.C. 612c note); sec. 1562, Pub. L. 99–198, 99 Stat. 1590 (7 U.S.C. 612c note); sec. 101(k), Pub. L. 100–202; sec. 1771(a), Pub. L. 101–624, 101 Stat. 3806 (7 U.S.C. 612c note); sec 402(a), Pub. L. 104–127, 110 Stat. 1028 (7 U.S.C. 612c note); sec. 4201, Pub. L. 107–171, 116 Stat. 134 (7 U.S.C. 7901 note); sec. 4221, Pub. L. 110–246, 122 Stat. 1886 (7 U.S.C. 612c note); sec. 4221, Pub. L. 113–79, 7 U.S.C. 612c note).
(a)
(b) * * *
(8) Developing a plan for the detection and prevention of dual participation, in coordination with CSFP local agencies and with the WIC State agency, unless no women, infants, and children remain enrolled in CSFP in the State;
The revision reads as follows:
(a)
The revisions read as follows:
(a) * * * To apply for CSFP benefits, the applicant or caretaker of the applicant must provide the following information on the application: * * *
(b) * * * After informing the applicant or caretaker of the applicant of his or her rights and responsibilities, in accordance with § 247.12, the local agency must ensure that the applicant or caretaker signs the application form beneath the following pre-printed statement. The statement must be read by, or to, the applicant or caretaker before signing. * * *
The revisions and addition read as follows:
(a)
(b) * * *
(4) The eligibility requirements in this section apply only to women, infants, and children who were certified and receiving CSFP benefits as of February 6, 2014, and whose enrollment has continued without interruption. Effective February 7, 2014, no new applications from women, infants, or children may be approved.
(d) * * * However, for the recertification of women, infants, and children, the State agency must implement the adjusted guidelines at the same time that the WIC agency implements the adjusted guidelines in WIC.
(a) * * *
(2) The local agency will make nutrition education available to all adult participants, and, if applicable, to parents or caretakers of infant and child participants, and will encourage them to participate; and
(a)
The revisions and addition read as follows:
(a) * * *
(1) * * * This paragraph only applies to the recertification of women, infants, and children who were certified and receiving CSFP benefits as of February 6, 2014, and whose enrollment in CSFP has continued without interruption.
(b)
(c) * * * The State agency must ensure that local agencies serve a CSFP participant who moves from another area to an area served by CSFP and whose certification period has not expired. * * *
(c)
The revisions read as follows:
(a)
(b) * * * In accordance with § 247.20(b), if the dual participation resulted from the participant or caretaker of the participant making false or misleading statements, or intentionally withholding information, the local agency must disqualify the participant from CSFP, unless the local agency determines that disqualification would result in a serious health risk. * * *
The revision reads as follows:
(a) * * *
(3)
The revision reads as follows:
(b) * * *
(1)
(c) * * * An individual or an individual's caretaker may request a fair hearing by making a clear expression, verbal or written, to a State or local agency official that an appeal of the adverse action is desired.
Animal and Plant Health Inspection Service, USDA.
Final rule.
We are amending the National Poultry Improvement Plan (NPIP, the Plan) and its auxiliary provisions by removing the descriptions of specific tests and sanitation procedures from the regulations. Instead, we will require tests to be performed and sanitation to be maintained in a manner approved by the Administrator. Approved procedures will be listed in an NPIP Program Standards document, which we are making available on the NPIP Web site. In addition, we are establishing new compartment classifications for defined subpopulations of primary breeding turkeys, primary egg-type chickens, and primary meat-type chickens. We are also providing new or modified sampling and testing procedures for Plan participants and participating flocks. The changes in this final rule were voted on and approved by the voting delegates at the Plan's 2010 and 2012 National Plan Conferences. These changes will streamline the provisions of the Plan, keep those provisions current with changes in the poultry industry, and provide for the use of new sampling and testing procedures.
Dr. Denise Brinson, DVM, Director, National Poultry Improvement Plan, VS, APHIS, USDA, 1506 Klondike Road, Suite 101, Conyers, GA 30094–5104; (770) 922–3496.
The National Poultry Improvement Plan (NPIP, also referred to below as “the Plan”) is a cooperative Federal-State-industry mechanism for controlling certain poultry diseases. The Plan consists of a variety of programs intended to prevent and control poultry diseases. Participation in all Plan programs is voluntary, but breeding flocks, hatcheries, and dealers must first qualify as “U.S. Pullorum-Typhoid Clean” as a condition for participating in the other Plan programs.
The Plan identifies States, flocks, hatcheries, dealers, and slaughter plants that meet certain disease control standards specified in the Plan's various programs. As a result, customers can buy poultry that has tested clean of certain diseases or that has been produced under disease-prevention conditions.
The regulations in 9 CFR parts 145, 146, and 147 (referred to below as the regulations) contain the provisions of the Plan. The Animal and Plant Health Inspection Service (APHIS, also referred to as “the Service”) of the U.S. Department of Agriculture (USDA, also referred to as “the Department”) amends these provisions from time to time to incorporate new scientific information and technologies within the Plan.
On January 28, 2014, we published in the
We solicited comments concerning our proposal for 60 days ending March 31, 2014. We received 11 comments by that date. They were from producers, poultry associations, and the general public. Of the 11 comments we received, 7 directly addressed the proposed rule. These comments are discussed below.
Part 146 of the regulations contains the NPIP provisions for commercial poultry. Currently, the only disease addressed in this part is H5/H7 low pathogenic avian influenza; under part 146, table-egg layer flocks, meat-type chicken slaughter plants, meat-type turkey slaughter plants, and certain types of game birds and waterfowl may participate in U.S. H5/H7 Avian Influenza Monitored classifications.
Section 146.11 sets out the audit process for participating slaughter plants. Paragraph (b) states that flocks slaughtered at a slaughter plant will be considered to be not conforming to the required protocol of the classifications if there are no test results available, if the flock was not tested within 21 days before slaughter, or if the test results for the flocks were not returned before slaughter. We proposed to amend paragraph (b) to refer to samples being collected and tested and to results being returned prior to movement to slaughter.
The seven commenters who addressed the rule opposed this change. They stated that requiring testing prior to slaughter, rather than prior to movement to slaughter, allows companies that have been sampling flocks at processing to continue doing so. It also allows producers whose flocks were inadvertently not sampled in the field to be tested at the slaughter plant and remain compliant.
They also stated that the proposed requirement to test prior to movement to slaughter would inadvertently combine the different testing requirements for participating slaughter plants in each subpart in part 146 into one set of testing requirements. This would prevent the different types of participating slaughter plants from setting different testing requirements. One commenter stated that the change would limit the flexibility of Official State Agencies and industry to develop alternative testing protocols in which the same number of birds are tested, as allowed under the regulations.
We believe it is important to have the test results for a flock returned prior to movement to slaughter to prevent potentially diseased birds from being exposed to other, healthy birds and possibly requiring cleaning and disinfection at the slaughter plant. The NPIP General Conference voted to approve this change at the 2012 Biennial Conference, reflecting the general consensus of NPIP participants. However, we are postponing the finalization of this change until an alternative proposal put forward by the commenters can be voted on during the 2014 NPIP Biennial Conference, which is scheduled to take place in Charlotte, NC, from July 10 through 12, 2014. Based on that vote, we will either retain this change in a stand-alone final rule or make alterations to the testing requirements in a separate proposed rule.
We are making a minor change and two corrections to the proposal in this final rule. Paragraph (a)(1)(i) of the proposed compartmentalization sections in §§ 145.45, 145.74, and 145.84 indicated that the company applying for compartmentalization would have to, upon request, work with the Official State Agency to provide data on the
Paragraph (a)(1)(v) of the proposed compartmentalization sections contained a grammatical redundancy, which we have removed in this final rule.
We also requested comment on the new Program Standards document. We did not receive any comments. However, one of the approved tests listed in the Program Standards document, the Rapid Chek© Select
Therefore, for the reasons given in the proposed rule and in this document, we are adopting the proposed rule as a final rule, with the changes discussed in this document.
This final rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget.
In accordance with the Regulatory Flexibility Act, we have analyzed the potential economic effects of this action on small entities. The analysis is summarized below. Copies of the full analysis are available on the Regulations.gov Web site (see footnote 1 in this document for a link to Regulations.gov) or by contacting the person listed under
The establishments that will be affected by the rule—principally entities engaged in poultry production and processing—are predominantly small by Small Business Administration standards. In those instances in which an addition or modification could potentially result in a cost to certain entities, we do not expect the costs to be significant. This rule embodies changes decided upon by the NPIP's General Conference Committee on behalf of Plan members, that is, changes recognized by the poultry industry as in their interest. We note that NPIP membership is voluntary.
Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action will not have a significant economic impact on a substantial number of small entities.
This program/activity is listed in the Catalog of Federal Domestic Assistance under No. 10.025 and is subject to Executive Order 12372, which requires intergovernmental consultation with State and local officials. (See 7 CFR part 3015, subpart V.)
This final rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule: (1) Preempts all State and local laws and regulations that are in conflict with this rule; (2) has no retroactive effect; and (3) does not require administrative proceedings before parties may file suit in court challenging this rule.
This final rule contains no new information collection or recordkeeping requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Animal diseases, Indemnity payments, Low pathogenic avian influenza, Poultry.
Animal diseases, Poultry and poultry products, Reporting and recordkeeping requirements.
Accordingly, we are amending 9 CFR parts 56, 145, 146, and 147 as follows:
7 U.S.C. 8301–8317; 7 CFR 2.22, 2.80, and 371.4.
The revision reads as follows:
(d)
The revisions and additions read as follows:
(c) * * *
(1) * * *
(i) Poultry infected with or exposed to H5/H7 LPAI must not be transported to a market for controlled marketing until approved by the Cooperating State Agency in accordance with the initial State response and containment plan described in § 56.10.
(iii) Routes to slaughter must avoid other commercial poultry operations whenever possible. All load-out equipment, trailers, and trucks used on premises that have housed poultry that were infected with or exposed to H5/H7 LPAI must be cleaned and disinfected and not enter other poultry premises or facilities for 48 hours after removing such poultry from their premises.
(iv) Flocks moved for controlled marketing must be the last poultry marketed during the week they are marketed.
(d) * * *
(1) * * *
(i) Secure all feathers and debris that might blow around outside the house in which the infected or exposed poultry were held by gathering and pushing the material into the house;
(iii) Close the house in which the poultry were held, maintaining just enough ventilation to remove moisture. Leave the house undisturbed for a minimum of 72 hours.
(2) * * *
(i) * * * Compost manure, debris, and feed by windrowing in the house if possible. If this is not possible, set up a system for hauling manure, debris, and feed to an approved site for burial, piling, or composting. Manure, debris, and feed may be removed from the house or premises and disposed of by composting it on site, leaving it in a undisturbed pile on site, or removing it from the site in covered vehicles. Land application of manure, debris, and feed should only be performed in accordance with the initial State response and containment plan described in § 56.10. Clean out the house or move or spread litter as determined by the Cooperating State Agency and in accordance with the initial State response and containment plan. * * *
(3) * * * Premises should remain empty until testing provides negative virus detection results and checked by the Cooperating State Agency in accordance with the initial State response and containment plan described in § 56.10. * * *
7 U.S.C. 8301–8317; 7 CFR 2.22, 2.80, and 371.4.
The additions read as follows:
The addition reads as follows:
(d) To ensure that Plan diseases are not spread, flocks must be qualified for their intended Plan classifications before being moved into breeder production facilities.
The revision reads as follows:
(a) * * * The sanitary procedures outlined in the NPIP Program Standards, or other procedures approved by the Administrator in accordance with § 147.53(d), will be considered as a guide in determining compliance with this provision. * * *
The revisions read as follows:
(c)
(g)
(m)
(o)
(t)
The revisions and addition read as follows:
(a) * * *
(1) * * * Official blood tests must be conducted in accordance with part 147 of this subchapter or according to literature provided by the producer. * * *
(6) * * *
(ii) * * * Bacteriological examination must be conducted in accordance with part 147 of this subchapter. * * *
(b) * * *
(1) * * * Tests must be conducted in accordance with this paragraph (b) and in accordance with part 147 of this subchapter. * * *
(3) When reactors to the test for which the flock was tested are submitted to a laboratory as prescribed by the Official State Agency, the final status of the flock will be determined in accordance with part 147 of this subchapter.
(d) * * *
(1) * * *
(ii) * * *
(C) The AGID test for avian influenza must be conducted in accordance with part 147 of this subchapter. The test can be conducted on egg yolk or blood samples. The AGID test is not recommended for use in waterfowl.
(2) * * *
(ii) * * *
(B) Chicken and turkey flocks that test positive on the ACIA must be further tested using the RRT–PCR or virus isolation. Positive results from the RRT–PCR or virus isolation must be further tested by Federal Reference Laboratories using appropriate tests for confirmation. Final judgment may be based upon further sampling and appropriate tests for confirmation.
(b) Hatching eggs produced by multiplier breeding flocks should be nest clean. They may be fumigated in accordance with part 147 of this subchapter or otherwise sanitized.
The revisions read as follows:
(d) * * *
(1) * * *
(viii) Hatching eggs are collected as quickly as possible, and their sanitation is maintained in accordance with part 147 of this subchapter.
(ix) Hatching eggs produced by the flock are incubated in a hatchery whose sanitation is maintained in accordance with part 147 of this subchapter and sanitized either by a procedure approved by the Official State Agency or in accordance with part 147 of this subchapter.
The revisions and addition read as follows:
(d) * * *
(1) * * *
(vi) Chicks shall be hatched in a hatchery whose sanitation is maintained in accordance with part 147 of this subchapter and sanitized or fumigated in accordance with part 147 of this subchapter;
(2) The Official State Agency may monitor the effectiveness of the sanitation practices in accordance with part 147 of this subchapter.
(m)
(1) A flock and the hatching eggs and chicks produced from it shall be eligible for this classification if they meet the following requirements, as determined by the Official State Agency:
(i) The flock originated from a U.S. S. Enteritidis Clean primary meat-type breeding flock.
(ii) The flock is maintained in accordance with part 147 of this
(iii) Environmental samples are collected from the flock in accordance with part 147 of this subchapter at 16–18 and 40–45 weeks of age. The samples shall be examined bacteriologically for group D Salmonella at an authorized laboratory, and cultures from group D positive samples shall be serotyped.
(2) The following actions must be taken with respect to the test results that are generated from this
(i) If
(ii) The test results and the results of any evaluations performed in accordance with paragraph (m)(2)(i) of this section will be reported on a quarterly basis to the Official State Agency and the NPIP Senior Coordinator.
(iii) Participating broiler integrators shall combine their respective test results (and the results of any associated evaluations) to help guide their decisionmaking regarding programs and practices to implement or maintain to address
(iv) Aggregate data regarding the prevalence of
(3) This classification may be revoked by the Official State Agency if the participant fails to comply with the requirements of this classification. The Official State Agency shall not revoke the participant's classification until the participant has been given an opportunity for a hearing in accordance with rules of practice adopted by the Official State Agency.
The addition and revision read as follows:
(e) * * *
(1) * * * It is recommended that any birds that are showing clinical signs of
(g) * * *
(3) All spent fowl being marketed for meat from flocks that have been tested as required by this paragraph shall be tested at a rate of 6 birds per flock within 21 days prior to movement to slaughter.
(a)
(1)
(i)
(ii)
(iii)
(A) The physical and spatial factors that separate the compartment from surrounding bird populations and affect the biosecurity status of the compartment.
(B) Relevant environmental factors that may affect exposure of the birds to AI.
(C) The functional boundary and fencing that are used to control access to the compartment.
(D) Facilities and procedures to prevent access by wild birds and to provide separation from other relevant hosts.
(E) The relevant infrastructural factors that may affect exposure to AI, including the construction and design of buildings or physical components, cleaning and disinfection of buildings and physical components between production groups with quality assurance verification, cleaning and disinfection of equipment, and introduction of equipment or material into the compartment.
(iv)
(A) Requirements that company employees and contract growers limit their contact with live birds outside the compartment.
(B) An education and training program for company employees and contractors.
(C) Standard operating procedures for company employees, contractors, and outside maintenance personnel.
(D) Requirements for company employees and non-company personnel who visit any premises within the compartment.
(E) Company veterinary infrastructure to ensure flock monitoring and disease diagnosis and control measures.
(F) Policies for management of vehicles and equipment used within the compartment to connect the various premises.
(G) Farm site requirements (location, layout, and construction).
(H) Pest management program.
(I) Cleaning and disinfection process.
(J) Requirements for litter and dead bird removal and/or disposal.
(v)
(vi)
(2)
(ii) Veterinary staff from the Official State Agency and NPIP staff will work in partnership with licensed, accredited veterinarians to train and certify auditors through Service-approved workshops. The trained auditors will conduct biosecurity and operational audits at least once every 2 years to ensure the integrity of the compartment. These audits will include evaluation of the critical control points and standard operating practices within the compartment, verification of the health status of the flock(s) contained within the compartment, and examination of the biosecurity and management system of the integrated components of the compartment.
(iii) In addition, the company must demonstrate compliance with paragraph (a)(1) of this section for remaining in the U.S. H5/H7 Avian Influenza Clean classification, surveillance for NAI within the compartment, and conducting tests in State or Federal laboratories or in NPIP authorized laboratories. Accredited veterinarians are responsible for the enforcement of active and passive surveillance of NAI in primary breeder flocks. Baseline health status must be maintained for all flocks or subpopulations within the compartment, indicating the dates and negative results of all avian influenza surveillance and monitoring testing, the dates and history of last disease occurrence (if any), the number of outbreaks, and the methods of disease control that were applied.
(iv) Documentation will be maintained in the company's database and will be verified as required by the Service and/or the Official State Agency.
(3)
(i) Oversight of the establishment and management of compartments;
(ii) Establishment of effective partnerships between the Service, the Plan, and the primary breeder industry;
(iii) Approval or denial of classification of compartments as U.S. H5/H7 Avian Influenza Clean Compartments under paragraph (a)(1) of this section;
(iv) Official certification of the health status of the compartment, and commodities that may be traded from it through participation in the Plan for avian diseases, including the U.S. H5/H7 Avian Influenza Clean program as
(v) Conducting audits of compartments at least once every 2 years to:
(A) Confirm that the primary breeding company's establishments are epidemiologically distinct and pathways for the introduction of disease into the compartment are closed through routine operational procedures; and
(B) Evaluate and assess the management and husbandry practices relating to biosecurity to determine whether they are in compliance with hygiene and biosecurity procedures for poultry primary breeding flocks and hatcheries in accordance with part 147 of this subchapter;
(vi) Providing, upon request, model plans for management and husbandry practices relating to biosecurity in accordance with part 147 of this subchapter, risk evaluations in conjunction with the primary breeder industry (including disease surveillance such as VS Form 9–4, “Summary of Breeding Flock Participation”), and diagnostic capability summaries and systems for initial State response and containment plans in accordance with § 56.10 of this chapter; and
(vii) Publicizing and sharing compartment information with international trading partners, upon request, to establish approval and recognition of the compartment, including timeliness and accuracy of disease reporting and surveillance measures as described in §§ 145.15 and 145.43(g).
(4)
(b) [Reserved]
The addition reads as follows:
(c) It is recommended that waterfowl flocks and gallinaceous flocks in open-air facilities be kept separate.
The revisions and addition read as follows:
(e) * * *
(1) It is a primary breeding flock in which a minimum of 30 birds has been tested negative to the H5 and H7 subtypes of avian influenza as provided in § 145.14(d) when more than 4 months of age;
(2) It is a multiplier breeding flock in which a minimum of 30 birds has been tested negative to the H5 and H7 subtypes of avian influenza as provided in § 145.14(d) when more than 4 months of age;
(3) A sample of at least 30 birds must be tested and found negative to H5/H7 avian influenza within 21 days prior to movement to slaughter.
(f)
(1) An Authorized Agent shall collect a minimum of five environmental samples, e.g., chick papers, hatching trays, and chick transfer devices, from the hatchery at least every 30 days. Testing must be performed at an authorized laboratory.
(2) To claim products are of this classification, all products shall be derived from a hatchery that meets the requirements of the classification.
(3) This classification may be revoked by the Official State Agency if the participant fails to follow recommended corrective measures.
(b) Hatching eggs produced by primary breeding flocks should be nest clean. They may be fumigated in accordance with part 147 of this subchapter or otherwise sanitized.
The revisions read as follows:
(d) * * *
(1) * * *
(ix) Hatching eggs produced by the flock are incubated in a hatchery whose sanitation is maintained in accordance with part 147 of this subchapter and sanitized either by a procedure approved by the Official State Agency or in accordance with part 147 of this subchapter.
(f) * * *
(2) A sample of at least 11 birds must be tested and found negative for avian influenza within 21 days prior to movement to slaughter.
(a)
(1)
(i)
(ii)
(iii)
(A) The physical and spatial factors that separate the compartment from surrounding bird populations and affect the biosecurity status of the compartment.
(B) Relevant environmental factors that may affect exposure of the birds to AI.
(C) The functional boundary and fencing that are used to control access to the compartment.
(D) Facilities and procedures to prevent access by wild birds and to provide separation from other relevant hosts.
(E) The relevant infrastructural factors that may affect exposure to AI, including the construction and design of buildings or physical components, cleaning and disinfection of buildings and physical components between production groups with quality assurance verification, cleaning and disinfection of equipment, and introduction of equipment or material into the compartment.
(iv)
(A) Requirements that company employees and contract growers limit their contact with live birds outside the compartment.
(B) An education and training program for company employees and contractors.
(C) Standard operating procedures for company employees, contractors, and outside maintenance personnel.
(D) Requirements for company employees and non-company personnel who visit any premises within the compartment.
(E) Company veterinary infrastructure to ensure flock monitoring and disease diagnosis and control measures.
(F) Policies for management of vehicles and equipment used within the compartment to connect the various premises.
(G) Farm site requirements (location, layout, and construction).
(H) Pest management program.
(I) Cleaning and disinfection process.
(J) Requirements for litter and dead bird removal and/or disposal.
(v)
(vi)
(2)
(ii) Veterinary staff from the Official State Agency and NPIP staff will work in partnership with licensed, accredited veterinarians to train and certify auditors through Service-approved workshops. The trained auditors will conduct biosecurity and operational audits at least once every 2 years to ensure the integrity of the compartment. These audits will include evaluation of the critical control points and standard operating practices within the compartment, verification of the health status of the flock(s) contained within the compartment, and examination of the biosecurity and management system of the integrated components of the compartment.
(iii) In addition, the company must demonstrate compliance with paragraph (a)(1) of this section for remaining in the U.S. Avian Influenza Clean classification, surveillance for NAI within the compartment, and conducting tests in State or Federal laboratories or in NPIP authorized laboratories. Accredited veterinarians are responsible for the enforcement of active and passive surveillance of NAI in primary breeder flocks. Baseline health status must be maintained for all flocks or subpopulations within the compartment, indicating the dates and negative results of all avian influenza surveillance and monitoring testing, the dates and history of last disease occurrence (if any), the number of outbreaks, and the methods of disease control that were applied.
(iv) Documentation will be maintained in the company's database and will be verified as required by the Service and/or the Official State Agency.
(3)
(i) Oversight of the establishment and management of compartments;
(ii) Establishment of effective partnerships between the Service, the Plan, and the primary breeder industry;
(iii) Approval or denial of classification of compartments as U.S. Avian Influenza Clean Compartments under paragraph (a)(1) of this section;
(iv) Official certification of the health status of the compartment, and commodities that may be traded from it through participation in the Plan for avian diseases, including the U.S. Avian Influenza Clean program as described in § 145.73(f) and diagnostic surveillance for H5/H7 low pathogenicity AI as described in § 145.15;
(v) Conducting audits of compartments at least once every 2 years to:
(A) Confirm that the primary breeding company's establishments are epidemiologically distinct and pathways for the introduction of disease into the compartment are closed through routine operational procedures; and
(B) Evaluate and assess the management and husbandry practices relating to biosecurity to determine whether they are in compliance with hygiene and biosecurity procedures for poultry primary breeding flocks and hatcheries in accordance with part 147 of this subchapter;
(vi) Providing, upon request, model plans for management and husbandry practices relating to biosecurity in accordance with part 147 of this subchapter, risk evaluations in conjunction with the primary breeder industry (including disease surveillance such as VS Form 9–4, “Summary of Breeding Flock Participation”), and diagnostic capability summaries and systems for initial State response and containment plans in accordance with § 56.10 of this chapter; and
(vii) Publicizing and sharing compartment information with international trading partners, upon request, to establish approval and recognition of the compartment, including timeliness and accuracy of disease reporting and surveillance measures as described in §§ 145.15 and 145.73(f).
(4)
(b) [Reserved]
(b) Hatching eggs produced by primary breeding flocks should be nest clean. They may be fumigated in accordance with part 147 of this subchapter or otherwise sanitized.
The revisions read as follows:
(e) * * *
(1) A flock and the hatching eggs and chicks produced from it shall be eligible for this classification if they meet the following requirements, as determined by the Official State Agency:
(i) The flock originated from a U.S. S. Enteritidis Clean flock, or one of the following samples has been examined bacteriologically for
(A) A sample of chick papers, hatcher tray swabs, or fluff collected and cultured in accordance with part 147 of this subchapter; and
(B) Samples of intestinal and liver or spleen tissues from a minimum of 30 chicks that died within 7 days after hatching and have been preserved daily by freezing prior to shipment to an authorized laboratory.
(ii) The flock is maintained in compliance with isolation, sanitation, and management procedures for Salmonella in accordance with part 147 of this subchapter.
(iii) Environmental samples are collected from the flock by or under the supervision of an Authorized Agent, in accordance with part 147 of this subchapter, when the flock reaches 4 months of age and every 30 days thereafter. Once the flock is in egg production and chicks are hatching from it, the samples must include at least 4 individual test assay results every 30 days in flocks of more than 500 birds or 2 individual assays per month in flocks of 500 birds or fewer. One of these results must come from samples collected from hatched chicks at a participating hatchery derived from said flock. These individual test assays may be derived from pooled samples from the farm or hatchery in accordance with part 147 of this subchapter, but must be run as separate test assays in the laboratory. The environmental samples shall be examined bacteriologically for group D Salmonella at an authorized laboratory, and cultures from group D positive samples shall be serotyped.
(iv) Blood samples from 300 birds from the flock are officially tested with pullorum antigen when the flock is at least 4 months of age. All birds with positive or inconclusive reactions, up to a maximum of 25 birds, shall be submitted to an authorized laboratory and examined for the presence of group D Salmonella in accordance with part 147 of this subchapter. Cultures from group D positive samples shall be serotyped.
(v) Hatching eggs produced by the flock are collected as quickly as possible and their sanitation is maintained in accordance with part 147 of this subchapter.
(vi) Hatching eggs produced by the flock are incubated in a hatchery whose sanitation is maintained in accordance with part 147 of this subchapter, and the hatchery must have been sanitized either by a procedure approved by the Official State Agency or by fumigation in accordance with part 147 of this subchapter.
(3) If SE is isolated from an environmental sample collected from the flock in accordance with paragraph (e)(1)(iii) of this section, an additional environmental sampling and 25 live cull birds or fresh dead birds (if present), or other randomly selected live birds if fewer than 25 culls can be found in the flock, must be bacteriologically examined for SE in accordance with part 147 of this subchapter. If only 1 bird from the 25-bird sample is found positive for SE., the participant may request bacteriological examination of a second 25-bird sample from the flock. In addition, if the flock with the SE isolation is in egg production and eggs are under incubation, the next four consecutive hatches shall be examined bacteriologically in accordance with part 147 of this subchapter. Samples shall be collected from all of the hatching unit's chick trays and basket trays of hatching eggs, or from all chick box papers from the flock, and tested, pooling the samples into a minimum of 10 separate assays. Any followup hatchery-positive SE isolations shall result in discontinuation of subsequent
(f) * * *
(1) * * *
(iv) Chicks shall be hatched in a hatchery whose sanitation is maintained in accordance with part 147 of this subchapter and sanitized or fumigated in accordance with part 147 of this subchapter.
(2) The Official State Agency may monitor the effectiveness of the sanitation practices in accordance with part 147 of this subchapter.
(a)
(1)
(i)
(ii)
(iii)
(A) The physical and spatial factors that separate the compartment from surrounding bird populations and affect the biosecurity status of the compartment.
(B) Relevant environmental factors that may affect exposure of the birds to AI.
(C) The functional boundary and fencing that are used to control access to the compartment.
(D) Facilities and procedures to prevent access by wild birds and to provide separation from other relevant hosts.
(E) The relevant infrastructural factors that may affect exposure to AI, including the construction and design of buildings or physical components, cleaning and disinfection of buildings and physical components between production groups with quality assurance verification, cleaning and disinfection of equipment, and introduction of equipment or material into the compartment.
(iv)
(A) Requirements that company employees and contract growers limit their contact with live birds outside the compartment.
(B) An education and training program for company employees and contractors.
(C) Standard operating procedures for company employees, contractors, and outside maintenance personnel.
(D) Requirements for company employees and non-company personnel who visit any premises within the compartment.
(E) Company veterinary infrastructure to ensure flock monitoring and disease diagnosis and control measures.
(F) Policies for management of vehicles and equipment used within the compartment to connect the various premises.
(G) Farm site requirements (location, layout, and construction).
(H) Pest management program.
(I) Cleaning and disinfection process.
(J) Requirements for litter and dead bird removal and/or disposal.
(v)
(vi)
(2)
(ii) Veterinary staff from the Official State Agency and NPIP staff will work in partnership with licensed, accredited veterinarians to train and certify auditors through Service-approved workshops. The trained auditors will conduct biosecurity and operational audits at least once every 2 years to ensure the integrity of the compartment. These audits will include evaluation of the critical control points and standard operating practices within the compartment, verification of the health status of the flock(s) contained within the compartment, and examination of the biosecurity and management system of the integrated components of the compartment.
(iii) In addition, the company must demonstrate compliance with paragraph (a)(1) of this section for remaining in the U.S. Avian Influenza Clean classification, surveillance for NAI within the compartment, and conducting tests in State or Federal laboratories or in NPIP authorized laboratories. Accredited veterinarians are responsible for the enforcement of active and passive surveillance of NAI in primary breeder flocks. Baseline health status must be maintained for all flocks or subpopulations within the compartment, indicating the dates and negative results of all avian influenza surveillance and monitoring testing, the dates and history of last disease occurrence (if any), the number of outbreaks, and the methods of disease control that were applied.
(iv) Documentation will be maintained in the company's database and will be verified as required by the Service and/or the Official State Agency.
(3)
(i) Oversight of the establishment and management of compartments;
(ii) Establishment of effective partnerships between the Service, the Plan, and the primary breeder industry;
(iii) Approval or denial of classification of compartments as U.S. Avian Influenza Clean Compartments under paragraph (a)(1) of this section;
(iv) Official certification of the health status of the compartment, and commodities that may be traded from it through participation in the Plan for avian diseases, including the U.S. Avian Influenza Clean program as described in § 145.83(g) and diagnostic surveillance for H5/H7 low pathogenicity AI as described in § 145.15;
(v) Conducting audits of compartments at least once every 2 years to:
(A) Confirm that the primary breeding company's establishments are epidemiologically distinct and pathways for the introduction of disease into the compartment are closed through routine operational procedures; and
(B) Evaluate and assess the management and husbandry practices relating to biosecurity to determine whether they are in compliance with hygiene and biosecurity procedures for poultry primary breeding flocks and hatcheries in accordance with part 147 of this subchapter;
(vi) Providing, upon request, model plans for management and husbandry practices relating to biosecurity in accordance with part 147 of this subchapter, risk evaluations in conjunction with the primary breeder industry (including disease surveillance such as VS Form 9–4, “Summary of Breeding Flock Participation”), and diagnostic capability summaries and systems for initial State response and containment plans in accordance with § 56.10 of this chapter; and
(vii) Publicizing and sharing compartment information with international trading partners, upon request, to establish approval and recognition of the compartment, including timeliness and accuracy of disease reporting and surveillance measures as described in §§ 145.15 and 145.83(g).
(4)
(b) [Reserved]
The revision and addition read as follows:
(c) * * *
(3) A sample of at least 30 birds must be tested and found negative to H5/H7 avian influenza within 21 days prior to movement to slaughter.
(d)
(1) A flock and the hatching eggs and day-old waterfowl produced from it must meet the following requirements, as determined by the Official State Agency, to be eligible for this classification:
(i) The flock is maintained in compliance with isolation, sanitation, and management procedures for Salmonella in accordance with part 147 of this subchapter.
(ii) If feed contains animal protein, the protein products must have been heated throughout to a minimum temperature of 190 °F or above, or to a minimum temperature of 165 °F for at least 20 minutes, or to a minimum temperature of 184 °F under 70 lbs. pressure during the manufacturing process.
(iii) Feed shall be stored and transported in a manner that prevents contamination.
(iv) Waterfowl shall be hatched in a hatchery whose sanitation is maintained in accordance with part 147 of this subchapter and sanitized or fumigated in accordance with part 147 of this subchapter.
(v) An Authorized Agent shall take environmental samples from the hatchery every 30 days, i.e., meconium or box liner paper. An authorized laboratory for Salmonella shall examine the samples bacteriologically.
(vi) An Authorized Agent shall take environmental samples in accordance with part 147 of this subchapter from each flock at 4 months of age and every 30 days thereafter. An authorized laboratory for Salmonella shall examine the environmental samples bacteriologically.
(vii) Flocks may be vaccinated with a paratyphoid vaccine:
(2) The Official State Agency may monitor the effectiveness of the egg sanitation practices in accordance with part 147 of this subchapter.
(3) To claim products are of this classification, all products shall be derived from a hatchery and flock that meet the requirements of the classification.
(4) This classification may be revoked by the Official State Agency if the participant fails to follow recommended corrective measures.
7 U.S.C. 8301–8317; 7 CFR 2.22, 2.80, and 371.4.
The revision reads as follows:
The revisions read as follows:
(b) * * *
(1) * * *
(ii) * * *
(C) The AGID test for avian influenza must be conducted in accordance with part 147 of this subchapter. The test can be conducted on egg yolk or blood samples. The AGID test is not recommended for use in waterfowl.
(2) * * *
(ii) * * *
(B) Chicken and turkey flocks that test positive on the ACIA must be retested using the RRT–PCR or virus isolation. Positive results from the RRT–PCR or virus isolation must be further tested by Federal Reference Laboratories using appropriate tests for confirmation. Final judgment may be based upon further sampling and appropriate tests for confirmation.
(a)
(2)
(c) If spent fowl are slaughtered at meat-type chicken slaughter plants that participate in the Plan, they may participate in the Plan through the provisions of this subpart C.
(a) * * *
(1) It is a meat-type turkey slaughter plant that accepts only meat-type turkeys from flocks where a minimum of 6 samples per flock have been collected no more than 21 days prior to movement to slaughter and tested negative with an approved test for type A avian influenza, as provided in § 146.13(b). It is recommended that samples be collected from flocks over 10 weeks of age with respiratory signs such as coughing, sneezing, snicking, sinusitis, or rales; depression; or decreases in food or water intake.
7 U.S.C. 8301–8317; 7 CFR 2.22, 2.80, and 371.4.
Blood testing must be conducted in a manner approved by the Administrator. Approved blood testing procedures are listed in the NPIP Program Standards, as defined in § 147.51. Blood testing procedures may also be approved by the Administrator in accordance with § 147.53(d)(1).
(Approved by the Office of Management and Budget under control number 0579–0007)
Bacteriological examination must be conducted in a manner approved by the Administrator. Approved bacteriological examination procedures are listed in the NPIP Program Standards, as defined in § 147.51. Bacteriological examination procedures may also be approved by the Administrator in accordance with § 147.53(d)(1).
Sanitation must be maintained in a manner approved by the Administrator. Approved procedures for maintaining sanitation are listed in the NPIP Program Standards, as defined in
(Approved by the Office of Management and Budget under control number 0579–0007)
Molecular examination must be conducted in a manner approved by the Administrator. Approved molecular examination procedures are listed in the NPIP Program Standards, as defined in § 147.51. Molecular examination procedures may also be approved by the Administrator in accordance with § 147.53(d)(1).
The following definitions apply in this subpart:
These minimum requirements are intended to be the basis on which an authorized laboratory of the Plan can be evaluated to ensure that official Plan assays are performed in accordance with the NPIP Program Standards or other procedures approved by the Administrator in accordance with § 147.53(d)(1) and reported as described in paragraph (f) of this section. A satisfactory evaluation will result in the laboratory being recognized by the NPIP office of the Service as an authorized laboratory qualified to perform the assays provided for in this part.
(a)
(b)
(c)
(d)
(e)
(f)
(2)
(g)
(a)(1) All tests that are used to qualify flocks for NPIP classifications must be approved by the Administrator as effective and accurate at determining whether a disease is present in a poultry flock or in the environment.
(2) All sanitation procedures performed as part of qualifying for an NPIP classification must be approved by the Administrator as effective at reducing the risk of incidence of disease in a poultry flock or hatchery.
(b) Tests and sanitation procedures that have been approved by the Administrator may be found in the NPIP Program Standards. In addition, all tests that use veterinary biologics (e.g., antiserum and other products of biological origin) that are licensed or produced by the Service and used as described in the NPIP Program Standards are approved for use in the NPIP.
(c) New tests and sanitation procedures, or changes to existing tests and sanitation procedures, that have been approved by the NPIP in accordance with the process described in subpart E of this part are subject to approval by the Administrator. NPIP participants may submit new tests and sanitation procedures, or changes to current tests and sanitation procedures, through that process.
(d)(1) Persons who wish to have a test approved by the Administrator as effective and accurate at determining whether a disease is present in a flock or in the environment may apply for approval by submitting the test, along with any supporting information and data, to the National Poultry Improvement Plan, APHIS, USDA, 1506 Klondike Road, Suite 101, Conyers, GA 30094. Upon receipt of such an application, the NPIP Technical Committee will review the test and any supporting information and data supplied with the application. If the NPIP Technical Committee determines the test to be of potential general use, the test will be submitted for consideration by the General Conference Committee of the NPIP in accordance with subpart E of this part, and the Administrator will respond with approval or denial of the test.
(2) Persons who wish to have a sanitation procedure approved by the Administrator as effective at reducing the risk of incidence of disease in a poultry flock or hatchery may apply for approval by submitting the sanitation procedure, along with any supporting information and data, to the National Poultry Improvement Plan, APHIS, USDA, 1506 Klondike Road, Suite 101, Conyers, GA 30094. Upon receipt of such an application, the NPIP Technical Committee will review the sanitation procedure and any supporting information and data supplied with the application. If the NPIP Technical Committee determines the sanitation procedure to be of potential general use, the sanitation procedure will be submitted for consideration by the General Conference Committee of the NPIP in accordance with subpart E of this part, and the Administrator will respond with approval or denial of the test.
(e)(1) When the Administrator approves a new test or sanitation procedure or a change to an existing test or sanitation procedure, APHIS will publish a notice in the
(2)(i) After the close of the public comment period, APHIS will publish a notice in the
(A) No comments were received on the notice;
(B) The comments on the notice supported the action described in the notice; or
(C) The comments on the notice were evaluated but did not change the Administrator's determination that approval of the test or sanitation procedure is appropriate based on the standards in paragraph (a) of this section.
(ii) If comments indicate that changes should be made to the test or sanitation procedure as it was made available in the initial notice, APHIS will publish a notice in the
(iii) Whenever APHIS adds or makes changes to tests or sanitation
(iv) If comments present information that causes the Administrator to determine that approval of the test or sanitation procedure would not be appropriate, APHIS will publish a notice informing the public of this determination after the close of the comment period.
Diagnostic test kits that are not licensed by the Service (e.g., bacteriological culturing kits) may be approved through the following procedure:
(a) The sensitivity of the kit will be estimated in at least three authorized laboratories selected by the Service by testing known positive samples, as determined by the official NPIP procedures found in the NPIP Program Standards or through other procedures approved by the Administrator. If certain conditions or interfering substances are known to affect the performance of the kit, appropriate samples will be included so that the magnitude and significance of the effect(s) can be evaluated.
(b) The specificity of the kit will be estimated in at least three authorized laboratories selected by the Service by testing known negative samples, as determined by tests conducted in accordance with the NPIP Program Standards or other procedures approved by the Administrator in accordance with § 147.53(d)(1). If certain conditions or interfering substances are known to affect the performance of the kit, appropriate samples will be included so that the magnitude and significance of the effect(s) can be evaluated.
(c) The kit will be provided to the cooperating laboratories in its final form and include the instructions for use. The cooperating laboratories must perform the assay exactly as stated in the supplied instructions. Each laboratory must test a panel of at least 25 known positive clinical samples supplied by the manufacturer of the test kit. In addition, each laboratory will be asked to test 50 known negative clinical samples obtained from several sources, to provide a representative sampling of the general population. The identity of the samples must be coded so that the cooperating laboratories are blinded to identity and classification. Each sample must be provided in duplicate or triplicate, so that error and repeatability data may be generated.
(d) Cooperating laboratories will submit to the kit manufacturer all raw data regarding the assay response. Each sample tested will be reported as positive or negative, and the official NPIP procedure used to classify the sample must be submitted in addition to the assay response value.
(e) The findings of the cooperating laboratories will be evaluated by the NPIP Technical Committee, and the Technical Committee will make a recommendation regarding whether to approve the test kit to the General Conference Committee. If the Technical Committee recommends approval, the final approval will be granted in accordance with the procedures described in §§ 147.46 and 147.47.
(f) Diagnostic test kits that are not licensed by the Service (e.g., bacteriological culturing kits) and that have been approved for use in the NPIP in accordance with this section are listed in the NPIP Program Standards.
Nuclear Regulatory Commission.
Correcting amendments.
The U.S. Regulatory Commission (NRC) published a final rule in the
This rule is effective on July 9, 2014.
Please refer to Docket ID NRC–2013–0072 when contacting the NRC about the availability of information for this final rule. You may obtain publicly-available information related to this final rule by any of the following methods:
• Federal Rulemaking Web site: Go to
• NRC's Agencywide Documents Access and Management System (ADAMS): You may obtain publicly-available documents online in the ADAMS Public Documents collection at
• NRC's PDR: You may examine and purchase copies of public documents at the NRC's PDR, Room O1–F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852.
Michael Purdie, Office of the Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington DC 20555–0001, telephone 301–415–0244, email:
The NRC published a final rule in the
Under the Administrative Procedure Act (5 U.S.C. 553(b)), an agency may waive the normal notice and comment requirements if it finds, for good cause, that they are impracticable, unnecessary, or contrary to the public interest. As authorized by 5 U.S.C. 553(b)(3)(B), the NRC finds good cause to waive notice and opportunity for comment on the amendments because they will have no substantive impact and are of a minor and administrative nature dealing with corrections to certain CFR sections related only to management, organization, procedure, and practice. Specifically, these amendments are to make a conforming change to the regulations to comply with a mandatory statutory requirement. These amendments do not require action by any person or entity regulated by the NRC. Also, this document does not change the substantive responsibilities of any person or entity regulated by the NRC. Furthermore, for the reasons stated, the NRC finds, in accordance with 5 U.S.C. 553(d)(3), that good cause exists to make this rule effective upon publication of this notice.
Criminal penalties, Extraordinary nuclear occurrence, Insurance, Intergovernmental relations, Nuclear materials, Nuclear power plants and reactors, Reporting and recordkeeping requirements.
For the reasons set out in the preamble and under the authority of the Atomic Energy Act of 1954, as amended; the Energy Reorganization Act of 1974, as amended; and 5 U.S.C. 552 and 553, the NRC is adopting the following correcting amendments to 10 CFR part 140.
Atomic Energy Act secs. 161, 170, 223, 234 (42 U.S.C. 2201, 2210, 2273, 2282); Energy Reorganization Act secs. 201, as amended, 202 (42 U.S.C. 5841, 5842); Government Paperwork Elimination Act sec. 1704 (44 U.S.C. 3504 note); Energy Policy Act of 2005, Pub. L. 109–58, 119 Stat. 594 (2005).
Each licensee required to have and maintain financial protection for each nuclear reactor as determined in § 140.11(a)(4) shall at the issuance of the license and annually, on the anniversary of the date on which the indemnity agreement is effective, provide evidence to the Commission that it maintains one of the following types of guarantee of payment of deferred premium in the amount specified in § 140.11(a)(4) for each reactor it is licensed to operate:
For the Nuclear Regulatory Commission.
Office of the Comptroller of the Currency, Treasury.
Final rule.
The Office of the Comptroller of the Currency (OCC) is adopting a final rule to increase assessments for national banks and Federal savings associations (FSAs) with assets of more than $40 billion. The increase will range between 0.32 percent and approximately 14 percent, depending on the total assets of the institution as reflected in its June 30, 2014, Consolidated Report of Condition and Income (Call Report). The average increase in assessments for affected banks and FSAs will be 12 percent. The final rule will not increase assessments for banks or FSAs with $40 billion or less in total assets. The OCC will implement the increase in assessments by issuing an amended Notice of Office of the Comptroller of the Currency Fees and Assessments (Notice of Fees), which will become effective as of the semiannual assessment due on September 30, 2014. In conjunction with the increase in assessments, the final rule updates the OCC's assessment rule to conform with section 318 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), which reaffirmed the authority of the Comptroller of the Currency (the Comptroller) to set the amount of, and methodology for, assessments. The final rule also makes technical and conforming changes to the assessment rule.
Effective August 8, 2014.
Gary Crane, Deputy Chief Financial Officer, Financial Management, (202) 649–5540, or Mitchell Plave, Special Counsel, or Henry Barkhausen, Attorney, Legislative and Regulatory Activities Division, (202) 649–5490, for persons who are deaf or hard of hearing, TTY, (202) 649–5597.
The National Bank Act
The OCC collects assessments from national banks and FSAs in accordance with 12 CFR part 8. Under part 8, the base assessment for banks and FSAs is calculated using a table with eleven categories, or brackets, each of which comprises a range of asset-size values. The assessment for each bank and FSA is the sum of a base amount, which is the same for every national bank and FSA in its asset-size bracket, plus a marginal amount, which is computed by applying a marginal assessment rate to the amount in excess of the lower boundary of the asset-size bracket.
The OCC's annual Notice of Fees sets forth the marginal assessment rates applicable to each asset-size bracket for
In recent years, marginal assessment rates for most national banks have been relatively stable.
The proposed increase in marginal assessment rates primarily reflects changes in the OCC's supervisory responsibilities arising out of the Dodd-Frank Act, which generally requires additional OCC supervisory resources for large banks and FSAs. The proposed increase for large banks and FSAs also reflects the fact the OCC did not raise marginal rates on the assets of large banks and FSAs in excess of $40 billion between 1995 and 2013.
The second commenter, a trade association for midsize banks, which the commenter defined as banks with between $10 billion and $50 billion in assets, agreed that the proposed increase in assessments focused appropriately on large banks and FSAs, but urged the OCC to make changes to the final rule. Specifically, the commenter suggested that the threshold for the increase in assessments be raised from $40 billion to $50 billion to avoid raising assessments for banks the commenter considers midsize. The commenter also suggested that the OCC consider alternative metrics for assessments, such as the complexity of a bank or FSA's operations, and the costs of regulatory compliance, particularly with the Dodd-Frank Act, as a percentage of a bank's ROA. The OCC will consider whether these alternative metrics would be appropriate components of the assessment structure in future reviews of the assessment system.
The final rule retains the $40 billion threshold for the assessment increase for several reasons. First, banks and FSAs with more than $40 billion in assets typically have complex banking operations and therefore require significant supervisory resources.
The final rule adopts the proposed increase to marginal rates without change. Under the final rule, marginal assessment rates for national banks and FSAs with assets of more than $40 billion will increase by 14.5 percent and will be effective for the assessment due on September 30, 2014. Marginal rates for banks and FSAs with $40 billion or less in assets will remain the same as set out in the 2014 Notice of Fees, published on December 12, 2013. The final rule continues the OCC's present assessment methodology and does not change the asset bracket table in 12 CFR 8.2(a). The revised marginal rates for national banks and FSAs with over $40 billion in assets are reflected in the following table:
The final rule amends 12 CFR part 8 to make it consistent with the proposal to increase the marginal assessment rates. Specifically, the final rule revises 12 CFR 8.2(a)(4) to recognize that the OCC may increase the marginal rates in amounts that exceed the rate of inflation, as under the current proposal. In addition, the final rule revises 12 CFR 8.2 to reflect section 318 of the Dodd-Frank Act, which reaffirmed the Comptroller's broad discretion to set assessments and to determine the assessment methodology. The final rule also updates 12 CFR 8.8 to make a technical change to reflect the current title of the notice of fees.
Under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501–3520), the OCC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid Office of Management and Budget (OMB) control number. This final rule amends part 8, which has an approved information collection under the PRA (OMB Control No. 1557–0223). The final rule does not introduce any new collections of information, nor does it amend part 8 in a way that modifies the collection of information that OMB has approved. Therefore, no PRA submission to OMB is required.
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601
As of December 31, 2013, the OCC supervised 1,741 banks (1,135 commercial banks, 66 trust companies, 492 Federal savings associations, and 48 branches or agencies of foreign banks). Approximately 1,231 of OCC-supervised institutions are small entities based on the SBA's definition of small entities for RFA purposes. As discussed in the
The OCC has analyzed the final rule under the factors in the Unfunded Mandates Reform Act of 1995 (UMRA) (2 U.S.C. 1532). Under this analysis, the OCC considered whether the final rule includes a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year (adjusted annually for inflation). The OCC has determined that this final rule will not result in expenditures by State, local, and tribal governments, or the private sector, of $100 million or more in any one year. Accordingly, this final rule is not subject to section 202 of the Unfunded Mandates Act.
Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 U.S.C.
The OCC finds there is good cause for this final rule to become effective before the first day of a calendar quarter. The basis for this finding is that the final rule does not impose any new reporting or disclosure burdens on banks and FSAs. While certain banks and FSAs will pay a higher assessment, the additional assessment does not require any changes to systems or procedures. For these reasons, the final rule will become effective on August 8, 2014.
Assessments, National banks, Savings associations, Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, the OCC amends 12 CFR part 8 as follows:
12 U.S.C. 16, 93a, 481, 482, 1467, 1831c, 1867, 3102, 3108, and 5412(b)(1)(B); and 15 U.S.C. 78c and 78
(a) Each national bank and each Federal savings association shall pay to the Comptroller of the Currency a semiannual assessment fee, due by March 31 and September 30 of each year, for the six-month period beginning on January 1 and July 1 before each payment date. The Comptroller of the Currency will calculate the amount due under this section and provide a notice of assessments to each national bank and each Federal savings association no later than 7 business days prior to collection on March 31 and September 30 of each year. In setting assessments, the Comptroller of the Currency may take into account the nature and scope of the activities of a national bank or Federal savings association, the amount and type of assets that the entity holds, the financial and managerial condition of the entity, and any other factor the Comptroller of the Currency determines is appropriate, as provided by 12 U.S.C. 16. The semiannual assessment will be calculated as follows:
(4) Each year, the OCC may index the marginal rates in Column D to adjust for the percent change in the level of prices, as measured by changes in the Gross Domestic Product Implicit Price Deflator (GDPIPD) for each June-to-June period. The OCC may at its discretion adjust marginal rates by amounts other than the percentage change in the GDPIPD. The OCC will also adjust the amounts in Column C to reflect any change made to the marginal rate.
(a)
(b)
Federal Aviation Administration (FAA), DOT.
Final rule.
This action amends the description of Area C and Area O of the Salt Lake City Class B airspace area by raising the floor of a small portion of Class B airspace between the Salt Lake City Class B surface area and the Hill Air Force Base (AFB) Class D airspace area. This action raises the Class B airspace floor in the northeast corner of Area C from 6,000 feet mean seal level (MSL) to 7,500 feet MSL, and redefines the new boundary segment using the power lines underlying the area. This action enhances the safety and flow of Visual Flight Rules (VFR) aircraft transitioning north and south through the Salt Lake Valley over Interstate 15.
Colby Abbott, Airspace Policy and Regulations Group, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: (202) 267–8783.
On December 19, 2013, the FAA published in the
The FAA is amending Title 14 of the Code of Federal Regulations (14 CFR) part 71 by modifying the Salt Lake City Class B airspace area. This action raises the floor of a portion of Class B airspace in the northeast corner of Area C from 6,000 feet MSL to 7,500 feet MSL. The portion of Class B airspace raised lies northeast of the power lines running northwest and southeast under Area C and is incorporated into the description of Area O, which has a 7,500 foot MSL Class B airspace floor. The power lines under Area C are used to visually define the new shared boundary between Area C and Area O in that area. These modifications enhance the safety and flow of VFR aircraft transitioning north and south in the Salt Lake Valley by following I–15, while continuing to support containment of large turbine-
The Salt Lake City Class B airspace Areas A, B, and D through N subareas are unchanged. The modifications to the Salt Lake City Class B airspace Area C and Area O subareas are outlined below.
All radials listed in this Salt Lake City Class B airspace area modification are stated in degrees relative to True North. All geographic coordinates are stated in degrees, minutes, and seconds based on North American Datum 83.
Implementation of the modification to the Salt Lake City Class B airspace area continues to ensure containment of large turbine-powered aircraft within Class B airspace as required by FAA directive. Additionally, this action allows VFR aircraft to transition east/west, north of the Salt Lake City Class B surface area, and north/south, to and from Salt Lake City Airport, using I–15 as an easily identifiable visual landmark outside of Class B airspace below 7,500 feet MSL. This modification enhances the safety and efficient management of aircraft operations in the Salt Lake City, UT, terminal area.
Class B airspace areas are published in paragraph 3000 of FAA Order 7400.9X, Airspace Designations and Reporting Points, dated August 7, 2013, and effective September 15, 2013, which is incorporated by reference in 14 CFR 71.1. The Class B airspace area listed in this document will be published subsequently in the Order.
Changes to Federal regulations must undergo several economic analyses. First, Executive Order 12866 and Executive Order 13563 direct that each Federal agency shall propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs. Second, the Regulatory Flexibility Act of 1980 (Pub. L. 96–354) requires agencies to analyze the economic impact of regulatory changes on small entities. Third, the Trade Agreements Act (Pub. L. 96–39) prohibits agencies from setting standards that create unnecessary obstacles to the foreign commerce of the United States. In developing U.S. standards, the Trade Act requires agencies to consider international standards and, where appropriate, that they be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) requires agencies to prepare a written assessment of the costs, benefits, and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local, or tribal governments, in the aggregate, or by the private sector, of $100 million or more annually (adjusted for inflation with base year of 1995). This portion of the preamble summarizes the FAA's analysis of the economic impacts of this proposed rule.
Department of Transportation Order DOT 2100.5 prescribes policies and procedures for simplification, analysis, and review of regulations. If the expected cost impact is so minimal that a proposed or final rule does not warrant a full evaluation, this order permits that a statement to that effect and the basis for it to be included in the preamble if a full regulatory evaluation of the cost and benefits is not prepared. Such a determination has been made for this final rule. The reasoning for this determination follows:
This final rule has the following benefits.
This final rule will improve the flow of air traffic, enhance safety, and reduce the potential for midair collision in the Salt Lake City Class B airspace.
Implementation of the modification to the Salt Lake City Class B airspace area will continue to ensure containment of large turbine-powered aircraft within Class B airspace as required by FAA directive. Additionally, this action will allow VFR aircraft to transition east/west, north of the Salt Lake City Class B surface area, and north/south, to and from Salt Lake City Airport, using I–15 as an easily identifiable visual landmark outside of Class B airspace below 7,500 feet MSL. This modification will enhance the safety and efficient management of aircraft operations in the Salt Lake City, UT terminal area.
The FAA stated in the notice of proposed rulemaking the FAA belief that this final rule will result in minimal costs. We received no comments regarding this determination and therefore accept that this rule will result in minimal costs.
The FAA has, therefore, determined that this final rule is not a “significant regulatory action” as defined in section 3(f) of Executive Order 12866, and is not “significant” as defined in DOT's Regulatory Policies and Procedures.
The Regulatory Flexibility Act of 1980 (Pub. L. 96–354) (RFA) establishes “as a principle of regulatory issuance that agencies shall endeavor, consistent with the objectives of the rule and of applicable statutes, to fit regulatory and informational requirements to the scale of the businesses, organizations, and governmental jurisdictions subject to regulation.” To achieve this principle, agencies are required to solicit and consider flexible regulatory proposals and to explain the rationale for their actions to assure that such proposals are given serious consideration.” The RFA covers a wide-range of small entities, including small businesses, not-for-profit organizations, and small governmental jurisdictions.
Agencies must perform a review to determine whether a rule will have a significant economic impact on a substantial number of small entities. If the agency determines that it will, the agency must prepare a regulatory flexibility analysis as described in the RFA.
However, if an agency determines that a rule is not expected to have a significant economic impact on a substantial number of small entities, section 605(b) of the RFA provides that the head of the agency may so certify and a regulatory flexibility analysis is not required. The certification must include a statement providing the factual basis for this determination, and the reasoning should be clear.
The FAA believes the rule will not have a significant economic impact on a substantial number of small entities as the economic impact is expected to be minimal. We received no comments regarding this determination in the notice of proposed rulemaking. As a
If an agency determines that a rulemaking will not result in a significant economic impact on a substantial number of small entities, the head of the agency may so certify under section 605(b) of the RFA. Therefore, as provided in section 605(b), the head of the FAA certifies that this rulemaking will not result in a significant economic impact on a substantial number of small entities.
The Trade Agreements Act of 1979 (Pub. L. 96–39), as amended by the Uruguay Round Agreements Act (Pub. L. 103–465), prohibits Federal agencies from establishing standards or engaging in related activities that create unnecessary obstacles to the foreign commerce of the United States. Pursuant to these Acts, the establishment of standards is not considered an unnecessary obstacle to the foreign commerce of the United States, so long as the standard has a legitimate domestic objective, such as the protection of safety, and does not operate in a manner that excludes imports that meet this objective. The statute also requires consideration of international standards and, where appropriate, that they be the basis for U.S. standards.
The FAA has assessed the potential effect of this final rule and determined that it will enhance safety and will not be considered an unnecessary obstacle to trade.
Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4) requires each Federal agency to prepare a written statement assessing the effects of any Federal mandate in a proposed or final agency rule that may result in an expenditure of $100 million or more (in 1995 dollars) in any one year by State, local, and tribal governments, in the aggregate, or by the private sector; such a mandate is deemed to be a “significant regulatory action.” The FAA currently uses an inflation-adjusted value of $151 million in lieu of $100 million.
This final rule does not contain such a mandate; therefore, the requirements of Title II of the Act do not apply.
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with FAA Order 1050.1E, “Environmental Impacts: Policies and Procedures,” paragraph 311a. This airspace action is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exist that warrant preparation of an environmental assessment.
Airspace, Incorporation by reference, Navigation (air).
In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 71 as follows:
49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p.389.
By removing the current descriptions of Area C and Area O, and adding in its place:
Federal Aviation Administration (FAA), DOT.
Final rule; technical amendment.
This action amends the time of designation for restricted area R–3002G at Fort Benning, GA, by removing the words “local time” and adding the words “Eastern time” to the published time of designation. The majority of the R–3002 complex (i.e., R–3002A through F) lies within the Eastern time zone. However, R–3002G is a small segment that is in the Central time zone. Since the Eastern time zone is predominant and is used for scheduling activities in the entire complex, the time of
Effective date 0901 UTC, September 18, 2014.
Paul Gallant, Airspace Policy and Regulations Group, AJV–11, Office of Airspace Services, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone: (202) 267–8783.
The Fort Benning, GA, restricted area complex consists of seven subareas designated R–3002A through G. Restricted areas R–3002A through F lie within the Eastern time zone, while R–3002G is a small segment that lies within the Central time zone. Normally, the times listed in the “time of designation” for a restricted area include the qualifier “local time” in the description. However, when a complex overlaps more than one time zone, the predominant time zone is specified in the time of designation for the lesser subarea even though that area extends into an adjacent time zone. In this case, all R–3002 subareas, except area G, lie within the Eastern time zone and the using agency schedules activation of the entire area based on Eastern time. Therefore, to avoid possible confusion, “Eastern time” is being added to the time of designation for R–3002G.
This action amends Title 14 Code of Federal Regulations (14 CFR) part 73 by removing the words “local time” from the time of designation for restricted area R–3002G, Fort Benning, GA, and inserting the words “Eastern time.” Since all R–3002 subareas, except area G, lie within the Eastern time zone, the Eastern time zone is predominant and is used for scheduling the activation of all subareas (A through G).
Because this amendment is simply an editorial change that does not affect the boundaries, designated altitudes, or activities conducted within the restricted area, notice and public procedure under 5 U.S.C. 553(b) are unnecessary.
The FAA has determined that this action only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. Therefore, this regulation: (1) Is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. Since this is a routine matter that only affects air traffic procedures and air navigation, it is certified that this rule, when promulgated, does not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
The FAA has determined that this action qualifies for categorical exclusion under the National Environmental Policy Act in accordance with 311d., FAA Order 1050.1E, Environmental Impacts: Policies and Procedures. This airspace action is an administrative change to the description of restricted area R–3002G to clarify the time zone used in scheduling activation of the airspace. It does not alter the dimensions, altitudes, or activities conducted within the airspace; therefore, it is not expected to cause any potentially significant environmental impacts, and no extraordinary circumstances exists that warrant preparation of an environmental assessment.
Airspace, Prohibited areas, Restricted areas.
In consideration of the foregoing, the Federal Aviation Administration amends 14 CFR part 73, as follows:
49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR, 1959–1963 Comp., p. 389.
By removing the current time of designation and adding the following:
Coast Guard, DHS.
Notice of enforcement of regulation.
The Coast Guard will enforce various special local regulations for annual regattas and marine parades in the Captain of the Port Detroit zone from 9 a.m. on June 27, 2014 through 6 p.m. on August 10, 2014. Enforcement of these regulations is necessary and intended to ensure safety of life on the navigable waters immediately prior to, during, and immediately after these regattas or marine parades. During the aforementioned period, the Coast Guard will enforce restrictions upon, and control movement of vessels in a specified area immediately prior to, during, and immediately after regattas or marine parades.
The regulations in 33 CFR 100.914, 100.915, 100.918, 100.919, and 100.920 will be enforced at dates and times specified in this document from June 27, 2014, through August 10, 2014.
If you have questions on this document, call or email LT Adrian Palomeque, Prevention Department, U.S. Coast Guard Sector Detroit, 110 Mount Elliot Ave., Detroit, MI 48207; telephone (313) 568–9508, email
The Coast Guard will enforce the following special local regulations listed in 33 CFR Part 100, Safety of Life on Navigable Waters, on the following dates and times, which are listed in chronological order:
(1)
This special local regulation will be enforced from 9 a.m. to 6 p.m. on June 27, 28, and 29, 2014. A regulated area is established to include all waters of the Saginaw River bounded on the north by the Liberty Bridge, located at 43°36.3′ N, 083°53.4′ W, and bounded on the south by the Veterans Memorial Bridge, located at 43°35.8′ N, 083°53.6′ W.
(2)
This special local regulation will be enforced from 6 p.m. to 6:45 p.m. on
(3)
This special local regulation will be enforced from 7 a.m. to 7 p.m. on July 11, 12, and 13, 2014. A regulated area is established to include all waters of the Detroit River, Belle Isle, Michigan, bound on the west by the Belle Isle Bridge (position 42°20′20″ N, 083°00′00″ W to 42°20′24″ N, 083°59′45″ W), and on the east by a north-south line drawn through Waterworks Intake Crib Light (Light List Number 8350; position 42°21′06″ N, 082°58′00″ W).
(4)
This special local regulation will be enforced from 8 a.m. to 8 p.m. on July 18, 19, and 20, 2014. The regulated area is established to include all waters of the Detroit River, Trenton, Michigan, bounded by an east/west line beginning at a point of land at the northern end of Elizabeth Park in Trenton, MI, located at position 42°8.2′ N; 083°10.6′ W, extending east to a point near the center of the Trenton Channel located at position 42°8.2′ N; 083°10.4′ W, extending south along a north/south line to a point at the Grosse Ile Parkway Bridge located at position 42°7.7′ N; 083°10.5′ W, extending west along a line bordering the Grosse Ile Parkway Bridge to a point on land located at position 42°7.7′ N; 083°10.7′ W, and along the shoreline to the point of origin. This area is in the Trenton Channel between Trenton and Grosse Isle, MI.
(5)
This special local regulation will be enforced from 10 a.m. to 6 p.m. on August 8, 9, and 10, 2014. A regulated area is established to include all waters of the St. Clair River, St. Clair, Michigan, bounded by latitude 42°52′00″ N to the north; latitude 42°49′00″ N to the south; the shoreline of the St. Clair River on the west; and the international boundary line on the east.
These five special local regulation sections apply regulations in § 100.901. Entry into, transiting, or anchoring within these regulated areas is prohibited unless authorized by the Coast Guard patrol commander (PATCOM). The PATCOM may restrict vessel operation within the regulated area to vessels having particular operating characteristics.
Vessels permitted to enter this regulated area must operate at a no wake speed and in a manner that will not endanger race participants or any other craft.
The PATCOM may direct the anchoring, mooring, or movement of any vessel within this regulated area. A succession of sharp, short signals by whistle or horn from vessels patrolling the area under the direction of the PATCOM shall serve as a signal to stop. Vessels so signaled shall stop and shall comply with the orders of the PATCOM. Failure to do so may result in expulsion from the area, a Notice of Violation for failure to comply, or both.
If it is deemed necessary for the protection of life and property, the PATCOM may terminate at any time the marine event or the operation of any vessel within the regulated area.
In accordance with the general regulations in § 100.35, the Coast Guard will patrol the regatta area under the direction of a designated Coast Guard Patrol Commander (PATCOM). The PATCOM may be contacted on Channel 16 (156.8 MHz) by the call sign “Coast Guard Patrol Commander.”
The rules in § 100.901 do not apply to vessels participating in the event or to government vessels patrolling the regulated area in the performance of their assigned duties.
This document is issued under authority of 33 CFR 100.35 and 5 U.S.C. 552 (a). If the Captain of the Port determines that any of these special local regulations need not be enforced for the full duration stated in this document, he or she may suspend such enforcement and notify the public of the suspension via a Broadcast Notice to Mariners.
Coast Guard, DHS.
Temporary final rule.
The Coast Guard is establishing a temporary safety zone on the navigable waters of the Colorado River in Bullhead City, AZ in support of the 2014 Bullhead City River Regatta. This temporary safety zone is necessary to provide for the safety of the participants, crew, spectators, sponsor vessels, and other users of the waterway. Persons and vessels are prohibited from entering into, transiting through, or anchoring within this safety zone unless authorized by the Captain of the Port, or his designated representative.
This rule is effective from 6 a.m. to 6 p.m. on August 9, 2014.
Documents mentioned in this preamble are part of docket [USCG–2014–0359]. To view documents mentioned in this preamble as being available in the docket, go to
If you have questions on this rule, call or email Lieutenant Commander John Bannon, Waterways Management, U.S. Coast Guard Sector San Diego, Coast Guard; telephone 619–278–7261, email
The Coast Guard is issuing this temporary final rule after publishing an NPRM on May 20, 2014, that provided a 30 day public comment period. The Coast Guard received no comments on the NPRM for this rule, and as such, no changes have been made to the safety zone. This temporary safety zone is established to support an annual marine event listed in 33 CFR 100.1102, Table 1, item 16.
The legal basis and authorities for this rule are found in 33 U.S.C. 1231, 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Public Law 107–295, 116 Stat. 2064; and Department of Homeland Security Delegation No. 0170.1, which collectively authorize the Coast Guard to propose, establish, and define regulatory safety zones.
Bullhead City, AZ is sponsoring the 2014 annual River Regatta, a permitted Coast Guard marine event, held on the navigable waters of the Colorado River in Bullhead City, AZ.
The temporary safety zone established by this rule supports that marine event. This recurring marine event is listed in 33 CFR 100.1102, Table 1, item 16.
This temporary safety zone is necessary to provide for the safety of the participants, crew, spectators, sponsor vessels, and other users of the waterway throughout this popular annual event. This event involves participants floating down the river on inflatable rafts, inner tubes, and floating platforms as part of the organized marine event. The size and types of floats will vary. Approximately 25,000 people are expected to participate in this event. The sponsor will provide over 32 patrol and rescue boats to help facilitate the event, make certain participants are wearing personal floatation devices, and ensure overall public safety. As the participants conclude each section of the river, the COTP will disestablish the associated safety zone for that section of the river as soon as it is safe to do so.
The Coast Guard received 0 comments on the NPRM for this rule, and as such, no changes have been made to the final rule.
Because the safety zone is being established to help support Bullhead City officials with event safety and to ensure a safe area for this widely attended event, the safety zone is necessary for this one-day event. Although the Coast Guard did not receive any official comments on the rulemaking, prior to publishing the NPRM, on April 28, 2014, Coast Guard Sector San Diego did receive an email notice from the Nevada Department of Wildlife (NDOW) concerning the safety of the event. Although this comment was not submitted officially to the NPRM docket, it does warrant recognition as it relates to the safety of the event and the establishment of a temporary safety zone that will limit public access to the waterway. NDOW stated a concern about the inability of event sponsors to enforce life jacket usage throughout the river float. NDOW estimates that less than 20% of event participants wear a life jacket throughout the entire six mile event. The Coast Guard recognizes that the sponsor of the event has trouble enforcing this rule in shallow water that involves approximately 25,000 participants. This year, additional life guard staffing and law enforcement presence will address this concern, including removal of participants at appropriate times for failing to wear their life jackets. Wearing a life jacket is a condition of participation.
In addition, NDOW discussed the lack of a comprehensive event evacuation plan, specifically throughout the six mile river route that includes private property shoreline and inaccessible shoreline to roads and parks. Event organizers do, however, address this concern in the Bullhead City Police Department event Incident Action Plan (IAP). The IAP will account for extreme weather, such as lightning, that will call for either temporarily or completely halting the event and removing participants from the waterway as safely and efficiently as possible.
We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on these statutes and executive orders.
This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, as supplemented by Executive Order 13563, Improving Regulation and Regulatory Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of Executive Order 12866 or under section 1 of Executive Order 13563. The Office of Management and Budget has not reviewed it under those Orders. This determination is based on the size and location of the safety zone. The safety zone will encompass all navigable waters in the vicinity of Davis Camp to Rotary Park in Bullhead City, AZ. Vessels may transit through the safety zone during the specified times if they request and receive permission from the Captain of the Port or his designated representative, on a case by case basis. And, as soon as possible, the waterway will be reopened in phases as the event winds down.
The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601–612, as amended, requires federal agencies to consider the potential impact of regulations on small entities during rulemaking. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.
The Coast Guard received no comments from the Small Business Administration on this rule and the impact of a temporary one day closure of the portion of the Colorado River for this annual event. The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities. This rule will affect the following entities, some of which might be small entities: The owners or operators of private, commercial vessels or for hire vessels, intending to transit or anchor in a portion of the waters of the Colorado River between Davis Camp to Rotary Park in Bullhead City, Arizona from 6 a.m. to 6 p.m. on August 9, 2014. Because this is a popular annual event supported by neighboring municipalities from Arizona and Nevada with in-depth planning, very few small businesses are impacted.
This safety zone will not have a significant economic impact on a substantial number of small entities for the following reasons. Although the safety zone would apply to the entire width of the river, traffic would be allowed to pass through the zone with the permission of the Captain of the Port, or his designated representative. This popular annual event is advertised extensively in the area. Before the effective period, the Coast Guard will publish a Local Notice to Mariners. And, just prior to the event, the Coast Guard will notify on-water users of the restriction to the waterway. Furthermore, many personal watercraft businesses are able to rent their equipment to event sponsors for event support. And, alternate waterway use locations exist above and beyond the affected six mile portion of the Colorado River, as well as Lake Mohave, located immediately adjacent to the waterway. This event is the only event throughout the year that limits full use of the navigable waterway and it is well advertised.
Under section 213(a) of the Small Business Regulatory Enforcement
Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1–888–REG–FAIR (1–888–734–3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.
This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520).
A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government. We have analyzed this rule under that Order and determined that this rule does not have implications for federalism.
The Coast Guard respects the First Amendment rights of protesters. Protesters are asked to contact the person listed in the
The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531–1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.
This rule will not cause a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.
This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.
We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children.
This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.
This action is not a “significant energy action” under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use.
This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.
We have analyzed this rule under Department of Homeland Security Management Directive 023–01 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321–4370f), and have determined that this action is one of a category of actions that do not individually or cumulatively have a significant effect on the human environment. This rule involves establishment of a temporary safety zone on the navigable waters of the Colorado River. This rule is categorically excluded from further review under paragraph 34(g) of Figure 2–1 of the Commandant Instruction. An environmental analysis checklist supporting this determination and a Categorical Exclusion Determination are available in the docket where indicated under
Harbors, Marine safety, Navigation (water), Reporting and recordkeeping requirements, Security measures, Waterways.
For the reasons discussed in the preamble, the Coast Guard amends 33 CFR part 165 as follows:
33 U.S.C. 1231; 46 U.S.C. Chapter 701, 3306, 3703; 50 U.S.C. 191, 195; 33 CFR 1.05–1, 6.04–1, 6.04–6, and 160.5; Pub. L. 107–295, 116 Stat. 2064; Department of Homeland Security Delegation No. 0170.1
(a)
(b)
(c)
The following definition applies to this section:
(d)
(1) In accordance with general regulations in 33 CFR part 165, Subpart
(2) The safety zone is closed to all vessel traffic, except as may be permitted by the COTP or a designated representative.
(3) Mariners requesting permission to transit through the safety zone may request authorization to do so from the Captain of the Port designated representative.
(4) All persons and vessels shall comply with the instructions of the Coast Guard Captain of the Port or his designated representative.
(5) Upon being hailed by U.S. Coast Guard or designated patrol personnel by siren, radio, flashing light or other means, the operator of a vessel shall proceed as directed.
(6) The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in the patrol and notification of the regulation.
Office of Special Education and Rehabilitative Services, Department of Education.
Final priority.
The Assistant Secretary for Special Education and Rehabilitative Services announces a priority under the Disability and Rehabilitation Research Projects and Centers Program administered by the National Institute on Disability and Rehabilitation Research (NIDRR). Specifically, we announce a priority for a Rehabilitation Engineering Research Center (RERC) on Improving the Accessibility, Usability, and Performance of Technology for Individuals who are Deaf or Hard of Hearing. The Assistant Secretary may use this priority for competitions in fiscal year (FY) 2014 and later years. We take this action to focus research attention on an area of national need. We intend the priority to contribute to improving the accessibility, usability, and performance of technology for individuals who are deaf or hard of hearing.
Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue SW., Room 5142, Potomac Center Plaza (PCP), Washington, DC 20202–2700. Telephone: (202) 245–6211 or by email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
The purpose of NIDRR's RERCs program, which is funded through the Disability and Rehabilitation Research Projects and Centers Program, is to improve the effectiveness of services authorized under the Rehabilitation Act. It does so by conducting advanced engineering research, developing and evaluating innovative technologies, facilitating service delivery system changes, stimulating the production and distribution of new technologies and equipment in the private sector, and providing training opportunities. RERCs seek to solve rehabilitation problems and remove environmental barriers to improvements in employment, community living and participation, and health and function outcomes of individuals with disabilities.
The general requirements for RERCs are set out in subpart D of 34 CFR part 350 (What Rehabilitation Engineering Research Centers Does the Secretary Assist?).
Additional information on the RERCs program can be found at:
29 U.S.C. 762(g) and 764(b)(3).
We published a notice of proposed priority for this program in the
There are differences between the proposed priority and this final priority as discussed in the
The Assistant Secretary for Special Education and Rehabilitative Services establishes a priority for a RERC on Improving the Accessibility, Usability, and Performance of Technology for Individuals who are Deaf or Hard of Hearing. The RERC must focus on innovative technological solutions, new knowledge, and concepts that will improve the lives of individuals who are deaf or hard of hearing.
Under this priority, the RERC must research, develop, and evaluate technologies, methods, and systems that will improve the accessibility, usability, and performance of technologies that benefit individuals who are deaf or hard of hearing. This includes:
(a) Improving technological and design features (e.g., device fit and comfort, ease of control, affordability) in order to maximize adoption and use of auditory enhancement devices;
(b) Improving the compatibility of auditory enhancement technologies with other technologies such as mobile devices, telephones, televisions, and other media devices);
(c) Improving the performance of auditory enhancement devices and other access-promoting technology (e.g., voice to sign computer, smart phone applications, or portable real-time captioning applications) in social environments (e.g., school, work, recreation, health care, and entertainment); and
(d) Enhancing aural rehabilitation, consumer involvement strategies (e.g., online access to peer and expert input on auditory technologies and communication strategies, consumer focus groups and surveys, and consumer beta testing and review of products), and consumer training to maximize access to auditory information in a variety of settings (e.g., educational, recreational, community, health care, and workplace). The RERC must involve key stakeholders in the design and implementation of RERC activities. These stakeholders must include individuals who are deaf or hard of hearing and consumer groups who represent them.
(e) Increasing the transfer of RERC-developed technologies to the marketplace for widespread testing and use by developing and implementing a plan to ensure that technologies developed by the RERC are made available to the public or to service delivery systems that serve the public. This technology transfer plan must be developed in the first year of the project period in consultation with the NIDRR-funded Center on Knowledge Translation for Technology Transfer.
When inviting applications for a competition using one or more priorities, we designate the type of each priority as absolute, competitive preference, or invitational through a notice in the
This notice does not preclude us from proposing additional priorities, requirements, definitions, or selection criteria, subject to meeting applicable rulemaking requirements.
This notice does not solicit applications. In any year in which we choose to use this priority, we invite applications through a notice in the
Under Executive Order 12866, the Secretary must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities in a material way (also referred to as an “economically significant” rule);
(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.
This final regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866.
We have also reviewed this final regulatory action under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—
(1) Propose or adopt regulations only upon a reasoned determination that their benefits justify their costs
(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;
(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and
(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.
Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”
We are issuing this final priority only on a reasoned determination that its benefits justify its costs. In choosing among alternative regulatory approaches, we selected those approaches that maximize net benefits. Based on the analysis that follows, the Department believes that this regulatory action is consistent with the principles in Executive Order 13563.
We also have determined that this regulatory action does not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.
In accordance with both Executive orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.
The benefits of the Disability and Rehabilitation Research Projects and Centers Program have been well established over the years, as projects similar to the one envisioned by the final priority have been completed successfully. The new RERC would generate, disseminate, and promote the use of new information that is intended to improve outcomes for individuals with disabilities in the areas of community living and participation, employment, and health and function.
You may also access documents of the Department published in the
Office of Special Education and Rehabilitative Services, Department of Education.
Final priority.
The Assistant Secretary for Special Education and Rehabilitative Services announces a priority for the Rehabilitation Research and Training Center (RRTC) Program administered by the National Institute on Disability and Rehabilitation Research (NIDRR). Specifically, we announce a priority for an RRTC on Family Support. The Assistant Secretary may use this priority for competitions in fiscal year (FY) 2014 and later years. We take this action to focus research attention on an area of national need. We intend the priority to contribute to improved outcomes for individuals with disabilities and family members who provide assistance to them.
Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue SW., Room 5142, Potomac Center Plaza (PCP), Washington, DC 20202–2700. Telephone: (202) 245–6211 or by email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
The purpose of the RRTCs, which are funded through the Disability and Rehabilitation Research Projects and Centers Program, is to achieve the goals of, and improve the effectiveness of, services authorized under the Rehabilitation Act through well-designed research, training, technical assistance, and dissemination activities in important topical areas as specified by NIDRR. These activities are designed to benefit rehabilitation service providers, individuals with disabilities, family members, policymakers, and other research stakeholders. Additional information on the RRTC program can be found at:
29 U.S.C. 762(g) and 764(b)(2).
We published a notice of proposed priority (NPP) for this program in the
There are differences between the proposed priority and this final priority as discussed in the
Generally, we do not address technical and other minor changes.
The Assistant Secretary for Special Education and Rehabilitative Services establishes a priority for an RRTC on Family Support. For purposes of this priority, family member is defined as any individual related by blood or affinity whose close association with an individual is the equivalent of a family relationship. The RRTC's work is intended to inform the design, implementation, and continuous improvement of Federal and State policies and programs related to assisting families in support, assistance, and nurturing of family members with disabilities. The RRTC will also identify and develop information for individuals with disabilities and their family members to guide their informed choice of community and family-based service and support options that best meet their needs. The RRTC's work must be conducted in a manner that takes the needs and experiences of multiple disability groups and their families into consideration. These broad disability groups, as described in NIDRR's Long-Range Plan, include physical disabilities, sensory disabilities, intellectual and developmental disabilities, and psychiatric disabilities. The RRTC's work must also be inclusive of individuals with disabilities of all ages, and the RRTC's research and related activities must be conducted in a manner that addresses the needs and experiences of people with disabilities and their families across the lifespan. The RRTC's work must include a focus on the family support needs and experiences of racial and ethnic minority families who support family members with disabilities.
The RRTC must be designed to contribute to better understanding of the phenomenon of family support; to improved community living and participation, health and function, and employment outcomes of individuals with disabilities supported by family members; and to effective support of family caregivers by—
(a) Developing and implementing a project research plan to identify the key elements of family support and family support programs and policy. This plan, once implemented by the grantee, must contribute to identification or development of relevant and high-quality data and information that will serve as an empirical foundation for improving assistance to families in support roles and to family support policies and programs. This task includes:
(i) Developing a conceptual framework for research on family support that includes both individual and societal level characteristics that influence provision of family support, considering existing knowledge about family support barriers in other populations.
(ii) Developing and prioritizing a list of research questions and evaluation topics that, when addressed, will lead to research-based information that can be used to improve family support policies, practices, programs, communications, and outcomes.
(iii) Working with NIDRR and Administration For Community Living (ACL) to identify relevant data sets and informational resources that can be analyzed to address the questions and topics in the research plan; and
(iv) Working with NIDRR and ACL to identify gaps in data and information resources that are available to address the questions and topics in the research plan and to identify strategies to fill those gaps.
(b) Conducting research and research syntheses to describe the nature and extent of support that is being provided to individuals with disabilities by family members, and the extent to which the family caregivers themselves receive assistance in the form of education/training, counseling/psychosocial support, personal care, homemaker services, respite care, and other relevant supports, as well as the amounts of assistance received and the private and public sources of payment for such assistance;
(c) Conducting research and research syntheses to identify and evaluate promising practices that States have used and could be adopted in other States to improve long-term services and supports for families of individuals with disabilities. This task includes—
(i) Identifying components of well-designed, effective State or local family support programs; and
(ii) Identifying and assessing methods for monitoring, tracking, and evaluating States' approaches to supporting families, which may include, but are not limited to, methods for monitoring the experiences of individuals and costs for recipients of family support services within broader existing long-term services and supports evaluation programs, such as the National Core Indicators or Participant Experience Survey; methods for understanding, monitoring, and responding to the unique needs of individual families, including the family members with and without disabilities; and methods for evaluating the outcomes for individuals and families receiving family support services.
(d) Identifying and involving key stakeholders in the research and research planning activities conducted under paragraphs (a), (b), and (c) to maximize the relevance and usefulness of the research products being developed. Stakeholders must include, but are not limited to, individuals with disabilities and their families (including, but not limited to, parents, siblings, and sons/daughters); national, State, and local-level policymakers; service providers; and relevant researchers in the field of disability and rehabilitation research;
(e) Identifying, evaluating, and disseminating accessible information at the national, State, service provider, and individual levels on topics of importance to sustaining and developing appropriate and effective family support services, practices, policies, and programs. These topics include, but are not limited to: Usefulness and effectiveness of current family support resources for families of differing circumstances; the roles of, and impact upon, families in the transitions from fee-for-service to integrated/managed long-term service and support systems; the roles and responsibilities of individuals with disabilities and their family members in the transition from agency-directed to consumer-directed services; best practices in supporting families both within and outside of disability services; accessing and coordinating community supports; the role of family-to-family and peer-to-peer support systems and other social networks; and other topics to be determined in collaboration with key stakeholders, NIDRR, and ACL representatives;
(f) Establishing a network of technical assistance providers and advocacy entities to assist in synthesizing and disseminating information related to implementing high-quality family support policies, programs, and practices for individuals with disabilities. Network members should include, but are not limited to: The Aging and Disability Resource Centers, the State Councils on Developmental Disabilities; Parent Training and Information Centers; Protection and Advocacy Client Assistance Programs; Centers for Independent Living; and private sector organizations that are recognized as national leaders in promoting family support policies, programs, and research; and
(g) Serving as a national resource center related to family support by—
(i) Providing information and technical assistance to individuals with disabilities, family members, service providers, policymakers, and other key stakeholders;
(ii) Providing training to facilitate understanding of the effective use of private and public options for the provision of supports to families, including training at the graduate, pre-service, and in-service levels, and to individuals with disabilities, families, and rehabilitation and other service providers. This training may be provided through conferences, workshops, public education programs, in-service training programs, and similar activities; and
(iii) Collaborating as appropriate with NIDRR's RRTC on Community Living Policy.
When inviting applications for a competition using one or more priorities, we designate the type of each priority as absolute, competitive preference, or invitational through a notice in the
This notice does not preclude us from proposing additional priorities, requirements, definitions, or selection criteria, subject to meeting applicable rulemaking requirements.
This notice does not solicit applications. In any year in which we choose to use this priority, we invite applications through a notice in the
Under Executive Order 12866, the Secretary must determine whether this regulatory action is “significant” and, therefore, subject to the requirements of the Executive order and subject to review by the Office of Management and Budget (OMB). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as an action likely to result in a rule that may—
(1) Have an annual effect on the economy of $100 million or more, or adversely affect a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities in a material way (also referred to as an “economically significant” rule);
(2) Create serious inconsistency or otherwise interfere with an action taken or planned by another agency;
(3) Materially alter the budgetary impacts of entitlement grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
(4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles stated in the Executive order.
This final regulatory action is not a significant regulatory action subject to review by OMB under section 3(f) of Executive Order 12866.
We have also reviewed this final regulatory action under Executive Order 13563, which supplements and explicitly reaffirms the principles, structures, and definitions governing regulatory review established in Executive Order 12866. To the extent permitted by law, Executive Order 13563 requires that an agency—
(1) Propose or adopt regulations only upon a reasoned determination that their benefits justify their costs (recognizing that some benefits and costs are difficult to quantify);
(2) Tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives and taking into account—among other things and to the extent practicable—the costs of cumulative regulations;
(3) In choosing among alternative regulatory approaches, select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity);
(4) To the extent feasible, specify performance objectives, rather than the behavior or manner of compliance a regulated entity must adopt; and
(5) Identify and assess available alternatives to direct regulation, including economic incentives—such as user fees or marketable permits—to encourage the desired behavior, or provide information that enables the public to make choices.
Executive Order 13563 also requires an agency “to use the best available techniques to quantify anticipated present and future benefits and costs as accurately as possible.” The Office of Information and Regulatory Affairs of OMB has emphasized that these techniques may include “identifying changing future compliance costs that might result from technological innovation or anticipated behavioral changes.”
We are issuing this final priority only on a reasoned determination that its benefits justify its costs. In choosing among alternative regulatory approaches, we selected those approaches that maximize net benefits. Based on the analysis that follows, the Department believes that this regulatory action is consistent with the principles in Executive Order 13563.
We also have determined that this regulatory action does not unduly interfere with State, local, and tribal governments in the exercise of their governmental functions.
In accordance with both Executive orders, the Department has assessed the potential costs and benefits, both quantitative and qualitative, of this regulatory action. The potential costs are those resulting from statutory requirements and those we have determined as necessary for administering the Department's programs and activities.
The benefits of the Disability and Rehabilitation Research Projects and Centers Program have been well established over the years, as projects similar to the one envisioned by the final priority have been completed successfully. The new RRTC will generate, disseminate, and promote the use of new information that will improve outcomes for individuals with disabilities in the areas of community living and participation, employment, and health and function.
You may also access documents of the Department published in the
Environmental Protection Agency (EPA).
Direct final rule.
The Environmental Protection Agency (EPA) is approving a State Implementation Plan (SIP) revision submitted by the State of Maryland. This revision pertains to Maryland's incorporation by reference of the most recent amendments to California's Low Emission Vehicle (LEV) program. The Clean Air Act (CAA) contains authority by which other states may adopt new motor vehicle emissions standards that are identical to California's standards. Maryland has adopted by reference California's light and medium-duty vehicle emissions and fuel standards, and consistent with California, submits amendments to these standards as revisions to the State's SIP. In this SIP revision, Maryland is updating its Low Emissions Vehicle Program regulation to adopt by reference California's Advanced Clean Car Program. This action is being taken under the CAA.
This rule is effective on September 8, 2014 without further notice, unless EPA receives adverse written comment by August 8, 2014. If EPA receives such comments, it will publish a timely withdrawal of the direct final rule in the
Submit your comments, identified by Docket ID Number EPA–R03–OAR–2014–0310 by one of the following methods:
A.
B.
C.
D.
Emlyn Vélez-Rosa (215) 814–2038, or by email at
On August 1, 2013, the Maryland Department of the Environment (MDE) submitted a revision to its SIP amending Maryland's Low Emissions Vehicle Program regulation, COMAR 26.11.34, to adopt California's Advanced Clean Cars Program, also referred to as the CA LEV III program. The Maryland Low Emissions Vehicle Program requires all new 2011 and subsequent model year passenger cars, light trucks, and medium-duty vehicles having a gross vehicle weight rating (GVWR) of 14,000 pounds or less that are sold in Maryland to meet California's vehicle standards.
Ozone is formed in the atmosphere by photochemical reactions between volatile organic compounds (VOCs), nitrogen oxides (NO
On July 18, 1997 (62 FR 38856), EPA promulgated an 8-hour ozone NAAQS, at 0.08 parts per million (ppm) averaged over an 8-hour time frame. On April 30, 2004 (69 FR 23951), EPA finalized designations for areas across the country with respect to the 1997 8-hour ozone NAAQS, which became effective on June 15, 2004. In this rulemaking action, EPA designated for the 1997 8-hour ozone NAAQS three separate nonattainment areas containing eleven counties and the City of Baltimore in Maryland: (1) The Baltimore, Maryland moderate nonattainment area (hereafter the Baltimore Area), consisting of the counties of Ann Arundel, Baltimore, Carroll, Harford, and Howard, and the City of Baltimore in Maryland; (2) the Washington, DC-MD-VA moderate nonattainment area (hereafter the Washington Area), whose Maryland's portion consists of the counties of Calvert, Charles, Frederick, Montgomery, and Prince George's; and (3) the Philadelphia-Wilmington-Atlantic City, PA-NJ-MD-DE moderate nonattainment area (hereafter the Philadelphia Area), whose Maryland's portion consists of Cecil County.
Two of Maryland's ozone nonattainment areas have attained the 1997 8-hour ozone NAAQS. On February 28, 2012 (77 FR 11739), EPA determined that the Washington Area attained the 1997 8-hour ozone NAAQS by its June 15, 2010 attainment date. On January 21, 2011 (76 FR 3840), EPA issued a 1-year attainment date extension (i.e., from June 15, 2010 to June 15 2011) for the Philadelphia Area. On March 26, 2012 (77 FR 17341), EPA determined that the Philadelphia Area attained the 1997 8-hour ozone NAAQS by its June 15, 2011 attainment date.
On March 11, 2011 (76 FR 13289), EPA issued a 1-year attainment date extension (i.e., from June 15, 2010 to June 15, 2011) for the Baltimore Area. On February 1, 2012 (77 FR 4901), EPA made a determination that the Baltimore Area did not attain the 1997 8-hour ozone NAAQS by its June 15, 2011 attainment date, based on quality assured, quality controlled, and certified ambient air monitoring data for 2008–2010. As a result, in this same rulemaking action EPA reclassified the Baltimore Area from moderate to serious nonattainment for the 1997 8-hour ozone NAAQS.
On March 27, 2008 (73 FR 16436), EPA revised the level of the 8-hour ozone NAAQS from 0.08 ppm to 0.075 ppm. EPA also strengthened the secondary 8-hour ozone standard to the level of 0.075 ppm making it identical to the revised primary standard. On May 21, 2012 (77 FR 30088), EPA finalized designations for the 2008 8-hour ozone NAAQS, that became effective on July 20, 2012. The 2008 8-hour ozone designations included the same three nonattainment areas previously designated for the 1997 8-hour ozone NAAQS, but with different classifications. The Washington Area and the Philadelphia-Wilmington-Atlantic City Area were classified as marginal nonattainment and the Baltimore Area was classified as moderate nonattainment.
Vehicles sold in the United States are required by the CAA to be certified to meet the Federal emission standards or California's emission standards. States are forbidden from adopting their own standards, but may adopt California's emission standards for which EPA has
Section 177 of the CAA authorizes other states to adopt California's standards in lieu of Federal vehicle standards, provided the state adopting California's standards does so at least two years prior to the model year in which they become effective and that EPA has issued a waiver of preemption to California for such standards. California emission standards have been traditionally more stringent than the EPA requirements, but their structure is similar to that of the Federal programs.
On February 10, 2000 (65 FR 6698), EPA adopted the second tier of Federal motor vehicle standards (Federal Tier 2 standards) enacted under the CAA. The Federal Tier 2 standards included tailpipe emissions standards for passenger vehicles and light duty trucks and gasoline sulfur standards. The standards were phased-in between the 2004 and 2007 model years, except in states that had formally adopted California's emission standards in lieu of the Federal standards.
On May 7, 2010 (75 FR 25324), EPA and the National Highway Traffic Safety Administration (NHTSA), an agency under the Department of Transportation (DOT), established a national program consisting of new standards for light-duty motor vehicles to reduce greenhouse gases (GHG) emissions and to improve fuel economy. This program affected new passenger cars, light-duty trucks, and medium-duty passenger vehicles sold in model years 2012 through 2016. EPA adopted the GHG emissions standards under the CAA, while NHTSA, as part of DOT, adopted standards related to fuel economy, the Corporate Average Fuel Economy (CAFE) standards, under the Energy Policy and Conservation Act (EPCA). Under this national program, adopted in coordination with California, automobile manufacturers face a single set of national emissions standards to meet both Federal and California emissions requirements.
On October 15, 2012 (77 FR 62624), EPA and NHTSA issued a joint final rule to further reduce GHG emissions and improve fuel economy for light-duty vehicles for model years 2017 and beyond. This rule extended the previous national program beyond 2016 by tightening GHG for model years 2017 to 2025 and the CAFE standards between model years 2017 and 2021. The rule continued to apply to passenger cars, light-duty trucks, and medium-duty passenger vehicles sold in the applicable model years.
EPA's GHG standards are based on carbon dioxide (CO
On March 3, 2014, EPA signed a final rule adopting Tier 3 Motor Vehicle Emission and Fuel Standards. The Federal Tier 3 program establishes more stringent Federal vehicle emissions standards and lowers the sulfur content of gasoline for new cars in states subject to the Federal program, beginning in model year 2017. The Federal Tier 3 vehicle program will reduce both tailpipe and evaporative emissions from passenger cars, light-duty trucks, medium-duty passenger vehicles, and some heavy-duty vehicles. The gasoline sulfur standard will enable more stringent vehicle emissions standards and will make emissions control systems more effective. The tailpipe standards include different phase-in schedules that vary by vehicle class but generally phase in between model years 2017 and 2025. The Tier 3 standards are closely harmonized with California LEV Tier III standards as well as with Federal and California GHG emission standards for light-duty vehicles.
In 1990, California's Air Resources Board (CARB) adopted its first generation of LEV standards applicable to light and medium duty vehicles. California's vehicle emission standards program is referred to as the California Low Emissions Vehicle Program (CA LEV program). These LEV standards were phased-in beginning in model year 1994 through model year 2003. In 1999, California adopted a second generation of CA LEV standards, known as CA LEV II. CA LEV II was phased-in beginning with model year 2004 through model year 2010. EPA granted a Federal preemption waiver for CA LEV II program on April 22, 2003 (68 FR 19811).
In December 2000, CARB modified the CA LEV II program to take advantage of some elements of the Federal Tier 2 regulations to ensure that only the cleanest vehicle models would continue to be sold in California. In 2006, CARB adopted technical amendments to its CA LEV II program that amended the evaporative emission test procedures, onboard refueling vapor recovery and spitback test procedures, exhaust emission test procedures, and vehicle emission control label requirements. These technical amendments aligned each of California's test procedures and label requirements with its Federal counterpart, in an effort to streamline and harmonize the California and Federal Tier 2 programs and to reduce manufacturer testing burdens and increase in-use compliance. On July 30, 2010 (75 FR 44948), EPA published a
The CA LEV II program reduces emissions in a similar manner to the Federal Tier 2 program by use of declining fleet average non-methane organic gas (NMOG) emission standards, applicable to each vehicle manufacturer each year. Separate fleet average standards are not established for NO
In January 2012, California approved a new emissions-control program for model years 2017 through 2025, called the Advanced Clean Cars Program, or the CA LEV III program. The program combines the control of smog, soot, and GHG and requirements for greater numbers of ZEV vehicles into a single package of standards. The regulations apply to light duty vehicles, light duty trucks, and medium duty passenger vehicles. Under the Advanced Clean Cars Program, manufacturers can certify vehicles to the standards before model year 2015. Beginning with model year 2020, all vehicles must be certified to CA LEV III standards. The ZEV amendments add flexibility to California's existing ZEV program for 2017 and earlier model years, and establish new sales and technology requirements starting with the 2018 model year. The CA LEV III amendments establish more stringent criteria and GHG emission standards starting with the 2015 and 2017 model years, respectively. The California GHG standards are almost identical in stringency and structure to the Federal GHG standards for model years from 2017 to 2025. Additionally, on December 2012, California adopted a “deemed to comply” regulation that enables manufacturers to show compliance with California GHG standards by demonstrating compliance with Federal GHG standards. On June 9, 2013 (78 FR 2112), EPA granted a Federal preemption waiver for California's Advanced Clean Cars Program. California's LEV Program is contained in the California Code of Regulations (CCR), Title 13 “Motor Vehicles,” Division 3 “Air Resources Board.”
In order to address ambient air quality in the State, Maryland's legislature adopted and the Governor signed the Maryland Clean Cars Act of 2007, the purpose of which was to implement California's motor vehicle emission standards. This statute compelled the adoption by MDE on November 19, 2007 of a rule to implement CA LEV II standards. This rule established Maryland regulatory chapter COMAR 26.11.34, entitled “Low Emission Vehicle Program” (also referred to as Maryland Clean Car Program), which became effective in Maryland on December 17, 2007. Since originally adopted, Maryland has revised its LEV program in 2009 and 2011 to reflect updates by California to the CA LEV II program. Maryland submitted these changes to EPA as SIP revisions, which EPA approved into Maryland's SIP.
The Maryland Clean Car Program has two objectives. The first is to reduce emissions of NO
Since Maryland last adopted California's vehicle standards in 2011, California has updated its rules to adopt its Advanced Clean Cars Program. As mentioned previously, on June 9, 2013 (78 FR 2112), EPA granted a Federal preemption waiver for California's Advanced Clean Cars Program. Maryland adopted California's updates to portions of CCR Title 13, Division 3 by amending COMAR 26.11.34.02 on February 6, 2013 (40:4 Md R. 347), as proposed on November 30, 2012 (39:24 Md. R. 1587–1590). These amendments became state-effective on March 4, 2013.
On August 1, 2013, Maryland submitted as a SIP revision the state-adopted amendments to the Maryland LEV Program rule, with exception of CCR, Title 13, Division 3, Section 2030 “Liquefied Petroleum Gas or Natural Gas Retrofit Systems,” effective on February 13, 2010. The purpose of this SIP revision is for Maryland to update its incorporation by reference provisions, under COMAR 26.11.34.02, to adopt the CA LEV III program. This SIP revision will replace in its entirety the existing regulation COMAR 26.11.34.02 as approved in the SIP on June 11, 2013.
The proposed SIP revision includes Maryland's revised Clean Car Program rules that adopt by reference California's Advanced Clean Car Program approved by CARB in 2012. These amendments are important for purposes of making sure Maryland's rules are consistent with those of California, and thus in compliance with Maryland's requirement under section 177 of the CAA.
As explained earlier, the California Advanced Clean Cars Program includes changes to CA LEV II, GHG, and ZEV standards, all of which have been adopted by Maryland. The California Advanced Clean Cars Program regulates criteria pollutants, and requires that all new 2017 and subsequent model year vehicles transferred (including titled and registered) in the State of Maryland be certified to meet the new California emission standards. The CA LEV III emission standards will be phased-in from 2017–2025. Maryland's update to its Clean Car Program will result in a further reduction of ozone precursors emissions of NO
EPA is approving a SIP revision submitted by Maryland on August 1, 2013. The SIP revision amends the Maryland Low Emission Vehicle Program, in regulation COMAR 26.11.34.02, to incorporate by reference California's Advanced Clean Car Program. Maryland's adoption of California's vehicle standards is authorized by section 177 of the CAA, and will ensure that Maryland's Low Emission Vehicle Program continues to be the same as California's Low Emission Vehicle program. EPA is publishing this rule without prior proposal because EPA views this as a noncontroversial amendment and anticipates no adverse comment. However, in the “Proposed Rules” section of today's
Under the CAA, the Administrator is required to approve a SIP submission that complies with the provisions of the CAA and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the CAA. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this proposed action:
• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);
• does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501
• is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601
• does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104–4);
• does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);
• is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);
• is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);
• is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the CAA; and
• does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).
The Congressional Review Act, 5 U.S.C. 801
Under section 307(b)(1) of the CAA, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by September 8, 2014. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. Parties with objections to this direct final rule are encouraged to file a comment in response to the parallel notice of proposed rulemaking for this action published in the proposed rules section of today's
Environmental protection, Air pollution control, Carbon monoxide, Incorporation by reference, Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements, Volatile organic compounds.
42 U.S.C. 7401
40 CFR part 52 is amended as follows:
42 U.S.C. 7401
(c) * * *
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Final rule, technical correction.
This final rule amends NHTSA regulations to include a new exemption relating to the Federal motor vehicle safety standard for ejection mitigation, and to correct a reference regarding the standard for lamps, reflective devices and associated equipment. The exemptions facilitate the mobility of physically disabled drivers and passengers.
If you wish to petition for reconsideration of this rule, submit your petition to the following address so that it is received by NHTSA by the date above: Administrator, National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE., West Building, Washington, DC 20590. You should refer in your petition to the docket number of this document. The petition will be placed in the docket. Note that all submissions received will be posted without change to
Christopher J. Wiacek, NHTSA Office of Crash Avoidance Standards, NVS–123 (telephone 202–366–4801), or Deirdre Fujita, NHTSA Office of Chief Counsel, NCC–112 (telephone 202–366–2992). The mailing address for these officials is: National Highway Traffic Safety Administration, 1200 New Jersey Avenue SE., Washington, DC 20590.
In response to a petition for rulemaking from Bruno Independent Living Aids (Bruno), this final rule amends 49 CFR Part 595, Subpart C, “Make Inoperative Exemptions, Vehicle Modifications to Accommodate People With Disabilities,” to include a new exemption relating to FMVSS No. 226, “Ejection mitigation.” This document also corrects a reference in the part to FMVSS No. 108, “Lamps, reflective devices and associated equipment.” The notice of proposed rulemaking (NPRM) preceding this final rule was published on October 26, 2012 (77 FR 65352).
The National Traffic and Motor Vehicle Safety Act (49 U.S.C. Chapter 301) (“Safety Act”) and NHTSA's regulations require vehicle manufacturers to certify that their vehicles comply with all applicable Federal motor vehicle safety standards (FMVSSs) (
49 CFR part 595, subpart C, sets forth exemptions from the make inoperative provision to permit, under limited circumstances, vehicle modifications that take the vehicles out of compliance with certain FMVSSs when the vehicles are modified to be used by persons with disabilities after the first retail sale of the vehicle for purposes other than resale. The regulation was promulgated to facilitate the modification of motor vehicles so that persons with disabilities can drive or ride in them. The regulation involves information and disclosure requirements and limits the extent of modifications that may be made. Details of the regulation are described in the October 26, 2012 NPRM.
On January 19, 2011,
To assess compliance with FMVSS No. 226, an impactor is propelled from inside a test vehicle toward the windows. The ejection mitigation safety system is required to prevent the impactor from moving more than a specified distance beyond the plane of a window. In the test, the countermeasure must retain the linear travel of the impactor such that the impactor must not travel 100 millimeters beyond the location of the inside surface of the vehicle glazing. This displacement limit serves to control the size of any gaps forming between the countermeasure (e.g., the ejection mitigation side curtain air bag) and the window opening, thus reducing the potential for both partial and complete ejection of an occupant.
The agency believes that vehicle manufacturers will meet the standard by means of side curtain air bag technology, and possibly supplement the technology with advanced glazing. Existing side impact air bag curtains (installed pursuant to FMVSS No. 214, “Side impact protection”) will be made larger so that they cover more of the window opening, made more robust to remain inflated longer, and made to deploy in both side impacts and in rollovers using sensor technology.
FMVSS No. 226 is a new regulation and currently, 49 CFR Part 595 does not provide for an exemption for vehicles that are modified to accommodate people with disabilities.
On October 26, 2012, NHTSA published an NPRM
Bruno manufactures a product line it calls “Turning Automotive Seating (TAS),” which replaces the seat installed by the original equipment manufacturer (OEM). In its petition, Bruno states that the purpose of TAS is
In its petition, Bruno referred to another NHTSA rulemaking (that has since resulted in a final rule
In the October 26, 2012 NPRM, NHTSA proposed to amend § 595.7(c) to add an exemption for FMVSS No. 226.
Nonetheless, the agency did acknowledge in the NPRM that the side impact sensing and electronic architecture system could be integrated with that of the ejection mitigation rollover protection system. Thus, NHTSA acknowledged the possibility that, in the process of modifying or replacing a seat to accommodate a person with a disability, the FMVSS No. 214 side impact air bag system could be deactivated, which could tangentially deactivate the FMVSS No. 226 rollover ejection mitigation system. Thus, NHTSA stated, for vehicles in which the seat is modified or replaced, it may not be practical to exempt them from the side impact requirements and not from ejection mitigation requirements. In the NPRM, NHTSA sought comment on the need for the requested exemption, and asked questions as to whether deactivating the side impact protection system would also deactivate the ejection mitigation system, and whether an exemption could only be for the ejection mitigation countermeasure (curtains) on the side of the vehicle affected by the modification, rather than for both sides.
The agency received one comment on the NPRM. The comment was from the National Mobility Equipment Dealers Association (NMEDA),
NMEDA also states that some modifications involve modifying the occupant restraint system (seat belt) for a seating position, such as when the original restraint system is integrated into the OEM seat and the OEM seat is removed. The commenter states that modifiers have to mount a new restraint system to the upper side roof rail of the vehicle, which “could affect the deployment of a 226 airbag [sic].”
Additionally, NMEDA states: “Since the technical specifications of the OEM 226 control modules are not available to modifiers, a modifier would not know whether the deactivation of one side of the vehicle's curtain airbags also deactivates the other side.”
The agency has determined that there is merit to Bruno's request to amend § 595.7 to add an exemption from the ejection mitigation requirements and thus has decided to adopt the proposed amendment. NMEDA's comment indicates that it is common for modifiers to deactivate or remove the side curtain air bag that is packaged in the headliner roof rail to make modifications to the seat belt to accommodate a disabled driver or passenger or to install a new seating system. To date, the side curtain air bag is the primary OEM countermeasure installed to meet FMVSS No. 226. Since the countermeasure would be deactivated or removed, an exemption from FMVSS No. 226 is warranted to facilitate transportation of people with disabilities. Further, modifiers are permitted by § 595.7 (see § 595.7(c)(15)) to deactivate or remove the OEM side curtain air bag installed in compliance with FMVSS No. 214. If the side curtain air bag were deactivated or removed from the vehicle, maintaining compliance with FMVSS No. 226 would not be possible.
That said, we recognize that the requested amendment presents a trade-off of substantial ejection mitigation protection in exchange for continued mobility for people with disabilities. The agency is concerned about the negative effect an exemption may have on the safety benefits afforded to occupants.
In an effort to balance the mobility needs of people who need vehicle modifications to accommodate a disability with the performance requirements of FMVSS No. 226, the exemption we have adopted is limited. Vehicle manufacturing designs generally utilize one ejection mitigation curtain air bag per side to protect the front and the rear rows. If the side curtain air bag must be made inoperative on one side of the vehicle to accommodate a disabled person, we are not convinced that the side curtain air bag on the other side of the vehicle needs to be made inoperative as well.
NHTSA believes it is necessary to maintain as much as possible the integrity of the ejection mitigation safety system for the side of the vehicle that is not altered. From NMEDA's comments, it appears possible to isolate and only deactivate the altered side of the vehicle using a shunt. Several major
Thus, we amend § 595.7(c) to add § 595.7(c)(17), and only exempt from S4.2 and S5 of 49 CFR 571.226 the side of the vehicle where a seat on that side of the vehicle must be changed to accommodate a person with a disability. A modifier may not knowingly make inoperative the side curtain air bag on the opposite side of the vehicle.
On December 4, 2007, the agency published a final rule (72 FR 68234) amending FMVSS No. 108, “Lamps, reflective devices, and associated equipment” (49 CFR 571.108), by reorganizing the regulatory text so that the standard provides a more straightforward and logical presentation of the applicable regulatory requirements. The final rule did not impose any new substantive requirements on manufacturers. The effective date of the rule was December 1, 2012.
FMVSS No. 108 includes a requirement that a turn signal operating unit installed on vehicles must be self-canceling by steering wheel rotation and capable of cancellation by a manually operated control. The requirement used to be in S5.1.1.5 of FMVSS No. 108, but after the 2007 final rule it is now in S9.1.1 of the standard.
Following the 2007 final rule, the agency did not revise § 595.7 to reflect the reorganized text of the lighting standard in the make inoperative exemption relating to FMVSS No. 108. Currently, § 595.7(c)(2) references S5.1.1.5 of FMVSS No. 108, when the correct paragraph reference is S9.1.1. Today's final rule corrects § 595.7(c)(2) to reference S9.1.1 of FMVSS No. 108.
As this final rule relieves the regulatory burdens on certain entities and involves FMVSS requirements that have already become effective, the agency believes that a 60-day effective date is appropriate.
The agency has considered the impact of this rulemaking action under E.O. 12866, E.O. 13563, and the Department of Transportation's regulatory policies and procedures. This rulemaking document was not reviewed by the Office of Management and Budget under E.O. 12866, “Regulatory Planning and Review.” It is not considered to be significant under E.O. 12866 or the Department's Regulatory Policies and Procedures (44 FR 11034; February 26, 1979). NHTSA has determined that the effects are so minor that a regulatory evaluation is not needed to support the subject rulemaking. This rulemaking imposes no costs on the vehicle modification industry. If anything, there could be a cost savings due to the exemption.
Modifying a vehicle in a way that makes inoperative the performance of ejection mitigation air bags will reduce the protections offered occupants in a rollover. However, the number of vehicles potentially modified is very small. This is essentially the trade-off that NHTSA is faced with when increasing mobility for persons with disabilities: When necessary vehicle modifications are made, some safety may unavoidably be lost to gain personal mobility. The agency has made the exemption adopted today as narrow as reasonably possible, to preserve ejection mitigation protection as much as possible.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. 601 et seq., as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996), whenever an agency is required to publish a notice of proposed rulemaking or final rule, it must prepare and make available for public comment a regulatory flexibility analysis that describes the effect of the rule on small entities (i.e., small businesses, small organizations, and small governmental jurisdictions). The Small Business Administration's regulations at 13 CFR Part 121 define a small business, in part, as a business entity “which operates primarily within the United States.” (13 CFR 121.105(a)). No regulatory flexibility analysis is required if the head of an agency certifies the rule will not have a significant economic impact on a substantial number of small entities. SBREFA amended the Regulatory Flexibility Act to require Federal agencies to provide a statement of the factual basis for certifying that a rule will not have a significant economic impact on a substantial number of small entities.
NHTSA has considered the effects of this final rule under the Regulatory Flexibility Act. Most dealerships and repair businesses are considered small entities, and a substantial number of these businesses modify vehicles to accommodate individuals with disabilities. I certify that this rule will not have a significant economic impact on a substantial number of small entities. While most dealers and repair businesses are considered small entities, the exemption will not impose any new requirements, but will instead provide additional flexibility. Therefore, the impacts on any small businesses affected by this rulemaking will not be substantial.
NHTSA has examined today's final rule pursuant to Executive Order 13132 (64 FR 43255; Aug. 10, 1999) and concluded that no additional consultation with States, local governments, or their representatives is mandated beyond the rulemaking process. The agency has concluded that the final rule does not have sufficient federalism implications to warrant consultation with State and local officials or the preparation of a federalism summary impact statement. The rule does not have “substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government.” This rule will not impose any requirements on anyone and instead lessens a requirement for modifiers.
NHTSA rules can have preemptive effect in two ways. First, the National Traffic and Motor Vehicle Safety Act contains an express preemption provision stating that when a motor vehicle safety standard is in effect under 49 U.S.C. chap. 301, a State or a political subdivision of a State may prescribe or continue in effect a standard applicable to the same aspect of performance of a motor vehicle or motor vehicle equipment only if the standard is identical to the standard prescribed under Chapter 301. 49 U.S.C. 30103(b)(1). This provision is not relevant to this rulemaking as it does not involve the establishing, amending or revoking of a Federal motor vehicle safety standard.
Second, the Supreme Court has recognized the possibility, in some
When promulgating a regulation, agencies are required under Executive Order 12988 to make every reasonable effort to ensure that the regulation, as appropriate: (1) Specifies in clear language the preemptive effect; (2) specifies in clear language the effect on existing Federal law or regulation, including all provisions repealed, circumscribed, displaced, impaired, or modified; (3) provides a clear legal standard for affected conduct rather than a general standard, while promoting simplification and burden reduction; (4) specifies in clear language the retroactive effect; (5) specifies whether administrative proceedings are to be required before parties may file suit in court; (6) explicitly or implicitly defines key terms; and (7) addresses other important issues affecting clarity and general draftsmanship of regulations.
Pursuant to this Order, NHTSA notes as follows. The preemptive effect of this rule is discussed above. NHTSA notes further that there is no requirement that individuals submit a petition for reconsideration or pursue other administrative proceeding before they may file suit in court.
Under the National Technology Transfer and Advancement Act of 1995 (NTTAA) (Pub. L. 104–113), “all Federal agencies and departments shall use technical standards that are developed or adopted by voluntary consensus standards bodies, using such technical standards as a means to carry out policy objectives or activities determined by the agencies and departments.” Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies, such as the Society of Automotive Engineers (SAE). The NTTAA directs us to provide Congress, through OMB, explanations when we decide not to use available and applicable voluntary consensus standards. No voluntary standards exist regarding this exemption for modification of vehicles to accommodate persons with disabilities.
The Unfunded Mandates Reform Act of 1995 requires agencies to prepare a written assessment of the costs, benefits and other effects of proposed or final rules that include a Federal mandate likely to result in the expenditure by State, local or tribal governments, in the aggregate, or by the private sector, of more than $100 million annually (adjusted for inflation with base year of 1995). This exemption does not result in expenditures by State, local or tribal governments, in the aggregate, or by the private sector in excess of $100 million annually.
NHTSA has analyzed this rulemaking action for the purposes of the National Environmental Policy Act. The agency has determined that implementation of this action will not have any significant impact on the quality of the human environment.
Under the Paperwork Reduction Act of 1995 (PRA), a person is not required to respond to a collection of information by a Federal agency unless the collection displays a valid OMB control number. This final rule does not contain new reporting requirements or requests for information beyond what is already required by 49 CFR Part 595, Subpart C. An entity taking advantage of the exemption will simply list FMVSS No. 226 in the document described in 49 CFR 595.7(b).
Executive Order 12866 requires each agency to write all rules in plain language. Application of the principles of plain language includes consideration of the following questions:
• Have we organized the material to suit the public's needs?
• Are the requirements in the rule clearly stated?
• Does the rule contain technical language or jargon that isn't clear?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the rule easier to understand?
• Would more (but shorter) sections be better?
• Could we improve clarity by adding tables, lists, or diagrams?
• What else could we do to make the rule easier to understand?
If you have any responses to these questions, please include them in your comments on this rule.
The Department of Transportation assigns a regulation identifier number (RIN) to each regulatory action listed in the Unified Agenda of Federal Regulations. The Regulatory Information Service Center publishes the Unified Agenda in April and October of each year. You may use the RIN contained in the heading at the beginning of this document to find this action in the Unified Agenda.
Anyone is able to search the electronic form of all submissions to any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the
Motor vehicle safety, Motor vehicles.
In consideration of the foregoing, NHTSA amends 49 CFR part 595 to read as follows:
49 U.S.C. 322, 30111, 30115, 30117, 30122 and 30166; delegation of authority at 49 CFR 1.95.
(c) * * *
(2) S9.1.1 of 49 CFR 571.108, in the case of a motor vehicle that is modified to be driven without a steering wheel or for which it is not feasible to retain the turn signal canceling device installed by the vehicle manufacturer.
(17) S4.2 and S5 of 49 CFR 571.226, on the side of the vehicle where a seat on that side of the vehicle must be changed to accommodate a person with a disability.
Nuclear Regulatory Commission.
Strategic assessment update; extension of comment period.
On May 15, 2014, the U.S. Nuclear Regulatory Commission (NRC) published a request for public comment on developments concerning the Low Level Radioactive Waste (LLRW) Regulatory Program. These developments over the next several years would affect licensees and States with LLRW disposal sites and actions that the NRC could take to ensure safety, security, and the protection of the environment. The public comment period was originally scheduled to close on July 14, 2014. The NRC has decided to extend the public comment period to allow more time for members of the public to develop and submit their comments.
The due date for comments requested in the document published on May 15, 2014 (79 FR 27772) is extended. Comments must be filed no later than September 15, 2014. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received before this date.
You may submit comments by any of the following methods (unless this document describes a different method for submitting comments on a specific subject):
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For additional direction on accessing information and submitting comments, see “Accessing Information and Submitting Comments” in the
Melanie C. Wong, Office of Federal and State Materials and Environmental Management Programs, U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001; telephone: 301–415–2432; email:
Please refer to Docket ID NRC–2014–0080 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document by any of the following methods:
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Please include Docket ID NRC–2014–0080 in the subject line of your comment submission, in order to ensure that the NRC is able to make your comment submission available to the public in this docket.
The NRC cautions you not to include identifying or contact information that you do not want to be publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment submissions into ADAMS.
On May 15, 2014 (79 FR 27772), the NRC published a request for public comments on developments to the LLRW Regulatory Program in the next several years that would affect licensees and States where LLRW disposal sites are located and actions that the NRC could take to ensure safety, security, and the protection of the environment. The public comment period was originally scheduled to close on July 14, 2014. The NRC has decided to extend the public comment period to allow more time for stakeholders to develop and submit their comments, and to consider and address the questions posed by the NRC in the document published on May 15, 2014 (79 FR 27772). The deadline for submitting comments is extended to September 15, 2014.
For the Nuclear Regulatory Commission.
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for all The Boeing Company Model 767 airplanes. This proposed AD was prompted by a report of a rotary actuator for the trailing edge (TE) flap that had slipped relative to its mating reaction ring, which is attached to the flap support rib. This proposed AD would require repetitive inspections for corrosion of the fixed ring gear and reaction ring splines of the rotary actuator assembly for each support position, and related investigative and corrective actions if necessary. We are proposing this AD to detect and correct reaction ring gears and rotary actuator gears from becoming disengaged with flaps extended and causing an uncommanded roll due to flap blowback, overload, or flap departure from the airplane, which could compromise safe flight and landing of the airplane.
We must receive comments on this proposed AD by August 25, 2014.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
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For service information identified in this proposed AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; telephone 206–544–5000, extension 1; fax 206–766–5680; Internet
You may examine the AD docket on the Internet at
Allen Rauschendorfer, Aerospace Engineer, Airframe Branch, ANM–120S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057–3356; phone: 425–917–6487; fax: 425–917–6590; email:
We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We have received a report of a TE flap rotary actuator that had slipped relative to its mating reaction ring, which is attached to the flap support rib. This occurred on a Model 767–300ER airplane that was delivered in June 1997 and had accumulated approximately 79,000 total flight hours and 14,000 total flight cycles in service. Removal of the reaction ring and actuator revealed that the mating splines were severely corroded. The manufacturer determined that, if the corrosion were to affect the mating splines on either surface (actuator or ring) to the point where they could no longer effectively engage, the actuator would be prone to possible slippage. Due to the similarity of the design, the potential condition could develop at multiple flap supports. Should degradation reach the point where both actuators on a single flap were unable to react to the torsion created by air loads, an uncommanded flap retraction, or blowback could occur. The condition of uncommanded roll with flaps extended, due to flap blowback, overload, or flap departure from the airplane, could compromise safe flight and landing of the airplane.
We reviewed Boeing Alert Service Bulletin 767–27A0229, dated March 4, 2014. For information on the procedures and compliance times, see this service information at
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 the same type design.
This proposed AD would require accomplishing the repetitive inspections for corrosion of the fixed ring gear and reaction ring splines of the rotary actuator assembly for each support position, and related investigative and corrective actions if necessary, specified in the service information described previously.
The phrase “related investigative actions” is used in this proposed AD. “Related investigative actions” are follow-on actions that (1) are related to the primary actions, and (2) further investigate the nature of any condition found. Related investigative actions in an AD could include, for example, inspections.
The phrase “corrective actions” is used in this proposed AD. “Corrective actions” are actions that correct or address any condition found. Corrective actions in an AD could include, for example, repairs.
The FAA worked in conjunction with industry, under the Airworthiness Directive Implementation Aviation Rulemaking Committee, to enhance the
As noted in the specified service information, steps labeled as RC must be done to comply with the proposed AD. However, steps that are not labeled as RC are recommended. Those steps that are not labeled as RC may be deviated from, done as part of other actions, or done using accepted methods different from those identified in the service information without obtaining approval of an alternative method of compliance (AMOC), provided the steps labeled as RC can be done and the airplane can be put back in a serviceable condition. Any substitutions or changes to steps labeled as RC will require approval of an AMOC.
We estimate that this proposed AD affects 389 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
We estimate the following costs to do any necessary repairs that would be required based on the results of the proposed inspection. We have no way of determining the number of aircraft that might need these repairs:
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.
(1) Is not a “significant regulatory action” under Executive Order 12866,
(2) Is not a “significant rule” under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979),
(3) Will not affect intrastate aviation in Alaska, and
(4) Will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by August 25, 2014.
None.
This AD applies to all The Boeing Company Model 767–200, –300, –300F, and –400ER series airplanes, certificated in any category.
Air Transport Association (ATA) of America Code 57, Wings.
This AD was prompted by a report of a trailing edge (TE) flap rotary actuator that had slipped relative to its mating reaction ring, which is attached to the flap support rib. We are issuing this AD to detect and correct reaction ring gears and rotary actuator gears from becoming disengaged with flaps extended and causing an uncommanded roll due to flap blowback, overload, or flap departure from the airplane, which could compromise safe flight and landing of the airplane.
Comply with this AD within the compliance times specified, unless already done.
Except as provided by paragraph (h) of this AD, at the applicable time specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 767–27A0229, dated March 4, 2014: Do a detailed inspection for corrosion of the rotary actuator assembly fixed ring gear and reaction ring splines for each support position; and do all applicable related investigative and corrective actions if necessary; in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 767–27A0229, dated March 4, 2014. Do all applicable related investigative and corrective actions before further flight. Repeat the inspection of the rotary actuator assembly fixed ring gear and reaction ring splines for each support position thereafter at the applicable intervals specified in paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 767–27A0229, dated March 4, 2014.
Where paragraph 1.E., “Compliance,” of Boeing Alert Service Bulletin 767–27A0229, dated March 4, 2014, specifies a compliance time “after the original issue date of this service bulletin,” this AD requires compliance within the specified compliance time “after the effective date of this AD.”
(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (j) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(3) An AMOC that provides an acceptable level of safety may be used for any repair required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Seattle ACO, to make those findings. For a repair method to be approved, the repair must meet the certification basis of the airplane and the approval must specifically refer to this AD.
(4) If the service information contains steps that are labeled as RC (Required for Compliance), those steps must be done to comply with this AD; any steps that are not labeled as RC are recommended. Those steps that are not labeled as RC may be deviated from, done as part of other actions, or done using accepted methods different from those identified in the specified service information without obtaining approval of an AMOC, provided the steps labeled as RC can be done and the airplane can be put back in a serviceable condition. Any substitutions or changes to steps labeled as RC require approval of an AMOC.
(1) For more information about this AD, contact Allen Rauschendorfer, Aerospace Engineer, Airframe Branch, ANM–120S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057–3356; phone: 425–917–6487; fax: 425–917–6590; email:
(2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; telephone 206–544–5000, extension 1; fax 206–766–5680; Internet
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to adopt a new airworthiness directive (AD) for certain The Boeing Company Model 747–400 and 747–400F series airplanes. This proposed AD was prompted by reports of cracking in the main equipment center (MEC) drip shield and exhaust plenum. This proposed AD would require installing a fiberglass reinforcing overcoat on the MEC drip shield. We are proposing this AD to prevent water penetration into the MEC, which could result in an electrical short and potential loss of several functions essential for safe flight.
We must receive comments on this proposed AD by August 25, 2014.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
•
•
•
•
For service information identified in this proposed AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; telephone 206–544–5000, extension 1; fax 206–766–5680; Internet
You may examine the AD docket on the Internet at
Francis Smith, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM–150S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057–3356; telephone: 425–917–6596; fax: 425–917–6590; email:
We invite you to send any written relevant data, views, or arguments about this proposal. Send your comments to an address listed under the
We will post all comments we receive, without change, to
We have received reports of cracking in the MEC drip shield and exhaust plenum, which have each been identified as part of the leak path into the MEC. Multiple operators have reported a cracked MEC drip shield. These cracks can allow water to penetrate the MEC drip shield and enter the MEC. Water penetration into the MEC, if not detected and corrected, could result in an electrical short and potential loss of several functions essential for safe flight.
We have previously issued AD 2011–16–06, Amendment 39–16764 (76 FR 47427, August 5, 2011), for certain The Boeing Company Model 747–400 and 747–400F series airplanes. AD 2011–16–06 requires inspecting for cracks and holes of the MEC drip shields, repairing cracks, stiffening the drip shield top surface, and installing a fiberglass reinforcing overcoat to the top and sides of the drip shield. We have since received reports of additional cracking of the drip shield that is not mitigated by AD 2011–16–06. The newly reported cracking occurs at the lower radius of the MEC drip shield, adjacent to the floor beams.
We reviewed Boeing Alert Service Bulletin 747–25A3640, dated January 8, 2014. For information on the procedures and compliance times, see this service information at
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 the same type design.
This proposed AD would require accomplishing the actions specified in the service information described previously.
The FAA worked in conjunction with industry, under the Airworthiness Directive Implementation Aviation Rulemaking Committee, to enhance the AD system. One enhancement was a new process for annotating which steps in the service information are required for compliance with an AD. Differentiating these steps from other tasks in the service information is expected to improve an owner's/operator's understanding of crucial AD requirements and help provide consistent judgment in AD compliance. The actions specified in the service information described previously include steps that are labeled as RC (required for compliance) because these steps have a direct effect on detecting, preventing, resolving, or eliminating an identified unsafe condition.
As noted in the specified service information, steps labeled as RC must be done to comply with the proposed AD. However, steps that are not labeled as RC are recommended. Those steps that are not labeled as RC may be deviated from, done as part of other actions, or done using accepted methods different from those identified in the service information without obtaining approval of an alternative method of compliance, provided the steps labeled as RC can be done and the airplane can be put back in a serviceable condition. Any substitutions or changes to steps labeled as RC will require approval of an alternative method of compliance.
We estimate that this proposed AD affects 15 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
Title 49 of the United States Code specifies the FAA's authority to issue rules on aviation safety. Subtitle I, section 106, describes the authority of the FAA Administrator. Subtitle VII: Aviation Programs, describes in more detail the scope of the Agency's authority.
We are issuing this rulemaking under the authority described in Subtitle VII, Part A, Subpart III, Section 44701: “General requirements.” Under that section, Congress charges the FAA with promoting safe flight of civil aircraft in air commerce by prescribing regulations for practices, methods, and procedures the Administrator finds necessary for safety in air commerce. This regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We determined that this 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 above, 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, 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.
Air transportation, Aircraft, Aviation safety, Incorporation by reference, Safety.
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
We must receive comments by August 25, 2014.
None.
This AD applies to The Boeing Company Model 747–400 and 747–400F airplanes, certificated in any category, as identified in Boeing Alert Service Bulletin 747–25A3640, dated January 8, 2014.
Air Transport Association (ATA) of America Code 25, Equipment/Furnishings.
This AD was prompted by reports of cracking in the main equipment center (MEC) drip shield and exhaust plenum. We are issuing this AD to prevent water penetration into the MEC, which could result in an electrical short and potential loss of several functions essential for safe flight.
Comply with this AD within the compliance times specified, unless already done.
Within 24 months after the effective date of this AD, install a fiberglass reinforcing overcoat on the MEC drip shield, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 747–25A3640, dated January 8, 2014.
(1) The Manager, Seattle Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (i)(1) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(3) An AMOC that provides an acceptable level of safety may be used for any repair required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Seattle ACO, to make those findings. For a repair method to be approved, the repair must meet the certification basis of the airplane, and the approval must specifically refer to this AD.
(4) If the service information contains steps that are labeled as RC (Required for Compliance), those steps must be done to comply with this AD; any steps that are not labeled as RC are recommended. Those steps that are not labeled as RC may be deviated from, done as part of other actions, or done using accepted methods different from those identified in the specified service information without obtaining approval of an AMOC, provided the steps labeled as RC can be done and the airplane can be put back in a serviceable condition. Any substitutions or changes to steps labeled as RC require approval of an AMOC.
(1) For more information about this AD, Francis Smith, Aerospace Engineer, Cabin Safety and Environmental Systems Branch, ANM–150S, FAA, Seattle Aircraft Certification Office, 1601 Lind Avenue SW., Renton, WA 98057–3356; telephone: 425–917–6596; fax: 425–917–6590; email:
(2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; telephone 206–544–5000, extension 1; fax 206–766–5680; Internet
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to supersede Airworthiness Directive (AD) 2005–14–07, which applies to certain The Boeing Company Model 727, 727C, 727–100, 727–100C, 727–200, and 727–200F series airplanes. AD 2005–14–07 currently requires repetitive inspections of the carriage attach fittings on the inboard and outboard foreflaps of each wing for cracking and other discrepancies, and corrective actions if necessary. Since we issued AD 2005–14–07, we received a report of broken inboard and outboard carriage attach fittings of the outboard foreflaps found during an inspection. This proposed AD would reduce certain repetitive inspection intervals for the inboard and outboard carriage attach fittings for the outboard foreflaps, require previously optional terminating actions which install improved outboard foreflap carriage attach fittings, and add new initial and repetitive inspections of those fittings and corrective actions if necessary. We are proposing this AD to detect and correct fatigue cracking of the attach fittings of the foreflap carriage of the wings, which could result in partial or complete loss of the foreflap and consequent loss of controllability of the airplane.
We must receive comments on this proposed AD by August 25, 2014.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
• Federal eRulemaking Portal: Go to
• Fax: 202–493–2251.
• Mail: U.S. Department of Transportation, Docket Operations, M–30, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590.
• Hand Delivery: Deliver to Mail address above between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.
For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; telephone 206–544–5000, extension 1; fax 206–766–5680; Internet
You may examine the AD docket on the Internet at
Chandraduth Ramdoss, Aerospace Engineer, Airframe Branch, ANM–120L, FAA, Los Angeles Aircraft Certification Office, 3960 Paramount Boulevard, Lakewood, CA 90712–4137; phone: 562–627–5239; fax: 562–627–5210; email
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
On June 29, 2005, we issued AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), for certain Boeing Model 727, 727C, 727–100, 727–100C, 727–200, and 727–200F series airplanes. AD 2005–14–07 requires repetitive inspections of the carriage attach fittings on the inboard and outboard foreflaps of each wing for cracking and other discrepancies, and corrective actions if necessary. For certain airplanes, AD 2005–14–07 also concurrently requires various other actions related to the subject area. AD 2005–14–07 also provides for an optional terminating action for the repetitive inspection requirements and for an optional replacement that defers the repetitive inspections. AD 2005–14–07 resulted from reports of damaged or failed outboard foreflaps with a cracked or failed carriage attach fitting of the foreflap sequencing carriage. We issued AD 2005–14–07 to detect and correct fatigue cracking of the attach fittings of the foreflap carriage of the wings, which could result in partial or complete loss of the foreflap and consequent loss of controllability of the airplane.
Since we issued AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), we received a report of broken inboard and outboard carriage attach fittings of the outboard foreflaps found during an inspection required by AD 2005–14–07. The airplane had 47,125 flight cycles. Boeing stated that the metallurgical analysis determined that the cause of the broken fittings is a suspected static overload condition.
We reviewed Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. For information on the procedures and compliance times, see this service information at
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 the same type design.
This proposed AD would retain all requirements of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005). This proposed AD would reduce certain repetitive inspection intervals for the inboard and outboard carriage attach fittings of the outboard foreflaps, require previously optional terminating actions which install improved outboard foreflap carriage attach fittings, and add new initial and repetitive inspections of those fittings and corrective action if necessary. This proposed AD would also require accomplishing the actions specified in the service information described previously. This proposed AD would also add a reference to Figure 3 of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002, in paragraph (i)(2) of this proposed AD that restates the requirements of paragraph (i) of AD 2005–14–07, to provide for further information on corrective actions.
The phrase “corrective actions” is used in this proposed AD. “Corrective actions” are actions that correct or address any condition found. Corrective actions in an AD could include, for example, repairs.
This proposed AD would retain all requirements of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005). Since AD 2005–14–07 was issued, the AD format has been revised, and certain paragraphs have been rearranged. As a result, the corresponding paragraph identifiers have been redesignated in this proposed AD, as listed in the following table:
We estimate that this proposed AD affects 98 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
We estimate the following costs to do any necessary replacements that would be required based on the results of the proposed inspection. We have no way of determining the number of aircraft that might need these replacements:
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 proposed regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We have determined that this 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 above, I certify that the 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, 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.
Air transportation, Aircraft, Aviation safety,
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this AD action by August 25, 2014.
This AD supersedes AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005).
This AD applies to Boeing Model 727, 727C, 727–100, 727–100C, 727–200, and 727–200F series airplanes, certificated in any category, as listed in Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002.
Air Transport Association (ATA) of America Code 57, Wings.
This AD was prompted by a report of broken carriage attach fittings of the inboard and outboard foreflaps found during an inspection and an additional report of broken inboard and outboard carriage attach fittings of the outboard foreflaps found during an inspection. We are issuing this AD to detect and correct fatigue cracking of the attach fittings of the foreflap carriage of the wings, which could result in partial or complete loss of the foreflap and consequent loss of controllability of the airplane.
Comply with this AD within the compliance times specified, unless already done.
This paragraph restates the requirements of paragraph (f) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with revised service information and new compliance time. Except as provided by paragraph (l) of this AD: Within 1,000 flight cycles after August 15, 2005 (the effective date of AD 2005–14–07) or within 6 months after the effective date of this AD, whichever occurs first, and thereafter at intervals not to exceed 1,000 flight cycles, except as required by paragraph (m) of this AD (for outboard foreflaps), inspect as specified in paragraphs (g)(1) and (g)(2) of this AD in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or Revision 4, dated September 26, 2012. As of the effective date of this AD, use only Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. Accomplishing the actions of paragraph (m) or (o) of this AD terminates the inspections required by this paragraph for outboard foreflaps only.
(1) A detailed inspection to detect cracks and surface deviations on all edges, surfaces, and lug attachment fastener holes on the two carriage attach fittings on the inboard and outboard foreflaps of each wing.
(2) A high frequency eddy current (HFEC) inspection to detect cracks at the lug attachment fastener holes on the two carriage attach fittings on the inboard and outboard foreflaps of each wing.
This paragraph restates the requirements of paragraph (g) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with revised service information. If any crack is detected or if any surface deviation beyond the limits specified in Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or Revision 4, dated September 26, 2012; is detected during any inspection required by paragraph (g) or (m) of this AD, before further flight, replace the carriage attach fitting with a new, improved fitting or a new fitting having the same part number as the existing fitting, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or Revision 4, dated September 26, 2012. As of the effective date of this AD, use only Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012.
(1) This paragraph restates the requirements of paragraph (h) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with revised service information. Within 3,500 flight cycles after August 15, 2005 (the effective date of AD 2005–14–07), inspect for interference between the carriage attach fitting and the carriage lug fitting, and do other related investigative actions by accomplishing all the actions specified in paragraph 3.C. and Figure 2 of the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or paragraph 3.B.3 and Figure 2 of the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. Do the actions in accordance with Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or Revision 4, dated September 26, 2012. As of the effective date of this AD, use only Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012.
(2) Paragraphs (i)(2)(i) and (i)(2)(ii) of this AD restate the requirements of paragraph (i) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with revised service information.
(i) If any discrepancy is found during any action required by paragraph (i)(1) of this AD, before further flight, accomplish applicable corrective action(s) (e.g., adding a shim or reworking the carriage attachment lug assembly) in accordance with paragraph 3.C. and Figure 2 or 3 of the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or paragraph 3.B.3. and Figure 3 of the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012; except as required by paragraph (i)(2)(ii) of this AD. As of the effective date of this AD, use only Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012.
(ii) Where Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; or Revision 4, dated September 26, 2012; specify to contact the manufacturer if rework of the improved fitting is required: Before further flight, rework in accordance with a method approved by the Manager, Seattle Aircraft Certification Office (ACO), or Los Angeles ACO, FAA, or in accordance with data meeting the type certification basis of the airplane approved by an Authorized Representative (AR) for the Boeing Delegation Option Authorization (DOA) Organization who has been authorized by the FAA to make such findings, or using a method approved in accordance with the procedures specified in paragraph (s) of this AD. For a repair method to be approved, the repair must meet the certification basis of the airplane, and the approval must specifically reference this AD. As of the effective date of this AD, any new repair approval must be done using a method approved in accordance with the procedures specified in paragraph (s) of this AD.
(1) This paragraph restates the requirements of paragraph (j) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with new paragraph reference. For Model 727 airplanes listed in Boeing 727 Service Bulletin 57–59, Revision 1, dated September 27, 1965: Before or at the same time with the requirements of paragraph (i) or (o) of this AD, install guide blocks and bushings in the midflap ribs in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–59, Revision 1, dated September 27, 1965.
(2) This paragraph restates the requirements of paragraph (k) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with new paragraph reference. For Model 727 airplanes listed in Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972: Before or at the same time with the requirements of paragraph (i) or (o) of this AD, do the actions specified in paragraphs (j)(2)(i) and (j)(2)(ii) of this AD, as applicable.
(i) For Groups I and II airplanes identified in Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972: Do a one-time inspection of the airload support roller for travel on the foreflap track in accordance with Part I of the Accomplishment Instructions of Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972.
(A) If the airload support roller travels within the limits specified in Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972, modify the control drum of the inboard flap and inboard jackscrews of the outboard flap, in accordance with Part II of the Accomplishment Instructions of Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972.
(B) If the airload support roller travels beyond the limits specified in Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972, repair in accordance with a method approved by the Manager, Seattle ACO, or Los Angeles ACO, FAA; or in accordance with data meeting the type certification basis of the airplane approved by an AR for the Boeing DOA Organization who has been authorized by the FAA to make such
(ii) For Group III airplanes identified in Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972: Modify the inboard jackscrews of the outboard flap (i.e., replacing the down stop at the inboard jackscrews of the outboard flap) in accordance with Part II of the Accomplishment Instructions of Boeing Service Bulletin 727–27–133, Revision 1, dated May 9, 1972.
(3) This paragraph restates the requirements of paragraph (l) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with new paragraph reference. For Model 727 airplanes listed in Boeing 727 Service Bulletin 57–72, dated September 21, 1966: Before or at the same time with the requirements of paragraph (i) or (o) of this AD, do the actions specified in paragraphs (j)(3)(i) through (j)(3)(iv) of this AD.
(i) Chamfer the upper and lower flanges at the aft end of the foreflap tracks in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–72, dated September 21, 1966.
(ii) Do a standard magnetic particle inspection of the entire foreflap tracks for cracks in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–72, dated September 21, 1966. If any crack is detected, before further flight, repair in accordance with a method approved by the Manager, Seattle ACO, or Los Angeles ACO, FAA; or in accordance with data meeting the type certification basis of the airplane approved by an AR for the Boeing DOA Organization who has been authorized by the FAA to make such findings, or using a method approved in accordance with the procedures specified in paragraph (s) of this AD. For a repair method to be approved, the repair must meet the certification basis of the airplane, and the approval must specifically reference this AD. As of the effective date of this AD, any new repair approval must be done using a method approved in accordance with the procedures specified in paragraph (s) of this AD.
(iii) Do a general visual inspection of the track rib faces at the front and rear spars to verify if the opening in the spars is flush with or clear of the plane of the rib faces, in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–72, dated September 21, 1966. If the opening is not flush or clear with the plane, before further flight, rework the spar opening in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–72, dated September 21, 1966.
(iv) Do a general visual inspection of the head or shank of bolts by securing the foreflap links to the foreflap tracks to verify if they protrude beyond the edge of the track flange in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–72, dated September 21, 1966. If the head or shank of the bolts protrude beyond the edge of the track flange, before further flight, rework in accordance with the Accomplishment Instructions of Boeing 727 Service Bulletin 57–72, dated September 21, 1966.
(v) For the purposes of this AD, a general visual inspection is defined as: “A visual examination of an interior or exterior area, installation, or assembly to detect obvious damage, failure, or irregularity. This level of inspection is made from within touching distance unless otherwise specified. A mirror may be necessary to enhance visual access to all exposed surfaces in the inspection area. This level of inspection is made under normally available lighting conditions such as daylight, hangar lighting, flashlight, or droplight and may require removal or opening of access panels or doors. Stands, ladders, or platforms may be required to gain proximity to the area being checked.”
(4) This paragraph restates the requirements of paragraph (m) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with a new paragraph identifier. For airplanes other than those identified in the service information specified in paragraphs (j)(1) through (j)(3) of this AD: Before or at the same time with the requirements of paragraph (i) or (o) of this AD, do an inspection to verify if any of the parts listed in the “Spares Affected” paragraph of each service information referenced in paragraphs (j)(1) through (j)(3) of this AD are installed on the airplane. If any part identified in that paragraph is found installed, before further flight, do the applicable corrective and investigative action(s) specified in paragraphs (j)(1) through (j)(3) of this AD.
This paragraph restates the requirements of paragraph (n) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with no changes. Replacement of the two carriage attach fittings on the inboard and outboard foreflaps of each wing with new, improved fittings, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; and accomplishment of the actions specified in paragraphs (j)(1) through (j)(4) of this AD, as applicable, before or concurrently with the replacement; constitutes terminating action for paragraphs (g) through (j) of this AD and paragraph (l) of this AD for those replaced fittings on the outboard and inboard foreflaps.
This paragraph restates the optional deferral of paragraph (o) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with no changes. Replacement of the two carriage attach fittings on the inboard and outboard foreflaps of each wing with new fittings having the same part number as the existing fittings, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 3, dated June 27, 2002; and accomplishment of the actions specified in paragraphs (j)(1) through (j)(4) of this AD, as applicable, before or concurrently with the replacement; defers the next inspection required by paragraph (g) of this AD for 10,000 flight cycles after the replacement. Thereafter, repeat the inspections required by paragraph (g) of this AD at intervals not to exceed 1,000 flight cycles, except as required by paragraph (m) of this AD.
Within 1,000 flight cycles after the most recent accomplishment of the inspections required by paragraph (g) of this AD, do a detailed inspection to detect cracks and surface deviations on all edges, surfaces, and lug attachment fastener holes, and a HFEC inspection to detect cracks at the lug attachment fastener holes, on the two carriage attach fittings on the outboard foreflaps of each wing, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012, and do all applicable corrective actions required by paragraph (h) of this AD. Repeat the inspections thereafter at intervals not to exceed 200 flight cycles until the requirements of paragraph (o) of this AD is accomplished. Accomplishing the requirements of this paragraph terminates the requirements of paragraph (g) of this AD for the outboard foreflaps only.
Within 200 flight cycles or 6 months after the effective date of this AD, whichever occurs first, do a general visual inspection and function check for damage and incorrect operation of the outboard foreflap installations, and all applicable corrective actions, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. Do the applicable corrective actions before further flight. Thereafter, repeat the inspection and check at intervals not to exceed 500 flight cycles.
For airplanes on which any production carriage attach fitting is still installed on the outboard foreflap: Within 3,000 flight cycles or 3 years after the effective date of this AD, whichever occurs first, replace all production carriage attach fittings with new, improved carriage attach fittings, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012, and do all applicable concurrent actions required by paragraph (k) of this AD. Accomplishing the requirements of this paragraph terminates the requirements of paragraphs (g) and (m) of this AD for outboard foreflaps only.
For airplanes on which a new carriage attach fitting with the original part number on the outboard foreflap was installed in accordance with paragraph (l) of this AD: Do the actions specified in paragraphs (p)(1) and (p)(2) of this AD.
(1) Within 1,000 flight cycles after the effective date of this AD, do a detailed inspection for cracks and surface deviation on all edges surfaces, and lug attachment fastener holes, and a HFEC inspection for cracks at the lug attachment fastener holes, on the carriage attach fittings for the outboard foreflaps, and do all applicable corrective actions, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. Repeat the inspection at intervals not to exceed 200 flight cycles. Do all applicable corrective actions before further flight.
(2) Within 3,000 flight cycles or 3 years after the effective date of this AD, replace the fitting with a new, improved fitting in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. Accomplishing the requirements of this paragraph terminates the requirements of paragraphs (g), (m), and (p)(1) of this AD for that outboard foreflap only.
For airplanes on which a new, improved carriage attach fitting on the outboard foreflap was replaced in accordance with the requirements of paragraph (k), (o), or (p) of this AD: Within 20,000 flight cycles after installing that fitting, do a detailed inspection for cracks and surface deviation on all edges surfaces, and lug attachment fastener holes, and a HFEC inspection for cracks at the lug attachment fastener holes, on the carriage attach fittings for the outboard foreflaps, and do all applicable corrective actions, in accordance with the Accomplishment Instructions of Boeing Alert Service Bulletin 727–57A0135, Revision 4, dated September 26, 2012. Do all applicable corrective actions before further flight. Repeat the inspection thereafter at intervals not to exceed 1,400 flight cycles. Accomplishing the requirements of this paragraph terminates the requirements of paragraph (g) of this AD for outboard foreflaps only.
(1) This paragraph restates the credit provided by paragraph (p) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with no changes. Installations accomplished before August 15, 2005 (the effective date of AD 2005–14–07), in accordance with Boeing 727 Service Bulletin 57–59, dated September 2, 1965, are acceptable for compliance with the requirements of paragraph (j)(1) of this AD.
(2) This paragraph restates the credit provided by paragraph (q) of AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), with no changes. Inspections and modifications accomplished before August 15, 2005 (the effective date of AD 2005–14–07), in accordance with Boeing Service Bulletin 727–27–133, dated October 7, 1971, are acceptable for compliance with the requirements of paragraph (j)(2) of this AD.
(1) The Manager, Los Angeles Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in paragraph (u) of this AD. Information may be emailed to:
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(3) An AMOC that provides an acceptable level of safety may be used for any repair required by this AD if it is approved by the Boeing Commercial Airplanes Organization Designation Authorization (ODA) that has been authorized by the Manager, Los Angeles ACO, to make those findings. For a repair method to be approved, the repair must meet the certification basis of the airplane, and the approval must specifically refer to this AD.
(4) AMOCs approved for AD 2005–14–07, Amendment 39–14184 (70 FR 39647, July 11, 2005), are approved as AMOCs for the corresponding provisions of this AD.
(1) For more information about this AD, contact Chandraduth Ramdoss, Aerospace Engineer, Airframe Branch, ANM–120L, FAA, Los Angeles Aircraft Certification Office, 3960 Paramount Boulevard, Lakewood, CA 90712–4137; phone: 562–627–5239; fax: 562–627–5210; email
(2) For service information identified in this AD, contact Boeing Commercial Airplanes, Attention: Data & Services Management, P.O. Box 3707, MC 2H–65, Seattle, WA 98124–2207; telephone 206–544–5000, extension 1; fax 206–766–5680; Internet
Federal Aviation Administration (FAA), DOT.
Notice of proposed rulemaking (NPRM).
We propose to supersede an existing airworthiness directive (AD) that applies to certain Piper Aircraft, Inc. Models PA–31P airplanes. AD 76–06–09 currently requires repetitive inspection of certain exhaust system parts with replacement of parts mating with the turbocharger, as necessary, and allows installation of a certain tailpipe v-band coupling as terminating action. Since we issued AD 76–06–09, there have been reports of exhaust system failures, the manufacturer issued new service information, and the tailpipe v-band coupling used for terminating action is obsolete. This proposed AD would require the use of the new service information and expand the scope of the inspections of the turbocharger exhaust system. We are proposing this AD to correct the unsafe condition on these products.
We must receive comments on this proposed AD by August 25, 2014.
You may send comments, using the procedures found in 14 CFR 11.43 and 11.45, by any of the following methods:
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For service information identified in this AD, use the following contact information, as applicable, Piper Aircraft, Inc., 2926 Piper Drive, Vero Beach, Florida 32960; telephone: (772) 567–4361; fax: (772) 978–6573; Internet:
You may examine the AD docket on the Internet at
Gary Wechsler, Aerospace Engineer, Atlanta Aircraft Certification Office, FAA, 1701 Columbia Avenue, College Park, Georgia 30337; telephone: (404) 474–5575; fax: (404) 474–5606; email:
We invite you to send any written relevant data, views, or arguments about this proposed AD. Send your comments to an address listed under the
We will post all comments we receive, without change, to
On October 17, 1978, we issued AD 76–06–09, Amendment 39–3325 (43 FR 50417, October 30, 1978), for certain Piper Aircraft, Inc. Model PA–31P airplanes. AD 76–06–09 requires repetitive inspection of certain exhaust system parts with replacement of parts mating with the turbocharger, as necessary, and allows installation of a certain tailpipe v-band coupling as terminating action. AD 76–06–09 resulted from reports of exhaust system failure. We issued AD 76–06–09 to preclude failure of the engine exhaust system.
Since we issued AD 76–06–09, Amendment 39–3325 (43 FR 50417, October 30, 1978), there have been exhaust system failures, the manufacturer issued new service information, and the tailpipe v-band coupling used for terminating action is obsolete.
We reviewed Textron Lycoming Mandatory Service Bulletin No. 393C, dated November 26, 1976; Piper Aircraft Corporation Service Bulletin No. 462A, dated November 3, 1975; Piper Aircraft, Inc. Service Bulletin No. 492A, dated May 29, 2012; Piper Aircraft, Inc. Service Bulletin No. 644E, dated May 9, 2012; Piper Aircraft Corporation kit part number (P/N) 760 974, dated February 19, 1976; Piper Aircraft Corporation kit P/N 761 045, dated February 19, 1976; and Piper Aircraft Corporation kit P/N 761 047, dated February 19, 1976. The service information describes procedures for inspecting and replacing parts of the turbocharger exhaust v-band couplings, vibration isolators, and support brackets.
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 the same type design.
This proposed AD would retain certain requirements of AD 76–06–09, Amendment 39–3325 (43 FR 50417, October 30, 1978). This proposed AD would require the use of the new service information and expand the scope of the inspections of the turbocharger exhaust system.
We estimate that this proposed AD affects 85 airplanes of U.S. registry.
We estimate the following costs to comply with this proposed AD:
We have no way of determining how much damage may be found on each airplane during the proposed inspection. The scope of damage on the exhaust system could vary from airplane to airplane due to the manner and environments the airplane may operate. We estimate the following costs to do any necessary modification/installation/replacement that would be required based on the results of the proposed inspection. We have no way of determining what damage may be found or the number of airplanes that might need these modification/installation/replacements:
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 proposed regulation is within the scope of that authority because it addresses an unsafe condition that is likely to exist or develop on products identified in this rulemaking action.
We have determined that this 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 above, I certify that the 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, 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.
Air transportation, Aircraft, Aviation safety,
Accordingly, under the authority delegated to me by the Administrator, the FAA proposes to amend 14 CFR part 39 as follows:
49 U.S.C. 106(g), 40113, 44701.
The FAA must receive comments on this AD action by August 25, 2014.
This AD supersedes AD 76–06–09, Amendment 39–3325 (43 FR 50417, October 30, 1978).
This AD applies to Piper Aircraft, Inc. Models PA–31P airplanes, serial numbers 31P–1 through 31P–80 and 31P–7300110 through 31P–7730012, that are certificated in any category.
Joint Aircraft System Component (JASC)/Air Transport Association (ATA) of America Code 78, Engine Exhaust.
This AD was prompted by reports of exhaust system failures, new service information issued by the manufacturer, and the tailpipe v-band coupling used for terminating action is obsolete. We are issuing this AD to prevent the possibility of an in-flight powerplant fire due to an exhaust system failure.
Comply with this AD within the compliance times specified, unless already done.
(1) Within the next 60 hours time-in-service (TIS) after the effective date of this AD or within the next 6 months after the effective date of this AD, whichever occurs first, and repetitively thereafter at intervals not to exceed 60 hours TIS or 6 months, whichever occurs first, inspect the parts as specified in table 1 of paragraph (g)(1) of this AD, if installed.
(2) If any damage is found in any inspection required in paragraph (g)(1) of this AD, before further fight, do the corrective actions, as applicable, in paragraphs (g)(2)(i) through (g)(2)(iv).
(i) Replace Piper v-band couplings exhibiting cracks and/or exhaust leak stains with airworthy parts following Piper Aircraft, Inc. Mandatory Service Bulletin No. 644E, dated May 9, 2012. Replace Lycoming v-band couplings exhibiting cracks and/or exhaust leak stains with airworthy parts following Lycoming Service Instruction No. 1238B, Revision B, dated January 6, 2010.
During replacement of v-band couplings, we recommend not opening the v-band coupling more than the MINIMUM diameter necessary to clear coupled flanges. It is recommended to replace any locknuts and/or mating couplings with airworthy parts when locknuts do not exhibit a prevailing torque when installed.
(ii) Replace Lycoming exhaust system parts exhibiting bulges, cracks, and/or exhaust leak stains with airworthy parts following Lycoming Service Instruction No. 1320, dated March 7, 1975; or Lycoming Service Instruction No. 1391, dated October 5, 1979, as applicable.
(iii) Replace Piper tail pipe assembly parts exhibiting bulges, cracks, and/or exhaust leak stains with airworthy parts following Piper Aircraft, Inc. Mandatory Service Bulletin No. 644E, dated May 9, 2012.
(iv) Replace Piper isolators and brackets exhibiting cracks, looseness and/or distortion following Piper Aircraft, Inc. Service Bulletin No. 462A, dated November 3, 1975; and Service Bulletin No. 492A, dated May 29, 2012.
(1) Within the next 100 hours TIS after the effective date of this AD or within the next 12 months after the effective date of this AD, whichever occurs first, review the airplane maintenance records to positively identify whether the modifications described in paragraphs (h)(1)(i) through (h)(1)(iii) of this AD have been done.
(i) Exhaust pipe slip joint modification following Piper Aircraft, Inc. Service Bulletin No. 492A, dated May 29, 2012; and Lycoming Service Bulletin No. 393C, dated November 26, 1976.
(ii) Installation of bracket and clamp assembly following Piper Kit No. 760–974 as specified in Piper Aircraft, Inc. Service Bulletin No. 492A, dated May 29, 2012; or Piper Aircraft, Inc. Service Bulletin 462A, dated November 3, 1975.
(iii) Replacement of Piper v-band coupling, part number 556–053, with Piper v-band coupling, part number 557–369, following Piper Aircraft, Inc. Mandatory Service Bulletin No. 644E, dated May 9, 2012.
(2) If you cannot positively identify that the modifications described in paragraphs (h)(1)(i) through (h)(1)(iii) of this AD have been done, before further flight, you must do the modifications described in paragraphs (h)(2)(i) through (h)(2)(ii), as applicable.
(i) Exhaust pipe slip joint modification following Piper Aircraft, Inc. Service Bulletin No. 492A, dated May 29, 2012, and Lycoming Service Bulletin SB 393C, dated November 26, 1976.
(ii) Installation of bracket and clamp assembly following Piper Kit No. 760–974 as specified in Piper Aircraft, Inc. Service Bulletin No. 492A, dated May 29, 2012; or Piper Aircraft, Inc. Service Bulletin 462A, dated November 3, 1975.
(iii) Replacement of Piper v-band coupling, part number 556–053, with Piper v-band coupling, part number 557–369, following Piper Aircraft, Inc. Mandatory Service Bulletin No. 644E, dated May 9, 2012.
(1) The Manager, Atlanta Aircraft Certification Office (ACO), FAA, has the authority to approve AMOCs for this AD, if requested using the procedures found in 14 CFR 39.19. In accordance with 14 CFR 39.19, send your request to your principal inspector or local Flight Standards District Office, as appropriate. If sending information directly to the manager of the ACO, send it to the attention of the person identified in the Related Information section of this AD.
(2) Before using any approved AMOC, notify your appropriate principal inspector, or lacking a principal inspector, the manager of the local flight standards district office/certificate holding district office.
(1) For more information about this AD, contact Gary Wechsler, Aerospace Engineer, Atlanta ACO, FAA, 1701 Columbia Avenue, College Park, Georgia 30337; telephone: (404) 474–5575; fax: (404) 474–5606; email:
(2) For service information identified in this AD, contact FAA, Small Airplane Directorate, 901 Locust, Kansas City, Missouri 64106. For information on the availability of this material at the FAA, call (816) 329–4148.
Internal Revenue Service (IRS), Treasury.
Correction to notice of proposed rulemaking.
This document contains corrections to a notice of proposed rulemaking and notice of public hearing (REG–150760–13) that was published in the
Written or electronic comments and request for a public hearing for the notice of proposed rulemaking and notice of public hearing published at 79 FR 27508, May 14, 2014, are still being accepted and must be received by August 12, 2014.
Andrea M. Hoffenson, at (202) 317–7053 (not a toll-free number).
The notice of proposed rulemaking and notice of public hearing that is the subject of this document is under section 856 of the Internal Revenue Code.
As published, the notice of proposed rulemaking and notice of public hearing (REG–150760–13) contains errors that are misleading and are in need of clarification.
Accordingly, notice of proposed rulemaking and notice of public hearing, that is the subject of FR Doc. 2014–11115, is corrected as follows:
1. On page 27508, in the preamble, first column, under the caption
2. On page 27510, in the preamble, second column, sixteenth line of the second full paragraph, the language “investment credit contexts, this” is corrected to read “investment tax credit contexts, this”.
3. On page 27510, in the preamble, third column, eighth and ninth lines of the first full paragraph, the language “depreciation, (prior) investment tax credit, and FIRPTA contexts. In drafting” is corrected to read “depreciation and (prior) investment tax credit contexts. In drafting”.
4. On page 27512, second column, fourth line of paragraph (e)(2), the language “is a distinct asset is based on all of the” is corrected to read “is a distinct asset is based on all the”.
5. On page 27512, third column, eighth line of paragraph (g)
6. On page 27512, third column, the last line of paragraph (g)
7. On page 27513, first column, paragraph (g)
8. On page 27513, second column, paragraph (g)
9. On page 27515, second column, paragraph (g)
10. On page 27515, second column, paragraph (g)
11. On page 27515, second column, paragraph (g)
12. On page 27515, second column, paragraph (g)
13. On page 27515, third column, paragraph (h), the third line, the language “quarters beginning on or before the date” is corrected to read “quarters beginning after the date”.
Environmental Protection Agency (EPA).
Proposed rule.
The Environmental Protection Agency (EPA) proposes to approve the State Implementation Plan (SIP) revision submitted by the State of Maryland for the purpose of incorporating by reference the most recent amendments to California's Low Emission Vehicle (LEV) program. The Clean Air Act (CAA) contains authority by which other states may adopt new motor vehicle emissions standards that are identical to California's standards. Maryland has adopted by reference California's light and medium-duty vehicle emissions and fuel standards, and consistent with California, submits amendments to these standards as revisions to the State's SIP. In this SIP revision, Maryland is updating its Low Emissions Vehicle Program regulation to adopt by reference California's Advanced Clean Car Program. In the Final Rules section of this
Comments must be received in writing by August 8, 2014.
Submit your comments, identified by Docket ID Number EPA–R03–OAR–2014–0310 by one of the following methods:
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Emlyn Vélez-Rosa, (215) 814–2038, or by email at
For further information regarding the amendments to Maryland's Low Emission Vehicle Program, please see the information provided in the direct final rulemaking action, with the same title, that is located in the “Rules and Regulations” section of this
Environmental Protection Agency (EPA).
Notice of proposed rulemaking.
Pursuant to the U.S. Environmental Protection Agency's Significant New Alternatives Policy program, this action proposes to list a number of flammable refrigerants as acceptable substitutes, subject to use conditions, for ozone-depleting substances in several end-uses: Household refrigerators and freezers, stand-alone commercial refrigerators and freezers, very low temperature refrigeration, non-mechanical heat transfer, vending machines, and room air conditioning units. This action also proposes to exempt from Clean Air Act Section 608's prohibition on venting, release, or disposal the hydrocarbon refrigerant substitutes that we are proposing to list in this action as acceptable subject to use conditions in specific end-uses. We are proposing this exemption on the basis of current evidence that their venting, release, or disposal would not pose a threat to the environment.
Comments must be received on or before September 8, 2014. Any party requesting a public hearing must notify the contact listed below under
Submit your comments, identified by Docket ID No. EPA–HQ–OAR–2013–0748, by one of the following methods:
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Margaret Sheppard, Stratospheric Protection Division, Office of Atmospheric Programs, Mail Code 6205J, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number (202) 343–9163; fax number (202) 343–2338, email address:
This rule lists as acceptable subject to use conditions a number of flammable refrigerant substitutes that EPA believes present overall lower risk to human health and the environment compared to other available or potentially available alternatives in the same end-uses. The proposed refrigerants include one hydrofluorocarbon (HFC) refrigerant—HFC–32—and four hydrocarbon refrigerants—ethane, isobutane, propane, and R–441A. This proposed rule, if finalized as proposed, would list one or more of these substitutes as acceptable subject to use conditions in a number of stationary air conditioning (AC) and refrigeration end-uses under the SNAP program, including: household refrigerators and freezers, retail food refrigeration, very low temperature refrigeration, non-mechanical heat transfer, vending machines, and residential and light commercial AC and heat pumps. The use conditions would set requirements to ensure that these substitutes do not present significantly greater risk in the end-use than other substitutes that are currently or potentially available.
All of the end-uses proposed in this rule are for stationary refrigeration or AC; EPA previously addressed flammable refrigerants in motor vehicle air conditioning (MVAC). On June 13, 1995, at 60 FR 31092, the Agency found all flammable substitutes to be unacceptable for use in MVAC unless specifically listed as acceptable subject to use conditions because of flammability risks and the lack of sufficient risk assessment and sufficient information to demonstrate safe use in that end-use at that time. 40 CFR Part 82, Subpart G, Appendix B. Some of these risks are unique to motor vehicles. In recent years, EPA has listed three low global warming potential (GWP) refrigerants as acceptable subject to use conditions for motor vehicles (i.e., R–152a, R–1234yf, and R–744).
This proposed rule responds to a number of SNAP submissions for four hydrocarbon refrigerants and HFC–32 and also lists some of these refrigerants as acceptable subject to use conditions in the same end-uses. Additionally, this action proposes to exempt from Section 608's prohibition on venting, release, or disposal, the four hydrocarbon refrigerant substitutes that we are proposing to list as acceptable subject to use conditions in specific end-uses, on the basis of current evidence that their venting, release, or disposal does not pose a threat to the environment. Note that other environmental regulatory requirements still apply. For example, for those refrigerants that are volatile organic compounds (VOC) as defined in 40 CFR 50.100(s), i.e., isobutane, propane, and R–441A,
With the exception of HFC–32, the refrigerants proposed acceptable subject to use conditions in this action are hydrocarbons or blends consisting solely of hydrocarbons. Hydrocarbon refrigerants have been in use for over 15 years in countries such as Germany, the United Kingdom, Australia, and Japan in household and commercial refrigerators and freezers. To a lesser extent, hydrocarbon refrigerants have also been used internationally in small AC units such as mini-splits and portable room air conditioners.
Because hydrocarbon refrigerants have zero ozone depletion potential (ODP) and very low GWPs compared to most other refrigerants, many companies recently have expressed interest in using hydrocarbons in the United States. Also, some companies have reported improved energy efficiency with hydrocarbon refrigerants (A.S. Trust & Holdings, 2012; A/S Vestfrost, 2012; CHEAA, 2013).
In a final rule in the
There is interest in use of HFC–32 (difluoromethane, Chemical Abstracts Service Registry Number [CAS Reg. No.] 75–10–5) in residential AC systems and heat pumps because it has a GWP of 675, which is lower than the GWPs of hydrochlorofluorocarbon (HCFC)-22 (1,810) and most other HFC-based refrigerants (approximately 1,500 to 4,000). It also has mild flammability compared to hydrocarbon refrigerants. Mini-split systems using HFC–32 are
This action proposes to list one or more of these five lower-GWP refrigerant substitute options as acceptable subject to use conditions in the end-uses identified previously. This is a regular update to EPA's lists of acceptable substitutes through the SNAP program under the authority of Section 612 of the Clean Air Act.
This action also responds to a call in the Climate Action Plan announced June 2013 for EPA to “use its authority through the Significant New Alternatives Policy Program to encourage private sector investment in low-emissions technology by identifying and approving climate-friendly chemicals” (Climate Action Plan, 2013). This rule proposes to approve a number of climate-friendly alternatives for various kinds of refrigeration and AC equipment, as discussed below. This is the first listing action EPA has taken since the Climate Action Plan was issued.
This action, if finalized, would expand the menu of available climate-friendly alternatives. Many of these alternatives can substitute both for ozone-depleting substances and for high-GWP HFCs. Using low-GWP alternatives instead of high-GWP HFCs would reduce climate-damaging emissions. Use and emissions of HFCs is rapidly increasing because they are the primary substitutes for ozone-depleting substances in many of the largest end-uses, and because use is growing worldwide, mostly as a result of increased demand for refrigeration and AC, particularly in developing countries. Although they represent a small fraction of current total greenhouse gas (GHG) emissions, their warming impact is hundreds to thousands of times higher than that of CO
HFCs are rapidly accumulating in the atmosphere. For example, the atmospheric concentration of HFC–134a, the most abundant HFC, has increased by about 10% per year from 2006 to 2012, and concentrations of HFC–143a and HFC–125 have risen over 13% and 16% per year from 2007–2011, respectively (Montzka, 2012; NOAA, 2013).
This action proposes to find acceptable, for specific end-uses and subject to use conditions, several alternatives that have GWPs significantly lower than both the ozone-depleting substances (ODS) and HFC substitute refrigerants currently used in those end-uses. For example, this action, if finalized, would allow the use of isobutane (R–600a) and the hydrocarbon blend R–441A in stand-alone commercial refrigerators. The GWPs
This notice of proposed rulemaking (NPRM) would list the following flammable refrigerants as acceptable subject to use conditions for use in specific end-uses within the refrigeration and AC sector: ethane (R–170), HFC–32 (R–32), isobutane (R–600a), propane (R–290), and the hydrocarbon blend R–441A. Types of residential and light commercial AC equipment addressed in this NPRM include window AC units; packaged terminal AC units and heat pumps; and portable room AC units. Types of refrigeration equipment include stand-alone commercial refrigerators and freezers (retail food refrigeration), very low temperature freezers, thermosiphons (non-mechanical transfer equipment), household refrigerators and freezers, and vending machines.
Table 1 identifies the potential entities that may wish to use ethane, HFC–32, R–441A, isobutane, propane, and other flammable refrigerants in these end-uses.
This table is not intended to be exhaustive, but rather a guide regarding entities likely to adopt the substitutes whose use would be regulated by this proposed action. If you have any questions about whether this action applies to a particular entity, consult the person listed in the preceding section,
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Below is a list of acronyms and abbreviations used in this preamble.
Section 612 of the Clean Air Act (CAA) requires EPA to develop a program for evaluating alternatives to ODS. EPA refers to this program as the Significant New Alternatives Policy (SNAP) program. The major provisions of section 612 are the following:
Section 612(c) requires EPA to promulgate rules making it unlawful to replace any class I substance (chlorofluorocarbon, halon, carbon tetrachloride, methyl chloroform, and hydrobromofluorocarbon) or class II
Section 612(c) requires EPA to publish a list of the substitutes unacceptable for specific uses and to publish a corresponding list of acceptable alternatives for specific uses. The list of acceptable substitutes may be found at
Section 612(d) grants the right to any person to petition EPA to add a substance to, or delete a substance from, the lists published in accordance with section 612(c). The Agency has 90 days to grant or deny a petition. Where the Agency grants the petition, EPA must publish the revised lists within an additional six months.
Section 612(e) directs EPA to require any person who produces a chemical substitute for a class I substance to notify the Agency not less than 90 days before new or existing chemicals are introduced into interstate commerce for significant new uses as substitutes for a class I substance. The producer must also provide the Agency with the producer's unpublished health and safety studies on such substitutes.
Section 612(b)(1) states that the Administrator shall seek to maximize the use of federal research facilities and resources to assist users of class I and II substances in identifying and developing alternatives to the use of such substances in key commercial applications.
Section 612(b)(4) requires the Agency to set up a public clearinghouse of alternative chemicals, product substitutes, and alternative manufacturing processes that are available for products and manufacturing processes which use class I and II substances.
On March 18, 1994, EPA published the original rulemaking (59 FR 13044) which established the process for administering the SNAP program and issued EPA's first lists identifying acceptable and unacceptable substitutes in the major industrial use sectors (Subpart G of 40 CFR Part 82). These eight sectors—refrigeration and air conditioning; foam blowing; cleaning solvents; fire suppression and explosion protection; sterilants; aerosols; adhesives, coatings and inks; and tobacco expansion—are the principal industrial sectors that historically consumed the largest volumes of ODS.
Section 612 of the CAA instructs EPA to list as acceptable those substitutes that present a lower overall risk to human health and the environment as compared with other substitutes that are currently or potentially available for a specific use.
Under the SNAP regulations, anyone who plans to market or produce a substitute in one of the eight major industrial use sectors where class I or class II substances have been used must provide notice to the Agency, including health and safety information on the substitute, at least 90 days before introducing it into interstate commerce for significant new use as an alternative. 40 CFR 82.176(a). This requirement applies to the persons planning to introduce the substitute into interstate commerce,
The Agency has identified four possible decision categories for substitutes that are submitted for evaluation: acceptable; acceptable subject to use conditions; acceptable subject to narrowed use limits; and unacceptable
After reviewing a substitute, the Agency may make a determination that a substitute is acceptable only if certain conditions are met in the way that the substitute is used to minimize risks to human health and the environment. EPA describes such substitutes as “acceptable subject to use conditions.” Entities that use these substitutes without meeting the associated use conditions are in violation of section 612 of the CAA and EPA's SNAP regulations. 40 CFR 82.174(c).
For some substitutes, the Agency may permit a narrowed range of use within an end-use or sector. For example, the Agency may limit the use of a substitute to certain end-uses or specific applications within an industry sector. EPA describes these substitutes as “acceptable subject to narrowed use limits.” A person using a substitute that is acceptable subject to narrowed use limits in applications and end-uses that are not consistent with the narrowed use limit is using the substitute in an unacceptable manner and is in violation of section 612 of the CAA and EPA's SNAP regulations. 40 CFR 82.174(c).
The Agency publishes its SNAP program decisions in the
In contrast, EPA publishes decisions concerning substitutes that are deemed acceptable with no restrictions as “notices of acceptability” or “determinations of acceptability,” rather than as proposed and final rules. As described in the preamble to the rule initially implementing the SNAP program in the
Many SNAP listings include “Comments” or “Further Information” to provide additional information on substitutes. Since this additional information is not part of the regulatory decision, these statements are not binding for use of the substitute under the SNAP program. However, regulatory requirements so listed are binding under other regulatory programs (e.g., worker protection regulations promulgated by the Occupational Safety and Health Administration (OSHA)). The “Further Information” identified in the listing does not necessarily include all other legal obligations pertaining to the use of the substitute. While the items listed are not legally binding under the SNAP program, EPA encourages users of substitutes to apply all statements in the “Further Information” column in their use of these substitutes. In many instances, the information simply refers to sound operating practices that have already been identified in existing industry and/or building codes or standards. Thus many of the statements, if adopted, would not require the affected user to make significant changes in existing operating practices.
For copies of the comprehensive SNAP lists of substitutes or additional information on SNAP, refer to EPA's Ozone Depletion Web site at:
In this action, EPA proposes to list the following refrigerants as acceptable substitutes, subject to use conditions, in the identified end-uses.
1.
i. The quantity of the substitute refrigerant (i.e., “charge size”) must not exceed 150 grams (5.29 ounces);
ii. These refrigerants may be used only in new equipment designed specifically and clearly identified for the refrigerant—i.e., none of these substitutes may be used as a conversion or “retrofit”
iii. These refrigerants may be used only in stand-alone commercial refrigerators and freezers that meet all requirements listed in Supplement SB to the 10th edition of Underwriters Laboratories (UL) Standard 471, dated November 24, 2010. In cases where the proposed rule includes requirements more stringent than those of the 10th edition of UL Standard 471, the appliance must meet the requirements of the rule, as finalized;
iv. The refrigerator or freezer must have red Pantone Matching System (PMS) #185 marked pipes, hoses, or other devices through which the refrigerant passes, to indicate the use of a flammable refrigerant. This color must be applied at all service ports and other parts of the system where service puncturing or other actions creating an opening from the refrigerant circuit to the atmosphere might be expected and must extend a minimum of one (1) inch in both directions from such locations;
v. The following markings, or the equivalent, must be provided and must be permanent:
(a) “DANGER—Risk of Fire or Explosion. Flammable Refrigerant Used. Do Not Use Mechanical Devices To Defrost Refrigerator. Do Not Puncture Refrigerant Tubing.” This marking must be provided on or near any evaporators that can be contacted by the consumer.
(b) “DANGER—Risk of Fire or Explosion. Flammable Refrigerant Used. To Be Repaired Only By Trained Service Personnel. Do Not Puncture Refrigerant Tubing.” This marking must be located near the machine compartment.
(c) “CAUTION—Risk of Fire or Explosion. Flammable Refrigerant Used. Consult Repair Manual/Owner's Guide Before Attempting To Service This Product. All Safety Precautions Must be Followed.” This marking must be located near the machine compartment.
(d) “CAUTION—Risk of Fire or Explosion. Dispose of Properly In Accordance With Federal Or Local Regulations. Flammable Refrigerant Used.” This marking must be provided on the exterior of the refrigeration equipment.
(e) “CAUTION—Risk of Fire or Explosion Due To Puncture Of Refrigerant Tubing; Follow Handling Instructions Carefully. Flammable Refrigerant Used.” This marking must be provided near all exposed refrigerant tubing.
With regard to the proposed use conditions, we note the following. First, regarding the use of red marking for pipes, hoses and other devices in proposed use condition iv., we discuss and solicit comment on direct color application on the applicable parts of the system, such as a red plastic sleeve, in Section V.D, “Color-coded hoses and piping.” Discussion of application of red coloring for equipment utilizing a process tube is also provided there. Second, regarding proposed use condition v., the difference between this proposed requirement and clauses SB6.1.2 to SB6.1.5 of UL Standard 471 is that all of these markings must be in letters no less than 6.4 mm (
2.
3.
i. The charge size for any household refrigerator, freezer, or combination refrigerator and freezer for each circuit using R–290 must not exceed 57 grams (2.01 ounces);
ii. This refrigerant may be used only in new equipment specifically designed and clearly identified for the refrigerant—i.e., none of these substitutes may be used as a conversion or “retrofit” refrigerant for existing equipment;
iii. This substitute may be used only in equipment that meets all requirements in Supplement SA to the 10th edition of UL Standard 250, dated August 25, 2000. (In cases where the proposed rule includes requirements more stringent than those of the 10th edition of UL Standard 250, the appliance must meet the requirements of the final SNAP listing);
iv. The refrigerator or freezer must have red Pantone Matching System (PMS) #185 marked pipes, hoses, and other devices through which the refrigerant passes to indicate the use of a flammable refrigerant;
v. Permanent markings must be provided on the equipment, as described above for stand-alone commercial refrigerators and freezers. All of these markings must be in letters no less than 6.4 mm (
4.
Equipment must meet all requirements of Supplement SA to the 7th edition of UL Standard 541, “Refrigerated Vending Machines,” dated December 30, 2011 (instead of the 10th edition of UL 471).
Note that in UL 541, the relevant references on equipment markings for flammable refrigerants in Supplement A are sections SA 6.1.2–SA 6.1.5.
5.
i. These refrigerants may be used only in new equipment designed specifically and clearly identified for the refrigerant—i.e., none of these substitutes may be used as a conversion or “retrofit” refrigerant for existing equipment;
ii. These refrigerants may be used only in air conditioners that meet all requirements listed in Supplement SA to the 8th edition, dated August 2, 2012, of Underwriters Laboratories (UL) Standard 484, “Room Air Conditioners.” If this rule is finalized as proposed, in cases where the final rule would include requirements more stringent than those of the 8th edition of UL Standard 484, the appliance would need to meet the requirements of the final rule in place of the requirements in the UL Standard;
iii. UL 484 includes charge limits for room air conditioners and adherence to those charge limits would normally be confirmed by the installer. In addition to proposing the charge limits in the UL 484 standard as a requirement, EPA is proposing the following charge size limits adherence to which must be confirmed by the original equipment manufacturer (OEM). In cases where the charge size limit listed is different from those determined by UL 484, the smaller of the two charge sizes would apply. For a review of how these charge size limits were derived, see “Derivation of Charge Limits for Room Air Conditioners,” EPA, 2014 in the docket. The charge size limit must be determined based on the type of equipment, the alternative refrigerant used, and the normal rated capacity of the unit. The proposed limits are presented in Tables 3 through 6 below in section V.C, “Charge size,” and in Tables A, B, C and D of the regulatory text at the end of this document.
iv. The air conditioner must have red Pantone Matching System (PMS) #185 marked pipes, hoses, or other devices through which the refrigerant passes to indicate the use of a flammable refrigerant. This color must be applied at all service ports and other parts of the system where service puncturing or other actions creating an opening from the refrigerant circuit to the atmosphere might be expected and must extend a minimum of one (1) inch in both directions from such locations;
v. The following markings, or the equivalent, must be provided and must be permanent:
(a) On the outside of the air conditioner: “DANGER—Risk of Fire or Explosion. Flammable Refrigerant Used. To Be Repaired Only By Trained Service Personnel. Do Not Puncture Refrigerant Tubing.”
(b) On the outside of the air conditioner: “CAUTION—Risk of Fire or Explosion. Dispose of Properly In Accordance With Federal Or Local Regulations. Flammable Refrigerant Used.”
(c) On the inside of the air conditioner near the compressor: “CAUTION—Risk of Fire or Explosion. Flammable Refrigerant Used. Consult Repair Manual/Owner's Guide Before Attempting To Service This Product. All Safety Precautions Must be Followed.”
(d) For portable air conditioners, packaged terminal air conditioners and packaged terminal heat pumps, on the outside of the product: “WARNING: Appliance shall be installed, operated and stored in a room with a floor area larger than “X” m
(e) For window air conditioners, on the outside of the product: “WARNING: Appliance shall be installed, operated and stored in a room with a floor area larger than “X” m
All of these markings must be in letters no less than 6.4 mm (
The regulatory text of our proposed decisions appears in tables at the end of this document. If finalized as proposed, this text would be codified at 40 CFR Part 82 Subpart G. The proposed regulatory text contains listing decisions for the end-uses discussed above. We note that there may be other legal obligations pertaining to the manufacture, use, handling, and disposal of hydrocarbons that are not included in the information listed in the tables (e.g., section 608 prohibition on venting, releasing, or disposing of refrigerant substitutes or Department of Transportation requirements for transport of flammable gases).
In summary, EPA is proposing to list ethane, isobutane, propane, HFC–32, and R–441A as acceptable subject to use conditions as substitute refrigerants in certain refrigeration and AC end-uses. If this proposal were to become final, it would be legal to use those refrigerants in the specified types of equipment under the conditions identified above. Use in the specified types of equipment that is not consistent with the use conditions, as finalized, would be a violation of CAA section 612 and EPA's implementing regulations. Both the equipment manufacturers and the end users should be familiar with these proposed use conditions and EPA would expect them to comply with any final use conditions.
Ethane, isobutane, and propane are hydrocarbons and R–441A is a hydrocarbon blend. Hydrocarbons are highly flammable organic compounds made up of hydrogen and carbon. Ethane has two carbons and a chemical formula of C
R–441A, also known by the trade name “HCR–188C,” is a highly flammable hydrocarbon blend consisting of 55% propane, 36% n-butane, 6% isobutane, and 3% ethane by weight. HFC–32 is a mildly flammable organic compound made up of hydrogen, carbon, and fluorine with the chemical formula CF
The American National Standards Institute (ANSI)/ASHRAE Standard 34–2010 assigns a safety group classification for each refrigerant which consists of two alphanumeric characters (e.g., A2 or B1). The capital letter indicates the toxicity and the numeral denotes the flammability. ASHRAE classifies Class A refrigerants as refrigerants for which toxicity has not been identified at concentrations less than or equal to 400 parts per million (ppm) by volume, based on data used to determine threshold limit value-time-weighted average (TLV–TWA) or consistent indices. Class B signifies refrigerants for which there is evidence of toxicity at concentrations below 400 ppm by volume, based on data used to determine TLV–TWA or consistent indices. The refrigerants are also assigned a flammability classification of 1, 2, or 3. Tests are conducted in accordance with ASTM E681 using a spark ignition source at 60 °C and 101.3 kPa (ASHRAE, 2010). Figure 1 in ANSI/ASHRAE Standard 15–2007 uses the same safety group but limits its concentration to 3400 ppm.
The flammability classification “1” is given to refrigerants that, when tested, show no flame propagation. The flammability classification “2” is given to refrigerants that, when tested, exhibit flame propagation, have a heat of combustion less than 19,000 kJ/kg (8,174 BTU/lb), and have a lower flammability limit (LFL) greater than 0.10 kg/m
Using these safety group classifications, ANSI/ASHRAE Standard 34–2010 categorizes ethane, isobutane, propane, and R–441A in the A3 Safety Group and categorizes HFC–32 in the A2L Safety Group.
Household refrigerators, freezers, and combination refrigerator/freezers are intended primarily for residential use, although they may be used outside the home. Household freezers only offer storage space at freezing temperatures, unlike household refrigerators. Products with both a refrigerator and freezer in a single unit are most common. Wine coolers used in residential settings are considered part of this end-use. EPA previously found the flammable
Retail food refrigeration includes the refrigeration systems, including cold storage cases, designed to chill food or keep it at a cold temperature for commercial sale. In this proposed rule, we are considering the use of hydrocarbons only in stand-alone equipment. A stand-alone appliance is one utilizing a sealed hermetic compressor and for which all refrigerant-containing components, including but not limited to the compressor, condenser, and evaporator, are assembled into a single piece of equipment before delivery to the ultimate consumer or user. Such equipment does not require the addition or removal of refrigerant when placed into initial operation. Stand-alone equipment is used to chill or to store chilled beverages or frozen products (e.g., reach-in beverage coolers, stand-alone ice cream cabinets, and wine coolers in commercial settings). This proposed rule does not apply to large commercial refrigeration systems such as, but not limited to, multiplex direct expansion refrigeration systems typically found in supermarkets. Such equipment typically requires larger charge sizes than those considered in this proposed rule. This proposal also does not apply to walk-in coolers, a type of equipment that typically requires larger charges than those considered in this proposed rule. EPA has already listed propane as acceptable subject to use conditions for use in stand-alone commercial refrigerators and freezers. December 20, 2011, at 76 FR 78832, codified at Appendix R to Subpart G of 40 CFR part 82.
Very low temperature refrigeration equipment is intended to maintain temperatures considerably lower than for refrigeration of food—for example, −80 °C (−170 °F) or lower. Examples of very low temperature refrigeration equipment include medical freezers and freeze-dryers, which generally require extremely reliable refrigeration cycles to maintain low temperatures and must meet stringent technical standards. In some cases, very low temperature refrigeration equipment may use a refrigeration system with two refrigerant loops or with a direct expansion refrigeration loop coupled with an alternative refrigeration technology (e.g., Stirling cycle). This allows a greater range of temperatures and may reduce the overall refrigerant charge.
There is no U.S. standard that we are aware of that applies specifically to very low temperature refrigeration or non-mechanical heat transfer. The submitter of information for use of ethane in very low temperature refrigeration has indicated that Underwriters Laboratories, Inc. has tested their equipment for compliance with the UL 471 standard for commercial refrigeration equipment, which addresses stand-alone commercial refrigerators and freezers. We are proposing compliance with the UL 471 standard as one of the conditions for use of ethane in very low temperature refrigeration equipment. This submission also addressed the use of ethane in a type of non-mechanical heat transfer equipment called a thermosiphon. Non-mechanical heat transfer involves cooling systems that rely on convection to remove heat from an area, rather than mechanical refrigeration. A thermosiphon is a type of heat transfer system that relies on natural convection currents, as opposed to using a mechanical pump. This proposal would allow use of ethane in non-mechanical heat transfer uses, provided that they meet the use conditions, including the requirements of Supplement B to the UL 471 standard and a charge limit of 150 g.
Vending machines are self-contained units for refrigerating beverages or food which dispense goods that must be kept cold or frozen. This end-use differs from other retail food refrigeration because goods are dispensed, rather than allowing the consumer to reach in to grab a beverage or food product. The design of the refrigeration system of a vending machine is similar to that of a self-contained commercial refrigerator or freezer. Typically the difference lies in how payment for goods is made and in the selection mechanisms found in vending machines but not in self-contained commercial refrigerator-freezers, and possibly the outer casing (e.g., glass doors and open, reach-in designs are generally used in self-contained commercial refrigerator-freezers whereas glass wall and other types of casings are used for vending machines). The standard UL 541 applies to vending machines. It contains a Supplement SA specifically addressing flammable refrigerants that is very similar to the Supplement SB in the UL 471 standard for commercial refrigerators and freezers.
This end-use includes equipment for cooling air in individual rooms, in single-family homes, and sometimes in small commercial buildings. This end-use differs from commercial comfort AC, which uses chillers that cool water that is then used to cool air throughout a large commercial building, such as an office building or hotel. Examples of equipment for residential and light commercial AC and heat pumps include:
• Central air conditioners, also called unitary AC or unitary split systems. These systems include an outdoor unit with a condenser and a compressor, refrigerant lines, an indoor unit with an evaporator, and ducts to carry cooled air throughout a building. Central heat pumps are similar but offer the choice to either heat or cool the indoor space. These systems are not addressed in this rule.
• Multi-split air conditioners. These systems include one or more outdoor unit(s) with a condenser and a compressor and multiple indoor units, each of which is connected to the outdoor unit by refrigerant lines. These systems are not addressed in this rule.
• Mini-split air conditioners. These systems include an outdoor unit with a condenser and a compressor and a single indoor unit that is connected to the outdoor unit by refrigerant lines. Cooled air exits directly from the indoor unit rather than being carried through ducts. These systems are not addressed in this rule.
• Window air conditioners. These are self-contained units that fit in a window with the condenser extending outside the window. These types of units would be regulated under this rule if it becomes final.
• Packaged terminal air conditioners and packaged terminal heat pumps. These are self-contained units that consist of a separate, un-encased combination of heating and cooling assemblies mounted through a wall. These types of units would be regulated under this rule if it becomes final.
• Portable room air conditioners. These are self-contained units used inside rooms that are designed to be
Of these types of equipment, window air conditioners, packaged terminal air conditioners, packaged terminal heat pumps, and portable room air conditioners are self-contained equipment with the condenser, compressor, evaporator, and tubing all within casing in a single unit. These units all fall under the scope of the UL 484 standard for Room Air Conditioners. In contrast, unitary split systems, multi-split systems and mini-split systems have an outdoor condenser that is separated from an indoor unit. Compared to split systems, self-contained equipment typically has smaller charge sizes, has fewer locations that are prone to leak, and is less likely to require servicing by a technician, thereby causing refrigerant releases. A lower risk of refrigerant releases and a potential for smaller releases and lower concentration releases would result in lower risk that flammable refrigerant could be ignited. Thus, self-contained air conditioners and heat pumps using a flammable refrigerant have lower risk for fire than split systems using a flammable refrigerant.
Section 612(c) of the Clean Air Act directs EPA to publish a list of acceptable replacement substances (“substitutes”) for class I and class II substances for specific uses. EPA compares the risks to human health and the environment of a substitute to the risks associated with other substitutes that are currently or potentially available. EPA also considers whether the substitute for class I and class II ODS “reduces the overall risk to human health and the environment” compared to the ODS historically used in the end-use. The criteria we review are listed at 40 CFR 82.180(a)(7). These criteria are: (i) Atmospheric effects and related health and environmental impacts; (ii) general population risks from ambient exposure to compounds with direct toxicity and to increased ground-level ozone; (iii) ecosystem risks; (iv) occupational risks; (v) consumer risks; (vi) flammability; and (vii) cost and availability of the substitute.
EPA evaluated each of the criteria for each substitute in each end-use for which we are proposing action and then for each substitute we considered overall risk to human health and the environment in comparison to other available or potentially available alternatives in the same end-uses. Based on our evaluations, we may reach different conclusions on the same substitute in different end-uses, because of different risk profiles (e.g., different exposure levels and usage patterns) and different sets of available or potentially available substitutes for each end-use.
As noted previously on May 17, 2013, at 78 FR 29035, environmental and human health exposures can vary significantly depending on the particular application of a substitute—and over time, information available regarding a substitute can change. SNAP's comparative risk framework does not imply fundamental tradeoffs with respect to different types of risk, either to the environment or to human health. EPA recognizes that during the nearly two-decade history of the SNAP program, new information about alternatives already found acceptable and new alternatives have emerged. To the extent possible, EPA considers current information that improves our understanding of the risk factors for the environment and human health in the context of the available or potentially available alternatives for a given use.
The SNAP program considers a number of environmental criteria when evaluating substitutes: Ozone depletion potential (ODP); climate effects, primarily based on global warming potential (GWP); local air quality impacts, particularly potential impacts on smog formation from emissions of volatile organic compounds (VOC); and ecosystem effects, particularly from negative impacts on aquatic life. These and other environmental and health risks are discussed below.
The ODP is the ratio of the impact on stratospheric ozone of a chemical compared to the impact of an identical mass of CFC–11. Thus, the ODP of CFC–11 is defined to be one (1.0). Other CFCs and HCFCs have ODPs that range from 0.01 to one (1.0).
All refrigerant substitutes in this proposal have an ODP of zero, lower than the ODP of the ozone depleting substances that they replace: CFC–12 (ODP = 1.0); HCFC–22 (ODP = 0.055); R–13B1 (ODP = 10) and R–502 (ODP = 0.334). The most commonly used substitutes in the end-uses addressed in this proposal also have an ODP of zero (e.g., R–404A, R– 134a, R–410A, and R–407C).
The GWP is a means of quantifying the potential integrated climate forcing of various greenhouse gases relative to carbon dioxide. All of the hydrocarbon refrigerants in this proposal have a relatively low 100-year integrated GWP of less than ten. HFC–32 has a GWP of 675. For comparison, some other commonly used, acceptable refrigerants in these end-uses are R–134a, R–404A, R–407C, and R–410A with GWPs of about 1,430, 3,920, 1,770, and 2,090, respectively. In very low temperature refrigeration, a common refrigerant is R–508B, with a GWP of 13,400. The GWPs of the ozone-depleting substances that they replace are: CFC–12 (GWP = 10,900); HCFC–22 (GWP = 1,810); R–13B1/halon 1301 (GWP = 7,140) and R–502 (GWP = 4,660) (IPCC, 2007). The GWPs of the substitutes reviewed in this proposal are significantly lower than those of other refrigerants currently being used in the residential and light commercial AC and heat pump end-use. As stated above, EPA considers overall risk to human health and the environment compared to ODS as well as alternatives that are available and potentially available in a given end-use. Therefore, the GWP of 675 for HFC–32 may not be considered low in other end-uses that have a larger variety of options available with lower GWPs. Among the acceptable substitutes listed in this end-use, only ammonia absorption and the non-vapor compression technologies evaporative cooling and desiccant cooling would have lower GWPs. Given technical limits on the effective use of the non-vapor compression technologies in different climates and the higher toxicity of ammonia than that of the alternatives proposed here, the proposed substitutes still reduce risk overall compared to the available and potentially available substitutes in this end-use.
The GHG impacts of these refrigerants also depend upon the energy use of
In addition to global impacts on the atmosphere, EPA evaluated potential impacts of the proposed substitutes on local air quality. Ethane and HFC–32 are exempt from the definition of VOC under CAA regulations (see 40 CFR 51.100(s)) addressing the development of State Implementation Plans (SIPs) to attain and maintain the national ambient air quality standards. The other proposed refrigerants, isobutane, propane, and components of R–441A, including isobutane, n-butane and propane, are VOC. Potential emissions of VOC from all substitutes for all end-uses in the refrigeration and AC sector are addressed by the venting prohibition under Section 608 of the CAA. Under that prohibition, refrigerant substitutes (and thus the VOC they contain) may only be emitted where EPA issues a final determination exempting a refrigerant substitute from the venting prohibition on the basis that venting, releasing or disposing of such substance does not pose a threat to the environment, as proposed elsewhere in this action (see Section VI, “How is EPA proposing to address venting, release, or disposal of the refrigerant substitutes proposed to be listed under section 608 of the Clean Air Act?” below). EPA estimates that potential emissions of hydrocarbons when used as refrigerant substitutes in all end-uses in the refrigeration and AC sector have little impact on local air quality, with the possible exception of unsaturated hydrocarbons such as propylene (ICF, 2014a). However, for those refrigerants that are VOC as defined in 40 CFR 50.100(s), a State could adopt additional control strategies if necessary for an ozone nonattainment area to attain the National Ambient Air Quality Standard (NAAQS) for ozone.
EPA analyzed a number of scenarios to consider the potential impacts on local air quality if hydrocarbon refrigerants were used widely. We used EPA's Vintaging Model to estimate the hydrocarbon emissions from these scenarios and EPA's Community Multiscale Air Quality (CMAQ) model to assess their potential incremental contributions to ground-level ozone concentrations (ICF, 2014a). That analysis assumed that the most reactive hydrocarbon proposed to be acceptable (isobutane) was used in all refrigeration and AC uses, and that all refrigerant used was emitted to the atmosphere even though isobutane is not being proposed as acceptable for use in all refrigeration and AC uses. In that extreme scenario, the model predicted that the maximum increase in the 8-hour average ground-level ozone concentration would be 0.72 ppb in Los Angeles. Further, in the analysis, the additional ground-level ozone did not result in exceeding the NAAQS where an area was in compliance without the additional refrigerant emissions. Given the potential sources of uncertainty in the modeling, the conservativeness of the assumptions, and the finding that the incremental VOC emissions from this refrigerant emissions would not cause any area that otherwise would meet the NAAQS to exceed it, we believe that the use of isobutane consistent with the use conditions will not result in significantly greater risk to the environment than other substitutes that are currently or potentially available. Further, propane, ethane, and n-butane, the remaining component of R–441A, are less reactive than isobutane and we reach a similar conclusion for those refrigerants.
EPA also analyzed the potential impacts of the uses of hydrocarbon refrigerants proposed to be acceptable under this rule. In this less conservative analysis, EPA looked at a set of end-uses that would be more likely to use hydrocarbon refrigerants between now and 2030. The analysis assumed use of hydrocarbon refrigerants in those uses for which UL currently has standards in place, for which the SNAP program has already listed the uses as acceptable subject to use conditions, or for which the SNAP program is reviewing a submission, including those in this rule.
The substitutes in this proposal are all highly volatile. They typically evaporate or partition to air, rather than contaminating surface waters. Effects on aquatic life of the substitutes are expected to be small and pose no greater risk of aquatic or ecosystem effects than those of other available substitutes for these uses.
Based on EPA's analysis, the overall environmental risks, including ODP, GWP, local air quality effects and ecosystem impacts are lower than or comparable to those of other acceptable substitutes in the same end-uses.
The flammability risks of the proposed substitutes are of potential concern because household and retail food refrigerators and freezers and room AC units have traditionally used refrigerants that are not flammable. Without appropriate use conditions, the flammability risk posed by these refrigerants could be higher than non-flammable refrigerants because individuals may not be aware that their actions could potentially cause a fire, and existing equipment has not been designed specifically to minimize flammable risks. In this section, we discuss the risks posed by the refrigerants considered in this rule and explain the proposed use conditions we believe are necessary to mitigate risks to ensure that the overall risk to human health and the environment posed by these proposed substitutes is not greater than the overall risk posed by other substitutes in the same end-uses. In addition, we discuss why the flammability risks have led us to propose that these substitutes are only acceptable for use in new equipment specifically designed for these flammable refrigerants.
Because of their flammable nature, ethane, isobutane, propane, HFC–32, and R–441A could pose a significant safety concern for workers and consumers in the end-uses addressed in this proposal if they are not handled correctly. In the presence of an ignition source (e.g., static electricity spark resulting from closing a door, using a torch during service, or a short circuit in wiring that controls the motor of a compressor), an explosion or a fire could occur when the concentration of refrigerant exceeds its lower flammability limit (LFL). The LFLs of the proposed substitutes are: ethane—30,000 ppm; HFC–32—139,000 ppm; isobutane—18,000 ppm; propane—21,000 ppm; and R–441A—20,500 ppm. Therefore, to use these substitutes safely, it is important to minimize the presence of potential ignition sources and to reduce the likelihood that the levels of ethane, HFC–32, isobutane, propane, or R–441A will exceed the LFL. Under the proposed listing decision, these substitutes would be acceptable for use only in new equipment (refrigerators, freezers and air conditioners) specifically designed for the refrigerant. We expect that the original equipment manufacturers, who would be storing large quantities of the refrigerant, are familiar with and use proper safety precautions to minimize the risk of explosion, because of the OSHA and building code requirements under which they operate. We are proposing to include in the “Further Information” section of the SNAP listings recommendations that these facilities be equipped with proper ventilation systems and be properly designed to reduce possible ignition sources.
To determine whether flammability would be a concern for manufacturing and service personnel or for consumers, EPA analyzed a plausible worst-case scenario to model a catastrophic release of the proposed refrigerants. The worst-case scenario analysis for each refrigerant revealed that even if the unit's full charge is emitted within one minute, none of these refrigerants reached their respective LFLs of 1.8% for isobutane, 2.1% for propane, 2.05% for R–441A, or 3.0% for ethane, provided that the charge sizes were no greater than those specified in the relevant standard from Underwriters Laboratories (ICF, 2014b,c,d,e,f,g,h,i,j,k). Thus, there would not be an excessive risk of fire or explosion, even under those worst-case assumptions, so long as the charge meets the use conditions in this proposed rule. Detailed analysis of the modeling results are discussed below in the next section regarding “Toxicity.” EPA also reviewed the submitters' detailed assessments of the probability of events that might create a fire and engineering risk and approaches to avoid sparking from the refrigeration equipment. Further information on these analyses and EPA's risk assessments are available in public docket EPA–HQ–OAR–2013–0748 at
In evaluating potential toxicity impacts of ethane, HFC–32, isobutane, propane, and R–441A on human health, EPA considered both occupational and consumer risks. EPA investigated the risk of asphyxiation and of exposure to toxic levels of refrigerant for a worst-case scenario and a typical use scenario for each refrigerant. In the worst-case scenario of a catastrophic leak, we modeled release of the unit's full charge within one minute into a confined space to estimate concentrations that might result. We considered a conservatively small space appropriate to each end-use, such as a small convenience store of 244 m
To evaluate toxicity of all five refrigerants, EPA estimated the maximum time-weighted average (TWA) exposure both for a short-term exposure scenario, with a 15-minute and 30-minute TWA exposure, and for an 8-hour time weighted average that would be more typical of occupational exposure for a technician servicing the equipment. We compared these short-term and long-term exposure values to relevant industry and government workplace exposure limits for ethane, HFC–32, isobutane, propane, and
• n-Butane, a component in R–441A: 800 ppm REL on 10-hr TWA; 6,900 ppm AEGL–1 over 30 minutes
• Ethane: 1000 ppm TLV on 8-hour TWA
• HFC–32: 1000 ppm manufacturer's exposure guideline on 8-hour TWA; 3000 ppm over 15 minutes
• Isobutane: 800 ppm REL on 10-hr TWA; 18,000 ppm NOAEL over 30 minutes
• Propane: 1000 ppm PEL on 8-hr TWA; 6,900 ppm AEGL–1 over 30 minutes
For equipment with which consumers might come into contact, such as retail food refrigerators and freezers, vending machines, household refrigerators and freezers, and room air conditioners, EPA performed a consumer exposure analysis. In this analysis, we examined potential catastrophic release of the entire charge of the substitute in one minute under a worst-case scenario. We did not examine exposure to consumers in very low temperature refrigeration, as equipment for this end-use would typically be used in the workplace, such as in laboratories, and not in a home or public space. The analysis was undertaken to determine the 15-minute or 30-minute TWA exposure levels for the substitute, which were then compared to the toxicity limits to assess the risk to consumers.
EPA considered toxicity limits for consumer exposure that reflect a short-term exposure such as might occur at home or in a store or other public setting where a member of the general public could be exposed and could then escape. Specific toxicity limits that we used in our analysis of consumer exposure include:
• n-Butane: 6,900 ppm AEGL–1 over 30 minutes
• HFC–32: cardiotoxic NOAEL of 350,000 ppm over 5 minutes
• Isobutane: 18,000 ppm NOAEL over 30 minutes
• Propane: 6,900 ppm AEGL–1 over 30 minutes
The analysis of consumer exposure assumed that 100 percent of the unit's charge would be released over one minute, at which time the concentration of refrigerant would peak in an enclosed space, and then steadily decline. Refrigerant concentrations were modeled under two air change scenarios, believed to represent the baseline of potential flow rates for a home or other public space, assuming flow rates of 2.5 and 4.5 air changes per hour (ACH) (Sheldon, 1989). The highest concentrations of the refrigerant occur in the lower stratum of the room when assuming the lower ventilation level of 2.5 ACH. Calculating the TWA exposure using 2.5 ACH results in a higher concentration than calculating the TWA exposure using 4.5 ACH. Even under the very conservative assumptions used in the consumer exposure modeling, the estimated 15-minute or 30-minute consumer exposures to the proposed refrigerants are much lower than the relevant toxicity limits and thus should not pose a toxicity risk any greater than that of other acceptable refrigerants in the proposed end-uses.
For further information, including EPA's risk screens and risk assessments as well as fault tree analyses from the submitters of the substitutes, see docket number EPA–HQ–OAR–2013–0748 at
EPA is proposing to list ethane, isobutane, propane, HFC–32, and R–441A as acceptable subject to use conditions in the specified end-uses, as described above in section III.A., “What listing decisions is EPA proposing in this action?.” EPA is proposing these uses in new equipment designed and manufactured specifically to use these alternatives. The use conditions include conditions consistent with industry standards, limits on charge size, and requirements for warnings and markings on equipment to inform consumers and technicians of potential flammability hazards. The proposed listings with the specific use conditions are intended to allow for the use of these flammable refrigerants in a manner that will ensure they do not pose a greater risk to human health or the environment than other substitutes that are currently or potentially available. We seek comment on the proposed listing as well as the specific use conditions discussed below.
EPA is proposing that the flammable refrigerants considered in this proposal be limited to use only in new equipment that has been designed and manufactured specifically for use with the listed alternative refrigerant. We are proposing that these substitutes may be used only in new equipment
EPA is proposing that the flammable refrigerants be used only in equipment that meets all requirements in the relevant supplements for flammable refrigerants in certain applicable UL Standards for refrigeration and AC equipment. Specifically, the standards cited include UL 471 10th edition for commercial refrigerators and freezers (including stand-alone freezers for very low temperature refrigeration), UL 250 10th edition (for household refrigerators and freezers), UL 541 7th edition for refrigerated vending machines, and UL 484 8th edition for room air conditioners.
UL has tested equipment for flammability risk in both household and retail food refrigeration. Further, UL has developed acceptable safety standards including requirements for construction, for markings, and for performance tests concerning refrigerant leakage, ignition of switching components, surface temperature of parts, and component strength after being scratched. These standards were developed in an open and consensus-based approach, with the assistance of experts in the AC and refrigeration industry as well as experts involved in assessing the safety of products. While similar standards exist from other bodies such as the International Electrotechnical Commission (IEC), we are proposing to rely on UL standards as those that are most applicable and recognized by the U.S. market. This proposed approach is the same as that in our previous rule on flammable refrigerants (December 20, 2011 at 76 FR 78832).
EPA is proposing use conditions that limit the amount of refrigerant allowed in each type of appliance. As before, we believe it is necessary to set limits on charge size in order for these refrigerants not to pose a risk to human health or the environment that is greater than the risk posed by other available substitutes. These limits will reduce the risk to workers and consumers since under worst-case scenario analyses, a leak of the proposed charge sizes did not result in concentrations of the refrigerant that met or exceeded the LFL, as explained above in Section IV.B, “Flammability and fire safety.”
EPA is proposing limitations on refrigerant charge size for household and stand-alone commercial refrigerators and freezers, vending machines, and room AC units that reflect the UL 250, UL 471, UL 541 and UL 484 standards. As discussed above in paragraph B of this section, we believe UL standards are most applicable to the U.S. market and offer requirements developed by a consensus of experts. EPA is proposing a charge size not to exceed 57 grams (2.01 ounces) for household refrigerators and freezers, not to exceed 150 grams (5.29 ounces) for retail food refrigeration in stand-alone units, and not to exceed 150 grams (5.29 ounces) for vending machines. We are proposing a varying charge size limit for room AC units as discussed below. To place these quantities in a familiar context, EPA estimates the charge size of a disposable lighter is equal to 30 grams (1.06 ounces).
The UL 250 standard for household refrigerators and freezers limits the amount of refrigerant that may leak to 50 grams (1.76 ounces). EPA is proposing a charge size of 57 grams (2.01 ounces) to allow for up to 7 grams (0.25 ounces) of refrigerant that might be solubilized in the oil (and assumed not to leak or immediately vaporize with the refrigerant in the case of a leak). EPA bases this estimate on information received from a manufacturer of hydrocarbon-based refrigerator-freezers (see EPA–HQ–OAR–2009–0286–0033 on
UL standards 541 (retail food refrigeration) and 471 (vending machines) limit the amount of refrigerant leaked to 150 grams (5.29 ounces). Furthermore, the charge size limit for A3 refrigerants (for retail food refrigeration) is in line with the IEC 60335–2–89 standard for commercial appliances, which has a charge size limit of 150 grams (5.29 ounces).
As noted above, EPA is proposing a varying charge size for room AC units. We are proposing that the maximum charge must be no greater than the amount calculated for a given sized space according to Appendix F to Supplement SA of UL Standard 484. This section of the UL standard uses a formula for charge of a fixed room air conditioner based upon the size of the space where the refrigerant may escape and the lower flammability limit of the refrigerant. The formula is as follows:
In addition to the formula mentioned above, UL 484 has a requirement that the maximum charge for a room air conditioner may not exceed the amount calculated using the following formula:
That formula sets maximum limits on refrigerant in a room air conditioner, as shown in Table 2. With the A3 refrigerants, the maximum value is 1 kg.
Although
We believe that these requirements, in combination with the other use conditions and commonly found informational materials, provide sufficient safeguards against instances of consumers selecting inappropriately-sized equipment. For instance, packaging, technical literature and sales display material will often guide a consumer in choosing the correct capacity for a given room size.
EPA has based its proposed charge limits upon appropriate capacity needs for an area to be cooled and the requirements for refrigerant charge relative to room size in Appendix F of UL 484, discussed above. A document in the docket describes this relationship in tables in a spreadsheet (EPA, 2014). The proposed charge limits for each refrigerant by equipment type and mounting location are as follows:
In cases where the rated capacity exceeds the maximum shown on the table, the maximum charge size in the table for that refrigerant applies. In cases where the normal rated capacity lies between two values listed next to each other in the table, the maximum charge size would be determined based on a linear interpolation between the two respective charge sizes. We assume that room air conditioners will be at least 5,000 BTU/hr in capacity; this corresponds to cooling a floor area of roughly 100 square feet or 9.3 m
EPA is requesting comment on the approach of adding a requirement for manufacturers to design with a maximum charge size consistent with the design cooling capacity. We also request comment on other potential methods for supplementing the formulas for calculating charge size in the UL 484 standard in order to reduce potential risks of a consumer using a room air conditioner with an inappropriately high charge that could result in a higher risk of fire.
EPA proposes that equipment must have distinguishing color-coded hoses and piping to indicate use of a flammable refrigerant. This will help technicians immediately identify the use of a flammable refrigerant, thereby potentially reducing the risk of using sparking equipment or otherwise having an ignition source nearby. The AC and refrigeration industry currently uses distinguishing colors as means for identifying different refrigerants. Likewise, distinguishing coloring has been used elsewhere to indicate an unusual and potentially dangerous situation, for example in the use of orange-insulated wires in hybrid electric vehicles. Currently, no industry standard exists for color-coded hoses or pipes for ethane, HFC–32, isobutane, propane, or R–441A. EPA is proposing that all such refrigerator tubing be colored red Pantone Matching System (PMS) #185 to match the red band displayed on the container of flammable refrigerants under the Air Conditioning, Heating and Refrigeration Institute (AHRI) Guideline “N” 2012, “2012 Guideline for Assignment of Refrigerant Container Colors.” This proposal mirrors the existing requirement for the use of hydrocarbons in residential and commercial refrigerator-freezers (December 20, 2011, at 76 FR 78832). EPA wants to ensure that there is adequate notice that a flammable refrigerant is being used within a particular piece of equipment or appliance. One mechanism to distinguish hoses and pipes is to add a colored plastic sleeve or cap to the service tube. The colored plastic sleeve or cap would have to be forcibly removed in order to access the service tube. This would signal to the technician that the refrigeration circuit that she/he was about to access contained a flammable refrigerant, even if all warning labels were somehow removed. This sleeve would be of the same red color (PMS #185) and could also be boldly marked with a graphic to indicate the refrigerant was flammable. This could be a cost-effective alternative to painting or dying the hose or pipe. EPA is taking comment on this mechanism of distinguishing the pipe and hose by adding a colored plastic sleeve or cap to the pipe or hose.
EPA is particularly concerned with ensuring adequate and proper notification for servicing and disposal of appliances containing flammable refrigerants. EPA believes the use of color-coded hoses, as well as the use of warning labels discussed below, would be reasonable and would be consistent with other general industry practices. This proposed approach is the same as that adopted in our previous rule on flammable refrigerants (December 20, 2011, at 76 FR 78832). EPA is interested in receiving information on how this requirement has been implemented for those end-uses that are already subject to the earlier rule, codified in Appendix R to Subpart G of 40 CFR Part 82.
As a use condition, EPA is proposing to require labeling of household and retail refrigerators and freezers, vending machines, non-mechanical heat transfer equipment, very low temperature refrigeration equipment, and room air conditioners. EPA is proposing the warning labels on the equipment contain letters at least
EPA believes that it would be difficult to see warning labels with the minimum lettering height requirement of
EPA considered requiring separate servicing fittings for use with flammable refrigerants to avoid mixing flammable and non-flammable refrigerants. We previously considered this option and proposed this as a use condition in a separate rulemaking in the
We also considered requiring only one use condition for each refrigerant and end-use—to meet the appropriate standard from Underwriters Laboratories. We understand that UL may incorporate certain elements of this proposal, particularly the proposed charge limit and the type font height for labels, into the UL 250 standard for household refrigerators and freezers. If those provisions were the only changes incorporated in a revised version of Supplement A of the UL 250 standard, EPA could remove the use conditions for charge size and for labeling requirements, as they would already be incorporated by reference through the use condition to follow the UL 250 standard. However, at this time, those changes have not been incorporated into UL 250. Therefore, EPA is proposing those use conditions as well as compliance with other aspects of UL 250.
Section 608 of the Act as amended, titled
Section 608(c)(1) further exempts from this self-effectuating prohibition “
Effective November 15, 1995, section 608(c)(2) of the Act extends the prohibition in section 608(c)(1) to knowingly venting or otherwise knowingly releasing or disposing of any refrigerant substitute for class I or class II substances by any person maintaining, servicing, repairing, or disposing of appliances or IPR. This prohibition applies to any substitute unless the Administrator determines that such venting, releasing, or disposing “does not pose a threat to the environment.” Thus, section 608(c) provides EPA authority to promulgate regulations to interpret, implement, and enforce this prohibition on venting, releasing, or disposing of class I or class II substances and their refrigerant substitutes, which we refer to as the “venting prohibition” in this NPRM.
Regulations promulgated under Section 608 of the Act, published on May 14, 1993 (58 FR 28660), established a recycling program for ozone-depleting refrigerants recovered during the servicing and maintenance of AC and refrigeration appliances. In the same 1993 rule, EPA also promulgated regulations implementing the section 608(c) prohibition on knowingly venting, releasing, or disposing of class I or class II controlled substances. These regulations were designed to substantially reduce the use and emissions of ozone-depleting refrigerants.
EPA issued a final rule on March 12, 2004, at 69 FR 11946 and a second rule on April 13, 2005, at 70 FR 19273 clarifying how the venting prohibition in section 608(c) applies to substitutes for CFC and HCFC refrigerants (e.g., hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) in part or whole) during the maintenance, service, repair, or disposal of appliances. These regulations are codified at 40 CFR Part 82, Subpart F. The regulation at 40 CFR 82.154(a) now states in part that:
(1) “Effective June 13, 2005, no person maintaining, servicing, repairing, or disposing of appliances may knowingly vent or otherwise release into the environment any refrigerant or substitute from such appliances, with the exception of the following substitutes in the following end-uses:
i. Ammonia in commercial refrigeration, or in [IPR] or in absorption units;
ii. Hydrocarbons in [IPR] (processing of hydrocarbons);
iii. Chlorine in [IPR] (processing of chlorine and chlorine compounds);
iv. Carbon dioxide in any application;
v. Nitrogen in any application; or
vi. Water in any application.
(2) The knowing release of a refrigerant or non-exempt substitute subsequent to its recovery from an appliance shall be considered a violation of this prohibition.
As explained in EPA's earlier rulemaking concerning refrigerant substitutes, EPA has not promulgated regulations requiring certification of refrigerant recycling/recovery equipment intended for use with substitutes to date (70 FR 19275; April 13, 2005). However, as EPA noted, the lack of a current regulatory provision should not be considered as an exemption from the venting prohibition for substitutes that are not expressly exempted in Section 82.154(a). EPA has also noted that, in accordance with section 608(c) of the Act, the regulatory prohibition at Section 82.154(a) reflects the statutory references to
On May 23, 2014 at 79 FR 29682, EPA revised the venting prohibition for refrigerant substitutes.
EPA determined that for the purposes of CAA section 608(c)(2), the venting, release or disposal of such hydrocarbon refrigerant substitutes in the specified end-uses does not pose a threat to the environment, considering both the inherent characteristics of these substances and the limited quantities used in the relevant applications. EPA additionally concluded that other authorities, controls and practices that apply to such refrigerants help to mitigate environmental risk from the release of those three hydrocarbon refrigerant substitutes. For example, state and local air quality agencies may include VOC emissions reduction strategies in state implementation plans developed to meet and maintain the NAAQS that would apply to hydrocarbon refrigerants.
For purposes of section 608(c)(2) of the CAA, EPA considers two factors in determining whether or not venting, release, or disposal of a substitute refrigerant during the maintenance, servicing, repairing, or disposing of appliances poses a threat to the environment. See 69 FR 11948 (March 12, 2004). First, EPA determines whether venting, release, or disposal of the substitute refrigerant poses a threat to the environment because of the inherent characteristics of the refrigerant, such as global warming potential. Second, EPA determines whether and to what extent such venting, release, or disposal actually takes place during the maintenance, servicing, repairing, or disposing of appliances, and to what extent such venting, release, or disposal is controlled by other authorities, regulations, or practices. To the extent that such releases are adequately controlled by other authorities, EPA defers to those authorities.
EPA has evaluated the potential environmental impacts of releasing into the environment the hydrocarbon refrigerant substitutes that we are proposing to list under the SNAP program as acceptable subject to use conditions in the end-uses proposed—i.e., ethane in very low temperature refrigeration and non-mechanical heat transfer; isobutane in retail food refrigeration (stand-alone equipment only) and vending machines; propane in household refrigerators and freezers, vending machines and room AC units; and R–441A in retail food refrigeration (stand-alone equipment only), vending machines and room AC units. In particular, we assessed the potential impact of the release of additional hydrocarbons on local air quality and their ability to decompose in the atmosphere, their ODP and their GWPs, as well as potential impacts on ecosystems (see Section IV above, “What criteria did EPA consider in determining whether to list the substitutes as acceptable and in determining appropriate use conditions and how does EPA consider those factors?”). As explained in that section, the ODP of these hydrocarbons is zero, the GWPs are less than 10, and effects on aquatic life from these hydrocarbons are expected to be small. As to potential effects on local air quality, based on the analysis and modeling results described above, EPA concludes that the four saturated hydrocarbon refrigerant substitutes proposed to be listed as acceptable subject to use conditions in specific end-uses—ethane, isobutane, propane, and R–441A—are expected to have little impact on local air quality. In addition, when examining all hydrocarbon substitute refrigerants in those uses for which UL currently has standards in place, for which the SNAP program has already listed the uses as acceptable subject to use conditions, or for which the SNAP program is reviewing a submission, including those in this rule, we found that even if all the refrigerant in appliances in end-uses addressed in this proposed rule were to be emitted, there would be a worst-case impact of less than 0.2% of the NAAQS for ground-level ozone in the Los Angeles area. In light of its evaluation of potential environmental impacts, EPA concludes that the four hydrocarbon refrigerant substitutes in the end-uses at issue in this proposal are not expected to pose a threat to the environment on the basis of the limited quantities used in the relevant end-uses and applications and on the basis of the inherent characteristics of these substances (ICF, 2014a).
As discussed above in sections IV.B., “Flammability and fire safety” and IV.C., “Toxicity,” EPA's SNAP program evaluated the potential for fire risk from flammability and toxicity risks from exposure to the substitute refrigerants in this proposal. EPA is providing some of that information in this section as well.
Hydrocarbons, including ethane, propane, isobutane and the hydrocarbon blend R–441A, are classified as A3 refrigerants by ASHRAE Standard 34–2010, indicating that they have low toxicity and high flammability. Hydrocarbons considered in this proposal have lower flammability limits (LFLs) ranging from 1.8% to 3.0% (18,000 ppm to 30,000 ppm). To address flammability risks, EPA is issuing
Like most refrigerants, hydrocarbons can displace oxygen at high concentrations and cause asphyxiation. Various industry and regulatory standards exist to address asphyxiation and toxicity risks. The SNAP program's analysis of asphyxiation and toxicity risks suggests that the use conditions proposed in this rule mitigate potential asphyxiation and toxicity risks. Furthermore, the Agency believes that the flammability risks and occupational exposures to hydrocarbons are adequately regulated by OSHA, building, and fire codes at a local and national level.
EPA believes that existing authorities, controls, and practices would help mitigate environmental risk from the release of these hydrocarbon refrigerants. Analyses performed for both this proposed rule and the SNAP rules issued in 1994 and 2011 (March 17, 1994, at 59 FR 13044 and December 20, 2011, at 76 FR 38832, respectively) indicate that existing regulatory requirements and industry practices designed to limit and control these substances adequately control the emission of the hydrocarbon refrigerants proposed to be listed in this action. As explained below, EPA concludes that the limits and controls under other authorities, regulations or practices adequately control the release of and exposure to the four hydrocarbon substitute refrigerants and mitigate risks from any possible release.
This conclusion is relevant to the second factor mentioned above in the overall determination of whether venting, release, or disposal of a substitute refrigerant poses a threat to the environment—that is, a consideration of the extent that such venting, release, or disposal is adequately controlled by other authorities, regulations, or practices. As such, this conclusion is another part of the determination that the venting, release, or disposal of these four hydrocarbon refrigerants would not pose a threat to the environment.
Industry service practices and OSHA standards and guidelines address hydrocarbon refrigeration equipment, include monitoring efforts, engineering controls, and operating procedures. OSHA requirements that apply during servicing include continuous monitoring of explosive gas concentrations and oxygen levels. In general, hydrocarbon emissions from refrigeration systems are likely to be significantly smaller than those emanating from the industrial process and storage systems, which are controlled for safety reasons. Further, the SNAP rule listing hydrocarbons as acceptable subject to use conditions for use in household and commercial stand-alone refrigerators and freezers (December 20, 2011, at 76 FR 78832), we noted that the amount of refrigerant from a refrigerant loop is limited (57 g for household refrigerators and freezers, and 150 g for commercial stand-alone refrigerators and freezers), indicating that hydrocarbon emissions from such uses are likely to be relatively small. Similar charge limits are proposed to apply to very low temperature refrigeration equipment, non-mechanical heat transfer equipment, and vending machines, with larger but still limited charges for room air conditioners (1000 g for hydrocarbon refrigerants).
Hydrocarbons that are also VOC may be regulated as VOC under sections of the Clean Air Act that address nonattainment, attainment and maintenance of the National Ambient Air Quality Standards for ground level ozone, including those sections addressing development of State Implementation Plans and those addressing permitting of VOC sources.
The release and/or disposal of many refrigerant substitutes, including hydrocarbons, are controlled by other authorities including those established by OSHA and NIOSH guidelines, various standards, and state and local building codes. To the extent that release during maintaining, repairing, servicing or disposing of appliances is controlled by regulations and standards of other authorities, EPA believes these practices and controls for the use of hydrocarbons are sufficiently protective. These practices and controls could help mitigate the risk to the environment that may be posed by the venting, release or disposal of these four hydrocarbon refrigerants during the maintaining, servicing, repairing, or disposing of appliances. This conclusion addresses the second factor in the analysis described above and is thus part of the determination that the venting, release, or disposal of these hydrocarbon refrigerant substitutes does not pose a threat to the environment.
EPA has reviewed the potential environmental impacts of four hydrocarbon refrigerant substitutes in the end-uses that we are proposing to list subject to use conditions under SNAP, as well as the authorities, controls and practices in place for those hydrocarbon refrigerant substitutes. Specifically, EPA concludes that these four hydrocarbon refrigerant substitutes in the proposed end-uses and subject to the proposed use conditions are not expected to pose a threat to the environment based on the inherent characteristics of these substances and the limited quantities used in the relevant applications. EPA additionally concludes that existing authorities, controls, and practices help mitigate environmental risk from the release of those four hydrocarbons in the proposed end-uses and subject to the proposed use conditions. In light of these conclusions and those described or identified above in this section, we are proposing to determine, in accordance with 608(c)(2), that based on current evidence and risk analyses, the venting, release or disposal of these four hydrocarbon refrigerant substitutes in the end-uses proposed does not pose a threat to the environment. Furthermore, EPA is proposing to exempt from the venting prohibition at 40 CFR 82.154(a)(1) these additional uses for which hydrocarbons are being proposed to be found acceptable subject to use conditions under the SNAP program.
EPA seeks information or data on whether there currently is an industry standard for recovery units for flammable refrigerants and whether there are commercially available recovery units that are specifically designed to be compatible with ethane, isobutane, propane, and R–441A. At this time, EPA is unaware of any recovery units that are designed specifically for recovering hydrocarbons and which are readily available in the U.S. Further, we are not aware of relevant U.S. standards for such recovery units. However, to the extent that these hydrocarbons are recovered rather than vented as would be allowed in the specified end-uses if this proposal became final, EPA recommends the use of recovery equipment designed for flammable refrigerants, when such equipment and relevant U.S. standards for it become available, in accordance with applicable safe handling practices.
Today's proposed rulemaking would regulate the use of HFC–32 in room AC units. All HFCs are currently subject to the venting prohibition. EPA is not proposing to extend the exemption to HFC–32 or any refrigerant blends that contain HFC–32 or any other HFC. Further, the exemption to the venting prohibition proposed in this NPRM does not extend to blends of hydrocarbons and other types of compounds, e.g., blends of HFCs and hydrocarbons. Such refrigerant substitutes would still be subject to the statutory and regulatory venting prohibition.
EPA recommends that only technicians specifically trained in handling flammable refrigerant substitutes service or dispose of refrigeration and AC equipment containing these substances. Technicians should know how to minimize the risk of fire and the procedures for using flammable refrigerant substitutes safely. Releases of large quantities of refrigerant substitutes during servicing and manufacturing, especially in enclosed, poorly ventilated spaces or in areas where large amounts of refrigerant are stored, could cause an explosion if an ignition source exists nearby. For these reasons, it is important that only properly trained technicians handle flammable refrigerant substitutes when maintaining, servicing, repairing, or disposing of household and retail food refrigerators and freezers, very low temperature freezers, non-mechanical heat transfer equipment (e.g., thermosiphons), and room air conditioners. In addition, EPA recommends that if hydrocarbon refrigerant substitutes were vented, released, or disposed of (rather than recovered), as would be allowed in the specified end-uses if this proposal became final, the release should be in a well-ventilated area, such as outside of a building.
We are aware that at least one organization, Refrigeration Service Engineers Society (RSES), has developed a technician training program in collaboration with refrigeration equipment manufacturers and users that addresses safe use of flammable refrigerant substitutes. In addition, EPA has reviewed several training programs provided as part of SNAP submissions from persons interested in flammable refrigerant substitutes. EPA intends to update the CAA Section 608 technician certification test bank provided to approved organizations that administer the certification exams in accordance with 40 CFR 82.161 to specifically include questions concerning flammable refrigerant substitutes.
EPA considered proposing a use condition requiring training in handling flammable refrigerant substitutes for technicians who service or dispose of refrigeration and AC equipment containing these substitutes. However, we do not have sufficient information on the core elements that should be part of such a training program to ensure that a training requirement would improve safety. Some examples of potential core elements that EPA might consider include:
• EPA's relevant use conditions for flammable refrigerants;
• relevant OSHA requirements for flammable gases; relevant industry standards (e.g., UL, ASHRAE, NFPA);
• MSDS information, including first aid and physical and chemical characteristics of flammable refrigerants; and
• requirements and procedures for safe storage and handling of flammable refrigerants.
Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a “significant regulatory action.” It raises novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under EO 12866 and 13563 (76 FR 3821, January 21, 2011) and any changes made in response to OMB recommendations have been documented in the docket for this action.
This action does not impose any new information collection burden. This proposed rule is an Agency determination. It contains no new requirements for reporting or recordkeeping. The Office of Management and Budget (OMB) has previously approved the information collection requirements contained in the existing regulations in Subpart G of 40 CFR Part 82 under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control number 2060–0226. This Information Collection Request (ICR) included five types of respondent reporting and recordkeeping activities pursuant to SNAP regulations: Submission of a SNAP petition, filing a SNAP/TSCA Addendum, notification for test marketing activity, recordkeeping for substitutes acceptable subject to use restrictions, and recordkeeping for small volume uses. The OMB control numbers for EPA's regulations are listed in 40 CFR part 9 and 48 CFR Chapter 15.C.
The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration's (SBA) regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
After considering the economic impacts of this proposed rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 U.S.C. 603 and 604.
This action contains no Federal mandates under the provisions of Title II of the Unfunded Mandate Reform Act of 1995 (UMRA), 2 U.S.C. 1531–1538 for State, local, or tribal governments or the private sector. This action imposes no enforceable duty on any State, local, or tribal governments or the private sector. The enforceable requirements of this proposed rule related to integrating risk mitigation devices, markings, and procedures for maintaining safety of refrigeration and AC equipment using flammable refrigerants affect only a small number of manufacturers of refrigeration and AC equipment and their technicians. Therefore, this rule is not subject to the requirements of sections 202 and 205 of the UMRA. This action is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. This regulation applies equipment manufacturers and not to governmental entities. Today's action, if finalized, would allow equipment manufacturers the additional options of using ethane, HFC–32, isobutane, propane, and R–441A in the specified end-uses. Because refrigeration and AC equipment for these refrigerants are not manufactured yet in the U.S. for the proposed end-uses, no change in business practice would be required to meet the use conditions. This proposed rule does not mandate a switch to these substitutes; consequently, there is no direct economic impact on entities from this rulemaking.
This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This regulation applies directly to facilities that use these substances and not to governmental entities. Thus, Executive Order 13132 does not apply to this action. In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between EPA and State and local governments, EPA specifically solicits comments on this proposed action from State and local officials.
This action does not have tribal implications, as specified in Executive Order 13175 (65 FR 67249, November 9, 2000). It will not have substantial direct effects on tribal governments, on the relationship between the Federal government and Indian tribes, or on the distribution of power and responsibilities between the Federal government and Indian tribes, as specified in Executive Order 13175. EPA specifically solicits additional comment on this proposed action from tribal officials.
This action is not subject to Executive Order 13045 (62 FR 19885, April 23, 1997) because it is not economically significant as defined in E.O. 12866, and because the Agency does not believe the environmental health or safety risks addressed by this action present a disproportionate risk to children. This proposed rule provides both regulatory restrictions and recommended guidelines based upon risk screens conducted in order to reduce risk of fire and explosion. This proposed rule, if finalized, would provide refrigerant substitutes that have no ODP and lower GWP than other substitutes currently listed as acceptable. The reduction in ODS and GHG emissions would assist in restoring the stratospheric ozone layer and provide climate benefits. The public is invited to submit comments or identify peer-reviewed studies and data that assess effects of early life exposure to the refrigerant substitutes addressed in this action.
This action is not a “significant energy action” as defined in Executive Order 13211, (66 FR 28355 (May 22, 2001)) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Preliminary information indicates that these new systems may be more energy efficient than currently available systems in some climates.
Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (“NTTAA”), Public Law 104–113, (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This proposed rule involves technical standards. EPA proposes to use current editions of the Underwriters Laboratories (UL) standards 250, 471, 541 and 484, which include requirements for safety and reliability for flammable refrigerants. This proposed rule regulates the safety and deployment of new substitutes for household and commercial refrigerators and freezers, vending machines, non-mechanical heat transfer equipment, very low temperature refrigeration equipment, and room air conditioners.
EPA welcomes comment on this aspect of the proposed rulemaking and, specifically invites the public to identify potentially applicable voluntary consensus standards and to explain why
Executive Order (E.O.) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the United States.
EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it increases the level of human health and environmental protection for all affected populations without having any disproportionately high and adverse human health or environmental effects on any population, including any minority or low-income population. This proposed rule, if finalized, would provide refrigerant substitutes that have no ODP and lower GWP than other substitutes currently listed as acceptable. The reduction in ODS and GHG emissions would assist in restoring the stratospheric ozone layer and provide climate benefits.
This preamble references the following documents, which are also in the Air Docket at the address listed in Section I.B.1. Unless specified otherwise, all documents are available electronically through the Federal Docket Management System, Docket # EPA–HQ–OAR–2013–0748.
Environmental protection, Administrative practice and procedure, Air pollution control, Incorporation by reference, Recycling, Reporting and recordkeeping requirements, Stratospheric ozone layer.
For the reasons stated in the preamble, 40 CFR part 82 is proposed to be amended as follows:
42 U.S.C. 7414, 7601, 7671–7671q.
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(iii) Effective [DATE 60 DAYS AFTER DATE OF PUBLICATION OF FINAL RULE IN THE
Coast Guard, DHS.
Proposed rule; extension of comment period.
The Coast Guard is extending the comment period on the advance notice of proposed rulemaking titled, “Training of Personnel and Manning on Mobile Offshore Units and Offshore Supply Vessels Engaged in U.S. Outer Continental Shelf Activities,” published on April 14, 2014. We are extending the comment period at the request of industry to ensure stakeholders have adequate time to submit complete responses.
The comment period for the proposed rule published April 14, 2014 (79 FR 20844) is extended. Comments and related material must either be submitted to our online docket via
You may submit comments identified by docket number USCG–2013–0175 using any one of the following methods:
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To avoid duplication, please use only one of these four methods. See the “Public Participation and Request for Comments” portion of the
If you have questions on this notice, call or email Mr. Gerald Miante, Maritime Personnel Qualifications Division (CG–OES–1), U.S. Coast Guard, 2703 Martin Luther King Jr. Avenue SE., Washington, DC 20593; telephone 202–372–1407, or email
We encourage you to submit comments and related materials on the advance notice of proposed rulemaking (ANPRM). With the exception of confidential and sensitive comments, all comments received will be posted, without change, to
If you submit a comment, please include the docket number for this notice (USCG–2013–0175) and provide a reason for each suggestion or recommendation. You may submit your comments and material online, or by fax, mail or hand delivery, but please use only one of these means. We recommend that you include your name and a mailing address, an email address, or a telephone number in the body of your document so that we can contact you if we have questions regarding your submission.
To submit your comment online, go to
If you submit comments, do not send materials that include trade secrets, confidential, commercial, or financial information; or Sensitive Security Information to the public regulatory docket. Please submit such comments separately from other comments on the rulemaking. Comments containing this type of information should be appropriately marked as containing such information and submitted by mail to the Coast Guard point of contact listed in the
Upon receipt of such comments, the Coast Guard will not place the comments in the public docket and will handle them in accordance with applicable safeguards and restrictions on access. The Coast Guard will hold them in a separate file to which the public does not have access, and place a note in the public docket that the Coast Guard has received such materials from the commenter. If the Coast Guard receives a request to examine or copy this information, we will treat it as any other request under the Freedom of Information Act (5 U.S.C. 552).
To view comments, as well as documents mentioned in this preamble as being available in the docket, go to
Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment, if submitted on behalf of an association, business, labor union, etc.). You may review a Privacy Act notice regarding our public dockets in the January 17, 2008, issue of the
On April 14, 2014, the Coast Guard published an ANPRM, “Training of Personnel and Manning on Mobile
On May 29, 2014, the International Association of Drilling Contractors requested that the Coast Guard extend the comment period by an additional 60 days to allow their organization, and others in the industry, more time to respond to the ANPRM and to gather the “organizational and economic data” that the Coast Guard requested in the ANPRM. The Coast Guard is extending the public comment period, as requested, to ensure that all stakeholders (industry, State and Federal Government agencies, and other individuals who would be impacted by this rulemaking) have adequate time to review and fully respond to the questions posed in the ANPRM and to any other material included in the ANPRM.
We encourage all members of the public to send comments explaining what, if any, impact this ANPRM could have on them or their organizations. Also, we ask that commenters be specific and detailed in their submissions to aid us in effectively responding to the comments, and so that we may craft regulations that will enhance existing maritime safety training.
This notice of extension is issued under the authority of 5 U.S.C. 552(a).
National Highway Traffic Safety Administration (NHTSA), Department of Transportation (DOT).
Notice of intent; request for scoping comments.
NHTSA plans to prepare an Environmental Impact Statement (EIS) to analyze the potential environmental impacts of new fuel efficiency standards for commercial medium- and heavy-duty on-highway vehicles and work trucks (potentially covering engines, chassis, vehicles, and/or trailers manufactured after model year 2018) that will be proposed by the agency pursuant to the Energy Independence and Security Act of 2007. This document initiates the scoping process for determining the scope of issues to be addressed in the EIS and for identifying the significant environmental issues related to the proposed action. Further, it discusses cooperating agencies, the environmental review process, and the agency's tentative planning and decision-making schedule. NHTSA invites the participation of Federal, State, and local agencies, Indian tribes, stakeholders, and the public in this process to help identify the significant issues and reasonable alternatives to be examined in the EIS, and to eliminate from detailed study the issues that are not significant.
The scoping process will culminate in the preparation and issuance of a Draft EIS (DEIS), which will be made available for public comment. To ensure that NHTSA has an opportunity to fully consider scoping comments and to facilitate NHTSA's prompt preparation of the DEIS, scoping comments should be received on or before August 8, 2014. NHTSA will try to consider comments received after that date to the extent the rulemaking schedule allows.
You may submit comments to the docket number identified in the heading of this document by any of the following methods:
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Regardless of how you submit your comments, please mention the docket number identified in the heading of this notice. If comments are submitted in hard copy form, please ensure that two copies are provided. If you wish to receive confirmation that your comments were received, please enclose a stamped, self-addressed postcard with the comments. Note that all comments received, including any personal information provided, will be posted without change to
For technical issues, contact James
In a forthcoming notice of proposed rulemaking (NPRM), NHTSA intends to propose fuel efficiency standards for commercial medium- and heavy-duty on-highway vehicles and work trucks (collectively, “HD vehicles” or “heavy-duty vehicles”) manufactured after model year (MY) 2018 pursuant to the Energy Independence and Security Act of 2007 (EISA).
In December 2007, EISA provided DOT (and by delegation, NHTSA
EISA also provides requirements for lead time and regulatory stability. New fuel efficiency improvement program standards that NHTSA adopts pursuant to EISA must provide not less than 4 full model years of regulatory lead-time and 3 full model years of regulatory stability.
On May 21, 2010, the President issued a memorandum to the Secretary of Transportation, the Secretary of Energy, the Administrator of EPA, and the Administrator of NHTSA that called for coordinated regulation of the heavy-duty vehicle market segment under EISA and under the Clean Air Act.
Continued improvement in the efficiency of HD vehicles is a key component of the President's 2013 Climate Action Plan to reduce carbon emissions.
In developing Phase 2 standards, the agencies are instructed to partner with industry leaders and other key stakeholders, including manufacturers, labor, States, and non-governmental organizations. To this end, EPA and NHTSA will consult with the California Air Resources Board (CARB) with the goal of ensuring that the next phase of standards allows manufacturers to continue to build a single national fleet.
NHTSA will prepare an EIS to analyze the potential environmental impacts of its proposed HD vehicle fuel efficiency standards and reasonable alternative standards. This Notice of Intent initiates the scoping process for the EIS under NEPA, 42 U.S.C. 4321–4347, and implementing regulations issued by CEQ, 40 CFR parts 1500–1508, and NHTSA, 49 CFR part 520.
Under NEPA, the purpose of and need for an agency's action inform the range of reasonable alternatives to be considered in its NEPA analysis.
Due to the diversity of the HD industry, the Phase 1 rule divided HD vehicles into three regulatory categories: Heavy-duty pick-up trucks and vans (Class 2b and Class 3), vocational vehicle chassis (Class 2b–Class 8), and combination tractors (Class 7 and 8). Phase 1 established separate standards for each of these categories, as well as standards for the engines powering vocational vehicles and combination tractors. Phase 2 may include post-MY 2018 engine and vehicle fuel efficiency standards that are more stringent than those for MYs 2016–2018, as well as regulatory standards and certification requirements for previously unregulated new trailers pulled by semi-tractors. The following discusses each of these regulatory categories in turn.
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NHTSA (in consultation with EPA) is still evaluating the costs and effectiveness of the various technologies available, the potential structure of the program, the stringencies of potential alternatives covering each regulatory category of the HD sector (Class 2b and 3 heavy-duty pick-up trucks and vans, Class 2b through 8 vocational vehicles, Class 7 and 8 combination tractors, trailers, and/or engines), and the range of reasonable alternatives for consideration in this rulemaking and EIS.
NEPA requires agencies to consider a “no action” alternative in their NEPA analyses and to compare the effects of not taking action with the effects of the reasonable action alternatives in order to demonstrate the different environmental effects of the action alternatives.
Similar to the approach NHTSA used in its EIS for the MY 2017–2025 light-duty CAFE standards, the EIS will also analyze action alternatives calculated at the lower point and at the upper point of the range the agency believes encompasses reasonable alternatives meeting the purpose and need of the proposed action (i.e., increasing fuel efficiency of HD vehicles in conformity with the requirements of EISA). These lower and upper “bounds” or “brackets” will account for various potential structures for the Phase 2 fuel efficiency improvement program and various levels of stringency for the regulatory categories identified above. These alternatives would bracket the range of actions the agency may select. If additional granularity is necessary, the agency may analyze additional action alternatives within the range.
In the draft EIS (DEIS), NHTSA intends to identify a Preferred Alternative, which may be one of the above-identified alternatives or a level of stringency that falls between those extremes. The Preferred Alternative would reflect what the agency believes is the “maximum feasible improvement” required under EISA, and may require fuel efficiency improvement that is constant throughout the regulatory period or varies from year to year (and from segment to segment) in accordance with predetermined stringency increases that would be established by this rule. However, the overall stringency and impacts will fall at or between the lower and upper brackets discussed above. NHTSA has not yet identified its Preferred Alternative.
The lower and upper bounds of the range of reasonable alternatives would
The range covered will reflect differences in the degree of technology adoption across the fleet, in costs to manufacturers and heavy-duty vehicle owners and operators, and in conservation of fuel and related reductions in GHGs. For example, the most stringent alternative NHTSA will evaluate would likely require, on balance, greater adoption of technology across the fleet than the least stringent alternative NHTSA will evaluate. As a result, the most stringent alternative would impose greater costs and achieve greater energy conservation and related reductions in GHGs.
This range of stringencies, along with the analysis for the Preferred Alternative, would provide a broad range of information for NHTSA to use in evaluating and weighing the statutory factors in EISA. It would also assist the decision-maker in considering the differences and uncertainties in the way in which key economic inputs (e.g., the price of fuel and the social cost of carbon) and technological inputs are estimated or valued.
NHTSA invites comments to ensure that the agency considers a full range of reasonable alternatives in setting new HD vehicle fuel efficiency improvement standards and that the agency identifies the environmental impacts and focuses its analyses on all the potentially significant impacts related to each alternative. Comments may go beyond the approaches and information that NHTSA described above for developing the alternatives and in identifying the potentially significant environmental effects. The agency may modify the proposed alternatives and environmental effects that will be analyzed in depth based upon the comments received during the scoping process and upon further agency analysis.
While the main focus of NHTSA's prior EISs (
Similar to past EIS practice, NHTSA plans to analyze environmental impacts related to fuel and energy use, air pollutant emissions including GHGs and their effects on temperature and climate change, air quality, natural resources, and the human environment. NHTSA will consider the direct and indirect impacts of the proposed HD standards, as well as the cumulative impacts
Because of the models NHTSA will use for this rulemaking and EIS, the agency anticipates analyzing impacts on fuel/energy use and pollutant emissions through 2050 and impacts on GHG emissions, global temperature, and climate change through 2100. In the CAFE MY 2017–2025 FEIS, NHTSA analyzed impacts on fuel/energy use and pollutant emissions through 2060. However, because HD vehicles generally accumulate the vast majority of their VMT in early years, and because more distant projections contain far more uncertainty, NHTSA believes the analysis year of 2050 for fuel/energy use and air quality will provide sufficient information for the decision-maker to assess the totality of the impacts related to the regulated vehicles. Because climate impacts are more long-term, NHTSA anticipates that the EIS will assess these impacts to 2100.
NHTSA specifically requests comment on its proposed analysis as laid out in the previous paragraphs. For example, do the resources and impacts described represent the significant issues to be analyzed in depth in the EIS?
The agency anticipates uncertainty in estimating the potential environmental impacts of the alternatives it proposes, particularly with regard to climate change. For instance, NHTSA expects that there will be uncertainty associated with its estimates of the range of potential global mean temperature changes that may result from changes in fuel and energy consumption and GHG emissions due to a range of new HD vehicle fuel efficiency standards. Further, it is difficult to predict and compare the ways in which potential temperature changes attributable to new HD vehicle fuel efficiency standards may, in turn, affect many aspects of the environment. NHTSA will endeavor to gather the key relevant and credible information. Where information is incomplete or unavailable, the agency will acknowledge the uncertainties in its NEPA analysis, and will apply the provisions in the CEQ regulations addressing “[i]ncomplete or unavailable information.”
NHTSA intends to rely primarily upon the Intergovernmental Panel on Climate Change (IPCC) Fourth and Fifth Assessment Reports and reports of the U.S. Climate Change Science Program (CCSP) and the U.S. Global Change Research Program (USGCRP), including the USGCRP Third National Climate Assessment (NCA) Report, as sources for recent “summar[ies] of existing credible scientific evidence which is relevant to evaluating the reasonably foreseeable significant adverse impacts on the human environment.”
NHTSA expects to rely on its previously published EISs, incorporating material by reference “when the effect will be to cut down on bulk without impeding agency and public review of the action.”
NHTSA has invited EPA, the Federal Motor Carrier Safety Administration (FMCSA), and the Department of Energy (DOE) to serve as cooperating agencies on this EIS.
• Identifying the significant issues to be analyzed in the EIS from a fuel use, climate change, and air quality perspective for heavy-duty vehicles;
• Participating in the scoping process as appropriate and, in particular, assisting NHTSA to “identify and eliminate from detailed study the issues which are not significant or which have been covered by prior environmental review (§ 1506.3), narrowing the discussion of these issues in the statement to a brief presentation of why they will not have a significant effect on the human environment or providing a reference to their coverage elsewhere;”
• Providing information and expertise on manufacture, sale, operation, and maintenance, of heavy-duty vehicles;
• Providing information and expertise related to technologies for improving the fuel efficiency of heavy-duty vehicles;
• Providing technical assistance, information, and expertise for modeling environmental impacts related to manufacture and use of heavy-duty vehicles;
• Participating in coordination meetings, as appropriate; and
• Reviewing and commenting on the DEIS and FEIS prior to publication.
NHTSA invites all Federal agencies, Indian Tribes, State and local agencies, stakeholders, and the public to participate in the scoping process.
All comments relevant to the scoping process are welcome. Specifically, NHTSA requests:
• Peer-reviewed scientific studies that have been issued since the EPA Endangerment Finding and that address or may inform: (a) The impacts on CO
• Comments on how NHTSA should estimate the potential changes in temperature that may result from the changes in CO
• Comments on how NHTSA should discuss or estimate any localized or regional impacts of decreased fuel use, including potential upstream impacts (e.g., changes in fuel use and emissions levels resulting from the extraction, production, storage, and distribution of fuel; changes in materials or other technologies), and comments on how NHTSA should estimate the potential impacts of these localized or regional changes on the environment.
• Comments on what time frame NHTSA should use to evaluate the environmental impacts that may result from setting HD vehicle fuel efficiency standards.
• Comments on emerging environmental issues that should be considered when setting standards.
NHTSA understands that there are a variety of potential alternatives that could be considered that fit within the purpose and need for the proposed rulemaking, as set forth in EISA. NHTSA is therefore interested in comments on how best to structure or describe proposed alternatives for purposes of evaluation under NEPA. Subject to the statutory restraints under EISA, a variety of potential alternatives could be considered within the purpose and need for the proposed rulemaking, each falling along a theoretically infinite continuum of potential standards. As described above, NHTSA plans to address this issue by identifying alternatives at the upper and lower bounds of a range within which we believe the statutory requirement for “maximum feasible improvement”
NHTSA seeks comments on what criteria should be used to choose the Preferred Alternative, given the agency's statutory requirement of developing a “program designed to achieve the maximum feasible improvement.”
In addition, as noted above, NHTSA requests comments on how the agency should assess cumulative impacts, including those from various emissions source categories and from a range of geographic locations. Also in regard to cumulative impacts, the agency requests comments on how to consider the incremental impacts from foreseeable future actions of other agencies or persons, and how they might interact with the HD vehicle fuel efficiency improvement program's incremental impacts.
Two important purposes of scoping are identifying the significant issues that merit in-depth analysis in the EIS and identifying and eliminating from detailed analysis the issues that are not significant and therefore require only a brief discussion in the EIS.
Written comments should include an Internet citation (with a date last visited) to each peer-reviewed study or report you cite in your comments if one is available. If a document you cite is not available to the public online, you should attach a copy to your comments
In the past, some commenters have incorporated by reference comments they or others have previously submitted with regard to other EISs prepared by NHTSA. To the degree those previously submitted comments do not relate to the current EIS, have already been responded to by the agency in a prior EIS, or have been addressed by changes in the prior or current EISs, NHTSA will not provide a direct response in the current DEIS or FEIS. If a commenter does not believe the issues raised in those previously submitted comments have been fully addressed by the agency, the commenter may choose to raise the issue again, but should provide sufficient explanation and supporting material in comments submitted to the agency with regard to the current EIS (including comments submitted during scoping).
Please be sure to reference the docket number identified in the heading of this document in your comments. NHTSA may communicate with interested parties by email. Thus, please also provide an email address (or a mailing address if you decline email communications).
NHTSA expects to prepare an NPRM and DEIS for public comment by March 2015, and an FEIS and final rule by March 2016. NHTSA will make its DEIS and FEIS available on the agency's Web site (
The Department of Agriculture has submitted the following information collection requirement(s) to Office of Management and Budget (OMB) for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104–13. Comments regarding (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology should be addressed to: Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, 725 17th Street NW., Washington, DC 20502. Commenters are encouraged to submit their comments to OMB via email to:
An agency may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
Office of the Chief Information Officer.
Notice and request for comments.
The Office of the Chief Information Officer, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public to comment on the “Generic Clearance for the Collection of Qualitative Feedback on Agency Service Delivery” for approval under the Paperwork Reduction Act (PRA) (44 U.S.C. 3501 et. seq.). This collection was developed as part of a Federal Government-wide effort to streamline the process for seeking feedback from the public on service delivery. This notice announces our intent to submit this collection to Office of Management and Budget (OMB) for approval and solicit comments on specific aspects for the proposed information collection.
Consideration will be given to all comments received by September 8, 2014.
Submit comments by one of the following methods:
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Comments submitted in response to this notice may be made available to the public. For this reason, please do not include in your comments information of a confidential nature, such as sensitive personal information or proprietary information. If you send an email comment, your email address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. Please note that responses
Ruth Brown, 202–720–8958 or Charlene Parker, 202–720–8681.
The solicitation of feedback will target areas such as: Timeliness, appropriateness, accuracy of information, courtesy, efficiency of service delivery, and resolution of issues with service delivery. Responses will be assessed to plan and inform efforts to improve or maintain the quality of service offered to the public. If this information is not collected, vital feedback from customers and stakeholders on the Agency's services will be unavailable.
The Agency will only submit a collection for approval under this generic clearance if it meets the following conditions:
• The collections are voluntary;
• The collections are low-burden for respondents (based on considerations of total burden hours, total number of respondents, or burden-hours per respondent) and are low-cost for both the respondents and the Federal Government;
• The collections are non-controversial and do not raise issues of concern to other Federal agencies;
• Any collection is targeted to the solicitation of opinions from respondents who have experience with the program or may have experience with the program in the near future;
• Personally identifiable information (PII) is collected only to the extent necessary and is not retained;
• Information gathered will be used only internally for general service improvement and program management purposes and is not intended for release outside of the agency;
• Information gathered will not be used for the purpose of substantially informing influential policy decisions; and
• Information gathered will yield qualitative information; the collections will not be designed or expected to yield statistically reliable results or used as though the results are generalizable to the population of study.
Feedback collected under this generic clearance provides useful information, but it does not yield data that can be generalized to the overall population. This type of generic clearance for qualitative information will not be used for quantitative information collections that are designed to yield reliably actionable results, such as monitoring trends over time or documenting program performance. Such data usage require more rigorous designs that address: The target population to which generalizations will be made, the sampling frame, the sample design (including stratification and clustering), the precision requirements or power calculations that justify the proposed sample size, the expected response rate, methods for assessing potential non-response bias, the protocols for data collection, and any testing procedures that were or will be undertaken prior to fielding the study. Depending on the degree of influence the results are likely to have, such collections may still be eligible for submission for other generic mechanisms that are designed to yield quantitative results.
As a general matter, information collections will not result in any new system of records containing privacy information and will not ask questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.
Below we provide projected average estimates for the next 3-years:
All written comments will be available for public inspection at
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid
The Department of Agriculture has submitted the following information collection requirement(s) to OMB for review and clearance under the Paperwork Reduction Act of 1995, Public Law 104–13. Comments regarding (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of burden including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology should be addressed to: Desk Officer for Agriculture, Office of Information and Regulatory Affairs, Office of Management and Budget (OMB),
An agency may not conduct or sponsor a collection of information unless the collection of information displays a currently valid OMB control number and the agency informs potential persons who are to respond to the collection of information that such persons are not required to respond to the collection of information unless it displays a currently valid OMB control number.
Forest Service, USDA.
Notice of initiating the development of a land management plan revision for the Chugach National Forest.
The Chugach National Forest, located in Southcentral Alaska, is initiating the development of a land management plan revision (forest plan). An Assessment will be posted to our Web site around September 1, 2014. We are inviting the public to help us further develop the “need for change” and a proposed action for the land management plan revision.
The Assessment report for the revision of the Chugach NF's land management plan will be posted on the following Web site at
Public meetings associated with the continued development of the “need for change” and a proposed action will be announced on the Web site cited above.
It is anticipated that the Notice of Intent to prepare an environmental impact statement (which will accompany the land management plan revision for the Chugach NF), will be published in the
Written comments or questions concerning this notice should be addressed to U.S. Forest Service, Chugach National Forest, 161 East 1st Avenue, Door 8, Anchorage, Alaska, 99501. Comments or questions may also be sent via email to
Steve Kessler, Acting Forest Plan Revision Team Leader, at 907–743–9461 or, after September 1, 2014, Mary C. Rasmussen, Forest Plan Revision Team Leader at 907–743–9500. Individuals who use telecommunication devices for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1–
More information on the planning process can also be found on the Chugach National Forest Planning Web site at
Pursuant to the 2012 Forest Planning Rule (36 CFR Part 219), the planning process encompasses three-stages: assessment, plan revision, and monitoring. The first stage of the planning process involves assessing social, economic, and ecological conditions of the planning area, which is documented in an assessment report. The assessment report for the Chugach NF is being completed and will be available around September 1, 2014 on the Forest Web site at
This notice announces the start of the second stage of the planning process, which is the development of the land management plan revision. The first task of plan revision is to develop a preliminary “need for change,” which identifies the need to change management direction in the current plan due to information already received about the planning area from the public or employees, changing conditions or monitoring information. The next task is to develop a proposed action, which considers which items identified in the need for change will be addressed in the revision. We are inviting the public to further help us develop our preliminary “need for change” which will inform the proposed action.
A proposed action will initiate our compliance with the National Environmental Policy Act. A Notice of Intent to prepare an environmental impact statement for the land management plan revision, which will include a description of the preliminary need for change and a description of the proposed action, is anticipated to be published around March 1, 2015 in the
Forest plans developed under the National Forest Management Act (NFMA) of 1976 describe the strategic direction for management of forest resources for ten to fifteen years, and are adaptive and amendable as conditions change over time. The Forest Plan for the Chugach NF was approved in 2002 and has been amended five times. On January 31, 2013 and February 7, 2013, public announcements were made that the Chugach NF was beginning to work on the Assessment for revising their Forest Plan. This notice announces the start of the second stage of the planning process, the development of the land management plan revision. Once the plan revision is completed, it will be subject to the objection procedures of 36 CFR Part 219, Subpart B, before it can be approved. The third stage of the planning process is the monitoring and evaluation of the revised plan, which is ongoing over the life of the revised plan.
As public meetings, other opportunities for public engagement, and public review and comment opportunities are identified to assist with the development of the forest plan revision, public announcements will be made, notifications will be posted on the Forest's Web site at
The responsible official for the revision of the land management plan for the Chugach National Forest is Terri Marceron, Forest Supervisor, Chugach National Forest, 161 East 1st Avenue, Door 8, Anchorage, AK 99501.
Dates and Times: Monday, July 21, 2014, at 12:00 p.m. [ET].
Notice is hereby given, pursuant to the provisions of the rules and regulations of the U.S. Commission on Civil Rights (Commission), and the Federal Advisory Committee Act (FACA), that a planning meeting of the Rhode Island Advisory Committee to the Commission will convene via conference call on Friday, July 25, 2014. The purpose of the planning meeting is for the Advisory Committee to discuss the project proposal on human trafficking and to plan a future briefing meeting.
The meeting will be conducted via conference call. In order to reserve a sufficient number of lines, members of the public, including persons with hearing impairments, who wish to listen to the conference call, are asked to either call (202–376–7533) or email the Eastern Regional Office (ERO), (
Members of the public who call-in can expect to incur charges for calls they initiate over wireless lines, and the Commission will not refund any incurred charges. Callers will incur no charge for calls they initiate over land-line connections to the toll-free telephone number.
Members of the public are entitled to submit written comments. The comments must be received in the ERO by August 25, 2014. Comments may be mailed to the Eastern Regional Office, U.S. Commission on Civil Rights, 1331 Pennsylvania Avenue, Suite 1150, Washington, DC 20425, faxed to (202) 376–7548, or emailed to Paul Eliasson at
Records generated from these meetings may be inspected and reproduced at the Eastern Regional Office, as they become available, both before and after each meeting. Persons interested in the work of this advisory committee are advised to go to the Commission's Web site,
The meetings will be conducted pursuant to the provisions of the rules and regulations of the Commission and FACA.
United States Patent and Trademark Office, Commerce.
Request for comments.
The United States Patent and Trademark Office (USPTO) is seeking public input on optimal patent first action and total pendency target levels. The current targets of ten month average first action pendency and twenty month average total pendency were established with stakeholder input in the previous USPTO 2010–2015 Strategic Plan. In the USPTO 2014–2018 Strategic Plan, the USPTO included an initiative to “work with stakeholders to refine long-term pendency goals, while considering requirements of the IP community”. The USPTO recognizes the importance of continually refining and defining optimal pendency to take into consideration the external environment affecting workload inputs, the commitments made to the fee paying public, and the need to ensure a balance between workload, production capacity, and requirements of the Intellectual Property (IP) community. As a first step in beginning that initiative, the USPTO is seeking public input about IP community's suggestions for optimal patent first action and total pendency target levels.
Comments must be sent by electronic mail message over the Internet addressed to:
Gregory L. Mills, Office of the Commissioner for Patents, at 571–272–1439.
As noted in the new 2014–2018 USPTO Strategic Plan, the USPTO is committed to working with stakeholders to refine long-term patent pendency goals, while considering the need for quality examination and other requirements of the IP community.
The current targets are ten month average first action pendency and twenty month average total pendency which are measures of the timeliness of the examination process. More specifically, average first action pendency, or average first office action pendency, is the average number of months from the patent application filing date until the date a first office action is mailed by the USPTO. This time includes not only the time an application is awaiting a decision by the USPTO, but also any time awaiting a reply from an applicant, for example, their time to submit all parts of their patent application. Average first action pendency is an average for all applications that have a first office action mailed over a three-month period of time.
Average total pendency is the average number of months from the patent application filing date until the date the application either issues as a patent or goes abandoned. This time includes not only the time an application is awaiting action by the USPTO, but also includes any time awaiting a reply from an applicant, for example, including any extensions of time. Average total pendency is an average for all applications that either issue as a patent or go abandoned over a three month period of time. It does not include applications in which a Request for Continued Examination (RCE) has been filed.
The current targets of ten month average first action pendency and twenty month average total pendency were established about five years ago in the USPTO's 2010–2015 Strategic Plan. These targets have guided the USPTO in making significant reductions to pendency over the past four years, specifically: (1) A thirty percent reduction in average first action pendency, from an average first action pendency of 25.7 months in fiscal year (FY) 2010 to the current average first action pendency of 18.1 months; and (2) a twenty percent reduction in average total pendency, from an average total pendency of 35.3 months in FY 2010 to the current average total pendency of 28.1 months.
The USPTO worked closely with stakeholders and responded to their concerns in establishing the targets of ten month first action pendency and twenty month total pendency in the previous 2010–2015 Strategic Plan. These pendency targets were supported by stakeholders when they were announced in 2009 (e.g., the Patent Public Advisory Committee (PPAC) gave its support to these pendency timeframes in their 2009 Annual Report).
In the January 2013 final rule to set and adjust patent fees under the authority provided in section 10 of the Leahy-Smith America Invents Act (AIA) (Pub. L. 112–29, 125 Stat. 284, 316–17 (2011)), the PPAC commented in the Patent Public Advisory Committee Fee Setting Report of September 24, 2012 that it “supports reducing pendency and while the proposed levels are laudable, there is nothing magical about the proposed pendency times,” specifically ten month first action pendency and twenty month total pendency.
The USPTO also currently has available a number of alternative prosecution options designed to reduce pendency including:
• Prioritized Examination (Track One) which allows users to receive a final disposition within an average of 12 months.
• Patent Prosecution Highway, which provides that when claims are determined to be allowable in the Office of First Filing, a corresponding application filed in the Office of Second Filing may be advanced out of turn.
• First Action Interview (FAI) Pilot program, in which an applicant is entitled to a first action interview, upon request, prior to the first Office action on the merits.
• After Final Consideration pilot (AFCP), which authorizes additional time for examiners to search and/or consider responses after final rejection.
• Quick-Path IDS (QPIDs) which eliminates the requirement for processing of a request for continued examination (RCE) with an information disclosure statement (IDS) filed after
Further details about these programs can be found at the USPTO Patent Application Initiatives Timeline Internet Web site (
The public is invited to submit comments on issues related to patent application pendency that they deem relevant. Comment regarding the issues below would be particularly helpful to the USPTO:
1. Are the current targets of ten month average first action patent pendency and twenty month average total patent pendency the right agency strategic targets for the USPTO, stakeholders, and the public at large? If not, what are the appropriate average first action patent pendency and average total patent pendency targets, and what is the supporting rationale for different targets?
2. Average first action pendency and average total pendency have been the historical measures for many years. Using average pendency as the historical measure allows for a range of pendency across all applications in all technology areas. Should the USPTO have first action pendency and total pendency targets be met by nearly all applications (e.g., 90 or 95 percent of applications meeting the pendency target) rather than an average first action pendency and total pendency targets? If so, what should the percentage be and why?
3. Using average pendency as the historical measure also allows for a range of pendency across different examining units. Should the USPTO consider more technology level patent pendency targets, for example, at the Technology Center level? If so, should all the Technology Centers have the same target? If not, please explain why Technology Centers should have different pendency target levels and how they should be determined?
4. The American Inventors Protection Act (AIPA) provides for patent term adjustment for certain examination delays.
First, a target tied to PTA provisions could be based on the percent of applications that were completed within a certain number of months, rather than the average of all applications completed. Should the USPTO consider using a first action pendency target tied to minimizing the number of applications in which a first action is not mailed within fourteen months?
Second, the PTA provisions include more specific actions by the USPTO in specific timeframes. Should the USPTO also consider using some of the other PTA specific timeframes for their optimal pendency targets?
5. The PPAC has previously suggested the USPTO's goal to reduce first action pendency to ten months may have the unintended consequences of increasing the uncertainty of the patenting process and potentially reducing the quality of patents due to the possibility of “hidden” prior art since patent applications are not published until eighteen months after their filing date.
6. There have been suggestions that many changes are occurring in the IP system, and the USPTO should be cautious at this point in time to avoid going too low in first action pendency. For example:
a. Some potentially significant case law decisions are pending which may impact large categories of inventions and possibly lead to reduced patent filings.
b. It has been just over one year since patent fees were adjusted.
c. There is a lot of activity in the global IP arena which may impact patent filing activity and IP practices in the United States.
The USPTO welcomes comments on these potential concerns.
7. In addition to seeking public input on optimal patent first action and total pendency levels, the USPTO also is interested in knowing if there are other activities where pendency or timeliness should be measured and reported. While the USPTO reports on a number of different patent pendency measures displayed on the Data Visualization Dashboard of the USPTO's Internet Web site (
a. What other metrics should the USPTO consider utilizing to measure pendency or timeliness throughout the examination process?
b. Specifically regarding RCEs, what other metrics should the USPTO consider utilizing to measure the pendency or timeliness regarding RCEs? Should these metrics also be considered for other continuing-type applications (
DoD.
Renewal of Federal Advisory Committee.
The Department of Defense is publishing this notice to announce that it is renewing the charter for the
Jim Freeman, Advisory Committee Management Officer for the Department of Defense, 703–692–5952.
This committee's charter is being renewed pursuant to 20 U.S.C. 929 and in accordance with the Federal Advisory Committee Act (FACA) of 1972 (5 U.S.C., Appendix, as amended) and 41 CFR 102–3.50(a).
The Council is a statutory Federal advisory committee that shall provide independent advice and recommendations to the Director, Department of Defense Education Activity (“the Director”) and the Secretary of Defense, as appropriate, on the following:
a. Recommend to the Director general policies for operation of the defense dependents' education system with respect to curriculum selection, administration, and operation of the system;
b. provide information to the Director from other Federal agencies concerned with primary and secondary education with respect to education programs and practices which such agencies have found to be effective and which should be considered for inclusion in the defense dependents' education system;
c. advise the Director on the design of the study and the selection of the contractor referred to in 20 U.S.C. 930(a)(2); and
d. perform such other tasks as may be required by the Secretary of Defense.
The Council reports to the Director for all matters listed in a through c above, and any other matters involving the DoD dependents' education system that are within the Director's purview. All matters outside the Director's purview shall be reported to the Secretary of Defense, through the Under Secretary of Defense for Personnel and Readiness (USD(P&R)).
The USD(P&R) or the Director, as appropriate, may act upon the Council's advice and recommendations.
The Council, pursuant to 20 U.S.C. 929(a), shall be comprised of the following 16 members:
a. The Secretary of Defense and the Secretary of Education, or their respective designees;
b. Twelve individuals appointed jointly by the Secretary of Defense and the Secretary of Education who shall be individuals who have demonstrated an interest in the field of primary or secondary education and who shall include representatives of professional employee organizations, school administrators, and parents of students enrolled in the defense dependents' education system, and one student enrolled in such system; and
c. A representative of the Secretary of Defense and of the Secretary of Education.
Members appointed to the Council from professional employee organizations, pursuant to 20 U.S.C. 929(a)(2), shall be individuals designated by those organizations and shall serve three-year terms of service, not to exceed two full terms.
The Secretary of Defense and Secretary of Education may approve the appointment of individuals appointed pursuant to 20 U.S.C. 929(a)(1)(B) for one-to-four year term of service; however, no member appointed pursuant to 20 U.S.C. 929(a)(1)(B), unless authorized by the Secretary of Defense and the Secretary of Education, may serve more than two consecutive terms of service, unless authorized by the Secretary of Defense and the Secretary of Education. Any member appointed to fill a vacancy occurring before the expiration of the term of service for which his or her predecessor was appointed shall be appointed for the remainder of such term. Individuals who are not full-time or permanent part-time Federal employees shall be appointed as experts or consultants pursuant to 5 U.S.C. 3109 to serve as special government employee (SGE) members. Individuals who are full-time or permanent part-time Federal employees shall be appointed pursuant to 41 CFR 102–3.130(a) to serve as regular government employee (RGE) members. All members shall have their appointment renewed on an annual basis.
Pursuant to 20 U.S.C. 929(d), members of the Council who are not full-time or permanent part-time employees of the Federal government shall, while attending meetings or conferences of the Council or otherwise engaged in the business of the Council, be entitled to compensation at the daily equivalent of the rate specified at the time of such service for level IV of the Executive Schedule under 5 U.S.C. 5315. All Council members, while on official travel, shall be entitled to compensation for travel and per diem.
Pursuant to 20 U.S.C. 929(a)(3), the Secretary of Defense and the Secretary of Education, or their designated representatives, shall serve as the Council's co-chairs.
Pursuant to 20 U.S.C. 929(a)(4), the Director, Department of Defense Education Activity, shall be the Executive Secretary of the Council, but shall not vote on matters before the Council.
All members of the Council are appointed to provide advice on the basis of their best judgment without representing any particular point of view and in a manner that is free from conflict of interest.
DoD, when necessary and consistent with the Council's mission and DoD policies and procedures, may establish subcommittees, task forces, or working groups to support the Council. Establishment of subcommittees will be based upon a written determination, to include terms of reference, by the Secretary of Defense, the Deputy Secretary of Defense, or USD (P&R), as the Council's sponsor.
Such subcommittees shall not work independently of the Council and shall report all of their recommendations and advice solely to the Council for full and open deliberation, discussion, and voting. Subcommittees, task forces, or working groups have no authority to make decisions and recommendations, verbally or in writing, on behalf of the Council. No subcommittee or any of its members can update or report, verbally or in writing, on behalf of the Council, directly to the DoD or any Federal officer or employee.
The Secretary of Defense or the Deputy Secretary of Defense will appoint subcommittee members to a term of service of one-to-four years, with annual renewals, even if the member in question is already a member of the Council. Subcommittee members shall not serve more than two consecutive terms of service unless authorized by the Secretary of Defense or the Deputy Secretary of Defense.
Subcommittee members, if not full-time or permanent part-time Federal employees, will be appointed as experts or consultants pursuant to 5 U.S.C. 3109 to serve as SGE members. Subcommittee members, who are full-time or permanent part-time Federal employees, shall be appointed pursuant to 41 CFR 102–3.130(a) to serve as RGE members. With the exception of reimbursement of official travel and per diem related to the Council or its subcommittees, subcommittee members shall serve without compensation.
All subcommittees operate under the provisions of FACA, the Sunshine Act, governing Federal statutes and regulations, and established DoD policies and procedures.
The Council's Designated Federal Officer (DFO) shall be a full-time or permanent part-time DoD employee and shall be appointed in accordance with established DoD policies and procedures.
The Council's DFO is required to be in attendance at all meetings of the Council and any subcommittees for the entire duration of each and every meeting. However, in the absence of the Council's DFO, a properly approved Alternate DFO, duly appointed to the Council according to established DoD policies and procedures, shall attend the entire duration of all meetings of the Council and its subcommittees.
The DFO, or the Alternate DFO, shall call all meetings of the Council and its subcommittees; prepare and approve all meeting agendas; and adjourn any meeting when the DFO, or the Alternate DFO, determines adjournment to be in the public interest or required by governing regulations or DoD policies and procedures.
Pursuant to 41 CFR 102–3.105(j) and 102–3.140, the public or interested organizations may submit written statements to Advisory Council on Dependents' Education membership about the Council's mission and functions. Written statements may be submitted at any time or in response to the stated agenda of planned meeting of the Advisory Council on Dependents' Education.
All written statements shall be submitted to the DFO for the Advisory Council on Dependents' Education, and this individual will ensure that the written statements are provided to the membership for their consideration. Contact information for the Advisory Council on Dependents' Education DFO can be obtained from the GSA's FACA Database—
The DFO, pursuant to 41 CFR 102–3.150, will announce planned meetings of the Advisory Council on Dependents' Education. The DFO, at that time, may provide additional guidance on the submission of written statements that are in response to the stated agenda for the planned meeting in question.
Notice of Availability (NOA) of a Record of Decision (ROD).
On June 26, 2014, the United States Air Force signed the ROD for the Final F–35 Beddown Supplemental Environmental Impact Statement (SEIS). Among other issues, the ROD states the Air Force decision to implement the No Action Alternative, the decision to beddown fifty-nine (59) F–35 aircraft, associated cantonment construction, and recommendations from the Air Force's Gulf Range Airspace Initiative.
The SEIS was made available to the public on February 28, 2014 through a NOA in the
Mr. Mike Spaits, 850–882–2836.
Department of the Air Force, DoD.
Notice of Meeting—2014 Open Forum for the NAVSTAR GPS Public Documents.
This notice informs the public that the Global Positioning Systems (GPS) Directorate will host the 2014 Public Open Forum on 22 August 2014 for the following NAVSTAR GPS public documents: IS–GPS–200 (Navigation User Interfaces), IS–GPS–705 (User Segment L5 Interfaces), IS–GPS–800 (User Segment L1C Interface), and ICD–GPS–870 (Navstar Next Generation GPS Operational Control Segment [OCX] to User Support Community Interfaces). Additional logistical details can be found below.
The purpose of this forum is to collect issues/comments for analysis and possible integration into the next GPS public document revisions. The GPS Directorate has determined that for the public documents noted above, there will be no technical baseline changes processed this fiscal year. All outstanding comments on the GPS public documents will be considered along with the comments received at this year's open forum in the next revision cycle. The 2014 Open Forum is open to the general public. For those who would like to attend and participate in this forum, we request that you register no later than August 1, 2014. Please send the registration information to
Comments will be collected, catalogued, and discussed as potential inclusions to the version following the current release. If accepted, these changes will be processed through the formal Directorate change process for IS–GPS–200, IS–GPS–705, IS–GPS–800, and ICD–GPS–870. All comments must be submitted in a Comments Resolution Matrix (CRM). These forms along with current versions of the documents and the official meeting notice are posted at:
Institute of Education Sciences (IES)/National Center for Education Statistics (NCES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before September 8, 2014.
Comments submitted in response to this notice should be submitted electronically through the Federal eRulemaking Portal at
For specific questions related to collection activities, please contact Kasha Kubdzela, 202–502–7411.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Institute of Education Sciences/National Center for Education Statistics (NCES), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before August 8, 2014.
Comments submitted in response to this notice should be submitted electronically through the Federal eRulemaking Portal at
For specific questions related to collection activities, please contact Kashka Kubdzela, 202–502–7411.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the burden of this collection on the respondents, including through the use of information technology. Please note that written comments received in response to this notice will be considered public records.
Office of Special Education and Rehabilitative Services, Department of Education.
Notice.
National Institute on Disability and Rehabilitation Research (NIDRR)—Disability and Rehabilitation Research Projects and Centers Program—Rehabilitation Engineering Research Centers (RERCs)—Improving the Accessibility, Usability, and Performance of Technology for Individuals who are Deaf or Hard of Hearing Notice inviting applications for new awards for fiscal year (FY) 2014.
Applications Available: July 9, 2014.
Deadline for Letter of Intent to Apply: August 13, 2014.
Date of Pre-Application Meeting: July 30, 2014.
Deadline for Transmittal of Applications: September 8, 2014.
The purpose of NIDRR's RERCs program, which is funded through the Disability and Rehabilitation Research Projects and Centers Program, is to improve the effectiveness of services authorized under the Rehabilitation Act. It does so by conducting advanced engineering research, developing and evaluating innovative technologies, facilitating service delivery system changes, stimulating the production and distribution of new technologies and equipment in the private sector, and providing training opportunities. RERCs seek to solve rehabilitation problems and remove environmental barriers to improvements in employment, community living and participation, and health and function outcomes of individuals with disabilities.
The general requirements for RERCs are set out in subpart D of 34 CFR part 350 (What Rehabilitation Engineering Research Centers Does the Secretary Assist?).
This priority is:
The full text of this priority is included in the notice of final priority for this program published elsewhere in this issue of the
The regulations in 34 CFR part 86 apply to institutions of higher education (IHEs) only.
We will reject any application that proposes a budget exceeding $950,000 for a single budget period of 12 months. The Assistant Secretary for Special Education and Rehabilitative Services may change the maximum amount through a notice published in the
The Department is not bound by any estimates in this notice.
1.
2.
1.
You can contact ED Pubs at its Web site, also:
If you request an application package from ED Pubs, be sure to identify this program as follows: CFDA number 84.133E–4.
Individuals with disabilities can obtain a copy of the application package in an accessible format (
2.
Notice of Intent to Apply: Due to the broad nature of the priority in this competition, and to assist with the selection of reviewers for this competition, NIDRR is requesting all potential applicants to submit a letter of intent (LOI). The submission is not mandatory and the content of the LOI will not be peer reviewed or otherwise used to rate an application.
Each LOI should be limited to a maximum of four pages and include the following information:
(1) The title of the proposed project, the name of the applicant, the name of the Project Director or Principal Investigator (PI), and the names of partner institutions and entities;
(2) A brief statement of the vision, goals, and objectives of the proposed project and a description of its activities at a sufficient level of detail to allow NIDRR to select potential peer reviewers;
(3) A list of proposed project staff including the Project Director or PI and key personnel;
(4) A list of individuals whose selection as a peer reviewer might constitute a conflict of interest due to involvement in proposal development, selection as an advisory board member, co-PI relationships, etc.; and
(5) Contact information for the Project Director or PI.
Submission of an LOI is not a prerequisite for eligibility to submit an application.
Applicants should submit the optional LOI by mail (either through the U.S. Postal Service or a commercial carrier) or by email to: Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue, Room 5142, Potomac Center Plaza (PCP), Washington, DC 20202, email:
For further information regarding the LOI submission process, contact Patricia Barrett at (202) 245–6211, or email:
Page Limit: The application narrative (Part III of the application) is where you, the applicant, address the selection criteria that reviewers use to evaluate your application. We recommend that you limit Part III to the equivalent of no more than 100 pages, using the following standards:
A “page” is 8.5″ x 11″, on one side only, with 1″ margins at the top, bottom, and both sides.
Double space (no more than three lines per vertical inch) all text in the application narrative. You are not required to double space titles, headings, footnotes, references, captions, or text in charts, tables, figures, and graphs.
Use a font that is either 12 point or larger or no smaller than 10 pitch (characters per inch).
Use one of the following fonts: Times New Roman, Courier, Courier New, or Arial.
The recommended page limit does not apply to Part I, the cover sheet; Part II, the budget section, including the narrative budget justification; Part IV, the assurances and certifications; or the one-page abstract, the resumes, the bibliography, or the letters of support. However, the page limit does apply to all of the application narrative section (Part III).
Please submit an appendix that lists every collaborating organization and individual named in the application, including staff, consultants, contractors, and advisory board members. We will use this information to help us screen for conflicts of interest with our reviewers.
An applicant should consult NIDRR's Long-Range Plan for Fiscal Years 2013–2017 (78 FR 20299) (Plan) when preparing its application. The Plan is organized around the following research domains: (1) Community Living and Participation; (2) Health and Function; and (3) Employment.
3.
Applications Available: July 9, 2014.
Deadline for Letter of Intent to Apply: August 13, 2014.
Date of Pre-Application Meeting: Interested parties are invited to participate in a pre-application meeting and to receive information and technical assistance through individual consultation with NIDRR staff. The pre-application meeting will be held on July 30, 2014. Interested parties may participate in this meeting by conference call with NIDRR staff from the Office of Special Education and Rehabilitative Services between 1:00 p.m. and 3:00 p.m., Washington, DC time. NIDRR staff also will be available from 3:30 p.m. to 4:30 p.m., Washington, DC time, on the same day, by telephone, to provide information and technical assistance through individual consultation. For further information or to make arrangements to participate in the meeting via conference call or to arrange for an individual consultation, contact the person listed under
Deadline for Transmittal of Applications: September 8, 2014.
Applications for grants under this competition must be submitted electronically using the Grants.gov Apply site (Grants.gov). For information (including dates and times) about how to submit your application electronically, or in paper format by mail or hand delivery if you qualify for an exception to the electronic submission requirement, please refer to section IV.7.
We do not consider an application that does not comply with the deadline requirements.
Individuals with disabilities who need an accommodation or auxiliary aid in connection with the application process should contact the person listed under
4.
5.
6.
a. Have a Data Universal Numbering System (DUNS) number and a Taxpayer Identification Number (TIN);
b. Register both your DUNS number and TIN with the System for Award Management (SAM) (formerly the Central Contractor Registry (CCR)), the Government's primary registrant database;
c. Provide your DUNS number and TIN on your application; and
d. Maintain an active SAM registration with current information while your application is under review by the Department and, if you are awarded a grant, during the project period.
You can obtain a DUNS number from Dun and Bradstreet. A DUNS number can be created within one to two business days.
If you are a corporate entity, agency, institution, or organization, you can obtain a TIN from the Internal Revenue Service. If you are an individual, you can obtain a TIN from the Internal Revenue Service or the Social Security Administration. If you need a new TIN, please allow two to five weeks for your TIN to become active.
The SAM registration process can take approximately seven business days, but may take upwards of several weeks, depending on the completeness and accuracy of the data entered into the SAM database by an entity. Thus, if you think you might want to apply for Federal financial assistance under a program administered by the Department, please allow sufficient time to obtain and register your DUNS number and TIN. We strongly recommend that you register early.
Once your SAM registration is active, you will need to allow 24 to 48 hours for the information to be available in Grants.gov and before you can submit an application through Grants.gov.
If you are currently registered with SAM, you may not need to make any changes. However, please make certain that the TIN associated with your DUNS number is correct. Also note that you will need to update your registration annually. This may take three or more business days.
Information about SAM is available at
In addition, if you are submitting your application via Grants.gov, you must (1) be designated by your organization as an Authorized Organization Representative (AOR); and (2) register yourself with Grants.gov as an AOR. Details on these steps are outlined at the following Grants.gov Web page:
7.
a.
Applications for grants under the RERC competition, CFDA Number 84.133E–4, must be submitted electronically using the Governmentwide Grants.gov apply site at
We will reject your application if you submit it in paper format unless, as described elsewhere in this section, you qualify for one of the exceptions to the electronic submission requirement
You may access the electronic grant application for this RERC competition at
Please note the following:
• When you enter the Grants.gov site, you will find information about submitting an application electronically through the site, as well as the hours of operation.
• Applications received by Grants.gov are date and time stamped. Your application must be fully uploaded and submitted and must be date and time stamped by the Grants.gov system no later than 4:30:00 p.m., Washington, DC time, on the application deadline date. Except as otherwise noted in this section, we will not accept your application if it is received—that is, date and time stamped by the Grants.gov system—after 4:30:00 p.m., Washington, DC time, on the application deadline date. We do not consider an application that does not comply with the deadline requirements. When we retrieve your application from Grants.gov, we will notify you if we are rejecting your application because it was date and time stamped by the Grants.gov system after 4:30:00 p.m., Washington, DC time, on the application deadline date.
• The amount of time it can take to upload an application will vary depending on a variety of factors, including the size of the application and the speed of your Internet connection. Therefore, we strongly recommend that you do not wait until the application deadline date to begin the submission process through Grants.gov.
• You should review and follow the Education Submission Procedures for submitting an application through Grants.gov that are included in the application package for this competition to ensure that you submit your application in a timely manner to the Grants.gov system. You can also find the Education Submission Procedures pertaining to Grants.gov under News and Events on the Department's G5 system home page at
• You will not receive additional point value because you submit your application in electronic format, nor will we penalize you if you qualify for an exception to the electronic submission requirement, as described elsewhere in this section, and submit your application in paper format.
• You must submit all documents electronically, including all information you typically provide on the following forms: the Application for Federal Assistance (SF 424), the Department of Education Supplemental Information for SF 424, Budget Information—Non-Construction Programs (ED 524), and all necessary assurances and certifications.
• You must upload any narrative sections and all other attachments to your application as files in a PDF (Portable Document) read-only, non-modifiable format. Do not upload an interactive or fillable PDF file. If you upload a file type other than a read-only, non-modifiable PDF or submit a password-protected file, we will not review that material. Additional, detailed information on how to attach files is in the application instructions.
• Your electronic application must comply with any page-limit requirements described in this notice.
• After you electronically submit your application, you will receive from Grants.gov an automatic notification of receipt that contains a Grants.gov tracking number.
This notification indicates receipt by Grants.gov only, not receipt by the Department. Grants.gov will also notify you automatically by email if your application met all the Grants.gov validation requirements or if there were any errors. You will be given an opportunity to correct any errors and resubmit your application, but you must still meet the deadline for submission of applications.
Once your application is successfully validated by Grants.gov, the Department will retrieve your application from Grants.gov and send you an email with a unique PR/Award number for your application. This second notification indicates that the Department has received your application and has assigned your application a PR/Award number (an ED-specified identifying number unique to your application).
These emails do not mean that your application is free of any disqualifying errors. It is your responsibility to ensure that your submitted application has met all of the Department's requirements, including submitting all attachments to your application as files in a PDF (Portable Document) read-only, non-modifiable format, as described in this notice and in the application instructions.
• We may request that you provide us original signatures on forms at a later date.
If you are prevented from electronically submitting your application on the application deadline date because of technical problems with the Grants.gov system, we will grant you an extension until 4:30:00 p.m., Washington, DC time, the following business day to enable you to transmit your application electronically or by hand delivery. You also may mail your application by following the mailing instructions described elsewhere in this notice.
If you submit an application after 4:30:00 p.m., Washington, DC time, on the application deadline date, please contact the person listed under
The extensions to which we refer in this section apply only to the unavailability of, or technical problems with, the Grants.gov system. We will not grant you an extension if you failed to fully register to submit your application to Grants.gov before the application deadline date and time or if the technical problem you experienced is unrelated to the Grants.gov system.
• You do not have access to the Internet; or
• You do not have the capacity to upload large documents to the Grants.gov system;
• No later than two weeks before the application deadline date (14 calendar days or, if the fourteenth calendar day before the application deadline date falls on a Federal holiday, the next business day following the Federal holiday), you mail or fax a written
If you mail your written statement to the Department, it must be postmarked no later than two weeks before the application deadline date. If you fax your written statement to the Department, we must receive the faxed statement no later than two weeks before the application deadline date.
Address and mail or fax your statement to: Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue SW., room 5142, PCP, Washington, DC 20202–2700. FAX: (202) 245–6211.
Your paper application must be submitted in accordance with the mail or hand delivery instructions described in this notice.
b.
If you qualify for an exception to the electronic submission requirement, you may mail (through the U.S. Postal Service or a commercial carrier) your application to the Department. You must mail the original and two copies of your application, on or before the application deadline date, to the Department at the following address: U.S. Department of Education, Application Control Center, Attention: (CFDA Number 84.133E–4), LBJ Basement Level 1, 400 Maryland Avenue SW., Washington, DC 20202–4260.
You must show proof of mailing consisting of one of the following:
(1) A legibly dated U.S. Postal Service postmark.
(2) A legible mail receipt with the date of mailing stamped by the U.S. Postal Service.
(3) A dated shipping label, invoice, or receipt from a commercial carrier.
(4) Any other proof of mailing acceptable to the Secretary of the U.S. Department of Education.
If you mail your application through the U.S. Postal Service, we do not accept either of the following as proof of mailing:
(1) A private metered postmark.
(2) A mail receipt that is not dated by the U.S. Postal Service.
If your application is postmarked after the application deadline date, we will not consider your application.
The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, you should check with your local post office.
If you qualify for an exception to the electronic submission requirement, you (or a courier service) may deliver your paper application to the Department by hand. You must deliver the original and two copies of your application by hand, on or before the application deadline date, to the Department at the following address: U.S. Department of Education, Application Control Center, Attention: (CFDA Number 84.133E–4), 550 12th Street SW., Room 7039, Potomac Center Plaza, Washington, DC 20202–4260.
The Application Control Center accepts hand deliveries daily between 8:00 a.m. and 4:30:00 p.m., Washington, DC time, except Saturdays, Sundays, and Federal holidays.
If you mail or hand deliver your application to the Department—
(1) You must indicate on the envelope and—if not provided by the Department—in Item 11 of the SF 424 the CFDA number, including suffix letter, if any, of the competition under which you are submitting your application; and
(2) The Application Control Center will mail to you a notification of receipt of your grant application. If you do not receive this notification within 15 business days from the application deadline date, you should call the U.S. Department of Education Application Control Center at (202) 245–6288.
1.
2.
In addition, in making a competitive grant award, the Secretary also requires various assurances including those applicable to Federal civil rights laws that prohibit discrimination in programs or activities receiving Federal financial assistance from the Department of Education (34 CFR 100.4, 104.5, 106.4, 108.8, and 110.23).
3.
1.
If your application is not evaluated or not selected for funding, we notify you.
2.
We reference the regulations outlining the terms and conditions of an award in the
3.
(b) At the end of your project period, you must submit a final performance report, including financial information, as directed by the Secretary. If you receive a multi-year award, you must submit an annual performance report that provides the most current performance and financial expenditure information as directed by the Secretary under 34 CFR 75.118. The Secretary may also require more frequent performance reports under 34 CFR 75.720(c). For specific requirements on reporting, please go to
4.
• The number of products (
• The average number of publications per award based on NIDRR-funded research and development activities in refereed journals.
• The percentage of new NIDRR grants that assess the effectiveness of interventions, programs, and devices using rigorous methods.
NIDRR uses information submitted by grantees as part of their Annual Performance Reports for these reviews.
5.
Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue SW., Room 5142, PCP, Washington, DC 20202–2700. Telephone: (202) 245–6211 or by email:
If you use a TDD or a TTY, call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
You may also access documents of the Department published in the
Office of Special Education and Rehabilitative Services, Department of Education.
Notice.
National Institute on Disability and Rehabilitation Research (NIDRR)—Disability and Rehabilitation Research Projects and Centers Program—Rehabilitation Research and Training Centers—Family Support Notice inviting applications for new awards for fiscal year (FY) 2014.
Applications Available: July 9, 2014.
Date of Pre-Application Meeting: July 30, 2014.
Deadline for Notice of Intent to Apply: August 13, 2014.
Deadline for Transmittal of Applications: September 8, 2014.
The purpose of the RRTCs, which are funded through the Disability and Rehabilitation Research Projects and Centers Program, is to achieve the goals of, and improve the effectiveness of, services authorized under the Rehabilitation Act through well-designed research, training, technical assistance, and dissemination activities in important topical areas as specified by NIDRR. These activities are designed to benefit rehabilitation service providers, individuals with disabilities, family members, policymakers, and other research stakeholders. Additional information on the RRTC program can be found at:
These priorities are:
The full text of the General RRTC Requirements priority is included in the notice of final priorities for the Disability and Rehabilitation Research Projects and Centers Program, published in the
The full text of the Family Support priority is included in the notice of final priority published elsewhere in this issue of the
29 U.S.C. 762(g) and 764(b)(2)(A).
The regulations in 34 CFR part 86 apply to institutions of higher education (IHEs) only.
We will reject any application that proposes a budget exceeding $875,000 for a single budget period of 12 months. The Assistant Secretary for Special Education and Rehabilitative Services may change the maximum amount through a notice published in the
The Department is not bound by any estimates in this notice.
1.
2.
1.
You can contact ED Pubs at its Web site, also:
If you request an application package from ED Pubs, be sure to identify this program as follows: CFDA number 84.133B–8.
Individuals with disabilities can obtain a copy of the application package in an accessible format (e.g., braille, large print, audiotape, or compact disc) by contacting the person or team listed under
2.
Notice of Intent to Apply: Due to the broad nature of the priority in the competition, and to assist with the selection of reviewers for the competition, NIDRR is requesting all potential applicants to submit a letter of intent (LOI). The submission is not mandatory and the content of the LOI will not be peer reviewed or otherwise used to rate an application.
Each LOI should be limited to a maximum of four pages and include the following information: (1) The title of the proposed project, the name of the applicant, the name of the Project Director or Principal Investigator (PI), and the names of partner institutions and entities; (2) a brief statement of the vision, goals, and objectives of the proposed project and a description of its activities at a sufficient level of detail to allow NIDRR to select potential peer reviewers; (3) a list of proposed project staff including the Project Director or PI and key personnel; (4) a list of individuals whose selection as a peer reviewer might constitute a conflict of interest due to involvement in proposal development, selection as an advisory board member, co-PI relationships, etc.; and (5) contact information for the Project Director or PI. Submission of an LOI is not a prerequisite for eligibility to submit an application.
NIDRR will accept the optional LOI via mail (through the U.S. Postal Service or commercial carrier) or email, by August 13, 2014. The LOI must be sent to: Patricia Barrett, U.S. Department of Education, 550 12th Street SW., Room 5142, Potomac Center Plaza (PCP), Washington, DC 20202; or by email to:
For further information regarding the LOI submission process, contact Patricia Barrett at (202) 245–6211. Page Limit: The application narrative (Part III of the application) is where you, the applicant, address the selection criteria that reviewers use to evaluate your application. We recommend that you limit Part III to the equivalent of no more than 100 pages, using the following standards:
• A “page” is 8.5″ x 11″, on one side only, with 1” margins at the top, bottom, and both sides.
• Double space (no more than three lines per vertical inch) all text in the application narrative. You are not required to double space titles, headings, footnotes, references, captions, or text in charts, tables, figures, and graphs.
• Use a font that is either 12 point or larger or no smaller than 10 pitch (characters per inch).
• Use one of the following fonts: Times New Roman, Courier, Courier New, or Arial.
The recommended page limit does not apply to Part I, the cover sheet; Part II, the budget section, including the narrative budget justification; Part IV, the assurances and certifications; or the one-page abstract, the resumes, the bibliography, or the letters of support. However, the page limit does apply to all of the application narrative section (Part III).
Please submit an appendix that lists every collaborating organization and individual named in the application, including staff, consultants, contractors, and advisory board members. We will use this information to help us screen for conflicts of interest with our reviewers.
An applicant should consult NIDRR's Long-Range Plan for Fiscal Years 2013–2017 (78 FR 20299) (Plan) when preparing its application. The Plan is organized around the following research domains: (1) Community Living and Participation; (2) Health and Function; and (3) Employment.
3.
Applications Available: July 9, 2014.
Date of Pre-Application Meeting: Interested parties are invited to participate in a pre-application meeting and to receive information and technical assistance through individual consultation with NIDRR staff. The pre-application meeting will be held on July 30, 2014. Interested parties may participate in this meeting by conference call with NIDRR staff from the Office of Special Education and Rehabilitative Services between 1:00 p.m. and 3:00 p.m., Washington, DC time. NIDRR staff also will be available from 3:30 p.m. to 4:30 p.m., Washington, DC time, on the same day, by telephone, to provide information and technical assistance through individual consultation. For further information or to make arrangements to participate in the meeting via
Deadline for Notice of Intent to Apply: August 13, 2014.
Deadline for Transmittal of Applications: September 8, 2014.
Applications for grants under the competition announced in this notice must be submitted electronically using the Grants.gov Apply site (Grants.gov). For information (including dates and times) about how to submit your application electronically, or in paper format by mail or hand delivery if you qualify for an exception to the electronic submission requirement, please refer to section IV. 7.
We do not consider an application that does not comply with the deadline requirements.
Individuals with disabilities who need an accommodation or auxiliary aid in connection with the application process should contact the person listed under
4.
5.
6.
a. Have a Data Universal Numbering System (DUNS) number and a Taxpayer Identification Number (TIN);
b. Register both your DUNS number and TIN with the System for Award Management (SAM) (formerly the Central Contractor Registry (CCR)), the Government's primary registrant database;
c. Provide your DUNS number and TIN on your application; and
d. Maintain an active SAM registration with current information while your application is under review by the Department and, if you are awarded a grant, during the project period.
You can obtain a DUNS number from Dun and Bradstreet. A DUNS number can be created within one to two business days.
If you are a corporate entity, agency, institution, or organization, you can obtain a TIN from the Internal Revenue Service. If you are an individual, you can obtain a TIN from the Internal Revenue Service or the Social Security Administration. If you need a new TIN, please allow two to five weeks for your TIN to become active.
The SAM registration process can take approximately seven business days, but may take upwards of several weeks, depending on the completeness and accuracy of the data entered into the SAM database by an entity. Thus, if you think you might want to apply for Federal financial assistance under a program administered by the Department, please allow sufficient time to obtain and register your DUNS number and TIN. We strongly recommend that you register early.
Once your SAM registration is active, you will need to allow 24 to 48 hours for the information to be available in Grants.gov and before you can submit an application through Grants.gov.
If you are currently registered with SAM, you may not need to make any changes. However, please make certain that the TIN associated with your DUNS number is correct. Also note that you will need to update your registration annually. This may take three or more business days.
Information about SAM is available at www.SAM.gov. To further assist you with obtaining and registering your DUNS number and TIN in SAM or updating your existing SAM account, we have prepared a SAM.gov Tip Sheet, which you can find at:
In addition, if you are submitting your application via Grants.gov, you must (1) be designated by your organization as an Authorized Organization Representative (AOR); and (2) register yourself with Grants.gov as an AOR. Details on these steps are outlined at the following Grants.gov Web page:
7.
a.
Applications for grants under the RRTC competition (CFDA Number 84.133B–8) must be submitted electronically using the Governmentwide Grants.gov Apply site at
We will reject your application if you submit it in paper format unless, as described elsewhere in this section, you qualify for one of the exceptions to the electronic submission requirement
You may access the electronic grant application for the RRTC competition (CFDA Number 84.133B–8) at
Please note the following:
• When you enter the Grants.gov site, you will find information about submitting an application electronically through the site, as well as the hours of operation.
• Applications received by Grants.gov are date and time stamped. Your application must be fully uploaded and submitted and must be date and time stamped by the Grants.gov system no later than 4:30:00 p.m., Washington, DC time, on the application deadline date. Except as otherwise noted in this section, we will not accept your application if it is received—that is, date and time stamped by the Grants.gov system—after 4:30:00 p.m., Washington, DC time, on the application deadline date. We do not consider an application that does not comply with the deadline requirements. When we retrieve your application from Grants.gov, we will notify you if we are rejecting your application because it was date and time stamped by the Grants.gov system after 4:30:00 p.m., Washington, DC time, on the application deadline date.
• The amount of time it can take to upload an application will vary depending on a variety of factors, including the size of the application and the speed of your Internet connection. Therefore, we strongly recommend that you do not wait until the application
• You should review and follow the Education Submission Procedures for submitting an application through Grants.gov that are included in the application package for the competition to ensure that you submit your application in a timely manner to the Grants.gov system. You can also find the Education Submission Procedures pertaining to Grants.gov under News and Events on the Department's G5 system home page at
• You will not receive additional point value because you submit your application in electronic format, nor will we penalize you if you qualify for an exception to the electronic submission requirement, as described elsewhere in this section, and submit your application in paper format.
• You must submit all documents electronically, including all information you typically provide on the following forms: The Application for Federal Assistance (SF 424), the Department of Education Supplemental Information for SF 424, Budget Information—Non-Construction Programs (ED 524), and all necessary assurances and certifications.
• You must upload any narrative sections and all other attachments to your application as files in a PDF (Portable Document) read-only, non-modifiable format. Do not upload an interactive or fillable PDF file. If you upload a file type other than a read-only, non-modifiable PDF or submit a password-protected file, we will not review that material. Additional, detailed information on how to attach files is in the application instructions.
• Your electronic application must comply with any page-limit requirements described in this notice.
• After you electronically submit your application, you will receive from Grants.gov an automatic notification of receipt that contains a Grants.gov tracking number. (This notification indicates receipt by Grants.gov only, not receipt by the Department.) The Department then will retrieve your application from Grants.gov and send a second notification to you by email. This second notification indicates that the Department has received your application and has assigned your application a PR/Award number (an ED-specified identifying number unique to your application).
• We may request that you provide us original signatures on forms at a later date.
If you are prevented from electronically submitting your application on the application deadline date because of technical problems with the Grants.gov system, we will grant you an extension until 4:30:00 p.m., Washington, DC time, the following business day to enable you to transmit your application electronically or by hand delivery. You also may mail your application by following the mailing instructions described elsewhere in this notice.
If you submit an application after 4:30:00 p.m., Washington, DC time, on the application deadline date, please contact the person listed under
The extensions to which we refer in this section apply only to the unavailability of, or technical problems with, the Grants.gov system. We will not grant you an extension if you failed to fully register to submit your application to Grants.gov before the application deadline date and time or if the technical problem you experienced is unrelated to the Grants.gov system.
• You do not have access to the Internet; or
• You do not have the capacity to upload large documents to the Grants.gov system;
• No later than two weeks before the application deadline date (14 calendar days or, if the fourteenth calendar day before the application deadline date falls on a Federal holiday, the next business day following the Federal holiday), you mail or fax a written statement to the Department, explaining which of the two grounds for an exception prevents you from using the Internet to submit your application.
If you mail your written statement to the Department, it must be postmarked no later than two weeks before the application deadline date. If you fax your written statement to the Department, we must receive the faxed statement no later than two weeks before the application deadline date.
Address and mail or fax your statement to: Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue SW., Room 5142, PCP, Washington, DC 20202–2700. FAX: (202) 245–6211.
Your paper application must be submitted in accordance with the mail or hand delivery instructions described in this notice.
b.
If you qualify for an exception to the electronic submission requirement, you may mail (through the U.S. Postal Service or a commercial carrier) your application to the Department. You must mail the original and two copies of your application, on or before the application deadline date, to the Department at the following address:
You must show proof of mailing consisting of one of the following:
(1) A legibly dated U.S. Postal Service postmark.
(2) A legible mail receipt with the date of mailing stamped by the U.S. Postal Service.
(3) A dated shipping label, invoice, or receipt from a commercial carrier.
(4) Any other proof of mailing acceptable to the Secretary of the U.S. Department of Education.
If you mail your application through the U.S. Postal Service, we do not accept either of the following as proof of mailing:
(1) A private metered postmark.
(2) A mail receipt that is not dated by the U.S. Postal Service.
If your application is postmarked after the application deadline date, we will not consider your application.
The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, you should check with your local post office.
c.
If you qualify for an exception to the electronic submission requirement, you
The Application Control Center accepts hand deliveries daily between 8:00 a.m. and 4:30:00 p.m., Washington, DC time, except Saturdays, Sundays, and Federal holidays.
(1) You must indicate on the envelope and—if not provided by the Department—in Item 11 of the SF 424 the CFDA number, including suffix letter, if any, of the program under which you are submitting your application; and
(2) The Application Control Center will mail to you a notification of receipt of your grant application. If you do not receive this notification within 15 business days from the application deadline date, you should call the U.S. Department of Education Application Control Center at (202) 245–6288.
1.
2.
In addition, in making a competitive grant award, the Secretary also requires various assurances including those applicable to Federal civil rights laws that prohibit discrimination in programs or activities receiving Federal financial assistance from the Department of Education (34 CFR 100.4, 104.5, 106.4, 108.8, and 110.23).
3.
1.
If your application is not evaluated or not selected for funding, we notify you.
2.
We reference the regulations outlining the terms and conditions of an award in the
3.
(b) At the end of your project period, you must submit a final performance report, including financial information, as directed by the Secretary. If you receive a multi-year award, you must submit an annual performance report that provides the most current performance and financial expenditure information as directed by the Secretary under 34 CFR 75.118. The Secretary may also require more frequent performance reports under 34 CFR 75.720(c). For specific requirements on reporting, please go to
4.
• The number of products (e.g., new or improved tools, methods, discoveries, standards, interventions, programs, or devices developed or tested with NIDRR funding) that have been judged by expert panels to be of high quality and to advance the field.
• The average number of publications per award based on NIDRR-funded research and development activities in refereed journals.
• The percentage of new NIDRR grants that assess the effectiveness of interventions, programs, and devices using rigorous methods.
NIDRR uses information submitted by grantees as part of their Annual Performance Reports for these reviews.
5.
Patricia Barrett, U.S. Department of Education, 400 Maryland Avenue SW., Room 5142, PCP, Washington, DC 20202–2700. Telephone: (202) 245–6211 or by email:
If you use a TDD or a TTY, call the Federal Relay Service (FRS), toll free, at 1–800–877–8339.
You may also access documents of the Department published in the
Office of Electricity Delivery and Energy Reliability, DOE.
Notice of Application.
Champlain VT, LLC, doing business as TDI-New England (TDI-NE), has applied for a Presidential permit to construct, operate, maintain, and connect an electric transmission line across the United States border with Canada.
Comments or motions to intervene must be submitted on or before August 8, 2014.
Comments or motions to intervene should be addressed as follows: Office of Electricity Delivery and Energy Reliability (OE–20), U.S. Department of Energy, 1000 Independence Avenue SW., Washington, DC 20585.
Christopher Lawrence (Program Office) at 202–586–5260 or via electronic mail at
The construction, operation, maintenance, and connection of facilities at the international border of the United States for the transmission of electric energy between the United States and a foreign country is prohibited in the absence of a Presidential permit issued pursuant to Executive Order (EO) 10485, as amended by EO 12038.
On May 20, 2014, TDI-NE., an entity principally based in Albany, New York, filed an application with the Office of Electricity Delivery and Energy Reliability of the Department of Energy (DOE) for a Presidential permit for the New England Clean Power Link Project. On June 23, 2014, TDI-NE filed supplemental information concerning its application. TDI-New England would own and operate the transmission facilities with functional control being turned over to the Independent System Operator of New England once the project is in service.
TDI-NE proposes to construct, operate and maintain the New England Clean Power Link Project (NECPL), a high voltage direct current (HVDC) electric transmission line with an operating voltage of +/− 300 to 320 kilovolts (kV). The project would be constructed in both aquatic (underwater) and terrestrial (underground) environments.
As proposed, NECPL is a high voltage direct current (HVDC) electric transmission line with an expected power transfer rating of 1000 megawatts (MW). The proposed project would originate in the Canadian province of Quebec and terminate in Ludlow, Vermont. From the Canadian border, the line would be located underground in Alburgh, Vermont for approximately 0.5 miles and would enter Lake Champlain via a horizontal directional drill. The cables would then be installed in Lake Champlain, within the jurisdictional waters of Vermont for 97.6 miles. The cables would emerge from Lake Champlain in the town of Benson, Vermont and would be buried along town roads and state highway rights-of-way for approximately 55.7 miles until terminating at a proposed converter station in Ludlow, Vermont. The total direct current portion of the project is approximately 153.8 miles. The project would also involve the construction of a single circuit 345 kilovolt (kV) underground high voltage alternating current (AC) transmission system which would run approximately 0.3 miles from the converter station in Ludlow to the Coolidge Substation located in the towns of Ludlow and Cavendish, Vermont. The total length of the proposed project from the U.S. border crossing in Alburgh to the Coolidge substation is approximately 154.1 miles.
Since the restructuring of the electric industry began, resulting in the introduction of different types of competitive entities into the marketplace, DOE has consistently expressed its policy that cross-border trade in electric energy should be subject to the same principles of comparable open access and non-discrimination that apply to transmission in interstate commerce. DOE has stated that policy in export authorizations granted to entities requesting authority to export over international transmission facilities. Specifically, DOE expects transmitting utilities owning border facilities to provide access across the border in accordance with the principles of comparable open access and non-discrimination contained in the Federal Power Act and articulated in Federal Energy Regulatory Commission (FERC) Order No. 888 (Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; FERC Stats. & Regs. ¶31,036 (1996)), as amended. In furtherance of this policy, DOE invites comments on whether it would be appropriate to condition any Presidential permit issued in this proceeding on compliance with these open access principles.
Additional copies of such motions to intervene also should be filed directly with: Mr. Donald Jessome, General Manager, TDI-New England, P.O. Box 155, Charlotte, VT 05445,
Before a Presidential permit may be issued or amended, DOE must determine that the proposed action is in the public interest. In making that determination, DOE considers the environmental impacts of the proposed project pursuant to the National Environmental Policy Act of 1969, determines the project's impact on electric reliability by ascertaining whether the proposed project would adversely affect the operation of the U.S. electric power supply system under normal and contingency conditions, and any other factors that DOE may also consider relevant to the public interest. Also, DOE must obtain the concurrences of the Secretary of State and the Secretary of Defense before taking final action on a Presidential permit application.
Copies of this application will be made available, upon request, for public inspection and copying at the address provided above, by accessing the program Web site at
Federal Energy Regulatory Commission, DOE.
Comment request.
In compliance with the requirements of the Paperwork Reduction Act of 1995, 44 U.S.C. 3507(a)(1)(D), the Federal Energy Regulatory Commission (Commission or FERC) is submitting its information collections FERC–520 (Application for Authority to Hold Interlocking Directorate Positions), FERC–561 (Annual Report of Interlocking Positions), and FERC–566 (Annual Report of a Utility's 20 Largest Purchasers) to the Office of Management and Budget (OMB) for review of the information collection requirements. Any interested person may file comments directly with OMB and should address a copy of those comments to the Commission as explained below. The Commission previously issued a Notice in the
Comments on the collection of information are due August 8, 2014.
Comments filed with OMB, identified by the OMB Control Nos. 1902–0083, 1902–0099, and 1902–0114, should be sent via email to the Office of Information and Regulatory Affairs:
A copy of the comments should also be sent to the Commission, in Docket No. IC14–9–000, by either of the following methods:
• eFiling at Commission's Web site:
• Mail/Hand Delivery/Courier: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE., Washington, DC 20426.
Ellen Brown may be reached by email at
An informational application, specified in 18 CFR Section 45.9, allows an applicant to receive automatic authorization for an interlocked position upon receipt of the filing by the Commission. The informational application applies only to those individuals who seek authorization as: (1) an officer or director of two or more public utilities where the same holding company owns, directly or indirectly, that percentage of each utility's stock (of whatever class or classes) which is required by each utility's by-laws to elect directors; (2) an officer or director of two public utilities, if one utility is owned, wholly or in part, by the other and, as its primary business, owns or operates transmission or generation facilities to provide transmission service or electric power for sale to its owners; or (3) an officer or director of more than one public utility, if such person is already authorized under Part 45 to hold different positions as officer or director of those utilities where the interlock involves affiliated public utilities.
Pursuant to 18 CFR 45.5, in the event that an applicant resigns or withdraws from Commission-authorized interlocked positions or is not re-elected or re-appointed to such interlocked positions, the Commission requires that the applicant submit a notice of change
Commenters also request certain exemptions from the FERC–520 and FERC–566 reporting requirements. White & Case suggests that the Commission should not require an informational report under Part 45 for automatic authorization to hold officer/director positions with more than one public utility in a corporate family when the corporate family does not include any franchised public utility with captive customers. White & Case also recommends that the Commission eliminate the requirement to file notices of change under section 45.5 of the Commission's regulations and the requirement to file FERC–566 for public utilities that do not make any reportable sales. NYISO argues that it should be exempted from the requirement to submit FERC–566. EPSA and NRG suggest that the Commission should exempt electric wholesale generators (EWG) from the FERC–566 filing requirement.
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
Any person desiring to protest in any of the above proceedings must file in accordance with Rule 211 of the Commission's Regulations (18 CFR 385.211) on or before 5:00 p.m. Eastern time on the specified comment date.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
Any person desiring to protest in any of the above proceedings must file in accordance with Rule 211 of the Commission's Regulations (18 CFR 385.211) on or before 5:00 p.m. Eastern time on the specified comment date.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following qualifying facility filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that on June 27, 2014, pursuant to Rule 206 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.206, Section 343.2 of the Procedural Rules Applicable to Oil Pipeline Proceedings, 18 CFR 343.2, and Sections 1(5), 8, 9, 13, 15, and 16 of the Interstate Commerce Act (ICA), 49 U.S.C. App. 1(5), 8, 9, 13, 15, and 16 (1994), HollyFrontier Refining & Marketing LLC, Southwest Airlines Co., Tesoro Refining and Marketing Company, US Airways Inc., Valero Marketing and Supply Company, and Western Refining Company, L.P. (together, Indicated Complainants) submitted a complaint challenging the justness and reasonableness of SFPP, L.P.'s (Respondent) West Line (Tariff Nos. 196.9.0 and 198.9.0) and East Line (Tariff No. 197.4.0) index rate increases taken in 2012 and Respondent's West Line (Tariff No. 198.10.0), East Line (Tariff No. 197.6.0), Oregon Line (Tariff No. 200.4.0), North Line (Tariff No. 199.4.0), and Sepulveda Line (Tariff No. 195.4.0) index increases taken in 2013. Indicated Complainants allege that Respondent's rates for this transportation are unjust and unreasonable and request that the Commission investigate Respondent's rates, set the proceedings for an evidentiary hearing to determine the just and reasonable rates for Respondent's index rate increases, require Respondent to pay reparations starting two years before the date of the Complaint for all rates, and award such other relief as is necessary and appropriate under the ICA.
Indicated Complainants state that copies of the Complaint were served on Respondent.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on June 30, 2014, pursuant to Rule 206 of the Federal Energy Regulatory Commission's (Commission) Rules of Practice and Procedure, 18 CFR 385.206, Section 343.2 of the Procedural Rules Applicable to Oil Pipeline Proceedings, 18 CFR 343.2, and Sections 1(5), 8, 9, 13, 15, and 16 of the Interstate Commerce Act (ICA), 49 U.S.C. App. 1(5), 8, 9, 13, 15, and 16 (1994), Chevron Products Company (Complainant) submitted a complaint challenging the justness and reasonableness of SFPP's (Respondent) West Line (Tariff Nos. 196.9.0 and 198.9.0) and East Line (Tariff No. 197.4.0) index rate increases taken in 2012 and Respondent's West Line (Tariff No. 198.10.0), East Line (Tariff No. 197.6.0), Oregon Line (Tariff No. 200.4.0), North Line (Tariff No. 199.4.0), and Sepulveda Line (Tariff No. 195.4.0) index increases taken in 2013. Complainant alleges that Respondent's rates for this transportation are unjust and unreasonable and request that the Commission investigate Respondent's rates, set the proceedings for an evidentiary hearing to determine the just and reasonable rates for Respondent's index rate increases, require Respondent to pay reparations starting two years before the date of the Complaint for all rates, and award such other relief as is necessary and appropriate under the ICA.
Complainant states that copies of the Complaint were served on Respondent.
Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent's answer and all interventions, or protests must be filed on or before the comment date. The Respondent's answer, motions to intervene, and protests must be served on the Complainants.
The Commission encourages electronic submission of protests and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
Take notice that on June 26, 2014, pursuant to Rule 207(a)(2) of the Commission's Rules of Practices and Procedure, 18 CFR 385.207(a)(2)(2014), Enbridge Energy, Limited Partnership (Enbridge Energy) filed a petition for a declaratory order confirming that Enbridge Energy may establish a new receipt point on the Lakehead System at Flanagan, Illinois, which will be available for shipper nominations only in months when the Lakehead System is in apportionment upstream of Flanagan such that not all of the volumes to or through Flanagan can be accepted, as more fully explained in the petition.
Any person desiring to intervene or to protest in this proceedings must file in accordance with Rules 211 and 214 of the Commission's Rules of Practice and Procedure (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Anyone filing a motion to intervene or protest must serve a copy of that document on the Petitioner.
The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at
Persons unable to file electronically should submit an original and 14 copies of the intervention or protest to the Federal Energy Regulatory Commission, 888 First St. NE., Washington, DC 20426.
The filings in the above proceedings are accessible in the Commission's eLibrary system by clicking on the appropriate link in the above list. They are also available for review in the Commission's Public Reference Room in Washington, DC. There is an eSubscription link on the Web site that enables subscribers to receive email notification when a document is added to a subscribed docket(s). For assistance with any FERC Online service, please email
On June 30, 2014, the Commission issued an order in Docket No. EL14–58–000, pursuant to section 206 of the Federal Power Act (FPA), 16 U.S.C. 824e (2012), instituting an investigation into the justness and reasonableness of Midwest Independent Transmission System Operator, Inc.'s (MISO) allocation of voltage or local reliability- related revenue sufficiency guarantee costs to pseudo-tied load.
The refund effective date in Docket No. EL14–58–000, established pursuant to section 206(b) of the FPA, will be the date of publication of this notice in the
Take notice that on June 20, 2014, Enable Gas Transmission, LLC (EGT) filed in Docket No. CP14–503–000 a Prior Notice request pursuant to Section 157.205 of the Commission's Regulations under the Natural Gas Act (NGA), and EGT's blanket certificate issued in Docket Nos. CP82–384–000 and CP82–384–001. EGT seeks authorization to install a new pipeline lateral, located in Grady and McClain Counties in the State of Oklahoma, all as more fully set forth in the application which is on file with the Commission and open to public inspection.
Specifically, EGT proposes to install about 16.2 miles of 24-inch diameter pipeline to be known as Line AD–607 and necessary appurtenant facilities in Grady and McClain Counties, Oklahoma. EGT states that Line AD–607 will connect EGT's Line AD-East with a natural gas processing plant currently being constructed, known as the Bradley Processing Plant.
Any questions regarding this application should be directed to Michelle Willis, Manager Regulatory & Compliance, Enable Gas Transmission, LLC, P. O. Box 21743, Shreveport, Louisiana 71151, by telephone at (318) 429–3708, by FAX at (318) 429–3133 or by email at
Any person or the Commission's Staff may, within 60 days after the issuance of the instant notice by the Commission, file pursuant to Rule 214 of the Commission's Procedural Rules (18 CFR 385.214) a motion to intervene or notice of intervention and, pursuant to section 157.205 of the Commission's Regulations under the NGA (18 CFR 157.205) a protest to the request. If no protest is filed within the time allowed therefore, the proposed activity shall be deemed to be authorized effective the day after the time allowed for protest. If
Pursuant to section 157.9 of the Commission's rules, 18 CFR 157.9, within 90 days of this Notice the Commission staff will either: Complete its environmental assessment (EA) and place it into the Commission's public record (eLibrary) for this proceeding, or issue a Notice of Schedule for Environmental Review. If a Notice of Schedule for Environmental Review is issued, it will indicate, among other milestones, the anticipated date for the Commission staff's issuance of the final environmental impact statement (FEIS) or EA for this proposal. The filing of the EA in the Commission's public record for this proceeding or the issuance of a Notice of Schedule for Environmental Review will serve to notify federal and state agencies of the timing for the completion of all necessary reviews, and the subsequent need to complete all federal authorizations within 90 days of the date of issuance of the Commission staff's FEIS or EA.
Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. Such motions or protests must be filed on or before the comment date. Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant. On or before the comment date, it is not necessary to serve motions to intervene or protests on persons other than the Applicant.
Persons who wish to comment only on the environmental review of this project should submit an original and two copies of their comments to the Secretary of the Commission. Environmental commentors will be placed on the Commission's environmental mailing list, will receive copies of the environmental documents, and will be notified of meetings associated with the Commission's environmental review process. Environmental commentors will not be required to serve copies of filed documents on all other parties. However, the non party commentors will not receive copies of all documents filed by other parties or issued by the Commission (except for the mailing of environmental documents issued by the Commission) and will not have the right to seek court review of the Commission's final order.
The Commission encourages electronic submission of comments, protests, and interventions in lieu of paper using the “eFiling” link at
This filing is accessible on-line at
On June 5, 2014, Commission staff issued a letter to Pennamaquan Tidal Power LLC (Pennamaquan Tidal) stating that Pennamaquan Tidal's proposed study plan for the Pennamaquan Tidal Power Plant Project (P–13884) filed on December 12, 2013, meets the requirements of section 5.11 of the Commission's regulations and that the Integrated Licensing Process (ILP) can resume. According to section 5.11(e) of the Commission's regulations, the next step in the ILP is the initial study plan meeting. In its June 5, 2014, letter, Commission staff indicated that the initial study plan meeting must be held within 75 days of, but no sooner than 60 days from, June 5, 2014. Accordingly, Pennamaquan Tidal has scheduled the meetings listed below:
Dates and Times: August 6 and 7, 2014. 8:00 a.m. to 5:00 p.m.
Location: Maine Department of Environmental Protection, Eastern Maine Regional Office, 106 Hogan Road, Bangor, Maine 04401.
Contact: Ramez Attiya, Pennamaquan Tidal, (281) 467–0846.
Date and Time: August 8, 2014. 12:00 p.m. to 2:00 p.m.
Location: Pembroke Town Office, 48 Old County Road, Pembroke, ME 04666.
Contact: Ramez Attiya, Pennamaquan Tidal, (281) 467–0846.
A revised process plan that includes new dates for completing the ILP is provided below:
Environmental Protection Agency (EPA).
Notice.
This notice announces EPA's receipt of an application, 67760–EUP–R, from Cheminova, Inc., 160 Wilson Blvd., Suite 700, Arlington, VA 22209, requesting an experimental use permit (EUP) for the chemical Flutriafol. The Agency has determined that the permit may be of regional and national significance. Therefore, because of the potential significance, EPA is seeking comments on this application.
Comments must be received on or before August 8, 2014.
Submit your comments, identified by docket identification (ID) number EPA–HQ–OPP–2014–0379, by one of the following methods:
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Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
Lois Rossi, Registration Division (7505P), Office of Pesticide Programs, Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460–0001; main telephone number: (703) 305–7090; email address
This action is directed to the public in general. Although this action may be of particular interest to those persons who conduct or sponsor research on pesticides, the Agency has not attempted to describe all the specific entities that may be affected by this action.
1.
2.
i. Identify the document by docket ID number and other identifying information (subject heading,
ii. Follow directions. The Agency may ask you to respond to specific questions or organize comments by referencing a
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.
3.
Under section 5 of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), 7 U.S.C. 136c, EPA can allow manufacturers to field test pesticides under development. Manufacturers are required to obtain an EUP before testing new pesticides or new uses of pesticides if they conduct experimental field tests on 10 acres or more of land or one acre or more of water.
Pursuant to 40 CFR 172.11(a), the Agency has determined that the following EUP application may be of regional and national significance, and therefore is seeking public comment on the EUP application:
Following the review of the application and any comments and data received in response to this solicitation, EPA will decide whether to issue or deny the EUP request, and if issued, the conditions under which it is to be conducted. Any issuance of an EUP will be announced in the
Environmental protection, Experimental use permits.
Environmental Protection Agency (EPA).
Notice; Extension of public comment period.
The EPA is announcing an extension of the public comment period for the notice titled “Greenhouse Gas Reporting Program: Publication of Aggregated Greenhouse Gas Data.”
The public comment period started on June 9, 2014 (79 FR 32948). This notice announces the extension of the deadline for public comment from July 9, 2014 to July 23, 2014. Comments must be received on or before July 23, 2014.
You may submit your comments, identified by Docket ID No. EPA–HQ–OAR–2014–0410 by any of the following methods:
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Do not submit information that you consider to be CBI or otherwise protected through
Carole Cook, Climate Change Division, Office of Atmospheric Programs (MC–6207J), Environmental Protection Agency, 1200 Pennsylvania Ave. NW., Washington, DC 20460; telephone number: (202) 343–9263; fax number: (202) 343–2342; email address:
Environmental Protection Agency.
Notification of Public Teleconference Meeting and Public Comment.
Pursuant to the Federal Advisory Committee Act (FACA), Public Law 92–463, the U.S. Environmental Protection Agency (EPA) hereby provides notice that the National Environmental Justice Advisory Council (NEJAC) will host a public teleconference meeting on Thursday, July 17, 2014, from 2:00 p.m. to 4:00 p.m. Eastern Time. The primary topics of discussion will be (1) recommendations for EPA's environmental justice policy on Tribes and Indigenous peoples, (2) a follow-up discussion about additional recommendations about ensuring environmental justice in goods movement, and (3) updates from NEJAC workgroups.
There will be a public comment period from 3:30 p.m. to 4:00 p.m. Eastern Time. Members of the public are encouraged to provide comments relevant to the topics of the meeting.
For additional information about registering to attend the meeting or to provide public comment, please see the “Registration” and
The NEJAC teleconference meeting on Thursday, July 17, 2014, will begin promptly at 2:00 p.m. Eastern Time.
Questions or correspondence concerning the teleconference meeting should be directed to Jasmin Muriel, U.S. Environmental Protection Agency, by mail at 1200 Pennsylvania Avenue NW. (MC2201A), Washington, DC 20460; by telephone at 202–564–4287; via email at
The Charter of the NEJAC states that the advisory committee shall provide independent advice to the Administrator on areas that may include, among other things, “advice about broad, cross-cutting issues related to environmental justice, including environment-related strategic, scientific, technological, regulatory, and economic issues related to environmental justice.”
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is providing notice of the process for submitting applications for critical use exemptions for 2017. Critical use exemptions are exceptions to the phaseout of production and import of methyl bromide, a controlled class I ozone-depleting substance. Critical use exemptions must be authorized by the Parties to
Applications for critical use exemptions must be submitted to EPA no later than September 30, 2014.
Applications for the methyl bromide critical use exemption can also be submitted by U.S. mail to: U.S. Environmental Protection Agency, Office of Air and Radiation, Stratospheric Protection Division, Attention Methyl Bromide Team, Mail Code 6205M, 1200 Pennsylvania Ave. NW., Washington, DC 20460.
Confidentiality: Application materials that are confidential should be submitted under separate cover and be clearly identified as “confidential business information.” Information covered by a claim of business confidentiality will be treated in accordance with the procedures for handling information claimed as confidential under 40 CFR part 2, subpart B, and will be disclosed only to the extent and by means of the procedures set forth in that subpart. If no claim of confidentiality accompanies the information when it is received by EPA, the information may be made available to the public by EPA without further notice to the company (40 CFR 2.203). EPA may place a copy of Worksheet 6 in the public domain. Any information on Worksheet 6 shall not be considered confidential and will not be treated as such by the Agency.
The
The Protocol provides that the Parties may exempt “the level of production or consumption that is necessary to satisfy uses agreed by them to be critical uses” (Art. 2H para 5). The Parties to the Protocol included this language in the treaty's methyl bromide phaseout provisions in recognition that alternatives might not be available by 2005 for certain uses of methyl bromide agreed by the Parties to be “critical uses.”
In their Ninth Meeting (1997), the Parties agreed to Decision IX/6, setting forth the following criteria for a “critical use” determination and an exemption from the production and consumption phaseout:
(a) That a use of methyl bromide should qualify as “critical” only if the nominating Party determines that:
(i) The specific use is critical because the lack of availability of methyl bromide for that use would result in a significant market disruption; and
(ii) There are no technically and economically feasible alternatives or substitutes available to the user that are acceptable from the standpoint of environment and health and are suitable to the crops and circumstances of the nomination.
(b) That production and consumption, if any, of methyl bromide for a critical use should be permitted only if:
(i) All technically and economically feasible steps have been taken to minimize the critical use and any associated emission of methyl bromide;
(ii) Methyl bromide is not available in sufficient quantity and quality from existing stocks of banked or recycled methyl bromide, also bearing in mind the developing countries' need for methyl bromide;
(iii) It is demonstrated that an appropriate effort is being made to evaluate, commercialize and secure national regulatory approval of alternatives and substitutes, taking into consideration the circumstances of the particular nomination. . . . Non-Article 5 Parties [which includes the U.S.] must demonstrate that research programs are in place to develop and deploy alternatives and substitutes. . . .
In 1998, Congress amended the Clean Air Act to require EPA to conform the U.S. phaseout schedule for methyl bromide to the provisions of the Protocol and to allow EPA to provide a critical use exemption. These amendments were codified in Section 604 of the Clean Air Act, 42 U.S.C. 7671c. Under EPA implementing regulations, the production and consumption of methyl bromide was phased out as of January 1, 2005. Section 604(d)(6), as added in 1998, allows EPA to exempt the production and import of methyl bromide from the phaseout for critical uses, to the extent consistent with the Montreal Protocol. EPA has defined “critical use” at 40 CFR 82.3 based on the criteria in Decision IX/6.
EPA regulations at 40 CFR 82.4 prohibit the production and import of methyl bromide in excess of the amount of unexpended critical use allowances held by the producer or importer, unless authorized under a separate exemption. Methyl bromide produced or imported by expending critical use allowances may be used only for the appropriate category of approved critical uses as listed in Appendix L to the regulations (40 CFR 82.4(p)(2)). The use of methyl bromide that was produced or imported through the expenditure of production
Entities requesting critical use exemptions should send a completed application to EPA on the candidate use by September 30, 2014. Critical use exemptions are valid for only one year and do not automatically renew. All users desiring to obtain an exemption must apply to EPA annually even if they have applied for critical uses in prior years. Because of the potential for changes to registration status, costs, and economic aspects of producing critical use crops and commodities, applicants must fill out the application form completely.
Upon receipt of applications, EPA will review the information and work with other interested Federal agencies as required in section 604 of the Clean Air Act to determine whether the candidate use satisfies Clean Air Act requirements, and whether it meets the critical use criteria adopted by the Parties to the Montreal Protocol and warrants nomination by the United States for an exemption.
All Parties, including the United States, must transmit nominations to the UNEP Ozone Secretariat by January 24, 2015, to be considered by the Parties at their annual meeting at the end of 2015. The UNEP Ozone Secretariat forwards nominations to the Montreal Protocol's Technical and Economic Assessment Panel (TEAP) and the Methyl Bromide Technical Options Committee (MBTOC). The MBTOC and the TEAP review the nominations to determine whether they meet the criteria for a critical use established by Decision IX/6, and to make recommendations to the Parties for critical use exemptions. The Parties then consider those recommendations at their annual meeting before making a final decision. If the Parties determine that a specified use of methyl bromide is critical and authorize an exemption from the Protocol's production and consumption phaseout for 2017, EPA may then take domestic action to allow the production and consumption to the extent consistent with the Clean Air Act.
Entities interested in obtaining a critical use exemption must complete the application form available at
Specifically, applications should include the information requested in the current version of the TEAP Handbook on Critical Use Nominations. The handbook is available electronically at
• A clear statement on the specific circumstances of the nomination which describe the critical need for methyl bromide and quantity of methyl bromide requested;
• Data on the availability and technical and economic feasibility of alternatives to the proposed methyl bromide use;
• A review of the comparative performance of methyl bromide and alternatives including control of target pests in research and commercial scale up studies;
• A description of all technically and economically feasible steps taken by the applicant to minimize methyl bromide use and emissions;
• Data on the use and availability of stockpiled methyl bromide;
• A description of efforts made to test, register, and commercially adopt alternatives;
• Plans for phase-out of critical uses of methyl bromide;
• The methodology used to provide economic comparisons.
EPA's Web site (
Since there is no formal end date for the CUE program, anyone interested in obtaining a critical use exemption may apply. However, the language and spirit of controls on ozone depleting substances under the Montreal Protocol envisions a phaseout and for the critical use exemption to be a “temporary derogation” from that phaseout. Over the last decade, the research, registration, and adoption of alternatives has led many sectors to transition from methyl bromide. The number of sectors nominated has declined from seventeen for 2006 to two for 2016. Below is information on how the agency evaluated specific uses in considering nominations for critical uses for 2016, as well as specific information needed for the U.S. to successfully defend future nominations for critical uses.
Data reviewed by EPA as part of the 2016 nomination process for commodities such as dried fruit and nuts indicate that sulfuryl fluoride is effective against key pests. The industry has mostly converted to sulfuryl fluoride and no market disruption has occurred. Rapid fumigation is not a critical condition for this sector and therefore products can be treated with sulfuryl fluoride or phosphine and be held for relatively long periods of time without a significant economic impact.
To support a nomination, applicants must address potential economic losses due to pest pressures, changes in quality, changes in timing, and any other economic implications for producers when converting to alternatives. Alternatives for which such information is needed are: Sulfuryl fluoride, propylene oxide (PPO), phosphine, and controlled atmosphere/temperature treatment system. Applicants should include the costs to retrofit equipment or design and construct new fumigation chambers for these alternatives. For the economic assessment applicants must provide: The amount of fumigant gas used (for both methyl bromide and alternatives, which may include heat), price per pound of the fumigant gas from the most recent use season, application rates, differences in time required for fumigation, differences in labor inputs (i.e., hours and wages) associated with alternatives, the amount of commodity treated with each fumigant/treatment and the value of the commodity being treated/produced. Applicants should also provide information on changes in costs for any other practices or
Where applicable, also provide examples of specific customer requests regarding pest infestation and examples of any phytosanitary requirements of foreign markets (e.g., import requirements of other countries) that may necessitate use of methyl bromide accompanied by explanation of why the methyl bromide quarantine and preshipment (QPS) exemption is not applicable for this purpose. Also include information on what pest control practices organic producers are using for their commodity.
Applicants must list how many facilities have been fumigated with methyl bromide over the last three years; the rate, volume, and target concentration over time [CT] of methyl bromide at each location; volume of each facility; number of fumigations per year; and the materials from which the facility was constructed. It is important for this sector to specify research plans into alternatives and alternative practices that support the transition from methyl bromide, as well as information on the technical and economic feasibility of using recapture technologies. Given the low volume of usage requested by the sector compared to the amount of remaining pre-phaseout inventory, it will also be important for applicants to indicate efforts to secure and use stockpiled methyl bromide.
In reviewing data for the 2016 CUE nomination, EPA found that although no single alternative is effective for all pest problems, a review of multiple year data indicates that the alternatives in various combinations provide control equal or superior to methyl bromide plus chloropicrin. Several research studies show that the three way mixture of 1,3-dichloropene plus chloropicrin plus metam sodium can effectively suppress pathogens (
To support a nomination, applicants must address potential changes to yield, quality, and timing when converting to alternatives, including: The mixture of 1,3-dichloropropene plus chloropicrin, the University of Georgia three way mixture of 1,3-dichloropropene plus chloropicrin plus metam (sodium or potassium) or allyl isothiocyanate (Dominus
Based on EPA's review of information as part of the 2016 nomination process, EPA believes alternatives are available as advances have been made: (1) In safely applying 100% chloropicrin, (2) in strategies to improve efficacy in applying 1,3-dichloropropene, and (3) in transitioning from experimental to commercial use of non-chemical tools, such as steam, anaerobic soil disinfestations, and substrate production.
To support a nomination, applicants must address potential changes to yield, quality, and timing when converting to alternatives, including: The mixture of 1,3-dichloropropene plus chloropicrin, the University of Georgia three way mixture of 1,3-dichloropropene plus chloropicrin plus metam (sodium or potassium) or allyl isothiocyanate (Dominus
EPA's review of data in the 2016 nomination process indicated that while no single alternative is effective for all pest problems, numerous field trials indicate alternatives to methyl bromide are effective. Therefore, EPA concluded that transitioning to the alternatives was feasible without substantial losses. Registered alternatives are available for individual-hole treatments and soil preparation procedures are available to enable effective treatment with alternatives even in soils with high moisture content.
To support a nomination, applicants must address potential changes to yield, quality, and timing when converting to alternatives, including: The mixture of 1,3-dichloropropene plus chloropicrin, the University of Georgia three way mixture of 1,3-dichloropropene plus chloropicrin plus metam (sodium or potassium), dimethyl disulfide (DMDS), and steam. Applications must address regulatory and economic implications for growers and your region's production of these crops using these alternatives, including the costs to retrofit equipment and the differential impact of buffers for methyl bromide plus chloropicrin compared to the alternatives. For the economic assessment applicants must provide the following: Price per pound of fumigant gas used (for both methyl bromide and alternatives) from the most recent use season; application rates; value of the crop being produced; differences in labor inputs (i.e., hours and wages); and any differences in equipment costs or time needed to operate equipment associated with alternatives.
In considering nominations for 2016, EPA found that while no single alternative is effective for all pest problems, a review of multiple year data indicates that the alternatives in various combinations provide control equal or superior to methyl bromide plus chloropicrin. Research demonstrates that 1,3-dichloropene plus chloropicrin, the three way mixture of 1,3-dichloropene plus chloropicrin plus metam sodium, and dimethyl disulfide plus chloropicrin all show excellent results. To support a nomination, applicants must address potential changes to yield, quality, and timing when converting to alternatives, including: The mixture of 1,3-dichloropropene plus chloropicrin, the
In considering this sector in the 2016 nomination process, EPA noted that a Special Local Need label allows Telone II to be used in accordance with certification standards for propagative material.
EPA has not found that a significant market disruption would occur in the golf industry in the absence of methyl bromide. To support a nomination, applicants must address potential changes to quality when converting to alternatives, including: Basamid, chloropicrin, 1,3-dichloropene, 1,3-dichloropene plus chloropicrin, metam sodium, or allyl isothiocyanate (Dominus
The Office of Management and Budget (OMB) has approved the information collection requirements contained in this notice under the provisions of the
42 U.S.C. 7414, 7601, 7671–7671q.
The Commission hereby gives notice of the filing of the following agreements under the Shipping Act of 1984. Interested parties may submit comments on the agreements to the Secretary, Federal Maritime Commission, Washington, DC 20573, within twelve days of the date this notice appears in the
By Order of the Federal Maritime Commission.
The notificants listed below have applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than July 23, 2014.
A. Federal Reserve Bank of Atlanta (Chapelle Davis, Assistant Vice President) 1000 Peachtree Street, NE., Atlanta, Georgia 30309:
1.
B. Federal Reserve Bank of Minneapolis (Jacquelyn K. Brunmeier, Assistant Vice President) 90 Hennepin Avenue, Minneapolis, Minnesota 55480–0291:
1.
In connection with this application,
2.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than August 1, 2014.
A. Federal Reserve Bank of Richmond (Adam M. Drimer, Assistant Vice President) 701 East Byrd Street, Richmond, Virginia 23261–4528:
1.
2.
In connection with this application, Applicant has also applied to engage in extending credit and servicing loans and acquiring debt in default, pursuant to sections 225.28(b)(1) and (b)(2)(vii), respectively.
B. Federal Reserve Bank of Kansas City (Dennis Denney, Assistant Vice President) 1 Memorial Drive, Kansas City, Missouri 64198–0001:
1.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for public comments regarding an extension to an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act (44 U.S.C. chapter 35), the Regulatory Secretariat Division (MVCB) will be submitting to the Office of Management and Budget (OMB) a request to review and approve an extension of a previously approved information collection requirement concerning OMB Circular A–119.
Submit comments on or before September 8, 2014.
Submit comments identified by Information Collection 9000–0153, OMB Circular A–119, by any of the following methods:
•
Submit comments via the Federal eRulemaking portal by searching the OMB control number 9000–0153. Select the link “Comment Now” that corresponds with “Information Collection 9000–0153, OMB Circular A–119”. Follow the instructions provided on the screen. Please include your name, company name (if any), and “Information Collection 9000–0153, OMB Circular A–119” on your attached document.
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Mr. Michael O. Jackson, Procurement Analyst, Acquisition Policy Division, GSA 202–208–4949 or email
On February 19, 1998, a revised OMB Circular A–119, “Federal Participation in the Development and Use of Voluntary Consensus Standards and in Conformity Assessment Activities,” was published in the
To the extent that data on the annual frequency of the use of voluntary consensus standards under FAR 52.211–7 is not available, we believe 100 is reasonable. As an aside, FAR part 45 recognizes the use of voluntary consensus standards in the management of Government property. However, in these cases there is no Government standard per se, with the voluntary consensus standard serving as the Government standard. Consequently, when under part 45 voluntary consensus standards are used, they are not an alternative to a Government standard under FAR 52.211–7.
Public comments are particularly invited on: Whether this collection of information is necessary for the proper performance of functions of the FAR, and whether it will have practical utility; whether our estimate of the public burden of this collection of information is accurate, and based on valid assumptions and methodology; ways to enhance the quality, utility, and clarity of the information to be collected; and ways in which we can minimize the burden of the collection of information on those who are to respond, through the use of appropriate technological collection techniques or other forms of information technology.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for a new OMB clearance.
The Paperwork Reduction Act (44 U.S.C. chapter 35) applies. The proposed rule contains information collection requirements. Accordingly, the Regulatory Secretariat Division (MVCB) has submitted a request for approval of a new information collection requirement concerning Commercial and Government Entity Code (FAR Case 2012–024) to the Office of Management and Budget. A request for comments was published in the
Submit comments on or before August 8, 2014.
Submit comments identified by Information Collection 9000–0185, Commercial and Government Entity Code by any of the following methods:
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•
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Mr. Edward Loeb, Procurement Analyst, Office of Government-wide Acquisition Policy, at telephone 202–501–0650 or via email to
DoD, GSA, and NASA published a proposed rule at 78 FR 23194 on April 18, 2013, soliciting public comments on the proposed rule and received one response.
DoD, GSA, and NASA are revising the FAR to require that offerors provide their Commercial and Government Entity (CAGE) codes to contracting officers and that, if owned by another entity, offerors will provide, in a new provision with their representations and certifications, the CAGE codes and names of such entity or entities. For those offerors located in the United States or its outlying areas that register in the System for Award Management (SAM), a CAGE code is assigned as part of the registration process. If SAM registration is not required, the offeror must request and obtain a CAGE code from the Defense Logistics Agency (DLA) Contractor and Government Entity Branch. A CAGE code is not required when a condition described at FAR 4.605(c)(2) applies and the acquisition is funded by an agency other than DoD or NASA. Offerors located outside the United States will obtain an NCAGE from their NATO Codification Bureau or, if not a NATO member or sponsored nation, from the NATO Support Agency (NSPA).
The Federal procurement community strives toward greater measures of transparency and reliability of data, to facilitate achievement of rigorous accountability of procurement dollars, processes, and compliance with regulatory and statutory acquisition requirements, e.g., the Federal Funding and Accountability and Transparency Act of 2006 (Pub. L. 109–282, 31 U.S.C. 6101 note). Increased transparency and accuracy of procurement data broaden the Government's ability to implement fraud detection technologies restricting opportunities for mitigating occurrences of fraud, waste, and abuse of taxpayer dollars.
To further the desired increases in traceability and transparency, this rule uses the unique identification that a CAGE code provides, coupled with vendor representation of ownership and owner CAGE code. The CAGE code is a five-character alpha-numeric identifier used extensively within the Federal Government and will provide for standardization across the Federal Government. This rule will support successful implementation of business tools that provide insight into:
The annual reporting burden to obtain CAGE codes is estimated as follows:
The annual reporting burden is estimated as follows to respond to ownership provision 52.204–YY requirements:
The combined total of the CAGE hours and the ownership provision hours are 207,698 response burden hours.
Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA).
Notice of request for public comments regarding an extension to an existing OMB clearance.
Under the provisions of the Paperwork Reduction Act (44 U.S.C. chapter 35), the Regulatory Secretariat Division (MVCB) will be submitting to the Office of Management and Budget (OMB) a request to review and approve an extension of a previously approved information collection requirement regarding prohibition on acquisition of products produced by forced or indentured child labor.
Submit comments identified by Information Collection 9000–0155, Prohibition on Acquisition of Products Produced by Forced or Indentured Child Labor, by any of the following methods:
•
•
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Mr. Michael O. Jackson, Procurement Analyst, Acquisition Policy Division, GSA 202–208–4949 or email
This information collection complies with Executive Order 13126, Prohibition on Acquisition of Products Produced by Forced or Indentured Child Labor. Executive Order 13126 requires that this prohibition be enforced within the federal acquisition system by means of: (1) A provision that requires the contractor to certify to the contracting officer that the contractor or, in the case of an incorporated contractor, a responsible official of the contractor has made a good faith effort to determine whether forced or indentured child labor was used to mine, produce, or manufacture any product furnished under the contract and that, on the basis of those efforts, the contractor is unaware of any such use of child labor; and (2) A provision that obligates the contractor to cooperate fully in providing reasonable access to the contractor's records, documents, persons, or premises if reasonably requested by authorized officials of the contracting agency, the Department of the Treasury, or the Department of Justice, for the purpose of determining whether forced or indentured child labor was used to mine, produce, or manufacture any product furnished under the contract.
The information collection requirements of the Executive Order are evidenced via the certification requirements delineated at FAR 22.1505, 52.212–3, 52.222–18, and 52.222–19.
To eliminate some of the administrative burden on offerors who must submit the same information to various contracting offices, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) decided to amend the Federal Acquisition Regulation (FAR) to require offerors to submit representations and certifications electronically via the Business Partner Network (BPN), unless certain exceptions apply. Online Representations and Certifications Application (ORCA) was the specific application on the BPN to replace the paper based Representations and Certifications process. The change to the FAR was accomplished by FAR Case 2002–024. The BPN and ORCA systems have now been incorporated into the System for Award Management, also known as SAM.
To date, there are 355,531 active registrants in SAM. Those registrants are required to complete the Representations and Certifications section of SAM. Of the 355,531 active registrants in SAM, 949 registrants identified their business concern as one that may supply an end product that is on the list of products requiring contractor certification as to Forced or Indentured Child Labor, identified by their country of origin. The 949 registrants will be used as the basis for the number of respondents. This number represents an increase from what was published in the
Please cite OMB Control No. 9000–0155, Prohibition on Acquisition of Products Produced by Forced or Indentured Child Labor, in all correspondence.
Office of the National Coordinator for Health Information Technology, Department of Health and Human Services.
30-Day notice of submission of information collection approval from the Office of Management and Budget and request for comments.
In compliance with section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Office of the National Coordinator for Health Information Technology (ONC), Department of Health and Human Services, announces plans to submit an Information Collection Request (ICR), described below, to the Office of Management and Budget (OMB). The ICR is for extending the use of the approved information collection assigned OMB control number 0955–0005, which expires on July 31, 2014. Prior to submitting that ICR to OMB, ONC seeks comments from the public regarding the burden estimate, below, or any other aspect of the ICR.
Comments must be submitted by August 8, 2014.
Written comments may be submitted to
To request additional information, please contact Penelope Hughes at
The agency received no comments in response to the 60-day notice for the extension request published in the
Below we provide the Office of the National Coordinator for Health Information Technology's projected average estimates for the next three years:
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid Office of Management and Budget control number.
Office of the National Coordinator for Health Information Technology, HHS.
Notice.
The goal of the EHR Innovations for Improving Hypertension Challenge is to seek practices that have used clinical decision support (CDS) to implement the most clinically successful examples of an evidence-based blood pressure treatment protocol, gather details about these tools
The statutory authority for this challenge competition is Section 105 of the America COMPETES Reauthorization Act of 2010 (Public L. No 111–358).
• Phase I submission period: July 7–October 6, 2014.
• Phase I winners announcement, tools posted: October 27, 2014.
• Phase II submission period: October 28, 2014–July 31, 2015.
• Phase II winners announcement: August/September, 2015.
Adam Wong,
a. Provide data on BP control rate and/or improvement, as well as data on hypertension prevalence in the practice (prevalence data is collected to better understand the organization's hypertension screening results, but is not used for review)
• Submission requires more than 70% BP control (<140/90) in hypertension patients; specifications used to determine this rate must be the same as that used for PQRS #236/NQF #0018 and/or
• Significant improvement over time in BP control: Provide the percent of the patient population whose BP rate was improved over a specified period. Each submission will be evaluated based on the percent improvement and time period but no specific threshold for these must be met as a part of submission requirements.
• Information about the patients affected by the CDS interventions to help describe the Challenge's reach and effects, including: Size of the practice's patient population and hypertension prevalence; Aggregate demographic information on the patient population (e.g., disparities); and Specialty and demographic information about the practice (e.g., number/type of providers, setting [rural vs. urban], type [academic vs. community]).
b. Describe Protocol elements addressed (use structured narrative; we encourage but do not require that submitters address all five elements):
• BP measurement/recording (e.g., use of documentation templates, highlighting abnormal BPs in EHR).
• BP follow-up and patient recall (e.g., use of registry reports).
• Medication selection and titration (e.g., use of order sets).
• Patient engagement (e.g., use of patient education and goal setting tools, templates for documenting and responding to home BP readings, patient reminders for medications/appointments).
• Workup/referral for poor control (e.g., reference information, hypertension-specific consult order forms).
c. Describe EHR/health IT tools used to implement protocol (generic description; screenshots optional) and details about deployment so that others can replicate it.
• Order sets, registry reports, documentation templates/tools, medication protocols, patient engagement/education tools, referral templates, reminders, etc.
• Tool descriptions can include generic version of intervention (e.g., contents of order set, documentation template, rule), screenshots, and/or implementable artifacts. We encourage, but do not require, use of the format described in the HL7 CDS Knowledge sharing implementation guide (also called the ‘Health eDecisions’ format).
d. Describe how the tools are deployed in workflow.
• Use CDS/Quality Improvement worksheets for standard presentation/replication (e.g., similar to QI case example within the CDS/QI resources recently provided by ONC
• The ultimate goal is that many organizations (e.g., professional societies, developers, quality organizations, RECs) spread use of the effective tools and related workflows from Phase 1 to many additional practice settings.
• Phase 2 submitters will develop and implement strategies for disseminating the CDS interventions recognized from Phase 1 as having the greatest value for BP control.
• Organizations with the greatest spread results and further spread potential will be selected for recognition, including a single winner, from the Phase 2 Challenge component.
a. Evidence that the tools and artifacts were implemented, or implementation is underway, in at least 2 other practices or provider groups.
• As part of describing the spread strategy, submitters must describe the CDS tools that were used to implement the hypertension control protocol; the format for this is based on that from Phase 1, and also includes any modification made to the tools so they could spread. We encourage, but do not require, use of the format described in the HL7 CDS Knowledge Sharing Implementation Guide (i.e., the `Health eDecisions' format).
b. Results from spreading CDS tools to other practices: Ideally blood pressure control/improvements similar to that achieved from the tools in Phase 1, but, at a minimum, compelling evidence of significant value from tool implementation.
c. Evidence of
d. Information about the patients affected by the CDS interventions, including:
• Size of practice's patient population and hypertension prevalence;
• Aggregate demographic information on the patient population (i.e., disparities); and
• Specialty and demographic information about the practice (e.g., number of providers, setting [rural vs. urban], type [academic vs. community]).
This information will help define the Challenge's reach and effects; the Challenge is intended to affect many different practices sizes and types.
e. Practice deployment strategy summary and critical success factors for spreading CDS tool implementation to enhance BP control.
To be eligible to win a prize under this challenge, an individual or entity—
(1) Shall have registered to participate in the competition under the rules promulgated by the Office of the National Coordinator for Health Information Technology.
(2) Shall have complied with all the requirements under this section.
(3) In the case of a private entity, shall be incorporated in and maintain a primary place of business in the United States, and in the case of an individual, whether participating singly or in a group, shall be a citizen or permanent resident of the United States.
(4) May not be a Federal entity or Federal employee acting within the scope of their employment.
(5) Shall not be an HHS employee working on their applications or submissions during assigned duty hours.
(6) Shall not be an employee of Office of the National Coordinator for Health IT.
(7) Federal grantees may not use Federal funds to develop COMPETES Act challenge applications unless consistent with the purpose of their grant award.
(8) Federal contractors may not use Federal funds from a contract to develop COMPETES Act challenge applications or to fund efforts in support of a COMPETES Act challenge submission.
An individual or entity shall not be deemed ineligible because the individual or entity used Federal facilities or consulted with Federal employees during a competition if the facilities and employees are made available to all individuals and entities participating in the competition on an equitable basis.
Entrants must agree to assume any and all risks and waive claims against the Federal Government and its related entities, except in the case of willful misconduct, for any injury, death, damage, or loss of property, revenue, or profits, whether direct, indirect, or consequential, arising from my participation in this prize contest, whether the injury, death, damage, or loss arises through negligence or otherwise.
Entrants must also agree to indemnify the Federal Government against third party claims for damages arising from or related to competition activities.
To register for this Challenge, participants can access
Phase 1 will have up to 4 winners, each of whom will receive a $5,000 prize. Other Phase 1 submitters who provide CDS tools that reviewers select for spread during Phase 2 dissemination efforts will receive non-monetary recognition (e.g., Honorable Mention).
Phase 2 will have a single winner of a $30,000 cash prize. Other Phase 2 submitters, whose CDS tool dissemination and implementation strategies the reviewers deem commendable, will receive non-monetary recognition (e.g., Honorable Mention).
Prize will be paid by contractor.
The review panel will make selections based upon the following criteria:
• BP Control (<140/90) among hypertension patients.
○ BP control
○ BP control rate
• Comprehensiveness and innovation in addressing the protocol elements using EHR or other health IT.
• CDS tool implementation description detailed enough so that others could replicate it.
• Ease with which others could implement the same approach (e.g., if the strategy required a high degree of custom development that cannot easily be shared, then it would be harder for others to replicate).
• Number of practices in which the CDS interventions were implemented, or implementation is underway.
• Number of practices expressing interest in replicating the CDS-enabled protocol implementation approach in addition to those that actually implemented it during Phase 2.
• CDS tool implementation spread efforts resulting in demonstrated BP control improvements. Absent actual BP control improvements, demonstration of compelling evidence that CDS tool implementation has made a positive impact on BP care processes and/or that BP control improvements are likely.
• Comprehensiveness and innovation in supporting BP protocol elements with CDS tools.
• Likelihood that the submitter's approach to spreading the CDS tool-enabled BP protocol implementation can be further replicated beyond Phase 2.
In order for an entry to be eligible to win this Challenge, it must not use HHS' or ONC's logos or official seals in the Submission, and must not claim endorsement.
General Conditions: ONC reserves the right to cancel, suspend, and/or modify the Contest, or any part of it, for any reason, at ONC's sole discretion.
• Each entrant retains title and full ownership in and to their submission. Entrants expressly reserve all intellectual property rights not expressly granted under the challenge agreement.
• By participating in the challenge, each entrant hereby irrevocably grants to Sponsor and Administrator a limited, non-exclusive, royalty-free, worldwide license and right to reproduce, publically perform, publically display, and use the Submission to the extent necessary to administer the challenge, and to publically perform and publically display the Submission, including, without limitation, for advertising and promotional purposes relating to the challenge.
15 U.S.C. 3719.
National Institute for Occupational Safety and Health (NIOSH), Centers for Disease Control and Prevention, Department of Health and Human Services.
Notice.
NIOSH gives notice as required by 42 CFR 83.12(e) of a decision to evaluate a petition to designate a class of employees from the General Atomics facility in La Jolla, California, to be included in the Special Exposure Cohort under the Energy Employees Occupational Illness Compensation Program Act of 2000. The initial proposed definition for the class being evaluated, subject to revision as warranted by the evaluation, is as follows:
Stuart L. Hinnefeld, Director, Division of Compensation Analysis and Support, National Institute for Occupational Safety and Health, 4676 Columbia Parkway, MS C–46, Cincinnati, OH 45226, Telephone 877–222–7570. Information requests can also be submitted by email to
Agency for Healthcare Research and Quality, HHS.
Notice.
This notice announces the intention of the Agency for Healthcare Research and Quality (AHRQ) to request that the Office of Management and Budget (OMB) approve the proposed information collection project: “Improving Hospital Informed Consent With an Informed Consent Toolkit.” In accordance with the Paperwork Reduction Act, AHRQ invites the public to comment on this proposed information collection.
Comments on this notice must be received by September 8, 2014.
Written comments should be submitted to: Doris Lefkowitz, Reports Clearance Officer, AHRQ, by email at
Copies of the proposed collection plans, data collection instruments, and specific details on the estimated burden can be obtained from the AHRQ Reports Clearance Officer.
Doris Lefkowitz, AHRQ Reports Clearance Officer, (301) 427–1477, or by email at
The ultimate aim of this project is to pilot test a toolkit to improve the informed consent process in U.S. hospitals. Clinical informed consent is the process by which a patient is told about the risks and benefits of proposed treatments or procedures, as well as alternatives, and makes a decision based on that information. Informed consent may be jeopardized by incorrect clinician assumptions about patient comprehension, the manner in which consent is sought, and poor readability of consent forms (Paasche-Orlow et al., 2013). All too frequently, patients do not understand the risks, benefits, and alternatives of their treatments even after signing a consent form (Braddock et al., 1999; Sudore et al., 2006). De-identified accreditation data analyzed as part of AHRQ's preliminary research for this data collection effort suggest that some hospitals are not following the basic ethical principles underlying informed consent. These data, as well as the guidance from the study's Expert and Stakeholder Panel, indicate that hospital administrators and clinicians could benefit from training on evidence-based practices to improve the informed consent process. These include improving communication, using interpreters to meet the communication needs of patients with limited English proficiency, using high-quality decision aids to support the informed consent discussion, and using teach-back to verify patient understanding (Temple University Health System, 2009). Hospital system changes that can facilitate these practices include improving hospitals' informed consent policies and enhancing the infrastructure that supports the informed consent process (e.g., interpreter services, high-quality decision aids, easy-to-understand forms).
Building upon a previously published guide, a review of the literature, and the aforementioned analysis of de-identified accreditation data, AHRQ has developed a new Informed Consent Toolkit. Toolkit content will be delivered via two training modules of approximately one hour each (one for hospital leaders, the other for frontline clinical staff), to be offered through a Learning Management System. Clinical staff taking the training will be eligible for continuing education (CE) credit.
AHRQ will pilot test the toolkit to assess:
• Effectiveness of the toolkit in improving informed consent processes and relevant outputs and outcomes
Pilot test results will be used to improve the toolkit and provide information to hospitals considering using it to improve their informed consent processes. The pilot test will take place in four hospitals. Each participating hospital will be asked to:
• Train the leaders of their choosing using the training module Champion improvements in their informed consent policies and processes based on the information and tools in the leader training.
• Train frontline staff members in four units, including at least one surgical unit. Using the frontline training module.
• Implement improvement initiatives over a period of two to six months in participating units based on materials presented in the frontline training.
• Conduct and cooperate with assessment activities:
○ In at least one unit, use the Rapid Feedback Patient Survey.
○ In at least one surgical unit, collect surgical cancellation and delay rates.
○ Collect other metrics to assess the effectiveness of the informed consent toolkit.
○ Cooperate with project team in the data collection efforts described below.
This study is being conducted by AHRQ through its contractor, Abt Associates Inc., pursuant to AHRQ's statutory authority to conduct and support research on health care and on systems for the delivery of such care, including activities with respect to the quality, effectiveness, efficiency, appropriateness and value of health care services and with respect to quality measurement and improvement. 42 U.S.C. 299a(a)(1) and (2).
The following data collections efforts will be pursued in participating hospitals to achieve project goals:
1. The Hospital Informed Consent Baseline and Final Assessment will be completed by the four hospitals participating in the pilot testing at baseline and upon completion of the implementation period. The assessment, completed by the hospital's designated liaison to the project and the leaders of the participating units (unit leaders), will describe each hospital's informed consent policies and processes (e.g., procedures that require signed informed consent forms, clinical staff roles and responsibilities in informed consent, when interpreter services should be used), and document any changes that occurred as a result of toolkit implementation. Questions will include both open-ended questions (e.g., descriptions of process) and Likert scale questions (1 to 5) regarding the extent to which essential components are covered in informed consent discussions (e.g., benefits and risks of alternatives) and evidence-based practices to improve the informed consent process are used.
2. Pre-/Post-Training Quiz. A quiz is given both before and after the training to measure whether knowledge (related to the content in the Toolkit) increases after completing the training module(s) and to identify potential Toolkit improvements. The pre-test is given after the participant registers for the training but before they begin the course content. Immediately after the participant completes the course content, they will be given the post test. The post quiz will also include a separate section with questions regarding learner's reactions to and evaluation of the Toolkit training. A post quiz score of 80% will be used as the threshold to obtain CE credits. There will be a pre/post quiz for each training module.
3. The Monthly Check-In Call. A project team member will hold a monthly check-in call with hospital liaisons and unit leaders to assess the progress of implementation of training programs and improvement initiatives at each hospital and within each unit. Check-in calls will occur monthly for up to six months. Each call will be up to 30 minutes in duration.
4. Frontline Clinical Staff Survey. A brief survey will be administered electronically to all clinicians who take the frontline staff training, both prior to training and approximately two to three months after completing it. Hospital liaisons will provide email addresses for the staff who will be invited to complete the training from each participating unit. These email addresses will be used to send clinicians the pre and post-training surveys. The survey will collect information about clinicians' self-reported use of evidence-based practices described in the frontline staff training, a self-assessment rating of their informed consent effectiveness, attitudes regarding patients' rights in informed consent, and reported learning and implementation experiences. The survey will also collect information about the clinician and their background (e.g., years in practice, practitioner type) and department. The survey will consist largely of closed-ended questions (e.g., scale or Likert response options) with several open-ended questions.
5. Interview and Site Visit Guide. Site visits and interviews will be conducted at each of the four participating hospitals. Each site visit will occur over a two-day period at least three months after sites have trained the majority of their staff on the participating units. The project team will conduct up to 18 in-depth interviews at each pilot site with hospital leaders and frontline clinicians. Leaders will include hospital champions spearheading the pilot test in their hospital (such as chiefs of surgery, department chairs, chief anesthesiologist/head of anesthesiology, nurse managers, charge nurses, nurse educators, patient safety/quality officers, legal/risk management officers) and leaders of units where the toolkit was piloted. Frontline clinician interviewees will be selected by unit leaders or hospital liaisons from the units where the toolkit was piloted. Liaisons and unit leaders will be asked to nominate a range of clinicians from those who embraced changes to those who were less willing to implement changes. Site visits will also involve limited observation (e.g., to observe documentation of informed consent completion, view new signage to remind clinicians to verify patient understanding in an informed consent discussion). The project team will also obtain relevant organizational documents (e.g., informed consent policies, training completion rates, implementation tracking data) and data (e.g., surgical cancellation rates). Interviews will capture qualitative data regarding clinician learning, toolkit implementation, behavior, and results pertaining to patient engagement.
6. Rapid Feedback Patient Survey. Hospitals participating in the pilot test will be required to implement the Rapid Feedback Patient Survey provided in the Toolkit in a subset of patients in at least one participating unit to capture patient's understanding of the information conveyed during the informed consent process, and their satisfaction with the informed consent discussion and process. Time to complete the rapid feedback patient survey is estimated at five minutes. We expect hospitals to administer this survey to at least 50 patients before implementation and 50 patients after implementation in at least one unit and randomize selection of patients to minimize potential bias.
Other outcome and output data from administrative records or electronic medical records (Secondary Data). Hospitals will also be asked to report on their rates of surgical cancellations and delays in at least one participating surgical unit, since prior research suggests that these rates can be improved (i.e., reduction in cancellations and some delays) when strategies such as teach-back were used in the informed consent process (NQF, 2005). Hospitals may also select other outcome measures of interest based on administrative records or electronic medical records. They may also report on output data such as number of informed consent forms improved or number of staff present during a teach-back or quality improvement exercise. Since these data collections involve extractions from existing clinic records or use of administrative records, they pose only minimal data collection burden to the hospital, specifically the person who needs to collect the data (i.e., hospital liaison or unit leader).
The purpose of the proposed data collection effort is to obtain information needed to modify and enhance the Informed Consent Toolkit and to provide information to hospitals considering using the toolkit to improve their informed consent processes. Since this is only a pilot study in 4 sites, outcomes or impacts will not be generalizable.
The data collected will help the project team: (1) understand the facilitators and barriers of implementing the tools and recommended improvements to informed consent policies and processes, and (2) assess the effectiveness of the toolkit in improving informed consent processes and other outcomes in four pilot implementation sites. The data collection effort may also provide insights that could guide dissemination of the toolkit. For example, if it was found that specific units (e.g., surgical units) across the pilot test hospitals strongly benefited from implementing a specific strategy suggested in the toolkit, then AHRQ could tailor and target its dissemination of the toolkit to those individuals and organizations that represent them. Once revisions are made based on results of the pilot study, the toolkit will be published on AHRQ's Web site. A manuscript describing the pilot study and its results will also be produced for publication in a peer-reviewed journal.
Exhibit 1 presents estimates of the reporting burden hours for the data collection efforts. Time estimates are based on prior experiences with pilot testing materials in hospitals and what can reasonably be requested of participating hospitals. The number of respondents listed in column A, Exhibit 1 reflects a projected 80 percent response rate for data collection efforts 2a, 2b, 4, and 6 below.
1. The Hospital Informed Consent Baseline and Final Assessment will establish a baseline and final assessment of each hospital's informed consent policies and processes that is completed by the site liaisons (one per hospital) and unit leaders (four per hospital) and will take each person 30 minutes to complete each time.
2. Pre-/Post-Training Quiz will be administered after participants register for the training but before they begin the course (pre-test), and immediately after participants complete the course content (post-test). There will be a pre-post quiz for each module. Each quiz will take 20 minutes to complete:
a. Frontline Staff Pre-/Post-Training Quiz: We assumed 40 frontline staff per unit for a total of 160 staff per hospital and a total of 640 across all four hospitals. We assumed 512 frontline staff will complete the pre-/post-training quiz based on an estimated 80 percent response rate.
b. Hospital Leader Pre-/Post-Training Quiz: We assumed eight leaders per hospital for a total of 32 across all four hospitals. We assumed 26 will complete the pre-/post-training quiz based on an estimated 80 percent response rate.
3. The Monthly Cheek-In Calls will occur with hospital liaisons and four unit leaders for a total of five individuals per hospital to assess the progress of implementation of training programs at each site and within each unit. Check-in calls will occur monthly for six months and will each take 30 minutes.
4. Frontline Clinical Staff Survey. A brief survey will be emailed to all clinicians both prior to training and approximately two to three months after completing the training. We assumed 40 frontline staff per unit for a total of 160 staff per hospital and a total of 640 across all four hospitals. We assumed 512 frontline staff will complete the survey based on an 80 percent response rate. It is expected to take 15 minutes to complete.
5. Interview and Site Visit Guide. Each site visit will occur over a two-day period and include up to 18 one hour interviews in each pilot site, with:
a. Two hospital leaders (e.g., legal, risk management) and four unit leaders (six per hospital).
b. Three front-line clinicians in each of four units (12 per hospital).
6. Rapid Feedback Patient Survey. The Rapid Feedback Patient Survey will be given to 100 patients (50 patients before implementation and 50 patients after) immediately following an informed consent discussion. It should take five minutes to complete. We assumed 100 patients per hospital for a total of 400 across all four hospitals. We assumed 320 patients will complete the survey based on an 80 percent response rate.
7. Other outcome and output data from administrative records or electronic medical records (Secondary Data). These secondary data will be provided by the hospital liaison or unit leaders. We have assumed five hours for each hospital liaison and unit lead to collect and provide these data.
Exhibit 2, below, presents the estimated annualized cost burden associated with the respondents' time to participate in this research. The total cost burden is estimated to be about $25,270.
The average hourly wage rate of $42.78 for the informed consent baseline, readiness assessment, and monthly check-in was calculated based on the 2013 average of the mean hourly wage rate for healthcare practitioners and medical occupations (all professions) of $33.62 and mean hourly wage rate for medical and health services managers, $51.95.
The average hourly rate of $33.62 of hospital staff pre- and post-training quiz and in-depth interviews was calculated based on the 2013 average of the mean hourly wage rate for healthcare practitioners and medical occupations (all professions), $33.62.
The average hourly rate of $51.95 for hospital leaders pre- and post-training quiz and in-depth interview was calculated based on the 2013 mean hourly wage rate for medical and health services managers, $51.95.
The average hourly wage rate for patients of $22.33 was calculated on the 2013 mean hourly wage rate for all occupations. Mean hourly wage rates for these groups of occupations were obtained from the Bureau of Labor & Statistics on “Occupational Employment and Wages, May 2013” found at the following URL:
In accordance with the Paperwork Reduction Act, comments on AHRQ's information collection are requested with regard to any of the following: (a) whether the proposed collection of information is necessary for the proper performance of AHRQ health care research and healthcare information dissemination functions, including whether the information will have practical utility; (b) the accuracy of AHRQ's estimate of burden (including hours and costs) of the proposed collection(s) of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and, (d) ways to minimize the burden of the collection of information upon the respondents, including the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and included in the Agency's subsequent request for OMB approval of the proposed information collection. All comments will become a matter of public record.
Agency for Healthcare Research and Quality, HHS.
Notice.
This notice announces the intention of the Agency for Healthcare Research and Quality (AHRQ) to request that the Office of Management and Budget (OMB) approve the proposed information collection project: “Taking Efficiency Interventions in Health Services Delivery to Scale.” In accordance with the Paperwork Reduction Act of 1995, AHRQ invites the public to comment on this proposed information collection.
This proposed information collection was previously published in the
Comments on this notice must be received by August 8, 2014.
Written comments should be submitted to: Doris Lefkowitz, Reports Clearance Officer, AHRQ, by email at
Copies of the proposed collection plans, data collection instruments, and specific details on the estimated burden can be obtained from the AHRQ Reports Clearance Officer.
Doris Lefkowitz, AHRQ Reports Clearance Officer, (301) 427–1477, or by email at
The primary care workforce is facing imminent clinician shortages and increased demand. With the implementation of the Affordable Care Act (ACA), Federally Qualified Health Centers (FQHCs) are expected to play a major role in addressing the large numbers of people who become eligible for health insurance as well as continue in their role as safety net providers. Thus, understanding new models of service delivery and improving efficiency within FQHCs is of national policy import. The proposed data collection supports the goal of developing a more efficient FQHC service delivery model through studying outcomes associated with a “delegate model,” which is designed to improve provider and team efficiency, and the spread of this model throughout a large FQHC.
Recent models of practice transformation have documented the use of an Organized Team Model that distributes responsibility for patient care among an interdisciplinary team, thereby allowing physicians to manage a larger panel size while practicing high quality care. The delegate model requires that all team members perform
AHRQ is working with John Snow, Inc. (JSI) and its partner, Penobscot Community Health Center (PCHC), to evaluate the effectiveness and spread of a delegate model in 5 of PCHC's 15 primary care service sites. The model will be spread from an initial pilot physician-medical assistant team to other clinics, as well as to other teams within each clinic. PCHC is an FQHC located in Bangor, Maine that serves northeastern Maine.
Currently, PCHC's primary care providers (PCPs, which include medical doctors, osteopaths, nurse practitioners, and physician assistants) each work with a Medical Assistant (MA). Under the delegate model, a pair of PCPs will be assigned an “administrative” MA to enhance their team. This position will enable shifting of responsibilities among the team, with the intent of relieving the PCPs of administrative tasks and incorporating new tasks that will enhance team efficiency. Examples of tasks that an administrative MA may take on include standardized prescription renewals, schedule management, in-box management, scribing, pre-visit planning with pre-appointment laboratory tests, and identification of patients for ancillary referrals (e.g., behavioral health and case management).
This study has the following goals:
(1) To evaluate the spread and effectiveness of the delegate model in five of PCHC's primary care sites;
(2) To evaluate the influence of the delegate model on provider satisfaction, team functioning, and patient satisfaction;
(3) To assess the contextual factors influencing the above outcomes; and
(4) To disseminate findings.
This study is being conducted by AHRQ through its contractor, JSI, pursuant to AHRQ's statutory authority to conduct and support research on health care and on systems for the delivery of such care, including activities with respect to the quality, effectiveness, efficiency, appropriateness and value of health care services and with respect to quality measurement and improvement. 42 U.S.C. 299a(a)(1) and (2).
AHRQ seeks approval for the following data collection activities:
• Team Survey that will be disseminated to all members of both delegate and non-delegate primary care teams to assess job satisfaction and team functioning in all participating sites at two points in time.
• Key Informant Interviews conducted with staff in each of the participating sites during two rounds of site visits, with key informants to include the Medical Director, Practice Director, members of primary care teams implementing the delegate model, and ancillary staff. A condensed version of the interview will be used for a conference call with each participating site's Medical Director and Practice Director as an interim activity between the two site visits.
The information yielded from this study is expected to inform a wide cross section of audiences and stakeholders about provider efficiency, practice redesign, team-based care, workforce strategies, and spread of an innovation. This study is not intended to make broad generalizations about the effectiveness of the delegate model of care, but rather to build initial evidence about this promising new model, its ability to increase panel size in FQHCs, and provide guidance on how similar models might be spread and evaluated.
Exhibit 1 shows the estimated annualized burden for the respondents' time to participate in this research. Information will be collected through an internet-based team survey and in-person and telephone interviews. Note that some respondents may be double-counted, so the total number of respondents may be less than 80. For example, a respondent may fill out a survey as well as participate in a phone interview.
Exhibit 2 shows the estimated annualized cost burden associated with the respondents' time to participate in this research. The total annual cost burden is estimated to be $25,151.
In accordance with the Paperwork Reduction Act, comments on AHRQ's information collection are requested with regard to any of the following: (a) Whether the proposed collection of information is necessary for the proper performance of AHRQ health care research and health care information dissemination functions, including whether the information will have practical utility; (b) the accuracy of AHRQ's estimate of burden (including hours and costs) of the proposed collection(s) of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and, (d) ways to minimize the burden of the collection of information upon the respondents, including the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and included in the Agency's subsequent request for OMB approval of the proposed information collection. All comments will become a matter of public record.
The Department of Health and Human Services is required to collect these data under section 1124 of Title I of the Elementary and Secondary Education Act, as amended by Public Law 103–382. The data are used by the U.S. Department of Education for allocation of funds for programs to aid disadvantaged elementary and secondary students. Respondents include various components of State Human Service agencies.
The 52 respondents include the 50 States, the District of Columbia, and Puerto Rico.
Estimated Total Annual Burden Hours: 13,746.20.
In compliance with the requirements of Section 506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Administration for Children and Families is soliciting public comment on the specific aspects of the information collection described above. Copies of the proposed collection of information can be obtained and comments may be forwarded by writing to the Administration for Children and Families, Office of Planning, Research and Evaluation, 370 L'Enfant Promenade, SW., Washington, DC 20447, Attn: ACF Reports Clearance Officer. Email address:
The Department specifically requests comments on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted within 60 days of this publication.
Proposed Projects:
The two fields “Results Expected and Benefits Expected” will be combined into one field to read “Results and Benefits Expected”. This will reduce redundancy and help reduce the burden on Grantees.
Estimated Total Annual Burden Hours: 2,050.
In compliance with the requirements of Section 506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Administration for Children and Families is soliciting public comment on the specific aspects of the
The Department specifically requests comments on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted within 60 days of this publication.
In accordance with Section 413(i) of the Social Security Act and 45 CFR part 284, the Department of Health and Human Services (HHS) intends to extend without change the following information collection requirements. For instances when Census Bureau data show that a States child poverty rate increased by 5 percent or more from one year to the next, a State may submit independent estimates of its child poverty rate. If HHS determines that the States independent estimates are not more reliable than the Census Bureau estimates, HHS will require the State to submit an assessment of the impact of the TANF program(s) in the State on the child poverty rate. If HHS determines from the assessment and other information that the child poverty rate in the State increased as a result of the TANF program(s) in the State, HHS will then require the State to submit a corrective action plan.
The respondents are the 50 States and the District of Columbia. When reliable Census Bureau data become available for the Territories, additional respondents might include Guam, Puerto Rico, and the Virgin Islands.
Estimated Total Annual Burden Hours: 14,688.
In compliance with the requirements of Section 506(c)(2)(A) of the Paperwork Reduction Act of 1995, the Administration for Children and Families is soliciting public comment on the specific aspects of the information collection described above. Copies of the proposed collection of information can be obtained and comments may be forwarded by writing to the Administration for Children and Families, Office of Planning, Research and Evaluation, 370 L'Enfant Promenade SW., Washington, DC 20447, Attn: ACF Reports Clearance Officer. Email address:
The Department specifically requests comments on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the proposed collection of information; (c) the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted within 60 days of this publication.
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing an opportunity for public comment on the proposed collection of certain information by the Agency. Under the Paperwork Reduction Act of 1995 (the PRA), Federal Agencies are required to publish notice in the
Submit either electronic or written comments on the collection of information by September 8, 2014.
Submit electronic comments on the collection of information to
FDA PRA Staff, Office of Operations, Food and Drug Administration, 8455 Colesville Rd., COLE–14526, Silver Spring, MD 20993–0002,
Under the PRA (44 U.S.C. 3501–3520), Federal Agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) and includes Agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of the PRA (44 U.S.C. 3506(c)(2)(A)) requires Federal Agencies to provide a 60-day notice in the
With respect to the following 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.
The information required under section 402(j)(5)(B) of the Public Health Service Act (PHS Act) (42 U.S.C. 282(j)(5)(B)) is submitted in the form of a certification, Form FDA 3674, which accompanies applications and submissions currently submitted to FDA and is already approved by OMB. The OMB control numbers and expiration dates for submitting FDA 3674 under the following parts are: 21 CFR parts 312 and 314 (human drugs) are 0910–0014, expiring April 30, 2015, and 0910–0001, expiring September 30, 2014; 21 CFR parts 312 and 601 (biological products) are 0910–0014 and 0910–0338, expiring January 31, 2017; 21 CFR parts 807 and 814 (devices) are 0910–0120, expiring January 31, 2017, and 0910–0231, expiring January 31, 2017.
Title VIII of the Food and Drug Administration Amendments Act of 2007 (Public Law 110–85) amended the PHS Act by adding section 402(j). The provisions require additional information to be submitted to the clinical trials data bank,
One provision, section 402(j)(5)(B) of the PHS Act, requires that a certification accompany human drug, biological, and device product submissions made to FDA. Specifically, at the time of submission of an application under sections 505, 515, or 520(m) of the FD&C Act (21 U.S.C. 355, 360e, or 360j(m)), or under section 351 of the PHS Act (42 U.S.C. 262), or submission of a report under section 510(k) of the FD&C Act (21 U.S.C. 360(k)), such application or submission must be accompanied by a certification, Form FDA 3674, that all applicable requirements of section 402(j) of the PHS Act have been met. Where available, such certification must include the appropriate National Clinical Trial (NCT) numbers.
The proposed extension of the collection of information is necessary to satisfy the previously mentioned statutory requirement. The importance of obtaining these data relates to adherence to the legal requirements for submissions to the clinical trials registry and results data bank and ensuring that individuals and organizations submitting applications or reports to FDA under the listed provisions of the FD&C Act or the PHS Act adhere to the appropriate legal and regulatory requirements for certifying to having complied with those requirements. The failure to submit the certification required by section 402(j)(5)(B) of the PHS Act, and the knowing submission of a false certification are both prohibited acts under section 301 of the FD&C Act (21 U.S.C. 331). Violations are subject to civil money penalties.
In January 2009, FDA issued “Guidance for Sponsors, Industry, Researchers, Investigators, and Food and Drug Administration Staff—Certifications to Accompany Drug, Biological Product, and Device Applications/Submissions: Compliance With Section 402(j) of The Public Health Service Act, Added By Title VIII of the Food and Drug Administration Amendments Act of 2007” available at
FDA's Center for Drug Evaluation and Research (CDER) received 1,564 investigational new drug applications (INDs) and 14,328 clinical protocol IND amendments in calendar year (CY) 2013. CDER anticipates that IND and clinical protocol amendment submission rates will remain at or near this level in the near future.
FDA's Center for Biologics Evaluation and Research (CBER) received 451 new INDs and 492 clinical protocol IND amendments in CY 2013. CBER anticipates that IND and clinical protocol amendment submission rates will remain at or near this level in the near future. The estimated total number of submissions (new INDs and new protocol submissions) subject to
Based on its experience with current submissions, FDA estimates that approximately 15 minutes on average would be needed per response for certifications which accompany IND applications and clinical protocol amendment submissions. It is assumed that most submissions to investigational applications will reference only a few protocols for which the sponsor/applicant/submitter has obtained a NCT number from
In CY 2013, CDER and CBER received 226 new drug applications (NDA)/biologics license applications (BLA)/resubmissions and 932 NDA/BLA amendments for which certifications are needed. CDER and CBER received 198 efficacy supplements/resubmissions to previously approved NDAs/BLAs in CY 2013. CDER and CBER anticipate that new drug/biologic applications/resubmissions and efficacy supplement submission rates will remain at or near this level in the near future.
FDA's Center for Devices and Radiological Health (CDRH) received a total of 530 new applications for premarket approvals (PMA), 510(k) submissions containing clinical information, PMA supplements, applications for humanitarian device exemptions (HDE) and amendments in CY 2013. CDRH anticipates that application, amendment, supplement, and annual report submission rates will remain at or near this level in the near future.
FDA's Office of Generic Drugs (OGD) received 1,001 abbreviated new drug applications (ANDAs) in 2013. OGD received 989 bioequivalence amendments/supplements in 2013. OGD anticipates that application, amendment, and supplement submission rates will remain at or near this level in the near future.
Based on its experience reviewing NDAs, BLAs, PMAs, HDEs, 510(k)s, and ANDAs and experience with current submissions of Form FDA 3674, FDA estimates that approximately 45 minutes on average would be needed per response for certifications which accompany NDA, BLA, PMA, HDE, 510(k), and ANDA marketing applications and submissions. It is assumed that the sponsor/applicant/submitter has electronic capabilities allowing them to retrieve the information necessary to complete the form in an efficient manner.
FDA estimates the burden of this collection of information as follows:
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is announcing the availability of a draft document entitled “Guidance for Industry: Design and Analysis of Shedding Studies for Virus or Bacteria-Based Gene Therapy and Oncolytic Products” dated July 2014. The draft guidance document provides sponsors of virus or bacteria-based gene therapy products (VBGT products) and oncolytic viruses or bacteria (oncolytic products) with recommendations on how to conduct shedding studies during preclinical and clinical development.
Although you can comment on any guidance at any time (see 21 CFR 10.115(g)(5)), to ensure that the Agency considers your comment on this draft guidance before it begins work on the final version of the guidance, submit either electronic or written comments on the draft guidance by November 19, 2014.
Submit written requests for single copies of the draft guidance to the Office of Communication, Outreach and Development, Center for Biologics Evaluation and Research (CBER), Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 3128, Silver Spring, MD 20993–0002. Send one self-addressed adhesive label to assist the office in processing your requests. The draft guidance may also be obtained by mail by calling CBER at 1–800–835–4709 or 240–402–7800. See the
Submit electronic comments on the draft guidance to
Tami Belouin, Center for Biologics Evaluation and Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 7301, Silver Spring, MD 20993–0002, 240–402–7911.
FDA is announcing the availability of a draft document entitled “Guidance for Industry: Design and Analysis of Shedding Studies for Virus or Bacteria-Based Gene Therapy and Oncolytic Products” dated July 2014. The draft guidance document provides sponsors of oncolytic and VBGT products with recommendations on how to conduct shedding studies during preclinical and clinical development. Oncolytic and VBGT products are derived from infectious viruses or bacteria. In general, these product-based viruses and bacteria are not as infectious or as virulent as the parent strain of virus or bacterium. Nonetheless, FDA is issuing this guidance because the possibility that infectious product-based viruses and bacteria may be shed by a patient raises safety concerns related to the risk of transmission to untreated individuals. To understand the risk associated with product shedding, sponsors should collect data in the target patient population in clinical trials before licensure.
The draft guidance is being issued consistent with FDA's good guidance practices regulation (21 CFR 10.115). The draft guidance, when finalized, will represent FDA's current thinking on this topic. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. An alternative approach may be used if such approach satisfies the requirement of the applicable statutes and regulations.
The draft guidance refers to previously approved collections of information found in FDA regulations. These collections of information are subject to review by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520). The collections of information in 21 CFR part 312 have been approved under OMB control number 0910–0014; the collections of information in 21 CFR part 600 have been approved under OMB control number 0910–0308; the collections of information in 21 CFR part 601 have been approved under OMB control number 0910–0338; and the collections of information in 21 CFR part 50 have been approved under OMB control number 0910–0755.
The draft guidance is being distributed for comment purposes only and is not intended for implementation at this time. Interested persons may submit either electronic comments regarding this document to
Persons with access to the Internet may obtain the draft guidance at either
Food and Drug Administration, HHS.
Notice of public meeting; request for comments.
The Food and Drug Administration (FDA) is announcing a public meeting and an opportunity for public comment on Patient-Focused Drug Development for Hemophilia A, Hemophilia B, von Willebrand Disease, and other heritable bleeding disorders such as other factor deficiencies (including I, V, VII, X, XI) and platelet disorders. Patient-Focused Drug Development is an FDA performance commitment under the fifth authorization of the Prescription Drug User Fee Act (PDUFA V). The public meeting is intended to provide FDA with patients' perspectives on the impact on daily life of Hemophilia A, Hemophilia B, von Willebrand Disease, and other heritable bleeding disorders. FDA also is seeking patients' perspectives on the available therapies for these disorders.
Submit either electronic or written comments by November 28, 2014. Submit electronic comments to
FDA will post the agenda approximately 5 days before the workshop at:
FDA has selected Hemophilia A, Hemophilia B, von Willebrand Disease, and other heritable bleeding disorders as the focus of a public meeting under the Patient-Focused Drug Development initiative. This initiative involves obtaining a better understanding of patients' perspectives on the challenges posed by these disorders, and the impact of therapies for these disorders. The Patient-Focused Drug Development initiative is being conducted to fulfill FDA performance commitments that are part of the PDUFA reauthorization under Title I of the Food and Drug Safety and Innovation Act (Pub. L. 112–144). The full set of performance commitments is available on the FDA Web site at
FDA has committed to obtaining the patient perspective on 20 disease areas during the course of PDUFA V. For each disease area, the Agency will conduct a public meeting to discuss the disease and its impact on patients' daily lives, the types of treatment benefits that matter most to patients, and patients' perspectives on the adequacy of the available therapies. These meetings will include participation of FDA review divisions, the relevant patient communities, and other interested stakeholders.
On April 11, 2013, FDA published a notice in the
The purpose of this Patient-Focused Drug Development meeting is to obtain input on the symptoms and other impacts that matter most to patients with Hemophilia A, Hemophilia B, von Willebrand Disease, and other heritable bleeding disorders. FDA also intends to seek patients' perspectives on current approaches to treating these disorders. FDA expects that this information will come directly from patients, caregivers, and patient advocates.
Heritable bleeding disorders are a diverse group of diseases and some involve lifelong defects in the clotting mechanism of the blood. The most frequently occurring of these disorders include Hemophilia A, Hemophilia B, and von Willebrand Disease. Less frequent yet also serious heritable bleeding disorders include Factor VII deficiency, Factor XIII deficiency, α2-antiplasmin deficiency and platelet disorders such as Gray platelet syndrome. Symptoms of heritable bleeding disorders include frequent nose bleed; prolonged and heavy menstrual bleeding; prolonged bleeding from cuts, trauma, dental extractions, and surgical procedures as well as bleeding into internal organs, muscles, and joints. Intracranial hemorrhage is a particularly serious and life-threatening manifestation. Specific treatment recommendations are determined by the type and severity of the disorder; but in general, therapies such as factor replacement, platelet transfusion, fresh frozen plasma, and cryoprecipitate are utilized.
The questions that will be asked of patients and patient stakeholders at the meeting are provided in this document. For each topic, a brief patient panel discussion will begin the dialogue. This will be followed by a facilitated discussion inviting comments from other patient and patient stakeholder
• Of all of the symptoms that you experience because of your condition, which one to three symptoms (bleeding or non-bleeding) have the most significant impact on your life? (Examples may include joint damage/pain, infections, prolonged and heavy bleeding with menstruation, fatigue, etc.)
• Are there specific activities that are important to you, but that you cannot do at all, or as well as you would like, because of your condition? Please describe, using specific examples. (Examples may include participating in physical activities, attending work/school, and family/social activities, etc.)
• How have your condition and its symptoms changed over time?
• What worries you most about your condition?
• What are you currently doing to treat your condition or its symptoms? (Examples may include blood transfusions, replacement therapies, over-the-counter products, and/or other therapies).
○ How well do these treatments work for you?
○ What are the most significant disadvantages or complications of your current treatments, and how do they affect your daily life?
○ How has your treatment changed over time and why?
○ What aspects of your condition are not improved by your current treatment regimen?
○ What treatment has had the most positive impact on your life?
• If you could create your ideal treatment, what would it do for you (i.e., what specific things would you look for in an ideal treatment)?
• If you had the opportunity to consider participating in a clinical trial studying experimental treatments, what things would you consider when deciding whether or not to participate?
If you wish to attend this meeting, visit
Patients and patient stakeholders who are interested in presenting comments as part of the initial panel discussions should register by August 22, 2014. You will be asked to indicate in your registration which topic(s) you wish to address. You will be asked to send a brief summary of responses to the topic questions to
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA or we) is announcing a publication containing modifications the Agency is making to the list of standards FDA recognizes for use in premarket reviews (“FDA Recognized Consensus Standards”). This publication, entitled “Modifications to the List of Recognized Standards, Recognition List Number: 036” (“Recognition List Number: 036”), will assist manufacturers who elect to declare conformity with consensus standards to meet certain requirements for medical devices.
Submit either electronic or written comments concerning this document at any time. See section VII for the effective date of the recognition of standards announced in this document.
Submit written requests for single copies of the document entitled “Modifications to the List of Recognized Standards, Recognition List Number: 036” to the Division of Industry and Consumer Education, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 4613, Silver Spring,
Submit electronic comments on this document to
Scott A. Colburn, Center for Devices and Radiological Health, Food and Drug Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 3632, Silver Spring, MD 20993, 301–796–6287,
Section 204 of the Food and Drug Administration Modernization Act of 1997 (Pub. L. 105–115) amended section 514 of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 360d). Amended section 514 allows FDA to recognize consensus standards developed by international and national organizations for use in satisfying portions of device premarket review submissions or other requirements.
In a notice published in the
Modifications to the initial list of recognized standards, as published in the
These notices describe the addition, withdrawal, and revision of certain standards recognized by FDA. The Agency maintains HTML and PDF versions of the list of FDA Recognized Consensus Standards. Both versions are publicly accessible at the Agency's Internet site. See section VI for electronic access information. Interested persons should review the supplementary information sheet for the standard to understand fully the extent to which FDA recognizes the standard.
FDA is announcing the addition, withdrawal, correction, and revision of certain consensus standards the Agency will recognize for use in premarket submissions and other requirements for devices. We will incorporate these modifications in the list of FDA Recognized Consensus Standards in the Agency's searchable database. We will use the term “Recognition List Number: 036” to identify these current modifications.
In table 1, we describe the following modifications: (1) The withdrawal of standards and their replacement by others, if applicable, (2) the correction of errors made by FDA in listing previously recognized standards, and (3) the changes to the supplementary information sheets of recognized standards that describe revisions to the applicability of the standards.
In section III, we list modifications the Agency is making that involve the initial addition of standards not previously recognized by FDA.
In table 2, we provide the listing of new entries and consensus standards added as modifications to the list of recognized standards under Recognition List Number: 036.
FDA maintains the Agency's current list of FDA Recognized Consensus Standards in a searchable database that may be accessed directly at our Internet site at
Any person may recommend consensus standards as candidates for
You may obtain a copy of “Guidance on the Recognition and Use of Consensus Standards” by using the Internet. The Center for Devices and Radiological Health (CDRH) maintains a site on the Internet for easy access to information including text, graphics, and files that you may download to a personal computer with access to the Internet. Updated on a regular basis, the CDRH home page includes the guidance as well as the current list of recognized standards and other standards-related documents. After publication in the
You may access “Guidance on the Recognition and Use of Consensus Standards,” and the searchable database for “FDA Recognized Consensus Standards” at
Interested persons may submit either electronic comments regarding this document to
Food and Drug Administration, HHS.
Notice.
The Food and Drug Administration (FDA) is requesting that any industry organizations interested in participating in the selection of a nonvoting industry representative to serve on the Cellular, Tissue, and Gene Therapies Advisory Committee for the Center for Biologics Evaluation and Research notify FDA in writing. FDA is also requesting nominations for a nonvoting industry representative to serve on the Cellular, Tissue, and Gene Therapies Advisory Committee. A nominee may either be self-nominated or nominated by an organization to serve as a nonvoting industry representative. Nominations will be accepted for current or upcoming vacancies effective with this notice.
Any industry organization interested in participating in the selection of an appropriate nonvoting member to represent industry interests must send a letter stating that interest to FDA by August 8, 2014, for the vacancy listed in this notice. Concurrently, nomination materials for prospective candidates should be sent to FDA by
All letters of interest from industry organizations should be submitted in writing to Gail Dapolito (see
Gail Dapolito, Center for Biologics Evaluation and Research, 10903 New Hampshire Ave., Bldg. 71, Rm. 6124, Silver Spring, MD 20993–0002, 240–402–8046;
The Agency intends to add a nonvoting industry representative to the following advisory committee:
The Committee reviews and evaluates available data relating to the safety, effectiveness, and appropriate use of human cells, human tissues, gene transfer therapies and xenotransplantation products which are intended for transplantation, implantation, infusion and transfer in the prevention and treatment of a broad spectrum of human diseases and in the reconstruction, repair or replacement of tissues for various conditions. The Committee also considers the quality and relevance of FDA's research program which provides support for the regulation of these products, and makes appropriate recommendations to the Commissioner of Food and Drugs (the Commissioner).
Any industry organization interested in participating in the selection of an appropriate nonvoting member to represent industry interests should send a letter stating that interest to the FDA contact (see
Individuals may self-nominate and/or an organization may nominate one or more individuals to serve as a nonvoting industry representative. Contact information, a current curriculum vitae, and the name of the committee of interest should be provided within 30 days of publication of this document (see
FDA has a special interest in ensuring that women, minority groups, individuals with physical disabilities, and small businesses are adequately represented on its advisory committees, and therefore, encourages nominations for appropriately qualified candidates from these groups. Specifically, in this document, nominations for nonvoting representatives of industry interests are encouraged from the cell, tissue, and gene transfer products manufacturing industry.
This notice is issued under the Federal Advisory Committee Act (5 U.S.C. app. 2) and 21 CFR part 14, relating to advisory committees.
Written comments and/or suggestions from the public and affected agencies are invited to address one or more of the following points: (1) Whether the proposed collection of information is necessary for the proper performance of the function of the agency, including whether the information will have practical utility; (2) the accuracy of the agency'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 those who are to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.
The evaluation will utilize the NIH's archived data on grants, institutions, Principal Investigators (PIs), and students funded with AREA monies. The evaluation will collect new data about (1) the quantity and quality of student participation in AREA projects, (2) records of PIs' subsequent funding histories, (3) applicants' experiences with the application process, (4) PIs' experiences implementing AREA Program objectives, and (5) the impact of AREA Program research participation on student career paths and outcomes.
The results of the evaluation will indicate the extent to which the AREA Program is meeting its goals of supporting meritorious research, strengthening the research environment at institutions of higher education that are not research intensive, and recruiting and training subsequent generations of the United States' biomedical scientist workforce. Intended audiences include the United States Congress, staff at NIH ICs that make AREA awards, and staff of the NIHOD.
OMB approval is requested for one year. There are no costs to respondents other than their time. The total estimated annualized burden hours are 629.
National Institutes of Health, HHS.
Notice.
This is notice, in accordance with 35 U.S.C. 209 and 37 CFR part 404, that the National Institutes of Health (NIH), Department of Health and Human Services (HHS), is contemplating the grant of a Start-Up Exclusive Evaluation Option License Agreement to Milo, LLC, a company having its headquarters in Cleveland, Ohio, to practice the inventions embodied in U.S. Provisional Patent Application No. 61/695,753, filed 20 April 2011 (HHS Ref. No. E–139–2011/1–US–01]), and PCT Patent Application No. PCT/US13/57632, filed 30 August 2013 (HHS Ref. No. E–139–2011/1–PCT–02), entitled “AAV Mediated Aquaporin-1 Gene Transfer to Treat Sjögren's Syndrome.” The patent rights in these inventions have been assigned to or exclusively licensed to the Government of the United States of America. The territory of the prospective license may be worldwide and the field of use may be limited to: “the use of the Licensed Patent Rights, limited to AAV mediated aquaporin-1, for the treatment of Sjögren's syndrome in humans.”
Upon the expiration or termination of the Start-Up Exclusive Evaluation Option License Agreement, Milo will have the exclusive right to execute a Start-up Exclusive Patent License Agreement which will supersede and replace the Start-up Exclusive Evaluation Option License Agreement, with no greater field of use and territory than granted in the Start-Up Exclusive Evaluation Option License Agreement.
Only written comments and/or applications for a license which are received by the NIH Office of Technology Transfer on or before July 24, 2014 will be considered.
Requests for copies of the patent application, inquiries, comments and other materials relating to the contemplated Start-Up Exclusive Evaluation Option License Agreement should be directed to: Vince Contreras, Ph.D., Licensing and Patenting Manager, Office of Technology Transfer, National Institutes of Health, 6011 Executive Boulevard, Suite 325, Rockville, MD 20852–3804; Telephone: (301) 435–4711; Facsimile: (301) 402–0220; Email:
The subject technology includes methods of treating Sjögren's syndrome by using recombinant adeno associated virus (rAAV) serotypes as vectors to deliver a gene that expresses AQP1. Aquaporin-1 is a pore protein that selectively channels water molecules across the cell membrane. Using animal models that mimic the dry mouth symptoms (xerostomia) of Sjögren's, it was discovered that there was restoration of fluid movement upon expression of AQP1. This potentially represents a long-term treatment for restoring exocrine gland function in Sjögren's patients where salivary gland activity is significantly reduced.
The prospective Start-Up Exclusive Evaluation Option License Agreement will be royalty bearing and will comply with the terms and conditions of 35 U.S.C. 209 and 37 CFR part 404. The prospective Start-Up Exclusive Evaluation Option License Agreement and a subsequent Start-Up Exclusive Patent License Agreement may be granted unless the NIH receives, within fifteen (15) days from the date of this published notice, written evidence and argument that establishes that the grant of the license would not be consistent with the requirements of 35 U.S.C. 209 and 37 CFR part 404.
Complete applications for a license in the prospective field of use that are filed in response to this Notice will be treated as objections to the grant of the contemplated Start-Up Exclusive Evaluation Option License Agreement. Comments and objections submitted in response to this Notice will not be made available for public inspection, and, to the extent permitted by law, will not be released under the Freedom of Information Act, 5 U.S.C. 552.
National Institutes of Health, HHS.
Notice.
The inventions listed below are owned by an agency of the U.S. Government and are available for licensing in the U.S. in accordance with 35 U.S.C. 209 and 37 CFR Part 404 to achieve expeditious commercialization of results of federally-funded research and development. Foreign patent applications are filed on selected inventions to extend market coverage for companies and may also be available for licensing.
Licensing information and copies of the U.S. patent applications listed below may be obtained by writing to the indicated licensing contact at the Office of Technology Transfer, National Institutes of Health, 6011 Executive Boulevard, Suite 325, Rockville, Maryland 20852–3804; telephone: 301–496–7057; fax: 301–402–0220. A signed Confidential Disclosure Agreement will
Technology descriptions follow.
• COTS healthcare system.
• Medical/hospital information systems.
• Customized views.
• Integrates into exiting management tool libraries.
• Early-stage.
• Prototype.
• Tissue and cell analysis in biomedical research.
• Potential applications in clinical diagnostics.
• Increased signal-to-noise ratio.
• Enhanced image resolution due to SNR.
• Improved analytical capabilities.
• Non-contact.
• May readily be adaptable to commercial microscopes.
• In vitro data available.
• Prototype.
• US Provisional Patent Application 61/224,772 filed July 10, 2009.
• US Patent 8,759,792 issued June 24, 2014.
• European Patent Application 10797972.6 filed July 12, 2010.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections
Federal Emergency Management Agency, DHS.
Notice; correction.
On May 13, 2014, the Federal Emergency Management Agency (FEMA) published in the
These flood hazard determinations will become effective on the date listed in the table below and revise the FIRM panels and FIS report in effect prior to this determination for the listed community.
From the date of the second publication of notification of these changes in a newspaper of local circulation, any person has ninety (90) days in which to request through the community that the Deputy Associate Administrator for Mitigation reconsider the changes. The flood hazard determination information may be changed during the 90-day period.
The affected community is listed in the table below. Revised flood hazard information for the community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for the community is accessible online through the FEMA Map Service Center at
Submit comments and/or appeals to the Chief Executive Officer of the community as listed in the table below.
Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646–4064, or (email)
The specific flood hazard determinations are not described for the community in this notice. However, the online location and local community map repository address where the flood hazard determination information is available for inspection is provided.
Any request for reconsideration of flood hazard determinations must be submitted to the Chief Executive Officer of the community as listed in the table below.
The modifications are made pursuant to section 201 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4105, and are in accordance with the National Flood Insurance Act of 1968, 42 U.S.C. 4001
The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program.
These flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. The flood hazard determinations are in accordance with 44 CFR 65.4.
The affected community is listed in the following table. Flood hazard determination information for the community is available for inspection at both the online location and the respective community map repository address listed in the table below. Additionally, the current effective FIRM and FIS report for the community is accessible online through the FEMA Map Service Center at
In the notice published at 79 FR 27332, the table contained inaccurate information for the associated community map repository address for LOMR case number 13–06–3803P for the City of Denton, Denton County, Texas, featured in the table. In this notice, FEMA is publishing a table containing the accurate information to address this prior error. The information provided below should be used in lieu of that previously published for the City of Denton.
Federal Emergency Management Agency, DHS.
Notice.
This notice amends the notice of a major disaster declaration for the State of Indiana (FEMA–4173–DR), dated April 22, 2014, and related determinations.
Dean Webster, Office of Response and Recovery, Federal Emergency Management Agency, 500 C Street SW., Washington, DC 20472, (202) 646–2833.
The notice of a major disaster declaration for the State of Indiana is hereby amended to include the following area among those areas determined to have been adversely affected by the event declared a major disaster by the President in his declaration of April 22, 2014.
Lake County for Public Assistance.
Lake County for snow assistance under the Public Assistance program for any continuous 48-hour period during or proximate to the incident period.
The following Catalog of Federal Domestic Assistance Numbers (CFDA) are to be used for reporting and drawing funds: 97.030, Community Disaster Loans; 97.031, Cora Brown Fund; 97.032, Crisis Counseling; 97.033, Disaster Legal Services; 97.034, Disaster Unemployment Assistance (DUA); 97.046, Fire Management Assistance Grant; 97.048, Disaster Housing Assistance to Individuals and Households In Presidentially Declared Disaster Areas; 97.049, Presidentially Declared Disaster Assistance—Disaster Housing Operations for Individuals and Households; 97.050, Presidentially Declared Disaster Assistance to Individuals and Households—Other Needs; 97.036, Disaster Grants—Public Assistance (Presidentially Declared Disasters); 97.039, Hazard Mitigation Grant.
Federal Emergency Management Agency, DHS.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report, once effective, will be used by insurance agents and others to calculate appropriate flood insurance premium rates for new buildings and the contents of those buildings.
Comments are to be submitted on or before October 7, 2014.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the tables below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
You may submit comments, identified by Docket No. FEMA–B–1415, to Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646–4064, or (email)
Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646–4064, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP and also are used to calculate the appropriate flood insurance premium rates for new buildings built after the FIRM and FIS report become effective.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the tables. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
Federal Emergency Management Agency, DHS.
Notice.
Comments are requested on proposed flood hazard determinations, which may include additions or modifications of any Base Flood Elevation (BFE), base flood depth, Special Flood Hazard Area (SFHA) boundary or zone designation, or regulatory floodway on the Flood Insurance Rate Maps (FIRMs), and where applicable, in the supporting Flood Insurance Study (FIS) reports for the communities listed in the table below. The purpose of this notice is to seek general information and comment regarding the preliminary FIRM, and where applicable, the FIS report that the Federal Emergency Management Agency (FEMA) has provided to the affected communities. The FIRM and FIS report are the basis of the floodplain management measures that the community is required either to adopt or to show evidence of having in effect in order to qualify or remain qualified for participation in the National Flood Insurance Program (NFIP). In addition, the FIRM and FIS report, once effective, will be used by insurance agents and others to calculate appropriate flood insurance premium rates for new buildings and the contents of those buildings.
Comments are to be submitted on or before October 7, 2014.
The Preliminary FIRM, and where applicable, the FIS report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the tables below. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
You may submit comments, identified by Docket No. FEMA–B–1419, to Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646–4064, or (email)
Luis Rodriguez, Chief, Engineering Management Branch, Federal Insurance and Mitigation Administration, FEMA, 500 C Street SW., Washington, DC 20472, (202) 646–4064, or (email)
FEMA proposes to make flood hazard determinations for each community listed below, in accordance with section 110 of the Flood Disaster Protection Act of 1973, 42 U.S.C. 4104, and 44 CFR 67.4(a).
These proposed flood hazard determinations, together with the floodplain management criteria required by 44 CFR 60.3, are the minimum that are required. They should not be construed to mean that the community must change any existing ordinances that are more stringent in their floodplain management requirements. The community may at any time enact stricter requirements of its own or pursuant to policies established by other Federal, State, or regional entities. These flood hazard determinations are used to meet the floodplain management requirements of the NFIP and also are used to calculate the appropriate flood insurance premium rates for new buildings built after the FIRM and FIS report become effective.
The communities affected by the flood hazard determinations are provided in the tables below. Any request for reconsideration of the revised flood hazard information shown on the Preliminary FIRM and FIS report that satisfies the data requirements outlined in 44 CFR 67.6(b) is considered an appeal. Comments unrelated to the flood hazard determinations also will be considered before the FIRM and FIS report become effective.
Use of a Scientific Resolution Panel (SRP) is available to communities in support of the appeal resolution process. SRPs are independent panels of experts in hydrology, hydraulics, and other pertinent sciences established to review conflicting scientific and technical data and provide recommendations for resolution. Use of the SRP only may be exercised after FEMA and local communities have been engaged in a collaborative consultation process for at least 60 days without a mutually acceptable resolution of an appeal. Additional information regarding the SRP process can be found online at
The watersheds and/or communities affected are listed in the tables below. The Preliminary FIRM, and where applicable, FIS report for each community are available for inspection at both the online location and the respective Community Map Repository address listed in the tables. Additionally, the current effective FIRM and FIS report for each community are accessible online through the FEMA Map Service Center at
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Intertek USA, Inc., as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Intertek USA, Inc. has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes for the next three years as of May 22, 2013.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services, U.S. Customs and Border Protection, 1331 Pennsylvania Avenue NW., Suite 1500N, Washington, DC 20229, tel. 202–344–1060.
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Intertek USA, Inc., 109 Sutherland Drive, Chickasaw,
Intertek USA, Inc. is accredited for the following laboratory analysis procedures and methods for petroleum and certain petroleum products set forth by the U.S. Customs and Border Protection Laboratory Methods (CBPL) and American Society for Testing and Materials (ASTM):
Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border Protection to conduct the specific test or gauger service requested. Alternatively, inquiries regarding the specific test or gauger service this entity is accredited or approved to perform may be directed to the U.S. Customs and Border Protection by calling (202) 344–1060. The inquiry may also be sent to
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Intertek USA, Inc., as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Intertek USA, Inc. has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes for the next three years as of March 26, 2013.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services, U.S. Customs and Border Protection, 1331 Pennsylvania Avenue NW., Suite 1500N, Washington, DC 20229, tel. 202–344–1060.
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Intertek USA, Inc., 1211 Belgrove Dr., St. Louis, MO 63137, has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes, in accordance with the provisions of 19 CFR 151.12 and 19 CFR 151.13. Intertek USA, Inc. is approved for the following gauging procedures for petroleum and certain petroleum products per the American Petroleum Institute (API) Measurement Standards:
Intertek USA, Inc. is accredited for the following laboratory analysis
Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border Protection to conduct the specific test or gauger service requested. Alternatively, inquiries regarding the specific test or gauger service this entity is accredited or approved to perform may be directed to the U.S. Customs and Border Protection by calling (202) 344–1060. The inquiry may also be sent to
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Intertek USA, Inc., as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Intertek USA, Inc. has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes for the next three years as of June 11, 2013.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services, U.S. Customs and Border Protection, 1331 Pennsylvania Avenue NW., Suite 1500N, Washington, DC 20229, tel. 202–344–1060.
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Intertek USA, Inc., 105 Merchant Lane, Pittsburgh, PA 15205, has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes, in accordance with the provisions of 19 CFR 151.12 and 19 CFR 151.13. Intertek USA, Inc. is approved for the following gauging procedures for petroleum and certain petroleum products per the American Petroleum Institute (API) Measurement Standards:
Intertek USA, Inc. is accredited for the following laboratory analysis procedures and methods for petroleum and certain petroleum products set forth by the U.S. Customs and Border Protection Laboratory Methods (CBPL) and American Society for Testing and Materials (ASTM):
Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border Protection to conduct the specific test or gauger service requested. Alternatively, inquiries regarding the specific test or gauger service this entity is accredited or approved to perform may be directed to the U.S. Customs and Border Protection by calling (202) 344–1060. The inquiry may also be sent to
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of accreditation and approval of Intertek USA, Inc., as a commercial gauger and laboratory.
Notice is hereby given, pursuant to CBP regulations, that Intertek USA, Inc. has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes for the next three years as of August 29, 2013.
Approved Gauger and Accredited Laboratories Manager, Laboratories and Scientific Services, U.S. Customs and Border Protection, 1331 Pennsylvania Avenue NW., Suite 1500N, Washington, DC 20229, tel. 202–344–1060.
Notice is hereby given pursuant to 19 CFR 151.12 and 19 CFR 151.13, that Intertek USA, Inc., 481–A East Shore Parkway, New Haven, CT 06512, has been approved to gauge petroleum and certain petroleum products and accredited to test petroleum and certain petroleum products for customs purposes, in accordance with the provisions of 19 CFR 151.12 and 19 CFR 151.13. Intertek USA, Inc. is approved for the following gauging procedures for petroleum and certain petroleum products per the American Petroleum Institute (API) Measurement Standards:
Intertek USA, Inc. is accredited for the following laboratory analysis procedures and methods for petroleum and certain petroleum products set forth by the U.S. Customs and Border Protection Laboratory Methods (CBPL) and American Society for Testing and Materials (ASTM):
Anyone wishing to employ this entity to conduct laboratory analyses and gauger services should request and receive written assurances from the entity that it is accredited or approved by the U.S. Customs and Border Protection to conduct the specific test or gauger service requested. Alternatively, inquiries regarding the specific test or gauger service this entity is accredited or approved to perform may be directed to the U.S. Customs and Border Protection by calling (202) 344–1060. The inquiry may also be sent to
Please reference the Web site listed below for a complete listing of CBP approved gaugers and accredited laboratories.
U.S. Customs and Border Protection, Department of Homeland Security.
Notice of final determination.
This document provides notice that U.S. Customs and Border Protection (CBP) has issued a final determination concerning the country of origin of certain Foley catheter trays to be offered to the U.S. Government under an undesignated government procurement contract. The final determination found that based upon the facts presented, the country of origin of the subject trays is China and U.S.A.
The final determination was issued on June 30, 2014. A copy of the final determination is attached. Any party-at-interest as defined in 19 CFR 177.22(d), may seek judicial review of this final determination within 30 days of July 9, 2014.
Fernando Peña, Esq., Valuation and Special Programs Branch, Office of International Trade; telephone (202) 325–1511.
Notice is hereby given that on June 30, 2014, pursuant to subpart B of part 177, Customs Regulations (19 CFR part 177, subpart B), CBP issued a final determination concerning the country of origin of certain Foley catheter trays to be offered to the U.S. Government under an undesignated government procurement contract. The final determination, Headquarters Ruling Letter H230416, was issued at the request of Medline Industries, Inc., under procedures set forth at 19 CFR part 177, subpart B, which implements Title III of the Trade Agreements Act of 1979, as amended (19 U.S.C. 2511–18).
In the final determination, CBP concluded that, based upon the facts presented, the processing in Mexico of several medical instruments and accessories to create the subject “Foley catheter trays” does not constitute a substantial transformation into a product of Mexico for purposes of U.S. government procurement.
Section 177.29, Customs Regulations (19 CFR 177.29), provides that notice of final determinations shall be published in the
This is in response to your letter on behalf of Medline Industries, Inc. (hereinafter “Medline”), in which you seek a final determination pursuant to subpart B of Part 177, Customs Regulations, 19 CFR 177.21
This final determination concerns the country of origin of six models of Foley catheter trays, which Medline is considering
According to your submission and information provided, Medline developed its Foley catheter trays (hereinafter “trays”) to aid in the prevention of catheter-associated urinary tract infections. Medline designed sterilized, single-use trays containing a catheter and all of the equipment necessary to insert the catheter, organized and sequenced in a way to minimize the possibility of infection. You state that each tray is intended to be used only as an entirety, for single use, after which use the individual components, other than the inserted catheter that remains in the patient, are discarded.
You state that Medline manufactures six different models of the tray, which differ principally in the materials used for the catheter. The main model sold is the silicone-elastomer coated latex Foley catheter tray. Medline also produces two latex-free models, including a 100% silicone model, and a silicone catheter with silver ions bound in the catheter's coating. Each of these three types comes in two sizes, 16Fr and 18Fr, using the industry standard French units (FR), where 1 Fr is equivalent to 0.33 mm of diameter. You state that the six tray models are otherwise similar.
With your correspondence, you provided a representative sample of the latex Foley model, together with a detailed description and a list of medical instruments and accessories (materials and components) placed into the tray. These include patient drapes, hand sanitizer, sterile gloves, a syringe prefilled with sterile water to inflate the catheter balloon, lubricating jelly, iodine swabsticks, a syringe to draw a urine sample, securement devices, and a specimen jar. In the sample, these instruments are arranged in a plastic tray, which contains indentations to hold items or group of items.
The medical instruments and accessories are sourced from China and the U.S., and imported into Mexico, where they are placed into trays, packaged, and boxed at Medline's facility in Nuevo Laredo, Mexico. Specifically for the latex Foley catheter tray, the specimen container, catheter Foley silver, gloves, and drainage bag are manufactured in China. The remaining materials are of U.S. origin.
The catheter is sourced in varying countries depending on the model. The silicone and latex catheters (as in the submitted sample of the latex Foley catheter tray) are manufactured in China. Silvertouch catheters are manufactured in India or Canada. For all models, the catheter and drainage bag are packaged together in Mexico, together with all of the medical instruments and materials needed to insert and secure the catheter, including materials to create a sterile field. The accessories of the other models and their origin were not provided.
You claim that all of the instruments and materials in the tray are intended to be used in conjunction with the insertion of the catheter, in a specific sequence, and only for one use, and thus function together as a single medical device. After their initial use, all of the included instruments and materials, as well as the instructions and plastic tray, are discarded and have no alternative use.
According to Medline the tray components are delivered to a clean room and put together by a designated line of approximately 15 specially trained technicians. The catheter is attached to the drain bag in a way that creates a closed urological system that minimizes contamination when the catheter is used on the patient. By connecting the catheter to the drain bag in Medline's sterile environment, instead of having a nurse connect the two in a hospital room environment, the risk of bacterial contamination and patient infection is minimized.
You claim that attaching the drain bag is a fundamental characteristic of a Foley catheter system, and that the design of the tray transforms the components into an assembly which promotes proper insertion of the Foley catheter, thereby minimizing patient risk. After packaging, Medline performs a quality inspection prior to wrapping, sealing and packaging operations in Mexico, before sending the finished trays for medical sterilization in the United States.
Whether Medline's Foley catheter system management trays are considered to be products of Mexico for purposes of U.S. Government procurement.
Under subpart B of part 177, 19 CFR 177.21
Under the rule of origin set forth under 19 U.S.C. 2518(4)(B):
In rendering advisory rulings and final determinations for purposes of U.S. Government procurement, CBP applies the provisions of subpart B of Part 177 consistent with the Federal Procurement Regulations.
In determining whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article.
In Headquarters Ruling Letter (HRL) 555268 dated March 6, 1991, Customs considered the eligibility for preferential tariff treatment under the Generalized System of Preferences to “Code 6000 Infection Control Systems.” Similar to the articles under consideration, the Code 6000 catherization tray contained the following items packaged together: Latex catheter, “Mono-Flo” drainage bag, lubricating jelly, latex gloves, fenestrated drape, underpad prefold, urine specimen vial, forceps, applicator rayon balls, prefilled 10 cubic centimeter syringe, a tamper band, and a package of povidone iodine solution. The tray contained sections and indentations for individual items. The paper cover of the tray, which was designed to be peeled off, listed the contents and the directions for use. Customs determined that the catheter of Malaysian origin imparted the essential character to the set and, therefore, the Code 6000 combination package was classified in subheading 9018.39.00, HTSUS. As in this case, with respect to the Code 6000 combination package, certain items in the set were imported into Mexico from the U.S. or other sources and merely packaged together with items of Mexican origin. Customs held that merely packaging the items originating outside of Mexico with items of Mexican origin clearly did not result in a substantial transformation of the non-Mexican items into “products of” that country. Therefore, because the entire imported entity (the set) was not the “product of” Mexico, as required by the GSP statute, neither the set nor any part thereof would be entitled to duty-free treatment under the GSP. As to the U.S. items in the set, it was determined that they were eligible for duty-free treatment under subheading 9801.00.10, HTSUS.
Accordingly, it is our conclusion that the operations carried out by Medline in Mexico on the imported components do not result in a substantial transformation of the items into a product of Mexico. Therefore, the origin of each item in the set will be where it was originally manufactured. Considering the sample of the latex Foley catheter tray, the specimen container, catheter foley silver,
On the basis of the information provided, we find that the operations in Mexico do not constitute a substantial transformation of the components in Medline's latex Foley catheter system management trays. Therefore, the country of origin of Medline's Foley catheter system management trays is China and the U.S. where the items were originally manufactured for purposes of U.S. Government procurement. The other five tray models will follow a similar result, and their country of origin will be where the items of those models were originally manufactured (India, Canada, or the U.S. as the case may be), but specific origin details were not provided for our consideration.
Notice of this final determination will be given in the
Bureau of Land Management, Interior.
Notice.
The plats of survey of the following described lands are scheduled to be officially filed in the Bureau of Land Management, Oregon State Office, Portland, Oregon, 30 days from the date of this publication.
A copy of the plats may be obtained from the Public Room at the Bureau of Land Management, Oregon State Office, 1220 SW., 3rd Avenue, Portland, Oregon 97204, upon required payment.
Kyle Hensley, (503) 808–6132, Branch of Geographic Sciences, Bureau of Land Management, 1220 SW., 3rd Avenue, Portland, Oregon 97204. Persons who use a telecommunications device for the deaf (TDD) may call the Federal Information Relay Service (FIRS) at 1–800–877–8339 to contact the above individual during normal business hours. The FIRS is available 24 hours a day, 7 days a week, to leave a message or question with the above individual. You will receive a reply during normal business hours.
A person or party who wishes to protest against this survey must file a written notice with the Oregon State Director, Bureau of Land Management, stating that they wish to protest. A statement of reasons for a protest may be filed with the notice of protest and must be filed with the Oregon State Director within thirty days after the protest is filed. If a protest against the survey is received prior to the date of official filing, the filing will be stayed pending consideration of the protest. A plat will not be officially filed until the day after all protests have been dismissed or otherwise resolved.
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 will be able to do so.
Bureau of Land Management, Interior.
Notice of Filing of Plats of Surveys.
The Bureau of Land Management (BLM) has officially filed the plats of survey of the lands described below in the BLM Idaho State Office, Boise, Idaho, effective 9:00 a.m., on the dates specified.
Bureau of Land Management, 1387 South Vinnell Way, Boise, Idaho, 83709–1657.
These surveys were executed at the request of the Bureau of Land Management to meet their administrative needs. The lands surveyed are:
The plat representing the dependent resurvey of a portion of the subdivisional lines, Township 19 North, Range 2 East, of the Boise Meridian, Idaho, Group Number 1390, was accepted April 25, 2014.
The plats representing the dependent resurvey of a portion of the township boundary between Townships 9 and 10 North, the subdivisional lines, and subdivision of certain sections, in Township 9 North, Range 17 East and Townships 9 and 10 North, Range 18 East, of the Boise Meridian, Idaho, Group Number 1386, were accepted June 3, 2014.
The plat representing the dependent resurvey of portions of the south and east boundaries, and subdivisional lines, and the metes-and-bounds surveys of Tracts 37 and 38, Township 50 North, Range 3 West, of the Boise Meridian, Idaho, Group Number 1371, was accepted June 25, 2014.
The plat representing the dependent resurvey of portions of the north boundary and subdivisional lines, and a metes-and-bounds survey in section 5, Township 31 North, Range 1 East, of the Boise Meridian, Idaho, Group Number 1379, was accepted June 25, 2014.
This survey was executed at the request of the Department of Defense to meet their administrative needs. The lands surveyed are:
The plat representing the dependent resurvey of a portion of the township boundary between Townships 4 and 5 South, the subdivisional lines and subdivision of sections, and a metes-and-bounds survey, in Townships 4 and
This survey was executed at the request of the Bureau of Indian Affairs to meet their administrative needs. The lands surveyed are:
The plat representing the dependent resurvey of portions of the west boundary, subdivisional lines, and subdivision of sections 8 and 34, and the subdivision of sections 19, 32, and 33, and the further subdivision of sections 8 and 34, Township 35 North, Range 2 West, of the Boise Meridian, Idaho, Group Number 1354, was accepted June 25, 2014.
This survey was executed at the request of the Natural Resources Conservation Service to meet their administrative needs. The lands surveyed are:
The plat represents the dependent resurvey of a portions of the east boundary and subdivisional lines, and the subdivision of section 12, and the metes-and-bounds survey of a portion of U.S.D.A. NRCS easements lands, NRCS Project No. 83021112019L2, Township 5 North, Range 25 East, of the Boise Meridian, Idaho, Group Number 1394, is accepted June 12, 2014.
These surveys were executed at the request of the U.S.D.A. Forest Service to meet their administrative needs. The lands surveyed are:
The Bureau of Land Management (BLM) will file the plat of survey of the lands described below in the BLM Idaho State Office, Boise, Idaho, 30 days from the date of publication in the
The plat representing the dependent resurvey of a portion of Tract 39, and the survey of portions of the east boundary and subdivisional lines, Township 30 North, Range 7 East, of the Boise Meridian, Idaho, Group Number 1324, was accepted June 19, 2014.
National Park Service, Interior.
Notice and request for comments.
We (National Park Service) will ask the Office of Management and Budget (OMB) to approve the Information Collection Request (ICR) described below. The National Park Service (NPS) is requesting approval for a new collection that will be used to provide information. This information collection will provide data for the economic analysis that may be used to evaluate future dam operation. To comply with the Paperwork Reduction Act of 1995 and as a part of our continuing efforts to reduce paperwork and respondent burden, we invite the general public and other Federal agencies to comment on this ICR. A Federal agency may not conduct or sponsor and a person is not required to respond to a collection of information unless it displays a currently valid OMB control number.
To ensure that your comments on this ICR are considered, OMB must receive them on or before August 8, 2014.
Please submit written comments on this information collection directly to the Office of Management and Budget (OMB) Office of Information and Regulatory Affairs, Attention: Desk Officer for the Department of the Interior, via email to
Dr. John Duffield, University of Montana, Department of Mathematical Sciences, Missoula, MT 5981;
The National Park Service (NPS) Act of 1916, 38 Stat 535, 16 USC 1, et seq., requires that the NPS preserve national parks for the use and enjoyment of present and future generations. The proposed collection is needed to update the scientific information that was used in the 1996 Record of Decision that the Department of the Interior used to inform their decisions on Dam operations. This information will be used to assist in the development of an operating plan for the Glen Canyon Dam in accordance with the Grand Canyon Protection Act to protect and improve the values for which the Grand Canyon National Park and Glen Canyon National Recreation Area were established. This notice will cover the development and pretesting of the final survey instrument.
On September 23, 2013, we published a
We again invite comments concerning this information collection on:
• Whether or not the collection of information is necessary, including whether or not the information will have practical utility;
• The accuracy of our estimate of the burden for this collection of information;
• Ways to enhance the quality, utility, and clarity of the information to be collected; and
• Ways to minimize the burden of the collection of information on respondents.
Comments that you submit in response to this notice are a matter of public record. 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 OMB in your comment to withhold your personal identifying information from public review, we cannot guarantee that it will be done.
National Park Service, Interior.
Notice of availability.
Pursuant to Section 102(2)(C) of the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4332(2)(C), the National Park Service (NPS) announces the availability of the Final Environmental Impact Statement (FEIS) for the General Management Plan (GMP) for Canaveral National Seashore (Seashore). Consistent with NPS laws, regulations, and policies and the purpose of the Seashore, the FEIS/GMP will guide the management of the Seashore over the next 20+ years.
The NPS will execute a Record of Decision (ROD) no sooner than 30 days following publication by the Environmental Protection Agency of its Notice of Availability of the FEIS/GMP in the
Electronic copies of the FEIS/GMP will be available online at
The FEIS/GMP responds to, and incorporates, agency and public comments received on the draft EIS/GMP, which was available for public review from August 18, 2011, through October 31, 2011. Two public meetings were held during the public review period to gather input on the draft EIS/GMP. There were 26 pieces of correspondence received during the public review period. The NPS responses to substantive agency and public comments are provided in Chapter 5, Consultation and Coordination, of the FEIS/GMP.
The FEIS/GMP evaluates four alternatives for managing use and development of the Seashore:
• Alternative A is the No-Action Alternative and is the continuation of current management.
• The NPS preferred alternative is Alternative B. Under this alternative, emphasis would be placed on retaining the national seashore's relatively undeveloped character and providing uncrowded experiences by dispersing visitors via a shuttle service or canoe, kayak, hiking and walking trails, and bicycle trails. Elements of this alternative would support the resilience of the Seashore to climate change concerns, such as sea level rise, coastal erosion, and higher storm surges, all of which may affect cultural and natural resources as well as visitor experience at the Seashore.
• Under Alternative C the Seashore would be managed as a place where visitors would explore and experience a wide range of opportunities that would be designed to provide an in-depth understanding of the natural and cultural history of eastern coastal Florida. When visitors enter the Seashore, they would be presented with choices for alternative modes of access to land- and water-based natural and cultural features, appropriate recreational opportunities, and educational pursuits. Enhanced development related to recreational opportunities and educational pursuits would be pursued.
• Under Alternative D, the Seashore would be managed to focus on enhancing the existing lands, resources, and facilities. Limited facility development would provide more efficient NPS administration and operations and enhanced visitor amenities. Coordination with partners would be increased to provide additional educational opportunities and programs for visitors and enhanced monitoring of Mosquito Lagoon resources.
Superintendent Myrna Palfrey, Canaveral National Seashore, 212 S. Washington Avenue, Titusville, FL 32796; telephone (321) 267–1110.
The responsible official for this FEIS/GMP is the Regional Director, NPS Southeast Region, 100 Alabama Street SW., 1924 Building Atlanta, Georgia 30303.
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has received a complaint entitled
Lisa R. Barton, Secretary to the Commission, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 205–2000. The public version of the complaint can be accessed on the Commission's Electronic Document Information System (EDIS) at EDIS,
General information concerning the Commission may also be obtained by accessing its Internet server at United States International Trade Commission (USITC) at USITC.
The Commission has received a complaint and a submission pursuant to section 210.8(b) of the Commission's Rules of Practice and Procedure filed on behalf of Choon's Design Inc. on July 1, 2014. The complaint alleges violations of section 337 of the Tariff Act of 1930 (19 U.S.C. 1337) in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain loom kits for creating linked articles. The complaint names as respondents Wangying of China; Island In The Sun LLC of Little Rock, AR; Quality Innovations Inc. of Irwindale, CA; Yiwu Mengwang Craft & Art Factory of China; Shenzhen Xuncent Technology Co., Ltd of China; Altatac Inc. of Los Angeles, CA; My Imports USA LLC of Edison, NJ; Jayfinn LLC of Gilbert, AZ; Creative Kidstuff, LLC of Minneapolis, MN; Hongkong Haoguan Plastic Hardware Co., of China; Blinkee.com, LLC of Fairfax, CA; Eyyup Arga of Lodi, NJ and Itcoolnomore of China. The complainant requests that the Commission issue a general exclusion order and cease and desist orders.
Proposed respondents, other interested parties, and members of the public are invited to file comments, not to exceed five (5) pages in length, inclusive of attachments, on any public interest issues raised by the complaint or section 210.8(b) filing. Comments should address whether issuance of the relief specifically requested by the complainant in this investigation would affect the public health and welfare in the United States, competitive conditions in the United States economy, the production of like or directly competitive articles in the United States, or United States consumers.
In particular, the Commission is interested in comments that:
(i) explain how the articles potentially subject to the requested remedial orders are used in the United States;
(ii) identify any public health, safety, or welfare concerns in the United States relating to the requested remedial orders;
(iii) identify like or directly competitive articles that complainant, its licensees, or third parties make in the United States which could replace the subject articles if they were to be excluded;
(iv) indicate whether complainant, complainant's licensees, and/or third party suppliers have the capacity to replace the volume of articles potentially subject to the requested exclusion order and/or a cease and desist order within a commercially reasonable time; and
(v) explain how the requested remedial orders would impact United States consumers.
Written submissions must be filed no later than by close of business, eight calendar days after the date of publication of this notice in the
Persons filing written submissions must file the original document electronically on or before the deadlines stated above and submit 8 true paper copies to the Office of the Secretary by noon the next day pursuant to section 210.4(f) of the Commission's Rules of Practice and Procedure (19 CFR 210.4(f)). Submissions should refer to the docket number (“Docket No. 3021”) in a prominent place on the cover page and/or the first page. (
Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.
This action is taken under the authority of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and of sections 201.10 and 210.8(c) of the Commission's Rules of Practice and Procedure (19 CFR 201.10, 210.8(c)).
By order of the Commission.
On July 2, 2014, the Department of Justice lodged a proposed consent decree with the United States District Court for the Western District of Virginia in a lawsuit entitled
The proposed Consent Decree will resolve claims alleged under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) against the Appalachian Power Company and Kingsport Power Company for costs incurred in responding to releases and threatened releases of hazardous substances at the Twin Cities Iron and Metal Site (the “Site”) located in Bristol, Virginia. Under the proposed Consent Decree, the Defendants will pay the United States $250,250 to resolve the United States' claims for past costs incurred at the Site.
The publication of this notice opens a period for public comment on the proposed consent decree. Comments should be addressed to the Assistant Attorney General, Environment and Natural Resources Division, and should refer to
During the public comment period, the proposed consent decree may be examined and downloaded at this Justice Department Web site:
We will provide a paper copy of the proposed consent decree upon written request and payment of reproduction costs. Please mail your request and payment to: Consent Decree Library, U.S. DOJ—ENRD, P.O. Box 7611, Washington, DC 20044–7611.
Please enclose a check or money order for $6.00 (25 cents per page reproduction costs) payable to the United States Treasury. For a paper copy without the exhibits and signature pages, the cost is $4.50.
Notice is hereby given pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)–(h), that a proposed Final Judgment, Stipulation and Competitive Impact Statement have been filed with the United States District Court for the District of Columbia in
Copies of the Complaint, proposed Final Judgment and Competitive Impact Statement are available for inspection at the Department of Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth Street NW., Suite 1010, Washington, DC 20530 (telephone: 202–514–2481), on the Department of Justice's Web site at
Public comment is invited within 60 days of the date of this notice. Such comments, including the name of the submitter, and responses thereto, will be posted on the U.S. Department of Justice, Antitrust Division's internet Web site, filed with the Court and, under certain circumstances, published in the
Plaintiffs, the United States of America (“United States”), acting under the direction of the Attorney General of the United States, and the State of Texas, acting by and through the Attorney General of Texas, bring this civil antitrust action against Defendants Martin Marietta Materials, Inc. (“Martin Marietta”) to enjoin Martin Marietta's proposed acquisition of Texas Industries, Inc. (“Texas Industries”). Plaintiffs complain and allege as follows:
1. On January 28, 2014, Martin Marietta and Texas Industries announced a definitive merger agreement valued at approximately $2.7 billion. The merger would create the largest aggregate producer in the United States, with annual net sales of nearly $3 billion.
2. The proposed acquisition would eliminate real and potential head-to-head competition between Martin Marietta and Texas Industries on price and service in supplying aggregate in the Dallas, Texas area. For a significant number of customers in the Dallas area, Martin Marietta and Texas Industries are two of the three best sources of Texas DOT-qualified aggregate. Elimination of competition between Martin Marietta and Texas Industries likely would give Martin Marietta the ability to raise prices or decrease the quality of service provided to these customers. As a result, the proposed acquisition likely would substantially lessen competition in the production and sale of aggregate in the Dallas area, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
3. Defendant Martin Marietta is incorporated in North Carolina with its headquarters in Raleigh, North Carolina. Martin Marietta produces, distributes, and/or markets aggregate for the construction industry in 29 states. Martin Marietta also produces aggregate in Nova Scotia, Canada, and the Bahamas, which it distributes and sells at numerous terminals and yards along the East Coast of the United States. In 2013, Martin Marietta had net sales of $2.1 billion.
4. Defendant Texas Industries is incorporated in Delaware with its headquarters in Texas. Texas Industries produces, distributes, and/or markets aggregate in five states; Texas, Oklahoma, Louisiana, Arkansas and California. Texas Industries also produces asphalt concrete, ready mix concrete, and has significant cement production capabilities in California and Texas. In 2013, Texas Industries had net sales of $800 million.
5. The United States brings this action pursuant to Section 15 of the Clayton Act, 15 U.S.C. §§ 4 and 25, as amended, to prevent and restrain Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. § 18.
6. The State of Texas brings this action under Section 16 of the Clayton Act, 15 U.S.C. § 26, to prevent and restrain Martin Marietta and Texas Industries from violating Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18. The State of Texas, by and through the Attorney General of Texas, brings this action as
7. Defendants produce and sell aggregate in the flow of interstate commerce. Defendants' activity in the production and sale of aggregate substantially affects interstate commerce. The Court has subject matter jurisdiction over this action pursuant to Section 15 of the Clayton Act, 15 U.S.C. § 25, and 28 U.S.C. §§ 1331, 1337(a), and 1345.
8. Defendants have consented to venue and personal jurisdiction in this judicial district.
9. Aggregate is stone, produced at mines, quarries, and gravel pits, that is used for construction projects and in various industrial processes. The aggregate produced in quarries and mines is predominantly limestone, granite, or trap rock. Different types and sizes of rock are needed to meet different specifications for use in asphalt concrete, ready mix concrete, industrial processes, and other products. Asphalt concrete consists of approximately 95 percent aggregate, and ready mix concrete is made of up of approximately 75 percent aggregate. Aggregate thus is an integral input for road and other construction projects.
10. The customer on each construction project establishes specifications that the aggregate must meet for each application for which it is used. State Departments of Transportation (“state DOTs”), including the Texas DOT, set specifications for aggregate used to produce asphalt concrete, ready mix concrete, and road base for state DOT projects. State DOTs specify characteristics such as hardness and durability, size, polish value, and a variety of other characteristics. The specifications are intended to ensure the longevity and safety of the projects that use aggregate.
11. For Texas DOT projects, the Texas DOT tests the aggregate to ensure that the stone for an application meets proper specifications at the quarry before it is shipped, when the aggregate is sent to the purchaser to produce an end product such as asphalt concrete, and often after the end product has been produced. In addition, the Texas DOT pre-qualifies quarries according to the end uses for the aggregate. Many city, county, and commercial entities in Texas use the Texas DOT aggregate specifications when building roads, bridges, and parking lots to optimize project longevity.
12. Aggregate is priced by the ton and is a relatively inexpensive product. Prices range from approximately five to twenty dollars per ton. A variety of approaches are used to price aggregate. For small volumes, aggregate often is sold according to a posted price. For larger volumes, customers either negotiate prices for a particular job or seek bids from multiple aggregate suppliers.
13. In areas where aggregate is locally available, it is transported from quarries to customers by truck. On a per-mile basis, trucking is the most expensive option for transporting aggregate over longer distances.
14. Aggregate is also shipped by rail from quarries to yards. It is then transported by truck from the yards to customers in the area. The rail yards, which typically are supplied by quarries that are 100 to 200 miles away, frequently are large operations that can handle 75- to 100-car unit trains and are served by large quarries located on rail lines that have automated aggregate rail-loading operations. Over longer distances, the cost of transporting aggregate by rail is significantly cheaper, on a per-mile basis, than by truck.
15. Within the broad category of aggregate, different types of stone are used for different purposes. For instance, aggregate used as road base is not the same as aggregate used in asphalt concrete. Accordingly, they are not interchangeable or substitutable for one another and demand for each is separate. Thus, each type of aggregate likely is a separate line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act.
16. Texas DOT-qualified aggregate is aggregate qualified by Texas DOT for use in road construction. Aggregate that meets the standards for Texas DOT qualification differs from other aggregate in its size, physical composition, functional characteristics, customary uses, consistent availability, and pricing. A customer whose job specifies Texas DOT-qualified aggregate cannot substitute non-Texas DOT-qualified aggregate or other materials.
17. Although numerous narrower product markets exist, the competitive dynamic for each type of Texas DOT-qualified aggregate is nearly identical. Therefore, they all may be combined for analytical convenience into a single relevant product market for the purpose of evaluating the competitive impact of the acquisition.
18. A small but significant increase in the price of Texas DOT-qualified aggregate would not cause a sufficient number of customers to substitute to another type of aggregate or another material so as to make such a price increase unprofitable. Accordingly, the production and sale of Texas DOT-qualified aggregate is a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act.
19. Aggregate is a relatively low-cost product that is bulky and heavy. As a result, the cost of transporting aggregate is high compared to the value of the product.
20. When customers seek price quotes or bids, the distance from the project site or plant location will have a considerable impact on the selection of a supplier, due to the high cost of transporting aggregate relative to the low value of the product. Suppliers know the importance of transportation cost to a potential customer's selection of an aggregate supplier; they know the locations of their competitors, and they often will factor the cost of transportation from other suppliers into the price or bid that they submit.
21. The primary factor that determines the area a supplier can serve is the location of competing quarries and rail yards. When quoting prices or submitting bids, aggregate suppliers will account for the location of the project site or plant, the cost of transporting aggregate to the project site or plant, and the locations of the competitors that might bid on a job. Therefore, depending on the location of the project site or plant, suppliers are able to adjust their bids to account for the distance other competitors are from a job.
22. The size of a geographic market also can depend on whether aggregate is being transported in an urban or rural setting and on specific characteristics of the road network. Where there are multiple quarries in a region, urban traffic congestion may greatly reduce the distance aggregate can be economically transported. In such cases, geographic markets can be very small. The closest quarry or rail yard to a customer also may have higher delivery costs than a more distant quarry because of local traffic patterns that increase fuel costs. Consequently, in large cities, local markets can be small and multiple geographic markets may exist.
23. Martin Marietta owns and operates two rail yards that serve Dallas County and portions of surrounding counties (hereinafter referred to as the “Dallas area”). Customers with plants or jobs in the Dallas area may, depending on the location of their plant or job sites, also economically procure Texas DOT-qualified aggregate from two rail yards operated by Texas Industries and from one competitor's quarry located in
24. Customers likely would be unable to switch to suppliers outside the Dallas area to defeat a small but significant price increase. Accordingly, the Dallas area is a relevant geographic market for the production and sale of Texas DOT-qualified aggregate within the meaning of Section 7 of the Clayton Act.
25. Vigorous competition between Martin Marietta and Texas Industries on price and customer service in the production and sale of Texas DOT-qualified aggregate has benefitted customers in the Dallas area.
26. The competitors that could constrain Martin Marietta and Texas Industries from raising prices on Texas DOT-qualified aggregate in the Dallas area are limited to those who are qualified by the Texas DOT to supply aggregate and can economically rail or truck the aggregate into the Dallas area. Currently only one other supplier of Texas DOT-qualified aggregate consistently can sell aggregate into the Dallas area on a cost-competitive basis with Martin Marietta or Texas Industries.
27. The proposed acquisition will eliminate the competition between Martin Marietta and Texas Industries and reduce from three to two the number of suppliers of Texas DOT-qualified aggregate in the Dallas area. Further, the proposed acquisition will substantially increase the likelihood that Martin Marietta will unilaterally increase the price of Texas DOT-qualified aggregate to a significant number of customers in the Dallas area.
28. The response of other suppliers of Texas DOT-qualified aggregate will not be sufficient to constrain a unilateral exercise of market power by Martin Marietta after the acquisition.
29. For certain customers, a combined Martin Marietta and Texas Industries will have the ability to increase prices for Texas DOT-qualified aggregate. The combined firm could also decrease service for these same customers by limiting availability or delivery options. Texas DOT-qualified aggregate producers know the distance from their own quarries or yards and their competitors' yards or quarries to a customer's job site. Generally, because of transportation costs, the farther a supplier's closest competitor is from a job site, the higher the price and margin that supplier can expect for that project. Post-acquisition, in instances where Martin Marietta and Texas Industries quarries or yards are the closest locations to a customer's project, the combined firm, using the knowledge of its competitors' locations, will be able to charge such customers higher prices or decrease the level of customer service.
30. Further, Martin Marietta's elimination of Texas Industries as an independent competitor in the production and sale of Texas DOT-qualified aggregate in the Dallas area likely will facilitate anticompetitive coordination among the remaining suppliers. Texas DOT-qualified aggregate that meets a specific standard is relatively standard and homogenous, and producers often estimate competitors' output, capacity, reserves, and costs. Given these market conditions, eliminating one of the few Texas DOT-qualified aggregate suppliers is likely to further increase the ability of the remaining competitors to coordinate successfully.
31. The transaction will substantially lessen competition in the market for Texas DOT-qualified aggregate in the Dallas area, which is likely to lead to higher prices and reduced customer service for consumers of such products, in violation of Section 7 of the Clayton Act.
32. Timely, likely, and sufficient entry in the production and sale of Texas DOT-qualified aggregate in the Dallas area is unlikely, given the substantial time and cost required to open a quarry or rail yard.
33. Quarries are particularly difficult to locate and permit. Locating a quarry may take as long as four years, particularly when seeking suitable sites with rail access. Once a location is chosen, obtaining a permit to open a new quarry in Texas is difficult and time-consuming. Aggregate producers have spent over two years successfully obtaining permits and also have failed to obtain quarry permits on multiple occasions.
34. Location is also essential for a rail-served quarry, so that the aggregate can be directly loaded on the trains for transportation to the rail yard. If the quarry is not located on a rail line, the aggregate must be transported by truck, which can eliminate the transportation cost advantage of using rail. Additionally, if the haul from the quarry to the rail yard is not a “single line” haul, with only one railroad carrier, the cost of the multi-line haul can diminish some of the cost advantage associated with moving aggregate by rail.
35. Establishing a rail yard is difficult and may take several years in addition to the time necessary to locate, permit and open a quarry. To achieve the economies necessary to be competitive in the Dallas area, rail yards must be large and able to handle large amounts of aggregate. Obtaining the large parcels of land and permits necessary to locate a rail yard in the Dallas area is difficult, and the cost of obtaining the land and building the rail yard would be considerable. The combined cost of permitting and opening both a new rail-served quarry and a new rail yard in the Dallas area could exceed $50 million.
36. Because of the cost and difficulty of establishing a quarry and a rail yard, entry will not be timely, likely or sufficient to mitigate the anticompetitive effects of Martin Marietta's proposed acquisition of Texas Industries.
37. Martin Marietta's proposed acquisition of Texas Industries likely will substantially lessen competition in the production and sale of Texas DOT-qualified aggregate in the Dallas area, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
38. Unless enjoined, the proposed acquisition likely will have the following anticompetitive effects, among others:
(a) actual and potential competition between Martin Marietta and Texas Industries in the market for the production and sale of Texas DOT-qualified aggregate in the Dallas area will be eliminated;
(b) prices for Texas DOT-qualified aggregate likely will increase and customer service likely would decrease;
(c) the potential for unlawful anticompetitive coordination between remaining competitors in the Dallas area likely will be increased.
39. Plaintiffs request that this Court:
(a) adjudge and decree that Martin Marietta's acquisition of Texas Industries would be unlawful and violate Section 7 of the Clayton Act, 15 U.S.C. § 18;
(b) preliminarily and permanently enjoin and restrain the Defendants and all persons acting on their behalf from consummating the proposed acquisition of Texas Industries by Martin Marietta, or from entering into or carrying out any other contract, agreement, plan, or understanding, the effect of which would be to combine Martin Marietta with Texas Industries;
(c) award Plaintiffs their costs for this action; and
(d) award Plaintiffs such other and further relief as the Court deems just and proper.
Plaintiff, United States of America (“United States”), pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act (“APPA” or “Tunney Act”), 15 U.S.C. § 16(b)–(h), files this Competitive Impact Statement relating to the proposed Final Judgment submitted for entry in this civil antitrust proceeding.
On January 28, 2014, Martin Marietta Materials, Inc. (“Martin Marietta”) and Texas Industries, Inc. (“Texas Industries”) announced a definitive merger agreement valued at approximately $2.7 billion. After investigating the competitive impact of that acquisition, the Plaintiffs filed a civil antitrust Complaint on June 26, 2014. The Complaint alleges that the acquisition likely will substantially lessen competition in the production and sale of aggregate qualified by the Texas Department of Transportation (“Texas DOT”) to customers in the Dallas, Texas area, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. As a result of the acquisition, prices for Texas DOT-qualified aggregate likely will increase and customer service likely will be reduced.
At the same time the Complaint was filed, Plaintiffs also filed a Hold Separate Stipulation and Order (“Hold Separate”) and a proposed Final Judgment. These filings are designed to eliminate the anticompetitive effects of Martin Marietta's acquisition of Texas Industries. The proposed Final Judgment, which is explained more fully below, requires Defendants, among other things, to divest Martin Marietta's rail yards located in Frisco, Texas and Dallas, Texas, and the quarry located in Mill Creek, Oklahoma. The terms of the Hold Separate ensure that the Divestiture Assets will be operated as a competitively independent, economically viable and ongoing business concern that will remain independent and uninfluenced by the consummation of the acquisition, and that competition is maintained during the pendency of the ordered divestiture.
Plaintiffs and Defendants have stipulated that the proposed Final Judgment may be entered after compliance with the APPA. Entry of the proposed Final Judgment would terminate this action, except that the Court would retain jurisdiction to construe, modify, or enforce the provisions of the proposed Final Judgment and to punish violations thereof.
Defendant Martin Marietta is incorporated in North Carolina with its headquarters in Raleigh, North Carolina. Martin Marietta produces, distributes, and/or markets aggregate for the construction industry in 29 states. Martin Marietta also produces aggregate in Nova Scotia, Canada, and the Bahamas, for distribution and sale at numerous terminals and yards along the East Coast of the United States. In 2013, Martin Marietta had net sales of $2.1 billion.
Defendant Texas Industries is incorporated in Delaware with its headquarters in Dallas, Texas. Texas Industries produces, distributes, and/or markets aggregate in; Texas, Oklahoma, Louisiana, Arkansas and California. Texas Industries also produces asphalt concrete, ready mix concrete, and cement. In 2013, Texas Industries had net sales of $800 million.
The merger would create the largest aggregate producer in the United States, with annual net sales of nearly $3 billion. The proposed transaction, as initially agreed by Defendants likely will lessen competition substantially. This acquisition is the subject of the Complaint and proposed Final Judgment filed by the United States on June 26, 2014.
Aggregate is stone, produced at mines, quarries, and gravel pits, that is used for construction projects and in various industrial processes. The aggregate produced in quarries and mines is predominantly limestone, granite, or trap rock. Different types and sizes of rock are needed to meet different specifications for use in asphalt concrete, ready mix concrete, industrial processes, and other products. Asphalt concrete consists of approximately 95 percent aggregate, and ready mix concrete is made of up of approximately 75 percent aggregate. Aggregate thus is an integral input for road and other construction projects.
The customer on each construction project establishes specifications that the aggregate must meet for each application for which it is used. State Departments of Transportation (“state DOTs”), including the Texas DOT, set specifications for aggregate used to produce asphalt concrete, ready mix concrete, and road base for state DOT projects. State DOTs specify characteristics such as hardness and durability, size, polish value, and a
For Texas DOT projects, the Texas DOT tests the aggregate to ensure that the stone for an application meets proper specifications at the quarry before it is shipped, when the aggregate is sent to the purchaser to produce an end product such as asphalt concrete, and often after the end product has been produced. In addition, the Texas DOT pre-qualifies quarries according to the end uses for the aggregate. Many city, county, and commercial entities in Texas use the Texas DOT aggregate specifications when building roads, bridges, and parking lots to optimize project longevity.
Aggregate is priced by the ton and is a relatively inexpensive product. Prices range from approximately five to twenty dollars per ton. A variety of approaches are used to price aggregate. For small volumes, aggregate often is sold according to a posted price. For larger volumes, customers either negotiate prices for a particular job or seek bids from multiple aggregate suppliers.
In areas where aggregate is locally available, it is transported from quarries to customers by truck. On a per-mile basis, trucking is the most expensive option for transporting aggregate over longer distances. Aggregate is also shipped by rail from quarries to yards. It is then transported by truck from the yards to customers in the area. The rail yards, which typically are supplied by quarries that are 100 to 200 miles away, frequently are large operations that can handle 75- to 100-car unit trains and are served by large quarries located on rail lines that have automated aggregate rail-loading operations. Over longer distances, the cost of transporting aggregate by rail is significantly cheaper, on a per-mile basis, than by truck.
Within the broad category of aggregate, different types of stone are used for different purposes. For instance, aggregate used as road base is not the same as aggregate used in asphalt concrete. Accordingly, they are not interchangeable or substitutable for one another and demand for each is separate. Thus, each type of aggregate likely is a separate line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act.
Texas DOT-qualified aggregate is aggregate qualified by Texas DOT for use in road construction. Aggregate that meets the standards for Texas DOT qualification differs from other aggregate in its size, physical composition, functional characteristics, customary uses, consistent availability, and pricing. A customer whose job specifies Texas DOT-qualified aggregate cannot substitute non-Texas DOT-qualified aggregate or other materials.
Although numerous narrower product markets exist, the competitive dynamic for each type of Texas DOT-qualified aggregate is nearly identical. Therefore, they all may be combined for analytical convenience into a single relevant product market for the purpose of evaluating the competitive impact of the acquisition.
A small but significant increase in the price of Texas DOT-qualified aggregate would not cause a sufficient number of customers to substitute to another type of aggregate or another material so as to make such a price increase unprofitable. Accordingly, the production and sale of Texas DOT-qualified aggregate is a line of commerce and a relevant product market within the meaning of Section 7 of the Clayton Act.
Aggregate is a relatively low-cost product that is bulky and heavy. As a result, the cost of transporting aggregate is high compared to the value of the product.
When customers seek price quotes or bids, the distance from the project site or plant location will have a considerable impact on the selection of a supplier, due to the high cost of transporting aggregate relative to the low value of the product. Suppliers know the importance of transportation cost to a potential customer's selection of an aggregate supplier; they know the locations of their competitors; and they often will factor the cost of transportation from other suppliers into the price or bid that they submit.
The primary factor that determines the area a supplier can serve is the location of competing quarries and rail yards. When quoting prices or submitting bids, aggregate suppliers will account for the location of the project site or plant, the cost of transporting aggregate to the project site or plant, and the locations of the competitors that might bid on a job. Therefore, depending on the location of the project site or plant, suppliers are able to adjust their bids to account for the distance other competitors are from a job.
The size of a geographic market also can depend on whether aggregate is being transported in an urban or rural setting and on specific characteristics of the road network. Where there are multiple quarries in a region, urban traffic congestion may greatly reduce the distance aggregate can be economically transported. In such cases, geographic markets can be very small. The closest quarry or rail yard to a customer also may have higher delivery costs than a more distant quarry because of local traffic patterns that increase fuel costs. Consequently, in large cities, local markets can be small and multiple geographic markets may exist.
Martin Marietta owns and operates two rail yards that serve Dallas County and portions of surrounding counties (hereinafter referred to as the “Dallas area”). Customers with plants or jobs in the Dallas area may, depending on the location of their plant or job sites, also economically procure Texas DOT-qualified aggregate from two rail yards operated by Texas Industries and from one competitor's quarry located in Bridgeport, Texas. Other quarries cannot compete successfully on a regular basis for customers with plants or jobs in the Dallas area because they are too far away and transportation costs are too great.
Customers likely would be unable to switch to suppliers outside the Dallas area to defeat a small but significant price increase. Accordingly, the Dallas area is a relevant geographic market for the production and sale of Texas DOT-qualified aggregate within the meaning of Section 7 of the Clayton Act.
Customers in the Dallas area have benefited from vigorous competition between Martin Marietta and Texas Industries on price and customer service in the production and sale of Texas DOT-qualified aggregate.
The competitors that could constrain Martin Marietta and Texas Industries from raising prices on Texas DOT-qualified aggregate in the Dallas area are limited to those who are qualified by the Texas DOT to supply aggregate and can economically rail or truck the aggregate into the Dallas area. Currently only one other supplier of Texas DOT-qualified aggregate consistently can sell aggregate into the Dallas area on a cost-competitive basis with Martin Marietta or Texas Industries.
The proposed acquisition will eliminate the competition between Martin Marietta and Texas Industries and reduce from three to two the number of suppliers of Texas DOT-qualified aggregate in the Dallas area. Further, the proposed acquisition will substantially increase the likelihood that Martin Marietta will unilaterally
For certain customers, a combined Martin Marietta and Texas Industries will have the ability to increase prices for Texas DOT-qualified aggregate. The combined firm could also decrease service for these same customers by limiting availability or delivery options. Texas DOT-qualified aggregate producers know the distance from their own quarries or yards and their competitors' yards or quarries to a customer's job site. Generally, because of transportation costs, the farther a supplier's closest competitor is from a job site, the higher the price and margin that supplier can expect for that project. Post-acquisition, in instances where Martin Marietta and Texas Industries quarries or yards are the closest locations to a customer's project, the combined firm, using the knowledge of its competitors' locations, will be able to charge such customers higher prices or decrease the level of customer service.
Further, Martin Marietta's elimination of Texas Industries as an independent competitor in the production and sale of Texas DOT-qualified aggregate in the Dallas area likely will facilitate anticompetitive coordination among the remaining suppliers. Texas DOT-qualified aggregate that meets a specific standard is relatively standard and homogenous, and producers often estimate competitors' output, capacity, reserves, and costs. Given these market conditions, eliminating one of the few Texas DOT-qualified aggregate suppliers is likely to further increase the ability of the remaining competitors to coordinate successfully.
The transaction will substantially lessen competition in the market for Texas DOT-qualified aggregate in the Dallas area, which is likely to lead to higher prices and reduced customer service for consumers of such products, in violation of Section 7 of the Clayton Act. The likely anticompetitive effects of the transaction in the Dallas area will not be mitigated by entry, given the substantial time and cost required to open a quarry or rail yard. Quarries are particularly difficult to locate and permit. Locating a quarry may take as long as four years, particularly when seeking suitable sites with rail access. Once a location is chosen, obtaining a permit to open a new quarry in Texas is difficult and time-consuming. Aggregate producers have spent over two years successfully obtaining permits and also have failed to obtain quarry permits on multiple occasions.
Location is also essential for a rail-served quarry, so that the aggregate can be directly loaded on the trains for transportation to the rail yard. If the quarry is not located on a rail line, the aggregate must be transported by truck, which can eliminate the transportation cost advantage of using rail. Additionally, if the haul from the quarry to the rail yard is not a “single line” haul, with only one railroad carrier, the cost of the multi-line haul can diminish some of the cost advantage associated with moving aggregate by rail.
Establishing a rail yard is difficult and may take several years in addition to the time necessary to locate, permit and open a quarry. To achieve the economies necessary to be competitive in the Dallas area, rail yards must be large and able to handle large amounts of aggregate. Obtaining the large parcels of land and permits necessary to locate a rail yard in the Dallas area is difficult, and the cost of obtaining the land and building the rail yard would be considerable. The combined cost of permitting and opening both a new rail-served quarry and a new rail yard in the Dallas area could exceed $50 million.
Because of the cost and difficulty of establishing a quarry and a rail yard, entry will not be timely, likely or sufficient to counteract the anticompetitive effects of Martin Marietta's proposed acquisition of Texas Industries.
The divestiture requirement of the proposed Final Judgment will eliminate the anticompetitive effects of the acquisition in the Dallas, Texas area by establishing a new, independent, and economically viable competitor. The proposed Final Judgment requires Defendants, within 90 days after the filing of the Complaint, or five days after notice of the entry of the Final Judgment by the Court, whichever is later, to divest Martin Marietta's rail yards located in Dallas, Texas and Frisco, Texas as well as its North Troy Quarry located in Mill Creek, Oklahoma (the “Divestiture Assets”). The Dallas yard primarily serves downtown Dallas, while the Frisco yard serves northern Dallas County and portions of the surrounding counties. The North Troy quarry serves as a source for aggregate that is distributed through the two rail yards. These assets constitute all of the assets that Martin Marietta currently uses to supply aggregate to the Dallas area, so the acquirer of these assets will be able to compete with Defendants.
While Defendants must make all of the Divestiture Assets available for purchase, Paragraph IV(B) of the proposed Final Judgment allows the acquirer to exclude from the Divestiture Assets any portion that the acquirer elects not to acquire, subject to the written approval of the United States, in its sole discretion, after consultation with the State of Texas. In this case, the rail yards are the source of direct competition between Defendants in the Dallas area; however, the rail yards cannot operate as an aggregate distribution facility without a source of aggregate, which the acquirer of the Divestiture Assets may not currently own. Paragraph IV(B) allows the acquirer of the Divestiture Assets not to purchase the North Troy quarry if it already owns or operates an aggregate source that could ship aggregate to the divested rail yards. The assets must be divested in such a way as to satisfy the United States in its sole discretion, after consultation with Texas, that the operations can and will be operated by the purchaser as a viable, ongoing business that can compete effectively in the relevant market. Defendants must take all reasonable steps necessary to accomplish the divestiture quickly and shall cooperate with prospective purchasers.
The terms of the proposed Final Judgment require Defendants to divest the Divestiture Assets within 90 days. If Defendants are unable to accomplish the divestiture within this period the United States, in its sole discretion, may grant Defendants one or more extensions of this time period not to exceed 90 days in total. The 90-day potential extension will permit the proposed acquirer to complete any testing and drilling that it may choose to conduct as part of its due diligence process. In the event that Defendants do not accomplish the divestiture within the periods prescribed in the proposed Final Judgment, the Final Judgment provides that the Court will appoint a trustee selected by the United States to effect the divestiture. If a trustee is appointed, the proposed Final Judgment provides that Defendants will pay all costs and expenses of the trustee. The trustee's commission will be structured so as to provide an incentive for the trustee based on the price obtained and the speed with which the divestiture is accomplished. After his or her appointment becomes effective, the trustee will file monthly reports with the Court and the United States setting forth his or her efforts to accomplish the divestiture. At the end of six months, if
The divestiture provisions of the proposed Final Judgment will eliminate the anticompetitive effects of the acquisition in the production and sale of Texas DOT-qualified aggregate in the Dallas area.
Section 4 of the Clayton Act, 15 U.S.C. § 15, provides that any person who has been injured as a result of conduct prohibited by the antitrust laws may bring suit in federal court to recover three times the damages the person has suffered, as well as costs and reasonable attorneys' fees. Entry of the proposed Final Judgment will neither impair nor assist the bringing of any private antitrust damage action. Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. § 16(a), the proposed Final Judgment has no prima facie effect in any subsequent private lawsuit that may be brought against Defendants.
The Plaintiffs and Defendants have stipulated that the proposed Final Judgment may be entered by the Court after compliance with the provisions of the APPA, provided that the United States has not withdrawn its consent. The APPA conditions entry upon the Court's determination that the proposed Final Judgment is in the public interest.
The APPA provides a period of at least sixty (60) days preceding the effective date of the proposed Final Judgment within which any person may submit to the United States written comments regarding the proposed Final Judgment. Any person who wishes to comment should do so within sixty (60) days of the date of publication of this Competitive Impact Statement in the
Written comments should be submitted to: Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, United States Department of Justice, 450 Fifth Street NW., Suite 8700, Washington, DC 20530.
The Plaintiffs considered, as an alternative to the proposed Final Judgment, a full trial on the merits against Defendants. The Plaintiffs could have continued the litigation and sought preliminary and permanent injunctions against Martin Marietta's acquisition of Texas Industries. The Plaintiffs are satisfied, however, that the divestiture of assets described in the proposed Final Judgment will preserve competition for the production and sale Texas DOT-qualified aggregate in the Dallas area. Thus, the proposed Final Judgment would achieve all or substantially all of the relief the Plaintiffs would have obtained through litigation, but avoids the time, expense, and uncertainty of a full trial on the merits of the Complaint.
The Clayton Act, as amended by the APPA, requires that proposed consent judgments in antitrust cases brought by the United States be subject to a sixty-day comment period, after which the court shall determine whether entry of the proposed Final Judgment “is in the public interest.” 15 U.S.C. § 16(e)(1). In making that determination, the court, in accordance with the statute as amended in 2004, is required to consider:
(A) the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.
As the United States Court of Appeals for the District of Columbia Circuit has held, under the APPA a court considers, among other things, the relationship between the remedy secured and the specific allegations set forth in the government's complaint, whether the decree is sufficiently clear, whether enforcement mechanisms are sufficient, and whether the decree may positively harm third parties.
Courts have greater flexibility in approving proposed consent decrees than in crafting their own decrees following a finding of liability in a litigated matter. “[A] proposed decree must be approved even if it falls short of the remedy the court would impose on its own, as long as it falls within the range of acceptability or is `within the reaches of public interest.' ”
Moreover, the court's role under the APPA is limited to reviewing the remedy in relationship to the violations that the United States has alleged in its Complaint, and does not authorize the court to “construct [its] own hypothetical case and then evaluate the decree against that case.”
In its 2004 amendments, Congress made clear its intent to preserve the practical benefits of utilizing consent decrees in antitrust enforcement, adding the unambiguous instruction that “[n]othing in this section shall be construed to require the court to conduct an evidentiary hearing or to require the court to permit anyone to intervene.” 15 U.S.C. § 16(e)(2). The language wrote into the statute what Congress intended when it enacted the Tunney Act in 1974, as Senator Tunney explained: “[t]he court is nowhere compelled to go to trial or to engage in extended proceedings which might have the effect of vitiating the benefits of prompt and less costly settlement through the consent decree process.” 119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the procedure for the public interest determination is left to the discretion of the court, with the recognition that the court's “scope of review remains sharply proscribed by precedent and the nature of Tunney Act proceedings.”
There are no determinative materials or documents within the meaning of the APPA that were considered by the United States in formulating the proposed Final Judgment.
WHEREAS, Plaintiffs, the United States of America and the State of Texas, filed their Complaint on June 26, 2014, Plaintiffs and Defendants, Martin Marietta Materials, Inc. (“Martin Marietta”) and Texas Industries, Inc. (“Texas Industries”), by their respective attorneys, have consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or law, and without this Final Judgment constituting any evidence against or admission by any party regarding any issue of fact or law;
AND WHEREAS, Defendants agree to be bound by the provisions of this Final Judgment pending its approval by the Court;
AND WHEREAS, the essence of this Final Judgment is the prompt and certain divestiture of certain rights or assets by Defendants to assure that
AND WHEREAS, Plaintiffs require Defendants to make certain divestitures for the purpose of remedying the loss of competition alleged in the Complaint;
AND WHEREAS, Defendants have represented to Plaintiffs that the divestitures required below can and will be made and that Defendants will later raise no claim of mistake, hardship or difficulty of compliance as grounds for asking the Court to modify any of the provisions contained below;
NOW THEREFORE, before any testimony is taken, without trial or adjudication of any issue of fact or law, and upon consent of the parties, it is ORDERED, ADJUDGED AND DECREED:
This Court has jurisdiction over the subject matter of and each of the parties to this action. The Complaint states a claim upon which relief may be granted against Defendants under Section 7 of the Clayton Act, as amended (15 U.S.C. § 18).
As used in this Final Judgment:
A. “Acquirer” means the entity to whom Defendants divest the Divestiture Assets.
B. “Martin Marietta” means Defendant Martin Marietta Materials, Inc., a North Carolina corporation with its headquarters in Raleigh, North Carolina, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, and their directors, officers, managers, agents, and employees.
C. “Texas Industries” means Defendant Texas Industries, Inc., a Delaware corporation with its headquarters in Dallas, Texas, its successors and assigns, and its subsidiaries, divisions, groups, affiliates, partnerships and joint ventures, and their directors, officers, managers, agents, and employees.
D. “Divestiture Assets” means:
1. the aggregate quarry, including the portable plant, located at 12310 W. Holder Road, Mill Creek, Oklahoma 74856 (the “North Troy Quarry”);
2. the rail yard located at 1760 Z Street Office, Dallas, Texas 75229 (the “Dallas Yard”);
3. the rail yard located at 6601 Eubanks Street, Frisco, Texas 75034 (the “Frisco Yard”);
4. all tangible assets used at or for the North Troy Quarry and the Dallas and Frisco Yards, including, but not limited to, all manufacturing equipment, tooling, and fixed assets, real property (leased or owned), mining equipment, aggregate reserves, personal property, inventory, office furniture, materials, supplies, and on- or off-site warehouses or storage facilities; all licenses, permits, and authorizations issued by any governmental organization; all contracts, agreements, leases (including renewal rights), commitments, and understandings, including sales agreements and supply agreements; all customer lists, contracts, accounts, and credit records; all other records; and, at the option of the Acquirer, a number of trucks, rail cars, and other vehicles usable at each of the North Troy Quarry and the Dallas and Frisco Yards, (limited, with respect to rail cars, to those that are used to serve the Dallas and Frisco Yards from the North Troy Quarry), equal to the average number of vehicles of each type used at the North Troy Quarry and the Dallas and Frisco Yards per month during the months of operation between January 1, 2013, and December 31, 2013 (calculated by averaging the number of each type of vehicle that was used at the North Troy Quarry and the Dallas and Frisco Yards at any time during each month of operation); and
5. all intangible assets used in the production and sale of aggregate produced at the North Troy Quarry or related to the Dallas and Frisco Yards, including, but not limited to, all contractual rights, patents, licenses and sublicenses, intellectual property, technical information, computer software (including dispatch software and management information systems) and related documentation, know-how, trade secrets, drawings, blueprints, designs, design protocols, specifications for materials, specifications for parts and devices, safety procedures for the handling of materials and substances, quality assurance and control procedures, design tools and simulation capability, all manuals and technical information provided by Defendants to their own employees, customers, suppliers, agents, or licensees, and all data (including aggregate reserve testing information) concerning the North Troy Quarry and the Dallas and Frisco Yards; provided, however, that with respect to any intellectual property, software, and systems used primarily for assets other than the Dallas and Frisco Yards and the North Troy Quarry, the Divestiture Assets shall include instead a perpetual royalty-free, non-exclusive license to all such intellectual property, software, and systems.
A. This Final Judgment applies to Martin Marietta and Texas Industries, as defined above, and all other persons in active concert or participation with any of them who receive actual notice of this Final Judgment by personal service or otherwise.
B. If, prior to complying with Section IV and V of this Final Judgment, Defendants sell or otherwise dispose of all or substantially all of their assets or of lesser business units that include the Divestiture Assets, they shall require the purchaser to be bound by the provisions of this Final Judgment. Defendants need not obtain such an agreement from the acquirer of the assets divested pursuant to this Final Judgment.
A. Defendants are ordered and directed, within 90 calendar days after the filing of the Complaint in this matter, or five (5) calendar days after notice of the entry of this Final Judgment by the Court, whichever is later, to divest the Divestiture Assets in a manner consistent with this Final Judgment to an Acquirer acceptable to the United States, in its sole discretion after consultation with the State of Texas. The United States, in its sole discretion, may agree to one or more extensions of this time period not to exceed 90 calendar days in total, and shall notify the Court in such circumstances. Defendants agree to use their best efforts to divest the Divestiture Assets as expeditiously as possible.
B. Notwithstanding the provisions of Paragraph IV(A), upon written request of Defendants, the United States, in its sole discretion, after consultation with the State of Texas, may agree, in writing, to exclude from the Divestiture Assets any portion thereof that the Acquirer, at its option, elects not to acquire.
C. In accomplishing the divestiture ordered by this Final Judgment, Defendants promptly shall make known, by usual and customary means, the availability of the Divestiture Assets. Defendants shall inform any person making inquiry regarding a possible purchase of the Divestiture Assets that they are being divested pursuant to this Final Judgment and provide that person with a copy of this Final Judgment. Defendants shall offer to furnish to all prospective Acquirers, subject to customary confidentiality assurances, all information and documents relating to the Divestiture Assets customarily provided in a due diligence process. Defendants shall make available such information to Plaintiffs at the same time that such information is made available to any other person.
D. Defendants shall provide the Acquirer and the United States with information relating to the personnel
E. Defendants shall permit prospective Acquirers of the Divestiture Assets to have reasonable access to personnel and to make inspections of the physical facilities of the Divestiture Assets; access to any and all environmental, zoning, and other permit documents and information; and access to any and all financial, operational, or other documents and information customarily provided as part of a due diligence process.
F. Defendants shall warrant to the Acquirer that each asset will be operational on the date of sale.
G. Defendants shall not take any action that will impede in any way the permitting, operation, or divestiture of the Divestiture Assets.
H. Defendants shall warrant to the Acquirer that there are no material defects in the environmental, zoning or other permits pertaining to the operation of each asset, and that following the sale of the Divestiture Assets, Defendants will not undertake, directly or indirectly, any challenges to the environmental, zoning, or other permits relating to the operation of the Divestiture Assets.
I. Unless the United States otherwise consents in writing, the divestiture pursuant to Section IV, or by trustee appointed pursuant to Section V, of this Final Judgment, shall include the entire Divestiture Assets, and shall be accomplished in such a way as to satisfy the United States, in its sole discretion, after consultation with the State of Texas, that the Divestiture Assets can and will be used by the Acquirer as part of a viable, ongoing business in the production and sale of aggregate. The divestitures, whether pursuant to Section IV or Section V of this Final Judgment,
(1) shall be made to an Acquirer that, in the United States's sole judgment, after consultation with the State of Texas, has the intent and capability (including the necessary managerial, operational, technical and financial capability) of competing effectively in the business of producing and selling aggregate; and
(2) shall be accomplished so as to satisfy the United States, in its sole discretion, after consultation with the State of Texas, that none of the terms of any agreement between an Acquirer and Defendants give Defendants the ability unreasonably to raise the Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to interfere in the ability of the Acquirer to compete effectively.
A. If Defendants have not divested the Divestiture Assets within the time period specified in Paragraph IV(A), Defendants shall notify the United States and the State of Texas of that fact in writing. Upon application of the United States, the Court shall appoint a trustee selected by the United States and approved by the Court to effect the divestiture of the Divestiture Assets.
B. After the appointment of a trustee becomes effective, only the trustee shall have the right to sell the Divestiture Assets. The trustee shall have the power and authority to accomplish the divestiture to an Acquirer acceptable to the United States, after consultation with the State of Texas, at such price and on such terms as are then obtainable upon reasonable effort by the trustee, subject to the provisions of Sections IV, V, and VI of this Final Judgment, and shall have such other powers as this Court deems appropriate. Subject to Paragraph V(D) of this Final Judgment, the trustee may hire at the cost and expense of Defendants any investment bankers, attorneys, or other agents, who shall be solely accountable to the trustee, reasonably necessary in the trustee's judgment to assist in the divestiture.
C. Defendants shall not object to a sale by the trustee on any ground other than the trustee's malfeasance. Any such objections by Defendants must be conveyed in writing to the United States and the trustee no later than ten (10) calendar days after the trustee has provided the notice required under Section VI.
D. The trustee shall serve at the cost and expense of Defendants, on such terms and conditions as the United States approves, including confidentiality requirements and conflict of interest certifications. The trustee shall account for all monies derived from the sale of the assets sold by the trustee and all costs and expenses so incurred. After approval by the Court of the trustee's accounting, including fees for its services yet unpaid and those of any professionals and agents retained by the trustee, all remaining money shall be paid to Defendants and the trust shall be terminated. The compensation of the trustee and any professionals and agents retained by the trustee shall be reasonable in light of the value of the Divestiture Assets and based on a fee arrangement providing the trustee with an incentive based on the price and terms of the divestiture and the speed with which it is accomplished, but timeliness is paramount. If the trustee and Defendants are unable to reach agreement on the trustee's compensation or other terms and conditions of sale within fourteen (14) calendar days of appointment of the trustee, the United States may, in its sole discretion, take appropriate action, including making a recommendation to the Court.
E. Defendants shall use their best efforts to assist the trustee in accomplishing the required divestiture. The trustee and any consultants, accountants, attorneys, and other agents retained by the trustee shall have full and complete access to the personnel, books, records, and facilities of the assets to be divested, and Defendants shall develop financial and other information relevant to such business as the trustee may reasonably request, subject to reasonable protection for trade secret or other confidential research, development, or commercial information. Defendants shall take no action to interfere with or to impede the trustee's accomplishment of the divestiture.
F. After its appointment, the trustee shall file monthly reports with the United States and, as appropriate, the Court setting forth the trustee's efforts to accomplish the divestiture ordered under this Final Judgment. To the extent such reports contain information that the trustee deems confidential, such reports shall not be filed in the public docket of the Court. Such reports shall include the name, address, and telephone number of each person who, during the preceding month, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person. The trustee shall maintain full records of all efforts made to divest the Divestiture Assets.
G. If the trustee has not accomplished the divestiture ordered under this Final Judgment within six (6) months after the trustee's appointment, the trustee shall promptly file with the Court a report setting forth (1) the trustee's efforts to accomplish the required divestiture, (2) the reasons, in the trustee's judgment, why the required divestiture has not been accomplished, and (3) the trustee's recommendations. To the extent such report contains information that the trustee deems confidential, such reports shall not be filed in the public docket of the Court. The trustee shall at the same time furnish such report to the
H. If the United States determines that the trustee has ceased to act or failed to act diligently or in a reasonably cost-effective manner, it may recommend the Court appoint a substitute trustee.
A. Within two (2) business days following execution of a definitive divestiture agreement, Defendants or the trustee, whichever is then responsible for effecting the divestiture required herein, shall notify the United States and the State of Texas of any proposed divestiture required by Section IV or V of this Final Judgment. If the trustee is responsible, it shall similarly notify Defendants. The notice shall set forth the details of the proposed divestiture and list the name, address, and telephone number of each person not previously identified who offered or expressed an interest in or desire to acquire any ownership interest in the Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United States of such notice, the United States, after consultation with the State of Texas, may request from Defendants, the proposed Acquirer, any other third party, or the trustee, if applicable, additional information concerning the proposed divestiture, the proposed Acquirer, and any other potential Acquirer. Defendants and the trustee shall furnish any additional information requested within fifteen (15) calendar days of the receipt of the request, unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or within twenty (20) calendar days after the United States has been provided the additional information requested from Defendants, the proposed Acquirer, any third party, and the trustee, whichever is later, the United States shall provide written notice to Defendants and the trustee, if there is one, stating whether or not it objects to the proposed divestiture. If the United States provides written notice that it does not object, the divestiture may be consummated, subject only to Defendants' limited right to object to the sale under Section V(C) of this Final Judgment. Absent written notice that the United States does not object to the proposed Acquirer or upon objection by the United States, a divestiture proposed under Section IV or Section V shall not be consummated. Upon objection by Defendants under Section V(C), a divestiture proposed under Section V shall not be consummated unless approved by the Court.
Defendants shall not finance all or any part of any purchase made pursuant to Section IV or V of this Final Judgment.
Until the divestiture required by this Final Judgment has been accomplished, Defendants shall take all steps necessary to comply with the Hold Separate Stipulation and Order entered by this Court. Defendants shall take no action that would jeopardize the divestiture ordered by this Court.
A. Within twenty (20) calendar days of the filing of the Complaint in this matter, and every thirty (30) calendar days thereafter until the divestiture has been completed under Section IV or V, Defendants shall deliver to the United States an affidavit as to the fact and manner of its compliance with Section IV or V of this Final Judgment. Each such affidavit shall include the name, address, and telephone number of each person who, during the preceding thirty (30) calendar days, made an offer to acquire, expressed an interest in acquiring, entered into negotiations to acquire, or was contacted or made an inquiry about acquiring, any interest in the Divestiture Assets, and shall describe in detail each contact with any such person during that period. Each such affidavit shall also include a description of the efforts Defendants have taken to solicit buyers for the Divestiture Assets, and to provide required information to prospective Acquirers, including the limitations, if any, on such information. Assuming the information set forth in the affidavit is true and complete, any objection by the United States to information provided by Defendants, including limitation on information, shall be made within fourteen (14) calendar days of receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint in this matter, Defendants shall deliver to the United States an affidavit that describes in reasonable detail all actions Defendants have taken and all steps Defendants have implemented on an ongoing basis to comply with Section VIII of this Final Judgment. Defendants shall deliver to the United States an affidavit describing any changes to the efforts and actions outlined in Defendants' earlier affidavits filed pursuant to this section within fifteen (15) calendar days after the change is implemented.
C. Defendants shall keep all records of all efforts made to preserve and divest the Divestiture Assets until one year after such divestiture has been completed.
A. For the purposes of determining or securing compliance with this Final Judgment, or of any related orders such as any Hold Separate Order, or of determining whether the Final Judgment should be modified or vacated, and subject to any legally recognized privilege, from time to time authorized representatives of the United States Department of Justice, including consultants and other persons retained by the United States, shall, upon written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, and on reasonable notice to Defendants, be permitted:
(1) access during Defendants' office hours to inspect and copy, or at the option of the United States, to require Defendants to provide hard copy or electronic copies of, all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Defendants, relating to any matters contained in this Final Judgment; and
(2) to interview, either informally or on the record, Defendants' officers, employees, or agents, who may have their individual counsel present, regarding such matters. The interviews shall be subject to the reasonable convenience of the interviewee and without restraint or interference by Defendants.
B. Upon the written request of an authorized representative of the Assistant Attorney General in charge of the Antitrust Division, Defendants shall submit written reports or response to written interrogatories, under oath if requested, relating to any of the matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in this section shall be divulged by the United States to any person other than an authorized representative of the executive branch of the United States, or the Texas Attorney General's Office, except in the course of legal proceedings to which the United States is a party
D. If at the time information or documents are furnished by Defendants to the United States, Defendants represent and identify in writing the material in any such information or documents to which a claim of protection may be asserted under Rule 26(c)(7) of the Federal Rules of Civil Procedure, and Defendants mark each pertinent page of such material, “Subject to claim of protection under Rule 26(c)(7) of the Federal Rules of Civil Procedure,” then the United States shall give Defendants ten (10) calendar days notice prior to divulging such material in any legal proceeding (other than a grand jury proceeding).
Defendants may not reacquire any part of the Divestiture Assets during the term of this Final Judgment.
This Court retains jurisdiction to enable any party to this Final Judgment to apply to this Court at any time for further orders and directions as may be necessary or appropriate to carry out or construe this Final Judgment, to modify any of its provisions, to enforce compliance, and to punish violations of its provisions.
Unless this Court grants an extension, this Final Judgment shall expire ten years from the date of its entry.
Entry of this Final Judgment is in the public interest. The parties have complied with the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16, including making copies available to the public of this Final Judgment, the Competitive Impact Statement, and any comments thereon and the United States's responses to comments. Based upon the record before the Court, which includes the Competitive Impact Statement and any comments and response to comments filed with the Court, entry of this Final Judgment is in the public interest.
Notice.
The Department of Labor (DOL) is submitting the Office of Disability Employment Policy (ODEP) sponsored information collection request (ICR) proposal titled, “Employment First State Leadership Mentoring Program Community of Practice Evaluation,” to the Office of Management and Budget (OMB) for review and approval for use in accordance with the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501 et seq.). Public comments on the ICR are invited.
The OMB will consider all written comments that agency receives on or before August 8, 2014.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the RegInfo.gov Web site at
Submit comments about this request by mail or courier to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for DOL–ODEP, Office of Management and Budget, Room 10235, 725 17th Street NW., Washington, DC 20503; by Fax: 202–395–6881 (this is not a toll-free number); or by email:
Michel Smyth by telephone at 202–693–4129 (this is not a toll-free number) or by email at
44 U.S.C. 3507(a)(1)(D).
This ICR seeks PRA authority for the Employment First State Leadership Mentoring Program Community of Practice Evaluation information collection. This information collection is designed to gauge, via a Web-based survey, the effectiveness of ODEP efforts to promote the implementation of Employment First (EF) policies and practices for persons with disabilities and to determine how well remote training and online forums facilitate the implementation of EF activities in each of the thirty participating states. Findings from this census of participating community of practice states also will provide the DOL with important information for strategic planning, program replication, and development of disability employment policies, approaches, and practices.
This proposed information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by the OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information if the collection of information does not display a valid Control Number.
Interested parties are encouraged to send comments to the OMB, Office of Information and Regulatory Affairs at the address shown in the
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
Notice.
The Department of Labor (DOL) is submitting the Mine Safety and Health Administration (MSHA) sponsored information collection request (ICR) titled, “Hoist Operators' Physical Fitness,” to the Office of Management and Budget (OMB) for review and approval for continued use, without change, in accordance with the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq. Public comments on the ICR are invited.
The OMB will consider all written comments that agency receives on or before August 8, 2014.
A copy of this ICR with applicable supporting documentation; including a description of the likely respondents, proposed frequency of response, and estimated total burden may be obtained free of charge from the RegInfo.gov Web site at
Submit comments about this request by mail or courier to the Office of Information and Regulatory Affairs, Attn: OMB Desk Officer for DOL–MSHA, Office of Management and Budget, Room 10235, 725 17th Street NW., Washington, DC 20503; by Fax: 202–395–6881 (this is not a toll-free number); or by email:
Contact Michel Smyth by telephone at 202–693–4129, TTY 202–693–8064, (these are not toll-free numbers) or by email at
44 U.S.C. 3507(a)(1)(D).
This ICR seeks to extend PRA authority for the Hoist Operators' Physical Fitness information collection requirements codified in regulations 30 CFR 56.19057 and 57.19057 that require the annual examination and certification of a hoist operator's fitness by a qualified, licensed physician that includes documentation and recordkeeping requirements. The safety of all metal and nonmetal miners riding hoist conveyances is largely dependent upon the attentiveness and physical capabilities of the hoist operator. Improper movements, over-speed, and over-travel of a hoisting conveyance can result in serious physical harm or death to all passengers. Federal Mine Safety and Health Act of 1977 sections 101(a) and 103(h) authorize this information collection.
This information collection is subject to the PRA. A Federal agency generally cannot conduct or sponsor a collection of information, and the public is generally not required to respond to an information collection, unless it is approved by the OMB under the PRA and displays a currently valid OMB Control Number. In addition, notwithstanding any other provisions of law, no person shall generally be subject to penalty for failing to comply with a collection of information that does not display a valid Control Number.
OMB authorization for an ICR cannot be for more than three (3) years without renewal, and the current approval for this collection is scheduled to expire on July 31, 2014. The DOL seeks to extend PRA authorization for this information collection for three (3) more years, without any change to existing requirements. The DOL notes that existing information collection requirements submitted to the OMB receive a month-to-month extension while they undergo review. For additional substantive information about this ICR, see the related notice published in the
Interested parties are encouraged to send comments to the OMB, Office of Information and Regulatory Affairs at the address shown in the
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses.
National Aeronautics and Space Administration.
Notice of meeting.
The National Aeronautics and Space Administration (NASA) announces a meeting of the Technology, Innovation and Engineering Committee of the NASA Advisory Council (NAC).
Monday, July 28, 2014, from 12:30 p.m. to 5 p.m.; and Tuesday, July 29, 2014, from 8 a.m. to 2:30 p.m., Local Time.
NASA Langley Research Center, (LaRC), 5 Langley Boulevard, Building 2101, Room 205A, Hampton, VA 23681. NOTE: Meeting location in Building 2101 will change to Room 105A and 105B from 11 a.m. to 12 p.m. on July 29.
Mr. Mike Green, Space Technology Mission Directorate, NASA Headquarters, Washington, DC 20546, (202) 358–4710, or
The meeting will be open to the public up to the capacity of the room. This meeting is also available telephonically and by WebEx. Any interested person may call the USA toll free conference call number 866–804–6184, passcode 6428446, to participate in this meeting by telephone. The WebEx link is
The agenda for the meeting includes the following topics:
Attendees will be requested to sign a register and to comply with NASA Langley Research Center security requirements, including the presentation of a valid picture ID before receiving access to NASA Langley Research Center. Foreign nationals attending this meeting will be required to provide a copy of their passport and visa in addition to providing the following information no less than 10 working days prior to the meeting: Full name; gender; date/place of birth; citizenship; visa/green card information (number, type, expiration date); passport information (number, country, telephone); employer/affiliation information (name of institution, address, country, telephone); title/position of attendee. To expedite admittance, attendees with U.S. citizenship and Permanent Residents (green card holders) can provide identifying information 3 working days in advance by contacting Ms. Cheryl Cleghorn at
It is imperative that the meeting be held on this date to accommodate the scheduling priorities of the key participants.
National Aeronautics and Space Administration.
Notice of Meeting.
In accordance with the Federal Advisory Committee Act, Public Law 92–463, as amended, the National Aeronautics and Space Administration announces a meeting of the Science Committee of the NASA Advisory Council (NAC). This Committee reports to the NAC. The meeting will be held for the purpose of soliciting, from the science community and other persons, research and technical information relevant to program planning.
Monday, July 28, 2014, 9:30 a.m. to 5:00 p.m.; and Tuesday, July 29, 2014, 8:00 a.m. to 2:30 p.m.; Local Time.
NASA Langley Research Center, 5 Langley Boulevard, Building 2101, Room 105A and 105B, Hampton, VA 23681. NOTE: Meeting location on July 28 from 9:30 a.m. to 1:10 p.m. will be in Room 305.
Ms. Ann Delo, Administrative Officer for the Science Committee, NASA Headquarters, Washington, DC 20546, (202) 358–0750, or
The meeting will be open to the public up to the capacity of the room. Any person interested in participating in the meeting by WebEx and telephone should contact Ms. Ann Delo at (202) 358–0750 for the web link, toll-free number and passcode. The agenda for the meeting includes the following topics:
• Subcommittee Reports.
• Program Status.
• Joint Session with the NAC Human Exploration and Operations Committee.
• Joint Session with the NAC Technology, Innovation and Engineering Committee.
Attendees will be requested to sign a register and to comply with NASA Langley Research Center (LaRC) security requirements, including the presentation of a valid picture ID before receiving access to NASA Langley Research Center. Foreign nationals attending this meeting will be required to provide a copy of their passport and visa in addition to providing the following information no less than 10 working days prior to the meeting: Full name; gender; date/place of birth; citizenship; visa/green card information (number, type, expiration date); passport information (number, country, telephone); employer/affiliation information (name of institution, address, country, telephone); title/position of attendee. To expedite admittance, attendees with U.S. citizenship and Permanent Residents (green card holders) can provide identifying information 3 working days in advance by contacting Ms. Cheryl Cleghorn at
National Aeronautics and Space Administration.
Notice of Meeting.
In accordance with the Federal Advisory Committee Act, Public Law 92–463, as amended, the National Aeronautics and Space Administration announces a meeting of the Aeronautics Committee of the NASA Advisory Council (NAC). This Committee reports to the NAC. The meeting will be held for the purpose of soliciting, from the aeronautics community and other persons, research and technical information relevant to program planning.
Tuesday, July 29, 2014, 8:00 a.m. to 2:45 p.m.; Local Time.
NASA Langley Research Center, 5 Langley Boulevard, Building 2101, Room 300H, Hampton, VA 23681.
Ms. Susan L. Minor, Executive Secretary for the NAC Aeronautics Committee, NASA Headquarters, Washington, DC 20546, (202) 358–0566, or
The meeting will be open to the public up to the capacity of the room. Any person interested in participating in the meeting by WebEx and telephone should contact Ms. Susan L. Minor at (202) 358–0566 for the web link, toll-free number and passcode. The agenda for the meeting includes the following topics:
Attendees will be requested to sign a register and to comply with NASA Langley Research Center (LaRC) security requirements, including the presentation of a valid picture ID before receiving access to NASA Langley Research Center. Foreign nationals attending this meeting will be required to provide a copy of their passport and visa in addition to providing the following information no less than 10 working days prior to the meeting: Full name; gender; date/place of birth; citizenship; visa/green card information (number, type, expiration date); passport information (number, country, telephone); employer/affiliation information (name of institution, address, country, telephone); title/position of attendee. To expedite admittance, attendees with U.S. citizenship and Permanent Residents (green card holders) can provide identifying information 3 working days in advance by contacting Ms. Cheryl Cleghorn at
National Archives and Records Administration.
Renewal of Advisory Committee on Presidential Library-Foundation Partnerships.
This notice is published in accordance with the provisions of section 9(a)(2) of the Federal Advisory Committee Act (Pub. L. 92–463, 5 U.S.C., App.) and advises of the renewal of the National Archives and Records Administration's (NARA) Advisory Committee on Presidential Library-Foundation Partnerships. In accordance with Office of Management and Budget (OMB) Circular A–135, OMB approved the inclusion of the Advisory Committee on Presidential Library-Foundation Partnerships in NARA's ceiling of discretionary advisory committees.
NARA has determined that the renewal of the Advisory Committee is in the public interest due to the expertise and valuable advice the Committee members provide on issues affecting the functioning of existing Presidential libraries and library programs and the development of future Presidential libraries. NARA will use the Committee's recommendations in its implementation of strategies for the efficient operation of the Presidential libraries.
NARA's acting Committee Management Officer is Patrice Little Murray. She can be reached at 301–837–2001.
Nuclear Regulatory Commission.
Regulatory guide; withdrawal.
The U.S. Nuclear Regulatory Commission (NRC) is withdrawing Regulatory Guide
The effective date of the withdrawal of Regulatory Guide 1.37 is July 2, 2014.
Please refer to Docket ID NRC–2014–0158 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods:
•
•
•
Andrea T. Keim, Office of New Reactors, telephone: 301–415–1671, email:
The NRC is withdrawing RG 1.37 because its guidance and regulatory positions are contained in RG 1.28, Revision 4, “Quality Assurance Program Criteria (Design and Construction)”; and RG 1.33, Revision 3, “Quality Assurance Program Requirements (Operation).” The NRC issued RG 1.28, Revision 4 in June 2010, which endorses NQA–1–2008 and the NQA–1a–2009 Addenda, Parts I and II. NQA–1–2008 and NQA–1a–2009 Addenda Part II incorporate the requirements and regulatory positions contained in RG 1.37, Revision 1. Additionally, RG 1.33 endorses ANSI/ANS 3.2–2012. ANSI/ANS 3.2–2012, Section 1.2, “Purpose,” requires implementation of the applicable sections of NQA–1–2008 and NQA–1a–2009 during the operational phase of power plant operation. Any update to RG 1.37 to endorse NQA–1–2008 and NQA–1a–2009, Part II, Subpart 2.1 would be redundant since the standards are already endorsed in RG 1.28, Revision 4 and in RG 1.33, Revision 3.
The withdrawal of RG 1.37 does not alter any prior or existing licensing commitments based on its use. The guidance provided in this RG is no longer necessary. Regulatory guides may be withdrawn when their guidance no longer provides useful information, or is superseded by technological innovations, congressional actions, or other events.
Regulatory guides are revised for a variety of reasons and the withdrawal of an RG should be thought of as the final revision of the guide. Although an RG is withdrawn, current licensees may continue to use it, and withdrawal does not affect any existing licenses or agreements. Withdrawal of an RG means that the RG should not be used for future NRC licensing activities. However, although an RG is withdrawn, changes to existing licenses can be accomplished using other regulatory products.
For the Nuclear Regulatory Commission.
Postal Regulatory Commission.
Notice.
The Commission is noticing a recent Postal Service filing concerning a change in rates of general applicability for Priority Mail. This notice informs the public of the filing, invites public comment, and takes other administrative steps.
Submit comments electronically via the Commission's Filing Online system at
David A. Trissell, General Counsel, at 202–789–6820.
On July 1, 2014, the Postal Service filed a notice pursuant to 39 CFR 3015.2 of its intention to change rates of general applicability for the competitive Priority Mail product.
The price changes are focused on Priority Mail, primarily in ground zones (Zones 1–4) and for heavier weighted (six-to-twenty pounds) pieces. Governors' Decision at 1. Retail prices will have an average price increase of 1.7 percent, Commercial Base prices will have an average price decrease of 0.9 percent, and Commercial Plus prices will have an average price decrease of 2.3 percent.
The Governors' Decision also indicates that the price changes should enable each competitive product to cover its attributable costs and should result in competitive products as a whole continuing to contribute more than 5.5 percent to the Postal Service's institutional costs in compliance with 39 U.S.C. 3633(a) and 39 CFR 3015.7(c).
The Commission establishes Docket No. CP2014–55 to consider the issues raised by the Postal Service's Notice. Interested persons may submit comments on whether the planned changes are consistent with 39 U.S.C. 3632 and 3633, and 39 CFR 3015.2. Comments are due no later than July 17, 2014. The public portions of these
Pursuant to 39 U.S.C. 505, the Commission designates Lyudmila Bzhilyanskaya to serve as Public Representative and represent the interests of the general public in this docket.
It is ordered:
1. The Commission establishes Docket No. CP2014–55 to consider the matters raised in this docket.
2. Pursuant to 39 U.S.C. 505, Lyudmila Bzhilyanskaya is appointed to serve as an officer of the Commission to represent the interests of the general public in these proceedings (Public Representative).
3. Comments are due no later than July 17, 2014.
4. The Secretary shall arrange for publication of this order in the
By the Commission.
Postal Service.
Notice of a change in rates of general applicability for competitive products.
This notice sets forth changes in rates of general applicability for competitive products.
Daniel J. Foucheaux, Jr., 202–268–2989.
On July 1, 2014, pursuant to their authority under 39 U.S.C. 3632, the Governors of the Postal Service established prices and classification changes for competitive products. The Governors' Decision and the record of proceedings in connection with such decision are reprinted below in accordance with section 3632(b)(2).
Pursuant to our authority under section 3632 of title 39, as amended by the Postal Accountability and Enhancement Act of 2006 (“PAEA”), we establish price changes for the Postal Service's shipping services (competitive products), specifically for Priority Mail. The changes are described generally below, with a detailed description of the changes in the attachment. The attachment includes the draft Mail Classification Schedule sections with changes in classification language in legislative format, and new prices displayed in the price charts.
The existing structure of Priority Mail Retail, Commercial Base, and Commercial Plus price categories is maintained. Prices in the ground zones (Zones 1–4) and heavier weights (6–20 pounds) will be adjusted to enhance Priority Mail's strategic position in the market. Retail prices will have an average prices increase of 1.7 percent. Commercial Base prices will have an average price decrease of 0.9 percent, while Commercial Plus prices will have an average price decrease of 2.3 percent. Price decreases will be targeted to attract ground volume in the six- to twenty-pound weight cells.
As shown in the nonpublic annex being filed under seal herewith, the changes we establish should enable each competitive product to cover its attributable costs (39 U.S.C. § 3633(a)(2)) and should result in competitive products as a whole complying with 39 U.S.C. § 3633(a)(3), which, as implemented by 39 C.F.R. § 3015.7(c), requires competitive products to contribute a minimum of 5.5 percent to the Postal Service's institutional costs. Accordingly, no issue of subsidization of competitive products by market dominant products should arise (39 U.S.C. § 3633(a)(1)). We therefore find that the new prices and classification changes are in accordance with 39 U.S.C. §§ 3632–3633 and 39 C.F.R. § 3015.2.
The changes in prices set forth herein shall be effective at 12:01 a.m. on September 7, 2014. We direct the Secretary to have this decision published in the
By The Governors:
In Zones 1–4 (including local), parcels weighing less than 20 pounds but measuring more than 84 inches in combined length and girth (but not more than 108 inches) are charged the applicable price for a 20-pound parcel.
In Zones 5–8, parcels exceeding one cubic foot are priced at the actual weight or the dimensional weight, whichever is greater.
For box-shaped parcels, the dimensional weight (pounds) is calculated by multiplying the length (inches) times the width (inches) times the height (inches) of the parcel, and dividing by 194.
For irregular-shaped parcels (parcels not appearing box-shaped), the dimensional weight (pounds) is calculated by multiplying the length (inches) times the width (inches) times the height (inches) at the associated maximum cross-sections of the parcel, dividing by 194, and multiplying by an adjustment factor of 0.785.
In Zones 1–4 (including local), parcels weighing less than 20 pounds but measuring more than 84 inches in combined length and girth (but not more than 108 inches) are charged the applicable price for a 20-pound parcel.
In Zones 5–8, parcels exceeding one cubic foot are priced at the actual weight or the dimensional weight, whichever is greater.
For box-shaped parcels, the dimensional weight (pounds) is calculated by multiplying the length (inches) times the width (inches) times the height (inches) of the parcel, and dividing by 194.
For irregular-shaped parcels (parcels not appearing box-shaped), the dimensional weight (pounds) is calculated by multiplying the length (inches) times the width (inches) times the height (inches) at the associated maximum cross-sections of the parcel, dividing by 194, and multiplying by an adjustment factor of 0.785.
In Zones 1–4 (including local), parcels weighing less than 20 pounds but measuring more than 84 inches in combined length and girth (but not more than 108 inches) are charged the applicable price for a 20-pound parcel.
In Zones 5–8, parcels exceeding one cubic foot are priced at the actual weight or the dimensional weight, whichever is greater.
For box-shaped parcels, the dimensional weight (pounds) is calculated by multiplying the length (inches) times the width (inches) times the height (inches) of the parcel, and dividing by 194.
For irregular-shaped parcels (parcels not appearing box-shaped), the dimensional weight (pounds) is calculated by multiplying the length (inches) times the width (inches) times the height (inches) at the associated maximum cross-sections of the parcel,
Add $20.00 for each Pickup On Demand stop.
Add $0.20 for each IMpb-noncompliant parcel paying commercial prices.
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202–268–3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on July 3, 2014, it filed with the Postal Regulatory Commission a
Postal Service
Notice.
The Postal Service gives notice of filing a request with the Postal Regulatory Commission to add a domestic shipping services contract to the list of Negotiated Service Agreements in the Mail Classification Schedule's Competitive Products List.
Elizabeth A. Reed, 202–268–3179.
The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on July 3, 2014, it filed with the Postal Regulatory Commission a
Postal Service
Notice with opportunity for comments.
The Postal Service hereby provides notice that Post Office Box
Please address all written comments regarding this notice to United States Postal Service, Retail Services, Room 6801, 475 L'Enfant Plaza SW., Washington, DC 20260–5013.
Direct questions or comments to:
Frank Ippolito, Retail Services,
David Rubin, General Counsel,
Locations providing Post Office Box service are classified as competitive or market-dominant and assigned to fee groups based upon the Post Office location and other criteria. Competitive fee groups provide more services than market-dominant ones, and have somewhat higher fees.
In May 2011, a
Since the original filing, the Postal Service expanded the competitive service to an additional location,
Since 2011, the Postal Service has expanded its use of competitive data to identify locations that qualify for reassignment to competitive status. This analysis identified approximately 1,625 locations which are eligible to be classified as competitive and assigned to a competitive Post Office Box fee group. These include Puerto Rican locations with nearby competitors that were omitted in 2011 but are included now. A list of affected locations, with the associated ZIP Codes, is provided in the Appendix to this notice.
The following is a list of the locations which are described in the Notice above as qualifying for reassignment from market-dominant to competitive fee groups. The list is sorted by ZIP Code in ascending numerical order with geographical breaks and headers. As indicated by the column headings, this list provides the ZIP Code of the affected PO Boxes (ZIP), the office name of the location (OFFICE NAME), the city where the PO Boxes are located (CITY), the current market-dominant fee group (CFG), and the new competitive fee group (NFG).
Please note that there are more ZIP Codes than locations being moved to competitive fee groups, because some locations serve more than one ZIP Code. These locations can be identified whenever multiple ZIP Codes are listed for a single office name.
Wednesday, July 23, 2014 from 1:00 p.m. through 3:00 p.m. (Eastern Standard Time).
Will be announced on the PCLOB's Web site
This meeting will be open to the public.
The Privacy and Civil Liberties Oversight Board will meet for the disposition of official business. The meeting is being held for three items of business. First, the Board will consider and vote on the release of its third semi-annual report to the President and Congress. Second, the Board will announce its short-term agenda. Third, the Board will receive the views of non-governmental organizations, the business community and the general public on its mid-term and long-term agenda.
The meeting is open to the public. Pre-registration is not required. Individuals wishing to address the meeting orally must provide advance notice to Sharon Bradford Franklin, at
Submit comments identified by Notice PCLOB 2014–04, Sunshine Act Meeting by any of the following methods:
•
•
•
Notice PCLOB 2014–04, Sunshine Act Meeting, in all correspondence related to this collection. All comments received will be posted without change to
Sharon Bradford Franklin, Executive Director, 202–331–1986.
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Section 15(c)(2) of the Securities Exchange Act of 1934 (15 U.S.C. 78a
The Commission staff estimates that there are approximately 221 broker-dealers subject to the Rule. The burden of the Rule on a respondent varies widely depending on the frequency with which new customers are solicited. On the average for all respondents, the staff has estimated that respondents process three new customers per week, or approximately 156 new customer suitability determinations per year. We also estimate that a broker-dealer would expend approximately one-half hour per new customer in obtaining, reviewing, and processing (including transmitting to the customer) the information required by Rule 15g–9, and each respondent would consequently spend 78 hours annually (156 customers × .5 hours) obtaining the information required in the rule. We determined, based on the estimate of 221 broker-dealer respondents, that the current annual burden of Rule 15g–9 is 17,238 hours (221 respondents × 78 hours).
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information on respondents; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Please direct your written comments to: Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington DC, 20549; or comments may be sent by email to:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The primary purpose of Rule 17a–10 is to obtain the economic and statistical data necessary for an ongoing analysis of the securities industry. Paragraph (a)(1) of Rule 17a–10 generally requires broker-dealers that are exempted from the requirement to file monthly and quarterly reports pursuant to paragraph (a) of Exchange Act Rule 17a–5 (17 CFR 240.17a–5) to file with the Commission the Facing Page, a Statement of Income (Loss), and balance sheet from Part IIA of Form X–17A–5
Paragraph (a)(2) of Rule 17a–10 requires a broker-dealer subject to Rule 17a–5(a) to submit Schedule I of Form X–17A–5 with its Form X–17A–5 for the calendar quarter ending December 31 of each year. The burden associated with filing Schedule I of Form X–17A–5 is accounted for in the PRA filing associated with Rule 17a–5.
Paragraph (b) of Rule 17a–10 provides that the provisions of paragraph (a) do not apply to members of national securities exchanges or registered national securities associations that maintain records containing the information required by Form X–17A–5 and which transmit to the Commission copies of the records pursuant to a plan which has been declared effective by the Commission.
The Commission estimates that approximately 38 broker-dealers will spend an average of 12 hours per year complying with Rule 17a–10. Thus, the total compliance burden is estimated to be approximately 456 hours per year.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's estimates of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
Please direct your written comments to Thomas Bayer, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549, or send an email to:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501–3520), the Securities and Exchange Commission (“Commission”) is soliciting comments on the collections of information summarized below. The Commission plans to submit the existing collection of information to the Office of Management and Budget for extension and approval.
Rule 17a–7 (17 CFR 270.17a–7) (the “rule”) under the Investment Company Act of 1940 (15 U.S.C. 80a–1
While most funds do not commonly engage in transactions covered by rule 17a–7, the Commission staff estimates that nearly all funds have adopted procedures for complying with the rule.
Of the 3318 existing funds, the staff assumes that approximately 25%, (or 830) enter into transactions affected by rule 17a–7 each year (either by the fund directly or through one of the fund's series), and that the same percentage (25%, or 38 funds) of the estimated 150 funds that newly register each year will also enter into these transactions, for a total of 868
Based on these estimates, the staff estimates the combined total annual burden hours associated with rule 17a–7 is 3204 hours.
The estimates of burden hours are made solely for the purposes of the Paperwork Reduction Act, and are not derived from a comprehensive or even a representative survey or study of the costs of Commission rules. The collection of information required by rule 17a–7 is necessary to obtain the benefits of the rule. Responses will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number.
Written comments are invited on: (a) Whether the collections of information are necessary for the proper performance of the functions of the Commission, including whether the information has practical utility; (b) the accuracy of the Commission's estimate of the burdens of the collections of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burdens of the collections of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
Please direct your written comments to Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The title for the collection of information is “Form N–PX (17 CFR 274.129) under the Investment Company Act of 1940, Annual Report of Proxy Voting Record.” Rule 30b1–4 (17 CFR 270.30b1–4) under the Investment Company Act of 1940 (15 U.S.C. 80a–1
The Commission estimates that there are approximately 2,500 Funds registered with the Commission, representing approximately 10,000 Fund portfolios, which are required to file Form N–PX.
The Commission also estimates that portfolios holding equity securities will bear an external cost burden of $1,000 per portfolio to prepare and update Form N–PX. Based on this estimate, the Commission estimates that the total annualized cost burden for Form N–PX is $6.2 million (6,200 responses × $1,000 per response = $6,200,000).
The collection of information under Form N–PX is mandatory. The information provided under the form is not kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication.
Please direct your written comments to Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to:
Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
The risk disclosure documents are for the benefit of the customers, to assure that they are aware of the risks of trading in “penny stocks” before they enter into a transaction. The risk disclosure documents are maintained by the broker-dealers and may be reviewed during the course of an examination by the Commission.
There are approximately 221 broker-dealers that could potentially be subject to current Rule 15g–2. The Commission estimates that approximately 5% of registered broker-dealers are engaged in penny stock transactions, and thereby subject to the Rule (5% × approximately 4,410 registered broker-dealers = 221 broker-dealers). The Commission estimates that each one of these firms processes an average of three new customers for penny stocks per week. Thus, each respondent processes approximately 156 penny stock disclosure documents per year. If communications in tangible form alone are used to satisfy the requirements of Rule 15g–2, then the copying and mailing of the penny stock disclosure document takes no more than two minutes. Thus, the total associated burden is approximately 2 minutes per response, or an aggregate total of 312 minutes per respondent. Since there are 221 respondents, the current annual burden is 68,952 minutes (312 minutes per each of the 221 respondents) or 1,150 hours for this third party disclosure burden. In addition, broker-dealers incur a recordkeeping burden of approximately two minutes per response when filing the completed penny stock disclosure documents as required pursuant to the Rule 15(g)(2)(c), which requires a broker-dealer to preserve a copy of the written acknowledgement pursuant to Rule 17a–4(b) of the Exchange Act. Since there are approximately 156 responses for each respondent, the respondents incur an aggregate recordkeeping burden of 68,952 minutes (221 respondents × 156 responses for each × 2 minutes per response) or 1,150 hours, under Rule 15g–2. Accordingly, the current aggregate annual hour burden associated with Rule 15g–2 (assuming that all respondents provide tangible copies of the required documents) is approximately 2,300 hours (1,150 third party disclosure hours + 1,150 recordkeeping hours).
The burden hours associated with Rule 15g–2 may be slightly reduced when the penny stock disclosure document required under the rule is provided through electronic means such as e-mail from the broker-dealer (
In addition, if the penny stock customer requests a paper copy of the information on the Commission's Web site regarding microcap securities, including penny stocks, from his or her broker-dealer, the printing and mailing of the document containing this information takes no more than two minutes per customer. Because many investors have access to the Commission's Web site via computers located in their homes, or in easily accessible public places such as libraries, then, at most, a quarter of customers who are required to receive the Rule 15g–2 disclosure document request that their broker-dealer provide them with the additional microcap and penny stock information posted on the Commission's Web site. Thus, each broker-dealer respondent processes approximately 39 requests for paper copies of this information per year or an aggregate total of 78 minutes per respondent (2 minutes per customer × 39 requests per respondent). Since there are 221 respondents, the estimated annual burden is 17,238 minutes (78 minutes per each of the 221 respondents) or 288 hours. This is a third party disclosure type of burden.
We have no way of knowing how many broker-dealers and customers will choose to communicate electronically. Assuming that 50 percent of respondents continue to provide documents and obtain signatures in tangible form and 50 percent choose to communicate electronically to satisfy the requirements of Rule 15g–2, the total aggregate burden hours would be 2,301 ((aggregate burden hours for sending disclosure documents and obtaining signed customer acknowledgments in tangible form × 0.50 of the respondents = 1,150 hours) + (aggregate burden hours for electronically signed and transmitted documents × 0.50 of the respondents = 863 hours) + (288 burden hours for those customers making requests for a copy of the information on the Commission's Web site)).
The Commission does not maintain the risk disclosure document. Instead, it must be retained by the broker-dealer for at least three years following the date on which the risk disclosure document was provided to the customer, the first two years in an accessible place. The collection of information required by the rule is mandatory. The risk disclosure document is otherwise governed by the internal policies of the broker-dealer regarding confidentiality, etc.
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number.
The public may view background documentation for this information collection at the following Web site:
Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
Under the Investment Company Act of 1940 (15 U.S.C. 80a–1
The purpose of Form N–54C is to notify the Commission that the business development company withdraws its election to be subject to Sections 55 through 65 of the Investment Company Act, enabling the Commission to administer those provisions of the Investment Company Act to such companies.
The Commission estimates that on average approximately 10 business development companies file these notifications each year. Each of those business development companies need only make a single filing of Form N–54C. The Commission further estimates that this information collection imposes a burden of one hour, resulting in a total annual PRA burden of 10 hours. Based on the estimated wage rate, the total cost to the business development industry of the hour burden for complying with Form N–54C would be approximately $3,200.
The collection of information under Form N–54C is mandatory. The information provided by the form is not kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number.
Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including
Please direct your written comments to Thomas Bayer, Chief Information Officer, Securities and Exchange Commission, C/O Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549; or send an email to:
Securities and Exchange Commission (“Commission”).
Notice of an application under section 6(c) of the Investment Company Act of 1940 (“Act”) for an exemption from section 15(a) of the Act and rule 18f–2 under the Act, as well as from certain disclosure requirements.
Applicants request an order that would permit them to enter into and materially amend subadvisory agreements with Wholly-Owned Sub-Advisers (as defined below) and non-affiliated sub-advisers without shareholder approval and would grant relief from certain disclosure requirements.
KraneShares Trust (the “Trust”) and Krane Funds Advisors, LLC (the “Initial Adviser”).
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants, 1350 Avenue of the Americas, 2nd Floor, New York, New York 10019.
Jill Ehrlich, Senior Counsel, at (202) 551–6819, or David P. Bartels, Branch Chief, at (202) 551–6821 (Division of Investment Management, Chief Counsel's Office).
The following is a summary of the application. The complete application may be obtained via the Commission's Web site by searching for the file number, or for an applicant using the Company name box, at
1. The Trust is organized as a Delaware statutory trust and is registered with the Commission as an open-end management investment company under the Act. The Trust may offer one or more series of shares (each, a “Fund” and collectively the “Funds”) with its own distinct investment objectives, policies and restrictions.
2. Applicants request an order to permit the Adviser,
3. The Adviser serves as the investment adviser to each Fund pursuant to an investment advisory agreement with the Trust (“Investment Management Agreement”). Any other Adviser will be registered with the Commission as an investment adviser under the Advisers Act. The Investment Management Agreement was approved by the Board, including a majority the Independent Trustees, and by the shareholders of each Fund in the manner required by sections 15(a) and 15(c) of the Act and rule 18f–2 thereunder. The terms of the Investment Management Agreement comply with section 15(a) of the Act. Each other investment management agreement with respect to a Fund (included in the term “Investment Management Agreement”) will comply with section 15(a) of the Act and will be similarly approved.
4. Pursuant to the terms of the Investment Management Agreement, the Adviser, subject to the supervision of the Board, provides continuous investment management of the assets of each Fund. The Adviser periodically reviews a Fund's investment policies and strategies and, based on the need of a particular Fund, may recommend changes to the investment policies and strategies of the Fund for consideration by the Board. For its services to each Fund under the Investment Management Agreement, the Adviser receives an investment management fee from that Fund. Consistent with the terms of the Investment Management Agreement, the Adviser may, subject to the approval of the Board, including a majority of the Independent Trustees, and the shareholders of the applicable Subadvised Fund (if required), delegate portfolio management responsibilities of all or a portion of the assets of a Subadvised Fund to one or more Sub-Advisers. The Adviser continues to have overall responsibility for the management and investment of the assets of each Subadvised Fund, and the Adviser's responsibilities include, for example, recommending the removal or replacement of Sub-Advisers and determining the portion of that Subadvised Fund's assets to be managed by any given Sub-Adviser and reallocating those assets as necessary from time to time.
5. The Adviser has entered into sub-advisory agreements with various Sub-Advisers (“Sub-Advisory Agreements”) on behalf of the Subadvised Funds. The Adviser may also, in the future, enter into Sub-Advisory Agreements on behalf of other Funds. The Sub-Advisory Agreements were approved by the Board, including a majority of the Independent Trustees, and the shareholders of the applicable Subadvised Fund in accordance with sections 15(a) and 15(c) of the Act and rule 18f–2 thereunder. In addition, the terms of each Sub-Advisory Agreement comply fully with the requirements of section 15(a) of the Act. The Sub-Advisers, subject to the supervision of the Adviser and oversight of the Board, determine the securities and other instruments to be purchased, sold or entered into by a Subadvised Fund's portfolio or a portion thereof, and place orders with brokers or dealers that they select. The Adviser will compensate each Sub-Adviser out of the fee paid to the Adviser under the Investment Management Agreement.
6. Subadvised Funds will inform shareholders of the hiring of a new Sub-Adviser pursuant to the following procedures (“Modified Notice and Access Procedures”): (a) within 90 days after a new Sub-Adviser is hired for any Subadvised Fund, that Subadvised Fund will send its shareholders
A “Multi-manager Information Statement” will meet the requirements of Regulation 14C, Schedule 14C and Item 22 of Schedule 14A under the Exchange Act for an information statement. Multi-manager Information Statements will be filed with the Commission via the EDGAR system.
7. Applicants also request an order under section 6(c) of the Act exempting the Subadvised Funds from certain disclosure obligations that may require each Subadvised Fund to disclose fees paid by the Adviser to each Sub-Adviser. Applicants seek relief to permit each Subadvised Fund to disclose (as a dollar amount and a percentage of the Subadvised Fund's net assets): (a) The aggregate fees paid to the Adviser and any Wholly-Owned Sub-Advisers; (b) the aggregate fees paid to Non-Affiliated Sub-Advisers; and (c) the fee paid to each Affiliated Sub-Adviser (collectively, the “Aggregate Fee Disclosure”). An exemption is requested to permit the Funds to include only the Aggregate Fee Disclosure. All other items required by sections 6–07(2)(a), (b) and (c) of Regulation S–X will be disclosed.
1. Section 15(a) of the Act states, in part, that it is unlawful for any person to act as an investment adviser to a registered investment company “except pursuant to a written contract, which contract, whether with such registered company or with an investment adviser of such registered company, has been approved by the vote of a majority of the outstanding voting securities of such registered company.” Rule 18f–2 under the Act provides that each series or class of stock in a series investment company affected by a matter must approve that matter if the Act requires shareholder approval.
2. Form N–1A is the registration statement used by open-end investment companies. Item 19(a)(3) of Form N–1A requires a registered investment company to disclose in its statement of additional information the method of computing the “advisory fee payable” by the investment company, including the total dollar amounts that the investment company “paid to the adviser (aggregated with amounts paid to affiliated advisers, if any), and any advisers who are not affiliated persons of the adviser, under the investment advisory contract for the last three fiscal years.”
3. Rule 20a–1 under the Act requires proxies solicited with respect to a registered investment company to comply with Schedule 14A under the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, require a proxy statement for a shareholder
4. Regulation S–X sets forth the requirements for financial statements required to be included as part of investment company registration statements and shareholder reports filed with the Commission. Sections 6–07(2)(a), (b) and (c) of Regulation S–X require registered investment companies to include in their financial statements information about investment advisory fees.
5. Section 6(c) of the Act provides that the Commission by order upon application may conditionally or unconditionally exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions of the Act, or from any rule thereunder, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants state that their requested relief meets this standard for the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser, subject to the review and approval of the Board, to select the Sub-Advisers who are in the best position to achieve the Subadvised Funds' investment objectives. Applicants assert that, from the perspective of the shareholder, the role of the Sub-Advisers is substantially equivalent to the role of the individual portfolio managers employed by an investment adviser to a traditional investment company. Applicants believe that permitting the Adviser to perform the duties for which the shareholders of the Subadvised Fund are paying the Adviser—the selection, supervision and evaluation of the Sub-Advisers—without incurring unnecessary delays or expenses is appropriate in the interest of the Subadvised Fund's shareholders and will allow such Subadvised Fund to operate more efficiently. Applicants state that the Investment Management Agreement will continue to be fully subject to section 15(a) of the Act and rule 18f–2 under the Act and approved by the Board, including a majority of the Independent Trustees, in the manner required by sections 15(a) and 15(c) of the Act. Applicants are not seeking an exemption with respect to the Investment Management Agreement.
7. Applicants assert that disclosure of the individual fees that the Adviser would pay to the Sub-Advisers of Subadvised Funds that operate in the multi-manager structure described in the application does not serve any meaningful purpose. Applicants contend that the primary reasons for requiring disclosure of individual fees paid to Sub-Advisers are to inform shareholders of expenses to be charged by a particular Subadvised Fund and to enable shareholders to compare the fees to those of other comparable investment companies. Applicants believe that the requested relief satisfies these objectives because the advisory fee paid to the Adviser will be fully disclosed and, therefore, shareholders will know what the Subadvised Fund's fees and expenses are and will be able to compare the advisory fees a Subadvised Fund is charged to those of other investment companies. Applicants assert that the requested disclosure relief would benefit shareholders of the Subadvised Fund because it would improve the Adviser's ability to negotiate the fees paid to Sub-Advisers. Applicants state that if the Adviser is not required to disclose the Sub-Advisers' fees to the public, the Adviser may be able to negotiate rates that are below a Sub-Adviser's “posted” amounts. Applicants assert that the relief will also encourage Sub-Advisers to negotiate lower sub-advisory fees with the Adviser if the lower fees are not required to be made public.
8. Applicants submit that the requested relief meets the standards for relief under section 6(c) of the Act. Applicants state that each Subadvised Fund will be required to obtain shareholder approval to operate as a “multiple manager” fund as described in the application before relying on the requested order. Applicants assert that conditions 6, 10, and 11 are designed to provide the Board with sufficient independence and the resources and information it needs to monitor and address any conflicts of interest. Applicants state that, accordingly, they believe the requested relief is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act.
Applicants agree that any order granting the requested relief will be subject to the following conditions:
1. Before a Subadvised Fund may rely on the order requested in the application, the operation of the Subadvised Fund in the manner described in the application, including the hiring of Wholly-Owned Sub-Advisers, will be approved by a majority of the Subadvised Fund's outstanding voting securities as defined in the Act, which in the case of a Master Fund will include voting instructions provided by shareholders of the Feeder Funds investing in such Master Fund or other voting arrangements that comply with section 12(d)(1)(E)(iii)(aa) of the Act or, in the case of a new Subadvised Fund whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, by the initial shareholder(s) before offering the Subadvised Fund's shares to the public.
2. The prospectus for each Subadvised Fund, and in the case of a Master Fund relying on the requested relief, the prospectus for each Feeder Fund investing in such Master Fund, will disclose the existence, substance and effect of any order granted pursuant to the application. Each Subadvised Fund (and any such Feeder Fund) will hold itself out to the public as employing the multi-manager structure described in the application. Each prospectus will prominently disclose that the Adviser has the ultimate responsibility, subject to oversight by the Board, to oversee the Sub-Advisers and recommend their hiring, termination, and replacement.
3. The Adviser will provide general management services to a Subadvised Fund, including overall supervisory responsibility for the general management and investment of the Subadvised Fund's assets. Subject to review and approval of the Board, the Adviser will (a) set a Subadvised Fund's overall investment strategies, (b) evaluate, select, and recommend Sub-Advisers to manage all or a portion of a Subadvised Fund's assets, and (c) implement procedures reasonably designed to ensure that Sub-Advisers comply with a Subadvised Fund's investment objective, policies and restrictions. Subject to review by the Board, the Adviser will (a) when appropriate, allocate and reallocate a Subadvised Fund's assets among Sub-
4. A Subadvised Fund will not make any Ineligible Sub-Adviser Changes without such agreement, including the compensation to be paid thereunder, being approved by the shareholders of the applicable Subadvised Fund, which in the case of a Master Fund will include voting instructions provided by shareholders of the Feeder Fund investing in such Master Fund or other voting arrangements that comply with section 12(d)(1)(E)(iii)(aa) of the Act.
5. Subadvised Funds will inform shareholders, and if the Subadvised Fund is a Master Fund, shareholders of any Feeder Funds, of the hiring of a new Sub-Adviser within 90 days after the hiring of the new Sub-Adviser pursuant to the Modified Notice and Access Procedures.
6. At all times, at least a majority of the Board will be Independent Trustees, and the selection and nomination of new or additional Independent Trustees will be placed within the discretion of the then-existing Independent Trustees.
7. Independent Legal Counsel, as defined in rule 0–1(a)(16) under the Act, will be engaged to represent the Independent Trustees. The selection of such counsel will be within the discretion of the then-existing Independent Trustees.
8. The Adviser will provide the Board, no less frequently than quarterly, with information about the profitability of the Adviser on a per Subadvised Fund basis. The information will reflect the impact on profitability of the hiring or termination of any sub-adviser during the applicable quarter.
9. Whenever a sub-adviser is hired or terminated, the Adviser will provide the Board with information showing the expected impact on the profitability of the Adviser.
10. Whenever a sub-adviser change is proposed for a Subadvised Fund with an Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser, the Board, including a majority of the Independent Trustees, will make a separate finding, reflected in the Board minutes, that such change is in the best interests of the Subadvised Fund and its shareholders, and if the Subadvised Fund is a Master Fund, the best interests of any applicable Feeder Funds and their respective shareholders, and does not involve a conflict of interest from which the Adviser or the Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser derives an inappropriate advantage.
11. No Trustee or officer of the Trust, a Fund or a Feeder Fund, or partner, director, manager or officer of the Adviser, will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person) any interest in a Sub-Adviser except for (a) ownership of interests in the Adviser or any entity, except a Wholly-Owned Sub-Adviser, that controls, is controlled by, or is under common control with the Adviser, or (b) ownership of less than 1% of the outstanding securities of any class of equity or debt of any publicly traded company that is either a Sub-Adviser or an entity that controls, is controlled by, or under common control with a Sub-Adviser.
12. Each Subadvised Fund and any Feeder Fund that invests in a Subadvised Fund that is a Master Fund will disclose the Aggregate Fee Disclosure in its registration statement.
13. Any new Sub-Advisory Agreement or any amendment to a Subadvised Fund's existing Investment Management Agreement or Sub-Advisory Agreement that directly or indirectly results in an increase in the aggregate advisory fee rate payable by the Subadvised Fund will be submitted to the Subadvised Fund's shareholders for approval.
14. In the event the Commission adopts a rule under the Act providing substantially similar relief to that requested in the application, the requested order will expire on the effective date of that rule.
For the Commission, by the Division of Investment Management, under delegated authority.
Securities and Exchange Commission (“Commission”).
Notice of an application under section 6(c) of the Investment Company Act of 1940 (“Act”) for an exemption from section 15(a) of the Act and rule 18f–2 under the Act, as well as from certain disclosure requirements.
Applicants request an order that would permit them to enter into and materially amend subadvisory agreements with Wholly-Owned Sub-Advisers (as defined below) and non-affiliated sub-advisers without shareholder approval and would grant relief from certain disclosure requirements.
Janus Investment Fund and Janus Aspen Series (each a “Trust”), and Janus Capital Management (“the Adviser”).
An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on July 28, 2014, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. Applicants: Janus Capital Management LLC, 151 Detroit Street, Denver, CO 80206.
Linda A. Schneider, Senior Counsel, at (202) 551–6859, or Holly Hunter-Ceci, Branch Chief, at (202) 551–6869 (Division of Investment Management, Chief Counsel's Office).
The following is a summary of the application. The Complete application may be obtained via the Commission's Web site by searching for the file number or an applicant using the Company name box, at
1. Janus Investment Fund is organized as a Massachusetts business trust and Janus Aspen Series is registered Delaware statutory trust. Each Trust is registered under the Act as an open-end management investment company. Each Trust currently has, or intends to introduce, at least one series of shares (each, a “Series”) with its own distinct investment objective, policies and restrictions that would operate under a multi-manager structure. The Adviser is a Delaware limited liability company
2. Each Series has or will have, as its investment adviser, the Adviser, or an entity controlling, controlled by or under common control with the Adviser or its successors (included in the term, the “Adviser”).
3. Under the terms of each Investment Management Agreement, the Adviser, subject to the supervision of the Board, will provide continuous investment management of the assets of each Series. The Adviser will periodically review a Series' investment policies and strategies, and based on the need of a particular Series may recommend changes to the investment policies and strategies of the Series for consideration by the Board. For its services to each Series under the applicable Investment Management Agreement, the Adviser will receive an investment management fee from that Series. Each Investment Management Agreement provides that the Adviser may, subject to the approval of the Board, including a majority of the Independent Board Members, and the shareholders of the applicable Subadvised Series (if required), delegate portfolio management responsibilities of all or a portion of the assets of a Subadvised Series to one or more Sub-Advisers.
4. Applicants request an order to permit the Adviser, subject to the approval of the Board of the relevant Trust, including a majority of the Independent Board Members, to, without obtaining shareholder approval: (i) Select Sub-Advisers to manage all or a portion of the assets of a Series and enter into Sub-Advisory Agreements (as defined below) with the Sub-Advisers, and (ii) materially amend Sub-Advisory Agreements with the Sub-Advisers.
5. Pursuant to each Investment Management Agreement, the Adviser has overall responsibility for the management and investment of the assets of each Subadvised Series. These responsibilities include recommending the removal or replacement of Sub-Advisers, determining the portion of that Subadvised Series' assets to be managed by any given Sub-Adviser and reallocating those assets as necessary from time to time.
6. The Adviser may enter into sub-advisory agreements with various Sub-Advisers (“Sub-Advisory Agreements”) to provide investment management services to the Subadvised Series. The terms of each Sub-Advisory Agreement comply or will comply fully with the requirements of section 15(a) of the Act and have been or will be approved by the Board, including a majority of the Independent Board Members and the initial shareholder of the applicable Subadvised Series, in accordance with sections 15(a) and 15(c) of the Act and rule 18f–2 thereunder. The Sub-Advisers, subject to the supervision of the Adviser and oversight of the Board, will determine the securities and other investments to be purchased or sold by a Subadvised Series and place orders with brokers or dealers that they select. The Adviser will compensate each Sub-Adviser out of the fee paid to the Adviser under the applicable Investment Management Agreement.
7. Subadvised Series will inform shareholders of the hiring of a new Sub-Adviser pursuant to the following procedures (“Modified Notice and Access Procedures”): (a) within 90 days after a new Sub-Adviser is hired for any Subadvised Series, that Subadvised Series will send its shareholders either a Multi-manager Notice or a Multi-manager Notice and Multi-manager Information Statement;
8. Applicants also request an order exempting the Subadvised Series from certain disclosure obligations that may require each Subadvised Series to disclose fees paid by the Adviser to each Sub-Adviser. Applicants seek relief to permit each Subadvised Series to disclose (as a dollar amount and a percentage of the Subadvised Series' net assets): (a) The aggregate fees paid to the Adviser and any Wholly-Owned Sub-Advisers; (b) the aggregate fees paid to Non-Affiliated Sub-Advisers; and (c) the fee paid to each Affiliated Sub-Adviser (collectively, the “Aggregate Fee Disclosure”).
1. Section 15(a) of the Act states, in part, that it is unlawful for any person to act as an investment adviser to a registered investment company “except pursuant to a written contract, which contract, whether with such registered company or with an investment adviser of such registered company, has been approved by the vote of a majority of the outstanding voting securities of such registered company.” Rule 18f–2 under the Act provides that each series or class of stock in a series investment company affected by a matter must approve that matter if the Act requires shareholder approval.
2. Form N–1A is the registration statement used by open-end investment companies. Item 19(a)(3) of Form N–1A requires a registered investment company to disclose in its statement of additional information the method of computing the “advisory fee payable” by the investment company, including the total dollar amounts that the investment company “paid to the adviser (aggregated with amounts paid to affiliated advisers, if any), and any advisers who are not affiliated persons of the adviser, under the investment advisory contract for the last three fiscal years.”
3. Rule 20a–1 under the Act requires proxies solicited with respect to a registered investment company to comply with Schedule 14A under the Exchange Act. Items 22(c)(1)(ii), 22(c)(1)(iii), 22(c)(8) and 22(c)(9) of Schedule 14A, taken together, require a proxy statement for a shareholder meeting at which the advisory contract will be voted upon to include the “rate of compensation of the investment adviser,” the “aggregate amount of the investment adviser's fee,” a description of the “terms of the contract to be acted upon,” and, if a change in the advisory fee is proposed, the existing and proposed fees and the difference between the two fees.
4. Regulation S–X sets forth the requirements for financial statements required to be included as part of a registered investment company's registration statement and shareholder reports filed with the Commission. Sections 6–07(2)(a), (b), and (c) of Regulation S–X require a registered investment company to include in its financial statement information about the investment advisory fees.
5. Section 6(c) of the Act provides that the Commission by order upon application may conditionally or unconditionally exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions of the Act, or from any rule thereunder, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Applicants state that their requested relief meets this standard for the reasons discussed below.
6. Applicants assert that the shareholders expect the Adviser, subject to the review and approval of the Board, to select the Sub-Advisers who are in the best position to achieve the Subadvised Series' investment objective. Applicants assert that, from the perspective of the shareholder, the role of the Sub-Advisers is substantially equivalent to the role of the individual portfolio managers employed by an investment adviser to a traditional investment company. Applicants believe that permitting the Adviser to perform the duties for which the shareholders of the Subadvised Series are paying the Adviser the selection, supervision and evaluation of the Sub-Advisers without incurring unnecessary delays or expenses is appropriate in the interest of the Subadvised Series' shareholders and will allow such Subadvised Series to operate more efficiently. Applicants state that each Investment Management Agreement will continue to be fully subject to section 15(a) of the Act and rule 18f-2 under the Act and approved by the Board, including a majority of the Independent Board Members, in the manner required by sections 15(a) and 15(c) of the Act. Applicants are not seeking an exemption with respect to the Investment Management Agreements.
7. Applicants assert that disclosure of the individual fees that the Adviser would pay to the Sub-Advisers of Subadvised Series that operate under the multi-manager structure described in the application would not serve any meaningful purpose. Applicants contend that the primary reasons for requiring disclosure of individual fees paid to Sub-Advisers are to inform shareholders of expenses to be charged by a particular Subadvised Series and to enable shareholders to compare the fees to those of other comparable investment companies. Applicants believe that the requested relief satisfies these objectives because the advisory fee paid to the Adviser will be fully disclosed and, therefore, shareholders will know what the Subadvised Series' fees and expenses are and will be able to compare the advisory fees a Subadvised Series is charged to those of other investment companies. Applicants assert that the requested disclosure relief “would benefit shareholders of the Subadvised Series because it would improve the Adviser's ability to negotiate the fees paid to Sub-Advisers. Applicants state that the Adviser may be able to negotiate rates that are below a Sub-Adviser's “posted” amounts if the Adviser is not required to disclose the Sub-Advisers' fees to the public. Applicants submit that the relief requested to use Aggregate Fee Disclosure will encourage Sub-Advisers to negotiate lower subadvisory fees with the Adviser if the lower fees are not required to be made public.
8. For the reasons discussed above, applicants submit that the requested relief meets the standards for relief under section 6(c) of the Act. Applicants state that the operation of the Subadvised Series in the manner described in the application must be approved by shareholders of a Subadvised Series before that Subadvised Series may rely on the requested relief. In addition, applicants state that the proposed conditions to the requested relief are designed to address any potential conflicts of interest, including any posed by the use of Wholly-Owned Sub-Advisers, and provide that shareholders are informed when new Sub-Advisers are hired. Applicants assert that conditions 6, 10 and 11 are designed to provide the Board with sufficient independence and the resources and information it needs to monitor and address any conflicts of interest with affiliated persons of the Adviser, including Wholly-Owned Sub-Advisers. Applicants state that, accordingly, they believe the requested relief is necessary or appropriate in the
Applicants agree that any order granting the requested relief will be subject to the following conditions:
1. Before a Subadvised Series may rely on the order requested in the application, the operation of the Subadvised Series in the manner described in the application, including the hiring of Wholly-Owned Sub-Advisers, will be, or has been, approved by a majority of the Subadvised Series' outstanding voting securities as defined in the Act, or, in the case of a new Subadvised Series whose public shareholders purchase shares on the basis of a prospectus containing the disclosure contemplated by condition 2 below, by the sole initial shareholder before offering the Subadvised Series' shares to the public.
2. The prospectus for each Subadvised Series will disclose the existence, substance, and effect of any order granted pursuant to the application. Each Subadvised Series will hold itself out to the public as employing the multi-manager structure described in the application. Each prospectus will prominently disclose that the Adviser has the ultimate responsibility, subject to oversight by the Board, to oversee the Sub-Advisers and recommend their hiring, termination and replacement.
3. The Adviser will provide general management services to a Subadvised Series, including overall supervisory responsibility for the general management and investment of the Subadvised Series' assets. Subject to review and approval of the Board, the Adviser will (a) set a Subadvised Series' overall investment strategies, (b) evaluate, select, and recommend Sub-Advisers to manage all or a portion of a Subadvised Series' assets, and (c) implement procedures reasonably designed to ensure that Sub-Advisers comply with a Subadvised Series' investment objective, policies and restrictions. Subject to review by the Board, the Adviser will (a) when appropriate, allocate and reallocate a Subadvised Series' assets among multiple Sub-Advisers; and (b) monitor and evaluate the performance of Sub-Advisers.
4. A Subadvised Series will not make any Ineligible Sub-Adviser Changes without the approval of the shareholders of the applicable Subadvised Series.
5. Subadvised Series will inform shareholders of the hiring of a new Sub-Adviser within 90 days after the hiring of the new Sub-Adviser pursuant to the Modified Notice and Access Procedures.
6. At all times, at least a majority of the Board will be Independent Board Members, and the selection and nomination of new or additional Independent Board Members will be placed within the discretion of the then-existing Independent Board Members.
7. Independent Legal Counsel, as defined in rule 0–1(a)(6) under the Act, will be engaged to represent the Independent Board Members. The selection of such counsel will be within the discretion of the then-existing Independent Board Members.
8. The Adviser will provide the Board, no less frequently than quarterly, with information about the profitability of the Adviser on a per Subadvised Series basis. The information will reflect the impact on profitability of the hiring or termination of any sub-adviser during the applicable quarter.
9. Whenever a sub-adviser is hired or terminated, the Adviser will provide the Board with information showing the expected impact on the profitability of the Adviser.
10. Whenever a sub-adviser change is proposed for a Subadvised Series with an Affiliated Sub-Adviser or a Wholly-Owned Sub-Adviser, the Board, including a majority of the Independent Board Members, will make a separate finding, reflected in the Board minutes, that such change is in the best interests of the Subadvised Series and its shareholders, and does not involve a conflict of interest from which the Adviser or the Affiliated Sub-Adviser or Wholly-Owned Sub-Adviser derives an inappropriate advantage.
11. No Board member or officer of a Subadvised Series, or director or officer of the Adviser, will own directly or indirectly (other than through a pooled investment vehicle that is not controlled by such person), any interest in a Sub-Adviser, except for (a) ownership of interests in the Adviser or any entity, other than a Wholly-Owned Sub-Adviser, that controls, is controlled by, or is under common control with the Adviser, or (b) ownership of less than 1% of the outstanding securities of any class of equity or debt of a publicly traded company that is either a Sub-Adviser or an entity that controls, is controlled by, or is under common control with a Sub-Adviser.
12. Each Subadvised Series will disclose the Aggregate Fee Disclosure in its registration statement.
13. In the event the Commission adopts a rule under the Act providing substantially similar relief to that requested in the application, the requested order will expire on the effective date of that rule.
14. Any new Sub-Advisory Agreement or any amendment to a Subadvised Series' existing Investment Management Agreement or Sub-Advisory Agreement that directly or indirectly results in an increase in the aggregate advisory rate payable by the Subadvised Series will be submitted to the Subadvised Series' shareholders for approval.
For the Commission, by the Division of Investment Management, under delegated authority.
Securities and Exchange Commission (“Commission”).
Notice of an application for an order pursuant to (a) section 6(c) of the Investment Company Act of 1940 (“Act”) granting an exemption from sections 18(f) and 21(b) of the Act; (b) section 12(d)(1)(J) of the Act granting an exemption from section 12(d)(1) of the Act; (c) sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Act; and (d) section 17(d) of the Act and rule 17d–1 under the Act to permit certain joint arrangements.
Applicants request an order that would permit certain registered open-end management investment companies to participate in a joint lending and borrowing facility.
BMO Fund, Inc. (“Company” or “BMO”), BMO Asset Management Corp. (“Adviser”), and BMO Harris Bank N.A. (“Bank”).
An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on July 28, 2014, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary.
Secretary, U.S. Securities and Exchange Commission, 100 F Street NE., Washington, DC, 20549–1090; Applicants: c/o BMO Funds, Inc., 111 East Kilbourn Avenue, Milwaukee, WI 53202.
Emerson S. Davis, Senior Counsel, at (202) 551–6868 or Daniele Marchesani, Branch Chief, at (202) 551–6821 (Division of Investment Management, Chief Counsel's Office).
The following is a summary of the application. The complete application may be obtained via the Commission's Web site by searching for the file number, or for an applicant using the Company name box, at
1. The Company is organized as a Wisconsin corporation and is registered under the Act as an open-end management investment company. The Company consists of multiple series, three of which comply with Rule 2a–7 under the Act and hold themselves out as money market funds (“Money Market Funds”). BMO Asset Management Corp. is a wholly-owned subsidiary of BMO Financial Corp, which is an indirectly wholly-owned subsidiary of the Bank of Montreal, a Canadian bank holding company. BMO Asset Management Corp. is, and any other Adviser will be registered as an investment adviser under the Investment Advisers Act of 1940 (“Advisers Act”) and serve as the investment adviser to the Funds.
2. At any particular time, while some Funds are entering into repurchase agreements, or purchasing other short-term instruments, other Funds may need to borrow money from the same or similar banks for temporary purposes to satisfy redemption requests, to cover unanticipated cash shortfalls such as a trade “fail” in which cash payment for a security sold by a Fund has been delayed, or for other temporary purposes. The Company, on behalf of the Funds, has entered into a Loan Agreement, as amended, with State Street Bank & Trust Company (the “Loan Agreement”) under which the Company has access to a $50 million standby line of credit on behalf of the Funds.
3. When a Fund borrows money from a bank or under the Loan Agreement, it pays interest on the loan at a rate that is higher than the rate that is earned by other (non-borrowing) Funds on investments in repurchase agreements or other short-term instruments of the same maturity as the bank loan or loan under the Loan Agreement. Applicants assert that this differential represents the profit earned by the lender on loans and is not attributable to any material difference in the credit quality or risk of such transactions.
4. The Funds seek to enter into master interfund lending agreements (“Interfund Lending Agreements”) with each other that would permit each Fund to lend money directly to and borrow money directly from other Funds through a credit facility for temporary purposes. The Money Market Funds will not participate as borrowers in the proposed credit facility. Applicants state that the proposed credit facility would both reduce the Funds' potential borrowing costs and enhance the ability of the lending Funds to earn higher rates of interest on their short-term lendings. Although the proposed credit facility would reduce the Funds' need to borrow from banks, the Funds would be free to establish and maintain committed lines of credit or other borrowing arrangements with unaffiliated banks.
5. Applicants anticipate that the proposed credit facility would provide a borrowing Fund with significant savings at times when the cash position of the borrowing Fund is insufficient to meet temporary cash requirements. This situation could arise when shareholder redemptions exceed anticipated volumes and certain Funds have insufficient cash on hand to satisfy such redemptions. When the Funds liquidate portfolio securities to meet redemption requests, they often do not receive payment in settlement for up to three days (or longer for certain foreign transactions). However, redemption requests normally are effected immediately. The proposed credit facility would provide a source of immediate, short-term liquidity pending settlement of the sale of portfolio securities.
6. Applicants also anticipate that a Fund could use the proposed credit facility when a sale of securities “fails” due to circumstances beyond the Fund's control, such as a delay in the delivery of cash to the Fund's custodian or improper delivery instructions by the broker effecting the transaction. “Sales fails” may present a cash shortfall if the Fund has undertaken to purchase a security using the proceeds from securities sold. Alternatively, the Fund could “fail” on its intended purchase due to lack of funds from the previous sale, resulting in additional cost to the Fund, or sell a security on a same-day settlement basis, earning a lower return on the investment. Use of the proposed credit facility under these circumstances would enable the Fund to have access to immediate short-term liquidity.
7. While bank borrowings could generally supply needed cash to cover unanticipated redemptions and sales fails, under the proposed credit facility, a borrowing Fund would pay lower interest rates than those that would be payable under short-term loans offered by banks. In addition, Funds making short-term cash loans directly to other Funds would earn interest at a rate higher than they otherwise could obtain from investing their cash in repurchase agreements or purchasing shares of a money market fund. Thus, applicants assert that the proposed credit facility would benefit both borrowing and lending Funds.
8. The interest rate to be charged to the Funds on any Interfund Loan (the “Interfund Loan Rate”) would be the average of the “Repo Rate” and the “Bank Loan Rate,” both as defined below. The Repo Rate for any day would be the highest rate available to a lending Fund, directly or through a joint account, from investment in overnight repurchase agreements. The Bank Loan Rate for any day would be calculated by the Credit Facility Team (as defined below) each day an Interfund Loan is made according to a formula established by each Fund's board of directors (the “Board”) and intended to approximate the lowest interest rate at which bank short-term loans would be available to the Funds. The formula would be based upon a publicly available rate (e.g., federal funds plus 25 basis points) and would vary with this rate so as to reflect changing bank loan rates. The initial formula and any subsequent modifications to the formula would be subject to the approval of each Fund's Board. In addition, each Fund's Board would periodically review the continuing appropriateness of using the formula to determine the Bank Loan Rate, as well as the relationship between the Bank Loan Rate and current bank loan rates that would be available to the Funds.
9. The proposed credit facility would be administered by the Funds' president, chief compliance officer and treasurer and chief compliance officer and an investment professional within the Adviser who serves as a portfolio manager for the Money Market Funds (the “Money Market Manager”) (collectively, the “Credit Facility Team”). No other portfolio manager of any Fund will serve as a member of the Credit Facility Team. On any day on which a Fund intends to borrow money, the Credit Facility Team would make an Interfund Loan from a lending Fund to a borrowing Fund only if the Interfund Loan Rate is (i) more favorable to the lending Fund than the Repo Rate and, if applicable, the yield of any money market fund in which a lending Fund could otherwise invest and (ii) more favorable to the borrowing Fund than the Bank Loan Rate. Under the proposed credit facility, the portfolio managers for each participating Fund could provide standing instructions to participate daily as a borrower or lender. The Money Market Funds would not participate as borrowers. The Credit Facility Team on each business day would collect data on the uninvested cash and borrowing requirements of all participating Funds. The Credit Facility Team would allocate loans among borrowing Funds without any further communication from the portfolio managers of the Funds (other than the Money Market Manager acting in his or her capacity as a member of the Credit Facility Team). All allocations made by the Credit Facility Team will require the approval of at least one member of the Credit Facility Team, who is a high level employee and who is not the Money Market Manager. Applicants anticipate that there typically will be far more available uninvested cash each day than borrowing demand. Therefore, after the Credit Facility Team has allocated cash for Interfund Loans, any remaining cash will be invested in accordance with the standing instructions of portfolio managers or such remaining amounts will be invested directly by the portfolio managers of the Funds and returned to the Funds.
10. The Credit Facility Team would allocate borrowing demand and cash available for lending among the Funds on what the Credit Facility Team believes to be an equitable basis, subject to certain administrative procedures applicable to all Funds, such as the time of filing requests to participate, minimum loan lot sizes, and the need to minimize the number of transactions and associated administrative costs. To reduce transaction costs, each InterFund Loan normally would be allocated in a manner intended to minimize the number of participants necessary to complete the loan transaction. The method of allocation and related administrative procedures would be approved by each Fund's Board, including a majority of directors who are not “interested persons” of the Fund, as that term is defined in section 2(a)(19) of the Act (“Independent Directors”), to ensure that both borrowing and lending Funds participate on an equitable basis.
11. The Credit Facility Team would: (a) Monitor the Interfund Loan Rate and the other terms and conditions of the loans; (b) limit the borrowings and loans entered into by each Fund to ensure that they comply with the Fund's investment policies and limitations; (c) ensure equitable treatment of each Fund; and (d) make quarterly reports to each Fund's Board concerning any transactions by the Fund under the proposed credit facility and the Interfund Loan Rate charged.
12. The Adviser and BMO Harris Bank, through the Credit Facility Team, would administer the proposed credit facility as a disinterested fiduciary as part of its duties under the relevant advisory or administrative contract with each Fund and would receive no additional fee as compensation for its services in connection with the administration of the proposed credit facility. They may collect standard pricing, record keeping, bookkeeping and accounting fees associated with the transfer of cash and/or securities in connection with repurchase and lending transactions generally, including transactions effected through the proposed credit facility. Such fees would be no higher than those applicable for comparable bank loan transactions.
13. No Fund may participate in the proposed credit facility unless: (a) The Fund has obtained shareholder approval for its participation, if such approval is required by law; (b) the Fund has fully disclosed all material information concerning the credit facility in its prospectus and/or statement of additional information; and (c) the Fund's participation in the credit facility is consistent with its investment objectives, limitations and organizational documents.
14. In connection with the credit facility, applicants request an order under section 6(c) of the Act exempting them from the provisions of sections 18(f) and 21(b) of the Act; under section 12(d)(1)(J) of the Act exempting them from section 12(d)(1) of the Act; under sections 6(c) and 17(b) of the Act exempting them from sections 17(a)(1), 17(a)(2), and 17(a)(3) of the Act; and under section 17(d) of the Act and rule 17d–1 under the Act to permit certain joint arrangements.
1. Section 17(a)(3) of the Act generally prohibits any affiliated person of a registered investment company, or affiliated person of an affiliated person, from borrowing money or other property from the registered investment company. Section 21(b) of the Act generally prohibits any registered management company from lending money or other property to any person, directly or indirectly, if that person controls or is under common control with that company. Section 2(a)(3)(C) of the Act defines an “affiliated person” of another person, in part, to be any person directly or indirectly controlling, controlled by, or under common control with, such other person. Section 2(a)(9) of the Act defines “control” as the “power to exercise a controlling influence over the management or policies of a company,” but excludes circumstances in which “such power is solely the result of an official position with such company.” Applicants state that the Funds may be under common control by virtue of having the Adviser as their common investment adviser
2. Section 6(c) of the Act provides that an exemptive order may be granted where an exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. Section 17(b) of the Act authorizes the Commission to exempt a proposed transaction from section 17(a) provided that the terms of the transaction, including the consideration to be paid or received, are fair and reasonable and do not involve overreaching on the part of any person concerned, and the transaction is consistent with the policy of the investment company as recited in its registration statement and reports filed under the Act, and with the general purposes of the Act. Applicants believe that the proposed arrangements satisfy these standards for the reasons discussed below.
3. Applicants assert that sections 17(a)(3) and 21(b) of the Act were intended to prevent a party with strong potential adverse interests to, and some influence over the investment decisions of, a registered investment company from causing or inducing the investment company to engage in lending transactions that unfairly inure to the benefit of such party and that are detrimental to the best interests of the investment company and its shareholders. Applicants assert that the proposed credit facility transactions do not raise these concerns because: (a) The Adviser and BMO Harris Bank, through the Credit Facility Team, would administer the program as a disinterested fiduciary as part of its duties under the relevant advisory contract with each Fund and a disinterested party, respectively, as part of its duties under the relevant advisory or administrative contract with each Fund; (b) all Interfund Loans would consist only of uninvested cash reserves that the lending Fund otherwise would invest in short-term repurchase agreements or other short-term instruments either directly or through a money market fund; (c) the Interfund Loans would not involve a significantly greater risk than other such investments; (d) the lending Fund would receive interest at a rate higher than it could otherwise obtain through such other investments; and (e) the borrowing Fund would pay interest at a rate lower than otherwise available to it under its bank loan agreements and avoid the up-front commitment fees associated with committed lines of credit. Moreover, applicants assert that the other terms and conditions that applicants propose also would effectively preclude the possibility of any Fund obtaining an undue advantage over any other Fund.
4. Section 17(a)(1) of the Act generally prohibits an affiliated person of a registered investment company, or any affiliated person of such a person, from selling securities or other property to the investment company. Section 17(a)(2) of the Act generally prohibits an affiliated person of a registered investment company, or any affiliated person of such a person, from purchasing securities or other property from the investment company. Section 12(d)(1) of the Act generally prohibits a registered investment company from purchasing or otherwise acquiring any security issued by any other investment company except in accordance with the limitations set forth in that section.
5. Applicants state that the obligation of a borrowing Fund to repay an Interfund Loan could be deemed to constitute a security for the purposes of sections 17(a)(1) and 12(d)(1) of the Act. Applicants also state that a pledge of assets in connection with an Interfund Loan could be construed as a purchase of the borrowing Fund's securities or other property for purposes of section 17(a)(2) of the Act. Section 12(d)(1)(J) of the Act provides that the Commission may exempt persons or transactions from any provision of section 12(d)(1) if and to the extent that such exemption is consistent with the public interest and the protection of investors. Applicants contend that the standards under sections 6(c), 17(b), and 12(d)(1)(J) are satisfied for all the reasons set forth above in support of their request for relief from sections 17(a)(3) and 21(b) and for the reasons discussed below. Applicants also state that the requested relief from section 17(a)(2) of the Act meets the standards of section 6(c) and 17(b) because any collateral pledged to secure an Interfund Loan would be subject to the same conditions imposed by any other lender to a Fund that imposes conditions on the quality of or access to collateral for a borrowing (if the lender is another Fund) or the same or better conditions (in any other circumstance).
6. Applicants state that section 12(d)(1) was intended to prevent the pyramiding of investment companies in order to avoid imposing on investors additional and duplicative costs and fees attendant upon multiple layers of investments. Applicants submit that the proposed credit facility does not involve these abuses. Applicants note that there will be no duplicative costs or fees to the Funds or their shareholders, and that the Adviser and BMO Harris Bank will receive no additional compensation for its services in administering the credit facility. Applicants also note that the purpose of the proposed credit facility is to provide economic benefits for all the participating Funds and their shareholders.
7. Section 18(f)(1) of the Act prohibits open-end investment companies from issuing any senior security except that a company is permitted to borrow from any bank, provided, that immediately after the borrowing, there is asset coverage of at least 300 per centum for all borrowings of the company. Under section 18(g) of the Act, the term “senior security” generally includes any bond, debenture, note or similar obligation or instrument constituting a security and evidencing indebtedness. Applicants request exemptive relief under section 6(c) from section 18(f)(1) to the limited extent necessary to permit a Fund to lend to or borrow directly from other Funds.
8. Applicants believe that granting relief under section 6(c) is appropriate because the Funds would remain subject to the requirement of section 18(f)(1) that all borrowings of a Fund, including combined interfund and bank borrowings, have at least 300% asset coverage. Based on the conditions and safeguards described in the application, applicants also submit that to allow the Funds to borrow from other Funds pursuant to the proposed credit facility is consistent with the purposes and policies of section 18(f)(1).
9. Section 17(d) of the Act and rule 17d–1 under the Act generally prohibit an affiliated person of a registered investment company, or any affiliated person of such a person, when acting as principal, from effecting any joint transaction in which the investment company participates, unless, upon application, the transaction has been approved by the Commission. Rule 17d–1(b) under the Act provides that in passing upon an application filed under the rule, the Commission will consider whether the participation of the registered investment company in a joint enterprise, joint arrangement, or profit-sharing plan on the basis proposed is consistent with the provisions, policies and purposes of the Act and the extent to which such participation is on a basis different from or less advantageous than that of the other participants.
10. Applicants assert that the purpose of section 17(d) is to avoid overreaching by and unfair advantage to insiders. Applicants assert that the proposed credit facility is consistent with the provisions, policies and purposes of the Act in that it offers both reduced
Applicants agree that any order granting the requested relief will be subject to the following conditions:
1. The Interfund Loan Rate will be the average of the Repo Rate and the Bank Loan Rate.
2. On each business day, the Credit Facility Team will compare the Bank Loan Rate with the Repo Rate and will make cash available for Interfund Loans only if the Interfund Loan Rate is: (a) More favorable to the lending Fund than the Repo Rate; and, if applicable, the yield of the highest yielding money market fund in which the lending Fund could otherwise invest and (b) more favorable to the borrowing Fund than the Bank Loan Rate.
3. If a Fund has outstanding bank borrowings, any Interfund Loans to the Fund: (a) will be at an interest rate equal to or lower than the interest rate of any outstanding bank loan;
4. A Fund may make an unsecured borrowing through the proposed credit facility if its outstanding borrowings from all sources immediately after the interfund borrowing total 10% or less of its total assets, provided that if the Fund has a secured loan outstanding from any other lender, including but not limited to another Fund, the Fund's interfund borrowing will be secured on at least an equal priority basis with at least an equivalent percentage of collateral to loan value as any outstanding loan that requires collateral. If a Fund's total outstanding borrowings immediately after an interfund borrowing would be greater than 10% of its total assets, the Fund may borrow through the proposed credit facility only on a secured basis. A Fund may not borrow through the proposed credit facility or from any other source if its total outstanding borrowings immediately after the interfund borrowing would be more than 33 1/3% of its total assets.
5. Before any Fund that has outstanding interfund borrowings may, through additional borrowings, cause its outstanding borrowings from all sources to exceed 10% of its total assets, the Fund must first secure each outstanding Interfund Loan by the pledge of segregated collateral with a market value at least equal to 102% of the outstanding principal value of the loan. If the total outstanding borrowings of a Fund with outstanding Interfund Loans exceed 10% of its total assets for any other reason (such as a decline in net asset value or because of shareholder redemptions), the Fund will within one business day thereafter: (a) Repay all of its outstanding Interfund Loans; (b) reduce its outstanding indebtedness to 10% or less of its total assets; or (c) secure each outstanding Interfund Loan by the pledge of segregated collateral with a market value at least equal to 102% of the outstanding principal value of the loan until the Fund's total outstanding borrowings cease to exceed 10% of its total assets, at which time the collateral called for by this condition (5) shall no longer be required. Until each Interfund Loan that is outstanding at any time that a Fund's total outstanding borrowings exceed 10% is repaid or the Fund's total outstanding borrowings cease to exceed 10% of its total assets, the Fund will mark the value of the collateral to market each day and will pledge such additional collateral as is necessary to maintain the market value of the collateral that secures each outstanding Interfund Loan at least equal to 102% of the outstanding principal value of the Interfund Loan.
6. No Fund may lend to another Fund through the proposed credit facility if the loan would cause its aggregate outstanding loans through the proposed credit facility to exceed 15% of the lending Fund's current net assets at the time of the loan.
7. A Fund's Interfund Loans to any one Fund shall not exceed 5% of the lending Fund's net assets.
8. The duration of Interfund Loans will be limited to the time required to receive payment for securities sold, but in no event more than seven days. Loans effected within seven days of each other will be treated as separate loan transactions for purposes of this condition.
9. A Fund's borrowings through the proposed credit facility, as measured on the day when the most recent loan was made, will not exceed the greater of 125% of the Fund's total net cash redemptions for the preceding seven calendar days or 102% of the Fund's sales fails for the preceding seven calendar days.
10. Each Interfund Loan may be called on one business day's notice by a lending Fund and may be repaid on any day by a borrowing Fund.
11. A Fund's participation in the proposed credit facility must be consistent with its investment objectives and limitations and organizational documents.
12. The Credit Facility Team will calculate total Fund borrowing and lending demand through the proposed credit facility, and allocate loans on an equitable basis among the Funds, without the intervention of any portfolio manager of the Funds (other than the Money Market Manager acting in his or her capacity as a member of the Credit Facility Team). All allocations will require the approval of at least one member of the Credit Facility Team, who is a high level employee and who is not the Money Market Manager. The Credit Facility Team will not solicit cash for the proposed credit facility from any Fund or prospectively publish or disseminate loan demand data to portfolio managers (except to the extent that the Money Market Manager has access to loan demand data). The Credit Facility Team will invest any amounts remaining after satisfaction of borrowing demand in accordance with the instructions of each of the relevant portfolio manager or such remaining amounts will be invested directly by the portfolio managers of the Funds or the Credit Facility Team will return remaining amounts to the Funds.
13. The Credit Facility Team will monitor the interest rates charged and the other terms and conditions of the Interfund Loans and will make a quarterly report to the Board of each Fund concerning the participation of the Funds in the proposed credit facility and the terms and other conditions of any extensions of credit under the credit facility.
14. The Board of each Fund, including a majority of the Independent Directors, will:
(a) Review, no less frequently than quarterly, each Fund's participation in the proposed credit facility during the preceding quarter for compliance with the conditions of any order permitting such transactions;
(b) establish the Bank Loan Rate formula used to determine the interest rate on Interfund Loans and review, no less frequently than annually, the continuing appropriateness of the Bank Loan Rate formula; and
(c) review, no less frequently than annually, the continuing appropriateness of the Fund's participation in the proposed credit facility.
15. In the event an Interfund Loan is not paid according to its terms and the default is not cured within two business days from its maturity or from the time the lending Fund makes a demand for payment under the provisions of the Interfund Lending Agreement, the Credit Facility Team will promptly refer the loan for arbitration to an independent arbitrator selected by the Board of each Fund involved in the loan who will serve as arbitrator of disputes concerning Interfund Loans.
16. Each Fund will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any transaction by it under the proposed credit facility occurred, the first two years in an easily accessible place, written records of all such transactions setting forth a description of the terms of the transactions, including the amount, the maturity and the Interfund Loan Rate, the rate of interest available at the time each Interfund Loan is made on overnight repurchase agreements and bank borrowings, the yield of any money market fund in which the lending Fund could otherwise invest, and such other information presented to the Fund's Board in connection with the review required by conditions 13 and 14.
17. The Credit Facility Team will prepare and submit to the Board of each Fund for review an initial report describing the operations of the proposed credit facility and the procedures to be implemented to ensure that all Funds are treated fairly. After the commencement of the proposed credit facility, the Credit Facility Team will report on the operations of the proposed credit facility at each Board's quarterly meetings.
Each Fund's chief compliance officer, as defined in Rule 38a–1(a)(4) under the Act, shall prepare an annual report for its Board each year that the Fund participates in the proposed credit facility, which report evaluates the Fund's compliance with the terms and conditions of the application and the procedures established to achieve such compliance. Each Fund's chief compliance officer will also annually file a certification pursuant to Item 77Q3 of Form N–SAR, as such Form may be revised, amended, or superseded from time to time, for each year that the Fund participates in the proposed credit facility, that certifies that the Fund and Adviser have established procedures reasonably designed to achieve compliance with the terms and conditions
(a) That the Interfund Loan Rate will be higher than the Repo Rate and, if applicable, the yield of the highest yielding Money Market Funds, but lower than the Bank Loan Rate;
(b) compliance with the collateral requirements as set forth in the application;
(c) compliance with the percentage limitations on interfund borrowing and lending;
(d) allocation of interfund borrowing and lending demand in an equitable manner and in accordance with procedures established by the Board of each Fund; and
(e) that the Interfund Loan Rate does not exceed the interest rate on any third party borrowings of a borrowing Fund at the time of the Interfund Loan.
Additionally, each Fund's independent public accountants, in connection with their Fund audit examinations, will review the operation of the proposed credit facility for compliance with the conditions of this application and their review will form the basis, in part, of the auditor's report on internal accounting controls in Form N–SAR.
18. No Fund will participate in the proposed credit facility upon receipt of requisite regulatory approval unless it has fully disclosed in its prospectus and/or statement of additional information all material facts about its intended participation.
For the Commission, by the Division of Investment Management, under delegated authority.
Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, July 10, 2014 at 2 p.m.
Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present.
The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matter at the Closed Meeting.
Commissioner Stein, as duty officer, voted to consider the items listed for the Closed Meeting in closed session.
The subject matter of the Closed Meeting will be:
At times, changes in Commission priorities require alterations in the scheduling of meeting items.
For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400.
On May 2, 2014, NYSE Arca, Inc. (“Exchange” or “NYSE Arca”), through its wholly-owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities” or “Corporation”), filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to list and trade Shares of the Fund pursuant to NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and trading of Investment Company Units (“Units”) based on fixed income securities indexes. The Fund is a series of the iShares Trust (“Trust”).
According to the Exchange, the Fund will seek investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P AMT-Free Municipal Series 2020 Index
According to the Exchange, the Index measures the performance of investment-grade U.S. municipal bonds maturing in 2020. As of February 28, 2014, there were 1,427 issues in the Index. The Index includes municipal bonds primarily from issuers that are state or local governments or agencies such that the interest on the bonds is exempt from U.S. federal income taxes and the federal alternative minimum tax (“AMT”). Each bond must have a rating of at least BBB- by S&P, Baa3 by Moody's Investors Service, Inc. (“Moody's”), or BBB- by Fitch, Inc. and must have a minimum maturity par amount of $2 million to be eligible for inclusion in the Index. To remain in the Index, bonds must maintain a minimum par amount greater than or equal to $2 million as of each rebalancing date. All bonds in the Index will mature between June 1 and August 31 of 2020. When a bond matures in the Index, an amount representing its value at maturity will be included in the Index throughout the remaining life of the Index, and any such amount will be assumed to earn a rate equal to the performance of the S&P's Weekly High Grade Index, which consists of Moody's Investment Grade-1 municipal tax-exempt notes that are not subject to federal AMT. The Exchange states that, by August 31, 2020, the Index is expected to consist entirely of cash carried in this manner. The Index is a market value weighted index and is rebalanced after the close on the last business day of each month.
The Exchange represents that the Index for the Fund does not meet all of the “generic” listing requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3) applicable to the listing of Units based on fixed income securities indexes. Specifically, the Index does not meet the requirement set forth in Commentary .02(a)(2), which provides that components that in the aggregate account for at least 75% of the weight of the index or portfolio each must have a minimum original principal amount outstanding of $100 million or more. Contrary to this requirement, as of February 28, 2014, only 6.25% of the weight of the Index components has a minimum original principal amount outstanding of $100 million or more.
The Exchange represents that the Fund generally will invest at least 80% of its assets in the securities of the Index, except during the last months of the Fund's operations. The Fund may at times invest up to 20% of its assets in cash and cash equivalents (including money market funds affiliated with BFA), as well as in municipal bonds not included in the Index, but which BFA believes will help the Fund track the Index. For example, the Fund may invest in municipal bonds not included in the Index in order to reflect prospective changes in the Index (such as Index reconstitutions, additions, and deletions). The Fund will generally hold municipal bond securities issued by state and local municipalities whose interest payments are exempt from U.S. federal income tax, the federal AMT and, effective beginning in 2013, a federal Medicare contribution tax of 3.8% on “net investment income,” including dividends, interest, and capital gains. In addition, the Fund may invest any cash assets in one or more affiliated municipal money market
Additional information regarding the Trust, the Fund, and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings, distributions, and taxes, among other things, is included in the Notice and Registration Statement, as applicable.
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of Section 6 of the Act
The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,
The Commission believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Exchange states that the Index Provider is not a broker-dealer or affiliated with a broker-dealer, and has implemented procedures designed to prevent the use and dissemination of material, non-public information regarding the Index.
Based on the Exchange's representations, the Commission believes that the Index is sufficiently broad-based and liquid to deter potential manipulation. As of February 28, 2014, there were 1,427 issues in the Index. As of the same date, 76.77% of the weight of the Index components was comprised of individual maturities that were part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more for all maturities of the offering.
In support of this proposal, the Exchange has made representations, including:
(1) Except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), the Shares of the Funds currently satisfy all of the generic listing standards under NYSE Arca Equities Rule 5.2(j)(3).
(2) The continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the Shares.
(3) The Shares will comply with all other requirements applicable to Units including, but not limited to, requirements relating to the dissemination of key information, such as the value of the Index and IIV, rules governing the trading of equity securities, trading hours, trading halts, surveillance, and the Information Bulletin to Equity Trading Permit Holders (each as described in more detail in the Notice and Registration Statement, as applicable), as set forth in Exchange rules applicable to Units and prior Commission orders approving the generic listing rules applicable to the listing and trading of Units.
(4) The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (“FINRA”) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.
(5) FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares with other markets or other entities that are members of ISG, and FINRA may obtain trading information regarding trading in the Shares from such markets or entities. FINRA also can access data obtained from the Municipal Securities Rulemaking Board relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA's Trade Reporting and Compliance Engine. The Exchange also may obtain information regarding trading in the Shares from markets or other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.
(6) For initial and continued listing of the Shares, the Trust is required to comply with Rule 10A–3 under the Act.
(7) The Fund generally will invest at least 80% of its assets in the securities of the Index.
(8) Over time the Fund's tracking error
(9) The Fund may at times invest up to 20% of its assets in cash and cash equivalents (including money market funds affiliated with BFA), as well as in municipal bonds not included in the Index, but which BFA believes will help the Fund track the Index.
(10) On or about August 31, 2020, the Fund will wind up and terminate, and its net assets will be distributed to the then-current shareholders.
This approval order is based on all of the Exchange's representations, including those set forth above and in the Notice, and the Exchange's description of the Funds.
For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1 thereto, is consistent with Section 6(b)(5) of the Act
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On March 18, 2014, New York Stock Exchange LLC (“NYSE” or the “Exchange”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange adopted Rule 98 in 1986, when NYSE specialist firms, which had been independent member-owned entities, increasingly became affiliates of larger member organizations. Because of the specialists” position in the market, Rule 98 required an organizational separation between a specialist and its affiliates. The purpose of that separation was to eliminate or control conflicts of interest between the business activities of affiliates of the specialist and the specialist's responsibilities to the market and to any customer orders the specialist represented as agent.
In 2008, the NYSE amended Rule 98 to adopt a more flexible, principles-based approach that among other things: (1) Redefined the persons to whom the rule applied; (2) allowed DMM operations to be integrated into better-capitalized member organizations; (3) permitted a DMM unit to share non-trading-related services with its parent member organization or approved persons; and (4) provided flexibility to member organizations and their approved persons in conducting risk management of DMM operations.
The Exchange now proposes to further amend Rule 98 in order to provide DMM units with greater flexibility in structuring their operations and to move further toward a principles-based approach and away from prescribing particular structures for DMM units. Under this proposed rule change, certain information barriers would continue to be required (for example, between a DMM unit and an affiliated investment-banking desk), and other required protections, in addition to information barriers, would address the role of DMMs and the trading floor in the NYSE's market. Proposed Rule 98 would, however, contain fewer prescriptions relating to the structure of DMM units, and it would instead—like similar rules relating to market-making firms on other exchanges
The Exchange asserts that the instant proposal should provide member organizations operating DMM units with the means to better manage risk across a firm—for example, by integrating DMM unit positions and quoting information with other quotes and positions by other units within the firm. The Exchange posits that a member organization operating a DMM unit, in the context of risk management
Proposed Rule 98(a)(1) provides that the rule shall apply to all member organizations seeking to operate a DMM unit at the Exchange and to any approved person that may provide services to a DMM unit.
Proposed Rule 98(b) revises, deletes, and adds certain definitions to provide member organizations operating a DMM unit with the flexibility to integrate their DMM operations with other units of the firm. Currently, Rule 98 defines the terms “non-public order information” and “DMM confidential information” separately. Non-public order information captures any information relating to order flow at the Exchange—including verbal indications of interest made with an expectation of privacy, electronic order interest, e-quotes, reserve interest, and information about imbalances at the Exchange—that is not publicly-available on a real-time basis via an Exchange-provided datafeed, such as NYSE OpenBook,
The Exchange proposes to replace the term “non-public information” with “Floor-based non-public information.” As discussed in more detail below, the Exchange proposes to maintain restrictions in proposed Rule 98(c)(3) to address the Floor-based activities of DMM units, and it proposes to use the term “Floor-based non-public order information” to identify the information those provisions are intended to protect.
The Exchange proposes to amend the term “DMM unit” to mean a trading unit within a member organization that is approved pursuant to Rule 103 to act as a DMM unit, and it proposes to eliminate the requirement that a DMM unit be an “aggregation unit,” which is currently defined to mean any trading or market-making department, division, or desk that meets the requirements of the definition of “independent trading unit” pursuant to Rule 200 of Regulation SHO.
Proposed Rule 98(c) would govern the operation of a DMM unit. Proposed Rule 98(c)(1) provides that a member organization will be permitted to operate a DMM unit, provided that the member organization has obtained prior written approval from the Exchange.
Proposed Rule 98(c)(2) specifies that a member organization seeking approval to operate a DMM unit pursuant to Rule 98 must maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such member organization's business, (i) to prevent the misuse of material, non-public information by such member organizations or persons associated with such member organization and (ii) to ensure compliance with applicable federal laws and regulations and with Exchange rules.
Proposed Rule 98(c)(3) pertains to restrictions on trading for member organizations operating a DMM unit. Proposed Rule 98(c)(3)(A) would generally provide that a member organization shall protect against the misuse of Floor-based non-public order information. The rule would further specify that only the Floor-based employees of the DMM unit and individuals responsible for the direct supervision of the DMM unit's Floor-based operations may have access (as permitted pursuant to Rule 104) to Floor-based non-public order information.
Proposed Rule 98(c)(3)(B) specifies the restrictions applicable to employees of the DMM unit while on the trading floor. Proposed Rule 98(c)(3)(B)(i) provides that, while on the trading floor of the Exchange, employees of the DMM unit, except as provided for in Rule 36.30, may trade only DMM securities and may do so only on or through the systems and facilities of the Exchange, as permitted by Exchange Rules. Proposed Rule 98(c)(3)(B)(ii) would specify that, while on the trading floor, Floor-based employees may not communicate with individuals or systems responsible for making trading decisions for related products or for away-market trading in DMM securities. Proposed Rule 98(c)(3)(B)(iii) adds a new restriction that, while on the trading floor, employees of the DMM unit shall not have access to customer information or the DMM unit's position in related products.
Proposed Rule 98(c)(3)(C) would provide that a Floor-based employee of a DMM unit who moves to a location off the trading floor of the Exchange, or any person who provides risk management oversight or supervision of the Floor-based operations of the DMM unit and becomes aware of Floor-based non-public order information, shall not (1) make such information available to customers, (2) make such information available to individuals or systems responsible for making trading decisions in DMM securities in away markets or related products, or (3) use any such information in connection with making trading decisions in DMM securities in away markets or related products. The proposed rule would cover an individual that leaves the trading floor, as well as a manager providing oversight or supervision of the Floor-based operations of the DMM unit. The Exchange's proposed amendments to Rule 98 would replace the concept of a person having “access to” information with that of a person being “aware of” information,
Proposed Rule 98(c)(3)(D) would provide that a DMM unit may make available to a Floor broker associated or affiliated with an approved person or member organization any information that the DMM would be permitted under Exchange rules to provide to an unaffiliated Floor Broker.
Proposed Rule 98(c)(4) would provide that any interest entered by the DMM unit in DMM securities at the Exchange must be entered through systems that identify such interest as DMM interest. The Exchange asserts that it is unnecessary to prescribe or require specific systems that a DMM unit must use, but this rule would require that the DMM unit's interest be identifiable and available for Exchange review through the system that the DMM unit elects to use.
Proposed Rule 98(c)(5) would require that a member organization provide the Exchange with real-time unit position information for any trading in DMM securities by the DMM unit and any independent trading unit.
Proposed Rule 98(c)(6) would specify that a DMM unit may not operate as a specialist or market maker on the Exchange or the NYSE MKT LLC (“NYSE MKT”) equities or options trading floors in related products, unless specifically permitted in Exchange rules.
Proposed Rule 98(c)(7) would maintain the existing requirement that the member organization maintain information barriers between the DMM unit and any investment banking or research departments. Proposed Rule 98(c)(7) would also continue to provide that no DMM or DMM unit may be directly supervised or controlled by an individual associated with an approved person or the member organization who is assigned to any investment banking or research departments.
Proposed Rule 98(d) would specify that DMM rules would only apply to the DMM unit's quoting or trading in their DMM securities for their own accounts at the Exchange. The Exchange represents that this provision is intended to clarify that DMM rule restrictions are not applicable to any customer orders routed to the Exchange by that member organization as agent.
The Exchange proposes to delete in its entirety Rule 98(e), which concerns the sharing of non-trading related services. The Exchange states that the focus of proposed Rule 98 on protecting against the misuse of material non-public information obviates the need to specify how a member organization or an
As part of the proposed restructuring of Rule 98, current Rule 98(g) would be renumbered as proposed Rule 98(e), existing Rule 98(h) would be renumbered as proposed Rule 98(f), and existing Rule 98(j) would be renumbered as proposed Rule 98(g). The Exchange proposes conforming changes to these sections, such as updating cross-references and changing the rule's reference to “the Division of Market Surveillance” and “NYSE Regulation” to a reference to “the Exchange.”
The Exchange proposes to delete Rule 98 Former, as well as any references thereto, because it is obsolete: All DMM firms operate pursuant to the current Rule 98.
Under the proposed revisions to Rule 98, a DMM unit would no longer need to apply for an exemption from Rule 105 trading restrictions because, as discussed above, while on the trading floor, Floor-based employees may trade only DMM securities (
In addition, because DMM units no longer have customer relationships, the Exchange proposes to delete in its entirety the DMM Booth Wire Policy, which is set forth in Rule 123B and which is now obsolete.
After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
Generally, the Exchange proposes to amend Rule 98 in order to provide DMM units with greater flexibility in structuring their operations, moving further toward a principles-based approach and away from prescribing particular structures. Under the proposed rule change, certain information barriers would continue to be required,
In patricular, proposed Rule 98(a) provides that a member organization will be permitted to operate a DMM unit provided that the member organization has obtained prior written approval from the Exchange. The Exchange represents that, although all member organizations currently operating DMM units under Rule 98 have written policies and procedures that have been approved by NYSE Regulation, Inc., the policies and procedures of member organizations that choose to modify their DMM operations consistent with proposed Rule 98 would be subject to Exchange review prior to implementation. In addition, the Exchange represents that FINRA would continue to monitor member organizations for compliance with such policies and procedures consistent with the current exam-based regulatory program associated with Rule 98.
Proposed Rule 98(c)(2) would replace the current, more prescriptive approach of current Rule 98 and would provide member organizations operating a DMM unit with greater organizational and operational flexibility, while still requiring that member organizations comply with their existing regulatory obligations. Specifically, proposed NYSE Rule 98(c)(2) would require a member organization seeking approval to operate a DMM unit to maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such member organization's business, (i) to prevent the misuse of material, non-public information by such member organizations or persons associated with such member organization and (ii) to ensure compliance with applicable federal laws and regulations and with Exchange rules. In addition, proposed Rule 98(c)(2) would specify that conduct constituting the misuse of material, non-public information includes, but is not limited to: (A) trading in any securities issued by a corporation, or in any related product, while in possession of material-non-public information concerning the issuer; or (B) trading in a security or related product, while in possession of material non-public information concerning imminent transactions in the security or related product; or (C) disclosing to another person or entity any material, non-public information involving a corporation whose shares are publicly traded or an imminent transaction in an underlying security or related product for the purpose of facilitating the possible misuse of such material, non-public information. Although the Exchange proposes to move to a more principles-based approach, and although certain information barriers may no longer be required, the Commission notes, and the Exchange acknowledges, that a member organization's business model or business activities may dictate that an information barrier or functional separation be part of the appropriate set of policies and procedures that would be reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable Exchange rules.
The Commission notes that amended Rule 98 would delete the defined term “DMM confidential information” and would replace the defined term “non-public information” with the term “Floor-based non-public information.” In the Commission's view, these definitional modifications should not reduce investor protections or market integrity. Instead, consistent with proposed Rule 98(c)(2) and Section 15(g) of the Act,
The Commission notes that proposed Rule 98(c)(2) is substantially similar to and expressly based on NYSE Arca Rule 6.3 and BATS Rule 5.5. NYSE's market structure, however differs from that of NYSE Arca and BATS, in that the Exchange continues to have a physical trading floor. Accordingly, the Commission believes that it is appropriate that proposed Rule 98 continues to include certain prescriptions that address the role of the DMM and the trading floor in its market. Specifically, as described above, proposed Rule 98(c)(3) relates to restrictions on trading for member organizations operating a DMM unit; proposed Rule 98(c)(4) would provide that any interest entered by the DMM unit in DMM securities at the Exchange must be entered through systems that identify such interest as DMM interest; proposed Rule 98(c)(5) would require that a member organization provide the Exchange with real-time unit position information for any trading in DMM securities by the DMM unit and any independent trading unit; proposed Rule 98(c)(6) would specify that a DMM unit may not operate as a specialist or market maker on the Exchange or the NYSE MKT equities or options trading floors in related products, unless specifically permitted in Exchange rules; and proposed Rule 98(c)(7) would maintain the existing requirement that the member organization maintain information barriers between the DMM unit and any investment banking or research departments.
Under this proposed rule change, member organizations could integrate DMM units with other trading operations within the member organization, including, if applicable, a customer-facing operation. The Commission notes that a DMM unit that is integrated with other market-making operations would be subject to existing rules that prohibit member organizations from disadvantaging their customers or other market participants by improperly capitalizing on a member organization's access to the receipt of material, non-public information. For instance, NYSE Rule 5320 generally prohibits a member organization from trading for its own account ahead of customer orders, which means that a member organization operating both a DMM unit, which engages in trading for its own account, and customer-facing operations would need to comply with the Manning Rule
The Commission believes that the proposed rule change is consistent with the Act. The principles-based regulatory approach in the proposal is substantially similar to the existing regulatory approach of NYSE Arca and BATS, while also accounting for the market structure differences (
The Commission notes that the policies and procedures required proposed Rule 98 will be subject to oversight by the Exchange and review by FINRA, and the Commission emphasizes that a member organization operating a DMM unit should be proactive in assuring that its policies and procedures reflect the current state of its business and continue to be reasonably designed to achieve compliance with applicable federal securities law and regulations and with applicable Exchange and FINRA rules. Finally, the Commission notes that existing Exchange rules also prohibit particular misuses of material, non-public information—for example, front-running customer orders—and that FINRA surveillances seek to detect violations of those rules.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On March 18, 2014, NYSE MKT LLC (the “Exchange” or “NYSE MKT”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The New York Stock Exchange LLC (“NYSE”) adopted Rule 98 (“NYSE Rule 98”) in 1986 when NYSE specialist firms, which had been independent member-owned entities, increasingly became affiliates of larger member organizations. Because of the specialists' position in the market, Rule 98 required an organizational separation between a specialist and its affiliates. The purpose of that separation was to eliminate or control conflicts of interest between the business activities of affiliates of the specialist and the specialist's responsibilities to the market and to any customer orders the specialist represented as agent.
In 2008, the NYSE amended NYSE Rule 98 to adopt a more flexible, principles-based approach that among other things: (1) Redefined the persons to whom the Rule applied; (2) allowed DMM operations to be integrated into better-capitalized member organizations; (3) permitted a DMM unit to share non-trading-related services with its parent member organization or approved persons; and (4) provided flexibility to member organizations and their approved persons in conducting risk management of DMM operations.
The Exchange now proposes to further amend Rule 98 in order to provide DMM units with greater flexibility in structuring their operations and to move further toward a principles-based approach and away from prescribing particular structures for DMM units. Under this proposed rule change, certain information barriers would continue to be required (for example, between a DMM unit and an affiliated investment-banking desk), and other required protections, in addition to information barriers, would address the role of DMMs and the trading floor in the Exchange's market. Proposed Rule 98 would, however, contain fewer prescriptions relating to the structure of DMM units, and it would instead, like similar rules relating to market-making firms on other exchanges,
The Exchange asserts that the instant proposal should provide member organizations operating DMM units with the means to better manage risk across a firm—for example, by integrating DMM unit positions and quoting information with other quotes and positions by other units within the firm. The Exchange posits that a member organization operating a DMM unit, in the context of risk management
Proposed Rule 98(a)(1) provides that the rule shall apply to all member organizations seeking to operate a DMM unit at the Exchange and to any approved person that may provide services to a DMM unit.
Proposed Rule 98(b) revises, deletes and adds certain definitions to provide member organizations operating a DMM unit with the flexibility to integrate their DMM operations with other units of the firm. Currently, Rule 98 defines the terms “non-public order information” and “DMM confidential information” separately. Non-public order information captures any information relating to order flow at the Exchange—including verbal indications of interest made with an expectation of privacy, electronic order interest, e-quotes, reserve interest, and information about imbalances at the Exchange—that is not publicly-available on a real-time basis via an Exchange-provided datafeed, such as NYSE OpenBook®,
The Exchange proposes to replace the term “non-public information” with “Floor-based non-public information.” As discussed in more detail below, the Exchange proposes to maintain restrictions in proposed Rule 98(c)(3) to address the Floor-based activities of DMM units and proposes to use the term “Floor-based non-public order information” to identify the information those provisions are intended to protect.
The Exchange proposes to amend the term “DMM unit” to mean a trading unit within a member organization that is approved pursuant to Rule 103—Equities to act as a DMM unit, and it proposes to eliminate the requirement that a DMM unit be an “aggregation unit,” which is currently defined to mean any trading or market-making department, division or desk that meets the requirements of the definition of “independent trading unit” pursuant to Rule 200 of Regulation SHO.
Proposed Rule 98(c) would govern the operation of a DMM unit. Proposed Rule 98(c)(1) provides that a member organization will be permitted to operate a DMM unit provided that the member organization has obtained prior written approval from the Exchange.
Proposed Rule 98(c)(2) specifies that a member organization seeking approval to operate a DMM unit pursuant to Rule 98 must maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such member organization's business, (i) to prevent the misuse of material, non-public information by such member organizations or persons associated with such member organization and (ii) to ensure compliance with applicable federal laws and regulations and with Exchange rules.
Proposed Rule 98(c)(3) pertains to restrictions on trading for member organizations operating a DMM unit. Proposed Rule 98(c)(3)(A) would generally provide that a member organization shall protect against the misuse of Floor-based non-public order information. The rule would further specify that only the Floor-based employees of the DMM unit and individuals responsible for the direct supervision of the DMM unit's Floor-based operations may have access (as permitted pursuant to Rule 104) to Floor-based non-public order information.
Proposed Rule 98(c)(3)(B) specifies the restrictions applicable to employees of the DMM unit while on the trading floor. Proposed Rule 98(c)(3)(B)(i) provides that, while on the trading floor of the Exchange, employees of the DMM unit, except as provided for in Rule 36.30—Equities, may trade only DMM securities and may do so only on or through the systems and facilities of the Exchange, as permitted by Exchange Rules. Proposed Rule 98(c)(3)(B)(ii) would specify that while on the trading floor, Floor-based employees may not communicate with individuals or systems responsible for making trading decisions for related products or for away-market trading in DMM securities. Proposed Rule 98(c)(3)(B)(iii) adds a new restriction that while on the trading floor, employees of the DMM unit shall not have access to customer information or the DMM unit's position in related products.
Proposed Rule 98(c)(3)(C) would provide that a Floor-based employee of a DMM unit who moves to a location off the trading floor of the Exchange, or any person who provides risk management oversight or supervision of the Floor-based operations of the DMM unit and becomes aware of Floor-based non-public order information, shall not (1) make such information available to customers, (2) make such information available to individuals or systems responsible for making trading decisions in DMM securities in away markets or related products, or (3) use any such information in connection with making trading decisions in DMM securities in away markets or related products. The proposed rule would cover an individual that leaves the trading floor, as well as a manager providing oversight or supervision of the Floor-based operations of the DMM unit. The Exchange's proposed amendments to Rule 98 would replace the concept of a person having “access to” information with that of a person being “aware of” information,
Proposed Rule 98(c)(3)(C) would also maintain and consolidate the Exchange's current “wall-crossing” provisions related to a non-Floor based individual who becomes aware of Floor-based non-public order information.
Proposed Rule 98(c)(3)(D) would provide that a DMM unit may make available to a Floor broker associated or affiliated with an approved person or member organization any information that the DMM would be permitted under Exchange rules to provide to an unaffiliated Floor Broker.
Proposed Rule 98(c)(4) would provide that any interest entered by the DMM unit in DMM securities at the Exchange must be entered through systems that identify such interest as DMM interest. The Exchange asserts it is unnecessary to prescribe or require specific systems that a DMM unit must use, but this rule would require that the DMM unit's interest be identifiable and available for Exchange review through the system that the DMM unit elects to use.
Proposed Rule 98(c)(5) would require that a member organization provide the Exchange with real-time unit position information for any trading in DMM securities by the DMM unit and any independent trading unit.
Proposed Rule 98(c)(6) would specify that a DMM unit may not operate as a specialist or market maker on the Exchange or the NYSE Amex Options LLC (“NYSE Amex Options”) equities or options trading floors in related products, unless specifically permitted
Proposed Rule 98(c)(7) would maintain the existing requirement that the member organization maintain information barriers between the DMM unit and any investment banking or research departments. Proposed Rule 98(c)(7) would also continue to provide that no DMM or DMM unit may be directly supervised or controlled by an individual associated with an approved person or the member organization who is assigned to any investment banking or research departments.
Proposed Rule 98(d) would specify that DMM rules would only apply to the DMM unit's quoting or trading in their DMM securities for their own accounts at the Exchange. The Exchange represents that this provision is intended to clarify that DMM rule restrictions are not applicable to any customer orders routed to the Exchange by that member organization as agent.
The Exchange proposes to delete in its entirety Rule 98(e), which concerns the sharing of non-trading related services. The Exchange states that the focus of proposed Rule 98 on protecting against the misuse of material non-public information obviates the need to specify how a member organization or an approved person provides back-office support operations, such as clearing, stock loan, and compliance, for the DMM unit. Rather, the Exchange asserts that how a member organization or approved person provides back-office operations to the DMM unit should not differ from how such services are provided to other trading units within that member organization or approved person. The Exchange also notes that, if a person in the member organization or an approved person is providing non-trading related services to the DMM unit and, as a result of such relationship, becomes aware of Floor-based non-public order information, such person would be subject to the wall-crossing provisions of proposed Rule 98(c)(3)(C), which is applicable to any person who is aware of such information. In addition, the Exchange notes that the protections for Floor-based non-public order information are retained in the proposed revisions to Rule 98 and are applicable to approved persons pursuant to proposed amended Rule 98(a)(1). The Exchange proposes conforming amendments to Rule 36.30—Equities.
As part of the proposed restructuring of Rule 98, current Rule 98(g) would be renumbered as proposed Rule 98(e), existing Rule 98(h) would be renumbered as proposed Rule 98(f), and existing Rule 98(j) would be renumbered as proposed Rule 98(g). The Exchange proposes conforming changes to these sections, such as updating cross-references and changing the rule's reference to “the Division of Market Surveillance” and “NYSE Regulation” to a reference to “the Exchange.”
The Exchange proposes to delete Rule 98 Former, as well as any references thereto, because it is obsolete: All DMM firms operate pursuant to the current Rule 98.
Under the proposed revisions to Rule 98, a DMM unit would no longer need to apply for an exemption from Rule 105 trading restrictions because, as discussed above, while on the trading floor, Floor-based employees may trade only DMM securities (
In addition, because DMM units no longer have their own customers, the Exchange proposes to delete in its entirety the DMM Booth Wire Policy, which is set forth in Rule 123B—Equities and which is now obsolete.
After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
Generally, the Exchange proposes to amend Rule 98 in order to provide DMM units with greater flexibility in structuring their operations, moving further toward a principles-based approach and away from prescribing particular structures. Under the proposed rule change, certain information barriers would continue to be required,
In particular, proposed Rule 98(a) provides that a member organization will be permitted to operate a DMM unit provided that the member organization has obtained prior written approval from the Exchange. The Exchange represents that, although all member organizations currently operating DMM units under Rule 98 have written policies and procedures that have been approved by NYSE Regulation, Inc., the policies and procedures of member organizations that choose to modify their DMM operations consistent with proposed Rule 98 would be subject to Exchange review prior to implementation. In addition, the Exchange represents that FINRA would continue to monitor member organizations for compliance with such policies and procedures consistent with the current exam-based regulatory program associated with Rule 98.
Proposed Rule 98(c)(2) would replace the current, more prescriptive approach of current Rule 98 and would provide member organizations operating a DMM unit with greater organizational and operational flexibility, while still requiring that member organizations comply with their existing regulatory obligations. Specifically, proposed Exchange Rule 98(c)(2) would require a member organization seeking approval to operate a DMM unit to maintain and enforce written policies and procedures reasonably designed, taking into consideration the nature of such member organization's business, (i) to prevent the misuse of material, non-public information by such member organizations or persons associated with such member organization and (ii) to ensure compliance with applicable federal laws and regulations and with Exchange rules. In addition, proposed Rule 98(c)(2) would specify that conduct constituting the misuse of material, non-public information includes, but is not limited to: (A) Trading in any securities issued by a corporation, or in any related product, while in possession of material-non-public information concerning the issuer; or (B) trading in a security or related product, while in possession of material non-public information concerning imminent transactions in the security or related product; or (C) disclosing to another person or entity any material, non-public information involving a corporation whose shares are publicly traded or an imminent transaction in an underlying security or related product for the purpose of facilitating the possible misuse of such material, non-public information. Although the Exchange proposes to move to a more principles-based approach, and although certain information barriers may no longer be required, the Commission notes, and the Exchange acknowledges, that a member organization's business model or business activities may dictate that an information barrier or functional separation be part of the appropriate set of policies and procedures that would be reasonably designed to achieve compliance with applicable securities laws and regulations and with applicable Exchange rules.
The Commission notes that amended Rule 98 would delete the defined term “DMM confidential information” and would replace the defined term “non-public information” with the term “Floor-based non-public information.” In the Commission's view, these definitional modifications should not reduce investor protections or market integrity. Instead, consistent with proposed Rule 98(c)(2) and Section 15(g) of the Act,
The Commission notes that proposed Rule 98(c)(2) is substantially similar to and expressly based on NYSE Arca Rule 6.3 and BATS Rule 5.5. The Exchange's market structure, however differs from that of NYSE Arca and BATS, in that the Exchange continues to have a physical trading floor. Accordingly, the Commission believes that it is appropriate that proposed Rule 98 continues to include certain prescriptions that address the role of the DMM and the trading floor in its market. Specifically, as described above, proposed Rule 98(c)(3) relates to restrictions on trading for member organizations operating a DMM unit; proposed Rule 98(c)(4) would provide that any interest entered by the DMM unit in DMM securities at the Exchange must be entered through systems that identify such interest as DMM interest; proposed Rule 98(c)(5) would require that a member organization provide the Exchange with real-time unit position information for any trading in DMM securities by the DMM unit and any independent trading unit; proposed Rule 98(c)(6) would specify that a DMM unit may not operate as a specialist or market maker on the Exchange or the NYSE MKT equities or options trading floors in related products, unless specifically permitted in Exchange rules; and proposed Rule 98(c)(7) would maintain the existing requirement that the member organization maintain information barriers between the DMM unit and any investment banking or research departments.
Under this proposed rule change, member organizations could integrate DMM units with other trading operations within the member organization, including, if applicable, a customer-facing operation. The Commission notes that a DMM unit that is integrated with other market-making operations would be subject to existing rules that prohibit member organizations from disadvantaging their customers or other market participants by improperly capitalizing on a member organization's access to the receipt of material, non-public information. For instance, Rule 5320 generally prohibits a member organization from trading for its own account ahead of customer orders, which means that a member organization operating both a DMM unit, which engages in trading for its own account, and customer-facing operations would need to comply with the Manning Rule
The Commission believes that the proposed rule change is consistent with the Act. The principles-based regulatory approach in the proposal is substantially similar to the existing regulatory approach of NYSE Arca and BATS, while also accounting for the market structure differences (
The Commission notes that the policies and procedures required proposed Rule 98 will be subject to oversight by the Exchange and review by FINRA, and the Commission emphasizes that a member organization operating a DMM unit should be proactive in assuring that its policies and procedures reflect the current state of its business and continue to be reasonably designed to achieve compliance with applicable federal securities law and regulations and with applicable Exchange and FINRA rules. Finally, the Commission notes that existing Exchange rules also prohibit particular misuses of material, non-public information—for example, front-running customer orders—and that FINRA surveillances seek to detect violations of those rules.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to amend the NYSE Arca Options Fee Schedule (“Fee Schedule”) relating to Manual Executions by Firms and Broker Dealers. The Exchange proposes to implement the fee change effective July 1, 2014. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The purpose of this filing is to modify the Exchange's fees on Firm and Broker Dealer Manual Executions to provide a lower rate in certain select symbols.
Currently, a Firm or Broker Dealer order executed Manually on the Floor of the Exchange that is not facilitating a Customer is charged $0.25 per contract.
The Exchange is proposing a rate of $0.12 per contract for Firm and Broker Dealer orders for select symbols that are active issues with narrow spreads and a competitive distribution of market share among the exchanges.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
The Exchange believes that the proposed special rate for Firm and Broker Dealer orders in select symbols is reasonable as it is within the general range of transaction fees for manual transactions. The proposed special rate for select symbols is reasonably designed to increase the competitiveness of the Exchange with other options exchanges that also offer increased incentives for higher volume symbols.
It is also not unfairly discriminatory to provide for a reduced fee for Firm and Broker Dealer orders in select symbols to attract business in certain issues to the Floor. Firms and Broker Dealers are generally represented on the Floor by Floor Brokers and providing a reduced fee in certain symbols incents them to have their orders executed on the Trading Floor where other participants are already present. Further, the proposal is not unfairly discriminatory in its treatment of Firms and Broker Dealers vis-à-vis Market Makers because Firms and Broker Dealers have their orders brought to the Floor for execution whereas Market Makers are providing liquidity for the orders. Market Makers are present and obligated to respond to a call for markets, and in return, Market Makers are charged a lower fee in all Manual executions, with the exception being select symbols. In addition, the Exchange believes that by providing a lower fee to Firm and Broker Dealer orders brought to the Floor in a highly competitive issue, Market Makers are provided a greater opportunity to interact with order flow, which in turn benefits market participants.
The proposed fee change is also not unfairly discriminatory because the reduced fee is available to any Firm or Broker Dealer.
Additionally, the proposed fee is an equitable allocation of fees because the intent is to create an incentive for non-Market Maker order flow to the Exchange, which will provide additional opportunities for Market Makers and other participants alike.
Finally, the Exchange believes that it is subject to significant competitive forces, as described below in the Exchange's statement regarding the burden on competition.
For these reasons, the Exchange believes that the proposal is consistent with the Act.
In accordance with Section 6(b)(8) of the Act,
The Exchange also believes that the proposed fee change will increase competition among exchanges where market share is very fairly spread out amongst five of the twelve exchanges, but where, in this active issue, one exchange has a disproportionate amount (30%) of market share. The Exchange believes that the proposed fee change may provide a competitive incentive to market participants. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues, and providing a reduced fee in certain select symbols for Firm and Broker Dealer orders that participate in Manual Executions allows OTP firms to attract additional business which benefits all participants. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment.
No written comments were solicited or received with respect to the proposed rule change.
The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A)
At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B)
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
FINRA is proposing to extend to July 17, 2015 the implementation of FINRA Rule 4240 (Margin Requirements for Credit Default Swaps). FINRA Rule 4240 implements an interim pilot program with respect to margin requirements for certain transactions in credit default swaps that are security-based swaps.
The text of the proposed rule change is available on FINRA's Web site at
In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
On May 22, 2009, the Commission approved FINRA Rule 4240,
As explained in the Approval Order, FINRA Rule 4240, coterminous with certain Commission actions, was intended to address concerns arising from systemic risk posed by CDS, including, among other things, risks to the financial system arising from the lack of a central clearing counterparty to clear and settle CDS.
Pursuant to Title VII of the Dodd-Frank Act, the CFTC and the Commission are engaged in ongoing rulemaking with respect to swaps and security-based swaps.
FINRA has filed the proposed rule change for immediate effectiveness and has requested that the SEC waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing, such that FINRA can implement the proposed rule change immediately. The proposed rule change will expire on July 17, 2015.
FINRA believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act,
FINRA does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. FINRA believes that extending the implementation of FINRA Rule 4240 for a limited period, to July 17, 2015, in light of the continuing development of the CDS business within the framework of the Dodd-Frank Act and pending the final implementation of new CFTC and SEC rules pursuant to Title VII of that legislation, helps to promote stability in the financial markets and regulatory certainty for members.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act
FINRA has requested that the Commission waive the five-day pre-filing notice requirement specified in Rule 19b–4(f)(6)(iii) under the Act.
FINRA also has requested that the Commission waive the 30-day operative delay, so that the proposed rule change may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
Copies of such filing also will be available for inspection and copying at the principal office of FINRA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–FINRA–2014–029 and should be submitted on or before July 30, 2014.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act” or “Exchange Act”),
CME is filing proposed rule changes that are limited to its business as a derivatives clearing organization (“DCO”). More specifically, the proposed rule changes contain amendments to certain aspects of CME's settlement procedures for five of CME's Cleared Over-the-Counter Foreign Exchange Spot, Forward and Swap Contracts.
In its filing with the Commission, CME included statements concerning the purpose and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. CME has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
CME is registered as a DCO with the Commodity Futures Trading Commission (“CFTC”) and offers clearing services for many different futures and swaps products. The proposed rule changes that are the subject of this filing are limited to CME's business as a DCO offering clearing services for CFTC-regulated swaps products. CME currently offers clearing services for cleared-only OTC FX contracts on a number of different currency pairs. These CME Cleared OTC FX Spot, Forward and Swap Contracts are non-deliverable foreign currency forward contracts and, as such, are considered to be “swaps” under applicable regulatory definitions.
The amendments would impact the following CME rules:
• CME Rule 277H.02.A.—Day of Cash Settlement and 277H.02.B.—[Reserved] and the addition of an Interpretation of Chapter 277H of Cleared OTC U.S. Dollar/Peruvian Nuevo Sol (USD/PEN) Spot, Forwards and Swaps Contracts (Rulebook Chapter: 277H; Code: USDPEN);
• CME Rule 273H.02.A.—Day of Cash Settlement and 273H.02.B.—[Reserved] and the addition of an Interpretation of Chapter 273H of Cleared OTC U.S. Dollar/Columbian Peso (USD/COP) Spot, Forwards and Swaps Contracts (Rulebook Chapter: 273H; Code: USDCOP);
• CME Rule 274H.02.B.—Procedures if No Cash Settlement Price is Available of Cleared OTC U.S. Dollar/Chilean Peso (USD/CLP) Spot, Forwards and Swaps Contracts (Rulebook Chapter: 274H; Code: USDCLP);
• CME Rule 257H.02.A.—Day of Cash Settlement of Cleared OTC U.S. Dollar/Brazilian Real (USD/BRL) Spot, Forwards and Swaps Contracts (Rulebook Chapter: 257H; Code: USDBRL); and
• CME Rule 283H.02.A.—Day of Cash Settlement of Cleared OTC U.S. Dollar/Philippines Peso (USD/PHP) Spot, Forwards and Swaps Contracts (Rulebook Chapter: 283H; Code: USDPHP).
In summary, the amendments would modify the rules above to align them with procedures currently used in the over-the-counter (OTC) non-deliverable forward (NDF) market in order to reduce basis risk for market participants.
The rules governing the cleared only USD/PEN and USD/COP contracts are being conformed to internationally accepted practices. The amendments would include new procedures to settle these contracts to the EMTA COP/EMTA PEN Indicative Survey Rate, as applicable, when the “Tasa Representativa del Mercado or TRM” Colombian peso per U.S. dollar rate or the “PEN INTERBANK AVE (PEN05)” Peruvian Nuevo Sol per U.S. dollar rate, as applicable, are unavailable. The new procedures are designed to follow current cash market practices by instituting certain back-up survey processes that would be available in the event the primary survey rates are unavailable. The back-up process is administered by EMTA, a prominent trade group for the emerging markets trading and investment community, and involves the consolidation of survey results gathered through polling of a set of participating banks.
The amendments to the USD/BRL and USD/PPH contracts are also designed to conform the rules to internationally accepted practices. For example, the amendments specify that, for each applicable cleared contract for the valid value date for cash settlement in one or two business days, as applicable, for the appropriate currency. Each contract would be liquidated under the rules by cash settlement at a price equal to the daily final settlement price.
The amendments to the USD/BRL and USD/PHP contracts are also designed to conform the rules to internationally accepted practices. For example, Rule 257H.02.A is being amended to read as follows: “Each Cleared OTC Contract, for a valid value date for cash settlement in two Business Days, shall be liquidated by cash settlement at a price equal to the daily Final Settlement Price for that day.” The previous formulation of Rule 257H.02.A specified one business day. In contrast, the language of Rule 283H.02.A is being amended to specify: “Each Cleared OTC Contract, for the valid value date for cash settlement in one Business Day, shall be liquidated by cash settlement at a price equal to the daily Final Settlement Price (FSP) for that day.” The previous formulation of Rule 283H.02.A specified two business days.
CME is amending the CME Rulebook regarding the USD/CLP contract to specify that in the event that the “CLP DÓLAR OBS (CLP10)” Chilean pesos per U.S. dollar rate is not published on a valid date for cash settlement, and the EMTA CLP Indicative Survey does not provide a rate, then Force Majeure shall be in effect.
The changes that are described in this filing are limited to CME's business as a DCO clearing products under the exclusive jurisdiction of the CFTC and do not materially impact CME's security-based swap clearing business in any way. The changes will be effective on filing. CME notes that it has also certified the proposed rule changes that are the subject of this filing to its primary regulator, the CFTC, in a separate filing, CME Submission No. 14–175. The text of the CME proposed rule amendments is attached as Exhibit 5 to CME's filing with the Commission, with additions underlined and deletions in brackets.
CME believes the proposed rule changes are consistent with the requirements of the Exchange Act including Section 17A of the Exchange Act.
Furthermore, the proposed changes are limited in their effect to products offered under CME's authority to act as a DCO. The products that are the subject of this filing are under the exclusive jurisdiction of the CFTC. As such, the proposed CME changes are limited to CME's activities as a DCO clearing swaps that are not security-based swaps, futures that are not security futures and forwards that are not security forwards. CME notes that the policies of the CFTC with respect to administering the Commodity Exchange Act are comparable to a number of the policies underlying the Exchange Act, such as promoting market transparency for over-the-counter derivatives markets, promoting the prompt and accurate clearance of transactions and protecting investors and the public interest.
Because the proposed changes are limited in their effect to OTC FX products offered under CME's authority to act as a DCO, the proposed changes are properly classified as effecting a change in an existing service of CME that:
(a) primarily affects the clearing operations of CME with respect to products that are not securities, including futures that are not security futures, swaps that are not security-based swaps or mixed swaps; and forwards that are not security forwards; and
(b) does not significantly affect any securities clearing operations of CME or any rights or obligations of CME with respect to securities clearing or persons using such securities-clearing service.
CME does not believe that the proposed rule change will have any impact, or impose any burden, on competition. The proposed amendments are designed to align CME's current rules related to five OTC FX swap contracts more closely with procedures currently used in the OTC NDF market for the purpose of reducing basis risk for market participants and are operational processing changes. These operational processing changes will help reduce market participants' basis risk and should not be seen to impact competition.
CME has not solicited, and does not intend to solicit, comments regarding this proposed rule change. CME has not received any unsolicited written comments from interested parties.
The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (“Managed Fund Shares”): WBI SMID Tactical Growth Shares; WBI SMID Tactical Value Shares; WBI SMID Tactical Yield Shares; WBI SMID Tactical Select Shares; WBI Large Cap Tactical Growth Shares; WBI Large Cap Tactical Value Shares; WBI Large Cap Tactical Yield Shares; WBI Large Cap Tactical Select Shares; WBI Tactical Income Shares; and WBI Tactical High Income Shares. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to list and trade shares (“Shares”) of the following under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares
Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund's portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund's portfolio. Commentary .06 to Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the establishment of a “fire wall” between the investment adviser and the broker-dealer reflects the applicable open-end fund's portfolio, not an underlying benchmark index, as is the case with index-based funds.
The Adviser is a registered broker-dealer and is affiliated with a broker-dealer. The Sub-Adviser is also affiliated with a broker-dealer. In such capacity, the Adviser and Sub-Adviser will implement a firewall with respect to its relevant personnel and its broker-dealer affiliates regarding access to information concerning the composition and/or changes to a portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. In the future, should (a) the Adviser and/or Sub-Adviser become newly affiliated with another broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a firewall with respect to such relevant personnel and/or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to a portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio.
Each Fund will be an actively-managed exchange-traded fund (“ETF”) and will not seek to replicate the performance of a specified index.
According to the Registration Statement, the Sub-Adviser will manage each Fund's portfolio based on a proprietary selection process as described below (the “Selection Process”). The Selection Process will attempt to provide consistent, attractive returns net of expenses with potentially less volatility and risk to capital than traditional approaches, whatever market conditions may be. Each Fund will define an absolute return approach to investment management in this way. The Selection Process will include a buy discipline and a sell discipline as described below.
The Sub-Adviser will use quantitative computer screening of fundamental stock information to evaluate domestic and foreign small-capitalization and mid-capitalization equity securities in an attempt to find companies with attractive characteristics worldwide. Dividend payments may be considered as part of the evaluation process.
Once securities are identified, the Sub-Adviser will utilize an overlay of technical analysis to confirm timeliness of security purchases. The Sub-Adviser will then add qualifying securities using available cash within the parameters of a Fund's target allocations. In addition, the Sub-Adviser will use a proprietary bond model to assess the appropriate duration of any exposure to debt securities. Duration is a measure of a fixed income security's expected price sensitivity to changes in interest rates. Securities with longer durations are expected to experience greater price movements than securities with shorter durations for the same change in prevailing interest rates. A portion of a Fund's bond exposure may also be invested to pursue perceived opportunities in varying segments of the debt market. This systematic process of identifying, evaluating, and purchasing securities will constitute the Sub-Adviser's buy discipline for each Fund.
According to the Registration Statement, once securities are purchased, the Sub-Adviser will maintain a strict sell discipline that attempts to control the effects of the volatility of each invested position on a Fund's value. If the security's price stays within this range of acceptable prices, the security will remain in a Fund. If the security's price falls below the bottom of this acceptable price range, the security will be sold. This will result in a responsive process that actively adjusts a Fund's allocation by causing it to become more fully invested or by raising cash to protect capital. During periods of high market volatility a significant amount of Fund holdings may be sold, resulting in a large allocation to cash in a Fund. The Selection Process will be run daily and cash will remain in the portfolio until a cash equivalent or a new security is purchased.
According to the Registration Statement, each Fund will be, under normal market conditions,
However, each Fund may temporarily depart from its principal investment strategy by making short-term investments in cash, cash equivalents, high-quality short-term debt securities, and money market instruments for temporary defensive purposes in response to adverse market, economic or political conditions. According to the Registration Statement, each Fund may acquire the following short-term investments: (1) Certificates of deposit issued by commercial banks as well as savings banks or savings and loan associations; (2) bankers' acceptances; (3) time deposits; and (4) commercial paper and short term notes rated at the time of purchase “A–2” or higher by Standard & Poor's®, “Prime-1” by Moody's® Investors Service, Inc., or similarly rated by another nationally recognized statistical rating organization or, if unrated, will be determined by the Sub-Adviser to be of comparable quality, as well as U.S. Government obligations.
According to the Registration Statement, certain Funds may use American depositary receipts (“ADR”), European depositary receipts (“EDR”) and Global depositary receipts (“GDR”) (collectively, “Depositary Receipts”) when, in the discretion of the Sub-Adviser, the use of such securities is warranted for liquidity, pricing, timing or other reasons. No Fund will invest more than 10% of its net assets in unsponsored Depositary Receipts.
According to the Registration Statement, each Fund that invests primarily in equities as described further below may also invest up to 20% of its principal investment assets in high-yield bonds (also known as “junk bonds”).
According to the Registration Statement, the WBI SMID Tactical Growth Shares will seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
According to the Registration Statement, under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed equity securities of small-capitalization and mid-capitalization
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, master limited partnerships (exchange-traded businesses organized as partnerships (“MLPs”)), and exchange-traded real estate investment trusts (“REITs”). The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund's principal investments may also consist of ETFs
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, the Fund may invest up to 20% of the Fund's net assets in large-capitalization equities,
The Fund may invest in the following types of debt securities: Fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in agency and non-agency residential mortgage-backed securities (“RMBS”) and asset-backed securities.
In addition, the Fund may utilize equity options for individual securities including writing (selling) covered calls, buying puts, using combinations of calls and puts, using combinations of calls and combinations of puts, and entering into cap and floor agreements.
The Fund may also enter into the following types of financial instruments: futures overlying equity indexes, interest rates, debt instruments, and currencies; government debt repurchase agreements; depository receipt conversion swaps
According to the Registration Statement, the WBI SMID Tactical Value Shares will seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
According to the Registration Statement, under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed equity securities of small-capitalization and mid-capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, the Fund may invest up to 20% of its net assets in large-capitalization equities, domestic and foreign debt securities (including junk bonds), ETFs (other than ETFs noted in the Principal Investments section for the Fund, above, that invest predominantly in small-capitalization and mid-capitalization equity securities), and/or in Option [sic] Strategies to enhance the Fund's returns or to mitigate risk and volatility. The Fund may also use Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI SMID Tactical Yield Share will seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed dividend-paying equity securities of small-capitalization and mid-capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, the Fund may invest up to 20% of the Fund's net assets in large-capitalization equities, domestic and foreign debt securities, high-yield bonds and/or in Option [sic] Strategies and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI SMID Tactical Select Shares will seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed equity securities of small-capitalization and mid-capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund may also invest up to 20% of the Fund's principal investments in junk bonds. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, the Fund may invest up to 20% of the Fund's net assets in large-capitalization equities, domestic and foreign debt securities, high-yield bonds and/or in Option [sic] Strategies and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI Large Cap Tactical Growth Shares objectives are to seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed equity securities of large capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, up to 20% of the Fund's net assets may be invested in small-capitalization and mid-capitalization equities, domestic and foreign debt securities, and high-yield bonds and/or in Option [sic] Strategies and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI Large Cap Tactical Value Shares objectives are to seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed equity securities of large capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund may also invest up to 20% of the Fund's principal investments in junk bonds. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, up to 20% of the Fund's net assets may be invested in small-capitalization and mid-capitalization equities, domestic and foreign debt securities, and high-yield bonds and/or in Option [sic] Strategies and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI Large Cap Tactical Yield Shares will seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed dividend-paying equity securities of large capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund may also invest up to 20% of the Fund's principal investments in high-yield bonds. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI Large Cap Tactical Select Shares objectives are to seek long-term capital appreciation and the potential for current income, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in the exchange-listed equity securities of large capitalization domestic and foreign companies selected by the Sub-Adviser utilizing the Selection Process.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles, MLPs, and REITs.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund may also invest up to 20% of the Fund's principal investments in junk bonds. The Fund's principal investments may also consist of ETFs that invest predominantly in small-capitalization and mid-capitalization equity securities and will be considered small-capitalization and mid-capitalization equity securities for purposes of the Fund's equity allocation target.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, up to 20% of the Fund's net assets may be invested in small-capitalization and mid-capitalization equities, domestic and foreign debt securities, and high-yield bonds and/or in Option [sic] Strategies described above and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, and high-yield bonds. The Fund may also invest in debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
According to the Registration Statement, the WBI Tactical Income Shares objectives are to seek current income with the potential for long-term capital appreciation, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in income producing debt and exchange listed equity securities of foreign and domestic issuers, including the securities of foreign and domestic corporate and governmental entities selected by the Sub-Adviser utilizing the Selection Process.
The types of debt securities in which the Fund will invest are corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, high-yield bonds, variable and floating rate securities, and debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles [sic] MLPs, and REITs. The Fund may invest in companies of any size market capitalization.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund may also invest up to 40% of the Fund's principal investments in junk bonds. The Fund's principal investments may also consist of ETFs that invest predominantly in debt securities and will be considered debt securities for the purposes of the Fund's debt target allocation and investments in other investment companies that invest predominantly in dividend-paying equity securities are considered dividend-paying equity securities for the purposes of the fund's income producing securities target allocation.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, up to 20% of the Fund's net assets may be invested in exchange listed foreign and domestic equities (other than the foreign and domestic equities noted in the Principal Investment section for the Fund, above), ETFs, ETNs (other than the debt-based ETFs and ETNs noted in the Principal Investment section for the Fund, above), and/or in Option [sic] Strategies and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
According to the Registration Statement, the WBI Tactical High Income Shares investment objectives are to seek high current income with the potential for long-term capital appreciation, while also seeking to protect principal during unfavorable market conditions.
Under normal market conditions, the Fund will invest at least 80% of its net assets in income producing debt and exchange listed equity securities of foreign and domestic issuers, including the securities of foreign and domestic corporate and governmental entities selected by the Sub-Adviser utilizing the Selection Process.
The types of debt securities in which the Fund will invest are corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities, high-yield bonds, variable and floating rate securities, and debt-based ETNs and ETFs. The Fund expects to invest in debt securities of all maturities, from less than one year up to thirty years, depending on the portfolio manager's assessment of the risks and opportunities along the yield curve.
The types of equity securities in which the Fund will invest are common stocks, preferred stocks, rights, warrants, convertibles [sic] MLPs, and REITs. The Fund may invest in companies of any size market capitalization.
The Fund may invest up to 50% of the Fund's principal investments in the securities of issuers in emerging markets, which could consist of Depositary Receipts, dollar denominated foreign securities and foreign equity securities. The Fund may also invest up to 80% of the Fund's principal investments in junk bonds. The Fund's principal investments may also consist of ETFs that invest predominantly in debt securities and will be considered debt securities for the purposes of the Fund's debt target allocation and investments in other investment companies that invest predominantly in dividend-paying equity securities are considered dividend-paying equity securities for the purposes of the fund's income producing securities target allocation.
While the Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, the Fund may directly invest in certain other investments, as described below. According to the Registration Statement, up to 20% of the Fund's net assets may be invested in exchange listed foreign and domestic equities (other than the foreign and domestic equities noted in the Principal Investment section for the Fund, above), ETFs, ETNs (other than the debt-based ETFs and ETNs noted in the Principal Investment section for the Fund, above), and/or in Option [sic] Strategies and Financial Instruments. Cash balances arising from the use of Financial Instruments typically will be held in money market instruments.
Each Fund will seek to qualify for treatment as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended.
As part of its non-principal strategy, a Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment), including Rule 144A securities.
According to the Registration Statement, a Fund will not invest more than 25% of its total assets, directly or indirectly, through underlying ETFs, in an individual industry, as defined by the Standard Industrial Classification Codes utilized by the Division of Corporate Finance of the Commission.
According to the Registration Statement, a Fund may not purchase or sell physical commodities or physical commodity contracts unless acquired as a result of ownership of securities or other instruments issued by persons that purchase or sell commodities or commodities contracts, but this shall not prevent a Fund from purchasing, selling and entering into financial futures contracts (including futures contracts on indices of securities, interest rates and currencies), options on financial futures contracts (including futures contracts on indices of securities, interest rates and currencies), warrants, swaps, forward contracts, or other derivative instruments that are not related to physical commodities.
According to the Registration Statement, each Fund will calculate net asset value (“NAV”) of the Shares of the respective Fund using the NAV of the respective Fund. NAV per share for each Fund will be computed by dividing the value of the net assets of a Fund (
For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available will be valued at market value. Market value will generally be determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.
In calculating NAV, each Fund's exchange traded equity investments, including domestic and foreign common stocks, preferred stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and REITS, will be valued at market value, which will generally be determined using the last reported official closing or last trading price on the exchange or market on which the security is primarily traded at the time of valuation or, if no sale has occurred, at the last quoted bid price on the primary market or exchange on which they are traded.
Unsponsored Depositary Receipts will be valued on the basis of the market closing price on the exchange where the stock of the foreign issuer that underlies the Depositary Receipt is listed. Debt securities, including fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities and high-yield bonds will be valued using market quotations when available or other equivalent indications of value provided by a third-party pricing service. Mortgage-backed securities, asset-backed securities, money market instruments and Financial Instruments (with the exception of reverse repurchase agreements, discussed below) will be
Any such third-party pricing service may use a variety of methodologies to value some or all of a Fund's debt securities to determine the market price. For example, the prices of securities with characteristics similar to those held by each Fund may be used to assist with the pricing process. In addition, the pricing service may use proprietary pricing models. In certain cases, some of a Fund's debt securities may be valued at the mean between the last available bid and ask prices for such securities or, if such prices are not available, at prices for securities of comparable maturity, quality, and type.
Short-term debt instruments having a remaining maturity of 60 days or less will generally be valued at amortized cost, which approximates market value.
Exchange traded equity options are generally valued on a basis of quotes obtained from a quotation reporting system, established market makers, or pricing services. Non-exchange-traded derivatives, including forwards, swaps, and certain options, will normally be valued on the basis of quotes obtained from brokers and dealers or pricing services using data reflecting the closing of the principal markets for those assets. Prices obtained from independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics.
OTC options may be valued intraday through option valuation models (
Caps and floors will be valued using the exchange closing prices on the interest rate options.
Reverse repurchase agreements and Rule 144A securities will generally be valued at bid prices received from independent pricing services as of the announced closing time for trading in such instruments.
Investments that may be valued using fair value pricing include, but are not limited to: (1) Securities that are not actively traded, including “restricted” securities and securities received in private placements for which there is no public market; (2) securities of an issuer that becomes bankrupt or enters into a restructuring; (3) securities whose trading has been halted or suspended; and (4) foreign securities traded on exchanges that close before a Fund's NAV is calculated. The NAV will be calculated by the Administrator and determined each Business Day as of the close of regular trading on the Exchange (ordinarily 4:00 p.m., Eastern time (“E.T.”). The Shares of each Fund will not be priced on days on which the Exchange is closed for trading.
According to the Registration Statement, an independent third party calculator, initially the Exchange, will calculate the Indicative Intra-Day Value (“IIV”) for each Fund during hours of trading on the Exchange by dividing the “Estimated Fund Value” as of the time of the calculation by the total number of outstanding Shares of that Fund. “Estimated Fund Value” is the sum of the estimated amount of cash held in a Fund's portfolio, the estimated amount of accrued interest owed to a Fund and the estimated value of the securities held in a Fund's portfolio, minus the estimated amount of a Fund's liabilities. The IIV will be calculated based on the same portfolio holdings disclosed on the Trust's Web site. The IIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session.
According to the Registration Statement, each Fund will provide the independent third party calculator with information to calculate the IIV, but a Fund will not be involved in the actual calculation of the IIV and are not responsible for the calculation or dissemination of the IIV. Each Fund makes no warranty as to the accuracy of the IIV. The IIV should not be viewed as a “real-time” update of NAV because the IIV may not be calculated in the same manner as NAV, which will be computed once per day.
In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600 (c)(3), will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session.
The IIV is the same as the Portfolio Indicative Value as defined in NYSE Arca Equities Rule 8.600 (c)(3).
According to the Registration Statement, each Fund will offer and issue Shares only in aggregations of a specified number of Shares (each, a “Creation Unit”). Creation Unit sizes will be 50,000 Shares per Creation Unit. The Creation Unit size for a Fund may change. Each Fund will issue and redeem Shares only in Creation Units at the NAV next determined after receipt of an order on a continuous basis on a “Business Day”. A Business Day with respect to a Fund will be, generally, any day on which the Exchange is open for business. The NAV of a Fund will be determined once each Business Day, normally as of the close of trading on the NYSE (normally, 4:00 p.m. E.T.). An order to purchase or redeem Creation Units will be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to the applicable cut-off time (typically required by 4:00 p.m. E.T. or 3:00 p.m. E.T. in the case of custom orders).
The consideration for purchase of a Creation Unit of a Fund will generally consist of the “in-kind” deposit of a designated portfolio of securities (the “Deposit Securities”) per each Creation Unit and a specified cash payment (the “Cash Component”). However, consideration may consist of the cash value of the Deposit Securities (“Deposit Cash”) and the Cash Component.
Together, the Deposit Securities or Deposit Cash, as applicable, and the Cash Component will constitute the “Fund Deposit,” which represents the minimum initial and subsequent investment amount for a Creation Unit of any Fund. The “Cash Component” is an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities or Deposit Cash, as applicable. The Cash Component will serve the function of compensating for any differences between the NAV per Creation Unit and the market value of the Deposit Securities or Deposit Cash, as applicable.
The Custodian, through the National Securities Clearing Corporation (“NSCC”), will make available on each Business Day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m. E.T.), the list of the names and the required number of shares of each Deposit Security or the required amount of Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for a Fund. According to the Registration Statement, the Trust
Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by a Fund through the Transfer Agent and only on a Business Day.
With respect to each Fund, the Custodian, through the NSCC, will make available immediately prior to the opening of business on the Exchange (currently 9:30 a.m. E.T.) on each Business Day, the list of the names and share quantities of each Fund's portfolio securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day (“Fund Securities”).
Redemption proceeds for a Creation Unit typically will be paid in-kind; however, such proceeds may be paid in cash or a combination of in-kind and cash, as determined by the Trust. With respect to in-kind redemptions of a Fund, redemption proceeds for a Creation Unit will consist of Fund Securities as announced by the Custodian on the Business Day of the request for redemption received in proper form plus or minus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of a Fund's Securities (the “Cash Redemption Amount”), less a fixed redemption transaction fee and any applicable additional variable charge. The Adviser represents that all persons redeeming Shares during a Business Day will be treated in the same manner with respect to payment of proceeds in-kind, in cash, or in a combination thereof.
The Trust may, in its discretion, exercise its option to redeem Shares in cash, and the redeeming Shareholders will be required to receive its redemption proceeds in cash, as described in the Registration Statement. The investor will receive a cash payment equal to the NAV of its Shares based on the NAV of Shares of the relevant Fund next determined after the redemption request is received in proper form. The Adviser represents that, to the extent the Trust effects a redemption of Shares in cash, such transactions will be effected in the same manner for all Authorized Participants.
Each Fund's Web site,
On a daily basis, each Fund will disclose on the Fund's Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, the individual identifier (CUSIP) or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund's portfolio. The Web site information will be publicly available at no charge.
In addition, a basket composition file, which includes the security names and share quantities required to be delivered in exchange for Fund Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the NYSE via the NSCC. The basket represents one Creation Unit of each Fund.
Investors can also obtain the Trust's Statement of Additional Information (“SAI”), Shareholder Reports and Form N–CSR. The Trust's SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR may be viewed on-screen or downloaded from the Commission's Web site at
Quotation and last-sale information for the Shares and underlying domestic exchange listed equities securities, including common stocks, preferred stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and REITS, will be available via the Consolidated Tape Association (“CTA”) high-speed line and from the national securities exchange on which they are listed. Quotation and last-sale information for domestic exchange-listed options contracts will be available via the Options Price Reporting Authority.
Price information regarding equity securities and options traded on non-U.S. securities exchanges will be available from the exchanges trading such securities, automated quotation systems, published or other public sources, or on-line information services such as Bloomberg or Reuters.
Quotation information for unsponsored Depositary Receipts will be available from major market data vendors. Quotation information for non-exchange-traded derivatives, including OTC options, forwards, and swaps may be obtained from brokers and dealers who make markets in such securities or major market data vendors. Price information on futures and options on futures will be available from major market data vendors and from securities and futures exchanges, as applicable.
Quotation information for debt securities, including fixed, floating and variable corporate debt securities, U.S. Government securities, debt securities of foreign issuers, sovereign debt securities, U.S. government agency securities and high-yield bonds, will be
Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees (including money manager and other advisory or management fees), portfolio holdings disclosure policies, distributions and taxes is included in the Registration Statement. All terms relating to each Fund that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement.
With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of each Fund.
Trading in Shares of a Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the Financial Instruments comprising the Disclosed Portfolio of a Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of a Fund may be halted.
The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (“MPV”) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001.
The Shares of each Fund will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), each Fund's Reporting Authority will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of each Fund's portfolio. The Exchange represents that, for initial and/or continued listing, each Fund will be in compliance with Rule 10A–3
The Exchange represents that trading in the Shares will be subject to the existing trading surveillances administered by the Financial Industry Regulatory Authority (“FINRA”) on behalf of the Exchange that are designed to detect violations of Exchange rules and applicable federal securities laws.
The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, underlying exchange-traded equity securities (including, without limitation, domestic and foreign common stocks, preferred stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and REITS), exchange-traded options, futures, options on futures contracts and options on securities indices with markets and entities that are members of ISG, and FINRA may obtain, on behalf of the Exchange, trading information regarding trading in the Shares, underlying exchange-traded equity securities, exchange-traded options, futures, options on futures contracts and options on securities indices from such markets or entities. In addition, the Exchange may obtain information regarding trading in the Shares, underlying exchange-traded equity securities (including, without limitation, domestic and foreign common stocks, preferred stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and REITS), exchange-traded options, futures, options on futures contracts and options on securities indices from markets and entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.
As noted above, not more than 10% of the net assets of a Fund in the aggregate shall consist of unsponsored Depositary Receipts. Not more than 10% of the net assets of each Fund in the aggregate invested in exchange traded equity securities shall consist of equity securities whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. Furthermore, not more than 10% of the net assets of a Fund in the aggregate shall consist of futures contracts or options contracts whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement.
In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees.
Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (“ETP”) Holders in an Information Bulletin (“Bulletin”) of the special characteristics and risks associated with trading the Shares.
In addition, the Bulletin will reference that a Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. E.T. each trading day.
The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5)
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Funds will continue to comply with all initial and continued listing requirements under NYSE Arca Equities Rule 8.600.
FINRA, on behalf of the Exchange, has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, underlying exchange-traded equity securities (including, without limitation, domestic and foreign common stocks, preferred stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and REITS), exchange-traded options, futures, options on futures contracts and options on securities indices with markets and entities that are members of ISG, and FINRA may obtain, on behalf of the Exchange, trading information regarding trading in the Shares, underlying exchange-traded equity securities, exchange-traded options, futures, options on futures contracts and options on securities indices from such markets or entities. In addition, the Exchange may obtain information regarding trading in the Shares, underlying exchange-traded equity securities (including, without limitation, domestic and foreign common stocks, preferred stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and REITS), exchange-traded options, futures, options on futures contracts and options on securities indices from markets and entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities reported to FINRA's TRACE.
As noted above, not more than 10% of the net assets of a Fund in the aggregate shall consist of unsponsored Depositary Receipts. Not more than 10% of the net assets of each Fund in the aggregate invested in exchange traded equity securities shall consist of equity securities whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. Furthermore, not more than 10% of the net assets of a Fund in the aggregate shall consist of futures contracts or options contracts whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement.
Each Fund's investments will, under normal circumstances, be consistent with its investment objective. Each Fund will not hold more than 15% of its net assets in illiquid securities, including Rule 144A securities. Each Fund will not invest in leveraged or inverse leveraged (
The Adviser is a registered broker-dealer and is affiliated with a broker-dealer. The Sub-Adviser is also affiliated with a broker-dealer. The Adviser and Sub-Adviser will accordingly implement a firewall with respect to its relevant personnel and its broker-dealer affiliate regarding access to information concerning the composition and/or changes to a portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. In the future, should (a) the Adviser and/or Sub-Adviser become newly affiliated with another broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a firewall with respect to such relevant personnel and/or its broker-dealer affiliate to accomplish the same purposes discussed immediately above.
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Adviser will establish a firewall as discussed immediately above. The Exchange will also obtain a representation from the issuer of the Shares that the NAVs per Share will be calculated daily and that the NAVs and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding each Fund and the Shares, thereby promoting market transparency.
Each Fund's portfolio holdings will be disclosed on its Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Moreover, the IIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last-sale information will be available via the CTA high-speed line. The Web site will include a form of the prospectus for each Fund and additional data relating to a Fund's NAVs and other applicable quantitative information. On a daily basis, the Fund will disclose for each portfolio holding of the Fund the following information: ticker symbol, the individual identifier (CUSIP) or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if
Trading in Shares of each Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of each Fund may be halted. In addition, as noted above, investors will have ready access to information regarding each Fund's holdings, the IIV, the Disclosed Portfolio, and quotation and last-sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, FINRA, on behalf of the Exchange, has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. In addition, as noted above, investors will have ready access to information regarding each Fund's holdings, the IIV, the Disclosed Portfolio, and quotation and last-sale information for the Shares.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace.
No written comments were solicited or received with respect to the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Exchange Act”)
On June 18, 2014, NFA also filed the proposed rule change with the Commodity Futures Trading Commission (“CFTC”) and requested that the CFTC make a determination
NFA Compliance Rule 2–9(b) (“Rule 2–9(b)”) and its related Interpretive Notice entitled “NFA Compliance Rule 2–9: Enhanced Supervisory Requirements” (“Notice”) require NFA member firms (“Members”) that meet certain criteria identified by NFA's Board of Directors (“Board”) to comply with specific enhanced supervisory requirements that are designed to prevent abusive sales practices. One way a Member firm triggers the enhanced supervisory requirements is to employ a certain specified number or percentage of associated persons (APs) that have previously been associated with another firm that was a “Disciplined Firm” (as defined in the Notice). The Notice, however, permits a Member firm to exclude certain of those APs and principals who meet very specific criteria identified by the Board from its determination of whether it triggers the enhanced supervisory requirements. The amendment to the Notice revises this criterion to provide limited additional relief to a few individual principals who would currently not be excluded from a Member firm's determination of whether it triggers the enhanced supervisory requirements.
The text of the proposed rule change is available at the principal office of NFA, on NFA's Web site at
In its filing with the Commission, NFA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NFA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.
Section 15A(k) of the Exchange Act
Rule 2–9(b) authorizes NFA's Board to require Members that meet certain criteria established by the Board to comply with specific enhanced supervisory requirements designed to prevent abusive sales practices. The related Notice specifies the criteria that subject a Member firm to the enhanced supervisory requirements and the enhanced supervisory requirements that must be followed.
As stated above, under Rule 2–9(b) and the Notice, a Member firm with a certain number or percentage of APs who were previously employed or associated with a Disciplined Firm is required to comply with the enhanced supervisory requirements. The Notice also provides that any Member with a principal who is or was a principal at another Member that was required to comply with the enhanced supervisory requirements must itself adopt the enhanced supervisory requirements or seek a waiver. The Notice further provides, however, that if the principal satisfies certain criteria in the Notice, the principal will not cause the Member to comply with the enhanced supervisory requirements.
NFA's Waiver Committee suggested that NFA make a minor modification to the Notice to provide limited additional relief to a few individual principals who the Waiver Committee believes are similarly situated to the current exempt group of principals but who do not benefit from the relief contemplated in creating the exemption because the principal does not satisfy the criteria that he/she was a principal at only one firm that was subject to the enhanced supervisory requirements. The Waiver Committee is concerned with respect to situations where a Member firm becomes subject to the enhanced supervisory requirements by virtue of having a significant percentage of APs who had formerly worked at Disciplined Firms. If a principal of that firm is also a principal of another Member firm, then the second Member firm automatically is subject to the enhanced supervisory requirements simultaneously with the original firm because the second Member firm now has a principal who is a principal of another Member (i.e., the first Member) that is subject to the enhanced supervisory requirements. There have been several instances where both Members have successfully petitioned the Waiver Committee for full waivers; however, the principals of those Members do not qualify for the current exemption because they have been principals of more than one such Member subject to the enhanced supervisory requirements.
The Waiver Committee requested that NFA modify the exemption to eliminate the requirement that the principal could only have been a principal of one firm that has been subject to the enhanced supervisory requirements and replace it with the requirement that the most recent firm in the principal's history that was subject to the enhanced supervisory requirements either had received a full waiver from those requirements or had abided by the requirements for two years and is no longer subject to the requirements. The proposed amendments do not eliminate any of the other requirements including that the individual principal must never have been personally subject to CFTC or NFA disciplinary action or a principal or an AP of a current Disciplined Firm; and that no firm in the principal's history that was subject to the enhanced supervisory requirements has become subject to a sales practice or promotional material based disciplinary action by NFA or the CFTC since becoming subject to the enhanced supervisory requirements.
NFA believes that the proposed rule change is authorized by, and consistent with, Section 15A(k)(2)(B) of the Exchange Act. That section sets out requirements for rules of a futures
NFA does not believe that the proposed rule change would impose any burden on competition. The amendments merely extend existing relief to certain individual principals whose backgrounds the Board has determined do not raise the supervisory concerns that Rule 2–9(b) and the Notice were intended to address.
NFA did not publish the rule changes to its membership for comment. NFA did not receive comment letters concerning the rule changes.
The proposed rule change is not effective because the CFTC has not yet determined that review of the proposed rule change is not necessary.
At any time within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Exchange Act.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On May 1, 2014, NYSE Arca, Inc. (“Exchange” or “NYSE Arca”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1)
The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (“Managed Fund Shares”): PIMCO Foreign Bond Exchange-Traded Fund (U.S. Dollar-Hedged), PIMCO Foreign Bond Exchange-Traded Fund (Unhedged), PIMCO Global Advantage Bond Exchange-Traded Fund, and PIMCO International Advantage Bond Exchange-Traded Fund. The text of the proposed rule change is available on the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements.
The Exchange proposes to list and trade shares (“Shares”) of the following under NYSE Arca Equities Rule 8.600,
The investment manager to the Funds will be Pacific Investment Management Company LLC (“PIMCO” or the “Adviser”). PIMCO Investments LLC will serve as the distributor for the Funds (“Distributor”). State Street Bank & Trust Co. will serve as the custodian and transfer agent for the Funds (“Custodian” or “Transfer Agent”).
Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a “fire wall” between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.
In the event (a) the Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the applicable portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio.
According to the Registration Statement, in selecting investments for each Fund, PIMCO will develop an outlook for interest rates, currency exchange rates and the economy,
With respect to each Fund, in seeking to identify undervalued currencies, PIMCO may consider many factors, including but not limited to, longer-term analysis of relative interest rates, inflation rates, real exchange rates, purchasing power parity, trade account balances and current account balances, as well as other factors that influence exchange rates such as flows, market technical trends and government policies. With respect to fixed income investing, PIMCO will attempt to identify areas of the bond market that are undervalued relative to the rest of the market. PIMCO will identify these areas by grouping fixed income investments into sectors such as money markets, governments, corporates, mortgages, asset-backed and international. Sophisticated proprietary software will then assist in evaluating sectors and pricing specific investments. Once investment opportunities are identified, PIMCO will shift assets among sectors depending upon changes in relative valuations, credit spreads and other factors.
Among other investments described in more detail herein, each Fund may invest in Fixed Income Instruments, which include:
• Securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);
• corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;
• mortgage-backed and other asset-backed securities;
• inflation-indexed bonds issued both by governments and corporations;
• structured notes, including hybrid or “indexed” securities and event-linked bonds;
• bank capital and trust preferred securities;
• loan participations and assignments;
• delayed funding loans and revolving credit facilities;
• bank certificates of deposit, fixed time deposits and bankers' acceptances;
• repurchase agreements on Fixed Income Instruments and reverse repurchase agreements on Fixed Income Instruments;
• debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises (“Municipal Bonds”);
• obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and obligations of international agencies or supranational entities.
A Fund's investments in derivative instruments will be made in accordance with the 1940 Act and consistent with the Fund's investment objective and policies. With respect to each Fund, derivative instruments will include forwards;
As described further below, each Fund will typically use derivative instruments as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. A Fund may also use derivative instruments to enhance returns. To limit the potential risk associated with such transactions, a Fund will segregate or “earmark” assets determined to be liquid by PIMCO in accordance with procedures established by the Trust's Board of Trustees (“Board”) and in accordance with the 1940 Act (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments. These procedures have been adopted consistent with Section 18 of the 1940 Act and related Commission guidance. In addition, each Fund will include appropriate risk disclosure in its
The Adviser believes that derivatives can be an economically attractive substitute for an underlying physical security that each Fund would otherwise purchase. For example, a Fund could purchase Treasury futures contracts instead of physical Treasuries or could sell credit default protection on a corporate bond instead of buying a physical bond. Economic benefits include potentially lower transaction costs or attractive relative valuation of a derivative versus a physical bond (
The Adviser further believes that derivatives can be used as a more liquid means of adjusting portfolio duration as well as targeting specific areas of yield curve exposure, with potentially lower transaction costs than the underlying securities (e.g., interest rate swaps may have lower transaction costs than physical bonds). Similarly, money market futures can be used to gain exposure to short-term interest rates in order to express views on anticipated changes in central bank policy rates. In addition, derivatives can be used to protect client assets through selectively hedging downside (or “tail risks”) in each Fund.
The Adviser believes that the use of derivatives will allow each Fund to selectively add diversifying sources of return from selling options. Option purchases and sales can also be used to hedge specific exposures in the portfolio, and can provide access to return streams available to long-term investors such as the persistent difference between implied and realized volatility. Option strategies can generate income or improve execution prices (
According to the Registration Statement, the Hedged Foreign Bond Fund will seek maximum total return,
The Hedged Foreign Bond Fund will invest primarily in investment grade debt securities, but may invest up to 10% of its total assets in high yield securities (“junk bonds”) rated B or higher by Moody's Investors Service, Inc. (“Moody's”), or equivalently rated by Standard & Poor's Ratings Services (“S&P”) or Fitch, Inc. (“Fitch”), or, if unrated, determined by PIMCO to be of comparable quality,
The Fund's portfolio will include a minimum of 13 non-affiliated issuers.
The Hedged Foreign Bond Fund may invest in securities and instruments that are economically tied to emerging market countries subject to applicable limitations set forth herein.
In furtherance of the Hedged Foreign Bond Fund 80% policy, or with respect to the Fund's other investments, the Hedged Foreign Bond Fund may invest, without limitation, in derivative instruments, subject to applicable law and any other restrictions described herein.
The Hedged Foreign Bond Fund may invest up to 20% of its assets in mortgage-related and other asset-backed securities, although this 20% limitation does not apply to securities issued or guaranteed by Federal agencies and/or U.S. government sponsored instrumentalities.
According to the Registration Statement, the Hedged Foreign Bond Fund will normally limit its foreign currency exposure (from non-U.S. dollar-denominated securities or currencies) to 20% of its total assets. The Fund may engage in foreign currency transactions on a spot (cash) basis and forward basis
The Hedged Foreign Bond Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls).
The Hedged Foreign Bond Fund may invest up to 10% of its total assets in preferred stock, convertible securities and other equity-related securities.
As disclosed in the Registration Statement, the Hedged Foreign Bond Fund may also invest in trade claims,
The Hedged Foreign Bond Fund may enter into repurchase agreements on instruments other than Fixed Income Instruments, in addition to repurchase agreements on Fixed Income Instruments mentioned above, in which the Fund purchases a security from a bank or broker-dealer, which agrees to repurchase the security at the Fund's cost plus interest within a specified time. Repurchase agreements maturing in more than seven days and which may not be terminated within seven days at approximately the amount at which the Fund has valued the agreements will be considered illiquid securities. The Fund may enter into reverse repurchase agreements on instruments other than Fixed Income Instruments, in addition to reverse repurchase agreements on Fixed Income Instruments mentioned above, subject to the Fund's limitations
According to the Registration Statement, the Unhedged Foreign Bond Fund will seek maximum total return, consistent with preservation of capital and prudent investment management. The Fund will seek to achieve its investment objective by investing, under normal circumstances, at least 80% of its assets in Fixed Income Instruments and derivatives based on Fixed Income Instruments that are economically tied to foreign (non-U.S.) countries
The Unhedged Foreign Bond Fund will invest primarily in investment grade debt securities, but may invest up to 10% of its total assets in high yield securities (junk bonds) rated B or higher by Moody's, or equivalently rated by S&P or Fitch, or, if unrated, determined by PIMCO to be of comparable quality,
The Fund's portfolio will include a minimum of 13 non-affiliated issuers.
The Unhedged Foreign Bond Fund may invest in fixed income and equity securities and instruments that are economically tied to emerging market countries, subject to applicable limitations set forth herein.
In furtherance of the Unhedged Foreign Bond Fund 80% policy, or with respect to the Fund's other investments, the Unhedged Foreign Bond Fund may invest, without limitation, in derivative instruments, subject to applicable law and any other restrictions described in the Registration Statement.
The Unhedged Foreign Bond Fund may invest up to 20% of its assets in mortgage-related and other asset-backed securities, although this 20% limitation does not apply to securities issued or guaranteed by Federal agencies and/or U.S. government sponsored instrumentalities.
According to the Registration Statement, the Unhedged Foreign Bond Fund may invest in fixed income and equity securities denominated in foreign (non-U.S.) currencies, engage in foreign currency transactions on a spot (cash) basis and forward basis
The Unhedged Foreign Bond Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The Unhedged Foreign Bond Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis and may engage in short sales.
The Unhedged Foreign Bond Fund may invest up to 10% of its total assets in preferred stock, convertible securities and other equity-related securities.
The Unhedged Foreign Bond Fund may invest in trade claims, privately placed and unregistered securities, and exchange-traded and OTC-traded structured products, including credit-linked securities, commodity-linked notes, and structured notes. The Fund may invest in Brady Bonds.
The Unhedged Foreign Bond Fund may enter into repurchase agreements on instruments other than Fixed Income Instruments, in addition to repurchase agreements on Fixed Income Instruments mentioned above, in which the Fund purchases a security from a bank or broker-dealer, which agrees to purchase the security at the Fund's cost plus interest within a specified time. Repurchase agreements maturing in more than seven days and which may not be terminated within seven days at approximately the amount at which the Fund has valued the agreements will be considered illiquid securities. The Fund may enter into reverse repurchase agreements on instruments other than Fixed Income Instruments, in addition to reverse repurchase agreements on Fixed Income Instruments mentioned above, subject to the Fund's limitations on borrowings.
According to the Registration Statement, the Global Advantage Bond Fund will seek total return exceeding that of its benchmarks, consistent with prudent investment management. The Fund will seek to achieve its investment objective by investing, under normal circumstances, at least 80% of its assets in Fixed Income Instruments and derivatives based on Fixed Income Instruments that are economically tied to at least three countries, which may include foreign (non-U.S.) countries and may also include the U.S. (the “Global Advantage Bond Fund 80% policy”). The average portfolio duration of the Fund will vary based on PIMCO's forecast for interest rates and, under normal circumstances, will not be expected to exceed eight years.
The Global Advantage Bond Fund may invest in both investment-grade debt securities and high-yield securities (junk bonds) subject to a maximum of 15% of its total assets in securities rated below B by Moody's, S&P or Fitch, or, if unrated, determined by PIMCO to be of comparable quality.
The Fund's portfolio will include a minimum of 13 non-affiliated issuers.
The Fund may invest, without limitation, in securities and instruments that are economically tied to emerging market countries.
In furtherance of the Global Advantage Bond Fund 80% policy, or with respect to the Fund's other investments, the Global Advantage Bond Fund may invest, without limitation, in derivative instruments, subject to applicable law and any other restrictions described herein.
The Global Advantage Bond Fund may invest up to 20% of its assets in mortgage-related and other asset-backed securities, although this 20% limitation does not apply to securities issued or guaranteed by Federal agencies and/or U.S. government sponsored instrumentalities.
The Global Advantage Bond Fund may invest, without limitation, in securities denominated in foreign currencies and in U.S. dollar-denominated securities of foreign issuers. The Fund may engage in foreign currency transactions on a spot (cash) basis and forward basis and invest in foreign currency futures and exchange-traded or OTC options contracts.
The Global Advantage Bond Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The Global Advantage Bond Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis and may engage in short sales.
The Global Advantage Bond Fund may invest up to 10% of its total assets in preferred stock, convertible securities and other equity-related securities.
The Global Advantage Bond Fund may invest in trade claims, privately placed and unregistered securities, and exchange-traded and OTC-traded structured products, including credit-linked securities, commodity-linked notes, and structured notes. The Fund may invest in Brady Bonds.
The Global Advantage Bond Fund may enter into repurchase agreements on instruments other than Fixed Income Instruments, in addition to repurchase agreements on Fixed Income Instruments mentioned above, in which the Fund purchases a security from a bank or broker-dealer, which agrees to purchase the security at the Fund's cost plus interest within a specified time. Repurchase agreements maturing in more than seven days and which may not be terminated within seven days at approximately the amount at which the Fund has valued the agreements will be considered illiquid securities. The Fund may enter into reverse repurchase agreements on instruments other than Fixed Income Instruments, in addition to reverse repurchase agreements on Fixed Income Instruments mentioned above, subject to the Fund's limitations on borrowings.
According to the Registration Statement, the International Advantage Bond Fund will seek total return exceeding that of its benchmarks, consistent with prudent investment management. The Fund will seek to achieve its investment objective by investing, under normal circumstances, at least 80% of its assets in Fixed Income Instruments and derivatives based on Fixed Income Instruments that are economically tied to foreign (non-U.S.) countries,
The International Advantage Bond Fund may invest in both investment-grade debt securities and high-yield securities (junk bonds) subject to a maximum of 15% of its total assets in securities rated below B by Moody's, S&P or Fitch, or, if unrated, determined by PIMCO to be of comparable quality.
The Fund's portfolio will include a minimum of 13 non-affiliated issuers.
The Fund may invest, without limitation, in securities and instruments that are economically tied to emerging market countries.
In furtherance of the International Advantage Bond Fund 80% policy, or with respect to the Fund's other investments, the International Advantage Bond Fund may invest, without limitation, in derivative instruments, subject to applicable law and any other restrictions described in its prospectus or Statement of Additional Information (“SAI”).
The International Advantage Bond Fund may invest up to 20% of its assets in mortgage-related and other asset-backed securities, although this 20% limitation does not apply to securities issued or guaranteed by Federal agencies and/or U.S. government sponsored instrumentalities.
The International Advantage Bond Fund may invest, without limitation, in securities denominated in foreign currencies and in U.S. dollar-denominated securities of foreign issuers. The Fund may engage in foreign currency transactions on a spot (cash) basis and forward basis and invest in foreign currency futures and exchange-traded or OTC options contracts.
The International Advantage Bond Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The International Advantage Bond Fund may purchase or sell securities on a when-issued, delayed delivery or forward commitment basis and may engage in short sales.
The International Advantage Bond Fund may invest up to 10% of its total assets in preferred stock, convertible securities and other equity-related securities.
The International Advantage Bond Fund may invest in variable and floating rate securities that are not Fixed Income Instruments. The Fund may invest in floaters and inverse floaters that are not Fixed Income Instruments and may engage in credit spread trades.
The International Advantage Bond Fund may invest in trade claims,
The International Advantage Bond Fund may enter into repurchase agreements on instruments other than Fixed Income Instruments, in addition to repurchase agreements on Fixed Income Instruments mentioned above, in which the Fund purchases a security from a bank or broker-dealer, which agrees to purchase the security at the Fund's cost plus interest within a specified time. Repurchase agreements maturing in more than seven days and which may not be terminated within seven days at approximately the amount at which the Fund has valued the agreements will be considered illiquid securities. The Fund may enter into reverse repurchase agreements on instruments other than Fixed Income Instruments, in addition to reverse repurchase agreements on Fixed Income Instruments mentioned above, subject to the Fund's limitations on borrowings.
Each Fund may invest in, to the extent permitted by Section 12(d)(1)(A) of the 1940 Act, other affiliated and unaffiliated funds, such as open-end or closed-end management investment companies, including other exchange-traded funds, provided that each Fund's investment in units or shares of investment companies and other open-end collective investment vehicles will not exceed 10% of that Fund's total assets. Each Fund may invest in securities lending collateral in one or more money market funds to the extent permitted by Rule 12d1–1 under the 1940 Act, including series of PIMCO Funds.
Each Fund's investments, including investments in derivative instruments, will be subject to all of the restrictions under the 1940 Act, including restrictions with respect to illiquid assets; that is, the limitation that a Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser, consistent with Commission guidance.
The Funds will be non-diversified, which means that each Fund may invest its assets in a smaller number of issuers than a diversified fund.
The Funds intend to qualify annually and elect to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code.
Each Fund may invest without limit, for temporary or defensive purposes, in U.S. debt securities, including taxable securities and short-term money market securities, if PIMCO deems it appropriate to do so. If PIMCO believes that economic or market conditions are unfavorable to investors, PIMCO may temporarily invest up to 100% of each Fund's assets in certain defensive strategies, including holding a substantial portion of the Fund's assets in cash, cash equivalents or other highly rated short-term securities, including securities issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Each Fund's investments, including derivatives, will be consistent with that Fund's investment objective and each Fund's use of derivatives may be used to enhance leverage. However, each Fund's investments will not be used to seek performance that is the multiple or inverse multiple (
The NAV of each Fund's Shares will be determined by dividing the total value of a Fund's portfolio investments and other assets, less any liabilities, by the total number of Shares outstanding.
Each Fund's Shares will be valued as of the close of regular trading of the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern time (“E.T.”) (the “NYSE Close”) on each day NYSE Arca is open (“Business Day”). Information that becomes known to each of the Funds or its agents after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a portfolio asset or the NAV determined earlier that day.
For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available will be valued at market value. Market value will generally be determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services.
Fixed Income Instruments, including those to be purchased under firm commitment agreements/delayed delivery basis, will generally be valued on the basis of quotes obtained from brokers and dealers or independent pricing services. Foreign fixed income securities will generally be valued on the basis of quotes obtained from brokers and dealers or pricing services using data reflecting the earlier closing of the principal markets for those assets. Short-term debt instruments having a remaining maturity of 60 days or less will generally be valued at amortized cost, which approximates market value.
As discussed in more detail below, derivatives will generally be valued on the basis of quotes obtained from brokers and dealers or pricing services using data reflecting the earlier closing of the principal markets for those assets. Local closing prices will be used for all instrument valuation purposes. Foreign currency-denominated derivatives will generally be valued as of the respective local region's market close.
With respect to specific derivatives:
• Currency spot and forward rates from major market data vendors
• Exchange traded futures will generally be valued at the settlement price of the exchange.
• A total return swap on an index will be valued at the publicly available index price. The index price, in turn, is determined by the applicable index calculation agent, which generally values the securities underlying the index at the last reported sale price.
• Equity total return swaps will generally be valued using the actual underlying equity at local market closing, while bank loan total return swaps will generally be valued using the evaluated underlying bank loan price minus the strike price of the loan.
• Exchange traded non-equity options, (for example, options on bonds, Eurodollar options and U.S. Treasury options), index options, and options on futures will generally be valued at the official settlement price determined by the relevant exchange, if available.
• OTC and exchange traded equity options will generally be valued on a basis of quotes obtained from a quotation reporting system, established market makers, or pricing services or at the settlement price of the applicable exchange.
• OTC FX options will generally be valued by pricing vendors.
• All other swaps such as interest rate swaps, inflation swaps, swaptions, credit default swaps, CDX/CDS will generally be valued by pricing services.
Exchange-traded equity securities will be valued at the official closing price or the last trading price on the exchange or market on which the security is primarily traded at the time of valuation. If no sales or closing prices are reported during the day, exchange-traded equity securities will generally be valued at the mean of the last available bid and ask quotation on the exchange or market on which the security is primarily traded, or using other market information obtained from quotation reporting systems, established market makers, or pricing services. Investment company securities that are not exchange-traded will be valued at NAV. Trade claims, privately placed and unregistered securities, and structured products will generally be valued on the basis of quotes obtained from brokers and dealers or independent pricing services.
If a foreign security's value has materially changed after the close of the security's primary exchange or principal market but before the NYSE Close, the security will be valued at fair value based on procedures established and approved by the Board. Foreign securities that do not trade when the NYSE is open are also valued at fair value.
Securities and other assets for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction. The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated to PIMCO the responsibility for applying the valuation methods. In the event that market quotes are not readily available, and the security or asset cannot be valued pursuant to one of the valuation methods, the value of the security or asset will be determined in good faith by the Valuation Committee of the Board generally based upon recommendations provided by PIMCO.
Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (
When a Fund uses fair value pricing to determine its NAV, securities will not be priced on the basis of quotes from the primary market in which they are traded, but rather may be priced by another method that the Board or persons acting at their direction believe reflects fair value. Fair value pricing may require subjective determinations about the value of a security. While the Trust's policy is intended to result in a calculation of the Fund's NAV that fairly reflects security values as of the time of pricing, the Trust cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.
For a Fund's 4:00 p.m. E.T. futures holdings, estimated prices from Reuters will be used if any cumulative futures margin impact is greater than $0.005 to the NAV due to futures movement after the fixed income futures market closes (3:00 p.m. E.T.) and up to the NYSE Close (generally 4:00 p.m. E.T.). Swaps traded on exchanges such as the Chicago Mercantile Exchange (“CME”) or the Intercontinental Exchange (“ICE–US”) will use the applicable exchange closing price where available.
Investments initially valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from pricing services. As a result, the NAV of a Fund's Shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the NYSE is closed. As a result, to the extent that a Fund holds foreign (non-U.S.) securities, the NAV of a Fund's Shares may change when an investor cannot purchase, redeem or exchange shares.
On each Business Day, before commencement of trading in Fund Shares on NYSE Arca, each Fund will disclose on its Web site the identities and quantities of the portfolio instruments and other assets held by a Fund that will form the basis for a Fund's calculation of NAV at the end of the Business Day.
In order to provide additional information regarding the intra-day value of Shares of a Fund, the NYSE Arca or a market data vendor will disseminate every 15 seconds through
A third party market data provider will calculate the PIV for each Fund. For the purposes of determining the PIV, the third party market data provider's valuation of derivatives is expected to be similar to their valuation of all securities. The third party market data provider may use market quotes if available or may fair value securities against proxies (such as swap or yield curves).
With respect to specific derivatives:
• Foreign currency derivatives may be valued intraday using market quotes, or another proxy as determined to be appropriate by the third party market data provider.
• Futures may be valued intraday using the relevant futures exchange data, or another proxy as determined to be appropriate by the third party market data provider.
• Interest rate swaps may be mapped to a swap curve and valued intraday based on the swap curve, or another proxy as determined to be appropriate by the third party market data provider.
• CDX/CDS may be valued using intraday data from market vendors, or based on underlying asset price, or another proxy as determined to be appropriate by the third party market data provider.
• Total return swaps may be valued intraday using the underlying asset price, or another proxy as determined to be appropriate by the third party market data provider.
• Exchange listed options may be valued intraday using the relevant exchange data, or another proxy as determined to be appropriate by the third party market data provider.
• OTC options may be valued intraday through option valuation models (
A third party market data provider's valuation of forwards will be similar to their valuation of the underlying securities, or another proxy as determined to be appropriate by the third party market data provider. The third party market data provider will generally use market quotes if available. Where market quotes are not available, they may fair value securities against proxies (such as swap or yield curves). Each Fund's disclosure of forward positions will include information that market participants can use to value these positions intraday.
Each Fund's disclosure of derivative positions in the applicable Disclosed Portfolio will include information that market participants can use to value these positions intraday. On a daily basis, the Funds will disclose on the Funds' Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in a Fund's portfolio.
For each Fund, the Adviser believes there will be minimal, if any, impact to the arbitrage mechanism as a result of the use of derivatives. Market makers and participants should be able to value derivatives as long as the positions are disclosed with relevant information. The Adviser believes that the price at which Shares trade will continue to be disciplined by arbitrage opportunities created by the ability to purchase or redeem creation Shares at their NAV, which should ensure that Shares will not trade at a material discount or premium in relation to their NAV.
The Adviser does not believe there will be any significant impacts to the settlement or operational aspects of a Fund's arbitrage mechanism due to the use of derivatives. Because derivatives generally are not eligible for in-kind transfer, they will be substituted with a “cash in lieu” amount (as described below) when each Fund processes purchases or redemptions of “Creation Units” (as described below) in-kind.
According to the Registration Statement, Shares of each of the Funds that trade in the secondary market will be “created” at NAV
On any given Business Day, purchases and redemptions of Creation Units will be made in whole or in part on a cash basis if an Authorized Participant deposits or receives (as applicable) cash in lieu of some or all of the Fund Deposit or Redemption Instruments, respectively, solely because such instruments are, in the case of the Fund Deposit, not available in sufficient quantity.
Except when aggregated in Creation Units, Shares will not be redeemable by the Funds. The prices at which
Additional information regarding the Trust, the Funds and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions and taxes is included in the Registration Statement. All terms relating to the Funds that are referred to but not defined in this proposed rule change are defined in the Registration Statement.
The Trust's Web site (
Each Fund's disclosure of derivative positions in the applicable Disclosed Portfolio will include information that market participants can use to value these positions intraday. On a daily basis, the Funds will disclose on the Funds' Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in a Fund's portfolio.
The Web site information will be publicly available at no charge.
In addition, a basket composition file, which includes the security names and share quantities, if applicable, required to be delivered in exchange for a Funds' Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the Exchange via the NSCC. The basket represents one Creation Unit of each of the Funds. The NAV of each of the Funds will normally be determined as of the close of the regular trading session on the Exchange (ordinarily 4:00 p.m. E.T.) on each Business Day. Authorized participants may refer to the basket composition file for information regarding Fixed Income Instruments, and any other instrument that may comprise a Fund's basket on a given day.
Investors can also obtain the Trust's SAI, the Funds' Shareholder Reports, and the Funds' Forms N–CSR and Forms N–SAR, filed twice a year. The Trust's SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR, Form N–PX and Form N–SAR may be viewed on-screen or downloaded from the Commission's Web site at
With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of any of the Funds.
The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (“MPV”) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001.
Each Fund's Shares will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Funds' Reporting Authority will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of each Fund's portfolio. The Exchange represents that, for initial and/or continued listing, each Fund will be in compliance with Rule 10A–3
The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (“FINRA”) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.
The surveillances referred to above generally focus on detecting securities trading outside their normal patterns. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, exchange-traded options, exchange-traded equities, futures and options on futures with other markets or other entities that are members of the ISG, and FINRA may obtain trading information regarding trading in the Shares, exchange-trade options, exchange-traded equities, futures and options on futures from such markets or entities. In addition, the Exchange may obtain information regarding trading in the Shares, exchange-traded options, exchange-traded equities, futures and options on futures from markets or other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.
Not more than 10% of the net assets of a Fund in the aggregate invested in exchange-traded equity securities shall consist of equity securities, including stocks into which a convertible security is converted, whose principal market is not a member of the ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. Furthermore, not more than 10% of the net assets of a Fund in the aggregate invested in futures contracts or exchange-traded options contracts shall consist of futures contracts or exchange-traded options contracts whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement.
In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees.
Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (“ETP”) Holders in an Information Bulletin (“Bulletin”) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated PIV will not be calculated or publicly disseminated; (4) how information regarding the PIV is disseminated; (5) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information.
In addition, the Bulletin will reference that each of the Funds is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. E.T. each trading day.
The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5)
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange
The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding each of the Funds and the Shares, thereby promoting market transparency. Moreover, the PIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange's Core Trading Session. On each Business Day, before commencement of trading in Shares in the Core Trading Session on the Exchange, each of the Funds will disclose on the Trust's Web site the Disclosed Portfolio that will form the basis for each Fund's calculation of NAV at the end of the business day. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last sale information will be available via the CTA high-speed line. Price information relating to U.S. exchange-listed options is available from the Options Price Reporting Authority. The Trust's Web site will include a form of the prospectus for each of the Funds and additional data relating to NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the any of the Funds will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of any of the Funds may be halted. In addition, as noted above, investors will have ready access to information regarding each of the Funds' holdings, the PIV, the Disclosed Portfolio, and quotation and last sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. The Adviser is not a broker-dealer but is affiliated with a broker-dealer and has implemented a “fire wall” with respect to such broker-dealer regarding access to information concerning the composition and/or changes to each Fund's portfolio. In addition, the Funds' Reporting Authority will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of each Fund's portfolio.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition with respect to such products among market participants, to the benefit of investors and the marketplace.
No written comments were solicited or received with respect to the proposed rule change.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as modified by Amendment No. 1 thereto, is consistent with the Act. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–9303.
Section 19(b)(2) of the Act
Amendment No. 1 amended and replaced the proposed rule change in its entirety. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change, as modified by Amendment No. 1 thereto, so that it has sufficient time to consider the proposed rule change as modified by Amendment No. 1.
Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Wisconsin Department of Transportation (WisDOT), Federal Highway Administration (FHWA).
Rescind notice of intent.
The FHWA is issuing this revised notice to advise the public that FHWA and WisDOT will not prepare a Tier 1 Environmental Impact Statement (EIS) for long-range transportation improvements in the WIS 47 corridor in Outagamie and Shawano Counties, Wisconsin. A Notice of Intent to prepare an EIS was published in the
Tracey Blankenship, Major Projects Program Manager, Federal Highway Administration, 525 Junction Road, Suite 8000, Madison, WI 53717; Telephone: (608) 829–7500. You may also contact Matthew Haefs, Wisconsin Department of Transportation, 944 Vanderperren Way, Green Bay, WI 54304; Telephone: (920) 492–5702.
The FHWA, in cooperation with WisDOT, will not prepare an EIS as previously intended on long-range improvements to address transportation demand, traffic operations, safety concerns, and corridor preservation needs on an approximate 33-mile portion of WIS 47 between US 41 in Outagamie County and WIS 29 in Shawano County. The EIS for this corridor is no longer needed because sufficient funds are not available at this time to program design or construction projects that would result from this study.
23 U.S.C. 315; 49 CFR 1.48.
R.J. Corman Railroad Company/Texas Lines, LLC (RJCD), a noncarrier, has filed a verified notice of exemption under 49 CFR 1150.31 to acquire from Texas South-Eastern Railroad Company and operate approximately 12 miles of track known as the Texas Southeastern Railroad (the Line) in Angelina County, Tex. The Line consists of: (1) Approximately two miles of mainline operating track in Diboll, Tex.; (2) some excepted connecting industrial spurs to shipper facilities; and (3) approximately 10 miles of adjoining excepted track, which is now used for rail car storage only and not for transportation purposes.
This transaction is related to a concurrently filed verified notice of exemption in
RJCD certifies that its projected revenues upon consummation of the proposed transaction will not result in the creation of a Class I or Class II rail carrier and states that its projected annual revenues will not exceed $5 million.
RJCD states that it intends to consummate the proposed transaction on or before July 31, 2014. The earliest the transaction can be consummated is July 23, 2014, the effective date of the exemption (30 days after the verified notice was filed).
If the verified notice contains false or misleading information, the exemption is void
An original and 10 copies of all pleadings, referring to Docket No. FD 35839, must be filed with the Surface Transportation Board, 395 E Street SW., Washington, DC 20423–0001. In addition, a copy of each pleading must be served on David R. Irvin, Moynahan, Irvin & Mooney, PSC, 110 North Main Street, Nicholasville, KY 40356.
Board decisions and notices are available on our Web site at
By the Board,
R.J. Corman Railroad Group, LLC (Group) and R.J. Corman Railroad Company, LLC (RJCRC) have filed a verified notice of exemption pursuant to 49 CFR 1180.2(d)(2) to continue in control of R.J. Corman Railroad Company/Texas Lines, LLC (RJCD), a noncarrier, upon RJCD's becoming a Class III carrier.
This transaction is related to a concurrently filed verified notice of exemption in
RJCD expects to consummate the transaction proposed in Docket No. FD 35839 and become a rail carrier on or before July 31, 2014. The earliest that Group and RCJRC can exercise their continued control of RJCD as a rail carrier is July 23, 2014, the effective date of this exemption (30 days after the verified notice was filed).
Group and RJCRC represent that: (1) RJCD will not connect with any other railroad directly or indirectly controlled by Group or RJCRC; (2) the proposed continuance in control transaction is not part of a series of anticipated transactions that would connect RJCD with any railroad directly or indirectly owned and controlled by Group or RJCRC; and (3) the proposed continuance in control transaction does not involve a Class I rail carrier. Therefore, the transaction is exempt from the prior approval requirements of 49 U.S.C. 11323.
Under 49 U.S.C. 10502(g), the Board may not use its exemption authority to relieve a rail carrier of its statutory obligation to protect the interests of its employees. Section 11326(c), however, does not provide for labor protection for transactions under 11324 and 11325 that involve only Class III rail carriers. Accordingly, the Board may not impose labor protective conditions here because all of the carriers involved are Class III carriers.
If the notice contains false or misleading information, the exemption is void
An original and 10 copies of all pleadings, referring to Docket No. FD 35840, must be filed with the Surface Transportation Board, 395 E Street SW., Washington, DC 20423–0001. In addition, a copy of each pleading must be served on David R. Irvin, Moynahan, Irvin & Mooney, PSC, 110 North Main Street, Nicholasville, KY 40356.
Board decisions and notices are available on our Web site at
By the Board,
Surface Transportation Board, DOT.
Notice Tentatively Authorizing Finance Transaction.
Texas Bus and Limo Acquisition Corp. (TBL), GBJ, Inc. (GBJ), Echo Tours and Charters L.P. (Echo), Roadrunner Charters, Inc. (Roadrunner), and Star Shuttle, Inc. (Star) (collectively, Applicants) have filed an application under 49 U.S.C. 14303 for Echo to acquire control of Tri-City Charters of Bossier, Inc. (Tri-City), and for TBL thereafter to acquire control of GBJ, Echo, Roadrunner, and Star. The Board is tentatively approving and authorizing the transaction, and, if no opposing comments are timely filed, this notice will be the final Board action. Persons wishing to oppose the application must follow the rules at 49 CFR 1182.5 and 1182.8.
Comments must be filed by August 25, 2014. Applicants may file a reply by September 8, 2014. If no comments are filed by August 25, 2014, this notice shall be effective on August 26, 2014.
Send an original and 10 copies of any comments referring to Docket No. MCF 21058 to: Surface Transportation Board, 395 E Street SW., Washington, DC 20423–0001. In addition, send one copy of comments to Applicant's representative: Richard P. Schweitzer, Richard P. Schweitzer, PLLC, Suite 800, 1776 K Street NW., Washington, DC 20006.
Scott Zimmerman, (202) 245–0386. Federal Information Relay Service (FIRS) for the hearing impaired: 1–800–877–8339.
TBL is a noncarrier holding company organized as a C Corp in Texas. Under the proposed transaction, TBL would acquire ownership and control of the stock of four Federally regulated motor carriers of passengers: Echo (MC–755212), GBJ (MC–369531), Roadrunner (MC–467373), and Star (MC–309567). Before TBL's acquisition of those four carriers, Echo would acquire 100 percent control of Tri-City (MC–370884), another Federally regulated motor carrier of passengers. (Echo, GBJ, Roadrunner, Star, and Tri-City are collectively called “Applicant carriers.”) Applicants state that, additionally, $75 million in debt among Echo, GBJ, Roadrunner, and Star is being consolidated and restructured. If the transaction is approved, upon completion: (1) Echo would own 100 percent of the Tri-City stock (as well as its equipment and operating authority); (2) TBL would own 100 percent of the stock of Echo, GBJ, Roadrunner, and Star; and (3) Echo, GBJ, Roadrunner, and Star would own 100 percent of the TBL stock in equal shares. Applicants state that by consolidating their operations under TBL, they would be able to gain efficiencies and to consolidate and restructure debt of each carrier.
Applicants state that TBL, GBJ, Roadrunner, and Star are not affiliated with any other motor carriers. GBJ provides interstate charter transportation, local city shuttle service, and sedan service in the Houston metropolitan area. Roadrunner provides charter services in the Dallas/Fort Worth metropolitan area. Star provides charter, convention, and tour operations, as well as paratransit and transit services, in the San Antonio and Austin markets. Tri-City, which has no parent, subsidiaries, or affiliates, provides charter service in Louisiana, Texas, and other parts of the southeast United States. Echo, which is owned and controlled by a limited general partnership organized under an unincorporated entity called ET&C GP, provides charter, tour, and local city shuttle transportation in the Dallas, Fort Worth, Abilene, Tyler, and Waco markets. Echo owns 100 percent of the stock of its subsidiary, Echo Transportation Solutions, LLC, which provides premium sedan and limousine service but does not operate commercial vehicles and holds no federal or state operating authority; Echo also owns and controls 50 percent of the stock of Gotta Go Tours by Patti, LLC, a company that provides tour marketing services and also holds no Federal or state operating authority.
Under 49 U.S.C. 14303(b), the Board must approve and authorize a transaction that it finds consistent with the public interest, taking into consideration at least: (1) The effect of the proposed transaction on the adequacy of transportation to the public; (2) the total fixed charges that result; and (3) the interest of affected carrier employees. Applicants have submitted information, as required by 49 CFR 1182.2, including the information to demonstrate that the proposed transaction is consistent with the public interest under 49 U.S.C. 14303(b), and a statement that Applicants' aggregate gross operating revenues for the preceding 12 months exceeded $2 million, see 49 U.S.C. 14303(g).
Applicants submit that the proposed transaction would have no significant impact on the adequacy of transportation because Applicants do not intend to change the operations of the Applicant carriers. Rather, Applicants anticipate that consolidating their operations would enhance service to the public by allowing carriers to engage in vehicle sharing arrangements, centralizing certain management functions, and allowing carriers to take advantage of better financial terms. According to Applicants, the debt restructuring would allow the carriers to increase investment in their companies and would allow them to replace aging vehicles with newer, more energy efficient vehicles on more favorable financial terms. With respect to fixed charges, Applicants state that the debt restructuring would lower interest payments on existing debt and allow them to secure better financial terms for additional financing of equipment. Thus, Applicants expect their overall fixed charge for financing of equipment acquisitions would decrease while their combined financial structure would be strengthened. Applicants state that the transaction would not have an overall negative impact on employees. The proposed transaction would consolidate some administrative and headquarters personnel, but Applicants assert that any contraction of personnel would be offset by additions in higher paying sales and field operations personnel in multiple cities in Texas.
Applicants further assert that the acquisition would not have a material adverse effect on competition, because the markets in which Applicant carriers compete are subject to robust competition. Applicants state that the Dallas/Fort Worth area, in which Echo and Roadrunner provide charter service, has over 15 interstate providers of charter and tour services generating over $150 million in annual revenues and operating approximately 670 vehicles. According to Applicants, the combined revenues of Echo and Roadrunner would be less than one-third of the market's annual revenues and would account for about 100 vehicles in the Dallas/Fort Worth market. Applicants estimate that the combined share of the Applicant carriers in the East Texas
On the basis of the application, the Board finds that the proposed acquisition is consistent with the public interest and should be tentatively approved and authorized. If any opposing comments are timely filed, these findings will be deemed vacated, and, unless a final decision can be made on the record as developed, a procedural schedule will be adopted to reconsider the application. See 49 CFR 1182.6(c). If no opposing comments are filed by the expiration of the comment period, this notice will take effect automatically and will be the final Board action.
Board decisions and notices are available on our Web site at
This decision will not significantly affect either the quality of the human environment or the conservation of energy resources.
It is ordered:
1. The proposed transaction is approved and authorized, subject to the filing of opposing comments.
2. If opposing comments are timely filed, the findings made in this notice will be deemed vacated.
3. This notice will be effective August 26, 2014, unless opposing comments are filed by August 25, 2014.
4. A copy of this notice will be served on: (1) The U.S. Department of Transportation, Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE., Washington, DC 20590; (2) the U.S. Department of Justice, Antitrust Division, 10th Street & Pennsylvania Avenue NW., Washington, DC 20530; and (3) the U.S. Department of Transportation, Office of the General Counsel, 1200 New Jersey Avenue SE., Washington, DC 20590.
By the Board, Chairman Elliott, Vice Chairman Miller, and Commissioner Begeman.
Notice and request for comments.
The U.S. Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104–13 (44 U.S.C. 3506(c)(2)(A)). Currently, the Community Development Financial Institutions Fund (CDFI Fund), Department of the Treasury, is soliciting comments concerning the Annual Certification and Data Collection Report Form. This reporting form will enable the CDFI Fund to recertify Community Development Financial Institutions (CDFIs) on an annual basis and reduce the burden of the re-certification process that currently occurs every three years. In addition to recertifying CDFIs, this report also seeks to collect financial and impact data on an annual basis to provide the CDFI Fund and the industry with more insight into the state and accomplishments of CDFIs. The process for data collection and reporting is expected to take place via electronic submission to the CDFI Fund pending the implementation of an electronic submission process. The Annual Certification and Data Collection Report Form may be obtained from the CDFI Certification page of the CDFI Fund's Web site at
Written comments should be received on or before September 8, 2014 to be assured of consideration. These comments will be considered before the CDFI Fund submits a request for Office of Management and Budget (OMB) review of the data reporting form described in this notice.
Direct all comments to Brette Fishman, Management Analyst at the Community Development Financial Institutions Fund, U.S. Department of the Treasury, 1500 Pennsylvania Avenue NW., Washington, DC 20020, by email to
The Annual Certification and Data Collection Report Form may be obtained from the CDFI Certification page of the CDFI Fund's Web site at
Abstract: A certified CDFI is a specialized financial institution that works in markets that are underserved by traditional financial institutions. CDFIs provide a unique range of financial products and services in economically distressed target markets, such as mortgage financing for low-income and first-time homebuyers and not-for-profit developers, flexible underwriting and risk capital for needed community facilities, and technical assistance, commercial loans and investments to small start-up or expanding businesses in low-income areas. CDFIs include regulated institutions such as community development banks and credit unions, and non-regulated institutions such as loan and venture capital funds. CDFI certification is a designation conferred by the CDFI Fund and is a requirement for: accessing financial assistance from the CDFI Fund through the CDFI Program, the Native American CDFI Assistance Program, and the Capital Magnet Fund; receiving certain benefits under the Bank Enterprise Award Program; and participation as an Eligible CDFI under the CDFI Bond Guarantee Program. Currently, CDFIs are currently recertified every three years. The CDFI Annual Certification and Data Collection Report Form would replace the extensive process conducted every three years with an annual report. This report will also collect financial and impact data from all CDFIs regardless of whether or not they have received monetary awards in their last fiscal year. This report is a preliminary method to collect standardized data on the full universe of certified CDFIs.
Pub. L. 104–13; 12 CFR 1805; 12 CFR 1806; 12 CFR 1807; 12 CFR 1808.
Office of Foreign Assets Control, Treasury.
Notice.
The Treasury Department's Office of Foreign Assets Control (“OFAC”) is publishing the name of one entity whose property and interests in property have been blocked pursuant to Executive Order 13413 of October 27, 2006, “Blocking Property of Certain Persons Contributing to the Conflict in the Democratic Republic of the Congo.”
The designation by the Director of OFAC of the one entity identified in this notice, pursuant to Executive Order 13413 of October 27, 2006, is effective on July 1, 2014.
Assistant Director, Sanctions Compliance and Evaluation, Office of Foreign Assets Control, Department of the Treasury, Washington, DC 20220, tel.: 202/622–2490.
This document and additional information concerning OFAC are available from OFAC's Web site (
On October 27, 2006, the President signed Executive Order 13413, “Blocking Property of Certain Persons Contributing to the Conflict in the Democratic Republic of the Congo” (the “Order” or “E.O. 13413”), pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701
Section 1 of the Order blocks, with certain exceptions, all property and interests in property that are in the United States, that come within the United States or that are or come within the possession or control of United States persons, of the persons identified by the President in the Annex to the Order, as well as those persons determined by the Secretary of the Treasury, after consultation with the Secretary of State, to meet any of the criteria set forth in subparagraphs (a)(ii)(A)–(a)(ii)(G) of Section 1 of the Order.
On July 1, 2014, the Director of OFAC, in consultation with the Secretary of State, designated pursuant to one or more of the criteria set forth in Section 1 of the Order, the one entity listed below, whose name has been added to the list of Specially Designated Nationals and Blocked Persons and whose property and interests in property, therefore, are blocked.
The listing of the blocked entity appears as follows:
Securities and Exchange Commission.
Final rules; interpretation.
The Securities and Exchange Commission (“SEC” or “Commission”) is adopting rules and providing guidance to address the application of certain provisions of the Securities Exchange Act of 1934 (“Exchange Act”) that were added by Subtitle B of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), to cross-border security-based swap activities. These rules and guidance in large part focus on the application of the Title VII definitions of “security-based swap dealer” and “major security-based swap participant” in the cross-border context. The Commission also is adopting a procedural rule related to the submission of applications for substituted compliance. In addition, the Commission is adopting a rule addressing the scope of our authority, with respect to enforcement proceedings, under section 929P of the Dodd-Frank Act.
Effective September 8, 2014.
Richard Gabbert, Senior Special Counsel, Joshua Kans, Senior Special Counsel, or Margaret Rubin, Special Counsel, Office of Derivatives Policy, at 202–551–5870, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–7010.
The Commission is adopting the following rules under the Exchange Act, accompanied by related guidance, regarding the application of Subtitle B of Title VII of the Dodd-Frank Act to cross-border activities: Rule 0–13 (filing procedures regarding substituted compliance requests); Rule 3a67–10 (regarding the cross-border implementation of the “major security-based swap participant” definition); Rule 3a71–3 (regarding the cross-border implementation of the
The Commission is adopting the first of a series of rules and providing guidance regarding the application of Title VII of the Dodd-Frank Act
The rules and guidance we are adopting are based on our May 23, 2013 proposal, which addressed the application of Title VII in the cross-border context.
This rulemaking's focus on the cross-border application of the dealer and major participant definitions reflects the critical and foundational role that those definitions occupy with regard to the implementation of Title VII.
These final rules and guidance do not address one key issue related to the application of the “security-based swap dealer” definition in the cross-border context. In the Cross-Border Proposing Release, we proposed that non-U.S. persons must count, against the relevant thresholds of the
As discussed in the Cross-Border Proposing Release, the 2008 financial crisis highlighted significant issues in the over-the-counter (“OTC”) derivatives markets, which had experienced dramatic growth in the years leading up to the crisis and are capable of affecting significant sectors of the U.S. economy.
Title VII provides for a comprehensive new regulatory framework for swaps and security-based swaps. Under this framework, the Commodity Futures Trading Commission (“CFTC”) regulates “swaps” while the Commission regulates “security-based swaps,” and the Commission and CFTC jointly regulate “mixed swaps.” The new framework encompasses the registration and comprehensive regulation of dealers and major participants, as well as requirements related to clearing, trade execution, regulatory reporting, and public dissemination.
The Dodd-Frank Act further provides that the SEC and CFTC jointly should further define certain terms, including “security-based swap dealer” and “major security-based swap participant.”
In developing these final rules and guidance, we have consulted and coordinated with the CFTC, the prudential regulators,
In addition, section 752(a) of the Dodd-Frank Act provides in part that “[i]n order to promote effective and consistent global regulation of swaps and security-based swaps, the Commodity Futures Trading Commission, the Securities and Exchange Commission, and the prudential regulators . . . as appropriate, shall consult and coordinate with foreign regulatory authorities on the establishment of consistent international standards with respect to the regulation (including fees) of swaps.”
In subsequent summits, the G20 leaders have reiterated their commitment to OTC derivatives regulatory reform. For example, in September 2013, the leaders of the G20 reaffirmed their commitments with respect to the regulation of the OTC derivatives markets, welcoming Financial Stability Board (“FSB”) members' confirmed actions and committed timetables to put the agreed OTC derivatives reforms into practice.
In expressing our preliminary views regarding the application of Title VII to security-based swap activity carried out in the cross-border context (including to persons engaged in such activities), the Cross-Border Proposing Release recognized that the security-based swap market is global in nature and that it developed prior to the enactment of the Dodd-Frank Act.
Reflecting the range of regulatory requirements that Title VII imposes upon the security-based swap market, the Cross-Border Proposing Release addressed the cross-border application of: (a) The
Following the Commission's proposal, the CFTC issued guidance regarding Title VII's application to cross-border swap activity.
Certain foreign regulators also have addressed or are in the process of addressing issues related to the cross-border implementation of requirements applicable to OTC derivatives.
The Commission received 36 comments in connection with the proposal.
Some commenters generally suggested that we harmonize with aspects of the CFTC Cross-Border Guidance, but also expressed preferences for particular elements of our proposed approach.
Many of those commenters particularly focused on differences between the two regulators' meanings of the term “U.S. person,” with several suggesting that we change our proposed definition to align with the CFTC's approach.
Commenters further raised a number of more general concerns in connection with the proposal, including concerns regarding cost-benefit issues,
One commenter conversely argued that, in lieu of cost-benefit principles, the Commission instead should be guided by public interest and investor protection principles, as well as the Dodd-Frank Act's intent to increase financial system soundness and prevent another financial crisis.
One commenter challenged the adequacy—indeed, the existence—of the cost-benefit analysis in the proposing release.
In addition, commenters addressed issues specific to the cross-border application of the entity-level and transaction-level requirements for dealers,
Commenters also addressed the proposed availability of substituted compliance.
We have carefully considered the comments received in adopting the final rules and providing guidance. Our final rules and guidance further reflect consultation with the CFTC, prudential regulators, and foreign regulatory authorities with regard to the development of consistent and comparable standards. Accordingly, certain aspects of the final rules and guidance—such as, for example, the treatment of guaranteed affiliates of U.S. persons for purposes of the dealer
In this section, we describe the most significant economic considerations regarding the security-based swap market that we have taken into account in implementing the cross-border application of the security-based swap dealer and major security-based swap participant definitions of Title VII. We are sensitive to the economic consequences and effects, including costs and benefits, of our rules, including with respect to the scope of our application of the security-based swap dealer and major security-based swap participant definitions in the cross-border context. We have taken into consideration the costs and benefits associated with persons being brought within one of these definitions through our cross-border application, as well as the costs market participants may incur in determining whether they are within the scope of these definitions and thus subject to Title VII, while recognizing that the ultimate economic impact of these definitions will be determined in part by the final rules regarding the substantive requirements applicable to security-based swap dealers and major security-based swap participants. Some of these economic consequences and effects stem from statutory mandates, while others result from the discretion we exercise in implementing the mandates.
As noted above, the cross-border implementation of the rules defining security-based swap dealer and major security-based swap participant is the first in a series of final rules that consider the cross-border implications of security-based swaps and Title VII. In determining how Title VII security-based swap dealer and major security-based swap participant definitions should apply to persons and transactions in the cross-border context, the Commission has been informed by our analysis of current market activity, including the extent of cross-border trading activity in the security-based swap market. Several key features of the market inform our analysis.
First, the security-based swap market is a global market. Security-based swap business currently takes place across national borders, with agreements negotiated and executed between counterparties often in different jurisdictions (and at times booked, managed, and hedged in still other jurisdictions). The global nature of the security-based swap market is evidenced by the data available to the Commission.
“North American corporate single-name CDS transactions” are classified as such because they use The International Swaps and Derivatives Association, Inc. (“ISDA”) North American documentation. These may include certain transactions involving non-U.S. reference entities. We do not have sufficiently reliable data on reference entity domicile (as opposed to
Second, dealers and other market participants are highly interconnected within this global market. While most market participants have only a few counterparties, dealers can have hundreds of counterparties, consisting of both non-dealing market participants (
However, these opportunities for international risk sharing also represent channels for risk transmission. In other words, the interconnectedness of security-based swap market participants provides paths for liquidity and risk to flow throughout the system, so that it can be difficult to isolate risks to a particular entity or geographic segment. Because dealers facilitate the great majority of security-based swap transactions, with bilateral relationships that extend to potentially hundreds of counterparties, liquidity problems or other forms of financial distress that begin in one entity or one corner of the globe can potentially spread throughout the network, with dealers as a central conduit.
Third, as highlighted in the Intermediary Definitions Adopting Release, dealing activity within the market for security-based swaps is highly concentrated.
The security-based swap market developed as an OTC market, without centralized trading venues or dissemination of pre- or post-trade pricing and volume information. In markets without transparent pricing, access to information confers a competitive advantage. In the current security-based swap market, large dealers and other large market participants with a large share of order flow have an informational advantage over smaller dealers and non-dealers who, in the absence of pre-trade transparency, observe a smaller subset of the market. Greater private information about order flow enables better assessment of current market values by dealers, permitting them to extract economic rents from counterparties who are less informed.
Taken together, the need for financial resources and the private information conveyed by order flow suggest that new entrants who intend to engage in security-based swap dealing activity in fact face high barriers to entry. One consequence of the current concentrated market structure is the potential for risk
In other words, the failure of a single large firm active in the security-based swap market can have consequences beyond the firm itself. One firm's default may reduce the willingness of dealers to trade with, or extend credit to, both non-dealers and other dealers. By reducing the availability of sufficient credit to provide intermediation services, and by reducing transaction volume that reveals information about underlying asset values, the effects of a dealer default may, through asset price and liquidity channels, spill over into other jurisdictions and even other markets in which security-based swap dealers participate.
Given that firms may be expected to consider the implications of security-based swap activity only on their own operations, without considering aggregate financial sector risk,
In sum, the security-based swap market is characterized by a high level of interconnectedness, facilitating risk sharing by counterparties. Further, it is a global market, in which the potential for significant inter-jurisdictional activity and access to liquidity may enhance risk sharing among counterparties. At the same time, channels for risk sharing also represent channels for risk transmission. The global nature of this market, combined with the interconnectedness of market participants, means that liquidity shortfalls or risks that begin pooling in one corner of the market can potentially spread beyond that corner to the entire security-based swap market, with dealers as a key conduit. Because dealers and major participants are a large subset of all participants in the global security-based swap market and facilitate the majority of transactions (and thus reach many counterparties), concerns surrounding these types of spillovers are part of the framework in which we analyze the economic effects of our final rules implementing the security-based swap dealer and major participant definitions in the cross-border context.
In determining how Title VII requirements should apply to persons and transactions in a market characterized by the types of risks we have described, we are aware of the potentially significant tradeoffs inherent in our policy decisions. Our primary economic considerations for promulgating rules and guidance regarding the application of the security-based swap dealer and major participant definitions to cross-border activities include the effect of our choices on efficiency, competition, and capital formation,
As noted above, participants may use security-based swaps to manage financial and commercial risks and benefit from a liquid market with broad participation that facilitates risk sharing. We also recognize the possibility that the same channels that enable risk sharing also facilitate the transmission of risks and liquidity problems that begin pooling in one geographic segment of the market to the global security-based swap market. As described more fully in section III.A.1, U.S. entities may take on risk exposures in the security-based swap market by transacting with non-U.S. counterparties through non-U.S. affiliates. This suggests that an approach that applied these Title VII definitions to transactions only where all activity occurs inside the United States would have little effect in addressing the risks associated with security-based swaps, including risks and associated economic consequences flowing from contagion that may originate abroad and reach U.S. market participants through security-based swap activities and the multiple bilateral relationships that may form as a result of those activities. The global reach of security-based swap dealers, including U.S. dealers, participating in the vast majority of trades
At the same time, the Commission recognizes that the regulatory requirements we adopt for security-based swap dealers and major participants under Title VII may not reach all market participants that act as dealers or that have positions that pose considerable risk concerns in the global security-based swap markets. These limits to the application of Title VII raise several issues. First, market participants may shift their behavior. Final Title VII requirements may impose significant direct costs on participants falling within the security-based swap dealer and major security-based swap participant definitions that are not borne by other market participants, including costs related to capital and margin requirements, regulatory reporting requirements, and business conduct requirements. The costs of these requirements may provide economic incentive for some market participants falling within the dealer and major participant definitions to restructure their security-based swap business to seek to operate wholly outside of the Title VII regulatory framework by exiting the security-based swap market in the United States and not transacting with U.S. persons, potentially fragmenting liquidity across geographic boundaries.
Second, to the extent that other jurisdictions may adopt requirements with different scopes or on different timelines, the requirements we adopt may also result in competitive distortions. That is, differences in regulatory requirements across jurisdictions, or the ability of certain non-U.S. market participants to avoid security-based swap dealer regulation under Title VII, may generate competitive burdens and provide incentives for non-U.S. persons to avoid transacting with U.S. persons.
Third, key elements of the rules adopted today—the definition of “U.S. person,” as well as rules covering treatment of guaranteed transactions, transactions with foreign branches, transactions conducted through conduit affiliates, and cleared anonymous transactions, and rules covering aggregation standards—all have implications for how U.S. and non-U.S. entities perform their
We expect that these requirements' application to security-based swap dealers and major security-based swap participants subject to Title VII will be
Finally, the final rules determining how non-U.S. persons must perform their
Future rulemakings that depend on these definitions are intended to address the transparency, risk, and customer protection goals of Title VII. For example, to further risk mitigation in the security-based swap market, we explained that “section 15F(e) of the Exchange Act and related rules impose capital and margin requirements on dealers and major participants, which will reduce the financial risks of these institutions and contribute to the stability of the security-based swap market in particular and the U.S. financial system more generally.”
Congress has given the Commission authority in Title VII to implement a security-based swap regulatory framework to address the potential effects of security-based swap activity on U.S. market participants, the financial stability of the United States, on the transparency of the U.S. financial system, and on the protection of counterparties.
Because some commenters had, prior to the proposal, argued that section 30(c) of the Exchange Act limited our ability to reach certain types of activity occurring at least in part outside the United States,
It is important to note that our approach to the application of Title VII security-based swap dealer and major security-based swap participant registration requirements does not limit, alter, or address the cross-border reach or extraterritorial application of any other provisions of the federal securities laws, including Commission rules, regulations, interpretations, or guidance.
Prior to our proposal, several commenters raised concerns about the application of Title VII to security-based swap activity in the cross-border context and specifically about the possibility that we would impose Title VII requirements on “extraterritorial” conduct. We received only a few comments on this issue in response to our preliminary views set forth in the proposal, and these generally focused on the application of section 30(c) of the Exchange Act to specific types of activity that we proposed to subject to Title VII rather than the proposed territorial framework more broadly.
One commenter expressed general agreement with our proposed guidance.
Because, as discussed above, we are not adopting “transaction conducted within the United States” as part of the final rule, we anticipate considering these comments in connection with soliciting additional public comment.
We continue to believe that a territorial approach to the application of Title VII is appropriate. This approach, properly understood, is grounded in the text of the relevant statutory provisions and is designed to help ensure that our application of the relevant provisions is consistent with the goals that the statute was intended to achieve.
As in our proposal, our analysis begins with an examination of the text of the statutory provision that imposes the relevant requirement. The statutory language generally identifies the types of conduct that trigger the relevant requirement and, by extension, the focus of the statute.
Section 772(b) of the Dodd-Frank Act amends section 30 of the Exchange Act to provide that “[n]o provision of [Title VII] . . . shall apply to any person insofar as such person transacts a business in security-based swaps without the jurisdiction of the United States,” unless that business is transacted in contravention of rules prescribed to prevent evasion of Title VII.
As noted above, the Dodd-Frank Act was enacted, in part, with the intent to address the risks to the financial stability of the United States posed by entities engaged in security-based swap activity, to promote transparency in the U.S. financial system, and to protect counterparties to such transactions.
Contrary to the views expressed by some commenters,
We believe that this approach to territorial application of Title VII provides a reasonable means of helping to ensure that our regulatory framework focuses on security-based swap activity that is most likely to raise the concerns that Congress intended to address in Title VII, including the potential effects of security-based swap activity on U.S. market participants, on the financial stability of the United States, on the transparency of the U.S. financial markets, and on the protection of counterparties.
In determining whether specific transactions should be included in a person's dealer
(i) holding oneself out as a dealer in security-based swaps,
(ii) making a market in security-based swaps,
(iii) regularly entering into security-based swaps with counterparties as an ordinary course of business for one's own account, or
(iv) engaging in any activity causing oneself to be commonly known in the trade as a dealer in security-based swaps.
In accordance with the authority provided by section 712(d)(1) of the Dodd-Frank Act, which provides that the CFTC and the Commission shall by rule further define, among other things, “security-based swap dealer,”
• Providing liquidity to market professionals or other persons in connection with security-based swaps;
• seeking to profit by providing liquidity in connection with security-based swaps,
• providing advice in connection with security-based swaps or structuring security-based swaps;
• having a regular clientele and actively soliciting clients;
• using inter-dealer brokers; and
• acting as a market maker on an organized security-based swap exchange or trading system.
As the foregoing lists illustrate, both the statutory text and our interpretation further defining the statutory term include within the security-based swap dealer definition a range of activities. In the Intermediary Definitions Adopting Release, we stated that transactions arising from dealing activity, as identified by the indicia described above, would generally be subject to relevant Title VII requirements applicable to dealers, including that such transactions be included in a person's calculations for purposes of the dealer
This approach is consistent with the purposes of the dealer definition and the
Under the foregoing analysis and consistent with our proposal, when a U.S. person as defined under this final rule
Wherever a U.S. person enters into a transaction in a dealing capacity, it is the U.S. person as a whole that is holding itself out as a dealer in security-based swaps, given that the financial resources of the entire person stand behind any dealing activity of the U.S. person, both at the time it enters into the transaction and for the life of the contract, even when the U.S. person enters into the transaction through a foreign branch or office. Moreover, the U.S. person as a whole seeks to profit by providing liquidity and engaging in market-making in security-based swaps, and the financial resources of the entire person enable it to provide liquidity and engage in market-making in connection with security-based swaps. Its dealing counterparties will look to the entire U.S. person, even when the U.S. person enters into the transaction through a foreign branch or office, for performance on the transaction. The entire U.S. person assumes, and stands behind, the obligations arising from the resulting agreement and is directly exposed to liability arising from non-performance of the non-U.S. person.
For these reasons, in our view a person does not hold itself out as a security-based swap dealer as anything other than a single person even when it enters into transactions through its foreign branch or office.
In the proposing release, we explained that we preliminarily believed that a territorial approach consistent with the text and purposes of the Dodd-Frank Act encompasses transactions involving a non-U.S. person counterparty whose dealing activity is guaranteed by a U.S. person.
In our view, a non-U.S. person engaged in dealing activity, to the extent that one or more transactions arising from such activity are guaranteed by a U.S. person, is engaged in relevant activity for purposes of the security-based swap dealer definition within the United States, with respect to those transactions. By virtue of the guarantee, the non-U.S. person effectively acts together with the U.S. person to engage in the dealing activity that results in the transactions, and the non-U.S. person's dealing activity with respect to such transactions cannot reasonably be isolated from the U.S. person's activity in providing the guarantee. The U.S.-person guarantor together with the non-U.S. person whose dealing activity it guarantees, and not just the non-U.S. person, may seek to profit by providing liquidity and engaging in market-making in security-based swaps, and the non-U.S. person provides liquidity and engages in market-making in connection with security-based swaps by drawing on the U.S. person's financial resources.
Moreover, the economic reality of the non-U.S. person's dealing activity, where the resulting transactions are guaranteed by a U.S. person, is identical, in relevant respects, to a transaction entered into directly by the U.S. guarantor. By virtue of the guarantee, transactions arising from the
Our interpretation of the statutory text of the definition, as well as our further definition of the term, as it applies to these entities is consistent with the purposes of Title VII, as discussed above. The exposure of the U.S. guarantor creates risk to U.S. persons and potentially to the U.S. financial system via the guarantor to a comparable degree as if the transaction were entered into directly by a U.S. person. We understand that in some circumstances a counterparty may choose not to enter into a security-based swap transaction (or may not do so on the same terms) with a non-U.S. subsidiary of a U.S. person when that non-U.S. subsidiary is acting in a dealing capacity to the extent that its dealing activity is not subject to a recourse guarantee by a U.S. affiliate, absent other circumstances (
One commenter noted that U.S. guarantors may provide guarantees for a variety of reasons, including to satisfy regulatory requirements, to “manage capital treatment across an entity,” and to “avoid negative credit rating consequences,” and argued that a guarantee may therefore not create risk within the United States.
Given the role of a foreign person whose activity is guaranteed in creating risk within the United States through its dealing activity, we believe that it is important to ensure that such a foreign person be required to register as a security-based swap dealer to the extent that its guaranteed dealing transactions (together with any dealing transactions with U.S. persons) are included in its
In sum, the guarantee provided by a U.S. person poses risk to U.S. persons and potentially to the U.S. financial system, and both the non-U.S. person whose dealing activity is guaranteed and its counterparty rely on the creditworthiness of the U.S. guarantor when entering into a security-based swap transaction and for the duration of the security-based swap. The economic reality of this transaction, even though entered into by a non-U.S. person, is substantially identical, in relevant respects, to a transaction entered into directly by a U.S. person. Accordingly, in our view, it is consistent with both the statutory text and with the purposes of the statute to identify such transactions as occurring within the United States for purposes of Title VII.
In our proposal, we stated that non-U.S. persons engaging in dealing activity would be required to count toward their
Dealing activity of non-U.S. persons that involves counterparties who are U.S. persons, as that term is defined in the final rule, necessarily involves the performance by the non-U.S. person of relevant activity under the “security-based swap dealer” definition at least in part within the United States. For example, in our view, a non-U.S. person engaging in dealing activity with a U.S. person is holding itself out as a dealer in security-based swaps within the United States.
Our application of the statute to non-U.S. persons is consistent with the purposes of Title VII, as discussed above. U.S. persons incur risks arising from this dealing activity, which in turn
As in our territorial approach to the security-based swap dealer definition (including the
(i) Maintains a substantial position in security-based swaps for any of the major security-based swap categories,
(ii) has outstanding security-based swaps that create substantial counterparty exposure that could have serious adverse effects on the financial stability of the U.S. banking system or financial markets; or
(iii) is a highly leveraged financial entity that maintains substantial position in outstanding security-based swaps in any major security-based swap category.
Pursuant to these provisions, we further interpreted this definition by, among other things, defining what constitutes a “substantial position” and “substantial counterparty exposure” for purposes of the major security-based swap participant definition.
The statutory focus of the major security-based swap participant definition differs from that of security-based swap dealer, in that the security-based swap dealer definition focuses on
Consistent with our proposal, we interpret section 30(c) of the Exchange Act as not requiring us to find that actual evasion has occurred or is occurring to invoke our authority to reach activity “without the jurisdiction of the United States” or to limit application of Title VII to security-based swap activity “without the jurisdiction of the United States” only to business that is transacted in a way that is purposefully intended to evade Title VII. Section 30(c) of the Exchange Act authorizes the Commission to apply Title VII to persons transacting a business “without the jurisdiction of the United States” if they contravene rules that the Commission has prescribed as “necessary or appropriate to prevent the evasion of any provision” of Title VII. The focus of this provision is not whether such rules impose Title VII requirements only on entities engaged in evasive activity but whether the rules are generally “necessary or appropriate” to prevent potential evasion of Title VII. In other words, section 30(c) of the Exchange Act permits us to impose prophylactic rules intended to prevent possible purposeful evasion, even though such rules may affect or prohibit some non-evasive conduct. Moreover, exercising the section 30(c) authority does not require us to draw a distinction
As in our proposal, our final rules and guidance reflect our careful consideration of the global nature of the security-based swap market and the types of risks created by security-based swap activity to the U.S. financial system and market participants and other concerns that the dealer and major security-based swap participant definitions were intended to address, as well as the needs of a well-functioning security-based swap market.
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At times, these principles reinforce one another; at other times, they may be in tension. For instance, regulating risk posed to the United States may, depending on the final rules, make it more costly for U.S.-based firms to conduct security-based swap business, particularly in foreign markets, compared to foreign firms; it could make foreign firms less willing to deal with U.S. persons; and it could discourage foreign firms from carrying out security-based swap dealing activity through branches or offices located in the United States. On the other hand, providing U.S. persons greater access to foreign security-based swap markets may, depending on the final rules, fail to appropriately address the risks posed to the United States from transactions conducted in part outside the United States or create opportunities for market participants to evade the application of Title VII, particularly until such time as other jurisdictions adopt similar comprehensive and comparable derivative regulations.
Balancing these sometimes competing principles has been complicated by the fact that Title VII imposes a new regulatory regime in a global marketplace. Title VII establishes reforms that will have implications for entities that compete internationally in the global security-based swap market. We have generally sought, in accordance with the statutory factors described above, to avoid creating opportunities for market participants to evade Title VII requirements, whether by restructuring their business or other means, or the potential for overlapping or conflicting regulations. We also have considered the needs for a well-functioning security-based swap market and for avoiding disruption that may reduce liquidity, competition, efficiency, transparency, or stability in the security-based swap market.
To assess the economic impact of the final rules described in this release, we are using as our baseline the security-based swap market as it exists at the time of this release, including applicable rules we have already adopted but excluding rules that we have proposed but not yet finalized.
Our analysis of the state of the current security-based swap market is based on data obtained from DTCC–TIW, especially data regarding the activity of market participants in the single-name CDS market during the period from 2008 to 2012. While other repositories may collect data on transactions in total return swaps on equity and debt, we do not currently have access to such data for these products (or other products that are security-based swaps). We have previously noted that the definition of security-based swaps is not limited to single-name CDS but we believe that the single-name CDS data are sufficiently representative of the market and therefore can directly inform the analysis of the state of the current security-based swap market.
We believe that the data underlying our analysis here provide reasonably comprehensive information regarding the single-name CDS transactions and composition of the single-name CDS market participants. We note that the data available to us from DTCC–TIW do not encompass those CDS transactions that both: (i) Do not involve U.S. counterparties;
A key characteristic of security-based swap activity is that it is concentrated among a relatively small number of entities that engage in dealing activities. In addition to these entities, thousands of other participants appear as counterparties to security-based swap contracts in our sample, and include, but are not limited to, investment companies, pension funds, private (hedge) funds, sovereign entities, and industrial companies. We observe that most non-dealer users of security-based swaps do not engage directly in the trading of swaps, but use dealers, banks, or investment advisers as intermediaries or agents to establish their positions. Based on an analysis of the counterparties to trades reported to the DTCC–TIW, there are 1,695 entities that engaged directly in trading between November 2006 and December 2012.
Table 1, below, highlights that more than three-quarters of these entities (DTCC-defined “firms” shown in DTCC–TIW, which we refer to here as “transacting agents”) were identified as investment advisers, of which approximately 40 percent (about 30 percent of all transacting agents) were registered investment advisers under the Investment Advisers Act of 1940 (“Investment Advisers Act”).
Principal
Among the accounts, there are 1,000 Dodd-Frank Act-defined special entities and 570 investment companies registered under the Investment Company Act of 1940.
(a) Dealing
Security-based swap dealers use a variety of business models and legal structures to engage in dealing business with counterparties in jurisdictions all around the world. As we noted in the proposal, both U.S.-based and foreign-based entities use certain dealing structures for a variety of legal, tax, strategic, and business reasons.
Bank and non-bank holding companies may use subsidiaries to deal with counterparties. Further, dealers may rely on multiple sales forces to originate security-based swap transactions. For example, a U.S. bank dealer may use a sales force in its U.S. home office to originate security-based swap transactions in the United States and use separate sales forces spread across foreign branches to originate security-based swap transactions with counterparties in foreign markets.
In some situations, an entity's performance under security-based swaps may be supported by a guarantee provided by an affiliate. More generally, guarantees may take the form of a blanket guarantee of an affiliate's performance on all security-based swap contracts, or a guarantee may apply only to a specified transaction or counterparty. Guarantees may give counterparties to the dealer direct recourse to the holding company or another affiliate for its dealer-affiliate's obligations under security-based swaps for which that dealer-affiliate acts as counterparty.
The security-based swap market is global in scope, with counterparties located across multiple jurisdictions. As depicted in Figure 1, the domicile of new accounts participating in the market has shifted over time.
Over
A U.S.-based holding company may conduct dealing activity through a foreign subsidiary that faces both U.S. and foreign counterparties. Similarly, foreign dealers may choose to deal with U.S. and foreign counterparties through U.S. subsidiaries. Non-dealer users of security-based swaps may participate in the market using an agent in their home country or abroad. An investment adviser located in one jurisdiction may transact in security-based swaps on behalf of beneficial owners that reside in another.
The various layers separating origination from booking by dealers, and management from ownership by non-dealer users, highlights the potential distinctions between the location where a transaction is arranged, negotiated, or executed, the location where economic decisions are made by managers on behalf of beneficial owners, and the jurisdiction ultimately bearing the financial risks associated with the security-based swap transaction that results. As a corollary, a participant in the security-based swap market may be exposed to counterparty risk from a jurisdiction that is different from the market center in which it participates.
In the Intermediary Definitions Adopting Release, we estimated, based on an analysis of DTCC–TIW data, that out of more than 1,000 entities engaged in single-name CDS activity worldwide in 2011, 166 entities engaged in single-name CDS activity at a sufficiently high level that they would be expected to incur assessment costs to determine whether they meet the “security-based swap dealer” definition.
In the Cross-Border Proposing Release, we revised those estimates to reflect a more granular analysis of the data. Under this refined approach—which identified the number of entities within a corporate group that may have to register—we estimated that 46 individual firms had three or more non-ISDA dealer counterparties, and that, of those, 31 firms engaged in at least $3 billion of security-based swap activity in 2011. We further estimated that, under the cross-border provisions of proposed Exchange Act rule 3a71–3(b), 27 of those entities engaged in at least $3 billion notional activity that they would have to count against the
Analysis of more recent data regarding the single-name CDS market using the same methodology suggests comparable results that are consistent with the reduction in transaction volume noted below. In particular, single-name CDS data from 2012 indicate that out of more than 1,000 entities engaged in single-name CDS activity, approximately 145 engaged in single-name CDS activity at a level high enough such that they may be expected to perform the dealer-trader analysis prescribed under the security-based swap dealer definition.
In calculating this estimate, Commission staff used methods identical to those used referenced in the Intermediary Definitions Adopting Release, 77 FR 30732 n.1509, aggregating the activity of DTCC accounts to the level of transacting agents and estimating the number of transacting agents with gross transaction notional amounts exceeding $2 billion in 2012. While the analysis contained in the Intermediary Definitions Adopting Release used a sample that ended in December 2011, the sample has been updated through the end of December 2012.
In connection with the economic analysis of the final cross-border dealer
In this regard it is important to note that, due to limitations in the availability of the underlying data, this analysis does not include information about transactions involving single-name CDS with a non-U.S. reference entity when neither party is domiciled in the United States or guaranteed by a person domiciled in the United States. This is because for single-name CDS with a non-U.S. reference entity, the data supplied to the Commission by the DTCC–TIW encompasses only information regarding transactions involving at least one counterparty domiciled in the United States or guaranteed by a person domiciled in the United States, based on physical addresses reported by market participants. That data exclusion introduces the possibility that these numbers may underestimate the number of persons that would engage in the dealer-trader analysis (and hence incur assessment costs) or that exceed $3 billion in dealing transactions on an annual basis (and hence would potentially be linked to programmatic costs and benefits).
Additionally, in the Intermediary Definitions Adopting Release, we estimated, based on position data from DTCC–TIW for 2011, that as many as 12 entities would be likely to perform
Analysis of more recent data regarding the single-name CDS market suggests comparable results. In particular, single-name CDS data from 2012 indicate that out of over 1,100 DTCC–TIW firms holding positions in single-name CDS activity and not expected to register as security-based swap dealers, nine had worldwide single-name CDS positions at a level high enough such that they may be expected to perform the major security-based swap participant threshold analysis prescribed under the security-based swap dealer definition. Analysis based on these more recent data is consistent with the prior conclusion that five or fewer entities would be likely to register as major security-based swap participants.
Single-name CDS contracts make up the vast majority of security-based swap products and most are written on corporate issuers, corporate securities, sovereign countries, or sovereign debt (reference entities and reference securities). Figure 2 below describes the percentage of global, notional transaction volume in North American corporate single-name CDS reported to the DTCC–TIW between January 2008 and December 2012, separated by whether transactions are between two ISDA-recognized dealers (interdealer transactions) or whether a transaction has at least one non-dealer counterparty.
The level of trading activity with respect to North American corporate single-name CDS in terms of notional volume has declined from more than $5 trillion in 2008 to approximately $2 trillion in 2012.
Against this backdrop of declining North American corporate single-name CDS activity, about half of the trading activity in North American corporate single-name CDS reflected in the set of data we analyzed was between counterparties domiciled in the United States and counterparties domiciled abroad. Basing counterparty domicile on the self-reported registered office location of the DTCC–TIW accounts, the Commission estimates that only 13 percent of the global transaction volume by notional volume between 2008 and 2012 was between two U.S.-domiciled counterparties, compared to 48 percent entered into between one U.S.-domiciled counterparty and a foreign-domiciled counterparty and 39 percent entered into between two foreign-domiciled counterparties (see Figure 3).
Changes to these estimates relative to figures presented in the proposing release represent additional data regarding new accounts in the time series as well as the use of a longer sample period.
When the domicile of DTCC–TIW accounts are instead defined according to the domicile of their ultimate parents, headquarters, or home offices (
Differences in classifications across different definitions of domicile illustrate the effect of participant structures that operate across jurisdictions. Notably, the proportion of activity between two foreign-domiciled counterparties drops from 39 percent to 18 percent when domicile is defined as the ultimate parent's domicile. As noted earlier, foreign subsidiaries of U.S. parent companies and foreign branches of U.S. banks, and U.S. subsidiaries of foreign parent companies and U.S. branches of foreign banks may transact with U.S. and foreign counterparties. However, this decrease in share suggests that the activity of foreign subsidiaries of U.S. firms and foreign branches of U.S. banks is generally higher than the activity of U.S. subsidiaries of foreign firms and U.S. branches of foreign banks.
By either of those definitions of domicile, the data indicate that a large fraction of North American corporate single-name CDS transaction volume is entered into between counterparties domiciled in two different jurisdictions or between counterparties domiciled outside the United States. For the purpose of establishing an economic baseline, this observation indicates that a large fraction of security-based swap
Efforts to regulate the swaps market are underway not only in the United States but also abroad. In 2009, leaders of the G20—whose membership includes the United States, 18 other countries, and the EU—called for global improvements in the functioning, transparency, and regulatory oversight of OTC derivatives markets agreeing that “all standardised OTC derivatives contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties (“CCPs”) by end-2012 at the latest. OTC derivatives contracts should be reported to trade repositories. Non-centrally cleared contracts should be subject to higher capital requirements.”
Pursuant to these commitments, jurisdictions with major OTC derivatives markets have taken steps toward substantive regulation of these markets, though the pace of regulation varies. This suggests that many foreign participants will face substantive regulation of their security-based swap activities that is intended to implement the G20 objectives and that may therefore address concerns similar to those addressed by rules the Commission has proposed but not yet adopted.
Foreign legislative and regulatory efforts have focused on five general areas: Requiring post-trade reporting of transactions data for regulatory purposes, moving OTC derivatives onto organized trading platforms, requiring central clearing of OTC derivatives, establishing or enhancing capital requirements, and establishing or enhancing margin requirements for OTC derivatives transactions.
The first two areas of regulation should help improve transparency in OTC derivatives markets, both to regulators and market participants. Regulatory transaction reporting requirements have entered into force in a number of jurisdictions including the EU, Hong Kong SAR, Japan, and Singapore, and other jurisdictions are in
Regulation of derivatives central clearing, capital requirements, and margin requirements aims to improve management of financial risks in these markets. Japan has rules in force mandating central clearing of certain OTC derivatives transactions. The EU has its legislation in place but has not yet made any determinations of specific OTC derivatives transactions subject to mandatory central clearing. Most other jurisdictions are still in the process of formulating their legal frameworks that govern central clearing. While the EU is the only major foreign jurisdiction that has initiated the process of drafting rules to implement margin requirements for OTC derivatives transactions, we understand that several other jurisdictions anticipate taking steps towards implementing such requirements.
Persons registered as security-based swap dealers or major security-based swap participants are likely also to engage in swap activity, which is subject to regulation by the CFTC. In the release proposing registration requirements for security-based swap dealers and major security-based swap participants, we estimated, based on our experience and understanding of the swap and security-based swap markets that of the 55 firms that might register as security-based swap dealers or major security-based swap participants, approximately 35 would also register with the CFTC as swap dealers or major swap participants.
This overlap reflects the relationship between single-name CDS contracts, which are security-based swaps, and index CDS contracts, which may be swaps or security-based swaps. A single-name CDS contract covers default events for a single reference entity or reference security. These entities and securities are often part of broad-based indices on which market participants write index CDS contracts. Index CDS contracts and related products make payouts that are contingent on the default of index components and allow participants in these instruments to gain exposure to the credit risk of the basket of reference entities that comprise the index, which is a function of the credit risk of the index components. As a result of this construction, a default event for a reference entity that is an index component will result in payoffs on both single-name CDS written on the reference entity and index CDS written on indices that contain the reference entity. Because of this relationship between the payoffs of single-name CDS and index CDS products, prices of these products depend upon one another. This dependence is particularly strong between index CDS contracts and single-name CDS contracts written on index components.
Because payoffs associated with these single-name CDS and index CDS are dependent, hedging opportunities exist across these markets. Participants who sell protection on reference entities through a series of single-name CDS transactions can lay off some of the credit risk of their resulting positions by buying protection on an index that includes a subset of those reference entities. Participants that are active in one market are likely to be active in the other. Commission staff analysis of approximately 4,400 DTCC–TIW accounts that participated in the market for single-name CDS in 2012 revealed that approximately 2,700 of those accounts, or 61 percent, also participated in the market for index CDS. Of the accounts that participated in both markets, data regarding transactions in 2012 suggest that, conditional on an account transacting in notional volume of index CDS in the top third of accounts, the probability of the same account landing in the top third of accounts in terms of single-name CDS notional volume is approximately 62 percent; by contrast, the probability of the same account landing in the bottom third of accounts in terms of single-name CDS notional volume is only 14 percent.
In an effort to comply with CFTC rules and applicable statutory provisions in the cross-border context, swap market participants, many of whom, as discussed above, likely also participate in the security-based swap market, may have already changed some market practices.
The CFTC's rules and cross-border guidance have likely influenced the information that market participants collect and maintain about the swap transactions they enter into and the counterparties they face. For example, the CFTC's guidance describes a majority-ownership approach for collective investment vehicles that are offered to U.S. persons, contemplating
Thus, as discussed in more detail in sections IV.I.2 and V.H.2 below, the adoption of rules that would seek similar information from security-based swap market participants as the CFTC seeks from swap market participants, may allow such participants to use infrastructure already in place as a result of CFTC regulation to comply with Commission regulation. Among those entities that participate in both markets, entities that are able to apply to security-based swap activity new capabilities they have built in order to comply with requirements applicable to cross-border swap activity may experience lower costs associated with assessing which cross-border security-based swap activity counts against the dealer
The Exchange Act excepts from designation as “security-based swap dealer” entities that engage in a “
To apply the exception to cross-border dealing activity, the Cross-Border Proposing Release would have required that a U.S. person count against the
Proposed Exchange Act rule 3a71–3 also contained a provision and associated definitions related to the cross-border application of counterparty protection requirements in connection with security-based swap activities. As discussed above, those matters are not the subject of the present rulemaking, and the Commission intends to address those matters as part of a subsequent rulemaking.
Commenters raised issues related to various aspects of this proposed approach to application of the
After considering commenters' views regarding the cross-border application of the
• Modifications to the proposed definition of “U.S. person”;
• Provisions to distinguish non-U.S. persons' dealing activity involving security-based swaps that are guaranteed by their U.S. affiliates from such non-U.S. persons' other dealing activity for purposes of the
• Provisions to distinguish non-U.S. persons that act as conduit affiliates (by entering into certain security-based swap transactions on behalf of their U.S. affiliates) from other non-U.S. persons for purposes of the
• Modifications to the application of the
• The addition of an exclusion related to cleared, anonymous transactions; and
• Modifications of the proposed aggregation provisions, in part by removing the “operational independence” condition to excluding dealing positions of affiliates that are registered dealers.
The final rules we are adopting reflect a territorial approach that is generally consistent with the principles that the Commission traditionally has followed with respect to the registration of brokers and dealers under the Exchange Act. Under this territorial approach, registration and other requirements applicable to brokers and dealers generally are triggered by a broker or dealer physically operating in the United States, even if its activities are directed solely toward non-U.S. persons outside the United States. The territorial approach further generally requires broker-dealer registration by foreign brokers or dealers that, from outside the United States, induce or attempt to induce securities transactions by persons within the United States—but not when such foreign brokers or dealers conduct their activities entirely outside the United States.
In the cross-border context, moreover, the application of the “security-based swap dealer” definition and its
Cross-border security-based swap transactions also are subject to the principle that transactions between majority-owned affiliates need not be considered for purposes of determining whether a person is a dealer.
As discussed below, these final rules and guidance do not address the proposed provisions regarding the cross-border application of the dealer definition to “transactions conducted within the United States,” as defined in the Cross-Border Proposing Release. We anticipate soliciting additional public comment on potential approaches for applying the dealer definition to non-U.S. persons in connection with activity between two non-U.S. persons where one or both are conducting dealing activity that occurs within the United States.
Under the proposal, a U.S. person would have counted all of its security-based swap dealing activity against the
Consistent with the proposal, the final rules require U.S. persons to apply all of their dealing transactions against the
As discussed above, it is our view that any dealing activity undertaken by a U.S. person, as defined in this final rule, occurs at least in part within the United States and therefore warrants the application of Title VII regardless of where particular aspects of dealing activity are conducted.
This interpretation, moreover, is consistent with the goals of security-based swap dealer regulation under Title VII. Security-based swap activity that results in a transaction involving a U.S. counterparty creates ongoing obligations that are borne by a U.S. person, and thus is properly viewed as occurring within the United States. The events associated with AIG FP, described in detail in our proposal, illustrate how certain transactions of U.S. persons can pose risks to the U.S. financial system even when they are conducted through foreign operations.
For the above reasons, we conclude that our approach does not apply to persons who are “transact[ing] a business in security-based swaps without the jurisdiction of the United States,” within the meaning of section 30(c) of the Exchange Act.
Consistent with our territorial approach to application of Title VII to cross-border security-based swap activity, our Cross-Border Proposal defined “U.S. person” to mean:
• Any natural person resident in the United States;
• Any partnership, corporation, trust, or other legal person organized or incorporated under the laws of the United States
• Any account (whether discretionary or non-discretionary) of a U.S. person.
This proposed definition of “U.S. person” generally followed an approach to defining U.S. person that is similar to that used by the Commission in other contexts,
The proposed definition of “U.S. person” was similar in many respects to the definition provided by CFTC staff in its October 12, 2012 no-action letter.
We received extensive comments on our proposed definition of “U.S. person.” In these comments, many commenters also expressed their views on the interpretation of “U.S. person” in the CFTC Cross-Border Guidance. As explained in more detail below, several commenters emphasized that we should minimize divergence from the CFTC's approach, including by adding certain elements to our definition of “U.S. person” that we had not proposed. Many commenters also identified specific elements of the CFTC interpretation that we should not adopt in our final rule.
Several commenters expressed the view that our proposed definition of “U.S. person” was clear, objective, and territorial in scope.
In response to our questions about whether our proposed definition of “U.S. person” provided sufficient guidance to investment vehicles and similar legal persons, commenters generally requested guidance but expressed a range of views as to what guidance we should provide. One commenter requested that we ensure that foreign investment vehicles with a “U.S. nexus” be considered U.S. persons.
Several commenters requested that we provide additional guidance regarding the application of the “principal place of business” test to investment vehicles. Some commenters specifically requested that we avoid diverging from the CFTC's interpretation of “U.S. person” in our own final definition.
A few commenters responded to our question whether the proposed definition should encompass funds that are majority-owned by U.S. persons, as the CFTC's interpretation does, with two commenters advocating against and three advocating in favor of such an approach.
One commenter suggested that we adopt the CFTC's approach by which collective investment vehicles that are offered publicly only to non-U.S. persons, and not offered to U.S. persons, would not generally be considered “U.S. persons.”
Two commenters urged us to include in the definition of “U.S. person” guaranteed subsidiaries and affiliates of U.S. persons.
One commenter suggested that the Commission follow the CFTC in including in its final “U.S. person” definition legal persons that are directly or indirectly majority-owned by one or more U.S. persons who bear unlimited responsibility for the obligations of that legal person, stating that such a provision is necessary to prevent evasion of Title VII.
One commenter expressed support for a principal place of business component to the “U.S. person” definition as set forth in our proposal.
Several commenters suggested that the Commission harmonize its approach to determining a person's principal place of business to the approach in the CFTC Cross-Border Guidance,
Several commenters recommended that, if the Commission were to adopt a “principal place” of business test in its “U.S. person” definition, market participants be allowed to rely on a counterparty's representations as to the counterparty's principal place of business.
One commenter supported the Commission's proposal for determining the U.S.-person status of an account, which would look to whether the owner of the account itself is a U.S. person,
A number of commenters expressed support for the Commission's proposal to exclude certain international organizations (
Some commenters requested that a potential dealer expressly be permitted to rely on a counterparty representation to fulfill its diligence requirements in determining whether its counterparty is a U.S. person under the final rule.
Consistent with the proposal, we are adopting a final definition of “U.S. person” that continues to reflect a territorial approach to the application of Title VII and is in most respects unchanged from the proposal.
The final rule defines “U.S. person” to mean:
• Any natural person resident in the United States;
• Any partnership, corporation, trust, investment vehicle, or other legal person organized, incorporated, or established under the laws of the United States or having its principal place of business in the United States;
• Any account (whether discretionary or non-discretionary) of a U.S. person; or
• Any estate of a decedent who was a resident of the United States at the time of death.
Consistent with the proposal, “special entities,” as defined in section 15F(h)(2)(C) of the Exchange Act, are U.S. persons because they are legal persons organized under the laws of the United States. Section 15F(h)(2)(C) of the Exchange Act defines the term “special entity” as: A Federal agency; a State, State agency, city, county, municipality, or other political subdivision of a State; any employee benefit plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1002; any governmental plan, as defined in section 3 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1002; or any endowment, including an endowment that is an organization described in section 501(c)(3) of the Internal Revenue Code of 1986. 15 U.S.C. 78o–10(h)(2)(C).
The final rule defines “principal place of business” to mean “the location from which the officers, partners, or managers of the legal person primarily direct, control, and coordinate the activities of the legal person.”
Also consistent with the proposal, the final definition excludes the following international organizations from the definition of “U.S. person”: The IMF, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies and pension plans, and any other similar international organizations, their agencies and pension plans.
To address commenters' requests,
Although one commenter requested that we use a definition of “U.S. person” that is consistent with Regulation S, we are declining to do so for the reasons described in our Cross-Border Proposing Release.
As in our proposed definition, the final definition of “U.S. person” provides that any natural person resident in the United States
Notwithstanding slight differences between the language of our final rule and the CFTC Cross-Border Guidance, we expect that a natural person's U.S.-person status under our final definition would be the same as under the CFTC Cross-Border Guidance.
As we noted in the proposal, it is consistent with the approach we have taken in prior rulemakings relating to the cross-border application of certain similar regulatory requirements to subject natural persons residing within the United States to our regulatory framework.
The final definition of “U.S. person” as applied to legal persons has been modified to clarify certain aspects of the rule. Also, in response to comments, we are adopting a definition of “principal place of business.” In general, the scope of the definition as applied to legal persons does not differ materially from the scope of our proposal.
As with the proposed rule, the final definition provides that any partnership, corporation, trust, or other legal person organized or incorporated under the laws of the United States or having its principal place of business in the United States would be a U.S. person.
Second, the final rule adds an express reference to “investment vehicle” in the non-exclusive list of legal persons to clarify that any such person, however formed, will be treated as a U.S. person for purposes of Title VII if it is organized, incorporated, or established under the laws of the United States or has its principal place of business in the United States.
As noted in our proposal, we have previously looked to where a legal person is organized, incorporated, or established to determine whether it is a U.S. person.
As under the proposal, the final definition determines a legal person's
Under the final definition, the status of a legal person as a U.S. person has no bearing on whether separately incorporated or organized legal persons in its affiliated corporate group are U.S. persons. Accordingly, a foreign subsidiary of a U.S. person is not a U.S. person merely by virtue of its relationship with its U.S. parent. Similarly, a foreign person with a U.S. subsidiary is not a U.S. person simply by virtue of its relationship with its U.S. subsidiary. Although two commenters urged that most foreign affiliates of U.S. persons be treated as U.S. persons themselves,
One commenter also urged us to follow the CFTC in including within the final definition any legal person that is directly or indirectly majority-owned by one or more U.S. persons that bear unlimited responsibility for the obligations and liabilities of such legal person.
Consistent with our proposal, we are defining “U.S. person” to include persons that are organized, incorporated, or established abroad, but have their principal place of business in the United States. For purposes of this final rule, and in response to commenters' request for further guidance,
Because the definition of “principal place of business” in this final rule is tailored to the unique characteristics of the security-based swap market, it does not limit, alter, or address any guidance regarding the meaning of the phrase “principal place of business” that may appear in other provisions of the federal securities laws, including the Investment Advisers Act, Commission rules, regulations, interpretations, or guidance.
This definition is intended to help market participants make rational and consistent determinations regarding whether their (or their counterparty's) principal place of business is in the United States.
As discussed in further detail below, we also are including in our definition of “U.S. person” a provision permitting persons to rely on representations from a counterparty regarding whether the counterparty's principal place of business is in the United States, unless these persons know or have reason to know that the representation is false.
Although we recognize that several commenters objected to including a “principal place of business” test in our definition of “U.S. person,”
We also note that limiting our definition of “U.S. person” to entities incorporated, established, or organized in the United States as some commenters requested would not eliminate the potential that entities would be simultaneously classified as U.S. persons and as local persons under foreign law. Even under such a definition, some persons could be classified both as U.S. persons for purposes of Title VII and as persons established in foreign jurisdictions under a foreign regulatory regime.
We also have considered the suggestion by one commenter that “principal place of business” be defined to incorporate certain quantitative thresholds and an exception for firms whose jurisdiction of incorporation has an acceptable regulatory framework in place.
Finally, we recognize that one commenter suggested that a “principal place of business” test should look to the location of personnel directing the security-based swap activity of the entity,
Application of the “principal place of business” test to externally managed investment vehicles presents certain challenges not present when determining the principal place of business of an operating company or other internally managed legal person. For example, an operating company generally will carry out key functions (including directing, controlling, and coordinating its business activities) on its own behalf and generally will have offices through which these functions are performed. Responsibility for key functions of an externally managed investment vehicle, on the other hand, generally will be allocated to one or more separate persons (such as external managers, or other agents), with few or no functions carried out through an office of the vehicle itself.
Notwithstanding these challenges, we also recognize that externally managed investment vehicle are active participants in the security-based swap market
Other, more recent, examples of risks of such entities established under foreign law manifesting themselves within the United States include the failure of two Bear Stearns hedge funds, which had significant repercussions within the United States, and the bailouts of bank-sponsored structured investment vehicles.
To address the unique characteristics of externally managed investment vehicles, we are including in our definition of “principal place of business” language specifying that an externally managed investment vehicle's principal place of business is “the office from which the manager
As noted above, at least one commenter suggested that a “principal place of business” test should look to the location of personnel directing the security-based swap activity of the vehicle.
In our proposal, we stated that we did not think that the U.S.-person status of a commodity pool operator (“CPO”) or fund adviser (as opposed to the fund actually entering into the transaction) was in itself relevant in determining the U.S.-person status of an investment vehicle.
Some commenters urged us to include in the definition investment vehicles that are majority-owned by U.S. persons.
We note that, because we are not following a majority-ownership approach for collective investment vehicles as part of the “U.S. person” definition, the U.S.-person status of accounts investing in such investment vehicles will not affect the U.S.-person status of such vehicles.
Because we are not adopting an ownership test for funds, we are also not following the suggestion of some commenters that we exclude from the “U.S. person” definition investment vehicles that are offered publicly only to non-U.S. persons and are not offered to
The final definition of “U.S. person” continues to mean “any account (whether discretionary or not) of a U.S. person,” irrespective of whether the person at which the account is held or maintained is a U.S. person.
Consistent with the overall approach to the definition of “U.S. person,” our focus under the “account” prong of this definition is on the party that actually bears the risk arising from the security-based swap transactions.
Where an account is owned by both U.S. persons and non-U.S. persons, the U.S.-person status of the account, as a general matter, should turn on whether any U.S.-person owner of the account incurs obligations under the security-based swap.
The final rule incorporates a new prong that expressly includes certain estates within the definition of “U.S. person.” Under the final rule any estate of a natural person who was a resident of the United States at the time of death is itself a U.S. person.
We continue to believe that estates are not likely to be significant participants in the security-based swap market, but we also believe that, given the unique characteristics of estates, it is appropriate to include in the “U.S. person” definition an express reference to estates of decedents who were residents of the United States at the time of death. This element of our final definition reflects similar considerations to those that informed our inclusion of natural persons who are residents of the United States within the scope of that definition. We noted above that the security-based swap activity of a natural person who is a resident of the United States raises the types of risks that Title VII is intended to address, given that person's residence status and likely financial and legal relationships, and we expect that the estate of a natural person who was a resident of the United States at the time of his or her death is likely to operate within the same relationships that warranted subjecting such transactions to Title VII during the life of the decedent.
As under the proposal, the final rule expressly excludes certain international organizations from the definition of U.S. person.
Our proposed definition of “U.S. person” did not expressly provide that parties could rely on representations from their counterparties as to their counterparties' U.S.-person status, although we did anticipate that parties likely would request such representations.
As we noted in the proposal, for purposes of the
Expressly permitting market participants to rely on such representations in the “U.S. person” definition should help mitigate challenges that could arise in determining a counterparty's U.S.-person status under the final rule. It permits the party best positioned to make this determination to perform an analysis of its own U.S.-person status and convey, in the form of a representation, the results of that analysis to its counterparty. In addition, such representations should help reduce the potential for inconsistent classification and treatment of a person by its counterparties and promote uniform application of Title VII.
The final rule reflects a constructive knowledge standard for reliance. Under this standard, a counterparty is permitted to rely on a representation, unless the person knows or has reason to know that the representation is inaccurate. A person would have reason to know the representation is not accurate for purposes of the final rule if a reasonable person should know, under all of the facts of which the person is aware, that it is not accurate.
We recognize that one commenter urged us to limit a reasonable reliance standard for such representations to representations concerning whether a person had its principal place of business in the United States.
The Cross-Border Proposing Release did not include requirements specific to “conduit affiliates” or other non-U.S. persons that enter into security-based swap transactions on behalf of their U.S. affiliates. Instead, the proposal would have treated those entities like other non-U.S. persons, and required them to count, against the
The proposal acknowledged the difference between its approach and the CFTC's approach in its proposed cross-border guidance, which encompassed special provisions for foreign affiliates that act as conduits for U.S. persons.
One commenter took the view that the Commission's rules should not make use of the conduit affiliate concept notwithstanding its use in the CFTC Cross-Border Guidance, stating that the concept lacks any statutory or regulatory authority, would not advance efforts to reduce systemic risk, and, if applied to end-users, would interfere with internal risk allocations within a corporate group.
One commenter further opposed the adoption of an approach that would require a “central booking system” or any other affiliate to register as a security-based swap dealer based solely on its inter-affiliate security-based swap transactions, arguing that such an approach would tie registration requirements to firms' internal risk management practices, and would hamper the ability to manage risk across a multinational enterprise.
The final rule distinguishes “conduit affiliates” from other non-U.S. persons by requiring such entities to count all of their dealing transactions against the
After careful consideration, we believe that requiring such conduit affiliates to count their dealing transactions against the
Accordingly, in our view, requiring conduit affiliates to count their dealing transactions against the thresholds is necessary or appropriate to prevent the evasion of any provision of the amendments made to the Exchange Act by Title VII for the reasons given above.
We also note that while this requirement appears consistent with the views of a commenter that supported the use of the conduit affiliate concept, we take no position on that commenter's view that conduit affiliates represent a type of entity that is subject to a de facto guarantee by a U.S. person.
In light of the anti-evasion rationale for this use of the conduit affiliate concept, which is consistent with our statutory anti-evasion authority, we are not persuaded by a commenter's view that the use of the concept is outside of our authority.
At the same time, we recognize the significance of commenter concerns that the use of the “conduit affiliate” concept or the use of a “central booking system” approach to registration could impede efficient risk management practices.
Moreover, in light of this anti-evasion purpose, the definition of “conduit affiliate” does not include entities that may otherwise engage in relevant activity on behalf of affiliated U.S. persons that are registered with the Commission as security-based swap dealers or major security-based swap participants, as we do not believe that transactions involving these types of registered entities and their foreign affiliates raise the types of evasion concerns that the conduit affiliate concept is designed to address.
In addition, in the context of the dealer
Moreover, as discussed above, over a recent six-year period, entities that are recognized as dealers are responsible for almost 85 percent of transactions involving single-name CDS.
Consistent with these goals, the final rule defines “conduit affiliate” in part as a non-U.S. person that directly or indirectly is majority-owned by one or more U.S. persons.
For purposes of the definition, the majority-ownership standard is met if one or more U.S. persons directly or indirectly own a majority interest in the non-U.S. person, where “majority interest” is the right to vote or direct the vote of a majority of a class of voting securities of an entity, the power to sell or direct the sale of a majority of a class of voting securities of an entity, or the right to receive upon dissolution, or the contribution of, a majority of the capital of a partnership.
The reference to “other arrangements” to transfer the risks and benefits of security-based swaps, as an alternative to entering into offsetting security-based swaps, may encompass, for example, the use of swaps to transfer risks and benefits of the security-based swaps (for example, two CDS based on slightly different indices of securities could be used to approximately replicate a security-based swap such as a CDS based on a single reference entity).
We note that while the CFTC Cross-Border Guidance also states the view that as a general matter conduit affiliates should count their dealing activity against the
In our view, the final rule's definition—including its prerequisite that the conduit affiliate be majority-owned by non-natural U.S. persons appropriately focuses the meaning of the term “conduit affiliate” on persons who may engage in security-based swap activity on behalf of U.S. affiliates in connection with dealing activity (and, as discussed below,
As noted above, the proposal would have required non-U.S. persons to count, against the
Aside from issues related to conduit affiliates, addressed above, commenters discussed other issues regarding the application of the
Under the proposal, a non-U.S. person's transactions involving security-based swaps guaranteed by its U.S. affiliate would have been treated the same as other transactions of non-U.S. persons for purposes of the
In the Cross-Border Proposing Release, we solicited comment regarding whether the “U.S. person” definition should incorporate foreign entities that are guaranteed by their U.S. affiliates.
Two commenters supported an alternative approach to require such guaranteed non-U.S. persons to count all of their dealing transactions against the thresholds. One commenter stated that non-U.S. persons that receive guarantees from U.S. persons should count all of their dealing transactions toward the
One comment letter did not explicitly address this issue, but did support the Commission's proposed approach not to require non-U.S. persons to aggregate the dealing transactions of their U.S.-guaranteed affiliates against the
Under the final rule, a non-U.S. person (other than a conduit affiliate, as discussed above) must count, against the
We understand that such rights may arise in a variety of contexts. For example, a counterparty would have such a right of recourse against the U.S. person if the applicable arrangement provides the counterparty the legally enforceable right to demand payment from the U.S. person in connection with the security-based swap, without conditioning that right upon the non-U.S. person's non-performance or requiring that the counterparty first make a demand on the non-U.S. person. A counterparty also would have such a right of recourse if the counterparty itself could exercise legally enforceable rights of collection against the U.S. person in connection with the security-based swap, even when such rights are conditioned upon the non-U.S. person's insolvency or failure to meet its obligations under the security-based swap, and/or are conditioned upon the counterparty first being required to take legal action against the non-U.S. person to enforce its rights of collection.
The terms of the guarantee need not necessarily be included within the security-based swap documentation or even otherwise reduced to writing (so long as legally enforceable rights are created under the laws of the relevant jurisdiction); for instance, such rights of recourse would arise when the counterparty, as a matter of law in the relevant jurisdiction, would have rights to payment and/or collection that may arise in connection with the non-U.S. person's obligations under the security-based swap that are enforceable.
Accordingly, the final rule clarifies that for these purposes a counterparty would have rights of recourse against the U.S. person “if the counterparty has a conditional or unconditional legally enforceable right, in whole or in part, to receive payments from, or otherwise collect from, the U.S. person in connection with the security-based swap.”
In revising the proposal, we have been influenced by commenter concerns that the proposed approach could allow non-U.S. persons to conduct a dealing business involving security-based swaps that are guaranteed by a U.S. affiliate without being regulated as a dealer, even though the guarantee exposes the U.S. person guarantor to risk in connection with the dealing activity.
This final rule also reflects our conclusion that a non-U.S. person—to the extent it engages in dealing activity involving security-based swaps subject to a recourse guarantee by its U.S. affiliate—engages in dealing activity that occurs, at least in part, within the United States. As discussed above, the economic reality is that by virtue of the guarantee the non-U.S. person effectively acts together with its U.S. affiliate to engage in the dealing activity that results in the transactions, and the non-U.S. person's dealing activity cannot reasonably be isolated from the U.S. person's activity in providing the guarantee. The U.S. person guarantor together with the non-U.S. person whose dealing activity it guarantees jointly may seek to profit by providing liquidity and otherwise engaging in dealing activity in security-based swaps, and it is the U.S. guarantor's financial resources that enable the guarantor to help its affiliate provide liquidity and otherwise engage in dealing activity. It is reasonable to assume that the counterparties of the non-U.S. person whose dealing activity is guaranteed look to both the non-U.S. person and the U.S. guarantor for performance on the security-based swap. Moreover, the U.S. guarantor bears risks arising from any security-based swap between the non-U.S. person whose dealing activity it guarantees and that affiliate's counterparties, wherever located.
This approach is consistent with the purposes of Title VII. The exposure of the U.S. guarantor creates risk to U.S. persons and potentially to the U.S. financial system via the guarantor to a comparable degree as if that U.S. person had directly entered into the transactions that constituted dealing activity by the affiliate. In many cases the counterparty to the non-U.S. person whose dealing activity is guaranteed may not enter into the transaction with that non-U.S. person, or may not do so on the same terms, absent the guarantee. The U.S. guarantor usually undertakes obligations with respect to the security-based swap regardless of whether that non-U.S. person ultimately defaults in connection with the security-based swap.
In requiring non-U.S. persons whose dealing involves security-based swaps that are guaranteed by a U.S. person to apply those dealing transactions against the
We believe, moreover, that this final rule is necessary or appropriate as a prophylactic measure to help prevent the evasion of the provisions of the Exchange Act that were added by the Dodd-Frank Act, and thus help ensure that the relevant purposes of the Dodd-Frank Act are not undermined. Without this rule, U.S. persons may have a strong incentive to evade dealer regulation under Title VII simply by conducting their dealing activity via a guaranteed affiliate, while the economic reality of transactions arising from that activity—including the risks these transactions introduce to the U.S. market—would be no different in most respects than transactions directly entered into by U.S. persons. In other words, for example, if a U.S. entity engaged in security-based swap dealing wanted to either avoid registration or otherwise have its security-based swap transactions with foreign counterparties be outside the various Title VII requirements with respect to those transactions, it could establish an overseas affiliate and simply extend a
Compared to the proposal, this approach also more fully accounts for differences between the regulatory regimes applicable to security-based swap dealers and major security-based swap participants. The definition of “major security-based swap participant” focuses on systemic risk issues, in that it particularly targets persons that maintain “substantial positions” that are “systemically important,” or that pose “substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets.”
In adopting these provisions, we acknowledge that the final rule does not go as far as some commenters have requested, in that it does not require a non-U.S. person to count its dealing transactions involving security-based swaps that do not grant its counterparty a recourse guarantee against the U.S. affiliate of that non-U.S. person, even if the U.S. affiliate is subject to a recourse guarantee with respect to other security-based swaps of the same non-U.S. person. The final rule also does not incorporate the suggestion from certain commenters that we should treat U.S. entities and their affiliates as equivalent for purposes of the cross-border implementation of Title VII.
Those commenters raise important concerns regarding the possibility that, even absent explicit financial support arrangements, U.S. entities that are affiliated with non-U.S. persons for reputational reasons may determine that they must support their non-U.S. affiliates at times of crisis. In those commenters' view, such considerations impose risks upon U.S. markets even absent explicit legal obligations. As a result, the commenters suggest that foreign affiliates of U.S. entities should have to count all their dealing transactions against the
Our modification requiring these non-U.S. persons to count certain of their dealing transactions with non-U.S. persons against the
This is not to say that more general financial support arrangements do not also pose risks to U.S. persons and potentially to the U.S. financial system, including risks posed by the activity of non-U.S. persons to their U.S. parents or affiliates. However, we believe that this focus on recourse guarantees appropriately addresses the most direct risks posed by such guarantee arrangements to U.S. persons and potentially to the U.S. financial system. We also note that Congress has provided additional regulatory tools apart from Title VII to address such risks. Indeed, in enacting the Dodd-Frank Act, Congress provided general tools—not merely tools focusing on derivatives activities—to address the risks associated with U.S.-based financial groups as a whole, including the risks posed by such groups' non-guaranteed foreign affiliates engaged in financial services business. This holistic approach to risks that could flow back to the United States may reflect the fact that financial services activities apart from security-based swaps constitute the great majority of such groups' overall financial activities outside the United States that can produce such risks. The regulatory tools substantially enhanced by the Dodd-Frank Act to better address these cross-border risks posed by financial services activities other than security-based swaps and such tools include globally consolidated capital requirements (including enhanced capital and leverage standards, group-wide single-counterparty credit limits, and capital surcharges for firms with particularly high levels of risk), and globally consolidated liquidity and risk management standards (including stress testing, debt-to-equity limitations, living will requirement, and timely remediation measures). By accounting for risks at the consolidated level, these tools address risks posed by guaranteed and non-guaranteed subsidiaries within U.S.-based financial groups, regardless of whether the subsidiaries are based in the United States or outside the United States.
For the reasons discussed above, however, we have concluded that the presence of those particular regulatory safeguards do not warrant the conclusion that non-U.S. guaranteed affiliates of U.S. persons should not have to count, against the
Conversely, one commenter implicitly appeared to oppose any requirement that non-U.S. persons count their guaranteed transactions carried out in a dealing capacity with non-U.S. person counterparties against their
Finally, in adopting these provisions we recognize that the CFTC Cross-Border Guidance appears to broadly opine that non-U.S. persons who receive any express guarantee from a U.S. affiliate should, as a general matter, count all of their dealing activity against the
Under the proposal, non-U.S. persons also would be required to count their dealing transactions entered into with a U.S. person, other than a foreign branch.
Under the CFTC's cross-border guidance, as a general matter non-U.S. persons may exclude their dealing activities involving foreign branches of U.S. persons only if the U.S. person is registered with the CFTC as a swap dealer.
The proposal solicited comment regarding whether non-U.S. persons should be required to count, towards their
Two commenters took the position that non-U.S. persons should have to count their transactions with foreign branches of U.S. banks against the
Commenters also addressed the application of the exception to non-U.S. persons' dealing activities involving counterparties that are guaranteed affiliates of non-U.S. persons. The proposal did not require such transactions to be counted. One commenter expressed support for the fact that our proposal, unlike the CFTC's guidance, did not require non-U.S. persons to count certain transactions with non-U.S. counterparties that are guaranteed by U.S. persons.
The final rule has been modified from the proposal to require non-U.S. persons (other than conduit affiliates
The requirement that such non-U.S. persons must count their dealing transactions with U.S. persons against the
In this regard we recognize that Exchange Act rule 15a–6, which provides an exemption for the activities of certain foreign broker-dealers, includes an exemption for transactions in securities with or for persons “that have not been solicited by the foreign broker or dealer.” Exchange Act rule 15a–6(a)(1). In adopting this provision, the Commission stated that it “does not believe, as a policy matter, that registration is necessary if U.S. investors have sought out foreign broker-dealers outside the United States and initiated transactions in foreign securities markets entirely of their own accord.”
The final rule permits such non-U.S. persons not to count certain dealing transactions conducted through a foreign branch of a counterparty that is a U.S. bank as part of the
As addressed in the Cross-Border Proposing Release, the ability of U.S. banks to conduct security-based swap activity potentially will be limited by section 716 of the Dodd-Frank Act, which in part prohibits certain federal assistance to security-based swap dealers, and by section 619 of the Dodd-Frank Act, which in part prohibits banking entities from engaging in proprietary trading.
As we noted in the proposal, although a foreign branch is part of a “U.S. person,” and dealing transactions with foreign branches pose risk to the U.S. financial system, requiring non-U.S. persons to count transactions with foreign branches “could limit access of U.S. banks to non-U.S. counterparties when they conduct their foreign security-based swap dealing activity through foreign branches because non-U.S. persons may not be willing to enter into transactions with them in order to avoid being required to register as a security-based swap dealer.”
The final rule differs from the proposal in that the final rule permits a non-U.S. person not to count its transactions with a foreign branch of a U.S. person against the
In adopting an exclusion for certain transactions with foreign branches, we recognize that some commenters opposed having any such exclusion for a non-U.S. person's transactions with a foreign branch, stating that the breadth of the proposed exclusion would facilitate the avoidance of the Dodd-Frank Act even while U.S. entities incur the risks of transactions with foreign entities, and that the exclusion would be based on a “scare tactic.”
We also recognize that commenters took the view that such an exclusion is inconsistent with the fact that foreign branches fall within the “U.S. person” definition.
We also have considered the view of one commenter that all of a non-U.S. person's transactions with foreign branches should be excluded from the
The final rule retains the proposed definition of “foreign branch,” which encompasses any branch of a U.S. bank that is located outside the United States, operates for valid business reasons, and is engaged in the business of banking and is subject to substantive banking regulation in the jurisdiction where it is located.
We are adopting this definition as proposed while recognizing that it differs from the CFTC's interpretation of “foreign branch” in its cross-border guidance.
The final rule modifies the proposed definition of “transaction conducted through a foreign branch” to provide that the definition addresses transactions that are arranged, negotiated, and executed by a U.S. person through a foreign branch if both: (a) The foreign branch is the counterparty to the transaction; and (b) the security-based swap transaction is arranged, negotiated, and executed on behalf of the foreign branch solely by persons located outside the United States.
Under the proposed rule, “transaction conducted through a foreign branch” was defined, in part, to exclude any transaction solicited, negotiated,
Similar to the proposal, the final definition of “transaction conducted through a foreign branch” also states that a person need not consider its counterparty's activities in connection with the transaction—
Separately, the final rule, consistent with the proposal, does not require such non-U.S. persons to count, against the
The Cross-Border Proposing Release also addressed the cross-border
In the Cross-Border Proposing Release we took the view that the approach would be consistent with the Dodd-Frank Act's statutory focus on the U.S. security-based swap market, in that the dealing of a person's U.S. affiliates would impact the U.S. financial system regardless of the location of the affiliate's counterparty, but that the dealing of a person's non-U.S. affiliates with other non-U.S. persons outside the United States would not impact the U.S. financial system to the same extent. We also took the view that the aggregation approach would minimize the opportunity for a person to evasively engage in large amounts of dealing activity, and that the approach would be in accordance with other aspects of the proposal governing which transactions would be applied against the thresholds.
The proposal separately would have permitted a person not to include, as part of the
This aspect of the proposal recognized that any person affiliated with a registered dealer otherwise would have to count the registered affiliate's dealing activity against the person's own
A number of commenters opposed the operational independence condition to the proposed exclusion, arguing that it would hinder operational efficiency—including the use of group-wide risk management—without any countervailing benefit,
The final rule governing aggregation, like the proposal, generally applies the principles that govern the counting of a person's own dealing activity to also determine how the person must count its affiliates' dealing activities for purposes of the
Moreover, the final rule modifies the exclusion from having to aggregate the dealing transactions of a person's registered dealer affiliate from the proposal, both to remove the operational independence condition and to address situations in which a person's affiliate has exceeded the
The final rule, like the proposal, provides in part that if a person engages in dealing transactions counted against the
These modifications from the proposal are consistent with similar modifications made to the rules regarding the counting of a person's own transactions for purposes of the
In addition, we are adopting an exception which provides that a person need not count against the
In part, this final rule has been modified from the proposal by removing the proposed operational independence condition. After considering the views of several commenters that the proposed operational independence condition would tend to inhibit operational efficiencies,
We also note that certain commenters raised concerns about the application of the aggregation provisions generally in the context of joint ventures, particularly in the context of minority shareholders.
The final rule also has been modified from the proposal to permit a person to rely on this provision if its affiliate is in the process of registering as a dealer. The
Three commenters expressed the view
The Cross-Border Proposing Release generally requested comment as to whether the proposed
After considering commenter views we have concluded that this type of exception is appropriate, particularly given that the final
For those reasons, the final rule has been revised from the proposal to except, from having to be counted against the
This exception also does not address the application of section 5 of the Securities Act to such transactions. Rule 239 under the Securities Act (17 CFR 230.239) provides an exemption under the Securities Act for certain security-based swap transactions involving an eligible clearing agency. This exemption does not apply to security-based swap transactions not involving an eligible clearing agency, such as the anonymous transactions entered into on the execution facility or national securities exchange, regardless of whether the security-based swaps subsequently are cleared by an eligible clearing agency.
In particular, the final rule in part provides that a non-U.S. person need not count such cleared anonymous transactions against the threshold, unless the non-U.S. person is a conduit affiliate.
The exception is not available when the non-U.S. person is a conduit affiliate because conduit affiliates are required to count all of their dealing transaction against the thresholds regardless of whether their counterparty is a U.S. or a non-U.S. person. As a result, the anonymous nature of the transaction would not cause implementation issues for conduit affiliates.
For purposes of the exception, a transaction would be “anonymous” only if the counterparty to the transaction in fact is unknown to the non-U.S. person prior to the transaction. The transaction would not be “anonymous” if, for example, a person submitted the transaction to an execution facility after accepting a request for quotation from a known counterparty or a known group of potential counterparties, even if the process of submitting the transaction itself did not involve a named counterparty.
Commenters to the Cross-Border Proposing Release raised issues regarding the application of the dealer registration requirement to limited security-based swap activities by certain “run-off” entities,
As discussed above, the final rule defining “U.S. person” (like the proposed definition of that term) specifically excludes several foreign public sector financial institutions and their agencies and pension plans, and more generally excludes any other similar international organization and its agencies and pension plans.
Separately, commenters stated that non-U.S. persons should not have to count their dealing transactions involving those organizations against the non-U.S. persons' dealer
Finally, two commenters stated that they should not be subject to the possibility of dealer regulation for comity reasons, on the grounds that they are arms of a foreign government.
These final rules and guidance regarding the cross-border implementation of the
Commenters addressed the associated cost-benefit issues from a variety of perspectives. Some directly addressed the link between the cross-border scope of the dealer definition and the associated costs and benefits, by arguing that cost-benefit principles warranted greater harmonization with approaches taken by the CFTC or foreign regulators.
Although we have considered those comments that expressed complete or partial support in favor of consistency with the CFTC guidance, these final rules nonetheless follow approaches that differ from those taken by the CFTC in certain regards, generally by taking approaches that are narrower in scope than those adopted by the CFTC.
We also have considered initiatives by foreign regulators related to the regulation of OTC derivatives. In that regard, we note that the regulatory regimes in certain other jurisdictions do not provide for the registration of persons who function as dealers, in contrast to the approach Congress took in Title VII. Also, we expect to take into account the regulatory frameworks followed in other jurisdictions as we assess requests for substituted compliance in connection with the substantive requirements applicable to security-based swap dealers and other market participants.
In actuality, our request for comment simply gave the public the opportunity to address our economic analysis. The economic assessment in this release specifically addresses those economic impacts in a context where many entities may have taken steps to follow the CFTC's cross-border guidance, and also recognizes that market participants may seek to structure their activities to avoid Title VII given differences between Title VII regulation and the regulation present in foreign regimes.
We have taken economic effects into account in adopting these final cross-border rules and providing guidance. In doing so, we believe that a narrow application of dealer regulation under Title VII—such as one that is limited to dealing activity that might be viewed as occurring solely within the United States—would not be sufficient to achieve the purposes of Title VII in light of the attributes of the security-based swap market, including the market's global nature, the concentration of dealing activity, the key role played by dealers and the risks posed by dealers via their legal and financial relationships. At the same time, we recognize that the cross-border application of Title VII has the potential to reduce liquidity within the U.S. market to the extent it increases the costs of entering into security-based swaps or provides incentives for particular market participants to avoid the U.S. market by operating wholly outside the Title VII framework.
The cross-border rules applying the “security-based swap dealer” definition to cross-border dealing activity implicate two categories of costs and benefits. First, certain current and future participants in the security-based swap market will incur assessment costs in connection with determining whether they fall within the “security-based swap dealer” definition and thus would have to register with the Commission.
Second, the registration and regulation of some entities as security-based swap dealers will lead to programmatic costs and benefits arising as a consequence of the Title VII requirements that apply to registered security-based swap dealers, such as the capital, margin, and business conduct requirements.
We discuss the programmatic and assessment costs and benefits associated with the final rules more fully below. We also discuss the economic impact of certain potential alternatives to the approach taken by the final rules.
Exchange Act rules 3a71–3, 3a71–4, and 3a71–5 will permit market participants to exclude certain dealing transactions from their
This does not mean that there is a one-to-one relationship between a person not being a “security-based swap dealer” as a result of these cross-border rules, and the resulting change to programmatic benefits and costs. Indeed, although these rules may determine which particular entities will be regulated as dealers, it does not follow that total programmatic costs and benefits will vary by an amount proportional to the volume of those entities' dealing activity. As the Commission explained in the Intermediary Definitions Adopting Release, some of the costs and benefits of regulating dealers may be fixed, while others may be variable depending on a particular person's security-based swap dealing activity.
We believe that the cross-border rules we are adopting today will focus the regulation of security-based swap dealers under Title VII upon those entities that engage in security-based swap transactions that occur in the United States, or on the prevention of evasion. Our definition of “security-based swap dealer” seeks to capture those entities for which regulation of security-based swap activity is warranted due to the nature of their activities with other market participants.
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In short, these final rules apply the
As noted above, in application the general
In the Cross-Border Proposing Release, we concluded that “[t]o the extent that an entity engaged in dealing activity wholly outside the United
In setting the
We stated that this was a “conservative” estimate.
We believe the methodology used in the Intermediary Definitions Adopting Release also is appropriate for considering the potential programmatic costs and benefits associated with the final cross-border rules. This methodology particularly can help provide context as to how rules regarding the cross-border application of the
Consistent with that methodology regarding the use of market data to identify entities that may be engaged in dealing activity pursuant to the dealer-trader distinction (
To apply the counting tests of these final rules to the data, Commission staff identified DTCC–TIW accounts associated with foreign branches and foreign subsidiaries of U.S. entities and counted all transaction activity in these accounts against the firm's
We recognize that there are limitations to using this methodology to consider the potential programmatic impact of the cross-border rules. These include limitations associated with the fact that the available data does not extend to all types of security-based swaps,
As part of the Intermediary Definitions Adopting Release we also considered more limited publicly available data regarding equity swaps.
• The Commission's access to data on CDS that are written on non-U.S. reference entities does not extend to data regarding transactions between two counterparties that are not domiciled in the United States, or guaranteed by a person domiciled in the United States.
• The available data also does not specifically distinguish those transactions of non-U.S. persons that are subject to a guarantee by a U.S. person, and other (non-guaranteed) transactions by such non-U.S. persons. As a result, we have assumed that all foreign subsidiaries of U.S. persons rely on guarantees for all transactions, which potentially overestimates the level of transaction activity that would count toward
Separately, the programmatic costs and benefits associated with the implementation of these rules cannot be quantified with any degree of precision because the full range of the
In addition, the programmatic benefits and costs associated with the cross-border application of the
In general, however, and consistent with our territorial approach, we believe that these rules are targeted appropriately, and do not apply dealer regulation to those entities that have a more limited involvement in the U.S. financial system and hence whose regulation as a security-based swap dealer under Title VII would be less linked to programmatic benefits (
Finally, we recognize that the U.S. market participants and transactions regulated under Title VII are a subset of the overall global security-based swap market and that shocks to risk or liquidity arising from a foreign entity's dealing activity outside the United States may spill into the United States. Such spillover risks associated with dealing activity that falls outside the scope of Title VII have the potential to affect U.S. persons and the U.S. financial system either through a foreign entity's transactions with foreign entities, which, in turn, transact with U.S. persons (and may, as a result, be registered security-based swap dealers or major security-based swap participants), or through membership in a clearing agency that may provide CCP services in the United States or have a U.S. person as a clearing member. We also have considered these spillovers in connection with our analysis of the effects of these final cross-border rules on efficiency, competition and capital formation.
The analysis of how these cross-border rules will affect the assessment costs associated with the “security-based swap dealer” definition and its
The Intermediary Definitions Adopting Release addressed how certain market participants whose security-based swap activities exceed or are not materially below the
Application of these cross-border rules to the
In adopting these rules we estimate the assessment costs that market participants may incur as a result. As discussed below, however, these costs in practice may be mitigated in large part by steps that market participants already have taken in response to other regulatory initiatives, including the CFTC Cross-Border Guidance.
The implementation of these cross-border rules in some circumstances has the potential to change the legal costs identified in the Intermediary Definitions Adopting Release, including by adding new categories of legal costs that non-U.S. persons may incur in connection with applying the
In the cross-border context, we believe that some non-U.S. persons that have more than $2 billion in total security-based swap transactions over the previous 12 months nonetheless may be expected to forgo the costs of performing the dealing activity analysis, if only a comparatively low volume of their security-based swap activity involves U.S. counterparties or otherwise potentially needs to be counted against the
Available data from 2012 indicates that 218 entities worldwide (147 of which are domiciled in the United States and 71 domiciled elsewhere) had security-based swap activity, with all counterparties, of $2 billion or more. Of those 218 entities 202 had total activity of $2 billion or more that—to the extent it constituted dealing activity—would appear to have to be counted against the
These estimates do not reflect a new category of costs arising from the cross-border rules. They instead are a revision of a category of previously identified costs that market participants may incur in engaging in the dealer-trader analysis, using newer data and reflecting only trades that are counted under the final cross-border rules.
Moreover, in considering the assessment costs associated with the final rules, we continue to hold the expectation, noted in the Intermediary Definitions Adopting Release, that market participants generally would be aware of the notional amount of their activity involving security-based swaps as a matter of good business practice.
In general, we believe that the costs of such systems should be similar to the costs estimated in the Intermediary Definitions Adopting Release for a system to monitor positions for purposes of the major security-based swap participant thresholds. In both cases—the assessment of dealer status in the cross-border context and the assessment of major participant status—such systems would have to flag a person's security-based swaps against the specific criteria embedded in the final rules, and then compare the cumulative amount of security-based swaps that meet those criteria against regulatory thresholds.
For purposes of the cost estimates in this release, we have updated these figures with more recent data as follows: The figure for a Compliance Attorney is $334/hour, the figure for a Compliance Manager is $283/hour, the figure for a Programmer Analyst is $220/hour, and the figure for a Senior Internal Auditor is $209/hour, each from SIFMA's Management & Professional Earnings in the Securities Industry 2013, modified by SEC staff to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits, and overhead. We also have updated the Intermediary Definitions Adopting Release's $464/hour figure for a Chief Financial Officer, which was based on 2011 data, with a revised figure of $500/hour, for a Chief Financial Officer with five years of experience in New York, that is from
We also believe that such non-U.S. persons will likely obtain the relevant information regarding the U.S.-person status of their new accounts as part of the account opening process, as a result of these and other regulatory requirements.
Consistent with the Cross-Border Proposing Release, moreover, this estimate is further based on estimated 40 hours of in-house legal or compliance staff's time (based on the above rate of $380 per hour for an in-house attorney) to establish a procedure of requesting and collecting representations from trading counterparties, taking into account that such representation may be incorporated into standardized trading documentation used by market participants. This leads to an estimate of $15,200 per firm for such costs.
As noted above, we generally would not expect a counterparty's U.S.-person status to vary over time absent changes such as reorganization, restructuring or merger.
In sum, we believe that the effect of these final cross-border rules would be an increase over the amounts that otherwise would be incurred by certain non-U.S. market participants, both in terms of additional categories of legal costs and in terms of the need to develop certain systems and procedures.
Requiring certain non-U.S. persons to incur such assessment costs is an unavoidable adjunct to the implementation of a set of rules that are appropriately tailored to apply the “security-based swap dealer” definition under Title VII to a global security-based swap market in a way that yields the important transparency, accountability, and counterparty protection benefits associated with dealer regulation under Title VII. The alternative—avoiding application of the Title VII dealer requirements to non-U.S. persons—would be inappropriate because, in our view, the dealing
It is important to recognize that our estimates of the assessment costs associated with these rules in practice may tend to overestimate that costs that market participants actually will incur as a result of these rules. This is because in practice, the assessment costs associated with the cross-border scope of the dealer definition (like the potential programmatic effects of that cross-border scope) may be tempered to the extent that the assessments that market participants conduct in connection with their security-based swap activities correspond to the assessments they otherwise would follow due to other regulatory requirements or business practices. Significantly, we understand that a substantial number of market participants already have engaged in assessment activities—including activities to determine whether their counterparties are U.S. persons—conforming to the requirements applicable to swaps. Given our expectation that persons that are not “U.S. persons” under the CFTC's policy (as set forth in its cross-border guidance) generally also would not be “U.S. persons” under our rules, certain market participants may reasonably determine that as part of the implementation of the rules we are adopting today they need not duplicate work already done in connection with implementing the CFTC's swaps regulations. In this regard we recognize the significance of commenter views emphasizing the importance of harmonization with the CFTC to control the costs associated with assessments under Title VII.
Finally, we also anticipate that certain market participants that wish to limit the possibility of being regulated as a dealer under Title VII, including the programmatic and assessment costs associated with the dealer definition, may choose to structure their business to avoid engaging in dealing transactions with U.S. persons (other than foreign branches of banks registered with the Commission as dealers).
As discussed above, the final rules incorporate a number of provisions designed to focus Title VII dealer regulation upon those persons that engage in the performance of security-based swap dealing activity within the United States in excess of the
In adopting these final rules we have considered alternative approaches suggested by commenters, including the economic effects of following such alternative approaches. In considering the economic impact of potential alternatives, we have sought to isolate the individual alternatives to the extent practicable, while recognizing that many of those alternatives are not mutually exclusive.
We further have considered such potential alternatives in light of the methodologies discussed above, by assessing the extent to which following particular alternatives would be expected to increase or decrease the number of entities that ultimately would be expected to be regulated as dealers under the final rules, as well as the corresponding economic impact. As discussed below, however, analysis of the available data standing alone would tend to suggest that various alternative approaches suggested by commenters would not produce large changes in the numbers of market participants that may have to be regulated as security-based swap dealers. These results are subject to the above limitations, however, including limitations regarding the ability to quantitatively assess how market participants may adjust their future activities in response to the rules we adopt or for independent reasons. Accordingly, while such analyses provide some context regarding alternatives, their use as tools for illustrating the economic effects of such alternatives is limited.
The final rules require U.S. banks to count all dealing transactions of their foreign branches against the
Adopting such an alternative approach potentially could provide market participants that are U.S. persons with incentives to execute higher volumes through their foreign branches. Such an outcome may be expected in part to reduce the programmatic and assessment costs associated with dealer regulation under Title VII. Such an outcome also would be expected to reduce the programmatic benefits associated with dealer regulation, given that those U.S. banks (and potentially the U.S. financial system) would incur risks via their foreign branches equivalent to the risk that might arise from transactions of
Using the 2012 data to assess the impact associated with this alternative does not indicate a change to our conservative estimate that up to 50 entities potentially would register as security-based swap dealers.
As discussed above, current data indicates that there are 27 market participants that have three or more counterparties that are not recognized as dealers by ISDA, and that have $3 billion or more in notional single-name CDS transactions over a 12 month period. Screening those entities against a cross-border test that is identical to the one we are adopting, except that it does not count foreign branches of U.S. banks as U.S. persons, leads to an estimate of 25 market entities that have $3 billion or more in activity that must be counted against the thresholds (rather than the 26 estimated in connection with the test we are adopting). That difference does not appear to warrant a change in the conservative estimate that up to 50 entities may register as security-based swap dealers.
The final rules require a non-U.S. person to count, against the
This aspect of the final rules reflects a middle ground between commenter views, given that some commenters opposed any consideration of guarantees as part of the dealer analysis, while others expressed the view that all affiliates of a U.S. person should be assumed to be the beneficiary of a
Following such alternative approaches could be expected to lead to disparate economic effects depending on which approach is followed. On the one hand, an approach that does not require counting against the thresholds of a non-U.S. person's transactions with non-U.S. counterparties that are guaranteed by their U.S. affiliates would help provide incentives for greater use of guarantees by U.S. persons, with an increase of the associated risk flowing to the United States.
Data assessment of the first alternative does not indicate a change to our estimate that up to 50 entities may be expected to register with the Commission as security-based swap dealers.
Screening the 27 market participants that have three or more counterparties that are not recognized as dealers by ISDA, and that have $3 billion or more in notional single-name CDS transactions over a 12 month period, with a revised
The final rules require that conduit affiliates of U.S. persons count all of their dealing transactions against the
The economic effects of not including these provisions—and instead treating conduit affiliates the same as other non-U.S. persons—has the potential to be significant, as it would remove a tool that should help to deter market participants from seeking to evade dealer regulation through arrangements whereby U.S. persons effectively engage in dealing activity with non-U.S. persons via back-to-back transactions involving non-U.S. affiliates.
Another potential alternative approach to addressing such evasive activity could be to narrow the inter-affiliate exception to having to count dealing transactions against the
The final rules require non-U.S. persons to count, against the thresholds, their dealing transactions involving counterparties that are foreign branches of U.S. banks unless the U.S. bank is registered as a security-based swap dealer and unless no U.S.-based personnel of the counterparty are involved in arranging, negotiating and executing the transaction. This reflects a change from the proposal, which would have excluded all such transactions with a foreign branch regardless of whether the U.S. bank was registered as a dealer. The change appropriately takes into consideration the benefits of having relevant Title VII provisions applicable to dealers apply to the transaction against the liquidity and disparate treatment rationales underlying the exclusion.
This aspect of the final rules reflects a middle ground between commenter views regarding transactions with foreign branches, given that some commenters expressed the view that all transactions with foreign branches should be counted against a non-U.S. person's
The effect of adopting the first alternative—whereby all transactions with foreign branches are excluded from being counted—could provide U.S. market participants that are not registered as dealers with incentives to execute higher volumes of security-based swaps through their foreign branches, resulting in higher amounts of risk being transmitted to the United States without the risk-mitigating attributes of having a registered dealer involved in the transaction.
The available data allows for estimates related to both potential alternatives subject to the limitations discussed above, and neither alternative would be expected to indicate a change to our assessment that up to 50 entities may be expected to register with the Commission as security-based swap dealers.
The final rules also incorporate definitions of “foreign branch” and “transaction conducted through a foreign branch” that potentially could be modified to reflect alternative approaches. While we do not believe that the economic impact of following such alternatives is readily quantifiable given the available data, we generally believe that any such effects would be limited, particularly in light of our understanding that few, if any, U.S. persons currently may participate in the single-name CDS market through their foreign branches.
Separately, the final rules do not require non-U.S. persons to count their dealing transactions with non-U.S. counterparties. Potential alternatives to that approach could be to require non-U.S. persons to count their dealing transactions with counterparties that are guaranteed affiliates of U.S. persons (at least with regard to transactions subject to the guarantees), or their dealing transactions with counterparties that are conduit affiliates.
Also, as discussed above, we anticipate soliciting additional public comment regarding counting of dealing transactions between two non-U.S. persons towards the
As we discussed in the Cross-Border Proposing Release, another potential approach related to the treatment of non-U.S. persons' dealing activities would be to not require the registration of non-U.S. persons that engage in dealing activity with U.S. person counterparties through an affiliated U.S. person intermediary.
The “U.S. person” definition used by the final rules seeks to identify those persons for whom it is reasonable to infer that a significant portion of their financial and legal relationships are likely to exist within the United States and for whom it is therefore reasonable to conclude that risks arising from their security-based swap activities could manifest themselves within the United States, regardless of location of their counterparties. Because the definition incorporates decisions regarding a range of issues, the definition potentially is associated with a number of alternative approaches that could influence the final rules' economic impact.
A particularly significant element of this definition addresses the treatment of investment vehicles. Under the final rule, a fund is a “U.S. person” if the vehicle is organized, incorporated or established within the United States, or if its principal place of business is in the United States, which we are interpreting to mean that the primary locus of the investment vehicle's day-to-day operations is within the United States. One potential alternative approach to this element would be to make use of a narrower definition that does not use a principal place of business test for investment vehicles, and hence does not encompass vehicles that are not established, incorporated, or organized within the United States, even if the primary locus of their day-to-day operations is located here. Another potential approach would be to focus the meaning of “principal place of business” on the location where the operational management activities of the fund are carried out, without regard to the location of the fund's managers.
Similarly, another potential alternative approach to the “U.S. person” definition would be for the definition not to incorporate a principal place of business test for operating companies. Under such an alternative approach, an operating company would not fall within the “U.S. person” definition if it is not organized, incorporated or established within the United States, even if the officers or directors who direct, control and coordinate the operating company's overall business activities are located in the United States.
Following an alternative approach whereby the “U.S. person” definition did not encompass a “principal place of business” test, or whereby the definition followed a narrower such test with regard to particular types of market participants, may be expected to reduce the programmatic costs and benefits associated with dealer regulation, in that it may lead certain non-U.S. persons not to have to register as dealers notwithstanding dealing activities with such counterparties above the
Aside from those issues related to the use of a “principal place of business” test, other aspects of the “U.S. person” definition also may affect the programmatic costs and benefits and assessment costs associated with dealer regulation. For example, the final rules do not encompass funds that are majority-owned by U.S. persons, although two commenters supported such an approach.
For the reasons detailed above, we believe that including majority-owned funds within the definition of “U.S. person” would be likely to increase programmatic costs (by causing more investment funds to be subject to Title VII requirements) as well as assessment costs, while not significantly increasing programmatic benefits given our view that the composition of a fund's beneficial owners is not likely to have significant bearing on the degree of risk that the fund's security-based swap activity poses to the U.S. financial system. Moreover, for the reasons discussed above, we also believe that an exclusion for publicly offered funds that are offered only to non-U.S. persons and not offered to U.S. persons, while likely to reduce programmatic costs, would also reduce programmatic benefits, by excluding certain funds from the definition of U.S. person based on factors that we do not believe are directly relevant to the degree of risk a fund's security-based swap activities are likely to pose to U.S. persons and potentially to the U.S. financial system.
Apart from those potential alternatives regarding the treatment of majority-owned funds and of investment vehicles offered only to non-U.S. persons, an additional alternative approach would be for the Commission simply to adopt the CFTC's interpretation of “U.S. person.” We do not believe that following that alternative approach would be expected to have a significant effect on programmatic costs and benefits, given the substantive similarities between the CFTC's interpretation and our final rule. Adopting such an alternative approach, however, could have an impact on assessment costs. We particularly are mindful that some commenters requested that we adopt a consistent definition notwithstanding their views regarding specific features of the definition, in part because they believed that differences between our definition of “U.S. person” and the CFTC's interpretation of that term would significantly increase costs associated with determining whether they or their counterparties are U.S. persons for purposes of Title VII. We recognize that differences between the two definitions could lead certain market participants to incur additional costs that they would not incur in the presence of identical definitions. At the same time, we are adopting definitions of “U.S. person”
In addition, as discussed above, the final “U.S. person” definition does not follow an approach similar to the one used in Regulation S.
Another potential alternative approach for addressing the “U.S. person” definition would be for the definition not to include the exclusion we are adopting with regard to specified international organizations. The alternative approach of not explicitly excluding such organizations from the definition could be expected to increase assessment costs—as counterparties to such organizations would have to consider those organizations' potential status as U.S. persons, which would implicate analysis of the privileges and immunities granted such persons under U.S. law—without likely countervailing programmatic benefits.
The available data suggests that an alternative in which offshore funds managed by U.S. persons are excluded from
The final rules apply the
The final rule also has been revised from the proposal to make the exclusion for registered dealer affiliates also available when an affiliate is in the process of registering as a dealer.
The final rules regarding the aggregation provision represent a middle ground between commenter views. One commenter specifically supported the proposal's “operational independence” condition that would limit when a person could exclude the dealing transactions of affiliates that are registered as dealers.
The economic impact of retaining the proposed operational independence condition potentially would reduce efficiencies and deter beneficial group-wide risk management practices. Conversely, the impact of the alternative approach of further limiting the aggregation requirement, such that it addresses only affiliated U.S. persons, would facilitate market participants' evasion of the dealer regulation requirement by dividing their dealing activity among multiple non-U.S. entities.
The economic impact of the alternative approach of retaining the “operational independence” condition is not readily susceptible to quantification, given the lack of data regarding the extent to which affiliates that engage in security-based swap activities jointly make use of back office, risk management, sales or trades, or other functions. Analysis of data related to the alternate approach under which the requirement would be further limited to aggregating transactions of affiliated U.S. persons would not be expected to indicate a change to our assessment that up to 50 entities may be expected to register with the Commission as security-based swap dealers, subject to the limitations discussed above.
The final rules include an exception whereby non-U.S. persons need not
The likely impact of the alternative approach of not including such an exception could be to deter the development of anonymous trading platforms, or to reduce U.S. persons' ability to participate in such platforms. In this regard the alternative can be expected to help reduce the programmatic benefits of Title VII. The impact of the alternative approach of not including this type of exception is not readily susceptible to quantification.
The statutory definition of “major security-based swap participant” encompasses persons that are not dealers but that nonetheless could pose a high degree of risk to the U.S. financial system.
In the Intermediary Definitions Adopting Release, we, together with the CFTC, adopted rules defining what constitutes a “substantial position” and “substantial counterparty exposure.”
We addressed the application of the major participant definition to cross-border security-based swaps in the Cross-Border Proposing Release, proposing that a U.S. person consider all security-based swap positions entered into by it, and also proposing that a non-U.S. person consider only its positions with U.S. persons but not its positions with other non-U.S. counterparties, even if the positions are entered into within the United States or the non-U.S. counterparties are guaranteed by a U.S. person.
In the proposal, we also explained our preliminary view on the application in the cross-border context of the general principles regarding attribution, which were set forth in guidance in the Intermediary Definitions Adopting Release. Specifically, we stated that a person's security-based swap positions must be attributed to a parent, affiliate, or guarantor for purposes of the major security-based swap participant analysis to the extent that the counterparties to those positions have recourse to that parent, affiliate, or guarantor in connection with the position.
Commenters raised several issues related to the proposed approach for applying the major security-based swap participant definition to cross-border security-based swaps. As discussed below, these include issues regarding: The treatment of a non-U.S. person's positions with foreign branches of U.S. banks, the treatment of guarantees, and the treatment of entities with legacy positions. Commenters also requested that the Commission generally harmonize its rules and guidance with the CFTC's Cross-Border Guidance.
After considering commenters' views, we are adopting final rules that have been modified from the proposal in certain important respects. As addressed in further detail below, key changes to the proposal include:
• A requirement that a conduit affiliate, as defined above, must include in its major security-based swap participant threshold calculations all of its security-based swap positions;
• A requirement that a non-U.S. person other than a conduit affiliate
• A modification to the proposed requirement that a non-U.S. person must include in its major security-based swap participant threshold calculations security-based swap positions with foreign branches of U.S. banks.
The final rules applying the major security-based swap participant definition also incorporate a conforming change by referring to such person's “positions” rather than “transactions.” This is consistent with the use of the term “positions” in the statutory definition of major security-based swap participant and the rules further defining that term.
Our approach to the application of the major security-based swap participant definition in the cross-border context incorporates certain principles that also apply in the context of the dealer definition and that are set forth in the Intermediary Definitions Adopting Release.
Under the proposal, a U.S. person would have considered all of its security-based swap positions for purposes of the major participant analysis.
Consistent with the proposal, the final rules require a U.S. person to consider all of its security-based swap positions in its major security-based swap participant threshold calculations.
As discussed above, in our view, the security-based swap positions of a U.S. person exist in the United States and raise, at the thresholds set forth in our further definition of major security-based swap participant, risks to the stability of the U.S. financial system or of U.S. entities, including those that may be systemically important.
The proposal would have treated non-U.S. persons acting as “conduits” for their U.S. affiliates the same as any other non-U.S. person for purposes of the major participant analysis, and, as such would have required those persons to include in their major participant threshold calculations only positions with U.S. persons.
The proposal solicited comment regarding whether a non-U.S. person's major participant analysis should incorporate security-based swaps other than those entered into with U.S. persons.
As discussed above, two commenters opposed applying the “conduit affiliate” definition to entities that serve as “central booking systems” for a corporate group, noting that the “central booking systems” are used to manage internal risk.
The final rule modifies the proposal to require conduit affiliates to include all of their security-based swap positions in their major participant threshold calculations.
After careful consideration and as discussed in the context of the dealer
We recognize that not all structures involving conduit affiliates may be evasive in purpose. We believe, however, that the anti-evasion authority of Exchange Act section 30(c) permits us to prescribe prophylactic rules to conduct without the jurisdiction of the United States, even if those rules would also apply to a market participant that has been transacting business through a pre-existing market structure established for valid business purposes, so long as the rule is designed to prevent possible evasive conduct.
In this context, as in the dealer context, we recognize the significance of commenters' concerns that the “conduit affiliate” concept may impede efficient risk management procedures, such as the use of central booking entities.
Moreover, we believe that commenter concerns may be mitigated by certain features of the major participant analysis and that, to the extent risk mitigation procedures such as “central booking systems” are impacted by the final rules on conduit affiliates, such anticipated impact is appropriate given the purpose of the major participant definition to identify entities that may pose significant risk to the market. As discussed in the Intermediary Definitions Adopting Release, we believe the major participant thresholds are high enough that they will not affect entities, including centralized hedging facilities, of any but the largest security-based swap users.
In addition to these features of the major security-based swap participant definition that we anticipate will mitigate the impact of the conduit affiliate rules on risk mitigation practices, we believe the focus of the major participant definition on the degree of risk to the U.S. financial system justifies regulation of certain entities that perform this function if they maintain positions at a level that may pose sufficient risk to trigger the major participant definition, regardless of the nature of their security-based swap activity.
For the foregoing reasons, we believe that the final rules regarding conduit affiliates are necessary or appropriate to prevent the evasion of any provision of the amendments made to the Exchange Act by Title VII and appropriately target potentially evasive scenarios that present the level of risk that the major security-based swap participant definition is intended to address.
The proposed rules would have required a non-U.S. person to include in its major security-based swap participant analysis all positions with U.S. persons, including foreign branches of U.S. banks.
As noted above, the proposed rules would have required a non-U.S. person to include in its major security-based swap participant threshold calculations all positions with U.S. persons, including foreign branches of U.S. banks.
The final rule, like the proposal, generally requires that non-U.S. persons (apart from the conduit affiliates, which are addressed above)
Generally requiring non-U.S. persons to consider their security-based swap positions with U.S. persons (except for positions with foreign branches of registered security-based swap dealers, as discussed below) will help ensure that persons whose positions are likely to pose a risk to the U.S. financial system at the relevant thresholds are subject to regulation as a major security-based swap participant.
While we considered one commenter's concern that the location of clearing should not be relevant for purposes of determining a non-U.S. person's major security-based swap participant status,
As noted above, the proposal would have required non-U.S. persons to include their positions with U.S. persons in their threshold calculations. This requirement would have extended to positions with foreign branches of U.S. banks.
The final rule has been modified from the proposal to require non-U.S. persons (other than conduit affiliates, as discussed above) to count, against their major security-based swap participant threshold calculations, their positions with U.S. persons other than positions with foreign branches of registered security-based swap dealers.
The final rule permits non-U.S. persons not to count certain positions that arise from transactions conducted through a foreign branch of a counterparty that is a U.S. bank.
A non-U.S. person would still have to count such positions for purposes of calculating its major security-based swap participant calculation thresholds if the non-U.S. person's counterparty (
We believe that the revision to the proposal allowing for an exclusion from counting positions that arise from transactions conducted through foreign branches of registered security-based swap dealers appropriately accounts for the risk in the U.S. financial system created by such positions. In our view, the risk of such positions is lessened when the U.S. bank itself is registered with the Commission as a security-based swap dealer because the U.S. bank, and its transactions, will be subject to the relevant Title VII provisions applicable to security-based swap dealers (for example, margin and reporting requirements).
The final rule should help mitigate concerns that non-U.S. persons will limit or stop trading with foreign branches of U.S. banks for fear of too easily triggering major security-based swap participant registration requirements under Title VII. Moreover, the inclusion of this exception in our final rule addresses comments expressing concern that non-U.S. persons would have to include positions with foreign branches of U.S. banks in their major security-based swap participant threshold calculations.
The proposal would have not required a non-U.S. person to count towards its major security-based swap participant calculation thresholds, those positions that it entered into with non-U.S.
As noted above, one commenter supported the Commission's proposed approach not to require a non-U.S. person whose positions with other non-U.S. persons are subject to a recourse guarantee from a U.S. person, to include such guaranteed positions in its own major participant threshold calculations, expressing support for using the major security-based swap participant attribution requirements to address the risk posed to the U.S. markets by such guarantees.
We are adopting a final rule that requires a non-U.S. person to include in its major security-based swap participant threshold calculations those positions for which the non-U.S. person's counterparty has rights of recourse against a U.S. person.
We note that we have retained the requirement in the proposal that the U.S. guarantor also attribute to itself, for purposes of its own major security-based swap participant threshold calculations, all security-based swaps entered into by a non-U.S. person that are guaranteed by the U.S. person.
Accordingly, the final rule modifies the proposal by requiring a non-U.S. person to include in its major security-based swap participant threshold calculations security-based swap positions for which a counterparty to the security-based swap has legally enforceable rights of recourse against a U.S. person, even if a non-U.S. person is counterparty to the security-based swap.
We understand that such rights may arise in a variety of contexts. For example, a counterparty would have such a right of recourse against the U.S. person if the applicable arrangement provides the counterparty the legally enforceable right to demand payment from the U.S. person in connection with the security-based swap, without conditioning that right upon the non-U.S. person's non-performance or requiring that the counterparty first make a demand on the non-U.S. person. A counterparty also would have such a right of recourse if the counterparty itself could exercise legally enforceable rights of collection against the U.S. person in connection with the security-based swap, even when such rights are conditioned upon the non-U.S. person's insolvency or failure to meet its obligations under the security-based swap, and/or are conditioned upon the counterparty first being required to take legal action against the non-U.S. person to enforce its rights of collection.
The terms of the guarantee need not necessarily be included within the security-based swap documentation or even otherwise reduced to writing (so long as legally enforceable rights are created under the laws of the relevant jurisdiction); for instance, such rights of recourse would arise when the counterparty, as a matter of law in the relevant jurisdiction, would have rights to payment and/or collection that may arise in connection with the non-U.S. person's obligations under the security-based swap that are enforceable. We would view the positions of a non-U.S. person as subject to a recourse guarantee if at least one U.S. person (either individually or jointly and severally with others) bears unlimited responsibility for the non-U.S. person's obligations, including the non-U.S. person's obligations to security-based swap counterparties. Such arrangements may include those associated with foreign unlimited companies or unlimited liability companies with at least one U.S.-person member or shareholder, general partnerships with at least one U.S.-person general partner, or entities formed under similar arrangements such that at least one U.S. persons bears unlimited responsibility for the non-U.S. person's liabilities. In our view, the nature of the legal arrangement between the U.S. person and the non-U.S. person—which makes the U.S. person responsible for the obligations of the non-U.S. person—is appropriately characterized as a recourse guarantee, absent countervailing factors. More generally, a recourse guarantee is present if, in connection with the security-based swap, the counterparty itself has a legally enforceable right to payment or collection from the U.S. person, regardless of the form of the arrangement that provides such an enforceable right to payment or collection.
In light of comments received and upon further consideration, we believe that the revised approach addresses, in a targeted manner, the risk to the U.S. financial system posed by entities whose counterparties are able to turn to a U.S. person for performance of the non-U.S. person's obligations under a security-based swap position.
The final rule reflects our conclusion that a non-U.S. person—to the extent it enters into security-based swap positions subject to a recourse guarantee by a U.S. person—enters into security-based swap positions that exist within the United States.
The final rules regarding positions for which a counterparty to the position has rights of recourse against a U.S. person aim to apply major participant regulation in similar ways to differing organizational structures that serve similar economic purposes, such as positions entered into by a non-U.S. person that are subject to a recourse guarantee by a U.S. person and security-based swap positions carried out through a foreign branch of a U.S. person.
As discussed below, we have maintained the proposed approach requiring a U.S. person to attribute to itself any position of a non-U.S. person for which the non-U.S. person's counterparty has rights of recourse against the U.S. person. This attribution requirement further reflects the focus of the major security-based swap participant definition on positions that may raise systemic risk concerns within the United States.
We note that, consistent with our proposal, we are not requiring non-U.S. persons to include in their major security-based swap participant threshold calculations positions for which they (as opposed to their counterparties) have a guarantee creating a right of recourse against a U.S. person. As we noted in the proposal, non-U.S. persons with a right of recourse against a U.S. person pursuant to a security-based swap do not pose a direct risk to the person providing a guarantee, as that person's failure generally will not trigger any obligations under the guarantee.
The Cross-Border Proposing Release stated the preliminary view that a person's security-based swap positions in the cross-border context would be attributed to a parent, other affiliate, or guarantor for purposes of the major participant analysis to the extent that the person's counterparties in those positions have recourse to that parent, other affiliate, or guarantor in connection with the position. Positions would not be attributed in the absence of recourse.
The final rules codify the proposed guidance related to attribution of guaranteed positions to provide clarity to market participants. We continue to believe that a U.S. person should attribute to itself any positions of a non-U.S. person for which the non-U.S.
Our preliminary view was that a U.S. person would attribute to itself all security-based swap positions for which it provides a guarantee for performance on the obligations of a non-U.S. person, other than in limited circumstances.
We are adopting rules that codify the preliminary views set forth in our proposal: A U.S. person is required to attribute to itself any security-based swap position of a non-U.S. person for which the non-U.S. person's counterparty to the security-based swap has rights of recourse against that U.S. person.
We believe that attribution of positions to guarantors is consistent with Exchange Act section 30(c), notwithstanding the argument by one commenter that attribution to a guarantor “extends beyond the intended limits of [s]ection 30(c) of the Exchange Act.”
As discussed above, the final rules regarding positions for which a counterparty to the position has rights of recourse against a U.S. person aim to apply major participant regulation to in similar ways to differing organizational structures that serve similar economic purposes, including structures such as security-based swap positions entered into by a non-U.S. person that are subject to a recourse guarantee by a U.S. person and security-based swap positions carried out through a foreign branch.
While we recognize one commenter's concern that attribution would require “double counting” certain positions, we do not agree with that commenter's assertion that the final rule constitutes double-counting, given that both entities assume the risk of the position by either entering into it directly or by guaranteeing it. Because both entities are involved in the position that poses risk to the U.S. financial system, both entities are required to include it in their respective major participant
In the proposal, we expressed our preliminary view that a non-U.S. person that provides a recourse guarantee for performance on the obligations of a U.S. person should attribute to itself the security-based swap positions of the U.S. person that are subject to guarantees by the non-U.S. person.
Consistent with our preliminary view, the final rule requires a non-U.S. person to attribute to itself any security-based swap positions of a U.S. person that are subject to a guarantee by the non-U.S. person.
Under the final rule, if a U.S. person in a transaction with a non-U.S. person counterparty has rights of recourse against another non-U.S. person under the security-based swap, the non-U.S. person guaranteeing the transaction must attribute the security-based swap to itself for purposes of its major security-based swap participant threshold calculations.
As explained above, we believe that attribution of positions to guarantors is consistent with Exchange Act section 30(c), notwithstanding the argument by one commenter that attribution to a guarantor “goes beyond the intended limits of section 30(c) of the Exchange Act.”
The final rules requiring non-U.S. persons to attribute certain positions to themselves for purposes of calculating their own major security-based swap participant calculation thresholds aims to apply major participant regulation in similar ways to differing organizational structures that serve similar economic purposes. For example, when a U.S. person has rights of recourse against a non-U.S. person, the economic reality of the position is substantially identical, in relevant respects, to a position entered into directly by the non-U.S. person with the U.S. person. The relevant attribution requirements reflect that a non-U.S. person would need to include such positions were it to enter into them directly.
The proposal stated our preliminary view that a guarantor would not be required to attribute to itself the security-based swap positions it guarantees, and, therefore, may exclude those positions from its threshold calculations, if the person whose positions it guarantees is already subject to capital regulation by the Commission or the CFTC (for example, by virtue of being regulated as a swap dealer, security-based swap dealer, major swap participant, major security-based swap participant, FCMs, brokers, or dealers), is regulated as a bank in the United States, or is subject to capital standards adopted by its home country supervisor that are consistent in all respects with the Capital Accord of the Basel Committee on Banking Supervision (“Basel Accord”).
One commenter supported our preliminary view that a non-U.S. person's guaranteed positions would not be attributed to the guarantor if the guaranteed non-U.S. person is subject to capital regulation by the Commission, the CFTC, or capital standards in its home jurisdiction that are consistent with the Basel Accord.
Although the final rules require, in some circumstances, both the guarantor and the guaranteed person to include guaranteed positions in their respective major security-based swap participant threshold calculations, the final rules do not require a guarantor to attribute guaranteed positions to itself when the guaranteed person is subject to capital regulation by the Commission or the CFTC (including, but not limited to regulation as a swap dealer, major swap participant, security-based swap dealer, major security-based swap participant, futures commission merchant, broker, or dealer).
As noted above, one commenter requested that a U.S. guarantor not be required to attribute to itself a person's positions for which it provides a guarantee while that person's registration as a major security-based swap participant is pending.
One commenter commented generally that the threshold for having to register as a major-security-based swap participant is too high.
The Cross-Border Proposing Release did not address the treatment of legacy portfolios, but we stated in the Intermediary Definitions Adopting Release that “the fact that these entities no longer engage in new swap or security-based swap transactions does not overcome the fact that entities that are major participants will have portfolios that are quite large and could pose systemic risk to the U.S. financial system.”
In the Commission's proposed capital and margin requirements, we proposed exceptions from certain account equity requirements, such as collection of
In the context of the cross-border application of the major security-based swap participant definition, we are maintaining our approach to legacy portfolios as described in the Intermediary Definitions Adopting Release and are not excluding entities that maintain legacy portfolios from the major security-based swap participant definition.
In the Cross-Border Proposing Release, we did not propose to specifically address the treatment of entities such as foreign central banks, international financial institutions, multilateral development banks, and sovereign wealth funds in the context of the major security-based swap participant definition and instead sought comment regarding the types, levels, and natures of security-based swap activity that such organizations regularly engage in in order to allow us to better understand the roles of these organizations in the security-based swap markets.
The final rule defining “U.S. person” (like the proposed definition of that term) specifically excludes several foreign public sector financial institutions and their agencies and pension plans, and more generally excludes any other similar international organization and its agencies and pension plans.
As discussed in the context of the
Similar to the discussion in the context of the
These final rules and guidance regarding the cross-border
As discussed in the context of the cost-benefit analysis of the application of the
We have taken economic effects into account in adopting these final cross-border rules and providing guidance. Because security-based swap contracts are associated with complex risks and the markets are highly interconnected, we believe that positions that exist within the United States, which are most likely to expose the U.S. financial system to financial risk, should generally be included in the major security-based swap participant threshold calculations. At the same time, we recognize that the cross-border application of Title VII has the potential to reduce liquidity within the U.S. market to the extent it increases the costs of entering into security-based swaps or provides incentives for particular market participants to avoid the U.S. market to operate wholly outside the Title VII framework.
As addressed in the analysis of the costs and benefits of our application of the
Second, the registration and regulation of some entities as major security-based swap participants will lead to programmatic costs and benefits arising as a consequence of the Title VII requirements that apply to registered major security-based swap participants.
We discuss these costs and benefits associated with the final rules more fully below. We also discuss the economic impact of certain potential alternatives to the approach taken in the final rules.
Exchange Act rule 3a67–10 will permit market participants to exclude certain of their positions from their major security-based swap participant threshold calculations, and thus may cause particular entities that engage in security-based swap transactions not to be regulated as major security-based swap participants. The rules accordingly may be expected to affect the programmatic costs and benefits associated with the regulation of major security-based swap participants under Title VII, given that those costs and benefits are determined in part by which persons will be regulated as major security-based swap participants.
As discussed in the context of the application of the
As such, the rules reflect our assessment and evaluation of programmatic costs and benefits:
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In short, these final rules apply the major security-based swap participant definition—which itself reflects cost-benefit considerations
In defining “substantial position” and “substantial counterparty exposure” as part of the Intermediary Definitions Adopting Release, we sought to capture persons whose security-based swap positions pose sufficient risk to counterparties and the markets generally that regulation as a market participant was warranted, without imposing costs of Title VII on those entities for which regulation currently may not be justified in light of the purposes of the statute.
That methodology determined that an entity that margins its positions would need to have security-based swap positions approaching $100 billion to reach the levels of potential future exposure required to meet the substantial position threshold, even before accounting for the impact of netting, while an entity that clears its security based swaps generally would need to have positions approaching $200 billion. We believed that it was reasonable to assume that most entities that will have security-based swap positions large enough to potentially cause them to be major participants in practice will post variation margin in connection with those positions that they do not clear, making $100 billion the relevant measure. The available data from 2011 showed that only one entity had aggregate gross notional positions (
In the Intermediary Definitions Adopting Release, we noted that to the extent that an entity's security-based swap positions are not cleared or associated with the posting of variation margin, security-based swap positions of $20 billion may lead to sufficient potential future exposure to cause the entity to be a major participant, though we believed that few, if any, entities would have a significant number of such positions. The data indicated that only 32 entities have notional CDS positions in excess of $10 billion.
We believe the methodology used in the Intermediary Definitions Adopting Release also is appropriate for considering the potential programmatic costs and benefits associated with the final cross-border rules. This methodology particularly can help provide context as to how rules regarding the cross-border application of the definition of major security-based swap participant may change the number of entities that must register as major security-based swap participants, and thus help provide perspective regarding the corresponding impact on the programmatic costs and benefits of Title VII. Applying that methodology to 2012 data regarding the single-name CDS market suggests that under these final rules five or fewer entities may have to register as major security-based swap participants—a number that is consistent with our estimates in the Intermediary Definitions Adopting Release.
Consistent with the methodology used in the Intermediary Definitions Adopting Release, the 2012 data indicated that two entities had aggregate gross notional positions (
The factors that are described in more detail in section IV.I.1(b) regarding the application of the
In general, however, and consistent with our territorial approach, we believe that these rules are targeted appropriately and do not apply major security-based swap participant regulation to those entities whose positions have a more limited impact on the U.S. financial system and hence whose regulation as a major security-based swap participant under Title VII would be less linked to programmatic benefits (
Finally, as discussed in the context of the
The analysis of how these cross-border rules will affect the assessment costs associated with the “major security-based swap participant” definition is related to the assessment cost analysis described in the Intermediary Definitions Adopting Release,
The Intermediary Definitions Adopting Release addressed how certain market participants could be expected to incur costs in connection with their determination of whether they have a “substantial position” in security-based swaps or pose “substantial counterparty exposure” created by their security-based swaps, which is necessary for determining whether they are major security-based swap participants.
As discussed in the context of the
In adopting these rules we estimate the assessment costs that market participants may incur as a result. As discussed below, however, these costs in practice may be mitigated in large part by steps that market participants already have taken in response to other regulatory initiatives, including compliance actions taken in connection with the requirements applicable to swaps.
The implementation of these cross-border rules in some circumstances has the potential to change the legal costs identified in the Intermediary Definitions Adopting Release, including by adding new categories of legal costs that non-U.S. persons may incur in connection with applying the major security-based swap participant definition in the cross-border context.
Under the final rules described above, available data from 2012 indicates that approximately nine persons will have relevant positions exceeding $25 billion, and we continue to believe that firms whose positions exceed this amount will be likely to perform the major participant threshold analysis.
These estimates do not reflect a new category of costs arising from the cross-border rules. They instead are a revision of a category of previously identified costs that market participants may incur in obtaining legal services to assist in performing the major participant analysis, using newer data and reflecting only positions that are counted under the final cross-border rules.
Consistent with the Cross-Border Proposing Release, moreover, this estimate is further based on estimated 40 hours of in-house legal or compliance staff's time (based on the above rate of $380 per hour for an in-house attorney) to establish a procedure of requesting and collecting representations from trading counterparties, taking into account that such representation may be incorporated into standardized trading documentation used by market participants. This leads to an estimate of $15,200 per firm for such costs.
In sum, we believe that the effect of these final cross-border rules would be an increase over the amounts that otherwise would be incurred by certain non-U.S. market participants, both in terms of additional categories of legal costs and in terms of the need to develop certain systems and procedures. As discussed in the context of the assessment costs applicable to the dealer analysis, we believe that requiring certain non-U.S. persons to incur such assessment costs is an unavoidable adjunct to the implementation of a set of rules that are appropriately tailored to apply the “major security-based swap participant” definition under Title VII to a global security-based swap market in a way that yields the relevant benefits associated with the regulation of major participants and achieves the benefits of Title VII.
As explained in the context of the analysis for dealers, we recognize that our estimates of assessment costs may result in an overestimation as such costs may be tempered to the extent that market participants' assessments correspond to the assessments they otherwise would follow due to other regulatory requirements or business practices, particularly with respect to assessments they may have made regarding the U.S.-person status of their counterparties.
Also as noted in the dealer discussion, we acknowledge that certain aspects of the final rules may differ from those of the CFTC, which may result in higher costs for market participants, but we believe that such differences are justified and we discuss those differences in the substantive discussions of the specific rules.
As discussed above, the final rules incorporate a number of provisions designed to focus Title VII major security-based swap participant regulation upon those persons whose security-based swap positions may raise the risks within the United States that the major participant definition was intended to address.
In adopting these final rules we have considered alternative approaches suggested by commenters, including the economic effects of following such alternative approaches. In considering the economic impact of potential alternatives, we have sought to isolate the individual alternatives to the extent practicable, while recognizing that many of those alternatives are not mutually exclusive.
We further have considered such potential alternatives in light of the methodologies discussed above, by assessing the extent to which following particular alternatives would be expected to increase or decrease the number of entities that ultimately would be expected to be regulated as major security-based swap participants under the final rules, as well as the corresponding economic impact. Analysis of the available data would tend to suggest that various alternative approaches suggested by commenters would not produce any changes in the numbers of market participants that may have to be regulated as major security-based swap participants. These results are subject to the above limitations, however, including limitations regarding the ability to quantitatively assess how market participants may adjust their future activities in response to the rules we adopt or for independent reasons. Accordingly, while such analyses provide some context regarding alternatives, their use as tools for illustrating the economic effects of such alternatives is limited.
As with the final rules in the context of the
As in the dealer analysis, using the 2012 data to assess the impact associated with this alternative does not indicate a change to our estimate that up to five entities potentially would register as major security-based swap participants, and the analysis is subject to the limitations discussed in the context of the dealer analysis.
The final rules require a non-U.S. person to count, against its major security-based swap participant calculation thresholds, positions for which the non-U.S. person's performance in connection with the transaction is subject to a recourse guarantee against a U.S. person. Although the proposal instead would have treated such guaranteed affiliates like any other non-U.S. persons, we believe that this provision is appropriate for the reasons discussed above, including the fact that such recourse guarantees pose risks to the U.S. financial system via the guarantor.
This aspect of the final rules reflects a middle ground between commenter views, as is discussed above regarding the approach taken in the dealer analysis.
The analysis of the first two alternatives discussed in the context of the application of the dealer requirements above also applies in the context of applying the major security-based swap participant definition.
For the foregoing reasons, we believe that the approach taken in the final rules is appropriate. We note that an assessment of the data regarding the first alternative does not indicate a change in the number of entities that may be expected to register as major security-based swap participants.
The final rules require conduit affiliates to count all of their security-based swap positions in their major security-based swap participant threshold calculations. The available data does not permit us to identify which market participants would be deemed conduit affiliates.
As addressed in the dealer analysis another alternative to address such evasive activity could be to narrow the inter-affiliate exception, such as by making the exception unavailable when non-U.S. persons enter into positions
The final rules require non-U.S. persons to include their positions arising from transactions conducted through foreign branches of U.S. banks unless the U.S. bank is registered as a security-based swap dealer. This reflects a change from the proposal, which would have required non-U.S. persons to include all positions with foreign branches of U.S. banks without exception. The final approach, as in the context of the dealer analysis, reflects a middle ground between commenter views, which provided two alternatives: That all positions arising from transactions conducted through foreign branches be counted or that no such position be counted against a non-U.S. person's major security-based swap participant calculation thresholds.
The available data related to these alternatives is subject to the limitations discussed above and does not indicate a change to our assessment of the number of entities that may be expected to register as major security-based swap participants.
Another alternative approach would require non-U.S. persons to include in their major security-based swap participant threshold calculations those positions for which they have rights of recourse against a U.S. person or their positions with counterparties that are conduit affiliates.
Our final attribution approach requires U.S. persons to include, for purposes of their major security-based swap participant calculation thresholds, those positions for which a non-U.S. person's counterparty has rights of recourse against the U.S. person.
An alternative approach would not require a U.S. person to include such positions in its threshold calculations. This alternative potentially reduces the programmatic costs and benefits of major participant regulation because it would reduce the number of positions that U.S. guarantors would include in their calculations. By reducing the costs associated with providing guarantees, such an alternative could reduce the barriers to participation in the security-based swap market faced by participants who might benefit from risk sharing afforded by security-based swap positions but cannot credibly provide sufficient information for their counterparties to assess creditworthiness. We further believe that such an approach would only reduce the assessment costs associated with major participant regulation to the extent that U.S. guarantors do not have private incentives in place to collect information about positions they guarantee.
As noted in section V.D.3, however, we believe it is important to account for the risk to the U.S. financial system transmitted by such guaranteed positions. Ensuring that a U.S. person counts positions of potentially several entities whose counterparties have rights of recourse against it, where each of those entities may be individually below the major participant threshold, will generate the types of benefits that Title VII was intended to produce. The benefits of including these positions are significant because, through the U.S. guarantor, these positions expose the U.S. financial system to the type of risk that the definition of major security-based swap participant is intended to address.
Under the final rules a non-U.S. person must include security-based swap positions of a U.S. person for which that person's counterparty has rights of recourse against the non-U.S. person, and security-based swap positions of another non-U.S. person that are with a U.S.-person counterparty who has rights of recourse against the non-U.S. person that is the potential major security-based swap participant.
An alternative approach to these requirements would be to not require non-U.S. persons to include such positions, even when those positions are entered into by U.S. persons or when a U.S. person has a right of recourse against them under those positions. Not requiring these positions to be attributed to the non-U.S. person could reduce assessment costs for non-U.S. persons and potentially result in fewer non-U.S. persons ultimately registering as major security-based swap participants. This alternative potentially improves risk sharing by U.S. persons who must rely on guarantees in order to participate in the security-based swap market by reducing the costs incurred by non-U.S. person guarantors. It likely would, however, also reduce programmatic benefits to the extent that non-U.S. persons that guarantee positions within the United States of multiple entities, each of which is below the major participant threshold, are not required
Such non-U.S. persons who provide guarantees ultimately bear the risk of positions they guarantee, and the aggregate risk exposure of the U.S. financial system to a non-U.S. person guarantor varies more directly with the notional amount of positions involving U.S. persons that are guaranteed than with the number of entities to which it provides guarantees. As a result, the Commission believes it is appropriate to apply attribution requirements that treat non-U.S. person guarantors of positions to which U.S. persons are counterparties as if they were direct counterparties. With respect to guarantees provided by non-U.S. persons to U.S. persons, the Commission believes it is appropriate to attribute guaranteed positions because U.S. persons bear the risk that non-U.S. person guarantors will be unable to fulfill obligations under the guarantees they provide.
The final approach requires non-U.S. persons to include in their major participant threshold calculations those positions that are entered into with U.S. persons, including positions that are cleared through a registered clearing agency in the United States. An alternative raised by a commenter suggested that the location of clearing not be relevant for purposes of determining whether a non-U.S. person is a major security-based swap participant.
Several commenters suggested that foreign government-related entities, such as sovereign wealth funds and MDBs, should be excluded from the U.S. person, security-based swap dealer, and major security-based swap participant definitions.
The Cross-Border Proposing Release addressed a range of substantive issues regarding the potential availability of substituted compliance, whereby a market participant could satisfy certain Title VII obligations by complying with comparable foreign requirements. These included issues regarding which requirements might be satisfied via substituted compliance, and regarding the showings necessary to obtain a substituted compliance order from the Commission.
The release also proposed to amend the Commission's Rules of General Application to establish procedures for considering substituted compliance requests, similar to the procedures that the Commission uses to consider exemptive order applications under section 36 of the Exchange Act.
One commenter raised concerns that the proposed availability of confidential treatment “would foreclose any public comment, debate or analysis of the applicant's claims about the foreign regulatory regime, leading to an industry-led process.” That commenter urged us to disallow confidential treatment of applications, and to invite public comment as foreign jurisdictions are considered for comparability.”
Commenters also asked for greater clarity regarding the information to be provided in connection with substituted compliance requests.
Other commenters addressed a related issue regarding whether foreign regulators could submit substituted compliance requests. Proposed Exchange Act rule 3a71–5, regarding substituted compliance for foreign security-based swap dealers, specified that such requests may be filed by a foreign security-based swap dealer or group of dealers. A number of commenters took the contrasting position that foreign regulators should be able to submit substituted compliance requests.
In large part, we expect to address issues regarding the availability of substituted compliance as part of future rulemakings, in conjunction with considering the cross-border application of the relevant substantive rules. As discussed above, we believe that it is appropriate to address issues regarding the cross-border application of the substantive requirements under Title VII in conjunction with considering the final rules to implement those substantive requirements, as substituted compliance potentially will constitute an integral part of the final approach toward cross-border application.
At this time, however, we believe that it is appropriate to adopt a final rule to address the procedures for submitting substituted compliance requests. Using the same general procedural requirements would facilitate the efficient consideration of substituted compliance requests. Proposed Exchange Act rule 0–13, moreover, is sufficiently flexible to accommodate requests related to a range of regulatory requirements, even when the requirements necessitate different approaches toward substituted compliance.
Accordingly, we are adopting Exchange Act rule 0–13 largely as proposed. In response to commenter input, however, the final rule has been modified from the proposal to provide that a request for a substituted compliance order may be submitted either by a party that potentially would comply with requirements under the Exchange Act pursuant to a substituted compliance order, or by a relevant foreign financial regulatory authority or authorities.
The final rule further revises the proposal to provide that applications should include supporting documentation regarding the methods that foreign financial regulatory authorities use to enforce compliance with the applicable rules.
In addition, the final rule revises the proposed language regarding the Commission's ability to request applications to be withdrawn, by omitting the proposed reference to the Commission acting “through its staff.”
The final rule further revises the proposed language regarding the process for considering applications, by providing that an appropriate response will be issued following “a vote by” the Commission.
Finally, the final rule revises the proposal by removing a provision that would have stated that requestors may seek confidential treatment of their application to the extent provided by Exchange Act rule 200.81. This change reflects the fact that under the final rules substituted compliance applications may be submitted by foreign financial regulatory authorities, and recognizes the importance of having the assessment consider potentially sensitive information regarding a foreign regime's compliance and enforcement capabilities and practices. Accordingly, requests for confidential treatment may be submitted pursuant to any applicable provisions governing confidentiality under the Exchange Act.
Separately, Commission Rule 200.83 is a procedural rule that addresses how persons submitting information to the Commission may request that the information not be disclosed pursuant to a request under the Freedom of Information Act for reasons permitted by Federal law. The rule does not apply when any other statute or Commission rule provides procedures for confidential treatment regarding particular categories of information, or where the Commission has specified that an alternative procedure be utilized in connection with a particular study, report, investigation or other matter. Under this rule, a person submitting information to the Commission must request confidential treatment at the time of the submission.
Exchange Act Section 24(f)(2) further provides that the Commission shall not be compelled to disclose privileged information obtain from any foreign securities authority or law enforcement authority if the foreign authority in good faith has determined and represented that the information is privileged.
In adopting rule 0–13, we recognize that the requirement that an application “include any supporting documents necessary to make the application complete” implicates commenter concerns regarding the need for further guidance regarding what information must be submitted as part of substituted compliance requests. We expect to address such issues regarding supporting documentation in the future, as we consider the potential availability of substituted compliance in connection with particular Title VII requirements.
The availability of substituted compliance has the potential to impact the interplay between programmatic costs and benefits associated with the Title VII regulation of security-based swap dealers and major security-based swap participants, as well as those associated with other Title VII requirements. For example, substituted compliance potentially may permit the risk management and other programmatic benefits of dealer regulation to be achieved while avoiding costs that market participants otherwise may incur. At the same time, the process of making substituted compliance requests may cause certain market participants to incur extra costs, although that possibility may be obviated in part by the provision that permits foreign financial authorities to make such requests.
As discussed throughout this release, the security-based swap market is a global market that is subject to regulatory requirements that may vary by jurisdiction. As a result, market participants that operate globally potentially could be subject to overlapping or conflicting regulations. If Title VII requirements for non-U.S. market participants conflict with regulations in local jurisdictions, Title VII could act as a barrier to entry to the U.S. security-based swap market. In such cases, allowing market participants to comply with Title VII via substituted compliance could act as a mechanism to preserve access for non-U.S. persons to the U.S. security-based swap market, reducing the likelihood that non-U.S. persons exit the U.S. market entirely. Therefore, we expect that substituted compliance—so long as it is conditioned on a foreign regime's comparability to the relevant requirements under the Dodd-Frank Act, and on the foreign regime having adequate compliance and enforcement capabilities—would help preserve access and competition in the U.S. market, and thus benefit non-dealer participants in the security-based swap market.
Although the costs associated with the process of making substituted compliance request may be uncertain at this time, the decision to request substituted compliance is purely voluntary. To the extent such requests are made by market participants, moreover, such participants would request substituted compliance only if, in their own assessment, compliance with applicable requirements under a foreign regulatory system was less costly than compliance with both the foreign regulatory regime and the relevant Title VII requirement. Even after a substituted compliance determination is made, market participants would only choose substituted compliance if the private benefits they expect to receive from participating in the U.S. market exceeds the private costs they expect to bear, including any conditions the Commission may attach to the substituted compliance determination. Where substituted compliance increases the number of dealers or other participants in the U.S. security-based swap market, or prevents existing participants from leaving the U.S. market, this may help mitigate the programmatic costs associated with the applicable Title VII requirements, while helping to ensure that the associated programmatic benefits are achieved.
The costs particularly associated with making substituted compliance requests, as well as the general costs and benefits associated with allowing substituted compliance, may be expected to vary between the various categories of Title VII requirements. Relevant considerations may include: Whether (and to what extent) substituted compliance is permitted in connection with a requirement; the relevant information required to demonstrate consistency between the foreign regulatory requirements and the Commission's analogous dealer requirements; the relevant information required to demonstrate the adequacy of the foreign regime's compliance and
We recognize that commenters have asked that the Commission coordinate with the CFTC and foreign regulators in making substituted compliance determinations. As discussed above, the Commission is subject to obligations to consult and coordinate with the CFTC and foreign regulators in connection with Title VII.
The provisions of the rules and guidance, discussed above, do not limit the cross-border reach of the antifraud provisions or other provisions of the federal securities laws that are not specifically addressed by this release.
In section 929P(b) of the Dodd-Frank Act, Congress added provisions to the federal securities laws confirming the Commission's broad cross-border antifraud authority.
Specifically, the Commission's antifraud enforcement authority under section 17(a) of the Securities Act and the antifraud provisions of the Exchange Act—including sections 9(j) and 10(b)—extends to “(1) conduct within the United States that constitutes significant steps in furtherance of [the antifraud violation], even if the securities transaction occurs outside the United States and involves only foreign investors,” and “(2) conduct occurring outside the United States that has a foreseeable substantial effect within the United States.”
Although no commenters challenged the Commission's interpretation of its cross-border antifraud authority, we are aware that a federal district court recently expressed the view that the statutory language may be unclear.
Further, we believe that our interpretation of the cross-border antifraud enforcement authority best advances the strong interest of the United States in applying the antifraud
This rule is designed to ensure the antifraud provisions of the securities laws are provided broad cross-border reach. Effective cross-border enforcement of the antifraud provisions should help detect and deter or stop transnational securities frauds the final rule may mitigate inefficiencies in allocation of capital. For example, by directly diverting financial resources from more productive projects to less productive projects, serious transnational securities frauds can generate welfare losses.
Further, in the absence of the cross-border application of the antifraud provisions, the perceived risk of fraud may indirectly result in less efficient capital allocation if it reduces investors' trust in the securities market.
In developing our approach to the cross-border application of the Title VII security-based swap dealer and major participant definitions, we have focused on meeting the goals of Title VII, including the promotion of the financial stability of the United States, by the improvement of accountability and transparency in the U.S. financial system and the protection of counterparties to security-based swaps. We also have considered the effects of our policy choices on competition, efficiency, and capital formation as mandated under section 3(f) of the Exchange Act. That section requires us, whenever we engage in rulemaking pursuant to the Exchange Act and are required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action will promote efficiency, competition, and capital formation.
In this section, we focus particularly on these effects. In adopting these final rules, we recognize that the most significant impact of the cross-border implementation of the dealer and major participant definitions will derive from the role of the definitions in determining which market entities are subject to security-based swap dealer and major security-based swap participant regulation under Title VII and which entities are not. That is, the scope of the final definitions will affect the ultimate regulatory costs and benefits that will accompany the full implementation of Title VII rules aimed at increasing transparency, accountability, and financial stability. Furthermore, the final cross-border rules may create incentives for market participants, including dealers as well as non-dealers and other non-registered entities who transact with dealers, to structure their businesses to operate wholly outside of the Title VII framework. This incentive may be particularly strong for entities at the boundaries of the definitions—for example, entities with relatively limited contact with U.S. persons—for whom the benefits of operating outside of Title VII may exceed the costs of restructuring or forgoing trading opportunities with U.S. counterparties.
As noted above, a key goal of Title VII of the Dodd-Frank Act is to promote the financial stability of the United States by improving accountability and transparency in the financial system. To that end, Title VII imposes new regulatory requirements on market participants who register as security-based swap dealers or major participants. The final cross-border implementation of the dealer and major participant definitions discussed in this release, including the cross-border implementation of the
As detailed above, the security-based swap market is a global, interconnected market. Within this global market, foreign and domestic dealers compete for business from counterparties, while non-dealers (including major participants) that participate in the market use security-based swaps for purposes that can include speculation and hedging. Because the market for security-based swaps is a global market and some participants may not engage in relevant security-based swap activity within the United States, the rules we adopt pursuant to Title VII will not reach all participants or all transactions in the global market. We are aware that application of rules to a subset of participants in the worldwide security-based swap market would change the costs and benefits of market participation for one group (those that engage in relevant security-based swap activity within the United States) relative to another (those that do not) and therefore create competitive effects.
More specifically, in addition to requiring U.S. dealers to register, our
However, we recognize that the final rule treats U.S. persons and different types of non-U.S. persons differently. Unless their dealing activity is guaranteed by a U.S. person, non-U.S. persons may exclude from their
To the extent that entities engaged in dealing activity exit the U.S. security-based swap market, the end result could be a U.S. market where fewer intermediaries compete less intensively for business. These exits could result in higher spreads and reduced liquidity, and could affect the ability and willingness of non-dealers within the United States to engage in security-based swaps. The concentrated nature of dealing activity suggests that there are high barriers to entry in connection with security-based swap dealing activity, which could preclude the ability of new dealers to enter the security-based swap market and compete away spreads.
Notwithstanding the potential that our final rule may reduce competition, the Commission believes it appropriate to require U.S. persons to count all dealing transactions towards the
Similarly, the cross-border application of the
Finally, incentives to restructure ultimately depend on future regulatory developments, both with respect to final Title VII rules and foreign regulatory frameworks; the differences in regulatory requirements across jurisdictions; and strategic interactions with non-dealer participants. For example, although pre-and post-trade transparency requirements provide a number of benefits both to financial markets and the real economy, dealers benefit from operating in opaque markets. To the extent that foreign jurisdictions require only regulatory reporting, without public dissemination requirements, dealers may wish to operate in jurisdictions where they can continue to benefit from opaque markets.
Other market participants, however, may prefer transparency, and the availability of transparent trading venues that result from Title VII pre- and post-trade transparency requirements could shift market power away from dealers. If non-dealer market participants are able to demand transparent trade execution, the incentives to restructure may be tempered, particularly if transparent venues attract liquidity away from opaque markets. Ultimately, the effects of transparency requirements on dealers' incentives to restructure depend on differences across jurisdictions, as well as whether non-dealer participants prefer transparency. These preferences may, in turn, depend on motives for trading among non-dealers. Hedgers and participants that need liquidity may prefer transparent venues while participants who believe they have private information about asset values may prefer opaque markets that allow them to trade more profitably on their information.
The potential restructurings and exits described above may impact competition in the U.S. market in different ways. On one hand, the ability to restructure one's business rather than exit the U.S. market entirely to avoid application of Title VII to a person's non-U.S. operations may reduce the number of entities that exit the market, thus mitigating the negative effects on competition described above. On the other hand, U.S. non-dealers may find that the only foreign security-based swap dealers that are willing to deal with them are those whose security-based swap business is sufficiently large to afford the costs of restructuring as well as registration and the ensuing compliance costs associated with applicable Title VII requirements. To the extent that smaller dealers continue to have an incentive to exit the market, the overall level of competition in the market may decline.
Moreover, regardless of the response of dealers to our approach, we cannot preclude the possibility that large non-dealer financial entities and other non-dealer market participants in the United States, such as investment funds, who have the resources to restructure their business also may pursue restructuring and move part of their business offshore in order to transact with dealers outside the reach of Title VII, either because liquidity has moved offshore or because these participants want to avoid Title VII requirements (such as transparency requirements) that may reveal information about trading strategies. This may reduce liquidity within the U.S. market and provide additional incentives for U.S. persons and non-U.S. persons to shift a higher proportion of their security-based swap business offshore, further reducing the level of competition within the United States. In this scenario, the competitive frictions caused by the application, in the cross-border context, of a
In addition to the global nature of the security-based swap market and the implications for the reach of Title VII dealer and major participant registration requirements, we also noted above the current opacity of the over-the-counter derivatives market and the informational advantage that dealers currently have over non-dealers. By having greater private order flow information, dealers are in a position to make more-informed assessments of market values and can use that information to extract rents from less-informed counterparties. While this issue will be the focus of future Commission rulemaking covering pre- and post-trade transparency, we note that the final rule to exclude cleared, anonymous transactions from the
The overall effects of the final approach described in this release on competition among dealing entities in the U.S. security-based swap market will depend on the way market participants ultimately respond to different elements of Title VII. Application of the dealer and major participant registration requirements may create incentives for dealers and market participants to favor non-U.S. counterparties; incentives to restructure due to inconsistent regulatory requirements may increase concentration among security-based swap dealers providing services to U.S. non-dealers. However, registration and compliance with Title VII may signal high quality and mitigate the incentive to restructure and exit U.S. markets for intermediaries with the ability to meet the standards set by Title VII. Furthermore, if hedgers and other market participants who do not benefit from opacity demand transparency and counterparty protections that come from trading with a registered dealer, dealers may prefer to register if serving this market is profitable. Finally, while fewer dealing entities could lead to decreased competition and wider
As noted above, in adopting the rules and guidance discussed in this release, we are required to consider whether these actions would promote efficiency. In significant part, the effect of these rules on efficiency is linked to the effect of these rules on competition. Definitional rules that promote, or do not unduly restrict, competition can be accompanied by regulatory benefits that minimize the risk of liquidity crises, aggregate capital shortfalls, and other manifestations of contagion. Furthermore, by reducing the costs that individual market participants impose on others through their trades—that is, by imposing registration requirements and substantive regulations on dealers and major participants who, by virtue of the volume of their transactions, their number of counterparties, and their aggregate positions and exposures, are most likely to contribute to risk spillovers—the rules promote efficiency within the market. Generally, rules and interpretations that promote competitive capital markets can be expected to promote the efficient allocation of risk, capital, and other resources by facilitating price discovery and reducing costs associated with dislocations in the market for security-based swaps.
As discussed several times throughout this release, the global nature of the security-based swap market suggests that the regulatory framework adopted under Title VII may not reach all participants or all transactions. Additionally, differing regulatory timelines and differences in regulatory scope may moderate the benefits flowing from Title VII. In particular, if other regulatory regimes offer more opacity in transactions, those who are most harmed by transparency (including dealers who currently benefit from privately observing order flow) have incentives to restructure their business to operate abroad or otherwise take advantage of regulatory gaps. Restructuring itself, while potentially optimal for an individual participant, represents a form of inefficiency for the overall market in that firms expend resources simply to circumvent regulation and not for any productive purpose.
More importantly, altering business models to take advantage of looser regulatory regimes undermines other efficiency benefits to Title VII. For example, U.S. dealers may have an incentive to restructure their businesses by setting up separately capitalized entities in non-U.S. jurisdictions, through which they would continue their dealing operations in order to take advantage of the rules applicable to non-U.S. persons. As discussed above, if some market participants choose to operate wholly outside of the Title VII regulatory framework, risk and liquidity may concentrate in less regulated, opaque corners of the market, undermining the benefits of Title VII. Moreover, insofar as the types of restructuring contemplated above purely constitute attempts at arbitraging regulations, including regulations applied to registered dealers, such as capital and reporting regulations, they represent a use of resources that could potentially be put to more productive uses. Ultimately, the incentive to restructure, and the corresponding loss of benefits, depends on the extent to which other jurisdictions implement comprehensive OTC derivatives regulations. If foreign jurisdictions subject security-based swap transactions to regulatory oversight consistent with Title VII, the ability to arbitrage regulations will be limited.
Nevertheless, two features of our rules adopted today may mitigate the incentive for market participants to undermine the benefits of Title VII through inefficient restructuring or evasion. First, the requirement that conduit affiliates count all dealing activity towards the
Finally, we received several comments from outside commenters urging us to harmonize our final rules with interpretations set forth in the CFTC's guidance.
We believe that many aspects of the final cross-border approach to the dealer and major participant definitions are likely to promote capital formation, by focusing dealer and major participant regulation on activity and entities that are most likely to serve as conduits of risk to U.S. persons and potentially to the U.S. financial system. We also believe that applying the full range of Title VII requirements to this group of entities will increase the likelihood that the benefits of Title VII, including increased transparency, accountability, and financial stability, will be realized. To the extent that these requirements reduce asymmetric information about market valuations, we expect that a security-based swap market with enhanced transparency and enhanced regulatory oversight may facilitate entry by a wide range of market participants seeking to engage in a broad range of hedging and trading activities.
Additionally, strengthening incentives for non-U.S. persons to trade in transparent venues encourages market participants to express their true valuations for security-based swaps; information revealed through transparent trades allows market participants to derive more-informed assessments with respect to asset valuations, leading to more efficient capital allocation. This should be true for the underlying assets as well. That is, information learned from security-based swap trading provides signals not only about security-based swap valuation, but also about the value of the reference assets underlying the swap.
However, the Commission recognizes that, to the extent that the cross-border implementation of the dealer and major participant definitions encourages inefficient restructuring or results in market fragmentation, the final rules may impair capital formation and result in a redistribution of capital across jurisdictional boundaries. We note that, unlike in the proposed rules, we are requiring non-U.S. persons with U.S. guarantees to include all transactions that benefit from a U.S. guarantee in their
The Paperwork Reduction Act of 1995 (“PRA”)
In the Cross-Border Proposing Release, we identified a number of proposed rules that contained “collection of information requirements” within the meaning of the PRA.
In addition, the representation provision of the proposed definition of “transaction conducted within the United States” contained a collection of information. These final rules do not encompass that collection of information requirement, however, because we are not adopting the “transaction conducted within the United States” element of the proposed rule in this release.
The Commission previously submitted proposed rule 3a71–3, as well as certain other rules proposed as part of the Cross-Border Proposing Release, to OMB for review in accordance with 44 U.S.C. 3507 and 5 CFR 1320.11. The title of the collection related to proposed rule 3a71–3 is “Reliance on Counterparty Representations Regarding Activity Within the United States.” OMB has not yet assigned Control Numbers in connection with rule 3a71–3 or the other rules submitted in connection with the proposal.
When determining whether a security-based swap transaction constitutes a “transaction conducted through a foreign branch,” a person may rely on its counterparty's representation that the transaction “was arranged, negotiated, and executed on behalf of the foreign branch solely by persons located outside the United States, unless such person knows or has reason to know that the representation is not accurate.”
Under the final rules, a non-U.S. person need not count, against the applicable thresholds of the dealer exception and the major security-based swap participant definition, dealing transactions with foreign branches of U.S. banks that are registered as security-based swap dealers. For these purposes, the foreign branch must be the counterparty to the security-based swap transaction, and the transaction must be arranged, negotiated, and executed on behalf of the foreign branch solely by persons located outside the United States.
As discussed in the Cross-Border Proposing Release, the Commission acknowledges that verifying whether a security-based swap transaction falls within the definition of “transaction conducted through a foreign branch” could require significant due diligence. The definition's representation provision would mitigate the operational difficulties and costs that otherwise could arise in connection with investigating the activities of a counterparty to ensure compliance with the corresponding rules.
These representations would be provided voluntarily by the counterparties to certain security-based swap transactions to other counterparties; therefore, the Commission would not typically receive confidential information as a result of this collection of information. However, to the extent that the Commission receives confidential information described in this representation provision through our examination and oversight program, an investigation, or some other means, such information would be kept confidential, subject to the provisions of applicable law.
Based on our understanding of the OTC derivatives markets, including the size of the market, the number of counterparties that are active in the market, and how market participants currently structure security-based swap transactions, the Commission estimates that up to 15 entities that are registered as security-based swap dealers may include a representation that a security-based swap is a “transaction conducted through a foreign branch” in their trading relationship documentation (
In the Cross-Border Proposing Release, we preliminarily estimated that 50 entities may include a representation that a transaction constitutes a “transaction conducted through a foreign branch.”
The estimates in this section reflect the Commission's experience with burden estimates for similar requirements and discussions by our staff with market participants. The Commission believes that, in most cases, the representations associated with the definition of “transaction conducted through a foreign branch” would be made through amendments to the parties' existing trading documentation (
The Commission estimates the maximum total paperwork burden associated with developing new representations would be, for each U.S. bank registered as a security-based swap dealer that may make such representations, no more than five hours, and up to $2,000 for the services of outside professionals, for an estimate of approximately 75 hours and $30,000 across all security-based swap counterparties that may make such representations. This estimate assumes
The Commission expects that the majority of the burden associated with the new disclosure requirements will be experienced during the first year as language is developed and trading documentation is amended. After the new representations are developed and incorporated into trading documentation, the Commission believes that the annual paperwork burden associated with this requirement would be no more than approximately 10 hours per counterparty for verifying representations with existing counterparties and onboarding new counterparties, for a maximum of approximately 150 hours across all applicable security-based swap counterparties.
When determining whether its counterparty is a U.S. person for purposes of the application of the dealer and major participant analyses, a person may rely on its counterparty's representation that the counterparty does not meet the applicable criteria to be a U.S. person, unless the person knows or has reason to know that the representation is not accurate.
Under the final rules, a non-U.S. person's dealer and major participant analysis require it to determine whether its security-based swap counterparties are U.S. persons because certain security-based swaps in which the counterparty is not a U.S. person will not have to be counted against the applicable thresholds.
The Commission recognizes that the “U.S. person” definition encompasses a number of distinct components, and that in some circumstances verifying whether a security-based swap counterparty is a “U.S. person” could require significant due diligence. As a result, the final rules have added a representation provision to that definition, to help mitigate the operational difficulties and costs that could arise in connection with investigating the status of a counterparty.
As with the representations associated with the “transaction conducted through a foreign branch” definition, these representations would be provided voluntarily by the counterparties to certain security-based swap transactions to other counterparties. The Commission would not typically receive confidential information as a result of this collection of information. However, to the extent that the Commission receives confidential information described in this representation provision through our examination and oversight program, an investigation, or some other means, such information would be kept confidential, subject to the provisions of applicable law.
Based on our understanding of the OTC derivatives markets, including the domiciles of counterparties that are active in the market, the Commission estimates that up to 2400 entities may provide representations that they do not meet the criteria necessary to be U.S. persons.
The estimates in this section reflect the Commission's experience with burden estimates for similar requirements and discussions by our staff with market participants. Consistent with the discussion above related to the representation provision of the “transaction conducted through a foreign branch” definition, the Commission believes that in most cases the representations associated with the “U.S. person” definition would be made through amendments to the parties' existing trading documentation (
As above, the Commission estimates the maximum total paperwork burden associated with developing new representations would be, for each counterparty that may make such representations, no more than five hours and up to $2,000 for the services of outside professionals, for a maximum of approximately 12,000 hours and $4.8 million across all security-based swap counterparties that may make such representations. This estimate assumes little or no reliance on standardized disclosure language.
The Commission expects that the majority of the burden associated with the new disclosure requirements will be experienced during the first year as language is developed and trading documentation is amended. After the new representations are developed and incorporated into trading documentation, the Commission believes that the annual paperwork burden associated with this requirement would be no more than approximately 10 hours per counterparty for verifying representations with existing counterparties and onboarding new counterparties, for a maximum of approximately 24,000 hours across all applicable security-based swap counterparties.
The Regulatory Flexibility Act (“RFA”)
For purposes of Commission rulemaking in connection with the RFA, a small entity includes: (1) When used with reference to an “issuer” or a “person,” other than an investment company, an “issuer” or “person” that, on the last day of its most recent fiscal year, had total assets of $5 million or less;
The Cross-Border Proposal stated that, based on feedback from industry participants and our own information about the security-based swap markets, we preliminarily believed that non-U.S. entities that would be required to register and be regulated as security-based swap dealers and major security-based swap participants exceed the thresholds defining “small entities” set out above. Thus, we noted that we preliminarily believed it is unlikely that the proposed rules regarding registration of security-based swap dealers and major security-based swap market participants would have a significant economic impact any small entity. As a result, we certified that the proposed rules would not have a significant economic impact on a substantial number of small entities for purposes of the RFA and requested written comments regarding this certification.
While we received comment letters that addressed cost issues in connection with the proposed rules, we did not receive any comments that specifically addressed whether the rules applying the definitions of “security-based swap dealer” or “major security-based swap participant” to the cross-border context would have a significant economic impact on small entities.
We continue to believe that the types of entities that would engage in more than a
These final rules will be effective 60 days following publication in the
If any provision of these rules, or the application thereof to any person or circumstance, is held to be invalid, such invalidity shall not affect other provisions or application of such provisions to other persons or circumstances that can be given effect without the invalid provision or application.
Because Exchange Act rules 3a67–10 and 3a71–3 through 3a71–5 address the application of the dealer and major participant definitions to cross-border security-based swap activities, those rules will not immediately impose requirements upon market participants even after the rules become effective. In the Intermediary Definitions Adopting Release, we noted that because the Commission has not yet promulgated final rules implementing the substantive requirements imposed on dealers and major participants by Title VII, persons determined to be dealers or major participants under the regulations adopted in that release need not register as such until the dates provided in the Commission's final rules regarding security-based swap dealer and major security-based swap participant registration requirements, and will not be subject to the requirements applicable to those dealers and major participants until the dates provided in the applicable final rules.
Although Exchange Act rule 0–13—regarding the procedures for the submission of substituted compliance requests—also will become effective at that time, we would not expect to receive any such requests until relevant substantive rulemakings have been completed. Those rulemakings are necessary to determine when substituted compliance may be available, and to promulgate the requirements against which we may assess comparability for purposes of making substituted compliance determinations.
Pursuant to the Exchange Act, 15 U.S.C. 78a
Brokers, Confidential business information, Fraud, Reporting and recordkeeping requirements, Securities.
Securities.
For the reasons stated in the preamble, the SEC is amending Title 17, Chapter II, of the Code of Federal Regulations as follows:
15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c–3, 78c–5, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o–4, 78o–10, 78p, 78q, 78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 80b–11, 7201 et seq., and 8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5221(e)(3); and 18 U.S.C. 1350, unless otherwise noted.
Sections 240.3a67–10, 240.3a71–3, 240.3a71–4, and 240.3a71–5 are also issued under Pub. L. 111–203, section 761(b), 124 Stat. 1754 (2010), and 15 U.S.C. 78dd(c).
(a) The application shall be in writing in the form of a letter, must include any supporting documents necessary to make the application complete, and otherwise must comply with § 240.0–3. All applications must be submitted to the Office of the Secretary of the Commission, by a party that potentially would comply with requirements under the Exchange Act pursuant to a substituted compliance order, or by the relevant foreign financial regulatory authority or authorities. If an application is incomplete, the Commission may request that the application be withdrawn unless the applicant can justify, based on all the facts and circumstances, why supporting materials have not been submitted and undertakes to submit the omitted materials promptly.
(b) An applicant may submit a request electronically. The electronic mailbox to use for these applications is described on the Commission's Web site at
(c) All filings and submissions filed pursuant to this rule must be in the English language. If a filing or submission filed pursuant to this rule requires the inclusion of a document that is in a foreign language, a party must submit instead a fair and accurate English translation of the entire foreign language document. A party may submit a copy of the unabridged foreign language document when including an English translation of a foreign language document in a filing or submission filed pursuant to this rule. A party must provide a copy of any foreign language document upon the request of Commission staff.
(d) An applicant also may submit a request in paper format. Five copies of every paper application and every amendment to such an application must be submitted to the Office of the Secretary at 100 F Street NE., Washington, DC 20549–1090. Applications must be on white paper no larger than 8
(e) Every application (electronic or paper) must contain the name, address, telephone number, and email address of each applicant and the name, address, telephone number, and email address of a person to whom any questions regarding the application should be directed. The Commission will not consider hypothetical or anonymous requests for a substituted compliance order. Each applicant shall provide the Commission with any supporting documentation it believes necessary for the Commission to make such determination, including information regarding applicable requirements established by the foreign financial regulatory authority or authorities, as well as the methods used by the foreign financial regulatory authority or authorities to monitor and enforce compliance with such rules. Applicants should also cite to and discuss applicable precedent.
(f) Amendments to the application should be prepared and submitted as set forth in these procedures and should be marked to show what changes have been made.
(g) After the filing is complete, the staff will review the application. Once all questions and issues have been answered to the satisfaction of the staff, the staff will make an appropriate recommendation to the Commission. After consideration of the recommendation and a vote by the Commission, the Commission's Office of the Secretary will issue an appropriate response and will notify the applicant.
(h) The Commission shall publish in the
(i) The Commission may, in its sole discretion, schedule a hearing on the matter addressed by the application.
(a)
(1)
(2)
(3)
(4)
(b)
(1) If such person is a U.S. person, all security-based swap positions that are entered into by the person, including positions entered into through a foreign branch;
(2) If such person is a conduit affiliate, all security-based swap positions that are entered into by the person; and
(3) If such person is a non-U.S. person other than a conduit affiliate, all of the following types of security-based swap
(i) Security-based swap positions that are entered into with a U.S. person; provided, however, that this paragraph (b)(3)(i) shall not apply to:
(A) Positions with a U.S. person counterparty that arise from transactions conducted through a foreign branch of the counterparty, when the counterparty is a registered security-based swap dealer; and
(B) Positions with a U.S. person counterparty that arise from transactions conducted through a foreign branch of the counterparty, when the transaction is entered into prior to 60 days following the earliest date on which the registration of security-based swap dealers is first required pursuant to the applicable final rules and regulations; and
(ii) Security-based swap positions for which the non-U.S. person's counterparty to the security-based swap has rights of recourse against a U.S. person; for these purposes a counterparty has rights of recourse against the U.S. person if the counterparty has a conditional or unconditional legally enforceable right, in whole or in part, to receive payments from, or otherwise collect from, the U.S. person in connection with the security-based swap.
(c)
(i) If such person is a U.S. person, any security-based swap position of a non-U.S. person for which the non-U.S. person's counterparty to the security-based swap has rights of recourse against that U.S. person.
This paragraph describes attribution requirements for a U.S. person solely with respect to the guarantee of the obligations of a non-U.S. person under a security-based swap. The Commission and the Commodity Futures Trading Commission previously provided an interpretation about attribution to a U.S. parent, other affiliate, or guarantor to the extent that the counterparties to those positions have recourse against that parent, other affiliate, or guarantor in connection with the position.
(ii) If such person is a non-U.S. person:
(A) Any security-based swap position of a U.S. person for which that person's counterparty has rights of recourse against the non-U.S. person; and
(B) Any security-based swap position of another non-U.S. person entered into with a U.S. person counterparty who has rights of recourse against the first non-U.S. person, provided, however, that this paragraph (c)(1)(ii)(B) shall not apply to positions described in § 240.3a67–10(b)(3)(i)(A) and (B).
(2)
(i) Subject to capital regulation by the Commission or the Commodity Futures Trading Commission (including, but not limited to regulation as a swap dealer, major swap participant, security-based swap dealer, major security-based swap participant, futures commission merchant, broker, or dealer);
(ii) Regulated as a bank in the United States;
(iii) Subject to capital standards, adopted by the person's home country supervisor, that are consistent in all respects with the Capital Accord of the Basel Committee on Banking Supervision; or
(iv) Deemed not to be a major security-based swap participant pursuant to § 240.3a67–8(a).
(a)
(1)
(A) Is directly or indirectly majority-owned by one or more U.S. persons; and
(B) In the regular course of business enters into security-based swaps with one or more other non-U.S. persons, or with foreign branches of U.S. banks that are registered as security-based swap dealers, for the purpose of hedging or mitigating risks faced by, or otherwise taking positions on behalf of, one or more U.S. persons (other than U.S. persons that are registered as security-based swap dealers or major security-based swap participants) who are controlling, controlled by, or under common control with the person, and enters into offsetting security-based swaps or other arrangements with such U.S. persons to transfer risks and benefits of those security-based swaps.
(ii)
(2)
(i) The branch is located outside the United States;
(ii) The branch operates for valid business reasons; and
(iii) The branch is engaged in the business of banking and is subject to substantive banking regulation in the jurisdiction where located.
(3)
(A) The foreign branch is the counterparty to such security-based swap transaction; and
(B) The security-based swap transaction is arranged, negotiated, and executed on behalf of the foreign branch solely by persons located outside the United States.
(ii)
(4)
(A) A natural person resident in the United States;
(B) A partnership, corporation, trust, investment vehicle, or other legal person organized, incorporated, or established under the laws of the United States or having its principal place of business in the United States;
(C) An account (whether discretionary or non-discretionary) of a U.S. person; or
(D) An estate of a decedent who was a resident of the United States at the time of death.
(ii) For purposes of this section,
(iii) The term
(iv) A person shall not be required to consider its counterparty to a security-based swap to be a U.S. person if such person receives a representation from the counterparty that the counterparty does not satisfy the criteria set forth in paragraph (a)(4)(i) of this section, unless such person knows or has reason to know that the representation is not accurate; for the purposes of this final rule a person would have reason to know the representation is not accurate if a reasonable person should know, under all of the facts of which the person is aware, that it is not accurate.
(5)
(b)
(1)(i) If such person is a U.S. person, all security-based swap transactions connected with the dealing activity in which such person engages, including transactions conducted through a foreign branch;
(ii) If such person is a conduit affiliate, all security-based swap transactions connected with the dealing activity in which such person engages; and
(iii) If such person is a non-U.S. person other than a conduit affiliate, all of the following types of transactions:
(A) Security-based swap transactions connected with the dealing activity in which such person engages that are entered into with a U.S. person; provided, however, that this paragraph (b)(1)(iii)(A) shall not apply to:
(
(
(B) Security-based swap transactions connected with the dealing activity in which such person engages for which the counterparty to the security-based swap has rights of recourse against a U.S. person that is controlling, controlled by, or under common control with the non-U.S. person; for these purposes a counterparty has rights of recourse against the U.S. person if the counterparty has a conditional or unconditional legally enforceable right, in whole or in part, to receive payments from, or otherwise collect from, the U.S. person in connection with the security-based swap; and
(2) If such person engages in transactions described in paragraph (b)(1) of this section, except as provided in § 240.3a71–4, all of the following types of security-based swap transactions:
(i) Security-based swap transactions connected with the dealing activity in which any U.S. person controlling, controlled by, or under common control with such person engages, including transactions conducted through a foreign branch;
(ii) Security-based swap transactions connected with the dealing activity in which any conduit affiliate controlling, controlled by, or under common control with such person engages; and
(iii) Security-based swap transactions connected with the dealing activity of any non-U.S. person, other than a conduit affiliate, that is controlling, controlled by, or under common control with such person, that are described in paragraph (b)(1)(iii) of this section.
Notwithstanding §§ 240.3a71–2(a)(1) and 240.3a71–3(b)(2), a person shall not include the security-based swap transactions of another person (an “affiliate”) controlling, controlled by, or under common control with such person where such affiliate either is:
(a) Registered with the Commission as a security-based swap dealer; or
(b) Deemed not to be a security-based swap dealer pursuant to § 240.3a71–2(b).
(a) For purposes of § 240.3a71–3(b)(1), a non-U.S. person, other than a conduit affiliate, shall not include its security-based swap transactions that are entered into anonymously on an execution facility or national securities exchange and are cleared through a clearing agency; and
(b) For purposes of § 240.3a71–3(b)(2), a person shall not include security-based swap transactions of an affiliated non-U.S. person, other than a conduit affiliate, when such transactions are entered into anonymously on an execution facility or national securities exchange and are cleared through a clearing agency.
15 U.S.C. 77s, 77v(c), 78w, 78aa(b), 80b–11, and 80b–14(b).
(a) Notwithstanding any other Commission rule or regulation, the antifraud provisions of the securities laws apply to:
(1) Conduct within the United States that constitutes significant steps in furtherance of the violation; or
(2) Conduct occurring outside the United States that has a foreseeable substantial effect within the United States.
(b) The antifraud provisions of the securities laws apply to conduct described in paragraph (a)(1) of this section even if:
(1) The violation relates to a securities transaction or securities transactions occurring outside the United States that involves only foreign investors; or
(2) The violation is committed by a foreign adviser and involves only foreign investors.
(c) Violations of the antifraud provisions of the securities laws described in this section may be pursued in judicial proceedings brought by the Commission or the United States.
By the Commission.
Federal Communications Commission.
Final rule.
In this document, the Federal Communications Commission (Commission) takes significant steps to continue the implementation of the 2011 universal service reforms. This document takes into account lessons learned and new marketplace developments to further the Commission's statutory mission of ensuring that all consumers have access to advanced telecommunications and information services.
Effective August 8, 2014, except for § 54.310(e)(1) which contains new or modified information collection requirements that will not be effective until approved by the Office of Management and Budget. The Federal Communications Commission will publish a document in the
Alexander Minard, Wireline Competition Bureau, (202) 418–0428 or TTY: (202) 418–0484.
This is a summary of the Commission's Report and Order, Declaratory Ruling, Order, Memorandum Opinion and Order and Seventh Order on Reconsideration in WC Docket Nos. 10–90, 14–58, 07–135; WT Docket No. 10–208; CC Docket No. 01–92; FCC 14–54, adopted on April 23, 2014 and released on June 10, 2014. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY–A257, 445 12th Street SW., Washington, DC 20554. Or at the following Internet address:
1. With the Report and Order, Declaratory Ruling, Order, Memorandum Opinion and Order, Seventh Order on Reconsideration, and concurrently adopted Further Notice of Proposed Rulemaking (FNPRM), the Commission takes significant steps to continue the implementation of the landmark reforms unanimously adopted by the Commission in 2011 to modernize universal service for the 21st century. The Commission builds on the solid foundation created in 2011, taking into account what they have learned to date and new marketplace developments, to fulfill our statutory mission to ensure that all consumers “have access to . . . advanced telecommunications and information services.”
2. A core component of the 2011 reforms was the creation of the Connect America Fund to preserve and advance voice and robust broadband services, both fixed and mobile, in high-cost areas of the nation that the marketplace would not otherwise serve. Today, the Commission adopts rules that build on the framework established by the Commission in the
3. Meeting the infrastructure challenge of the 21st century will be a multi-year journey. It took the nation almost 50 years to bring electricity to 99 percent of rural farms; decades later, it took 35 years to complete the original portion of the interstate highway system. In just two years, the Commission's reforms have set the nation on a path that will bring new fixed broadband services to more than 1.6 million Americans, new mobile services to historically unserved Tribal lands, and improved mobile coverage along our nation's roads. Achieving universal access to broadband will not occur overnight. Today, the Commission takes further steps to bring broadband service to every corner of the country.
4. The Report and Order adopts several rules to establish the foundation for the award of support in price cap areas where the price cap carrier declines the offer of model-based support. Specifically, the Commission concludes that all areas where the average cost per location equals or exceeds a specified cost benchmark are eligible for Phase II support in the competitive bidding process. The Commission sets a support term of 10 years for support awarded through the competitive bidding process. The Commission permits price cap carriers that decline model-based support to participate in the competitive bidding process that it expects to be prepared to conduct by the end of 2015.
5. The Commission also addresses more generally provider eligibility for support through the competitive bidding process and the Remote Areas Fund. The Commission permits entities to seek designation as eligible telecommunications carriers (ETCs) after notification they are winning bidders for the offer of Phase II Connect America funding. The Commission concludes that recipients of support through the competitive bidding process or the Remote Areas Fund must certify as to their financial and technical capabilities to provide the required services within the specified timeframe in the geographic area for which they seek support.
6. The Commission issues a declaratory ruling to provide rate-of-return carriers greater clarity regarding their obligations to extend broadband service upon reasonable request.
7. In the Order, the Commission phases in support reductions associated with the 2014 rate floor of $20.46 over a multi-year period to provide time for incumbent carriers and state commissions to make any adjustments they deem necessary. In particular, the Commission defers any support reductions for lines that have rates of $14 or greater until January 2, 2015. Between January 2, 2015, and June 30, 2016, the Commission implements support reductions only to the extent rates are below $16; between July 1, 2016 and June 30, 2017, the Commission implements support reductions only for lines with rates under $18 or the rate floor established by the 2016 rate survey, whichever is lower; and between July 1, 2017 and June 30, 2018, the Commission implements support reductions only for lines with rates under $20 or the 2017 rate floor, whichever is lower. Thus, the
8. The Commission also reconsiders certain aspects of the
9. In addition, the Commission waives certain application fees that deter companies from rationalizing their service territory boundaries, deny a petition for reconsideration of the Commission's decision to impose broadband public interest obligations on recipients of high-cost support, while affirming that these conditions do not constitute common carrier regulation, and dismiss or deny two applications for review of the Wireline Competition Bureau's (Bureau)
10. In the
11.
12. Moreover, the Commission recognizes that the actual cost for a provider to serve census blocks that are above the extremely high-cost threshold may, in fact, be less than is predicted by the cost model. Potential service providers that have done the appropriate due diligence are in a better position to know local conditions on the ground and thus determine whether the support potentially available will enable them to meet the associated obligations. The Commission believes it would be the most efficient use of Phase II funding to provide support to areas above the specified funding threshold and then target the discrete budget for the Remote Areas Fund to those areas that remain unserved after the competitive bidding process.
13. A price cap carrier that elects to make the state-level commitment is already free to deploy to locations that would be above the extremely high-cost threshold to satisfy a portion of its build out obligation. By making extremely high-cost areas eligible for support in the competitive bidding process, the Commission effectively provides participants in the competitive bidding process the same choice: They may elect or not elect to serve those areas that the model has determined to be extremely high-cost.
14. The Commission does not decide at this time whether to use census blocks, or aggregations of census blocks such as census tracts, as the minimum size geographic unit eligible in the Phase II competitive bidding process. The Commission concluded we would entertain proposals in the rural broadband experiments in price cap territories at the census tract level, and the Commission currently is reviewing the expressions of interest received to date. The lessons learned from our review of the expressions of interest in the rural broadband experiments will give us better data and allow us to make a more informed decision on this issue later this year.
15.
16. The Commission does not find any compelling reason to limit the term of support awarded through a competitive bidding process to five years, as initially suggested by some commenters. Specifically, the
17. The Commission concludes that a price cap carrier's decision not to accept model-based support should not preclude it from participating in the competitive bidding process. The Commission finds that maximizing the number of qualified eligible participants is likely to improve the quality of the competitive bids and the results of the process. Moreover, the Commission does not find persuasive the arguments made by several commenters that permitting price cap carriers to participate in the competitive bidding process would give them the ability to “cherry pick” the most desirable service areas. The Commission expects that a price cap carrier will determine whether to accept the offer of model-based support primarily based on its own analysis of whether the support offered for the state justifies undertaking the associated obligations. It is not unreasonable that a carrier might conclude that the total amount of state-level support would not meet the obligations in the carrier's specific circumstances, while also concluding that many or even all parts of the state are worth serving at some other support level. In addition, though a carrier could strategically decline the model-based support in the hope of favorably selecting only the most desirable service areas, that strategy would have risks. Indeed, the very desirability of certain service areas creates the possibility that the carrier might not be awarded those areas through the competitive bidding process or that the support amount for those areas will be bid down to a level that is less than what the model would have provided. In our predictive judgment, the costs of excluding price cap carriers that decline model-based support exceed the possible benefits. The Commission therefore declines to exclude price cap carriers from the competitive bidding process.
18. In response to the proposals in the
19.
20. The Commission seeks to encourage as many different types of providers as possible to participate in the competitive bidding process that will award support to serve high-cost and extremely high-cost areas. Likewise, the Commission seeks to encourage participation in the Remote Areas Fund. Recognizing that there may be areas of the country that the incumbent price cap carriers do not wish to serve, it is time to take steps to establish a framework that will enable other providers to become ETCs.
21. The Commission reaffirms that entities selected to receive support from Connect America Phase II or the Remote Areas Fund must obtain ETC designation from either a state public utility commission pursuant to section 214(e)(2), or the Commission pursuant to section 214(e)(6), of the Act. The Commission declines at this time to adopt the suggestion of certain parties that it either forbear from ETC designation requirements, or that it preempt states from issuing ETC designations. Rather, to address concerns in the record and to encourage participation in the competitive process as well as the Remote Areas Fund, the Commission adopts a more liberal process for the timing of ETC designation.
22. After consideration of the record, the Commission concludes that potential applicants in the Phase II competitive bidding process need not be ETCs at the time they initially apply for funding at the Commission. Rather, the Commission is persuaded that it should permit entities to obtain ETC designation after the announcement of winning bidders for the offer of Phase II Connect America funding, which it believes will encourage greater participation in the competitive process by a wider range of entities. ETC status must be confirmed before funding awarded through the competitive process is disbursed. The Commission finds that maximizing the number of qualified participants in the competitive bidding process is likely to improve the overall quality of the process. Some qualified potential bidders may be hesitant to invest resources to apply for an ETC designation absent any sense of whether they are likely to be awarded Phase II support. Other potential bidders may have concerns about triggering obligations as an ETC pending the result of the competitive bidding process or for areas for which they are not ultimately awarded support. Moreover, unlike entities that are already ETCs, entities that do not yet have ETC designation would risk making public their bidding strategy if required to seek ETC designation in the states where they intend to bid. On balance, the Commission concludes that the benefits of encouraging greater participation in the Phase II competitive bidding process outweigh any potential risk that winning bidders do not meet the necessary requirements to be designated an ETC.
23. The Commission acknowledges that it declined to take that approach for the Mobility Fund Phase I and Tribal
24. In the Mobility Fund Phase I, the Commission expressly permitted potential bidders to obtain conditional ETC designation prior to filing the short-form application. Given our decision to permit entities to seek ETC designation after public notice of the winning bidders for the offer of Phase II support, the Commission does not anticipate many parties would seek conditional ETC designation prior to applying for funding. To the extent a party chooses to do so, however, and a state or this Commission issues a conditional ETC designation prior to the auction, the Commission expects that the ETC designation in such situations will be finalized quickly as a pro forma matter after announcement of the winning bidders for Phase II support.
25. The Commission seeks comment in the concurrently adopted FNPRM on implementation issues relating to ETC designation, including the timeframe in which a winning bidder must seek ETC designation before being deemed in default.
26.
27. In this section, the Commission addresses issues relating to the transition from existing support to Connect America Phase II.
28.
29. The Commission's desire to avoid flash cuts has led it to adopt transitions of varying lengths for various reforms adopted in the
30. Accordingly, the Commission adopts the following transition: In all years, a carrier accepting state-level support pursuant to Connect America Phase II that is less than the Connect America Phase I frozen high-cost support will receive the full amount of Connect America Phase II support. Assuming the Commission adopts the proposal in the concurrently adopted FNPRM to make the funding term for Connect America Phase II coincide with calendar years, in 2015 the carrier would receive, in addition to its Phase II support, 75 percent of the difference between the annualized amount of Connect America Phase II support that it accepted and the amount of Connect America Phase I frozen high-cost support that it received in 2014. In 2016, it would receive 50 percent of the difference; in 2017, it would receive 25 percent of the difference; in 2018 and in 2019, it would receive only Connect
31. The Commission concludes that competitive ETCs awarded Connect America Phase II support through the competitive bidding process will cease to receive legacy phase-down support for those specific areas upon commencement of Connect America Phase II support. The Commission previously concluded that, with respect to any price cap carrier that declines the offer of model-based support, the carrier's Phase I support will terminate when support is provided to another provider for that area through the competitive bidding process. Similarly, the Commission also determined that a competitive ETC's legacy phase-down support would be terminated in any area for which it is awarded Mobility Fund Phase II support upon commencement of support. For similar reasons, the Commission finds that any competitive ETC that is authorized to receive Phase II support through a competitive bidding process will no longer receive frozen legacy support for the area in question. Given the carrier's explicit endorsement of the support amount in its bid, the Commission sees no need for additional support to ease the transition to Connect America Phase II.
32. In the
33. The Commission sought comment on the methodology used for determining whether an incumbent LEC is 100 percent overlapped by an unsubsidized competitor, and it directed the Bureau “to publish a finalized methodology for determining areas of overlap and a list of companies for which there is a 100 percent overlap.” Now that the study area boundary data collection has been completed, the Commission expects the Bureau will implement that directive in the months ahead.
34. The Commission proposes in the concurrently adopted FNPRM that the Bureau should review the study area boundary data in conjunction with data collected on the FCC Form 477 and the National Broadband Map every other year to determine whether and where 100 percent overlaps exist. The Commission also proposes to adjust the baseline for support reductions to be the amount of support received in the year immediately preceding the determination of 100 percent overlap, rather than 2010 support amounts.
35. Sections 54.313 and 54.314 of the Commission's rules require that all reports and certifications filed pursuant to these sections be filed with the Commission's Office of the Secretary in WC Docket No. 10–90. The Commission takes this opportunity to amend the Code of Federal Regulations to direct all section 54.313 and 54.314 filers to file their reports and certifications with the Office of the Secretary in the newly-opened WC Docket No. 14–58.
36. The Commission also takes this opportunity to make several rule amendments. First, the Commission moves the rules regarding HCLS and safety net additive, which currently are located in subpart F of Part 36, into a new subpart M in Part 54 in order to consolidate all high-cost rules in Part 54, and make conforming changes throughout Part 54. In the course of moving those rules, the Commission also deletes those portions that are no longer applicable due to the passage of time and other changes previously implemented in the
37. In contrast, in the areas served by price cap carriers the Commission concluded it would target support to high-cost areas, and support would be disbursed through a combination of a forward-looking model and a competitive bidding mechanism. Price cap carriers accepting model-based support must deploy voice and broadband-capable networks to all supported locations that are deemed “high-cost” and not served by an unsubsidized competitor, but they are not required to extend broadband in extremely high-cost areas as determined by the forward-looking cost model.
38. The Commission expressly recognized that there are some areas of the country where it is cost prohibitive to extend broadband using terrestrial wireline technology and, that in some areas, satellite or fixed wireless technologies may be more cost-effective options to extend service. It established a Remote Areas Fund with a budget of at least $100 million annually to address those areas that are not served. It envisioned that this dedicated funding would not be available in those remote areas in rural America that already have broadband meeting the Commission's performance requirements that it sought comment on in the
39. Since the issuance of the
40.
41. The Commission acknowledges there is some ambiguity in the
42. Rate-of-return carriers evaluating a request to extend broadband service should consider whether it would be reasonable to make the necessary upgrades in light of anticipated end-user revenues from the retail provision of broadband service and other sources of revenues, including but not limited to federal or state universal service funding projected to be available under current rules. In considering end-user revenues, carriers should take into account the reasonable comparability benchmark for broadband services. If the incremental cost of undertaking the necessary upgrades to a particular location exceed the revenues that could be expected from that upgraded line, a request would not be reasonable.
43. A request to upgrade an existing voice line to provide broadband service would not be reasonable if it would require new investments that would cause total high-cost support, excluding CAF–ICC, to exceed $250 per line per month in a given study area. The Commission determined in the
44. Thus, under these prior determinations, the Commission declares that a request is not reasonable if it would require a carrier to undertake new network upgrades to install new backhaul facilities or to replace existing copper lines to the home with fiber merely for the purpose of newly providing broadband service in study areas where total support already is subject to the $250 per line monthly cap. Moreover, the Commission declares that a request is not reasonable if it would require a carrier to undertake new network upgrades to newly provide broadband service to requesting customers if that would cause total monthly support that presently is under the $250 cap to exceed the cap, under our existing rules.
45. The Commission also declares that a rate-of-return carrier has no obligation to extend broadband-capable infrastructure in any census block that is served by an unsubsidized competitor that meets the Commission's current performance standards. Indeed, to do so would be inconsistent with the Commission's general policy—which is not limited to price cap territories—that “all broadband build out obligations for fixed broadband are conditioned on not spending the funds to serve customers in areas already served by an `unsubsidized competitor.' ” The Commission cannot and will not condone new investment subsidized by universal service funds to occur in areas that are already served by marketplace
46. For purposes of determining whether a census block is served by an unsubsidized competitor, the Commission provides flexibility to rate-of-return carriers to make that determination in one of several ways. They are free to, but not required to, rely upon the treatment of a particular census block in the forward-looking cost model recently adopted by the Wireline Competition Bureau for the offer of support to price cap carriers. They are free to, but not required to, rely upon published coverage maps or online tools provided by competitors to enable prospective customers to determine whether service is available at particular addresses. There may be other ways a rate-of-return carrier may determine whether a particular location already is served by another provider; the Commission does not intend to suggest these are the only means of making such a determination. The Commission proposes in the concurrently adopted FNPRM to preclude rate-of-return carriers going forward, as of a date certain, from including in cost studies used for the determination of HCLS and interstate common line support (ICLS) the costs associated with new investment in areas that are already served by a qualifying provider that provides voice and broadband meeting the Commission's Phase II performance requirements. The Commission seeks comment in the concurrently adopted FNPRM on a rule to preclude new investment from being recovered through HCLS and ICLS as of a date certain and instead to develop a new Connect America Fund that will support voice and broadband-capable networks in rural America within the existing Connect America Fund budget.
47. While the Commission does not decide now as a general matter whether and if so how a forward-looking cost model could be used to identify areas that would be eligible for funding from the Remote Areas Fund, it believes the Connect America Cost Model developed by the Bureau potentially could be a useful tool for rate-of-return carriers to consider where it might be reasonable to extend broadband-capable infrastructure and for other purposes. The Commission recognizes that some parties have suggested that further work would be required before the Connect America Cost Model could be used for any purpose in rate-of-return territories. At a minimum, the Commission concludes it should be updated to incorporate the new study area boundaries data that the Bureau recently collected before it can be used for regulatory purposes in rate-of-return territories. The Commission therefore directs the Bureau to undertake further work to update the Connect America Cost Model to incorporate study boundary data, and such other adjustments as may be appropriate.
48. In this regard, the Commission recognizes that a larger percentage of locations in rate-of-return areas lie above the likely extremely high-cost threshold identified by the Bureau in its recent order adopting inputs for the forward-looking cost model for the offer of support to price cap carriers. Commenters expressing concern about the use of the model for determining rate-of-return areas that would be served by the Remote Areas Fund appear to assume that such extremely high-cost areas would only be served by the Remote Areas Fund, and that existing support for those areas would be eliminated. The Commission emphasizes that it has made no decisions regarding how the Remote Areas Fund might be implemented in those areas of the country where the incumbent provider is a rate-of-return carrier. Classification of a rate-of-return area as extremely high-cost under the forward-looking model does not mean that support would only be available from the Remote Areas Fund.
49. Finally, the Commission notes that our decision today does not change support under the existing support mechanisms for rate-of-return carriers, nor does it impact existing broadband service in extremely high-cost areas. Rather, the Commission issues this declaratory ruling so that carriers can make efficient and prudent investments going forward in the near term, while the Commission considers the issues raised in the FNPRM. As parties have recognized, rate-of-return carriers are free today to deploy alternative technologies, or resell satellite service, in areas determined to be beyond a reasonable request for the extension of fiber, in order to meet customer demand.
50. On March 20, 2014, the Bureau announced that the average local end-user rate plus state regulated fees of the surveyed incumbent LECs in urban areas is $20.46. In addition, the Bureau requested comment on a petition filed by the Eastern Rural Telecom Association (ERTA), Independent Telephone & Telecommunications Alliance (ITTA), NTCA, the National Exchange Carrier Association (NECA), the United States Telecom Association (USTelecom), and WTA—Advocates for Rural Broadband requesting that the deadline for compliance with the 2014 local service rate floor be extended from July 1, 2014 to January 2, 2015, and that subsequent adjustments to the rate floor should then be made annually on January 2.
51. Under section 54.313(h), the $20.46 rate floor goes into effect on July 1, 2014, and all incumbent ETCs are required to report their rates to the Universal Service Administrative Company (USAC) for the number of lines for which “the sum of those rates and fees are below the rate floor.” Pursuant to section 54.318(b), any incumbent ETC whose rate for local service plus state regulated fees is below the rate floor shall have its “high-cost support reduced by an amount equal to the extent to which its rates for residential local service plus state regulated fees are below the local urban rate floor, multiplied by the number of lines for which it is receiving support.”
52. No parties opposed the Associations' Petition. On reply, commenters overwhelmingly supported an extension of the deadline to comply with the 2014 local service rate floor. In support of the extension, commenters note that there would be roughly sixty days for incumbent LECs currently at the $14 benchmark to take steps to adjust rates to be consistent with the 2014 local service rate floor, which may require a full local rate proceeding before state regulators. Commenters also suggest that carriers will need sufficient time to minimize the impact of the rate increase on consumers and complete other necessary modifications. In addition to overwhelmingly supporting a delay in the implementation of the rule, commenters suggest that a phase-in of the 2014 local service rate floor is appropriate and necessary to mitigate the risk of rate shock for consumers. While comments vary on the appropriate phase-in, two associations argued that an annual increase capped at roughly $2.00 would be acceptable. In addition, several commenters ask the Commission to re-evaluate the local service rate floor as a general matter, suggesting that capping the annual increase in the local rate service floor would not impact the high-cost budget adopted in the
53.
54. In the
55. For 2014, the Bureau's survey determined that the average urban rate is $19.81 plus $0.65 in state fees (a total of $20.46). Because the survey average for flat-rate local service is more than four dollars higher than the Commission anticipated, the Commission agrees with commenters that a more gradual approach to the reductions to universal service support under section 54.318(b) is warranted, and waiver of this rule is appropriate.
56. Therefore, the Commission waives the application of section 54.318(b) for lines reported July 1, 2014, with a rate of $14 or above. Commencing January 2, 2015 (reflecting rates as of December 1, 2014), and thereafter, through June 30, 2016, the Commission waives section 54.318(b) to the extent reported lines are less than $16. For the period between July 1, 2016, and June 30, 2017, it waives section 54.318(b) to the extent reported rates are less than $18, or the 2016 rate floor, whichever is lower. For the period between July 1, 2017, and June 30, 2018, we waive section 54.318(b) to the extent reported rates are less than $20, or the 2017 rate floor, whichever is lower. The Commission believes that this four-year transition should provide sufficient time for carriers and state commissions to determine whether and how to make adjustments, without unreasonable effects on carriers and consumers. Further, because the Commission is extending implementation of the support reductions associated with the next rate floor until July 2016, it does not believe that it is necessary to change the annual date on which the annual rate floor goes into effect. Because ETCs otherwise are required to submit their annual reports on July 1 each year, the Commission thinks it will be easier to keep the rate floor effective date consistent with these other filings. The Commission leaves flexibility to the affected parties to determine whether and, if they seek to adjust their rates, how to do so over the next four years. The Commission emphasizes, however, that nothing in our rules requires carriers affected by the rate floor to adjust their local rates.
57. While the Commission understands some parties are concerned about significant rate hikes, it is not convinced based on the information before us that implementation of the approach adopted herein will lead to widespread rate hikes. Our experience with the implementation of the rule thus far suggests that not all carriers will raise rates to meet the rate floor. The $14 rate floor went into effect on July 1, 2013, and carriers have now had two opportunities to report the number of lines below that rate floor. The rate floor increased from $10 in 2012 to $14 in 2013, a 40 percent increase. When this occurred, interested parties were largely silent and voiced little opposition. The Commission notes that three-quarters of the lines subject to support reductions this year (based on the rates in effect on December 1, 2013) were price cap carrier lines, while one-quarter of the lines affected were reported by rate-of-return carriers. The fact that many carriers continue to report some lines with rates well below the $14 rate floor suggests that they may have made a business decision to grandfather the lower rates for those customers and accept the associated support reductions. Indeed, the Commission notes that more than two years after the Commission adopted the $14 rate floor to be implemented in 2013, carriers in 34 study areas in 16 states still are reporting a number of lines with residential local service charges of $5 or less, further reinforcing our view that individual carriers may choose not to raise rates in response to the current rate floor. The Commission therefore can predict that, although there could be increases in some rates, it is unlikely that there will be a significant number of dramatic increases.
58. In response to the NARUC petition, the Commission notes that the Bureau has posted on the Commission's Web site the data used to develop the rate floor with explanatory notes, effectively granting that aspect of NARUC's petition. Moreover, the Commission also notes that our action today to phase-in the effect of the rule over a four-year period effectively responds to NARUC's suggestion that “at a minimum, delay and perhaps a phasing in of the new floor is warranted.” NARUC also suggests that the Commission should seek comment on how to calculate the benchmark. In the
59. The Commission is not persuaded by arguments that it should artificially cap the 2014 rate floor to be a figure lower than what was calculated by the rate survey. The rate floor rule is separate from the rule requiring reductions in support for rates below the rate floor; there is no reason why it is necessary to “cap” the rate floor itself.
60. The Commission does not waive section 54.313(h) of our rules. The announced urban rate floor is $20.46; incumbent ETCs must report their rates to USAC to the extent that their rates plus state fees are below this amount. Having information regarding ETC rates below the urban rate floor will facilitate our ability over the next four years to monitor the impact of this rule on carriers and consumers. Effective July 1, 2016, the rate floor will be determined by the next urban rate survey. The Commission directs the Bureau to conduct the next survey in sufficient time to announce the results in early 2015 and to announce the 2016 rate floor no later than January 31, 2016.
61. The Commission agrees with the Maine Office of Public Advocate that a carrier should not be subject to universal service support reductions as a result of the rate floor for those lines provided to Lifeline customers. The Commission has consistently emphasized its commitment to ensuring that its reforms do not negatively impact Lifeline customers. The Commission therefore waives application of section 54.318(i) for lines provided to customers enrolled in the Lifeline program. The Commission concludes that allowing carriers to maintain rate plans that are priced below the rate floor for Lifeline subscribers strikes the appropriate balance between ensuring that consumers across America are not funding below-average rates for selected consumers, while providing targeted relief to ensure this rule does not negatively impact Lifeline subscribers. Therefore, the Commission waives section 54.318(i) and direct USAC to take steps to ensure there will be no reductions in high-cost support for lines provided to customers enrolled in the Lifeline program.
62. The Commission declines to reconsider the adoption of a rate floor. Such requests effectively are untimely petitions for reconsideration of the original decision in the
63. The Commission's rules require carriers filing petitions for waiver of the study area boundary freeze to submit a $7,990 application fee with their petitions. Historically, the Commission has imposed application fees to recoup a portion of the direct cost it incurs to provide specific services to individuals and companies. The $7,990 fee is a uniform fee that applies to all petitions for waiver of Part 32 accounting rules, Part 36 separations rules, Part 43 reporting requirements, Part 64 cost allocation rules, Part 65 rate of return rules, and Part 69 access charge rules.
64.
65. In this section, the Commission addresses two applications for review of the Bureau's
66. In the
67. In the
68. In the
69. ACS requests that the Commission review and reverse the Bureau's decision. For the reasons discussed below, the Commission denies ACS's application.
70. The
71. The Commission concludes that the Bureau's action falls within its delegated authority to interpret and implement the requirements of the unsubsidized competitor rule. ACS's arguments fail for two reasons. First, while the Commission required that the list of eligible areas be determined as close as possible to the completion of the cost model, that does not necessarily translate to a requirement that the unsubsidized status of a provider be determined based on whether that provider is receiving funding at the time the cost model is completed. While the former is a decision made by the Commission, the latter is an interpretation of what it means to be “unsubsidized,” and the authority to make that interpretation is delegated to the Bureau.
72. Second, ACS's argument is not ripe for our consideration. The Bureau has not ruled that any and all providers receiving support after the start of Phase II qualify as unsubsidized. Quite the opposite: the Bureau presumes such providers are subsidized and requires that they come forward to present evidence if they wish to challenge that designation. In light of this, all the Bureau did was provide a procedural vehicle through which interested parties could—if they so choose—present certain evidence for consideration. Recognizing that the Commission delegated to the Bureau the implementation of the challenge process, the Commission is not persuaded that it was beyond the Bureau's delegated authority to invite parties to bring such evidence to the agency's attention.
73. Ultimately, the issue of the Bureau's delegated authority is moot, however, because the Commission agrees that the Phase II challenge process is the appropriate venue for parties to present evidence that they serve areas with a service that meets the standards established for Phase II, and that those areas should be excluded from the offer of support to price cap carriers. The Commission therefore affirms the Bureau's invitation to interested parties to present such evidence in the challenge process. ACS will suffer no substantial prejudice by the challenge process proceeding as the Bureau has outlined, as there will be time to make any final determinations on this topic based on a full record before the offer of support is extended. It is appropriate and timely for the Bureau to move forward with the Phase II challenge process now.
74. To provide all interested parties, including those outside Alaska, the opportunity to weigh in more broadly on how the Commission can use Connect America funding most efficiently, it seeks comment more generally on this topic in the concurrently adopted FNPRM. Specifically, the Commission proposes to exclude areas with competitors, whether or not subsidized, from Phase II eligibility in certain circumstances. Parties are free to raise substantive arguments in response to the concurrently adopted FNPRM as to whether this approach would harm universal service. As such, the Commission declines to address ACS's substantive policy arguments at this time, and it denies ACS's Application for Review.
75. NCTA challenges the Bureau's determination that the standards used for Phase II recipients' service obligations will also be used in assessing whether a provider qualifies as an unsubsidized competitor. The Commission concludes that the arguments advanced by NCTA are not appropriate for consideration in an application for review. The Commission therefore dismisses NCTA's Application for Review.
76. NCTA seeks review of the Bureau's determination that uniform standards will be used in assessing whether areas are served by unsubsidized competitors as well as setting the requirements that apply to recipients of Phase II model-based support. NCTA argues that using the same standards for both groups will result in wasteful and inefficient use of universal service funds; that the decision is tantamount to directly regulating broadband rates, terms, and conditions; and that unsubsidized competitors should not be held to the same performance standards as Phase II recipients, but rather should be evaluated based only on the speed of their offerings.
77. NCTA's arguments constitute an untimely petition for reconsideration of the decisions made in the
78. The Commission concludes that NCTA's application is procedurally defective. Therefore, the Commission dismisses NCTA's Application for Review.
79. In this section, the Commission addresses several petitions for reconsideration of certain aspects of the
80. When the Commission adopted SNA, the number of access lines was growing. At that time, the Commission did not anticipate that incumbent telephone companies would lose access lines as they have over the past decade. Because incumbent LECs qualified for SNA support by realizing growth in TPIS on a per-line basis, decreasing access lines resulted in the majority of carriers receiving SNA support due to significant loss of lines, rather than significant increases in investment. For example, in 2009 and 2010, close to sixty percent of incumbent LECs that qualified for SNA did so because of line loss rather than increased investment.
81. In the 2011
82. Since the release of the
83.
84. The Commission reiterates that carriers are not entitled to universal service support simply because they may have an expectation of such support. However, the Commission believes that providing a more measured transition for carriers is not only consistent with the original intent of the SNA mechanism, but also furthers the goals of the
85. The Commission notes that our decision, by focusing only on those carriers who qualify for SNA based on significant network investments, will have a limited budgetary impact. In 2013, USAC disbursed approximately
86. The Commission otherwise finds that parties have presented no new evidence or raised new arguments that convince us to delay or reverse the Commission's general decision to eliminate and phase out SNA. Accordingly, the Commission denies other requests to reconsider actions relating to SNA.
87. As the Commission explained in the
88. The Commission also declines to alter the phase down of support for carriers that qualified for SNA due to line loss prior to or during 2009. The phase down adopted by the Commission was part of a total package of reforms designed to balance the Commission's objectives of advancing the availability of modern networks capable of supporting broadband and voice services at reasonably comparable rates and encouraging efficient investment while minimizing the burden on consumers and businesses. The Commission found that the SNA mechanism was not well designed to meet its intended purpose. Extending the phase down for two additional years would thwart the Commission's reform goals and reward inefficiency.
89. The Commission also is not persuaded by USTelecom's argument that it should extend the phase down of SNA support for incumbent rate-of-return carriers that qualified for SNA support due to line loss to provide treatment equivalent to that provided to competitive ETCs. In the
90. For price cap carriers, the Commission began the process of transitioning high-cost support to the Connect America Fund. In Connect America Phase I, the Commission froze existing high-cost support for price cap carriers and their rate-of-return affiliates until Connect America Phase II is implemented. As a condition of receiving this frozen support, the Commission required price cap carriers to use a portion of that support “to build and operate broadband-capable networks” necessary “to offer the provider's own retail broadband service in areas substantially unserved by an unsubsidized competitor.”
91. The
92. In its petition for reconsideration, USTelecom claims that the Commission “lacks authority” to condition the receipt of “legacy” federal universal support on these broadband public interest conditions. It argues that these conditions constitute “common-carrier regulation,” and that because broadband is classified as a Title I information service, the Commission is precluded from imposing such conditions on support pursuant to section 3(51) of the Act. That section provides, in relevant part, that “[a] telecommunications carrier shall be treated as a common carrier under this [Act] only to the extent that it is engaged in providing telecommunications services.”
93.
94. The Commission is not persuaded by the argument that the broadband public interest obligations are not a voluntarily assumed condition on the receipt of federal subsidies because incumbent LECs cannot recover the costs they incur fulfilling various other regulatory obligations in the absence of high-cost universal service support and, therefore, incumbent LECs have no
95. Moreover, all incumbent LECs are subject to regulatory obligations as incumbents, irrespective of whether they receive high-cost universal service support. Thus, those obligations, which are distinct from the universal service objectives of section 254, do not entitle some subset of incumbent LECs to high-cost universal service support. Further, incumbent LECs recover the costs associated with many of those obligations from other sources. Accordingly, the Commission does not agree that incumbent LECs have no choice but to comply with the broadband public interest conditions because they will not be able to recover their costs in the absence of federal subsidies.
96. Likewise, the Commission does not share the view that support is not “ `sufficient . . . to preserve and advance universal service.' ” The Commission explained, at length, the basis of its predictive judgment that federal universal service subsidies would be sufficient to support both voice and broadband in the
97. Marketplace trends since the Commission adopted the
98. Even if the broadband public interest conditions amounted to regulation, which they do not, they fall far short of a
99. If, for example, a customer such as a community anchor institution negotiated terms and pricing for broadband services with an ETC to address the unique needs of that institution, the
100. In the February 2013
101. Subsequently, the Bureau implemented a data collection to update study area boundaries used in developing the geographical variables in the regression analysis. In July 2013, the Bureau took several additional measures to provide greater clarity regarding the support amounts that rate-of-return carriers would receive in 2014.
102.
103. The Commission now concludes, however, that the benchmarking rule is not effectively advancing those objectives. When the Commission adopted the benchmarking rule in the
104. The Commission now finds that the rule unintentionally has encouraged carriers that were not subject to the benchmarks to believe that they too needed to limit their investment in broadband-capable networks. This was due in part to the fact that the new rule
105. The evidence before us does not permit us to draw a firm conclusion regarding the actual impact of the rule in question; much of the concern appears to be focused on potential other reforms that might be implemented in the future. A number of trade associations, carriers, and consultants have expressed to the Commission that the benchmarking rule has been discouraging investment. According to the Rural Associations, 69 percent of the NTCA members that responded to a survey stated that they were “postponing or cancelling fixed network upgrades” due to “uncertainty surrounding” the benchmarking rule and other reforms in the
106. While the Bureau staff and affected stakeholders have proceeded in good faith to implement the directives of the Commission in the
107. With the elimination of the benchmarking rule, carriers' HCLS support will be distributed as it previously had been prior to the
108. The Commission continues to have significant concerns with the “race to the top” incentives that exist under the HCLS rule. Given the perception of and concerns with the benchmarking rule, however, the Commission concludes it is appropriate to eliminate it while it considers options to increase incentives for efficient investment of universal service funds. The Commission will press forward with efforts to ensure that these funds are disbursed efficiently and in the public interest. Such efforts are essential if the Commission is to remain within the budget framework established by a unanimous Commission in the
109.
110. This document contains new information collection requirements subject to the PRA. It will be submitted to the Office of Management and Budget (OMB) for review under section 3507(d) of the PRA. OMB, the general public, and other Federal agencies are invited to comment on the new information collection requirements contained in this proceeding. In addition, the Commission notes that pursuant to the Small Business Paperwork Relief Act of 2002, it previously sought specific comment on how the Commission might further reduce the information collection burden for small business concerns with fewer than 25 employees. The Commission describes impacts that might affect small businesses, which includes most businesses with fewer than 25 employees, in the Final Regulatory Flexibility Analysis (FRFA) in Appendix C,
111. As required by the Regulatory Flexibility Act of 1980 (RFA), as amended, an Initial Regulatory Flexibility Analyses (IRFA) was incorporated in the
112. The Report and Order adopts several rules to establish the foundation for the award of support in price cap areas where the price cap carrier declines the offer of model-based support. Specifically, the Commission
113. The Commission also addresses more generally provider eligibility for support through the competitive bidding process and the Remote Areas Fund. The Commission permits entities to seek designation as eligible telecommunications carriers (ETC) after notification they are winning bidders for the offer of Phase II Connect America funding. The Commission also concludes that recipients of support through the competitive bidding process or Remote Areas Fund must certify as to their financial and technical capabilities to provide the required services within the specified timeframe in the geographic area for which they seek support.
114. The Commission issues a declaratory ruling to provide rate-of-return carriers greater clarity regarding their obligations to extend broadband service upon reasonable request.
115. In the Order, the Commission phases in support reductions associated with the 2014 rate floor of $20.46 over a multi-year period to provide time for incumbent carriers and state commissions to make any adjustments they deem necessary. In particular, the Commission defers any support reductions for lines that have rates of $14 or greater until January 2, 2015. Between January 2, 2015, and June 30, 2016, the Commission implements support reductions only to the extent rates are below $16; between July 1, 2016 and June 30, 2017, it implements support reductions only for lines with rates under $18 or the rate floor established by the 2016 rate survey, whichever is lower; and between July 1, 2017 and June 30, 2018, the Commission implements support reductions only for lines with rates under $20 or the 2017 rate floor, whichever is lower. Thus, the impact of this rule is phased in over a four-year period. In addition, the Commission waives any support reductions associated with lines provided to customers enrolled in the Lifeline program. This will minimize the effect of rate-floor-related support reductions on small entities with Lifeline customers.
116. The Commission also reconsiders certain aspects of the
117. In addition, the Commission waives the application fees for carriers seeking a study area waiver to transfer lines below the sub-exchange level. Prior to this decision, study area waivers required an application fee of $7,990 regardless of the number of lines involved. Because the processing of sub-exchange level transfers is now routine, the burden and cost associated with reviewing these petitions has been reduced and the application fee, which is a deterrent to transferring lines, is no longer necessary. The Commission also denies a petition for reconsideration of the Commission's decision to impose broadband public interest obligations on recipients of high-cost support, and in the Memorandum Opinion and Order the Commission dismisses or denies two applications for review of the Wireline Competition Bureau's (Bureau)
118. There were no relevant comments filed that specifically addressed the rules and policies proposed in the
119. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the rules adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A “small-business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.
120.
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123.
124. The Commission has included small incumbent LECs in this present RFA analysis. As noted above, a “small business” under the RFA is one that,
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140. The auction of the 1,053 800 MHz SMR geographic area licenses for the General Category channels was conducted in 2000. Eleven bidders won 108 geographic area licenses for the General Category channels in the 800 MHz SMR band qualified as small businesses under the $15 million size standard. In an auction completed in 2000, a total of 2,800 Economic Area licenses in the lower 80 channels of the 800 MHz SMR service were awarded. Of the 22 winning bidders, 19 claimed small business status and won 129 licenses. Thus, combining all three auctions, 40 winning bidders for geographic licenses in the 800 MHz SMR band claimed status as small business.
141. In addition, there are numerous incumbent site-by-site SMR licensees and licensees with extended implementation authorizations in the 800 and 900 MHz bands. The Commission does not know how many firms provide 800 MHz or 900 MHz geographic area SMR pursuant to extended implementation authorizations, nor how many of these providers have annual revenues of no more than $15 million. One firm has over $15 million in revenues. In addition, the Commission does not know how many of these firms have 1,500 or fewer employees. The Commission assumes, for purposes of this analysis, that all of the remaining existing extended implementation authorizations are held by small entities, as that small business size standard is approved by the SBA.
142.
143. In addition, the SBA's Cable Television Distribution Services small business size standard is applicable to EBS. There are presently 2,032 EBS licensees. All but 100 of these licenses are held by educational institutions. Educational institutions are included in this analysis as small entities. Thus, the Commission estimates that at least 1,932 licensees are small businesses. Since 2007, Cable Television Distribution Services have been defined within the broad economic census category of Wired Telecommunications Carriers; that category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies.” The SBA defines a small business size standard for this category as any such firms having 1,500 or fewer employees. The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees. According to Census Bureau data for 2007, there were a total of 955 firms in this previous category that operated for the entire year. Of this total, 939 firms had employment of 999 or fewer employees, and 16 firms had employment of 1000 employees or more. Thus, under this size standard, the majority of firms can be considered small and may be affected by rules adopted pursuant to the Order.
144.
145. In 2007, the Commission reexamined its rules governing the 700 MHz band in the
146.
147.
148.
149.
150. As of March 2010, there were 424,162 PLMR licensees operating 921,909 transmitters in the PLMR bands below 512 MHz. The Commission notes that any entity engaged in a commercial activity is eligible to hold a PLMR license, and that any revised rules in this context could therefore potentially impact small entities covering a great variety of industries.
151.
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165. The first category of Satellite Telecommunications “comprises establishments primarily engaged in providing point-to-point telecommunications services to other establishments in the telecommunications and broadcasting industries by forwarding and receiving communications signals via a system of satellites or reselling satellite telecommunications.” For this category, Census Bureau data for 2007 show that there were a total of 512 firms that operated for the entire year. Of this total, 464 firms had annual receipts of under $10 million, and 18 firms had receipts of $10 million to $24,999,999. Consequently, the Commission estimates that the majority of Satellite Telecommunications firms are small entities that might be affected by rules adopted pursuant to the Order.
166. The second category of Other Telecommunications “primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing Internet services or voice over Internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry.” For this category, Census Bureau data for 2007 show that there were a total of 2,383 firms that operated for the entire year. Of this total, 2,346 firms had annual receipts of under $25 million. Consequently, the Commission estimates that the majority of Other Telecommunications firms are small entities that might be affected by our action.
167.
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174.
175. In the Report and Order, the Commission requires that entities participating in the Phase II competitive bidding process and the Remote Areas Fund certify as to their financial and technical capabilities to provide the required services within the specified timeframe in the geographic area for which they seek support.
176. The Commission also makes a procedural rule amendment to require all ETCs to file their section 54.313 and 54.314 reports and certifications in WC Docket No. 14–58.
177. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its approach, which may include the following four alternatives, among others: (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance or reporting requirements under the rule for small entities; (3) the use of performance, rather than design, standards; and (4) an exemption from coverage of the rule, or any part thereof, for small entities.
178. The rules that the Commission adopts in the Report and Order, Declaratory Ruling, Order, Memorandum Opinion and Order, and Seventh Order on Reconsideration provide flexibility by streamlining certain processes for all carriers, including small entities. For example, the Commission permits entities that wish to participate in the Phase II competitive bidding process to seek ETC designation for the Phase II competitive bidding process and Remote Areas Fund after being notified they are winning bidders for the offer of the award of Phase II Connect America funding. The Commission recognized that some qualified bidders, including small entities, may be hesitant to invest resources to apply for an ETC designation prior to the competitive bidding process without any sense of whether they are likely to be awarded Phase II support.
179. In the Order, the Commission also removes a deterrent for all carriers, including small carriers, that wish to transfer or acquire parts of exchanges. The Commission waives on our own motion the $7,990 application fee for carriers filing petitions for waiver of the study area boundary freeze for transfers at the sub-exchange level. This change could be especially beneficial to small entities that may have found the application fee prohibitive. The Order also delays any support reductions associated with the rate floor rule over a multi-year period, giving carriers, including small carriers, more time to adjust to the requirement.
180. The rules that the Commission adopts for the Phase II competitive bidding process also provide flexibility for all participants, including small entities, to determine the most cost-effective way to serve areas where they are awarded support through the competitive bidding process. By permitting participants to select to bid on extremely high-cost areas, the Commission permits participants to build integrated networks that span both types of areas in adjacent census blocks as appropriate. And by providing a funding term of 10 years (subject to existing requirements and the availability of funds), the Commission seeks to stimulate greater interest in the competitive bidding process.
181. The Commission declines to adopt a transition period for competitive ETCs that receive support through the Phase II competitive bidding process because competitive ETCs, including small entities, have the ability to determine the level of support necessary to support an area through their bid, and thus a transition period is unnecessary.
182. The Commission also takes steps to provide greater certainty to rate-of-
183. The Commission will send a copy of the Report and Order, Declaratory Ruling, Memorandum Opinion and Order, Seventh Order on Reconsideration, and concurrently adopted Further Notice of Proposed Rulemaking, including this FRFA, in a report to be sent to Congress and the Government Accountability Office pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996. In addition, the Commission will send a copy of the Report and Order, Declaratory Ruling, Order, Memorandum Opinion and Order, Seventh Order on Reconsideration, and concurrently adopted Further Notice of Proposed Rulemaking, including this FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of the Report and Order, Declaratory Ruling, Memorandum Opinion and Order, Seventh Order on Reconsideration, and concurrently adopted Further Notice of Proposed Rulemaking (or summaries thereof) will also be published in the
184. Accordingly,
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Communications common carriers, Reporting and recordkeeping requirements, Telephone, Uniform System of Accounts.
Communications common carriers, Reporting and recordkeeping requirements, Telecommunications, Telephone.
Communications common carriers, Reporting and recordkeeping requirements, Telephone.
For the reasons discussed in the preamble, the Federal Communications Commission amends 47 CFR parts 36, 54, and 69 as follows:
47 U.S.C. 151, 154(i) and (j), 205, 221(c), 254, 303(r), 403, 410, and 1302 unless otherwise noted.
47 U.S.C. 151, 154(i), 201, 205, 214, 219, 220, 254, 303(r), 403, and 1302 unless otherwise noted.
(b) For purposes of this section, universal service support is defined as the sum of the amounts calculated pursuant to §§ 54.1304 and 54.1310, and §§ 54.305, and 54.901 through 54.904. Line counts for purposes of this section shall be as of the most recent line counts reported pursuant to § 54.1306(i).
(d) Transferred exchanges in study areas operated by rural telephone companies that are subject to the limitations on loop-related universal service support in paragraph (b) of this section may be eligible for a safety valve loop cost expense adjustment based on the difference between the rural incumbent local exchange carrier's index year expense adjustment and subsequent year loop cost expense adjustments for the acquired exchanges. Safety valve loop cost expense adjustments shall only be available to rural incumbent local exchange carriers that, in the absence of restrictions on high-cost loop support in paragraph (b) of this section, would qualify for high-cost loop support for the acquired exchanges under § 54.1310.
(1) For carriers that buy or acquire telephone exchanges on or after January 10, 2005, from an unaffiliated carrier, the index year expense adjustment for the acquiring carrier's first year of operation shall equal the selling carrier's loop-related expense adjustment for the transferred exchanges for the 12-month period prior to the transfer of the exchanges. At the acquiring carrier's option, the first year of operation for the transferred exchanges, for purposes of calculating safety valve support, shall commence at the beginning of either the first calendar year or the next calendar quarter following the transfer of exchanges. For the first year of operation, a loop cost expense adjustment, using the costs of the acquired exchanges submitted in accordance with §§ 54.1305 and 54.1306, shall be calculated pursuant to § 54.1310 and then compared to the index year expense adjustment. Safety valve support for the first period of operation will then be calculated pursuant to paragraph (d)(3) of this section. The index year expense adjustment for years after the first year of operation shall be determined using cost data for the first year of operation
(2) For carriers that bought or acquired exchanges from an unaffiliated carrier before January 10, 2005, and are not subject to the exception in paragraph (c) of this section, the index year expense adjustment for acquired exchange(s) shall be equal to the rural incumbent local exchange carrier's high-cost loop expense adjustment for the acquired exchanges calculated for the carrier's first year of operation of the acquired exchange(s). At the carrier's option, the first year of operation of the transferred exchanges shall commence at the beginning of either the first calendar year or the next calendar quarter following the transfer of exchanges. The index year expense adjustment shall be determined using cost data for the acquired exchange(s) submitted in accordance with §§ 54.1305 and 54.1306 and shall be calculated in accordance with § 54.1310. The index year expense adjustment for rural telephone companies that have operated exchanges subject to this section for more than a full year on August 8, 2014 shall be based on loop cost data submitted in accordance with § 54.1306 for the year ending on the nearest calendar quarter following August 8, 2014. For each subsequent year, ending on the same calendar quarter as the index year, a loop cost expense adjustment, using the costs of the acquired exchanges, will be calculated pursuant to § 54.1310 and will be compared to the index year expense adjustment. Safety valve support is calculated pursuant to paragraph (d)(3) of this section.
(3) Up to fifty (50) percent of any positive difference between the transferred exchanges loop cost expense adjustment and the index year expense adjustment will be designated as the transferred exchange's safety valve loop cost expense adjustment and will be available in addition to the per-line loop-related support transferred from the selling carrier to the acquiring carrier pursuant to paragraph (b) of this section. In no event shall a study area's safety valve loop cost expense adjustment exceed the difference between the carrier's study area loop cost expense adjustment calculated pursuant to § 54.1310 and transferred support amounts available to the acquired exchange(s) under paragraph (b) of this section. Safety valve support shall not transfer with acquired exchanges.
(e) The sum of the safety valve loop cost expense adjustment for all eligible study areas operated by rural telephone companies shall not exceed five (5) percent of the total rural incumbent local exchange carrier portion of the annual nationwide loop cost expense adjustment calculated pursuant to § 54.1302. The five (5) percent cap on the safety valve mechanism shall be based on the lesser of the rural incumbent local exchange carrier portion of the annual nationwide loop cost expense adjustment calculated pursuant to § 54.1302 or the sum of rural incumbent local exchange carrier expense adjustments calculated pursuant to § 54.1310. The percentage multiplier used to derive study area safety valve loop cost expense adjustments for rural telephone companies shall be the lesser of fifty (50) percent or a percentage calculated to produce the maximum total safety valve loop cost expense adjustment for all eligible study areas pursuant to this paragraph. The safety valve loop cost expense adjustment of an individual rural incumbent local exchange carrier also may be further reduced as described in paragraph (d)(3) of this section.
(a)
(b)
(e)
(1) An entity may obtain eligible telecommunications carrier designation after public notice of winning bidders in a competitive bidding process for the offer of Phase II Connect America support. An applicant in the competitive bidding process shall certify that it is financially and technically qualified to provide the services supported by Connect America Phase II in order to receive such support.
(2) To the extent an applicant in the competitive bidding process seeks eligible telecommunications carrier designation prior to public notice of winning bidders for Phase II Connect America support, its designation as an eligible telecommunications carrier may be conditional subject to the receipt of Phase II Connect America support.
(f)
(f) * * *
(1)
(i) All reports pursuant to this section shall be filed with the Office of the Secretary of the Commission clearly referencing WC Docket No. 14–58, with the Administrator, and with the relevant state commissions or relevant authority in a U.S. Territory, or Tribal governments, as appropriate.
(c)
(2) An eligible telecommunications carrier not subject to the jurisdiction of a State shall file a sworn affidavit executed by a corporate officer attesting that the carrier only used support during the preceding calendar year and will only use support in the coming calendar year for the provision, maintenance, and upgrading of facilities and services for which support is intended. The affidavit must be filed with both the Office of the Secretary of the Commission clearly referencing WC Docket No. 14–58, and with the Administrator of the high-cost universal service support mechanism, on or before the deadlines set forth in paragraph (d) of this section. All affidavits filed pursuant to this section shall become part of the public record maintained by the Commission.
(d) For purposes of this section, high-cost support is defined as the support available pursuant to § 54.1310 and frozen high-cost support provided to price cap carriers to the extent it is based on support previously provided pursuant to § 54.1310 or former high-cost proxy model support.
(g) Any reductions in high-cost support under this section will not be redistributed to other carriers that receive support pursuant to § 54.1310.
(a) Universal service support shall be eliminated in an incumbent local exchange carrier study area where an unsubsidized competitor, or combination of unsubsidized competitors, as defined in § 54.5, offers to 100 percent of residential and business locations in the study area voice and broadband service at speeds of at least 4 Mbps downstream/1 Mbps upstream, with latency suitable for real-time applications, including Voice over Internet Protocol, and usage capacity that is reasonably comparable to comparable offerings in urban areas, at rates that are reasonably comparable to rates for comparable offerings in urban areas.
(b) After a determination there is a 100 percent overlap, the incumbent local exchange carrier shall receive the following amount of high-cost support:
(1) In the first year, two-thirds of the lesser of the incumbent's total 2010 high-cost support or $3000 times the number of reported lines as of year-end 2010;
(2) In the second year, one-third of the lesser of the incumbent's total 2010 high-cost support or $3000 times the number of reported lines as of year-end 2010;
(3) In the third year and thereafter, no support shall be paid.
(a) * * *
(1) Beginning July 31, 2002, each rate-of-return carrier shall submit to the Administrator in accordance with the schedule in § 54.1306 the number of lines it serves, within each rate-of-return carrier study area showing residential and single-line business line counts and multi-line business line counts separately. For purposes of this report, and for purposes of computing support under this subpart, the residential and single-line business class lines reported include lines assessed the residential and single-line business End User Common Line charge pursuant to § 69.104 of this chapter, and the multi-line business class lines reported include lines assessed the multi-line business End User Common Line charge pursuant to § 69.104 of this chapter. For purposes of this report, and for purposes of computing support under this subpart, lines served using resale of the rate-of-return local exchange carrier's service pursuant to section 251(c)(4) of the Communications Act of 1934, as amended, shall be considered lines served by the rate-of-return carrier only and must be reported accordingly.
(2) A rate-of-return carrier may submit the information in paragraph (a) of this section in accordance with the schedule in § 54.1306, even if it is not required to do so. If a rate-of-return carrier makes a filing under this paragraph, it shall separately indicate any lines that it has acquired from another carrier that it has not previously reported pursuant to paragraph (a) of this section, identified by customer class and the carrier from which the lines were acquired.
(a) This subpart addresses support for loop-related costs included in § 54.1308. The expense adjustment calculated pursuant to this subpart M shall be added to interstate expenses and deducted from state expenses after expenses and taxes have been apportioned pursuant to subpart D of part 36 of this chapter. Beginning January 1, 2012, this subpart will only apply to incumbent local exchange
(b) The expense adjustment will be computed on the basis of data for a preceding calendar year which may be updated at the option of the carrier pursuant to § 54.1306(a).
(a) Beginning January 1, 2013, and each calendar year thereafter, the total annual amount of the incumbent local exchange carrier portion of the nationwide loop cost expense adjustment shall not exceed the amount for the immediately preceding calendar year, multiplied times one plus the Rural Growth Factor calculated pursuant to § 54.1303.
(b) The annual rural incumbent local exchange carrier portion of the nationwide loop cost expense adjustment shall be reduced to reflect the transfer of rural incumbent local exchange carrier access lines that are eligible for expense adjustments pursuant to § 54.1310. The reduction shall equal the amount of the § 54.1310 expense adjustment available to the transferred access lines at the time of the transfer and shall be effective in the next calendar quarter after the access lines are transferred.
(c) Safety net additive support calculated pursuant to § 54.1304, and transferred high-cost support and safety valve support calculated pursuant to § 54.305 of this part shall not be included in the rural incumbent local exchange carrier portion of the annual nationwide loop cost expense adjustment.
(a) The Rural Growth Factor (RGF) is equal to the sum of the annual percentage change in the United States Department of Commerce's Gross Domestic Product—Chained Price Index (GPD–CPI) plus the percentage change in the total number of rural incumbent local exchange carrier working loops during the calendar year preceding the July 31st filing submitted pursuant to § 54.1305. The percentage change in total rural incumbent local exchange carrier working loops shall be based upon the difference between the total number of rural incumbent local exchange carrier working loops on December 31 of the calendar year preceding the July 31st filing and the total number of rural incumbent local exchange carrier working loops on December 31 of the second calendar year preceding that filing, both determined by the company's submissions pursuant to § 54.1305. Loops acquired by rural incumbent local exchange carriers shall not be included in the RGF calculation.
(b) Beginning July 31, 2012, pursuant to § 54.1301(a), the calculation of the Rural Growth Factor shall not include price cap carrier working loops and rate-of-return local exchange carrier working loops of companies that were affiliated with price cap carriers during the calendar year preceding the July 31st filing submitted pursuant to § 54.1305.
(a)
(b)
(c)
(2) If paragraph (c)(1) of this section is met, the rural incumbent local exchange carrier must notify the Administrator; failure to properly notify the Administrator of eligibility shall result in disqualification of that study area for safety net additive, requiring the rural incumbent local exchange carrier to again meet the eligibility requirements in paragraph (c)(1) of this section for that study area in a subsequent period.
(3) Upon completion of verification by the Administrator that the study area meets the stated criterion in paragraphs (a), (b), or (c) of this section, the Administrator shall:
(i) Pay to any qualifying rural telephone company safety net additive support for the qualifying study area in accordance with the calculation set forth in paragraph (b) of this section; and
(ii) Continue to pay safety net additive support in any of the four succeeding years in which the total carrier loop expense adjustment is limited by the provisions of § 54.1302. Safety net additive support in the succeeding four years shall be the lesser of:
(A) The sum of capped support and the safety net additive support received in the qualifying year; or
(B) The rural telephone company's uncapped support.
(a) In order to allow determination of the study areas and wire centers that are entitled to an expense adjustment pursuant to § 54.1310, each incumbent local exchange carrier (LEC) must provide the National Exchange Carrier Association (NECA) (established pursuant to part 69 of this chapter) with the information listed for each study area in which such incumbent LEC operates, with the exception of the information listed in paragraph (h) of this section, which must be provided for each study area. This information is to be filed with NECA by July 31st of each year. The information provided pursuant to paragraph (i) of this section must be updated pursuant to § 54.1306. Rural telephone companies that acquired exchanges subsequent to May 7, 1997, and incorporated those acquired exchanges into existing study areas shall separately provide the information required by paragraphs (b)
(b) Unseparated, i.e., state and interstate, gross plant investment in Exchange Line Cable and Wire Facilities (C&WF) Subcategory 1.3 and Exchange Line Central Office (CO) Circuit Equipment Category 4.13. This amount shall be calculated as of December 31st of the calendar year preceding each July 31st filing.
(c) Unseparated accumulated depreciation and noncurrent deferred federal income taxes, attributable to Exchange Line C&WF Subcategory 1.3 investment, and Exchange Line CO Circuit Equipment Category 4.13 investment. These amounts shall be calculated as of December 31st of the calendar year preceding each July 31st filing, and shall be stated separately.
(d) Unseparated depreciation expense attributable to Exchange Line C&WF Subcategory 1.3 investment, and Exchange Line CO Circuit Equipment Category 4.13 investment. This amount shall be the actual depreciation expense for the calendar year preceding each July 31st filing.
(e) Unseparated maintenance expense attributable to Exchange Line C&WF Subcategory 1.3 investment and Exchange Line CO Circuit Equipment Category 4.113 investment. This amount shall be the actual repair expense for the calendar year preceding each July 31st filing.
(f) Unseparated corporate operations expenses, operating taxes, and the benefits and rent proportions of operating expenses. The amount for each of these categories of expense shall be the actual amount for that expense for the calendar year preceding each July 31st filing. The amount for each category of expense listed shall be stated separately.
(g) Unseparated gross telecommunications plant investment. This amount shall be calculated as of December 31st of the calendar year preceding each July 31st filing.
(h) Unseparated accumulated depreciation and noncurrent deferred federal income taxes attributable to local unseparated telecommunications plant investment. This amount shall be calculated as of December 31st of the calendar year preceding each July 31st filing.
(i) The number of working loops for each study area. For universal service support purposes, working loops are defined as the number of working Exchange Line C&WF loops used jointly for exchange and message telecommunications service, including C&WF subscriber lines associated with pay telephones in C&WF Category 1, but excluding WATS closed end access and TWX service. These figures shall be calculated as of December 31st of the calendar year preceding each July 31st filing.
(a) Any incumbent local exchange carrier subject to § 54.1301(a) may update the information submitted to the National Exchange Carrier Association (NECA) on July 31st pursuant to § 54.1305 one or more times annually on a rolling year basis according to the schedule.
(1) Submit data covering the last nine months of the previous calendar year and the first three months of the existing calendar year no later than September 30th of the existing year;
(2) Submit data covering the last six months of the previous calendar year and the first six months of the existing calendar year no later than December 30th of the existing year;
(3) Submit data covering the last three months of the second previous calendar year and the first nine months of the previous calendar year no later than March 30th of the existing year.
(b) [Reserved]
(a) On October 1 of each year, the National Exchange Carrier Association (NECA) shall file with the Commission and Administrator the information listed below. Information filed with the Commission shall be compiled from information provided to NECA by telephone companies pursuant to § 54.1305.
(1) The unseparated loop cost for each study area and a nationwide-average unseparated loop cost.
(2) The annual amount of the high cost expense adjustment for each study area, and the total nationwide amount of the expense adjustment.
(3) The dollar amount and percentage of the increase in the nationwide average unseparated loop cost, as well as the dollar amount and percentage increase for each study area, for the previous 5 years, or the number of years NECA has been receiving this information, whichever is the shorter time period.
(b) [Reserved]
(a) For the purpose of calculating the expense adjustment, the study area total unseparated loop cost equals the sum of the following:
(1) Return component for net unseparated Exchange Line C&WF subcategory 1.3 investment and Exchange Line CO Circuit Equipment Category 4.13 investment. This amount is calculated by deducting the accumulated depreciation and noncurrent deferred Federal income taxes attributable to C&WF Subcategory 1.3 investment and Exchange Line Category 4.13 circuit investment reported pursuant to § 54.1305(b) from the gross investment in Exchange Line C&WF Subcategory 1.3 and CO Category 4.13 reported pursuant to § 54.1305(a) to obtain the net unseparated C&WF Subcategory 1.3 investment, and CO Category 4.13 investment. The net unseparated C&WF Subcategory 1.3 investment and CO Category 4.13 investment is multiplied by the study area's authorized interstate rate of return.
(2) Depreciation expense attributable to C&WF Subcategory 1.3 investment, and CO Category 4.13 investment as reported in § 54.1305(c).
(3) Maintenance expense attributable to C&WF Subcategory 1.3 investment, and CO Category 4.13 investment as reported in § 54.1305(d).
(4) Corporate Operations Expenses, Operating Taxes and the benefits and rent portions of operating expenses, as reported in § 54.1305(e) attributable to investment in C&WF Category 1.3 and COE Category 4.13. This amount is calculated by multiplying the total amount of these expenses and taxes by the ratio of the unseparated gross exchange plant investment in C&WF Category 1.3 and COE Category 4.13, as reported in § 54.1305(a), to the unseparated gross telecommunications plant investment, as reported in § 54.1305(f). Total Corporate Operations Expense for purposes of calculating high-cost loop support payments beginning January 1, 2012 shall be limited to the lesser of § 54.1308(a)(4)(i) or (ii).
(i) The actual average monthly per-loop Corporate Operations Expense; or
(ii) A monthly per-loop amount computed according to paragraphs (a)(4)(ii)(A), (a)(4)(ii)(B), (a)(4)(ii)(C), and (a)(4)(ii)(D) of this section. To the extent that some carriers' corporate operations expenses are disallowed pursuant to these limitations, the national average unseparated cost per loop shall be adjusted accordingly.
(A) For study areas with 6,000 or fewer total working loops the amount monthly per working loop shall be $42.337 − (.00328 × the number of total working loops), or, $63,000/the number of total working loops, whichever is greater;
(B) For study areas with more than 6,000 but fewer than 17,887 total working loops, the monthly amount per working loop shall be $3.007 + (117,990/the number of total working loops); and
(C) For study areas with 17,887 or more total working loops, the monthly amount per working loop shall be $9.562.
(D) Beginning January 1, 2013, the monthly per-loop amount computed according to paragraphs (a)(4)(ii)(A), (a)(4)(ii)(B), and (a)(4)(ii)(C) of this section shall be adjusted each year to reflect the annual percentage change in the United States Department of Commerce's Gross Domestic Product-Chained Price Index (GDP–CPI).
(b) [Reserved]
(a)
(1) The national average unseparated loop cost per working loop shall be recalculated by the National Exchange Carrier Association to reflect the September, December, and March update filings.
(2) Each new nationwide average shall be used in determining the additional interstate expense allocation for companies which made filings by the most recent filing date.
(3) The calculation of a new national average to reflect the update filings shall not affect the amount of the additional interstate expense allocation for companies which did not make an update filing by the most recent filing date.
(b)
(1) If a company elects to, or is required to, update the data which it has filed with the National Exchange Carrier Association as provided in § 54.1306(a), the study area average unseparated loop cost per working loop and the amount of its additional interstate expense allocation shall be recalculated to reflect the updated data.
(2) [Reserved]
(c) The national average inseparated loop Cost per working loop shall be the greater of:
(1) The amount calculated pursuant to the method described in paragraph (a) of this section; or
(2) Beginning July 1, 2001, for rural carriers, an amount calculated to produce the maximum rural incumbent local exchange carrier portion of nationwide loop cost expense adjustment allowable pursuant to § 54.1302(a).
(a) [Reserved]
(b) [Reserved]
(c) Beginning January 1, 1988, for study areas reporting 200,000 or fewer working loops pursuant to § 54.1305(h), the expense adjustment (additional interstate expense allocation) is equal to the sum of paragraphs (c)(1) through (2) of this section.
(1) Sixty-five percent of the study area average unseparated loop cost per working loop as calculated pursuant to § 54.1309(b) in excess of 115 percent of the national average for this cost but not greater than 150 percent of the national average for this cost as calculated pursuant to § 54.1309(a) multiplied by the number of working loops reported in § 54.1305(h) for the study area; and
(2) Seventy-five percent of the study area average unseparated loop cost per working loop as calculated pursuant to § 54.1309(b) in excess of 150 percent of the national average for this cost as calculated pursuant to § 54.1309(a) multiplied by the number of working loops reported in § 54.1305(h) for the study area.
(d) Beginning April 1, 1989, the expense adjustment calculated pursuant to § 54.1310(c) shall be adjusted each year to reflect changes in the amount of high-cost loop support resulting from adjustments calculated pursuant to § 54.1306(a) made during the previous year. If the resulting amount exceeds the previous year's fund size, the difference will be added to the amount calculated pursuant to § 54.1310(c) for the following year. If the adjustments made during the previous year result in a decrease in the size of the funding requirement, the difference will be subtracted from the amount calculated pursuant to § 54.1310(c) for the following year.
47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 403.
Beginning April 1, 1989, expenses allocated to the interstate jurisdiction pursuant to §§ 54.1310 and 36.641 of this chapter shall be assigned to the Universal Service Fund Element.
Federal Communications Commission.
Proposed rule.
In this document, the Federal Communications Commission (Commission) proposes measures to update and further implement the framework adopted by the Commission in 2011. The Commission strives to adapt its universal service reforms to ensure those living in high-cost areas have access to services that are reasonably comparable to services offered in urban areas.
Comments are due on or before August 8, 2014 and reply comments are due on or before September 8, 2014. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this document, you should advise the contact listed below as soon as possible.
You may submit comments, identified by either WC Docket No. 10–90, WC Docket No. 14–58, WC Docket No. 07–135, WT Docket No. 10–208, or CC Docket No. 01–92, by any of the following methods:
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•
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For detailed instructions for submitting comments and additional information on the rulemaking process, see the
Alexander Minard, Wireline Competition Bureau, or Suzanne Yelen, Wireline Competition Bureau, (202) 418–7400 or TTY: (202) 418–0484.
This is a synopsis of the Commission's Further Notice of Proposed Rulemaking (FNPRM) in WC Docket Nos. 10–90, 14–58, 07–135, WT Docket No. 10–208, and CC Docket No. 01–92; FCC 14–54, adopted on April 23, 2014 and released on June 10, 2014. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY–A257, 445 12th St. SW., Washington, DC 20554 or at the following Internet address:
Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS).
Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW., Room TW–A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of
Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW., Washington DC 20554.
1. With this Further Notice of Proposed Rulemaking (FNPRM) and concurrently adopted Report and Order, Declaratory Ruling, Order, Memorandum Opinion and Order, and Seventh Order on Reconsideration, the Commission takes significant steps to continue the implementation of the landmark reforms unanimously adopted by the Commission in 2011 to modernize universal service for the 21st century. The Commission builds on the solid foundation created in 2011, taking into account what they have learned to date and new marketplace developments, to fulfill our statutory mission to ensure that all consumers “have access to . . . advanced telecommunications and information services.”
2. A core component of the 2011 reforms was the creation of the Connect America Fund to preserve and advance voice and robust broadband services, both fixed and mobile, in high-cost areas of the nation that the marketplace would not otherwise serve. Today, the Commission adopts rules that build on the framework established by the Commission in the
3. Meeting the infrastructure challenge of the 21st century will be a multi-year journey. It took the nation almost 50 years to bring electricity to 99 percent of rural farms; decades later, it took 35 years to complete the original portion of the interstate highway
4. In the FNPRM, the Commission proposes measures to update and implement further the framework adopted by the Commission in 2011. The Commission strives to adapt our universal service reforms to ensure those living in high-cost areas have access to services that are reasonably comparable to services offered in urban areas. Consistent with that goal, in the FNPRM the Commission proposes to revise our current broadband performance obligations to require minimum speeds of 10 Mbps downstream to ensure that the services delivered using Connect America funds are reasonably comparable to the services enjoyed by consumers in urban areas of the country. The FNPRM also proposes to apply uniformly the same performance obligations to all recipients of Phase II support and to rate-of-return carriers. In addition, the Commission seeks to further develop the record on the ability of Phase II recipients to satisfy their obligations using any technology or a combination thereof—whether wireline or wireless, fixed or mobile, terrestrial or satellite—that meets the performance standards for Phase II. The FNPRM also proposes to provide financial incentives for recipients of Phase II support to accelerate their network deployment.
5. To target our finite universal service funds most effectively, the FNPRM proposes to exclude from eligibility for Phase II support those areas that are served by
6. In addition, the FNPRM seeks comment on several proposals regarding eligible telecommunications carrier (ETC) designation. It proposes to require entities that are winning bidders for the offer of Phase II support in the competitive bidding process to apply for ETC designation within 30 days of public announcement of winning bidders. It also proposes to adopt a rebuttable presumption that a state commission lacks jurisdiction over an entity seeking ETC designation if it fails to initiate a proceeding within 60 days.
7. The FNPRM seeks comment on specific proposals for the design of the Phase II competitive bidding process that will occur in areas where price cap carriers decline model-based support. Through this public input, and what the Commission learns from the expressions of interest already submitted for rural broadband experiments, it should be prepared to make further decisions by the end of the year on the design of the competitive bidding process that will be used for Phase II in price cap territories where the price cap carrier declines the state-level commitment.
8. The FNPRM also addresses significant developments that have occurred since the adoption of the
9. In the FNPRM, the Commission also focuses on developing and implementing a “Connect America Fund” for rate-of-return carriers. Specifically, they Commission seeks comment on reform proposals that would address a number of the identified shortcomings in the current support mechanisms that provide support to rate-of-return carriers. As a short term measure, the Commission proposes to apply the effect of the annual rebasing of the cap on support known as high-cost loop support (HCLS) equally on all recipients of HCLS, to address the problematic incentives of the current rule. As another near term reform, the Commission also proposes to prohibit recovery of new investment occurring on or after January 1, 2015, through either HCLS or interstate common line support (ICLS) in areas that are served by a qualifying competitor that offers voice and broadband service meeting the Commission's standards. As a longer term measure, the Commission seeks comment on limiting recovery of new investment through HCLS or ICLS as of a date certain, in conjunction with implementation of a Connect America Fund for rate-of-return carriers. The Commission proposes to adopt a stand-alone broadband support mechanism that meets defined parameters and seek to develop further the record on various industry proposals. Building on a proposal recently submitted by the Independent Telephone & Telecommunications Alliance (ITTA), the Commission proposes to provide rate-of-return carriers the option of participating in a two-step transition to Phase II model-based support and seek comment on alternative rate regulation measures and specific implementation issues. The Commission also seeks comment in the FNPRM on providing one-time funding for middle mile projects on Tribal lands in 2015. Such an approach could serve as a template for further implementation on a broader scale in subsequent years.
10. In today's decision, the Commission also revisits some fundamental assumptions regarding implementation of the Remote Areas Fund. Part of ensuring that the Commission use its universal service funding wisely is developing effective and targeted mechanisms to address the challenges of serving the most remote, high-cost areas. Rather than prejudging
11. Finally, the FNPRM proposes to codify a broadband certification requirement for recipients of funding that are subject to broadband performance obligations, seeks comment on specific levels of support reduction for non-compliance with service obligations, and proposes to modify our rules regarding reductions in support when parties miss filing deadlines in order to better calibrate the support reduction to coincide with the period of noncompliance.
12. With the actions the Commission takes today and those planned for later this year, it expects to move forward to implement the offer of Phase II model-based support by the end of the year, as they noted in January. The Commission also expects to take further action to implement the rural broadband experiments it adopted in their January
13.
14. In the
15. The Commission proposes a new downstream speed standard of 10 Mbps to further the statutory goal of ensuring that consumers in rural parts of the country have access to advanced telecommunications and information services that are reasonably comparable to those services available in urban areas. The most recent round of State Broadband Initiative (SBI) data show that nearly all persons living in urban areas have access to fixed broadband with downstream speeds of at least 10 Mbps. SBI data as of June 2013 indicate that only two percent of the population residing in urban census blocks lack access to fixed broadband with speeds of 10 Mbps downstream/768 kbps upstream. In contrast, the SBI data indicate that 33 percent of the population residing in rural census blocks lack access to fixed broadband providing 10 Mbps/768 kbps speeds.
16. SBI data also show that urban users have greater access to higher upstream speeds than rural users. Given the statutory goal of reasonable comparability, should the Commission set an upstream speed requirement for universal service purposes at a level higher than 1 Mbps, such as 2 Mbps? The Commission specifically seeks comment on whether 1 Mbps upstream will provide sufficient bandwidth for residential consumers to take advantage of applications and services that advance critical public purposes such as education and healthcare. In the recent Rural Broadband Workshop, some parties suggested that upload speeds higher than 1 Mbps were necessary to support certain telehealth applications. To the extent commenters argue that the Commission should set a different upstream benchmark than 1 Mbps for universal service purposes, they should provide specific examples of the applications and services that require such upstream capability for residential consumers.
17. In proposing to increase the current broadband downstream speed benchmark, the Commission is primarily focusing on the minimum standard for
18. In the
19. As discussed in the concurrently adopted Report and Order, under the framework adopted by the Commission in the
20. In addition, if commenters believe that it would make more requests for service unreasonable, therefore requiring carriers to scale back their deployment plans, the Commission seeks comment on how to ensure that consumers in those areas receive service. For example, if a request for a higher speed service would be unreasonable but a request that meets our current standard would be reasonable, the Commission seeks comment on permitting the deployment at the lower speed standard. The Commission also seeks comment on whether carriers should be allowed to self-identify territories that they would not be able to serve (either alone or through a voluntary partnership) so that the Commission could extend broadband service to those consumers through a different mechanism.
21. The Commission seeks comment on the costs and benefits of increasing the speed benchmark. Will it help or hinder our efforts to reach unserved consumers? Will the benefits gained by consumers in having access to higher speeds outweigh the increased cost of deploying a more robust network? What impact would it have on participation in the Phase II competitive bidding process and our ability to preserve and advance universal service in areas where a price cap carrier declines model-based support? Is it reasonable to assume that the same number of residents would be served in Phase II at speeds of 10 Mbps/1 Mbps as would be served at 4 Mbps/1 Mbps? The Commission directs the Bureau to publish information within 15 days of release of this FNPRM regarding the number of locations that would be eligible for the offer of model-based support if the revised speed benchmark were used to determine the presence of an unsubsidized competitor and the number of locations that would be above the extremely high-cost threshold. The Commission encourages parties to address in their comments how changing the speed standard would affect the number of consumers that could be served.
22. The Commission intends to take action on this proposed revision to the speed benchmark prior to extending the offer of support to price cap carriers so that they have clarity as to what is expected of them over the five-year Phase II term if they make state-level commitments to accept model-based support. Under the existing rules, Phase II state-level commitment funding recipients must provide broadband with speeds of 4 Mbps/1 Mbps to all locations and speeds of 6 Mbps/1.5 Mbps to a subset of locations as specified by the Bureau. If the Commission adopts our proposal to raise the minimum speed benchmark to 10 Mbps downstream, it proposes that the Bureau would no longer be required to specify a number of locations that would receive 6 Mbps downstream or 1.5 Mbps upstream for recipients of model-based support. The Commission seeks comment on this proposal.
23. If the Commission adopts the proposal to extend broadband downstream speeds to 10 Mbps, it seeks comment regarding whether it should provide a longer term for Connect America Phase II model-based support than the five-year term it adopted in the
24.
25. Parties that argue that standards should be relaxed for the Phase II competitive bidding process that will occur in areas where the price cap carrier declines model-based support should identify with specificity which standard should be relaxed and to what extent, and explain why relaxation of such standards is consistent with
26. In the
27. The Commission also proposes to apply these usage allowance and latency standards to rate-of-return ETCs that are subject to broadband performance obligations. This would ensure that consumers have access to the same baseline level of broadband service regardless of whether they reside in a price cap or rate-of-return study area. Again, the Commission emphasizes that it does not expect that rate-of-return carriers would only provide broadband offerings to customers that meet these requirements. Rather, they would be free to offer an array of services of varying speeds, usage, and price to meet customer demand. If commenters argue that rate-of-return carriers should either be exempted from or be subject to relaxed usage allowance and latency standards, the Commission specifically seeks comment on how it can ensure that consumers in rate-of-return areas are not relegated to substantially less robust services than consumers living in price cap areas.
28.
29. The Commission seeks to develop more fully the record on allowing Phase II recipients to satisfy their obligations using any technology or combination thereof—whether wireline or wireless, fixed or mobile, terrestrial or satellite—that meets the performance standards for Phase II. Specifically, any Phase II recipient satisfying its obligations would be required to meet the Phase II requirements for speed, latency, usage allowance, and pricing, as they exist today or may be modified in the future in response to this FNPRM. The Commission emphasizes that wireless providers are free, and indeed encouraged, to participate in Connect America Phase II, and fixed wireless already is an option for the delivery of service in Phase II under the framework established by the Commission in the
30. In a similar vein, for the Phase II competitive bidding process, should the Commission exclude from eligibility for funding any area that is served by a competitor that meets the Commission's current standards for the offer of model-based support to price cap carriers, again presuming that the same service and pricing standards are met, regardless of technology? The Commission welcomes input on the extent to which mobile or satellite providers today meet those standards.
31. The Commission seeks comment on how to ensure that the end-user experience is functionally equivalent whether the connection is provided through fixed or mobile means. Should the Commission require, for instance, that providers allow consumers subscribing to the service to attach or tether their mobile connections to other devices? This will allow consumers to use their mobile connections on traditionally fixed platforms, such as desktop computers, thus allowing access to the same applications and functionalities as consumers served through fixed connections. The Commission also seeks comment on the ability of a mobile connection to support multiple devices. Should the Commission adopt requirements that the mobile service allow users to be able to use multiple devices simultaneously? To the extent that additional devices or subscriptions are required to support multiple devices, should the Commission consider that in determining reasonable price comparability? The Commission additionally seeks comment on whether any other requirements should attach to Phase II support for mobile or satellite technologies to ensure they provide the end user with the same service qualities obtained when a fixed service is purchased. For example, mobile service can have a far greater variation in service quality as compared to fixed services, with service quality not only changing based on location within a tower's footprint, but also even whether the service is being used indoors rather than outdoors. How should the Commission address these issues to ensure that networks supported with universal service funds provide consumers with high-quality broadband access regardless of the technology deployed? How should the Commission ensure that consumers are still able to use services that generally rely on fixed networks, such as medical monitoring or security systems? What would be the impact on businesses and anchor institutions if the Commission were to exclude from eligibility for Phase II support those areas that are served by mobile or satellite providers that meet the Phase II standards?
32.
33. Alternatively, should the Commission require recipients of such support to provide an evolving level of service over the funding period based on trends in consumer usage? For instance, should the Commission use FCC Form 477 and other Commission data, such as the Measuring Broadband America results, to monitor the service available in urban markets and create an index that would enable the Commission to modify service obligations (speed, usage allowance, latency, and price) based on trends in urban offerings and usage for all ETCs receiving support with a ten-year term? The Commission seeks comment on what, if any, other data sources it should rely on if it were to establish an evolving benchmark. Should the evolving standard be based on an average or median consumer's usage? Would use of this approach with an evolving standard affect the incentives for providers to accept support with a ten-year term and, ultimately, affect the deployment of broadband to consumers?
34.
35.
36. The Commission proposes to provide financial incentives for recipients of Phase II support to accelerate their network deployment. Specifically, funds could be disbursed on an accelerated timetable if a recipient completed its deployment ahead of the required timeframe. For instance, for price cap carriers making a state-level commitment, all or some fraction of the remaining support for the five-year term that has not yet been disbursed after network completion is validated could be paid out over six months. How could a similar proposal be implemented for ETCs awarded support through a competitive bidding process? If the Commission adopts such a system, how should it structure the accelerated payout? The Commission proposes that if it were to adopt such a system, accelerated payment would not be made until the Universal Service Administrative Company (USAC) has validated the completion of network deployment. The Commission seeks comment on this proposal.
37. In developing the Connect America Cost Model, the Bureau concluded that census blocks shown as served on the National Broadband Map would be treated as presumptively served, and it determined that, for purposes of the Phase II challenge process, partially served census blocks would be treated as fully served. It did so primarily for administrative reasons, due to concern that conducting a challenge process at the sub-census block level would be time consuming and burdensome for all affected parties.
38. In the concurrently adopted Report and Order, the Commission recognized the need to provide recipients of Phase II support flexibility to serve areas where the average cost is equal to or above the Connect America Phase II funding benchmark. The Commission concluded that allowing funding recipients in the competitive bidding process to deploy to locations that would be above the extremely high-cost threshold would enable them to build integrated networks in adjacent census blocks as appropriate.
39. For similar reasons, the Commission now seeks comment on two potential measures that would provide all recipients of Phase II funding, both in the state-level commitment process and competitive bidding process, greater flexibility to satisfy their deployment obligations.
40. First, the Commission seeks comment on to permitting Phase II recipients (both price cap carriers accepting the state-level commitment and winners in a competitive bidding process) to specify they are willing to deploy to less than 100 percent of locations in their funded areas, with associated support reductions to the extent they elect to deploy to less than 100 percent of funded locations. If the Commission were to adopt such a proposal, it proposes to establish a minimum percentage of locations that must be served by a Phase II recipient. Would 95 percent of funded locations be an appropriate minimum? To the extent parties argue that the required percentage should be lower than 95 percent, they should identify with specificity the particular number. Should the Commission require the Phase II recipient to specify the number of locations it intends to deploy to at the time funding is first authorized, or should it provide it with flexibility to adjust its deployment commitments for some period of time after making a state-level commitment or being authorized to receive support through a competitive bidding process?
41. The Commission seeks comment on how to adjust the support a Connect America Phase II recipient should receive if it were to adopt this proposal. One way to reduce support would be in direct proportion to the number of locations left unserved within a given state. Another way would reduce a provider's support based on the support the model attributed to serving each location. Is one methodology superior to the other? Is one method more administrable or does either create better incentives for deployment? Would the method that reduces support based on model-determined support be appropriate for Phase II recipients that are awarded support through a competitive bidding process? Are there other methodologies that would better
42. Second, the Commission seeks comment on allowing Phase II recipients to substitute some number of unserved locations within partially served census blocks for locations within funded census blocks. Phase II funding recipients thus would have the option to deploy to some number of unserved locations within partially served census blocks in lieu of deploying to a number of locations in otherwise eligible census blocks. This approach could enable more effective network deployment and bring service to unserved consumers in those partially served census blocks. If the Commission were to adopt such an approach, should it establish a limit on the number of locations that could be substituted to meet the deployment obligation? For instance, should a price cap carrier or recipient of support through a competitive bidding process be able to substitute no more than five percent of its funded locations with unserved locations in partially served census blocks?
43. The Commission seeks comment on whether the benefits of allowing the flexibility to serve in partially served census blocks outweigh the costs imposed on those that have invested private capital to deploy service nearby. The Commission seeks comment on how the substitution process would work given that Connect America Phase II recipients are most likely to substitute locations when the costs of serving the new locations is lower than the cost of serving the locations originally designated in funded census blocks. For example, the simplest substitution metric would require that the number of new locations equal or exceed the number of old locations (i.e., one-for-one swaps). A more complicated substitution metric would require the modelled support for serving the new locations equal or exceed the modelled support for serving old locations. Is one methodology superior to the other? Is either more administrable or does either create better incentives for deployment? Are there other methodologies that would better serve our universal service goals if the Commission were to adopt this proposal?
44. The Commission emphasizes that it is not proposing to overturn the Bureau's decision not to entertain sub-census block challenges in the Phase II challenge process. That was a reasonable decision given the anticipated number of challenges that may be filed regarding the list of census blocks potentially eligible for the offer of model-based support. Partially served census blocks will continue to be treated the same as fully served census blocks, and excluded from calculations of the offer of model-based support. Rather, the Commission is proposing to give funding recipients the flexibility to deploy to unserved locations that within census blocks that are deemed served, after they are awarded support either through the offer of model-based support or the competitive bidding process, subject to reasonable limitations to ensure that no overbuilding occurs.
45. The Commission seeks comment on measures to ensure that this flexibility does not result in the overbuilding of those locations within such census blocks that are in fact served. For example, should the Phase II funding recipient be required to announce publicly the locations in any partially served census block it plans to deploy to, with sufficient specificity that would enable other providers to determine whether they serve such areas? Would it be sufficient to require an identification of the roads or addresses intended for deployment, or should the Commission also requires an announcement of the latitude/longitude coordinates for specific locations?
46. To minimize the burden of monitoring intended deployment plans on other potentially impacted parties, the Commission proposes that the price cap carrier would be required to identify locations outside of its funded census blocks intended for potential deployment on an annual basis during the five-year term. This could occur, for instance, in conjunction with filing the annual FCC Form 481. After making such an announcement, the funding recipient would be required to wait a period of time before commencing construction to those locations. Is 90 days a sufficient period of time? The Commission seeks comment on whether a 90-day notice process would enable any existing providers to inform the Phase II funding recipient that it already serves the locations in question with voice and broadband service meeting the Commission's standards. If no statement of service is received within 90 days, the funding recipient would be permitted to deploy to the locations. The funding recipient could disregard statements received after the 90-day window. What process should occur if another provider contends that it serves the locations, but the Phase II funding recipient wants to contest such assertions?
47. If the Commission were to adopt such a rule, should it specify a format for the announcement of the planned deployment or the statement of service? Would it be sufficient that the announcement be posted to the Phase II funding recipient's Web site, or should the Commission require that the announcement be posted to ECFS? Should the Commission require that a copy of the announcement of intended deployment plans be sent to any existing voice and broadband provider shown as serving the area on the National Broadband Map? Should the Commission require that the statement of service be made under penalty of perjury? Should such statements be posted to ECFS in lieu of or in addition to submitting them to the funding recipient? What other requirements should the Commission consider that will meet our objectives of providing service to unserved consumers in high-cost areas, regardless of their location, while ensuring that the Commission does not inadvertently fund deployment to areas that are in fact served?
48.
49. The Commission also seeks comment on excluding from the Phase II competitive bidding process any area that is served by a price cap carrier that offers fixed residential voice and broadband meeting the Commission's requirements. Consequently, if the
50. If the Commission were to allow Connect America support to be used to overbuild the broadband network of a provider, even one that is subsidized, it would mean those support dollars would not be available to deploy broadband-capable infrastructure in areas that truly lack broadband. On the other hand, the Commission recognizes that excluding areas that currently may have fixed residential voice and broadband services may make it more difficult for bidders in a competitive process to develop bids for a network that is cost-effective to build; it is possible that the amount of support provided for the unserved census blocks alone may be insufficient to build out to those census blocks on a stand-alone basis. The Commission seeks comment on this analysis and how best to ensure that it extends broadband-capable infrastructure to those lacking it today.
51. The Commission seeks comment on whether it should exclude from Phase II support only those areas where the current provider certifies that it is able and willing to continue providing terrestrial fixed residential voice and broadband services meeting the Commission's requirements for a specified period of time, such as five years. Some parties argue that a subsidized provider may cease to provide service once support is phased out, leaving consumers in such areas without service. Rather than assuming that existing providers will not exit those markets that they currently serve, regardless of whether they receive legacy support in such areas or not, requiring a certification could provide an additional assurance that consumers will receive the same level of service that they otherwise would have if the area were not receiving Phase II support. If the current provider is unwilling to make such a certification, then the area would not be precluded from receiving Phase II support.
52. Finally, the Commission also seeks comment on the broader question of whether universal service funds are ever efficiently used when spent to overbuild areas where another provider has already deployed service. In this section, the Commission proposes to exclude support for areas already served by an existing provider meeting the requisite voice and broadband requirements; whether a provider receives universal service support should not necessarily be the determining factor. The Commission proposes to define such a provider that meets the voice and broadband requirements as a “qualifying competitor.” Second, the Commission seeks comment on whether our other rules that reduce or eliminate support in areas with unsubsidized competitors should be reframed as reducing or eliminating support in areas with qualifying competitors, whether subsidized or not. For example, should the 100 percent overlap rule apply only where unsubsidized competitors overlap an incumbent or also where any qualifying competitor overlaps the incumbent?
53. As noted in the concurrently adopted Report and Order, only ETCs designated pursuant to section 214(e) of the Act “shall be eligible to receive specific Federal universal service support.” Section 214(e)(2) gives states the primary responsibility for ETC designation. However, section 214(e)(6) provides that this Commission is responsible for processing requests for ETC designation when the service provider is not subject to the jurisdiction of the state public utility commission.
54. Streamlining the process of seeking federal designation when states may lack jurisdiction is necessary for the efficient implementation of the Connect America Fund, so that the Commission may provide support for access to services in high-cost areas, including the most remote and costly areas of the nation, in an efficient and timely manner. The Commission believes that this can be accomplished within the Act's framework for state and federal action. Although the Commission has previously stated that it would act on ETC designation applications “only in those situations where the carrier can provide the Commission with an affirmative statement from the state commission or a court of competent jurisdiction that the carrier is not subject to the state commission's jurisdiction” and that the technology used (e.g., satellite service) “does not
55. In the concurrently adopted Order, the Commission permits entities to seek ETC designation
56. Second, the Commission proposes to adopt a rebuttable presumption that a state commission lacks jurisdiction over an ETC designation petition for purposes of Connect America Phase II competitive bidding or Remote Areas Fund if it fails to initiate a proceeding on that petition within 60 days of receiving it. The Commission seeks comment on whether it should adopt a similar rebuttable presumption if a state commission fails to decide a petition within a certain period of time, such as 90 days of initiating a proceeding on it. Under this proposal, a carrier may file for ETC designation with the Commission and point to the lack of state action within the prescribed time period as evidence that the petitioner is not subject to the jurisdiction of a state commission. In determining whether a state commission lacks jurisdiction over the applicant, Commission staff would weigh any statements that a state commission submits during the notice-and-comment period against the lack of action and the arguments of the applicants. The Commission seeks comment on this proposal.
57. The Commission notes that this streamlined framework would not preempt a state's designation authority under section 214(e)(2) but instead is intended to be consistent with the framework of the Communications Act, while ensuring that applications will not remain pending before state commissions for an undefined period of time while carriers wait for an affirmative statement that there is no state jurisdiction. Nor would this action make ETC designation “nationwide,” but instead would require approval by this agency on a case-by-case basis, based on reviewing the evidence of jurisdiction, as well as the fact that the individual state commission did not act within the requisite period. And the Commission recognizes that alternative technology service providers, such as satellite or fixed wireless service, have not traditionally been subject to state public utility commission regulations. If a state has a law expressly stating that it does not have jurisdiction over a relevant type of technology, Commission staff would consider such a statute relevant in its determination of Commission jurisdiction. To the extent states do assert jurisdiction over alternative technology service providers, given our shared commitment to expanding the availability of broadband to all Americans, the Commission expects that state commissions will act swiftly to conclude such proceedings in order to rule on the ETC application.
58. Third, the Commission seeks comment on sunsetting ETC designations tied to participation in the Connect America Phase II competitive bidding process or the Remote Areas Fund after the funding term has expired and the entity has fulfilled its build-out and public interest obligations. As WISPA has explained, “imposing continuing obligations that extend beyond the funding term would discourage participation by qualified companies that desire to compete for funding under the subject CAF program.” The Commission seeks comment on whether sunsetting those ETC designations is consistent with the Act. The Commission notes that a carrier may not discontinue voice service without receiving authorization pursuant to section 214 and that sunsetting an ETC designation for federal purposes would not impact state obligations such as carrier of last resort obligations to the extent applicable. The Commission seeks comment on this proposal. Under such a proposal, how would the Commission ensure that rates remain affordable for low-income consumers? Should those ETCs be required to maintain their ETC designation for purposes of the Lifeline program throughout the areas for which they receive support, subject to existing procedures for relinquishment?
59. At this time, the Commission does not propose to preempt state review of ETC designation applications or to deem applications granted after 30 days because there is nothing in the record before us that would warrant such a broad change from the existing framework. Rather, the Commission believes that the proposed changes to the current ETC process would be sufficient. The Commission seeks comment on this analysis.
60. In this section, the Commission seeks to develop further the record on several transition issues relating to implementation of Phase II in areas currently served by price cap carriers. First, the Commission seeks comment on the amount of support to be provided to the incumbent ETC in areas that no other provider wishes to serve, and the associated obligations that go with such funding. Second, the Commission seeks comment on performance obligations to be associated with frozen support elected by price cap carriers serving non-contiguous areas of the country. Third, the Commission proposes various minor changes and clarifications regarding the transition to Phase II.
61.
62. The Commission seeks comment on how to calculate the amount of frozen support that should be provided to the price cap carrier in situations where another ETC is awarded support through a competitive bidding process to serve a portion, but not all, of the area that is subject to the state-level commitment. The Commission also seeks comment on providing frozen support on an interim basis to price cap carriers, in those areas determined by the model to be extremely high-cost areas where there is no other voice provider, pending designation of other ETCs to serve such areas and further Commission proceedings.
63. The Commission proposes a simplified methodology to calculate the amount of support to provide at least on an interim basis in high-cost and extremely high-cost areas to the extent no other ETC is designated to serve such areas. In particular, the Commission proposes to use the Connect America Cost Model to develop a ratio of the cost of serving all blocks where the average cost per location is at or above the final funding benchmark adopted by the Bureau for determining the offer of model-based support to price cap carriers to the total cost of serving for the state. That ratio would then be multiplied by the total amount of Phase I frozen support for that carrier in the relevant state. Is this a reasonable interim methodology to use to calculate support to be provided for those areas that no other party wishes to serve? Are there other potential methodologies for providing a pro-rata amount of frozen high-cost support for such areas? What would be the budgetary impact of awarding such additional frozen support to incumbent providers in certain areas if the full Phase II budget is awarded through the combination of the offer of model-based support to price cap carriers and competitive bidding process?
64. The Commission proposes to eliminate or modify the current requirement that the price cap carrier certify that all of its frozen support in 2015 and thereafter “was used to build and operate-broadband-capable networks used to offer the provider's own retail broadband services in areas substantially unserved by an unsubsidized competitor.” The Commission seeks comment on whether, once the offer of model-based support is implemented, price cap carriers declining model-based support should instead be required to certify that they are using such support to continue to offer voice service in such high-cost and extremely high-cost areas that no other providers wish to serve. Should such frozen support be provided for a defined period of time, or until the occurrence of specific event, such as the designation of another ETC to serve the area in question? What would be an appropriate time frame to revisit both the nature of the obligations and the amount of frozen support to be provided to price cap carriers to serve such high-cost and extremely high-cost areas? In particular, should the Commission revisit these questions when it conducts further proceedings to determine next steps after the end of the term of Phase II support for those price cap carriers
65. Both landline and mobile voice services meet the definition of voice telephony and both have been supported through the federal high-cost and the Lifeline programs. In the
66. The Commission asks commenters to provide specific data relating to the extent of mobile wireless coverage in the areas identified by the forward-looking cost model as high-cost or extremely high-cost. How would the Commission determine whether areas purportedly served by mobile voice providers are in fact served? What data sources should the Commission rely upon, if it were ultimately to conclude that interim frozen support is not necessary in areas where there is a mobile voice service provider? How should the Commission take into account the fact that mobile coverage may vary within a census block, with some customers receiving adequate coverage while other customers may not? Should the Commission refocus our vision for the Remote Areas Fund to preserve voice service for residential consumers in those price cap areas that do not have adequate signal strength for mobile service to be a reliable alternative?
67.
68. The Commission seeks comment on whether ETCs should be deemed to only have a federal high-cost obligation for the geographic areas for which they receive support. Does such a reading comport with the statutory language in section 214—which specifies that ETCs “shall, throughout the service area for which the designation is received—offer the services that are supported by Federal universal service support mechanisms under section 254(c)”? The Commission notes that under such a statutory interpretation, if an incumbent LEC ETC no longer were receiving any form of high-cost support, it would effectively become Lifeline-only ETCs throughout its service territory with the continuing obligation to provide service to Lifeline customers, subject to existing ETC relinquishment procedures.
69. What specific ETC obligations would an incumbent LEC be relieved of under such an interpretation of the statute? To the extent an incumbent LEC receives CAF–ICC support, how should the Commission determine the specific geographic areas that would be associated with that support?
70.
71. The Commission proposes that non-contiguous carriers electing to receive frozen support be subject to the same public interest service standards as those receiving model-based support, however modified in response to this FNPRM. In this FNPRM, the Commission seeks comment on whether it should increase the minimum broadband speed requirement for carriers that elect model-based Phase II support to 10 Mbps downstream. If the Commission adopts this new standard, it proposes it should also apply to non-contiguous carriers that elect to continue to receive frozen support. To the extent non-contiguous carriers contend that they should be held to a lesser speed standard, they should propose with specificity the number or percentage of locations in their funded areas that would receive lesser service.
72. Consistent with the
73. In addition to speed and price obligations, the Commission proposes that non-contiguous carriers continuing to receive frozen support be subject to the same usage allowance specified by the Bureau for price cap carriers receiving model-based support. Specifically, the Commission proposes that these non-contiguous carriers must initially offer at least one service option that provides a minimum usage allowance of 100 GB per month at a rate that either meets the reasonable comparability benchmark announced by the Bureau or at a rate that is the same or lower than rates for its fixed wireline services in urban areas. The Commission also proposes that this minimum initial usage allowance should be adjusted over time to reflect trends in consumer usage over time. The Bureau permitted price cap carriers accepting model-based support to make this determination based on the usage level of 80 percent of all of its broadband subscribers, including those subscribers that live outside of Phase II-funded areas, while concluding that 100 GB would serve as a floor, even if 80 percent of the carrier's subscribers used less than 100 GB. The Commission
74. The Commission also proposes that non-contiguous carriers be required to meet a roundtrip provider network latency of 100 milliseconds or less. The Bureau noted in the
75. The Commission proposes that non-contiguous carriers receiving frozen support must not use such support in any areas where there is a terrestrial provider of fixed residential voice and broadband service that meets our Phase II performance requirements. To the extent a non-contiguous carrier is unable to meet this requirement, the Commission proposes that it relinquish whatever amount of frozen support it is unable to use for the intended purpose. The Commission seeks comment on these proposals.
76. The Commission seeks comment on the specific build out obligations that non-contiguous carriers receiving frozen support would have in those census blocks that do not currently have broadband service meeting the Commission's requirements. Specifically, should non-contiguous carriers receiving frozen support be required to deploy voice and broadband-capable networks and offer services meeting the above performance metrics to all locations in those funded areas, consistent with the state-level commitments required of carriers receiving model-based support? In the alternative, should these carriers be allowed to serve some subset of locations within their respective service areas where the average cost equals or exceeds the funding benchmark established by the Bureau? Should they also be required to extend broadband-capable networks to serve some specified number of locations in census blocks determined by the model to be above the extremely high-cost threshold?
77. The Commission seeks comment on how to monitor and enforce compliance by non-contiguous carriers receiving frozen support once it has determined their specific service obligations. Are there any measures that must be in place to ensure that the Commission has the ability to monitor compliance with these service obligations? Are there any considerations specific to non-contiguous areas that the Commission should account for when determining whether these carriers have complied with their service obligations? Below, the Commission proposes potential support reductions for price cap carriers receiving model-based support that fail to fulfill their service obligations. The Commission proposes that non-contiguous carriers receiving frozen support would be subject to similar reductions in support for failing to fulfill their service obligations. Should any adjustments to that framework be made?
78. Finally, the Commission seeks comment on whether to specify a five-year term for those non-contiguous carriers that elect to receive frozen support, and whether there is a need to modify the term of support for such non-contiguous carriers. Are there any specific extenuating circumstances in non-contiguous areas that would require extending the term of frozen support for longer than five years?
79. Recognizing there may be differing circumstances for each of the non-contiguous carriers, the Commission asks whether it should adopt tailored service obligations for each one that chooses to elect frozen support. To the extent non-contiguous carriers contend that they could not meet one or more of the public interest service standards set forth above, they should submit specific alternatives. However, the Commission notes that, for certain non-contiguous carriers, the amount of frozen support they would receive is greater than the amount of model-based support they would receive. The Commission expects, therefore, that any alternatives proposed by these carriers would reflect this level of support and would be consistent with the Commission's goal of ensuring universal availability of modern networks capable of providing voice and broadband service to homes, businesses, and community anchor institutions.
80. The Commission proposes several minor changes and clarifications regarding the implementation of the transition to model-based support to ease the administration of Connect America Phase II. First, the Commission proposes to align the five-year term for model-based support provided to price cap carriers that elect to make a state-level commitment with calendar years, specifically, 2015 through 2019. Second, the Commission proposes that a carrier accepting state-level support pursuant to Connect America Phase II should receive the full amount of Phase II support in the initial year, rather than the transitional amount of support adopted in the
81. Under the recordkeeping and reporting rules established by the Commission, many accountability requirements operate on a calendar year basis. Aligning the funding years of Connect America Phase II with the reporting and recordkeeping years established in sections 54.313 and 54.314 of the Commission's rules could lessen administrative burdens, for the Fund Administrator, states, and recipients.
82. At this juncture, the Commission anticipates that while the offer of support may be extended before the end of 2014, the deadline for acceptance will be in 2015, 120 days later. The Commission proposes to disburse a lump sum amount to those carriers for whom model-based support in a given state will be greater than Connect America Phase I support, representing the additional amount of model-based support that would accrue for the
83. In the
84. The Commission now proposes to eliminate the transition year and disburse the full amount of model-based support in the initial year to those carriers for whom the amount of model-based support is greater than frozen support. The Commission expects this will reduce administrative burden on the Fund Administrator, as it will only need to program its systems once to disburse the appropriate monthly amounts over the five-year period, rather than first implementing a transition year, and then switching to the full model-determined amounts the second year. In addition, the Commission expects that this would provide greater certainty for carriers accepting a state-level commitment than deferring disbursement of part of the initial year's support until certain milestones are met, as suggested in the
85. The Commission therefore proposes that, for a carrier accepting a state-level commitment, in the first year the carrier will receive 100 percent of the annualized amount the carrier will receive pursuant to Connect America Phase II, and no additional Connect America Phase I support. The Commission seeks comment on this proposal and our analysis.
86. As described above, the Commission noted “[t]o the extent a carrier will receive less money from CAF Phase I than it will receive under frozen high-cost support, there will be an appropriate multi-year transition to the lower amount.” It is not clear from the language whether the Commission intended the reference to “CAF Phase I” to encompass Phase I incremental support.
87. The Commission proposes to clarify that for the purposes of transitioning from Connect America Phase I to Phase II, only Connect America Phase I frozen support is relevant. Specifically, the multi-year phase down in support that the Commission adopts in the concurrently adopted Report and Order would only apply to frozen support and would not include Phase I incremental support. Incremental support was provided to carriers on a one-time basis in exchange for specific build-out commitments, in contrast to the ongoing frozen support. The Commission is unaware of any policy justification for providing any fraction of the one-time support on a recurring basis under the guise of a transition to Connect America Phase II. The Commission seeks comment on this proposed clarification.
88. More than 1,000 expressions of interest in rural broadband experiments have been filed by a wide range of entities. Although the Commission has not yet established selection criteria or a budget for those experiments, it is likely that there will be a number of well-developed formal proposals. Such proposals provide strong evidence that at least some entities are prepared to extend robust broadband in a given high-cost area for an amount less than or equal to the amount of model-based support that would be provided to a price cap carrier through the state-level commitment process for that area. The Commission therefore seeks comment on whether such an indication of potential competitive entry through a formal proposal for an area should be grounds for removing that area from a carrier's state-level commitment (i.e., the carrier would not receive model-based support for that area and would have no obligation to meet the broadband performance obligations in that area).
89. The Commission seeks comment on what conditions a rural broadband experiment formal proposal would have to meet in order to remove a geographic area from a price cap carrier's state-level commitment. In particular, the Commission seeks comment on the broadband performance, amount of support requested, and other conditions a rural broadband formal proposal should meet before the area it covers would be removed from the price cap carrier's state-level commitment. For example, based on staff review thus far, it appears that the vast majority of the expressions of interest received to date are requesting one-time support, rather than recurring support. In order to remove a particular geographic area from the state-level commitment, should the amount of one-time support requested be annualized over a ten-year period, to provide an apples-to-apples basis for comparison to model-based support? Should the proposal be required to indicate a willingness to receive the amount of one-time support requested over a multi-year period, such as five or ten years? What other factors should the Commission consider before concluding a formal application is sufficiently meritorious to remove an area from a carrier's state-level commitment?
90. From an administrative perspective, how would the Commission implement the removal of an area from a carrier's state-level commitment? Should the Commission remove all areas that are covered by formal rural broadband experiment proposals that meet the conditions discussed above that the Commission does not fund through the rural broadband experiment? What other criteria could the Commission use to determine whether an area should be removed from a carrier's state level commitment? To the extent a formal rural broadband experiment proposal covers an area that is served in part by a rate-of-return carrier and in part by a price cap carrier, should the proposal be required to indicate that the applicant will proceed if only funded in the price cap portion of the proposed service area,
91. If the Commission were to adopt such an approach, how would this affect the incentives of potential participants in the Phase II competitive bidding process to express their interest prior to the offer of support to price cap carriers? How would this affect the incentives of price cap carriers to accept or decline model-based support? How would it affect the timing and extent of the deployment of broadband-capable infrastructure in high-cost areas? Given that the vast majority of the expressions of interest proposing to extend fiber-based technologies propose to deploy fiber-to-the-premise, would removing such areas from the state-level commitment result in greater deployment of broadband to high-cost areas than would be the case under the current Connect America framework?
92. In the concurrently adopted Report and Order, the Commission sets certain parameters for the Phase II competitive bidding process. In this section, the Commission seeks to develop further the record on additional issues relating to the competitive bidding process that will occur in Phase II.
93. In the
94. The Commission recognizes the importance of specifying in advance objective, well-defined, and measurable criteria for selecting among entities that seek funding in a competitive bidding process. The record received in response to the
95.
96.
97.
98.
99.
100. Rather than the multi-step approach proposed above, should the Commission consider bidding credits to effectuate priorities that advance our objectives? The Commission seeks to refresh the record on the use of bidding credits, including bidding credits for service to Tribal lands, and also ask whether to provide bidding credits to bidders that propose to offer service that substantially exceeds the Commission's standards.
101. The Commission also seeks comments on concerns that a reverse auction will result in bidders competing to provide the minimally acceptable level of service. How can the Commission best ensure that any competitive bidding process it ultimately adopts will bring an evolving level of broadband service to consumers, businesses, and anchor institutions in rural America? The Commission now seeks to refresh the record and seek more focused comment on what objective metrics should be used when the Connect America Phase II competitive bidding process is implemented nationwide in price cap territories to the extent the offer of model-based support is declined. Specifically, what criteria should be adopted that will determine who is awarded support?
102. Additionally, the Commission seeks comment on what specific rules and requirements must be in place before it makes the offer of model-based support to price cap carriers. As noted above, the Commission has already adopted rules for the award of universal service support through a competitive bidding process, codified in Subpart AA of Part 1. Those rules specify, among other things, that the following will be specified by public notice prior to the commencement of competitive bidding: (1) The dates and procedures for submitting applications to participate in the competitive bidding process; (2) the details of and deadlines for posting a bond or depositing funds with the Commission to provide funds to draw upon in the event of defaulting bids; (3) procedures for competitive bidding, including but not limited to whether package bidding will be allowed and reserve prices; and (4) the amount of default payments, not to exceed 20 percent of the amount of the defaulted bid amount. Typically, these matters would be specified only after the Commission knows the inventory of areas that will be subject to auction. The Commission seeks comment on which, if any, of these matters should be specified by public notice before it makes the offer of model-based support to price cap carriers. Are there other rules and requirements that should be specified in advance of the commencement of the Connect America Phase II competitive bidding process?
103. Since the
104.
105. Section 254(b) of the Act requires the Commission to base policies on the “preservation and advancement of universal service.” In recognition of this statutory directive, the Commission in the
106. Given the experiences with Mobility Fund Phase I and Tribal Mobility Fund Phase I where demand for universal service support far exceeded the supply of available funding, the Commission recognizes that there is a need and desire on the behalf of providers to extend mobile service, consistent with our universal service goals. The Commission therefore proposes to focus competitive bidding for Mobility Fund Phase II support on extending mobile 4G LTE to the remaining U.S. population that will not have it available from either Verizon or AT&T. Consistent with this objective, the Commission proposes to distribute those funds within a defined budget so as to maximize the population that can be served with 4G LTE. The Commission proposes to identify areas eligible for support, i.e., areas where neither Verizon nor AT&T provide 4G LTE, but also seek comment below on whether this standard will preserve existing service in those situations where the network of a mobile provider covers both eligible and ineligible areas. The Commission also proposes to identify eligible areas using the most recently available data for this purpose as reported on Form 477. Our FCC Form 477 data collection was revised in June 2013; the Commission expects to begin collecting more granular data regarding mobile broadband service and new data regarding mobile voice service availability in September 2014. The Commission seeks comment on these proposals.
107. Based on technological developments in the industry, our proposal would require that recipients of Mobility Fund Phase II support deploy 4G LTE. Is there another deployment standard the Commission should use? For example, in the
108.
109. The Commission seeks to further develop the record on how much of that $400 million in competitive ETC support provided today to smaller and regional wireless providers is covering ongoing operating expenses, and how much of it is being used to extend service to unserved areas. To the extent commenters contend that the current funding is necessary to preserve existing service, they should identify with particularity those amounts and specify the extent to which such subsidized service overlaps with the coverage areas of one of the four national providers. To what extent is existing frozen support being provided to areas that are not expected to receive 4G LTE from either Verizon or AT&T?
110. In re-evaluating the appropriate size of the Mobility Fund Phase II, should the Commission preserve the existing amount of funding dedicated to Tribal lands? In 2011, the Commission concluded that up to $100 million of the Mobility Fund Phase II budget should be targeted at Tribal lands throughout the nation, including remote areas in Alaska. Recognizing the continuing connectivity challenges facing Tribal lands, should the Commission proceed to conduct an auction to award up to $100 million in ongoing support to mobile providers on Tribal lands throughout the nation? To what extent are Tribal lands in the geographic areas where AT&T and Verizon do not intend to extend 4G LTE? Should the Commission implement such an auction first, before determining how to proceed more generally with respect to Mobility Fund Phase II?
111. If the Commission adjusts downward the budget for Mobility Fund Phase II, it proposes to reallocate those funds to the Remote Areas Fund or the competitive bidding process for Connect America Phase II. The Commission seeks comment on this proposal. The Commission expects wireless providers that meet the requisite service standards will participate in both the Remote Areas Fund and Connect America Fund. Wireless technology may well be the appropriate solution to serve many areas lacking broadband today, and the Connect America Phase II competitive bidding process and Remote Areas Fund will be implemented in a technologically neutral manner to allow the participation of as many entities as possible. Would re-allocating a portion of the Mobility Fund Phase II budget to either of these mechanisms be consistent with our overall reform objectives?
112. The Commission specifically asks commenters whether, instead of maintaining the $500 million budget for Mobility Fund Phase II, it should use a portion of that budget, potentially including undisbursed funds remaining from Mobility Fund Phase I, to provide one-time support to those providers willing to extend mobile LTE to eligible unserved areas. If the Commission were to adopt such an approach, how much funding should it reserve for recurring annual support under a more narrowly focused Mobility Fund Phase II?
113.
114.
115. The Commission proposes to amend our identical support phase-down rules in several ways. First, for each wireless competitive ETC for which competitive ETC funding exceeds 1 percent of its wireless revenues, the Commission proposes to maintain existing support levels until a specified date after the announcement of winning bidders for Mobility Fund Phase II ongoing support, with that date depending on whether it is a winning bidder of such support. While the Commission is not convinced that maintaining existing support levels for these providers is necessary to ensure that consumers continue to have access to mobile service, it lacks sufficient data at this time to adopt a more tailored approach. Second, the Commission proposes to accelerate the phase-down for those wireless carriers that it
116.
117. Regardless of what the Commission ultimately adopts regarding the phase-down in frozen support for competitive ETCs, the Commission proposes to accelerate the phase-down for any wireless competitive ETC for whom high-cost support represents one percent or less of its wireless revenues, eliminating such support on December 31, 2014 or the effective date of the rule, whichever is later. A number of competitive ETCs currently are receiving very small amounts of support. Is it reasonable to assume that if a carrier's competitive ETC support is a tiny fraction of its revenues, that carrier is not relying on such support to maintain existing service? The Commission proposes to determine the requisite percentage based on reported revenues as submitted by the high-cost recipient or its affiliated holding company on the most recent FCC Form 499–A. The Commission seeks comment on this proposal. For purposes of implementing such a proposal for wireless competitive ETCs, should the Commission focus solely on reported wireless revenues or on total revenues reported on the FCC Form 499? The Commission notes that if it were to adopt this proposal, any provider could seek a waiver of the accelerated phase-down if the elimination of support would result in consumers losing access to existing service.
118. The Commission seeks comment on whether to take a different approach for resumption of the phase-down in frozen support for wireline competitive ETCs. For instance, should the Commission maintain existing frozen support levels (i.e., 60 percent of baseline support) for wireline competitive ETCs until winning bidders are announced in the Phase II competitive bidding process? Or, should the Commission revise our rules and continue the phase down of support for these wireline competitive ETCs upon the effective date of a rule, unless they are the only provider of voice and broadband service meeting our current broadband performance obligations in an area?
119. Finally, the Commission notes that because the
120. The Commission now proposes to freeze the total amount provided to each competitive ETC serving remote areas in Alaska. This would simplify support calculations for the Administrator, while not disturbing existing support levels for existing competitive ETCs. Competitive ETCs would no longer be required to file line counts for remote areas of Alaska, thus alleviating the need for the Bureau to address on a case-by-case basis how competitive ETCs should report line counts in situations where the customer's billing address is either unavailable or does not accurately represent the location of where the service is actually provided. Under this proposal, the baseline for competitive ETC support in remote areas of Alaska would be set as of a date certain, such as December 31, 2014, or the effective date of the rule, whichever is later. The Commission seeks comment on this proposal.
121. Above, the Commission proposes to maintain existing support levels for wireless competitive ETCs until after it adopts rules for Mobility Fund Phase II. Consistent with the framework established by the Commission in 2011, the Commission proposes to maintain the baseline frozen support for each competitive ETC serving remote areas in Alaska until (1) the first month after the month in which its Mobility Fund Phase II or Tribal Mobility Fund Phase II ongoing support is authorized in the case of a winning bidder of such Mobility Fund Phase II support, or (2) the first month after the month in which a public notice announces winning bidders for ongoing support under Mobility Fund Phase II or the Tribal Mobility Fund Phase II, whichever is later, for a competitive ETCs that is not winning bidder of such Mobility Fund Phase II or Tribal Mobility Fund Phase II support. Upon that date certain, the phase-down in support would commence under the schedule originally adopted by the Commission: 80 percent of the baseline in the first year; 60 percent of the baseline in the second year; 40 percent of the baseline in the third year; and 20 percent of the baseline in the fourth year. The Commission seeks comment on this proposal. To the extent parties argue for a different approach, they should
122. Rate-of-return carriers play a significant and vital role in the deployment of 21st century networks throughout the country. The Commission recognizes that telephone service would not exist today in many rural and remote areas of the country without the concerted efforts of local companies to serve their communities. As the Commission moves forward with the Connect America Fund Phase II for price-cap carriers, it remains cognizant of the fact that many of the same marketplace and technological forces that led to the development of the Connect America Fund for price cap carriers are also affecting rate-of-return carriers. Access lines are declining; residential customers increasingly are cutting the cord; and both consumers and businesses are demanding broadband. Rate-of-return carriers are not insulated from competitive pressures, and they must be prepared to shift their business models for a new era. In light of these realities, the Commission seeks here to renew a dialogue regarding the best way to encourage continued investment in broadband networks throughout rural America to ensure that all consumers have access to reasonably comparable services at reasonably comparable rates. In short, the Commission seeks to establish a “Connect America Fund” for rate-of-return carriers.
123. The Commission continues to have significant concerns regarding the structure and incentives created under the existing high-cost mechanisms for rate-of-return carriers, such as the “race to the top” incentives that exist under HCLS and the “cliff effect” of the annual adjustment of the HCLS cap. The structure of the current HCLS mechanism creates problematic incentives: Some companies operating in high-cost areas receive all of their incremental additional investment through the federal support mechanism, while other companies operating in high-cost areas receive no support whatsoever from HCLS due to how support is reduced to fall within the overall HCLS cap.
124. Support for rate-of-return carriers has been subject to the HCLS cap, which is rebased annually through a rural growth factor, for more than a decade. In 2001, the Commission modified the distribution of HCLS by rebasing the fund for rural telephone companies and retaining an indexed cap. Specifically, the Commission concluded that the total cap on HCLS would be adjusted annually by a rural growth factor equal to the sum of the annual percentage changes in the gross domestic product-chain priced index and the total number of working loops. Given decreases in working loops in rate-of-return study areas in recent years, resulting in reductions of the indexed cap, HCLS has been reduced substantially for many rate-of-return carriers while others incur almost no reduction. The Commission also adopted a rule that ensures that rural carriers receive the total amount of capped HCLS, regardless of the extent to which individual carriers' costs exceed the actual national average cost per-loop (NACPL) by the requisite percentages. Neither of these features of the HCLS rule was altered in the
125. As a near term measure that can be quickly implemented to mitigate both of these deficiencies, the Commission proposes to reduce support proportionally among all HCLS recipients by no longer adjusting the NACPL, but instead reducing the reimbursement percentages for all carriers. Under the proposed rule, reductions in support will be spread proportionally among all carriers, and carriers presently close to the NACPL will no longer run the risk of “falling off the cliff” in terms of their receipt of HCLS support. This rule could be implemented beginning January 1, 2015. The Commission seeks comment on this proposal and invite comment on other possible methods to address this issue.
126. The HCLS rules require adjusting the NACPL annually so that total HCLS support equals the indexed cap. Currently, HCLS rules reimburse 65 percent of the loop costs in excess of 115 percent, but less than 150 percent of the NACPL and 75 percent of loop costs in excess of 150 percent of the NACPL. Because the NACPL is adjusted each year, many carriers are precluded from receiving any HCLS, and those carriers with costs close to the NACPL that is used to determine HCLS experience large percentage reductions in support. This gives those carriers with the highest loop costs relative to the national average minimal incentive to reduce costs. To curtail this “race to the top,” the Commission proposes to freeze the NACPL that is used to determine support and instead to reduce HCLS proportionately among all HCLS recipients by reducing the 65 percent and 75 percent reimbursement percentages by equivalent amounts to maintain aggregate support at the indexed cap. This effectively would freeze the NACPL at the capped amount as of December 31, 2014, or the effective date of the rule, whichever is later. In conjunction with this “freezing” of the NACPL, the Commission also proposes to reduce the NACPL and continue to use the 65 percent and 75 percent reimbursement percentages whenever calculated support using the 65 and 75 percentages will not exceed the indexed cap for HCLS in the aggregate. Under the first part of the proposed rule, reductions in support would be spread proportionally among all recipients of HCLS, and carriers presently close to the now frozen NACPL would no longer run the risk of “falling off the cliff” in terms of their receipt of HCLS support. Under the second part of the proposed rule, if there are other changes that would otherwise result in a lowering of the NACPL, carriers will receive support based on the 65 and 75 percentage reimbursements.
127. The Commission proposes as another near-term measure to adopt a rule that no new investment after a date certain (i.e., December 31, 2014) may be recovered through HCLS and ICLS when such investment occurs in areas that are already served by a qualifying competitor. The Commission seeks comment on this proposal.
128. The Commission proposes measures to monitor and enforce compliance with such a rule. Price cap carriers today are precluded from using support in areas that are served by an unsubsidized competitor. Support may be used to serve geographic areas that are partially served by an unsubsidized competitor; however, price cap carriers must certify that, with respect to the support dollars subject to this obligation, a majority of the served locations are unserved by an unsubsidized competitor. For purposes of determining whether this requirement is met, price cap carriers must be prepared to provide asset records demonstrating the existence of facilities that serve locations in census blocks where there is no unsubsidized competitor. The Commission proposes to take a similar approach if it adopts a rule precluding recovery of new investment in areas served by competitors through our universal service support mechanisms.
129. In particular, to enforce a requirement that new investment recovered in whole or in part through
130. In the concurrently adopted Report and Order, the Commission codified the rules adopted by the Commission to eliminate support in study areas where there is a 100 percent overlap with an unsubsidized competitor. If the Commission adopts our proposal above to not provide support to areas with a “qualifying competitor,” should the Commission similarly modify the 100 percent overlap rule? The Commission also proposes to adopt a timeline for periodic determination of whether there is a 100 percent overlap, with the Bureau reviewing the study area boundary data in conjunction with data collected on the FCC Form 477 and the National Broadband Map every other year to determine whether and where 100 percent overlaps exist. The Commission also proposes to adjust the baseline for support reductions to be the amount of support received in the immediately preceding year before a determination is made that there is a 100 percent overlap, rather than 2010 support amounts. The Commission seeks comment on these proposals.
131. In the longer term, the Commission questions the continued viability of the HCLS and ICLS mechanisms in their current form and suggest that all affected stakeholders focus on creating a new Connect America Fund for cost recovery that will be consistent with the core principles for reform adopted by the Commission in 2011. For that reason, the Commission seeks comment on a rule under which no new investment would be included in cost studies used for the determination of HCLS and ICLS after a date certain, and HCLS and ICLS would become the mechanisms to recover only past investment occurring prior to that date certain. Over time, the amount recovered through HCLS and ICLS would diminish, and all new investment would be recovered through a new Connect America Fund for rate-of-return territories specifically designed to meet the Commission's overall objective to support voice and broadband-capable networks in areas that the marketplace would not otherwise serve and to ensure that consumers in rural, insular and high-cost areas have access to reasonably comparable services at reasonably comparable rates to consumers living in high-cost areas.
132. If the Commission were to adopt such a rule, it would not implement the limitation on recovery of new investment through the existing mechanisms until the new Connect America Fund was in place and operational. The Commission welcomes stakeholder proposals for the design of this Connect America Fund to make more efficient use of universal service funds and encourage the deployment of broadband-capable networks, working within the existing budget of $2 billion for rate-of-return territories. What timeline would be an appropriate target to set for the implementation of the Connect America Fund for rate-of-return territories and the limitation on recovery of investment in the old mechanisms? If the Commission were to wind down the existing HCLS and ICLS mechanisms and create a new Connect America Fund for use in rate-of-return territories, what action should the Commission then take in its pending rate represcription proceeding?
133. The Commission proposes to adopt a stand-alone broadband funding mechanism for rate-of-return carriers and provide specific guidance on the desired implementation of such an approach. The Commission proposes that such a mechanism be designed to (a) calculate support amounts that remain within the existing rate-of-return budget, (b) distribute support equitably and efficiently, so that all rate-of-return carriers have the opportunity to extend broadband service where it is cost-effective to do so, (c) distribute support based on forward-looking costs (rather than embedded costs), and (d) ensure that no double recovery occurs by removing the costs associated with the provision of broadband Internet access service from the regulated rate base. The Commission seek comments on how to implement such a proposal for rate-of-return carriers. The Commission specifically seeks comment on what rules or rule parts would need to change (e.g., how should Parts 32, 64 and/or 69 change to ensure that costs associated with the provision of broadband Internet access service are not included in the regulated rate base), and whether such a mechanism should be designed in a way that provides support based on locations or total network costs, rather than subscriber access lines. The Commission seeks comment on whether, for instance, it should modify our cost allocation rules to require that costs associated with multi-use facilities used to deliver broadband Internet access service be allocated between regulated and non-regulated activities based on an actual revenue allocator (or a potential revenues allocator), in such fashion that the amount removed from the regulated rate base would not exceed the amount of support received via a stand-alone broadband funding mechanism, or some other method. The Commission also seeks comment on whether such a mechanism should be designed to support lines where a consumer also subscribes to voice service, and whether the collected-but-not-yet-distributed support from the $2 billion annual budget for rate-of-return territories currently in the broadband reserve account should be used to kick start such a mechanism. The Commission believes that such a proposal is consistent with the Commission's stated policy goals, would create incentives for continued broadband deployment in rate-of-return territories, and would reduce incentives to skew customer purchasing decisions.
134. The Commission also seeks to develop further the record on other proposals. NTCA has presented its own stand-alone broadband proposal, which relies on complicated cost-calculations based on embedded costs. The proposal also does not appear to account for the fact that when a carrier's voice line is
135. The Commission also seeks to understand further the rationale for the assumed broadband subscriber line charge of $26 in NTCA's proposal. For the offer of model-based support in price cap territories, the Commission directed the Wireline Competition Bureau to set the funding threshold for model-based support taking into account “where the cost of service is likely to be higher than can be supported through reasonable end-user rates alone.” The Commission expects end user rates for broadband-only lines to be higher than $26. If the Commission were to provide support for stand-alone broadband offered by rate-of-return carriers, should it provide such support only for costs that exceed the $52.50 funding benchmark established for price cap territories? To the extent parties argue that a lower figure should be used in rate-of-return areas, they should provide a detailed analysis of what figures the Commission should assume are reasonable end user rates for retail broadband internet access.
136. The Commission also seeks comment on whether an approach that provides support for all costs over a pre-determined figure—whatever that dollar figure may be—would provide appropriate incentives for carriers to make efficient expenditures. By providing support for 100 percent of incremental costs to all study areas with costs above the proposed $26 per line per month threshold, what is the incentive on the part of recipients to be efficient as they make new investments in the future? Would a better approach be one that provides a set amount of Connect America support for voice and broadband-capable infrastructure in the study area, potentially with the amount per study area adjusted over time in a manner consistent with the growth in broadband-only subscription rates, rather than a per-line amount?
137. The Commission also seeks comment on how the proposal fits within the overall universal service support budget framework. Of the $4.5 billion budget for the Connect America Fund, the Commission concluded that “up to $2 billion,” including intercarrier compensation recovery would be available annually in rate-of-return territories. USAC's projected demand for rate-of-return carriers was at an annualized rate of $2.014 billion in 2013, with actual disbursements of $1.958 billion. According to NTCA's own projections, its stand-alone broadband proposal would result in support in excess of $2 billion flowing to rate-of-return carriers annually in 2015–2017 under a variety of assumptions.
138. Finally, the NTCA proposal does not appear to have a mechanism to ensure that universal service is not subsidizing new investment occurring in areas served by an unsubsidized competitor. The Commission therefore seeks further comment on this issue, and alternative proposals that would better meet our reform objectives.
139. In addition to its proposal concerning support for broadband-only lines, NTCA submitted a plan to establish an annual investment budget for individual rate-of-return carriers called the “Capital Budget Mechanism.” NTCA states that this mechanism is intended to promote fiscal responsibility while also providing more predictable and transparent planning for investment in rate-of-return carrier networks. It includes a four-step framework for determining a budget for high-cost supported future investment, as follows: (1) Determine current loop investment (i.e., total loop investment for each rate-of-return carrier study area), adjusted for inflation; (2) determine a “future allowable loop investment” for each rate-of-return carrier, based on the replacement of depreciated plant, precluding support to replace plant that is still used and useful; (3) use a trigger to identify alleged inefficiencies, which would enable prospective adjustment to a carrier's future allowable loop investment; and (4) establish an annual budget for each rate-of-return carrier by dividing each carrier's future allowable investment by a period of years to establish budget of supported additional investment each year. One critical shortcoming in the proposal as presented, however, is that there is no concrete plan for how the Commission would implement the trigger that “identifies alleged inefficiencies.” Absent specificity on this key point, the Commission is skeptical as to how the proposal could be put in place in the near term. The Commission therefore seeks to develop the record on this proposal and invite specific, actionable proposals for defining the relevant triggers. How would it work within the context of the Commission's current rules? How does this proposal fit within the budget for rate-of-return territories?
140. The Commission proposes to adopt rules that would allow rate-of-return ETCs to elect to participate in a voluntary, two-phase transition to model-based universal service support, including participation in the Connect America Fund Phase II. The Commission also seeks comment on whether rate-of-return carriers should be allowed to transition on a voluntary basis to an alternative rate regulation approach. As an initial matter, the Commission asks parties to address whether the voluntary path to model-based support and the alternative rate regulation approach are linked, or whether they should be considered independent of each other. The Commission proposes to adopt a transition framework for voluntary participation in Connect America Phase II for rate-of-return carriers and seek comment on alternative rate regulation approaches and specific implementation details below.
141. The Commission previously has sought comment in this docket on potential reforms that would provide support to rate-of-return carriers under mechanisms other than the current legacy mechanisms. The Bureau sought further to develop the record on facilitating voluntary participation in Phase II of the Connect America Fund in the
142. ITTA has proposed the most comprehensive plan in the record for such a transition (ITTA Plan). The ITTA Plan calls for, among other things, a voluntary, two-phase transition to a model-based support framework for rate-of-return ETCs. ITTA argues that the plan is designed to provide a viable path for rate-of-return carriers to move to model-based support. Any rate-of-return carrier would be free to participate at any time during either of the two phases of the plan. A participating carrier would also have the discretion to opt-in to model-based support for all of its study areas, or for a subset of its study areas.
143. During the first phase of the ITTA Plan, an electing carrier's ICLS and HCLS would be frozen at current levels (i.e., as of December 31 of the year prior to that carrier's election). Existing service obligations for rate-of-return carriers, such as the requirement to offer broadband service meeting the Commission's current requirements, with actual speeds of at least 4 Mbps downstream and 1 Mbps upstream “upon reasonable request” would remain in effect.
144. The second phase of the ITTA Plan for universal service support would begin after a rate-of-return carrier-specific support model is defined and established. According to ITTA, rate-of-return carriers that accept support under this model would assume the same service and public interest obligations as price cap carriers receiving Connect America Phase II model-based support. Model-based support would be made available for ten years to participating rate-of-return carriers. For those rate-of-return carriers choosing to participate in the second phase after it becomes operational, model-based support would be made available to such carriers for the remainder of the ten-year timeframe left for carriers who elected to participate at the beginning of the second phase.
145. The ITTA Plan proposes that rate-of-return carriers that decline support for certain study areas would be relieved of ETC status and obligations in those study areas where support is declined. Those study areas would then be opened up to a competitive bidding process similar to that used in areas where price cap carriers decline Connect America Phase II support. To the extent that the Phase II funding made available for a study area in the second phase is lower than frozen support, ITTA proposes that support would be transitioned down to the level determined appropriate by the rate-of-return-specific model over a five-year period.
146. The ITTA Plan proposes an alternative rate regulation approach for rate-of-return carrier intercarrier compensation (ICC), special access, and broadband internet access services. Carriers could elect participation in the proposed alternative rate regulation plan at any time by study area. Electing carriers would continue to implement ICC rate reductions pursuant to the timeline adopted in the
147.
148.
149. Should the Commission adopt a specific deadline for rate-of-return carriers to elect this voluntary path to receive model-based support? For instance, should carriers be required to elect this path within 120 days of the Bureau adopting revisions to the Connect America Cost Model for use in determining support for rate-of-return carriers electing to receive model-based support? Put another way, should the Commission prohibit carriers from voluntarily transitioning to model-based support if they do not do so within a Commission-defined window? To the extent parties argue a longer time period to make the election is necessary, they should specify what time frame would be appropriate.
150.
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155. The ITTA Plan also suggests that a competitive bidding process be designed for rate-of-return areas where support is declined under the second phase of the proposal. What timeframe would be realistic to assume for further model development, and how would that affect the overall timing of implementation of the ITTA proposal? What are the advantages and disadvantages of holding the competitive bidding process for areas not elected by the rate-of-return carriers at a date subsequent to the Phase II competitive bidding process that will occur after the offer of model-based support to price cap carriers?
156.
157. The ITTA Plan allows carriers to elect participation by study area and to choose when to enter an alternative rate regulation plan. With this flexibility, the sensitivity of the retention ratio, or other costing determinant, to year-to-year differences could create the ability for carriers to time their election to maximize their retention ratio, or their cost base, to their benefit. Above the Commission proposes to require electing carriers to make a state-level election to receive model-based support. Would that lessen the incentive of participants to time strategically their elections to maximize their retention ratios or their cost base? Parties should comment on the sensitivity of any alternative costing measure and on means by which any gaming opportunities can be minimized. Parties should also address the need for any special conditions to check the ability of affiliated carriers to shift costs between study areas electing an alternative regulation plan and those that do not.
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163. Finally, how would adoption of some variant of the ITTA Plan further the Commission's goals? In the
164. In this section, the Commission seeks comment on potential measures to provide support for middle mile for rate-of-return carriers, recognizing that the cost of backhaul is an important component of the ability of such providers to offer broadband services to their customers at rates that are reasonably comparable to similar offerings in urban areas. The Commission proposes to focus initially on supporting middle mile infrastructure on Tribal lands. The Commission also invites longer term proposals for supporting middle mile connectivity in territories served by rate-of-return carriers.
165.
166. As an initial step, the Commission proposes to award $10 million in one-time support for new middle mile construction in 2015 on Tribal lands. Depending on lessons learned, this approach then could be expanded further in subsequent years to address middle mile challenges facing rate-of-return carriers more generally.
167. The Commission proposes to award the $10 million support for middle mile projects on Tribal lands pursuant to our existing rules for competitive bidding processes codified in Subpart AA of Part 1. Under such a competitive bidding process, the Commission would solicit proposals for middle mile projects designed to expand voice and broadband coverage to the greatest number of unserved locations on Tribal lands. The Commission proposes to award funds through a single round bidding process to those applicants proposing to bring new terrestrial broadband service to the greatest number of locations for a specified amount of funding. The Commission seeks comment on this proposal and alternatives.
168. The Commission encourages multi-stakeholder partnerships in the creation of competitive proposals. The Commission is particularly interested in proposals that would encourage contributions from state and Tribal governments or entities. Should the Commission award a bidding credit to the extent there is an explicit commitment of matching funds from state or Tribal government or related entities? The Commission could, for instance, provide a 50 percent bidding credit to the extent state or Tribal entities provided matching funds dollar for dollar. Should the same bidding credit be available to applicants that can leverage other sources of funding for the project, such as funding from other federal agencies?
169. The Commission seeks comment on whether support for the expansion of current middle mile construction
170. The Commission seeks comment on ARC's suggestion that the Commission should adopt some mechanism to ensure that recipients of middle mile funding should be required, as a condition of that funding, to provide access to that middle mile connectivity at a reasonable rate. For example, while allowing recipients of funding to enter into individually negotiated arrangements with other providers, should they be required to charge rates for middle mile connectivity that are no higher than rates for comparable connectivity in urban areas of the state? Should they be precluded from charging rates that are higher than the discounted rates available to recipients of funding under the E-rate or rural health care programs?
171. To avoid waste, fraud, and abuse, the Commission seeks further comment on what reporting requirements it should require to ensure that middle mile infrastructure projects are financially viable and can be timely completed. The Commission proposes that any applicant certify to its financial and technical capability to build out such infrastructure. The Commission proposes the winning bidders be subject to a default payment in an amount equal to 20 percent of the defaulted bid, pursuant to section 1.21004 of our current competitive bidding rules. The Commission also seeks comment on oversight measures that will ensure that USAC has sufficient information to oversee project deployment and completion.
172. In the
173. Here, the Commission seeks comment on issues related to this framework that are applicable to all Connect America Fund recipients that are required to offer broadband service as a condition of receiving high-cost support. These recipients include price cap carriers accepting the state-level commitment in exchange for model-based support, recipients of the Phase II competitive bidding process, and rate-of-return carriers that receive high-cost loop support, interstate common line support, or CAF–ICC support. The Commission first seeks comment on codifying a broadband reasonable comparability certification requirement for all ETCs receiving Connect America support. The Commission also seeks comment on modifying the reduction in support for late-filed section 54.313 and 54.314 reports and certifications. Finally, the Commission seeks comment on the consequences it should impose if ETCs do not meet the Commission's service obligations for voice or broadband service.
174.
A letter certifying that the pricing of the company's broadband services is no more than the applicable benchmark as specified in a public notice issued by the Wireline Competition Bureau, or is no more than the non-promotional prices charged for comparable fixed wireline services in urban areas.
175. Recognizing that ETCs receiving Connect America Fund support are free to offer a variety of broadband service offerings, for purposes of this certification the Commission proposes that they would only need to certify that one plan meets the reasonable comparability benchmark specified annually by the Wireline Competition Bureau in a Public Notice in order to make the requisite certification.
176. The Commission seeks comment on when it should begin to require Connect America recipients to submit their broadband reasonable comparability certification. Carriers that accept the state-level commitment are required to certify that they are providing broadband service that meets the required public service obligations to 85 percent of their supported locations by the end of the third year of support. However, throughout the five-year term as they increasingly deploy broadband to supported locations and connect customers, the Commission expects that they will offer broadband service that at least meets the Commission's requirements. Similarly, the Commission expects that while the Commission will impose build-out requirements for Phase II competitive bidding recipients, recipients will offer broadband service that at least meets the Commission's requirements throughout their support term. Thus, the Commission proposes requiring price cap carriers that accept the state-level commitment and recipients of the Phase II competitive bidding process to submit their first certification with the first annual report they are required to submit after accepting support, and then each year with their annual report thereafter. Under the proposed timeline for the offer of model-based support to price cap carriers, this would mean that price cap carriers accepting model-based support would be required to make their first such certification in the annual report filed on July 1, 2016. The Commission also proposes that rate-of-return carriers, which are currently required to provide broadband that meets the Commission's public service obligations upon reasonable request, should submit such a certification. Because rate-of-return carriers are already required to be providing broadband service upon reasonable request as a condition of their support, the Commission proposes that they begin to submit such a certification with the first annual report after the requirement has received Paperwork Reduction Act (PRA) approval from the Office of Management and Budget, and then each year with their annual report thereafter.
177. The Commission seeks comment on this proposal and whether any adjustments need to be made to either certification requirement to account for differences between price cap carriers and rate-of-return carriers and other potential recipients of funding awarded through the Phase II competitive bidding process.
178.
179. Under the current rules, a carrier that misses a section 54.313 and 54.314 filing deadline by only a few days loses an entire quarter of support. The Commission proposes to adopt a rule that would impose a minimum support reduction for any late filing, which would be applied even in those instances when the filing is only a few days late. In particular, the Commission proposes that deadlines for filing reports shall be strictly enforced, with a minimum reduction of support in an amount equivalent to seven days of support, and to the extent the deadline is missed by more than seven days, support would be reduced on a pro-rata daily basis equivalent to the period of non-compliance. If the Commission were to adopt these proposed rule changes, a carrier that files a report or certification within 14 days of the deadline would lose 14 days of support, a carrier that files a report or certification two months after a deadline would lose two months of support, and so on. The Commission thus proposes to modify section 54.313(j) to read as follows:
(1) In order for a recipient of high-cost support to continue to receive support for the following calendar year, or retain its eligible telecommunications carrier designation, it must submit the annual reporting information required by this section annually by July 1 of each year. Eligible telecommunications carriers that file their reports after the July 1 deadline shall receive a reduction in support pursuant to the following schedule: (a) Eligible telecommunications carriers that file after the July 1 deadline, but by July 8, will have their support reduced in an amount equivalent to seven days in support; (b) Eligible telecommunications carriers that file on or after July 9 will have their support reduced on a pro-rata daily basis equivalent to the period of non-compliance.
180. The Commission also proposes to modify the rule regarding certifications for use of support, section 54.314(d), to read as follows:
(1) In order for an eligible telecommunications carrier to receive federal high-cost support, the State or the eligible telecommunications carrier, if not subject to the jurisdiction of a State, must file an annual certification, as described in paragraph (c) of this section, with both the Administrator and the Commission by October 1 of each year. If states or eligible telecommunications carriers file the annual certification after the October 1 deadline, the carriers subject to the certification shall receive a reduction in support pursuant to the following schedule: (a) Eligible telecommunications carriers subject to certifications filed after the October 1 deadline, but by October 8 will have their support reduced in an amount equivalent to seven days in support; (b) Eligible telecommunications carriers subject to certifications filed on or after October 9 will have their support reduced on a pro-rata daily basis equivalent to the period of non-compliance.
181. Recognizing that some ETCs quickly rectify their failure to meet a filing deadline, thereby minimizing the negative impact on the administration of the Connect America Fund, should the Commission also provide a one-time grace period for ETCs that miss the filing deadline by only a few days? The Commission proposes that any ETC that misses the deadline but files within three days after the deadline would not receive a reduction in support. But if the ETC filed on the fourth day after the deadline, it would be subject to the seven day minimum support reduction, and then after seven days, its support would be reduced on a pro-rata daily basis equivalent to the period of non-compliance, as described in the prior paragraph. If the Commission were to adopt this proposed one-time grace period, an ETC that files a report or certification within two days of the deadline would not lose support, an ETC that files a report or certification within five days of the deadline would lose seven days of support, and an ETC that files a report or certification within 14 days of the deadline would lose 14 days of support, and so on. The Commission proposes only providing this grace period once for a given holding company, regardless of the number of affiliated operating companies that may individually be designated as an ETC. If an ETC misses the deadline a subsequent year, the seven day minimum support reduction would apply even if it files within three days of the deadline. The Commission also proposes to apply the grace period at the holding company level, so that a grace period would not be available to another operating company of that holding company that holds the ETC designation to serve a different study area.
Finally, the Commission proposes that if an ETC (or another ETC with the same holding company) misses the deadline for a second time, it will be responsible for the reduction in support that would have occurred the first year that the deadline was missed if there had been no grace period. For example, if an ETC missed the deadline by two days the first year, it would not lose support due to the grace period. But, if another ETC within the same holding company (or the same ETC) misses the deadline again a subsequent year by eight days, it would be subject to a loss of support for eight days, pluss the seven day minimum reduction of support that would have applied to its affiliate ETC the prior year if there had been no grace period, for a reduction in support that totals 15 days.
182. The proposed rule would amend the rule for annual reporting by recipients of high-cost support, section 54.313(j) to add a new subsection (2):
(2) Grace period. An eligible telecommunications carrier that submits the annual reporting information required by this section after July 1 but before July 5 will not receive a reduction in support if the eligible telecommunications carrier and all other eligible telecommunications carriers owned by the same holding company as the eligible telecommunications carrier have not missed the July 1 deadline in any prior year. The next time that either the eligible telecommunications carrier that had previously benefitted from the grace period or an eligible telecommunications carrier owned by the same holding company misses the July 1 deadline, that eligible telecommunications carrier will be subject to a reduction of seven days in support in addition to the reduction of support it will receive pursuant to (j)(1) of this section.
183. The proposed rule also would amend the rule for certification regarding use of support, section 54.314(d), to add a new subsection (2):
(2) Grace period. If an eligible telecommunications carrier or state submits the annual certification required by this section after October 1 but before October 5, the eligible telecommunications carrier subject to the certification will not receive a reduction in support if the eligible
184. The Commission also proposes to cease the practice of providing waivers to parties that commit to implement improved internal controls to ensure compliance in the future as it has done previously. As a practical matter, parties invariably seek waivers of the filing requirements when they miss the deadline and addressing such waiver requests diverts staff from other Commission priorities. While waivers may have been justified in the past when the consequence for failure to meet a deadline was the loss of entire year of support, going forward the Commission does not believe it serves the public interest to absolve an ETC of any consequence when it fails to meet a Commission-mandated requirement merely due to administrative or clerical oversight. All ETCs should have policies and procedures in place to ensure compliance with Commission reporting requirements, and promising to do better in the future should not become a routine basis for grant of a waiver of a filing deadline. The Commission thus seeks comment on whether it should revisit our prior findings that good cause for waiver is present when parties commit to implement improved internal controls to ensure compliance in the future. More generally, the Commission seeks comment on these proposals to modify our rules and practices regarding filing deadlines and alternatives identified by commenters.
185. The Commission also seeks comment on whether it should apply our proposals described above to reduce support for late-filed section 54.313 and 54.314 reports and certifications to recipients of Mobility Fund Phase II support, and if so, whether any of the specific proposals it makes today for Mobility Fund Phase II warrant a modification of our approach to reductions of support.
186.
187. One alternative would be to give providers an opportunity to improve performance prior to withholding support in certain circumstances. For example, if there were an audit finding or other determination that a provider failed to meet performance measurements for a certain number of months consecutively (such as two months) or a certain number of months during a one-year period (such as three months), the provider could be required to submit a plan to USAC describing how it will come into compliance within a certain period (such as six months). If a provider does not meet its performance standards during the requisite period, it would then lose a certain percentage of funding (such as five percent) for each
188. Another alternative would be to adopt quickly-increasing support reductions to heighten provider incentives to meet performance standards. For example, if there were an audit finding or other determination that a provider failed to meet performance measurements for a certain number of months consecutively (such as two months) or a certain number of months during a one-year period (such as three months), the provider could lose five percent of its funding for each of the next six months. If performance levels were not being met after six months, the provider would lose 25 percent of its funding for each of the next six months.
189. The Commission also seeks to develop more fully the record on consequences for failing to meet the Commission's reasonable comparability benchmarks. Under longstanding precedent, the Commission presumes that a voice rate is within a reasonable range if it falls within two standard deviations of the national average. In the
190. The Commission also seeks comment on whether it should apply any of our proposals described above for reducing support for non-compliance with service obligations to recipients of Mobility Fund Phase II support, and whether any of the specific proposals it makes today for Mobility Fund Phase II would warrant a modification of our approach to such reductions of support.
191. The FNPRM contains proposed new information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and OMB to comment on the proposed information collection requirements contained in this document, as required by the PRA. In addition, pursuant to the Small Business Paperwork Relief Act, the Commission seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees.
192. The Commission will send a copy of this Further Notice of Proposed Rulemaking to Congress and the Government Accountability Office pursuant to the Congressional Review Act.
193. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the Commission has prepared this present Initial Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact on a substantial number of small entities by the policies and rules proposed in this Further Notice of Proposed Rulemaking (FNPRM). Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the FNPRM provided on the first page of this document. The Commission will send a copy of the FNPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). In addition, the FNPRM and IRFA (or summaries thereof) will be published in the
194. In the FNPRM, the Commission proposes measures to update and implement further the framework adopted by the Commission in 2011. The Commission strives to adapt our universal service reforms to ensure those living in high-cost areas have access to services that are reasonably comparable to services offered in urban areas. Consistent with that goal, in the FNPRM the Commission proposes to revise our current broadband performance obligations to require minimum speeds of 10 Mbps downstream to ensure that the services delivered using Connect America funds are reasonably comparable to the services enjoyed by consumers in urban areas of the country and seek comment on whether to increase the upstream speed requirement to something higher than 1 Mbps. The FNPRM also proposes to apply uniformly the same performance obligations to all recipients of Phase II support and to rate-of-return carriers. In addition, the Commission seeks to further develop the record on the ability of Phase II recipients to satisfy their obligations using any technology or a combination thereof—whether wireline or wireless, fixed or mobile, terrestrial or satellite—that meets the performance standards for Phase II. The FNPRM also proposes to provide financial incentives for recipients of Phase II support to accelerate their network deployment.
195. The Commission proposes to apply the same usage allowances and latency benchmarks that the Bureau implemented for price cap carriers that will accept the offer of model-based support in the state-level commitment process to ETCs that will receive support through a competitive bidding process.
196. To target our finite universal service funds most effectively, the FNPRM proposes to exclude from eligibility for Phase II support those areas that are served by
197. The FNPRM seeks comment on several proposals regarding ETC designation. It proposes to require entities that are winning bidders for the offer of Phase II support in the competitive bidding process to apply for ETC designation within 30 days of public announcement of winning bidders. It also proposes to adopt a rebuttable presumption that a state commission lacks jurisdiction over an entity seeking ETC designation if it fails to initiate a proceeding within 60 days.
198. The FNPRM seeks comment on the amount of frozen support to provide to incumbents that decline the offer of model-based support where no other provider wishes to serve, and on the obligations associated with such support. It proposes to eliminate or modify the requirement that a price cap carrier certify that all of its frozen support is used to build and operate a broadband-capable network used to offer the provider's own retail broadband service in areas substantially unserved by an unsubsidized competitor. The FNPRM also proposes to define the public interest obligations that would apply to recipients of frozen support in the non-contiguous areas of the United States. The Commission also proposes several minor changes and clarifications regarding the implementation of the transition to model-based support to ease the administration of Connect America Phase II.
199. The FNPRM seeks comment on specific proposals for the design of the Phase II competitive bidding process that will occur in areas where price cap carriers decline model-based support.
200. The FNPRM also addresses significant developments that have occurred since the adoption of the
201. In the FNPRM, the Commission also focuses on developing and implementing a “Connect America Fund” for rate-of-return carriers. As a short term measure, the Commission proposes to apply the effect of the annual rebasing of the cap on support known as high-cost loops support (HCLS) equally on all recipients of HCLS. As another near term reform, the Commission also proposes to prohibit recovery of new investment occurring on or after January 1, 2015, through either HCLS or interstate common line support (ICLS) in areas that are served by a qualifying competitor that offers voice and broadband service meeting the Commission's standards. The Commission proposes that such rate-of-return carriers, many of which are small entities, document their compliance with this requirement in the course of an audit or other inquiry, and to create a safe harbor that an area is presumed unserved if the rate-of-return carrier announces an intention to make new investment and no other provider notifies the rate-of-return carrier that it serves the area.
202. As a longer term measure, the Commission is seeking comment on limiting recovery of new investment
203. Finally, the FNPRM proposes to codify a broadband certification requirement for recipients of funding that are subject to broadband performance obligations, seeks comment on specific levels of support reduction for non-compliance with service obligations, and proposes to modify our rules regarding reductions in support when parties miss filing deadlines in order to better calibrate the support reduction to coincide with the period of noncompliance.
204. The legal basis for any action that may be taken pursuant to the FNPRM is contained in sections 1, 2, 4(i), 5, 201–206, 214, 218–220, 251, 252, 254, 256, 303(r), 332, 403, and 405 of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, 47 U.S.C. §§ 151, 152, 154(i), 155, 201–206, 214, 218–220, 251, 252, 254, 256, 303(r), 332, 403, 405, 1302, and sections 1.1, 1.2, 1.3, 1.115, 1.421, 1.427, and 1.429 of the Commission's rules, 47 CFR 1.1, 1.2, 1.3, 1.115, 1.421, 1.427, and 1.429.
205. The RFA directs agencies to provide a description of, and where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small-business concern” under the Small Business Act. A small-business concern” is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA.
206.
207.
208.
209.
210. The Commission has included small incumbent LECs in this present RFA analysis. As noted above, a “small business” under the RFA is one that,
211.
212.
213.
214.
215.
216.
217.
218.
219.
220.
221.
222.
223.
224.
225.
226. The auction of the 1,053 800 MHz SMR geographic area licenses for the General Category channels was conducted in 2000. Eleven bidders won 108 geographic area licenses for the General Category channels in the 800 MHz SMR band qualified as small businesses under the $15 million size standard. In an auction completed in 2000, a total of 2,800 Economic Area licenses in the lower 80 channels of the 800 MHz SMR service were awarded. Of the 22 winning bidders, 19 claimed small business status and won 129 licenses. Thus, combining all three auctions, 40 winning bidders for geographic licenses in the 800 MHz SMR band claimed status as small business.
227. In addition, there are numerous incumbent site-by-site SMR licensees and licensees with extended implementation authorizations in the 800 and 900 MHz bands. The Commission does not know how many firms provide 800 MHz or 900 MHz geographic area SMR pursuant to extended implementation authorizations, nor how many of these providers have annual revenues of no more than $15 million. One firm has over $15 million in revenues. In addition, the Commission does not know how many of these firms have 1500 or fewer employees. The Commission assumes, for purposes of this analysis, that all of the remaining existing extended implementation authorizations are held by small entities, as that small business size standard is approved by the SBA.
228.
229. In addition, the SBA's Cable Television Distribution Services small business size standard is applicable to EBS. There are presently 2,032 EBS licensees. All but 100 of these licenses are held by educational institutions. Educational institutions are included in this analysis as small entities. Thus, the Commission estimates that at least 1,932 licensees are small businesses. Since 2007, Cable Television Distribution Services have been defined within the broad economic census category of Wired Telecommunications Carriers; that category is defined as follows: “This industry comprises establishments primarily engaged in operating and/or providing access to transmission facilities and infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using wired telecommunications networks. Transmission facilities may be based on a single technology or a combination of technologies.” The SBA defines a small business size standard for this category as any such firms having 1,500 or fewer employees. The SBA has developed a small business size standard for this category, which is: all such firms having 1,500 or fewer employees. According to Census Bureau data for 2007, there were a total of 955 firms in this previous category that operated for the entire year. Of this total, 939 firms had employment of 999 or fewer employees, and 16 firms had employment of 1000 employees or more. Thus, under this size standard, the majority of firms can be considered small and may be affected by rules adopted pursuant to the FNPRM.
230.
231. In 2007, the Commission reexamined its rules governing the 700 MHz band in the
232.
233.
234.
235.
236. As of March 2010, there were 424,162 PLMR licensees operating 921,909 transmitters in the PLMR bands below 512 MHz. The Commission notes that any entity engaged in a commercial activity is eligible to hold a PLMR license, and that any revised rules in this context could therefore potentially impact small entities covering a great variety of industries.
237.
238.
239.
240.
241.
242.
243.
244.
245.
246.
247.
248.
249.
250.
251. The first category of Satellite Telecommunications “comprises establishments primarily engaged in providing point-to-point telecommunications services to other establishments in the telecommunications and broadcasting industries by forwarding and receiving communications signals via a system of satellites or reselling satellite telecommunications.” For this category, Census Bureau data for 2007 show that there were a total of 512 firms that operated for the entire year. Of this total, 464 firms had annual receipts of under $10 million, and 18 firms had receipts of $10 million to $24,999,999. Consequently, the Commission estimates that the majority of Satellite Telecommunications firms are small entities that might be affected by rules adopted pursuant to the FNPRM.
252. The second category of Other Telecommunications “primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing Internet services or voice over Internet protocol (VoIP) services via client-supplied telecommunications connections are also included in this industry.” For this category, Census Bureau data for 2007 show that there were a total of 2,383 firms that operated for the entire year. Of this total, 2,346 firms had annual receipts of under $25 million. Consequently, the Commission estimates that the majority of Other Telecommunications firms are small entities that might be affected by our action.
253.
254.
255.
256.
257.
258.
259.
260.
261. In this FNPRM, the Commission seeks public comment on additional steps for its comprehensive universal service reform. The transition to the reforms could affect all carriers including small entities, and may include new administrative processes. In proposing these reforms, the Commission seeks comment on various
262. For example, in the FNPRM, the Commission seeks further comment on the design of the Phase II competitive bidding process in which small entities may participate. It is likely that the rules the Commission ultimately adopts for the competitive bidding process will impose obligations on small entities deciding to participate.
263. In defining the areas eligible for Phase II support, the Commission seeks comment on excluding from eligibility areas served by any provider that offers voice and broadband meeting the Commission's requirements—regardless of whether the provider is subsidized or unsubsidized. The Commission seeks comment on requiring competitors (including small entities) that wish to contest the eligibility of an area to certify to the Commission that they are able and willing to continue providing voice and broadband service meeting the Commission's requirements for a period of time, such as five years.
264. The Commission seeks comment on methods of providing funding recipients with increased flexibility in making their deployments. First, the Commission seeks comment on permitting Phase II recipients to specify that they are willing to deploy to less than 100 percent of locations in exchange for some lesser amount of funding. In such a process, the recipients may be required to state the percent or number of locations that they are willing to serve. Second, the Commission seeks comment on requiring Connect America funding recipients to make a statement announcing their intent to deploy to unserved locations in partially served census blocks. Such recipients may potentially also be required to send a copy of that statement to any provider currently shown on the National Broadband Map as serving that census block.
265. Moreover, the Commission seeks comment on near term measures for reforms to rate-of-return carriers' support mechanism. As a part of this short-term reform, the Commission proposes adopting a rule that no new investment may be recovered through HCLS or ICLS as of a date certain when such investment occurs in areas that are already served by a competing provider of voice and broadband services meeting our requirements. In the FNPRM, the Commission proposes to require rate-of-return carriers, many of which are small entities, to be prepared to document with asset records and associated receipts that new investment for which recovery is sought through federal support mechanisms is occurring only in census blocks that are not served by other providers. It also proposes that rate-of-return carriers be required to announce an intention to make new investment and wait 90 days before such investment may properly be eligible for cost recovery through the universal service support mechanisms. The FNPRM also proposes a transition framework for rate-of-return carriers to elect to receive support based on a forward looking cost model.
266. The Commission anticipates that rate-of-return carriers are likely to be subject to other accountability measures depending on which reforms the Commission ultimately adopts. The Commission also seeks comment on setting aside $10 million of support for the construction of middle mile networks on Tribal lands. If such a program is implemented and small entities choose to participate, they would be subject to the trial's rules, including any accountability obligations the Commission chooses to adopt after considering comments submitted in response to the FNPRM.
267. The Commission also seeks comment on requiring entities participating in the Phase II competitive bidding process to submit an application to become an ETC within 30 days of notification that they are the winning bidders for those areas where they have not already been designated as ETCs. This proposal is intended to facilitate the ability of non-incumbent carriers, many of which are small entities, to participate in the Connect America Fund and the Remote Areas Fund. The Commission also proposes to adopt a rebuttable presumption that if a state commission fails to initiate an ETC designation proceeding within 60 days, the entity may file for ETC designation with the Commission and point to the lack of state action within the prescribed time period as evidence that the petitioner is not subject to the jurisdiction of a state commission. The Commission also proposes to require winning bidders to submit proof to the Commission that they have filed the requisite ETC designation application within the required timeframe to the extent filed with a state commission.
268. The Commission also seeks comment on several proposals related to the “uniform national framework for accountability” that was established in the
269. The Commission seeks comment on proposals for specific service obligations for carriers serving non-contiguous areas electing to continue to receive frozen support amounts. The Commission seeks comment on how it can monitor for compliance with these obligations.
270. The Commission also proposes rules for Mobility Fund II, in which small entities might choose to participate. The proposed rules would impose a number of obligations including the requirement that participating entities secure a letter of credit, the requirements for the contents of the applications to participate and for winning bidders, and various certifications and reporting requirements.
271. The RFA requires an agency to describe any significant, specifically small business, alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): “(1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rules for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities.”
272. The FNPRM seeks comment from all interested parties. The Commission is aware that some of the proposals under consideration may affect small
273. The Commission expects to consider the economic impact on small entities, as identified in comments filed in response to the FNPRM, in reaching its final conclusions and taking action in this proceeding. The reporting, recordkeeping, and other compliance requirements in the FNPRM could have an impact on both small and large entities. The Commission believes that any impact of such requirements is outweighed by the accompanying public benefits. Further, these requirements are necessary to ensure that the statutory goals of section 254 of the Act are met without waste, fraud, or abuse.
274. The Commission has made an effort to anticipate the challenges faced by small entities in complying with its rules. For example, when proposing new speed obligations, the Commission recognizes that ETCs, including small entities, may not be able to meet revised speed standards immediately. Noting that rate-of-return carriers, which are often small entities, are required to deploy broadband upon reasonable request, the Commission emphasizes that rate-of-return carriers would only be required to meet the higher speed if the request for service is reasonable—meaning that the carrier could cost effectively extend voice and broadband-capable network to that location, given its anticipated end-user revenues and other sources of support. The Commission also seeks comment on the timeframe for rate-of-return carriers to upgrade their networks to a faster speed benchmark. Related to the other performance standards the Commission proposes to impose—particularly usage and latency standards—the Commission also requests that parties identify whether the requirements are too stringent and offer alternative proposals.
275. The Commission also seeks comment on how the obligations for carriers serving non-contiguous areas should be adjusted when determining support obligations for those that select frozen support in lieu of model-based support.
276. The Commission proposes to allow Phase II recipients to meet their deployment obligations using any technology that meets the performance requirements. If adopted, this would give participants, including small entities, additional flexibility in satisfying their obligations. The Commission also seeks comment on two potential measures that would provide all recipients of Phase II funding, both in the state-level commitment process and competitive bidding process, greater flexibility to satisfy their deployment obligations. These include proposing to permit Phase II recipients to specify that they are willing to deploy to less than 100 percent of locations in their funded areas, with associated support reductions, and to allow Phase II recipients to substitute some number of unserved locations within partially served census blocks for locations within funded census blocks.
277. The Commission also proposes to retarget the focus of Mobility Fund Phase II to the U.S. population that will not have 4G LTE through commercial deployments and those areas where support is needed to preserve existing mobile voice and broadband service that would not otherwise exist without governmental support. The FNPRM proposes adjusting downward the budget for a retargeted Mobility Fund II. While this could affect small mobile providers, the Commission notes that if Mobility Fund Phase II is retargeted as proposed, support could be available for small entities that are the only providers serving populations in portions of the country.
278. The Commission proposes targeted measures to maintain competitive ETC funding until after the Mobility Fund Phase II auction. Thus, the Commission proposes to maintain 60 percent competitive ETC baseline support for those wireless ETCs whose competitive ETC support exceeds one percent of their wireless revenues, until a specified date after the Mobility Fund Phase II ongoing support. While the Commission proposes to eliminate competitive ETC support for wireless ETCs for whom high-cost support represents less than one percent of their wireless revenues, it notes that such carriers can take advantage of the waiver process if the elimination of support would result in consumers losing access to existing mobile voice or broadband service. The FNRPM also proposes to freeze competitive ETC support for competitive ETCs serving remote areas of Alaska, many of which are small entities, which would provide greater certainty to individual carriers regarding their support amounts. The FNRPM also proposes a delayed time table for phasing down that frozen support compared to other competitive ETCs.
279. The FNPRM proposes to exclude from eligibility for Phase II support those areas served by a provider that offers voice and broadband services meeting the Commission's requirements regardless of whether the competitor is subsidized or unsubsidized. The Commission also seeks comment on excluding from eligibility providers that are offering qualifying service regardless of what technology is used to deliver that service. If adopted, these proposals could limit the overbuilding of areas served by other providers, some of which may be small entities.
280. For rate-of-return carriers, the Commission seeks comment on short-term and long-term reforms to ensure that funds provided to rate-of-return carriers are disbursed efficiently and in the public interest. Recognizing the need to eliminate the inefficiencies of the universal service support mechanisms for rate-of-return carriers, the FNPRM proposes to modify the current HCLS mechanism by reducing the reimbursement percentages for all carriers and to limit the ability of rate-of-return carriers to recover new investment through HCLS in areas where other providers are offering voice and broadband. The Commission also proposes a funding mechanism that would provide support for rate-of-return carriers' broadband-only lines and seeks comment on various industry proposals for longer term reforms. The Commission anticipates taking into account the unique challenges faced by rate-of-return carriers when determining which reforms to adopt.
281. In the FNPRM, the Commission seeks comment on specific proposals for the design of the Phase II competitive bidding process and the rules for a retargeted Mobility Phase II. The Commission asks a variety of questions about how these mechanisms should be designed, and proposes rules for Mobility Fund Phase II. The Commission anticipates that small entities will comment and provide data on the challenges they face and proposals for how to design the mechanisms to accommodate small entities. The Commission anticipates taking these comments and any alternatives proposed into consideration when making final decisions on how the mechanisms will be designed and what rules it will adopt for entities receiving support from these mechanisms.
282. The Commission proposes a broadband reasonably comparable rate certification on all ETCs that receive ongoing high-cost support in areas served by price cap carriers and rate-of-return carriers, but it also seeks comment on modifying the reduction in support for late filing. Although the Commission notes that filing deadlines will be strictly enforced, it proposes to adjust the reduction of support for all ETCs, including small entities, and provide a grace period to ensure it is not unduly punitive given the nature of non-compliance. The Commission also seeks comment on support reductions it
283. None.
284.
285.
• Electronic Filers: Comments may be filed electronically using the Internet by accessing the ECFS:
Paper Filers: Parties who choose to file by paper must file an original and one copy of each filing. Because more than one docket number appears in the caption of this proceeding, filers must submit two additional copies for each additional docket number.
• Filings can be sent by hand or messenger delivery, by commercial overnight courier, or by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the Commission's Secretary, Office of the Secretary, Federal Communications Commission.
○ All hand-delivered or messenger-delivered paper filings for the Commission's Secretary must be delivered to FCC Headquarters at 445 12th St. SW., Room TW–A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of
○ Commercial overnight mail (other than U.S. Postal Service Express Mail and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD 20743.
○ U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12th Street SW., Washington, DC 20554.
286.
287.
288.
289. Accordingly,
290.
291.
292.
Communications common carriers, Reporting and recordkeeping requirements, Telecommunications, Telephone.
For the reasons discussed in the preamble, the Federal Communications Commission proposes to amend 47 CFR part 54 as follows:
Sections 1, 4(i), 5, 201, 205, 214, 219, 220, 254, 303(r), and 403 of the Communications Act of 1934, as amended, and section 706 of the Communications Act of 1996, as amended; 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 254, 303(r), 403, and 1302 unless otherwise noted.
(d) If a state fails to initiate a proceeding on an entity's application for eligible telecommunications carrier designation within 60 calendar days from the date the application is filed, that applicant may presume the state lacks jurisdiction and may file an application for eligible telecommunications carrier designation with the Commission pursuant to section 214(a)(6).
(a) Competitive eligible telecommunications carriers will, beginning January 1, 2012, receive support as described in this paragraph.
(1)
(i) “Total 2011 support” is the amount of support disbursed to a competitive eligible telecommunication carrier for 2011, without regard to prior period adjustments related to years other than 2011 and as determined by the Administrator on January 31, 2012.
(ii) For the purpose of calculating the $3,000 per line limit, the average of lines reported by a competitive eligible telecommunication carrier pursuant to line count filings required for December 31, 2010, and December 31, 2011, shall be used. The $3,000 per line limit shall be applied to support amounts determined for each incumbent study area served by the competitive eligible telecommunications carrier.
(2)
(i) From January 1, 2012, to June 30, 2012, each competitive eligible telecommunications carrier shall receive its monthly baseline support amount each month.
(ii) From July 1, 2012 to June 30, 2013, each competitive eligible telecommunications carrier shall receive 80 percent of its monthly baseline support amount each month.
(iii) Beginning July 1, 2013, until a date specified by public notice, each competitive eligible telecommunications carrier shall receive 60 percent of its monthly baseline support amount each month.
(iv) Each competitive eligible telecommunications carrier that is not a winning bidder for Mobility Fund Phase II support shall receive 40 percent of its monthly baseline support amount each month for twelve months, beginning the first month after the month in which a public notice announces winning bidders for Mobility Fund Phase II support, and then 20 percent of its monthly baseline support amount each month for the subsequent twelve months. Thereafter, it shall not receive universal service support pursuant to this section.
(v) If a competitive eligible telecommunications carrier becomes eligible to receive high-cost support pursuant to the Mobility Fund Phase II, it will cease to be eligible for phase-down support in the first month after the month in which its Mobility Fund Phase II support is authorized.
(b)
(1)
(i) The ACS-Anchorage incumbent study area;
(ii) The ACS-Juneau incumbent study area;
(iii) The Fairbanks zone 1 disaggregation zone in the ACS-Fairbanks incumbent study area; and
(iv) The Chugiak 1 and 2 and Eagle River 1 and 2 disaggregation zones of the Matanuska Telephone Association incumbent study area.
(2)
(3)
(i)
(ii)
(4)
(5)
(i) Commencing in the first month after the month in which a public notice announces winning bidders for ongoing support from Mobility Fund Phase II or Tribal Mobility Fund Phase II, each competitive eligible telecommunications carrier subject to delayed phase down that is not a winning bidder in Mobility Fund Phase II or Tribal Mobility Fund Phase II shall receive 80 percent of its monthly baseline support amount each month for twelve months; 60 percent of its monthly support for the next 12 months; 40 percent of its monthly support for the next twelve months; and 20 percent of its monthly support for the next twelve months. Thereafter, it shall not receive universal service support pursuant to this section.
(ii) If a competitive eligible carrier subject to delayed phase down is a winning bidding for Mobility Fund Phase I or Tribal Mobility Fund Phase II support, it will cease to be eligible for phase-down support in the first month after the month in which its Mobility Fund Phase II or Tribal Mobility Fund Phase II support is authorized.
(c)
(d)
Recipients of Connect America Phase II support (whether awarded through the offer of model-based support to price cap carriers or through a competitive bidding process) are required to offer broadband service at actual speeds of at least 10 Mbps downstream/1 Mbps upstream, with latency suitable for real-time applications, including Voice over Internet Protocol, and usage capacity that is reasonably comparable to comparable offerings in urban areas, at rates that are reasonable comparable to rates for comparable offerings in urban areas. For purposes of determining reasonable comparability of rates, recipients are presumed to meet this requirement if they offer rates at or below the benchmarks to be announced annually by public notice issued by the Wireline Competition Bureau.
(c) Deployment Obligation. Recipients of Connect America Phase II support must complete deployment to 85 percent of supported locations within three years of notification of Phase II support authorization and up to 100 percent of supported locations within five years of notification of Phase II support authorization. For purposes of meeting the obligation to deploy to the requisite number of supported locations, recipients may serve unserved locations in census blocks with costs above the extremely high-cost threshold instead of locations in eligible census blocks, provided that they meet the public interest obligations set forth in § 54.309 for those locations and provided that the total number of locations covered is greater than or equal to the number of the eligible census blocks for which funding is authorized.
(e)
(a)
(1) The “baseline support amount” is the amount of support disbursed to a rate-of-return carrier in the prior calendar year, without regard to prior period adjustments related to years other than that calendar year and as determined by USAC in the month following election of frozen support.
(2) For the purpose of calculating the $3,000 per line limit, the average of lines reported by the rate-of-return carrier pursuant to line count filings required for two immediately preceding years shall be used.
(3) A carrier receiving frozen high cost support under this rule shall be deemed to be receiving Interstate Common Line Support equal to the amount of support that the carrier was eligible for under that mechanism in the preceding year.
(b) Connect America Phase II support may be made available in rate-of-return territories for census blocks identified as eligible by public notice. The number of supported locations will be identified for each area eligible for support by public notice. Rate-of-return carriers that voluntarily elect to transition to Phase II model-based support shall elect to make a state-level commitment to receive such support. Such electing carriers will be subject to the public interest obligations set forth in § 54.309.
(c) Upon electing to receive model-based support, rate-of-return carriers will be subject to the transition specified in § 54.310(f) to the extent frozen support is less than Phase II model-based support for a given state.
(a) Any recipient of high cost support shall provide:
(12) A letter certifying that the pricing of the company's broadband services is no more than the applicable benchmark as specified in a public notice issued by the Wireline Competition Bureau, or is no more than the non-promotional prices charged for comparable fixed wireline services in urban areas.
(c) In addition to the information and certification in paragraph (a) of this section, price cap carriers that receive frozen support pursuant to § 54.312(a) shall provide by July 1, 2016 and thereafter a certification that all frozen high-cost support the company received in the previous year was used to build and operate broadband-capable networks used to offer the provider's own retail broadband service in areas substantially unserved by a qualifying competitor as defined in § 54.5.
(f) * * *
(1) Beginning July 1, 2016. A progress report on its five-year service quality plan pursuant to § 54.202(a) that includes the following information:
(i) A letter certifying that it is taking reasonable steps to provide upon reasonable request broadband services at actual speeds of at least 10 Mbps downstream/1 Mbps upstream, with latency suitable for real-time applications, including Voice over Internet Protocol, and usage capacity that is reasonably comparable to comparable offerings in urban areas, at rates that are reasonable comparable to rates for comparable offerings in urban areas, and that requests for such service are met within a reasonable amount of time; and
(j)
(i) Eligible telecommunications carriers that file after the July 1 deadline, but by July 8, will have their support reduced in an amount equivalent to seven days in support;
(ii) Eligible telecommunications carriers that file on or after July 9 will have their support reduced on a pro-rata daily basis equivalent to the period of non-compliance.
(2)
(d)
(i) Eligible telecommunications carriers subject to certifications filed after the October 1 deadline, but by October 8, will have their support reduced in an amount equivalent to seven days in support;
(ii) Eligible telecommunications carriers subject to certifications filed on or after October 9 will have their support reduced on a pro-rata daily basis equivalent to the period of non-compliance.
(2)
(3)
(a) Universal service support shall be eliminated in an incumbent local exchange carrier study area where a qualifying competitor, or combination of qualifying competitors, as defined in § 54.5, offers to 100 percent of residential and business locations in the study area voice and broadband service at speeds of at least 10 Mbps downstream/1 Mbps upstream, with latency suitable for real-time applications, including Voice over Internet Protocol, and usage capacity that is reasonably comparable to comparable offerings in urban areas, at rates that are reasonably comparable to rates for comparable offerings in urban areas.
(b) After a determination there is a 100 percent overlap, the incumbent local exchange carrier shall receive the following amount of high-cost support:
(1) In the first year, two-thirds of the lesser of the incumbent's total high-cost support in the immediately preceding calendar year or $3,000 times the number of reported lines as of year-end for the immediately preceding calendar year;
(2) In the second year, one-third of the lesser of the incumbent's total high-cost support in the immediately preceding calendar year or $3,000 times the number of reported lines as of year-end for the immediately preceding calendar year;
(3) In the third year and thereafter, no support shall be paid.
(c) The Wireline Competition Bureau shall update its analysis of where there is a 100 percent overlap on a biennial basis.
(a) Effective January 1, 2015, no new investment shall be recovered through interstate common line support in areas served by a qualifying competitor as defined in § 54.5.
(b) An incumbent local exchange carrier may presume that an area is unserved by a qualifying competitor after publicly posting, for 90 days, information on its Web site regarding its intent to make new investment in the area in question, if it does not receive notification from a qualifying provider that it serves locations within the area where new investment is proposed.
The Commission will use competitive bidding, as provided in part 1, subpart AA of this chapter, to determine the recipients of support available through Phase II of the Mobility Fund and the amount(s) of support that they may receive for specific geographic areas, subject to applicable post-auction procedures.
(a) Mobility Fund Phase II support may be made available for census blocks or other areas identified as eligible by public notice.
(b) Coverage units for purposes of conducting competitive bidding and disbursing support based on designated population will be identified by public notice for each area eligible for support.
(a) Except as provided in § 54.1014, an applicant shall be an Eligible Telecommunications Carrier in an area in order to receive Mobility Fund Phase II support for that area. The applicant's designation as an Eligible Telecommunications Carrier may be conditional subject to the receipt of Mobility Fund support.
(b) An applicant shall have access to spectrum in an area that enables it to satisfy the applicable performance requirements in order to receive Mobility Fund Phase II support for that area. The applicant shall certify, in a form acceptable to the Commission, that it has such access at the time it applies to participate in competitive bidding and at the time that it applies for support and that it will retain such access for ten (10) years after the date on which it is authorized to receive support.
(c) An applicant shall certify that it is financially and technically qualified to provide the services supported by Mobility Fund Phase II in order to receive such support.
(a) A Tribally-owned or –controlled entity that has pending an application to be designated an Eligible Telecommunications Carrier may participate in an auction by bidding for support in areas located within the boundaries of the Tribal lands associated with the Tribe that owns or controls the entity. To bid on this basis, an entity shall certify that it is a Tribally-owned or –controlled entity and identify the applicable Tribe and Tribal lands in its application to participate in the competitive bidding. A Tribally-owned or -controlled entity shall receive any Mobility Fund Phase II support only after it has become an Eligible Telecommunications Carrier.
(b) Tribally-owned or –controlled entities may receive a bidding credit with respect to bids for support within the boundaries of associated Tribal lands. To qualify for a bidding credit, an applicant shall certify that it is a Tribally-owned or –controlled entity and identify the applicable Tribe and Tribal lands in its application to participate in the competitive bidding. An applicant that qualifies shall have its bid(s) for support in areas within the
(c) A winning bidder for support in Tribal lands shall notify and engage the Tribal governments responsible for the areas supported.
(1) A winning bidder's engagement with the applicable Tribal government shall consist, at a minimum, of a discussion regarding:
(i) A needs assessment and deployment planning with a focus on Tribal community anchor institutions;
(ii) Feasibility and sustainability planning;
(iii) Marketing services in a culturally sensitive manner;
(iv) Rights of way processes, land use permitting, facilities siting, environmental and cultural preservation review processes; and
(v) Compliance with Tribal business and licensing requirements.
(2) A winning bidder shall notify the appropriate Tribal government of its winning bid no later than five business days after being identified by public notice as a winning bidder.
(3) A winning bidder shall certify in its application for support that it has substantively engaged appropriate Tribal officials regarding the issues specified in paragraph(d)(1) of this section, at a minimum, as well as any other issues specified by the Commission, and provide a summary of the results of such engagement. A copy of the certification and summary shall be sent to the appropriate Tribal officials when it is sent to the Commission.
(4) A winning bidder for support in Tribal lands shall certify in its annual report, pursuant to § 54.1019(a)(5), and prior to disbursement of support, pursuant to § 54.1018, that it has substantively engaged appropriate Tribal officials regarding the issues specified in paragraph(d)(1) of this section, at a minimum, as well as any other issues specified by the Commission, and provide a summary of the results of such engagement. A copy of the certification and summary shall be sent to the appropriate Tribal officials when it is sent to the Commission.
(a)
(1) Provide ownership information as set forth in § 1.2112(a) of this chapter;
(2) Certify that the applicant is financially and technically capable of meeting the public interest obligations of § 54.1016 in each area for which it seeks support;
(3) Disclose its status as an Eligible Telecommunications Carrier in any area for which it will seek support or as a Tribal entity with a pending application to become an Eligible Telecommunications Carrier in any such area, and certify that the disclosure is accurate;
(4) Describe the spectrum access that the applicant plans to use to meet obligations in areas for which it will bid for support, including whether the applicant currently holds a license for or leases the spectrum, and certify that the description is accurate and that the applicant will retain such access for at least 10 years after the date on which it is authorized to receive support;
(5) Make any applicable certifications required in § 54.1014.
(b)
(2)
(i) Identification of the party seeking the support, including ownership information as set forth in § 1.2112(a) of this chapter;
(ii) Certification that the applicant is financially and technically capable of meeting the public interest obligations of § 54.1016 in the geographic areas for which it seeks support;
(iii) Proof of the applicant's status as an Eligible Telecommunications or as a Tribal entity with a pending application to become an Eligible Telecommunications Carrier in any area for which it seeks support and certification that the proof is accurate;
(iv) A description of the spectrum access that the applicant plans to use to meet obligations in areas for which it is winning bidder for support, including whether the applicant currently holds a license for or leases the spectrum, and certification that the description is accurate and that the applicant will retain such access for at least 10 years after the date on which it is authorized to receive support;
(v) A detailed project description that describes the network, identifies the proposed technology, demonstrates that the project is technically feasible, discloses the budget and describes each specific phase of the project, e.g., network design, construction, deployment and maintenance;
(vi) Certifications that the applicant has available funds for all project costs that exceed the amount of support to be received from Mobility Fund Phase II and that the applicant will comply with all program requirements;
(vii) Any guarantee of performance that the Commission may require by public notice or other proceedings, including but not limited to the letters of credit required in § 54.1017, or a written commitment from an acceptable bank, as defined in § 54.1017(a)(1), to issue such a letter of credit;
(viii) Certification that the applicant will offer service in supported areas at rates that are within a reasonable range of rates for similar service plans offered by mobile wireless providers in urban areas for a period during the term of the support the applicant seeks;
(ix) Any applicable certifications and showings required in § 54.1014; and
(x) Certification that the party submitting the application is authorized to do so on behalf of the applicant.
(xi) Such additional information as the Commission may require.
(3)
(ii) Any application that, as of the submission deadline, either does not identify the applicant seeking support as specified in the public notice announcing application procedures or does not include required certifications shall be denied.
(iii) An applicant may be afforded an opportunity to make minor modifications to amend its application or correct defects noted by the applicant, the Commission, the Administrator, or other parties. Minor modifications include correcting typographical errors in the application and supplying non-material information that was inadvertently omitted or was not available at the time the application was submitted.
(iv) Applications to which major modifications are made after the deadline for submitting applications shall be denied. Major modifications include, but are not limited to, any changes in the ownership of the
(v) After receipt and review of the applications, a public notice shall identify each winning bidder that may be authorized to receive Mobility Fund Phase II support, after the winning bidder submits a Letter of Credit and an accompanying opinion letter as required by § 54.1016, in a form acceptable to the Commission, and any final designation as an Eligible Telecommunications Carrier that any Tribally-owned or –controlled applicant may still require. Each such winning bidder shall submit a Letter of Credit and an accompanying opinion letter as required by § 54.1016, in a form acceptable to the Commission, and any required final designation as an Eligible Telecommunications Carrier no later than 10 business days following the release of the public notice.
(vi) After receipt of all necessary information, a public notice will identify each winning bidder that is authorized to receive Mobility Fund Phase II support.
(a)
(1) Outdoor minimum data transmission rates of 800 kbps uplink and 2000 kbps downlink;
(2) Transmission latency low enough to enable the use of real time applications, such as VoIP.
(b)
(c)
(d)
(e)
(a) Before being authorized to receive Mobility Fund Phase II support, a winning bidder shall obtain an irrevocable standby letter of credit which shall be acceptable in all respects to the Commission. Each winning bidder authorized to receive Mobility Fund Phase II support shall maintain the standby letter of credit or multiple standby letters of credit in an amount equal to the amount of Mobility Fund Phase II support that the winning bidder has been and is eligible to request be disbursed to it pursuant to § 54.1018 plus the additional performance default amount described in § 54.1016(e), until at least 120 days after the winning bidder receives its final distribution of support pursuant to this section.
(1) The bank issuing the letter of credit shall be acceptable to the Commission. A bank that is acceptable to the Commission is:
(i) Any United States Bank;
(A) That is among the 50 largest United States banks, determined on the basis of total assets as of the end of the calendar year immediately preceding the issuance of the letter of credit,
(B) Whose deposits are insured by the Federal Deposit Insurance Corporation, and
(C) That has a long-term unsecured credit rating issued by Standard & Poor's of A− or better (or an equivalent rating from another nationally recognized credit rating agency); or
(ii) An agricultural credit bank in the United States that serves rural utilities and is a member of the United States Farm Credit System;
(A) That has total assets equal to or exceeding the total assets of any of the 50 largest United States banks, determined on the basis of total assets as of the end of the calendar year immediately preceding the issuance of the letter of credit,
(B) Whose deposits are insured by the Farm Credit System Insurance Corporation, and
(C) That has a long-term unsecured credit rating issued by Standard & Poor's of A− or better (or an equivalent rating from another nationally recognized credit rating agency); or
(iii) Any non-U.S. bank that;
(A) Is among the 50 largest non-U.S. banks in the world, determined on the basis of total assets as of the end of the calendar year immediately preceding the issuance of the letter of credit (determined on a U.S. dollar equivalent basis as of such date),
(B) Has a branch office in the District of Columbia or such other branch office agreed to by the Commission,
(C) Has a long-term unsecured credit rating issued by a widely-recognized credit rating agency that is equivalent to an A− or better rating by Standard & Poor's, and
(D) Issues the letter of credit payable in United States dollars.
(2) [Reserved]
(b) A winning bidder for Mobility Fund Phase II support shall provide with its Letter of Credit an opinion letter from its legal counsel clearly stating, subject only to customary assumptions, limitations, and qualifications, that in a proceeding under Title 11 of the United States Code, 11 U.S.C. 101 et seq. (the “Bankruptcy Code”), the bankruptcy
(c) Authorization to receive Mobility Fund Phase II support is conditioned upon full and timely performance of all of the requirements set forth in § 54.1016, and any additional terms and conditions upon which the support was granted.
(1) Failure by a winning bidder authorized to receive Mobility Fund Phase II support to comply with any of the requirements set forth in § 54.1015 or any other term or conditions upon which support was granted, or its loss of eligibility for any reason for Mobility Fund Phase II support will be deemed an automatic performance default, will entitle the Commission to draw the entire amount of the letter of credit, and may disqualify the winning bidder from the receipt of Mobility Fund Phase II support or additional USF support.
(2) A performance default will be evidenced by a letter issued by the Chief of either the Wireless Bureau or Wireline Bureau or their respective designees, which letter, attached to a standby letter of credit draw certificate, and shall be sufficient for a draw on the standby letter of credit for the entire amount of the standby letter of credit.
(a) A winning bidder for Mobility Fund Phase II support will be advised by public notice whether it has been authorized to receive support. The public notice will detail how disbursement will be made available.
(b) Mobility Fund Phase II support will be available for disbursement to a winning bidder authorized to receive support for 10 years following the date on which it is authorized.
(c) Prior to each disbursement request, a winning bidder for support in a Tribal land will be required to certify that it has substantively engaged appropriate Tribal officials regarding the issues specified in § 54.1014(d)(1), at a minimum, as well as any other issues specified by the Commission and to provide a summary of the results of such engagement.
(d) Prior to each disbursement request, a winning bidder will be required to certify that it is in compliance with all requirements for receipt of Mobility Fund Phase II support at the time that it requests the disbursement.
(a) A winning bidder authorized to receive Mobility Fund Phase II support shall submit an annual report no later than July 1 in each year for the ten years after it was so authorized. In addition to the information required by § 54.313, each annual report shall include the following, or reference the inclusion of the following in other reports filed with the Commission for the applicable year:
(1) Electronic shapefiles of the outdoor minimum data transmission rates requirement coverage polygons illustrating the area newly reached by mobile services at a minimum resolution of 100 meters;
(2) A list of relevant census blocks previously deemed unserved, with total resident population and resident population residing in areas newly reached by mobile services (based on Census Bureau data and estimates);
(3) If any such testing has been conducted, data received or used from drive tests, or scattered site testing, analyzing network coverage for mobile services in the area for which support was received;
(4) Certification that the winning bidder offers service in supported areas at rates that are within a reasonable range of rates for similar service plans offered by mobile wireless providers in urban areas;
(5) Any applicable certifications and showings required in § 54.1014; and
(6) Updates to the information provided in § 54.1015(b)(2)(v).
(b) The party submitting the annual report must certify that they have been authorized to do so by the winning bidder.
(c) Each annual report shall be submitted to the Office of the Secretary of the Commission, clearly referencing WT Docket No. 10–208; the Administrator; and the relevant state commissions, relevant authority in a U.S. Territory, or Tribal governments, as appropriate.
A winning bidder authorized to receive Mobility Fund Phase II support and its agents are required to retain any documentation prepared for, or in connection with, the award of Mobility Fund Phase II support for a period of not less than 10 years after the date on which the winning bidder receives its final disbursement of Mobility Fund Phase II support.
(a) Until December 31, 2014, the national average unseparated loop cost per working loop, except as provided in paragraph (c) of this section, is equal to the sum of the Loop Costs for each study area in the country as calculated pursuant to § 54.1308(a) divided by the sum of the working loops reported in § 54.1305(h) for each study area in the country. The national average unseparated loop cost per working loop shall be calculated by the National Exchange Carrier Association.
(d) Effective January 1, 2015, the national average unseparated loop cost per working loop shall be frozen at the amount in effect as of December 31, 2014, or lowered to the extent the expense adjustment (additional interstate expense allocation) calculated by the sum of paragraphs (d)(1) and (2) of this section does not exceed the maximum allowable support calculated pursuant to section 54.1302(a) of this subpart.
(1) Sixty-five percent of the study area average unseparated loop cost per working loop as calculated pursuant to § 54.1309(b) in excess of 115 percent of the national average for this cost but not greater than 150 percent of the national average for this cost pursuant to § 54.1309(d) multiplied by the number of working loops reported in § 54.1305(h) for all study areas with less than 200,000 working loops.; and
(2) Seventy-five percent of the study area average unseparated loop cost per working loop as calculated pursuant to § 54.1309(b) in excess of 150 percent of the national average for this cost pursuant to § 54.1309(d) multiplied by the number of working loops reported in § 54.1305(h) for all study areas with less than 200,000 working loops.
(a) Beginning January 1, 2015, for study areas reporting 200,000 or fewer working loops pursuant to § 54.1305(h), the expense adjustment (additional interstate expense allocation) is equal to the sum of paragraphs (b)(1) and (2) of this section multiplied by the ratio of the maximum allowable support calculated pursuant to section 54.1302(a) to the aggregate sum of paragraphs (b)(1) and (2) of this section for all study areas reporting 200,000 or
(b) Until December 31, 2014, for study areas reporting 200,000 or fewer working loops pursuant to § 54.1305(h), the expense adjustment (additional interstate expense allocation) is equal to the sum of paragraphs (b)(1) through (2) of this section.
(1) Sixty-five percent of the study area average unseparated loop cost per working loop as calculated pursuant to § 54.1309(b) in excess of 115 percent of the national average for this cost but not greater than 150 percent of the national average for this cost as calculated pursuant to § 54.1309 multiplied by the number of working loops reported in § 54.1305(h) for the study area; and
(2) Seventy-five percent of the study area average unseparated loop cost per working loop as calculated pursuant to § 54.1309(b) in excess of 150 percent of the national average for this cost as calculated pursuant to § 54.1309 multiplied by the number of working loops reported in § 54.1305(h) for the study area.
(c) Beginning January 1, 2015, the expense adjustment shall be adjusted each year to reflect changes in the amount of high-cost loop support resulting from adjustments calculated pursuant to § 54.1306(a) made during the previous year. If the resulting amount exceeds the previous year's fund size, the difference will be added to the amount calculated pursuant to § 54.1310(a). If the adjustments made during the previous year result in a decrease in the size of the funding requirement, the difference will be subtracted from the amount calculated pursuant to § 54.1310(a) for the following year.
(a) Effective January 1, 2015, no new investment shall be recovered through high-cost loop support in areas served by a qualifying competitor as defined in section 54.5.
(b) An incumbent local exchange carrier may presume that an area is unserved by a qualifying competitor after publicly posting, for 90 days, information on its Web site regarding its intent to make new investment in the area in question, if it does not receive notification from a qualifying provider that it serves locations within the area where new investment is proposed.
Environmental Protection Agency.
Proposed rule.
The Environmental Protection Agency (EPA) is proposing amendments to the Standards of Performance for Grain Elevators as a result of the 8-year review of the new source performance standards required by the Clean Air Act. We are proposing to clarify certain provisions in the existing subpart DD. The EPA is also proposing a new subpart DDa for grain elevators, which would apply to affected facilities that commence construction, modification or reconstruction after July 9, 2014 and includes the proposed clarifications for subpart DD and several new provisions. In response to Executive Order 13563, Improving Regulation and Regulatory Review, the EPA conducted an analysis of subpart DD. In considering the directives of the Executive Order, the EPA conducted several analyses to determine the effectiveness of subpart DD, to determine whether subpart DD is still relevant, and to determine whether subpart DD is excessively burdensome. Based on the results of these analyses, the EPA concluded that subpart DD is still effective, relevant and not excessively burdensome.
Submit your comments, identified by Docket ID Number EPA–HQ–OAR–2010–0706, by one of the following methods:
Do not submit information that you consider to be CBI or otherwise protected through
For information concerning the proposed amendments, contact Mr. Bill Schrock, Natural Resources Group, Sector Policies and Programs Division (E143–03), Research Triangle Park, North Carolina 27711; telephone number (919) 541–5032; fax number (919) 541–3470; email address:
A redline version of the regulatory language that incorporates the proposed changes in this action is available in the docket for this action (Docket ID No. EPA–HQ–OAR–2010–0706)
New source performance standards implement CAA section 111(b) and are issued for categories of sources that EPA has listed because they cause, or contribute significantly to, air pollution, that may reasonably be anticipated to endanger public health or welfare. The primary purpose of the NSPS is to attain and maintain ambient air quality by ensuring application of the best system of emission reduction (BSER) that has been adequately demonstrated, taking into consideration the cost of achieving such emission reductions, and any non-air quality health and environmental impact and energy requirements. Section 111(b)(1)(B) of the CAA requires the EPA to review and, if appropriate, revise existing NSPS at least every 8 years. The NSPS for grain elevators (40 CFR part 60, subpart DD) were promulgated in 1978 and last reviewed in 1984. As part of the review, the EPA is required to consider what degree of emission limitation is achievable through the application of the BSER, which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated. The EPA also considers the emission limitations and reductions that have been achieved in practice.
In addition to conducting the NSPS review, the EPA is evaluating the start-up, shutdown and malfunction (SSM) provisions in the rule in light of the D.C. Circuit Court of Appeals decision in
To address the NSPS review, SSM exemptions and other changes, the EPA
This rulemaking also responds to Executive Order 13563, Improving Regulation and Regulatory Review, which directs federal agencies to “. . . review existing rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.” It also responds to a petition submitted by a coalition representing the grain elevator industry that, citing the Executive Order, requests the EPA to review and repeal subpart DD. In considering the directives of the Executive Order, the EPA conducted several analyses aimed at determining the effectiveness of subpart DD, determining whether subpart DD is still relevant and determining whether subpart DD is excessively burdensome. Based on the results of these analyses, the EPA concluded that subpart DD is still effective, relevant and not excessively burdensome but we are proposing some amendments to clarify certain provisions.
Based on the results of the NSPS review, the EPA is proposing the following:
We are proposing amendments to subpart DD to clarify the definition of grain unloading station and grain loading station, and to clarify enclosure requirements for barge or ship unloading operations.
We are proposing a new subpart DDa that will include the standards of performance and other provisions in subpart DD, as clarified in this proposal which reflect current industry operations, as well as the following additional new standards and provisions based on our review of available information:
• An additional method for determining applicability that includes the storage capacity of temporary storage facilities (TSFs).
• Ten percent opacity standards for barge or ship unloading stations not using an unloading leg and for column dryers using a wire screen.
• Particulate Matter (PM) and opacity standards for affected facilities associated with TSFs consistent with those associated with permanent storage units.
• Particulate Matter performance tests conducted every 60 months, opacity tests conducted annually, and weekly visual inspections for affected facilities, and visual inspections of fabric filters every 6 months.
• Records for the new applicability calculation method, excess emissions events, fabric filter inspections, opacity tests, weekly visual inspections and PM tests, and the type of grain processed during performance tests.
• Requirement to submit electronic copies of performance tests reports to the EPA using the EPA's electronic reporting tool (ERT).
• New definitions for “permanent storage capacity,” “temporary storage facility,” “wire screen column dryer,” and “en-masse drag conveyor.”
We are also proposing that the PM standards are applicable at all times.
Table 1 summarizes the costs and benefits of this action. See section VI of this preamble for further discussion.
Categories and entities potentially regulated by this proposed rule include those listed in Table 2 of this preamble.
This table is not intended to be exhaustive but rather provides a guide for readers regarding entities likely to be regulated by the proposed amendments. To determine whether your facility would be regulated by the proposed amendments, you should carefully examine the applicability criteria in 40 CFR 60.300 and 40 CFR 60.300a. If you have any questions regarding the applicability of the proposed amendments to a particular entity, contact the person listed in the preceding
If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in the
NSPS implement CAA section 111, which requires that each NSPS reflect the degree of emission limitation achievable through the application of the BSER which (taking into consideration the cost of achieving such emission reductions, any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated. This level of control is referred to as BSER and has been referred to in the past as “best demonstrated technology” or BDT. In assessing whether a standard is achievable, the EPA must account for routine operating variability associated with performance of the system on whose performance the standard is based. See
We are also proposing in this rulemaking that existing affected facilities that are modified or reconstructed would be subject to this proposed rule. Under CAA section 111(a)(4), “modification” means any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted. Changes to an existing facility that do not result in an increase in the emission rate are not considered modifications (40 CFR 60.14).
Rebuilt emission units would become subject to the proposed standards under the reconstruction provisions, regardless of changes in emission rate. Reconstruction means the replacement of components of an existing facility such that: (1) the fixed capital cost of the new components exceeds 50 percent of the fixed capital cost that would be required to construct a comparable entirely new facility; and (2) it is technologically and economically feasible to meet the applicable standards (40 CFR 60.15).
Section 111(b)(1)(B) of the CAA requires the EPA to periodically review and revise the standards of performance, as necessary, to reflect improvements in methods for reducing emissions. The NSPS are directly enforceable federal regulations issued for categories of sources which cause, or contribute significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare. Since 1970, the NSPS have been successful in achieving long-term emissions reductions in numerous industries by assuring that cost-effective controls are installed on new, reconstructed or modified sources.
In 1978, the EPA promulgated “Standards of Performance for Grain Elevators” (40 CFR part 60, subpart DD) (August 3, 1978, 43 FR 34347). Since then, we have conducted one review of the standards, which promulgated minor revisions to clarify certain provisions (March 27, 1984, 49 FR 11750).
The current subpart DD applies to affected facilities at any grain storage elevators or grain terminal elevators storing corn, wheat, sorghum, rice, rye, oats, barley and soybeans which are constructed, reconstructed or modified after August 3, 1978. On August 7, 1977 Congress amended the Clean Air Act with a provision that exempts country grain elevators with less than 2.5 million bushels of grain storage capacity from standards developed under section 111 of the Act. A “grain storage elevator” means any grain elevator
The affected facilities at grain elevators are each truck unloading station, truck loading station, barge and ship unloading station, barge and ship loading station, railcar loading station, railcar unloading station, grain dryer and all grain handling operations. 40 CFR 60.300.
The current NSPS, as amended under the 1984 review, include the following emission limits and work practice standards:
Initial compliance with the PM and opacity emission limits in the current NSPS (subpart DD) is demonstrated by conducting initial performance tests. Subpart DD does not contain any continuous compliance requirements.
Today's proposed standards would apply to affected facilities at any grain storage elevators or grain terminal elevators storing corn, wheat, sorghum, rice, rye, oats, barley and soybeans which are constructed, reconstructed or modified after July 9, 2014. We are also proposing clarifications that would apply to affected facilities at any grain storage elevator or grain terminal elevator storing corn, wheat, sorghum, rice, rye, oats, barley and soybeans which are constructed, reconstructed or modified after August 3, 1978. The affected facilities at grain elevators are each truck unloading station, truck loading station, barge and ship unloading station, barge and ship loading station, railcar loading station, railcar unloading station, grain dryer and all grain handling operations. Neither the proposed standards nor the clarifications to the existing standards are changing the rules for currently affected facilities, however the proposed standards will cover a new type of barge unloader and column dryer not contemplated by the existing standards.
The primary pollutant emitted and the only pollutant regulated by the grain elevator NSPS is PM. Particle pollution can cause serious health problems. The size of particles is directly linked to their potential for causing health problems. EPA's national and regional rules to reduce emissions of pollutants that form particle pollution will help state and local governments meet the Agency's national air quality standards. Particulate matter is emitted from grain as it is conveyed from one affected facility to another, unloaded or loaded onto transport vessels and during the drying process. Opacity is regulated to ensure proper operation and maintenance of the PM controls and to control fugitive emissions.
The PM concentration limits are based on filterable PM measured by EPA Method 5. Filterable PM consists of those particles directly emitted by a source as a solid or liquid at the stack (or similar release conditions) and captured on the filter of a stack test train. A fraction of the PM emitted from grain elevator affected facilities is PM with an aerodynamic diameter less than or equal to 2.5 micrometers (PM
The PM concentration limits in today's proposed NSPS review are based on filterable PM measured by EPA Method 5 because the majority of PM emissions data available are Method 5 data. Emissions of condensable PM, which is PM that is not directly emitted but is formed in the atmosphere, are measured using EPA Method 202. These emissions can be added as the “back half” to a Method 5 sampling train. However, the EPA is not proposing separate standards for condensable PM because available emissions test data for condensable PM are limited and not adequate for setting standards.
The EPA is proposing the following actions regarding the NSPS for grain elevators. As summarized in section IV.C.1 of this preamble, we are proposing clarifications to specific
We are proposing clarifications to three provisions in subpart DD. These proposed clarifications are summarized in Table 3 of this preamble, which presents both the current provision in subpart DD and a description of the proposed clarifications. EPA's rationale for these proposed changes is provided in section V.D. of this preamble. These proposed revisions are intended to keep the meaning and intent of the definitions as originally promulgated while making sure the definitions encompass the changes in the industry since the last review of subpart DD in 1984.
The proposed clarifications are applicable to all affected facilities that commenced construction, modification or reconstruction after August 3, 1978.
We are proposing a new subpart DDa for affected facilities that commence construction, modification, or reconstruction after July 9, 2014. Subpart DDa includes the standards in subpart DD, including the clarifications discussed in Table 3 of this preamble for subpart DD, and new requirements for affected facilities. The proposed new requirements are summarized below. EPA's rationale for these proposed changes is provided in sections V.A through V.D. of this preamble. The new requirements include a new definition of permanent storage capacity that accounts for storage capacity from TSFs; other new definitions; emission standards for two new subcategories; and testing, monitoring, reporting and recordkeeping requirements. We are also proposing a requirement in subpart DDa that all emission standards in subpart DDa apply at all times, including periods of SSM.
We are proposing the following definitions:
“Permanent storage capacity” is proposed to be the grain storage capacity calculated using proposed Equations 1 or 2, as applicable. This proposed definition revises the method used to determine applicability by providing a new method to calculate “permanent storage capacity” using TSF capacity and the grain storage capacity of buildings, other types of bins and silos. Equation 1 is proposed for grain elevators where the grain storage capacity and historical grain throughput for all their grain storage buildings, bins and silos are known.
Equation 2 is proposed for grain elevators where the grain storage capacity and historical grain throughput for all grain storage buildings, bins or silos are not known. Equation 2 would be used at grain elevators that had at least one storage building, bin, or silo that did not exist prior to the date of construction, modification or reconstruction of the affected facility.
“Grain unloading station” is proposed as specified in Table 3 of this preamble.
“Grain loading station” is proposed as specified in Table 3 of this preamble.
“Temporary storage facility” or “TSF” is proposed to be defined as any grain storage bin that: (1) Uses an asphalt, concrete or other improved base material; (2) uses rigid, self-supporting
“Wire screen column dryer” is proposed to be defined to be any equipment used to reduce the moisture content of grain in which the grain flows from the top to the bottom in one or more continuous packed columns between two woven wire screens or between a combination of perforated metal sheets and wire screens.
“En-masse drag conveyor” is proposed to mean a device that uses paddles or flights mounted on a chain to remove grain from a barge or ship.
“Portable equipment” is proposed to mean equipment that includes (but is not limited to) portable augers, portable conveyors and front-end loaders that are not fixed at any one spot and can be moved around the site.
We are proposing the following actions regarding the PM standards:
• Maintain the subpart DD standards for “rack dryers” and “column dryers” and add a provision that “wire screen column dryers” are prohibited from discharging into the atmosphere any gases that exhibit greater than 10-percent opacity.
• Clarify the requirements for barge and ship unloading stations using an unloading leg as specified in Table 3 of this preamble.
• Add an opacity limit of 10 percent for all affected facilities at barge and ship unloading stations that unload grain using en-masse drag conveyors.
• Require that requests for an equivalency determination for alternative controls for barge unloading stations apply only to barge unloading stations that do not use an unloading leg or en-masse drag conveyor.
• Add a requirement that unloading facilities and grain handling operations at TSFs meet the subpart DD requirements for PM (0.01 gr/dscf) and opacity (5 percent for truck unloading and 0 percent for grain handling) if portable equipment is not used.
• Add a requirement that the standards of subpart DDa apply at all times including periods of SSM.
We are proposing the following actions to test methods and procedures:
• Annual opacity testing be conducted for each applicable opacity limit for each affected facility (using Method 9).
• PM testing be conducted every 60 months for each applicable PM limit for each affected facility (using Method 5 or 17).
We are proposing that, within 60 days of each performance test, the results of the performance test be submitted electronically to the EPA using the Compliance and Emissions Data Reporting Interface (CEDRI) that is accessed through the EPA's CDX (
The General Provisions in 40 CFR part 60 provide that emissions in excess of the level of the applicable emission limit during periods of SSM shall not be considered a violation of the applicable emission limit unless otherwise specified in the applicable standard. See 40 CFR 60.8(c). The General Provisions, however, may be amended for individual subparts. Here, the EPA is proposing standards in subpart DDa that apply at all times as specified in the proposed § 60.302a(e). This is discussed further in section V.C.3, and with respect to specific standards in various sections below.
We are proposing the following new monitoring requirements:
• Fabric filter/baghouse inspections every 6 months.
• Weekly visible emissions checks of affected facilities.
We are proposing the following new records:
• Total storage capacity (bushels) for each building, bin (excluding TSFs), and silo used to store grain.
• Storage capacity for each TSF.
• Calculations documenting the emissions quantification for excess emission events.
• Results of fabric filter/baghouse inspections and any corrective action taken maintained on-site.
• Results of weekly visible emission checks, including any corrective action taken. Records maintained on site for a minimum of 36 months.
• Results of the annual opacity tests.
• The type of grain processed during performance tests at the affected facility.
CAA section 111(a)(1) requires that standards of performance for new sources reflect the “. . . degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction, and any nonair quality health and environmental impacts and energy requirements) the Administrator determines has been adequately demonstrated.”
Section 111(b)(1)(B) of the CAA requires the EPA to review and revise, if appropriate, NSPS standards. Accordingly, we conducted the following evaluations as part of our review of subpart DD:
• We conducted a BSER analysis for the grain elevator source category.
• We evaluated the method for determining applicability under subpart DD.
• We evaluated whether any changes are needed to the subpart DD compliance requirements.
• We evaluated subpart DD for any provisions that need clarification.
We are proposing minor revisions to subpart DD that would apply retrospectively to all facilities that currently are subject to subpart DD. We are also proposing a new subpart DDa that would apply to affected facilities that commence construction, modification or reconstruction after July 9, 2014. The proposed requirements in subpart DDa include the clarifications we are proposing to subpart DD as well as some substantive new requirements. Our decision to propose revisions to subpart DD and propose a new subpart DDa is explained in detail in sections V.A through D of this preamble.
A performance standard reflects the degree of emission limitation achievable through the application of the BSER that the EPA determines has been adequately demonstrated, taking into consideration costs, nonair quality health and environmental impacts and energy requirements.
We conducted the BSER review by first assessing changes that have occurred to the grain elevator source category since the last review of the NSPS in 1984. We then identified currently used, new and emerging control systems and assessed whether they represent advances in emission reduction techniques compared to the control techniques used to comply with the existing NSPS. For each new or emerging control option identified, we then evaluated emission reductions, costs, energy requirements and non-air quality impacts. The results of these considerations are presented in section V.A.1 of this preamble.
The EPA gathered information from various sources to identify significant changes that have occurred to the grain elevator source category since the last NSPS review. We reviewed several sources of information, including responses from an industry survey, information in the RACT/BACT/LAER Clearinghouse (RBLC), requirements in state rules and additional information collected from the grain elevator industry. Sections V.A.1.a through V.A.1.d of this preamble describe our review of each source of information and section V.A.1.e of this preamble presents the results of the EPA's evaluation of these sources including any significant changes identified.
To characterize the current state of emissions, practices, operations and controls in the industry, we conducted a CAA section 114 ICR in 2009 for grain elevator operations. The survey was addressed to facilities with any grain elevator that would constitute a “grain terminal elevator” or a “grain storage elevator” (as defined in 40 CFR 60.301). To gather general background information about the industry, respondents were required to submit information for facilities based on storage type, grain(s) handled and the EPA region. Survey responses were collected from 121 grain elevators. The survey responses provided information on grain elevator capacity, grain elevator throughputs for three successive years, the use of temporary storage facilities, barge unloading operations, dryer design, general information on facility characteristics and control devices and work practices used to reduce PM emissions from various sources. The survey responses and database developed from the response information are in the grain elevator docket at EPA–HQ–OAR–2010–0706.
The EPA established the RBLC as a repository of information on air pollution control technologies required by state air pollution control programs (including past RACT, BACT and LAER decisions). Reasonably Available Control Technology is required on existing sources in areas that are not meeting national ambient air quality standards (i.e., non-attainment areas). Under the New Source Review (NSR) program, BACT is required on new or modified major sources in attainment areas and LAER is required on new or modified major sources in non-attainment areas. We reviewed the RBLC to identify any new control technologies that have been used at grain elevators since the last review of the rule. Results of the RBLC review are discussed in the memorandum, “Evaluation of the Revisions to Grain Elevator Emission Standards” in the grain elevator docket at EPA–HQ–OAR–2010–0706.
In order to assess whether state regulations provide more stringent emission limits or additional controls than subpart DD, we conducted a review of the regulations from the 12 states with the most grain storage capacity and the largest number of grain elevators in operation. The 12 states are: Iowa, Illinois, Minnesota, Nebraska, Kansas, Indiana, North Dakota, South Dakota, Ohio, Texas, Missouri and Wisconsin. We reviewed each state's grain elevator standards and evaluated other state regulations controlling PM, opacity and fugitive dust emissions that may be applicable to grain elevators. The review of state rules is presented in the memorandum, ”Evaluation of Grain Elevator Emission Standards in Response to Executive Order 13563” in the grain elevator docket at EPA–HQ–OAR–2010–0706.
The EPA conducted several meetings with a coalition representing grain elevators owners and operators. Members of the coalition provided information on current practices and provided technical presentations to the EPA. The technical presentations and coalition submittals are contained in the grain elevator docket at EPA–HQ–OAR–2010–0706.
Based on our review of the state rules, we identified no requirements more stringent than those in subpart DD. Our review of the RBLC did not identify any control techniques that are different from the control techniques used by grain elevators to comply with the subpart DD standards. Our review of the survey responses and information gathered at meetings resulted in identifying: (1) Emissions test reports and one control technique that we determined not to be BSER for affected facilities as explained below, and (2) several new emission sources since subpart DD was last reviewed in 1984. Section V.A.e.2 discusses our evaluation of new information collected for existing affected facilities. Section V.A.e.3 discusses our evaluation of the new emission sources. Both evaluations are documented in the memorandum, “Evaluation of the Revisions to Grain Elevator Emission Standards” in the grain elevator docket at EPA–HQ–OAR–2010–0706.
Subpart DD regulates the following affected facilities: grain dryers, grain handling, grain loading stations (trucks, railcars and barges/ships) and grain unloading stations (trucks, railcars and barges/ships). Subpart DD requires affected facilities, except grain dryers, to meet a PM emission limit of 0.01 gr/dscfm for process emissions (i.e., non-fugitive emissions). All affected facilities are also required to meet opacity limits, specific to each affected facility, to control fugitive dust emissions. As discussed earlier, we did not identify any more stringent state requirements or more advanced emission control technology from the RBLC for these affected facilities.
Some of the grain elevators responding to the 2009 CAA section 114 survey also provided emissions test reports and permit information. We evaluated the PM emissions test reports to determine whether the PM emission limits in subpart DD were reflective of emissions from well-controlled facilities. The survey responses, permit information and information collected from a literature search provided information on application of mineral oil as a dust suppression technique to reduce fugitive PM emissions. We conducted a BSER analysis for fugitive emissions considering the application of mineral oil to grain.
The results of the BSER analysis showed that for fugitive sources, the limited information available did not indicate any advances in emission control techniques that support changing the current NSPS requirements, including the application of mineral oil. An emission limit developed using the emissions data collected with the survey responses resulted in an achievable limit that is the same as the limit in subpart DD. Our detailed review is discussed in V.A.2.a and V.A.2.b of this preamble.
No other emission control technologies or work practices have been identified for reducing emissions from affected facilities at grain storage or grain terminal elevators. Based on these results, consistent with our obligations under CAA section 111(b), we propose that the control techniques and resultant emission reductions on
We conducted a BSER analysis to determine if we should propose a different PM emission limit for newly constructed, modified, and reconstructed affected facilities at grain elevators. Subpart DD requires process emissions from affected facilities (e.g., truck unloading stations, grain handling operations, etc., but excluding grain dryers) to meet a PM emission limit of 0.01 grains per dry standard cubic foot (gr/dscf). Grain elevators typically meet the standard using fabric filters.
The EPA estimates between 340 and 920 grain elevators could be subject to Subpart DD. In 2009, EPA sent CAA section 114 surveys to 120 grain elevators to characterize the industry and obtain data on PM emission control techniques and associated emissions. Respondents to the survey provided PM emission test reports from 15 grain elevators, which represent only approximately 1.6 percent to 4 percent of the grain elevators potentially subject to subpart DD. We first evaluated the test reports to determine whether sufficient information existed to propose revisions to the PM emission limit. The 15 grain elevators who submitted test reports for PM emissions controlled with fabric filters submitted those reports for the following affected facilities: (1) 7 railcar unloading stations; (2) 4 truck unloading stations; (3) 3 grain handling operations; and (4) 2 barge unloading stations. The survey results indicated that a typical grain elevator has on average 2 truck unloading stations, 4 grain handling operations, 1 barge unloading station, and 1 railcar unloading station. Information provided in the survey responses also indicated that approximately 75 percent of railcar unloading stations, truck unloading stations, barge unloading stations, and grain handling operations are subject to subpart DD. Applying the typical counts to the estimated range of grain elevators that could be subject to subpart DD, and accounting for the fraction that could be subject to subpart DD, the number of affected facilities potentially subject to subpart DD is between 2,200 and 6,200. Comparing these numbers to the number of tests reports collected, we estimated that the facilities submitting PM emission test reports account for only approximately 0.3 percent to 0.7 percent of the population of railcar unloading stations, truck unloading stations, grain handling operations, and barge unloading stations at grain elevators that could be subject to subpart DD. Additionally, the test reports do not include any tests conducted at barge/ship loading stations, railcar loading stations, or truck loading stations.
We further evaluated the PM emission levels from the available test reports, measured as an average of three test runs, which ranged from 0.01 to 0.00002 gr/dscf. It appears the wide variation in PM emissions is due to the different affected facilities that were tested, other operational considerations (i.e., speed of the process) and grain characteristics. EPA had previously concluded that the amount of dust emitted during processing of grain in the various affected facilities depends on the type of grain being handled, the quality of the grain, and the moisture content of the grain.
In considering the limited data and the limitations of the data, we concluded that the PM emission test reports do not sufficiently characterize the performance of fabric filters controlling PM from the full range of affected facilities subject to subpart DD. Accordingly, we have determined that there is insufficient available information to support proposed revisions to the PM emission limits. We are therefore proposing to maintain the PM limit at 0.01 gr/dscf.
We believe the limited number of test reports submitted is due to the current subpart DD only requiring one initial emission test of an affected facility. As discussed in Section V.C.1 of this preamble, EPA believes that additional testing is needed to ensure compliance with the emission limit. We are therefore proposing, in subpart DDa, to require repeat testing of affected facilities every five years. Not only will these tests help the sources determine compliance with the standards, they will provide a more robust set of information for when this rule is next reviewed. We estimate that by the next 8 year review of subpart DDa, initial PM emission tests may be conducted on as many as 300 affected facilities and repeat testing may be conducted on as many as 120 affected facilities, providing approximately 420 PM emission tests to evaluate for determining whether to revise the PM limit. We are also proposing that the emission tests be conducted while processing the highest PM emitting grains to establish PM emissions for all operating scenarios that are expected to occur. We are also proposing to require records of the grain type processed during the testing.
A few permits submitted with responses to the CAA section 114 surveys indicate that some grain elevators use mineral oil as a fugitive dust suppression technique. Mineral oil application is primarily used to reduce the possibility of a grain elevator explosion caused by dust.
The EPA has previously studied the application of mineral oil at grain elevators, noting that there were several potential benefits, such as reduced dust disposal cost, less grain weight loss, as well as improved safety in the working environment.
The subpart DD fugitive emission standards require meeting a 0 percent opacity limit for grain handling operations and require opacities ranging from 5 to 20 percent for loading and unloading stations. We do not have information on how mineral oil application would affect the fugitive opacity limits, e.g., whether the opacity levels would decrease to 0 percent, stay the same or result in another limit. Additionally, portable grain handling equipment, such as portable augers,
The EPA mineral oil study also noted that there are concerns regarding the effect the oil has on grain quality, and consequently, its price. The EPA study indicates that mills and distilleries are concerned about the long-term effects of oil on grain. For some grains, the use of mineral oil may be more problematic, such as for wheat in the milling process. In addition, grain exported to other countries may be required to meet hydrocarbon levels and grain not meeting those levels may be considered contaminated. For example, the European Union's code of practices states that any detection of a level of mineral oil above 300 mg/kg is considered to be contaminated by mineral oil. Therefore, mineral oil application might not be economically feasible for all grains and may result in product quality and contamination concerns.
EPA has only limited information on the effectiveness and cost of mineral oil application, and no test information. We have concluded that mineral oil application as a dust suppression technique for limiting emissions from fugitive sources has not been demonstrated. Therefore, we are not proposing a requirement to use mineral oil. We are requesting additional information on the effectiveness of mineral oil in combination with existing controls and when applied at fugitive sources regulated by the NSPS, particularly those associated with portable grain handling equipment. We are also soliciting information on the capital and operating cost of mineral oil application systems and any problems in grain quality associated with using mineral oil.
Our review of the survey responses and presentations by representatives of the grain elevator industry identified the following three significant changes that have occurred to grain elevators since the last review of subpart DD in 1984:
• Use of new barge unloading technologies (e.g., en-masse drag conveyors).
• Use of wire screen column dryers.
• Use of TSFs.
We evaluated each of the changes to determine if they result in new emission sources, and, if so, whether existing subpart DD requirements represent BSER. To assess BSER, we: (1) Identified available control measures applicable to each emission source; and (2) evaluated these measures to determine emission reductions achieved, associated costs, nonair environmental impacts, energy impacts and any limitations to their application. The evaluation is presented in sections V.A.3.a through V.A.3.c of this preamble. The BSER analysis is documented in the memorandum, “Evaluation of the Revisions to Grain Elevator Emission Standards” in the grain elevator docket at EPA–HQ–OAR–2010–0706.
Barge unloading stations are an affected facility regulated by subpart DD. Subpart DD standards for barge and ship unloading were established for a specific type of unloading mechanism, referred to as either a marine leg or bucket elevator. Under subpart DD, process emissions caused by unloading using a marine leg/bucket elevator must be controlled by enclosing the marine leg/bucket elevator from the top to the bottom of the leg. Emissions must be vented to a control device using a ventilation flow rate of 40 ft
Some barge unloading stations currently use en-masse drag conveyors, which were not in use the last time we reviewed subpart DD. En-masse drag conveyors operate under a different principle than bucket elevators or marine legs. En-masse drag conveyors are plug-flow drag conveyors that are designed to operate vertically. The conveyor uses paddles or flights mounted on a chain to move grain. The side of the conveyor where the grain is being transferred is filled with grain. This type of unloader is significantly different than a bucket unloading leg which has open space between each bucket and can therefore be enclosed and ventilated to a control device. Therefore, dust aspiration to meet the design ventilation requirement of 40 ft
Section 111 of the CAA makes an allowance for the EPA to subcategorize source categories based on differences in size, type and class. An en-masse drag conveyor is a different type of barge unloading system than the marine leg or bucket elevator due to the differences in the unloading mechanism. As such, en-masse drag conveyors constitute a new subcategory of barge unloading system. All emissions from barge unloading using an en-masse drag conveyor are fugitive in nature because they cannot be captured and ventilated to a control device. Some barges have a small opening where the en-masse drag conveyor enters and those openings can be covered around the en-masse loader, thereby limiting fugitive emissions. Other barges have a large opening where a bulldozer is lowered into the barge to move grain toward the unloader. This type of application of the en-masse drag conveyor does not allow openings to be covered, due to safety requirements. No other technologies or techniques have been identified to control fugitive emissions from barge unloading.
The EPA collected test results from two one-hour method 9 tests for opacity conducted at one en-masse system (loading into the barges with larger openings) to demonstrate equivalency with the current standards, per the requirements in 60.302(d)(3) of subpart DD. Method 9 requires that opacity readings be recorded to the nearest 5 percent at 15-second intervals. Opacity is determined as an average of 24 consecutive observations, i.e., a set of observations. The average opacity levels during the highest set of observations of each test were 8.75 and 9.79 percent. Because method 9 opacity
Based on our evaluation, we are proposing a new subcategory for barge unloading stations—barge unloading stations with an en-masse drag conveyor. Based on these results, consistent with our obligations under CAA section 111(b), we are proposing that the 10 percent opacity limit represents BSER for en-masse drag conveyors used to unload grain from barges. We are also proposing that such systems be required to meet an opacity limit of 10 percent at all times.
We expect that en-masse drag conveyor systems that have a small opening could achieve a lower level of opacity if the opening was covered; however, we do not have sufficient data to establish a different opacity limit for these systems. We do not have information on the effectiveness of the cover, costs of the cover, procedures for using the cover or if there are operational or health issues that may occur if the opening is covered. We are requesting additional information to evaluate this control option.
Subpart DD contains provisions that allow for alternative methods of control for barge unloading stations instead of meeting the requirements for unloading legs. We are also proposing similar provisions for subpart DDa. We are proposing that affected barge unloading stations not using an unloading leg or an en-masse drag conveyor may use other methods of emission control that are demonstrated to the Administrator's satisfaction to reduce emissions of PM to the same level or less than the standards for barge unloaders using marine legs or en-mass drag conveyors.
The EPA requests comment on all aspects of the BSER determination for barge unloading using an en-masse drag conveyor. We also request comment on whether there are other types of barge unloading systems that should be considered for subcategorization. If so, the EPA requests information on control technologies that may be used on the unloading system, costs, emission reductions associated with the control and emissions test information for them. The EPA also requests information on technologies or practices that may be used to control emissions from barge unloading using an en-masse conveyor system and additional opacity tests conducted at en-masse conveyor systems.
Grain dryers are an affected facility under subpart DD. The subpart DD emission limits for dryers were established for two types of grain dryers used at grain elevators: rack dryers and column dryers. Grain column dryers are defined as equipment used for drying the grain in which the grain flows by gravity from the top of the dryer to the bottom in one or more packed columns between two perforated metal sheets. Subpart DD requires that PM emissions from grain dryers be reduced by meeting an opacity limit of 0 percent if a column dryer uses column plate perforations exceeding 0.094 inches, or if a rack dryer passes exhaust gases through a screen filter coarser than 50 mesh.
In its review of the grain elevator industry, the EPA found that an additional type of column grain dryer not addressed in subpart DD is now being used. Most rice dryers currently use column dryers with woven wire mesh screens in place of, or in addition to, perforated plates because perforated plates damage the rice kernel, are less efficient for rice drying and are not durable. All the wire mesh column dryers reported in response to the ICR except one are used for drying rice. The wire screens also allow for air transport from the dryer while entrapping PM from the rice. Information provided by one company drying rice shows that of the 126 dryers they operate, 115 are column dryers; 115 of all the dryers (column and rack) use a wire screen of 24 mesh size, and 9 use a 50 mesh size for controlling PM emissions (50 mesh is a smaller screen size than 24 mesh). The 50 mesh screens are being replaced over time because of maintenance and plugging problems.
After an evaluation of the differences in size, type and class of column dryers, per CAA section 111, the EPA is proposing that wire screen column dryers constitute a new subcategory of grain dryers because they are a different type of dryer to which subpart DD does not apply.
Emissions from grain dryers are fugitive in nature. It is not possible to fully enclose grain dryers and vent PM emissions to a control device because of the large size of the dryer, the way that PM is emitted (through the side walls of the dryer rather than from a stack or vent), and because the dryer needs sufficient air flow to work properly and an enclosure would restrict the airflow. Therefore, there are no add-on controls that can be applied to control PM emissions from these dryers. The PM emitted is a function of the size of the openings on the dryer sidewalls. Larger openings emit more PM. The current industry practice is to use wire screens of 24 mesh size to reduce the size of the openings, resulting in reducing PM emissions.
The BSER for rice dryers is to use a wire screen size of 24 mesh, as it reduces PM emissions and also allows proper operation of the dryer. We identified no regulatory options that are more stringent and are technically viable. Higher mesh sizes (e.g., 50, 100) are available that would have smaller openings, resulting in even more emissions reductions. However, information from one rice facility indicates that the 50 mesh screens cause plugging problems and choke the airflow of the dryers and require substantial maintenance to clean. The EPA also determined, during the development of subpart DD in 1978, that the higher sizes, such as 100 mesh screens, would restrict air flow and result in more plugging of the openings such that there would be an unreasonable cost impact due to the need to clean the screens frequently, reduced drying performance and additional energy requirements. Those determinations are still true today.
The EPA collected opacity information for four column dryers with 24 mesh wire screens for drying rice. The opacity data for these dryers consist of one run of 30 minutes of observation for each dryer. The average opacities for the four dryers ranged from 1.13 to 8.38 percent, with the average opacities for the highest period of observation ranging from 5 to 10 percent. After rounding to the nearest increment of 5 percent, the corresponding opacity limit based on the data from the four rice dryers is 10 percent. Based on the information collected, this level is achievable by all wire screen column dryers using 24 mesh.
Because this limit is achievable by the wire screen column dryers that
Based on this evaluation, we are proposing a new subcategory of wire screen column dryers in subpart DDa with an opacity limit of 10 percent for this subcategory. Based on these results, consistent with our obligations under CAA section 111(b), we propose that an opacity limit of 10 percent represents BSER for wire screen column dryers and are proposing standards for wire screen column dryers in subpart DDa.
We have information from one Method 9 test conducted during filling and emptying operations for one wire screen column dryer drying rice. The average opacity for one run of 30 minutes was 15.6 percent, with the average opacity for the highest period of observation during the run at 28.75 percent. We are soliciting additional emissions test information and descriptions for emptying and filling activities to fully understand this process and set, if appropriate, a standard of performance.
We request comment on all aspects of the BSER analysis for wire screen column dryers. We also request additional emission test information for this subcategory of grain dryer.
Subpart DD does not regulate grain storage units (buildings, bins, silos). Instead, subpart DD regulates each affected facility (e.g., loading and unloading stations, grain dryers, grain handling operations) at any grain terminal elevator or any grain storage elevator. Under subpart DD, grain terminal elevators and grain storage elevators are defined in part by their permanent grain storage capacity. “Grain terminal elevator” means any grain elevator that has a permanent storage capacity of more than 2.5 million bushels (excluding elevators located at animal food manufacturers, pet food manufacturers, cereal manufacturers, breweries and livestock feedlots). “Grain storage elevator” means any grain elevator located at any wheat flour mill, wet corn mill, dry corn mill used for human consumption, rice mill or soybean extraction plant that has a permanent grain storage capacity of 1 million bushels.
Temporary storage facilities have been used by the grain elevator industry since the early 1990s. They are intended for bulk storage of grain on a temporary basis, i.e., they are intended to handle intermittent surges and surpluses and are not used necessarily every year. Under the U.S. Warehouse Act, TSFs are licensed and are defined by the following criteria:
• Use of asphalt, concrete or other approved base material.
• Use of rigid self-supporting sidewalls.
• Use of aeration.
• Use of an acceptable covering (e.g., tarp).
In 2007, the EPA received a letter from the National Grain and Feed Association requesting clarification about whether a TSF would constitute “permanent storage capacity” as defined in subpart DD for the purpose of determining applicability under subpart DD. On November 21, 2007, the EPA issued a letter indicating that TSFs should be included in “permanent storage capacity” when determining the applicability of subpart DD. The EPA conducted additional reviews of TSFs and decided that changes to the definition of “permanent storage capacity” were more appropriately made as part of this NSPS review. Consequently, the EPA issued letters in July 2014 to the National Grain and Feed Association and the National Oilseed Processors Association, rescinding the November 21, 2007, letter. These letters can be found at Docket ID Number EPA–HQ–OAR–2010–0706.
Information collected in responses to surveys the EPA sent to grain elevators, gathered at site visits, and at industry meetings indicate that while grain stored in TSFs is kept on a temporary basis, the TSF structures are generally in place on a long-term basis and not dismantled, and may be used for multiple crops. Considering the length of time the structure is in place, the TSF structure then serves the same purpose as a permanent structure, even though the materials of construction and storage times are different. Therefore, we are proposing that the definition of “permanent storage capacity” include TSF capacity. However, we recognize that emissions from TSFs are significantly different than emissions from permanent structures due to the differences in grain throughputs. Therefore, we are also proposing a methodology to prorate the TSF storage capacity for the applicability determination. Our discussion of this methodology is provided in section V.B of this preamble.
We also evaluated BSER for affected facilities associated with TSFs. Information from site visits and survey responses indicate that only truck unloading and loading stations and grain handling operations are used at TSFs. Based on the survey responses and information provided by the industry, we determined that there are two types of grain handling and loading/unloading operations associated with TSFs: (1) Those associated with portable grain handling and loading/unloading equipment; and (2) those associated with fixed grain handling and loading/unloading equipment.
Portable grain handling/loading/unloading equipment include (but are not limited to) portable augers, portable conveyors and front-end loaders that are not fixed at any one spot and can be moved around the site. These pieces of equipment are typically not enclosed due to potential fine dust explosion risk and are therefore not vented to a control device. This explosion risk, combined with the portable nature of the equipment and associated emissions does not permit the capture and routing of the emissions through a stack for control. As such, their emissions are fugitive in nature. The EPA does not have any emission test information on portable grain handling, unloading stations and loading stations. We also have identified no technically viable emission control options for portable equipment. We considered application of mineral oil for dust suppression, but determined in section A.2.b of this preamble that application of mineral oil was not an appropriate emission control technique. Consequently, we propose to determine that BSER for portable grain handling, loading and unloading equipment associated with TSFs is no control. We request comment on our proposed determination. We are also soliciting emissions test data for these sources, as well as information on the types of emission controls that are feasible and the cost of the controls.
Fixed grain handling and loading/unloading equipment are constructed to be stationary and directly connected to the storage facilities for ease of transferring grain. Fixed equipment can also be enclosed and emissions can be vented to a control device. Fixed equipment at TSFs are similar to those associated with permanent storage
We conducted a BSER analysis for meeting the subpart DD requirements by evaluating the costs and emission reductions over a 5 year period to be consistent with the economic impacts analysis. We identified three scenarios at grain elevators that would be affected by adding TSFs: (1) A greenfield facility that exceeds the subpart DDa applicability criteria due to the capacity of TSFs; (2) an existing facility that is below the subpart DDa applicability criteria, but then adds a TSF and exceeds the criteria; and (3) an existing facility already subject to subpart DD (because it exceeds the subpart DD applicability criteria) that then adds a TSF. The additional costs associated with these scenarios include a shed to limit fugitives from unloading stations to meet the applicable opacity standard, and in certain situations, new fabric filters to meet PM limits. In other situations, the EPA concluded that PM emissions from the affected facility could be vented to an existing fabric filter at the grain elevator. Emission reductions were estimated based on routing PM emissions from grain sent to the TSF (and using truck unloading and grain handling affected facilities) to a fabric filter.
We estimated the capital costs to be $1.09 million and the total annual cost (including testing and monitoring costs) to be $0.616 million. The emission reductions were estimated to be 31 tons of PM
Information collected in responses to surveys the EPA sent to grain elevators shows that TSFs are intended for bulk storage of grain on a temporary basis, i.e., they are intended to handle intermittent surges and surpluses and are not used necessarily every year, even though the structure may be in place for several years. The survey responses show that, on average, TSFs have one turnover per year. Specifically, they are filled one time in a year and emptied once each year. Other types of storage facilities (buildings, bins (not including TSFs) and silos) have, on average, nine turnovers a year, and throughput a significantly higher amount of grain in a year than TSFs. The same amount of grain stored in TSFs could be stored in smaller-sized permanent storage facilities that are turned over more frequently. Due to the uncertainties in crop forecasts and fluctuations in crop yields and economics, TSFs are used rather than constructing other types of structures that are more costly and may not be warranted in the future.
Emissions from affected facilities at grain elevators are proportional to the amount of grain throughput. Consequently, affected facilities associated with TSFs have significantly less emissions than affected facilities associated with other types of storage.
Based on the information collected in the surveys and the EPA's understanding of the different uses between TSFs and other types of storage facilities, the EPA has concluded that the capacity of TSFs, as an indicator of emissions, is not a one-to-one equivalency to the capacity of other types of grain storage units. As a result, the EPA analyzed the survey information and developed a method for calculating an adjusted TSF storage capacity that would be equivalent to the storage capacity of other types of grain storage units (i.e., buildings, silos and bins). This adjusted storage capacity for TSFs would then be used to calculate “permanent storage capacity” by summing the adjusted TSF capacity with the capacity for all other types of structures.
For subpart DDa, the EPA is proposing a method for determining the adjusted TSF storage capacity for a given grain elevator by: (1) Establishing the ratio of total annual storage capacity of all other types of storage facilities (excluding TSFs) to the total grain throughput for those storage facilities; and (2) applying that ratio to the total TSF capacity, thereby factoring down the TSF capacity.
For example, consider a grain elevator has 2,000,000 bushels of storage capacity in silos and an average annual throughput of 16,000,000 bushels through the silos. The ratio of permanent storage capacity to throughput is 0.125. If a TSF is constructed with a storage capacity of 1,000,000 bushels, the TSF capacity would be multiplied by the 0.125 ratio resulting in an equivalent permanent capacity of 125,000 bushels. The total permanent capacity of the grain elevator would be 2,125,000 bushels.
The EPA is proposing that grain elevators with new affected facilities use this method to calculate “permanent storage capacity” for determining applicability of subpart DDa. The EPA is proposing that, when historical throughput data are available for all storage facilities, grain elevators would be required to use the historical data to calculate a site-specific adjusted TSF storage capacity, and use the following equation to calculate “permanent storage capacity:”
For situations where at least one grain storage building, bin or silo did not exist prior to the date that construction, modification or reconstruction of the affected facility commenced (i.e., the grain elevator does not have historical throughput data for the storage facilities), the EPA is proposing that grain elevators use a default factor to calculate the adjusted TSF capacity. The following equation would be used to then calculate the “permanent storage capacity”:
We request comment on this proposed approach. Refer to the memorandum, “Determination of Permanent Storage Capacity Equivalents for Temporary Storage Facilities” in the grain elevator docket at EPA–HQ–OAR–2010–0706 for further details.
In subpart DDa, we are proposing new monitoring, reporting and recordkeeping requirements and new provisions for startup, shutdown and malfunctions.
The EPA evaluated the monitoring requirements currently required in subpart DD to determine if they are adequate for determining compliance. Currently under subpart DD, grain elevators are required to conduct an initial PM and opacity performance test but are not required to perform follow-on testing to demonstrate continuous compliance. In light of our understanding that equipment need to be periodically maintained and checked for operational performance to ensure compliance with the emission standards, the EPA concluded that additional compliance requirements are needed in the proposed subpart DDa rule. In subpart DDa, the EPA is proposing to require periodic compliance testing for affected facilities. We are proposing that PM performance tests using EPA Method 5 or Method 17 be conducted every 60 months and opacity tests using Method 9 be conducted annually. We are proposing that operators perform weekly visual emissions checks on affected facilities and maintain records of these checks, including any corrective action taken as a result of visible emissions. The proposed requirements are expected to ensure that emission control systems are properly maintained over time, ensure continuous compliance with standards and improve data accessibility. For fabric filter and baghouse control devices, we are proposing that affected facilities perform periodic visual inspections of the inside of the baghouse or fabric filter at intervals of 6 months. Corrective action must be taken if the baghouse is in need of repair or replacement.
We are requesting comment on whether to require bag leak detection systems (BLDS) at affected facilities controlled with fabric filters and baghouses. Bag leak detectors are one method that has been used in other source categories for ensuring proper performance of fabric filter and baghouses. The EPA has estimated the capital cost of BLDS to be $24,000 per application. We are soliciting comments on whether BLDS can be used for affected facilities in this source category, problems that may occur specific to their use in this source category and the reasonableness of the cost for this source category.
In subpart DDa, we are proposing that the following records be maintained:
• The total storage capacity (bushels) for each building, bin (excluding TSFs) and silo used to store grain.
• The storage capacity of each TSF.
• Records quantifying emissions over the applicable standards for excess emissions events.
• Results of 6 month baghouse and fabric filter inspections, including any corrective action.
• Weekly visual emissions checks and any corrective action taken as a result of positive visual emissions checks.
• Results of annual opacity tests.
• The type of grain processed during the performance test at the affected facility.
In subpart DDa, we are proposing that the following records be reported:
• Results of performance tests, including Method 5, 17 and 9.
• Reports required to be submitted by part 60 general provisions.
The storage capacities of the various storage units are inputs to the calculation of equivalent permanent storage capacity, which is an input to the calculation of equivalent permanent storage capacity for TSFs. They are necessary to verify compliance with the applicability of the standard. Records quantifying the emissions for excess emission events provide the EPA information on the magnitude of the emissions release.
As discussed in section V.C.1 of this preamble, we are proposing that grain elevators conduct PM compliance testing every 60 months and opacity testing annually and conduct weekly visual inspections of affected facilities. We are proposing that the Method 5 (or Method 17) and the Method 9 test results be reported to the EPA. Results of the visual inspections are proposed to be maintained on site. The type of grain processed during performance tests allows EPA to better characterize the emissions measured.
Through this proposal, the EPA is describing a process to increase the ease and efficiency of performance test data submittal and improve data accessibility. Specifically, the EPA is proposing that owners and operators of grain elevators submit electronic copies of required performance test reports to the EPA's WebFIRE database. Data will be entered through an electronic emissions test report structure called the ERT. The ERT will generate an electronic report which will be submitted using the CEDRI. The submitted report will be stored in both EPA's CDX and in the WebFIRE database making access to data very straightforward and easy. A description of the ERT can be found at
The proposal to submit performance test data electronically to the EPA applies only to those performance tests conducted using test methods that will be supported by the ERT. The ERT contains a specific electronic data entry form for most of the commonly used EPA reference methods. A listing of the pollutants and test methods supported by the ERT is available at:
We believe that industry will benefit from this proposed approach to electronic data submittal. The EPA believes, through this approach, industry will save time in the performance test submittal process. Additionally, the standardized format that the ERT uses allows sources to create a more complete test report resulting in less time spent on data backfilling if a source did not know which data elements were required to be submitted. Also through this proposal, industry would only need to submit a report once to meet the requirements of the applicable subpart. This means that the report would be accessible on the WebFIRE database by any stakeholder who requested a copy from the facility resulting in a time saving for industry. This also benefits industry by cutting back on recordkeeping costs as the performance test reports that are submitted to the EPA using CEDRI are
Another benefit to industry is that since the EPA will already have performance test data in hand, fewer or less substantial data collection requests in conjunction with prospective required technology reviews will be needed. This would result in a decrease in staff time needed to respond to data collection requests.
State, local and tribal agencies will also benefit from more streamlined and accurate review of electronic data submitted to them. For example, the ERT would allow for an electronic review process rather than a manual data assessment; thus making review and evaluation of the source-provided data and calculations easier and more efficient. In addition, the public stands to benefit from electronic reporting of emissions data because the electronic data will be easier for the public to access and it will be available shortly after it is submitted in the system. For example, the WebFIRE database is easily accessible and provides a user friendly interface for any stakeholder to find and review any report submitted.
One major shared advantage of the proposed submittal of performance test data through the ERT is a standardized method to compile and store much of the documentation required to be reported by this rule. The ERT clearly states what testing information would be required by the test method and has the ability to house additional data elements required by a delegated authority. Another important proposed benefit of submitting these data to the EPA at the time the source test is conducted is that it should substantially reduce the effort involved in data collection activities in the future. Having these data allows the EPA to develop improved emission factors, make fewer information requests and promulgate better regulations.
In addition, the EPA must have performance test data to conduct effective reviews of CAA sections 112 and 129 standards, as well as for many other purposes including compliance determinations, emission factor development and annual emission rate determinations. In conducting these required reviews, the EPA has found it ineffective and time consuming, not only for us, but also for regulatory agencies and source owners and operators, to locate, collect and submit performance test data because of varied locations for data storage and varied data storage methods. In recent years, however, stack testing firms have typically collected performance test data in electronic format, making it possible to move to an electronic data submittal system that would increase the ease and efficiency of data submittal and improve data accessibility.
A common complaint heard from industry and regulators is that emission factors are outdated or not representative of a particular source category. With timely receipt and incorporation of data from performance tests, the EPA would be able to ensure that emission factors, when updated, represent the most current range of operational practices. Finally, another benefit of the proposed data submittal to WebFIRE electronically is that these data would greatly improve the overall quality of existing and new emissions factors by supplementing the pool of emissions test data for establishing emissions factors
In summary, in addition to supporting regulation development, control strategy development and other air pollution control activities, having an electronic database populated with performance test data would save industry, state, local, tribal agencies and the EPA significant time, money and effort while also improving the quality of emission inventories and, as a result, air quality regulations.
The general provisions in 40 CFR part 60 provide that emissions in excess of the level of the applicable emissions limit during periods of SSM shall not be considered a violation of the applicable emission limit unless otherwise specified in the applicable standard (see 40 CFR 60.8(c)). In its 2008 decision in
In proposing the standards in this rule, the EPA has taken into account startup and shutdown periods and does not have any information that indicates that emissions during startup and shutdown are different from emissions during steady-state operation; therefore, the EPA proposes to apply the proposed standards during all periods of operation.
If you believe that the EPA's conclusion is incorrect or that the EPA has failed to consider any relevant information on this point, we encourage you to submit comments, including test data during periods of startup and shutdown. In particular, we note that the general provisions in part 60 require facilities to keep records of the occurrence and duration of any SSM (40 CFR 60.7(b)) and either report to the EPA any period of excess emissions that occurs during periods of SSM (40 CFR 60.7(c)(2)) or report that no excess emissions occurred (40 CFR 60.7(c)(4)). Thus, any comments that contend that sources cannot meet the proposed standard during startup and shutdown periods should provide these data and other specifics supporting their claim.
Periods of startup, normal operations and shutdown are all predictable and routine aspects of a source's operations. However, by contrast, malfunction is defined as “any sudden, infrequent, and not reasonably preventable failure of air pollution control equipment, process equipment, or a process to operate in a normal or usual manner. Failures that are caused in part by poor maintenance or careless operation are not malfunctions.” (40 CFR 60.2). The EPA has determined that section 111 does not require that emissions that occur during periods of malfunction be factored into development of CAA section 111 standards. Nothing in CAA section 111 or in case law requires that the EPA anticipate and account for the innumerable types of potential malfunction events in setting emission standards. CAA section 111 provides that the EPA set standards of performance which reflect the degree of emission limitation achievable through ”the application of the best system of emission reduction” that the EPA determines is adequately demonstrated. A malfunction is a failure of the source to perform in a “normal or usual manner” and no statutory language
Further, accounting for malfunctions in setting emission standards would be difficult, if not impossible, given the myriad different types of malfunctions that can occur across all sources in the category and given the difficulties associated with predicting or accounting for the frequency, degree and duration of various malfunctions that might occur. As such, the performance of units that are malfunctioning is not “reasonably” foreseeable. See, e.g.,
In the event that a source fails to comply with the applicable CAA section 111 standards as a result of a malfunction event, the EPA would determine an appropriate response based on, among other things, the good faith efforts of the source to minimize emissions during malfunction periods, including preventative and corrective actions, as well as root cause analyses to ascertain and rectify excess emissions. The EPA would also consider whether the source's failure to comply with the CAA section 111 standards was, in fact, “sudden, infrequent, not reasonably preventable” and was not instead “caused in part by poor maintenance or careless operation.” 40 CFR 60.2 (definition of malfunction).
Further, to the extent the EPA files an enforcement action against a source for violation of an emission standard, the source can raise any and all defenses in that enforcement action and the federal district court will determine what, if any, relief is appropriate. The same is true for citizen enforcement actions. Similarly, the presiding officer in an administrative proceeding can consider any defense raised and determine whether administrative penalties are appropriate.
In several prior rules, the EPA had included an affirmative defense to civil penalties for violations caused by malfunctions in an effort to create a system that incorporates some flexibility, recognizing that there is a tension, inherent in many types of air regulation, between ensuring adequate compliance and simultaneously recognizing that despite the most diligent of efforts, emission standards may be violated under circumstances entirely beyond the control of the source. Although the EPA recognized that its case-by-case enforcement discretion provides flexibility in these circumstances, it included the affirmative defense language to provide a more formalized approach and more regulatory clarity.
As summarized in section IV of this preamble, we are proposing revisions to three provisions in subpart DD to clarify applicability of the standards for grain elevators under subpart DD. These proposed revisions are intended to keep the meaning and intent of the definitions as originally promulgated while making the definitions applicable to the changes in the industry since the last review of subpart DD in 1984. The same clarifications are being proposed in subpart DDa. These proposed clarifications would apply to all affected facilities that commence construction, modification or reconstruction after August 3, 1978 (i.e., all affected facilities under both subpart DD and proposed subpart DDa). None of these clarifications would increase the cost of the rule or result in a change in PM emissions.
We are proposing to revise the definition of “grain unloading station”
The background information document (BID) (EP–450/2–77–001a) for the original grain elevator NSPS does not define each piece of equipment included in the term “grain unloading station”. However, throughout the BID, in the description of the grain elevator emission sources and processes in chapter 2, and in Figures 2–2 through 2–4, and Figures 4–1 through 4–4, the unloading process is described and shown to terminate at a hopper. Grain is then transported from the hopper via a conveyor to a bucket elevator. Based on the information in the BID, we concluded that at the time the NSPS was proposed and later finalized, the standard practice of the grain elevator industry was to have the hopper be the ending piece of equipment at the truck, rail, and barge/ship unloading stations. We received information from the grain elevator industry that since the last review of subpart DD in 1984, some grain unloading stations no longer use a hopper as the end of the unloading station, and instead use another storage unit, or transfer grain directly onto the grain conveyor. Industry white papers that serve as the basis for this conclusion can be found at Docket ID Number EPA–HQ–OAR–2010–0706. Because of these changes, we are proposing to better define the outer boundaries of a “grain unloading station” where the termination point of the unloading operation is not a hopper. The NSPS and the BID also do not specify the types of equipment included in grain unloading stations, resulting in the boundaries of the “unloading station” affected facilities being unclear to the regulated community. We received input from the grain industry on the types of equipment that are included in the “grain unloading station”. Consequently, we are also proposing to clarify in the definition all the types of equipment involved in unloading, up to the point that the grain is transferred to either storage or to grain handling operations. Industry white papers that serve as the basis for this conclusion can be found at Docket ID Number EPA–HQ–OAR–2010–0706.
We are therefore proposing revisions to the definition of “grain unloading station” to clarify that a “grain unloading station” encompasses the portion of a grain elevator where the grain is transferred from a truck, railcar, barge or ship to a receiving hopper, or to the grain handling equipment that connects the unloading station to the rest of the grain elevator. This definition includes all of the equipment, support structures and associated dust control equipment and aspiration systems required to operate or are otherwise connected to the grain unloading station. We are requesting comment on our interpretation of the intent of the original NSPS definition of “grain unloading station” and our proposed revisions to the definition.
We are proposing to revise the definition of “grain loading station” to clarify all the types of equipment involved in unloading, up to the point that the grain is transferred to either storage or to grain handling operations. As discussed in section V.D.1 of this preamble, the background information document (BID) (EP–450/2–77–001a) for the original grain elevator NSPS does not define each piece of equipment included in the term “grain loading station”. Because the NSPS and the BID do not specify the types of equipment included in grain unloading stations, the boundaries of the “grain loading station” affected facilities are unclear to the regulated community. We also received input from the grain industry on the types of equipment that are included in the “grain loading station”. Consequently, we are proposing to clarify in the definition all the types of equipment involved in loading. Industry white papers that serve as the basis for this conclusion can be found at Docket ID Number EPA–HQ–OAR–2010–0706. The proposed revision also maintains consistency with the proposed revision to the definition of “grain unloading station”. These changes are supported by representatives of the grain elevator industry in their white papers.
Current § 60.302(d)(1) requires that the unloading leg be enclosed from the top, including the receiving hopper, to the center line of the bottom pulley. However, not all barge and ship unloading stations currently use a hopper. More recently, new technologies have been developed such that a hopper is not required. We are proposing to revise § 60.302(d)(1) to clarify the provision for affected barge and ship unloading stations for which aspiration of the casing provides dust control at the boot of the conveyor and a receiving hopper is not used. The proposed revision clarifies that, in such cases, the unloading leg is required to be enclosed from the top to the center line of the bottom pulley and ventilation to a control device is required to be maintained on both sides of the leg.
In setting standards, the CAA requires us to consider emission control approaches, taking into account the estimated costs and emission reductions, as well as impacts on energy, solid waste and other effects.
The cost, environmental and economic impacts presented in this section are expressed as incremental differences between the impacts of grain elevators complying with the proposed subpart DDa and the current NSPS requirements of subpart DD. The impacts are presented for future grain elevators that are projected to commence construction, reconstruction or modification over the 5 years following proposal of the revised NSPS. Costs are based on 2012 dollars. The analyses and the documents referenced below can be found at Docket ID Number EPA–HQ–OAR–2010–0706.
In order to estimate the incremental impacts of the proposed subpart DDa requirements, we first identified the potential scenarios where grain elevators may be constructed, reconstructed or modified and subject to subpart DDa. Seven different scenarios were identified and are summarized in Table 4 of this preamble.
We then estimated the number of potential grain elevators, and affected facilities within grain elevators, that would incur an incremental cost and emission reduction for each scenario. The estimates were developed by reviewing responses to a 2009 CAA section 114 survey and extrapolating the results over the next 5 years. For further detail on the methodology of these calculations, see the memorandum, “Impacts of Grain Elevator NSPS Review,” at Docket ID Number EPA–HQ–OAR–2010–0706.
The requirements in the proposed subpart DDa that differ from subpart DD are a revised applicability determination by incorporating TSF capacity, control of affected facilities associated with TSFs, annual opacity testing for affected facilities, PM testing every 60 months for affected facilities, weekly visual inspection of affected facilities, inspection of fabric filters and baghouses every 6 months, new recordkeeping requirements, reporting in ERT, a new opacity limit for wire screen column dryers and a new opacity limit for barge unloading stations using an en-masse conveyor system. These proposed requirements would be incurred only by affected facilities that commence construction, modification or reconstruction after July 9, 2014 (i.e., they would not be incurred by all affected facilities at a grain elevator). Barge unloading stations using an en-masse conveyor and wire screen column dryers are not expected to incur a cost or emissions impact because data collected indicate that sources should be able to meet the standards without additional controls. Particulate matter testing every 5 years for affected facilities would occur outside of the 5-year period analyzed because most construction, reconstructions and modifications for grain elevators are expected to occur after the first or second year following promulgation. The cost for Method 5 PM testing is contained in the memorandum, “Impacts of Grain Elevator NSPS Review,” at Docket ID Number EPA–HQ–OAR–2010–0706. Based on information provided in the responses to the 2009 survey, including permits, we believe grain elevators are already keeping the records that we are proposing in subpart DDa, except for those associated with visual monitoring. The only incremental cost estimated for subpart DDa would be for control of affected facilities using fixed equipment associated with TSFs, initial testing at affected facilities that meet the subpart DDa applicability criteria due to TSFs, annual opacity testing at affected facilities, weekly visual inspection of affected facilities, inspection of fabric filters for affected facilities every 6 months, the recordkeeping associated with visual monitoring and inspections, and reporting in ERT. Eighty-eight grain elevators, with 221 affected facilities, are projected to be subject to the NSPS in the next 5 years, in one of the seven scenarios, because they will construct, reconstruct or modify an affected facility. Table 5 summarizes the costs of this action. Capital costs are estimated to be $1,087,000 to comply with the proposed requirements. We estimate that the total increase in nationwide annual costs for the 221 affected facilities at 88 grain elevators is $1,116,000 for the number of affected facilities that are projected to be constructed, reconstructed or modified by the fifth year following promulgation of subpart DDa. Recordkeeping and reporting annual costs are estimated to be $83,000 for the number of affected facilities that are projected to be constructed, reconstructed or modified by the third year following promulgation of subpart DDa. We determined that the projected compliance costs are reasonable as they are not expected to result in a significant market impact, whether they are passed on to the purchaser or absorbed by firms. Incremental emissions reductions of PM
In addition to reducing emissions, there are several benefits to today's proposed rulemakings. The proposed subpart DDa rule eliminates the startup, shutdown and malfunction exemption. The removal of SSM is meant to ensure continuous compliance with the final standards. The rule establishes a 5-year repeat emissions testing requirement. The repeat testing requirement was established in a way that minimizes the costs for testing and reporting while still providing the source and the agency the necessary information needed to ensure continuous compliance with the final standards. We are adding a requirement for electronic submittal of performance test data. This simplifies submittal for affected sources and having such data publicly available enhances transparency and accountability through better public access to pollution control data.
We do not expect any indirect or secondary incremental air quality
The total costs associated with subpart DDa's proposed control requirements and testing and monitoring requirements are $1.11 million over five years for the total number of affected facilities that are projected to be constructed, reconstructed or modified by the fifth year following promulgation.
The EPA also performed a screening analysis for impacts on all affected small entities by comparing compliance costs to average sales revenues. This is known as the cost-to-revenue or cost-to-sales ratio, or the “sales test.” The use of a “sales test” for estimating small business impacts for a rulemaking is consistent with guidance offered by the EPA on compliance with SBREFA and is consistent with guidance published by the U.S. SBA's Office of Advocacy that suggests that cost as a percentage of total revenues is a metric for evaluating cost increases on small entities in relation to increases on large entities.
These projected compliance costs are reasonable as they are not expected to result in a significant market impact, whether they are passed on to the purchaser or absorbed by firms. The small business screening analysis results indicated that approximately 98% of all affected small facilities would have a cost-to-sales ratio of less than 1%, with a minimum cost-to-sales ratio of less than 1%, an average cost-to-sales ratio of less than 1%, and a maximum cost-to-sales ratio of 2.4%. The small business screening analysis results indicated that the NSPS for Grain Elevators will not have a significant economic impact on a substantial number of small entities (SISNOSE).
Executive Order 13563, Improving Regulation and Regulatory Review, requires federal agencies to “. . . review existing rules that may be outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned.” A coalition representing the grain elevator industry submitted a petition for the EPA to review and repeal the existing NSPS for grain elevators in 40 CFR part 60, subpart DD. In considering the directives of the Executive Order and the coalition petition, the EPA conducted several analyses aimed at determining the effectiveness of the existing subpart DD standard, determining whether the standard is still relevant and determining whether the standard was excessively burdensome. The analyses and results are discussed in detail in the memorandum, “Evaluation of Grain Elevator Emission Standards in Response to Executive Order 13563,” in the grain elevator docket at EPA–HQ–OAR–2010–0706.
To address questions on the necessity and value of the standard, the effectiveness of subpart DD in reducing emissions was evaluated. Since the development of the original standard, the EPA has focused PM emission control programs on limiting direct emissions of PM
As a first step in the analyses, we assembled a database of grain elevators from: (1) Responses to a 2009 CAA section 114 survey sent to grain elevators; (2) information gathered from state regulatory agencies and (3) information gathered from the EPA's OECA and from the USDA FSA. Uncontrolled PM
We concluded that the NSPS achieves a substantial emission reduction (approximately 85,000 tpy) of PM
To assess whether the subpart DD standards are still relevant, grain production projections from the USDA were evaluated to determine if crop production is expected to increase in the future and consequently increase the demand for grain storage. The USDA provides crop production projections from 2010 through 2021 for corn, sorghum, barley, oats, wheat, rice and soybeans, which are the typical crops stored at grain elevators. A review of the projections shows that production of wheat, sorghum, oats and rice is expected to remain unchanged or decrease between 2010 and 2015, and between 2010 and 2021. The production of corn, soybeans and barley is expected to increase during these time intervals. The increases in corn, soybeans and barley offset the decreases in the other grains and total production of grain is projected to increase by 1.46 billion bushels (7.7 percent) by 2015, and 2.79 billion bushels (14.8 percent) by 2021.
A review also was conducted to identify if any new grain elevators have been constructed in the last 5 years. We found that over the past 5 years three grain elevators with capacities greater than 2.5 million bushels have been constructed and would likely be subject to subpart DD. The results of the search show that grain elevators are continuing to be constructed. Based on the pattern of information in the survey responses and other information collection, some are replacements for facilities that were shutdown and some are completely new facilities. Given the high crop production, excepting the 2012 drought year, many units added capacity, either as permanent or temporary storage, if a new greenfield facility was not constructed. It is not known how many of these grain elevators with increased capacity are subject to subpart DD. While it cannot be determined how many new grain elevators will be constructed in the future, or whether capacities at existing facilities will be
To address whether the standard is overly burdensome, we reviewed the cost of complying with the subpart DD standards. Grain elevators meet the PM emission limit using fabric filters. Fabric filters are also routinely used for dust control for health and safety reasons (e.g., prevent fugitive dust explosions); fabric filters that are used for health and safety will meet the NSPS requirements. Therefore, for most affected facilities, the specific cost that is associated only with subpart DD is compliance testing. Subpart DD requires only an initial Method 5 test for PM and an initial Method 9 test for opacity. The cost for each initial Method 5 PM test is $12,200 and each initial Method 9 opacity test is $2,500. Annualized over 5 years, the costs are $3,000 and $610, respectively. There are no monitoring, recordkeeping and reporting requirements for subpart DD. Based on an evaluation of these one-time costs associated with compliance, the EPA concluded that the subpart DD standards do not impose an excessive burden on grain elevators.
Based on the results of these analyses, the EPA concluded that the subpart DD standards are still effective, relevant and not excessively burdensome.
This action is not a “significant regulatory action” under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is therefore not subject to review under the Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2001).
As described in section VII., the EPA prepared an analysis of the potential costs and benefits associated with this action. This analysis is contained in the memorandum, “Estimated Impacts of Revisions to the Grain Elevator NSPS” in the grain elevator docket at EPA–HQ–OAR–2010–0706. The total cost of the revisions to the NSPS is estimated to be $0.22 million per year over the next 5 years, totaling $1.11 million in the fifth year.
The information collection requirements in this proposed rule have been submitted for approval to the OMB under the Paperwork Reduction Act, 44 U.S.C. 3501,
The operating, monitoring and recordkeeping requirements in this proposed rule would be based on the information collection requirements in CAA section 111, the EPA's NSPS General Provisions (40 CFR part 60, subpart A), as well as state operating permits. The recordkeeping and reporting requirements in the General Provisions are mandatory pursuant to CAA section 114 (42 U.S.C. 7414). All information other than emission data submitted to the EPA pursuant to the information collection requirements for which a claim of confidentiality is made is treated according to CAA section 114(c) and the EPA's implementing regulations at 40 CFR part 2, subpart B.
The annual average burden associated with the proposed revisions to NSPS requirements is estimated to involve 3,300 labor hours at $110,000 and operation and maintenance costs of $265,000. The annual average burden for the designated administrator is estimated to involve 810 labor hours at $54,000. Burden is defined at 5 CFR 1320.3(b).
An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for the EPA's regulations in 40 CFR are listed in 40 CFR part 9.
To comment on the agency's need for this information, the accuracy of the provided burden estimates and any suggested methods for minimizing respondent burden, the EPA has established a public docket for this rule, which includes this ICR, under Docket ID Number EPA–HQ–OAR–2010–0706. Submit any comments related to the ICR to the EPA and OMB. See the
The RFA generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedures Act or any other statute unless the agency certifies that the proposed rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations and small government jurisdictions.
For purposes of assessing the impacts of today's proposed rule on small entities, small entity is defined as: (1) A small business as defined by the SBA's regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.
After considering the economic impacts of today's proposed rule on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. The small entities directly regulated by this proposed rule are small grain elevators, cooperative elevators and small grain processors. We have determined that 2 percent of all affected small grain elevators, or two facilities, may experience an impact in total revenue of 2 percent.
Although the proposed rule will not have a significant economic impact on a substantial number of small entities, the EPA nonetheless has tried to reduce the impact of this rule on small entities by minimizing testing, monitoring, recordkeeping and reporting requirements to be only those essential to assuring compliance with the NSPS.
This rule does not contain a federal mandate that may result in expenditures of $100 million or more for state, local and tribal governments, in the aggregate, or the private sector in any 1 year. While there are hundreds of grain elevators in use, the new testing, monitoring, recordkeeping and reporting requirements of subpart DDa apply only to new affected facilities that commence construction on or after July 9, 2014. The EPA projects that only 88 grain elevators will be subject to the new requirements, and based on the burden estimate, believes the costs to be minimal. Thus, this rule is not subject
This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. Grain elevators are not operated by government entities.
This action does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This proposed action will not impose substantial direct compliance costs on state or local governments and will not preempt state law. Thus, Executive Order 13132 does not apply to this action.
In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between the EPA and state and local governments, the EPA specifically solicits comment on this proposed action from state and local officials.
This action does not have tribal implications, as specified in Executive Order 13175, (65 FR 67249; November 9, 2000). The EPA is not aware of any grain elevators owned or operated by Indian tribal governments. Thus, Executive Order 13175 does not apply to this action.
The EPA specifically solicits comments from tribal officials on any potential impact on tribes from this proposed action.
The EPA interprets Executive Order 13045 (62 F.R. 19885, April 22, 1997) as applying to those regulatory actions that concern health or safety risks, such that the analysis required under section 5–501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it is based solely on an analysis of the degree of emission reduction that is achievable through the application of the best system of emissions reduction, as provided in CAA section 111.
This action is not a “significant energy action” as defined in Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not a significant regulatory action under Executive Order 12866.
Section 12(d) of the NTTAA of 1995, Public Law No. 104–113 (15 U.S.C. 272 note) directs the EPA to use (voluntary consensus standards) VCS in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. VCS are technical standards (e.g., materials specifications, test methods, sampling procedures and business practices) that are developed or adopted by VCS bodies. The NTTAA directs the EPA to provide Congress, through OMB, explanations when the agency decides not to use available and applicable VCS.
This proposed rulemaking involves technical standards. We conducted searches for Performance Standards for Grain Elevators (40 CFR part 60, subparts DD and DDa) through the enhanced National Standards Service Network database managed by the ANSI. We also contacted VCS organizations and accessed and searched their databases. Searches were conducted for EPA Methods 5 and 9 of 40 CFR part 60, Appendix A. During the search, if the title or abstract (if provided) of the VCS described technical sampling and analytical procedures that are similar to the EPA's reference method, we considered it as a potential equivalent method. All potential standards were reviewed to determine the practicality of the VCS for this rule. This review requires significant method validation data which meets the requirements of EPA Method 301 for accepting alternative methods or scientific, engineering and policy equivalence to procedures in EPA reference methods. We may reconsider determinations of impracticality when additional information is available for particular VCS.
One VCS was identified as an acceptable alternative to EPA test methods for the purpose of this rule. The VCS ASTM D7520–09, “Standard Test Method for Determining the Opacity of a Plume in the Outdoor Ambient Atmosphere” is an acceptable alternative to Method 9 if operated under specific conditions, documented in the memorandum, “Voluntary Consensus Standard Results for Performance Standards for Grain Elevators (40 CFR Part 60, Subparts DD and DDa)”, in the grain elevator docket in EPA–HQ–OAR–2010–0706. The search identified five VCS that were potentially applicable for this rule in lieu of EPA reference methods. After reviewing the available standards, EPA determined that five candidate VCS (ASME B133.9–1994 (2001), ISO 9096:1992 (2003), ANSI/ASME PTC–38–1980 (1985), ASTM D3685/D3685M–98 (2005), CAN/CSA Z223.1–M1977) identified for measuring emissions of pollutants or their surrogates subject to emission standards in the rule would not be practical due to lack of equivalency, documentation, validation data and other important technical and policy considerations. The EPA welcomes comments on this aspect of the proposed rulemaking and specifically invites the public to identify potentially-applicable VCS and to explain why such standards should be used in this regulation.
Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on EJ. Its main provision directs federal agencies, to the greatest extent practicable and permitted by law, to make EJ part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies and activities on minority populations and low-income populations in the United States.
The EPA has concluded that it is not feasible to determine whether there would be disproportionately high and adverse human health or environmental effects on minority, low income or indigenous populations from the proposal of this rule because it is unknown where new facilities will be located and the EPA does not have specific location information for sources that would be affected by this NSPS. The agency is seeking comment on the location of sources covered by the proposed standards and on the potential impacts of this rule on minority, low income and indigenous populations. The additional information that will be collected from the increase in testing requirements is expected to better inform the agency of the emissions associated with this source category and their significance, and will ensure better compliance with the proposed rule, and
Environmental protection, Administrative practice and procedure, Air pollution control, Intergovernmental relations, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, title 40, chapter I, of the Code of Federal Regulations is proposed to be amended as follows:
42 U.S.C. 7401, et seq.
(b) Any facility under paragraph (a) of this section which commences construction, modification, or reconstruction after August 3, 1978, and on or before July 9, 2014, is subject to the requirements of this part.
(j)
(k)
(d) * * *
(1) The unloading leg shall be enclosed from the top (including the receiving hopper) to the center line of the bottom pulley and ventilation to a control device shall be maintained on both sides of the leg and the grain receiving hopper. Where aspiration of the casing provides dust control at the boot of the conveyor and a receiving hopper is not used, the unloading leg must be enclosed from the top to the center line of the bottom pulley and ventilation to a control device must be maintained on both sides of the leg.
(a) The provisions of this subpart apply to each affected facility at any grain terminal elevator or any grain storage elevator, except as provided under § 60.304a(b). The affected facilities are each truck unloading station, truck loading station, barge and ship unloading station, barge and ship loading station, railcar loading station, railcar unloading station, grain dryer, and all grain handling operations.
(b) Any facility under paragraph (a) of this section that commences construction, modification, or reconstruction after July 9, 2014 is subject to the requirements of this part.
As used in this subpart, all terms not defined herein have the meaning given them in the Clean Air Act and in subpart A of this part.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(1)
(2)
(m)
(n)
(o)
(p)
(q)
(1) Uses an asphalt, concrete, or other comparable base material;
(2) Uses rigid, self-supporting sidewalls;
(3) Provides adequate aeration; and
(4) Provides an acceptable covering (e.g., tarp).
(r)
(s)
(a) On and after the date of completing the initial performance test required in § 60.8, no owner or operator subject to the provisions of this subpart shall cause to be discharged into the atmosphere any gases which exhibit:
(1) Greater than 0 percent opacity from any column dryer with column plate perforation exceeding 2.4 mm diameter (ca. 0.094 inch).
(2) Greater than 0 percent opacity from any rack dryer in which exhaust gases pass through a screen filter coarser than 50 mesh.
(3) Greater than 10 percent opacity from any wire screen column dryer.
(b) On and after the date of completing the initial performance test required in § 60.8, no owner or operator subject to the provisions of this subpart shall cause to be discharged into the atmosphere from any affected facility except a grain dryer, or grain handling, loading, or unloading affected facilities at a TSF using portable equipment, any process emission which:
(1) Contains particulate matter in excess of 0.023 g/dscm (ca. 0.01 gr/dscf).
(2) Exhibits greater than 0 percent opacity.
(c) On and after the date of completing the initial performance test required in § 60.8, no owner or operator subject to the provisions of this subpart shall cause to be discharged into the atmosphere any fugitive emission from:
(1) Any individual truck unloading station, railcar unloading station, or railcar loading station, which exhibits greater than 5 percent opacity.
(2) Any grain handling operation which exhibits greater than 0 percent opacity.
(3) Any truck loading station which exhibits greater than 10 percent opacity.
(4) Any barge or ship loading station which exhibits greater than 20 percent opacity.
(d) The owner or operator of any barge or ship unloading station must meet the requirements specified in paragraph (d)(1), (2), or (3) of this section.
(1) Barge or ship unloading operations using an unloading leg must operate as specified in paragraphs (d)(1)(i) and (ii) of this section.
(i) The unloading leg must be enclosed from the top (including the receiving hopper) to the center line of the bottom pulley and ventilation to a control device must be maintained on both sides of the leg and the grain receiving hopper. Where aspiration of the casing provides dust control at the boot of the conveyor and a receiving hopper is not used, the unloading leg must be enclosed from the top to the center line of the bottom pulley and ventilation to a control device must be maintained on both sides of the leg.
(ii) The total rate of air ventilated must be at least 32.1 actual cubic meters per cubic meter of grain handling capacity (ca. 40 ft3/bu).
(2) On and after the date of completing the initial performance test required in § 60.8, visible emissions from a barge or ship unloading station using an en-masse drag conveyor must not exceed 10 percent opacity.
(3) For barge or ship unloading stations not using an unloading leg or an en-masse drag conveyor, the owner or operator must use other methods of emission control demonstrated to the Administrator's satisfaction to reduce emissions of particulate matter to the same level or less.
(e) These standards apply at all times.
(a) In conducting the performance tests required in § 60.8, the owner or operator must use as reference methods and procedures the test methods in appendix A of this part or other methods and procedures as specified in this section, except as provided in § 60.8(b). Acceptable alternative methods and procedures are given in paragraph (c) of this section.
(b) The owner or operator must determine compliance with the particulate matter and opacity standards in § 60.302a as follows:
(1) Method 5 at 40 CFR part 60, appendix A–3 must be used to determine the particulate matter concentration and the volumetric flow rate of the effluent gas. The sampling time and sample volume for each run must be at least 60 minutes and 1.70 dscm (60 dscf). The probe and filter holder must be operated without heaters.
(2) Method 2 at 40 CFR part 60, appendix A–1 must be used to
(3) Method 9 at 40 CFR part 60, appendix A–4 and the procedures in § 60.11 must be used to determine opacity.
(c) The owner or operator may use the following as alternatives to the reference methods and procedures specified in this section:
(1) For Method 5 at 40 CFR part 60, appendix A–3, Method 17 at 40 CFR part 60, appendix A–6 may be used.
(d) Periodic performance tests must be conducted as specified in paragraphs (d)(1) and (2) of this section.
(1) Method 9 at 40 CFR part 60, appendix A–4 testing for opacity must be performed annually. The first performance test must be conducted no later than 12 months after the initial performance test required in § 60.8 of this part. Subsequent performance tests must be conducted at intervals no longer than 12 months following the previous periodic performance test.
(2) Method 5 at 40 CFR part 60, appendix A–3 testing for particulate matter concentration must be conducted no later than 60 months after the initial performance test required in § 60.8 of this part. Subsequent performance tests must be conducted at intervals no longer than 60 months following the previous periodic performance test. The periodic performance test results must be submitted according to § 60.306a. The performance test must be conducted while processing grains that will result in the highest PM emissions.
(a) You must conduct weekly visual emissions checks for each affected facility and take corrective action for positive visual emissions checks.
(b) You must conduct inspections of fabric filters and baghouses at each affected facility no later than 6 months after the initial performance test required in § 60.8 of this part. Subsequent inspections must be conducted at intervals no longer than 6 months following the previous inspection.
You must maintain the records specified in subpart A of this part and the records specified in paragraphs (a) through (f) of this section.
(a) Total storage capacity and annual throughput of grain (bushels) for each building, bin (excluding TSFs), and silo used to store grain.
(b) Total storage capacity for each TSF.
(c) The date, time and duration of each event that causes an affected source to fail to meet an applicable standard; the record must list the affected source or equipment, an estimate of the volume of each regulated pollutant emitted over the standard for which the source failed to meet a standard, and a description of the method used to estimate the emissions.
(d) Results of 6 month baghouse and fabric filter inspections, including any corrective action taken.
(e) Weekly visual emissions checks and any corrective action taken as a result of positive visual emissions checks.
(f) Results of 12 month opacity tests.
(a) Within 60 days after the date of completing each performance test (defined in § 60.8) as required by this subpart and § 60.8, you must submit the results of the performance tests, and include the type of grain processed at the affected facility for which the performance test is being conducted, required by this subpart to the EPA by the following steps. You must use the EPA's Electronic Reporting Tool (ERT) (see
(b) Within 60 days after the date of completing each Method 9 opacity test required in this subpart and § 60.11, you must submit the results of the opacity tests to the Administrator at the appropriate address as shown in 40 CFR 60.4.
(c) The date, time and duration of each event that causes an affected facility to fail to meet a standard; the record must list the affected facility or equipment, an estimate of the volume of each regulated pollutant emitted over the standard for which the source failed to meet a standard, and a description of the method used to estimate the emissions.
(a) The factor 6.5 must be used in place of “annual asset guidelines repair allowance percentage,” to determine whether a capital expenditure as defined by § 60.2 has been made to an existing facility.
(b) The following physical changes or changes in the method of operation are not by themselves considered to be a modification of any existing facility:
(1) The addition of gravity loadout spouts to existing grain storage or grain transfer bins.
(2) The installation of automatic grain weighing scales.
(3) Replacement of motor and drive units driving existing grain handling equipment.
(4) The installation of permanent storage capacity with no increase in hourly grain handling capacity.
Environmental Protection Agency (EPA).
Direct final rule.
EPA is promulgating significant new use rules (SNURs) under the Toxic Substances Control Act (TSCA) for 43 chemical substances which were the subject of premanufacture notices (PMNs). Six of these chemical substances are subject to TSCA section 5(e) consent orders issued by EPA. This action requires persons who intend to manufacture (including import) or process any of these 43 chemical substances for an activity that is designated as a significant new use by this rule to notify EPA at least 90 days before commencing that activity. The required notification will provide EPA with the opportunity to evaluate the intended use and, if necessary, to prohibit or limit that activity before it occurs.
This rule is effective on September 8, 2014. For purposes of judicial review, this rule shall be promulgated at 1 p.m. (e.s.t.) on July 23, 2014.
Written adverse or critical comments, or notice of intent to submit adverse or critical comments, on one or more of these SNURs must be received on or before August 8, 2014 (see Unit VI. of the
For additional information on related reporting requirement dates, see Units I.A., VI., and VII. of the
Submit your comments, identified by docket identification (ID) number EPA–HQ–OPPT–2014–0166, by one of the following methods:
•
•
•
Additional instructions on commenting or visiting the docket, along with more information about dockets generally, is available at
You may be potentially affected by this action if you manufacture, process, or use the chemical substances contained in this rule. The following list of North American Industrial 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 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 and 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 these SNURs 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.
2.
i. Identify the document by docket ID number and other identifying information (subject heading,
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.
EPA is promulgating these SNURs using direct final procedures. These SNURs will require persons to notify
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) requires persons to submit a significant new use notice (SNUN) to EPA at least 90 days before they manufacture 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 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 the
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 43 chemical substances that are the subject of these SNURs, EPA considered relevant information about the toxicity of the chemical substances, likely human exposures and environmental releases associated with possible uses, and the four bulleted TSCA section 5(a)(2) factors listed in this unit.
EPA is establishing significant new use and recordkeeping requirements for 43 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) Registry number (if assigned for non-confidential chemical identities).
• Basis for the TSCA section 5(e) consent order or the basis for the TSCA non-section 5(e) SNURs (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 rule.
The regulatory text section of this rule specifies the activities designated as significant new uses. Certain new uses, including production volume limits (i.e., limits on manufacture and importation volume) and other uses designated in this rule, may be claimed as CBI. Unit IX. discusses a procedure companies may use to ascertain whether a proposed use constitutes a significant new use.
This rule includes 6 PMN substances (P-11-526, P-12-241, P-12-242, P-12-557, P-12-558, and P-13-237) that are subject to “risk-based” consent orders under TSCA section 5(e)(1)(A)(ii)(I) where EPA determined that activities associated with the PMN substances may present unreasonable risk to human health or the environment. Those consent orders require protective measures to limit exposures or otherwise mitigate the potential unreasonable risk. The so-called “TSCA section 5(e) SNURs” on these PMN substances are promulgated pursuant to § 721.160, and are based on and consistent with the provisions in the underlying consent orders. The TSCA section 5(e) SNURs designate as a “significant new use” the absence of the protective measures required in the corresponding consent orders.
This rule also includes SNURs on 36 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 “TSCA 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 TSCA 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.
1. Risk notification. If as a result of the test data required, the company becomes aware that the PMN substance may present a risk of injury to human health or the environment, the company must incorporate this new information, and any information on methods for protecting against such risk into a Material Safety Data Sheet (MSDS), within 90 days.
2. Manufacture of the PMN substance: (a) According to the chemical composition section of the consent order, including analyzing and reporting certain starting material impurities to EPA; and (b) within the maximum established limits of certain fluorinated impurities of the PMN substance as stated in the consent order.
3. Use of the substance only as described in the consent order.
4. Submission of certain testing prior to exceeding the confidential production volume limit of the PMN substance specified in the consent order.
The SNUR designates as a “significant new use” the absence of these protective measures.
1. Risk notification. If as a result of the test data required, the company becomes aware that the PMN substances may present a risk of injury to human health or the environment, the company must incorporate this new information, and any information on methods for protecting against such risk into a Material Safety Data Sheet (MSDS), within 90 days.
2. Manufacture of the PMN substances: (a) According to the chemical composition section of the consent order, including analyzing and reporting certain starting raw material impurities to EPA; and (b) within the maximum established limits of certain fluorinated impurities of the PMN substances as stated in the consent order.
3. Use of the substances only as described in the consent order.
4. Submission of certain environmental fate and toxicity testing prior to exceeding the confidential production volume limit of the aggregate amount of the PMN substances described in P-12-241 and P-12-242 specified in the consent order.
5. The individual annual manufacture volume for P-12-241 and P-12-242 must not reach the confidential annual production volume specified in the consent order.
The SNUR designates as a “significant new use” the absence of these protective measures.
1. Establishment and use of a hazard communication program, including human health, environmental hazard precautionary statements on each label and the MSDS.
2. Use of the substances only as described in the consent order.
3. No use of the substances resulting in surface water concentrations exceeding the concentrations of concern identified in the releases to water section of the consent order.
1. An 8-hour time-weighted-average (TWA) inhalation exposure limit of 1 part per million (ppm) to the PMN substance.
2. Use of the PMN substance only as a raw feed stock for refineries.
3. No use of the substance resulting in surface water concentrations that exceed 4 ppb.
The SNUR designates as a “significant new use” the absence of these protective measures.
(A) Fish acute toxicity test, freshwater and marine (OPPTS Test Guideline 850.1075); a mysid acute toxicity test (OPPTS Test Guideline 850.1350); and an algal toxicity test (OCSPP Test Guideline 850.4500) or;
(B) the whole sediment acute toxicity test, invertebrates, marine (OPPTS Test Guideline 850.1740).
(A) Fish acute toxicity test, freshwater and marine (OPPTS Test Guideline 850.1075); a mysid acute toxicity test (OPPTS Test Guideline 850.1350); and an algal toxicity test (OCSPP Test Guideline 850.4500) or;
(B) the whole sediment acute toxicity test, invertebrates, marine (OPPTS Test Guideline 850.1740).
During review of the PMNs submitted for the chemical substances that are subject to these SNURs, EPA concluded that for 6 of the 43 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 SNUR provisions for these chemical substances are consistent with the provisions of the TSCA section 5(e) consent orders. These SNURs are promulgated pursuant to § 721.160 (see Unit VI.).
In the other 36 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 issuing 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 rule:
• EPA will receive notice of any person's intent to manufacture or process a listed chemical substance for the described significant new use before that activity begins.
• EPA will have an opportunity to review and evaluate data submitted in a SNUN before the notice submitter begins manufacturing or processing a listed chemical substance for the described significant new use.
• EPA will be able to regulate prospective manufacturers 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 will ensure that all manufacturers 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 at
EPA is issuing these SNURs as a direct final rule, as described in § 721.160(c)(3) and § 721.170(d)(4). In accordance with § 721.160(c)(3)(ii) and § 721.170(d)(4)(i)(B), the effective date of this rule is September 8, 2014 without further notice, unless EPA receives written adverse or critical comments, or notice of intent to submit adverse or critical comments before August 8, 2014.
If EPA receives written adverse or critical comments, or notice of intent to submit adverse or critical comments, on one or more of these SNURs before August 8, 2014, EPA will withdraw the relevant sections of this direct final rule before its effective date. EPA will then issue a proposed SNUR for the chemical substance(s) on which adverse or critical comments were received, providing a 30-day period for public comment.
This rule establishes SNURs for a number of chemical substances. Any person who submits adverse or critical comments, or notice of intent to submit adverse or critical comments, must identify the chemical substance and the new use to which it applies. EPA will not withdraw a SNUR for a chemical substance not identified in the comment.
To establish a significant new use, EPA must determine that the use is not ongoing. The chemical substances subject to this rule have undergone premanufacture review. In cases where EPA has not received a notice of commencement (NOC) and the chemical substance has not been added to the TSCA Inventory, no person may commence such activities without first submitting a PMN. Therefore, for chemical substances for which an NOC has not been submitted EPA concludes that the designated significant new uses are not ongoing.
When chemical substances identified in this rule are added to the TSCA Inventory, EPA recognizes that, before the rule is effective, other persons might engage in a use that has been identified as a significant new use. However, TSCA section 5(e) consent orders have been issued for 6 of the 43 chemical substances, and the PMN submitters are prohibited by the TSCA section 5(e) consent orders from undertaking activities which would be designated as significant new uses. The identities of 39 of the 43 chemical substances subject to this rule have been claimed as confidential and EPA has received no post-PMN
Therefore, EPA designates July 9, 2014 as the cutoff date for determining whether the new use is ongoing. Persons who begin commercial manufacture or processing of the chemical substances for a significant new use identified as of that date would have to cease any such activity upon the effective date of the final rule. To resume their activities, these persons would have to first comply with all applicable SNUR notification requirements and wait until the notice review period, including any extensions, expires. If such a person met the conditions of advance compliance under § 721.45(h), the person would be considered exempt from the requirements of the SNUR. Consult the
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 TSCA non-section 5(e) SNURs. Descriptions of tests are provided for informational purposes.
In the TSCA section 5(e) consent orders for several of the chemical substances regulated under this 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. Under recent TSCA section 5(e) consent orders, each PMN submitter is required to submit each study before reaching the specified production limit. 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 or processing.
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.
By this rule, EPA is establishing certain significant new uses which have been claimed as CBI subject to Agency confidentiality regulations at 40 CFR part 2 and 40 CFR part 720, subpart E. Absent a final determination or other disposition of the confidentiality claim under 40 CFR part 2 procedures, EPA is required to keep this information confidential. EPA promulgated a procedure to deal with the situation where a specific significant new use is CBI, at § 721.1725(b)(1).
Under these procedures a manufacturer or processor may request EPA to determine whether a proposed use would be a significant new use under the rule. The manufacturer or processor must show that it has a
If EPA determines that the use identified in the
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 at
EPA has evaluated the potential costs of establishing SNUN requirements for potential manufacturers and processors of the chemical substances subject to this rule. EPA's complete economic analysis is available in the docket under docket ID number EPA–HQ–OPPT–2014–0166.
This rule establishes SNURs for several new chemical substances that were the subject of PMNs, or 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. 3501
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 does not impose any burden requiring additional OMB approval. If an entity were to submit a SNUN 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. 601
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.
This rule is within the scope of the February 18, 2012 certification. Based on the Economic Analysis discussed in Unit XI. 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.
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 will be impacted by this rule. As such, EPA has determined that this rule does 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. 1501
This action will 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 rule does not have Tribal implications because it is not expected to have substantial direct effects on Indian Tribes. This rule does not significantly nor uniquely affect the communities of Indian Tribal governments, nor does 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 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).
Pursuant to the Congressional Review Act (5 U.S.C. 801
Environmental protection, Reporting and recordkeeping requirements.
Environmental protection, Chemicals, Hazardous substances, Reporting and recordkeeping requirements.
Therefore, 40 CFR parts 9 and 721 are amended as follows:
7 U.S.C. 135
15 U.S.C. 2604, 2607, and 2625(c).
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(a) Chemical substance and significant new uses subject to reporting. (1) The chemical substance identified generically as amphoteric fluorinated surfactant (PMN P-11-526) is subject to reporting under this section for the significant new uses described in paragraph (a)(2) of this section.
(2) The significant new uses are:
(i)
(A) If as a result of the test data required under the TSCA section 5(e) consent order for this substance, the employer becomes aware that this substance may present a risk of injury to human health or the environment, the employer must incorporate this new information, and any information on methods for protecting against such risk, into a MSDS as described in § 721.72(c) within 90 days from the time the employer becomes aware of the new information. If this substance is not being manufactured, processed, or used in the employer's workplace, the employer must add the new information to a MSDS before the substance is reintroduced into the workplace.
(B) The employer must ensure that persons who will receive the PMN substance from the employer, or who have received the PMN substance from the employer within 5 years from the date the employer becomes aware of the new information described in paragraph (a)(2)(i)(A) of this section, are provided an MSDS containing the information required under paragraph (a)(2)(i)(A) of this section within 90 days from the time the employer becomes aware of the new information.
(ii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(A) If as a result of the test data required under the TSCA section 5(e) consent order for this substance, the employer becomes aware that this substance may present a risk of injury to human health or the environment, the employer must incorporate this new information, and any information on methods for protecting against such risk, into a MSDS as described in § 721.72(c) within 90 days from the time the employer becomes aware of the new information. If this substance is not being manufactured, processed, or used in the employer's workplace, the employer must add the new information to a MSDS before the substance is reintroduced into the workplace.
(B) The employer must ensure that persons who will receive the PMN substance from the employer, or who have received the PMN substance from the employer within 5 years from the date the employer becomes aware of the new information described in paragraph (a)(2)(i)(A) of this section, are provided an MSDS containing the information required under paragraph (a)(2)(i)(A) of this section within 90 days from the time the employer becomes aware of the new information.
(ii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(A) If as a result of the test data required under the TSCA section 5(e) consent order for this substance, the employer becomes aware that this substance may present a risk of injury to human health or the environment, the employer must incorporate this new information, and any information on methods for protecting against such risk, into a MSDS as described in § 721.72(c) within 90 days from the time the employer becomes aware of the new information. If this substance is not being manufactured, processed, or used in the employer's workplace, the employer must add the new information to a MSDS before the substance is reintroduced into the workplace.
(B) The employer must ensure that persons who will receive the PMN substance from the employer, or who have received the PMN substance from the employer within 5 years from the date the employer becomes aware of the new information described in paragraph (a)(2)(i)(A) of this section, are provided an MSDS containing the information required under paragraph (a)(2)(i)(A) of this section within 90 days from the time the employer becomes aware of the new information.
(ii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii)
(iii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air- purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance specific) cartridges in combination with HEPA filters.
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet.
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved].
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii)
(b)
(1)
(2)
(3)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air- purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance specific) cartridges in combination with HEPA filters.
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet.
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air- purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance specific) cartridges in combination with HEPA filters.
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet.
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air- purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet.
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air- purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance specific) cartridges in combination with HEPA filters.
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet.
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air- purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance specific) cartridges in combination with HEPA filters.
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet.
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(A) NIOSH-certified power air-purifying respirator with a hood or helmet and with appropriate gas/vapor (acid gas, organic vapor, or substance specific) cartridges in combination with HEPA filters;
(B) NIOSH-certified continuous flow supplied-air respirator equipped with a loose fitting facepiece, hood, or helmet;
(C) NIOSH-certified negative pressure (demand) supplied-air respirator with a full facepiece.
(ii)
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(a)
(2) The significant new uses are:
(i)
(ii) [Reserved]
(b)
(1)
(2)
(3)