issue-1996-05-01•Federal Register final rules — 1996-05-01
Federal Register final rules — 1996-05-01
issue-1996-05-01Federal Register final rules — 1996-05-01Regulation
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FR Doc. 96-9662 Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals With Disabilities
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19336-19366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9662]
[[Page 19335]]
_______________________________________________________________________
Part II
Department of Labor
_______________________________________________________________________
Office of Federal Contract Compliance Programs
_______________________________________________________________________
41 CFR Parts 60-250 and 60-741
Affirmative Action and Nondiscrimination Obligations of Contractors and
Subcontractors Regarding Individuals With Disabilities, Disabled
Veterans and Veterans of the Vietnam Era; Invitation to Self-Identify;
Final Rules
Federal Register / Vol. 61, No. 85 / Wednesday, May 1, 1996 / Rules
and Regulations
[[Page 19336]]
DEPARTMENT OF LABOR
Office of Federal Contract Compliance Programs
41 CFR Part 60-741
RIN 1215-AA76
Affirmative Action and Nondiscrimination Obligations of
Contractors and Subcontractors Regarding Individuals With Disabilities
AGENCY: Office of Federal Contract Compliance Programs, Labor.
ACTION: Final rule.
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SUMMARY: The Office of Federal Contract Compliance Programs of the
Department of Labor (OFCCP) is revising the regulations implementing
section 503 of the Rehabilitation Act of 1973, as amended (section 503
or the act), which requires Government contractors and subcontractors
to take affirmative action to employ and advance in employment
qualified individuals with disabilities. The final rule makes three
general types of revisions to the section 503 regulations. First, the
regulations' nondiscrimination provisions generally are conformed to
the regulations published by the Equal Employment Opportunity
Commission (EEOC) implementing title I of the Americans with
Disabilities Act of 1990 (ADA). Second, the regulations incorporate
recent amendments to section 503. Third, the regulations are revised to
strengthen and clarify various existing provisions relating to
affirmative action, recordkeeping, enforcement and other issues. In
addition, the term ``Director'' that appears in the current regulations
and the previous proposal has been replaced throughout the final rule
with the term ``Deputy Assistant Secretary.''
The final rule partially withdraws a final rule published by the
Department of Labor on December 30, 1980 (which was subsequently
suspended) concerning section 503, Executive Order 11246 and the
Vietnam Era Veterans' Readjustment Assistance Act of 1974, as amended.
The withdrawal applies only to those provisions of the rule which
pertain to section 503.
EFFECTIVE DATE: These regulations will take effect on August 29, 1996.
FOR FURTHER INFORMATION CONTACT: Joe N. Kennedy, Deputy Director,
OFCCP, 202-219-9475 (voice), 1-800-326-2577 (TDD). Copies of this final
rule, including copies in alternative formats, may be obtained by
calling OFCCP at 202-219-9430 (voice) or 1-800-326-2577 (TDD). The
alternative formats available are: Large print, electronic file on
computer disk, and audio-tape.
SUPPLEMENTARY INFORMATION:
Current Regulations and Rulemaking History
This final rule revises the current regulations (41 CFR part 60-
741) implementing section 503 of the Rehabilitation Act of 1973, as
amended (29 U.S.C. 793) (section 503 or the act), which requires
parties holding a Government contract or subcontract in excess of
$10,000 to ``take affirmative action to employ and advance in
employment qualified individuals with disabilities.'' These regulations
establish specific affirmative action obligations for contractors
(e.g., contractors are required to use effective practices to recruit
qualified individuals with disabilities). The duty to undertake
affirmative action encompasses a duty to refrain from discriminating
against qualified individuals with disabilities.
On October 21, 1992, the Department of Labor's Office of Federal
Contract Compliance Programs (OFCCP) published a notice of proposed
rulemaking (NPRM or the proposal), 57 FR 48084, proposing to revise the
regulations implementing section 503. A notice correcting certain
technical errors in the NPRM was issued on October 30, 1992. 57 FR
49160. The comment period ended November 20, 1992. Thirty-seven
comments were received. A number of comments were submitted on behalf
of several organizations and represented the views of various groups,
employers, or individuals with disabilities. The comments have been
analyzed and considered in the development of this final rule.
Regulatory Revisions
1. Conformance With Americans With Disabilities Act Standards
The final rule was precipitated, in part, by the passage of the
Americans with Disabilities Act of 1990, 42 U.S.C. 12101 et seq. The
Americans with Disabilities Act provides comprehensive civil rights
protections to individuals with disabilities in the areas of
employment, public accommodations, State and local governmental
services, and telecommunications. Title I of the Americans with
Disabilities Act (ADA), which is enforced by the Equal Employment
Opportunity Commission (EEOC), prohibits private and State and local
governmental employers from discriminating against qualified
individuals with disabilities in all aspects of employment. The EEOC
published regulations implementing the ADA on July 26, 1991 (29 CFR
part 1630). The ADA regulations establish comprehensive, detailed
prohibitions regarding disability discrimination but do not address
issues regarding affirmative action. The ADA and its implementing
regulations became effective on July 26, 1992, with respect to
employers with 25 or more employees; on July 26, 1994, this coverage
was extended to employers with 15 or more employees.
This final rule conforms OFCCP's section 503 regulations to the
EEOC's ADA regulations. This action ensures that OFCCP and EEOC will
avoid the imposition of inconsistent legal standards when processing
complaints of discrimination that fall within the overlapping
jurisdiction of both section 503 and title I of the ADA, as is required
by section 107(b) of the ADA and by a recent amendment to section 503.
Section 107(b) of the ADA requires that OFCCP and EEOC establish
procedures to ensure that administrative complaints filed under both
laws are ``dealt with in a manner that avoids duplication of effort and
prevents imposition of inconsistent or conflicting standards.'' 1
Section 505(c) of the Rehabilitation Act Amendments of 1992 (Pub. L.
102-569, 106 Stat. 4344) (the 1992 amendments or the 1992 legislation)
amended section 503 by adding a new paragraph (e) which expressly
obligates the Secretary of Labor to develop these same procedures.
Also, the 1992 amendments added a new paragraph (d) to section 503,
which provides that ``The standards used to determine whether [section
503] has been violated in a complaint alleging nonaffirmative action
employment discrimination under [section 503] shall be the standards
applied under title I of the Americans with Disabilities Act of 1990.''
In conforming the section 503 regulations to the EEOC's ADA
regulations, this rule effectively implements these requirements.
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\1\ Pursuant to that section, OFCCP and EEOC published joint
regulations which set forth procedures governing the processing of
complaints that fall within the overlapping jurisdiction of both
title I of the ADA and section 503. 41 CFR part 60-742 (OFCCP) and
29 CFR part 1641 (EEOC). The joint rule requires, among other
things, that OFCCP (acting as EEOC's agent) process and resolve
complaints of employment discrimination based on disability for
purposes of title I of the ADA (as well as for section 503) when
there is jurisdiction under both statutes. OFCCP is required by the
rule to apply legal standards that are consistent with the
substantive legal standards applied under the ADA.
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One of the comments submitted in response to the publication of the
NPRM expressed the view that OFCCP's post-ADA role should be to focus
its enforcement efforts on affirmative action matters, as distinguished
from discrimination issues. The commenter's view is based on the
assertion that
[[Page 19337]]
OFCCP's authority to engage in compliance activities under section 503
relating to issues of discrimination was limited by the passage of the
ADA, which, the commenter contends, effectively transferred much of
OFCCP's authority in this area to EEOC. OFCCP disagrees. OFCCP's role
in the enforcement of the nondiscrimination requirements of section 503
was reaffirmed by the provisions of the ADA and the 1992 amendments
requiring coordination of enforcement under the ADA and section 503 and
the application of ADA standards in section 503 discrimination cases.
Nondiscrimination requirements are discussed in more detail in this
final rule than in the current regulations, because the final rule
incorporates the more expansive discussion of these requirements
contained in the ADA regulations. However, OFCCP views the expanded
discussion as a clarification of the general nondiscrimination
requirements under the current regulations, rather than as a
significant alteration of those requirements. Accordingly, in general,
this final rule does not affect the applicability of case law
(administrative and judicial) developed under section 503. (Thus,
section 503 case law continues in effect unless inconsistent or in
conflict with this rule.)
Because this final rule generally conforms the section 503
nondiscrimination regulations to the EEOC's ADA regulations, the
Interpretative Guidance on Title I of the Americans with Disabilities
Act set out as an appendix to the title I regulations--which provides
guidance about key provisions of the regulations--is equally applicable
with respect to the interpretation of the parallel provisions of these
regulations. Similarly, the Technical Assistance Manual on the
Employment Provisions (Title I) of the Americans with Disabilities Act
issued by the EEOC may also be relied upon for guidance.
As is discussed later in this preamble, however, there are a number
of differences, primarily of an editorial or technical nature, between
this rule and EEOC's regulations. For instance, the rule uses the term
``contractor,'' which is specific to the section 503 program, rather
than the analogous terms used by the ADA--``covered entity'' and
``employer.'' This final rule also contains a few explanatory
footnotes, which are intended for clarity only. OFCCP wishes to
reemphasize that it intends to apply its regulations consistently with
parallel provisions of the ADA regulations.
2. Implementation of the 1992 Statutory Amendments
This rule also implements a number of recent legislative amendments
to section 503, including--with one exception discussed below--the
amendments set forth in the 1992 legislation. The 1992 legislation was
signed into law on October 29, 1992, eight days after the issuance of
the NPRM, and thus the amendments to section 503 contained in that
legislation were not reflected in the proposal. The amendments to the
current section 503 regulations that are necessitated by the 1992
legislation and are ministerial and technical in nature have been
incorporated into this rule without substantive change. Publication in
proposed form would serve no useful purpose and is unnecessary under
the Administrative Procedure Act (5 U.S.C. 553(b)(B)). OFCCP,
therefore, finds good cause to waive notice of proposed rulemaking with
respect to the implementation of these amendments. The revisions to the
regulations necessitated by the legislative amendments are described
below.
The 1992 legislation amended the act's general jurisdictional
provisions in two respects. First, section 505(a) of the 1992
legislation amended section 503(a) by raising the contract dollar
amount threshold for covering a contractor from ``in excess of $2500''
to ``in excess of $10,000.'' Accordingly, this rule replaces all
references to $2500 contained in the current regulations with
references to $10,000.
Second, section 505(a) of the 1992 legislation also removed a
provision in section 503 of the act limiting its coverage to the
contractor's positions that are engaged in work related to Government
contracts. Prior to this amendment, section 503(a) provided that
Government contracts and subcontracts ``shall contain a provision
requiring that, in employing persons to carry out such contract, the
party contracting with the United States shall take affirmative action
to employ and advance in employment qualified individuals with
handicaps.'' The 1992 legislation struck out the phrase ``in employing
persons to carry out such contract.'' The effect of this amendment is
to apply the requirements of section 503 to all of a covered
contractor's or subcontractor's work force at all of its facilities.
In response to the coverage amendment, the few references to the
``carry out the contract'' language contained in the NPRM are omitted
from this final rule. Further, in order to reflect this amendment,
proposed Sec. 60-741.4(a)(2)--which expressly limited application of
the regulations to positions that are engaged in carrying out a
contract--has been revised in the final rule to clarify that such
limitation applies only to the contractor's employment decisions and
practices occurring before the amendment (see discussion in the
section-by-section analysis below).
Moreover, section 505(b) of the 1992 legislation codified the
``separate facility'' waiver provision contained in the current
regulations (Sec. 60-741.3(a)(5)) by expressly incorporating it (with
minor editorial changes) into section 503. The provision permits the
contractor to seek a waiver from the requirements of the regulations
for facilities that are not connected to a Government contract. (The
amendment added a new subsection (c)(2) to section 503 of the act; it
supplemented existing subsection (c), which the amendment redesignated
as subsection (c)(1), authorizing the granting of regulatory waivers in
the national interest.) The legislative history of the waiver amendment
indicates that it was included in the legislation in order to reaffirm
the long-standing ``separate facility'' waiver policy codified in the
regulations. S. Rep. 357, 102nd Cong., 2d Sess. 72 (1992).
This rule implements the waiver amendment by retaining the current
regulations' separate facility waiver provision (without change); the
final rule sets out the provision at Sec. 60-741.4(b)(3). As is
discussed above, the NPRM had replaced the current waiver provision
with proposed Sec. 60-741.4(a)(2), which is retained in this final rule
with modifications (see discussion below).2
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\2\ Section 505(b) of the 1992 amendments also requires OFCCP to
promulgate regulations that set forth the standards used for
granting separate facility waivers. This final rule does not
implement this requirement. OFCCP issued a separate proposed rule
setting out proposed regulatory standards for granting separate
facility waivers on February 14, 1996 (60 FR 5902).
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Also, the 1992 legislation (Sec. 102(f)(4)) clarified that
homosexuality and bisexuality are not disabilities under section 503,
and excluded from protection under section 503 certain conditions
(e.g., transvestism, transsexualism, pedophilia and compulsive
gambling) in order to conform the types of conditions protected from
discrimination under section 503 and the ADA. These provisions are
incorporated by the final rule in Secs. 60-741.3(d) and (e), and are
discussed in the section-by-section analysis below.
[[Page 19338]]
Finally, the 1992 legislation substituted the term ``disability''
for the term ``handicap'' throughout the Rehabilitation Act, including
section 503 (see, e.g., Sec. 102(f)(2) of the 1992 legislation). This
amendment, which did not affect the meaning or application of the term,
conforms the terminology used by the Rehabilitation Act to that used in
the ADA. The NPRM proposed a similar substitution in language
throughout the section 503 regulations, which is carried forward in
this final rule. (The proposed definition of ``individual with a
disability'' clarified, at Sec. 60-741.2(n)(2), that the regulations
refer to that term rather than to the term ``individual with
handicaps,'' which was then used in the Rehabilitation Act. This
statement is omitted from this final rule.)
3. Partial Withdrawal of the 1980 Final Rule
This final rule also partially withdraws a final rule published by
OFCCP on December 30, 1980 (45 FR 86215; corrected at 46 FR 7332,
January 23, 1981), and deferred indefinitely on August 25, 1981 (46 FR
42865). That 1980 rule would have revised the regulations at 41 CFR
chapter 60 implementing section 503 of the Rehabilitation Act as well
as two other laws enforced by OFCCP--Executive Order 11246 (30 FR
12319, September 28, 1965), as amended (the Executive Order), and the
affirmative action provisions of the Vietnam Era Veterans' Readjustment
Assistance Act of 1974, as amended (38 U.S.C. 4212) (section 4212). The
Executive Order requires Government contractors and subcontractors to
assure equal employment opportunity without regard to race, color,
religion, sex and national origin. Section 4212 mandates similar
requirements with regard to the employment of certain disabled veterans
and veterans of the Vietnam era.
The December 30, 1980, rule was to take effect on January 29, 1981.
On January 28, 1981, the Department of Labor published a notice (at 46
FR 9084) delaying the effective date of the final rule until April 29,
1981, to allow the Department time to review the regulation fully. The
Department published three subsequent deferrals of the rule in 1981 in
order to fully review the regulations in accordance with Executive
Order 12291, to permit consultation with interested groups, and to
comply with intergovernmental review and coordination procedures. The
Department again postponed the rule's effective date on August 25,
1981, until action could be taken on a proposed rule published on the
same date (46 FR 42968). The August 25, 1981, proposal would have
revised a number of provisions contained in the December 30, 1980,
final rule as well as a number of provisions in 41 CFR chapter 60 which
were not amended by that final rule. Final action has not been taken
with respect to the proposed regulations issued on August 25, 1981, or,
consequently, with respect to the 1980 final rule.
The substance of a number of the provisions contained in the 1980
final rule pertaining to the current section 503 regulations was
incorporated into the NPRM and is carried forward by this final rule.
However, as explained in the NPRM, OFCCP has determined not to go
forward with some of the other revisions to the regulations. In order
to avoid conflict with the 1980 final rule, this final rule withdraws
all provisions of the 1980 rule that pertain to section 503.
4. Impact on the 1980 Proposed Rule
On December 30, 1980, OFCCP published a proposed rule (45 FR
86206), the primary purpose of which was to conform the regulations
implementing section 503 and section 4212 (which were patterned after
those implementing section 503) to the employment provisions of the
Department of Labor's regulations implementing section 504 of the
Rehabilitation Act, which appear at 29 CFR part 32. Because this final
rule conforms the section 503 regulations to those implementing title I
of the ADA, it supersedes the 1980 proposal insofar as the 1980
proposal would conform section 503's regulations to those implementing
section 504.
Overview of Final Rule
This final rule consists of five subparts. Subpart A, ``Preliminary
Matters, Equal Opportunity Clause,'' explains the purpose, application
and construction of the regulations in general and contains an
extensive definitions section. The definitions section incorporates the
definitions contained in the EEOC regulations implementing title I of
the ADA which are relevant to the enforcement of section 503 and
contains a number of revisions to the current definitions as well.
Subpart A also contains provisions relating to coverage under section
503, and coverage exemptions and waivers, as well as the equal
opportunity clause, which delineates a covered contractor's general
duties under the act. Subpart B is a new subpart, which specifies the
employment actions that will be deemed to constitute prohibited
discrimination under section 503. In general, this subpart is identical
to the parallel provisions in the EEOC regulations. Some deletions and
modifications have been made with respect to the EEOC regulations to
conform to section 503 policies and procedures. Subpart C, which
governs the applicability of the affirmative action program
requirement, reorganizes, clarifies and strengthens the affirmative
action provisions in the current regulations. This subpart is not
paralleled in the ADA regulations, which mandate nondiscrimination
requirements only. As stated in Sec. 60-741.40(a) and discussed below,
the requirements of subpart C apply only to Government contractors with
50 or more employees and a contract of $50,000 or more. All other
subparts of the regulation are applicable to all contractors covered by
section 503.3 Subpart D covers general enforcement and complaint
procedures. To help ensure an enforcement approach consistent with that
used under the Executive Order, this subpart incorporates a number of
provisions from the regulations implementing the Executive Order.
Further, subpart D's provisions regarding complaint procedures are
conformed to the counterpart provisions contained in procedural
regulations applicable to the ADA. Subpart E, Ancillary Matters,
incorporates revised provisions on recordkeeping (e.g., it extends the
current one-year record retention period to two years for larger
contractors and conforms the scope of the retention obligation to that
applied by the EEOC under the ADA) and makes other revisions.
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\3\ The NPRM specifically requested public input on the topic of
affirmative action under section 503, including comment on the
appropriateness of the affirmative action obligations contained in
the proposal and suggestions regarding other obligations that might
be imposed. The public input on these issues was quite limited.
OFCCP is continuing to explore these issues and will consider
whether further revisions to the regulations' affirmative action
provisions would be appropriate.
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Finally, the rule contains two new appendices. One of the new
appendices sets out guidance on positions engaged in carrying out a
Government contract. This is an important concept in determining which
of the contractor's positions are subject to part 60-741 with respect
to its employment decisions and practices occurring before October 29,
1992. (As noted above, on that date, section 503, which had applied
only insofar as the contractor was employing persons to carry out a
contract, was amended to extend coverage thereunder to all of the
contractor's positions--irrespective of their relation to the
contract.) The second new appendix
[[Page 19339]]
sets out guidance on the duty to provide reasonable accommodation under
the act. The appendix is consistent with the discussion of this issue
contained in the Interpretative Guidance on Title I of the Americans
with Disabilities Act which is set out as an appendix to the EEOC's ADA
regulations.
A discussion of significant comments and an explanation of the
changes made from the NPRM to this final rule (other than those
discussed above) follows.
Section-by-Section Analysis of Comments and Revisions
Section 60-741.1 Purpose, Applicability and Construction
Section 60-741.1(b) Applicability
Proposed paragraph (b) stated in part that the regulations apply to
Government contracts which are performed within the United States. Upon
reconsideration, OFCCP believes that this statement is unnecessary in
this context, inasmuch as a similar clarification is made in Sec. 60-
741.4(a)(4) (which, as discussed below, has been revised for clarity).
Therefore, the statement is omitted in the final rule.
Section 60-741.2 Definitions
Section 60-741.2(a) Act
The citation of authority contained in the proposed definition has
been revised to make reference to the Rehabilitation Act Amendments of
1992.
Section 60-741.2(d) Deputy Assistant Secretary
The current regulation defines the term ``Director.'' The Director
has been given the new title of ``Deputy Assistant Secretary for
Federal Contract Compliance''; the final rule has been revised
accordingly.
Section 60-741.2(f) United States
The current regulation defines the United States as including the
Panama Canal Zone. The proposal deleted the Panama Canal Zone, which by
treaty is no longer part of the United States, and added the Northern
Mariana Islands. The final rule further updates the definition by
listing Wake Island and deleting the Trust Territory of the Pacific
Islands.
Section 60-741.2(i) Government Contract
Four commenters objected to the clarification set forth in the
definition of the term ``Government contract''--that contracts covered
under section 503 include those under which the Government is a seller
of goods or services as well as those under which it is a purchaser. In
relevant part, the definition provides that a ``Government contract''
is ``any agreement or modification thereof between any contracting
agency and any person for the purchase, sale or use of personal
property or nonpersonal services (including construction).'' The NPRM
proposed substitution of a reference to contracts for the ``purchase,
sale or use'' of goods or services for the existing reference (Sec. 60-
741.2) to the ``furnishing'' of goods or services. (The existing
regulation also states that the term ``services,'' as used in the
definition, applies irrespective of whether the Government is a
purchaser or seller. This statement is unnecessary in light of the
proposed revision, and thus was not carried forward in the NPRM.) The
commenters contended that this interpretation is inconsistent with
section 503(a), because the statute expressly or implicitly limits
coverage to those contracts in which the Federal Government is
procuring property or nonpersonal services, rather than those in which
it is the supplier. For the reasons discussed below, OFCCP believes
that the definition as proposed in the NPRM is consistent with the
statute, and thus declines to modify it.
In relevant part, section 503(a) provides that coverage under the
act applies to ``Any contract * * * entered into by any Federal
department or agency for the procurement of personal property and
nonpersonal services (including construction).'' OFCCP has long
interpreted the statute to cover both contracts in which the Government
is the seller of goods or services and those in which it is the
purchaser. This interpretation is supported by the statute's use of the
term ``any contract'' and by its broad remedial purpose. OFCCP believes
that the statute's use of the term ``procurement'' simply refers to the
subject matter of the contract, and does not restrict its application
to situations in which the Government, rather than the contractor, is
procuring goods or services. Further direct support is found in the
act's legislative history--which describes section 503 as applying to
``any contract * * * entered into by any Federal department or agency
for personal property or services'' (S. Rep. No. 318, 93rd Cong., 1st
Sess., reprinted in 1973 U.S. Code Cong. & Ad. News 2142 (emphasis
added)), and as ``a provision to ensure [that] any qualified
handicapped individual shall be given full and fair consideration for
employment by any contractor who seeks to contract with the Federal
Government'' (id., reprinted in 1973 U.S. Code Cong. & Ad. News 2123
(emphasis added)). There is nothing in this legislative history
suggesting that Congress intended to limit coverage under the act to
contracts in which the Government is a purchaser.
Moreover, at least one court has upheld a similar interpretation
under the Executive Order. Crown Central Petroleum Corp. v. Kleppe, 424
F. Supp. 744 (D. Md. 1976). In relevant part, the Executive Order (at
section 202) provides that (with the exception of certain specified
types of contracts), a provision obligating the contractor to comply
with the Order shall be included in ``every Government contract.'' In
Kleppe, the court held that the Executive Order is applicable to the
Government's lease to Crown Central of rights to mine on Federal lands.
The court ruled that the application of the Executive Order to this
situation is consistent with the Order's literal language, and that an
interpretation limiting the Order's application to only suppliers of
goods or services would be inconsistent with the national policy of
eliminating racial and other discrimination embodied in the Executive
Order. 424 F. Supp. at 427-28. An analogous rationale applies to
section 503 in view of Congress' clear intent that the contract
coverage provisions of section 503 parallel those of the Executive
Order. See S. Rep. No. 1297, 93rd Cong., 2d Sess., reprinted in 1974
U.S. Code Cong. & Ad. News 6427.
One commenter objected to the subdefinition of ``personal
property'' (Sec. 60-741.2(i)(6)) as inconsistent with OFCCP's statutory
authority. The definition states that the term, as used in connection
with the terms ``Government contract'' and ``subcontract'' (Sec. 60-
741.2(l)), ``includes supplies and contracts for the use of real
property (such as lease arrangements), unless the contract for the use
of real property itself constitutes real property (such as
easements).'' The commenter asserted that neither a plain reading of
section 503 itself--which states that the act applies to contracts
concerning personal property and nonpersonal services--nor its
legislative history supports an interpretation that leasehold interests
in real property are covered by the act.
The current definition of ``Government contract'' (at Sec. 60-
741.2) provides, in relevant part, that the term includes agreements
``for the furnishing of supplies or services or for the use of real or
personal property including lease arrangements.'' As stated in the
NPRM's preamble, the revision to the regulation was intended ``to make
clear, consistent with the language of the act, that only contracts
regarding personal property
[[Page 19340]]
(including those for the use of real property where such use
constitutes personal property) and `nonpersonal' services are
covered.'' The subdefinition of ``personal property'' simply recognizes
that real property leases constitute personal property under the common
law, and applies that principle in defining the scope of coverage under
section 503. See, e.g., In re Wolverton Associates, Inc. v. Official
Creditors' Committee, 909 F.2d 1286 (9th Cir. 1990); United States v.
Dally, 165 F. Supp. 194 (S.D.N.Y. 1958); First National Bank of Kansas
City v. Nee, 85 F. Supp. 840 (W.D. Mo. 1949), aff'd, 190 F.2d 61 (8th
Cir. 1951). The subdefinition is retained in the final regulation
without modification.
Several commenters representing credit unions raised objections to
OFCCP's position, as stated in the NPRM's preamble, that Federal
deposit and share insurance constitutes a Government contract within
the meaning of section 503, and thus subjects financial institutions
with such insurance to coverage under the act. The statement in the
NPRM's preamble regarding coverage of Federal deposit and share
insurance as a Government contract did not reflect any change in the
regulations implementing section 503--indeed, the NPRM did not propose
any regulatory provisions regarding this issue. Rather, the preamble
discussion merely restated and clarified the agency's long-standing
position; it was noted that OFCCP stated this position in the purpose
and application section (Sec. 60-741.1) of its 1980 final rule.
(Similar opposition had been raised in response to the proposal
preceding the 1980 final rule.) The preamble also stated that OFCCP
continues to hold this view, and that OFCCP declined to incorporate
into the proposal a similar statement regarding coverage of Federal
deposit and share insurance, because OFCCP believed it is unnecessary
to single out this contractual relationship from any other covered by
the regulations. This statement, then, was merely intended to explain
why the proposal differed from the 1980 final rule, and simply echoed
OFCCP's long-standing policy on the issue. Nevertheless, OFCCP
conducted a careful and detailed reevaluation of its position in light
of changes in some of the statutes affecting the financial industry.
Based upon that review, OFCCP continues to believe in the soundness of
its position and does not modify it.
Additionally, these commenters asserted that coverage of Federal
deposit and share insurance under section 503 would improperly
interfere with the authority of the regulatory agencies of financial
institutions to regulate credit unions. Also, some commenters asserted
that such a position is invalid because to date OFCCP has failed to
issue a rule codifying it; relatedly, some commenters requested that
OFCCP seek public comment on the coverage issue, and others requested
that the comment period for the NPRM be extended to permit additional
public input on the issue. OFCCP believes that it need not expressly
incorporate its policy into a regulatory provision or seek public
comment, inasmuch as the policy merely reflects an interpretation of an
existing regulatory provision (i.e., the definition of ``Government
contract''); thus, it is exempt from the notice and comment procedures
of the Administrative Procedure Act. See 5 U.S.C. 553(b)(A).
OFCCP also wishes to reemphasize that it will continue to maintain
its long-standing policy of imposing sanctions other than debarment of
financial institutions from future deposit or share insurance, or
cancellation, termination or suspension of a financial institution's
deposit or share insurance for violations of section 503 (see Sec. 60-
741.66 Sanctions and penalties).
Section 60-741.2(l) ``Subcontract''
The final rule was revised slightly to correct a clerical error.
The proposed definition of ``subcontract'' had inadvertently omitted
the parenthetical phrase ``(including construction)''. The proposed and
final definitions of the term ``Government contract'' (Sec. 60-
741.2(i)(5)) confirm that the parenthetical phrase was intended to be
included in the definition of ``subcontract'' the same as it is
included in the definition of the term ``Government contract'' so that
the definitions are parallel.
Section 60-741.2(q) ``Substantially limits''
The final rule was revised slightly to mirror the corresponding
definition in the ADA regulations. The proposed rule had used the
phrase ``within the normal range of abilities of persons in the general
population'' in place of the ADA rule's reference to the ``average
person in the general population.'' The proposal stated that the
difference in language was intended for clarity only and that OFCCP
intended to apply the definition and subdefinition in the same manner
as they are applied under the ADA. However, in order to prevent any
misunderstanding regarding OFCCP's intent, the final rule repeats the
ADA language verbatim and includes a footnote further describing the
definition.
Additionally, the subdefinition relating to substantial limitation
in the major life activity of working has been revised slightly to
conform to the corresponding ADA provision at 29 CFR 1630.2(j)(3). As
revised, it refers to the average person in the general population
having comparable training, skills, and abilities.
Section 60-741.2(v) ``Reasonable accommodation''
The final rule incorporates a definition identical to the ADA
definition at 29 CFR 1630.2(o) (see appendix discussion related to
Sec. 1630.2(o)); the current section 503 regulations do not contain a
definition of the term. The definition states that a reasonable
accommodation is any change in the work environment or the way job
duties are customarily performed that enables individuals with
disabilities to perform the essential functions of the job in issue, or
that ensures equal opportunity for individuals with disabilities with
respect to the application process or the enjoyment of benefits and
privileges of employment.
The proposal had contained a slight modification of the ADA
definition. Paragraph (v)(1)(i) of the OFCCP proposal referred to
modifications to the job application process that enable ``an
applicant'' with a disability to be considered for a position, while
the ADA definition uses the term ``qualified applicant'' in this
context. However, the final rule repeats the ADA regulation verbatim,
in order to clarify that the interpretation is meant to be the same.
OFCCP now explains in a footnote that contractors should not draw the
erroneous inference that their duty to provide a reasonable
accommodation with respect to applicants with disabilities is limited
to those who ultimately can demonstrate that they are qualified to
perform the job in issue. Applicants with disabilities must be provided
a reasonable accommodation if they are qualified with respect to the
application process (e.g., if they present themselves at the correct
location and time to fill out an application). This is the same
approach used under the ADA's definition.
The proposal contained a similar departure from the ADA regulation
in paragraph (v)(3), which referenced an informal, interactive process
with ``the individual with a disability.'' To clarify that the
regulations are meant to be interpreted consistently, the final rule
mirrors the ADA regulation and refers to a ``qualified'' individual.
OFCCP now
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explains in a footnote that contractors must engage in such an
interactive process with individuals with disabilities because, until
they have done so, they may be unable to determine whether a reasonable
accommodation is available that will result in the person being
qualified.
Section 60-741.2(y) Direct Threat
Two disability rights groups objected to the reference to the
health or safety of the individual with a disability in the definition
of ``direct threat.'' One group expressed the concern that the
reference to the risk to the individual might result in direct threat
determinations that are based on paternalistic or stereotypical views
concerning persons with disabilities. The other group asserted that
contractors might exempt themselves from the requirements of section
503 simply by invoking this rationale with little or no evidence of an
actual threat. OFCCP believes that such concerns are unwarranted. The
definition is identical to the parallel definition contained in EEOC's
ADA regulations (Sec. 1630.2(r)), which, in turn, is based on the case
law interpreting the Rehabilitation Act. As noted in EEOC's
interpretative guidance, the employer's assessment of whether there is
a risk to the individual with a disability, like its assessment of risk
to others, must be based strictly on valid medical analyses or other
objective evidence. The assessment must be made on a case-by-case basis
relying on the factors set out in the definition, rather than on
subjective perceptions, irrational fears, patronizing attitudes or
stereotypes. See Mantolete v. Bolger, 767 F.2d 1416 (9th Cir. 1985);
Bentivegna v. U.S. Department of Labor, 694 F.2d 619 (9th Cir. 1982);
E.E. Black, Ltd. v. Marshall, 497 F.Supp. 1088 (D. Hi. 1980). OFCCP
intends to ensure that contractors comply with this requirement. The
final rule adopts the definition without change.
Section 60-741.3 Exceptions to the Definitions of ``Individual With a
Disability'' and ``Qualified Individual with a Disability''
Section 60-741.3(a)(4) Construction
Paragraph (a)(4)(ii) clarifies that an individual is not
necessarily protected by section 503 simply because he or she is a
recovered or recovering drug abuser or is erroneously regarded as a
current drug user. Such an individual must still satisfy the
requirements for protection as a ``qualified individual with a
disability.'' An individual erroneously regarded as illegally using
drugs, for example, would have to show that he or she was regarded as a
drug addict in order to demonstrate that he or she meets the definition
of a ``qualified individual with a disability.''
Section 60-741.3(a)(5) Current Illegal Use of Drugs--Drug Testing
One commenter expressed a concern that this provision conflicts
with the policy of the National Labor Relations Board (NLRB) relating
to an employer's obligation to engage in collective bargaining with its
employees' representatives regarding the imposition of a workplace drug
testing policy. Paragraph (a)(5) provides that a contractor may seek
reasonable assurances, through drug testing and other means, that a
recovered or recovering drug user is no longer engaging in the illegal
use of drugs. This paragraph merely clarifies that such drug testing
does not conflict with the regulations implementing section 503. It
does not require an employer to implement drug testing, and therefore
does not conflict with the above NLRB policy.
Section 60-741.3(d) Homosexuality and Bisexuality
This paragraph of the final rule, which clarifies that
homosexuality and bisexuality do not constitute disabilities under
section 503, incorporates (with minor editorial changes) an amendment
contained in the 1992 legislation (Sec. 102(f)(4)). (The amendment
added a new paragraph (E) to the definition of ``individual with a
disability'' set out at 29 U.S.C. 706(8).) The amendment parallels a
provision contained in the ADA (42 U.S.C. 12211(a)), which is
implemented in the EEOC's regulations at Sec. 1630.3(e). The amendment
was intended to facilitate the consistent application of section 503
and the ADA.
Section 60-741.3(e) Other Conditions
This paragraph, which specifies that section 503 does not apply to
certain specified conditions--for instance, transvestism,
transsexualism, pedophilia and compulsive gambling--incorporates (with
minor editorial changes) an amendment contained in the 1992 legislation
(Sec. 102(f)(4)). (The amendment added a new paragraph (F) to the
statutory definition of ``individual with a disability.'') The
paragraph parallels a provision contained in the EEOC's regulations
(Sec. 1630.3(d)). The amendment was intended to conform the types of
conditions excluded from protection under section 503 to those excluded
from protection under the ADA (see 42 U.S.C. 12211(b)). (Paragraph (d)
of the NPRM provided that the terms ``individual with a disability''
and ``disability'' do not apply to an individual solely because the
individual is a transvestite. That clarification is subsumed within
this paragraph of the final rule.)
Section 60-741.4 Coverage and Waivers
Section 60-741.4(a)(2) Coverage--Positions Engaged in Carrying out a
Contract
The NPRM, among other things, provided (at paragraph (a)(2)(i))
that the regulations cover only positions of the contractor that are
engaged in carrying out a Government contract, and (in paragraphs
(a)(2)(i) (A) and (B)) set forth standards defining the circumstances
under which a position shall be deemed to be engaged in carrying out a
contract. Further, the proposal (in paragraphs (a)(2)(iii) (A) and (B))
required the contractor to make a determination as to which of its
positions are covered by the regulations as well and a record of its
determination, and (in paragraph (a)(2)(iii)(C)) provided that if a
contractor fails to make this determination, it must extend the
protections of the act and the regulations to all of its positions
until such time as it makes the coverage determination for a particular
position. The final rule revises these provisions consistent with the
1992 amendment to section 503 extending coverage under the act to the
contractor's entire work force.
As stated in the preamble to the NPRM, the purpose of the provision
limiting application of the regulations to positions that are engaged
in carrying out a contract was to more closely conform the regulations
to the jurisdictional limitation then-contained in section 503(a) as
interpreted by the court in Washington Metropolitan Area Transit
Authority v. DeArment, 55 EPD para.40,507 (D.D.C. 1991). The 1992
legislation, by striking this jurisdictional limitation from section
503, amended the act to apply to all of a covered contractor's or
subcontractor's work force. This amendment had prospective effect only.
In order to reflect this statutory amendment, the coverage
limitation set forth in paragraph (a)(2)(i) of the NPRM has been
revised in the final rule to provide that the limitation applies only
to the contractor's employment decisions and practices occurring before
the amendment's effective date--October 29, 1992. The proposed
standards governing the determination whether a position is engaged in
carrying out a contract have been carried forward in the final rule
without
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substantive change. (Stylistic revisions reflecting the jurisdictional
limitation's retroactive application have been incorporated throughout
paragraph (a)(2) as well as in appendix D, which sets out guidance
regarding positions engaged in carrying out a contract.) Thus, for
instance, in investigating whether a contractor covered by section 503
has discriminated against an individual with a disability in violation
of the act, the issue whether the discriminatee was employed in, or was
an applicant for, a position engaged in carrying out a Government
contract will be relevant only if the alleged discrimination occurred
before October 29, 1992. This section still has practical utility
because there are a number of pending section 503 complaints involving
alleged violations of the act which occurred before the amendment.
Moreover, the requirement contained in the NPRM that the contractor
determine which of its positions carry out contracts (and thus are
covered) and make a record of that determination has been eliminated in
the final rule. As explained in the preamble to the NPRM, this
determination was necessary in order to define the scope of the
contractor's affirmative action and nondiscrimination obligations under
the regulations. This determination, which was intended to be applied
prospectively only, is no longer needed inasmuch as the act has been
amended to extend those obligations to the contractor's entire work
force.
Three commenters objected to ``prong A'' of the coverage test
(paragraph (a)(2)(i)(A))--which provides that a position is engaged in
carrying out a contract if its duties include work that fulfills a
contractual obligation, or work that is necessary to, or that
facilitates, performance of the contract or a provision of the
contract. The commenters asserted that this provision is inconsistent
with the jurisdictional limitation that was contained in the statute in
that it would result in the coverage of positions with a tenuous
connection to the contract. Further, these commenters stated that the
regulation fails to provide sufficient guidance as to which positions
are engaged in carrying out a contract. Two of these commenters also
objected to the paperwork burdens associated with the coverage
determination requirement.
OFCCP disagrees with the assertion that prong A is inconsistent
with the jurisdictional limitation. As stated in the preamble to the
proposed rule, prong A reflects the practical reality that performance
of a contract generally requires the cooperation of a variety of
individuals engaged in auxiliary and related functions beyond direct
production of the goods or provision of the services that are the
object of the contract. Therefore, OFCCP believes it reasonable to
construe positions ``engaged in carrying out'' a contract as including
those which perform work that is necessary to, or that facilitates,
performance of the contract--even if the work is not directly required
by an express contractual term. OFCCP also disagrees that the
regulation fails to provide sufficient guidance on the application of
prong A; OFCCP has attempted to provide contractors with as much
guidance as possible on this issue in appendix D to the regulations.
Finally, the commenters' concerns regarding increased burdens have been
rendered moot in that the coverage determination requirement has been
omitted in the final rule.
Section 60-741.4(a)(3) Contracts and Subcontracts for Indefinite
Quantities
One commenter raised a concern that paragraph (a)(3) of this
section will result in undue burdens on contractors in that it would
require the incorporation of the equal opportunity clause (see Sec. 60-
741.5) into existing indefinite quantity contracts whenever an
individual order under such contracts meets the jurisdictional amount
for coverage. This concern is unwarranted. This provision does not
require that an existing contract be revised or reissued to incorporate
the clause physically in the contract in such a situation; it simply
provides that the requirements of the clause shall apply to the
contract (irrespective of whether the clause is physically incorporated
into the contract).
Section 60-741.4(a)(4) Work Within the United States (Proposed)
Proposed Sec. 60-741.4(a)(4) stated that the regulations apply only
to ``employment within the United States.'' (For the sake of clarity,
the final rule revises this section to substitute the phrase
``employment activities within the United States'' for the above
language.)
Under current Sec. 60-741.4(a)(3), the regulations are made
applicable to work performed abroad by employees recruited within the
United States. The final rule narrows the scope of that coverage. As
discussed in the NPRM, the proposed narrowing was a response to the
Supreme Court's decision in EEOC v. Aramco, 111 S. Ct. 1227 (1991),
which held that title VII of the Civil Rights Act of 1964 (title VII)
does not apply to United States citizens employed abroad by United
States employers. OFCCP concluded that a similar coverage limitation
applies to section 503. Upon reconsideration, OFCCP believes that
proposal failed to clearly reflect OFCCP's policy with respect to the
coverage of employment decisions made within the United States
affecting employment opportunities abroad (issues which were not
addressed by the Aramco decision). Accordingly, the final rule revises
this section to clarify that the regulations cover decisions of the
contractor made within the United States, pertaining to the
contractor's applicants and employees who are within the United States,
regarding employment opportunities abroad. OFCCP's established policy
is to treat these particular employment decisions as covered by section
503.
In the Civil Rights Act of 1991, Congress amended title VII and the
ADA to provide expressly for extraterritorial application of those
laws. We considered whether it is possible to apply a similar rule
under section 503, and concluded that it is not. Although the Civil
Rights Act of 1991 reversed the result of Aramco with respect to title
VII and the ADA, it did not erase the longstanding legal principle
repeated in that case that, absent contrary intent, legislation applies
only within the borders of the United States. We are unaware of any
such expressed intent regarding section 503.
Section 60-741.5 Equal Opportunity Clause
Section 60-741.5(a) Government Contracts
Proposed paragraph 4 of this section (one of the provisions of the
equal opportunity clause, which must be included in all covered
contracts and subcontracts) stated that the contractor agrees to post,
in a form to be prescribed by the Director (now the Deputy Assistant
Secretary for Federal Contract Compliance Programs), a notice regarding
the rights of applicants and employees under section 503. The final
rule revises this section to require the contractor to ensure that
applicants and employees with disabilities are informed of the contents
of the notice. In part, this revision responds to a suggestion by a
disability rights group that the regulations be revised to require that
the posting mandated by proposed Sec. 60-741.80 (the contractor's equal
opportunity policy statement) be accessible to persons with vision
impairments. (As discussed below, this posting requirement has been
transferred to Sec. 60-741.44(a).) OFCCP believes that such an
accessibility requirement should apply both to this
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posting and the posting mandated by Sec. 60-741.5(a) (paragraph 4);
therefore, the final rule makes the requirement applicable to both
notices. OFCCP concludes that the contractor must ensure that these
notices are accessible to applicants and employees with disabilities to
satisfy its duty to provide a reasonable accommodation. A contractor
may make these notices accessible, for example, by having the notice
read to a visually disabled individual or by lowering the posted notice
so that it may be read by a person in a wheelchair.
Section 60-741.5(f) Duties of Contracting Agencies
The proposal provided in part that contracting agencies are
required to cooperate with the Director (now Deputy Assistant Secretary
for Federal Contract Compliance Programs) in the performance of his or
her responsibilities under the act, including taking such actions for
noncompliance as set forth in Sec. 60-741.66 (Sanctions and penalties)
as may be ordered by the Director (now Deputy Assistant Secretary). The
final rule revises this section by incorporating references to the
Secretary of Labor (in addition to the reference to the Deputy
Assistant Secretary for Federal Contract Compliance Programs); this
revision is intended to accurately reflect the role of the Secretary in
the enforcement of the act.
Section 60-741.21(g) Prohibitions
The text of this subsection has been altered slightly from the
proposal, to provide that exclusionary selection criteria that
``concern only marginal functions of the job,'' rather than those that
``do not concern an essential function of the job,'' would not be
consistent with business necessity. This subtle distinction allows for
the possibility that there may be selection criteria that do not relate
to either essential or marginal functions, which are consistent with
business necessity. Conforming changes have been made to Secs. 60-
741.44(c)(1) and (2).
Section 741.21(h) Administration of Tests
In the proposed rule this paragraph contained broader language than
the comparable ADA provision. The NPRM specified that contractors must
administer employment tests in an appropriate format to individuals
with impaired ``sensory, manual, speaking, mobility or other skills.''
The ADA rule does not reference ``mobility and other skills.'' Our
stated intent in including the additional language was to clarify that
individuals with disabilities may not be excluded from a job that they
can actually perform merely because they are hampered in the ability to
complete or succeed on a test as a result of their impaired skills
(resulting from their disability)--no matter what the impaired skills
may be. Upon further consideration, we have decided to track more
strictly the wording of the EEOC regulation, which in turn strictly
tracks the wording of the ADA. We have added to appendix A on
reasonable accommodation additional guidance on the administration of
tests that is consistent with our proposed rule.
Section 741.23 Medical Examinations and Inquiries
Section 60-741.23(b) Permitted Medical Examinations and Inquiries
One commenter suggested that the regulations clarify that OFCCP
will follow EEOC's interpretative guidance (relating to Sec. 1630.14(a)
of the ADA regulations) which provides that physical agility tests are
not medical examinations, and thus may be given at any point in the
application or employment process. OFCCP does indeed intend to follow
this interpretation. As stated earlier, the EEOC's interpretative
guidance is equally applicable with respect to the counterpart
provisions of this rule, and it may be relied upon for guidance. See
Sec. 60-741.1(c)(1). Further, a phrase was deleted from the final rule
as redundant.
Section 60-741.23(c) Invitation to Self-Identify
This paragraph of the NPRM stated that the contractor may invite
applicants and employees to self-identify as individuals with
disabilities as specified in Sec. 60-741.42. This paragraph has been
revised to reflect changes made by the final rule to Sec. 60-741.42
(see discussion below).
Section 60-741.23(d) Confidentiality and Use of Medical Information
One commenter raised the concern that the requirement contained in
proposed Sec. 60-741.23(d), that information regarding the medical
condition or history of an applicant or employee be treated as a
confidential record, conflicts with an employer's obligation under the
Railway Labor Act to provide such information to bargaining
representatives under specified circumstances. OFCCP has not yet taken
a position on this issue. The EEOC will be addressing similar issues
under the ADA in future Compliance Manual sections and policy guidance.
OFCCP intends to coordinate its policy under section 503 relating to
this issue with the EEOC at an appropriate time in the future.
Further, to ensure greater confidentiality OFCCP has narrowed the
scope of the requirement that confidential medical information be made
available to Government officials. As revised, the rule provides access
to Government officials enforcing the laws administered by OFCCP (i.e.,
section 503, Executive Order 11246, and the affirmative action
provisions of the Vietnam Era Veterans' Readjustment Assistance Act (38
U.S.C. Sec. 4212)), and those enforcing the ADA. A corresponding
revision has been made in appendix B, which contains a sample
invitation to self identify.
Section 60-741.25 Health Insurance, Life Insurance and Other Benefit
Plans
One commenter recommended that the regulations provide additional
clarification regarding permissible coverage restrictions under benefit
plans. OFCCP intends to develop future guidance on this and related
issues in coordination with EEOC.
Subsection (a) has been slightly revised to refer to ``[a]n insurer
* * *, or any agent or entity that administers benefit plans * * *.''
The proposal had erroneously deviated from the corresponding ADA
provision, using the word ``contractor'' rather than ``entity.''
Subpart C--Affirmative Action Program
Several commenters made observations concerning this subpart as a
whole. One, for example, recommended that the final rule clarify that
nondiscrimination and affirmative action are separate and distinct
concepts, and that affirmative action does not mean that an employer is
required to grant a preference. Affirmative action and
nondiscrimination are separate, but related, concepts. The duty to
undertake affirmative action subsumes the duty to refrain from
discrimination. Thus, for example, a contractor that is discriminating
is not fulfilling its affirmative action obligations to identify,
prevent and remedy discrimination. OFCCP also wishes to clarify that
section 503 and these implementing regulations do not require employers
to grant a preference to individuals with disabilities.
Subpart C requires covered contractors to institute a system of
proactive measures designed to ensure equal employment opportunity for
individuals with disabilities. For example, contractors are required to
ensure that their personnel processes provide for careful consideration
of the
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job qualifications of known disabled individuals (Sec. 60-741.44(b));
periodically review job qualification standards to ensure that, to the
extent they tend to screen out qualified persons with disabilities,
such requirements are consistent with business necessity (Sec. 60-
741.44(c)); and take appropriate efforts to effectively recruit workers
with disabilities (Sec. 60-741.44(f)). These measures do not require
the contractor to extend a preference for individuals with
disabilities; rather, they are designed to create a working environment
that actively welcomes qualified persons with disabilities at all
levels in the contractor's work force.
Section 60-741.40 Applicability of the Affirmative Action Program
Requirement
The NPRM contained a proposal (in paragraph (a)) to raise the
threshold for the application of the written affirmative action program
(AAP) requirement from the current (Sec. 60-741.5(a)) 50 or more
employees and a Government contract of $50,000 or more, to 150 or more
employees and a contract of $150,000 or more. Several commenters
expressed approval of the NPRM proposal, one expressed disapproval, and
two favored a higher threshold--250 employees and a Federal contract of
$250,000 or more.
Upon further consideration, OFCCP believes it is in the public
interest to maintain the threshold requirements imposed at current
Sec. 60-741.5(a). Raising the threshold as proposed would remove nearly
two million workers from the protection of a Section 503 affirmative
action program. Further, since a large proportion of new jobs are
created in companies with fewer than 150 employees, relieving such
companies from the affirmative action program requirement would have a
significant impact on the employment opportunities of individuals with
disabilities. Finally, OFCCP wishes to maintain consistency in its
affirmative action program threshold among its three programs, and that
threshold under both its Executive Order 11246 program (Secs. 60-
1.40(a), 60-2.1(a)) and 38 U.S.C. 4212 program (Sec. 60-250.5(a)) is 50
or more employees and a Government contract of $50,000 or more.
Accordingly, the corresponding threshold in the current Section 503
regulations is carried forward in this final rule without change.
A number of commenters expressed concern regarding proposed
paragraph (b) insofar as it requires contractors to prepare and
maintain an AAP at each establishment. These commenters asserted that
it would be overly burdensome to comply with this requirement at
establishments which employ very few people. Although this paragraph,
which is virtually identical to current Sec. 60-741.5(a), does not
define ``establishment,'' OFCCP has applied that term flexibly in order
to accommodate small establishment issues. The Secretary of Labor's
decision in OFCCP v. Coldwell, Banker and Co., 78-OFCCP-12 (August 14,
1987), an Executive Order 11246 case, recognized that the term
``establishment'' generally means a physically distinct place of
business or location. However, he also recognized that there may be
circumstances where it is appropriate for OFCCP to approve the grouping
of separate facilities for AAP purposes. Factors that may be relevant
include whether there is centralized authority for personnel decisions,
whether the facilities are in the same labor market or recruiting area,
and the number of employees at the facilities. Contractors may request
that OFCCP approve the grouping of particular facilities for AAP
purposes.
Section 60-741.42 Invitation to Self-Identify
This section addresses a contractor's obligation to invite
applicants and employees with disabilities to self-identify in order to
benefit from the contractor's affirmative action program. Under the
current regulations (41 CFR 60-741.5(c)(1)) contractors are required to
invite employees and applicants to self-identify. Under paragraph (a)
of the NPRM contractors would be permitted, but not required, to invite
self-identification. The final rule differs from the proposed version,
and is similar to the current rule, in that it makes the obligation to
extend the invitation mandatory. The final rule takes a different
approach from the current rule, however, in that it specifies that
except in limited circumstances the invitation is to be extended after
an employment offer has been made and before the applicant begins work.
OFCCP had explained in the preamble to the NPRM that it believed
the invitation to self-identify should be permissive, rather than
mandatory, in light of other proposed provisions (Secs. 60-741.44(b)
and (d)) which provide comparable protections. However, upon
reconsideration, OFCCP believes that these provisions (which are
carried forward in the final rule) do not provide protections
comparable to a mandatory invitation to self-identify. Sections 60-
741.44(b) and (d) are intended to ensure that the contractor will
afford individuals with a known disability proper consideration for
employment opportunities and reasonable accommodations. In contrast,
the mandatory invitation to self-identify is designed to afford persons
whose disabilities may not be known to the contractor a full
opportunity to come forward to request an accommodation. Further, the
mandatory invitation ensures that notice is provided of the
contractor's obligations with respect to individuals with disabilities.
Accordingly, the final rule carries forward the mandatory requirement
from the current regulations.
Further, the proposed permissive invitation provision was based in
part on the concern that a mandatory requirement might result in
inadvertent violations of the ADA regulatory prohibitions regarding
medical inquiries by employers subject to both laws. Those regulations
generally prohibit inquiries (such as those required by Sec. 60-741.42)
whether an applicant or employee is an individual with a disability or
as to the nature or severity of the disability but specify that such
inquiries are permitted if required to satisfy the affirmative action
requirements of section 503 (see Sec. 1630.13 of the ADA regulations
and the interpretative guidance relating to Sec. 1630.14). At the time
the NPRM was published, OFCCP was concerned that a contractor might
inadvertently extend the invitation to workers who are not covered by
section 503--and thus, such an invitation arguably would not fall
within this exception to the medical inquiries prohibition. (As is
discussed above, prior to the act's amendment by the 1992 legislation
only employees who were employed in, or applicants for, positions that
are engaged in carrying out a Government contract were covered.) OFCCP
believed that a permissive invitation would permit the contractor to
avoid extending the invitation where an applicant's or employee's
coverage under section 503 was unclear. In view of the amendment
extending coverage under the act to all of the contractor's positions,
this issue no longer presents a significant concern.
The revised provision is intended to comport with EEOC regulations
and guidance on pre-employment inquiries. Paragraph (a) of the rule
requires the contractor to issue the invitation after making an offer
of employment and before the applicant begins his or her employment
duties. This approach is consistent with Sec. 1630.14(b) of the EEOC's
regulations, which provides that an employer may require a medical
inquiry after making an offer of employment to a job applicant and
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before the applicant begins his or her job duties, if all entering
employees in the same job category are subjected to such an inquiry
regardless of disability. Inviting an applicant to self-identify before
an offer of employment has been made is permitted only in two limited
circumstances: If the invitation is made when the contractor actually
is undertaking affirmative action at the pre-offer stage; and if the
invitation is made pursuant to a Federal, state or local law requiring
affirmative action for individuals with disabilities. EEOC's October
10, 1995, ``ADA Enforcement Guidance: Preemployment Disability-Related
Questions and Medical Examinations'' authorizes pre-employment
inquiries in these circumstances. Furthermore, in order to ensure
consistency between the requirements of section 503 and the Vietnam Era
Veterans' Readjustment Assistance Act (VEVRAA), OFCCP plans to issue an
Interim Final Rule conforming the invitation to self-identify provision
of VEVRAA with that in this rule.
Further, the rule has been revised (paragraph (b) of the final
rule; paragraph (a) of the proposal) to require that the invitation
inform the individual that the request to benefit under the
contractor's affirmative action program may be made immediately or at
any time in the future. This revision is intended to help ensure that
the individual is aware that he or she is not precluded from making the
request at any time in the future merely because an initial request was
made or because he or she failed to make the request immediately in
response to the invitation. For example, an individual with a
disability simply may not choose to self-identify before beginning
work, but may wish to do so later; after beginning work an individual
may develop a disability; or a pre-existing minor disability may become
more severe. Proposed paragraph (b), which set forth a similar
clarification--but did not require that it be included in the
invitation itself--has been omitted in the final rule.
Section 60-741.44 Required Contents of Affirmative Action Programs
Section 60-741.44(a) Policy Statement
Paragraph (a) of the proposal, which provided that the contractor
shall include its equal opportunity policy statement in its affirmative
action program, has been revised for clarity. As revised, this section
states that the contractor shall post the policy statement on company
bulletin boards, and specifies the type of information that should be
included in the policy statement--both suggested (relevant information
about the contractor's policy) and required (notification that the
contractor is obligated, as specified in Sec. 60-741.69, to refrain
from harassment or intimidation). In this part, OFCCP uses the term
``shall'' when material is mandatory and ``should'' when the material
is encouraged but not required. This revision largely conforms the
provision to the counterpart Executive Order regulation (41 CFR 60-
2.20(a)). The notice posting requirement was set out in proposed
subpart E (Ancillary Matters) at Sec. 60-741.80; that section also
provided that the posting shall include a notification regarding the
contractor's obligation to refrain from harassment or intimidation. For
the sake of clarity, the substance of these provisions has been
transferred to Sec. 60-741.44(a). (Proposed Secs. 60-741.81 through 60-
741.85 have been redesignated as Secs. 60-741.80 through 60-741.84,
respectively.) OFCCP believes that the revisions establishing suggested
guidance on the contents of equal opportunity notices, will simplify
the process of preparing such notices. Additionally, as discussed in
connection with Sec. 60-741.5(a), the final rule revises this section
to require the contractor to ensure that applicants and employees with
disabilities are informed of the contents of the policy statement.
Section 60-741.44(d) Reasonable Accommodation to Physical and Mental
Limitations
A few commenters objected to paragraph (d) of the proposal insofar
as it provides that where an employee with a known disability is having
difficulty performing his or her job, the contractor shall
confidentially inquire whether the employee is in need of a reasonable
accommodation. The preamble to the proposal stated that the contractor
is required to make the inquiry only in situations where it is
reasonable to conclude that a performance problem may be related to a
disability. These commenters asserted that it may be difficult to
determine with certainty whether the employee's performance problem is
the result of a disability. Consequently, the commenters argued, the
requirement may compel some contractors to make potentially offensive
inquiries regarding needed accommodations (i.e., inquiries based on
unfounded and stereotypical assumptions).
In order to address this concern, paragraph (d) has been revised in
the final rule to require the contractor to make an initial inquiry as
to whether the performance problem has any connection to the employee's
disability, and that a second inquiry about needed accommodations only
be made where the individual indicates that the problem does have such
a connection. Moreover, paragraph (d) has been revised to require the
contractor to make the initial inquiry only where the employee is
having significant difficulty performing the job and it is reasonable
to conclude that the performance problem may be related to the known
disability.
The revision requiring the contractor to make the initial inquiry
only where the employee is having a significant job performance problem
is intended to minimize the burden placed on the contractor while also
helping to ensure that the accommodation issue is fully explored by
both the employee and the contractor before the employee may be subject
to adverse action.
One commenter suggested that, rather than imposing a requirement on
contractors to inquire about the need for a reasonable accommodation
where an individual with a known disability is having a job performance
FR Doc. 96-9662 Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals With Disabilities
problem, OFCCP should encourage contractors to ensure that individuals
with disabilities are aware of their rights under section 503,
including their right to request a reasonable accommodation. The
difficulty with this approach is that, notwithstanding a contractor's
efforts to disseminate this information, some individuals with
disabilities may remain unaware of their right to request a reasonable
accommodation. Moreover, many individuals with disabilities may not
perceive the need for an accommodation (for instance, a person with
narcolepsy might fail to recognize the fact that his or her disability
is so severe as to interfere with the performance of the job).
Section 60-741.44(f) External Dissemination of Policy, Outreach and
Positive Recruitment
Some commenters viewed paragraph (f) as imposing too many
burdensome requirements. OFCCP disagrees. Proposed paragraph (f), which
is generally consistent with current Sec. 60-741.6(f), does not impose
any new appreciable obligations. It simply specifies that a contractor
is required to engage in such outreach and recruitment activities--as
appropriate to its circumstances (such as size, resources, and the
adequacy of current procedures)--that are reasonably designed to
effectively recruit qualified individuals with disabilities. The
methods for doing so that are specified in paragraphs (f)(1) through
(f)(7) are
[[Page 19346]]
suggested, rather than mandatory. This provision is carried forward in
the final rule without change.
Section 60-741.60 Compliance Reviews
OFCCP did not receive any comments during the comment period
regarding the proposed provision relating to compliance reviews.
However, questions subsequently have arisen regarding whether this
provision gives OFCCP new authority to conduct reviews or simply
clarifies existing authority under section 503 and the present
regulations. This provision simply reaffirms more clearly OFCCP's
existing authority under the act and the regulations (see current
Sec. 60-741.25) to conduct compliance reviews to evaluate contractors'
compliance with the law.
Section 60-741.61 Complaint Procedures
Section 60-741.61(b) Place and Time of Filing
OFCCP's paragraph (b) proposal to extend the current 180 day
complaint filing period to 300 days is adopted in this final rule. The
final rule provides a uniform national standard which will not be
shorter than the complaint filing period under the ADA. Section 107(a)
of the ADA, which incorporates the procedural requirements of section
706 of title VII, requires the EEOC to defer for 60 days to State or
local agency processing of an ADA complaint if a State or local law
prohibits the employment practice alleged to be unlawful, and the
agency is authorized to grant or seek relief. In such jurisdictions, an
ADA complaint may be filed with the EEOC within 30 days of the
conclusion of the State or local agency processing or within 300 days
of the date of the alleged violation, whichever occurs earlier.
However, where there is no deferral (no State or local law prohibits
the employment practice at issue, or no State or local agency is
authorized to grant or seek relief), an ADA complaint must be filed
with the EEOC within 180 days of the alleged violation.
The proposed 300 day filing period under section 503 thus ensured
that in deferral jurisdictions a complaint covered by both section 503
and the ADA would be timely under both statutes. As discussed in the
preamble to the NPRM, however, the 300 day section 503 period also
would mean that in nondeferral jurisdictions complaints covered by both
statutes and filed between 181 and 300 days of the alleged violation
would be timely under section 503 but not under ADA. In such cases, the
complainant would lose rights unique to ADA (such as the private right
to file a law suit).
Some commenters objected to a blanket 300 day period because
witnesses may not still be available, and if available, may no longer
have a fresh recollection of pertinent events--particularly in the
construction industry, where many projects are completed within 300
days. However, inasmuch as the ADA 300 day filing period in deferral
jurisdictions is a statutory requirement (as it has been under title
VII), contractors would encounter any such problem under the ADA
irrespective of the time period adopted under section 503.
Another commenter objected to the proposal because, in its view,
the 300 day period was developed for the convenience of the states
rather than the Federal enforcement agencies, and thus it offers no
support for extension of the filing period under section 503. However,
OFCCP does not rely on the ADA filing period as legal support for
extending the section 503 period to 300 days. Rather, OFCCP's decision
to extend the period is based upon a desire to establish a uniform
national standard which will be at least as long as the complaint
filing period under the ADA. Because no frequently updated list of
deferral jurisdictions is published and readily available, complainants
and contractors may not know whether they are in a deferral
jurisdiction. Therefore, a uniform national standard will result in
ease of administration and public certainty regarding the filing
deadline.
Section 60-741.61(c)(2) Contents of Complaints--Third Party Complaints
Five commenters objected to this paragraph, which provides in part
that a complaint filed by an authorized representative need not
identify by name the person on whose behalf the complaint is filed. The
purpose of this provision, which is derived from the analogous ADA
regulation (29 CFR 1601.7(a)), is to help prevent retaliation against
persons seeking to exercise their rights under the act. The commenters
asserted that in some cases contractors would have difficulty
responding to the allegations of a complaint without knowing the
identity of the person on whose behalf it is filed. OFCCP wishes to
emphasize that in many cases it would not be necessary to disclose the
individual's identity to enable the contractor to respond effectively.
For example, where the complaint alleges a broad contractor policy or
practice (such as the rejection of all applicants who have had a back
injury or the use of an application form that requests pre-offer
medical information), the contractor will be able to respond fully
without knowing the name of the person(s) on whose behalf the complaint
was filed. However, OFCCP acknowledges that where the complaint
involves practices with limited applicability (such as a failure to
provide reasonable accommodation for a specific disability in a
specific job), it may not be possible to protect the individual's
confidentiality. Therefore, the final rule reflects that
confidentiality will be protected where possible, given the facts and
circumstances in the complaint.
Additionally, the proposal stated that ``during the investigation''
of a third-party complaint OFCCP shall verify the authorization of the
complaint by the person on whose behalf the complaint is made. The
phrase ``during the investigation'' is omitted in the final rule. This
revision is intended to permit OFCCP to verify the complaint's
authorization at an earlier stage of its processing of the complaint--
that is, before the contractor is provided notice that the complaint
has been filed.
Section 60-741.61(f) Resolution of Matters
Paragraph (f)(1) has been revised to clarify that the notification
required thereunder shall be provided to the contractor as well as to
the complainant. This reflects current OFCCP practice.
Section 60-741.66 Sanctions and Penalties
Section 60-741.66(c) Debarment
The proposed paragraph authorizes OFCCP to impose fixed-term
debarments. A few commenters objected to the fixed-term debarment
concept. These commenters were concerned that fixed-term debarment is
too harsh a measure, especially if it is used in response to what the
commenters termed ``paper'' violations, that is, violations of
recordkeeping or affirmative action requirements which do not involve
discrimination. OFCCP does not view fixed-term debarments as too harsh
a measure, and OFCCP does not intend to seek a fixed term debarment for
minor, technical violations of the law. Explicit regulatory authority
to impose debarment for a minimum fixed-term is necessary to ensure the
continued future compliance of some contractors.
OFCCP believes the fixed-term debarment sanction will be
particularly effective in encouraging compliance among the recalcitrant
contractors who repeatedly break their promises of future compliance
with respect to affirmative action and recordkeeping
[[Page 19347]]
requirements. OFCCP views affirmative action and recordkeeping
requirements as fundamental to section 503 compliance. These
requirements provide the foundation for the contractor's affirmative
action efforts and provide the basis for monitoring the contractor's
compliance by both the contractor and OFCCP.
The current regulations (at Sec. 60-741.50) require a showing that
a debarred contractor will carry out employment policies and practices
in compliance with section 503 and its regulations as one of the
conditions of reinstatement. OFCCP has traditionally accepted a
contractor's promise of future compliance as sufficient to meet this
requirement. Unfortunately, OFCCP has found that, for some contractors,
a promise is not enough. The sanction of debarment for a fixed-term of
not less than six months but no more than three years establishes a
minimum trial period during which a contractor can demonstrate its
commitment and ability to establish personnel practices that will
ensure continuing compliance with its section 503 obligations. See,
e.g., OFCCP v. Disposable Safety Wear, 92-OFC-11 (Decision and Final
Administrative Order of the Secretary of Labor, September 29, 1992).
The express recognition of fixed-term debarment in the regulations is
designed to put contractors on notice that an empty promise of future
compliance will not be a sufficient premise for continued contracting
with the Federal Government. Express regulatory recognition of the
sanction of fixed-term debarment will strengthen the section 503
enforcement scheme by deterring contractors from engaging in violations
``based on a cold weighing of the costs and benefits of
noncompliance.'' Janik Paving & Construction v. Brock, 828 F.2d 84 (2d
Cir. 1987).
Accordingly, OFCCP has determined to retain in this final rule the
authority to impose fixed-term debarments. However, after further
consideration, OFCCP has decided to remove reference to willful or
aggravated from the fixed-term debarment provision. Although a few
commenters expressed concern that the proposal would fail to provide
sufficient guidance as to the types of violations that would trigger
the sanction, OFCCP believes that it is neither practicable nor
necessary to precisely define the types of violations for which it
would impose a fixed-term debarment, and declines to do so. Rather,
OFCCP will retain discretion to make determinations on a case-by-case
basis. In making such determinations, OFCCP will consider, among other
factors, the severity of the violation, whether the violation can be
fully remedied in the absence of a fixed-term debarment and the
contractor's compliance history.
Section 60-741.69 Intimidation and Interference
One commenter objected to the references to state and local laws in
paragraph (a) as exceeding OFCCP's jurisdiction. The objective of this
provision is not, as the commenter suggests, to enforce a state or
local law, but to proscribe activities which interfere with a person's
exercise of his or her rights under a state or local law. OFCCP may
seek the same range of sanctions for a violation of this provision
(such as debarment and/or back pay) as it does for other violations of
section 503.
Section 60-741.80 Posting of Notices (Proposed)
As discussed in connection with Sec. 60-741.44(a), proposed
Sec. 60-741.80 is not carried forward in the final rule. Subsequent
sections have been redesignated accordingly.
Section 60-741.80 Recordkeeping
Section 60-741.80(a) General Requirements
A number of commenters raised concerns regarding paragraph (a) of
this section. This paragraph revises the current record retention
obligation--which at Sec. 60-741.52(a) provides that contractors are
required to maintain for one year records relating to complaints
against the contractor--by making it applicable to any personnel or
employment record made or kept by the contractor. This revision
conforms the obligation to the analogous requirement under EEOC's
recordkeeping regulations (29 CFR 1602.14(a)) issued pursuant to title
VII and the ADA. Paragraph (a) also specifies that when a contractor
has been notified that a complaint has been filed, that a compliance
review has been initiated or that an enforcement action has commenced,
the contractor shall preserve all relevant personnel records until the
final disposition of the action. Again, this requirement parallels the
corresponding EEOC regulation issued pursuant to title VII and the ADA.
Paragraph (a) of the final rule varies slightly from the
corresponding provision contained in the NPRM. The final rule does not
carry forward the reference to records regarding coverage
determinations contained in the provision's listing of examples of the
types of records that must be preserved, inasmuch as contractors are no
longer required to make such coverage determinations (see discussion
regarding Sec. 60-741.4(a)(2)). Further, the recordkeeping obligation
in the final rule remains at one year for smaller contractors, instead
of being increased to two years for all contractors as had been
proposed. In order to provide regulatory relief for smaller
contractors, only contractors that have 150 or more employees and a
Government contract of $150,000 or more are required to maintain
records for two years.
One commenter was concerned that paragraph (a) unjustifiably
expands the types of records that must be kept beyond those required by
EEOC. This concern is misplaced and was apparently based on the fact
that the listing in paragraph (a) of examples of the types of personnel
records that must be maintained varies somewhat from the corresponding
listing contained in the EEOC regulation. OFCCP intends that this
requirement apply to the same records as does the EEOC regulation--that
is, to any personnel or employment record made or kept by the employer.
A number of commenters objected to the extension of the retention
period on the grounds that it is inconsistent with the one-year
retention period under EEOC's regulations applicable to title VII and
the ADA. Some commenters objected that it would impose unreasonable
record storage burdens on large companies that have many thousands of
applicants and employees, and others stated that it would burden small
and medium size contractors that have fewer personnel department
resources, including small construction firms that have a fluid
workforce and high turnover. With respect to the first concern, the
longer retention period is justified by differences between the
enforcement activities of OFCCP and EEOC. As explained in the proposal,
a two year retention period provides greater assurance that relevant
records will be available during OFCCP compliance reviews (during which
the agency generally reviews employment practices and activity going
back two years). In contrast, EEOC's enforcement of title VII and the
ADA is triggered exclusively by charges--which must be filed within 180
days (or, in deferral jurisdictions, 300 days) of an alleged violation.
Thus, EEOC's one-year retention period is adequate to ensure that
relevant records are not discarded before the expiration of the filing
period.
Turning to the second concern, OFCCP believes that overall there
will be only a minimal increase in burden imposed on the larger
contractors as a result of the extended record retention period. (EEOC
reached a similar conclusion in 1991 (see 56 FR 35753
[[Page 19348]]
(July 26, 1991)) when it doubled its existing six-month retention
period under title VII to one year--an obligation that applies to a
significantly larger universe of employers than does the obligation
under section 503, which applies only to contractors that have 150 or
more employees and a Government contract of $150,000 or more.) Many
large employers, and some small employers as well, are increasingly
maintaining electronic records. Where this is the case, compliance with
the requirement will impose little or no additional burden. Moreover,
the decision to reduce the record retention period for small
contractors to one year--the same period required by EEOC--will provide
relief to small companies that are less likely to maintain electronic
records.
Section 60-741.80(b) Failure to Preserve Records
Proposed paragraph (b) provided in part that where a contractor has
destroyed or failed to preserve the records that it is required to
preserve under paragraph (a), there shall be a presumption that such
records would have been unfavorable to the contractor. However,
proposed paragraph (b) contained a proviso which stated that the
presumption shall not apply where the contractor shows that the
destruction or failure to preserve records results from circumstances
that are outside of its control. A number of commenters objected to
this adverse inference provision on the grounds that it would deny due
process and would be unduly harsh, especially, they asserted, because
records are frequently misplaced or destroyed inadvertently through
clerical error. One commenter requested that OFCCP clarify that the
failure to preserve records must be willful.
OFCCP believes that this requirement is necessary to prevent
OFCCP's compliance monitoring and enforcement efforts from being
frustrated by the destruction or failure to preserve records. OFCCP
intends to invoke the presumption selectively where the facts warrant
(and reserves the right to do so, when warranted, even in cases where
the contractor claims but cannot substantiate that the destruction or
failure to preserve records was inadvertent). In recognition of this
discretionary approach, the final rule revises this section to state
that the presumption ``may'' be invoked. Contractors will have a full
opportunity to submit evidence to rebut the inference.
Section 60-741.80(c)
The final rule changes the effective date of this section from the
proposed 30 days after the date of publication to 120 days after the
date of publication. This change in the effective date is due to
amendments that altered the requirements of the Paperwork Reduction Act
after OFCCP published the NPRM. OFCCP anticipates obtaining and
publishing an OMB control number during the 120 day period.
Section 60-741.82 Labor Organizations and Recruiting and Training
Agencies
One commenter expressed concern that this section may authorize
OFCCP to compel the parties to a collective bargaining agreement to
make modifications to the agreement. The commenter contended that such
a position may be inconsistent with that of the EEOC under its
regulations implementing the ADA. Section 60-741.82 does not make any
substantive changes to the section 503 regulation that it replaces, and
that regulation has been in effect since the first section 503
regulations were promulgated in 1976. Moreover, the regulation
parallels an Executive Order 11246 regulation (Sec. 60-1.9) that has
been in effect since 1968. Section 60-741.82 does not on its face
require such modifications to collective bargaining agreements, and
OFCCP normally does not have jurisdiction over the union.
The EEOC will be addressing various issues under the ADA related to
collective bargaining agreements in future Compliance Manual sections
and policy guidance. OFCCP, to the extent possible, intends to
coordinate its policy under section 503 relating to collective
bargaining agreements with the EEOC at an appropriate time in the
future.
Section 60-741.84 Effective Date
The final rule was modified slightly to clarify that contractors
presently holding Government contracts are required to update their
affirmative action programs within 120 days of the effective date of
these regulations only as required to comply with the changes made by
the final rule. A complete annual updating of the programs is not
required within 120 days. The proposal also had stated that the
effective date would be 30 days after publication. However, OFCCP must
display a valid OMB control number before the recordkeeping provisions
in the final rule can become effective. Therefore, the effective date
of the rule will be when OFCCP publishes the OMB control number in the
Federal Register, which OFCCP anticipates will be between 90 and 120
days after publication of this final rule.
Appendix D to Part 60-741--Guidelines Regarding Positions Engaged in
Carrying Out a Contract (Proposed as Appendix A)
Proposed appendix A was included in the NPRM to provide guidance on
the application of proposed Sec. 60-741.4(a)(2)(i)(A)--prong A of the
regulatory test for determining which of the contractor's positions are
engaged in ``carrying out'' a Government contract--and to assist
contractors in making the coverage determinations required under
proposed Sec. 60-741.4(a)(2)(iii) (see discussion regarding Sec. 60-
741.4(a)(2) above). As noted above, as a result of an amendment to
section 503, the issue whether the contractor's positions were engaged
in carrying out a Government contract is relevant only with respect to
the contractor's employment decisions and practices which occurred
before October 29, 1992. On that date, the act, which had applied only
insofar as the contractor was employing persons to carry out a
contract, was amended to extend coverage thereunder to all of the
contractor's positions--irrespective of their relation to the contract.
Consequently, the proposed coverage determination requirement, which
was intended to be applied prospectively to define the scope of the
contractor's obligations under section 503, is omitted from the final
rule as unnecessary. OFCCP has nevertheless determined to retain the
appendix in the final rule to provide guidance on its policy relating
to coverage with respect to the contractor's employment decisions and
practices occurring before the act's amendment, and has revised the
appendix to make this clarification.
This appendix still has practical utility because, as noted above,
there are a number of pending section 503 complaints involving alleged
violations of the act which occurred before the amendment. Moreover, it
is OFCCP's general practice during its compliance reviews to examine
the contractor's employment practices dating back two years immediately
preceding the compliance review and, as applicable, to assess liability
for violations occurring during that period. Once all matters involving
employment practices and decisions occurring before October 29, 1992,
are finally resolved, OFCCP will withdraw this appendix. In order to
preserve the continuity of the letter designations for the appendices
to the regulations at the time of the withdrawal, proposed appendix A
has been redesignated as appendix D, and
[[Page 19349]]
proposed appendices B, C, and D have been redesignated as appendices A,
B and C, respectively.
Proposed appendix A stated that a contract is not deemed covered
unless, among other things, it is performed within the United States.
This statement is omitted from the final rule to reflect the revision
to Sec. 60-741.1(b) (see discussion above). Also, the paragraphs of the
appendix have been numbered for ease of reference.
Appendix A to Part 60-741--Guidelines on a Contractor's Duty To Provide
Reasonable Accommodation (Proposed as Appendix B)
The discussions of Secs. 60-741.42 and 741.44(d) contained in
paragraph 2 of proposed appendix B have been revised to reflect the
revisions to those sections in the final rule (see discussion above
regarding those sections). Additionally, the appendix has been renamed,
and a paragraph of introductory text has been added, to clarify the
differences between reasonable accommodation and affirmative action
under section 503. As discussed above, this final rule redesignates
this appendix as appendix A.
Appendix B to Part 60-741--Invitation to Self-Identify (Proposed as
Appendix C)
Paragraph 1 has been revised to incorporate a clarification that
the individual may make a request--immediately in response to the
invitation or at any time in the future--to benefit under the
contractor's affirmative action program (see discussion above regarding
Sec. 60-741.42). As discussed above, this final rule redesignates this
appendix as appendix B. The appendix is renamed to clarify that it is a
``sample'' invitation. Finally, a note has been added at the beginning
of the appendix to state that when the invitation to self-identify is
being extended prior to an offer of employment, sample text relating to
identification of reasonable accommodations should be omitted. This
will avoid a conflict with the EEOC's ADA Guidance, which generally
precludes asking a job applicant (prior to a job offer being made)
about potential reasonable accommodations.
Appendix C to Part 60-741--Review of Personnel Processes (Proposed as
Appendix D)
As discussed above, this final rule redesignates this appendix as
appendix C.
Regulatory Procedures
Executive Order 12866
The Department is issuing this rule in conformance with Executive
Order 12866. This rule has been determined to be significant for
purposes of Executive Order 12866 and therefore has been reviewed by
OMB. This rule does not meet the criteria of section 3(f)(1) of
Executive Order 12866 and therefore the information enumerated in
section 6(a)(3)(C) of that Order is not required.
Regulatory Flexibility Act
The final rule clarifies existing requirements for Federal
contractors. In view of this fact and because the final rule does not
substantively change existing obligations for Federal contractors, the
rule will not have a significant economic impact on a substantial
number of small business entities. The Secretary has certified to the
Chief Counsel for Advocacy of the Small Business Administration to this
effect. Therefore, a regulatory flexibility analysis under the
Regulatory Flexibility Act is not required.
Unfunded Mandates Reform Act
This final rule does not include any Federal mandate that may
result in the expenditure by state, local and tribal governments in the
aggregate, or by the private sector, of $100,000,000 or more in any one
year.
Paperwork Reduction Act
This final rule establishes new recordkeeping provisions that did
not previously exist. The rule extends the current one-year record
retention period to two years for those larger contractors that have
150 or more employees and a Government contract of $150,000 or more,
and it makes this retention obligation applicable to a broader range of
records. It requires that, for purposes of confidentiality, information
obtained by contractors regarding the medical condition or history of
any applicant or employee be collected and maintained on separate forms
and in separate medical files. Lastly, it requires contractors to
maintain a separate file regarding applicants who have identified
themselves as individuals with disabilities.
The NPRM projected an increase of 1.1 million paperwork burden
hours associated with contractors determining which positions carry out
Government contracts. As discussed above, the 1992 legislation, by
striking this jurisdictional limitation from Section 503, eliminates
the need for contractors to determine which positions are covered.
Therefore, contractors will not need to incur the estimated 1.1 million
paperwork burden hours mentioned in the proposal. As stated in the
NPRM, OFCCP does not believe the other recordkeeping requirements
created by this rule will result in a net increase in burden hours as
compared to the current regulation.
These recordkeeping requirements have been submitted to the Office
of Management and Budget for clearance under the Paperwork Reduction
Act (44 U.S.C. 3501 et seq.). OFCCP solicits comments concerning these
recordkeeping requirements to: (i) 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; (ii) 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; (iii)
enhance the quality, utility, and clarity of the information to be
collected; and (iv) 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.
Written comments on the recordkeeping requirements should be sent
to Joe N. Kennedy, Deputy Director, OFCCP, Room C-3325, 200
Constitution Ave., N.W., Washington, D.C. 20210. To be assured of
consideration, comments must be in writing and must be received on or
before July 1, 1996. As a convenience to commenters, OFCCP will accept
public comments transmitted by facsimile (FAX) machine. The telephone
number of the FAX receiver is (202) 219-6195. To assure access to the
FAX equipment, only public comments of six or fewer pages will be
accepted via FAX transmittal. Receipts of FAX transmittals will not be
acknowledged, except that the sender may request confirmation of
receipt by calling OFCCP at (202) 219-9430 (voice), 1(800) 326-2577
(TDD).
These new recordkeeping requirements are not effective until OFCCP
displays a currently valid OMB control number. Upon receipt of that
number, which OFCCP anticipates will take between 90 and 120 days,
OFCCP will publish a document in the Federal Register.
List of Subjects in 41 CFR Part 60-741
Administrative practice and procedure, Civil rights, Employment,
Equal employment opportunity,
[[Page 19350]]
Government contracts, Government procurement, Individuals with
disabilities, Investigations, Reporting and recordkeeping requirements.
Signed at Washington, D.C., this 12th day of April, 1996.
Robert B. Reich,
Secretary of Labor.
Bernard E. Anderson,
Assistant Secretary for Employment Standards.
Shirley J. Wilcher,
Deputy Assistant Secretary for Federal Contract Compliance.
Accordingly, with respect to the rule amending 41 CFR chapter 60
published on December 30, 1980 (45 FR 86216), which was suspended
indefinitely at 46 FR 42865, the revision of part 60-741 is withdrawn,
and in parts 60-1 and 60-30, all references to section 503 of the
Rehabilitation Act are withdrawn; with respect to title 41 of the Code
of Federal Regulations, chapter 60 is amended as set forth below.
Part 60-741 is revised to read as follows:
PART 60-741--AFFIRMATIVE ACTION AND NONDISCRIMINATION OBLIGATIONS
OF CONTRACTORS AND SUBCONTRACTORS REGARDING INDIVIDUALS WITH
DISABILITIES
Subpart A--Preliminary Matters, Equal Opportunity Clause
Sec.
60-741.1 Purpose, applicability and construction.
60-741.2 Definitions.
60-741.3 Exceptions to the definitions of ``individual with a
disability'' and ``qualified individual with a disability.''
60-741.4 Coverage and waivers.
60-741.5 Equal opportunity clause.
Subpart B--Discrimination Prohibited
60-741.20 Covered employment activities.
60-741.21 Prohibitions.
60-741.22 Direct threat defense.
60-741.23 Medical examinations and inquiries.
60-741.24 Drugs and alcohol.
60-741.25 Health insurance, life insurance and other benefit plans.
Subpart C--Affirmative Action Program
60-741.40 Applicability of the affirmative action program
requirement.
60-741.41 Availability of affirmative action program.
60-741.42 Invitation to self-identify.
60-741.43 Affirmative action policy.
60-741.44 Required contents of affirmative action programs.
60-741.45 Sheltered workshops.
Subpart D--General Enforcement and Complaint Procedures
60-741.60 Compliance reviews.
60-741.61 Complaint procedures.
60-741.62 Conciliation agreements and letters of commitment.
60-741.63 Violation of conciliation agreements and letters of
commitment.
60-741.64 Show cause notices.
60-741.65 Enforcement proceedings.
60-741.66 Sanctions and penalties.
60-741.67 Notification of agencies.
60-741.68 Reinstatement of ineligible contractors.
60-741.69 Intimidation and interference.
60-741.70 Disputed matters related to compliance with the act.
Subpart E--Ancillary Matters
60-741.80 Recordkeeping.
60-741.81 Access to records.
60-741.82 Labor organizations and recruiting and training agencies.
60-741.83 Rulings and interpretations.
60-741.84 Effective date.
Appendix A To Part 60-741--Guidelines on a Contractor's Duty To
Provide Reasonable Accommodation
Appendix B To Part 60-741--Sample Invitation to Self-Identify
Appendix C To Part 60-741--Review of Personnel Processes
Appendix D To Part 60-741--Guidelines Regarding Positions Engaged in
Carrying Out a Contract
Authority: 29 U.S.C. 706 and 793; and E.O. 11758 (3 CFR, 1971-
1975 Comp., p. 841).
Subpart A--Preliminary Matters, Equal Opportunity Clause
Sec. 60-741.1 Purpose, applicability, and construction.
(a) Purpose. The purpose of this part is to set forth the standards
for compliance with section 503 of the Rehabilitation Act of 1973, as
amended (29 U.S.C. 793), which requires Government contractors and
subcontractors to take affirmative action to employ and advance in
employment qualified individuals with disabilities.
(b) Applicability. This part applies to all Government contracts
and subcontracts in excess of $10,000 for the purchase, sale or use of
personal property or nonpersonal services (including construction):
Provided, That subpart C of this part applies only as described in
Sec. 60-741.40(a). Compliance by the contractor with the provisions of
this part will not necessarily determine its compliance with other
statutes, and compliance with other statutes will not necessarily
determine its compliance with this part: Provided, That compliance
shall also satisfy the employment provisions of the Department of
Labor's regulations implementing section 504 of the Rehabilitation Act
of 1973 (see 29 CFR 32.2(b)) when the contractor is also subject to
those requirements.
(c) Construction--(1) In general. Except as otherwise provided in
this part, this part does not apply a lesser standard than the
standards applied under title I of the Americans with Disabilities Act
of 1990 (42 U.S.C. 12101 et seq.), or the regulations issued by the
Equal Employment Opportunity Commission pursuant to that title (29 CFR
part 1630). The Interpretive Guidance on Title I of the Americans with
Disabilities Act set out as an appendix to 29 CFR part 1630 issued
pursuant to that title may be relied upon for guidance in interpreting
the parallel provisions of this part.
(2) Relationship to other laws. This part does not invalidate or
limit the remedies, rights, and procedures under any Federal law or the
law of any State or political subdivision that provides greater or
equal protection for the rights of individuals with disabilities as
compared to the protection afforded by this part. It may be a defense
to a charge of violation of this part that a challenged action is
required or necessitated by another Federal law or regulation, or that
another Federal law or regulation prohibits an action (including the
provision of a particular reasonable accommodation) that would
otherwise be required by this part.
Sec. 60-741.2 Definitions.
(a) Act means the Rehabilitation Act of 1973, Pub. L. 93-112 (29
U.S.C 706 and 793), as amended by sec. 111, Pub. L. 93-516; sec.
103(d)(2)(B), Pub. L. 99-506; sec. 9, Pub. L. 100-259; sec. 512, Pub.
L. 101-336 ; and secs. 102 and 505, Pub. L. 102-569.
(b) Equal opportunity clause means the contract provisions set
forth in Sec. 60-741.5, ``Equal opportunity clause.''
(c) Secretary means the Secretary of Labor, United States
Department of Labor, or his or her designee.
(d) Deputy Assistant Secretary means the Deputy Assistant Secretary
for Federal Contract Compliance of the United States Department of
Labor, or his or her designee.
(e) Government means the Government of the United States of
America.
(f) United States, as used herein, shall include the several
States, the District of Columbia, the Virgin Islands, the Commonwealth
of Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern
Mariana Islands, and Wake Island.
(g) Recruiting and training agency means any person who refers
workers to any contractor, or who provides or supervises apprenticeship
or training for employment by any contractor.
(h) Contract means any Government contract or subcontract.
(i) Government contract means any agreement or modification thereof
[[Page 19351]]
between any contracting agency and any person for the purchase, sale or
use of personal property or nonpersonal services (including
construction). The term Government contract does not include agreements
in which the parties stand in the relationship of employer and
employee, and federally assisted contracts.
(1) Modification means any alteration in the terms and conditions
of a contract, including supplemental agreements, amendments and
extensions.
(2) Contracting agency means any department, agency, establishment
or instrumentality of the United States, including any wholly owned
Government corporation, which enters into contracts.
(3) Person, as used in paragraphs (i) and (l) of this section,
means any natural person, corporation, partnership or joint venture,
unincorporated association, State or local government, and any agency,
instrumentality, or subdivision of such a government.
(4) Nonpersonal services, as used in paragraphs (i) and (l) of this
section, includes, but is not limited to, the following: Utility,
construction, transportation, research, insurance, and fund depository.
(5) Construction, as used in paragraphs (i) and (l) of this
section, means the construction, rehabilitation, alteration,
conversion, extension, demolition, or repair of buildings, highways, or
other changes or improvements to real property, including facilities
providing utility services. The term also includes the supervision,
inspection, and other on-site functions incidental to the actual
construction.
(6) Personal property, as used in paragraphs (i) and (l) of this
section, includes supplies and contracts for the use of real property
(such as lease arrangements), unless the contract for the use of real
property itself constitutes real property (such as easements).
(j) Contractor means, unless otherwise indicated, a prime
contractor or subcontractor holding a contract in excess of $10,000.
(k) Prime contractor means any person holding a contract in excess
of $10,000, and, for the purposes of subpart D of this part, ``General
Enforcement and Complaint Procedures,'' includes any person who has
held a contract subject to the act.
(l) Subcontract means any agreement or arrangement between a
contractor and any person (in which the parties do not stand in the
relationship of an employer and an employee):
(1) For the purchase, sale or use of personal property or
nonpersonal services (including construction) which, in whole or in
part, is necessary to the performance of any one or more contracts; or
(2) Under which any portion of the contractor's obligation under
any one or more contracts is performed, undertaken, or assumed.
(m) Subcontractor means any person holding a subcontract in excess
of $10,000 and, for the purposes of subpart D of this part, ``General
Enforcement and Complaint Procedures,'' any person who has held a
subcontract subject to the act.
(n)(1) Individual with a disability means any person who:
(i) Has a physical or mental impairment which substantially limits
one or more of such person's major life activities;
(ii) Has a record of such an impairment; or
(iii) Is regarded as having such an impairment.
(2) See Sec. 60-741.3 for exceptions to the definition in paragraph
(n)(1) of this section.
(o) Physical or mental impairment means:
(1) Any physiological disorder, or condition, cosmetic
disfigurement, or anatomical loss affecting one or more of the
following body systems: neurological, musculoskeletal, special sense
organs, respiratory (including speech organs), cardiovascular,
reproductive, digestive, genito-urinary, hemic and lymphatic, skin, and
endocrine; or
(2) Any mental or psychological disorder, such as mental
retardation, organic brain syndrome, emotional or mental illness, and
specific learning disabilities.
(p) Major life activities means functions such as caring for
oneself, performing manual tasks, walking, seeing, hearing, speaking,
breathing, learning, and working.
(q) Substantially limits--(1) The term substantially limits means:
(i) Unable to perform a major life activity that the average person
in the general population can perform; \1\ or
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\1\ People have a range of abilities with regard to many major
life activities such as walking, lifting, and bending, and a range
of such abilities may be considered average. Thus, the term
``average'' person in the general population does not indicate a
need to determine a precise average ability, but rather reflects
that a range of abilities may be considered average.
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(ii) Significantly restricted as to the condition, manner or
duration under which an individual can perform a particular major life
activity as compared to the condition, manner, or duration under which
the average person in the general population can perform that same
major life activity.
(2) The following factors should be considered in determining
whether an individual is substantially limited in a major life
activity:
(i) The nature and severity of the impairment;
(ii) The duration or expected duration of the impairment; and
(iii) The permanent or long term impact, or the expected permanent
or long term impact of or resulting from the impairment.
(3) With respect to the major life activity of working--
(i) The term substantially limits means significantly restricted in
the ability to perform either a class of jobs or a broad range of jobs
in various classes as compared to the average person having comparable
training, skills, and abilities. The inability to perform a single,
particular job does not constitute a substantial limitation in the
major life activity of working.
(ii) In addition to the factors listed in paragraph (q)(2) of this
section, the following factors may be considered in determining whether
an individual is substantially limited in the major life activity of
working:
(A) The geographic area to which the individual has reasonable
access;
(B) The job from which the individual has been disqualified because
of an impairment, and the number and types of jobs utilizing similar
training, knowledge, skills or abilities, within that geographic area,
from which the individual is also disqualified because of the
impairment (class of jobs); and/or
(C) The job from which the individual has been disqualified because
of an impairment, and the number and types of other jobs not utilizing
similar training, knowledge, skills or abilities, within that
geographic area, from which the individual is also disqualified because
of the impairment (broad range of jobs in various classes).
(r) Has a record of such impairment means has a history of, or has
been misclassified as having, a mental or physical impairment that
substantially limits one or more major life activities.
(s) Is regarded as having such an impairment means:
(1) Has a physical or mental impairment that does not substantially
limit major life activities but is treated by the contractor as
constituting such limitation;
(2) Has a physical or mental impairment that substantially limits
major life activities only as a result of
[[Page 19352]]
the attitudes of others toward such impairment; or
(3) Has none of the impairments defined in paragraph (o)(1) or (2)
of this section, but is treated by the contractor as having a
substantially limiting impairment.
(t) Qualified individual with a disability means an individual with
a disability who satisfies the requisite skill, experience, education
and other job-related requirements of the employment position such
individual holds or desires, and who, with or without reasonable
accommodation, can perform the essential functions of such position.
(See Sec. 60-741.3 for exceptions to this definition.)
(u) Essential functions--(1) In general. The term essential
functions means fundamental job duties of the employment position the
individual with a disability holds or desires. The term essential
functions does not include the marginal functions of the position.
(2) A job function may be considered essential for any of several
reasons, including but not limited to the following:
(i) The function may be essential because the reason the position
exists is to perform that function;
(ii) The function may be essential because of the limited number of
employees available among whom the performance of that job function can
be distributed; and/or
(iii) The function may be highly specialized so that the incumbent
in the position is hired for his or her expertise or ability to perform
the particular function.
(3) Evidence of whether a particular function is essential
includes, but is not limited to:
(i) The contractor's judgment as to which functions are essential;
(ii) Written job descriptions prepared before advertising or
interviewing applicants for the job;
(iii) The amount of time spent on the job performing the function;
(iv) The consequences of not requiring the incumbent to perform the
function;
(v) The terms of a collective bargaining agreement;
(vi) The work experience of past incumbents in the job; and/or
(vii) The current work experience of incumbents in similar jobs.
(v) Reasonable accommodation--(1) The term reasonable accommodation
means:
(i) Modifications or adjustments to a job application process that
enable a qualified applicant with a disability to be considered for the
position such applicant desires; \2\ or
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\2\ A contractor's duty to provide a reasonable accommodation
with respect to applicants with disabilities is not limited to those
who ultimately demonstrate that they are qualified to perform the
job in issue. Applicants with disabilities must be provided a
reasonable accommodation with respect to the application process if
they are qualified with respect to that process (e.g., if they
present themselves at the correct location and time to fill out an
application).
---------------------------------------------------------------------------
(ii) Modifications or adjustments to the work environment, or to
the manner or circumstances under which the position held or desired is
customarily performed, that enable a qualified individual with a
disability to perform the essential functions of that position; or
(iii) Modifications or adjustments that enable the contractor's
employee with a disability to enjoy equal benefits and privileges of
employment as are enjoyed by the contractor's other similarly situated
employees without disabilities.
(2) Reasonable accommodation may include but is not limited to:
(i) Making existing facilities used by employees readily accessible
to and usable by individuals with disabilities; and
(ii) Job restructuring; part-time or modified work schedules;
reassignment to a vacant position; acquisition or modifications of
equipment or devices; appropriate adjustment or modifications of
examinations, training materials, or policies; the provision of
qualified readers or interpreters; and other similar accommodations for
individuals with disabilities.
(3) To determine the appropriate reasonable accommodation it may be
necessary for the contractor to initiate an informal, interactive
process with the qualified individual with a disability in need of the
accommodation.\3\ This process should identify the precise limitations
resulting from the disability and potential reasonable accommodations
that could overcome those limitations. (Appendix A of this part
provides guidance on a contractor's duty to provide reasonable
accommodation.)
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\3\ Contractors must engage in such an interactive process with
an individual with disabilities whether or not a reasonable
accommodation ultimately is identified. Contractors must engage in
the interactive process because, until they have done so, they may
be unable to determine whether a reasonable accommodation exists
that will result in the person being qualified.
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(w) Undue hardship--(1) In general. Undue hardship means, with
respect to the provision of an accommodation, significant difficulty or
expense incurred by the contractor, when considered in light of the
factors set forth in paragraph (w)(2) of this section.
(2) Factors to be considered. In determining whether an
accommodation would impose an undue hardship on the contractor, factors
to be considered include:
(i) The nature and net cost of the accommodation needed, taking
into consideration the availability of tax credits and deductions, and/
or outside funding;
(ii) The overall financial resources of the facility or facilities
involved in the provision of the reasonable accommodation, the number
of persons employed at such facility, and the effect on expenses and
resources;
(iii) The overall financial resources of the contractor, the
overall size of the business of the contractor with respect to the
number of its employees, and the number, type and location of its
facilities;
(iv) The type of operation or operations of the contractor,
including the composition, structure and functions of the work force of
such contractor, and the geographic separateness and administrative or
fiscal relationship of the facility or facilities in question to the
contractor; and
(v) The impact of the accommodation upon the operation of the
facility, including the impact on the ability of other employees to
perform their duties and the impact on the facility's ability to
conduct business.
(x) Qualification standards means the personal and professional
attributes including the skill, experience, education, physical,
medical, safety and other requirements established by the contractor as
requirements which an individual must meet in order to be eligible for
the position held or desired.
(y) Direct threat means a significant risk of substantial harm to
the health or safety of the individual or others that cannot be
eliminated or reduced by reasonable accommodation. The determination
that an individual with a disability poses a ``direct threat'' shall be
based on an individualized assessment of the individual's present
ability to perform safely the essential functions of the job. This
assessment shall be based on a reasonable medical judgment that relies
on the most current medical knowledge and/or on the best available
objective evidence. In determining whether an individual would pose a
direct threat, the factors to be considered include:
(1) The duration of the risk;
(2) The nature and severity of the potential harm;
(3) The likelihood that the potential harm will occur; and
(4) The imminence of the potential harm.
[[Page 19353]]
Sec. 60-741.3 Exceptions to the definitions of ``individual with a
disability'' and ``qualified individual with a disability.''
(a) Current illegal use of drugs--(1) In general. The terms
individual with a disability and qualified individual with a disability
do not include individuals currently engaging in the illegal use of
drugs, when the contractor acts on the basis of such use.
(2) ``Drug'' defined. The term drug means a controlled substance,
as defined in schedules I through V of section 202 of the Controlled
Substances Act (21 U.S.C. 812).
(3) ``Illegal use of drugs'' defined. The term illegal use of drugs
means the use of drugs, the possession or distribution of which is
unlawful under the Controlled Substances Act, as updated pursuant to
that act. Such term does not include the use of a drug taken under
supervision by a licensed health care professional, or other uses
authorized by the Controlled Substances Act or other provisions of
Federal law.
(4) Construction. (i) Nothing in paragraph (a)(1) of this section
shall be construed to exclude as an ``individual with a disability'' or
as a ``qualified individual with a disability'' an individual who:
(A) Has successfully completed a supervised drug rehabilitation
program and is no longer engaging in the illegal use of drugs, or has
otherwise been rehabilitated successfully and is no longer engaging in
the illegal use of drugs;
(B) Is participating in a supervised rehabilitation program and is
no longer engaging in such use; or
(C) Is erroneously regarded as engaging in such use, but is not
engaging in such use.
(ii) In order to be protected by section 503 and this part, an
individual described in paragraph (a)(4)(i) of this section must
satisfy the requirements of the definition of qualified individual with
a disability.
(5) Drug testing. It shall not be a violation of this part for the
contractor to adopt or administer reasonable policies or procedures,
including but not limited to drug testing, designed to ensure that an
individual described in paragraphs (a)(4)(i)(A) and (B) of this section
is no longer engaging in the illegal use of drugs. (See Sec. 60-
741.24(b)(1).)
(b) Alcoholics--(1) In general. The terms individual with a
disability and qualified individual with a disability do not include an
individual who is an alcoholic whose current use of alcohol prevents
such individual from performing the essential functions of the
employment position such individual holds or desires or whose
employment, by reason of such current alcohol abuse, would constitute a
direct threat to property or to the health or safety of the individual
or others.
(2) Duty to provide reasonable accommodation. Nothing in paragraph
(b)(1) of this section shall relieve the contractor of its obligation
to provide a reasonable accommodation for an individual described in
paragraph (b)(1) of this section when such an accommodation will enable
the individual to perform the essential functions of the employment
position such individual holds or desires, or when the accommodation
will eliminate or reduce the direct threat to property or the health or
safety of the individual or others posed by such individual, provided
that such individual satisfies the requisite skill, experience,
education and other job-related requirements of such position.
(c) Contagious disease or infection--(1) In general. The terms
individual with a disability and qualified individual with a disability
do not include an individual who has a currently contagious disease or
infection and who, by reason of such disease or infection, would
constitute a direct threat to the health or safety of the individual or
others or who, by reason of the currently contagious disease or
infection, is unable to perform the essential functions of the
employment position such individual holds or desires.
(2) Duty to provide reasonable accommodation. Nothing in paragraph
(c)(1) of this section shall relieve the contractor of its obligation
to provide a reasonable accommodation for an individual described in
paragraph (c)(1) of this section when such an accommodation will enable
the individual to perform the essential functions of the employment
position such individual holds or desires, or when the accommodation
will eliminate or reduce the direct threat to the health or safety of
the individual or others posed by such individual, provided that such
individual satisfies the requisite skill, experience, education and
other job-related requirements of such position.
(d) Homosexuality or bisexuality. The term impairment as defined in
this part does not include homosexuality or bisexuality, and therefore
the term individual with a disability as defined in this part does not
include an individual on the basis of homosexuality or bisexuality.
(e) Other conditions. The term individual with a disability does
not include an individual on the basis of:
(1) Transvestism, transsexualism, pedophilia, exhibitionism,
voyeurism, gender identity disorders not resulting from physical
impairments, or other sexual behavior disorders;
(2) Compulsive gambling, kleptomania, or pyromania; or
(3) Psychoactive substance use disorders resulting from current
illegal use of drugs.
Sec. 60-741.4 Coverage and waivers.
(a) Coverage--(1) Contracts and subcontracts in excess of $10,000.
Contracts and subcontracts in excess of $10,000 are covered by this
part. No contracting agency or contractor shall procure supplies or
services in less than usual quantities to avoid the applicability of
the equal opportunity clause.
(2) Positions engaged in carrying out a contract. (i) With respect
to the contractor's employment decisions and practices occurring before
October 29, 1992, this part applies only to employees who were employed
in, and applicants for, positions that were engaged in carrying out a
Government contract; with respect to employment decisions and practices
occurring on or after October 29, 1992, this part applies to all of the
contractor's positions irrespective of whether the positions are or
were engaged in carrying out a Government contract. A position shall be
considered to have been engaged in carrying out a contract if:
(A) The duties of the position included work that fulfilled a
contractual obligation, or work that was necessary to, or that
facilitated, performance of the contract or a provision of the
contract; or
(B) The cost or a portion of the cost of the position was allowable
as a cost of the contract under the principles set forth in the Federal
Acquisition Regulation at 48 CFR Ch. 1, part 31: Provided, That a
position shall not be considered to have been covered by this part by
virtue of this provision if the cost of the position was not allocable
in whole or in part as a direct cost to any Government contract, and
only a de minimis (less than 2%) portion of the cost of the position
was allocable as an indirect cost to Government contracts, considered
as a group.
(ii) Application. Where a contractor or a division or establishment
of a contractor was devoted exclusively to Government contract work,
all positions within the contractor, division, or establishment shall
be considered to have been covered by this part. (Appendix D of this
part provides guidance on positions engaged in carrying out a
contract.)
[[Page 19354]]
(3) Contracts and subcontracts for indefinite quantities. With
respect to indefinite delivery-type contracts and subcontracts
(including, but not limited to, open end contracts, requirement-type
contracts, Federal Supply Schedule contracts, ``call-type'' contracts,
and purchase notice agreements), the equal opportunity clause shall be
included unless the contracting agency has reason to believe that the
amount to be ordered in any year under such contract will not be in
excess of $10,000. The applicability of the equal opportunity clause
shall be determined at the time of award for the first year, and
annually thereafter for succeeding years, if any. Notwithstanding the
above, the equal opportunity clause shall be applied to such contract
whenever the amount of a single order exceeds $10,000. Once the equal
opportunity clause is determined to be applicable, the contract shall
continue to be subject to such clause for its duration, regardless of
the amounts ordered, or reasonably expected to be ordered in any year.
(4) Employment activities within the United States. This part
applies only to employment activities within the United States and not
to employment activities abroad. The term employment activities within
the United States includes actual employment within the United States,
and decisions of the contractor made within the United States,
pertaining to the contractor's applicants and employees who are within
the United States, regarding employment opportunities abroad (such as
recruiting and hiring within the United States for employment abroad,
or transfer of persons employed in the United States to contractor
establishments abroad).
(5) Contracts with State or local governments. The requirements of
the equal opportunity clause in any contract or subcontract with a
State or local government (or any agency, instrumentality or
subdivision thereof) shall not be applicable to any agency,
instrumentality or subdivision of such government which does not
participate in work on or under the contract or subcontract.
(b) Waivers--(1) Specific contracts and classes of contracts. The
Deputy Assistant Secretary may waive the application to any contract of
the equal opportunity clause in whole or part when he or she deems that
special circumstances in the national interest so require. The Deputy
Assistant Secretary may also grant such waivers to groups or categories
of contracts: where it is in the national interest; where it is found
impracticable to act upon each request individually; and where such
waiver will substantially contribute to convenience in administration
of the act. When a waiver has been granted for any class of contracts,
the Deputy Assistant Secretary may withdraw the waiver for a specific
contract or group of contracts to be awarded, when in his or her
judgment such action is necessary or appropriate to achieve the
purposes of the act. The withdrawal shall not apply to contracts
awarded prior to the withdrawal, except that in procurements entered
into by formal advertising, or the various forms of restricted formal
advertising, such withdrawal shall not apply unless the withdrawal is
made more than 10 calendar days before the date set for the opening of
the bids.
(2) National security. Any requirement set forth in the regulations
of this part shall not apply to any contract whenever the head of the
contracting agency determines that such contract is essential to the
national security and that its award without complying with such
requirements is necessary to the national security. Upon making such a
determination, the head of the contracting agency will notify the
Deputy Assistant Secretary in writing within 30 days.
(3) Facilities not connected with contracts. The Deputy Assistant
Secretary may waive the requirements of the equal opportunity clause
with respect to any of a contractor's facilities which he or she finds
to be in all respects separate and distinct from activities of the
contractor related to the performance of the contract, provided that he
or she also finds that such a waiver will not interfere with or impede
the effectuation of the act. Such waivers shall be considered only upon
the request of the contractor.
Sec. 60-741.5 Equal opportunity clause.
(a) Government contracts. Each contracting agency and each
contractor shall include the following equal opportunity clause in each
of its covered Government contracts or subcontracts (and modifications,
renewals, or extensions thereof if not included in the original
contract):
Equal Opportunity for Workers With Disabilities
1. The contractor will not discriminate against any employee or
applicant for employment because of physical or mental disability in
regard to any position for which the employee or applicant for
employment is qualified. The contractor agrees to take affirmative
action to employ, advance in employment and otherwise treat
qualified individuals with disabilities without discrimination based
on their physical or mental disability in all employment practices,
including the following:
i. Recruitment, advertising, and job application procedures;
ii. Hiring, upgrading, promotion, award of tenure, demotion,
transfer, layoff, termination, right of return from layoff and
rehiring;
iii. Rates of pay or any other form of compensation and changes
in compensation;
iv. Job assignments, job classifications, organizational
structures, position descriptions, lines of progression, and
seniority lists;
v. Leaves of absence, sick leave, or any other leave;
vi. Fringe benefits available by virtue of employment, whether
or not administered by the contractor;
vii. Selection and financial support for training, including
apprenticeship, professional meetings, conferences, and other
related activities, and selection for leaves of absence to pursue
training;
viii. Activities sponsored by the contractor including social or
recreational programs; and
ix. Any other term, condition, or privilege of employment.
2. The contractor agrees to comply with the rules, regulations,
and relevant orders of the Secretary of Labor issued pursuant to the
act.
3. In the event of the contractor's noncompliance with the
requirements of this clause, actions for noncompliance may be taken
in accordance with the rules, regulations, and relevant orders of
the Secretary of Labor issued pursuant to the act.
4. The contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices in a
form to be prescribed by the Deputy Assistant Secretary for Federal
Contract Compliance Programs, provided by or through the contracting
officer. Such notices shall state the rights of applicants and
employees as well as the contractor's obligation under the law to
take affirmative action to employ and advance in employment
qualified employees and applicants with disabilities. The contractor
must ensure that applicants and employees with disabilities are
informed of the contents of the notice (e.g., the contractor may
have the notice read to a visually disabled individual, or may lower
the posted notice so that it might be read by a person in a
wheelchair).
5. The contractor will notify each labor organization or
representative of workers with which it has a collective bargaining
agreement or other contract understanding, that the contractor is
bound by the terms of section 503 of the Rehabilitation Act of 1973,
as amended, and is committed to take affirmative action to employ
and advance in employment individuals with physical or mental
disabilities.
6. The contractor will include the provisions of this clause in
every subcontract or purchase order in excess of $10,000, unless
exempted by the rules, regulations, or orders of the Secretary
issued pursuant to section 503 of the act, as amended, so that such
provisions will be binding upon each subcontractor or vendor. The
contractor will take such action with respect to any subcontract or
purchase order as the Deputy Assistant Secretary for Federal
Contract
[[Page 19355]]
Compliance Programs may direct to enforce such provisions, including
action for noncompliance.
[End of Clause]
(b) Subcontracts. Each contractor shall include the equal
opportunity clause in each of its subcontracts subject to this part.
(c) Adaption of language. Such necessary changes in language may be
made to the equal opportunity clause as shall be appropriate to
identify properly the parties and their undertakings.
(d) Inclusion of the equal opportunity clause in the contract. It
is not necessary that the equal opportunity clause be quoted verbatim
in the contract. The clause may be made a part of the contract by
citation to 41 CFR 60-741.5(a).
(e) Incorporation by operation of the act. By operation of the act,
the equal opportunity clause shall be considered to be a part of every
contract and subcontract required by the act and the regulations in
this part to include such a clause, whether or not it is physically
incorporated in such contract and whether or not there is a written
contract between the agency and the contractor.
(f) Duties of contracting agencies. Each contracting agency shall
cooperate with the Deputy Assistant Secretary and the Secretary in the
performance of their responsibilities under the act. Such cooperation
shall include insuring that the equal opportunity clause is included in
all covered Government contracts and that contractors are fully
informed of their obligations under the act and this part, providing
the Deputy Assistant Secretary with any information which comes to the
agency's attention that a contractor is not in compliance with the act
or this part, responding to requests for information from the Deputy
Assistant Secretary, and taking such actions for noncompliance as are
set forth in Sec. 60-741.66 as may be ordered by the Secretary or the
Deputy Assistant Secretary.
Subpart B--Discrimination Prohibited
Sec. 60-741.20 Covered employment activities.
The prohibition against discrimination in this part applies to the
following employment activities:
(a) Recruitment, advertising, and job application procedures;
(b) Hiring, upgrading, promotion, award of tenure, demotion,
transfer, layoff, termination, right of return from layoff, and
rehiring;
(c) Rates of pay or any other form of compensation and changes in
compensation;
(d) Job assignments, job classifications, organizational
structures, position descriptions, lines of progression, and seniority
lists;
(e) Leaves of absence, sick leave, or any other leave;
(f) Fringe benefits available by virtue of employment, whether or
not administered by the contractor;
(g) Selection and financial support for training, including
apprenticeships, professional meetings, conferences and other related
activities, and selection for leaves of absence to pursue training;
(h) Activities sponsored by the contractor including social and
recreational programs; and
(i) Any other term, condition, or privilege of employment.
Sec. 60-741.21 Prohibitions.
The term discrimination includes, but is not limited to, the acts
described in this section and Sec. 60-741.23.
(a) Disparate treatment. It is unlawful for the contractor to deny
an employment opportunity or benefit or otherwise to discriminate
against a qualified individual with a disability because of that
individual's disability.
(b) Limiting, segregating and classifying. Unless otherwise
permitted by this part, it is unlawful for the contractor to limit,
segregate, or classify a job applicant or employee in a way that
adversely affects his or her employment opportunities or status on the
basis of disability. For example, the contractor may not segregate
qualified employees with disabilities into separate work areas or into
separate lines of advancement.
(c) Contractual or other arrangements--(1) In general. It is
unlawful for the contractor to participate in a contractual or other
arrangement or relationship that has the effect of subjecting the
contractor's own qualified applicant or employee with a disability to
the discrimination prohibited by this part.
(2) Contractual or other arrangement defined. The phrase
contractual or other arrangement or relationship includes, but is not
limited to, a relationship with: an employment or referral agency; a
labor organization, including a collective bargaining agreement; an
organization providing fringe benefits to an employee of the
contractor; or an organization providing training and apprenticeship
programs.
(3) Application. This paragraph (c) applies to the contractor, with
respect to its own applicants or employees, whether the contractor
offered the contract or initiated the relationship, or whether the
contractor accepted the contract or acceded to the relationship. The
contractor is not liable for the actions of the other party or parties
to the contract which only affect that other party's employees or
applicants.
(d) Standards, criteria or methods of administration. It is
unlawful for the contractor to use standards, criteria, or methods of
administration, that are not job-related and consistent with business
necessity, and that:
(1) Have the effect of discriminating on the basis of disability;
or
(2) Perpetuate the discrimination of others who are subject to
common administrative control.
(e) Relationship or association with an individual with a
disability. It is unlawful for the contractor to exclude or deny equal
jobs or benefits to, or otherwise discriminate against, a qualified
individual because of the known disability of an individual with whom
the qualified individual is known to have a family, business, social or
other relationship or association.
(f) Not making reasonable accommodation. (1) It is unlawful for the
contractor to fail to make reasonable accommodation to the known
physical or mental limitations of an otherwise qualified applicant or
employee with a disability, unless such contractor can demonstrate that
the accommodation would impose an undue hardship on the operation of
its business.
(2) It is un
FR Doc. 96-9662 Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals With Disabilities
lawful for the contractor to deny employment
opportunities to an otherwise qualified job applicant or employee with
a disability based on the need of such contractor to make reasonable
accommodation to such an individual's physical or mental impairments.
(3) A qualified individual with a disability is not required to
accept an accommodation, aid, service, opportunity or benefit which
such qualified individual chooses not to accept. However, if such
individual rejects a reasonable accommodation, aid, service,
opportunity or benefit that is necessary to enable the individual to
perform the essential functions of the position held or desired, and
cannot, as a result of that rejection, perform the essential functions
of the position, the individual will not be considered a qualified
individual with a disability.
(g) Qualification standards, tests and other selection criteria--
(1) In general. It is unlawful for the contractor to use qualification
standards, employment tests or other selection criteria that screen out
or tend to screen out an individual with a disability or a class of
individuals with disabilities, on the basis of disability, unless the
standard, test or other selection criterion, as used by the contractor,
is shown to be job-
[[Page 19356]]
related for the position in question and is consistent with business
necessity. Selection criteria that concern an essential function may
not be used to exclude an individual with a disability if that
individual could satisfy the criteria with provision of a reasonable
accommodation. Selection criteria that exclude or tend to exclude an
individual with a disability or a class of individuals with
disabilities because of disability but concern only marginal functions
of the job would not be consistent with business necessity. The
contractor may not refuse to hire an applicant with a disability
because the applicant's disability prevents him or her from performing
marginal functions.
(2) The Uniform Guidelines on Employee Selection Procedures, 41 CFR
part 60-3, do not apply to the Rehabilitation Act and are similarly
inapplicable to this part.
(h) Administration of tests. It is unlawful for the contractor to
fail to select and administer tests concerning employment in the most
effective manner to ensure that, when a test is administered to a job
applicant or employee who has a disability that impairs sensory,
manual, or speaking skills, the test results accurately reflect the
skills, aptitude, or whatever other factor of the applicant or employee
that the test purports to measure, rather than reflecting the impaired
sensory, manual, or speaking skills of such employee or applicant,
except where such skills are the factors that the test purports to
measure.
(i) Compensation. In offering employment or promotions to
individuals with disabilities, it is unlawful for the contractor to
reduce the amount of compensation offered because of any income based
upon a disability-related pension or other disability-related benefit
the applicant or employee receives from another source.
Sec. 60-741.22 Direct threat defense.
The contractor may use as a qualification standard the requirement
that an individual be able to perform the essential functions of the
position held or desired without posing a direct threat to the health
or safety of the individual or others in the workplace. (See Sec. 60-
741.2(y) defining direct threat.)
Sec. 60-741.23 Medical examinations and inquiries.
(a) Prohibited medical examinations or inquiries. Except as stated
in paragraphs (b) and (c) of this section, it is unlawful for the
contractor to require a medical examination of an applicant or employee
or to make inquiries as to whether an applicant or employee is an
individual with a disability or as to the nature or severity of such
disability.
(b) Permitted medical examinations and inquiries--(1) Acceptable
pre-employment inquiry. The contractor may make pre-employment
inquiries into the ability of an applicant to perform job-related
functions, and/or may ask an applicant to describe or to demonstrate
how, with or without reasonable accommodation, the applicant will be
able to perform job-related functions.
(2) Employment entrance examination. The contractor may require a
medical examination (and/or inquiry) after making an offer of
employment to a job applicant and before the applicant begins his or
her employment duties, and may condition an offer of employment on the
results of such examination (and/or inquiry), if all entering employees
in the same job category are subjected to such an examination (and/or
inquiry) regardless of disability.
(3) Examination of employees. The contractor may require a medical
examination (and/or inquiry) of an employee that is job-related and
consistent with business necessity. The contractor may make inquiries
into the ability of an employee to perform job-related functions.
(4) Other acceptable examinations and inquiries. The contractor may
conduct voluntary medical examinations and activities, including
voluntary medical histories, which are part of an employee health
program available to employees at the work site.
(5) Medical examinations conducted in accordance with paragraphs
(b)(2) and (b)(4) of this section do not have to be job-related and
consistent with business necessity. However, if certain criteria are
used to screen out an applicant or applicants or an employee or
employees with disabilities as a result of such examinations or
inquiries, the contractor must demonstrate that the exclusionary
criteria are job-related and consistent with business necessity, and
that performance of the essential job functions cannot be accomplished
with reasonable accommodations as required in this part.
(c) Invitation to self-identify. The contractor shall invite the
applicant to self-identify as an individual with a disability as
specified in Sec. 60-741.42.
(d) Confidentiality and use of medical information. (1) Information
obtained under this section regarding the medical condition or history
of any applicant or employee shall be collected and maintained on
separate forms and in separate medical files and treated as a
confidential medical record, except that:
(i) Supervisors and managers may be informed regarding necessary
restrictions on the work or duties of the applicant or employee and
necessary accommodations;
(ii) First aid and safety personnel may be informed, when
appropriate, if the disability might require emergency treatment; and
(iii) Government officials engaged in enforcing the laws
administered by OFCCP, including this part, or enforcing the Americans
with Disabilities Act, shall be provided relevant information on
request.
(2) Information obtained under this section regarding the medical
condition or history of any applicant or employee shall not be used for
any purpose inconsistent with this part.
Sec. 60-741.24 Drugs and alcohol.
(a) Specific activities permitted. The contractor:
(1) May prohibit the illegal use of drugs and the use of alcohol at
the workplace by all employees;
(2) May require that employees not be under the influence of
alcohol or be engaging in the illegal use of drugs at the workplace;
(3) May require that all employees behave in conformance with the
requirements established under the Drug-Free Workplace Act of 1988 (41
U.S.C. 701 et seq.);
(4) May hold an employee who engages in the illegal use of drugs or
who is an alcoholic to the same qualification standards for employment
or job performance and behavior to which the contractor holds its other
employees, even if any unsatisfactory performance or behavior is
related to the employee's drug use or alcoholism;
(5) May require that its employees employed in an industry subject
to such regulations comply with the standards established in the
regulations (if any) of the Departments of Defense and Transportation,
and of the Nuclear Regulatory Commission, and other Federal agencies
regarding alcohol and the illegal use of drugs; and
(6) May require that employees employed in sensitive positions
comply with the regulations (if any) of the Departments of Defense and
Transportation, and of the Nuclear Regulatory Commission, and other
Federal agencies that apply to employment in sensitive positions
subject to such regulations.
(b) Drug testing--(1) General policy. For purposes of this part, a
test to determine the illegal use of drugs is not considered a medical
examination.
[[Page 19357]]
Thus, the administration of such drug tests by the contractor to its
job applicants or employees is not a violation of Sec. 60-741.23.
Nothing in this part shall be construed to encourage, prohibit, or
authorize the contractor to conduct drug tests of job applicants or
employees to determine the illegal use of drugs or to make employment
decisions based on such test results.
(2) Transportation employees. Nothing in this part shall be
construed to encourage, prohibit, or authorize the otherwise lawful
exercise by contractors subject to the jurisdiction of the Department
of Transportation of authority to test employees in, and applicants
for, positions involving safety-sensitive duties for the illegal use of
drugs or for on-duty impairment by alcohol; and remove from safety-
sensitive positions persons who test positive for illegal use of drugs
or on-duty impairment by alcohol pursuant to paragraph (b)(1) of this
section.
(3) Any information regarding the medical condition or history of
any employee or applicant obtained from a test to determine the illegal
use of drugs, except information regarding the illegal use of drugs, is
subject to the requirements of Secs. 60-741.23(b)(5) and (c).
Sec. 60-741.25 Health insurance, life insurance and other benefit
plans.
(a) An insurer, hospital, or medical service company, health
maintenance organization, or any agent or entity that administers
benefit plans, or similar organizations may underwrite risks, classify
risks, or administer such risks that are based on or not inconsistent
with State law.
(b) The contractor may establish, sponsor, observe or administer
the terms of a bona fide benefit plan that are based on underwriting
risks, classifying risks, or administering such risks that are based on
or not inconsistent with State law.
(c) The contractor may establish, sponsor, observe, or administer
the terms of a bona fide benefit plan that is not subject to State laws
that regulate insurance.
(d) The contractor may not deny a qualified individual with a
disability equal access to insurance or subject a qualified individual
with a disability to different terms or conditions of insurance based
on disability alone, if the disability does not pose increased risks.
(e) The activities described in paragraphs (a), (b) and (c) of this
section are permitted unless these activities are used as a subterfuge
to evade the purposes of this part.
Subpart C--Affirmative Action Program
Sec. 60-741.40 Applicability of the affirmative action program
requirement.
(a) The requirements of this subpart apply to every Government
contractor that has 50 or more employees and a contract of $50,000 or
more.
(b) Contractors described in paragraph (a) of this section shall,
within 120 days of the commencement of a contract, prepare and maintain
an affirmative action program at each establishment. The affirmative
action program shall set forth the contractor's policies and procedures
in accordance with this part. This program may be integrated into or
kept separate from other affirmative action programs.
(c) The affirmative action program shall be reviewed and updated
annually.
(d) The contractor shall submit the affirmative action program
within 30 days of a request from OFCCP, unless the request provides for
a different time. The contractor also shall make the affirmative action
program promptly available on-site upon OFCCP's request.
Sec. 60-741.41 Availability of affirmative action program.
The full affirmative action program shall be available to any
employee or applicant for employment for inspection upon request. The
location and hours during which the program may be obtained shall be
posted at each establishment.
Sec. 60-741.42 Invitation to self-identify.
(a) The contractor shall, after making an offer of employment to a
job applicant and before the applicant begins his or her employment
duties, invite the applicant to inform the contractor whether the
applicant believes that he or she may be covered by the act and wishes
to benefit under the affirmative action program. The contractor may
invite self-identification prior to making a job offer only when:
(1) The invitation is made when the contractor actually is
undertaking affirmative action for individuals with disabilities at the
pre-offer stage; or
(2) The invitation is made pursuant to a Federal, state or local
law requiring affirmative action for individuals with disabilities.
(b) The invitation referenced in paragraph (a) of this section
shall state that a request to benefit under the affirmative action
program may be made immediately and/or at any time in the future. The
invitation also shall summarize the relevant portions of the act and
the contractor's affirmative action program. Furthermore, the
invitation shall state that the information is being requested on a
voluntary basis, that it will be kept confidential, that refusal to
provide it will not subject the applicant to any adverse treatment, and
that it will not be used in a manner inconsistent with the act. If an
applicant so identifies himself or herself, the contractor should also
seek the advice of the applicant regarding proper placement and
appropriate accommodation, after a job offer has been extended. The
contractor also may make such inquiries to the extent they are
consistent with the ADA (e.g., in the context of asking applicants to
describe or demonstrate how they would perform the job). The contractor
shall maintain a separate file on persons who have self-identified and
provide that file to OFCCP upon request. This information may be used
only in accordance with this part. (An acceptable form for such an
invitation is set forth in Appendix B of this part. Because a
contractor usually may not seek advice from an applicant regarding
placement and accommodation until after a job offer has been extended,
the invitation set forth in Appendix B of this part contains
instructions regarding modifications to be made if it is used at the
pre-offer stage.)
(c) Nothing in this section shall relieve the contractor of its
obligation to take affirmative action with respect to those applicants
or employees of whose disability the contractor has knowledge.
(d) Nothing in this section shall relieve the contractor from
liability for discrimination under the act.
Sec. 60-741.43 Affirmative action policy.
Under the affirmative action obligations imposed by the act
contractors shall not discriminate because of physical or mental
disability and shall take affirmative action to employ and advance in
employment qualified individuals with disabilities at all levels of
employment, including the executive level. Such action shall apply to
all employment activities set forth in Sec. 60-741.20.
Sec. 60-741.44 Required contents of affirmative action programs.
Acceptable affirmative action programs shall contain, but not
necessarily be limited to, the following ingredients:
(a) Policy statement. The contractor shall include an equal
opportunity policy statement in its affirmative action program, and
shall post the policy statement on company bulletin boards. The
contractor must ensure that applicants and employees with
[[Page 19358]]
disabilities are informed of the contents of the policy statement (for
example, the contractor may have the statement read to a visually
disabled individual, or may lower the posted notice so that it may be
read by a person in a wheelchair). The policy statement should indicate
the chief executive officer's attitude on the subject matter, provide
for an audit and reporting system (see paragraph (h) of this section)
and assign overall responsibility for the implementation of affirmative
action activities required under this part (see paragraph (i) of this
section). Additionally, the policy should state, among other things,
that the contractor will: recruit, hire, train and promote persons in
all job titles, and ensure that all other personnel actions are
administered, without regard to disability; and ensure that all
employment decisions are based only on valid job requirements. The
policy shall state that employees and applicants shall not be subjected
to harassment, intimidation, threats, coercion or discrimination
because they have engaged in or may engage in any of the following
activities:
(1) Filing a complaint;
(2) Assisting or participating in an investigation, compliance
review, hearing, or any other activity related to the administration of
section 503 of the Rehabilitation Act of 1973, as amended (section 503)
or any other Federal, State or local law requiring equal opportunity
for disabled persons;
(3) Opposing any act or practice made unlawful by section 503 or
its implementing regulations in this part or any other Federal, State
or local law requiring equal opportunity for disabled persons; or
(4) Exercising any other right protected by section 503 or its
implementing regulations in this part.
(b) Review of personnel processes. The contractor shall ensure that
its personnel processes provide for careful, thorough, and systematic
consideration of the job qualifications of applicants and employees
with known disabilities for job vacancies filled either by hiring or
promotion, and for all training opportunities offered or available. The
contractor shall ensure that its personnel processes do not stereotype
disabled persons in a manner which limits their access to all jobs for
which they are qualified. The contractor shall periodically review such
processes and make any necessary modifications to ensure that these
obligations are carried out. A description of the review and any
necessary modifications to personnel processes or development of new
processes shall be included in any affirmative action programs required
under this part. The contractor must design procedures that facilitate
a review of the implementation of this requirement by the contractor
and the Government. (Appendix C of this part is an example of an
appropriate set of procedures. The procedures in Appendix C of this
part are not required and contractors may develop other procedures
appropriate to their circumstances.)
(c) Physical and mental qualifications. (1) The contractor shall
provide in its affirmative action program, and shall adhere to, a
schedule for the periodic review of all physical and mental job
qualification standards to ensure that, to the extent qualification
standards tend to screen out qualified individuals with disabilities,
they are job-related for the position in question and are consistent
with business necessity.
(2) Whenever the contractor applies physical or mental
qualification standards in the selection of applicants or employees for
employment or other change in employment status such as promotion,
demotion or training, to the extent that qualification standards tend
to screen out qualified individuals with disabilities, the standards
shall be related to the specific job or jobs for which the individual
is being considered and consistent with business necessity. The
contractor shall have the burden to demonstrate that it has complied
with the requirements of paragraph (c)(2) of this section.
(3) The contractor may use as a defense to an allegation of a
violation of paragraph (c)(2) of this section that an individual poses
a direct threat to the health or safety of the individual or others in
the workplace. (See Sec. 60-741.2(y) defining direct threat.)
(d) Reasonable accommodation to physical and mental limitations.
The contractor shall make reasonable accommodation to the known
physical or mental limitations of an otherwise qualified individual
with a disability unless it can demonstrate that the accommodation
would impose an undue hardship on the operation of its business. If an
employee with a known disability is having significant difficulty
performing his or her job and it is reasonable to conclude that the
performance problem may be related to the known disability, the
contractor shall confidentially notify the employee of the performance
problem and inquire whether the problem is related to the employee's
disability; if the employee responds affirmatively, the contractor
shall confidentially inquire whether the employee is in need of a
reasonable accommodation.
(e) Harassment. The contractor must develop and implement
procedures to ensure that its employees with disabilities are not
harassed because of disability.
(f) External dissemination of policy, outreach and positive
recruitment. The contractor shall undertake appropriate outreach and
positive recruitment activities such as those listed in paragraphs
(f)(1) through (7) of this section that are reasonably designed to
effectively recruit qualified individuals with disabilities. It is not
contemplated that the contractor will necessarily undertake all the
activities listed in paragraphs (f)(1) through (7) of this section or
that its activities will be limited to those listed. The scope of the
contractor's efforts shall depend upon all the circumstances, including
the contractor's size and resources and the extent to which existing
employment practices are adequate.
(1) The contractor should enlist the assistance and support of
recruiting sources (including State employment security agencies, State
vocational rehabilitation agencies or facilities, sheltered workshops,
college placement officers, State education agencies, labor
organizations and organizations of or for individuals with
disabilities) for the contractor's commitment to provide meaningful
employment opportunities to qualified individuals with disabilities.
Formal briefing sessions should be held, preferably on company
premises, with representatives from recruiting sources. Plant tours,
clear and concise explanations of current and future job openings,
position descriptions, worker specifications, explanations of the
company's selection process, and recruiting literature should be an
integral part of the briefing. Formal arrangements should be made for
referral of applicants, follow up with sources, and feedback on
disposition of applicants.
(2) The contractor's recruitment efforts at all schools should
incorporate special efforts to reach students with disabilities. The
contractor should engage in recruitment activities at educational
institutions which participate in training of individuals with
disabilities, such as schools for the blind, deaf, or learning
disabled. An effort should be made to participate in work-study
programs with rehabilitation facilities and schools which specialize in
training or educating individuals with disabilities.
(3) The contractor should establish meaningful contacts with
appropriate social service agencies, organizations of and for
individuals with disabilities, and vocational rehabilitation agencies
or
[[Page 19359]]
facilities, for such purposes as advice, technical assistance and
referral of potential employees. Technical assistance from the
resources described in this paragraph may consist of advice on proper
placement, recruitment, training and accommodations contractors may
undertake, but no such resource providing technical assistance shall
have authority to approve or disapprove the acceptability of
affirmative action programs.
(4) The contractor should include individuals with disabilities
when employees are pictured in consumer, promotional or help wanted
advertising. Individuals with disabilities should be made available for
participation in career days, youth motivation programs, and related
activities in their communities.
(5) The contractor should send written notification of company
policy to all subcontractors, vendors and suppliers, requesting
appropriate action on their part.
(6) The contractor should take positive steps to attract qualified
individuals with disabilities not currently in the work force who have
requisite skills and can be recruited through affirmative action
measures. These persons may be located through the local chapters of
organizations of and for individuals with disabilities.
(7) The contractor, in making hiring decisions, should consider
applicants with known disabilities for all available positions for
which they may be qualified when the position(s) applied for is
unavailable.
(g) Internal dissemination of policy. (1) A strong outreach program
will be ineffective without adequate internal support from supervisory
and management personnel and other employees, who may have had limited
contact with individuals with disabilities in the past. In order to
assure greater employee cooperation and participation in the
contractor's efforts, the contractor shall develop internal procedures
such as those listed in paragraph (g)(2) of this section for
communication of its obligation to engage in affirmative action efforts
to employ and advance in employment qualified individuals with
disabilities. It is not contemplated that the contractor will
necessarily undertake all the activities listed in paragraph (g)(2) of
this section or that its activities will be limited to those listed.
These procedures shall be designed to foster understanding, acceptance
and support among the contractor's executive, management, supervisory
and other employees and to encourage such persons to take the necessary
actions to aid the contractor in meeting this obligation. The scope of
the contractor's efforts shall depend upon all the circumstances,
including the contractor's size and resources and the extent to which
existing practices are adequate.
(2) The contractor should implement and disseminate this policy
internally as follows:
(i) Include it in the contractor's policy manual.
(ii) Periodically inform all employees and prospective employees of
its commitment to engage in affirmative action to increase employment
opportunities for qualified individuals with disabilities. The
contractor should schedule special meetings with all employees to
discuss policy and explain individual employee responsibilities.
(iii) Publicize it in the company newspaper, magazine, annual
report and other media.
(iv) Conduct special meetings with executive, management, and
supervisory personnel to explain the intent of the policy and
individual responsibility for effective implementation, making clear
the chief executive officer's attitude.
(v) Discuss the policy thoroughly in both employee orientation and
management training programs.
(vi) Meet with union officials and/or employee representatives to
inform them of the contractor's policy, and request their cooperation.
(vii) Include articles on accomplishments of disabled workers in
company publications.
(viii) When employees are featured in employee handbooks or similar
publications for employees, include individuals with disabilities.
(h) Audit and reporting system. (1) The contractor shall design and
implement an audit and reporting system that will:
(i) Measure the effectiveness of the contractor's affirmative
action program.
(ii) Indicate any need for remedial action.
(iii) Determine the degree to which the contractor's objectives
have been attained.
(iv) Determine whether individuals with known disabilities have had
the opportunity to participate in all company sponsored educational,
training, recreational and social activities.
(v) Measure the contractor's compliance with the affirmative action
program's specific obligations.
(2) Where the affirmative action program is found to be deficient,
the contractor shall undertake necessary action to bring the program
into compliance.
(i) Responsibility for implementation. An official of the
contractor shall be assigned responsibility for implementation of the
contractor's affirmative action activities under this part. His or her
identity should appear on all internal and external communications
regarding the company's affirmative action program. This official shall
be given necessary top management support and staff to manage the
implementation of this program.
(j) Training. All personnel involved in the recruitment, screening,
selection, promotion, disciplinary, and related processes shall be
trained to ensure that the commitments in the contractor's affirmative
action program are implemented.
Sec. 60-741.45 Sheltered workshops.
Contracts with sheltered workshops do not constitute affirmative
action in lieu of employment and advancement of qualified disabled
individuals in the contractor's own work force. Contracts with
sheltered workshops may be included within an affirmative action
program if the sheltered workshop trains employees for the contractor
and the contractor is obligated to hire trainees at full compensation
when such trainees become ``qualified individuals with disabilities.''
Subpart D--General Enforcement and Complaint Procedures
Sec. 60-741.60 Compliance reviews.
(a) OFCCP may conduct compliance reviews to determine if the
contractor maintains nondiscriminatory hiring and employment practices
and is taking affirmative action to ensure that applicants are employed
and that employees are placed, trained, upgraded, promoted, and
otherwise treated in accordance with this part during employment. The
compliance review shall consist of a comprehensive analysis and
evaluation of each aspect of the aforementioned practices, policies,
and conditions resulting therefrom. Where necessary, recommendations
for appropriate sanctions shall be made.
(b) Where deficiencies are found to exist, reasonable efforts shall
be made to secure compliance through conciliation and persuasion
pursuant to Sec. 60-741.62.
Sec. 60-741.61 Complaint procedures.
(a) Coordination with other agencies. Pursuant to section 107(b) of
the Americans with Disabilities Act of 1990 (ADA), OFCCP and the Equal
Employment Opportunity Commission have promulgated regulations setting
[[Page 19360]]
forth procedures governing the processing of complaints falling within
the overlapping jurisdiction of both the act and title I of the ADA to
ensure that such complaints are dealt with in a manner that avoids
duplication of effort and prevents the imposition of inconsistent or
conflicting standards. Complaints filed under this part will be
processed in accordance with those regulations, which are found at 41
CFR part 60-742, and with this part.
(b) Place and time of filing. Any applicant for employment with a
contractor or any employee of a contractor may, personally or by an
authorized representative, file a written complaint with the Deputy
Assistant Secretary alleging a violation of the act or the regulations
in this part. The complaint may allege individual or class-wide
violation(s). Complaints may be submitted to the OFCCP, 200
Constitution Avenue, N.W., Washington, D.C. 20210, or to any OFCCP
regional, district, or area office. Such complaint must be filed within
300 days of the date of the alleged violation, unless the time for
filing is extended by OFCCP for good cause shown.
(c) Contents of complaints--(1) In general. A complaint must be
signed by the complainant or his or her authorized representative and
must contain the following information:
(i) Name and address (including telephone number) of the
complainant;
(ii) Name and address of the contractor who committed the alleged
violation;
(iii) The facts showing that the individual is disabled or has a
history of a disability or was regarded by the contractor as having a
disability;
(iv) A description of the act or acts considered to be a violation,
including the pertinent dates (in the case of an alleged continuing
violation, the earliest and most recent date that the alleged violation
occurred should be stated); and
(v) Other pertinent information available which will assist in the
investigation and resolution of the complaint, including the name of
any known Federal agency with which the employer has contracted.
(2) Third party complaints. A complaint filed by an authorized
representative need not identify by name the person on whose behalf it
is filed. The person filing the complaint, however, shall provide OFCCP
with the name, address and telephone number of the person on whose
behalf it is made, and the other information specified in paragraph
(c)(1) of this section. OFCCP shall verify the authorization of such a
complaint by the person on whose behalf the complaint is made. Any such
person may request that OFCCP keep his or her identity confidential,
and OFCCP will protect the individual's confidentiality wherever that
is possible given the facts and circumstances in the complaint.
(d) Incomplete information. Where a complaint contains incomplete
information, OFCCP shall seek the needed information from the
complainant. If the information is not furnished to OFCCP within 60
days of the date of such request, the case may be closed.
(e) Investigations. The Department of Labor shall institute a
prompt investigation of each complaint.
(f) Resolution of matters. (1) If the complaint investigation finds
no violation of the act or this part, or if the Deputy Assistant
Secretary decides not to refer the matter to the Solicitor of Labor for
enforcement proceedings against the contractor pursuant to Sec. 60-
741.65(a)(l), the complainant and contractor shall be so notified. The
Deputy Assistant Secretary, on his or her own initiative, may
reconsider his or her determination or the determination of any of his
or her designated officers who have authority to issue Notifications of
Results of Investigation.
(2) The Deputy Assistant Secretary will review all determinations
of no violation that involve complaints that are not also cognizable
under title I of the Americans with Disabilities Act.
(3) In cases where the Deputy Assistant Secretary decides to
reconsider the determination of a Notification of Results of
Investigation, the Deputy Assistant Secretary shall provide prompt
notification of his or her intent to reconsider, which is effective
upon issuance, and his or her final determination after
reconsideration, to the person claiming to be aggrieved, the person
making the complaint on behalf of such person, if any, and the
contractor.
(4) If the investigation finds a violation of the act or this part,
OFCCP shall invite the contractor to participate in conciliation
discussions pursuant to Sec. 60-741.62.
Sec. 60-741.62 Conciliation agreements and letters of commitment.
(a) If a compliance review, complaint investigation or other review
by OFCCP finds a material violation of the act or this part, and if the
contractor is willing to correct the violations and/or deficiencies,
and if OFCCP determines that settlement on that basis (rather than
referral for consideration of formal enforcement) is appropriate, a
written conciliation agreement shall be required. The agreement shall
provide for such remedial action as may be necessary to correct the
violations and/or deficiencies noted, including, where appropriate (but
not necessarily limited to) such make whole remedies as back pay and
retroactive seniority. The agreement shall also specify the time period
for completion of the remedial action; the period shall be no longer
than the minimum period necessary to complete the action.
(b) The term ``conciliation agreement'' does not include ``letters
of commitment,'' which are appropriate for resolving minor technical
deficiencies.
Sec. 60-741.63 Violation of conciliation agreements and letters of
commitment.
(a) When OFCCP believes that a conciliation agreement has been
violated, the following procedures are applicable:
(1) A written notice shall be sent to the contractor setting forth
the violation alleged and summarizing the supporting evidence. The
contractor shall have 15 days from receipt of the notice to respond,
except in those cases in which OFCCP asserts that such a delay would
result in irreparable injury to the employment rights of affected
employees or applicants.
(2) During the 15-day period the contractor may demonstrate in
writing that it has not violated its commitments.
(b) In those cases in which OFCCP asserts that a delay would result
in irreparable injury to the employment rights of affected employees or
applicants, enforcement proceedings may be initiated immediately
without proceeding through any other requirement contained in this
chapter.
(c) In any proceedings involving an alleged violation of a
conciliation agreement OFCCP may seek enforcement of the agreement
itself and shall not be required to present proof of the underlying
violations resolved by the agreement.
(d) When OFCCP believes that a letter of commitment has been
violated, the matter shall be handled, where appropriate, pursuant to
Sec. 60-741.64. The violation may be corrected through a conciliation
agreement, or an enforcement proceeding may be initiated.
Sec. 60-741.64 Show cause notices.
When the Deputy Assistant Secretary has reasonable cause to believe
that the contractor has violated the act or this part, he or she may
issue a notice requiring the contractor to show cause, within 30 days,
why monitoring,
[[Page 19361]]
enforcement proceedings or other appropriate action to ensure
compliance should not be instituted. The issuance of such a notice is
not a prerequisite to instituting enforcement proceedings (see Sec. 60-
741.65).
Sec. 60-741.65 Enforcement proceedings.
(a) General. (1) If a compliance review, complaint investigation or
other review by OFCCP finds a violation of the act or this part, and
the violation has not been corrected in accordance with the
conciliation procedures in this part, or OFCCP determines that referral
for consideration of formal enforcement (rather than settlement) is
appropriate, OFCCP may refer the matter to the Solicitor of Labor with
a recommendation for the institution of enforcement proceedings to
enjoin the violations, to seek appropriate relief, and to impose
appropriate sanctions, or any of the above in this sentence. OFCCP may
seek back pay and other make whole relief for aggrieved individuals
identified during a complaint investigation or compliance review. Such
individuals need not have filed a complaint as a prerequisite to OFCCP
seeking such relief on their behalf. Interest on back pay shall be
calculated from the date of the loss and compounded quarterly at the
percentage rate established by the Internal Revenue Service for the
underpayment of taxes.
(2) In addition to the administrative proceedings set forth in this
section, the Deputy Assistant Secretary may, within the limitations of
applicable law, seek appropriate judicial action to enforce the
contractual provisions set forth in Sec. 60-741.5, including
appropriate injunctive relief.
(b) Hearing practice and procedure. (1) In administrative
enforcement proceedings the contractor shall be provided an opportunity
for a formal hearing. All hearings conducted under the act and this
part shall be governed by the Rules of Practice for Administrative
Proceedings to Enforce Equal Opportunity Under Executive Order 11246
contained in 41 CFR part 60-30 and the Rules of Evidence set out in the
Rules of Practice and Procedure for Administrative Hearings Before the
Office of Administrative Law Judges contained in 29 CFR part 18,
subpart B: Provided, That a final administrative order shall be issued
within one year from the date of the issuance of the recommended
findings, conclusions and decision of the Administrative Law Judge, or
the submission of any exceptions and responses to exceptions to such
decision (if any), whichever is later.
(2) Complaints may be filed by the Solicitor, the Associate
Solicitor for Civil Rights, Regional Solicitors and Associate Regional
Solicitors.
(3) For the purposes of hearings pursuant to this part, references
in 41 CFR part 60-30 to ``Executive Order 11246'' shall mean section
503 of the Rehabilitation Act of 1973, as amended; to ``equal
opportunity clause'' shall mean the equal opportunity clause published
at 41 CFR 60-741.5; and to ``regulations'' shall mean the regulations
contained in this part.
Sec. 60-741.66 Sanctions and penalties.
(a) Withholding progress payments. With the prior approval of the
Deputy Assistant Secretary so much of the accrued payment due on the
contract or any other contract between the Government contractor and
the Federal Government may be withheld as necessary to correct any
violations of the provisions of the act or this part.
(b) Termination. A contract may be canceled or terminated, in whole
or in part, for failure to comply with the provisions of the act or
this part.
(c) Debarment. A contractor may be debarred from receiving future
contracts for failure to comply with the provisions of the act or this
part subject to reinstatement pursuant to Sec. 60-741.68. Debarment may
be imposed for an indefinite period, or may be imposed for a fixed
period of not less than six months but no more than three years.
(d) Hearing opportunity. An opportunity for a formal hearing shall
be afforded to a contractor before the imposition of any sanction or
penalty.
Sec. 60-741.67 Notification of agencies.
The Deputy Assistant Secretary shall ensure that the heads of all
agencies are notified of any debarments taken against any contractor.
Sec. 60-741.68 Reinstatement of ineligible contractors.
(a) Application for reinstatement. A contractor debarred from
further contracts for an indefinite period under the act may request
reinstatement in a letter filed with the Deputy Assistant Secretary at
any time after the effective date of the debarment; a contractor
debarred for a fixed period may make such a request following the
expiration of six months from the effective date of the debarment. In
connection with the reinstatement proceedings, all debarred contractors
shall be required to show that they have established and will carry out
employment policies and practices in compliance with the act and this
part. Additionally, in determining whether reinstatement is appropriate
for a contractor debarred for a fixed period, the Deputy Assistant
Secretary also shall consider, among other factors, the severity of the
violation which resulted in the debarment, the contractor's attitude
towards compliance, the contractor's past compliance history, and
whether the contractor's reinstatement would impede the effective
enforcement of the act or this part. Before reaching a decision, the
Deputy Assistant Secretary may conduct a compliance review of the
contractor and may require the contractor to supply additional
information regarding the request for reinstatement. The Deputy
Assistant Secretary shall issue a written decision on the request.
(b) Petition for review. Within 30 days of its receipt of a
decision denying a request for reinstatement, the contractor may file a
petition for review of the decision with the Secretary. The petition
shall set forth the grounds for the contractor's objections to the
Deputy Assistant Secretary's decision. The petition shall be served on
the Deputy Assistant Secretary and the Associate Solicitor for Civil
Rights and shall include the decision as an appendix. The Deputy
Assistant Secretary may file a response within 14 days to the petition.
The Secretary shall issue the final agency decision denying or granting
the request for reinstatement. Before reaching a final decision, the
Secretary may issue such additional orders respecting procedure as he
or she finds appropriate in the circumstances, including an order
referring the matter to the Office of Administrative Law Judges for an
evidentiary hearing where there is a material factual dispute that
cannot be resolved on the record before the Secretary.
Sec. 60-741.69 Intimidation and interference.
(a) The contractor shall not harass, intimidate, threaten, coerce,
or discriminate against, any individual because the individual has
engaged in or may engage in any of the following activities:
(1) Filing a complaint;
(2) Assisting or participating in any manner in an investigation,
compliance review, hearing, or any other activity related to the
administration of the act or any other Federal, State or local law
requiring equal opportunity for disabled persons;
(3) Opposing any act or practice made unlawful by the act or this
part or any other Federal, State or local law requiring equal
opportunity for disabled persons; or
(4) Exercising any other right protected by the act or this part.
[[Page 19362]]
(b) The contractor shall ensure that all persons under its control
do not engage in such harassment, intimidation, threats, coercion or
discrimination. The sanctions and penalties contained in this part may
be exercised by the Deputy Assistant Secretary against any contractor
who violates this obligation.
Sec. 60-741.70 Disputed matters related to compliance with the act.
The procedures set forth in the regulations in this part govern all
disputes relative to the contractor's compliance with the act and this
part. Any disputes relating to issues other than compliance, including
contract costs arising out of the contractor's efforts to comply, shall
be determined by the disputes clause of the contract.
Subpart E--Ancillary Matters
Sec. 60-741.80 Recordkeeping.
(a) General requirements. Any personnel or employment record made
or kept by the contractor shall be preserved by the contractor for a
period of two years from the date of the making of the record or the
personnel action involved, whichever occurs later. However, if the
contractor has fewer than 150 employees or does not have a Government
contract of at least $150,000, the minimum record retention period
shall be one year from the date of the making of the record or the
personnel action involved, whichever occurs later. Such records
include, but are not necessarily limited to, records relating to
requests for reasonable accommodation; the results of any physical
examination; job advertisements and postings; applications and resumes;
tests and test results; interview notes; and other records having to do
with hiring, assignment, promotion, demotion, transfer, lay-off or
termination, rates of pay or other terms of compensation, and selection
for training or apprenticeship. In the case of involuntary termination
of an employee, the personnel records of the individual terminated
shall be kept for a period of two years from the date of the
termination, except that contractors that have fewer than 150 employees
or that do not have a Government contract of at least $150,000 shall
keep such records for a period of one year from the date of the
termination. Where the contractor has received notice that a complaint
of discrimination has been filed, that a compliance review has been
initiated, or that an enforcement action has been commenced, the
contractor shall preserve all personnel records relevant to the
complaint, compliance review or action until final disposition of the
complaint, compliance review or action. The term ``personnel records
relevant to the complaint, compliance review or action'' would include,
for example, personnel or employment records relating to the aggrieved
person and to all other employees holding positions similar to that
held or sought by the aggrieved person and application forms or test
papers completed by an unsuccessful applicant and by all other
candidates for the same position as that for which the aggrieved person
applied and was rejected.
(b) Failure to preserve records. Failure to preserve complete and
accurate records as required by paragraph (a) of this section
constitutes noncompliance with the contractor's obligations under the
act and this part. Where the contractor has destroyed or failed to
preserve records as required by this section, there may be a
presumption that the information destroyed or not preserved would have
been unfavorable to the contractor: Provided, That this presumption
shall not apply where the contractor shows that the destruction or
failure to preserve records results from circumstances that are outside
of the contractor's control.
(c) The requirements of this section shall apply only to records
made or kept on or after August 29, 1996.
Sec. 60-741.81 Access to records.
Each contractor shall permit access during normal business hours to
its places of business for the purpose of conducting on-site compliance
reviews and complaint investigations and inspecting and copying such
books and accounts and records, including computerized records, and
other material as may be relevant to the matter under investigation and
pertinent to compliance with the act or this part. Information obtained
in this manner shall be used only in connection with the administration
of the act, the administration of the Americans with Disabilities Act
of 1990 (ADA) and in furtherance of the purposes of the act and the
ADA.
Sec. 60-741.82 Labor organizations and recruiting and training
agencies.
(a) Whenever performance in accordance with the equal opportunity
clause or any matter contained in the regulations in this part may
necessitate a revision of a collective bargaining agreement, the labor
organizations which are parties to such agreement shall be given an
adequate opportunity to present their views to OFCCP.
(b) OFCCP shall use its best efforts, directly or through
contractors, subcontractors, local officials, vocational rehabilitation
facilities, and all other available instrumentalities, to cause any
labor organization, recruiting and training agency or other
representative of workers who are employed by a contractor to cooperate
with, and to assist in, the implementation of the purposes of the act.
Sec. 60-741.83 Rulings and interpretations.
Rulings under or interpretations of the act and this part shall be
made by the Deputy Assistant Secretary.
Sec. 60-741.84 Effective date.
This part shall become effective August 29, 1996, and shall not
apply retroactively. Contractors presently holding Government contracts
shall update their affirmative action programs as required to comply
with this part by December 27, 1996.
Appendix A to Part 60-741--Guidelines on a Contractor's Duty To
Provide Reasonable Accommodation
The guidelines in this appendix are in large part derived from,
and are consistent with, the discussion regarding the duty to
provide reasonable accommodation contained in the Interpretive
Guidance on Title I of the Americans with Disabilities Act (ADA) set
out as an appendix to the regulations issued by the Equal Employment
Opportunity Commission (EEOC) implementing the ADA (29 CFR part
1630). Although the following discussion is intended to provide an
independent ``free-standing'' source of guidance with respect to the
duty to provide reasonable accommodation under this part, to the
extent that the EEOC appendix provides additional guidance which is
consistent with the following discussion, it may be relied upon for
purposes of this part as well. See Sec. 60-741.1(c). Contractors are
obligated to provide reasonable accommodation and to take
affirmative action. Reasonable accommodation under section 503, like
reasonable accommodation required under the ADA, is a part of the
nondiscrimination obligation. See EEOC appendix cited in this
paragraph. Affirmative action is unique to section 503, and includes
actions above and beyond those required as a matter of
nondiscrimination. An example of this is the requirement discussed
in paragraph 2 of this appendix that a contractor shall make an
inquiry of an employee with a known disability who is having
significant difficulty performing his or her job.
1. A contractor is required to make reasonable accommodations to
the known physical or mental limitations of an ``otherwise
qualified'' individual with a disability, unless the contractor can
demonstrate that the accommodation would impose an undue hardship on
the operation of its business. As stated in Sec. 60-741.2(t), an
individual with a disability is qualified if he or she satisfies all
the skill, experience,
[[Page 19363]]
education and other job-related selection criteria, and can perform
the essential functions of the position with or without reasonable
accommodation. A contractor is required to make a reasonable
accommodation with respect to its application process if the
individual with a disability is qualified with respect to that
process. One is ``otherwise qualified'' if he or she is qualified
for a job, except that, because of a disability, he or she needs a
reasonable accommodation to be able to perform the job's essential
functions.
2. Although the contractor would not be expected to accommodate
disabilities of which it is unaware, the contractor has an
affirmative obligation to provide a reasonable accommodation for
applicants and employees of whose disability the contractor has
actual knowledge. As stated in Sec. 60-741.42 (see also Appendix B
of this part), the contractor is required to invite applicants who
have been provided an offer of employment, before they begin their
employment duties, to indicate whether they may have a disability
and wish to benefit under the contractor's affirmative action
program. That section further provides that the contractor should
seek the advice of individuals who ``self-identify'' in this way as
to proper placement and appropriate accommodation. Moreover,
Sec. 60-741.44(d) provides that if an employee with a known
disability is having significant difficulty performing his or her
job and it is reasonable to conclude that the performance problem
may be related to the disability, the contractor is required to
confidentially inquire whether the problem is disability related and
if the employee is in need of a reasonable accommodation.
3. An accommodation is any change in the work environment or in
the way things are customarily done that enables an individual with
a disability to enjoy equal employment opportunities. Equal
employment opportunity means an opportunity to attain the same level
of performance, or to enjoy the same level of benefits and
privileges of employment as are available to the average similarly
situated employee without a disability. Thus, for example, an
accommodation made to assist an employee with a disability in the
performance of his or her job must be adequate to enable the
individual to perform the essential functions of the position. The
accommodation, however, does not have to be the ``best''
accommodation possible, so long as it is sufficient to meet the job-
related needs of the individual being accommodated. There are three
areas in which reasonable accommodations may be necessary: (1)
Accommodations in the application process; (2) accommodations that
enable employees with disabilities to perform the essential
functions of the position held or desired; and (3) accommodations
that enable employees with disabilities to enjoy equal benefits and
privileges of employment as are enjoyed by employees without
disabilities.
4. The term ``undue hardship'' refers to any accommodation that
would be unduly costly, extensive, substantial, or disruptive, or
that would fundamentally alter the nature or operation of the
contractor's business. The contractor's claim that the cost of a
particular accommodation will impose an undue hardship requires a
determination of which financial resources should be considered--
those of the contractor in its entirety or only those of the
facility that will be required to provide the accommodation. This
inquiry requires an analysis of the financial relationship between
the contractor and the facility in order to determine what resources
will be available to the facility in providing the accommodation. If
the contractor can show that the cost of the accommodation would
impose an undue hardship, it would still be required to provide the
accommodation if the funding is available from another source, e.g.,
a State vocational rehabilitation agency, or if Federal, State or
local tax deductions or tax credits are available to offset the cost
of the accommodation. In the absence of such funding, the individual
with a disability should be given the option of providing the
accommodation or of paying that portion of the cost which
constitutes the undue hardship on the operation of the business.
5. Section 60-741.2(v) lists a number of examples of the most
common types of accommodations that the contractor may be required
to provide. There are any number of specific accommodations that may
be appropriate for particular situations. The discussion in this
appendix is not intended to provide an exhaustive list of required
accommodations (as no such list would be feasible); rather, it is
intended to provide general guidance regarding the nature of the
obligation. The decision as to whether a reasonable accommodation is
appropriate must be made on a case-by-case basis. The contractor
generally should consult with the individual with a disability in
deciding on the appropriate accommodation; frequently, the
individual will know exactly what accommodation he or she will need
to perform successfully in a particular job, and may suggest an
accommodation which is simpler and less expensive than the
accommodation the contractor might have devised. Other resources to
consult include the appropriate State vocational rehabilitation
services agency, the Equal Employment Opportunity Commission (1-800-
669-EEOC (voice), 1-800-800-3302 (TDD)), the Job Accommodation
Network (JAN) operated by the President's Committee on Employment of
People with Disabilities (1-800-JAN-7234), private disability
organizations, and other employers.
6. With respect to accommodations that can permit an employee
with a disability to perform essential functions successfully, a
reasonable accommodation may require the contractor to, for
instance, modify or acquire equipment. For the visually-impaired
such accommodations may include providing adaptive hardware and
software for computers, electronic visual aids, braille devices,
talking calculators, magnifiers, audio recordings and brailled or
large print materials. For persons with hearing impairments,
reasonable accommodations may include providing telephone handset
amplifiers, telephones compatible with hearing aids and
telecommunications devices for the deaf (TDDs). For persons with
limited physical dexterity, the obligation may require the provision
of goose neck telephone headsets, mechanical page turners and raised
or lowered furniture.
7. Other reasonable accommodations of this type may include
providing personal assistants such as a reader, interpreter or
travel attendant, permitting the use of accrued paid leave or
providing additional unpaid leave for necessary treatment. The
contractor may also be required to make existing facilities readily
accessible to and usable by individuals with a disability--including
areas used by employees for purposes other than the performance of
essential job functions such as restrooms, break rooms, cafeterias,
lounges, auditoriums, libraries, parking lots and credit unions.
This type of accommodation will enable employees to enjoy equal
benefits and privileges of employment as are enjoyed by employees
who do not have disabilities.
8. Another of the potential accommodations listed in Sec. 60-
741.2(v) is job restructuring. This may involve reallocating or
redistributing those nonessential, marginal job functions which a
qualified individual with a disability cannot perform to another
position. Accordingly, if a clerical employee is occasionally
required to lift heavy boxes containing files, but cannot do so
because of a disability, this task may be reassigned to another
employee. The contractor, however, is not required to reallocate
essential functions, i.e., those functions that the individual who
holds the job would have to perform, with or without reasonable
accommodation, in order to be considered qualified for the position.
For instance, the contractor which has a security guard position
which requires the incumbent to inspect identity cards would not
have to provide a blind individual with an assistant to perform that
duty; in such a case, the assistant would be performing an essential
function of the job for the individual with a disability. Job
restructuring may also involve allowing part-time or modified work
schedules. For instance, flexible or adjusted work schedules could
benefit persons who cannot work a standard schedule because of the
need to obtain medical treatment, or persons with mobility
impairments who depend on a public transportation system that is not
accessible during the hours of a standard schedule.
9. Reasonable accommodation may also include reassignment to a
vacant position. In general, reassignment should be considered only
when accommodation within the individual's current position would
pose an undue hardship. Reassignment is not required for applicants.
However, in making hiring decisions, contractors are encouraged to
consider known applicants with disabilities for all available
positions for which they may be qualified when the position(s)
applied for is unavailable. Reassignment may not be used to limit,
segregate, or otherwise discriminate against employees with
disabilities by forcing reassignments to undesirable positions or to
designated offices or facilities. Employers should reassign the
individual to an equivalent position in terms of pay, status, etc.,
if the individual is qualified, and if the
[[Page 19364]]
position is vacant within a reasonable amount of time. A
``reasonable amount of time'' should be determined in light of the
totality of the circumstances.
10. The contractor may reassign an individual to a lower graded
position if there are no accommodations that would enable the
employee to remain in the current position and there are no vacant
equivalent positions for which the individual is qualified with or
without reasonable accommodation. The contractor may maintain the
reassigned individual with a disability at the salary of the higher
graded position, and must do so if it maintains the salary of
reassigned employees who are not disabled. It should also be noted
that the contractor is not required to promote an individual with a
disability as an accommodation.
11. With respect to the application process, appropriate
accommodations may include the following: (1) providing information
regarding job vacancies in a form accessible to the vision or
hearing impaired, e.g., by making an announcement available in
braille, in large print, or on audio tape, or by responding to job
inquiries via TDDs; (2) providing readers, interpreters and other
similar assistance during the application, testing and interview
process; (3) appropriately adjusting or modifying employment-related
examinations, e.g., extending regular time deadlines, allowing a
blind person or one with a learning disorder such as dyslexia to
provide oral answers for a written test, and permitting an
applicant, regardless of the nature of his or her disability, to
demonstrate skills through alternative techniques and utilization of
adapted tools, aids and devices; and (4) ensuring an applicant with
a mobility impairment full access to testing locations such that the
applicant's test scores accurately reflect the applicant's skills or
aptitude rather than the applicant's mobility impairment.
Appendix B to Part 60-741--Sample Invitation to Self-Identify
Note: When the invitation to self-identify is being extended
prior to an offer of employment, as is permitted in limited
circumstances under Sec. 60-741.42(a), paragraph 2(ii) of this
appendix, relating to identification of reasonable accommodations,
should be omitted. This will avoid a conflict with the EEOC's ADA
Guidance, which in most cases precludes asking a job applicant
(prior to a job offer being made) about potential reasonable
accommodations.
[Sample Invitation to Self-Identify]
1. This employer is a Government contractor subject to section
503 of the Rehabilitation Act of 1973, as amended, which requires
Government contractors to take affirmative action to employ and
advance in employment qualified individuals with disabilities. If
you have a disability and would like to be considered under the
affirmative action program, please tell us. You may inform us of
your desire to benefit under the program at this time and/or at any
time in the future. This information will assist us in placing you
in an appropriate position and in making accommodations for your
disability. [The contractor should here insert a brief provision
summarizing the relevant portion of its affirmative action program.]
Submission of this information is voluntary and refusal to provide
it will not subject you to any adverse treatment. Information you
submit about your disability will be kept confidential, except that
(i) supervisors and managers may be informed regarding restrictions
on the work or duties of individuals with disabilities, and
regarding necessary accommodations; (ii) first aid and safety
personnel may be informed, when and to the extent appropriate, if
the condition might require emergency treatment; and (iii)
Government officials engaged in enforcing laws administered by OFCCP
or the Americans with Disabilities Act, may be informed. The
information provided will be used only in ways that are not
inconsistent with section 503 of the Rehabilitation Act.
2. If you are an individual with a disability, we would like to
include you under the affirmative action program. It would assist us
if you tell us about (i) any special methods, skills, and procedures
which qualify you for positions that you might not otherwise be able
to do because of your disability so that you will be considered for
any positions of that kind, and (ii) the accommodations which we
could make which would enable you to perform the job properly and
safely, including special equipment, changes in the physical layout
of the job, elimination of certain duties relating to the job,
provision of personal assistance services or other accommodations.
Appendix C to Part 60-741--Review of Personnel Processes
The following is a set of procedures which contractors may use
to meet the requirements of Sec. 60-741.44(b):
1. The application or personnel form of each known applicant
with a disability should be annotated to identify each vacancy for
which the applicant was considered, and the form should be quickly
retrievable for review by the Department of Labor and the
contractor's personnel officials for use in investigations and
internal compliance activities.
2. The personnel or application records of each known individual
with a disability should include (i) the identification of each
promotion for which the employee with a disability was considered,
and (ii) the identification of each training program for which the
individual with a disability was considered.
3. In each case where an employee or applicant with a disability
is rejected for employment, promotion, or training, a statement of
the reason should be appended to the personnel file or application
form as well as a description of the accommodations considered. This
statement should be available to the applicant or employee concerned
upon request.
4. Where applicants or employees are selected for hire,
promotion, or training and the contractor undertakes any
accommodation which makes it possible for him or her to place an
individual with a disability on the job, the application form or
personnel record should contain a description of that accommodation.
Appendix D to Part 60-741--Guidelines Regarding Positions Engaged
in Carrying Out a Contract
As stated in Sec. 60-741.4(a)(2), with respect to the
contractor's employment decisions and practices occurring before
October 29, 1992, this part 60-741 applies only to employees who
were employed in, and applicants for, positions that were engaged in
carrying out a Government contract.1 The regulatory definition
has two prongs. Under Sec. 60-741.4(a)(2)(i)(A) (``prong A''),
positions are deemed to have been engaged in carrying out a
Government contract if their duties included work that fulfilled a
contractual obligation, or work that was necessary to, or that
facilitated, performance of the contract or a provision of the
contract. Alternatively, under Sec. 60-741.4(a)(2)(i)(B) (``prong
B''), positions are deemed to have been engaged in carrying out a
Government contract if, pursuant to principles set forth in the
Federal Acquisition Regulation (FAR) at 48 CFR Ch. 1, part 31, the
cost of the positions or a portion of their cost was allocable to a
contract as a direct cost, or 2 percent or more of the cost was
allocable as an indirect cost to Government contracts considered as
a group. This appendix provides guidance as to the application of
prong A of the definition.
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\1\ Prior to October 29, 1992, section 503 applied only insofar
as the contractor was ``employing persons to carry out'' a
Government contract. On that date, the act was amended to apply to
all of a covered contractor's work force, irrespective of whether
particular positions are engaged in carrying out a Government
contract. Accordingly, the guidance contained in this appendix will
be relied on by OFCCP in monitoring and enforcing compliance with
section 503 only with respect to the contractor's employment
decisions and practices occurring before October 29, 1992.
(Moreover, prior to that date, section 503 covered only contractors
holding a contract ``in excess of $2500''; this figure was amended
on October 29, 1992 to ``in excess of $10,000.'' Consequently, this
appendix makes reference to the $2500 threshold level.)
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1. The regulatory definition includes positions whose duties
involved work that fulfilled a contractual obligation. Such work
includes work producing the goods or providing the services that
were the object of the contract and also work that fulfilled
ancillary contract obligations. For example, if a contract required
the contractor to keep certain cost records or to meet certain
quality control standards, employees who were engaged in such
functions were fulfilling a contractual obligation.
2. Positions are also included if their duties included work
that was necessary to or that facilitated performance of the
contract. The inclusion of work of this character is intended to
reflect the practical reality that performance of a contract
generally requires the cooperation of a variety of individuals
engaged in auxiliary and related functions beyond direct production
of the goods or provision of the services that are the object of the
contract.
[[Page 19365]]
3. To give one example, a contract for production and sale of
goods to the Government commonly requires the work not only of the
production employees assembling the goods, but also of those engaged
in functions such as repairing the machinery used in producing the
goods; maintaining the plant and facilities; assuring quality
control and security; storing the goods after production; delivering
them to the Government; hiring, paying, and providing personnel
services for the employees engaged in contract-related work; keeping
financial and accounting records; performing related office and
clerical tasks; and supervising or managing the employees engaged in
such tasks. This list is not intended to be exhaustive, but only to
illustrate that a variety of functions may commonly be involved in
carrying out a contract.
4. Whether a particular position was engaged in carrying out a
contract depends on the facts as to the nature of the duties that
were actually performed and their relationship to contract
performance. A position is included if its duties included work that
furthered or contributed to the performance of the contract. The
work need not have been essential or indispensable to performance of
the contract. It is sufficient that it was useful or that it
benefitted or contributed to carrying out the contract.
5. Nor is it material that the work was not required by an
express contract term. For example, a contract to provide
transportation services may not have explicitly incorporated terms
requiring maintenance and repair of the means of transportation to
keep them in safe operating condition. Such work, however, was
implicitly necessary to carry out the contract.
6. It is irrelevant that the contractor could have performed the
contract some other way, without making use of a particular function
or particular employees, if the way the contractor chose to carry
out the contract does in fact make use of them. For example, if a
contractor employed three quality control inspectors, or used three
quality control processes, to monitor the manufacture of goods for
sale to the Government, all three were involved in carrying out the
contract, notwithstanding any claim that two would have been
sufficient. If a contractor manufactured goods at its plant in St.
Louis for delivery in Chicago, employees who transported the goods
were carrying out the contract, regardless whether the contractor
could have made the goods locally at its plant in Chicago. If a
contractor employed security guards or watchmen to protect its plant
producing goods for the Government from vandalism or theft of
equipment, because in its business judgment it was prudent to do so,
employees who were engaged in those tasks were contributing to
performance of the contract and were covered.
7. If a position's regular duties included work that contributed
to the performance of the contract, and the contract met the act's
dollar threshold for coverage, it is irrelevant that such work was
only a portion of the position's total duties or that it took only a
small amount of time. For example, a Government agency may have
contracted to lease a photocopying machine under terms that
obligated the leasing company to provide repair and maintenance
service. The technician assigned to provide such service was
``carrying out the contract'' regardless whether he or she provided
similar service for numerous private customers and spent only a
small fraction of his or her time working on the agency's machine.
Similarly, individuals who worked on an assembly line manufacturing
automobiles, a portion of which were sold under contract to the
Government, while the bulk were sold commercially, were covered.
That 95% of the vehicles they produced were sold elsewhere does not
negate the fact that the individuals were carrying out the contract
to make vehicles for the Government.
8. A group of employees may also have performed duties that
simultaneously contributed to performance of both Government and
non-Government contracts. In this situation, if the contract
exceeded $2500 and the duties of the position in fact contributed to
carrying out the contract, the position was covered. For example,
the Government may have contracted with airline carriers to provide
transportation to Federal employees performing official duties. The
contract was performed through the work of employees including the
flight crew, the ground maintenance crew, the baggage handlers, the
ticketing agents, the airport and gate staff, and other corporate
personnel. Federal employees probably typically formed only a small
percentage of an airline's passengers. Nonetheless, the pilots who
flew the planes and the other staff were carrying out the terms of
the contract.
9. These principles are illustrated by the final decision of the
Department in OFCCP v. Monongahela Railroad Co., 85-OFC-2
(Administrative Law Judge Recommended Decision, April 2, 1986),
aff'd, (Deputy Under Secretary for Employment Standards, March 11,
1987). Monongahela involved the interpretation of the term
``necessary'' in the context of the definition of the term
``subcontract'' under this part 60-741. ``Subcontract'' is defined
in relevant part as any agreement for the furnishing of supplies or
services ``which in whole or in part is necessary to the performance
of any one or more [Government] contracts.'' The decision held that
a railroad company's transport of coal that was used by a power
company to generate electricity was ``necessary'' to the performance
of the power company's obligation to supply the Government with
power and that the railroad company was therefore a covered
``subcontractor''. The decision reached this result even though
numerous other carriers also transported coal to the power company,
the coal that the carrier delivered was used to generate electricity
for the Government and for nongovernmental customers alike, and the
power company sold only a small fraction (less than 1%) of its
output to the Government. That is, the decision found that the
crucial factor is whether the activity contributes to the
performance of a Government contract, regardless of whether the
contractor could have performed the contract some other way, and
regardless of whether the activity contributes as well, and
predominantly, to carrying out non-Government contracts.
10. Although the act broadly reached all positions that
contributed to or facilitated the performance of the Government
contract, its coverage was not limitless. First, positions were
covered only if they bore an appropriate relationship to a covered
contract. The contract must have been for the purchase, sale, or use
of personal property or nonpersonal services, must have been for an
amount in excess of $2500, and must not have been otherwise exempt.
11. Second, the breadth of coverage depended to a large extent
on how the contractor chose to organize its work force to perform
its contract obligations. A contractor who segregated contract from
noncontract work necessarily employed fewer persons to carry out its
contracts than one who did not. To continue the example given above,
if a plant with several assembly lines produced automobiles, some of
which were shipped to the Government and others sold commercially,
the application of section 503 would have been limited if the
Government contract automobiles were made on only one of the
assembly lines. In that case, employees who were on the other lines,
which never produced automobiles for the Government, were outside
the act. If, however, the contractor did not segregate the contract
from noncontract production, the employees on each of the lines were
covered.
12. Third, while the relationship between the work of a position
and the performance of the contract need not have been direct, the
relationship must have been real and not hypothetical. For example,
a firm may have done substantial business with both the Government
and private customers. Individuals who were employed to plan and
design new facilities that were intended for use with non-Government
work would not be deemed to have been covered merely because of the
possibility that at some point in the future the facilities would be
used to carry out Government contracts. Again, a firm may have been
partly unionized and partly non-unionized. Assume the Government
contract was performed exclusively in the non-union part of the work
force. An individual who was assigned to represent management in
dealing with the union would not have been covered simply because
the arrangements he or she made with the union might subsequently
influence the personnel practices followed for the nonunion
employees as well.
13. Coverage depended on the regular or assigned duties and
responsibilities of the position. A person that held a position did
not go in and out of coverage as she performed first contract and
then noncontract work if, throughout the period, one of the duties
of the position was to perform contract-related work as the need or
occasion arose. For example, the photocopy machine technician who
was assigned responsibility to repair machines leased to the
Government and to private firms was covered throughout the contract
term, including the period before he or she first repaired the
Government's machine. Discrimination against the employee was not
permissible simply because the discrimination was effected on a
[[Page 19366]]
day when the technician was servicing a private firm. Likewise,
workers who were on an assembly line whose products were shipped at
times to the Government and at times to private customers were
covered, as were employees of the airline carrier whose duties
included at times helping to transport Federal employees pursuant to
a contract.
14. On the other hand, a person whose duties were permanently
changed may have gained or lost coverage as a result. For example,
an engineer who had been working on developing weapons under a
contract with the military, and who accordingly was covered, may
have been transferred to work on development of civilian aircraft
for private customers. If the new position did not include any
contract-related duties, the individual lost protection under the
act at the time of the transfer.
15. It is the position's regular or assigned duties that were
controlling. If a portion, however small, of a position's regular
duties was necessary to or facilitated carrying out a Government
contract, the position was covered. On the other hand, the isolated
and unanticipated performance, outside the position's regular
duties, of a contract-related task will not result in a finding of
coverage. For example, suppose another employee of the photocopy
machine company, whose regular duties were in no way contract-
related, was unexpectedly needed to substitute for the technician
who repaired the machine leased to the Government. Assuming
substitution in such situations was not one of the employee's
regular or foreseeable duties, his or her isolated performance of
the task on a particular occasion would not result in a finding of
coverage. In some cases, there will be a formal written position
description that will serve as evidence of the position's actual
duties and responsibilities. In other cases, there may not be a
written position description, or the position description may be
inaccurate or incomplete. In all cases, however, it should be
possible to identify the position's actual duties, and to make a
determination of coverage on that basis.
16. The fact that a position is deemed not to have been engaged
in carrying out a Government contract does not affect the
individual's rights under the Americans with Disabilities Act of
1990.
[FR Doc. 96-9662 Filed 4-30-96; 8:45 am]
BILLING CODE 4510-27-P
Complete official Federal Register PDF
FR Doc. 96-9661 Affirmative Action Obligations of Contractors and Subcontractors for Disabled Veterans and Veterans of the Vietnam Era; Invitation to Self-Identify
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19366-19369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9661]
=======================================================================
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DEPARTMENT OF LABOR
Office of Federal Contract Compliance Programs
41 CFR Part 60-250
RIN 1215-AA62
Affirmative Action Obligations of Contractors and Subcontractors
for Disabled Veterans and Veterans of the Vietnam Era; Invitation to
Self-Identify
AGENCY: Office of Federal Contract Compliance Programs (OFCCP), Labor.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim rule modifies the OFCCP regulation requiring
Government contractors to invite job applicants to inform the
contractor whether the applicant believes that he or she may be covered
by the affirmative action provisions of the Vietnam Era Veterans'
Readjustment Assistance Act of 1974, and wishes to benefit under the
contractor's affirmative action program. These changes are
substantively identical to OFCCP revisions, published elsewhere in this
issue of the Federal Register, to the rule requiring invitations to
self-identify under Section 503 of the Rehabilitation Act of 1973.
Issuing identical rule changes will minimize regulatory burdens,
because Government contractors will not need separate forms, notices
and posters for inviting self-identification under the two affirmative
action laws.
DATES: This interim rule will take effect on August 29, 1996.
OFCCP invites comments on this interim rule. To be assured of
consideration, comments must be in writing and must be received on or
before July 1, 1996.
ADDRESSES: Comments should be sent to Joe N. Kennedy, Deputy Director,
Office of Federal Contract Compliance Programs, Room C--3325-200
Constitution Avenue, N.W., Washington, D.C. 20210.
As a convenience to commenters, OFCCP will accept public comments
transmitted by facsimile (FAX) machine. The telephone number of the FAX
receiver is (202) 219-6195. Only public comments of six or fewer pages
will be accepted via FAX transmittal. This limitation is necessary in
order to assure access to the equipment. Receipt of FAX transmittals
will not be acknowledged, except that the sender may request
confirmation of receipt by calling OFCCP at (202) 219-9430 (voice) or 1
(800) 326-2577 (TDD).
Comments received will be available for public inspection in Room
C-3325, from 9 a.m. to 5 p.m., Monday through Friday, except legal
holidays, from May 15, 1996 until this interim rule is published in
final form. Persons who need assistance to review the comments will be
provided with appropriate aids such as readers or print magnifiers. To
schedule an appointment, call (202) 219-9430 (voice) or 1 (800) 326-
2577 (TDD).
Copies of this interim rule are available in the following
alternative formats: large print, electronic file on computer disk and
audio-tape. Copies may be obtained from OFCCP by calling (202) 219-9430
(voice) or 1 (800) 326-2577 (TDD).
FOR FURTHER INFORMATION CONTACT: Joe N. Kennedy, Deputy Director,
Office of Federal Contract Compliance Programs, Room C-3325, 200
Constitution Avenue NW., Washington, D.C. 20210. Telephone: (202) 219-
9475 (voice), 1 (800) 326-2577 (TDD).
SUPPLEMENTARY INFORMATION:
Background
The affirmative action provisions of the Vietnam Era Veterans'
Readjustment Assistance Act of 1974, as amended, 38 U.S.C. 4212
(Section 4212, VEVRAA, or the Act), require parties holding Government
contracts and subcontracts of $10,000 or more, to ``take affirmative
action to employ and advance in employment qualified special disabled
veterans and veterans of the Vietnam era.'' OFCCP enforces Section 4212
and has published implementing regulations at 41 CFR Part 60-250.
Covered disabled veterans include persons entitled to disability
compensation under the laws administered by the Department of Veterans
Affairs for disability rated at 30 percent or more, and persons whose
discharge or release from active duty was for a disability incurred or
aggravated in the line of duty. 41 CFR 250.2.
Today's interim rule regarding the invitation to self-identify in
41 CFR 60-250.5(d), described in detail below, is prompted by OFCCP's
publication, elsewhere in today's Federal Register, of a final rule
revising the regulations at 41 CFR Part 60-741 implementing Section 503
of the Rehabilitation Act of 1973. Section 503 requires that Government
contractors and subcontractors take affirmative action to employ and
advance in employment qualified individuals with disabilities.
Because of the close similarity between VEVRAA and Section 503 in
terms of their substantive protections and jurisdictional requirements,
these two laws have been treated in tandem by OFCCP and often by
Government contractors as well. For instance, OFCCP's regulations
implementing the two laws historically have been parallel. Many
contractors use the same notices and forms to comply with their
regulatory duties under each law. One such obligation is that
contractors extend to their employees and applicants an invitation to
identify themselves as being covered under the law and wishing to
benefit under the contractor's affirmative action program. Under the
existing VEVRAA regulation at 41 CFR 60-250.5(d), contractors must
extend the invitation to all job
[[Page 19367]]
applicants. By contrast, the new Section 503 rule at 41 CFR 60-
741.42(a) explicitly requires contractors to invite applicants to self-
identify after making offers of employment and before applicants begin
their employment duties. The new Section 503 rule, which is consistent
with standards set under the Americans with Disabilities Act of 1990
(ADA) (42 U.S.C. 12112(d); 29 CFR 1630.13-.14), permits inviting an
applicant to self-identify before a job offer is made only in two
limited circumstances: (i) if the invitation is made when the
contractor actually is undertaking affirmative action at the pre-offer
stage; and (ii) if the invitation is made pursuant to a Federal, state
or local law requiring affirmative action for individuals with
disabilities.
Representatives of Government contractors have expressed concern
that if contractors are faced with a self-identification requirement
under VEVRAA that is different than the requirement under Section 503,
each contractor will have to revise its forms, notices, and posters
when the Section 503 final regulations take effect, and then change
these same forms, notices, and posters again when OFCCP promulgates its
contemplated revisions to the VEVRAA regulations. Consistent with
suggestions by the regulated community, this interim rule modifies the
VEVRAA self-identification regulation to mirror the parallel regulation
under Section 503 and makes these changes effective at the same time as
the new Section 503 regulations.
The Department believes that there is good cause under the
Administrative Procedure Act (APA), 5 U.S.C. 553(b)(B), to issue
today's interim rule without first issuing a proposed rule and
undergoing rulemaking procedures. As noted above, if this interim rule
is not effective at the same time as the Section 503 regulations,
covered contractors will need to have separate forms, notices and
posters for inviting self-identification under the two laws. Delaying
uniformity among these OFCCP rules, as well as with the ADA, will waste
resources within the regulated community and confuse the public as to
the law. In addition, the issues concerning Government contractors'
inviting individuals with disabilities to self-identify to obtain the
benefits of affirmative action programs, and conformance with the Equal
Employment Opportunity Commission's (EEOC) implementation of the ADA,
were already subject to public scrutiny during the Section 503
rulemaking. See, e.g., 57 FR 48084, 48095, 48097, Oct. 21, 1992. The
modifications made to Sec. 60-250.5(d) are in accordance with the
Congressional mandate expressed in the ADA regarding pre-employment
inquiries of the existence of disabilities.
For these reasons, publication of this interim rule in proposed
form prior to the effective date of the Section 503 invitation to self-
identify regulation is impracticable, unnecessary and contrary to the
public interest. Thus, good cause exists under the APA to dispense with
notice of proposed rulemaking.
Summary of the Interim Rule
This interim rule, 41 CFR 60-250.5(d), is substantively the same as
the new Section 503 regulation at 41 CFR 60-741.42; it adopts the
standards contained in the ADA implementing regulations regarding
disability discrimination, but applies these standards to covered
disabled veterans and veterans of the Vietnam era. Much of Sec. 60-
250.5(d), however, will remain the same as it has been since it was
published 20 years ago. (41 FR 26386, 26389, June 25, 1976.) A summary
of the major changes to the previous rule follows.
Paragraph (d)(1) of the interim rule mirrors language in the
Section 503 final rule at Sec. 60-741.42(a). Paragraph (d)(1) requires
the contractor, after making an offer of employment and before the
applicant begins his or her employment duties, to invite applicants to
self-identify in order to benefit from the contractor's affirmative
action program for disabled veterans and veterans of the Vietnam era.
This approach is consistent with the ADA and the EEOC regulation at 29
CFR 1630.14(b), which provides that an employer may require a medical
inquiry after making an offer of employment to a job applicant and
before the applicant begins his or her job duties, if all entering
employees in the same job category are subjected to such an inquiry
regardless of disability.
Paragraphs (d)(2) and (d)(3) provide limited exceptions to the
general requirement of paragraph (d)(1). In paragraph (d)(2),
contractors are permitted to invite disabled veterans to self-identify
before an employment offer has been made only in two limited
circumstances: (i) if the invitation is made when the contractor
actually is undertaking affirmative action for disabled veterans at the
pre-offer stage; or (ii) if the invitation is made under a Federal,
state or local law requiring affirmative action for disabled veterans.
EEOC's October 10, 1995, ``ADA Enforcement Guidance: Preemployment
Disability-Related Questions and Medical Examinations'' also authorizes
pre-employment inquiries in these circumstances. In paragraph (d)(3),
contractors are similarly permitted to make pre-offer invitations to
Vietnam-era veterans to self-identify in limited circumstances: (i) if
the invitation is made when the contractor actually is undertaking
affirmative action for Vietnam-era veterans at the pre-offer stage; or
(ii) if the invitation is made under a Federal, state or local law
requiring affirmative action for Vietnam-era veterans.
Paragraph (d)(4) of the interim rule requires that the invitation
inform the individual that the request to benefit under the
contractor's affirmative action program may be made immediately or at
any time in the future. This revision will help ensure that the
individual is aware that he or she is not precluded from making the
request at a later time whether or not an initial request was made. For
example, a covered veteran simply may choose not to self-identify
before beginning work, but may wish to do so later.
Paragraph (d)(4) also requires that the contractor maintain a
separate file on applicants and employees who have identified
themselves as covered disabled veterans or Vietnam-era veterans and
provide that file to OFCCP upon request. This requirement parallels 41
CFR Sec. 60-741.42(b), and is consistent with separate file
requirements already existing under the ADA (42 U.S.C. 12112(d)(3)(B);
29 CFR 1630.14(b)(1)). For many years, the VEVRAA regulations have
required contractors to maintain the confidentiality of this
information, and the explicit requirement for separate files of such
information aids in the protection of the records' confidentiality.
Paragraph (d)(5) of the interim rule mirrors Sec. 60-741.42(c).
This provision clarifies that nothing in this section relieves the
contractor of its obligation to take affirmative action with respect to
those applicants or employees who are known to the contractor to be
disabled veterans or Vietnam-era veterans. The invitation to self-
identify is not the only affirmative action requirement under VEVRAA.
This provision merely helps to ensure that contractors are not confused
about this important point. For example, as stated in current Sec. 60-
250.6(b), ``[c]ontractors shall review their personnel processes to
determine whether their present procedures assure careful, thorough and
systematic consideration of the job qualifications of known disabled
veteran applicants and Vietnam era veteran applicants for job vacancies
filled either by hiring or promotion, and for all training
opportunities offered or available.''
[[Page 19368]]
Paragraph (d)(6) provides that nothing in this section relieves the
contractor from liability for discrimination under the Act. This
provision is identical to language in the current VEVRAA regulation and
to the language in Sec. 60-741.42(d), and is merely organized into its
own subparagraph.
The contractor may develop its own invitation for complying with
Sec. 60-250.5(d), although an acceptable form of such invitation is set
forth in revised Appendix A to Part 60-250. This amended appendix is
substantially similar to the current Appendix A, but incorporates a
number of changes to the appendix to conform it to the requirements of
revised Sec. 60-250.5(d). For instance, amended Appendix A clarifies
that the information submitted to the contractor will be used to assist
it in placing the individual in an appropriate position and in making
appropriate accommodations, and that the information will be used only
in accordance with the Act and the regulations. New Appendix A also
specifies that the contractor should incorporate into the invitation a
brief summary of the relevant portion of its affirmative action
program.
Regulatory Procedures
Executive Order 12866
This interim rule is issued in conformance with Executive Order
12866. This interim rule has been determined not to be significant for
purposes of Executive Order 12866 and therefore need not be reviewed by
OMB. This interim rule does not meet the criteria of Section 3(f)(1) of
Executive Order 12866 and therefore the information listed in Section
6(a)(3)(C) of that Order is not required.
This conclusion is based on the fact that this interim rule does
not substantively change the existing obligation of Federal contractors
to apply a policy of nondiscrimination and affirmative action in their
employment of qualified special disabled veterans and veterans of the
Vietnam era. Although the rule generally conforms the existing Section
4212 regulation regarding the invitation to self-identify to the new
Section 503 rule, it does not significantly alter the substance of the
existing provisions.
Regulatory Flexibility Act
The interim rule will retain consistency, and avoid confusion and
conflict, between the Section 4212 regulation requiring larger
Government contractors to provide an invitation to self-identify and
the parallel Section 503 regulation. Moreover, these two regulations
conform to the ADA nondiscrimination requirements applicable to private
and State and local government employers with 15 or more employees. In
view of this regulatory consistency and because the interim rule does
not substantively change existing obligations for Federal contractors,
we certify that the rule will not have a significant economic impact on
a substantial number of small business entities. Therefore, under the
Regulatory Flexibility Act, 5 U.S.C. 605(b), a regulatory flexibility
analysis is not required.
Unfunded Mandates Reform Act
This interim rule does not include any Federal mandate that may
result in the expenditure by State, local and tribal governments in the
aggregate, or by the private sector, of $100,000,000 or more in any one
year.
Paperwork Reduction Act
The interim rule requires those contractors who, for affirmative
action purposes, invite applicants and employees to identify themselves
as covered disabled veterans or veterans of the Vietnam era to maintain
a separate file on such applicants and employees. This recordkeeping
provision is the same as that contained in the Section 503 final rule,
41 CFR Sec. 60-741.42(b). Approximately 89,000 Federal service and
supply contractors and 100,000 Federal construction contractors are
subject to VEVRAA and Section 503.
OFCCP does not believe that this requirement will result in
increased recordkeeping burdens for contractors. OFCCP believes that a
number of contractors may already have maintained separate files on
such applicants and employees in order to implement the VEVRAA
confidentiality requirements. In addition, the ADA presently requires
employers with 15 or more employees to maintain on separate forms and
in separate medical files information obtained regarding the medical
condition or history of applicants and to treat this information as
confidential medical records (42 U.S.C. 12112(d)(3)(B); 29 CFR
1630.14(b)(1)). Furthermore, because the invitation to self-identify is
only required by the interim rule to occur after a job offer has been
made, and not to all applicants, there will be fewer records of self-
identification being generated than in the past. Therefore, although
the recordkeeping language in the interim rule is more expansive than
that in the current VEVRAA regulations, OFCCP does not believe it will
result in increased recordkeeping burdens.
As noted above, OFCCP believes that by issuing this interim rule to
be effective at the same time as the Section 503 regulations, the
covered contractors' paperwork requirements will be minimized because
there will not be a need to have separate forms, notices and posters
for inviting self-identification under VEVRAA and Section 503.
Uniformity among the implementing regulations of VEVRAA, Section 503
and the ADA, will also minimize confusion and, therefore, help to
ensure the greatest public benefit associated with these Federal
programs.
It is also important to note that the interim rule retains a sample
invitation in Appendix A to Part 60-250. Thus, the interim rule
minimizes the burden on contractors of designing their own invitations,
while preserving flexibility for those contractors who currently use,
or decide to develop, different but otherwise effective and appropriate
forms of invitation.
Information collection under the VEVRAA regulations, and under the
Section 503 regulations, is covered by OMB control numbers 1215-0072
and 1215-0163. The interim rule's recordkeeping requirements have been
submitted to OMB under the Paperwork Reduction Act (PRA), 44 U.S.C.
3501. OFCCP solicits comments concerning the interim rule's collection
of information to: (i) 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; (ii) evaluate the accuracy of the agency's estimate of the
burden of the proposed collection of information, including the
validity of methodology and assumptions used; (iii) enhance the
quality, utility and clarity of the information to be collected; and
(iv) 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. The new recordkeeping requirement in the
interim rule is not effective until OFCCP displays a currently valid
OMB control number. Upon receipt of that number, which OFCCP
anticipates will take between 90 and 120 days, OFCCP will publish a
document in the Federal Register.
Request for Public Comments
OFCCP requests public comment on the provisions of the interim
rule. OFCCP invites written views from all interested parties,
including public and
[[Page 19369]]
private disability organizations, veterans representatives, private and
State and local government contractors with the Federal Government,
Federal contracting agencies, and concerned individuals. OFCCP will
consider the public comments in developing a final rule.
List of Subjects in 41 CFR Part 60-250
Administrative practice and procedure, Civil rights, Employment,
Equal employment opportunity, Government contracts, Government
procurement, Investigations, Reporting and recordkeeping requirements,
Veterans.
Signed at Washington, D.C. this 12th day of April, 1996.
Robert B. Reich,
Secretary of Labor.
Bernard E. Anderson,
Assistant Secretary for Employment Standards.
Shirley J. Wilcher,
Deputy Assistant Secretary for Federal Contract Compliance.
For the reasons set forth above, 41 CFR Part 60-250 is amended as
set forth below.
PART 60-250--AFFIRMATIVE ACTION OBLIGATIONS OF CONTRACTORS AND
SUBCONTRACTORS FOR DISABLED VETERANS AND VETERANS OF THE VIETNAM
ERA
1. The authority citation for Part 60-250 is revised to read as
follows:
Authority: 29 U.S.C. 793; 38 U.S.C. 4211 and 4212; Executive
Order 11758 (3 CFR, 1971-1975 Comp., p. 841).
2. Section 60-250.5 is amended by revising paragraph (d) to read as
follows:
Sec. 60-250.5 Applicability of the affirmative action program
requirement.
* * * * *
(d) Invitation to self-identify. (1) Except as provided in
paragraphs (d) (2) and (3) of this section, the contractor shall, after
making an offer of employment to a job applicant and before the
applicant begins his or her employment duties, invite the applicant to
inform the contractor whether the applicant believes that he or she may
be covered by the Act and wishes to benefit under the affirmative
action program.
(2) The contractor may invite disabled veterans to self-identify
prior to making a job offer only when:
(i) The invitation is made when the contractor actually is
undertaking affirmative action for disabled veterans at the pre-offer
stage; or
(ii) The invitation is made pursuant to a Federal, state or local
law requiring affirmative action for disabled veterans.
(3) The contractor may invite veterans of the Vietnam era to self-
identify prior to making a job offer only when:
(i) The invitation is made when the contractor actually is
undertaking affirmative action for veterans of the Vietnam era at the
pre-offer stage; or
(ii) The invitation is made pursuant to a Federal, state or local
law requiring affirmative action for veterans of the Vietnam era.
(4) The invitation referenced in paragraphs (d)(1) through (3) of
this section shall state that a request to benefit under the
affirmative action program may be made immediately and/or at any time
in the future. The invitation also shall summarize the relevant
portions of the Act and the contractor's affirmative action program.
Furthermore, the invitation shall state that the information is being
requested on a voluntary basis, that it will be kept confidential, that
refusal to provide it will not subject the applicant to any adverse
treatment, and that it will not be used in a manner inconsistent with
the Act. If an applicant so identifies himself or herself, the
contractor should also seek the advice of the applicant regarding
proper placement and appropriate accommodation, after a job offer has
been extended. The contractor also may make such inquiries to the
extent they are consistent with the Americans with Disabilities Act of
1990 (ADA), 42 U.S.C. 12101, (e.g., in the context of asking applicants
to describe or demonstrate how they would perform the job). The
contractor shall maintain a separate file on persons who have self-
identified and provide that file to OFCCP upon request. This
information may be used only in accordance with this part. (An
acceptable form for such an invitation is set forth in Appendix A of
this part. Because a contractor usually may not seek advice from an
applicant regarding placement and accommodation until after a job offer
has been extended, the invitation set forth in Appendix A of this part
contains instructions regarding modifications to be made if it is used
at the pre-offer stage.)
(5) Nothing in this section shall relieve the contractor of its
obligation to take affirmative action with respect to those applicants
or employees who are known to the contractor be disabled veterans or
veterans of the Vietnam era.
(6) Nothing in this section shall relieve the contractor from
liability for discrimination under the Act.
3. Appendix A to Part 60-250 is revised to read as follows:
Appendix A to Part 60-250--Sample Invitation to Self-Identify
Note: When the invitation to self-identify is being extended
prior to an offer of employment, as is permitted in limited
circumstances under Sec. 60-250.5(d)(2) and (3), paragraph 2(ii) of
this appendix, relating to identification of reasonable
accommodations, should be omitted. This will avoid a conflict with
the EEOC's Americans with Disabilities Act (ADA) Guidance, which in
most cases precludes asking a job applicant (prior to a job offer
being made) about potential reasonable accommodations.
[Sample Invitation to Self-Identify]
1. This employer is a Government contractor subject to the
Vietnam Era Veterans' Readjustment Assistance Act of 1974, as
amended, which requires Government contractors to take affirmative
action to employ and advance in employment qualified disabled
veterans and veterans of the Vietnam era covered by the Act. If you
are a disabled veteran or veteran of the Vietnam era covered by the
Act and would like to be considered under the affirmative action
program, please tell us. You may inform us of your desire to benefit
under the program at this time and/or at any time in the future.
This information will assist us in placing you in an appropriate
position and in making accommodations for your disability if you are
a disabled veteran. [The contractor should here insert a brief
provision summarizing the relevant portion of its affirmative action
program.] Submission of this information is voluntary and refusal to
provide it will not subject you to any adverse treatment.
Information you submit will be kept confidential, except that (i)
supervisors and managers may be informed regarding restrictions on
the work or duties of disabled veterans, and regarding necessary
accommodations; (ii) first aid and safety personnel may be informed,
when and to the extent appropriate, if the condition might require
emergency treatment; and (iii) Government officials engaged in
enforcing laws administered by OFCCP or the Americans with
Disabilities Act, may be informed. The information provided will be
used only in ways that are not inconsistent with the Vietnam Era
Veterans' Readjustment Assistance Act of 1974, as amended.
2. If you are a disabled veteran or a veteran of the Vietnam era
covered by the Act, we would like to include you under the
affirmative action program. If you are a disabled veteran it would
assist us if you tell us about (i) any special methods, skills, and
procedures which qualify you for positions that you might not
otherwise be able to do because of your disability so that you will
be considered for any positions of that kind, and (ii) the
accommodations which we could make which would enable you to perform
the job properly and safely, including special equipment, changes in
the physical layout of the job, elimination of certain duties
relating to the job, provision of personal assistance services or
other accommodations.
[FR Doc. 96-9661 Filed 4-30-96; 8:45 am]
BILLING CODE 4510-27-P
Complete official Federal Register PDF
FR Doc. 96-10823 Revisions to Maintenance and Preventive Maintenance Rule
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19498-19502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10823]
[[Page 19497]]
_______________________________________________________________________
Part IX
Department of Transportation
_______________________________________________________________________
Federal Aviation Administration
_______________________________________________________________________
14 CFR Part 43
Revisions to Maintenance and Preventive Maintenance Rule; Final Rule
Federal Register / Vol. 61, No. 85 / Wednesday, May 1, 1996 / Rules
and Regulations
[[Page 19498]]
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 43
[Docket No. 28273; Amendment No. 43-36]
RIN 2120-AE57
Revisions to Maintenance and Preventive Maintenance Rule
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This rule amends the maintenance rules to allow properly
trained pilots of aircraft type certificated for 9 or fewer passenger
seats and operated under 14 CFR Part 135 to perform certain maintenance
tasks on their aircraft. This rule also adds certain tasks to those
items considered to be preventive maintenance. The changes are needed
because a large number of exemption requests has demonstrated a need
for pilots conducting certain types of operations to be able to respond
more rapidly to emergency medical missions and to reconfigure cabins to
accommodate changing needs to transport varying combinations of
passenger and/or cargo in situations when a certificated mechanic is
not available to perform the required maintenance task. This rule will
improve emergency response and flight turnaround times for these
operations, and will relieve the public and agency burdens of filing
and processing exemptions.
EFFECTIVE DATE: May 31, 1996.
FOR FURTHER INFORMATION CONTACT: Edward L. Ortiz, General Aviation
Commercial Branch (AFS-340), Aircraft Maintenance Division, Federal
Aviation Administration, 800 Independence Avenue, S.W., Washington,
D.C. 20591, (202) 267-8203.
SUPPLEMENTARY INFORMATION:
Background
Statement of the Problem
Many small air carriers operating under 14 CFR part 135 (part 135)
perform missions in locations where or during times when a certificated
mechanic may not be available to perform certain maintenance tasks that
need immediate attention. These air carriers provide emergency
ambulance service; transport internal organs for emergency medical
treatment; transport packages, parts, and electronic equipment whose
delivery is of a time-critical nature; and provide normal passenger-
carrying service, occasionally with freight as a secondary load.
Because the demand for these services varies and, especially in the
case of medical emergency calls, arises at all times of the day, it is
impossible for air carriers to anticipate airplane configuration
requirements.
Performing cabin conversions to aircraft operating under part 135
is considered either maintenance (if extensive) or preventive
maintenance (if simple), and must currently be performed by a
certificated mechanic as required by Sec. 43.3. Similarly, the removal
and replacement of medical oxygen bottles is considered maintenance and
must be performed by a certificated mechanic.
For many carriers, locating a mechanic each time a request for
service occurs creates lengthy delays that are costly and could be
potentially life threatening to injured or ill passengers. Similarly,
providing a maintenance crew on ``24-hour call'' is cost prohibitive
for many carriers.
In addition to imposing these burdens, the current regulations also
prohibit general aviation pilots from removing and replacing easily
removable communication and navigation devices, and from updating
easily replaceable data bases. Certain aviation communication and
navigation systems are now designed for easy removal and data base
update. Many privately-owned aircraft owners and operators prefer to
remove this self-contained equipment (a job that normally requires only
an allen wrench and no disassembly of the unit) to prevent theft. They
also would like to be able to insert flight plans or update the Air
Traffic Control (ATC) software data base. Current regulations require
that a mechanic perform these tasks.
History
The FAA has addressed over 250 petitions for exemption from the
sections of part 43 governing these ``maintenance'' items. A majority
of these petitions were from nonhelicopter, air taxi operators who
learned from local FAA inspectors that their pilots are not authorized
to reconfigure their cabins or exchange medical oxygen bottles. The
petitions for exemption highlight several common issues: (1) Many small
part 135 air carriers operate in areas where they undergo a hardship
due to their regions' lack of certificated mechanics; (2) Many others
operate during times when certificated mechanics are not normally on
duty (these missions are usually time-critical); and (3) Many of these
operators are unable to operate their aircraft in only one
configuration. Passenger-to-cargo or passenger-to-stretcher conversion
ensures the most efficient utilization of cabin space on each flight.
In most instances, seats stretchers, base assemblies, and other items
used in the conversion are approved for aircraft installation, and the
procedures for installation and removal are designed to be accomplished
safely by a trained person.
Historically, the FAA has granted exemptions to permit pilots of
aircraft operated under part 135 to perform seat removal and
replacement tasks only if the aircraft were operated in remote areas
such as the Alaskan bush or sparsely populated areas of the
Northwestern United States. Certificated mechanics servicing these
areas are scarce. Many of the operations include such essential
services as flying food, mail, needed goods, and people into and out of
areas that may not be accessible by other modes of transportation.
More recently, however, exemptions have been granted to part 135
air carriers to permit their properly trained pilots to reconfigure
cabin seats when flying missions of an emergency nature during times--
at night and on weekends--when certificated mechanics are not normally
available, and when a time delay incurred by locating a mechanic could
cause undue burden or create a life-threatening situation.
The FAA has determined that if a properly trained pilot can change
seat configurations in a remote area where a certificated mechanic is
not available (and which might be performed under adverse conditions),
he or she would be capable of and should be allowed to perform the same
conversions under better conditions such as those present at the
operator's maintenance base.
Passenger-to-cargo and passenger-to-stretcher conversions have been
performed safely by pilots who have been trained to do so and who are
employed by air carriers holding exemptions allowing their pilots to
perform the tasks. No reported incidents or accidents have been
attributed to properly trained pilots changing aircraft cabin
configurations. If an air taxi operator develops an appropriate program
for performing seat conversions and appropriately instructs and trains
its pilots according to the program, safety levels equivalent to those
achieved by certificated mechanics will be maintained.
Also, on January 10, 1994, the FAA published a Request for Comments
(59 FR 1326; docket No. 27581) to solicit from the public a list of
those regulations that are believed to be unwarranted or inappropriate.
The
[[Page 19499]]
agency received eight comments that addressed the maintenance and
preventive maintenance regulations of part 43. The commenters noted
that current regulations do not allow a pilot of a part 135 operator to
remove and reinstall aircraft cabin seats and stretchers. The comments
feel that the current regulations are unnecessary and are financially
and physically burdensome. They point out that the FAA has issued a
number of exemptions to relieve the burden, and that the exemption
process itself is burdensome and time consuming.
The FAA has determined that the concern shown for this issue is
significant, and that this rulemaking action is consistent with the
agency's responsibility to review the continuing need for its
regulations and to eliminate regulations that impose unnecessary
burdens.
Related Rulemaking
The Aviation Rulemaking Advisory Committee (ARAC), which is a
committee composed of aviation community and FAA personnel, has been
tasked with reviewing part 43 and Appendix A to determine what
revisions, if any, should be made. The FAA has not yet received any
recommendations.
The Current Rule
Part 43 requires air carriers to use certificated mechanics for
their aircrafts' maintenance and preventive maintenance needs. This
requirement reflects an FAA policy that passengers of all aircraft be
given a high degree of safety protection through the proper
installation of cabin seats and appointments. As outlined in Appendix
A, paragraph (c), of this part, removal and replacement of aircraft
seats is considered preventive maintenance.
Several years ago, the FAA recognized the need for pilots operating
helicopters under part 135 to be able to perform certain preventive
maintenance tasks when operating in remote areas. Accordingly, the
agency amended part 43, effective January 6, 1987 (51 FR 40702, Nov. 7,
1986), by adding a new Sec. 43.3(h), which authorizes part 135
certificate holders to allow their pilots, when operating rotorcraft,
to perform specific preventive maintenance tasks, under the following
conditions:
(1) The items of preventive maintenance must be a result of a known
or suspected mechanical difficulty or malfunction that occurred en
route to or in a remote area.
(2) The pilot must have satisfactorily completed an approved
training program and is authorized, in writing, by the certificate
holder for each item of preventive maintenance that the pilot is
authorized to perform.
(3) There must be no certificated mechanic available to perform
preventive maintenance.
(4) The certificate holder must have procedures to evaluate the
accomplishment of a preventive maintenance item that requires a
decision concerning the airworthiness of the rotorcraft.
(5) The items of preventive maintenance authorized by this section
must be those listed in paragraph (c) of Appendix A of part 43.
Discussion of Comments
A Notice of Proposed Rulemaking (NPRM) entitled ``Revisions to
Maintenance and Preventive Maintenance'' was published on July 18, 1995
(60 FR 36926), which solicited public comment. Forty comments were
received. Thirty-one commenters agree with the proposal as published.
Five commenters believe that airplanes with 10 to 19 passenger
seats should be included in the rulemaking, and one commenter believes
that rotorcraft with 10 or more seats should be similarly included. The
FAA disagrees. This rulemaking was precipitated by the volume of
exemption requests that were filed by operators who needed a shorter
turn-around time to respond to emergency medical missions and other
time sensitive operations, or who operated in areas where a
certificated mechanic was not available. Almost all of the exemption
requests were filed by operators whose airplanes are configured with
nine or fewer passenger seats. As stated in the NPRM, the FAA continues
to find that operators of aircraft type certificated for 10 or more
passenger seats are required to have a maintenance organization in
place to support their part 135 operations, and their aircraft tend to
be more complex in design and construction. The FAA will continue to
address operations using aircraft configured with 10 or more passenger
seats on a case by case basis. There will be no change to the proposed
rule as a result of these comments.
One commenter suggests that the regulatory language in Sec. 43.3(h)
be amended to include fixed wing aircraft with nine or fewer passenger
seats. The FAA disagrees. This rulemaking addresses specific tasks
associated with specific operations, and the suggestions of the
commenter are outside the scope of this action. There will be no change
to the proposed rule as a result of these comments.
One commenter proposes that the word ``aircraft'' be changed to
read ``airplane.'' The FAA disagrees. The rule is intended to include
rotorcraft so helicopter pilots can also perform the tasks prescribed
that allow for a shorter turn around in emergency situations. Without
the term ``aircraft,'' helicopter pilots transporting patients, for
instance, would not be allowed to reconfigure their cabins without an
exemption. The commenter also proposes that the word ``fewer'' be
replaced by the old term ``less'' in the context ``nine or fewer.'' The
FAA recognizes that people are familiar with the hold terminology, but
the agency is moving in a direction to correct grammatical errors
whenever rules are revised. The new term, ``nine or fewer'' is being
incorporated into new rulemaking efforts. There will be no change to
the proposed rule as a result of these comments.
The same commenter is concerned about the phrase in paragraph (i)
that says ``may perform the removal and reinstallation of approved
aircraft cabin-mounted seats. . .'' He suggests that the sentence
should include a reference to maintenance and preventive maintenance,
as stated in the section title, and that the term ``aircraft'' should
again read ``airplane.'' The FAA disagrees. The title of the section is
sufficient without repeating it in paragraph (i); the redundancy would
not clarify the rule language, but would rather make it more
cumbersome. The argument for ``aircraft'' vs. ``airplane'' is addressed
above. There will be no change to the proposed rule as a result of
these comments.
The same commenter suggests that the rule should allow pilots of
part 135 rotorcraft to perform the functions. The FAA agrees and will
retain the term ``aircraft'' in the rule language. The commenter
suggests that the reference to part 135 be removed from Sec. 43.3(g),
which, he states, would eliminate the need for paragraph (h) and (i).
He also suggests that current paragraphs (h) (2), (3), (4), and (5)
should be incorporated into existing paragraph (g), and that existing
paragraph [i] should be redesignated as new paragraph (h). Under this
scheme, existing paragraph (h)(1) would be eliminated. He also suggests
that the new rule should add the removal and reinstallation of
stretchers and cabin-mounted medical oxygen bottles to [paragraph (c)
of] Appendix A. The FAA disagrees. Removing the reference to part 135
from Sec. 43.3(g) would allow pilots to perform any of the tasks listed
in paragraph (c) of Appendix A. The purpose of this rulemaking is to
allow pilots performing specific operations to perform only
[[Page 19500]]
certain tasks relevant to the operation. Pilots are hired to fly
aircraft, not to perform maintenance and preventive maintenance in all
areas on a regular basis. Moreover, the suggestion to incorporate
existing paragraphs (h) (2), (3), (4), and (5) into existing paragraph
(g) would have the unintended effect of having general aviation pilots,
who operate under part 91, meet requirements intended and adopted for
rotorcraft pilots who operate under part 135 in order to perform
preventive maintenance tasks. The suggestion to revise Sec. 43.3(g) is
outside the scope of this rulemaking and no change to the proposal will
be made pursuant to the suggestion.
Two commeters point out that removing and replacing navigation and
communication devices (paragraph (c)(31)) could adversely affect safety
if the connectors are not properly engaged upon reinstallation and no
operational check is performed. The FAA agrees, and has revised the
proposed rule language to reflect that the panel-mounted device must be
a front loading device that employs a tray-mounted connector that
connects the unit when the unit is installed into the instrument panel.
Language has also been added to paragraphs (c)(31) and (c)(32) to
require an operational check prior to use, in accordance with the
applicable sections of part 91. Depending on the type of flight and/or
the type of equipment, a pilot would have to comply with FAA91.407 or
Sec. 91.171.
One of these commenters also suggests that procedures on how to
perform the maintenance task and any testing required to determine if
the equipment is serviceable after maintenance is performed, should be
documented in the aircraft flight manual. The FAA agrees that the
information should be made available to the pilot, but will not
restrict the location of the material to the flight manual. Paragraph
(i)(2) has been revised to require the certificate holder to have
written procedures available to the pilot to evaluate the
accomplishment of the task.
The same commenter states that the tasks permitted in this
rulemaking should be allowed only when there is no maintenance
personnel available. The FAA disagrees. During rulemaking proceedings,
the FAA examined this issue extensively. The definition of
``availability'' is complex enough that in this case, it was determined
that if a pilot is properly trained to perform the tasks, he or she
should be permitted to perform them whenever needed during operations
described in this rulemaking action. Over 250 exemptions have been
granted by the FAA to allow pilots to perform the tasks described here,
with no adverse effect on safety. Therefore, no change will be made to
the proposal as a result of this comment.
International Compatibility
The FAA has reviewed corresponding International Civil Aviation
Organization regulations and Joint Aviation Authority regulations,
where they exist, and has identified no differences in these proposed
amendments and the foreign regulations.
Paperwork Reduction Act
Information collection requirements in the amendment to Sec. 43.3
have been previously approved by the Office of the Management and
Budget (OMB) under the provisions of the Paperwork Reduction Act of
1980 (Pub. L. 96-511) and have been assigned PMB Control Number 2120-
0021. For further information contact: the Information Requirements
Division, M-34, Office of the Secretary of Transportation, 400 Seventh
Street, SW., Washington, DC 20590, (202) 366-4735.
Regulatory Evaluation Summary
Executive Order 12866 established the requirement that, within the
extent permitted by law, a Federal regulatory action may be undertaken
only if the potential benefits to society for the regulation outweigh
the potential costs to society. In response to this requirement, and in
accordance with Department of Transportation policies and procedures,
the FAA has estimated the anticipated benefits and costs of this
rulemaking action. The FAA has determined that this rule change is not
a significant rulemaking action as defined by Executive Order 12866
(Regulatory Planning and Review). The results are summarized in this
section. For more detailed economic information, see the full
regulatory evaluation contained in the docket.
This rule is cost relieving because it eliminates the need for
operators to carry mechanics on trips to remote areas or make special
trips to maintenance facilities for the purpose of altering seat
configurations or exchanging medical oxygen bottles. Currently, even if
a mechanic is not needed on a regular basis at a remote site, operators
may have to hire the services of a local mechanic to reconfigure a
cabin, which can be especially expensive for emergency medical
evacuation operations conducted at night during off-duty hours. For the
purposes of this regulatory evaluation, the FAA assumes that typical
air taxi operators that fly into remote areas where mechanics are
scarce could make 36 trips per year that require cabin configuration.
The FAA further assumes that a pilot flying into a remote area has to
fly the airplane for an additional hour (roundtrip) to a larger airport
where a mechanic is available to perform the required maintenance.
The FAA estimates that a mechanic will have to be paid for \1/2\
hour of working time at a loaded wage rate (including benefits) of
$18.16 per hour. The FAA also estimates that, in the event a cabin
reconfiguration is needed in a remote area, the airplane burns an
additional 30 gallons of fuel during the one hour of flying time needed
to reach an available mechanic, which adds $60 to operating costs. The
additional cost per trip amounts to $69. On an annual basis, these
cost-savings amount to $2,484 ($69 x 36) based on the assumption of 36
trips per year. The FAA further estimates that at least 30 operators
per year have a recurring need to reconfigure cabins in remote areas
based on the number of requests for exemption from the requirements of
Sec. 43.3 submitted to the FAA each year. This number is a very
conservative estimate; many air taxi operators are unaware of this
option and forego the additional revenue that could be earned through
reconfiguring their cabins. The FAA estimates that industry-wide cost
savings from the proposed rule amendment amount to $74,520 per year
($2,484 x 30). Over a 10-year period, the discounted value of these
cost savings amounts to $523,382.
Since January 1987, part 135 rotorcraft operators have been
permitted to allow their pilots to perform certain preventive
maintenance tasks, under very limited specified conditions, one of
which is that the item of preventive maintenance must be the result of
a malfunction that occurred en route to or in a remote area. In
addition, numerous exemptions that permitted pilots of aircraft
operating under part 135 to reconfigure cabins were granted to
operators of rotorcraft. Each of the above authorizations contained a
requirement that the pilot be properly trained for the preventive
maintenance task that would be undertaken. Rotorcraft pilots operating
under part 91 rules are authorized to perform preventive maintenance
tasks under Sec. 43.3(g).
National Transportation Safety Board (NTSB) accident reports reveal
no instance of rotorcraft accidents where the removal and replacement
of cabin seats by a rotorcraft pilot was suspected as a possible cause.
In fact, a search of the FAA and NTSB accident and incident data
recorded for part 91 and
[[Page 19501]]
part 135 operations over the 1972-present period did not reveal a
single instance in which the performance by a pilot of any of the tasks
that would be authorized in this final rule were suspected as having
had a causal role in an accident. The FAA has therefore determined that
this final rule is cost relieving and will not reduce the current level
of safety.
In the NPRM, the FAA solicited information from the public to
refine its estimate of cost savings. No comments were received.
International Trade Impact Analysis
This rule will affect only those operators engaged in part 135
operations of a localized or regional nature. No impact is expected on
international trade because these domestic operators seldom compete
with foreign firms in the markets they serve.
Regulatory Flexibility Determination
The Regulatory Flexibility Act of 1980 (RFA) was enacted by
Congress to ensure that small entities are not unnecessarily and
disproportionately burdened by government regulations. The RFA requires
agencies to review rules that may have ``a significant economic impact
on a substantial number of small entities.'' This final rule is of a
cost relieving nature and will therefore afford cost savings to
individual part 135 operators.
Under FAA Order 2100.14A, the criterion for a ``substantial
number'' is a number that is not less than 11 and that is more than one
third of the small entities subject to the rule. This rule will affect
all part 135 operators who operate aircraft type certificated for 9 or
fewer passenger seats. For operators of aircraft for hire, a small
operator is one that owns, but not necessarily operates, nine or fewer
aircraft.
The FAA's criterion for a ``significant impact'' is $4,330 or more
per year for a unscheduled operator. The extent of the cost savings per
operator is estimated at $2,484 per operator in the section on economic
impacts. The FAA concludes, therefore, that this rule will not have a
significant economic impact, positive or negative, on a substantial
number of small entities.
Federalism Implications
This final rule will not have substantial direct effects on the
States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Therefore, in accordance with Executive
Order 12612, it is determined that this rule will not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment.
Conclusion
For the reasons discussed in the preamble, and based on the
findings in the Regulatory Flexibility Determination and the
International Trade Impact Analysis, the FAA has determined that this
final rule is not a significant regulatory action under Executive Order
12866. In addition, the FAA certifies that this final rule will not
have a significant economic impact, positive or negative, on a
substantial number of small entities under the criteria of the
Regulatory Flexibility Act. This rule is considered nonsignificant
under Order DOT 2100.5, Policies and Procedures for Simplification,
Analysis, and Review of Regulations. A regulatory evaluation of the
rule, including an initial Regulatory Flexibility Determination and
International Trade Impact Analysis, has been placed in the docket. A
copy may be obtained by contacting the person identified under FOR
FURTHER INFORMATION CONTACT.
List of Subjects 14 CFR Part 43
Aircraft, Aviation safety, Reporting and recordkeeping
requirements.
The Amendment
In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 43 of the Federal Aviation
Regulations as follows:
PART 43--MAINTENANCE, PREVENTIVE MAINTENANCE, REBUILDING, AND
ALTERATION
1. The authority citation for part 43 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701, 44703, 44705, 44707,
44711, 44713, 44717.
2. In Sec. 43.3, paragraph (i) is redesignated as paragraph (j),
and a new paragraph (i) is added to read as follows:
Sec. 43.3 Persons authorized to perform maintenance, preventive
maintenance, rebuilding, and alterations.
* * * * *
(i) Notwithstanding the provisions of paragraph (g) of this
section, in accordance with an approval issued to the holder of a
certificate issued under part 135 of this chapter, a pilot of an
aircraft type-certificated for 9 or fewer passenger seats, excluding
any pilot seat, may perform the removal and reinstallation of approved
aircraft cabin seats, approved cabin-mounted stretchers, and when no
tools are required, approved cabin-mounted medical oxygen bottles,
provided--
(1) The pilot has satisfactorily completed an approved training
program and is authorized in writing by the certificate holder to
perform each task; and
(2) The certificate holder has written procedures available to the
pilot to evaluate the accomplishment of the task.
* * * * *
3. In Appendix A to part 43, paragraph (c)(30)(i), the reference
``Sec. 147.21(f)'' is revised to read ``Sec. 147.21(e) of this
chapter.''
4. In Appendix A to part 43, paragraphs (c)(31) and (c)(32) are
added to read as follows:
Appendix A to Part 43--Major Alterations, Major Repairs, and
Preventive Maintenance
* * * * *
(c) * * *
(31) Removing and replacing self-contained, front instrument panel-
mounted navigation and communication devices that employ tray-mounted
connectors that connect the unit when the unit is installed into the
instrument panel, (excluding automatic flight control systems,
transponders, and microwave frequency distance measuring equipment
(DME)). The approved unit must be designed to be readily and repeatedly
removed and replaced, and pertinent instructions must be provided.
Prior to the unit's intended use, and operational check must be
performed in accordance with the applicable sections of part 91 of this
chapter.
(32) Updating self-contained, front instrument panel-mounted Air
Traffic Control (ATC) navigational software data bases (excluding those
of automatic flight control systems, transponders, and microwave
frequency distance measuring equipment (DME)) provided no disassembly
of the unit is required and pertinent instructions are provided. Prior
to the unit's intended use, an operational check must be performed in
accordance with applicable sections of part 91 of this chapter.
Sec. 43.7 [Amended]
5. In section 43.7(d), the reference ``Sec. 43.3(h)'' is revised to
read ``Sec. 43.3(j)''.
Sec. 43.11 [Amended]
6. In section 43.11(b), the reference ``Sec. 91.30(d)(2)'' is
revised to read ``Sec. 91.213(d)(2) of this chapter''.
[[Page 19502]]
Issued in Washington, DC, on April 26, 1996.
David R. Hinson,
Administrator.
[FR Doc. 96-10823 Filed 4-30-96; 8:45 am]
BILLING CODE 4910-13-P
Complete official Federal Register PDF
FR Doc. 96-10820 Safety Zones, Security Zones, and Special Local Regulations
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19192-19193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10820]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Parts 100 and 165
[CGD 96-024]
Safety Zones, Security Zones, and Special Local Regulations
AGENCY: Coast Guard, DOT.
ACTION: Notice of temporary rules issued.
-----------------------------------------------------------------------
SUMMARY: This document provides required notice of substantive rules
adopted by the Coast Guard and temporarily effective between January 1,
1996 and March 31, 1996, which were not published in the Federal
Register. This quarterly notice lists temporary local regulations,
security zones, and safety zones, which were of limited duration and
for which timely publication in the Federal Register was not possible.
DATES: This notice lists temporary Coast Guard regulations that became
effective and were terminated between January 1, 1996 and March 31,
1996, as well as several regulations which were not included in the
previous quarterly list.
ADDRESSES: The complete text of these temporary regulations may be
examined at, and is available on request, from Executive Secretary,
Marine Safety Council (G-LRA), U.S. Coast Guard Headquarters, 2100
Second Street, SW., Washington, DC 20593-0001.
FOR FURTHER INFORMATION CONTACT:
Commander Stephen J. Darmody, Executive Secretary, Marine Safety
Council at (202) 267-1477 between the hours of 8 a.m. and 3 p.m.,
Monday through Friday.
SUPPLEMENTARY INFORMATION: District Commanders and Captains of the Port
(COTP) must be immediately responsive to the safety needs of the waters
within their jurisdiction; therefore, District Commanders and COTPs
have been delegated the authority to issue certain local regulations.
Safety zones may be established for safety or environmental purposes. A
safety zone may be stationary and described by fixed limits or it may
be described as a zone around a vessel in motion. Security zones limit
access to vessels, ports, or waterfront facilities to prevent injury or
damage. Special local regulations are issued to enhance the safety of
participants and spectators at regattas and other marine events. Timely
publication of these regulations in the Federal Register is often
precluded when a regulation responds to an emergency, or when an event
occurs without sufficient advance notice. However, the affected public
is informed of these regulations through Local Notices to Mariners,
press releases, and other means. Moreover, actual notification is
provided by Coast Guard patrol vessels enforcing the restrictions
imposed by the regulation.
Because mariners are notified by Coast Guard officials on-scene
prior to enforcement action, Federal Register notice is not required to
place the special local regulation, security zone, or safety zone in
effect. However, the Coast Guard, by law, must publish in the Federal
Register notice of substantive rules adopted. To discharge this legal
obligation without imposing undue expense on the public, the Coast
Guard periodically publishes a list of these temporary special local
regulations, security zones, and safety zones. Permanent regulations
are not included in this list because they are published in their
entirety in the Federal Register. Temporary regulations may also be
published in their entirety if sufficient time is available to do so
before they are placed in effect or terminated. These safety zones,
special local regulations and security zones have been exempted from
review under E.O. 12866 because of their emergency nature, or limited
scope and temporary effectiveness.
The following regulations were placed in effect temporarily during
the period January 1, 1996 and March 31, 1996, unless otherwise
indicated.
Stephen J. Darmody,
Commander, U.S. Coast Guard, Executive Secretary Marine Safety Council.
Quarterly Report
----------------------------------------------------------------------------------------------------------------
Effective
Docket No. Location Type date
----------------------------------------------------------------------------------------------------------------
Corpus Christi 96-001.................. Gulf Intracoastal Safety Zone.................... 1/13/96
Waterway.
Corpus Christi 96-002.................. Gulf Intracoastal Safety Zone.................... 1/22/96
Waterway.
Hampton Roads 95-079................... Chesapeake Bay, VA....... Safety Zone.................... 11/13/95
Huntington 96-001...................... Kanawha River, Kanawha Safety Zone.................... 1/19/96
Falls, WV.
Huntington 96-002...................... Kanawha Falls, WV........ Safety Zone.................... 1/21/96
Huntington 96-003...................... Winfield, WV............. Safety Zone.................... 1/22/96
[[Page 19193]]
Huntington 96-004...................... Gallipolis, WV........... Safety Zone.................... 1/31/96
Huntington 96-006...................... M. 183 to M. 185.5....... Safety Zone.................... 2/29/96
Jacksonville 96-016.................... Vilano Beach, FL......... Safety Zone.................... 3/12/96
LA/Long Beach 96-001................... San Pedro Bay, CA........ Safety Zone.................... 2/14/96
LA/Long Beach 96-004................... San Pedro Bay, CA........ Safety Zone.................... 3/19/96
LA/Long Beach 96-005................... San Pedro Bay, CA........ Safety Zone.................... 3/23/96
Louisville 96-002...................... Ohio River, Cincinnati, Safety Zone.................... 2/5/96
OH.
Miami 96-012........................... Key West, FL............. Safety Zone.................... 3/2/96
Miami 96-019........................... Fort Lauderdale, FL...... Safety Zone.................... 3/18/96
Morgan City 95-003..................... Gulf Intracoastal Safety Zone.................... 2/12/96
Waterway, Houman, LA.
New Orleans 96-001..................... M. 94 to M. 97........... Safety Zone.................... 2/19/96
San Diego 96-001....................... San Diego Bay, CA........ Safety Zone.................... 3/7/96
San Juan 96-001........................ San Juan Harbor, PR...... Safety Zone.................... 1/6/96
San Juan 96-011........................ San Juan Harbor, PR...... Safety Zone.................... 2/27/96
San Juan 96-024........................ San Juan, PR............. Security Zone.................. 3/21/96
01-95-174.............................. Charlestown, MA.......... Security Zone.................. 3/28/96
01-95-177.............................. Mystic, CT............... Safety Zone.................... 12/31/95
01-96-019.............................. Bridgeport, CT........... Safety Zone.................... 3/17/96
01-96-400.............................. Port of New York and New Safety Zone.................... 1/7/96
Jersey.
05-96-006.............................. Albemarle Sound, NC...... Safety Zone.................... 1/31/96
05-96-011.............................. Hampton Roads, VA........ Safety Zone.................... 3/14/96
07-96-002.............................. Hillsborough Bay, Tampa, Special Local.................. 2/3/96
FL.
07-96-022.............................. St. Augustine, FL........ Special Local.................. 3/31/96
07-96-025.............................. Bahia De Mayaguez, PR.... Special Local.................. 3/24/96
07-96-026.............................. Old San Juan, PR......... Special Local.................. 3/31/96
13-96-003.............................. Columbia River, OR....... Safety Zone.................... 2/13/96
13-96-005.............................. Portland, OR............. Security Zone.................. 2/14/96
13-96-006.............................. Columbia River, OR....... Safety Zone.................... 2/14/96
13-96-007.............................. Columbia River, OR....... Safety Zone.................... 2/15/96
13-96-008.............................. Queets, WA............... Safety Zone.................... 3/27/96
13-96-009.............................. Benton, WA............... Safety Zone.................... 3/28/96
----------------------------------------------------------------------------------------------------------------
[FR Doc. 96-10820 Filed 4-30-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-10794 Office of the Assistant Secretary for Housing-Federal Housing Commissioner; Disposition of Multifamily Projects and Sale of HUD-Held Multifamily Mortgages; Final Rule; Correction
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Page 19188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10794]
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 290
[Docket No. FR-3715-C-03]
RIN 2502-AG30
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Disposition of Multifamily Projects and Sale of HUD-Held
Multifamily Mortgages; Final Rule; Correction
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule; Correction.
-----------------------------------------------------------------------
SUMMARY: On March 21, 1996 (61 FR 11684), the Department published a
final rule that implemented the regulatory requirements under the
Multifamily Housing Property Disposition Reform Act of 1994 that
affected the management and disposition of HUD-owned properties and
properties with HUD-held mortgages, and the sale of HUD-held
multifamily mortgages. The purpose of this correction is to remove
duplicate information contained in Sec. 290.39(c).
EFFECTIVE DATE: April 22, 1996.
FOR FURTHER INFORMATION CONTACT: Barbara D. Hunter, Director, Program
Management Division, Office of Multifamily Asset Management and
Disposition, Department of Housing and Urban Development, Room 6182,
451 7th Street, SW., Washington, DC 20410. Telephone (202) 708-3944;
TTY (202) 708-4594. (These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION: Accordingly, FR Doc. 96-6791, a final rule
on Part 290, Multifamily Projects and Sale of HUD-Held Multifamily
Mortgages, published in the Federal Register on March 21, 1996 at 61 FR
11684, is corrected as follows:
On page 11690, in the third column, in Sec. 290.39, paragraph (c)
is corrected by removing the second paragraph (c)(2) that begins with
``(2) A subsidized project * * *'', and by also removing the
undesignated paragraph in the second paragraph (c)(2) that begins with
``This requirement shall continue * * *''.
Dated: April 25, 1996.
Camille E. Acevedo,
Assistant General Counsel for Regulations.
[FR Doc. 96-10794 Filed 4-30-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-10792 Federal Motor Vehicle Safety Standards; Fuel System Integrity
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19201-19202]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10792]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 571
[Docket No. 96-44, Notice 01]
RIN 2127-AG30
Federal Motor Vehicle Safety Standards; Fuel System Integrity
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation.
ACTION: Final rule, technical amendment.
-----------------------------------------------------------------------
SUMMARY: This document deletes several obsolete sections of Standard
No. 301, ``Fuel System Integrity.'' They relate to (1) the standard's
general requirements in S5 as they apply to light vehicles, (2) the
requirements for schoolbuses in S5.4, and (3) the requirements for fuel
spillage in S5.5. These sections are obsolete because the time periods
to which they specify are all in the past.
EFFECTIVE DATE: This rule is effective May 31, 1996.
FOR FURTHER INFORMATION CONTACT: For nonlegal issues: Dr. William J.J.
Liu, Office of Vehicle Safety Standards, NPS-12, telephone (202) 366-
4923.
For legal issues: Mr. Marvin Shaw, Office of Chief Counsel, NCC-20,
(202) 366-2992. Both may be reached at the National Highway Traffic
Safety Administration, 400 Seventh St., S.W., Washington, D.C., 20590.
SUPPLEMENTARY INFORMATION: Pursuant to the President's March 4, 1995
directive, ``Regulatory Reinvention Initiative,'' to the heads of
departments and agencies, NHTSA undertook a review of all its
regulations and directives. During the course of this review, the
agency identified several requirements and regulations that are
potential candidates for rescission. In reviewing Standard No. 301, the
agency identified several obsolete sections relating to (1) the
standard's general requirements in S5 as they apply to light vehicles,
(2) the requirements for school buses in S5.4, and (3) the requirements
for fuel spillage in S5.5. These sections are obsolete because the time
periods to which they relate are all in the past. To improve the
clarity and conciseness of
[[Page 19202]]
Standard No. 301, the agency is deleting these sections from the
standard.
The obsolete sections of the standard relating to certain light
vehicles are S5.2 and S5.3. Paragraph S5.2 had set forth requirements
for vehicles with a gross vehicle weight rating (GVWR) of 6,000 pounds
or less. Paragraph S5.3 had set forth requirements for vehicles with a
GVWR of more than 6,000 pounds but not more than 10,000 pounds. These
weight provisions, while relevant when the Standard was enacted in 1975
are no longer relevant. Paragraph S5.1 is amended to include vehicles
that were formerly addressed in S5.2 and S5.3. Paragraph S5.4 is
amended to delete an outdated reference to vehicles manufactured before
April 1, 1977. Paragraph S5.5 is amended to delete an outdated
reference to vehicles manufactured before September 1, 1976.
NHTSA finds good cause to make this amendment effective 30 days
after publication of this document. This amendment makes minor changes
to Standard No. 301.
NHTSA also finds for good cause that notice and an opportunity for
comment on this document are unnecessary. This document does not impose
any additional responsibilities on any manufacturer. Instead, this
document simply removes outdated provisions and references in the
standard.
Rulemaking Analyses and Notices
Executive Order 12866 and DOT Regulatory Policies and Procedures
This rulemaking document was not reviewed under E.O. 12866,
``Regulatory Planning and Review.'' Further, this action has been
determined to be not ``significant'' under the Department of
Transportation's regulatory policies and procedures. This rule removes
outdated portions of Standard 301 without changing any of the
requirements in the standard. Because this rule does not affect any
substantive requirement of the fuel system integrity standard, its
impacts are so minimal as not to warrant preparation of a full
regulatory evaluation.
Regulatory Flexibility Act
NHTSA has also considered the impacts of this rule under the
Regulatory Flexibility Act. I hereby certify that this rule will not
have a significant economic impact on a substantial number of small
entities. As noted above, this rule simply removes outdated portions of
Standard 301. It has no effect whatsoever on the manufacture or sale of
vehicles.
National Environmental Policy Act
NHTSA has also analyzed this rule under the National Environmental
Policy Act and determined that it will not have a significant impact on
the human environment.
Executive Order 12612 (Federalism)
NHTSA has analyzed this rule in accordance with the principles and
criteria contained in E.O. 12612, and has determined that this rule
will not have significant federalism implications to warrant the
preparation of a Federalism Assessment.
Civil Justice Reform
This rule will not have any retroactive effect. Under 49 U.S.C.
30103, whenever a Federal motor vehicle safety standard is in effect, a
State may not adopt or maintain a safety standard applicable to the
same aspect of performance which is not identical to the Federal
standard, except to the extent that the state requirement imposes a
higher level of performance and applies only to vehicles procured for
the State's use. 49 U.S.C. 30161 sets forth a procedure for judicial
review of final rules establishing, amending or revoking Federal motor
vehicle safety standards. That section does not require submission of a
petition for reconsideration or other administrative proceedings before
parties may file suit in court.
List of Subjects in 49 CFR Part 571
Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber
products, Tires.
In consideration of the foregoing, the agency is amending 49 CFR
Sec. 571.301, Fuel System Integrity, to read as follows:
PART 571--FEDERAL MOTOR VEHICLE SAFETY STANDARDS
1. The authority citation for part 571 continues to read as
follows:
Authority: 49 U.S.C. 322, 30111, 30115, 30117, and 30166;
delegation of authority at 49 CFR 1.50.
2. Section 571.301 is amended by revising S5.1, S5.4, and S5.5 and
by removing and reserving S5.2 and S5.3 to read as follows:
Sec. 571.301 Standard No. 301, Fuel System Integrity.
* * * * *
S5. General requirements.
S5.1 Passenger cars, and multipurpose passenger vehicles, trucks,
and buses with a GVWR of 10,000 pounds or less. Each passenger car and
each multipurpose passenger vehicle, truck, and bus with a GVWR of
10,000 pounds or less shall meet the requirements of S6.1 through S6.4.
Each of these types of vehicles that is manufactured to use alcohol
fuels shall also meet the requirements of S6.6.
S5.2 [Reserved]
S5.3 [Reserved]
S5.4 Schoolbuses with a GVWR greater than 10,000 pounds. Each
schoolbus with a GVWR greater than 10,000 pounds shall meet the
requirements of S6.5. Each schoolbus with a GVWR greater than 10,000
pounds that is manufactured to use alcohol fuels shall meet the
requirements of S6.6.
S5.5 Fuel Spillage: Barrier Crash. Fuel spillage for each vehicle
in any fixed or moving barrier crash test shall not exceed 1 ounce by
weight from impact until motion of the vehicle has ceased, and shall
not exceed a total of 5 ounces by weight in the 5-minute period
following cessation of motion. For the subsequent 25-minute period,
fuel spillage during any 1-minute interval shall not exceed 1 ounce by
weight.
Issued on: April 25, 1996.
Barry Felrice,
Associate Administrator for Safety Performance Standards.
[FR Doc. 96-10792 Filed 4-30-96; 8:45 am]
BILLING CODE 4910-59-P
Complete official Federal Register PDF
FR Doc. 96-10791 Federal Motor Vehicle Safety Standards; Compressed Natural Gas Fuel Containers
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19202-19204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10791]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
49 CFR Part 571
[Docket No. 93-02; Notice 13]
RIN 2127-AF79
Federal Motor Vehicle Safety Standards; Compressed Natural Gas
Fuel Containers
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In response to a request by the Aluminum Association, this
document amends the specifications in FMVSS No. 304, Compressed Natural
Gas Fuel Container Integrity, with respect to CNG containers made with
aluminum alloys. The changes make FMVSS No. 304 consistent with the
most recent voluntary standard issued by the aluminum industry.
DATES: Effective date: The amendments in this document become effective
May 31, 1996.
Petitions for reconsideration: Any petition for reconsideration of
this rule must be received by NHTSA no later than June 17, 1996.
ADDRESSES: Petitions for reconsideration of this rule should refer to
the above
[[Page 19203]]
mentioned docket number and be submitted to: Administrator, National
Highway Traffic Safety Administration, 400 Seventh Street, S.W.,
Washington, D.C. 20590.
FOR FURTHER INFORMATION CONTACT: For non-legal issues: Mr. Charles
Hott, NPS-12, Office of Safety Performance Standards, National Highway
Traffic Safety Administration, 400 Seventh Street, S.W., Washington,
D.C. 20590 (Telephone 202-366-0247).
For legal issues: Mr. Marvin L. Shaw, NCC-20, Rulemaking Division,
Office of Chief Counsel, National Highway Traffic Safety
Administration, 400 Seventh Street, SW., Washington, D.C. 20590
(Telephone 202-366-2992) (FAX 202-366-3820) (internet
[email protected])
SUPPLEMENTARY INFORMATION:
I. Final Rule Establishing FMVSS No. 304
On September 26, 1994, NHTSA published a final rule addressing the
safe performance of compressed natural gas (CNG) containers 1 (59
FR 49010). The final rule established a new Federal motor vehicle
safety standard (FMVSS) FMVSS No. 304, Compressed Natural Gas Fuel
Container Integrity. The Standard specifies pressure cycling, burst,
and bonfire tests for the purpose of ensuring the durability, initial
strength, and venting of CNG containers. In addition, the Standard
specifies labeling requirements for CNG fuel containers. FMVSS No. 304
took effect on March 27, 1995.
---------------------------------------------------------------------------
1 When used as a motor fuel, natural gas is stored on-
board a vehicle in cylindrical containers at a pressure of
approximately 20,684 kPa (3,000 psi). Among the terms used to
describe CNG fuel containers are tanks, containers, cylinders, and
high pressure vessels. The agency will refer to them as
``containers'' throughout this document.
---------------------------------------------------------------------------
FMVSS No. 304 is patterned after the American National Standards
Institute's (ANSI's) voluntary industry standard known as ANSI/NGV2.
ANSI/NGV2 was developed by the Natural Gas Vehicle Coalition. ANSI/NGV2
and FMVSS No. 304 specify detailed material and other requirements for
different types of CNG containers, including those made with aluminum
alloys. For each type of container, ANSI/NGV2 and FMVSS No. 304 specify
a unique safety factor for determining the internal hydrostatic
pressure that the container must withstand during the burst test. In
addition, a container must meet the applicable material and
manufacturing requirements as well as the burst test.
FMVSS No. 304 specifies certain material and manufacturing
characteristics for aluminum containers using alloy 6010 and alloy
6061. The material characteristics specify the percentage of various
elements, including magnesium, silicon, copper, and manganese. The
specifications for the two aluminum alloys listed in FMVSS No. 304 were
identical to the specifications set forth in ANSI/NGV2. In establishing
the specifications applicable to aluminum alloys, the Natural Gas
Vehicle Coalition relied on the Aluminum Association Standards Data
document (Sixth Edition 1979).
On March 24, 1995, The Aluminum Association, Inc. (TAAI) submitted
a letter to NHTSA, requesting several changes be made to FMVSS No. 304,
with respect to specifications for aluminum alloys 6010 and 6061. TAAI
stated that FMVSS No. 304 is inconsistent with the TAAI registered
limits for materials used in these two aluminum alloys. That
organization stated that because the 1979 document, on which the ANSI/
NGV2 composition tables are based, has been superseded several times in
recent years, the chemical compositions for aluminum alloys set forth
in FMVSS No. 304 do not reflect the current compositions for these
alloys, as accepted by the aluminum industry. TAAI provided a copy of
the most recent document in which the industry aluminum alloy
specifications are contained: The Registration Record of Aluminum
Association Designations and Chemical Composition Limits for Wrought
Aluminum and Wrought Aluminum Alloys (Revised December 1993).
On November 16, 1995, NHTSA published a notice of proposed
rulemaking (NPRM) to amend FMVSS No. 304 to adopt the TAAI
specifications for aluminum alloys used in CNG containers. (60 FR
57567) The proposed changes would make FMVSS No. 304 consistent with
the most recent aluminum industry specifications for those
materials.2 The agency requested comments about the
appropriateness and safety implications of adopting TAAI's request.
---------------------------------------------------------------------------
2 The agency already corrected the magnesium limits for
alloy 6061 to the range of 0.80 to 1.20, based on a typographical
correction provided by the American Gas Association. This was
published on July 24, 1995, as part of a final rule on petitions for
reconsideration on FMVSS No. 304 (60 FR 37836).
---------------------------------------------------------------------------
NHTSA received one comment to the proposal. The commenter, NGV
Systems, Inc. agreed with the proposed changes to FMVSS No. 304.
NHTSA has decided to amend FMVSS No. 304 with respect to the
chemical compositions for aluminum alloys set forth in the Standard. By
having FMVSS No. 304 reflect the current compositions for these alloys,
as accepted by the aluminum industry, today's amendments will better
ensure the safety of such containers.
As explained in the NPRM, the statute requires that each order
(i.e., final rule) shall take effect no sooner than 180 days from the
date the order is issued unless good cause is shown that an earlier
effective date is in the public interest. NHTSA concludes that there is
good cause not to provide the 180 day lead time given that this
amendment has no adverse effect on manufacturers or public safety. The
rulemaking merely makes minor changes to the chemical compositions in
FMVSS No. 304. Based on the above, the agency concludes that there is
good cause for an effective date 30 days after publication of the final
rule.
Rulemaking Analyses and Notices
1. Executive Order 12866 (Federal Regulatory Planning and Review) and
DOT Regulatory Policies and Procedures
This rulemaking was not reviewed under E.O. 12866. NHTSA has
analyzed this rulemaking and determined that it is not ``significant''
within the meaning of the Department of Transportation's regulatory
policies and procedures. A full regulatory evaluation is not required
because the rule has no effect on costs or benefits, since the
amendments adopt current industry specifications. The aluminum alloys
6010 and 6061 previously specified in FMVSS No. 304 had a slightly
different composition than alloys manufactured in accordance with
current specifications for these materials. TAAI did not identify, and
NHTSA is not aware of, any safety problems such as reduced strength,
durability or resistance to environmental hazards that might result
from this difference in aluminum specifications for CNG containers. The
potential costs, benefits, and other impacts of not adopting this
petition cannot be quantified at this time.
2. Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, NHTSA has
evaluated the effects of this action on small entities. Based upon this
evaluation, I certify that the amendment will not have a significant
economic impact on a substantial number of small entities. CNG
container manufacturers typically do not qualify as small entities.
Further, as noted above, the changes have no more than a minimal impact
on the costs or benefits associated with FMVSS No. 304. Accordingly, no
regulatory flexibility analysis has been prepared.
[[Page 19204]]
3. Executive Order 12612 (Federalism)
This action has been analyzed in accordance with the principles and
criteria contained in Executive Order 12612, and it has been determined
that the rulemaking has insufficient Federalism implications to warrant
preparation of a Federalism Assessment.
4. National Environmental Policy Act
Finally, the agency has considered the environmental implications
of this rulemaking in accordance with the National Environmental Policy
Act of 1969 and determined that the rulemaking will not significantly
affect the human environment.
5. Civil Justice Reform
This rulemaking will not have any retroactive effect. Under section
103(d) of the National Traffic and Motor Vehicle Safety Act (49 U.S.C.
30111), whenever a Federal motor vehicle safety standard is in effect,
a state may not adopt or maintain a safety standard applicable to the
same aspect of performance which is not identical to the Federal
standard. Section 105 of the Act (49 U.S.C. 30161) sets forth a
procedure for judicial review of final rules establishing, amending or
revoking Federal motor vehicle safety standards. That section does not
require submission of a petition for reconsideration or other
administrative proceedings before parties may file suit in court.
List of Subjects in 49 CFR Part 571
Imports, Motor vehicle safety, Motor vehicles, Rubber and rubber
products, Tires.
In consideration of the foregoing, the agency is amending Standard
No. 304, Compressed Natural Gas Fuel Container Integrity, in Title 49
of the Code of Federal Regulations at Part 571 as follows:
PART 571--FEDERAL MOTOR VEHICLE SAFETY STANDARDS
1. The authority citation for Part 571 continues to read as
follows:
Authority: 49 U.S.C. 322, 30111, 30115, 30117, and 30166;
delegation of authority at 49 CFR 1.50
2. Section 571.304 is amended by revising S5.2.2 to read as
follows:
Sec. 571.304 Standard No. 304, Compressed Natural Gas Fuel Container
Integrity.
* * * * *
S5.2.2 Aluminum containers and aluminum liners. (Type 1, Type 2 and
Type 3) shall be 6010 alloy, 6061 alloy, and T6 temper. The aluminum
heat analysis shall be in conformance with one of the following grades:
Table Two.--Aluminum Heat Analysis
------------------------------------------------------------------------
6061 alloy
Grade element 6010 alloy percent percent
------------------------------------------------------------------------
Magnesium...................... 0.6 to 1.0......... 0.8 to 1.2.
Silicon........................ 0.8 to 1.2......... 0.40 to 0.8.
Copper......................... 0.15 to 0.6........ 0.15 to 0.40.
Chromium....................... 0.10 max........... 0.04 to 0.35.
Iron........................... 0.50 max........... 0.7 max.
Titanium....................... 0.10 max........... 0.15 max.
Manganese...................... 0.20 to 0.8........ 0.15 max.
Zinc........................... 0.25 max........... 0.25 max.
Others, Each \1\............... 0.05 max........... 0.05 max.
Others, Total \1\ \2\.......... 0.15 max........... 0.15 max.
Aluminum min................... Remainder.......... Remainder.
------------------------------------------------------------------------
\1\ ``Others'' includes listed elements for which no specific limit is
shown as well as unlisted metallic elements. The producer may analyze
samples for trace elements not specified in the registration or
specification. However, such analysis is not required and may not
cover all metallic ``other'' elements. Should any analysis by the
producer or purchaser establish that an ``others'' element exceeds the
limit of ``Each'' or that the aggregate of several ``others'' elements
exceeds the limit of ``Total,'' the material shall be considered non-
conforming.
\2\ The sum of those ``Others'' metallic elements 0.010 percent or more
each, expressed to the second decimal before determining the sum.
(Registration Record of Aluminum Association Designations and
Chemical Composition Limits for Wrought Aluminum and Wrought
Aluminum Alloys, The Aluminum Association, Inc. Rev. Dec. 1993)
* * * * *
Issued on: April 25, 1996.
Ricardo Martinez,
Administrator.
[FR Doc. 96-10791 Filed 4-30-96; 8:45 am]
BILLING CODE 4910-59-P
Complete official Federal Register PDF
FR Doc. 96-10786 Food Stamp Program: Failure to Comply with Federal, State, or Local Welfare Assistance Program Requirements
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19155-19160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10786]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Food and Consumer Service
7 CFR Parts 272 and 273
[Amendment No. 369]
RIN 0584-AC08
Food Stamp Program: Failure to Comply with Federal, State, or
Local Welfare Assistance Program Requirements
AGENCY: Food and Consumer Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This action amends Food Stamp Program regulations to prohibit
an increase in food stamp benefits when a household's benefit from
another
[[Page 19156]]
Federal, State or local means-tested assistance program decreases as a
result of a penalty imposed on the household for intentionally failing
to comply with a requirement of the other program. This regulatory
change is necessary to more fully implement congressional intent that
the Food Stamp Program reinforce, not mitigate, another program's
penalties.
EFFECTIVE DATE: This final action is effective May 31, 1996. State
agencies must implement no later than November 27, 1996.
FOR FURTHER INFORMATION CONTACT: Questions regarding the rulemaking
should be addressed to Margaret Batko, Supervisor, Eligibility and
Certification Regulation Section, Certification Policy Branch, Program
Development Division, Food Stamp Program, Food and Consumer Service,
USDA, 3101 Park Center Drive, Alexandria, Virginia 22302. Ms. Batko may
also be reached by telephone at (703) 305-2496.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rulemaking has been determined to be significant for purposes
of Executive Order 12866, and therefore, has been reviewed by the
Office of Management and Budget.
Executive Order 12778
This rulemaking has been reviewed under Executive Order 12778,
Civil Justice Reform. The rule is intended to have preemptive effect
with respect to any state or local laws, regulations or policies that
conflict with its provisions or that would otherwise impede its full
implementation. The 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. In the Food Stamp Program the administrative
procedures are as follows: (1) For program benefit recipients--State
administrative procedures issued pursuant to 7 U.S.C. 2020(e)(10) and 7
CFR 273.15; (2) for State agencies--administrative procedures issued
pursuant to 7 U.S.C. 2023 set out at 7 CFR 276.7
Executive Order 12372
The Food Stamp Program is listed in the Catalog of Federal Domestic
Assistance under No. 10.551. For the reasons set forth in the final
rule and related Notice(s) to 7 CFR part 3105, subpart V (48 FR 29115,
June 24, 1983; or 48 FR 54317, December 1, 1983, as appropriate), this
Program is excluded from the scope of Executive Order 12372 which
requires intergovernmental consultation with State and local officials.
Regulatory Flexibility Act
This rulemaking has also been reviewed with respect to the
requirements of the Regulatory Flexibility Act of 1980 (Pub. L. 96-354,
94 Stat. 1164, September 19, 1980). William E. Ludwig, Administrator of
the Food and Consumer Service (FCS), has certified that this action
would not have a significant economic impact on a substantial number of
small entities. The changes would affect food stamp applicants and
recipients who intentionally fail to comply with other Federal, State
or local welfare assistance program requirements. The rulemaking also
affects State and local welfare agencies which administer the Food
Stamp Program.
Paperwork Reduction Act
This rulemaking does not contain additional reporting or
recordkeeping requirements subject to approval by the Office of
Management and Budget (OMB) under the Paperwork Reduction Act of 1980
(44 U.S.C. 3507).
Background
Section 164 of the Food Stamp Act Amendments of 1982 (Pub. L. 97-
253, Title I, Subtitle E, Sept. 8, 1982) amended Section 8 of the Food
Stamp Act of 1977 (Act) to add a new paragraph (d) which prohibits an
increase in food stamp benefits due to a decrease in household income
resulting from a penalty levied by a Federal, State, or local welfare
or public assistance program for an intentional failure to comply with
the other program's requirements. 7 U.S.C. 2017(d). Currently, the
regulations at 7 CFR 273.11(k) limit the prohibition against increasing
food stamp benefits to situations in which a household's welfare or
public assistance benefits have been reduced because of agency
recoupment. If the recoupment was precipitated by a finding of an
intentional program violation, food stamp eligibility and benefit
levels are calculated without regard for the amount of the reduction in
assistance due to the recoupment. On
August 8, 1995, at 60 FR 40311, we proposed to expand the current
prohibition on increases in food stamp benefits to include all
situations in which a decrease (reduction, suspension or termination)
in assistance income occurs as a result of a penalty being imposed for
an intentional failure to comply with a Federal, State, or local
welfare or public assistance program requirement. The proposal provided
that State agencies would calculate food stamp benefits using the
benefit amount which would have been issued by the other program if no
penalty had been applied against that program's benefit amount.
Comments on the proposed rulemaking were solicited from interested
parties for 45 days. A total of 30 comment letters were received; 26
from State and local welfare agencies, three from legal aid groups, and
one from the general public. All letters which specifically addressed
the provisions of the proposed rulemaking were considered in developing
the final rule. The remaining sections of the preamble address the
significant issues raised by commenters.
State welfare agencies generally supported the proposed rule but
had varying degrees of concern relative to: the lack of a definition of
``intentional failure to comply''; what constitutes a penalty; and the
food stamp benefit calculation procedure. The legal aid groups opposed
the provision stating concern about the impact on the nutritional
levels of children and lack of due process protection for the affected
households.
Who Does the Provision Apply To?
The proposed rule specified that the expansion in the prohibition
on increases in food stamp benefits based on a reduction in income from
assistance programs would apply to acts of intentional noncompliance
with Federal, State, or local welfare or public assistance programs
which are means-tested and distribute publicly funded benefits.
Historically, we have always made a distinction between welfare or
public assistance programs and other types of Federal, State or local
programs by categorizing welfare and public assistance programs as
``means-tested'' programs. It has come to our attention that there may
be Federal, State or local programs in existence which are means-tested
but are not generally considered to be welfare or public assistance.
Therefore, it is not enough to provide that this rule affects ``means-
tested'' programs only. The final clarifies that the provision only
applies to means-test programs governed by welfare or public assistance
laws or regulations.
One commenter asked that the final provision be revised to require
that individuals who are receiving Social Security Disability Insurance
(SSDI) payments because of drug addiction and/or alcoholism and who do
not comply with Federal treatment requirements be covered by the final
rule. Since SSDI is not means-tested
[[Page 19157]]
assistance or generally considered to be welfare or public assistance,
the final rule would not apply when a reduction in SSDI benefits occurs
for failure to comply with a Federal treatment program requirement. We
believe it would not be administratively permissible to create an
exception for this particular benefit program situation without express
congressional direction.
At least one State agency and the legal aid groups recommended that
the term ``intentional'' be defined. Some of these commenters also
recommended that we require the other Federal, State and local agencies
to use clear and convincing evidence in making a determination of
intentional noncompliance or that the food stamp caseworker be required
to at least take into consideration the Food Stamp Program's ``good
cause'' provisions prior to taking action to prohibit an increase in
food stamp benefits.
As stated in the preamble of the proposed rulemaking, the Food
Stamp Program will not be involved in the determination of whether or
not an individual intentionally failed to comply with another program's
requirement and whether or not there was good cause for the
noncompliance. It should be noted, however, that a State or local
worker may be responsible for many of the other welfare or public
assistance programs. Thus, it is conceivable that such worker may be
directly/indirectly involved in the determination of intentional
failure to comply with another program's requirements. For the purpose
of determining individual food stamp benefit levels, we intend that
food stamp workers only verify if a known decrease in a household's
benefits under another welfare or public assistance program is due to a
determination by the other program of intentional failure to comply. If
the determination is not specifically identified by the other program
as an ``intentional'' failure to comply, the prohibition on increased
food stamp benefits would not apply.
One commenter recommended that the word ``intentional'' be dropped
from the final rule so that it would apply to all acts of
noncompliance. Another commenter also stated that the prohibition on
increases in food stamp benefits should apply to any act of
noncompliance provided there are appropriate opportunities to establish
good cause and to ensure that the household was aware of the obligation
before sanctions were imposed. We do not have the discretion to expand
the coverage of the prohibition to any act of noncompliance. Section
8(d) of the Act applies only to acts of intentional failure to comply
with another welfare or public assistance program's requirements. These
commenters may be interested to know that there is pending legislation
being considered by Congress that, if passed, would expand the coverage
of Section 8(d) to include any act of noncompliance.
One commenter noted that penalties for noncompliance with certain
child support enforcement provisions do not result in actual reductions
of benefits; instead, the penalty imposed is a denial of benefits. For
example, the Aid to Families with Dependent Children (AFDC) program in
some States requires that an unmarried parent identify a child's other
parent. If the applicant-parent refuses to provide the requested
information, benefits are denied. The commenter suggested that
Sec. 273.11(k) be applied to these situations. In the scenario
suggested by this commenter, household income for purposes of
determining eligibility for food stamp benefits would be the amount of
AFDC the household would have received had the household provided the
requested information.
We do not have the discretion to adopt this suggestion. The
language of section 8(d) of the Act provides that there be no increase
in food stamp benefits when benefits under another Federal, State or
local welfare or public assistance program are decreased due to
intentional noncompliance. It is clear from the statutory language that
Congress' intent was to limit the application to situations where
benefits are being received and then decreased due to an intentional
act of noncompliance. In the suggested situation benefits are never
received so they can not be decreased. However, there is pending
legislation under consideration by Congress that would make compliance
with child support enforcement requirements a condition of eligibility
for food stamp benefits.
In reviewing comments on who the provision should apply to, it came
to our attention that in the preamble of the August 8 proposed rule we
made reference to welfare assistance and public assistance
interchangeably. Yet we inadvertently failed to include a reference to
public assistance in the actual regulatory text of the proposed rule.
We are correcting this oversight in this rulemaking. In addition, the
final rule clarifies that State agencies shall define what constitutes
a welfare assistance program or a public assistance program. The only
requirement for the State agency selection of appropriate programs is
that they be means-tested and distribute public funds.
How Should the Provision Be Applied?
Household vs. Individual
One commenter noted that AFDC programs in certain States allow
State agencies to terminate cash assistance to not only an individual
who has failed to comply with program requirements, but also to other
household members. This commenter recommended that the prohibition on
increases in food stamp benefits for deceases in other types of
assistance be limited to that part of the welfare benefit decrease
representing the benefit share of the individual who intentionally
failed to comply, not the entire household's benefits. We are not
adopting this suggestion. It is clear from the language of the Act that
the prohibition on increased food stamp benefits required by Section
8(d) applies to a household and not simply individual household
members. We do not have the authority to create regulatory distinctions
in conflict with the express language of the Act.
Family Cap
Some State agencies are implementing welfare reform programs which
include a ``family cap'' requirement. The family cap requirement
provides that if an individual has another child while receiving
assistance under the program, the family will not receive an increase
in assistance for the additional child. One commenter suggested that
some State agencies may consider the act of having the additional child
to be an ``intentional failure to comply'' with the rules and
regulations of the assistance program. This commenter claimed that
under the terms of the August 8 proposed rule, an increase in food
stamp benefits for the additional member would not be allowed. This
commenter suggested that we modify the proposed rule to allow increases
in food stamp benefits in these situations regardless of State
penalties.
The commenter misinterpreted the intent and impact of the proposed
rule. In the situation noted by the commenter, the family's current
assistance would not be decreased; rather, the family would not be
entitled to increased assistance for the additional member. The
proposed rule specifically stated that the prohibition on increased
food stamp benefits would not apply in situations where the household's
benefits under another program are frozen at the current level due to
an act of intentionally failing to comply with a requirement of that
program.
[[Page 19158]]
Food Stamp Program Work Sanctions
Current rules at 7 CFR 273.7(g)(2) provide that individuals who
fail to comply, whether intentionally or not, with a work requirement
under Title IV of the Social Security Act or an unemployment
compensation work requirement, where such work requirement is
comparable to a food stamp work requirement, shall be treated as though
the individual had failed to comply with the food stamp requirement and
the client shall be subject to a food stamp penalty. One commenter
questioned if the August 8 proposed rule would take precedence over 7
CFR 273.7(g)(2). It would not. The provision at 7 CFR 273.7(g)(2)
imposes a food stamp sanction for noncompliance with certain work
requirements. The proposed changes to 7 CFR 273.11(k) would have
prevented an increase in food stamp benefits when a household was
sanctioned by another Federal, State or local means-tested welfare or
public assistance program for noncompliance. We have revised the final
rule to clarify that Sec. 273.11(k) does not apply in cases where
individuals or households are sanctioned for noncompliance with a food
stamp work requirement pursuant to 7 CFR 273.7(g)(2).
Administrative Problems
Some commenters claimed that they would not be able to comply with
Sec. 273.11(k) in situations involving intentional failures to comply
with the requirements for receiving Supplemental Security Income (SSI)
benefits because SSI benefits are not determined by the State or local
welfare agency. These commenters believe they will not receive
cooperation from SSI offices in obtaining the necessary information.
One commenter suggested exempting SSI from the programs covered by
Sec. 273.11(k). Another commenter suggested we incorporate
Sec. 273.11(k) a mandate that the necessary information be included in
the SDX data base maintained by SSA.
Section 8(d) of the Act does not provide us with the latitude to
treat SSI differently than other means-tested welfare or public
assistance programs. Further, the statute does not give us the latitude
to require adjustments in the SDX data base. States and localities will
have to work with all the associated programs to share the information
necessary to comply with the requirements of this final rule. However,
we do recognize that the other agencies may not cooperate in providing
the necessary information, or cannot do so due to information
disclosure laws. Therefore, we are amending the final rule to provide
that if a State agency is unsuccessful in obtaining information from
another program necessary to enable it to comply with this rulemaking,
the State agency will not be held responsible for such noncompliance.
Most commenters believed the requirements of the August 8 proposed
rule would be too complex to administer, would result in the need to
make costly changes to computer systems, and would be prone to error.
Alternatives suggested by commenters included: Allowing State agencies
an option to implement or not implement the provision; allowing State
agencies to implement in a manner which works best for the State--such
as allowing a State option to determine what constitutes a penalty; or
allowing a State option to use a standard amount to be deemed as food
stamp income through the duration of the penalty period imposed by the
other program; or allowing a State to impose the same penalty against
food stamp benefits as imposed against the benefits of the other
program; or allowing a State agency to freeze the amount of the
benefits under the affected program through the duration of the
penalty.
We cannot allow a State agency to choose not to implement
Sec. 273.11(k). Section 8(d) of the Act clearly mandates that there
will be no increase in food stamp benefits when a household's benefits
under another program are decreased due to an intentional failure to
comply with a requirement of that program. This rulemaking expands on
the current provision to more fully reflect congressional intent.
We also cannot adopt the suggestion of allowing a State agency to
impose the same penalty against the food stamp benefit as was imposed
against benefits under the program in which the noncompliance occurred.
The statute does not provide an option to reduce, suspend or terminate
the household's current food stamp benefit level; the statute only
prohibits an increase in food stamp benefits for noncompliance with
another program's requirements. However, pending legislation, if passed
as currently written, would provide such flexibility to a State agency.
While we cannot adopt some of the alternatives suggested by
commenters, some of the other alternatives mentioned may be more
feasible and cost-effective than our proposed procedures. In the
interest of State flexibility and our intent to eliminate prescriptive
regulations where possible, we are revising the final provision to
allow State agencies to implement the prohibition on food stamp benefit
increases in a manner which works best for that State. However, to
ensure that State agencies implement the provision within the confines
of the current statutory parameters, we are revising proposed
Sec. 273.11(k) to include the following minimum requirements:
1. State agencies shall apply Sec. 273.11(k) to prevent increases a
household's food stamp benefits when benefits under another Federal,
State or local means-tested welfare or public assistance program are
decreased (reduced, terminated, or suspended) due to a determination by
the other program of an act of intentional failure to comply with a
requirement of such program. Section 273.11(k) does not apply with
regard to cases of noncompliance which meet the requirements of 7 CFR
273.7(g)(2). If the State agency is not successful in obtaining the
necessary cooperation from the other program to enable it to comply
with the requirements of Sec. 273.11(k), the State agency shall not be
held responsible for noncompliance so long as the State agency has made
a good faith effort to obtain the information.
2. State agencies shall not reduce, suspend or terminate a
household's current food stamp benefit level when the household's
benefits under another means-tested welfare or public assistance
program have been decreased due to an intentional failure to comply
with a requirement of that program, except as provided at 7 CFR
273.7(g)(2).
3. State agencies must adjust food stamp benefits when eligible
members are added to the food stamp household regardless of whether or
not the household is prohibited from receiving benefits for the member
under another Federal, State or local means-tested welfare or public
assistance program.
4. Changes in household circumstances which are not related to a
penalty imposed by another Federal, State or local means-tested welfare
or public assistance program shall not be affected by this provision.
Cases of Recoupment and Reduction
One commenter noted that the proposed rule implied that it only
applied in situations where overissued benefits received due to
intentional noncompliance with a program requirement are being recouped
or a reduction in benefits is being applied as a fiscal penalty for
intentional noncompliance. This commenter questioned how food stamp
benefits would be calculated in situations in which a household is
subject to both a recoupment and a reduction for the same act of
intentional noncompliance.
[[Page 19159]]
As stated earlier, the final rule will allow State agencies to
implement the provision in a manner which works best for that State
agency. Thus, State agencies would establish their own procedures to
address this situation.
Notice to Clients
The legal aid groups that commented believed that households
affected by application of Sec. 273.11(k) should receive a food stamp
notice from State agencies explaining why their food stamp benefits are
not going up, and informing them that they are entitled to a hearing on
the issue of whether their program violation was intentional.
Current regulations at 7 CFR 273.13 require State agencies to
provide households with timely and adequate notice when reducing or
terminating food stamp allotments. Section 273.11(k) does not result in
a reduction, termination, or suspension of a household's current food
stamp benefit amount. Thus, State agencies are not obligated to provide
a notice of adverse action or adequate notice. However, the State
agency may provide such a notice at its option.
Additionally, a household would not be entitled to a separate and
distinct food stamp fair hearing on the issue of intent. The
determination of intentional failure must be made by the other program
for the food stamp prohibition to take affect. A separate and distinct
food stamp fair hearing to appeal another program's determination of
intent would place the Food Stamp Program in a position of second
guessing another program's determination. Of course, a State or local
worker who deals with multiple welfare or public assistance programs
may be directly or indirectly involved in the initial determination of
intent or client appeal of such determinations.
Several commenters raised concerns about how to calculate the food
stamp benefit in situations where the person's benefits from another
program are suspended or terminated due to an intentional failure to
comply, especially in cases of long periods of suspension or indefinite
termination of benefits. The commenters were particularly concerned
about cases for which benefits are terminated indefinitely and the
recipient never reapplies for those program benefits again. They felt
that it would be virtually impossible to track such cases. One
commenter suggested exempting such cases from the provision. Another
commenter recommended placing a time limit on the prohibition on
increased food stamp benefits in Sec. 273.11(k) for such cases. Still
another commenter recommended limiting the application of
Sec. 273.11(k) to the time it takes to repay the overpayment or to the
time the recipient begins to cooperate, whichever is less.
Section 8(d) of the Act clearly states that the prohibition against
increasing food stamp benefits shall apply for the duration of the
penalty imposed by the welfare or public assistance program. Therefore,
we do not have the discretion to allow State agencies to place time
restrictions on the application of Sec. 273.11(k). Moreover, we do not
agree that cases with long penalties should be exempt from the
prohibition. Generally, the more serious the act of intentional
noncompliance, the more serious the fiscal penalty and/or the longer
the penalty period. To do as the commenter has asked would result in
the more serious cases of intentional noncompliance receiving an
increase in food stamp benefits, while persons still receiving benefits
even though reduced for a much lesser degree of intentional
noncompliance could not receive an increase in food stamp benefits.
Implementation
The proposed rule provided that State agencies would be required to
implement the rule when final on the first day of the first month
beginning 120 days after publication of the final rulemaking. The 120-
day time period between publication and required implementation was
proposed to provide State agencies with sufficient lead time to
reprogram or train employees before implementing the new Program
requirement. It has come to our attention that some State agencies may
be able to implement sooner and would like to do so while other State
agencies believe the lead time is too short. We agree that State
agencies should have the flexibility to either implement soon after
publication or to have more lead time. Accordingly, this final rule
provides that State agencies must implement Sec. 273.11(k) ``no later
than'' 210 days from the date of publication in the Federal Register.
In addition, one commenter asked if we intend that Sec. 273.11(k)
apply to pending cases of intentional failure to comply with another
program's requirements. The final rule also clarifies that
Sec. 273.11(k) only affects those cases where a pertinent decrease in
the household's benefits from another program occurs on or after the
effective date of this final rulemaking.
Some State agencies commented that their computer systems are
designed to automatically update food stamp benefits when public
assistance benefits change. Until their computers can be reprogrammed,
the State agencies would have to manually bypass this automatic update
process which will increase administrative burden and result in errors.
These commenters suggested that variances in food stamp allotments due
to this regulation be excluded from the quality control error
determination. In accordance with Section 16(c)(3) of the Act,
variances resulting from implementation of a new rule change are
excluded from error analysis for 120 days from the required
implementation date of the rule change. Some State agencies may
implement earlier than the required implementation date, in such cases
the 120-day count begins on the actual date of implementation by the
State agency. We do not have the discretion to exclude variances for a
longer period of time. State agencies which plan to implement earlier
than the required date are reminded to follow the procedures at 7 CFR
275.12(d)(2)(vii)(A).
List of Subjects
7 CFR Part 272
Alaska, Civil rights, Food stamps, Grant programs--social programs,
Reporting and recordkeeping requirements.
7 CFR Part 273
Administrative practice and procedures, Aliens, Claims, Food
stamps, Grant programs--social programs, Penalties, Reporting and
recordkeeping requirements, Social security, Students.
Accordingly, 7 CFR Parts 272 and 273 are amended as follows:
PART 272--REQUIREMENTS FOR PARTICIPATING STATE AGENCIES
1. The authority citation of Parts 272 and 273 continues to read as
follows:
Authority: 7 U.S.C. 2011-2032.
2. In Sec. 272.1, a new paragraph (g)(145) is added to read as
follows:
Sec. 272.1 General terms and conditions.
* * * * *
(g) Implementation. * * *
(145) Amendment No. 369. The provisions of Amendment No. 369 are
effective May 31, 1996. State agencies must implement no later than
November 27, 1996. The provisions of this amendment are applicable for
determinations of intentional failure to comply made on or after the
effective date of the amendment.
[[Page 19160]]
PART 273--CERTIFICATION OF ELIGIBLE HOUSEHOLDS
Sec. 273.9 [Amended]
3. In Sec. 273.9, the second sentence of paragraph (b)(5)(i) is
amended by removing the words ``for purposes of recouping from a
household an overpayment which resulted from the household's
intentional failure to comply with the other program's requirements''.
4. In Sec. 273.11, paragraph (k) is revised to read as follows:
Sec. 273.11 Action on households with special circumstances.
* * * * *
(k) Failure to comply with another assistance program's
requirements. A State agency shall not increase food stamp benefits
when a household's benefits received under another means-tested
Federal, State or local welfare or public assistance program, which is
governed by welfare or public assistance laws or regulations and which
distributes public funds, have been decreased (reduced, suspended or
terminated) due to an intentional failure to comply with a requirement
of the program that imposed the benefit decrease. This provision does
not apply in the case of individuals or households subject to a food
stamp work sanction imposed pursuant to 7 CFR 273.7(g)(2). State agency
procedures shall adhere to the following minimum conditions:
(1) This provision must be applied to all applicable cases. If a
State agency is not successful in obtaining the necessary cooperation
from another Federal, State or local means-tested welfare or public
assistance program to enable it to comply with the requirements of this
provision, the State agency shall not be held responsible for
noncompliance as long as the State agency has made a good faith effort
to obtain the information.
(2) A State agency shall not reduce, suspend or terminate a
household's current food stamp allotment amount when the household's
benefits under another applicable assistance program have been
decreased due to an intentional failure to comply with a requirement of
that program.
(3) A State agency must adjust food stamp benefits when eligible
members are added to the food stamp household regardless of whether or
not the household is prohibited from receiving benefits for the
additional member under another Federal, State or local welfare or
public assistance means-tested program.
(4) Changes in household circumstances which are not related to a
penalty imposed by another Federal, State or local welfare or public
assistance means-tested program shall not be affected by this
provision.
Dated: April 23, 1996.
Ellen Haas,
Under Secretary for Food, Nutrition, and Consumer Services.
[FR Doc. 96-10786 Filed 4-30-96; 8:45 am]
BILLING CODE 3410-30-U
Complete official Federal Register PDF
FR Doc. 96-10779 National Flood Insurance Program; Group Flood Insurance Policy for Individual and Family Grant Program
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19197-19201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10779]
=======================================================================
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FEDERAL EMERGENCY MANAGEMENT AGENCY
44 CFR Parts 61 and 206
RIN 3067-AC35
National Flood Insurance Program; Group Flood Insurance Policy
for Individual and Family Grant Program
AGENCY: Federal Emergency Management Agency (FEMA).
ACTION: Interim final rule with request for comments.
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SUMMARY: This interim final rule changes FEMA's Individual and Family
Grant (IFG) regulations by establishing a minimum damage threshold of
$201 or more in real or personal property losses, or both, resulting
from any type of incident in order to receive an IFG award in these
damage categories. The rule also changes our flood insurance
regulations for IFG award recipients in Presidentially declared major
disasters by establishing a Group Flood Insurance Policy (GFIP) and the
criteria for its implementation. This interim final rule also
authorizes the GFIP, as a one-time, pilot project, for recipients of
the State of Alaska's own, fully funded disaster assistance grants to
help individuals and families recover from flooding in September and
October 1995. Comments are being solicited on making the GFIP available
in the future to any
[[Page 19198]]
State with a fully funded, disaster assistance grant program for
individuals and families.
DATES: This interim final rule is effective on May 1, 1996. Please
submit any comments in writing by July 1, 1996.
FOR FURTHER INFORMATION CONTACT: Charles M. Plaxico, Jr., Federal
Emergency Management Agency, Federal Insurance Administration, (202)
646-3422, (facsimile) (202) 646-4327; or Laurence W. Zensinger in
FEMA's Response and Recovery Directorate, (202) 646-3642, (facsimile)
(202) 646-2730.
SUPPLEMENTARY INFORMATION: On February 7, 1995, FEMA published in the
Federal Register (Vol. 60, page 7130) an interim final rule changing
the flood insurance regulations for Individual and Family Grant program
recipients in Presidentially declared major disasters, in order to meet
the mandates of Sec. 582 of the National Flood Insurance Reform Act of
1994 (NFIRA), which the President signed into law on September 23,
1994.
On March 15, 1995, FEMA then published in the Federal Register (60
FR 13945) a proposed rule to establish an IFG eligibility requirement
of $201 or more in real or personal property damage, or both, resulting
from any type of disaster incident in order to receive an IFG award for
items in these categories. In the same rule, we proposed to establish a
GFIP and proposed criteria for the GFIP 's implementation by the
National Flood Insurance Program (NFIP) when FEMA provides IFG awards.
The term of the GFIP will be for 36 months, and, for implementation
under the IFG program, will begin 60 days from the date of the disaster
declaration. For the pilot project to be conducted in the State of
Alaska, the term of the GFIP will begin on the date this interim final
rule is published in the Federal Register. On and after the inception
date of the GFIP, coverage for individual IFG recipients or the named
insureds under FEMA's pilot project with the State of Alaska, will
begin on the 30th day after the NFIP receives from the State the
records of GFIP insureds and their premium payments. Hereafter and with
this understanding, the GFIP will be referred to as a 3-year policy.
To meet the NFIRA requirements that were effective when the
President signed the law on September 23, 1994, FEMA had to write the
February 7, 1995 interim final rule to be effective retroactively.
However, FEMA welcomed comments for a 60-day period. The proposed rule,
which made additions to the same paragraphs changed by the interim
final rule, provided for a 45-day comment period. To ensure State and
Regional personnel were informed of these two rules, FEMA staff
included a rules presentation at eight Human Services Automated Systems
Orientation (HSASO) sessions, at which time issues were discussed and
written comments were encouraged. FEMA also requested comments on the
estimates for the additional paperwork or record-keeping reporting
burden in connection with the time it would take a State to research
and compile the information and send premium payments to the NFIP. FEMA
invited the public to submit comments to the agency or to the Office of
Management and Budget (OMB) on the paperwork issues including the
burden estimates and any aspects of the information collection
requirements. Neither FEMA nor OMB received comments in connection with
the collection of information.
FEMA received four sets of written comments on each of the two
rules--two of the six respondents commented on both rules. The tally of
comments included representatives of four state agencies dealing with
emergency management, a private consultant service dealing with banking
and legislative issues, and an insurance committee of an association
concerned with floodplain management issues. While generally supportive
of the proposal to establish a GFIP the respondents did express concern
for one or more of the proposed provisions.
One State agency had a series of concerns. The first concern
questioned how the February 7, 1995 interim final rule escaped OMB
review. OMB does not require a review of rules where the aggregate
annual impact of the rule is less than $100 million.
The second concern, which was shared by another State, was that the
NFIRA would place an administrative and monitoring burden on the States
as an unfunded mandate. One State felt this would occur even if NFIP
would track and maintain all information. FEMA has worked hard to take
up the administrative burden for the States and will further ease
burdens by tracking flood insurance maintenance beyond the 3-year
requirement that has been in effect since the Flood Disaster Protection
Act of 1973.
The State's third concern was that the NFIRA requirements should be
effectuated after the date FEMA had notified them by letter of the
requirement. By mandating that the flood insurance purchase and
maintenance requirement be made effective upon the signature of the
President, Congress clearly intended to allow no exemptions. As a
result FEMA had no time to inform States of the requirements and allow
them to prepare for the consequences.
The next concern was that the cost of implementing the rule would
be greater to Federal and State governments than the benefits of
tracking data for the life of each property. Congress clearly intended
NFIRA mandates to be carried out regardless of the costs. However,
since FEMA already tracks the data necessary to administer this
program, there should be no additional burden to States.
This State then proposed alternatives to NFIRA legislation.
However, those alternatives are already part of NFIRA or are part of
the implementing regulations.
A second State felt it was punitive to require new owners to
purchase and maintain flood insurance; this feeling was shared by many
State participants in the HSASO sessions held during the comment
periods. The NFIRA--not the rule--requires new owners to maintain flood
insurance. Congress intended for property owners who buy or build in a
floodplain to protect themselves or bear the cost. Accordingly,
disaster assistance will not be provided to the occupant for a second
flood when flood insurance has not been purchased and maintained by the
new owner.
Two States questioned who would be responsible for informing the
buyer of property upon which the flood insurance purchase and
maintenance requirements were imposed. The NFIRA stipulates the
``transferor'' or seller of the property must disclose this requirement
to the buyer, and such written notification must be contained in
documents evidencing the transfer of ownership of the property.
Three States and the association expressed concern about a database
tracking system for real estate transactions. Rather than attempt to
undertake the impossible task of tracking such sales forever, FEMA has
chosen to prohibit Federal flood disaster assistance from being
provided for a property a second time. To do otherwise would place a
heavy burden on State and local governments.
The association felt the Federal government, and not the States,
should maintain any database required to implement the mandates imposed
by Sec. 582 of the NFIRA. FEMA agrees and will maintain the database.
A State and the association expressed concern that was also voiced
by the majority of attenders at the HSASO sessions, namely, that the
coverage
[[Page 19199]]
maintenance requirement, equating to the IFG maximum grant amount, is a
financial hardship to IFG recipients, who are predominantly the elderly
and individuals and families receiving public support. FEMA must
implement laws enacted by the Congress. In recognizing that maintaining
flood insurance is a hardship on those with limited income, FEMA is
establishing a GFIP to assist grantees for up to 3 years of coverage.
However, in keeping with the spirit of NFIRA to increase NFIP
participation and replace disaster assistance with flood insurance
coverage, we have decided to establish for all IFG recipients the
maximum IFG award amount as the amount of flood insurance to be bought
and maintained as a condition for future IFG eligibility for any
uninsured flood-damaged real or personal property, or both.
The association recommended a long-term, low-cost policy providing
a fixed amount of flood insurance coverage, and offering the grantee
the option of purchasing either a GFIP or a Standard Flood Insurance
Policy (SFIP). Under a GFIP, the State will provide the grantee with up
to 3 years of coverage. The grantee can always switch to an SFIP at an
increased cost.
The association and a State were concerned that grantees will not
maintain flood insurance beyond the end of the 3-year term of the GFIP.
FEMA shares this concern. NFIP will send a notice to GFIP certificate
holders at the end of the 3-year policy period to alert them to the
maintenance requirement and to the consequences of not maintaining
flood insurance. The notice will (1) encourage them to apply for NFIP's
conventional SFIP by contacting a local insurance agent, producer, or a
private insurance company selling NFIP policies, and (2) advise them as
to the amount of coverage they must maintain in order not to jeopardize
their eligibility for future disaster assistance.
One of the States suggested that the responsibility of the NFIP to
notify the IFG grantee/policyholder toward the end of the 3-year
coverage period (as described in the Supplementary Information section
of the proposed rule and as discussed above) be incorporated into the
implementing regulations. FEMA agrees and a new paragraph (c)
incorporating such language has been added to Sec. 61.17.
The consultant recommended that the cost of the flood insurance be
deducted from the grant award and that flood insurance coverage be
placed directly by FEMA through its regional offices. To ensure that
the IFG recipient will have coverage as soon after the grant award as
possible, a fixed premium amount will be added to the IFG awards
(subject to the current grant maximum), but withheld from the grant and
provided directly to the NFIP Servicing Agent. Since the Servicing
Agent is already equipped to issue policies, it would not be cost-
effective to duplicate this capability using the limited FEMA resources
in the regions. The Servicing Agent will send the IFG recipient a
Certificate of Flood Insurance and advise the grantee of the option of
securing increased limits of coverage by purchasing an SFIP at an
increased cost.
One of the States suggested we continue to allow grants of $200 or
less, but exempt those recipients from the insurance requirement. The
law does not appear to allow us the option of exempting grantees from
maintaining flood insurance. Therefore, we have determined it was more
cost-effective for the victim and the government to disallow grants of
$200 or less for damages or losses to real or personal property, or
both. This minimum-loss eligibility requirement shall be applicable not
only to floods, but also to all types of disaster incidents.
The consultant questioned whether the maximum grant amount (then
$12,600) was for the entire family or each member of the household,
since there appeared to be an inconsistency in reference to
``homeowner.'' The proposed rule refers to a ``homeowner'' in context
of an insurance ``policy'', whereas grants are made to each eligible
property owner to apply to damaged/lost property. The maintenance
requirement is, therefore, placed on each property owner who receives a
grant.
The consultant then questioned how new maps or revised map changes
would affect a homeowner who has received a grant when the property was
not initially in a special flood hazard area (SFHA) and, as a result of
a new or revised map, is placed in an SFHA. If a property was not in an
SFHA at the time the grant was given, there would have been no flood
insurance purchase requirement. If the homeowner were to apply for an
IFG grant at a later date after the property had been placed in an
SFHA, the flood insurance purchase requirement would apply and the
State would follow the procedure for securing a GFIP for that IFG
recipient.
The fourth State objected to the burdensome requirement of
providing NFIP with weekly reports and payments. Since FEMA does not
want to burden States, we are asking for weekly vs. daily reports. FEMA
will also provide States with an automated system that will support
this requirement.
The same State felt that the NFIRA flood insurance requirements
should apply to the Disaster Housing Assistance program, as well as to
the IFG program. FEMA is in the process of reviewing this proposition.
This State's last comment was that all disaster programs should
comply with the same regulations. FEMA is coordinating with all Federal
and State agencies involved in implementing this law. We have actively
solicited and welcomed comments from all sources, and have tried our
best to ensure equity in program assistance provided to all.
In addition to the changes made in response to the comments, we
amended Sec. 61.17(b)(2) in this final rule to clarify that benefits
under Article 3 B.3. of the SFIP Dwelling Form will not be subject to a
separate deductible, but are subject to the GFIP deductible of $200
(applicable separately to any building loss and any contents loss).
Additionally, FEMA received a request from the State of Alaska to
make the GFIP available not only to recipients of IFG grants but also
to recipients of its own fully funded disaster assistance program
comparable to the IFG program in benefits and eligibility requirements.
The State's request, which was prompted by a recent disaster recovery
effort, has merit. FEMA has determined that 42 U.S.C. Secs. 4014(a)(2)
and 4015(b)(2), which authorize FEMA to make the GFIP available to
recipients of IFG awards, may also apply to recipients of certain
State-funded disaster assistance programs. We have modified the interim
final rule to apply the GFIP, as a one-time, pilot project, to
recipients of the State of Alaska's own fully funded disaster
assistance program for individuals and families suffering damage from
flooding that occurred in the State during September and October 1995.
The decision to make the GFIP available to these flood disaster victims
is based on the fact that the State of Alaska's award program is
comparable to the IFG program, including eligibility requirements such
as income levels. The State also has the capability to provide
information to the NFIP in a format compatible with NFIP requirements.
The evaluation of this one-time, pilot project of the GFIP in the State
of Alaska will help FEMA evaluate whether the GFIP should be made
available to other States requesting the availability of the GFIP for
100-percent, State-funded disaster assistance programs comparable to
the IFG program. Comments are also being solicited specifically on this
issue.
Finally, Sec. 582 of the NFIRA prohibits future Federal disaster
assistance to
[[Page 19200]]
anyone who fails to obtain and maintain flood insurance coverage in
connection with previous flood-related disaster assistance. Section 582
provides: ``Notwithstanding any other provision of law, no Federal
disaster relief assistance made available in a flood disaster may be
used to make a payment (including any loan assistance payment) to a
person for repair, replacement, or restoration for damage to any
personal, residential, or commercial property if that person at any
time has received flood disaster assistance that was conditional on the
person first having obtained flood insurance under applicable Federal
law and subsequently having failed to obtain and maintain flood
insurance as required under applicable Federal law on such property.''
In light of the requirements of Sec. 582, and in anticipation of
the spring flood season, there is an urgent need to make the GFIP
available upon publication of this final rule. FEMA finds that there is
a compelling need and good cause to waive the 30-day effective date
requirements of the Administrative Procedure Act, 5 U.S.C. 553(d). This
interim final rule is effective on the date of publication in the
Federal Register.
National Environmental Policy Act
This interim final rule is categorically excluded from the
requirements of 44 CFR Part 10, Environmental Consideration. No
environmental impact assessment has been prepared.
Executive Order 12866, Regulatory Planning and Review
This interim final rule is not a significant regulatory action
within the meaning of Sec. 2(f) of E.O. 12866 of September 30, 1993, 58
FR 51735, but attempts to adhere to the regulatory principles set forth
in E.O. 12866. The interim final rule has not been reviewed by the
Office of Management and Budget under E.O. 12866.
Paperwork Reduction Act
This interim final rule does not contain a collection of
information and therefore is not subject to the provisions of the
Paperwork Reduction Act of 1995.
Executive Order 12612, Federalism
This interim final rule involves no policies that have federalism
implications under E.O. 12612, Federalism, dated October 26, 1987.
Executive Order 12778, Civil Justice Reform
This interim final rule meets the applicable standards of
Sec. 2(b)(2) of E.O. 12778.
List of Subjects in 44 CFR Parts 61 and 206
Flood insurance; Disaster assistance.
Accordingly, 44 CFR Parts 61 and 206 are amended as follows:
PART 61--INSURANCE COVERAGE AND RATES
1. The authority citation for Part 61 continues to read as follows:
Authority: 42 U.S.C. 4001 et seq.; Reorganization Plan No. 3 of
1978, 43 FR 41943, 3 CFR, 1978 Comp., p. 329; E.O. 12127 of Mar. 31,
1979, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.
2. Section 61.17 is added to read as follows:
Sec. 61.17 Group Flood Insurance Policy.
(a) A Group Flood Insurance Policy (GFIP) is a policy covering all
individuals named by a State as recipients under Sec. 411 of the
Stafford Act (42 U.S.C. 5178) of an Individual and Family Grant (IFG)
program award for flood damage as a result of a Presidential major
disaster declaration, and, as a one-time, pilot project, to recipients
of the State of Alaska's own fully funded disaster assistance program
for individuals and families suffering damage from flooding in
September and October 1995. Alaska's disaster assistance program is
comparable to the IFG program in benefits and eligibility requirements,
including income levels. The State of Alaska has also agreed to provide
information to the National Flood Insurance Program (NFIP) in a data
format compatible with NFIP requirements. The premium for the GFIP,
initially, is a flat fee of $200 per policyholder. Thereafter, the
premium may be adjusted to reflect NFIP loss experience and any
adjustment of benefits under the IFG program. The amount of coverage
shall be equivalent to the maximum grant amount established under
Sec. 411. The term of the GFIP shall be for 36 months and will begin,
for implementation with the IFG program, 60 days from the date of the
disaster declaration. For FEMA's pilot project with the State of
Alaska, the term of the three-year policy will begin on May 1, 1996. On
and after the inception date of the GFIP, coverage for IFG recipients
or for recipients of the one time pilot project of the GFIP for the
State of Alaska's own comparable fully funded, disaster assistance
program, will begin on the 30th day after the NFIP receives the records
of GFIP insureds and their premium payments from the State. A
Certificate of Flood Insurance shall be sent to each IFG recipient,
and, for the one-time pilot project in Alaska, to each individual or
family receiving a grant from Alaska's own fully funded disaster
assistance program.
(b) The GFIP is the Standard Flood Insurance Policy Dwelling Form
(a copy of which is included in Appendix A(1) of this part), except
that:
(1) The GFIP provides coverage for losses caused by land
subsidence, sewer backup, or seepage of water without regard to the
requirement in paragraph B.3. of Article 3 that the structure be
insured to 80 percent of its replacement cost or the maximum amount of
insurance available under the NFIP.
(2) Article 7, Deductibles, does not apply to the GFIP. Instead, a
special deductible of $200 (applicable separately to any building loss
and any contents loss) applies to insured flood-damage losses sustained
by the insured property in the course of any subsequent flooding event
during the term of the GFIP. The separate deductible applicable to
Article 3 B.3 does not apply.
(3) Article 9 E., Cancellation of Policy By You, does not apply to
the GFIP.
(4) Article 9 G., Policy Renewal, does not apply to the GFIP.
(c) A notice will be sent to the GFIP certificate holders
approximately 60 days before the end of the 3-year term of the GFIP.
The notice will (1) encourage them to contact a local insurance agent
or producer or a private insurance company selling NFIP policies under
the Write Your Own program of the NFIP to apply for a conventional NFIP
Standard Flood Insurance Policy and (2) advise them as to the amount of
coverage they must maintain in order not to jeopardize their
eligibility for future disaster assistance.
PART 206--FEDERAL DISASTER ASSISTANCE FOR DISASTERS DECLARED ON OR
AFTER NOVEMBER 23, 1988
3. The authority citation for Part 206 is revised to read as
follows:
Authority: 42 U.S.C. 5121 et seq.; 42 U.S.C. 4001 et seq.;
Reorganization Plan No. 3 of 1978, 43 FR 41943, 3 CFR, 1978 Comp.,
p. 329; E.O. 12127, 44 FR 19367, 3 CFR, 1979 Comp., p. 376.
Subpart E--Individual and Family Grant Programs
4. Section 206.131(a) is amended by adding a sentence between the
sentence ending, ``* * * to reflect changes in the Consumer Price Index
for all Urban Consumers,'' and the sentence beginning, ``The Governor
or his/her designee is responsible . . .'' to read as set forth below,
and
[[Page 19201]]
Sec. 206.131(d)(1)(iii) (C) and (D) are revised to read as follows:
Sec. 206.131 Individual and family grant programs.
(a) * * * IFG assistance for damages or losses to real or personal
property, or both, will be provided to individuals or families with
those IFG-eligible losses totaling $201 or more; those individuals with
damages or losses of $200 or less to real or personal property, or
both, are ineligible. * * *
* * * * *
(d) * * *
(1) * * *
(iii) * * *
(C)(1) The State may not make a grant for acquisition or
construction purposes in a designated special flood hazard area in
which the sale of flood insurance is available under the NFIP unless
the individual or family obtains adequate flood insurance and maintains
such insurance for as long as they live at that property address. The
coverage shall equal the maximum grant amount established under
Sec. 411(f) of the Stafford Act. If the grantee is a homeowner, flood
insurance coverage must be maintained on the residence at the flood-
damaged property address for as long as the structure exists if the
grantee, or any subsequent owner of that real estate, ever wishes to be
assisted by the Federal government with any subsequent flood damages or
losses to real or personal property, or both. If the grantee is a
renter, flood insurance coverage must be maintained on the contents for
as long as the renter resides at the flood-damaged property address.
The restriction is lifted once the renter moves from the rental unit.
(2) Individuals named by a State as eligible recipients under
Sec. 411 of the Stafford Act for an IFG program award for flood damage
as a result of a Presidential major disaster declaration will be
included in a Group Flood Insurance Policy (GFIP) established under the
National Flood Insurance Program (NFIP) regulations, at 44 CFR 61.17.
(i) The premium for the GFIP is a necessary expense within the
meaning of this section. The State shall withhold this portion of the
IFG award and provide it to the NFIP on behalf of individuals and
families who are eligible for coverage. The coverage shall be
equivalent to the maximum grant amount established under Sec. 411(f) of
the Stafford Act.
(ii) The State IFG program staff shall provide the NFIP with
records of individuals who received an IFG award and are, therefore, to
be insured. Records of IFG grantees to be insured shall be accompanied
by payments to cover the premium amounts for each grantee for the 3-
year policy term. The NFIP will then issue a Certificate of Flood
Insurance to each grantee. Flood insurance coverage becomes effective
on the 30th day following the receipt of records of GFIP insureds and
their premium payments from the State, and terminates 36 months from
the inception date of the GFIP, i.e., 60 days from the date of the
disaster declaration.
(iii) Insured grantees would not be covered if they are determined
to be ineligible for coverage based on a number of exclusions
established by the NFIP. Therefore, once grantees/policyholders receive
the Certificate of Flood Insurance that contains a list of the policy
exclusions, they should review that list to see if they are ineligible
for coverage. Those grantees who fail to do this may find that their
property is, in fact, not covered by the insurance policy when the next
flooding incident occurs and they file for losses. Once the grantees
find that their damaged buildings, contents, or both, are ineligible
for coverage, they should notify the NFIP in writing in order to have
their names removed from the GFIP, and to have the flood insurance
maintenance requirement expunged from the NFIP data-tracking system.
(If the grantee wishes to refer to or review a Standard Flood Insurance
Policy, it will be made available by the NFIP upon request.)
(D) A State may not make a grant to any individual or family who
received Federal disaster assistance for flood damage occurring after
September 23, 1994, if that property has already received federal
flood-disaster assistance in a disaster declared after September 23,
1994, a flood insurance purchase and maintenance requirement was levied
as a condition or result of receiving that Federal disaster assistance,
and flood insurance was, in fact, not maintained in an amount at least
equal to the maximum IFG grant amount. However, if that property was
determined to be ineligible for NFIP flood insurance coverage and is in
a special flood hazard area located in a community participating in the
NFIP, then the State may continue to make grants to those individuals
or families that receive additional damage in all subsequent
Presidentially declared major disasters involving floods.
(Catalog of Federal Domestic Assistance No. 83.100, ``Flood
Insurance''; No. 83.516, ``Disaster Assistance'')
Dated: April 25, 1996.
James L. Witt,
Director.
[FR Doc. 96-10779 Filed 4-30-96; 8:45 am]
BILLING CODE 6718-02-P
Complete official Federal Register PDF
FR Doc. 96-10758 Nectarines and Peaches Grown in California; Relaxation of Quality Requirements for Fresh Nectarines and Peaches
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19160-19164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10758]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 916 and 917
[Docket No. FV95-916-5FR]
Nectarines and Peaches Grown in California; Relaxation of Quality
Requirements for Fresh Nectarines and Peaches
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This final rule relaxes, for the 1996 season only, the quality
requirements for California nectarines and peaches. This rule
establishes a ``CA Utility'' quality requirement, based on minimum
quality standards established under the California Agricultural Code,
with a limitation on the amount of fruit meeting U.S. No. 1 or higher
grade requirements that may be contained in the utility pack. This
final rule also requires that containers of nectarines and peaches
meeting the ``CA Utility'' quality requirement be clearly marked ``CA
Utility.'' This final rule will allow more nectarines and peaches into
fresh market channels, and is designed to benefit growers and
consumers.
EFFECTIVE DATE: This final rule becomes effective May 2, 1996.
FOR FURTHER INFORMATION CONTACT: Kenneth Johnson, Marketing Specialist,
Marketing Order Administration Branch, Fruit and Vegetable Division,
AMS, USDA, P.O. Box 96456, Room 2523-S, Washington, DC 20090-6456;
telephone: (202) 720-2861; or Terry Vawter, Marketing Specialist,
California Marketing Field Office, Marketing Order Administration
Branch, Fruit and Vegetable Division, AMS, USDA, 2202 Monterey Street,
Suite 102B, Fresno, California, 93721; telephone: (209) 487-5901.
SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing
Agreement and Marketing Order Nos. 916 and 917 [7 CFR Parts 916 and
917] regulating the handling of nectarines and peaches grown in
California, respectively, hereinafter referred to as the orders. The
orders are effective under the Agricultural Marketing Agreement Act of
1937, as amended [7 U.S.C. 601-674], hereinafter referred to as the
Act.
The Department of Agriculture (Department) is issuing this final
rule in conformance with Executive Order 12866.
This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. This final rule is not intended to have
retroactive effect. This final rule will not preempt any State or local
laws, regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with the Secretary a
petition stating that the order, any provision of the order, or any
obligation imposed in connection with the order is not in accordance
with law and request a modification of the order or to be exempted
therefrom. A handler is afforded the opportunity for a hearing on the
petition. After the hearing the Secretary would rule on the petition.
The Act provides that the district court of the United States in any
district in which the handler is an inhabitant, or has his or her
principal place of business, has jurisdiction to review the Secretary's
ruling on the petition, provided an action is filed not later than 20
days after the date of the entry of the ruling.
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. The purpose of the
RFA is to fit regulatory actions to the scale of business subject to
such actions in order that small businesses will not be unduly or
disproportionately burdened. Marketing orders issued pursuant to the
Act, and rules issued thereunder, are unique in that they are brought
about through group action of essentially small entities acting on
their own behalf. Thus, both statutes have small entity orientation and
compatibility.
There are about 300 California nectarine and peach handlers subject
to regulation under the orders covering nectarines and peaches grown in
California, and about 1,800 producers of these fruits in California.
Small agricultural producers have been defined by the Small Business
Administration [13 CFR 121.601] as those having annual receipts of less
than $500,000, and small agricultural service firms are defined as
those whose annual
[[Page 19161]]
receipts are less than $5,000,000. A majority of these handlers and
producers may be classified as small entities.
This final rule establishes, for the 1996 season only, a ``CA
Utility'' quality requirement and a container marking requirement for
shipments of ``CA Utility'' fruit.
Minimum grade requirements for fresh nectarines and peaches grown
in California are in effect under Sec. 916.356 and Sec. 917.459,
respectively. This rule amends Secs. 916.356 and 917.459 by revising
paragraph (a)(1) under each section to permit shipments of fruit
meeting ``CA Utility'' quality requirements. ``CA Utility'' quality
requirements are the same as the requirements set forth in the
California Agricultural Code for nectarines and peaches with the
exception that not more than 30 percent of the fruit in a container may
meet or exceed the requirements of the U.S. No. 1 Grade Standard. ``CA
Utility'' fruit must be inspected by the Federal or Federal-State
Inspection Service and certified as meeting the ``CA Utility'' quality
requirements. ``CA Utility'' fruit are subject to assessment, maturity,
size and all other requirements of the orders.
This rule also amends Secs. 916.350 and 917.442 by adding a
paragraph to each section to specify that each package or container of
nectarines and peaches shipped, meeting the requirements of the newly
established ``CA Utility'' quality, must be conspicuously marked with
the words ``CA Utility'' on a visible display panel.
Shipments of California nectarines and peaches are subject to
minimum grade, size, and maturity requirements under the provisions of
Marketing Orders 916 (section 916.356) during the period April 1
through October 31 each year and 917 (section 917.459) during the
period April 1 through November 23 each year. Currently, nectarine
shipments are required to meet the requirements of U.S. No. 1 Grade,
except less scarring is permitted than under the U.S. No. 1 Grade, and
the tolerance for fruit that is not well formed is greater than the
U.S. No. 1 Grade. Different minimum size requirements are in effect for
different groupings of nectarine varieties.
Peach shipments are currently required to meet the requirements of
U.S. No. 1 Grade, except there is an additional tolerance for fruit
damage caused by open sutures. Also, different minimum size
requirements are in effect for different groupings of peach varieties.
Both the nectarine and peach regulations allow the shipment of
fruit one size smaller than the specified minimum if the fruit meets
higher maturity requirements. Both nectarine and peach shipments are
also subject to container, pack, and container marking requirements.
Prior to the 1995 shipping season, the Nectarine Administrative and
Peach Commodity Committees (Committees), the agencies responsible for
local administration of the orders, considered recommending a change in
the nectarine and peach regulations to allow a utility grade for these
fruits. (Utility grade is a lower quality fruit than U.S. No. 1.)
During the 1995 season, changes were made to allow the shipment of a
utility grade for California plums, which are regulated under a State
program. The plum utility grade was based on California Agricultural
Code requirements. The Committees voted not to recommend a utility
grade for nectarines and peaches for the 1995 season. The Committees
did, however, hire Dr. Dennis Nef, California State University, Fresno,
to conduct a research project to study the potential impact of a
utility grade for nectarines and peaches. The Committees also believed
that industry experience with the plum utility grade would be helpful
in making future recommendations for appropriate quality requirements
for nectarines and peaches. The report prepared by Dr. Nef was
presented to the Nectarine and Peach Grade and Size Subcommittees in
October 1995. The report found that about 22 percent of the peaches
sampled in packinghouse cull bins in 1995 would have met California
Agricultural Code requirements. Of the nectarines sampled from
packinghouse culls in that year, about 6 percent would have met
California Agricultural Code requirements, and an additional 14 percent
failed marketing order quality requirements but met U.S. No. 1 Grade
requirements (as indicated previously, the nectarine requirements under
the order permit less fruit scarring than allowed under the U.S. No. 1
Grade). The report pointed out that these findings were based on a
season which was marked by unusual crop and weather conditions. After
reviewing the report, the nectarine and peach subcommittees voted not
to recommend to the full Committees that a utility grade be implemented
in 1996 for nectarines and peaches, citing the unusual weather
conditions that resulted in below normal crop production. They believed
that Dr. Nef's research project should be continued for another year to
allow for the collection of data based on a more typical season.
On November 29, 1995, the Department wrote to the Committees,
recommending that a utility grade be adopted for nectarines and peaches
for the 1996 season beginning April 1, 1996. The Committees met on
December 6-7, 1995, to discuss possible implementation of a utility
grade for nectarines and peaches for the 1996 season. Committee members
and others in attendance at the meetings expressed views in opposition
to and in support of implementing a utility grade.
Commentors in opposition to a utility grade for nectarines and
peaches stated that the 1995 season was not a normal season for plums,
nectarines, or peaches and should not be used as a basis for
recommending a utility grade. They also said that the tree fruit
industry is facing competition in both domestic and in foreign markets.
One commentor stated that utility grade fruit would damage the
reputation of California-produced tree fruit and another stated that
poor quality California plums had been shipped to Hong Kong during the
1995 season, and that these plums had damaged the overall reputation of
California plums. One commentor stated that allowing a utility grade
would result in inspections of fruit which would only serve to verify
that the fruit in the container is poor quality. Others stated that
lower quality fruit is not wasted and may be used for cattle feed.
Another stated that the results of the recent grower referendum
indicated support for the continuation of the program and the
continuation of current quality standards.
One commentor in support of a utility grade for nectarines stated
that the implementation of a utility grade for plums in 1995 resulted
in a $10 million increase in plum grower revenue. Commentors noted that
less than 10 percent of the plum pack was utility grade. One commentor
stated that while less than one percent of his organization's plum pack
was utility grade, this lower grade should be available for use by
nectarine and peach handlers if a market exists. Others commented that
the Department had recommended a utility grade for nectarines and
peaches for one year only--1996.
Committee members and others who commented at the December 1995
Committee meetings indicated that a niche market may exist for utility
grade fruit and that the opportunity should be made available to market
lower quality fruit to meet demand. Reducing quality requirements would
allow more fruit to be marketed. The lower quality fruit would be made
available at lower prices, which would especially benefit lower income
consumers.
[[Page 19162]]
Data on recent production of California nectarines and peaches in
relation to season average producer prices appear to indicate that
lesser quality fruit could be marketed successfully without interfering
with sales of higher quality fruit. The limited additional quantity
expected to be made available would be expected to have a minimal
effect on consumer purchases and season average producer prices for
California nectarines and peaches. Sales of lesser quality fruit to a
niche market could increase producer revenue and promote consumer
satisfaction.
The implementation of utility quality requirements for the 1996
season would authorize fruit meeting these requirements to be shipped
to market and would provide information on consumer and retailer
acceptance of such fruit. This information could then be used to
supplement information collected by Dr. Nef and assist the Committees
in developing appropriate quality requirements for the 1997 season.
Based on the foregoing, the Department proposed that a utility
grade for nectarines and peaches be implemented on a temporary basis
for the 1996 season. The Department proposed, for purposes of this
regulation, to define ``CTFA Utility'' to mean fruit which meets the
requirements of the U.S. No. 2 Grade defined in the United States
Standards for Grades of Nectarines (7 CFR 51.3145 through 51.3160) and
the United States Standards for Grades of Peaches (7 CFR 51.1210
through 51.1223), except that misshapened fruit and fruit with serious
damage due to scarring would be permitted.
In order to prevent confusion in the marketplace and to clearly
differentiate shipments of ``CTFA Utility'' fruit from better quality
fruit, the Department proposed requiring containers of ``CTFA Utility''
fruit to be conspicuously marked with the words ``CTFA Utility''. In
addition, it was proposed that shipments of such fruit continue to be
required to meet the same container, pack, and container marking
requirements in effect for shipments of higher quality fruit.
A proposed rule concerning this action was published in the March
4, 1996, Federal Register (61 FR 8225), with a 30-day comment period
ending on April 3, 1996. Nine comments were received. Jonathan Field,
Manager of the California Tree Fruit Agreement, and John Tos, Chairman
of the Peach Commodity Committee, submitted comments on behalf of the
Committees, recommending modifications to the proposed rule as
published. Six other commentors supported the establishment of a
utility quality requirement, but did not fully agree with the
Committees' comments: Harry Snyder, Consumers Union of U.S., Inc; Joe
Caram, nectarine grower, Reedley, California; Steven Booz, Reedley,
California; Richard Mittry, tree fruit grower, Sultana, California; Dan
Gerawan, tree fruit grower-shipper, Reedley, California; and Craig
Rasmussen, a grower and packer of California tree fruit, Reedley,
California.
One comment received from Leroy Giannini, a grower-handler of
California tree fruit, Dinuba, California, opposes the establishment of
utility quality requirements. Mr. Giannini states that California
nectarines and peaches have grown in production over the last 30 years
from 1 million cartons annually to almost 20 million cartons. He
attributed this growth to the industry's quality assurance program. Mr.
Giannini states further that during the 1995 season, ``Utility'' grade
plums were marked up at retail, but neither grower nor consumer
interests were well served. Mr. Giannini believes that the goal of
providing lower cost plums to consumers through implementation of the
``Utility'' grade failed to materialize.
Comments supporting modification of the proposed rule addressed
revisions in four areas: Whether the utility quality requirements
should be based on the U.S. Standards for Grades; whether there should
be a limit on the amount of U.S. No. 1 grade fruit in the utility pack;
where utility quality fruit should be permitted to be marketed; and how
utility quality fruit should be labeled.
The Basis for Utility Quality Requirements
As previously indicated, the Department proposed defining utility
quality in terms of a modified U.S. No. 2 grade. In Messrs. Field and
Tos's comments, they state that the Committees support basing nectarine
and peach utility quality requirements on the minimum quality standards
established in the California Agricultural Code. The Committees believe
the quality requirements for California nectarines and peaches should
be consistent with the minimum requirements in place for the California
plum utility grade, which are based on the California Agricultural
Code.
In addition to providing consistency within the California tree
fruit industry, the Committees believe that basing the utility quality
requirements on the California Agricultural Code will result in lower
inspection costs. Mr. Field provided a letter from Mr. John Wiley,
Branch Chief, Shipping Point Inspection, California Department of Food
and Agriculture, which stated that requiring inspectors to review
product for a quality requirement which is not a part of their normal
procedures would increase the cost of inspection, thereby increasing
program costs, particularly to small growers. Mr. Wiley stated further
that, having a proposed quality requirement of U.S. No. 2 with
different tolerances for peaches and nectarines, would increase the
time required for training and supervision as well as increase the
potential for confusion by inspectors and the difficulty of
differentiating between the various grades.
Mr. Gerawan supported using the California Agricultural Code as a
basis for utility quality requirements. The remaining commentors did
not state specifically whether they supported this proposed
modification or not. The Department believes that the Committees' and
Mr. Gerawan's arguments have merit. Also, defining the utility quality
requirements in terms of the California Agricultural Code should not
result in any less fruit being made available to fresh markets. For
these reasons, the Committees' and Mr. Gerawan's proposed revision is
adopted.
Limitation of U.S. No. 1 Grade Fruit in Utility Packs
The Committees support limiting the amount of U.S. No. 1 grade
fruit that can be included in a utility pack. Specifically, they
support a limit of 15 percent in any container. Mr. Field, in his
comment, states that a utility quality requirement must be clearly
distinct from a U.S. No. 1 grade. Failure to provide a clear
distinction could cause confusion in the marketplace and would not meet
the goal of providing low-cost fruit to low-income consumers. Mr. Field
contends that the Department failed to address this issue in its
proposal which to allow for a U.S. No. 2 grade, with a 100 percent
tolerance for misshapen and seriously scarred fruit; and that such
action would, in effect, do away with regulatory grades in place for
California nectarines and peaches. Mr. Field states that containers
could be marked as utility without regard to the amount of U.S. No. 1
therein. Fruit could be packed at 80-85 percent U.S. No. 1 and fail
marketing order requirements, but rather than be repacked, it could be
marked utility and marketed. This would cause confusion in the
marketplace since the fruit would not be adequately distinguished from
U.S. No. 1 grade fruit. By the same token, a container of nectarines or
peaches could have 0 percent U.S. No. 1 or 100 percent U.S. No. 1
product
[[Page 19163]]
inside, but could be marked utility for whatever reason the shipper
determined appropriate. According to Mr. Field, this clearly
demonstrates why the Committees believe it is necessary to establish a
maximum tolerance of 15 percent for U.S. No. 1 grade fruit in
containers marketed as utility grade fruit.
In the comments received in support of the proposed rule, five
commentors stated that the Department should not set a 15 percent
tolerance on U.S. No. 1 grade fruit in containers marked utility. These
commentors contend that it would be too difficult and costly for
packers to meet a 15 percent tolerance because some containers would
not meet the utility quality requirements because they would have too
much ``good fruit'' in the box. These commentors could see no
reasonable justification for limiting the amount of good quality fruit
in a utility pack.
Mr. Rasmussen offered a compromise. He believes that there should
be a limit on the amount of U.S. No. 1 grade fruit in the utility pack
to ensure a distinct difference between the packs, but states the 15
percent limit supported by the Committees was overly restrictive. He
supports a limit of 30 percent. This limit has proved workable for the
California plum industry's use of a utility grade standard.
The Department finds that Mr. Rasmussen's suggested revision is
reasonable. Thus, this rule provides that the amount of fruit in a
container of utility quality fruit that meets or exceeds the
requirements of a U.S. No. 1 grade cannot exceed 30 percent.
Where Utility Quality Fruit May Be Shipped
The Committees, through Mr. Field, also comment that on an
experimental basis, utility quality fruit should be limited to the
domestic markets. Mr. Field opines that under sections 916.54 and
917.43 of the orders, special purpose shipments can be made for
research purposes for special markets. Mr. Field believes that this
authority allows restricting utility grade shipments, which would
enable the nectarine and peach industries to continue studying the
utility quality requirements, the availability of lower quality fruit
to lower income consumers, and the benefits of making the lower quality
product available. Mr. Field believes limiting shipments of utility
quality fruit to the domestic market would allow for these studies to
progress and would allay the fears of the industries that low quality
fruit in export markets is to the long term detriment of the
industries.
Five commentors state that there is no rationale for restricting
the sale of utility quality California nectarines and peaches to
Mexico, where there is believed to be strong market demand for the
product. One commentor--Mr. Rasmussen--did not state a position on this
subject.
The Committees did not provide sufficient evidence that the
adoption of the CA Utility requirement for the 1996 season only would
result in any damage to export markets. Thus, the Committees' proposal
is denied.
Labeling Requirements for Utility Quality Fruit
The Committees, through Mr. Field, comment that the name of the
proposed quality requirement, ``CTFA Utility'' should be known instead
as ``USDA Utility''. The Committees believe that since the Department
initially proposed the utility quality requirements, such quality
requirements should be called ``USDA Utility.'' It is the consensus of
the Committees that the California quality image could be diluted by
using ``California'' or ``CTFA'' to describe the lower quality product.
Mr. Field also states that containers of utility quality California
nectarines and peaches should meet all size, marking, and standard
container requirements, with the additional requirement that the
marking of ``USDA Utility'' should be a minimum height of \3/4\ inches
and on the visible display panel of the box. (The proposed rule did not
specify where such marking should appear.) As provided in the proposed
rule, consumer bags or packages are also required to be to be marked.
Requiring the marking to be on a visible display panel and on consumer
packages will enable consumers and retailers to identify the fruit as
utility quality when it is palletized or on display at the retail
level.
Mr. Rasmussen is the only other commentor who expresses an opinion
on this issue. He states that the utility quality peaches and
nectarines should be known as ``CA Utility.'' This is comparable to the
designation used for California plums, and having the same nomenclature
for peaches and nectarines would be advantageous from the standpoint of
maintaining uniformity among the three commodities and creating less
confusion in the marketplace.
The Department finds that Mr. Rasmussen's position has merit and is
therefore adopted. Further, the Committees' proposal to require the
marking on a visible display panel also has merit and is incorporated
in this final rule.
The intent of this rule is to establish a minimum quality
requirement for California nectarines and peaches to allow more fruit
into fresh market channels, ensure customer satisfaction and improve
returns to producers. Moreover, as previously stated, information
gathered as a result of allowing shipments of ``CA Utility'' quality
fruit, for the 1996 season, can be used to help determine appropriate
quality requirements for California nectarines and peaches for the 1997
season.
This rule reflects the Department's appraisal of the need to revise
the quality and container marking requirements for California
nectarines and peaches. The Department believes that this rule will
have a beneficial impact on producers, handlers, and consumers of
California nectarines and peaches.
Based on available information, the AMS has determined that this
action will not have a significant economic impact on a substantial
number of small entities.
After consideration of all relevant matter presented, including the
information and recommendations submitted by the Committees, the
comments received, and other available information, it is hereby found
that this rule, as hereinafter set forth, will tend to effectuate the
declared policy of the Act.
It is further found that good cause exists for not postponing the
effective date of this rule until 30 days after publication in the
Federal Register (5 U.S.C. 553) because this rule should apply to as
many shipments of California nectarines and peaches as possible. The
shipping seasons for both California nectarines and peaches began on
April 1, 1996. Further, handlers are aware of this rule, which was
recommended in a proposed rule in early March and discussed in public
meetings of the Committees. Also, this rule provides an additional
alternative for handlers of California nectarines and peaches, and no
additional time is needed for those handlers to comply with the relaxed
quality requirements. Finally, a 30-day comment period was provided for
in the proposed rule, and all comments have been considered in
developing this final rule.
List of Subjects
7 CFR Part 916
Marketing agreements, Nectarines, Reporting and recordkeeping
requirements.
[[Page 19164]]
7 CFR Part 917
Marketing agreements, Peaches, Pears, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR Parts 916 and 917
are amended as follows:
1. The authority citation for 7 CFR Parts 916 and 917 continues to
read as follows:
Authority: 7 U.S.C. 601-674.
PART 916--NECTARINES GROWN IN CALIFORNIA
2. Section 916.350 is amended by adding a new paragraph (d) to read
as follows:
Sec. 916.350 California Nectarine Container and Pack Regulation.
* * * * *
(d) During the period April 1 through October 31, 1996, each
container or package when packed with nectarines meeting CA Utility
requirements, shall bear the words ``CA Utility'', along with all other
required container markings, in letters of \3/4\ inch minimum height on
the visible display panel. Consumer bags or packages must also be
clearly marked on the bag or package as ``CA Utility'' along with other
required markings.
3. Section 916.356 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 916.356 California Nectarine Grade and Size Regulation.
(a) * * *
(1) Any lot or package or container of any variety of nectarines
unless such nectarines meet the requirements of U.S. No. 1 grade:
Provided, that nectarines 2 inches in diameter or smaller, shall not
have fairly light colored, fairly smooth scars which exceed an
aggregate area of a circle \3/8\ inch in diameter, and nectarines
larger than 2 inches in diameter shall not have fairly light colored,
fairly smooth scars which exceed an aggregate area of a circle \1/2\
inch in diameter: Provided further, That an additional tolerance of 25
percent shall be permitted for fruit that is not well formed but not
badly misshapen. Provided further, That during the period April 1
through October 31, 1996, any handler may handle nectarines if such
nectarines meet ``CA Utility'' quality requirements. The term ``CA
Utility'' means that not more than 30 percent of the nectarines in any
container meet or exceed the requirements of the U.S. No. 1 grade and
that such nectarines are mature and are:
(i) Free from insect injury which has penetrated or damaged the
flesh; split pits which cause an unhealed crack or one or more well
healed cracks which, either singly or in the aggregate, are more than
\3/8\ inch in length; mold, brown rot, and decay which has affected the
edible portion; and
(ii) Free from serious damage due to skin breaks, cuts, growth
cracks, bruises, or other causes.
(iii) Tolerances. Not more than 10 percent, by count, of the
nectarines in any one container may be below the requirements which are
prescribed by this subparagraph, including not more than 5 percent, by
count, for any one defect, except split pits. An additional tolerance
of 10 percent, by count, of the nectarines in any one container or bulk
lot may contain nectarines affected with split pits. This means a total
tolerance of 20 percent is allowed for all defects, including split
pits, but not to exceed 15 percent for split pits alone.
* * * * *
PART 917--FRESH PEARS AND PEACHES GROWN IN CALIFORNIA
3. Section 917.442 is amended by adding a new paragraph (d) to read
as follows:
Sec. 917.442 California Peach Container and Pack Regulation.
* * * * *
(d) During the period April 1 through November 23, 1996, each
container or package when packed with peaches meeting CA Utility
requirements, shall bear the words ``CA Utility'', along with all other
required container markings, in letters of \3/4\ inch minimum height on
the visible display panel. Consumer bags or packages must also be
clearly marked on the bag or package as ``CA Utility'' along with other
required markings.
4. Section 917.459 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 917.459 California Peach Grade and Size Regulation.
(a) * * *
(1) Any lot or package or container of any variety of peaches
unless such peaches meet the requirements of U.S. No. 1 grade:
Provided, that an additional 25 percent tolerance shall be permitted
for fruit with open sutures which are damaged, but not seriously
damaged. Provided, That during the period April 1 through November 23,
1996, any handler may handle peaches if such peaches meet ``CA
Utility'' quality requirements. The term ``CA Utility'' means that not
more than 30 percent of the peaches in any container meet or exceed the
requirements of the U.S. No. 1 grade and that such peaches are mature
and are:
(i) Free from insect injury which has penetrated or damaged the
flesh; split pits which cause an unhealed crack or one or more healed
cracks which, either singly or in the aggregate, are more than \1/2\
inch in length; and mold, brown rot, and decay; and
(ii) Free from serious damage due to cuts, skin breaks, growth
cracks, bruises, scab, rust, blight, disease, hail or other causes.
Damage to any peach is serious when it causes a waste of 10 percent or
more, by volume, of the individual peach.
(iii) Tolerances. Not more than 10 percent, by count, of the
peaches in any container may be below the requirements prescribed by
this subparagraph. Not more than one-half of this tolerance shall be
allowed for any one cause. Individual containers in any lot may contain
not more than 1 \1/2\ times the tolerances specified if the percentage
of defects of the entire lot averages within the tolerances.
* * * * *
Dated: April 25, 1996.
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 96-10758 Filed 4-30-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-10742 Staff Assignments and Review of Action Under Assignments
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19166-19171]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10742]
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DEPARTMENT OF TRANSPORTATION
14 CFR Part 385
[Docket No. OST-96-1268]
RIN 2105-AC38
Staff Assignments and Review of Action Under Assignments
AGENCY: Office of the Secretary, Department of Transportation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department is amending its regulations on staff
assignments and review of action under assignments to remove or update
obsolete provisions and organizational references, and reorder the
sequence of assignments in a more logical manner and to more closely
reflect the Department's staff organization.
EFFECTIVE DATE: The rule shall become effective on May 31, 1996.
FOR FURTHER INFORMATION CONTACT: Carol A. Woods, Air Carrier Fitness
Division, X-56, Department of Transportation, 400 Seventh Street, S.W.,
Washington, DC 20590, (202) 366-9721.
SUPPLEMENTARY INFORMATION: In his Regulatory Reinvention Initiative
Memorandum of March 4, 1995, President Clinton directed Federal
agencies to conduct a page-by-page review of all of their regulations
and
to ``eliminate or revise those that are outdated or otherwise in need
of reform.'' In response to that directive, the Department has
undertaken a review of its aviation economic regulations as contained
in 14 CFR Chapter II. This rule is one result of those efforts.
Subsequent rulemakings will address other regulations.
In this rulemaking part 385 is being amended to remove or update
obsolete provisions and organizational references, to replace
references to the Federal Aviation Act with references to Subtitle VII
of Title 49 of the United States Code (Transportation), and to reorder
and renumber the assignments in a more logical manner and to more
closely reflect the Department's staff organization.
Current Sec. 385.13--Authority of the Director, Office of
International Aviation, and Sec. 385.14--Authority of the Director,
Office of Aviation Analysis (new Sec. 385.12), are being revised to
eliminate authorities no longer used, to extend the authority for
routine procedural decisions to additional cases (e.g., to add
authority to dismiss certificate applications for lack of prosecution,
to request applicants to provide additional information, to authorize
the refund of filing fees due to the withdrawal or dismissal of an
application at an early stage without the issuance of the requested
authority), and to reorganize and renumber the authorities in a more
logical sequence.
Current Sec. 385.27--Authority of the Director, Office of Aviation
Information Management, Research and Special Programs Administration
(new Sec. 385.19), and Sec. 385.28--Authority of the Director, Office
of Administrative Operations (new Sec. 385.21), are being amended to
reflect changes in functions and names of organizations. In addition,
newly designated Sec. 385.21(b) is being removed since the delegation
of authority for this function is now contained in 49 CFR 89.5--
Collection of Claims Owed the United States.
Current Sec. 385.30, which contains the authority assigned to the
Director, Office of Community and Consumer Affairs, is being removed as
unnecessary. As part
[[Page 19167]]
of a staff reorganization, the functions of that office became part of
the Office of the General Counsel.
Executive Order 12866 (Regulatory Planning and Review)
The Department has analyzed the economic and other effects of the
amendments and has determined that they are not ``significant'' within
the meaning of Executive Order 12866. The amendment will not have an
annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities. It will
not create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency, and it will not materially
alter the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof. Nor does
it raise any novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
Executive Order 12866. The rule is considered ``nonsignificant'' under
Executive Order 12866 and was not reviewed by the Office of Management
and Budget.
DOT Regulatory Policies and Procedures
The amendments are not significant under the Department's
Regulatory Policies and Procedures, dated February 26, 1979, because
they do not involve important Departmental policies; rather, they are
being made solely for the purposes of eliminating obsolete
requirements, correcting out-of-date references, and enhancing the
organization of the regulations used by the Department to administer
its aviation economic regulatory functions. The Department has also
determined that issuance of this rule will have no economic impact.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, the Department
has evaluated the effects of this action on small entities. For
purposes of its aviation economic regulations, Departmental policy
categorizes air carriers operating small aircraft (60 seats or less or
18,000 pounds maximum payload or less) as small entities for purposes
of the Regulatory Flexibility Act. Based upon this evaluation, the
Department certifies that the amendment would not have a significant
economic impact on a substantial number of small entities.
Executive Order 12612 (Federalism)
These amendments have been analyzed in accordance with the
principles and criteria contained in Executive Order 12612. The
Department has determined that the amendments do not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment. The amendments will not have a substantial direct effect on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government.
National Environmental Policy Act
The Department has also analyzed the amendments for the purpose of
the National Environmental Policy Act. The amendments will not have any
significant impact on the quality of the human environment.
Paperwork Reduction Act
There are no reporting or recordkeeping requirements associated
with the amendments.
Notice and Opportunity for Public Comment Unnecessary
Under the Administrative Procedure Act (5 U.S.C. 553), the
Department determines that notice and an opportunity for public comment
are unnecessary and contrary to the public interest. The amendments
made in this document are ministerial, removing obsolete and redundant
material or making minor technical and terminology changes. These
changes will have no substantive impact, and the Department would not
anticipate receiving meaningful comments on them. Comment is therefore
unnecessary, and it would be contrary to the public interest to delay
unnecessarily this effort to eliminate or revise outdated rules.
Lists of Subjects in 14 CFR Part 385
Authority delegations (government agencies), Organization and
functions (government agencies).
Final Rule
For the reasons set out in the preamble, Title 14, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 385--[AMENDED]
1. The authority citation for part 385 is revised to read as
follows:
Authority: 49 U.S.C. Subtitle I, Chapters 401, 411, 413, 415,
417.
2. In Sec. 385.1, remove the first two definitions, Act and Board.
3. In Sec. 385.1, definition of Reviewing Official, remove the
words ``the Assistant Secretary for Governmental Affairs, the Assistant
Secretary for Administration,''.
4. In Sec. 385.1, definition of Staff action, remove the words
``Title IV or X of the Act'' and add, in their place, the words
``Subparts I, II and IV of Subtitle VII of Title 49 of the United
States Code (Transportation)''.
5. In Sec. 385.1, add a new definition in alphabetical order to
read as follows:
Sec. 385.1 Definitions.
* * * * *
Statute means Subtitle VII of Title 49 of the United States Code
(Transportation).
Sec. 385.2 [Amended]
6. In Sec. 385.2, remove the words ``section 204 of the Federal
Aviation Act'' and add, in their place, the words ``section 40113 of
the Statute''; remove the words ``Titles IV and X of the Act'' and add,
in their place, the words ``Subparts I, II, and IV of the Statute''.
Secs. 385.3, 385.4, 385.13, 385.19, 385.28, 385.54 [Amended]
7. The authority citations at the end of Secs. 385.3, 385.4,
385.13, 385.19, 385.28, and 385.54 are removed.
Sec. 385.14 [Redesignated as Sec. 385.12]
8. Section 385.14 is redesignated as Sec. 385.12 and is revised to
read as follows:
Sec. 385.12 Authority of the Director, Office of Aviation Analysis.
The Director, Office of Aviation Analysis, has authority:
(a) With respect to applications filed under section 41102 to
engage in interstate or foreign scheduled or charter air
transportation, section 41103 to engage in all-cargo air
transportation, or section 41738 to engage in certain commuter air
transportation:
(1) To issue an order stating the Department's intention to process
the application through show-cause procedures or other expedited
procedures, where that course of action is clear under current policy
and precedent.
(2) To issue an order to show cause proposing to grant such
application in those cases where no objections to the application have
been filed, and where the Department has already found the applicant to
be fit, willing and able to provide service of the same basic scope and
character.
(3) To issue an order, subject to any Presidential review required
under
[[Page 19168]]
section 41307 of the Statute, making final an order to show cause
issued under paragraph (a)(2) of this section, where no objections to
the order to show cause have been filed.
(4) To issue an order dismissing an application:
(i) When dismissal is requested or consented to by the applicant;
(ii) For lack of prosecution; or
(iii) When the application has become moot.
(5) To review Air Carrier Certificates and Operations
Specifications issued by the Federal Aviation Administration to
carriers that have been granted certificate or commuter air carrier
authority, and information concerning those carriers' fitness to
operate under that authority that emerged following the issuance of
orders establishing their fitness, and--
(i) To amend orders issuing the certificate or commuter air carrier
authority to advance the effective dates of the authority if the review
is satisfactory;
(ii) To stay the effectiveness of such orders for up to 30 days if
the review is unsatisfactory;
(iii) To lift the stay of effectiveness imposed under paragraph
(a)(5)(ii) of this section when the unsatisfactory conditions that
required issuance of the stay have been resolved; or
(iv) To issue notices announcing the effective date of the
certificate or commuter air carrier authority.
(b) To approve or deny applications of air carriers:
(1) For exemptions from section 41102 or 41103 of the Statute, and
from orders issued thereunder, and from applicable regulations under
this chapter where the course of action is clear under current policy
or precedent.
(2) For waivers of the Department's filing fee requirements under
part 389 of this chapter, in accordance with current policy or
precedent.
(3) For relief under section 40109 of the Statute to hold out,
arrange, and coordinate the operation of air ambulance flights as
indirect air carriers in accordance with established precedent.
(c) To waive the deadlines in Sec. 377.10(c) of this chapter for
filing applications for the renewal of temporary authorizations when,
in the Director's judgment, the public interest would be served. The
provisions of Sec. 377.10(d) of this chapter shall apply in the same
manner as to a timely filed application.
(d) With respect to air carrier names:
(1) To register names and trade names of certificated and commuter
air carriers pursuant to part 215 of this chapter.
(2) To reissue certificates issued under sections 41102 or 41103 of
the Statute when revisions thereof are necessitated by a change in the
name of a carrier, provided that no issue of substance concerning the
operating authority of the carrier is involved.
(e) To approve, deny, or cancel registrations filed with the
Department by air taxi operators and commuter air carriers pursuant to
part 298 of this chapter.
(f) With respect to Canadian charter air taxi operations:
(1) To approve applications for registration, or require that a
registrant submit additional information, or reject an application for
registration for failure to comply with part 294 of this chapter.
(2) To cancel, revoke, or suspend the registration of any Canadian
charter air taxi operator using small aircraft registered under part
294 of this chapter that:
(i) Filed with the Department a written notice that it is
discontinuing operations;
(ii) No longer is designated by its home government to operate the
services contemplated by its registration;
(iii) Holds a foreign air carrier permit under section 41302 to
operate large aircraft charters between the United States and Canada;
(iv) Fails to keep its filed certificate of insurance current;
(v) No longer is substantially owned or effectively controlled by
persons who are:
(A) Citizens of Canada;
(B) The Government of Canada; or
(C) A combination of both; or
(vi) No longer holds current effective Operations Specifications
issued by the FAA.
(3) To grant or deny requests for a waiver of part 294 of this
chapter, where grant or denial of the request is in accordance with
current policy or precedent.
(g) To approve certificates of insurance filed with the Department
on behalf of U.S. and foreign air carriers in accordance with the
provisions of part 205 of this chapter.
(h) With respect to foreign air freight forwarders:
(1) To approve applications for registration, or require that a
registrant submit additional information, or reject an application for
registration for failure to comply with part 297 of this chapter.
(2) To cancel the registration of any foreign air freight forwarder
or foreign cooperative shippers association that files a written notice
with the Department indicating the discontinuance of common carrier
activities.
(3) To exempt the registrant from the requirement contained in
Sec. 297.20 of this chapter that substantial ownership and effective
control reside in citizens of the country that the applicant claims as
its country of citizenship, where the course of action is clear under
current precedent or policies.
(i) With respect to charter operations:
(1) To grant or deny requests for waiver of parts 207, 208, 212,
372, and 380 of this chapter, where grant or denial of the request is
in accordance with established precedent.
(2) To approve or disapprove direct air carrier escrow agreements
filed pursuant to parts 207, 208, and 212 of this chapter.
(3) To reject or accept Public Charter prospectuses filed under
part 380 of this chapter.
(4) With respect to the procedures for the registration of foreign
charter operators under subpart F of part 380 of this chapter:
(i) To approve applications for registration, or require that a
registrant submit additional information, or reject an application for
registration for failure to comply with part 380 of this chapter.
(ii) To notify the applicant that its application will require
further analysis or procedures, or is being referred to the Assistant
Secretary for Aviation and International Affairs for formal action.
(iii) To cancel the registration of a foreign charter operator if
it files a written notice with the Department that it is discontinuing
its charter operations.
(iv) To waive provisions of subpart F of part 380 of this chapter.
(j) With respect to mail rates:
(1) To issue show-cause orders proposing to make modifications of a
technical nature in the mail rate formula applicable to temporary or
final service mail rate orders.
(2) To issue final orders establishing temporary and final service
mail rates:
(i) In those cases where no objection has been filed following
release of the show-cause order, and where the rates established are
the same as those proposed in the show-cause order; and
(ii) In those cases where it is necessary to make modifications of
a technical nature in the rates proposed in the show-cause order.
(3) To issue final orders amending mail rate orders of air carriers
to reflect changes in the names of the carriers subject to the orders.
(4) To issue a letter, in the case of air mail contracts filed with
the Department under part 302 of this chapter against which no
complaints have been filed, stating that the contract will not be
disapproved by the Department and may become effective immediately.
[[Page 19169]]
(k) With respect to essential air service proceedings:
(1) To establish procedural dates.
(2) To issue orders setting interim rates of compensation for
carriers required to provide essential air service.
(3) To issue orders approving a carrier's alternate service pattern
if:
(i) The resulting level of service at the eligible place would be
equal to or greater than the level of service earlier determined to be
essential for that place;
(ii) The community concerned does not object to the carrier's
implementation of the alternate service pattern; and
(iii) The carrier is not receiving a subsidy for the service or
implementation of the alternate service pattern would not increase the
carrier's subsidy.
(4) To issue orders adjusting the operational and/or financial unit
rates of the payout formula for a carrier receiving subsidy under
section 41732 of the Statute where the adjustment will not increase the
total amount of compensation that the carrier will receive.
(5) To renew, up to five times in succession, an order under
section 41734 of the Statute to an air carrier to continue providing
essential air service while the Department attempts to find a
replacement carrier.
(6) To request service and subsidy proposals from carriers
interested in providing essential air service to an eligible place that
is not receiving essential air service and for which no appeal of its
essential air service determination is pending.
(7) To request service and subsidy proposals from carriers
interested in providing essential air service when no proposals were
filed in response to a previous request for proposals.
(8) To issue final orders establishing interim or final subsidy
rates under section 41732 or final adjustments of compensation for
continued service under section 41732 in those cases where no objection
has been filed to a show-cause order, and where the rates established
are the same as or less than those proposed in the approved show-cause
order.
(9) With respect to provisions for terminations, suspensions, or
reductions of service under part 323 of this chapter:
(i) To require any person who files a notice, objection, or answer
to supply additional information.
(ii) To require service of a notice, objection, or answer upon any
person.
(iii) To accept late-filed objections or answers, upon motion, for
good cause shown.
(iv) To extend the time for filing objections for answers, when the
initial notice has been filed earlier than required under Sec. 323.5.
9. Section 385.13 is revised to read as follows:
Sec. 385.13 Authority of the Director, Office of International
Aviation.
The Director, Office of International Aviation, has authority to:
(a) Approve or deny applications for exemptions, where the course
of action is clear under current policy or precedent:
(1) For air carriers, from chapter 411 of the Statute and from
certificates and orders issued under that chapter;
(2) For foreign air carriers, from section 41301 and from permits
and related orders issued under chapter 413;
(3) For air carriers and foreign air carriers, from chapter 415 and
from orders issued and tariffs filed under that chapter; and
(4) From orders and applicable regulations under this chapter.
(b) With respect to applications for certificates of public
convenience and necessity under section 41102 and foreign air carrier
permits under section 41302:
(1) Issue an order to show cause proposing to grant such
application in those cases where no objections to the application have
been filed, and the applicant has already been found fit, willing, and
able by the Department to provide service of the same basic scope and
character;
(2) Issue an order stating the Department's intention to process
the application through show-cause procedures;
(3) Issue an order, subject to Presidential review under section
41307, to make final an order to show cause issued under the
circumstances of paragraph (b)(1) of this section, where no objections
to the show-cause order have been filed; and
(4) Reissue certificates of public convenience and necessity and
foreign air carrier permits when revisions are necessitated by a change
in the name of the carrier or of points specified, provided that no
issue of substance concerning the operating authority of a carrier is
involved.
(c) With respect to an application under section 41102 for a
certificate to engage in foreign scheduled air transportation, issue an
order instituting an investigation of the applicant's fitness and other
issues related to the application, where no person has already filed an
objection to the application and the investigation will be conducted by
oral hearing procedures.
(d) Issue an order to show cause why a foreign air carrier permit
should not be revoked under section 41304 when:
(1) The government of the permit holder's home country represents
that it does not object to revocation of the permit; and
(2) The permit holder--
(i) Has ceased operations; or
(ii) No longer holds valid authority from its own government to
operate the services in its permit.
(e) Approve or disapprove requests by foreign air carriers for
authorizations provided for, or waivers of restrictions contained, in
any agreement or in any permit or order of the Department, when no
person disclosing a substantial interest objects or where the course of
action is clear under current policy or precedent.
(f) Waive the deadlines in Sec. 377.10(c) of this chapter for
filing applications for renewal of unexpired temporary authorizations
when, in the Director's judgment, the public interest would be served.
The provisions of Sec. 377.10(d) of this chapter shall apply in the
same manner as to a timely filed application.
(g) Extend the time allowed for action on a complaint of unfair or
discriminatory practices, filed under section 41310, for an additional
period or periods of 30 days each, not to exceed the 180th day after
filing unless that deadline has been waived by the complainant.
(h) Grant or deny applications for statements of authorization
under parts 207, 208, and 212 of this chapter, and requests for waivers
of the requirements of parts 207, 208, and 212 of this chapter, where
grant or denial of the request is in accordance with current policy or
precedent.
(i) Approve or disapprove charter trips by foreign air carriers,
and those by air carriers that are predominantly in foreign air
transportation, when prior authorization is required by:
(1) Any provision of this chapter; or
(2) An order of the Department.
(j) Approve or disapprove requests by foreign air carriers for
waivers of the 30-day advance filing requirement for proposed schedules
whose filing the Department has ordered under part 213 of this chapter.
(k) Approve, when no person disclosing a substantial interest
objects, or disapprove requests by foreign air carriers for special
authorizations provided for in part 216 of this chapter.
(l) With respect to applications for statements of authorization to
conduct intermodal cargo services under part 222 of this chapter:
(1) Approve applications under part 222 of this chapter where no
person with a substantial interest raises objections citing specific
facts of
[[Page 19170]]
nonreciprocity or of restraints on competition by U.S. air carriers;
(2) Reject applications under part 222 of this chapter where there
is no agreement by the United States permitting the proposed services;
or
(3) Require that an applicant under part 222 of this chapter submit
additional information.
(m) Approve or disapprove issuance of foreign aircraft permits
provided for in part 375, subparts E and H, of this chapter.
(n) Grant or deny applications of foreign air carriers for renewal
of emergency exemptions granted under 49 U.S.C. 40109(g).
(o) Grant or deny applications by air carriers and foreign air
carriers under part 389 of this chapter for waivers of the Department's
filing fee requirements, in accordance with current policy or
precedent.
(p) Determine matters in proceedings under section 40109 and
chapters 411, 413 and 415, that have not been set for oral evidentiary
hearing, in addition to those authorized under Sec. 385.3, such matters
to include, inter alia, filing times, service of documents, submissions
of additional information, filing of otherwise unauthorized documents,
access to information for which confidential treatment has been
requested, rejection of incomplete or otherwise defective applications,
and solicitation of applications for authority.
(q) Approve or disapprove applications under part 223 of this
chapter for permission to furnish free or reduced-rate foreign air
transportation.
(r) With respect to International Air Transport Association (IATA)
agreements filed with the Department pursuant to sections 41309 and
41308 of the Statute, or pursuant to Civil Aeronautics Board Order E-
9305 of June 15, 1955:
(1) Issue orders approving or disapproving IATA agreements relating
to fare and rate matters under section 41309, and granting or denying
antitrust immunity under section 41308, where the course of action is
clear under current policy and precedent.
(2) Issue orders describing filed agreements, establishing
procedural dates for submission of justification, comments and replies,
which support or oppose agreements, and prescribing the particular
types of data to be included in such submission.
(s) Reject any tariff, supplement, or revised page that is filed by
any U.S. air carrier or foreign air carrier, and that is subject to
rejection because it is not consistent with chapter 415 of the Statute
or with part 221 or 222 of this chapter. Where a tariff, supplement or
loose-leaf page is filed on more than 60 days' notice and is not
rejected within the first 30 days (including the filing date), it shall
not be rejected after such 30-day period under this authority unless
the issuing carrier is given an opportunity to remove the cause for
rejection by the effective date, by special tariff permission if
necessary, and fails to take such corrective action.
(t) Approve or disapprove any application for special tariff
permission under part 221, subpart P, of this chapter to make tariff
changes upon less than statutory notice.
(u) Approve or disapprove applications for waiver of part 221 of
this chapter.
(v) Institute an investigation of, or institute an investigation
and suspend the effectiveness of, a tariff or change in a tariff which:
(1) Is substantially similar to a prior tariff under investigation
or suspension; and
(2) Is filed by or on behalf of one or more of the parties to the
prior tariff; and
(3) Is filed within 90 days after the expiration, modification, or
cancellation of the prior tariff, or within 90 days after the effective
date of an order requiring its cancellation or modification.
(w) In instances when an investigation of a tariff is pending, or
the tariff is under suspension, or when a complaint requesting
investigation or suspension of a tariff has been filed:
(1) Permit cancellation of the tariff; or
(2) If the grounds for the investigation or complaint have been
removed through cancellation, expiration or modification of the tariff,
either dismiss the investigation or complaint, or terminate the
suspension.
(x) Extend the period of suspension of a tariff when the
proceedings concerning the lawfulness of such tariff cannot be
concluded before the expiration of the existing suspension period,
provided that the aggregate of such extensions may not be for a longer
period than permitted under section 41509.
(y) Cancel the suspension of and/or dismiss an investigation of a
tariff relating to service predominantly in foreign air transportation
where the course of action is clear under current policy and precedent.
10. In part 385 the following sections are redesignated as set
forth in the following table:
------------------------------------------------------------------------
New
Old section section
------------------------------------------------------------------------
385.17....................................................... 385.20
385.19....................................................... 385.14
385.20....................................................... 385.17
385.21....................................................... 385.18
385.22....................................................... 385.15
385.23....................................................... 385.16
385.27....................................................... 385.19
------------------------------------------------------------------------
11. In newly designated Sec. 385.19, the section heading and the
introductory text are revised to read as follows:
Sec. 385.19 Authority of the Director, Office of Aviation Information,
Bureau of Transportation Statistics.
The Director, Office of Aviation Information, Bureau of
Transportation Statistics (BTS) has authority to:
* * * * *
Sec. 385.19 [Amended]
12. In newly designated Sec. 385.19, remove the words ``Titles IV
and X of the Act'' in paragraph (a) and ``Title IV and X of the Act''
in paragraph (b), and add, in their place, the words ``Subparts I, II,
and IV of the Statute''.
Secs. 385.24, 385.25, 385.26, 385.29 [Removed]
13. Sections 385.24, 385.25, 385.26, and 385.29, currently
reserved, are removed.
Sec. 385.30 [Removed]
14. Section 385.30 is removed.
Sec. 385.28 [Redesignated as Sec. 385.21]
15. Section 385.28 is redesignated as Sec. 385.21.
16. In newly designated Sec. 385.21, the section heading, the
introductory text, and paragraph (a) are revised to read as follows:
Sec. 385.21 Authority of the Chief, Accounting Division, Office of
Budget and Policy, Federal Transit Administration.
The Chief, Accounting Division, Office of Budget and Policy,
Federal Transit Administration, has authority to:
(a) Approve and order the payment of refunds of filing fees paid
under Sec. 389.27(b) of this chapter when such refunds have been
authorized by either the Director, Office of Aviation Analysis, or the
Director, Office of International Aviation.
* * * * *
Sec. 385.21 [Amended]
17. In newly designated Sec. 385.21, paragraph (b) is removed and
paragraphs (c), (d), and (e) are redesignated as paragraphs (b), (c),
and (d), respectively.
18. In newly designated Sec. 385.21(d) before the period, add the
words ``for small community service under 49 U.S.C. 41737''.
[[Page 19171]]
19. In subpart C, the following sections are redesignated as set
forth in the following table:
------------------------------------------------------------------------
New
Old section subpart C section
subpart C
------------------------------------------------------------------------
385.50....................................................... 385.30
385.51....................................................... 385.31
385.52....................................................... 385.32
385.53....................................................... 385.33
385.54....................................................... 385.34
------------------------------------------------------------------------
Sec. 385.31 [Amended]
20. In newly designated Sec. 385.31(c), remove the reference
``Sec. 385.22(a)'' and add, in its place, the reference
``Sec. 385.15(a)''.
Issued in Washington DC, on this 15th day of April, 1996.
Charles A. Hunnicutt,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 96-10742 Filed 4-30-96; 8:45 am]
BILLING CODE 4910-62-P
Complete official Federal Register PDF
FR Doc. 96-10741 Aircraft Accident Liability Insurance; Terminations, Suspensions, and Reductions of Service
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19164-19166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10741]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
14 CFR Parts 205 and 323
[Docket No. OST-96-1269]
RIN 2105-AC46
Aircraft Accident Liability Insurance; Terminations, Suspensions,
and Reductions of Service
AGENCY: Office of the Secretary, Department of Transportation.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Department is amending its regulations on aircraft
accident liability insurance and on terminations, suspensions, and
reductions of essential air service, to remove or update obsolete
provisions and organizational and statutory references.
EFFECTIVE DATE: The rule shall become effective on May 31, 1996.
FOR FURTHER INFORMATION CONTACT: Carol A. Woods, Air Carrier Fitness
Division, X-56, Department of Transportation, 400 Seventh Street, SW.,
Washington, DC 20590, (202) 366-9721.
SUPPLEMENTARY INFORMATION: In his Regulatory Reinvention Initiative
[[Page 19165]]
Memorandum of March 4, 1995, President Clinton directed Federal
agencies to conduct a page-by-page review of all of their regulations
and to ``eliminate or revise those that are outdated or otherwise in
need of reform.'' In response to that directive, the Department has
undertaken a review of its aviation economic regulations as contained
in 14 CFR Chapter II. This rule is one result of those efforts.
Subsequent rulemakings will address other regulations.
In this rulemaking, parts 205 and 323 are being amended to remove
or update obsolete provisions and organizational references, and to
replace references to the Federal Aviation Act with references to
Subtitle VII of Title 49 of the United States Code (Transportation).
Executive Order 12866 (Regulatory Planning and Review)
The Department has analyzed the economic and other effects of the
amendments and has determined that they are not ``significant'' within
the meaning of Executive Order 12866. The amendment will not have an
annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities. It will
not create a serious inconsistency or otherwise interfere with an
action taken or planned by another agency, and it will not materially
alter the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of recipients thereof. Nor does
it raise any novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
Executive Order 12866. The rule is considered ``nonsignificant'' under
Executive Order 12688 and was not reviewed by the Office of Management
and Budget.
DOT Regulatory Policies and Procedures
The amendments are not significant under the Department's
Regulatory Policies and Procedures, dated February 26, 1979, because
they do not involve important Departmental policies; rather, they are
being made solely for the purposes of eliminating obsolete
requirements, correcting out-of-date references, and enhancing the
organization of the regulations used by the Department to administer
its aviation economic regulatory functions. The Department has also
determined that issuance of this rule will have no economic impact.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act, the Department
has evaluated the effects of this action on small entities. For
purposes of its aviation economic regulations, Departmental policy
categorizes air carriers operating small aircraft (60 seats or less or
18,000 pounds maximum payload or less) as small entities for purposes
of the Regulatory Flexibility Act. Based upon this evaluation, the
Department certifies that the amendment would not have a significant
economic impact on a substantial number of small entities.
Executive Order 12612 (Federalism)
These amendments have been analyzed in accordance with the
principles and criteria contained in Executive Order 12612. The
Department has determined that the amendments do not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment. The amendments will not have a substantial direct effect on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government.
National Environmental Policy Act
The Department has also analyzed the amendments for the purpose of
the National Environmental Policy Act. The amendments will not have any
significant impact on the quality of the human environment.
Paperwork Reduction Act
There are no reporting or recordkeeping requirements associated
with the amendments.
Notice and Opportunity for Public Comment Unnecessary
Under the Administrative Procedure Act (5 U.S.C. 553), the
Department determines that notice and an opportunity for public comment
are impracticable, unnecessary, and contrary to the public interest.
The amendments made in this document are ministerial, removing obsolete
and redundant material or making minor technical and terminology
changes. These changes will have no substantive impact, and the
Department would not anticipate receiving meaningful comments on them.
Comment is therefore unnecessary, and it would be contrary to the
public interest to delay unnecessarily this effort to eliminate or
revise outdated rules.
Lists of Subjects
14 CFR Part 205
Air carriers, Insurance, Reporting and recordkeeping requirements.
14 CFR Part 323
Administrative practice and procedure, Air carriers, Reporting and
recordkeeping requirements.
Final Rule
For the reasons set out in the preamble, Title 14, Chapter II of
the Code of Federal Regulations is amended as follows:
PART 205--[AMENDED]
1. The authority citation for part 205 is revised to read as
follows:
Authority: 49 U.S.C. Chapters 401, 411, 413, 417.
Sec. 205.1 [Amended]
2. In Sec. 205.1, remove the punctuation and word ``, overseas,''.
Sec. 205.4 [Amended]
3. In Sec. 205.4(c), remove the words ``222 West Seventh Street,
Box 27'' and add, in their place, the words ``801 B Street, Suite
506''; remove the number ``99513'' and add, in its place, the number
``99501-3657''.
PART 323--[AMENDED]
4. The authority citation for part 323 is revised to read as
follows:
Authority: 49 U.S.C. Chapters 401, 411, 417.
Secs. 323.1, 323.3, 323.4, 323.9 [Amended]
5. In Secs. 323.1, 323.3(a)(2), (a)(4) introductory text, (a)(5),
(c)(1), (c)(2), (c)(3) introductory text, 323.4(a)(5) introductory
text, (a)(5)(ii), 323.9(b)(4), (b)(6), and (c), remove the words
``essential air transportation'' and add, in their place, the words
``essential air service''.
Secs. 323.1, 323.5 [Amended]
6. In Secs. 323.1 and 323.5(a)(1), remove the words ``section 419
of the Act'' and add, in their place, the words ``49 U.S.C. 41731-
41742''.
7. In Sec. 323.2, the definitions Act, Eligible point, and
Essential air transportation are removed, the definition Certificated
carrier is revised, and the definitions Eligible place, Essential air
service, FAA, and Statute are added in alphabetical order, to read as
follows:
Sec. 323.2 Definitions.
* * * * *
Certificated carrier means a direct air carrier holding authority
to provide air
[[Page 19166]]
transportation granted by the Department of Transportation (``DOT'') or
the former Civil Aeronautics Board (``CAB'') in the form of a
certificate of public convenience and necessity under section 41102 of
the Title 49 of the United States Code (Transportation) (``the
Statute'') or an all-cargo air transportation certificate to perform
all-cargo air transportation under section 41103 of the Statute.
Eligible place means a place in the United States that--
(1) Was an eligible point under section 419 of the Federal Aviation
Act of 1958 as in effect before October 1, 1988;
(2) Received scheduled air transportation at any time between
January 1, 1990, and November 4, 1990; and
(3) Is not listed in Department of Transportation Orders 89-9-37
and 89-12-52 as a place ineligible for compensation under Subchapter II
of Chapter 417 of the Statute. (For availability of Department of
Transportation Orders, see 49 CFR part 7, subpart E and appendix A.)
Essential air service is that air transportation which the
Department has found to be essential under Subchapter II of Chapter 417
of the Statute.
FAA means the Federal Aviation Administration, U.S. Department of
Transportation.
* * * * *
Statute means Subtitle VII of Title 49 of the United States Code
(Transportation).
* * * * *
Sec. 323.3 [Amended]
8. In Sec. 323.3(a)(5), remove the words ``section 419(a)(2) or
section 419(b)(4) of the Act'' and add, in their place, the words
``section 41731 or section 41733 of the Statute''.
Secs. 323.3, 323.4 [Amended]
9. In Secs. 323.3(a)(2), (a)(3), (a)(4) introductory text,
(a)(4)(iii), (a)(5), (c)(1), (c)(2), (c)(3) introductory text,
(c)(3)(iii), and 323.4(a)(5) introductory text, remove the words ``CAB
or''.
Secs. 323.3, 323.7 [Amended]
10. In Secs. 323.3(a)(1), (a)(3), (a)(5), (d), and 323.7(a)(1),
remove the word ``points'' and add, in its place, the word ``places''.
Secs. 323.3, 323.4, 323.5, 323.7, 323.9, 323.13, 323.14 [Amended]
11. In Secs. 323.3(a)(1), (a)(2), (a)(3), (a)(4) introductory text,
(a)(5), (c)(1), (c)(2), (c)(3) introductory text, (d), 323.4(a)(5)(i),
(a)(5)(ii), (a)(6), 323.5(a)(1) and (a)(2), 323.7(a)(1), 323.9(a),
(b)(3), (b)(4), 323.13(b)(1), 323.14(a) and (c), remove the word
``point'' wherever it occurs and add, in its place, the word ``place''.
Sec. 323.6 [Amended]
11a. In Sec. 323.6(b), remove the word ``point(s)'' and add, in its
place, the word ``place(s)''.
Sec. 323.9 [Amended]
11b. In Sec. 323.9(c), remove the word ``point's'' and add, in its
place, the word ``place's''.
Sec. 323.7 [Amended]
12. In Sec. 323.7(a)(1), remove the words ``section 401'' wherever
they occur, and add, in their place, the words ``section 41102''.
13. Section 323.8 is revised to read as follows:
Sec. 323.8 Exemptions.
Carriers are exempted from paragraphs (a)(1), (a)(3), and (a)(5) of
Sec. 323.3 to the extent that those provisions require them to file a
notice when terminating or suspending the domestic leg of an
international flight (fill-up service).
Secs. 323.14, 323.15 [Amended]
14. In Secs. 323.14(d) and 323.15(b), remove the words ``Office of
Essential Air Service'' and add, in their place, the words ``Office of
Aviation Analysis''.
Issued in Washington, DC, on this 15th day of April, 1996.
Charles A. Hunnicutt,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 96-10741 Filed 4-30-96; 8:45 am]
BILLING CODE 4910-62-P
Complete official Federal Register PDF
FR Doc. 96-10714 Early Warning Reporting Requirements, Minimum Financial Requirements, Prepayment of Subordinated Debt, Gross Collection of Exchange-Set Margin for Omnibus Accounts and Capital Charge on Receivables From Foreign Brokers
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19177-19187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10714]
=======================================================================
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 1
Early Warning Reporting Requirements, Minimum Financial
Requirements, Prepayment of Subordinated Debt, Gross Collection of
Exchange-Set Margin for Omnibus Accounts and Capital Charge on
Receivables From Foreign Brokers
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
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SUMMARY: Rule 1.12 of the Commodity Futures Trading Commission
(Commission or CFTC) sets forth the financial early warning reporting
requirements for futures commission merchants (FCMs) and introducing
brokers (IBs), which are designed to afford the Commission and industry
self-regulatory organizations (SROs) sufficient advance notice of a
firm's financial or operational problems to take such protective or
remedial action as may be needed to assure the safety of customer funds
and the integrity of the marketplace. The Commission has determined to
adopt amendments to Commission Rule 1.12, applicable to FCMs only, that
will: amend paragraph (g) to require the reporting of a reduction in
net capital of 20 percent or more within two business days and a
planned reduction in excess adjusted net capital of 30 percent or more
two business days prior thereto, and to make that paragraph applicable
to all FCMs, rather than just those FCMs subject to the risk assessment
reporting requirements of Commission Rule 1.15; require reporting of a
margin call that exceeds an FCM's excess adjusted net capital which
remains unanswered by the close of business on the day following the
issuance of the call; and require reporting by an FCM when-ever its
excess adjusted net capital is less than six percent of the maintenance
margin required to support positions of noncustomers carried by the
FCM, unless the noncustomer is itself subject to the Commission's
minimum financial requirements for an FCM or the Securities and
Exchange Commission's (SEC's) minimum financial requirements for a
securities broker-dealer (BD).
The Commission has also determined to adopt amendments to: Rules
1.17(a)(1)(i) and (ii) to (a) increase the minimum required dollar
amount of adjusted net capital for FCMs from $50,000 to $250,000, (b)
increase the minimum required dollar amount of adjusted net capital for
IBs from $20,000 to $30,000, and (c) make the amount of adjusted net
capital required by a registered futures association for its member
FCMs and IBs an element of the Commission's minimum financial
requirements for FCMs and IBs; Rule 1.17(h)(2)(vii) with respect to the
procedure to obtain approval for prepayment of subordinated debt; and
Rule 1.58, which governs gross collection of exchange-set margins for
omnibus accounts, to make it applicable to omnibus accounts carried by
FCMs for foreign brokers. The Commission believes that these amendments
will conform the Commission's rules with those of SROs and therefore
should not require changes in the operations of most firms. In
addition, the Commission has determined that the five percent capital
charge for unsecured receivables from a foreign broker will not apply
where the receivables represent deposits required to maintain futures
or options positions, the foreign broker has been granted comparability
relief under Commission Rule 30.10, and the asset is held in accordance
with the relevant grant of relief under Rule 30.10 at the foreign
broker, with another foreign broker that has been granted comparability
relief under Commission Rule 30.10, or at a depository in the same
jurisdiction as either foreign broker in accordance with Commission
Rule 30.7.
EFFECTIVE DATE: May 31, 1996.
FOR FURTHER INFORMATION CONTACT: Paul H. Bjarnason, Jr., Chief
Accountant, or Lawrence B. Patent, Associate Chief Counsel, Division of
Trading and Markets, Commodity Futures Trading Commission, 1155 21st
Street, N.W., Washington, D.C. 20581; telephone (202) 418-5459 or 418-
5439.
[[Page 19178]]
SUPPLEMENTARY INFORMATION:
I. Early Warning Rules
A. Reportable Events in General
The Commission has required each FCM 1 to report to the
Commission and to the FCM's designated self-regulatory organization
(DSRO) certain events pertaining to the FCM's financial condition, the
FCM's procedures for safeguarding customer and firm assets, and its
ability to monitor its financial condition through an appropriate
system of records and reports. The purpose of such reporting is to make
the Commission and the FCM's DSRO aware of circumstances that have or
potentially could have a negative impact on the FCM's ability to carry
on normal business operations consistent with the Commission's
prudential requirements and pose a potential threat to customer funds
or the FCM's financial integrity. Receipt of such notices results in a
heightened degree of surveillance over the FCM by the Commission and
the DSRO. The events to be reported include undercapitalization, the
FCM's adjusted net capital being below its early warning level (i.e.,
150 percent of the minimum required), failure to maintain current books
and records, the existence of material inadequacies in the FCM's
accounting systems or internal controls, and the issuance of a margin
call exceeding the FCM's adjusted net capital. Collectively, these are
known as the Commission's early warning reporting requirements and are
set forth in Rule 1.12. With respect to notices relative to reductions
in capital, one purpose of this rulemaking has been to harmonize
required notices to the SEC and relevant futures and securities SROs.
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\1\ Rule 1.12 also requires certain reports from FCMs, IBs, and
exchange clearing organizations. The rule amendments that have been
adopted relate only to reporting by FCMs. No changes have been made
with respect to reporting requirements imposed on FCM applicants,
IBs or IB applicants, or clearing organizations.
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B. Background of This Rulemaking
On March 1, 1994, the Commission published proposed Risk Assessment
Rules for Holding Company Systems, 59 FR 9689. Certain portions of
these proposals were adopted as final rules by the Commission. 59 FR
66674 (Dec. 28, 1994). The proposed risk assessment rules generally
would have required, inter alia, an FCM to notify the Commission of
certain events or transactions that would reduce or potentially reduce
the FCM's net capital. These ``triggering'' events were originally
proposed to be included in a new Rule 1.15 as part of the risk
assessment reporting rules. However, several of the commenters on the
risk assessment proposals suggested that the reporting of certain of
these triggering events should more appropriately be part of the
Commission's early warning reporting system set forth in Rule 1.12, and
the Commission agreed. Therefore, when the Commission adopted as part
of the risk assessment rulemaking one of the triggering provisions
relating to declines in an FCM's adjusted net capital, that provision
was adopted as Rule 1.12(g) instead of as a provision of Rule 1.15, and
was made applicable only to those FCMs which are required to file
reports under Rule 1.15.2
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\2\ The balance of the proposed trigger event provisions remains
under consideration by the Commission.
---------------------------------------------------------------------------
Certain commenters on the risk assessment proposals had suggested
that the notice provision relating to declines in capital should be
applicable to all FCMs, not just those subject to the risk assessment
rules. The Commission agreed, but was concerned that FCMs which
believed that they were not subject to the risk assessment rules may
not have availed themselves of the opportunity to comment upon the
Commission's March 1994 risk assessment proposals, including the
provision adopted as Rule 1.12(g). Therefore, the Commission adopted
Rule 1.12(g) in December 1994 as applicable only to those FCMs subject
to the risk assessment rules and at the same time proposed to amend
Rule 1.12(g) to make the reporting of capital declines applicable to
all FCMs. 59 FR 66822 (Dec. 28, 1994). In the same Federal Register
release which announced the proposed amendment to Rule 1.12(g), the
Commission also proposed to make certain other changes to the early
warning system as an adjunct to its risk assessment initiative and in
response to comments received on the March 1994 risk assessment rule
proposals which would: (1) require an FCM to report a margin call that
exceeds its excess adjusted net capital and remains unanswered by the
close of business on the day following the issuance of the call
(proposed Rule 1.12(f)(4)); and (2) require an FCM to report whenever
its excess adjusted net capital is less than six percent of the
maintenance margin required to support proprietary and noncustomer
positions carried by the FCM (proposed Rule 1.12(f)(5)).
The Commission originally permitted 30 days for public comment on
the proposed amendments to Rule 1.12 and it extended the comment period
for an additional 30 days in response to a request from the Securities
Industry Association (SIA). 60 FR 7925 (Feb. 10, 1995). The Commission
received six written comments on these proposals, including two from
contract markets (Chicago Board of Trade (CBT) and Chicago Mercantile
Exchange (CME)), two from trade associations (Futures Industry
Association (FIA) and SIA), one from an FCM, Bielfeldt & Company
(Bielfeldt), and one from an associated person, Alvin L. Goldberg. The
Commission's Division of Trading and Markets (Division) also received
two letters from the Intermarket Financial Surveillance Group
(IFSG),3 dated February 22 and April 8, 1996, respectively, which
bear directly upon one of these proposals and have been considered
along with the other comment letters.
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\3\ The IFSG was formed in 1988 to provide a coordinating body
to address financial surveillance issues relevant to both futures
and securities markets. It includes representatives of most of the
principal commodity and securities exchanges as well as the National
Futures Association (NFA) and the National Association of Securities
Dealers, Inc. Staff members of the CFTC and of the SEC frequently
attend IFSG meetings as observers.
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The Commission has carefully considered the comments received. The
Commission has determined to adopt the proposed amendment concerning
unanswered margin calls as proposed. The Commission has also
determined, based upon a review of the comments and its own
reconsideration of the proposal, that the provision of the early
warning system for FCMs requiring a comparison of excess adjusted net
capital to six percent of the maintenance margin level will only apply
to those positions carried by an FCM on behalf of a noncustomer that is
not itself subject to the Commission's minimum financial requirements
for an FCM or the minimum financial requirements of the SEC for a BD.
The Commission is therefore not adopting Rule 1.12(f)(5) as proposed,
which would have applied six percent of the maintenance margin level to
all positions held in noncustomer and proprietary accounts. The
Commission has further determined to modify slightly the standards in
Rule 1.12(g) concerning notice of substantial declines in capital in
light of the comments received, particularly the IFSG letters, and its
own reconsideration of the issue. The Commission has also clarified
certain matters in response to issues raised in the comment letters, as
discussed more fully below.
C. Reductions in Capital
As noted above, the Commission in December 1994 added to the list
of
[[Page 19179]]
reportable events under Rule 1.12 a new paragraph (g), requiring that
certain FCMs (i.e., those FCMs required to file risk assessment
reports) report capital declines which may not necessarily result in
the FCM being undercapitalized or its capital declining below early
warning levels, but which are sufficiently material to the FCM's
regulatory capital to warrant enhanced monitoring by the Commission and
the FCM's DSRO.4
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\4\ There are approximately 190 FCMs required to file risk
assessment reports, and the extension of Rule 1.12(g) would cover
the remaining FCMs, approximately 70 firms.
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The event currently required to be reported under Rule 1.12(g) is
the occurrence of any transaction or condition that results in a
reduction of more than 20 percent in the adjusted net capital of an FCM
from that reported in the most recent financial report filed with the
Commission pursuant to Commission Rule 1.10.5 The rule draws a
distinction, with respect to when the event must be reported, between
those events occurring in the normal course of business and those which
are extraordinary. If the decline in adjusted net capital is due to
activities in the normal course of an FCM's business, the reduction is
to be reported within two business days following the event. These
events are not normally planned for in advance, such as operating
losses, proprietary trading losses or increased charges against net
capital. However, where a transaction or series of transactions is
planned to be taken which will reduce adjusted net capital by more than
20 percent, the notice must be filed at least two business days in
advance of the transaction or series of transactions.6 This would
permit Commission or DSRO staff to make further inquiries concerning
the transaction before the transaction is effected to assure that the
FCM has adequately considered the effect of the transaction on its
overall liquidity. Ideally, an explanation would be included to
facilitate this process. The rule does not provide for Commission
approval or disapproval of the transaction prior to the FCM effecting
the transaction, nor does it provide a means for the Commission to
delay or prevent the FCM from carrying out the transaction.7
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\5\ Certain exchanges have a similar requirement. The rule
amendment whose adoption is announced herein is intended to induce
all SROs to conform their similar rules to the Commission
requirement. See CME Rule 972A; CBT Rule 285.03; New York Mercantile
Exchange Rule 2.14(d) and Clearing Rule 9.22(c)(i) and (ii);
Commodity Exchange, Inc. Rule 7.08(a); Coffee, Sugar and Cocoa
Exchange, Inc. Clearing Rule 302(c)(i); Kansas City Board of Trade
Rule 1311.00; Kansas City Board of Trade Clearing Corporation Rule
8.01(c); and Minneapolis Grain Exchange Rule 2088.00.
\6\ The SEC also has a similar rule, Rule 240.15c3-1(e)(1), 17
CFR 240.15c3-1(e)(1)(1995), which requires a BD to provide notice
two business days prior to withdrawals of equity capital that on a
net basis exceed in the aggregate in any 30 calendar day period, 30
percent of the firm's excess net capital, or two business days after
such withdrawals during any 30 calendar day period exceed 20 percent
of the firm's excess net capital.
\7\ As more fully discussed below, the Commission requested
comment as to whether Rule 1.12(g) should establish a mechanism by
which the Commission could delay or prevent an FCM from carrying out
the transaction. The SEC has authority to restrict capital
withdrawals for up to twenty business days under certain conditions.
17 CFR 240.15c3-1(e)(3)(1995).
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The filing under Rule 1.12(g) is to be made, in accordance with
Rule 1.12(h), with the regional office of the Commission with which the
FCM normally files its financial reports under Rule 1.10, with the
principal office of the Commission in Washington, D.C., with the FCM's
DSRO and with the SEC if the FCM is also registered as a BD. Rule
1.12(g) also provides that, following receipt of a notice from an FCM,
the Director of the Division, or the Director's designee, may request
additional information concerning the effect of the reported event on
the FCM's financial or operational condition. The FCM is required to
provide such additional information within three business days, or
sooner if the Division believes prompter filing is needed to address
the condition causing the filing of the early warning notice and so
requests.
As adopted in December 1994, Rule 1.12(g) applies only to those
FCMs which are required to file reports with the Commission under the
risk assessment rules. Several commenters on the Commission's March
1994 risk assessment proposals, including FIA and NFA, suggested that
the reporting requirement now in paragraph (g) be made applicable to
all FCMs, not just those required to report under Rule 1.15. The
Commission agreed that this reporting requirement serves to alert the
Commission and DSRO to potential problems resulting from transactions
that affect an FCM directly and therefore should not be limited to
those FCMs subject to the risk assessment rules. Since FCMs that
believed they were not subject to the risk assessment rules may not
have taken the opportunity to comment on the Commission's March 1994
risk assessment rule proposals, the Commission determined to publish
these proposed changes to Rule 1.12(g) for comment.
All of the commenters on the Commission's December 1994 proposals
addressed the Commission's proposal concerning Rule 1.12(g). Two
commenters expressed support for the extension of Rule 1.12(g) to all
FCMs. Three commenters noted that several regulators and SROs had
similar, but slightly different, requirements in this area. They
further pointed out that the IFSG was attempting to develop a consensus
on how to harmonize the various requirements directed at the same types
of reporting and requested that the Commission not adopt its proposals
until the IFSG completed its study. One of these commenters, FIA,
suggested in the alternative that the Commission adopt a ``no-action''
position to permit an FCM to follow a related rule of its DSRO or the
New York Stock Exchange, Inc. (NYSE), as elected by the FCM. The IFSG
reported on its harmonization efforts in its letters to the Division
dated February 22 and April 8, 1996 and stated that the Commission and
SEC should adopt similar rules which would require two business days
prior notice when excess adjusted net capital is to be reduced 30
percent or more and notice within two business when net capital has
been reduced by 20 percent or more.8
---------------------------------------------------------------------------
\8\ IFSG's first letter dated February 22, 1996, which was
superseded by its April 8, 1996 letter, recommended that the notices
be made 48 hours, rather than two business days, prior to or
following the event, and that such notices be based upon net capital
declines in either situation, rather than upon a decline in excess
adjusted net capital with respect to prior notice. The prior notice
rule adopted herein is the same as that of the SEC adjusted to apply
to FCMs and the subsequent notice in the same as that required by
the NYSE so adjusted. FCMs that are BDs will continue to have to
file any additional notices required by the SEC which in the case of
post-reduction notices may include some notices triggered by
haircuts.
---------------------------------------------------------------------------
As noted above, the Commission requested comment as to whether Rule
1.12(g) should establish a mechanism by which the Commission could
delay or prevent an FCM from carrying out planned transactions that
would reduce adjusted net capital by more than 20 percent. Three
commenters stated that the Commission should not be able to delay or
prevent capital reductions. A fourth commenter, SIA, stated that for
firms dually registered as FCMs and BDs, only the SEC should have such
authority, but it supported CFTC authority to delay or prevent capital
reductions for other FCMs (i.e., those not also registered as BDs).
Although it did not directly address the question posed by the
Commission, the FCM commenter, Bielfeldt, stated that no notice under
Rule 1.12(g) should be required with respect to capital reductions
resulting from planned transactions. Another commenter, Mr. Goldberg,
expressed his belief that the capital rules as written do not require
[[Page 19180]]
firms to establish systems to monitor capital on a day-to-day basis; in
his view, it is sufficient if a firm can, at a later date, demonstrate
that it was in compliance on any date. Therefore, Mr. Goldberg believes
that the effect of planned transactions on a firm's capital would not
be readily determinable, rendering a firm incapable of providing early
warning with respect to such transactions.
There were two other comments related to the proposed amendment of
Rule 1.12(g). Two commenters requested clarification that notice under
the rule would not be required with respect to repayment or prepayment
of subordinated debt, since separate notice of such events and DSRO
approval is already required. Another commenter stated that the
calculation used in Rule 1.12(g) should be based upon net capital, as
modified by the dollar amount of deficit and undermargined accounts,
rather than adjusted net capital.
The Commission has carefully considered these comments and has
determined to amend Rule 1.12(g) consistent with the suggestions of the
IFSG.9 The Commission believes that this action will make its rule
concerning capital reductions consistent with the SEC's rule and the
rules of futures and securities industry SROs in this area. The IFSG's
letters were jointly addressed to the Division and to the SEC's
Division of Market Regulation (DMR) and the Division's staff has been
in contact with DMR staff to assure similarity of treatment regarding
early warning notices related to capital reductions. The Commission's
December 1995 proposals, which are discussed more fully below, as well
as the Commission's February 1996 proposals,10 were intended to
conform Commission minimum financial and related reporting requirements
with those of the SROs and SEC in various areas, as recommended by
several participants in the Commission's roundtable on capital issues
held on September 18, 1995. A uniform approach among the Commission,
SEC and the SROs with respect to notices of major capital reductions
should simplify the reporting requirements for FCMs that are also BDs
and/or members of more than one futures or securities SRO, eliminating
needless inconsistencies among required notices relating to the same
types of circumstances, and provide consistent and sufficient
information to financial regulators and SROs to permit them to monitor
effectively the financial condition of firms under their jurisdiction.
---------------------------------------------------------------------------
\9\ The IFSG's April 8, 1996 letter made two other suggestions
in addition to those referred to above which were that: (1) notice
not be triggered by a futures or securities transaction in the
ordinary course of business between an FCM and an affiliate where
the FCM makes payment to or on behalf of such affiliate for such
transaction and then receives payment from such affiliate for such
transaction within two business days from the date of the
transaction; and (2) an FCM's DSRO have discretion to exempt the FCM
from filing notice under Rule 1.12(g) where withdrawals, advances or
loans in the aggregate, on a net basis, equal $500,000 or less. The
Commission is adopting the former suggestion as a proviso to Rule
1.12(g). As to the second suggestion, Commission staff discussed the
issue with an IFSG representative, who stated that it was included
in the letter since the SEC rule provides for such exemptions. The
IFSG representative further indicated that such a provision was not
an issue of concern to the futures industry members of IFSG so the
Commission is not including it in Rule 1.12(g).
\10\ 61 FR 7080 (Feb. 26, 1996). These proposals concerned the
financial reporting cycle and the debt-equity ratio requirements for
FCMs and IBs.
---------------------------------------------------------------------------
The Commission notes that basing the event requiring notice within
two business days upon a decline in net capital rather than adjusted
net capital as currently in the rule will require larger reductions to
trigger the notice since net capital will normally exceed adjusted net
capital. Conversely, since the prior notice requirement will be based
upon a decline in excess adjusted net capital rather than adjusted net
capital as currently in the rule, smaller reductions could trigger the
notice since adjusted net capital will necessarily exceed excess
adjusted net capital, despite the fact that the percentage decline
required to trigger prior notice has been increased from 20 to 30
percent. The Commission believes that it has now achieved a balanced
approach in this area that implements its ongoing resolve to streamline
its rules and avoid unnecessary duplication or redundant or
inconsistent requirements to the extent consistent with customer
protection. It also further harmonizes the Commission's rules with SEC
rules and takes account of the ongoing harmonization project of the
IFSG.11
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\11\ For an FCM dually registered as a BD and taking advantage
of the option available under Commission Rule 1.10(h) to file a copy
of its Financial and Operational Combined Uniform Single (FOCUS)
Report in lieu of Form 1-FR-FCM (which includes about one-half of
all FCMs), the calculation for subsequent notice would be based upon
``tentative net capital'' as set forth in SEC Rule 240.15c3-1, i.e.,
net capital before securities haircuts, and the calculation for
prior notice would be based upon ``excess net capital.'' The
Commission's definition of net capital and the SEC's definition of
tentative net capital, as well as the Commission's definition of
excess adjusted net capital and the SEC's definition of excess net
capital, are for practical purposes the same.
---------------------------------------------------------------------------
The Commission has also determined not to establish a mechanism
whereby it could delay or prevent an FCM from carrying out planned
transactions that would reduce excess adjusted net capital by 30
percent or more. The Commission continues to view the early warning
requirements under Rule 1.12 as essentially a mechanism for
notification of situations that have or potentially could have a
negative impact on a firm's ability to carry on normal business
operations consistent with the Commission's prudential requirements and
that pose a potential threat to customer funds or a firm's financial
integrity. In the case of a planned reduction, the Commission believes
that an explanation should accompany the notice. Although the
Commission's staff may wish to discuss reported events with the
FCM,12 the Commission does not believe that a formal mechanism to
delay or prevent events giving rise to a notice under Rule 1.12(g) is
warranted at this time. The Commission currently has the authority to
require specific reports from custodians upon the transfer of
segregated funds in certain circumstances and also requires 100 percent
segregation of customer obligations unlike the SEC that has a more
limited requirement. These two authorities make it less likely that
there could be a ``run'' on a futures firm or a misappropriation of
segregated funds without additional authority to preclude reductions of
capital. Moreover, the Commission is aware of the need for regulators
to be sensitive to the liquidity needs of a holding company system as a
whole consistent with its responsibilities to the regulated entity.
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\12\ The Commission notes that Rule 1.12(g)(3) provides that the
Director of the Division or the Director's designee may require an
FCM filing a notice under Rule 1.12(g) to furnish additional
information. The Commission believes that it is important to
maintain this flexibility and this is another reason why early
warning notices should be filed with the Commission as well as the
DSRO and not only with the latter as Bielfeldt suggested.
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The Commission also wishes to respond to the comments of Bielfeldt
and Mr. Goldberg that no notice should be required or can be prepared
with respect to capital reductions resulting from planned transactions.
As the Commission stated when it published the proposals:
The Commission's early warning rules relating to an FCM's level
of capital contemplate that the FCM will have systems in place to
monitor its capital levels and its compliance with the Commission's
net capital rules on a day-to-day basis. The Commission requires
each FCM to be able to demonstrate its capital compliance at any
time and not just on a required formal computation or filing
date.13 Consequently,
[[Page 19181]]
the effect of planned transactions on net capital should be readily
determinable.
\13\ See Commission Rules 1.17(a)(3)-(5) and 1.18(b), 17 CFR
1.17(a)(3)-(5) and 1.18(b) (1995).
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The Commission further notes that since it issued these proposals,
the failure of Barings PLC has occurred. That failure only reinforces
the need for FCMs to have robust internal controls and capital
monitoring systems that permit a firm to assess its financial position
on a day-to-day, if not more frequent, basis.
In response to the request of two of the commenters noted above,
the Commission wishes to make clear that Rule 1.12(g) does not require
separate notice with respect to repayment or prepayment of subordinated
debt since an FCM must always get approval for prepayment of
subordinated debt from its DSRO as discussed more fully below.14
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\14\ See Commission Rules 1.17(h)(2)(vii) and (viii), 17 CFR
1.17(h)(2)(vii) and (viii) (1995); CFTC Interpretative Letter No.
85-17, [1984-1986 Transfer Binder] Comm. Fut. L. Rep. (CCH)
para.22,738 (Sept. 10, 1985).
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D. Unanswered Margin Calls
As part of the March 1994 risk assessment rule proposals, the
Commission had proposed Rule 1.15(b)(2)(iii), which would have required
an FCM to notify the Division whenever aggregate cumulative losses in
all noncustomer accounts exceeded the greater of: (A) in any 30-day
period, 10 percent of the last reported consolidated stockholders'
equity of the FCM's parent or $50 million, or (B) in any 12-month
period, 20 percent of the last reported consolidated stockholders'
equity of the FCM's parent or $100 million.15 This proposal was
opposed by several commenters. Some of the commenters suggested that,
as an alternative, an FCM be required to notify the Commission within
two business days after a margin call to a noncustomer remains
outstanding for two business days, if the margin call exceeds 20
percent of the FCM's adjusted net capital.
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\15\ 59 FR 9689, 9706 (March 1, 1994).
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In response to these comments, the Commission determined in
December 1994 to propose Rule 1.12(f)(4) which would require an FCM to
file an early warning notice when a margin call on a customer,
noncustomer or omnibus account that exceeds the firm's excess adjusted
net capital is not answered by the close of business on the day
following the day the call is made. The Commission's proposal would
permit FCMs to take into account favorable market moves in determining
whether the margin call would be required to be reported under this
rule.16
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\16\ 59 FR 66822, 66823-24.
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For purposes of proposed Rule 1.12(f)(4), a margin call would mean
any deposit of funds required by the FCM to margin, guarantee or secure
a futures or commodity option position. Thus, if, with respect to an
exchange-traded contract, the FCM requires a deposit in excess of the
minimum required pursuant to exchange rules, that greater amount would
be the amount used in determining whether a call has been collected
from an account holder. Although exchanges may exempt firms from the
requirements of Commission Rule 1.12(f)(3), which requires notice of
issuance of a margin call in excess of a firm's entire adjusted net
capital, the Commission proposed not to permit the granting of such
waivers from the Rule 1.12(f)(4) notice requirement. The Commission
also requested additional comment, however, on the originally proposed
trigger event for which Rule 1.12(f)(4) was proposed as an
alternative.17
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\17\ See proposed Rule 1.15(b)(2)(iii) in the March 1994 risk
assessment proposals, 59 FR 9689, 9706.
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The contract market and trade association commenters addressed
proposed Rule 1.12(f)(4). CBT supported the proposal. CME, FIA and SIA
stated that the rule should be based upon the exchange minimum
maintenance margin level only, since such a rule could otherwise be a
disincentive for FCMs to establish higher internal margin requirements.
FIA and SIA also requested that the Commission allow more time to meet
a margin call before notice is required if foreign customers are
involved. CBT and CME urged the Commission to repeal Rule 1.12(f)(3),
which requires an FCM to file a notice when an account is undermargined
by an amount in excess of the FCM's adjusted net capital, since it is
little used and similar to the proposal. FIA suggested two
clarifications: (1) That the Commission state that a margin call is
usually issued on the day following the day the account becomes
undermargined; and (2) that the provision be applied to all commodity
interest accounts subject to margining. FIA and SIA also requested that
the Commission define ``excess adjusted net capital.''
The Commission has carefully considered these comments and has
determined to adopt Rule 1.12(f)(4) as proposed. As to whether the
minimum margin standard in the rule should be the exchange minimum
level or any higher amount set by the FCM, the Commission believes that
FCMs establish margin requirements for accounts based upon an
assessment of the creditworthiness of the account owner and that a Rule
1.12(f)(4) notice requirement should have negligible impact in the
context of margin requirements intended to safeguard a firm's financial
position. Further, if the Commission adopted the view of certain
commenters that the exchange minimum maintenance margin level is the
appropriate level for purposes of Rule 1.12(f)(4) and an FCM set an
account's maintenance margin level higher than the minimum requirement
of an exchange, the FCM would be required to monitor the impact of the
lower exchange minimum requirement for purposes of Rule 1.12(f)(4). The
Commission believes that such a requirement could be more costly and
confusing to keep track of than simply requiring an FCM to treat a
margin call for the account as a margin call under Rule 1.12(f)(4).
Concerning the comment that more time be allowed to meet a margin
call if foreign customers are involved, the Commission is not persuaded
that this would be appropriate. As far back as the October 1987 market
break, the Division noticed a disproportionate incidence of customer
defaults and liquidations attributable to foreign traders. FCMs were
urged to establish procedures to assure that they obtain adequate
security from foreign customers to protect against the potential for
price fluctuations to result in aberrant margin calls that could not be
readily satisfied by such customers and that, for the FCM, could be
unduly costly or impossible to recover were legal action against the
customer ultimately required.18 The Commission believes that the
events that have occurred since 1987, including the growing
internationalization of the futures markets, and the Commission's
determination, as discussed below, to require gross collection of
exchange-set margin for all omnibus accounts, including those
originated by foreign brokers, lead to the conclusion that margin calls
attributable to foreign traders should not be given preferential
treatment in the context of the early warning notice requirement of
Rule 1.12(f)(4).
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\18\ Follow-up Report on Financial Oversight of Stock Index
Futures Markets During October 1987, CFTC Division of Trading and
Markets, at 84 (Jan. 6, 1988).
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In response to FIA's suggestions, the Commission wishes to make
clear that a margin call is usually issued on the business day
following the business day the account becomes undermargined and that
Rule 1.12(f)(4) as proposed and adopted ``applies to all accounts
carried by the futures commission merchant
[[Page 19182]]
* * * that are subject to margining * * *.'' As to the term ``excess
adjusted net capital,'' this means an FCM's adjusted net capital less
its required minimum adjusted net capital computed in accordance with
Commission Rule 1.17.19 The Commission further wishes to make
clear that the notice required by Rule 1.12(f)(4) must include account
name, date of margin call, amount of margin call and the FCM's excess
adjusted net capital. The Commission also believes that Rule 1.12(f)(3)
referred to above, although somewhat similar to Rule 1.12(f)(4), should
continue as a separate early warning notice requirement.
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\19\ See also 17 CFR 1.17(d)(3) (1995); Form 1-FR-FCM, page 8,
line 24.
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E. Maintenance Margin Factor
Some commenters on the Commission's March 1994 risk assessment
proposals also suggested that, in lieu of adopting the proposal
referred to above concerning the reporting of losses in noncustomer
accounts, the Commission amend Rule 1.12 to add an early warning
reporting requirement to require an FCM to report to the Commission
whenever its excess adjusted net capital is less than six percent of
the maintenance margin requirement applicable to positions in
proprietary and noncustomers' accounts. These commenters noted that the
CME imposes a capital requirement on an informal basis on its clearing
members that factors in a percentage of proprietary and noncustomers
margin requirements. The Commission determined to propose an amendment
to Rule 1.12 in December 1994 in line with the commenters' suggestions.
All of the commenters on the December 1994 proposals addressed this
provision and stated that proprietary positions are subject to haircuts
and thus should not be included in the calculation for an early warning
notice requirement.20 The trade association commenters also stated
that positions held by noncustomers who are subject to capital
requirements of the Commission, or of another regulator or an SRO,
either domestic or foreign, should not be included in the calculation
required by Rule 1.12(f)(5).
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\20\ Bielfeldt further commented that haircuts on proprietary
positions should be eliminated and all accounts should be treated
similarly for capital purposes. This comment addresses issues
outside of the scope of this rulemaking proceeding.
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The Commission has reconsidered its proposal in light of these
comments. As noted above, the proposal responded to comments on the
March 1994 risk assessment proposals which apparently misread the CME's
requirements, since the CME rule only adds a percentage of noncustomer
margin. The Commission recognizes that proprietary positions are
already accounted for in the minimum financial rule through haircuts;
however, noncustomer positions are not and neither are they factored
into the minimum financial requirement based upon four percent of
customer funds. Based upon the comments and its reconsideration of the
issue, the Commission has determined not to include proprietary
accounts as a factor in determining whether notice is required under
Rule 1.12(f)(5).21 However, noncustomer accounts will be included
in the calculation under Rule 1.12(f)(5), unless the noncustomer is
itself subject to the Commission's minimum financial requirements for
an FCM or the SEC's minimum financial requirements for a BD. This is
intended to reflect the fact that affiliates rarely retain excess funds
at the clearing firm. The Commission will reassess whether this
exclusion is appropriate in connection with its further review of the
capital rule as a whole.
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\21\ Because of this determination, the Commission's proposal
that maintenance margin with respect to an FCM's proprietary account
shall mean the amount of funds the FCM is required to maintain at
the clearing organization with its clearing broker, or five percent
of the value of the contract, whichever is greater, is moot. The
Commission requested comment on that point and CME and Bielfeldt
objected to the five percent provision, while CBT thought such a
provision should be used only in the absence of margin being set by
the exchange or clearing organization.
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II. Minimum Financial Requirements for FCMs and IBs
On December 7, 1995, the Commission voted to propose amendments to
Rule 1.17 to: (a) Increase the required minimum dollar amount of
adjusted net capital for FCMs from $50,000 to $250,000; 22 (b)
increase the required minimum dollar amount of adjusted net capital for
``independent'' IBs from $20,000 to $30,000; 23 and (c) make the
amount of adjusted net capital required by a registered futures
association for its member FCMs and IBs an element of the Commission's
minimum financial requirements for FCMs and IBs.24
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\22\ This proposal would also have the effect of increasing an
FCM's ``early warning'' level of adjusted net capital from $75,000
to $375,000 despite the fact that Rule 1.12(b)(1) itself would not
be amended.
\23\ More than two-thirds of IBs enter into a guarantee
agreement with an FCM in accordance with Commission Rules
1.17(a)(2)(ii) and 1.10(j) in lieu of raising their own capital, and
thus would be unaffected by the proposed amendment.
\24\ These proposals and others discussed below were published
at 60 FR 63995 (Dec. 13, 1995).
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These amendments were proposed in order to permit the Commission to
use its authority under Section 6c of the Commodity Exchange Act (Act)
25 to enforce compliance with what are effectively, for the
reasons discussed when the proposals were published,26 the current
minimum adjusted net capital requirements applicable to FCMs and
independent IBs with the benefit of all of the remedies available to
the Commission under the Act for the enforcement of compliance with any
provision of the Act and any rule promulgated thereunder.27 In
addition, these amendments would harmonize the Commission's minimum
financial requirements for FCMs and independent IBs with the prevailing
standards established by NFA rules.28 The amendments would also
support the objective of assuring that FCMs have a substantial
commitment to meeting their regulatory obligations to customers, an
objective for which an increased requirement appears appropriate given
the increase in the amount of funds held by FCMs and the change in the
value of the dollar since 1978, the last time the Commission increased
the required minimum dollar amount of capital for FCMs.29 The
Commission also believed that the proposed amendments to Rule 1.17 were
necessary to clarify its authority to require the transfer of positions
at such time as a firm is no longer in compliance with the NFA rule,
and to eliminate any confusion that may have existed as to whether the
Commission could take action where an FCM's adjusted net capital is
below $250,000 yet still at least $50,000,30 or
[[Page 19183]]
an independent IB's adjusted net capital is below $30,000 yet still
$20,000 or more.31
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\25\ 7 U.S.C. 13a-1 (1994).
\26\ See 60 FR 63995, 63996.
\27\ Section 6c of the Act authorizes the Commission, whenever
it appears that a person has engaged, is engaging, or is about to
engage in any act or practice constituting a violation of any
provision of the Act or any rule or regulation thereunder, to bring
an action to enjoin such act or practice, or to enforce compliance
with the Act or any rule or regulation thereunder. However, the
Commission does not have the authority to discipline an exchange
member for violation of an exchange rule in the absence of the
exchange's failure to act, or to enforce compliance with a
registered futures association's own rule upon a member thereof. See
Sections 8c(a)(1) and 17(l)(1) of the Act, 7 U.S.C. 12c(a)(1) and
21(l)(1) (1994).
\28\ Commission Rule 170.15, 17 CFR 170.15 (1995), mandates that
each person required to register as an FCM become and remain a
member of a futures association which provides for the membership
therein of such FCM unless there is no registered futures
association. NFA is the only registered futures association.
\29\ 43 FR 39956, 39972 (Sept. 8, 1978).
\30\ On November 24, 1992, the SEC adopted rule amendments to
raise its minimum net capital requirements for BDs holding customer
funds, which had been $25,000, to $250,000 in stages. The
requirement increased to $100,000 effective July 1, 1993, $175,000
effective January 1, 1994 and to the current level of $250,000
effective July 1, 1994. See 57 FR 56973, 56990 (Dec. 2, 1992); 17
CFR 240.15c3-1e(a) (1995).
\31\ The Commission's minimum dollar amount of adjusted net
capital for independent IBs has remained unchanged at $20,000 since
1983, when rules governing IBs were first adopted, so the change in
the dollar's value since that time justifies an increase to $30,000
for the minimum amount. 48 FR 35248 (Aug. 3, 1983).
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Four comment letters were received on the December 1995 proposals,
submitted by FIA, NFA, CBT and CME. FIA and NFA supported the proposed
amendments to the Commission's minimum financial requirements for FCMs
and independent IBs. CBT and CME supported raising the minimum dollar
amounts of the Commission's financial requirements to those of the NFA
for FCMs and independent IBs, but objected to incorporating all aspects
of NFA's minimum financial requirements (i.e., the standards based on
number of branches and associated persons (APs)) into the Commission's
rules.32 CBT stated that:
\32\ NFA minimum financial requirements for FCMs and independent
IBs based upon the number of branches and APs are discussed in the
proposing release, 60 FR 63995, 63997.
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Many SROs have their own internal rules to determine capital
that have been developed to address a specific need identified by
that SRO. It can be anticipated that the NFA may develop further
capital standards to address the capital needs of the firms for
which it is primarily responsible and although all FCMs doing
customer business are subject to these requirements, by virtue of
being members of the NFA, if such requirements become Commission
mandates, there would be a greater responsibility placed on the
other DSROs to monitor compliance with what are in essence another
organization's internal capital requirements.
The Commission disagrees with this comment. A registered futures
association cannot impose a minimum financial requirement for its
member FCMs and IBs unless such a rule is approved by the Commission.
When the Commission approves such a rule of the registered futures
association, the proposed amendment would make that standard an element
of the Commission's minimum requirements. Therefore, SROs effectively
will be monitoring compliance with the minimum financial requirements
for doing Commission-regulated FCM business, not another organization's
internal capital requirements.33
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\33\ All SROs are required to have in effect and enforce rules
approved by the Commission prescribing minimum financial and related
reporting requirements for member FCMs and IBs. Such requirements
must be the same as, or more stringent than, those contained in
Commission Rules 1.10 and 1.17. See Commission Rule 1.52, 17 CFR
1.52 (1995).
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Based upon a review of the comments and its own consideration of
these issues, the Commission has determined to adopt the amendments to
Rule 1.17(a) as proposed. The Commission is also adopting conforming
amendments to the early warning level of adjusted net capital for FCMs
(new paragraph (b)(3) of Rule 1.12), the restrictions on withdrawals of
equity capital (new paragraph (e)(1)(iii) of Rule 1.17), and various
provisions of Rule 1.17(h) concerning subordinated debt.34 The
Commission further notes that several provisions of Rule 1.17 contain
cross-references to Rule 1.17(a)(1)(i)(A) and 1.17(a)(1)(ii)(A), the
minimum dollar amount of adjusted net capital for FCMs and independent
IBs, respectively. These other provisions of Rule 1.17 restrict or
require certain actions if specified levels of adjusted net capital,
which in all cases exceed 100 percent of the minimum dollar amount, are
breached. Thus, the amendments to Rule 1.17(a)(1)(i)(A) and
(a)(1)(ii)(A) will have a corresponding impact on various FCM and
independent IB activities or obligations referred to elsewhere in Rule
1.17.35
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\34\ See 60 FR 63995, 63997.
\35\ The other provisions of Rule 1.17 referred to herein are
discussed at 60 FR 63995, 63996.
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III. Approval of Prepayment of Subordinated Debt
The Commission also proposed in December 1995 to codify a Division
``no-action'' letter 36 by amending Commission Rule
1.17(h)(2)(vii)(C) generally to require submission by an FCM or
independent IB of a request for approval of prepayment of subordinated
debt only to its DSRO.37 However, the Commission also proposed
that dual approval by the DSRO and the Commission would be required if
the requested prepayment would result in a reduction of 20 percent or
more of the firm's adjusted net capital.38
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\36\ CFTC Interpretative Letter No. 85-17, [1984-1986 Transfer
Binder] Comm. Fut. L. Rep. (CCH) para. 22,738 (Sept. 10, 1985).
\37\ In those rare instances where the registrant is not a
member of any SRO (which would mean that it could not handle
customer business), such a request would be submitted to the
Commission.
\38\ The Commission made clear when it proposed this amendment
that if a firm's subordinated debt amounts to 25 percent of its
adjusted net capital and the firm wishes to prepay all outstanding
subordinated debt and simultaneously enter into new subordinated
debt arrangements for the same amount, but with a different maturity
date or interest rate, dual approval would not be required since
there would be no net effect on the firm's adjusted net capital.
Similarly, if a firm wanted to convert subordinated debt to paid-in
capital, dual approval would not be required so long as such
conversion did not result in a reduction of 20 percent or more of
the firm's adjusted net capital. 60 FR 63995, 63997-98.
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FIA supported the amendment as proposed, but NFA, CBT and CME each
raised objections to a requirement for dual approval by the DSRO and
the Commission where prepayments of subordinated debt would reduce a
firm's adjusted net capital by at least 20 percent. The commenters
stated that DSROs have demonstrated the capability to competently
handle prepayment of subordinated debt during the past ten years of the
no-action period. CME stated that a firm will be required to provide
notice of a decrease of 20 percent or more in adjusted net capital
pursuant to Rule 1.12(g), as discussed above. CBT recommended that the
Commission make clear that a prepayment of subordinated debt that
results in a decrease of 20 percent or more in adjusted net capital
constitutes a reporting event to the Commission.39 NFA recommended
that approval of such prepayment should only be required by the DSRO,
which in turn should be required to provide the Commission with notice
of any such approvals.
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\39\ The comment letters referred to the adjusted net capital
standard in the proposal. As noted above, the amendments to Rule
1.12(g) as adopted are based upon a reduction in a firm's net
capital or excess adjusted net capital.
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The Commission has considered this issue in light of the comments
received and the other rule amendments it is announcing herein,
particularly Rule 1.12(g) discussed above. The Commission believes that
dual approval by the DSRO and the Commission need not be required for
prepayment of subordinated debt, even if such prepayment would reduce
an FCM's or independent IB's net capital by 20 percent or more or its
excess adjusted net capital by 30 percent or more. In such cases,
however, the DSRO must immediately provide the Commission with a copy
of any notice of approval of prepayment of subordinated debt issued to
an FCM or an independent IB.40
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\40\ This requirement is in addition to the current requirement
that each DSRO report monthly to the regional office of the
Commission nearest to it all actions taken with respect to
subordinated loan agreements. Division of Trading and Markets
Financial and Segregation Interpretation No. 4-1, para. 25, 1 Comm.
Fut. L. Rep. (CCH) para. 7114A, at 7102 (July 29, 1985).
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IV. Gross Collection of Exchange-Set Margins
The Commission also proposed in December 1995 to amend Rule 1.58,
which governs gross collection of exchange-set margin for omnibus
accounts, to make it applicable to omnibus accounts carried by FCMs for
foreign brokers. The Commission made this proposal because, in view of
the
[[Page 19184]]
increasing internationalization of the financial markets, and in
particular the increasing use of foreign omnibus accounts, the
Commission believed that foreign broker omnibus accounts should be
treated in the same manner as omnibus accounts carried for domestic
FCMs. The Commission also noted that the proposals would conform Rule
1.58 to the industry practice since, as a result of staff
recommendations in rule enforcement reviews and SRO rule changes, all
active U.S. contract markets other than the New York Cotton Exchange
and the Philadelphia Board of Trade require that FCMs collect margin
for omnibus accounts of foreign brokers as well as other domestic FCMs
on a gross basis.
FIA, CBT and CME supported the proposed amendment to Rule 1.58 and
the Commission has determined to adopt this amendment as
proposed.41 The Commission believes that gross collection of
exchange-set margin at the clearing firm materially improves financial
control over the positions carried through omnibus accounts.
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\41\ A fuller discussion of this issue is set forth in the
proposing release. 60 FR 63995, 63998.
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V. Receivables From Foreign Brokers
Commission Rule 1.17(c)(5)(xiii) requires that an FCM or
independent IB, when computing its adjusted net capital, take a charge
against its net capital based upon:
Five percent of all unsecured receivables includable under
paragraph (c)(2)(ii)(D) of this section used by the applicant or
registrant in computing `net capital' and which are not receivable
from (A) a registered futures commission merchant, or (B) a broker
or dealer which is registered as such with the Securities and
Exchange Commission.42
\42\ This charge relates to funds deposited by an FCM with a
foreign broker for clearing transactions on non-U.S. markets, as
distinct from the exclusion from current assets for debit/deficit
accounts under Rule 1.17(c)(2)(i), where a customer of the FCM has a
debt to the FCM.
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This provision has been unchanged since it was adopted by the
Commission as part of the major overhaul of the minimum financial and
related reporting requirements in 1978.43 In 1978, foreign futures
business was totally unregulated and foreign options were banned.
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\43\ 43 FR 39956, 39975 (Sept. 8, 1978).
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By letter dated January 12, 1996 to the Division, the Joint Audit
Committee 44 requested that the Commission exempt from the five
percent capital charge set forth in Rule 1.17(c)(5)(xiii) those
unsecured receivables from a foreign broker that has been granted
``comparability relief'' under Commission Rule 30.10.45
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\44\ The Joint Audit Committee (JAC) is composed of
representatives of all U.S. futures SROs. It was established to
coordinate audit and financial surveillance, plans, policies and
procedures, particularly with respect to FCMs that are members of
more than one SRO. Responsibility for monitoring firms that are
members of more than one SRO is allocated among the SROs under a
Joint Audit Plan in which all of the exchanges and NFA participate.
\45\ 17 CFR 30.10 (1995). Part 30 of the Commission's rules
governs foreign futures and options transactions (i.e., commodity
interest transactions entered into by a person located in the U.S.
on or subject to the rules of a foreign board of trade) and
generally requires, among other things, that persons engaged in such
transactions for or on behalf of customers located in the U.S.
register under the Act. However, the Part 30 rules contain an
exemptive provision pursuant to which the Commission may exempt a
firm located outside the U.S. from the application of certain of the
Commission's rules based upon substituted compliance by the firm
with corresponding regulatory requirements of the foreign
jurisdiction in areas such as registration, minimum financial
requirements, safeguarding of customer funds, record-keeping and
reporting requirements, and sales practice standards, and subject to
certain conditions primarily related to the protection of customer
funds.
The relief is granted to firms designated by a foreign entity
such as the United Kingdom Securities and Investments Board or the
Association of Futures Brokers and Dealers (U.K.). A listing of
these entities is set forth in Appendix C to the Commission's Part
30 rules.
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When the Commission adopted Rule 1.17(c)(5)(xiii) in 1978, there
were no Part 30 rules and the Commission had little interaction with
foreign regulators compared to what it has in that regard today.
Indeed, many foreign jurisdictions had no developed regulatory
structure for the futures industry at that time. The Commission was
therefore concerned that unsecured receivables from foreign brokers
represented greater risk to a firm's financial condition than those
from a registered FCM or BD, and should be subject to an additional
capital charge. The increased cooperation among regulators globally and
enhancement of capital standards monitoring today as compared to 1978
justifies a reconsideration of the appropriateness of Commission Rule
1.17(c)(5)(xiii). The Commission also notes that registered FCMs and
BDs today may have large exposures in a jurisdiction such as the U.K.
and an unsecured receivable from such an FCM or BD would not be subject
to a haircut whereas the same receivable from a U.K. affiliate of a
U.S. firm would be subject to the five percent charge so the five
percent charge is a regulatory rather than a location charge.
Based upon its consideration of this issue, the Commission has
determined to add a proviso to Rule 1.17(c)(5)(xiii) such that the
haircut will not apply to an unsecured receivable due from a foreign
broker if the receivable represents deposits required to maintain
futures and commodity option positions (i.e., ``excess'' deposits by an
FCM with a foreign broker are still subject to the five percent
charge), the foreign broker has been granted comparability relief
pursuant to Commission Rule 30.10 and the receivable is held in
compliance with the customer funds protection requirements of the
relevant Commission order made under Rule 30.10 by the foreign broker
itself, with another foreign broker that has been granted comparability
relief under Commission Rule 30.10, or at a depository in the same
jurisdiction as either foreign broker that would qualify as a
depository for funds in accordance with Commission Rule 30.7.
Essentially, the Commission is interpreting the existing rule to treat
``Rule 30.10 firms'' akin to a registered FCM, provided the conditions
about the nature and location of the receivable are also met. As this
relieves a burden on FCMs and independent IBs in computing their
adjusted net capital, and follows a request for such relief by the JAC
on behalf of the member firms of the SROs, the Commission finds good
cause that it is unnecessary to publish this rule amendment for public
comment.46 However, although the Commission is publishing this
amendment as a final rule, it would encourage any interested parties to
submit comments on this amendment.
---------------------------------------------------------------------------
\46\ See 5 U.S.C. 553(b) (1994). Preliminary review of data
related to this charge by the Commission's staff indicates that
these receivables are not a substantial asset for most firms. The
Commission also notes that its staff will review firms' financial
statements to determine if unsecured receivables from foreign
brokers are a substantial portion, such as 25 percent, of a firm's
assets and, if so, may undertake discussions with the firms
concerning the circumstances involved.
---------------------------------------------------------------------------
VI. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-611 (1994),
requires that agencies, in proposing rules, consider the impact of
those rules on small businesses. The rule amendment discussed herein
would affect FCMs and independent IBs. The Commission has previously
determined that, based upon the fiduciary nature of FCM/customer
relationships, as well as the requirement that FCMs meet minimum
financial requirements, FCMs should be excluded from the definition of
small entity.47
---------------------------------------------------------------------------
\47\ See 47 FR 18618, 18619 (Apr. 30, 1982).
---------------------------------------------------------------------------
With respect to IBs, the Commission stated that it is appropriate
to evaluate within the context of a particular rule whether some or all
IBs should be considered to be small entities and, if
[[Page 19185]]
so, to analyze the economic impact on such entities at that
time.48 The amendments to Rules 1.17(c)(5)(xiii) and (h)(2)(vii)
eliminate the capital charge for unsecured receivables from certain
foreign brokers and reduce the burden associated with the procedure to
obtain approval for prepayment of subordinated debt, respectively.
Accordingly, these amendments impose no additional requirements on an
independent IB. In addition, the amendment to the minimum adjusted net
capital requirement for an IB conforms the Commission's requirement to
that of the NFA and therefore there should be no impact on an IB's
financial operations. Therefore, these rule amendments will not have a
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------
\48\ See 48 FR 35248, 35275-78 (Aug. 3, 1983).
---------------------------------------------------------------------------
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1980 (PRA), 44 U.S.C. 3501 et seq.
(1994), imposes certain requirements on federal agencies (including the
Commission) in connection with their conducting or sponsoring any
collection of information as defined by the PRA. In compliance with the
PRA, the Commission submitted the December 1994 proposed rule
amendments and their associated information collection requirements to
the Office of Management and Budget. The burden associated with that
entire collection (3038-0024) including the December 1994 proposed rule
amendments, is as follows:
Average Burden Hours Per Response: 18.00.
Number of Respondents: 1,782.
Frequency of Response: annually, quarterly and on occasion.
The burden associated with the December 1994 proposed rule
amendments was as follows:
Average Burden Hours Per Response: 1.00.
Number of Respondents: 12.
Frequency of Response: on occasion.
The Office of Management and Budget approved the December 1994
submission concerning collection 3038-0024 on February 1, 1995.
When the Commission proposed rule amendments in December 1995, it
noted that the proposed rule amendments had no burden,49 although
Rules 1.12, 1.17 and 1.58 are part of groups of rules with the
following burdens.
---------------------------------------------------------------------------
\49\ The proposed increase in the dollar amount of minimum
adjusted net capital for an FCM and IB would necessitate only a
change in line item 23E of the Statement of the Computation of
Minimum Capital Requirements on Form 1-FR-FCM and in line item 15 of
that Statement on Form 1-FR-IB, as well as a calculation of the
minimum adjusted net capital requirement based upon a firm's branch
offices and APs.
---------------------------------------------------------------------------
The burden associated with the collection required by Rules 1.12
and 1.17 (3038-0024), including the rule amendments proposed in
December 1995, is as noted above. The burden associated with the
collection required by Rule 1.58 (3038-0026), including the rule
amendments proposed in December 1995, is as follows:
A. Reporting
Average Burden Hours Per Response: 0.04.
Number of Respondents: 100.00.
Frequency of Response: daily.
B. Recordkeeping
Average Burden Hours Per Response: 1.00.
Number of Respondents: 300.00
Frequency of Response: annually.
Persons wishing to comment on the estimated paperwork burden
associated with these rule amendments should contact Jeff Hill, Office
of Management and Budget, room 3228, NEOB, Washington, DC 20503 (202)
395-7340. Copies of the information collection submissions to OMB are
available from Joe F. Mink, CFTC Clearance Officer, 1155 21st Street,
NW., Washington, DC 20581, (202) 418-5170.
List of Subjects in 17 CFR Part 1
Commodity futures, Minimum financial requirements.
In consideration of the foregoing, and pursuant to the authority
contained in the Commodity Exchange Act, and in particular Sections
4f(b), 4f(c), 4g and 8a, 7 U.S.C. 6f(b), 6f(c), 6g, and 12a, the
Commission hereby amends Part 1 of Chapter I of Title 17 of the Code of
Federal Regulations as follows:
PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT
1. The authority citation for Part 1 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f,
6g, 6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a,
12c, 13a, 13a-1, 16, 16a, 19, 21, 23 and 24.
2. Section 1.12 is amended by removing the word ``or'' at the end
of paragraph (b)(2), by redesignating paragraph (b)(3) as paragraph
(b)(4), by adding a new paragraph (b)(3), by adding paragraphs (f)(4)
and (f)(5) and by revising the introductory text of paragraph (g),
paragraph (g)(1) and paragraph (g)(2) to read as follows:
Sec. 1.12 Maintenance of minimum financial requirements by futures
commission merchants and introducing brokers.
* * * * *
(b) * * *
(3) 150 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member; or
* * * * *
(f) * * *
(4) A futures commission merchant shall report immediately whenever
any commodity interest account it carries is subject to a margin call,
or call for other deposits required by the futures commission merchant,
that exceeds the futures commission merchant's excess adjusted net
capital, determined in accordance with Sec. 1.17, and such call has not
been answered by the close of business on the day following the
issuance of the call. This applies to all accounts carried by the
futures commission merchant, whether customer, noncustomer, or omnibus,
that are subject to margining, including commodity futures and options.
In addition to actual margin deposits by an account owner, a futures
commission merchant may also take account of favorable market moves in
determining whether the margin call is required to be reported under
this paragraph.
(f)(5)(i) A futures commission merchant shall report immediately
whenever its excess adjusted net capital is less than six percent of
the maintenance margin required by the futures commission merchant on
all positions held in accounts of a noncustomer other than a
noncustomer who is subject to the minimum financial requirements of:
(A) A futures commission merchant, or
(B) The Securities and Exchange Commission for a securities broker
and dealer.
(ii) For purposes of paragraph (f)(5)(i), maintenance margin shall
include all deposits which the futures commission merchant requires the
noncustomer to maintain in order to carry its positions at the futures
commission merchant.
(g) A futures commission merchant shall provide written notice of a
substantial reduction in capital as compared to that last reported in a
financial report filed with the Commission pursuant to Sec. 1.10. This
notice shall be provided as follows:
(1) If any event or series of events, including any withdrawal,
advance, loan or loss cause, on a net basis, a reduction in net capital
(or, if the futures commission merchant is qualified to use the filing
option available under Sec. 1.10(h), tentative net capital as defined
in the rules of the Securities and Exchange Commission) of 20 percent
or more, notice must be provided within two business days of
[[Page 19186]]
the event or series of events causing the reduction; and
(2) If equity capital of the futures commission merchant or a
subsidiary or affiliate of the futures commission merchant consolidated
pursuant to Sec. 1.10(f) (or 17 CFR 240.15c3-1e) would be withdrawn by
action of a stockholder or a partner or by redemption or repurchase of
shares of stock by any of the consolidated entities or through the
payment of dividends or any similar distribution, or an unsecured
advance or loan would be made to a stockholder, partner, sole
proprietor, employee or affiliate, such that the withdrawal, advance or
loan would cause, on a net basis, a reduction in excess adjusted net
capital (or, if the futures commission merchant is qualified to use the
filing option available under Sec. 1.10(h), excess net capital as
defined in the rules of the Securities and Exchange Commission) of 30
percent or more, notice must be provided at least two business days
prior to the withdrawal, advance or loan that would cause the
reduction: Provided, however, That the provisions of paragraphs (g)(1)
and (g)(2) of this section do not apply to any futures or securities
transaction in the ordinary course of business between a futures
commission merchant and any affiliate where the futures commission
merchant makes payment to or on behalf of such affiliate for such
transaction and then receives payment from such affiliate for such
transaction within two business days from the date of the transaction.
* * * * *
3. Section 1.17 is amended as follows:
3.1. By revising paragraph (a)(1);
3.2. By revising paragraph (c)(5)(xiii);
3.3. By removing the word ``or'' at the end of paragraph
(e)(1)(ii), by redesignating paragraph (e)(1)(iii) as (e)(1)(iv), and
by adding a new paragraph (e)(1)(iii);
3.4. By removing the word ``or'' at the end of paragraph
(h)(2)(vi)(C)(2), by redesignating paragraph (h)(2)(vi)(C)(3) as
paragraph (h)(2)(vi)(C)(4), and by adding a new paragraph
(h)(2)(vi)(C)(3);
3.5. By removing the word ``or'' at the end of paragraph
(h)(2)(vii)(A)(2), by redesignating paragraph (h)(2)(vii)(A)(3) as
paragraph (h)(2)(vii)(A)(4) and, as redesignated, revising it, and by
adding a new paragraph (h)(2)(vii)(A)(3);
3.6. By removing the word ``or'' at the end of paragraph
(h)(2)(vii)(B)(2), by redesignating paragraph (h)(2)(vii)(B)(3) as
paragraph (h)(2)(vii)(B)(4) and, as redesignated, revising it, and by
adding new paragraphs (h)(2)(vii)(B)(3) and (h)(2)(vii)(C);
3.7. By removing the word ``or'' at the end of paragraph
(h)(2)(viii)(A)(2), by redesignating paragraph (h)(2)(viii)(A)(3) as
paragraph (h)(2)(viii)(A)(4), and by adding a new paragraph
(h)(2)(viii)(A)(3);
3.8. By removing the word ``or'' at the end of paragraph
(h)(3)(ii)(B), by redesignating paragraph (h)(3)(ii)(C) as paragraph
(h)(3)(ii)(D), and by adding a new paragraph (h)(3)(ii)(C); and
3.9. By redesignating paragraphs (h)(3)(v)(C) and (D) as paragraphs
(h)(3)(v)(D) and (E) and by adding a new paragraph (h)(3)(v)(C). The
revised and added paragraphs read as follows:
Sec. 1.17 Minimum financial requirements for futures commission
merchants and introducing brokers.
(a)(1)(i) Except as provided in paragraph (a)(2)(i) of this
section, each person registered as a futures commission merchant must
maintain adjusted net capital equal to or in excess of the greatest of:
(A) $250,000;
(B) Four percent of the following amount: The customer funds
required to be segregated pursuant to the Act and these regulations and
the foreign futures or foreign options secured amount, less the market
value of commodity options purchased by customers on or subject to the
rules of a contract market or a foreign board of trade: Provided,
however, That the deduction for each customer shall be limited to the
amount of customer funds in such customer's account(s) and foreign
futures and foreign options secured amounts;
(C) The amount of adjusted net capital required by a registered
futures association of which it is a member; or
(D) For securities brokers and dealers, the amount of net capital
required by Rule 15c3-1(a) of the Securities and Exchange Commission
(17 CFR 240.15c3-1(a)).
(ii) Except as provided in paragraph (a)(2) of this section, each
person registered as an introducing broker must maintain adjusted net
capital equal to or in excess of the greatest of:
(A) $30,000;
(B) The amount of adjusted net capital required by a registered
futures association of which it is a member; or
(C) For securities brokers and dealers, the amount of net capital
required by Rule 15c3-1(a) of the Securities and Exchange Commission
(17 CFR 240.15c3-1(a)).
* * * * *
(c) * * *
(5) * * *
(xiii) Five percent of all unsecured receivables includable under
paragraph (c)(2)(ii)(D) of this section used by the applicant or
registrant in computing ``net capital'' and which are not receivable
from
(A) A registered futures commission merchant, or
(B) A broker or dealer which is registered as such with the
Securities and Exchange Commission: Provided, however, That if the
unsecured receivable represents deposits required to maintain futures
and commodity option positions, is receivable from a broker which has
been granted comparability relief pursuant to Sec. 30.10 of this
chapter, and is held by the broker itself, with another foreign broker
that has been granted comparability relief under Sec. 30.10 of this
chapter, or at a depository in the same jurisdiction as either foreign
broker that would qualify as a depository for funds in accordance with
Sec. 30.7 of this chapter, and, in the case of customer funds, is held
in accordance with the special requirements of the applicable
Commission order issued under Sec. 30.10 of this chapter, there will be
no charge.
* * * * *
(e) * * *
(1) * * *
(iii) 120 percent of the amount of adjusted net capital required by
a registered futures association of which it is a member; or
* * * * *
(h) * * *
(2) * * *
(vi) * * *
(C) * * *
(3) 120 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member; or
* * * * *
(vii) * * *
(A) * * *
(3) 120 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member; or
(4) For an applicant or registrant which is also a securities
broker or dealer, the amount of net capital specified in Rule 15c3-
1d(b)(7) of the Securities and Exchange Commission (17 CFR 240.15c3-
1d(b)(7)).
(B) * * *
(3) 120 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member; or
(4) For an applicant or registrant which is also a securities
broker or dealer, the amount of net capital specified in Rule 15c3-
1d(c)(5)(ii) of the Securities and Exchange Commission (17 CFR
240.15c3-1d(c)(5)(ii)): Provided, however, That no special prepayment
shall be made if pre-tax losses during the latest three-month period
were greater than 15 percent of current excess adjusted net capital.
[[Page 19187]]
(C) Notwithstanding the provisions of paragraphs (h)(2)(vii)(A) and
(h)(2)(vii)(B) of this section, in the case of an applicant, no
prepayment or special prepayment shall occur without the prior written
approval of the National Futures Association; in the case of a
registrant, no prepayment or special prepayment shall occur without the
prior written approval of the designated self-regulatory organization,
if any, or of the Commission if the registrant is not a member of a
self-regulatory organization. The designated self-regulatory
organization shall immediately provide the Commission with a copy of
any notice of approval issued where the requested prepayment or special
prepayment will result in the reduction of the registrant's net capital
by 20 percent or more or the registrant's excess adjusted net capital
by 30 percent or more.
(viii) * * *
(A) * * *
(3) 120 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member; or
* * * * *
(3) * * *
(ii) * * *
(C) 120 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member; or
* * * * *
(v) * * *
(C) 120 percent of the amount of adjusted net capital required by a
registered futures association of which it is a member;
* * * * *
4. Section 1.58 is revised to read as follows:
Sec. 1.58 Gross collection of exchange-set margins.
(a) Each futures commission merchant which carries a commodity
futures or commodity option position for another futures commission
merchant or for a foreign broker on an omnibus basis must collect, and
each futures commission merchant and foreign broker for which an
omnibus account is being carried must deposit, initial and maintenance
margin on each position reported in accordance with Sec. 17.04 of this
chapter at a level no less than that established for customer accounts
by the rules of the applicable contract market.
(b) If the futures commission merchant which carries a commodity
futures or commodity option position for another futures commission
merchant or for a foreign broker on an omnibus basis allows a position
to be margined as a spread position or as a hedged position in
accordance with the rules of the applicable contract market, the
carrying futures commission merchant must obtain and retain a written
representation from the futures commission merchant or from the foreign
broker for which the omnibus account is being carried that each such
position is entitled to be so margined.
Issued in Washington, D.C. on April 25, 1996, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 96-10714 Filed 4-30-96; 8:45 am]
BILLING CODE 6351-01-P
Complete official Federal Register PDF
FR Doc. 96-10712 Standards for Grades of Slaughter Cattle and Standards for Grades of Carcass Beef
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Page 19155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10712]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 61, No. 85 / Wednesday, May 1, 1996 / Rules
and Regulations
[[Page 19155]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 53 and 54
[No. LS-94-009]
Standards for Grades of Slaughter Cattle and Standards for Grades
of Carcass Beef
AGENCY: Agricultural Marketing Service (AMS), USDA.
ACTION: Final rule, postponement of effective date.
-----------------------------------------------------------------------
SUMMARY: This document postpones the effective date of the final rule
(61 FR 2891-2898) to revise the official U.S. standards for grades of
carcass beef and the related standards for grades of slaughter cattle
from July 1, 1996, until January 31, 1997. Upon the effective date, the
changes eliminate ``B'' maturity (approximately 30-42 months of age)
carcasses with small or slight marbling degrees from the Choice and
Select grades and include them in the Standard grade. This action is
being taken because carcasses with these characteristics have been
shown to be both variable and often unacceptable in palatability, which
contributes significantly to inconsistent palatability of Choice and
Select grade beef. The standards for grades of slaughter cattle, which
are based on the beef carcass grades, are revised to parallel the
changes in the beef carcass grade standards. The extension of the
effective date is in response to several requests asking for additional
time to make needed adjustments to management strategies in order to
respond to the grade change.
EFFECTIVE DATE: The effective date of the final rule is postponed from
July 1, 1996, to January 31, 1997.
FOR FURTHER INFORMATION CONTACT: Herbert C. Abraham, Chief, Livestock
and Meat Standardization Branch, Livestock and Seed Division,
Agricultural Marketing Service, U.S. Department of Agriculture, P.O.
Box 96456, Washington, D.C. 20090-6456, 202/720-4486.
SUPPLEMENTARY INFORMATION: On January 19, 1995, the Agricultural
Marketing Service (AMS), U.S. Department of Agriculture, under
authority of the Agricultural Marketing Act of 1946, as amended (7
U.S.C. 1621-1627), published a proposed rule (60 FR 3982-3986) to
revise the official U.S. standards for grades of carcass beef and the
related slaughter cattle standards by eliminating ``B'' maturity
(approximately 30-42 months of age) carcasses with small or slight
marbling degrees from the Choice and Select grades and including them
in the Standard grade. In consideration of the over 400 written
comments received on the proposal, and all other available information,
the proposed rule was adopted and a final rule was published on January
30, 1996, (61 FR 2891-2898). To allow the industry time to adjust its
production and marketing practices and to market beef currently in the
pipeline, implementation was scheduled for July 1, 1996.
Since the publication of the final rule, AMS has received several
requests from several State cattle associations, a national packer
organization, and several members of Congress to delay the effective
date. The requests for a delay primarily focused on the belief that it
is in the industry's best interest to provide a ``full'' adjustment
period of 18 months prior to implementation, which they indicated was
provided for in the AMS economic analysis. They stated this would allow
the industry to better adjust management strategies to conform to the
new revised standards. In the published final rule, the Department did
not conclude that an 18-month adjustment period was necessary prior to
implementation of the changes. The reference to an 18-month period in
the final rule was one of the periods of time after implementation used
to calculate the economic impact of the changes rather than a period of
time for delaying implementation. It was concluded that during the 18-
month period following implementation, there would be a net positive
impact of $86-million if only 25 percent of the B-maturity carcasses
were eliminated through improved management practices. Greater benefits
would accrue if more than 25 percent of the B-maturity carcasses were
eliminated. A 5-month period prior to implementation was provided so
many of the cattle now in feedlots could be marketed before the changes
became effective. Although an 18-month adjustment period was never
intended, AMS recognizes there may be some confusion about
establishment of the implementation date, and that implementation of
the changes at a time of large beef supplies and high grain prices may
not be in the best economic interest of the industry. Consequently, AMS
has decided to delay implementation of the beef grade changes. Although
the sooner that changes in production and management practices are
implemented, the greater the total benefits to the entire beef
industry, AMS recognizes that there are some situations where short-
term economic losses might occur and this additional delay should allow
market forces to adjust by the implementation date. The delay in no way
prevents cattle producers and feeders from adopting new management
strategies at this time to minimize the production of B-maturity
carcasses.
Therefore, the effective date of the final rule that was published
at 61 FR 2891-2898 on January 30, 1996, is postponed until January 31,
1997.
Authority: 7 U.S.C. 1621-1627.
Dated: April 24, 1996.
Lon Hatamiya,
Administrator.
[FR Doc. 96-10712 Filed 4-30-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-10698 Approval and Promulgation of Air Quality Implementation Plans; Pennsylvania; Redesignation Request and Maintenance Plan for the Pittsburgh Ozone Nonattainment Area
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19193-19197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10698]
=======================================================================
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[PA034-4014, PA035-4015; FRL-5465-1]
Approval and Promulgation of Air Quality Implementation Plans;
Pennsylvania; Redesignation Request and Maintenance Plan for the
Pittsburgh Ozone Nonattainment Area
AGENCY: Environmental Protection Agency.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Environmental Protection Agency (EPA) is disapproving a
redesignation request for the Pittsburgh ozone nonattainment area and a
State Implementation Plan (SIP) revision submitted by the Commonwealth
of Pennsylvania. This SIP revision consists of a maintenance plan for
the Pittsburgh ozone nonattainment area. The effect of this action is
to disapprove the redesignation request and its associated maintenance
plan because the area violated the National Ambient Air Quality
Standard for ozone (the ozone NAAQS) and additionally is not otherwise
eligible for redesignation. This action is being taken under sections
107 and 110 of the Clean Air Act.
EFFECTIVE DATE: This final rule is effective on May 31, 1996.
ADDRESSES: Copies of the documents relevant to this action are
available for public inspection during normal business hours at the
Air, Radiation, and Toxics Division, Environmental Protection Agency,
Region III, 841 Chestnut Building, Philadelphia, Pennsylvania 19107 and
the Pennsylvania Department of Environmental Protection, Bureau of Air
Quality, P.O. Box 8468, 400 Market Street, Harrisburg, Pennsylvania
17105.
FOR FURTHER INFORMATION CONTACT: Maria A. Pino, (215) 597-9337, at the
EPA Region III office, or via e-mail at [email protected].
SUPPLEMENTARY INFORMATION: On February 7, 1996 (61 FR 4598), EPA
published a notice of proposed rulemaking (NPR) for the Commonwealth of
Pennsylvania that proposed disapproval of the redesignation request and
maintenance plan for the Pittsburgh-Beaver Valley ozone nonattainment
area (the Pittsburgh area). The formal redesignation request was
submitted by the Commonwealth of Pennsylvania on November 12, 1993. At
the same time, the Commonwealth submitted a maintenance plan for the
Pittsburgh area as a SIP revision. The Commonwealth subsequently
amended the maintenance plan on January 13, 1994 and, again, on May 12,
1995. During the 1995 ozone season, the Pittsburgh area violated the
ozone NAAQS, making the area ineligible for redesignation. Therefore,
EPA proposed to disapprove the redesignation request and its associated
maintenance plan.
Other specific details of the Commonwealth's redesignation request
and maintenance plan for the Pittsburgh area, and the rationale for
EPA's proposed action are explained in the NPR and will not be restated
here. Both positive and adverse public comments were received on the
NPR. EPA received three comment letters in favor of the proposed
disapproval of the Pittsburgh area redesignation request and
maintenance plan. Two comment letters were opposed to the disapproval.
The following is a summary of the adverse comments received on the NPR,
and EPA's response to those comments.
Comment#1: Two commenters maintained that transport of ozone and
NOX is the primary cause of the violations in the Pittsburgh area.
The letters contained the following comments:
[[Page 19194]]
(1) ``Southwestern Pennsylvania's ozone is primarily due to
transported ozone and NOX from upwind states.''
(2) ``Despite the potential health and economic harm to residents
of southwestern Pennsylvania, EPA has failed to properly control
interstate transport of ozone and NOX into Pennsylvania.''
(3) ``EPA has failed to consider the effects of transport in
determining whether southwestern Pennsylvania has violated the NAAQS
for ozone and whether its maintenance plan is adequate.''
(4) ``Transport of ozone from outside Pennsylvania into the
Pittsburgh-Beaver Valley area was not considered.''
(5) ``Disapproval of southwestern Pennsylvania's attainment
application could worsen, rather than improve, the region's air
quality.'' The commenter asserted that, because the ozone in the
Pittsburgh area is due primarily to transport, additional emission
controls will not prevent exceedances, and may have little or no effect
on the area's ozone levels. Also, ``extraordinary measures'' would be
needed to prevent exceedances.
One commenter contends that ozone readings at monitoring points
near the West Virginia/Ohio/Pennsylvania border demonstrate a strong
correlation between the amount of ozone transported across the border
and the readings in the Pittsburgh-Beaver Valley area. The commenter
claimed that imposition of additional emission controls in the
Pittsburgh area would further exacerbate the substantial economic
incentive in the neighboring states of Ohio and West Virginia, which
are not included in the Ozone Transport Region (OTR) and include areas
that have been granted redesignation to attainment and/or NOX
exemptions under section 182(f) of the Act.
EPA's Response: While Pennsylvania has made great strides in
improving the air quality in the Pittsburgh area, ozone remains a
problem. EPA believes that the Pittsburgh area generates substantial
emissions of VOC and NOX, which contribute significantly to the
nonattainment problem there. This was demonstrated in 1995, when
exceedances were recorded in Pittsburgh, and ozone concentrations at
the border and in all other western and central Pennsylvania areas were
below the standard.
On November 15, 1990, amendments to the 1977 Clean Air Act were
enacted. Pub. L. 101-549, 104 Stat. 2399, codified at 42 U.S.C. 7401-
7671q. The Pittsburgh-Beaver Valley area was designated nonattainment
for ozone prior to enactment of the amended Act. The area retained its
designation of nonattainment under the amended Act, and was classified
as moderate on November 6, 1991 (56 FR 56694). Despite being classified
as moderate since 1991, the Pittsburgh area has not fully adopted and
implemented all statutory requirements for moderate ozone nonattainment
areas, including automobile inspection and maintenance (I/M) and
reasonably available control technology (RACT) for all of its major
sources of VOC and NOX. Therefore, emissions in the Pittsburgh
area have not been reduced to the extent required by the Clean Air Act
for moderate nonattainment areas.
Disapproval of the redesignation request will not worsen the area's
air quality. In fact, the opposite is true. If the redesignation
request was approved, and the area was not required to address its air
quality problem by reducing its emissions of ozone precursors (VOC and
NOX), the area would continue to violate the ozone NAAQS whenever
meteorological conditions were favorable for ozone formation. However,
if the redesignation request is disapproved, and the area adopts and
implements all control measures required for moderate ozone
nonattainment areas, precursor emissions will be reduced and,
therefore, ozone concentrations in the area will be reduced.
Pennsylvania has made no demonstration that the ozone problem in
the Pittsburgh area is caused by transport from upwind sources. An
adequate technical demonstration, including emissions data and a
modeling analysis, must be provided to support any claim of transport-
dominated nonattainment.
Although ozone levels recorded at monitors near the West Virginia/
Ohio/Pennsylvania border seem to correlate with the levels recorded
further east in the nonattainment area, this data is not sufficient to
demonstrate that the Pittsburgh area's ozone problem is due to
transport. During the summer of 1995, on the days when monitors in the
Pittsburgh area (``downwind'' monitors in Allegheny and Westmoreland
Counties) recorded exceedances of the ozone standard, ozone levels at
the monitors on the western border of the Pittsburgh area (the
``upwind'' monitors in Beaver and Washington Counties, Pennsylvania)
recorded increased levels of ozone. However, these ``upwind'' monitors
did not record any exceedances of the ozone standard. In other words,
``downwind'' monitors in the Pittsburgh area always recorded higher
ozone levels than the monitors at the western border. This demonstrates
the Pittsburgh area is causing its own exceedances by generating ozone
in the area.
Furthermore, EPA intends to use its authority under sections
110(a)(2)(A) and (D) of the Clean Air Act, where appropriate, to
require any state to reduce its emissions where there is evidence, such
as photochemical grid modeling, showing that the area's emissions
contribute significantly to nonattainment in, or interfere with
maintenance by, any other state. EPA is working with the states and
other organizations, through the Ozone Transport Assessment Group
(OTAG), to design and complete studies that consider upwind sources and
quantify their impacts. As the studies progress, EPA will continue to
work with the states and other organizations to develop mutually
acceptable attainment strategies. Under the Clean Air Act, each state
is ultimately responsible for ensuring that emissions originating in
the state do not contribute significantly to nonattainment in, or
interfere with maintenance by, any other state.
Moreover, Governor Ridge has publicly stated that Pittsburgh has an
ozone problem. The Governor has initiated a stakeholders process, a
cooperative effort between industry and government, to resolve
Pennsylvania's air quality problems. EPA officials are actively
involved in this process to help Pennsylvania determine the most
suitable emission control measures for the Pittsburgh-Beaver Valley
area.
Finally, even if the violations in Pittsburgh could be attributed
to transport, EPA would not have the authority to redesignate
Pittsburgh to attainment. Section 107(d)(1)(A)(ii) defines an
attainment area as an area ``that meets'' the national ambient air
quality standard and section 107(d)(3)(E) prohibits EPA from
redesignating an area to attainment unless EPA determines that the area
is attaining the standard. As an area that is experiencing violations
of the ozone standard is not attaining the standard, EPA is not
authorized by the Clean Air Act to redesignate such an area to
attainment.
Comment #2: ``EPA has established an unreasonable methodology for
determining a region's compliance with the National Ambient Air Quality
Standard (NAAQS) for ozone, and has failed to comply with statutory
requirements to review and revise the standard.'' The commenter also
criticized EPA's method of determining an area's design value and EPA's
methods used to locate monitors.
EPA's Response: The ozone NAAQS is a health-based standard that
couples
[[Page 19195]]
exposure time and concentration. EPA has determined that the level of
the NAAQS is a one-hour average ozone concentration of 0.12 parts per
million (ppm). This standard is designed to protect public health.
Attainment of the ozone NAAQS is determined using three consecutive
years of data to account for year-to-year variations in meteorological
conditions as well as year-to-year variations in VOC and NOX
emissions. Concentrations of ozone above the NAAQS level cause
respiratory problems such as shortness of breath, coughing, congestion,
and lung tissue damage and can result in loss of work, and increased
hospitalizations. Those most at risk are children, outdoor workers,
people with respiratory problems, such as asthma, and people who spend
a lot of time outside.
Under section 109(d)(1) of the Act, EPA is required to perform a
review of the ozone NAAQS every five years. The last review was
completed in 1993 (58 FR 13008). That review resulted in retaining the
existing standard: 0.12 ppm, 1 hour average, average annual expected
exceedances 1 (i.e. for a three-year period, the average
number of expected exceedances at each monitoring site must be less
than or equal to one per year). (See 40 CFR 50.) However, in the
February 3, 1994 Federal Register (59 FR 5164), EPA announced that, due
to new studies published in the scientific literature on ozone's health
and environmental effects, another review of the ozone NAAQS would be
conducted as rapidly as possible. EPA is planning to complete its
review and propose its findings as early as mid-1996. EPA expects to
take final action regarding its current review of the ozone NAAQS by
mid-1997, which is within five years of completion of its last review.
The 0.12 ppm ozone standard and the method used by EPA to determine
whether an area is attaining the ozone standard were decided upon
through notice and comment rulemaking and are contained in 40 CFR Part
50 Sec. 50.9 and App. H (44 FR 8220 (Feb. 8, 1979)). EPA is bound by
that standard and that method unless and until it is changed through
further rulemaking. Thus, this rulemaking is simply not the appropriate
forum for raising concerns regarding the ozone standard or the methods
for determining attainment of the standard. EPA is simply following its
own regulations that were promulgated previously pursuant to notice and
comment rulemaking procedures.
Section 183(g) of the Act requires EPA to conduct a study of
whether the methodology EPA used to establish a design value for ozone
provides an adequate indicator of ozone air quality. (The design value
is an indicator that EPA uses to determine the extent of an area's
nonattainment problem.) In accordance with this requirement, EPA
conducted a study and published its results in December 1994 in a
report entitled Clean Air Act Ozone Design Value Study: Final Report
(EPA-454/R-94-035). The report concluded that:
(1) The EPA design value method yields ozone design values that are
consistent with the current NAAQS.
(2) The EPA design value provides a reasonable estimate of peak
ozone levels within urban areas and the degree of nonattainment of the
area.
(3) Ozone design values calculated using EPA's method correlate
highly with other methods.
(4) A meteorologically adjusted design value may not be the best
indicator of the air people actually breathe, and is a major departure
from current EPA policy.
Finally, monitor location is determined through a cooperative
process between EPA and states. EPA has detailed criteria for the
placement of monitors (40 CFR 58). Monitors are located throughout a
nonattainment area, in a network designed to characterize the air
quality of the entire area. EPA and the states conduct annual reviews
of monitoring networks to determine if monitors are properly located.
EPA's latest review of the Pittsburgh area monitoring network,
conducted in the spring of 1995, indicated that the monitor locations
were adequate in assessing the ambient air quality in the area.''
Comment #3: ``EPA's methodology for measuring attainment fails to
properly assess southwestern Pennsylvania's compliance with the Clean
Air Act since most of the population of the region is not experiencing
ozone levels in violation of the federal standard.'' The commenter
contends that the Pittsburgh area's moderate classification was based
on high ozone levels in 1988, and that in each of the 6 subsequent
years, 1989-1994, the area's ozone levels were ``better than'' the
standard. In recognition of this, EPA determined that the area met the
standard in July of 1995. The violation in 1995 was a function of the
weather, and the federal ozone standard fails to make adjustments for
unusual weather. VOC and NOX, which react to form ozone, are not
considered pollutants. Ozone levels are low most days, because the
temperature is usually below 90 degrees.
The commenter went on to state that only 2 of 11 monitors violated
the standard, and that although there were 9 exceedance days, the
exceedance lasted only 1 or two hours on most of the exceedance days.
Only on the hottest day of the year, July 15, did the exceedance last
more than 4 hours. Ozone is low in most areas, on most days, and at
most times of the day.
EPA's Response: As stated above, exceedances of 0.12 ppm ozone for
one hour or longer have been determined to cause measurable health
effects in healthy individuals. Compliance with the ozone NAAQS is
determined using three consecutive years of data to account for year-
to-year variations in emissions and meteorological conditions. As noted
above, these determinations were made pursuant to long-standing EPA
regulations, and this rulemaking is simply not the appropriate forum
for comments regarding the ozone standard or the methodology for
determining attainment of the standard. The area first had air quality
data that met the NAAQS in 1992, considering the years 1990-1992, and
continued to meet the standard in 1993 and 1994. Then, in 1995, the
area once again violated the NAAQS. In light of the methodology used to
determine attainment of the ozone NAAQS, even if meteorological
conditions were unusual in 1995 (an allegation that the commenter
failed to substantiate with any analysis or data), there is no basis
for ignoring the violations monitored during that time period.
As shown in the tables below, the area was not without exceedances
from 1989 to 1994. From 1987 to 1995, the number of exceedances varied
from year to year with no discernable pattern. This variation is due to
year-to-year variations in emissions and meteorological conditions.
Pittsburgh Area: Number of Ozone Exceedances: 1987-1995
------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------
10..... 41 5 0 2 0 1 4 17
------------------------------------------------------------------------
[[Page 19196]]
Because the area has not adequately reduced its VOC and NOX
emissions, it is subject to ozone exceedances whenever meteorological
conditions are conducive to ozone formation. One of the goals of the
Clean Air Act is to minimize the health risks that people encounter.
Since meteorological conditions cannot be controlled, the way to reduce
health risks due to ozone in the Pittsburgh area is to reduce the
anthropogenic emissions of VOC and NOX, both of which are
considered pollutants. Furthermore, many VOCs are listed as hazardous
air pollutants under section 112 of the Clean Air Act, and nitrogen
dioxide (NO2) is individually regulated by EPA because of its
health and welfare effects. As a result, the reduction of VOC and
NOX emissions will reduce the health risks that are associated
with exposure to VOC and NOX, as well as reducing the health risks
due to elevated ozone levels.
Ozone is a regional pollutant. It is not formed in the same place
as its VOC and NOX precursors are generated. The VOC and NOX
that react to form ozone are usually generated from different sources.
These pollutants are transported through the air (by the wind) to a
common location, and then react in the presence of sunlight. Because of
this transport, emissions from the entire area contribute to ozone
exceedances, even if the exceedances are recorded only at a few
monitors. Therefore, all ozone monitors in an ozone nonattainment area
must be free of violations for the area to be considered meeting the
ozone NAAQS.
Comment #4: ``EPA should have redesignated the Pittsburgh area
prior to the summer of 1995.'' The commenter wrote that, since the
request was submitted in 1993, EPA had ample opportunity and
justification to approve it, and that for 4 consecutive three-year
periods, 1989-1994, the NAAQS was achieved. Another commenter stated
that, because of the debate over vehicle inspection and maintenance (I/
M), EPA refused to redesignate the area.
EPA's Response: Under section 107(d)(3)(E) of the Act, the
following five criteria must be met for an ozone nonattainment area to
be redesignated to attainment:
1. The area must meet the ozone NAAQS.
2. The area must meet applicable requirements of section 110 and
Part D of the Act.
3. The area must have a fully approved SIP under section 110(k) of
the Act.
4. The area must show that its experienced improvement in air
quality is due to permanent and enforceable measures.
5. The area must have a fully approved maintenance plan under
section 175A of the Act, including contingency measures.
In order for EPA to redesignate an area, all five of these criteria
must be met. It is true, that from 1992 to 1994, the Pittsburgh area
met the first criterion. The area did have ambient air quality data
that met the ozone NAAQS. However, the area did not meet the remaining
four criteria.
According to criteria 2 and 3, all applicable Part D requirements,
including new source review (NSR), NOX and VOC reasonably
available control technology (RACT), and I/M, must be submitted to EPA
and approved into the SIP before a redesignation request can be
approved. As the area lacks SIP-approved RACT rules for major sources
of NOX and VOC, SIP-approved I/M, and SIP-approved NSR, EPA could
not approve its redesignation request.
The violations that were recorded in 1995 indicate that criterion 4
was not met. The permanent and enforceable emission reductions achieved
in the area were evidently not adequate to maintain the improved air
quality that was experienced between 1989 and 1994, which was due, in
part, to the meteorological conditions experienced during that period.
Criterion 5 was established to ensure that any area that is
redesignated to attainment will be able to maintain compliance with the
NAAQS for at least a ten-year maintenance period following the
redesignation. The Pittsburgh area does not meet criterion 5 because
its maintenance plan is unapprovable. The maintenance plan does not
project maintenance of the NAAQS for the required 10 years beyond EPA
approval of the redesignation request. The submitted maintenance plan
projects emissions only up to 2004. When the maintenance plan was last
amended in 1995, it should have projected emissions out to at least
2006, to allow time for EPA to process the requests. In addition, the
maintenance plan contains inadequate contingency measures. Contingency
measures are needed to correct violations that might occur during the
maintenance period, in order to ensure that public health is protected.
The only contingency measure provided in the maintenance plans is
improved rule effectiveness. No source categories have been chosen, and
no rule effectiveness matrix or protocol has been completed.
Comment #5: ``The exceedances during the summer of 1995 were the
result of unusual meteorological conditions.''
EPA's Response: Ozone formation is a very complex process, which
involves meteorological conditions as well as the concentration of VOCs
and NOX in the air. As stated above, attainment of the ozone NAAQS
is determined using three consecutive years of data to account for
variations in meteorological conditions as well as variations in VOC
and NOX emissions. Since we cannot control the weather, we must
control levels of ozone in the breathable air by controlling the
concentration of NOX and VOC in the air. Our goal is to ensure
that everyone is breathing healthy air, regardless of the weather.
Comment #6: ``EPA is not treating Pennsylvania in the same manner
as other similarly situated states.'' According to the commenter, EPA
is not treating four other states with pending redesignation requests
(Ohio, Kentucky, Michigan and Georgia) for areas that experienced
violations in 1995 in the same way as Pittsburgh. The commenter also
claims that EPA treated Pittsburgh differently by not approving its
November 1993 redesignation request, whereas EPA did approve
redesignation requests for other ozone nonattainment areas.
EPA's Response: EPA is aware of three other ozone nonattainment
areas that have pending redesignation requests and that experienced
violations of the NAAQS in 1995. These areas include two moderate ozone
nonattainment areas: Muskegon, Michigan, and the Cincinnati area (a
multi-state area that covers parts of Ohio and northern Kentucky); and
one marginal area: Birmingham, Alabama.
EPA is not aware of any area in Georgia in this situation. EPA
acknowledges that it has not yet proposed disapproval of those
redesignation requests.
These areas differ from Pittsburgh, however. In the case of the two
other moderate areas, EPA's 18-month period for acting on the
redesignation requests has not yet expired and EPA is not yet legally
obligated to take action on those requests. In contrast, in the case of
Pittsburgh, EPA's statutory 18-month period for taking action expired
in May of 1995. See CAA Sec. 107(d)(3)(D). Thus, the time period for
EPA to act on the Pittsburgh redesignation has expired, but has not
done so in the case of Muskegon and Cincinnati. Birmingham is a
marginal area that has a less serious ozone air quality problem than
Pittsburgh, a moderate area. Although EPA has not yet acted on
Birmingham's redesignation request, that fact does not justify further
inaction on Pittsburgh's
[[Page 19197]]
request in light of the expiration of the 18-month statutory time
period for acting on Pittsburgh's November 12, 1993 request.
EPA notes that it has not and may not (in light of section
107(d)(1)(A)(i) and 107(d)(3)(E)) approve a redesignation request for
an area that is violating the ozone standard. Thus, the three other
areas just discussed, like Pittsburgh, are and must remain designated
nonattainment areas until they attain the standard and satisfy the
other redesignation criteria.
With respect to the comment that EPA treated Pittsburgh differently
by not approving its redesignation request while approving others, EPA
notes that Pittsburgh's request, unlike the others EPA approved, does
not and did not meet other redesignation criteria of section
107(d)(3)(E). (See Response to Comment 4.) Thus, EPA did not treat
Pittsburgh differently from other similarly situated areas by not
approving its redesignation request while approving others. The others
satisfied the statutory criteria for redesignation; Pittsburgh's did
not.
Final Action
Because the Pittsburgh area is not eligible for redesignation, EPA
is disapproving Pennsylvania's request for redesignation of the
Pittsburgh area and the accompanying maintenance plan, which was
originally submitted on November 12, 1993, and amended on January 13,
1994 and May 12, 1995.
When the final disapproval of the maintenance plan is effective,
the Pittsburgh area will no longer be able to demonstrate conformity to
the submitted maintenance plan pursuant to the transportation
conformity requirements in 40 CFR 93.128(i). Since the submitted
maintenance plan budget will no longer apply for transportation
conformity purposes, the build/no-build and less-than-90 tests will
apply pursuant to 40 CFR 93.122. In addition, the Commonwealth
submitted a 15% rate-of-progress plan (15% plan) on March 22, 1996.
Ninety days after this submittal date, the emissions budget contained
in this 15% plan will apply for conformity purposes pursuant to 40 CFR
93.118 and 93.128(a)(1)(ii), as well as the build/no-build test under
40 CFR 93.122.
Nothing in this action should be construed as permitting or
allowing or establishing a precedent for any future request for
revision to any state implementation plan. Each request for revision to
the state implementation plan shall be considered separately in light
of specific technical, economic, and environmental factors and in
relation to relevant statutory and regulatory requirements.
Under Section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to State, local, or tribal governments in the aggregate; or to
the private sector, of $100 million or more. Under section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that the approval action proposed/promulgated
does not include a Federal mandate that may result in estimated costs
of $100 million or more to either State, local, or tribal governments
in the aggregate, or to the private sector. This Federal action
approves pre-existing requirements under State or local law, and
imposes no new Federal requirements. Accordingly, no additional costs
to State, local, or tribal governments, or to the private sector,
result from this action.
As described in the NPR, EPA has determined that the disapproval of
the redesignation request will not affect a substantial number of small
entities. EPA's denial of the Commonwealth's redesignation request
under section 107(d)(3)(E) of the Act does not affect any existing
requirements applicable to small entities nor does it impose new
requirements. The area retains its current designation status and will
continue to be subject to the same statutory requirements. To the
extent that the area must adopt regulations, based on its nonattainment
status, EPA will review the effect of those actions on small entities
at the time the Commonwealth submits those regulations.
This action has been classified as a Table 3 action for signature
by the Regional Administrator under the procedures published in the
Federal Register on January 19, 1989 (54 FR 2214-2225), as revised by a
July 10, 1995 memorandum from Mary Nichols, Assistant Administrator for
Air and Radiation. The Office of Management and Budget (OMB) has
exempted this regulatory action from E.O. 12866 review.
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action, pertaining to the disapproval of
Pennsylvania's redesignation request and maintenance plan for the
Pittsburgh ozone nonattainment area, must be filed in the United States
Court of Appeals for the appropriate circuit by July 1, 1996. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this rule for the purposes of judicial
review nor does it extend the time within which a petition for judicial
review may be filed, and shall not postpone the effectiveness of such
rule or action. This action may not be challenged later in proceedings
to enforce its requirements. (See section 307(b)(2).)
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Hydrocarbons,
Nitrogen dioxide, Ozone, Reporting and recordkeeping requirements.
Dated: April 22, 1996.
W. Michael McCabe,
Regional Administrator, Region III.
[FR Doc. 96-10698 Filed 4-30-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-10690 Reinstatement of Two Sections of HUD's Standards of Conduct Regulation at 24 CFR Part 0; Correction
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19187-19188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10690]
=======================================================================
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Part 0
[Docket No. FR-3331-C-02]
RIN 2501-AB55
Reinstatement of Two Sections of HUD's Standards of Conduct
Regulation at 24 CFR Part 0; Correction
AGENCY: Office of the Secretary, Department of Housing and Urban
Development.
ACTION: Correction to final rule.
-----------------------------------------------------------------------
SUMMARY: This correction to a final rule issued by the Department of
Housing and Urban Development (Department) reinstates two sections of
HUD's Standards of Conduct at 24 CFR part 0, that pertain to ``Outside
employment and other activities'' and ``Financial interests,'' which
were deleted in a final rule published on April 5, 1996.
DATES: Effective Date: May 6, 1996.
FOR FURTHER INFORMATION CONTACT: Aaron Santa Anna, Assistant General
Counsel, Ethics Law Division, at (202) 708-3815, or Sam E. Hutchinson,
Associate General Counsel, Office of Human Resources Law, (202) 708-
0888; 451 Seventh Street, SW., Washington, DC 20410. Hearing or speech-
impaired individuals may call HUD's TDD number (202) 708-3259.
(Telephone numbers are not toll-free.)
SUPPLEMENTARY INFORMATION: On April 5, 1996, the Department published a
final rule that revised the Department's Standards of Conduct
regulation at 24 CFR Part 0. This final rule takes effect on May 6,
1996. See 61 FR 15350. The final rule removed 24 CFR part 0 in its
entirety and replaced it with a single section that provides a cross
reference to the executive branch financial disclosure regulations at 5
CFR part 2634 and the Standards of Ethical Conduct for Employees of the
Executive Branch regulation at 5 CFR part 2635 (the Standards). Most of
the provisions in 24 CFR part 0 were superseded when 5 CFR parts 2634
and 2635 took effect.
Among the provisions removed from 24 CFR part 0 were two--
Sec. 0.735-203 regarding ``Outside employment and other activities''
and Sec. 0.735-204 regarding ``Financial interests''--that were not
superseded by 5 CFR parts 2634 and 2635. Those two provisions remained
in effect temporarily under the Notes following 5 CFR 2635.804 and 5
CFR 2635.403(a), as extended at 59 FR 4779-4780, 60 FR 6390-6391, and
60 FR 66857-66858 (see also appendixes A-C to 5 CFR part 2635). The
notes are ``grandfather'' provisions that currently preserve until
August 7, 1996 (or until issuance of the agency's supplemental
standards of ethical conduct regulation, whichever occurs first) such
requirements for prior approval of employment or activities, and
prohibitions on acquiring or holding a specific financial interest,
contained in agency regulations, instructions or other issuances in
effect prior to the effective date of the Standards. In accordance with
these grandfather provisions, the Department is reinstating removed
sections 0.735-203 and 0.735-204 of 24 CFR, renumbered respectively as
sections 0.2 and 0.3, to avoid an untimely lapse in enforcement
authority pending issuance of the Department's supplemental standards
of ethical conduct as a final rule.
On June 30, 1995, the Department published proposed supplemental
standards of ethical conduct for its employees. See 60 FR 34420-34426.
The proposed rule would establish restrictions on outside employment
and activities and prohibitions on the ownership of certain financial
interests, similar to those in 24 CFR 0.735-203 and 0.735-204. In that
rulemaking document, the Department also proposed to revise 24 CFR part
0 by removing all of the provisions therein and replacing them with a
residual provision that would cross reference 5 CFR parts 2634 and
2635, as well as the Department's supplemental standards of ethical
conduct to be codified at 5 CFR part 7501. Upon publication of the
Department's supplemental standards of ethical conduct as a final rule,
the Department will, as proposed at 60 FR 34420-34426, amend the
residual cross reference section in 24 CFR part 0 by adding a cross
reference to the Department's supplemental standards of ethical conduct
at 5 CFR part 7501. In
[[Page 19188]]
addition, if the Department's supplemental standards of ethical conduct
regulation takes effect before the expiration of the grandfather period
on August 7, 1996, the Department will, upon the effective date of
those regulations, amend 24 CFR part 0 by removing the grandfathered
sections regarding ``Outside employment and other activities'' and
``Financial interests.''
Accordingly, FR Doc. 96-8380, a final rule published in the Federal
Register on April 5, 1996 (61 FR 15350), is amended by adding the
following provisions in title 24 of the Code of Federal Regulations:
PART 0--STANDARDS OF CONDUCT
1. The authority citation for part 0 continues to read as follows:
Authority: 5 U.S.C. 7301; 42 U.S.C. 3535(d).
Sec. 0.735-203 [Redesignated as Sec. 0.2]
2. Section 0.735-203 is redesignated as Sec. 0.2.
Sec. 0.735-204 [Redesignated as Sec. 0.3]
3. Section 0.735-204 is redesignated as Sec. 0.3.
Dated: April 25, 1996.
Camille E. Acevedo,
Assistant General Counsel for Regulations.
[FR Doc. 96-10690 Filed 4-30-96; 8:45 am]
BILLING CODE 4210-32-P
Complete official Federal Register PDF
FR Doc. 96-10664 Fisheries Obligation Guarantee Program and Interjurisdictional Fisheries Act Program; Consolidation and Simplification of Regulations
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19171-19177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10664]
=======================================================================
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
15 CFR Part 902
50 CFR Parts 253 and 255
[Docket No. 960319086-6086-01; I.D. 021696A]
RIN 0648-AF48
Fisheries Obligation Guarantee Program and Interjurisdictional
Fisheries Act Program; Consolidation and Simplification of Regulations
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: NMFS amends the Fisheries Obligation Guarantee (FOG) Program
and Interjurisdictional Fisheries Act (IFA) Program regulations to
consolidate, clarify and simplify them in accordance with the National
Performance Review (NPR). This final rule also amends reference to
Paperwork Reduction Act (PRA) information-collection requirements to
reflect the consolidation.
EFFECTIVE DATE: May 1, 1996.
ADDRESSES: Michael L. Grable, Chief, Financial Services Division,
National Marine Fisheries Service, 1315 East-West Highway, Silver
Spring, MD 20910.
FOR FURTHER INFORMATION CONTACT: Michael L. Grable, (301) 713-2390.
SUPPLEMENTARY INFORMATION: The FOG Program provides long-term debt to
the fisheries and aquacultural industries. The IFA Program promotes and
encourages state activities in support of the management of
interjurisdictional fisheries resources identified in interstate or
Federal fishery management plans. The two regulations governing these
programs are consolidated and revised to comply with the NPR's clarity
and simplicity objectives. The revision reduces the regulations to
about 45 percent of their former size. It replaces outdated, confusing,
burdensome, duplicative, or superfluous provisions with clear policies
that efficiently effect statutory intent. It adds the minimum
provisions needed to make the regulations current. The revision is
extensive, so the revised regulations are republished in their
entirety.
Section 3506(c)(B)(i) of the PRA requires that agencies inventory
and display a current control assigned by the Director, Office of
Management and Budget (OMB), for each agency information collection.
Section 902.1(b) identifies the location of NOAA regulations for which
OMB approval numbers have been issued. This final rule eliminates
recordkeeping and recording requirements previously contained in
Sec. 255.4.
Classification
This rule refers to collection of information requirements that
have been approved by OMB under the Paperwork Reduction Act (PRA).
Applications for the Fisheries Obligation Guarantee Program have been
approved under OMB Control No. 0648-0012, with an estimated response
time of 8 hours per application. Applications for financial assistance
under the Interjurisdictional Fisheries Act Program use standard
Federal application procedures approved under OMB Control Numbers 0348-
0043, 0348-0044, and 0348-0046.
The estimated response time above includes the time for reviewing
instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate
or any other aspect of the collection of information to NMFS at the
Addresses above, and to OMB at the Office of Information and Regulatory
Affairs, Office of Management and Budget, Washington, D.C. 20503
(Attention: NOAA Desk Officer).
Notwithstanding any other provision of law, no person is required
to respond to, nor shall any person be subject to a penalty for failure
to comply with a collection of information, subject to the requirements
of the PRA, unless that collection of information displays a currently
valid OMB Control Number.
This rule consolidates and simplifies existing regulations and is
administrative in nature. No useful purpose would be served by prior
notice and opportunity for comment. Accordingly, under 5 U.S.C.
553(b)(B), the Assistant Administrator for Fisheries, NOAA, for good
cause finds that prior notice and opportunity for comment is
unnecessary. Also, because this rule is administrative in nature and
not a substantive rule under 5 U.S.C. 533(d), it will be immediately
effective upon publication.
This final rule has been determined to be not significant for the
purposes of E.O. 12866.
Under NOAA Administrative Order 205-11, 7.01, dated December 17,
1990, the Under Secretary for Oceans and Atmosphere has delegated
authority to sign material for publication in the Federal Register to
the Assistant Administrator For Fisheries, NOAA.
List of Subjects
50 CFR Part 253
Disaster assistance, Fisheries, Grant programs-business,
Intergovernmental relations, Reporting and recordkeeping requirements,
Research.
50 CFR Part 255
Fisheries, Fishing vessels, Loan programs-business, Reporting and
recordkeeping requirements.
Catalog of Federal Domestic Assistance numbers CFDA No. 11.415
and CFDA No. 11.407, respectively.
Dated: April 23, 1996.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
For the reasons set out in the preamble, 15 CFR chapter IX and 50
CFR chapter II are amended as follows:
15 CFR CHAPTER IX
PART 902--NOAA INFORMATION COLLECTION REQUIREMENTS UNDER THE
PAPERWORK REDUCTION ACT: OMB CONTROL NUMBERS
1. The authority citation for part 902 continues to read as
follows:
Authority: 44 U.S.C. 3501 et seq.
2. In Sec. 902.1, paragraph (b) the table, is amended by adding in
the left column under 50 CFR, in numerical order, the
[[Page 19172]]
entry ``253.15'' and in the right column, in corresponding position,
the control number ``0012''.
50 CFR CHAPTER II
3. Part 253 is revised to read as follows:
PART 253--FISHERIES ASSISTANCE PROGRAMS
Subpart A--General
Sec.
253.1 Purpose.
Subpart B--Fisheries Obligation Guarantee Program
253.10 Definitions.
253.11 Guarantee policy.
253.12 Guaranteed note, U.S. note, and security documents.
253.13 Ability and experience requirements.
253.14 Economic and financial requirements.
253.15 Miscellaneous.
253.16 Fees.
253.17 Demand and payment.
253.18 Program operating guidelines.
253.19 Default and liquidation.
Subpart C--Interjurisdictional Fisheries
253.20 Definitions.
253.21 Apportionment.
253.22 State projects.
253.23 Other funds.
253.24 Administrative requirements.
Authority: 46 U.S.C. 1271-1279 and 16 U.S.C. 4101 et seq.
Subpart A--General
Sec. 253.1 Purpose.
(a) The regulations in this part pertain to fisheries assistance
programs. Subpart B of these rules governs the Fisheries Obligation
Guarantee Program, which guarantees the repayment of certain long-term
fisheries and aquacultural debts. This allows those debts to be placed
in the same private investment market that buys U.S. Treasury
securities, where interest rates are lower and maturities are longer.
The Program does all credit work and holds and services all credit
collateral. The Program's guarantee fee makes it self-supporting.
(b) Subpart C implements Title III of Public Law 99-659 (16 U.S.C.
4100 et seq.), which has two objectives:
(1) To promote and encourage State activities in support of the
management of interjurisdictional fishery resources identified in
interstate or Federal fishery management plans; and
(2) To promote and encourage management of interjurisdictional
fishery resources throughout their range.
(3) The scope of this part includes guidance on making financial
assistance awards to States or Interstate Commissions to undertake
projects in support of management of interjurisdictional fishery
resources in both the exclusive economic zone (EEZ) and State waters,
and to encourage States to enter into enforcement agreements with
either the Department of Commerce or the Department of the Interior.
Subpart B--Fisheries Obligation Guarantee Program
Sec. 253.10 Definitions.
The terms used in this subpart have the following meanings:
Act means Title XI of the Merchant Marine Act, 1936, as amended.
Actual cost means project cost (less a 10-percent salvage value),
depreciated (excluding land) on a straightline basis at 1-year
intervals over the project property's useful life including
architectural, engineering, inspection, delivery, outfitting, and
interest costs, as well as the cost of any consulting contract the
Division requires.
Applicant means the one applying for a guarantee (the prospective
notemaker).
Application means an application for a guarantee.
Application fee means 0.5 percent of the dollar amount of an
application.
Aquacultural facility means land, land structures, water
structures, water craft built in the U.S., and equipment for hatching,
caring for, or growing fish under controlled circumstances and for its
unloading, receiving, holding, processing, or distribution for
commercial purposes.
CCF means Capital Construction Fund.
Citizen means a citizen or national of the U.S. who is otherwise
also a citizen for the purpose of documenting a vessel in the coastwise
trade under section 2 of the Shipping Act, 1916, as amended.
Contributory project means any project that contributes to
developing the U.S. fishing industry by: Causing any vessel to catch
less overutilized species than before; applying new technology;
improving safety or fuel efficiency; making project property more
efficient, productive, or competitive; potentially increasing fisheries
exports; helping develop an underutilized fishery; or enhancing
financial stability, financial performance, growth, productivity, or
any other business attribute.
Demand means a noteholder's request that the guarantor pay a
guaranteed note's full principal and interest balance.
Division means the Financial Services Division, National Marine
Fisheries Service, National Oceanic and Atmospheric Administration,
U.S. Department of Commerce.
Dual Use CCF means a CCF agreement whose qualified vessel is
project property and whose deposits are pledged to repayment of the
U.S. note.
Facility means a fisheries facility or aquacultural facility.
Financing means the first permanent debt placed on project property
for financing its project cost.
Fish means all forms of aquatic animal and plant life, except
marine mammals and birds.
Fishery facility means land, land structures, water craft that do
not fish, and equipment used for transporting, unloading, receiving,
holding, processing, or distributing fish for commercial purposes
(including any fishery facility for passenger fishing).
Fishing means catching wild fish for commercial purposes (including
passenger fishing).
Guarantee means the guarantor's contractual promise, backed by the
full faith and credit of the United States, to repay a guaranteed note
if a notemaker fails to repay it as agreed.
Guarantee fee means 1 percent of a guaranteed note's average annual
unpaid principal balance.
Guaranteed note means a promissory note from a notemaker to a
noteholder whose repayment the guarantor guarantees.
Guarantor means the U.S., acting, under the Act, by and through the
Secretary of Commerce.
Industry means the fisheries and/or aquacultural industry.
Noteholder means a guaranteed note payee.
Notemaker means a guaranteed note payor.
Passenger fishing means carrying in vessels for commercial purposes
passengers who catch fish.
Program means the Fisheries Obligation Guarantee Program.
Project means the construction of new project property or the
refurbishing or purchase of used project property including
architectural, engineering, inspection, delivery, outfitting, and
interest costs, as well as the cost of any consulting contract the
Division requires.
Project property means the vessel or facility involved in a project
whose actual cost is eligible under the Act for guarantee and controls
the dollar amount of a guaranteed note.
Property means the project property and all other property pledged
as security for a U.S. note.
Qualified means acceptable, in the Division's credit risk judgment,
and otherwise meeting the Division's requirements for guarantee.
[[Page 19173]]
Refinancing means newer debt that either replaces older debt or
reimburses applicants for previous expenditures.
Refinancing/assumption fee means 0.25 percent of the principal
amount of a guaranteed note to be refinanced or assumed.
Refurbishing means any reconstruction, reconditioning, or other
improvement of used project property involving more than routine repair
or maintenance.
Security documents mean all collateral securing the U.S. note's
repayment and all other assurances, undertakings, and contractual
arrangements associated with the U.S. note.
Underutilized fishery means:
(1) For a vessel, any fish species harvested below its sustainable
yield.
(2) For a fisheries facility, any facility using that species or
any for which aggregate facilities are inadequate to best use harvests
of that or any other species.
U.S. means the United States of America and, for citizenship
purposes, includes the Commonwealth of Puerto Rico; American Samoa; the
U.S. Virgin Islands; Guam; the Republic of the Marshal Islands; the
Federated States of Micronesia; the Commonwealth of the Northern
Mariana Islands; any other commonwealth, territory, or possession of
the United States; or any political subdivision of any of them.
U.S. note means a promissory note payable by the notemaker to the
guarantor.
Useful life means the period during which project property will, as
determined by the Division, remain economically productive.
Vessel means any vessel documented under U.S. law and used for
fishing.
Wise use means the wise use of fisheries resources and their
development, advancement, management, conservation, and protection.
Sec. 253.11 Guarantee policy.
(a) A guarantee financing or refinancing up to 80 percent of a
project's actual cost shall be available to any qualified citizen
otherwise eligible under the Act and these rules, except:
(1) Vessel construction. The Program will not finance this project
cost. The Program will only refinance this project cost for an existing
vessel whose previous construction cost has already been financed (or
otherwise paid). Refinancing this project cost for a vessel that
already exists is not inconsistent with wise use, but financing it may
be.
(2) Vessel refurbishing that materially increases an existing
vessel's harvesting capacity. The Program will not finance this project
cost. The Program will only refinance this project cost for a vessel
whose previous refurbishing cost has already been financed (or
otherwise paid). Refinancing this project cost is not inconsistent with
wise use, but financing it may be.
(3) Purchasing a used vessel or used fishery facility. The Program
will neither finance nor refinance this project cost (except for a used
vessel or fishery facility that the Program purchased and is
reselling), unless the used vessel or fishery facility will be
refurbished in the United States and will be a contributory project or
it will be used in an underutilized fishery.
(b) Every project, other than those specified in paragraphs (a) (1)
and (2) of this section, is consistent with wise use and every project,
other than those specifically precluded in paragraphs (a) (1) and (2)
of this section, may be financed, as well as refinanced.
Sec. 253.12 Guaranteed note, U.S. note, and security documents.
(a) Guaranteed note--(1) Principal. This may not exceed 80 percent
of actual cost, but may, in the Division's credit judgment, be less.
(2) Maturity. This may not exceed 25 years, but shall not exceed
the project property's useful life and may, in the Division's credit
judgment, be less.
(3) Interest rate. This may not exceed the amount the Division
deems reasonable.
(4) Prepayment penalty. The Division will allow a reasonable
prepayment penalty, but the guarantor will not guarantee a notemaker's
payment of it.
(5) Form. This will be the simple promissory note (with the
guarantee attached) the Division prescribes, promising only to pay
principal, interest, and prepayment penalty.
(6) Sole security. The guaranteed note and the guarantee will be
the noteholder's sole security.
(b) U.S. note and security documents--(1) Form. The U.S. note and
security documents will be in the form the Division prescribes.
(2) U.S. note. This exists to evidence the notemaker's actual and
contingent liability to the guarantor (contingent if the guarantor does
not pay the guaranteed note (including any portion of it), on the
notemaker's behalf or if the guarantor does not advance any other
amounts or incur any other expenses on the notemaker's behalf to
protect the U.S. or accommodate the notemaker; actual if, and to the
same monetary extent that, the guarantor does). Payment of the
guaranteed note by anyone but the guarantor will amortize the original
principal balance (and interest accruing on it) of the U.S. note to the
same extent that it amortizes the guaranteed note. The U.S note will,
among other things, contain provisions for adding to its principal
balance all amounts the Program advances, or expenses it incurs, to
protect the U.S. or accommodate the notemaker.
(3) Security documents. The Division will, at a minimum, require a
pledge of all project property (or adequate substitute collateral). The
Division will require such other security as it deems the circumstances
of each notemaker and project require to protect the U.S. All security
documents will secure the U.S. note. The security documents will, among
other things, contain provisions for adding to the U.S. note all
Program advances, expenditures, and expenses required to protect the
U.S. or accommodate the notemaker.
(4) Recourse. Significant Program reliance, as a secondary means of
repayment, on the net worths of parties other than the notemaker will
ordinarily require secured recourse against those net worths. Recourse
may be by a repayment guarantee or irrevocable letter of credit.
Ordinarily, the Division will require recourse against: All major
shareholders of a closely-held corporate notemaker, the parent
corporation of a subsidiary corporate notemaker without substantial
pledged assets other than the project property, and all major limited
partners. The Division may also require recourse against others it
deems necessary to protect the U.S. The principal parties in interest,
who ultimately stand most to benefit from the project, should
ordinarily be held financially accountable for the project's
performance. Where otherwise appropriate recourse is unavailable, the
conservatively projected net liquidating value of the notemaker's
assets pledged to the Program must, in the Division's credit judgment,
substantially exceed all projected Program exposure.
(c) Dual-use CCF. For a vessel, the Division may require annually
depositing some portion of the project property's net income into a
dual-use CCF. A dual-use CCF provides the normal CCF tax-deferral
benefits, but also both gives the Program control of CCF withdrawals
and recourse against CCF deposits and ensures an emergency refurbishing
reserve (tax-deferred) for project property.
Sec. 253.13 Ability and experience requirements.
A notemaker and the majority of its principals must generally have
the ability, experience, resources, character, reputation, and other
qualifications the
[[Page 19174]]
Division deems necessary for successfully operating the project
property and protecting the U.S. The Program will ordinarily not
provide guarantees: For venture capital purposes; to a notemaker whose
principals are all from outside the industry; or for a notemaker the
majority of whose principals cannot document successful industry
ability and experience of a duration, degree, and nature consistent
with protecting the U.S.
Sec. 253.14 Economic and financial requirements.
(a) Income and expense projections. The Division's conservative
income and expense projections for the project property's operation
must prospectively indicate net earnings that can service all debt,
properly maintain the project property, and protect the U.S. against
the industry's cyclical economics and other risks of loss.
(b) Working capital. The Division's conservative assessment of an
applicant's financial condition must indicate initial working capital
prospectively sufficient to provide for the project property to achieve
net earnings projections, fund all foreseeable contingencies, and
protect the U.S. At the Division's discretion, some portion of
projected working capital needs may be met by something other than
current assets minus current liabilities (i.e., by a line or letter of
credit, noncurrent assets readily capable of generating working
capital, a guarantor with sufficient financial resources, etc.).
(c) Audited financial statements. These will ordinarily be required
for any notemaker with large or financially extensive operations whose
financial condition the Division believes it cannot otherwise assess
with reasonable certainty.
(d) Consultant services. Infrequently, expert consulting services
may be necessary to help the Division assess a project's economic,
technical, or financial feasibility. The Division will select and
employ the necessary consultant, but require the applicant to reimburse
the Division. A subsequently approved application will not be closed
until the applicant reimburses the Division. This cost may, at the
Division's discretion, be included in a guaranteed note's amount. For a
declined application, the Division may reimburse itself from the
remaining 25 percent of the application fee.
Sec. 253.15 Miscellaneous.
(a) Applicant. Only the legal title holder of project property (or
the lessee of an appropriate long-term financing lease) may apply for a
guarantee. Applicants must submit an ``Application for Fisheries
Obligation Program Guarantee'' to the appropriate NMFS Regional
Financial Services Branch to be considered for a guaranteed loan.
(b) Investigation and approval. The Division shall do a due
diligence investigation of every application it accepts and determine
if, in the Division's sole judgment, the application is eligible and
qualified. Applications the Division deems ineligible or unqualified
will be declined. The Division will approve eligible and qualified
applications based on the applicability of the information obtained
during the application and investigation process to the programmatic
goals and financial requirements of the program and under terms and
conditions that, in the Division's sole discretion, protect the U.S.
The Division will state these terms and conditions in its approval in
principal letter.
(c) Insurance. All property and other risks shall be continuously
insured during the term of the U.S. note. Insurers must be acceptable
to the Division. Insurance must be in such forms and amounts and
against such risks as the Division deems necessary to protect the U.S.
Insurance must be endorsed to include the requirements the U.S., as
respects its interest only, deems necessary to protect the U.S. (e.g.,
the Program will ordinarily be an additional insured as well as the
sole loss payee for the amount of its interest; cancellation will
require 20 days' advance written notice; vessel seaworthiness will be
admitted, and the Program will be adequately protected against other
insureds' breaches of policy warranties, negligence, omission, etc.)
(d) Property inspections. The Division will require adequate
condition and valuation inspection of all property as the basis for
assessing the property's worth and suitability for guarantee. The
Division may also require these at specified periods during guarantee
life. These must be conducted by competent and impartial inspectors
acceptable to the Division. Inspection cost will be at an applicant's
expense. Those occurring before application approval may be included in
actual cost.
(e) Guarantee terms and conditions. The Division's approval in
principle letter shall specify the terms and conditions of the
guarantor's willingness to guarantee. These shall be incorporated in
closing documents that the Division prepares. Terms and conditions are
at the Division's sole discretion. An applicant's nonacceptance will
result in disqualification for guarantee.
(f) Noteholder. The Division will, as a gratuitous service, request
parties interested in investing in guaranteed notes to submit offers to
fund each prospective guaranteed note. The Division and the applicant
will, by mutual consent, choose the responsive bidder, which ordinarily
will be the prospective noteholder whose bid represents the lowest net
effective annual cost of capital. Until the Division has closed the
guarantee, arrangements between an applicant and a prospective
noteholder are a matter of private contract between them, and the
Program is not responsible to either for nonperformance by the other.
(g) Closing--(1) Approval in principle letters. Every closing will
be in strict accordance with a final approval in principle letter.
(2) Contracts. The guaranteed note, U.S. note, and security
documents will ordinarily be on standard Program forms that may not be
altered without Divisional approval. The Division will ordinarily
prepare all contracts, except certain pledges involving real property,
which will be prepared by each notemaker's attorney at the direction
and approval of the Division's attorney.
(3) Closing schedules. The Division will ordinarily close guarantee
transactions with minimal services from applicants' attorneys, except
where real property pledges or other matters appropriate for private
counsel are involved. Real property services required from an
applicant's attorney may include: Title search, mortgage and other
document preparation, execution and recording, escrow and disbursement,
and a legal opinion and other assurances. An applicant's attorney's
expense, and that of any other private contractor required, is for
applicant's account. Attorneys and other contractors must be
satisfactory to the Division. The Division will attempt to meet
reasonable closing schedules, but will not be liable for adverse
interest-rate fluctuations, loss of commitments, or other consequences
of being unable to meet an applicant's and a prospective noteholder's
closing schedule. These parties should work closely with the Division
to ensure a closing schedule the Division can meet.
Sec. 253.16 Fees.
(a) Application fee. The Division will not accept an application
without the application fee. Fifty percent of the application fee is
fully earned at application acceptance, and is not
[[Page 19175]]
refundable. The rest is fully earned when the Division issues an
approval in principal letter, and it is refundable only if the Division
declines an application or an applicant requests refund before the
Division issues an approval in principal letter.
(b) Guarantee fee. Each guarantee fee will be due in advance and
will be based on the guaranteed note's repayment provisions for the
prospective year. The first annual guarantee fee is due at guarantee
closing. Each subsequent one is due and payable on the guarantee
closing's anniversary date. Each is fully earned when due, and shall
not subsequently be refunded for any reason.
(c) Refinancing or assumption fee. This fee applies only to
refinancing or assuming existing guaranteed notes. It is due upon
application for refinancing or assuming a guaranteed note. It is fully
earned when due and shall be nonrefundable. The Division may waive a
refinancing or assumption fee's payment when the refinancing or
assumption's primary purpose is to protect the U.S.
(d) Where payable. Fees are payable by check made payable to
``NMFS/FSFF.'' Other than those collected at application or closing,
fees are payable by mailing checks to: U.S. Department of Commerce,
National Oceanic and Atmospheric Administration, National Marine
Fisheries Service, P.O. Box 73004, Chicago, Ill. 60673. To ensure
proper crediting, each check must include the official case number the
Division assigns to each guarantee.
Sec. 253.17 Demand and payment.
Every demand must be delivered in writing to the Division. Each
must include the noteholder's certified record of the date and amount
of each payment made on the guaranteed note and the manner of its
application. Should the Division not acknowledge receipt of a timely
demand, the noteholder must possess evidence of the demand's timely
delivery.
Sec. 253.18 Program operating guidelines.
The Division may issue Program operating guidelines, as the need
arises, governing national Program policy and administrative issues not
addressed by these rules.
Sec. 253.19 Default and liquidation.
Upon default of the security documents, the Division shall take
such remedial action (including, where appropriate, liquidation) as it
deems best able to protect the U.S.' interest.
Subpart C--Interjurisdictional Fisheries
Sec. 253.20 Definitions.
The terms used in this subpart have the following meanings:
Act means the Interjurisdictional Fisheries Act of 1986, Public Law
99-659 (Title III).
Adopt means to implement an interstate fishery management plan by
State action or regulation.
Commercial fishery failure means a serious disruption of a fishery
resource affecting present or future productivity due to natural or
undetermined causes. It does not include either:
(1) The inability to harvest or sell raw fish or manufactured and
processed fishery merchandise; or
(2) Compensation for economic loss suffered by any segment of the
fishing industry as the result of a resource disaster.
Enforcement agreement means a written agreement, signed and dated,
between a state agency and either the Secretary of the Interior or
Secretary of Commerce, or both, to enforce Federal and state laws
pertaining to the protection of interjurisdictional fishery resources.
Federal fishery management plan means a plan developed and approved
under the Magnuson Fishery Conservation and Management Act (16 U.S.C.
1801 et seq.).
Fisheries management means all activities concerned with
conservation, restoration, enhancement, or utilization of fisheries
resources, including research, data collection and analysis,
monitoring, assessment, information dissemination, regulation, and
enforcement.
Fishery resource means finfish, mollusks, and crustaceans, and any
form of marine or Great Lakes animal or plant life, including habitat,
other than marine mammals and birds.
Interjurisdictional fishery resource means:
(1) A fishery resource for which a fishery occurs in waters under
the jurisdiction of one or more states and the U.S. Exclusive Economic
Zone; or
(2) A fishery resource for which an interstate or a Federal fishery
management plan exists; or
(3) A fishery resource which migrates between the waters under the
jurisdiction of two or more States bordering on the Great Lakes.
Interstate Commission means a commission or other administrative
body established by an interstate compact.
Interstate compact means a compact that has been entered into by
two or more states, established for purposes of conserving and managing
fishery resources throughout their range, and consented to and approved
by Congress.
Interstate Fisheries Research Program means research conducted by
two or more state agencies under a formal interstate agreement.
Interstate fishery management plan means a plan for managing a
fishery resource developed and adopted by the member states of an
Interstate Marine Fisheries Commission, and contains information
regarding the status of the fishery resource and fisheries, and
recommends actions to be taken by the States to conserve and manage the
fishery resource.
Landed means the first point of offloading fishery resources.
NMFS Regional Director means the Director of any one of the five
National Marine Fisheries Service regions.
Project means an undertaking or a proposal for research in support
of management of an interjurisdictional fishery resource or an
interstate fishery management plan.
Research means work or investigative study, designed to acquire
knowledge of fisheries resources and their habitat.
Secretary means the Secretary of Commerce or his/her designee.
State means each of the several states, the District of Columbia,
the Commonwealth of Puerto Rico, American Samoa, the Virgin Islands,
Guam, or the Commonwealth of the Northern Mariana Islands.
State Agency means any department, agency, commission, or official
of a state authorized under the laws of the State to regulate
commercial fisheries or enforce laws relating to commercial fisheries.
Value means the monetary worth of fishery resources used in
developing the apportionment formula, which is equal to the price paid
at the first point of landing.
Volume means the weight of the fishery resource as landed, at the
first point of landing.
Sec. 253.21 Apportionment.
(a) Apportionment formula. The amount of funds apportioned to each
state is to be determined by the Secretary as the ratio which the
equally weighted average of the volume and value of fishery resources
harvested by domestic commercial fishermen and landed within such state
during the 3 most recent calendar years for which data satisfactory to
the Secretary are available bears to the total equally weighted average
of the volume and value of all fishery resources harvested by domestic
commercial fishermen and
[[Page 19176]]
landed within all of the states during those calendar years.
(1) The equally weighted average value is determined by the
following formula:
[GRAPHIC] [TIFF OMITTED] TR01MY96.004
[GRAPHIC] [TIFF OMITTED] TR01MY96.005
[GRAPHIC] [TIFF OMITTED] TR01MY96.006
(2) Upon appropriation of funds by Congress, the Secretary will
take the following actions:
(i) Determine each state's share according to the apportionment
formula.
(ii) Certify the funds to the respective NMFS Regional Director.
(iii) Instruct NMFS Regional Directors to promptly notify states of
funds' availability.
(b) No state, under the apportionment formula in paragraph (a) of
this section, that has a ratio of one-third of 1 percent or higher may
receive an apportionment for any fiscal year that is less than 1
percent of the total amount of funds available for that fiscal year.
(c) If a State's ratio under the apportionment formula in paragraph
(b) of this section is less than one-third of 1 percent, that state may
receive funding if the state:
(1) Is signatory to an interstate fishery compact;
(2) Has entered into an enforcement agreement with the Secretary
and/or the Secretary of the Interior for a fishery that is managed
under an interstate fishery management plan;
(3) Borders one or more of the Great Lakes;
(4) Has entered into an interstate cooperative fishery management
agreement and has in effect an interstate fisheries management plan or
an interstate fisheries research program; or
(5) Has adopted a Federal fishery management plan for an
interjurisdictional fishery resource.
(d) Any state that has a ratio of less than one-third of 1 percent
and meets any of the requirements set forth in paragraphs (c) (1)
through (5) of this section may receive an apportionment for any fiscal
year that is not less than 0.5 percent of the total amount of funds
available for apportionment for such fiscal year.
(e) No state may receive an apportionment under this section for
any fiscal year that is more than 6 percent of the total amount of
funds available for apportionment for such fiscal year.
(f) Unused apportionments. Any part of an apportionment for any
fiscal year to any state:
(1) That is not obligated during that year;
(2) With respect to which the state notifies the Secretary that it
does not wish to receive that part; or
(3) That is returned to the Secretary by the state, may not be
considered to be appropriated to that state and must be added to such
funds as are appropriated for the next fiscal year. Any notification or
return of funds by a state referred to in this section is irrevocable.
Sec. 253.22 State projects.
(a) General--(1) Designation of state agency. The Governor of each
state shall notify the Secretary of which agency of the state
government is authorized under its laws to regulate commercial
fisheries and is, therefore, designated receive financial assistance
awards. An official of such agency shall certify which official(s) is
authorized in accordance with state law to commit the state to
participation under the Act, to sign project documents, and to receive
payments.
(2) States that choose to submit proposals in any fiscal year must
so notify the NMFS Regional Director before the end of the third
quarter of that fiscal year.
(3) Any state may, through its state agency, submit to the NMFS
Regional Director a completed NOAA Grants and Cooperative Agreement
Application Package with its proposal for a project, which may be
multiyear. Proposals must describe the full scope of work,
specifications, and cost estimates for such project.
(4) States may submit a proposal for a project through, and request
payment to be made to, an Interstate Fisheries Commission. Any payment
so made shall be charged against the apportionment of the appropriate
state(s). Submitting a project through one of the Commissions does not
remove the matching funds requirement for any state, as provided in
paragraph (c) of this section.
(b) Evaluation of projects. The Secretary, before approving any
proposal for a project, will evaluate the proposal as to its
applicability, in accordance with 16 U.S.C. 4104(a)(2).
(c) State matching requirements. The Federal share of the costs of
any project conducted under this subpart, including a project submitted
through an Interstate Commission, cannot exceed 75 percent of the total
estimated cost of the project, unless:
(1) The state has adopted an interstate fishery management plan for
the fishery resource to which the project applies; or
(2) The state has adopted fishery regulations that the Secretary
has determined are consistent with any Federal fishery management plan
for the species to which the project applies, in which case the Federal
share cannot exceed 90 percent of the total estimated cost of the
project.
(d) Financial assistance award. If the Secretary approves or
disapproves a proposal for a project, he or she will promptly give
written notification, including, if disapproved, a detailed explanation
of the reason(s) for the disapproval.
(e) Restrictions. (1) The total cost of all items included for
engineering, planning, inspection, and unforeseen contingencies in
connection with any works to be constructed as part of such a proposed
project shall not exceed 10 percent of the total cost of such works,
and shall be paid by the state as a part
[[Page 19177]]
of its contribution to the total cost of the project.
(2) The expenditure of funds under this subpart may be applied only
to projects for which a proposal has been evaluated under paragraph (b)
of this section and approved by the Secretary, except that up to
$25,000 each fiscal year may be awarded to a state out of the state's
regular apportionment to carry out an ``enforcement agreement.'' An
enforcement agreement does not require state matching funds.
(f) Prosecution of work. All work must be performed in accordance
with applicable state laws or regulations, except when such laws or
regulations are in conflict with Federal laws or regulations such that
the Federal law or regulation prevails.
Sec. 253.23 Other funds.
(a) Funds for disaster assistance. (1) The Secretary shall retain
sole authority in distributing any disaster assistance funds made
available under section 308(b) of the Act. The Secretary may distribute
these funds after he or she has made a thorough evaluation of the
scientific information submitted, and has determined that a commercial
fishery failure of a fishery resource arising from natural or
undetermined causes has occurred. Funds may only be used to restore the
resource affected by the disaster, and only by existing methods and
technology. Any fishery resource used in computing the states' amount
under the apportionment formula in Sec. 253.21(a) will qualify for
funding under this section. The Federal share of the cost of any
activity conducted under the disaster provision of the Act shall be
limited to 75 percent of the total cost.
(2) In addition, pursuant to section 308(d) of the Act, the
Secretary is authorized to award grants to persons engaged in
commercial fisheries, for uninsured losses determined by the Secretary
to have been suffered as a direct result of a fishery resource
disaster. Funds may be distributed by the Secretary only after notice
and opportunity for public comment of the appropriate limitations,
terms, and conditions for awarding assistance under this section.
Assistance provided under this section is limited to 75 percent of an
uninsured loss to the extent that such losses have not been compensated
by other Federal or State programs.
(b) Funds for interstate commissions. Funds authorized to support
the efforts of the three chartered Interstate Marine Fisheries
Commissions to develop and maintain interstate fishery management plans
for interjurisdictional fisheries will be divided equally among the
Commissions.
Sec. 253.24 Administrative requirements.
Federal assistance awards made as a result of this Act are subject
to all Federal laws, Executive Orders, Office of Management and Budget
Circulars as incorporated by the award; Department of Commerce and NOAA
regulations; policies and procedures applicable to Federal financial
assistance awards; and terms and conditions of the awards.
PART 255--[REMOVED]
4. Under the authority of 46 U.S.C. 1271-1279, part 255 is removed.
[FR Doc. 96-10664 Filed 4-30-96; 8:45 am]
BILLING CODE 3510-22-P
Complete official Federal Register PDF
FR Doc. 96-10544 Environmental Settlement FundsClassification
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19189-19192]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10544]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
26 CFR Parts 1, 301, and 602
[TD 8668]
RIN 1545-AT02
Environmental Settlement Funds--Classification
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to the
classification of certain organizations as trusts for federal tax
purposes. The final regulations provide guidance to taxpayers on the
proper classification of trusts formed to collect and disburse amounts
for environmental remediation of an existing waste site to discharge
taxpayers' liability or potential liability under applicable
environmental laws.
DATES: These regulations are effective May 1, 1996.
For dates of applicability, see Sec. 301.7701-4(e)(5).
FOR FURTHER INFORMATION CONTACT: James A. Quinn, (202) 622-3060 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under
control number 1545-1465. This information is required by the IRS to
ensure the proper reporting of items of income and expense of an
environmental remediation trust in which a portion of the trust is
treated as owned by a grantor.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
The estimated annual burden per respondent is 4 hours.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, T:FP, Washington,
DC 20224, and to the Office of Management and Budget, Attn: Desk
Officer for the Department of the Treasury, Office of Information and
Regulatory Affairs, Washington, DC 20503.
Books or records relating to this collection of information must be
retained as long as their contents may become material in the
administration
[[Page 19190]]
of any internal revenue law. Generally, tax returns and tax return
information are confidential, as required by 26 U.S.C. 6103.
Background
On August 4, 1995, the IRS published in the Federal Register a
notice of proposed rulemaking (60 FR 39903) to provide guidance on the
classification of certain organizations as trusts for federal tax
purposes. Written comments responding to the notice were received, and
a public hearing was held on October 26, 1995. After consideration of
the comments received, the proposed regulations are adopted as revised
by this Treasury decision.
Summary of Significant Comments and Revisions
The proposed regulations provide that an environmental remediation
trust is considered a trust for purposes of the Internal Revenue Code.
Under the proposed regulations, a trust is an environmental remediation
trust if the primary purpose of the trust is collecting and disbursing
amounts for environmental remediation of an existing waste site. One
commentator suggested that ``response costs'' should be considered
amounts incurred for environmental remediation. To address this
concern, the final regulations clarify that environmental remediation
includes the costs of remedying and removing environmental
contamination. One commentator also suggested that the final
regulations define the term existing waste site. The final regulations
do not adopt this comment. The term existing waste site should be
sufficiently specific to allow taxpayers to establish an environmental
remediation trust for any contaminated site that currently requires
remediation under environmental laws.
The proposed regulations provide that all contributors to an
environmental remediation trust must have potential liability or a
reasonable expectation of liability under federal, state, or local
environmental laws for environmental remediation of the waste site. A
commentator suggested that the final regulations be clarified to
provide that eligible contributors include contributors with ``actual''
as well as potential liability and contributors who are released from
liability upon their contribution to the trust. The final regulations
clarify that contributors having ``actual'' liability are eligible
contributors. The final regulations do not address the treatment of
contributors that are released from liability by the governmental
authority upon contribution to the trust; the regulations are intended
only to address the tax treatment of environmental remediation trusts
in which contributors continue to have actual or potential liability
(and thus are treated as owners of the trust under section 677). In
situations where one or more contributors are released from liability
by the governmental authority upon contribution to the trust, the rules
for qualified settlement funds may apply to the entire trust. See
Sec. 1.468B-1(c) and (h)(2). If such contributors contribute amounts to
a trust that is separate from the environmental remediation trust,
however, the classification of the environmental remediation trust as a
trust will not be affected.
One commentator suggested that a cross-reference to these
regulations be inserted in Sec. 1.671-4(a) and Sec. 1.677(a)-1(d)
because the proposed regulations address reporting and grantor trust
issues. The final regulations include the suggested cross-references.
Other commentators suggested that the final regulations address the
timing of deductions for contributions to the trust, the treatment of
interest earned by the trust, and other federal tax consequences of the
trust. The final regulations do not adopt these suggestions. The
regulations are limited to the classification of an environmental
remediation trust as a trust for purposes of section 7701 and do not
address or affect the timing or amount of a deduction for environmental
remediation costs. Amounts contributed to an environmental remediation
trust and interest earned on those amounts must be taken into account
under the appropriate federal tax accounting rules, including the
economic performance rules of section 461(h). Under those rules,
taxpayers generally cannot deduct contributions to the trust at the
time of contribution or deduct earnings at the time they are received
by the trust.
The proposed regulations provide that the regulations will apply to
trusts formed on or after the date of publication of final regulations.
One commentator suggested that the final regulations should be
effective, at the trustee's option, to trusts meeting the requirements
of an environmental remediation trust established prior to such date,
effective as of any date designated by the trustee. The commentator
further suggested that, with respect to amounts held in a fund,
account, or trust meeting the requirements of an environmental
remediation trust prior to the date of publication of the final
regulations, the IRS should not challenge the classification of the
fund, account, or trust as a trust for federal tax purposes.
The final regulations are effective for trusts meeting the
definition of an environmental remediation trust that are formed on or
after May 1, 1996. The final regulations may be relied on by trusts
formed before May 1, 1996, if the trust has at all times met all
requirements of the final regulations and the grantors reported items
of income and deduction consistent with the final regulations on
original or amended returns. This provision allows a trust and grantors
that have met all of the requirements of the final regulations
throughout the existence of the trust to treat the trust as an
environmental remediation trust. The final regulations also provide
that, for trusts formed before May 1, 1996, that are not described by
the preceding rule, the Commissioner may permit by letter ruling, in
appropriate circumstances, the final regulations to be applied subject
to appropriate terms and conditions.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It has also been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Code, the notice of
proposed rulemaking preceding these regulations was submitted to the
Small Business Administration for comment on its impact on small
business.
Drafting Information
The principal author of these regulations is James A. Quinn of the
Office of Assistant Chief Counsel (Passthroughs and Special
Industries). However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 301
Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income
taxes, Penalties, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
[[Page 19191]]
Amendments to the Regulations
Accordingly, 26 CFR parts 1, 301, and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.671-4 is amended by adding a sentence to the end
of paragraph (a) as follows:
Sec. 1.671-4 Method of reporting.
(a) * * * Section 301.7701-4(e)(2) of this chapter provides
guidance on how these reporting rules apply to an environmental
remediation trust.
* * * * *
Par. 3. Section 1.677(a)-1 is amended by adding a sentence to the
end of paragraph (d) as follows:
Sec. 1.677(a)-1 Income for benefit of grantor; general rule.
* * * * *
(d) * * * See Sec. 301.7701-4(e) of this chapter for rules on the
classification of and application of section 677 to an environmental
remediation trust.
* * * * *
PART 301--PROCEDURE AND ADMINISTRATION
Par. 4. The authority citation for part 301 continues to read as
follows:
Authority: 26 U.S.C. 7805 * * *
Par. 5. Section 301.7701-4(e) is added to read as follows:
Sec. 301.7701-4 Trusts.
* * * * *
(e) Environmental remediation trusts. (1) An environmental
remediation trust is considered a trust for purposes of the Internal
Revenue Code. For purposes of this paragraph (e), an organization is an
environmental remediation trust if the organization is organized under
state law as a trust; the primary purpose of the trust is collecting
and disbursing amounts for environmental remediation of an existing
waste site to resolve, satisfy, mitigate, address, or prevent the
liability or potential liability of persons imposed by federal, state,
or local environmental laws; all contributors to the trust have (at the
time of contribution and thereafter) actual or potential liability or a
reasonable expectation of liability under federal, state, or local
environmental laws for environmental remediation of the waste site; and
the trust is not a qualified settlement fund within the meaning of
Sec. 1.468B-1(a) of this chapter. An environmental remediation trust is
classified as a trust because its primary purpose is environmental
remediation of an existing waste site and not the carrying on of a
profit-making business that normally would be conducted through
business organizations classified as corporations or partnerships.
However, if the remedial purpose is altered or becomes so obscured by
business or investment activities that the declared remedial purpose is
no longer controlling, the organization will no longer be classified as
a trust. For purposes of this paragraph (e), environmental remediation
includes the costs of assessing environmental conditions, remedying and
removing environmental contamination, monitoring remedial activities
and the release of substances, preventing future releases of
substances, and collecting amounts from persons liable or potentially
liable for the costs of these activities. For purposes of this
paragraph (e), persons have potential liability or a reasonable
expectation of liability under federal, state, or local environmental
laws for remediation of the existing waste site if there is authority
under a federal, state, or local law that requires or could reasonably
be expected to require such persons to satisfy all or a portion of the
costs of the environmental remediation.
(2) Each contributor (grantor) to the trust is treated as the owner
of the portion of the trust contributed by that grantor under rules
provided in section 677 and Sec. 1.677(a)-1(d) of this chapter. Section
677 and Sec. 1.677(a)-1(d) of this chapter provide rules regarding the
treatment of a grantor as the owner of a portion of a trust applied in
discharge of the grantor's legal obligation. Items of income,
deduction, and credit attributable to an environmental remediation
trust are not reported by the trust on Form 1041, but are shown on a
separate statement to be attached to that form. See Sec. 1.671-4(a) of
this chapter. The trustee must also furnish to each grantor a statement
that shows all items of income, deduction, and credit of the trust for
the grantor's taxable year attributable to the portion of the trust
treated as owned by the grantor. The statement must provide the grantor
with the information necessary to take the items into account in
computing the grantor's taxable income, including information necessary
to determine the federal tax treatment of the items (for example,
whether an item is a deductible expense under section 162(a) or a
capital expenditure under section 263(a)) and how the item should be
taken into account under the economic performance rules of section
461(h) and the regulations thereunder. See Sec. 1.461-4 of this chapter
for rules relating to economic performance.
(3) All amounts contributed to an environmental remediation trust
by a grantor (cash-out grantor) who, pursuant to an agreement with the
other grantors, contributes a fixed amount to the trust and is relieved
by the other grantors of any further obligation to make contributions
to the trust, but remains liable or potentially liable under the
applicable environmental laws, will be considered amounts contributed
for remediation. An environmental remediation trust agreement may
direct the trustee to expend amounts contributed by a cash-out grantor
(and the earnings thereon) before expending amounts contributed by
other grantors (and the earnings thereon). A cash-out grantor will
cease to be treated as an owner of a portion of the trust when the
grantor's portion is fully expended by the trust.
(4) The provisions of this paragraph (e) may be illustrated by the
following example:
Example. (a) X, Y, and Z are calendar year corporations that are
liable for the remediation of an existing waste site under
applicable federal environmental laws. On June 1, 1996, pursuant to
an agreement with the governing federal agency, X, Y, and Z create
an environmental remediation trust within the meaning of paragraph
(e)(1) of this section to collect funds contributed to the trust by
X, Y, and Z and to carry out the remediation of the waste site to
the satisfaction of the federal agency. X, Y, and Z are jointly and
severally liable under the federal environmental laws for the
remediation of the waste site, and the federal agency will not
release X, Y, or Z from liability until the waste site is remediated
to the satisfaction of the agency.
(b) The estimated cost of the remediation is $20,000,000. X, Y,
and Z agree that, if Z contributes $1,000,000 to the trust, Z will
not be required to make any additional contributions to the trust,
and X and Y will complete the remediation of the waste site and make
additional contributions if necessary.
(c) On June 1, 1996, X, Y, and Z each contribute $1,000,000 to
the trust. The trust agreement directs the trustee to spend Z's
contributions to the trust and the income allocable to Z's portion
before spending X's and Y's portions. On November 30, 1996, the
trustee disburses $2,000,000 for remediation work performed from
June 1, 1996, through September 30, 1996. For the six-month period
ending November 30, 1996, the interest earned on the funds in the
trust was $75,000, which is allocated in equal shares of $25,000 to
X's, Y's, and Z's portions of the trust.
(d) Z made no further contributions to the trust. Pursuant to
the trust agreement, the trustee expended Z's portion of the trust
before expending X's and Y's portion.
[[Page 19192]]
Therefore, Z's share of the remediation disbursement made in 1996 is
$1,025,000 ($1,000,000 contribution by Z plus $25,000 of interest
allocated to Z's portion of the trust). Z takes the $1,025,000
disbursement into account under the appropriate federal tax
accounting rules. In addition, X's share of the remediation
disbursement made in 1996 is $487,500, and Y's share of the
remediation disbursement made in 1996 is $487,500. X and Y take
their respective shares of the disbursement into account under the
appropriate federal tax accounting rules.
(e) The trustee made no further remediation disbursements in
1996, and X and Y made no further contributions in 1996. From
December 1, 1996, to December 31, 1996, the interest earned on the
funds remaining in the trust was $5,000, which is allocated $2,500
to X's portion and $2,500 to Y's portion. Accordingly, for 1996, X
and Y each had interest income of $27,500 from the trust and Z had
interest income of $25,000 from the trust.
(5) This paragraph (e) is applicable to trusts meeting the
requirements of paragraph (e)(1) of this section that are formed on or
after May 1, 1996. This paragraph (e) may be relied on by trusts formed
before May 1, 1996, if the trust has at all times met all requirements
of this paragraph (e) and the grantors have reported items of ,income
and deduction consistent with this paragraph (e) on original or amended
returns. For trusts formed before May 1, 1996, that are not described
in the preceding sentence, the Commissioner may permit by letter
ruling, in appropriate circumstances, this paragraph (e) to be applied
subject to appropriate terms and conditions.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 6. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Sec. 602.101 [Amended]
Par. 7. In Sec. 602.101, paragraph (c) is amended by adding the
entry ``301.7701-4 . . . . 1545-1465'' in numerical order to the table.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: April 5, 1996.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 96-10544 Filed 4-30-96; 8:45 am]
BILLING CODE 4830-01-P
Complete official Federal Register PDF
FR Doc. 96-10446 Office of the Assistant Secretary for Administration; HUD Acquisition Regulation; Field Reorganization, Streamlining, and Simplification
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19468-19473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10446]
[[Page 19467]]
_______________________________________________________________________
Part VII
Department of Housing and Urban Development
_______________________________________________________________________
48 CFR Parts 2401, 2402, 2404, et al.
HUD Acquisition Regulation; Field Reorganization, Streamlining, and
Simplification; Final Rule
Federal Register / Vol. 61, No. 85 / Wednesday, May 1, 1996 / Rules
and Regulations
[[Page 19468]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
48 CFR Parts 2401, 2402, 2404, 2405, 2406, 2409, 2411, 2412, 2413,
2414, 2415, 2416, 2417, 2419, 2420, 2426, 2428, 2429, 2432, 2434,
2436, 2437, 2442, 2452 and 2453
[Docket No. FR-3887-F-02]
RIN No. 2535-AA23
Office of the Assistant Secretary for Administration; HUD
Acquisition Regulation; Field Reorganization, Streamlining, and
Simplification
AGENCY: Office of the Assistant Secretary for Administration, HUD.
ACTION: Final rule; technical amendments.
-----------------------------------------------------------------------
SUMMARY: The purpose of this final rule is to amend the HUD Acquisition
Regulation (HUDAR) to: implement the Department's Field reorganization,
particularly the establishment of the Administrative Service Centers;
implement the Federal Acquisition Streamlining Act of 1994 (FASA);
augment Departmental efforts to streamline and simplify the procurement
process by removing unnecessary restrictions; make technical amendments
to the interim rule; and, correct obsolete references.
EFFECTIVE DATE: May 31, 1996.
FOR FURTHER INFORMATION CONTACT: Edward L. Girovasi, Jr., Director,
Policy and Evaluation Division, Office of Procurement and Contracts,
Room 5262, 451 Seventh Street, SW., Washington, DC 20410-3000 (voice
(202) 708-0294, TTY (202) 708-1112). (These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
Background
The uniform regulation for the procurement of supplies and services
by Federal departments and agencies, the Federal Acquisition Regulation
(FAR), was promulgated on September 19, 1983 (48 FR 42102). The FAR is
codified in title 48, chapter 1, of the Code of Federal Regulations.
HUD promulgated its regulation to implement the FAR on March 1, 1984
(49 FR 7696).
The HUDAR (title 48, chapter 24 of the Code of Federal Regulations)
is prescribed by the Assistant Secretary for Administration under
section 7(d) of the Department of HUD Act (42 U.S.C. 3535(d)); section
205(c) of the Federal Property and Administrative Services Act of 1949
(40 U.S.C. 486(c)); the Secretary's delegation effective October 9,
1985 (50 FR 42097); and the general authorization in FAR 1.301.
On September 5, 1995 (60 FR 46152), the Department published an
interim rule to amend the HUDAR to update existing coverage with
respect to the Department's structure and organizational
responsibilities, to implement the Federal Acquisition Streamlining Act
(FASA) (Pub. L. 103-355, approved October 13, 1994), and to streamline
Departmental procurement practices. This rule responds to public
comment on the interim rule, and issues it as a final rule. This rule
also removes unnecessary restrictions and corrects obsolete references.
Public Comments
During the public comment period, one comment was received on the
interim rule.
The commenter expressed concern regarding the language at
Sec. 2415.608(a)(2), which permits the identification of proposals
submitted in a best value procurement as being either ``acceptable'',
``unacceptable but capable of being made acceptable'', or
``unacceptable.'' The interim rule stated, ``However, under
solicitations where mandatory requirements are established, those
proposals that do not meet the mandatory requirements may be found
unacceptable without further review.''
The commentor pointed out that this practice seems to set up a
dichotomy between best value procurements and those with mandatory
requirements, as though they are mutually exclusive. The commentor
stated that if a proposal fails to meet a minimum requirement, it could
be rejected as ``unacceptable'' without further review, which
contradicted the ability to identify a proposal as ``unacceptable but
capable of being made acceptable.'' The commentor stated that
presumably, there will be many proposals that fail to meet one or more
mandatory requirements in the initial round, but which, through minor
clarification or even discussions, could easily be corrected to meet
any such requirement. The commentor recommended that the language in
the last sentence of Sec. 2415.608(a)(2) either be revised to be
consistent with the preceding coverage, or deleted altogether.
HUD agrees with the commentor and has deleted the last sentence of
Sec. 2415.608(a)(2) in the final rule. The language as written in the
interim rule could, to some extent, limit the Department's ability to
select the best contractor. Potentially, the initial proposal
representing the best value could be rejected as ``unacceptable'' for
failing to meet a mandatory requirement of the solicitation, when the
deficiency could possibly be corrected through minor clarification or
discussions. Such a proposal may represent an outstanding offer in all
other respects, but under the interim rule, it would have been rejected
as ``unacceptable''. Requiring the Department to reject as
``unacceptable'' any proposal that fails to meet a solicitation's
mandatory requirements appears to defeat the purpose of a best value
procurement. Removal of the last sentence resolves this problem. In
addition, Sec. 2415.608(a)(2) and (3) are merged and redesignated as
Sec. 2415.608(a)(3) to conform to a corresponding FAR change.
Additional Changes
The following changes are also made by this rule:
HUDAR 2401.102 through 2401.105 are redesignated as 2401.103
through 2401.106, respectively, to conform to corresponding FAR
structure recently published as FAC 90-29, effective July 3, 1995. The
heading titles and regulation text are unchanged.
HUDAR 2409.508 through 2409.508-2 are redesignated as 2409.507
through 2409.507-2, respectively, to conform to the corresponding FAR
structure. The regulation text is unchanged.
HUDAR part 2412, Contract delivery performance, is redesignated as
part 2411 and retitled to conform to the revised corresponding FAR
structure published as FAC 90-32, effective October 1, 1995.
HUDAR 2412.1, Delivery or performance schedules, is redesignated as
Sec. 2411.4 to conform to the revised FAR structure published as FAC
90-32, effective October 1, 1995. The regulation text is unchanged.
HUDAR 2412.104, Contract clause, is redesignated as Sec. 2411.404
to conform to the revised FAR structure published as FAC 90-32,
effective October 1, 1995. The text is revised to simplify the
prescriptive language.
HUDAR 2413.106-2 is revised to reflect the changed procurement
method name.
HUDAR 2413.505-1 is revised to authorize the use of Form HUD-2542,
Purchase Order and Payment Authorization, for any purchase using
simplified acquisition procedures charged to the FHA Fund, and to
remove information that is internal in nature.
HUDAR 2414.406, Mistakes in bids, is redesignated as Sec. 2414.407
to conform to the FAR structure revision published as FAC 90-29,
effective July 3, 1995.
HUDAR 2414.406-3, Other mistakes disclosed before award, is
redesignated as Sec. 2414.407-3 to conform to the FAR structure
revision published as FAC 90-
[[Page 19469]]
29, effective July 3, 1995. The regulation text is unchanged.
HUDAR 2414.406-4, Mistakes after award, is redesignated as
Sec. 2414.407-4 to conform to the FAR structure revision published as
FAC 90-29, effective July 3, 1995. The regulation text is revised to
clarify that the concurrence of counsel should be obtained at
headquarters or the field, depending on the location of the contracting
activity.
The heading HUDAR 2414.408, Award, is added to conform to the FAR
structure revision published as FAC 90-29, effective July 3, 1995.
HUDAR 2414.407-70, Award when only one bid is received, is
redesignated as Sec. 2414.408-70 to conform to the revised FAR
structure published in FAC 90-29, effective July 3, 1995. The
regulation text is unchanged.
HUDAR 2415.407, Solicitation provisions, contains numerous
revisions to remove unnecessary restrictions, simplify the prescriptive
language, tailor proposal content to the specific solicitation, and
reduce paperwork burdens placed on offerors. The revisions will give
contracting officers more latitude when requesting other than certified
cost or pricing data in accordance with FAR 15.804-5(a)(2), and will
clarify distinctions in procedures when using the ``lowest-priced
technically acceptable proposal'' or ``best value'' approach to source
selection.
HUDAR 2415.413-1, Alternate I, is amended to eliminate
unnecessarily restrictive requirements regarding the evaluation of
proposals. This revision will allow the Department the flexibility to
have proposal evaluations performed by the most competent technical and
management sources available.
HUDAR 2415.413-2, Alternate II, is added to establish a procedure
consistent with the FAR for instances when it is necessary for external
parties to evaluate proposals to meet the Department's evaluation
needs.
In HUDAR 2415.605, Evaluation factors, paragraphs (c) and (e) are
renumbered to conform to the revised FAR structure published as FAC 90-
31, effective October 1, 1995.
HUDAR 2415.1004, Protests against award, is renumbered to conform
to the revised FAR structure published as FAC 90-31, effective October
1, 1995. The text of the regulation is unchanged.
HUDAR 2416.504, Indefinite-quantity contracts, is renumbered to
Sec. 2416.506, and the title is revised to Solicitation provisions and
contract clauses, to conform to recent FAR changes published in the
Federal Register September 26, 1995 as FAC 90-33, effective October 1,
1995. Paragraph (e) is redesignated as a new section, Sec. 2416.506-70,
Unpriced delivery/task orders, to more accurately reflect the text. The
text of the regulation is unchanged.
HUDAR subpart 2417.2, Options, and Sec. 2417.204(e), Contracts, are
added in accordance with FAR 17.204(e) to give the Department more
flexibility for the acquisition of supplies or services and to
establish the Senior Procurement Executive as the approving official
for solicitations and contracts where the total of the basic and option
periods exceed 5 years.
HUDAR part 2419, Small business and small disadvantaged business
concerns, is retitled to conform to the revised FAR structure published
as FAC 90-32, effective October 1, 1995.
HUDAR 2419.201, General policy, contains numerous revisions to
include reference to women-owned small businesses to conform to
corresponding revisions in the FAR published as FAC 90-32, effective
October 1, 1995.
HUDAR subpart 2419.7, Subcontracting with small businesses and
small disadvantaged business concerns, is retitled to conform to the
revised FAR structure published as FAC 90-32, effective October 1,
1995. The regulation text is unchanged.
HUDAR subpart 2419.9, Contracting opportunities for women-owned
small businesses, is removed in its entirety to conform to
corresponding FAR changes published as FAC 90-32, effective October 1,
1995.
HUDAR part 2420, Labor surplus area concerns, is removed in its
entirety and reserved to conform to the revised FAR structure published
as FAC 90-32, effective October 1, 1995.
HUDAR 2434.001, Definition, is removed in its entirety. The
threshold for major system acquisitions is addressed in internal
directives.
In HUDAR 2437.110, Solicitation provisions and contract clauses,
paragraph (f) is revised by removing the last sentence to simplify the
prescriptive language. The forms identified in the clause prescription
are specified in the clause and do not also need to be in the
prescription.
To remove unnecessary restrictions and reduce burdens on contractor
and HUD personnel, the dollar threshold for requiring HUD Form 441.1,
``Project Management System Baseline Plan'', contained in HUDAR
2442.1106, Reporting requirements, is increased from $100,000 to
$500,000. In addition, the text is revised to allow the use of the
prescribed forms for contracts under $500,000, when determined
necessary by the Contracting Officer.
Accordingly, the prescription at HUDAR 2442.1107, Contract clause,
is revised to reflect the increased dollar threshold of $500,000.
HUDAR 2452.212-70, Contract period, is renumbered to conform to the
revised FAR structure published as FAC 90-32, effective October 1,
1995. The text of the regulation is corrected to cite the renumbered
HUDAR reference and revised to simplify the prescriptive language.
HUDAR 2452.215-70, Proposal content and outline, is revised to
eliminate unnecessary restrictions and simplify the basic provision
concerning proposal content. A new Alternate I is added for
procurements using the lowest-priced technically acceptable approach to
source selection. A new Alternate II is added for situations where the
proposed contract requires work on, or access to, sensitive automated
systems.
HUDAR 2452.219-70, Small business and small disadvantaged business
subcontracting plan, is retitled and the text is revised to include
women-owned small businesses to conform to recent FAR changes published
as FAC 90-32, effective October 1, 1995, to eliminate repetition and
clarify the content of Alternate I.
HUDAR 2452.237-75, Clearance of personnel, paragraph (a), is
amended to revise the forms to be submitted in the event contractor
personnel will be working on-site in any HUD office. The forms
originally specified have changed and this amendment merely revises the
paragraph to reflect the correct forms. Paragraphs (b) and (c) of the
section remain unchanged.
The prescriptive language at HUDAR 2452.242-71, Project management
system, is revised to correspond to the clause prescription at HUDAR
2442.1107. The text of the clause remains unchanged.
Other Matters
Paperwork Reduction Act
The information collection requirements contained in this rule have
been approved by the Office of Management and Budget in accordance with
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), and assigned
OMB control number 2535-0091. An agency may not conduct or sponsor, and
a person is not required to respond to, a collection of information
unless the collection displays a valid control number.
Environmental Impact
In accordance with 40 CFR 1508.4 of the regulations of the Council
on
[[Page 19470]]
Environmental Quality and 24 CFR 50.20(k) of the HUD regulations, the
policies and procedures contained in this rule relate only to the
performance of accounting, auditing and fiscal functions and,
therefore, are categorically excluded from the requirements of the
National Environmental Policy Act.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this rule, and in so doing
certifies that this rule will not have a significant economic impact on
a substantial number of small entities. This rule merely makes
amendments to the Department's acquisition regulations that simplify
HUD's procurement process, revise internal HUD component references,
and implement FAR revisions without adding additional requirements.
Executive Order 12612, Federalism
The General Counsel, as the Designated Official under Section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule will not have substantial direct effects on
States or their political subdivisions, or the relationship between the
Federal government and the States, or on the distribution of power and
responsibilities among the various levels of government. The rule makes
technical revisions and corrections to the agency's regulations. As a
result, the rule is not subject to review under the Order.
Executive Order 12606, The Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this rule will not have
potential for significant impact on family formation, maintenance, and
general well-being, and, thus, is not subject to review under the
Order. The rule involves Departmental procurement procedures only.
List of Subjects in 48 CFR Parts 2401, 2402, 2404, 2405, 2406, 2409,
2411, 2412, 2413, 2414, 2415, 2416, 2417, 2419, 2420, 2426, 2428, 2429,
2432, 2434, 2436, 2437, 2442, 2452 and 2453
Government procurement, HUD acquisition regulations.
Accordingly, title 48, Chapter 24, of the Code of Federal
Regulations is amended by adopting as final the interim rule published
on September 5, 1995 (60 FR 46152), with the following changes:
PART 2401--FEDERAL ACQUISITION REGULATIONS SYSTEM
1. The authority citation for part 2401 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
2401.105 [Redesignated]
2. Section 2401.105 is redesignated as 2401.106.
2401.104-2 [Redesignated]
3. Section 2401.104-2 is redesignated as 2401.105-2.
2401.104 [Redesignated]
4. Section 2401.104 is redesignated as 2401.105.
2401.103 [Redesignated]
5. Section 2401.103 is redesignated as 2401.104.
2401.102 [Redesignated]
6. Section 2401.102 is redesignated as 2401.103.
PART 2409--CONTRACTOR QUALIFICATIONS
7. The authority citation for part 2409 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
2409.508 [Redesignated]
8. Section 2409.508 is redesignated as 2409.507.
2409.508-1 [Redesignated]
9. Section 2409.508-1 is redesignated as 2409.507-1.
2409.508-2 [Redesignated]
10. Section 2409.508-2 is redesignated as 2409.507-2.
PART 2412--CONTRACT DELIVERY OR PERFORMANCE
11. The authority citation for part 2412 is revised to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
Part 2412 [Redesignated]
12. Part 2412 is redesignated as Part 2411 and the heading is
revised to read as follows:
PART 2411--DESCRIBING AGENCY NEEDS
2411.1 [Redesignated]
13. Newly designated subpart 2411.1 is redesignated as 2411.4.
2411.104 [Redesignated]
14. Newly designated 2411.104 is redesignated as 2411.404 and
revised to read as follows:
2411.404 Contract clause.
(a) The Contracting Officer may insert the clause at 48 CFR
2452.211-70, Contract Period, in all solicitations and contracts.
PART 2413--SIMPLIFIED ACQUISITION PROCEDURES
15. The authority citation for part 2413 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 41 U.S.C. 253; 42 U.S.C. 3535(d).
16. Section 2413.106-2 is revised to read as follows:
2413.106-2 Data to support purchases.
(d) Contracting officers may use Form HUD-24007, Purchase/Delivery
Order Data File, to record all relevant data pertaining to a purchase
using simplified acquisition procedures, including recording written
and oral quotations received and documenting orders against GSA
contracts.
17. Section 2413.505-1 is revised to read as follows:
2413.505-1 Optional Form (OF) 347, order for supplies and services,
and Optional Form 348, order for supplies and services schedule-
continuation.
(b) For purchases charged to the FHA Fund using simplified
acquisition procedures, contracting officers may use Form HUD-2542,
Purchase Order and Payment Authorization.
PART 2414--SEALED BIDDING
18. The authority citation for part 2414 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 41 U.S.C. 253; 42 U.S.C. 3535(d).
2414.406 [Redesignated]
19. Section 2414.406 is redesignated as 2414.407.
2414.406-3 [Redesignated]
20. Section 2414.406-3 is redesignated as 2414.407-3.
2414.406-4 [Redesignated]
21. Section 2414.406-4 is redesignated as 2414.407-4, and revised
to read as follows:
2414.407-4 Mistakes after award.
(d) For determinations under FAR 14.407-4(b) (1) and (2), the Head
of the Contracting Activity will obtain the concurrence of legal
counsel before notification to the Contractor. The Contracting Officer
shall be notified promptly of action to be taken.
22. A new section, ``2414.408 Award,'' is added immediately
following redesignated 2414.407-4, to read as follows:
[[Page 19471]]
2414.408 Award.
2414.407-70 [Redesignated]
23. Section 2414.407-70 is redesignated as 2414.408-70.
PART 2415--CONTRACTING BY NEGOTIATION
24. The authority citation for part 2415 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 41 U.S.C. 253; 42 U.S.C. 3535(d).
25. Section 2415.407 is revised to read as follows:
2415.407 Solicitation provisions.
(a) The Contracting Officer shall insert a provision substantially
the same as the provision at 48 CFR 2452.215-70, Proposal Content, in
all solicitations for negotiated procurements using the best value
approach selection method expected to exceed the simplified acquisition
limit. The Contracting officer shall adapt paragraph (c) of the
provision (i.e., include, delete, and provide additional detail to
subparagraphs) to address the particular requirements of the immediate
solicitation. The provision may be used in simplified acquisitions when
it is necessary to obtain technical and management information in
making the award selection. When award selection will be made through
the lowest-priced technically acceptable proposal method, the provision
shall be used with its Alternate I. If the proposed contract requires
work on, or access to, sensitive automated systems as required by the
clause at 48 CFR 2452.237-76, the provision shall be used with its
Alternate II.
26. Section 2415.413-1 is revised to read as follows:
2415.413-1 Alternate I.
It is HUD's policy to have proposals evaluated by the most
competent technical and management sources available. The Department's
preferred procedure for evaluation of proposals is not to disclose the
proposals outside the Government for evaluation purposes. If external
parties will not be used to evaluate proposals, the procedures in FAR
15.413-1 Alternate I, shall be used.
27. A new section 2415.413-2 is added to read as follows:
2415.413-2 Alternate II.
When it is necessary to disclose proposals outside the Government
to meet the Department's evaluation needs, the procedures in FAR
15.413-2 Alternate II, shall be used.
(f)(1) The HCA is authorized to make decisions regarding the
release of proposals outside the Government.
(2) The written agreement shall be obtained prior to releasing
proposals to the evaluator.
(3) The HCA shall make the written determination, which shall be
retained permanently in the official contract file.
2415.605 [Amended]
28. In section 2415.605, paragraph (c) is redesignated (d)(1) and
paragraph (e) is redesignated as paragraph (d)(2).
29. In section 2415.608, paragraph (a) is revised to read as
follows:
2415.608 Proposal evaluation.
(a) After receipt of proposals, the Contracting Officer will
forward copies of the technical portion of each proposal to the TEP
Chairperson or his or her designee. The cost/price portion of each
proposal shall be retained by the Contracting Officer pending initial
technical evaluation by the TEP.
(3) Technical evaluation. The TEP shall rate each proposal based on
the evaluation factors specified in the solicitation. The TEP shall
identify each proposal as being either acceptable, unacceptable but
capable of being made acceptable, or unacceptable. A proposal shall be
considered unacceptable if it is so clearly deficient that it cannot be
corrected through written or oral discussions. Under the best value
approach, predetermined cut-off scores designed to determine a
threshold level of acceptability of proposals shall not be employed. A
technical evaluation report, which complies with FAR 15.608(a)(3),
shall be prepared and signed by the technical evaluator(s), furnished
to the contracting officer, and maintained as a permanent record in the
official procurement file.
* * * * *
2415.1004 [Redesignated]
30. Section 2415.1004 is redesignated as 2415.1005.
PART 2416--TYPES OF CONTRACTS
31. The authority citation for part 2416 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 41 U.S.C. 253; 42 U.S.C. 3535(d).
2416.504 [Redesignated]
32. Section 2416.504 is redesignated as 2416.506 and the heading is
revised to read as follows:
2416.506 Solicitation provisions and contract clauses.
33. In the newly redesignated section 2416.506, paragraph (e) is
redesignated as section 2416.506-70 and the heading is added to read as
follows:
2416.506-70 Unpriced delivery/task orders.
(e) * * *
PART 2417--SPECIAL CONTRACTING METHODS
34. The authority citation for part 2417 is revised to read as
follows:
Authority: 31 U.S.C. 1535; 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
35. A new subpart 2417.2 is added to read as follows:
Subpart 2417.2--Options
36. A new section 2417.204 is added to read as follows:
2417.204 Contracts.
(e) The Senior Procurement Executive shall approve any solicitation
or contract which exceeds the five (5) year maximum for acquisitions of
supplies or services.
PART 2419--SMALL BUSINESS PROGRAMS
37. The heading of part 2419 is revised to read as set forth above.
38. The authority citation for part 2419 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
39. Section 2419.201(c), (d)(1) through (7) and (d)(9) are revised
to read as follows:
2419.201 General policy.
(c) The Director, Office of Small and Disadvantaged Business
Utilization (OSDBU), Headquarters, is responsible for the
administration of HUD's small business programs. This includes
Department-wide responsibility for developing, implementing, executing,
and managing these programs, providing advice on these programs, and
representing HUD before other government agencies on matters primarily
affecting small, small disadvantaged and women-owned small businesses.
(d) Each head of a contracting activity shall designate a small
business specialist who shall perform the following functions:
(1) Maintain a program designed to locate capable small business
sources as referenced in 48 CFR 2419.201(c) for current and future
procurements;
(2) Coordinate inquiries and requests for advice from such
businesses on procurement matters;
(3) Review proposed requirements for supplies and services, ensure
that all such business concerns will be afforded an equitable
opportunity to compete, and, as appropriate, initiate
[[Page 19472]]
recommendation for small business or Section 8a set-asides (under the
Small Business Act);
(4) Take action to ensure the availability of adequate
specifications and drawings, when necessary, to obtain participation by
such businesses in a procurement;
(5) Review proposed procurements for possible breakout of items
suitable for procurement from such businesses;
(6) Advise such businesses with respect to the financial assistance
available under existing laws and regulations and assist such
businesses in applying for financial assistance;
(7) Ensure that adequate records are maintained and accurate
reports are prepared concerning such businesses participation in the
procurement program;
* * * * *
(9) Act as liaison between the Contracting Officer and the
appropriate SBA office in connection with set-asides, certificates of
competency, size classification, and any other matter in which the
small business program may be involved.
40. The heading of subpart 2419.7 is revised to read as follows:
Subpart 2419.7--Subcontracting With Small Business, Small
Disadvantaged Business and Women-Owned Small Business Concerns
Subpart 2419.9 [Removed]
41. Subpart 2419.9 is removed.
Subpart 2419.901 [Removed]
42. Section 2419.901 is removed.
PART 2420--LABOR SURPLUS AREA CONCERNS
43. The authority citation for part 2420 is revised to read as
follows:
Authority: 42 U.S.C. 3535(d).
PART 2420 [REMOVED AND RESERVED]
44. Part 2420, consisting of subpart 2420.1 and Sec. 2420.102, is
removed and reserved.
PART 2434--MAJOR SYSTEM ACQUISITIONS
45. The authority citation for part 2434 is revised to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
2434.001 [Removed]
46. Section 2434.001 is removed.
PART 2437--SERVICE CONTRACTING
47. The authority citation for part 2437 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
48. In Sec. 2437.110, paragraph (f) is revised to read as follows:
2437.110 Solicitation provisions and contract clauses.
* * * * *
(f) The Contracting Officer shall insert the clause at 48 CFR
2452.237-75, Clearance of Personnel, in all solicitations and contracts
where contractor personnel will be working on-site in any HUD office.
* * * * *
PART 2442--PRODUCTION SURVEILLANCE AND REPORTING
49. The authority citation for part 2442 is revised to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
50. Section 2442.1106 is revised to read as follows:
2442.1106 Reporting requirements.
(a) All contracts for professional or technical services exceeding
$500,000 shall use HUD Form 441.1, ``Project Management System Baseline
Plan,'' to outline how the Contractor proposes to carry out the
contract work and HUD Form 661.1, ``Project Management System Progress
Report,'' to monitor quantitative progress against the baseline plan.
Each of these forms shall be accompanied by a narrative description.
The Contracting Officer may waive the requirement to use these forms if
he or she believes the Statement of Work or contractor's technical
proposal are sufficiently specific or another acceptable means for
project management is substituted. Contracts awarded under the Acquired
Property Program are exempt from use of this reporting requirement. The
prescribed forms may be used for contracts under $500,000, when
determined necessary by the Contracting Officer.
51. Section 2442.1107 is revised to read as follows:
2442.1107 Contract clause.
The Contracting Officer shall insert the clause at 48 CFR 2452.242-
71, Project Management System, in solicitations and contracts for
professional or technical services exceeding $500,000, unless the
Contracting Officer determines that the Statement of Work or technical
proposal is sufficiently specific, or another acceptable method for
project management is substituted. Use of this clause in contracts
below the stated threshold is at the discretion of the Contracting
Officer.
PART 2452--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52. The authority citation for part 2452 continues to read as
follows:
Authority: 40 U.S.C. 486(c); 42 U.S.C. 3535(d).
2452.212-70 [Redesignated]
53. Section 2452.212-70 is redesignated as Sec. 2452.211-70 and the
introductory text is revised to read as follows:
2452.211-70 Contract period.
As prescribed in 2411.404(a), insert the following clause in all
solicitations and contracts:
* * * * *
54. Section 2452.215-70 is revised to read as follows:
2452.215-70 Proposal content.
As prescribed in 2415.407(a), insert a provision substantially the
same as the following:
Proposal Content (Oct 1995)
(a) Proposals shall be submitted in two parts as described in
paragraphs (b) and (c) below. Each of the parts must be complete in
itself so that evaluation of each part may be conducted
independently, and so that the technical and management part may be
evaluated strictly on its own merit. Proposals shall be submitted in
the format, if any, prescribed elsewhere in this solicitation.
Proposals shall be enclosed in sealed packaging and addressed to the
office specified in the solicitation. The offeror's name and
address, the solicitation number and the date and time specified in
the solicitation for proposal submission must appear in writing on
the outside of the package.
(b) Proposals shall be submitted in original and [insert number]
copies of Part I and [insert number] copies of Part II.
(c) Part I--Technical and Management.
(1) Prior experience. The offeror shall provide evidence of the
offeror's (i.e., firm's or organization's) prior and current
experience in performing the work and/or providing the deliverables
required by the solicitation.
(2) Past Performance. The offeror shall provide evidence of the
offeror's past performance in accomplishing work--including meeting
delivery dates and schedules--the same as, or substantially similar
to, that required by the solicitation. The offeror shall provide
references as follows [Contracting Officer insert specific
instruction for reference check information required].
(3) Personnel qualifications. The offeror shall provide the
names, position descriptions and information to support the
qualifications--including relevant experience, specialized training
and education--of all proposed key personnel (see the clause
entitled ``Key Personnel'' in this solicitation for further
definition). The
[[Page 19473]]
term ``personnel'' shall include any proposed consultants and
subcontractor employees who will perform duties of key personnel.
(4) Management Capability. The offeror shall provide evidence of
his/her organization's ability to manage the work required under the
proposed contract. The offeror shall describe how the work will be
organized, the proposed staffing and the responsibilities and
existing commitments of proposed staff.
(5) Technical Capability. The offeror shall provide a detailed
description of how he/she proposes to conduct the work required
under the proposed contract.
(6) Mandatory Minimum Requirements. The offeror shall provide
evidence, including copies of documents, as appropriate of
[contracting officer insert description of requirement(s), e.g.,
licenses, minimum experience, etc., or delete this paragraph if not
applicable].
(d) Part II--Business Proposal.
(1) The Offeror shall complete the Representations and
Certifications provided in Section K of this solicitation and
include them in this Part II.
(2) The offeror shall provide information to support the
offeror's proposed costs or prices as prescribed elsewhere in this
Section L.
(End of Provision)
Alternate I (Oct 1995)
Substitute paragraph (c) with the following:
(c) Part I--Technical and Management Information.
(1) Prior experience. The offeror shall provide evidence that
the offeror's (i.e., firm's or organization's) prior experience
meets the following minimum standards: [contracting officer insert
specific experience requirements].
(2) Past Performance. The offeror shall provide evidence of the
offeror's past performance as follows: [contracting officer insert
specific performance requirements]. The offeror shall provide
references as follows [contracting Officer insert specific
instruction for reference check information required].
(3) Personnel qualifications. The offeror shall provide the
names, position descriptions and evidence that proposed key
personnel (see the clause entitled ``Key Personnel'' elsewhere in
this solicitation for definition) meet the minimum qualifications
described below. The term ``personnel'' includes any proposed
consultants and subcontractor employees who will perform duties of
key personnel. The minimum qualifications are: [contracting officer
insert descriptions]
(4) Management Capability. The offeror shall provide evidence of
his/her organization's ability to manage the work required under the
proposed contract. The offeror shall describe how the work will be
organized, the proposed staffing and the responsibilities and
existing commitments of proposed staff.
(End of provision)
Alternate II (Oct 1995)
Add the following subparagraph, numbered sequentially, to
paragraph (c):
The offeror shall describe in detail how the offeror will
maintain the security of automated systems as required by clause
2452.237-76 in Section I of this solicitation.
(End of provision)
55. Section 2452.219-70 is amended by revising the section heading,
the intrductory text, the clause heading, paragraphs (b) through (d),
and Alternate I to read as follows:
2452.219-70 Small, Small Disadvantaged, and Women-Owned Small
Business Subcontracting Plan.
As prescribed in 2419.708, insert the following provision:
Small, Small Disadvantaged and Women-Owned Small Business
Subcontracting Plan (Oct 1995)
* * * * *
(b) Consistent with the national interest, it is HUD policy that
small business, women-owned small business and small business
concerns that are owned and controlled by socially and economically
disadvantaged individuals shall have the maximum practicable
opportunity to participate in the performance of HUD work at the
prime and subcontract level. Therefore, any contract awarded as a
result of this solicitation shall fully comply with the intent of
this policy, and the successful offeror shall agree to pursue an
effective and comprehensive small business, small disadvantaged
business and women-owned small business subcontracting program in
compliance with the clause entitled ``Utilization of Small, Small
Disadvantaged and Women-Owned Small Business Concerns.''
(c) Prior compliance with subcontracting plans shall be
considered in determining the responsibility of an offeror (see FAR
9.104-3). Therefore, offerors having previous contracts with
subcontracting plans shall provide the following information: agency
name; agency point of contact; contract number; total contract
value; a synopsis of the work required under the contract; the
role(s) of the subcontractor(s) involved; and, the applicable goals
and actual performance (dollars and percentages) for subcontracting
with small, small disadvantaged and women-owned small business
concerns. This information shall be provided for the three most
recently (within the last three years) completed contracts with such
subcontracting plans.
(d) The contract expected to result from this solicitation will
contain the clause at FAR 52.219-9, ``Small, Small Disadvantaged and
Women-Owned Small Business Subcontracting Plan.'' In accordance with
that clause, the offeror shall submit the complete subcontracting
plan with the response to this solicitation. The content of the
final plan is subject to negotiation. Failure to submit a complete
subcontracting plan and negotiate its content in good faith shall
make the offeror ineligible for the contract award.
(End of provision)
Alternate I (Dec 1992)
This alternate is required for all sealed bid solicitations
exceeding $500,000 ($1,000,000 for construction) that are not set
aside for small business. In such cases, insert the following
paragraph (d) for that in the basic clause:
(d) The contract expected to result from this solicitation will
contain the clause at FAR 52.219-9, ``Small, Small Disadvantaged and
Women-Owned Small Business Subcontracting Plan (Alternate I).'' The
offeror submitting the apparent low bid, upon request by the
Contracting Officer, shall submit a subcontracting plan, where
applicable, which addresses separately subcontracting with small,
small disadvantaged business and women-owned small business
concerns, and which shall be included in and made a part of the
resultant contract. The Contracting Officer will review the adequacy
of the subcontracting plan as part of the responsibility
determination (FAR Subpart 9.1). Failure to submit an adequate
subcontracting plan where applicable shall make the bidder
ineligible for the contract award.
(End of provision)
56. In Sec. 2452.237-75, the clause heading and paragraph (a) are
revised to read as follows:
2452.237-75 Clearance of personnel.
* * * * *
Clearance of Personnel (June 1995)
(a) The contractor shall submit to the Contracting Officer
within five days after contract award, two (2) completed Forms FD-
258, ``Fingerprint Chart'', one original and one copy of the SF 85P,
``Questionnaire for Public Trust Positions'', and one original and
one copy of the OF 306, ``Declaration for Federal Employment'', for
the contractor and all employees who have access to the building in
performance of the contract work. These forms must be submitted for
all replacement employees prior to entrance on duty. Necessary forms
will be furnished by HUD. If the Contracting Officer receives an
unsuitable report on any employee after processing these forms or if
the Contracting Officer finds a prospective employee to be
unsuitable or unfit for his/her duties, the contractor shall be
advised immediately that such employee cannot continue to work or be
assigned to work under the contract.
* * * * *
57. In Sec. 2452.242-71, the introductory text is revised to read
as follows:
2452.242-71 Project management system.
As prescribed in 2442.1107, insert the following clause:
* * * * *
Dated: April 19, 1996.
Marilynn A. Davis,
Assistant Secretary for Administration.
[FR Doc. 96-10446 Filed 4-30-96; 8:45 am]
BILLING CODE 4210-01-P
Complete official Federal Register PDF
FR Doc. 96-10396 Treatment of Underwriters in Section 351 and Section 721 Transactions
[Federal Register Volume 61, Number 85 (Wednesday, May 1, 1996)]
[Rules and Regulations]
[Pages 19188-19189]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10396]
=======================================================================
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 8665]
RIN 1545-AT55
Treatment of Underwriters in Section 351 and Section 721
Transactions
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations concerning transfers
of cash to a corporation or a partnership. The final regulations will
affect taxpayers in transactions under section 351 or section 721 when
there is an offering of stock or partnership interests through an
underwriter.
EFFECTIVE DATE: May 1, 1996.
FOR FURTHER INFORMATION CONTACT: Concerning the regulation under
section 351(a), Susan T. Edlavitch, (202) 622-7750; concerning the
regulation under section 721(a), James A. Quinn, (202) 622-3060 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regulations under section 351 and
section 721. The final regulations provide for the treatment of
transfers of cash to a corporation or a partnership pursuant to an
offering of stock or partnership interests through an underwriter.
Section 351(a) provides that no gain or loss is recognized if
property is transferred to a corporation by one or more persons solely
in exchange for stock in the corporation and immediately after the
exchange the person or persons are in control (as defined in section
368(c)) of the corporation.
Section 721(a) provides that no gain or loss is recognized to a
partnership or to any of its partners in the case of a contribution of
property to the partnership in exchange for an interest in the
partnership.
On August 10, 1995, the IRS published in the Federal Register a
notice of proposed rulemaking (CO-26-95), adding regulations under
section 351 and section 721 of the Internal Revenue Code relating to
transfers of cash to a corporation or a partnership (60 FR 40792). The
proposed rules were based on the conclusion that Situation 2 of Rev.
Rul. 78-294 (1978-2 C.B. 141) does not reflect current underwriting
practices. The proposed rules were also based on the conclusion that
underwritings of partnership interests should be treated similarly to
underwritings of stock. The rules, under certain circumstances,
disregard underwriters of stock and partnership interests for purposes
of section 351 and section 721.
Public Comments and the Final Regulations
The IRS received few comments from the public on the proposed
regulations. The comments received were generally supportive of the
proposed regulations but sought guidance beyond the intended scope of
the rules. No public hearing was requested and none was held. After
consideration of all the comments, the regulations proposed by CO-26-95
are adopted by this Treasury decision.
In the notice of proposed rulemaking, the IRS and Treasury invited
public comment with respect to three issues: (a) Whether the proposed
rules should apply for all tax purposes; (b) whether the proposed rules
should be limited to underwriters; and (c) whether the proposed rules
should be limited to cash transactions. After consideration of
[[Page 19189]]
these issues, the regulations proposed by CO-26-95 are adopted without
any change in language. However, although the regulations specifically
concern underwriters, it is intended that its principles could apply
equally in factually analogous situations. For example, if the
ownership by other intermediaries in the distribution of stock or
partnership interests, such as broker-dealers, is transitory, that
ownership should also be disregarded.
Effect on Other Documents
The following publication is obsolete as of May 1, 1996: Rev. Rul.
78-294 (1978-2 C.B. 141).
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It also has been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Drafting Information
The principal authors of these regulations are Susan T. Edlavitch
of the Office of Assistant Chief Counsel (Corporate) and Brian J.
O'Connor, formerly of the Office of Assistant Chief Counsel
(Passthroughs and Special Industries). However, other personnel from
the IRS and Treasury participated in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.351-1 also issued under 26 U.S.C. 351. * * *
Section 1.721-1 also issued under 26 U.S.C. 721. * * *
Par. 2. In Sec. 1.351-1, paragraph (a)(3) is added to read as
follows:
Sec. 1.351-1 Transfer to corporation controlled by transferor.
(a) * * *
(3) Underwritings of stock--(i) In general. For the purpose of
section 351, if a person acquires stock of a corporation from an
underwriter in exchange for cash in a qualified underwriting
transaction, the person who acquires stock from the underwriter is
treated as transferring cash directly to the corporation in exchange
for stock of the corporation and the underwriter is disregarded. A
qualified underwriting transaction is a transaction in which a
corporation issues stock for cash in an underwriting in which either
the underwriter is an agent of the corporation or the underwriter's
ownership of the stock is transitory.
(ii) Effective date. This paragraph (a)(3) is effective for
qualified underwriting transactions occurring on or after May 1, 1996.
* * * * *
Par. 3. In Sec. 1.721-1, paragraph (c) is added to read as follows:
Sec. 1.721-1 Nonrecognition of gain or loss on contribution.
* * * * *
(c) Underwritings of partnership interests--(1) In general. For the
purpose of section 721, if a person acquires a partnership interest
from an underwriter in exchange for cash in a qualified underwriting
transaction, the person who acquires the partnership interest is
treated as transferring cash directly to the partnership in exchange
for the partnership interest and the underwriter is disregarded. A
qualified underwriting transaction is a transaction in which a
partnership issues partnership interests for cash in an underwriting in
which either the underwriter is an agent of the partnership or the
underwriter's ownership of the partnership interests is transitory.
(2) Effective date. This paragraph (c) is effective for qualified
underwriting transactions occurring on or after May 1, 1996.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: March 26, 1996.
Leslie Samuels,
Assistant Secretary of Treasury.
[FR Doc. 96-10396 Filed 4-30-96; 8:45 am]
BILLING CODE 4830-01-P
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