issue-1997-05-20•Federal Register proposed rules — 1997-05-20
Federal Register proposed rules — 1997-05-20
issue-1997-05-20Federal Register proposed rules — 1997-05-20Proposed Regulation
Published Federal Register documents, not public-inspection drafts. The GPO XML/text rendition is a research aid; the linked complete official PDF retains the printed layout and all graphics. Graphics are retained in that PDF and are not independently reproduced in this text rendition. Publication does not establish that every provision remains legally in force.
FR Doc. 97-13198 Coal Management Regulations
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Page 27563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13198]
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DEPARTMENT OF THE INTERIOR
Bureau of Land Management
43 CFR Parts 3400, 3410, 3420, 3440, 3450, 3460, 3470, 3480
[WO-320-1320-02-1A]
RIN 1004-AD11
Coal Management Regulations
AGENCY: Bureau of Land Management, Interior.
ACTION: Advance notice of proposed rulemaking; reopening of comment
period.
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SUMMARY: The Bureau of Land Management (BLM) is reopening for 60
additional days the comment period for the advance notice of proposed
rulemaking (ANPR) concerning the revision of its regulations governing
coal operations on Federally leased lands. BLM published the ANPR on
April 9, 1997. The reopening is in response to a request from a
representative of interested parties for additional time to provide
information.
DATES: BLM will accept comments until 5 p.m. Eastern time on July 21,
1997. BLM will not necessarily consider comments received after this
time in developing the proposed rule or include them in the
administrative record.
ADDRESSES: Commenters may mail written comments to the Bureau of Land
Management, Administrative Record, Room 401LS, 1849 C Street, NW,
Washington, DC 20240; or hand-deliver written comments to the Bureau of
Land Management, Administrative Record, Room 401, 1620 L Street, NW,
Washington, D.C. Comments will be available for public review at the L
Street address from 7:45 a.m. to 4:15 p.m. Eastern time, Monday through
Friday, excluding Federal holidays. See the SUPPLEMENTARY INFORMATION
section for the electronic access and filing address.
FOR FURTHER INFORMATION CONTACT: Bill Radden-Lesage, (202) 452-0350
(Commercial or FTS).
SUPPLEMENTARY INFORMATION:
Electronic Access and Filing Address
Commenters may transmit comments electronically via the Internet
to: WOC[email protected]. Please submit comments as an ASCII file and
avoid the use of special characters or encryption. Please include your
name and address in your message. If you do not receive a confirmation
from the system that we have received your Internet message, contact
the Administrative Record at (202) 452-5030.
On April 9, 1997, BLM published an advance notice of proposed
rulemaking requesting comments to assist in the revision of its
regulations governing coal operations on Federally leased lands.
Interested persons were given 30 days, until May 9, 1997, to submit
comments. See 62 FR 17141 for additional information and public comment
procedures.
BLM has received a request from the National Mining Association for
a 60-day extension of the comment period. The request states that an
extension would allow the organization to conduct additional research,
gathering, and evaluation of quantitative information necessary to
document changes in the electric utility industry. After careful
consideration of the request, BLM has decided to accept comments for an
additional 60 days. Because the original 30-day comment period has now
closed, we are reopening, rather than extending, the comment period on
the ANPR.
Dated: May 14, 1997.
Sylvia V. Baca,
Assistant Secretary for Land and Minerals Management.
[FR Doc. 97-13198 Filed 5-19-97; 8:45 am]
BILLING CODE 4310-84-P
Complete official Federal Register PDF
FR Doc. 97-13184 Consumer Information; Motor Vehicle Safety; Rollover Prevention
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27578-27579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13184]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Chapter V
Consumer Information; Motor Vehicle Safety; Rollover Prevention
AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.
ACTION: Grant of petition for rulemaking.
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SUMMARY: The agency grants an August 20, 1996 petition for rulemaking
from Consumers Union of United States, Inc., requesting NHTSA to
commence a rulemaking proceeding to consider establishing ``an
emergency handling test [for sport-utility vehicles] and to require
that information derived from that test be included in the consumer
warnings required by the agency.'' The agency seeks to evaluate the
issues raised in the petition in view of the agency's continuing
interest in rollover safety, as evidenced by its 1994 rulemaking
proposal to amend its consumer information regulations to require
passenger vehicles to be labeled with information about their
resistance to rollover, and other related rulemaking activities.
The agency will respond in a separate notice to a request from the
petitioner that NHTSA should commence a proceeding to decide whether to
issue an order concerning an alleged defect in model year (MY) 1995-96
Isuzu Trooper and Acura SLX sport-utility vehicles.
FOR FURTHER INFORMATION CONTACT: For nonlegal issues: Michael Pyne or
Gayle Dalrymple, Office of Crash Avoidance Standards, NPS-20, telephone
(202) 366-4931, National Highway Traffic Safety Administration, 400
Seventh St., S.W., Washington, D.C., 20590.
For legal issues: Deirdre Fujita, Office of the Chief Counsel, NCC-
20, telephone (202) 366-2992, address same as above.
SUPPLEMENTARY INFORMATION: This document announces that NHTSA is
granting a petition for rulemaking from Consumers Union of United
States, Inc. (CU), requesting NHTSA to establish a standard and/or a
rating system ``that will help consumers to compare emergency handling
performance of sport-utility vehicles.'' CU asks the agency to
``augment its consumer information disclosure requirement by (1)
establishing a testing system that rates comparatively the ability of
sport-utility vehicles to perform emergency maneuvers acceptably, (2)
[requiring] that each such vehicle include its rating in the required
warning, and (3) [requiring] vehicles that exhibit a high rollover
propensity during emergency handling testing to achieve a minimum
acceptable rating through vehicle modifications.''
The agency issued a rulemaking proposal (NPRM) in 1994 to amend its
consumer information regulations (49 CFR Part 575) to require passenger
vehicles to be labeled with information about their resistance to
rollover. That proposal, which is still pending, would require vehicles
to be labeled by make/model with a ``stability metric,'' which is a
measured vehicle characteristic that relates to some degree to a
vehicle's likelihood of rollover involvement. The agency issued the
proposal in the belief that the information would enable prospective
purchasers to make informed choices about new vehicles based on
differences in rollover risk, and motivate manufacturers to give more
priority to rollover stability in designing their vehicles.
NHTSA has also undertaken a variety of other activities intended to
mitigate the adverse effects of rollovers, including a final rule
requiring upgraded padding on the upper interior of light vehicles, a
final rule extending the side door latch requirements to rear doors,
and research evaluating improved roof crush resistance, enhanced side
window glazing, improved door latches, and advanced occupant restraint
systems. These activities are explained in detail in the May 1996
``Status Report for Rollover Prevention and Injury Mitigation,''
available in NHTSA Docket No. 91-68, Notice 5.
CU's petition is related to the 1994 NPRM: both pertain to the
rollover resistance of vehicles and envision a rating system by which
prospective purchasers may compare vehicle performance. However, the
petition differs from the NPRM in several key respects. The CU petition
focuses on on-road, untripped rollover crashes, while the NPRM
encompasses both on- and off-road single vehicle rollovers. Also, the
CU petition envisions a dynamic test for evaluating vehicle
performance, while the NPRM proposed a static test which isolates and
measures a vehicle attribute.
NHTSA will initially focus on exploring whether it can develop a
practicable, repeatable and appropriate dynamic emergency handling test
that assesses, among other issues, a vehicle's propensity for
involvement in an on-road, untripped rollover crash. The agency will
expand this exploration beyond CU's suggestion that any such emergency
handling test be limited to sport utility vehicles. Assuming the agency
can develop a technically sound test protocol, it should be equally
useful for all light vehicles, including cars, trucks, and vans.
The granting of CU's rulemaking petition should not be
misinterpreted as an endorsement of the CU test procedure. In its
petition, CU described a particular dynamic test procedure that it has
been using since 1988 to rate the rollover propensity of vehicles.
Based on preliminary testing conducted by the agency's Office of
Defects Investigation, it does not currently appear that the CU ``short
course'' test by itself is an appropriate assessment of rollover
propensity or will be the primary focus of NHTSA's exploration of a
dynamic handling test. Indeed, CU's rulemaking petition shows that CU
did not anticipate that the agency would focus
[[Page 27579]]
on the CU test protocol--instead, CU urged that ``the agency should
determine the exact parameters of the test course and test requirements
based on its own investigation.'' NHTSA will explore a variety of
vehicle maneuvers, including a double lane change, as part of its
efforts to develop an appropriate dynamic emergency handling test.
Similarly, the granting of the rulemaking petition does not
necessarily mean that a rule will be issued. The determination of
whether to issue a rule will be made in the course of a rulemaking
proceeding, in accordance with statutory criteria.
CU also petitioned NHTSA to commence a proceeding to decide whether
to issue an order concerning an alleged defect in MY 1995-96 Isuzu
Trooper and Acura SLX sport-utility vehicles. The agency will respond
to this request for a defect proceeding in a separate document.
Authority: 49 U.S.C. 322, 30111, 30115, 30117 and 30166;
delegation of authority at 49 CFR 1.50.
Issued on May 14, 1997.
L. Robert Shelton,
Associate Administrator for Safety Performance Standards.
[FR Doc. 97-13184 Filed 5-15-97; 3:08 pm]
BILLING CODE 4910-59-P
Complete official Federal Register PDF
FR Doc. 97-13182 Empowerment Contracting
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27556-27562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13182]
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DEPARTMENT OF COMMERCE
15 CFR Part 3
[Docket No. 960828234-7093-04]
RIN 0690-AA25
Empowerment Contracting
AGENCY: Department of Commerce.
ACTION: Proposed regulations; request for comment.
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SUMMARY: The Department of Commerce is reissuing these proposed
guidelines requesting public comment on policies and procedures
intended to promote economy and efficiency in Federal procurement by
grating qualified large businesses and qualified small businesses
appropriate incentives to encourage business activity in areas of
general and severe economic distress. This actions taken in accordance
with the President's Executive Order entitled, ``Empowerment
Contracting.'' The standards and procedures set forth in these proposed
guidelines serve as the basis for a proposed revision to the Federal
Acquisition Regulation (``FAR''): Information obtained from public
comment on these guidelines will be used to help draft the final
Commerce and FAR regulations.
DATES: Comments must be submitted on or before July 21, 1997.
ADDRESSES: Comments may be mailed to the Department of Commerce, Office
of the Assistant General Counsel for Finance and Litigation, Room 5896,
14th and Constitution Street, NW., Washington, DC 20230.
FOR FURTHER INFORMATION CONTACT: Joe Levine, 202-482-1071.
SUPPLEMENTARY INFORMATION:
A. Background
On May 21, 1996, President Clinton issued Executive Order 13005,
``Empowerment Contracting'' (the ``Order''). The purpose of the Order
is to strengthen the economy and secure broad-based competition for
Federal contracts by fostering growth of Federal contractors in
economically distressed communities. In the Order, the President
charged the Secretary of Commerce (the ``Secretary''), in consultation
with the Secretaries of Housing and Urban Development, Labor and
Defense; and the Administrators of the General Services Administration,
the National Aeronautics and Space Administration, the Small Business
Administration, and the Office of Federal Procurement Policy, to
develop policies and procedures to ensure that Federal agencies, when
awarding contracts in unrestricted competitions, grant qualified large
and small businesses appropriate price or evaluation incentives to
encourage business activity in areas of general economic distress.
Specifically, the Order requires the Secretary to ``develop
policies and procedures to ensure that agencies, to the extent
permitted by law, grant qualified large businesses and qualified small
businesses appropriate incentives to encourage business activity in
areas of general economic distress, including a price or a non-price
evaluation credit, when assessing offers for government contracts in
unrestricted competitions, where the incentives would promote the
policy set forth in this Order.'' The Order also calls upon the
Secretary to (1) monitor the implementation and operation of the
procedures developed; (2) ensure proper administration of the program
and reduce the potential for fraud by intended beneficiaries; (3)
develop a process to evaluate the effectiveness of the procedures
developed; and (4) issue an annual report to the President on the
status and effectiveness of the program. In addition, the Secretary
must ensure that all policies, procedures and regulations developed
pursuant to the Order minimize the administrative burden on affected
agencies and the procurement process.
On September 13, 1996, the Department published, in the Federal
Register, its proposed Guidelines for implementing Executive Order
13005 (61 FR 48463). After several extensions, the period for public
comment closed on January 6, 1997. These revised Guidelines, and the
proposed amendments to the FAR, which were published on April 18, 1997
(62 FR 19200), for a 60 day public comment period, are based on
comments received under that process and further internal analysis.
B. Public Comments
Comments were received from 40 commentors. They included businesses
of all sizes, not-for-profit entities, industry and trade associations,
Federal agencies, State and local governments and one member of
Congress.
Federal agency comments included the following recommended
revisions to the proposed guidelines:
(1) Firms should be required to have met the eligibility criteria
prior to award of contracts. Eligibility based on prospective criteria
will raise monitoring and compliance problems.
(2) If firms are required to meet the eligibility criteria prior to
award of contracts, challenges to their status can be resolved prior to
award.
(3) The initial test phase of six months is too short. It should be
eighteen months.
(4) The third test of significant economic activity, ``ownership'',
should be deleted as not relevant.
(5) Criteria should apply to areas, not an area.
(6) The areas of general economic distress should include labor
surplus areas.
(7) The criteria for ``eligibility'' should not have ranges, but
rather a fixed percentage and higher targets.
(8) The threshold for applicability is too low. It should be $1
million.
(9) Qualification should be based on pre-certifications, not a
``showing''.
(10) The incentives should be revised to reflect the increasing
number of ``best value'' awards.
(11) The Department of Commerce needs to establish regulations to
cover challenges of eligibility.
(12) The preferences/incentives should not be cumulative with
incentives of other programs implemented through the procurement
system. To allow cumulative preferences will encourage ``front''
companies.
(13) The incentives are too high. The application of cumulative
incentives
[[Page 27557]]
will have an adverse impact on agency budgets.
A number of commentors suggested that special treatment be afforded
to firms located in areas with particularly high levels of economic
distress.
Other commentors, including several not-for-profits, expressed
support for the program and suggested various technical adjustments.
These comments included such recommendations as:
(1) The subcontracting criterion of 15% for the previous six months
is too high as a criterion for significant economic activity.
(2) Employment percentages of 40% to 50% are achievable within the
eligible areas.
(3) Certification and challenges should be delegated to local
government economic agencies.
(4) The $100,000 threshold is too high. A lower threshold would
offer more opportunities to small businesses.
(5) The incentives should be higher.
(6) Monitoring is essential to the success of the program.
(7) Firms track their data on a yearly basis, therefore, a six
month first phase is inadequate.
(8) The definition for ``not-for-profit'' should be expanded to
include government units, universities, and hospitals.
(9) Credit should be given for banking with minority firms.
(10) Preferences should be given to business enterprises owned by
American Indian tribes, Alaskan natives, tribal or native-American
corporations, and tribal organizations.
C. Guideline Revisions
Revisions have been made to the guidelines that respond to many of
these comments. These changes will enhance the program while remaining
consistent with the goals, policies and provisions of Executive Order
13005.
I. General
The guidelines have been reformatted to become a new part 3 to 15
CFR.
II. Definitions
The definitions pertaining to eligibility have been revised to
refer to areas, rather than an area, to allow businesses to receive
credit for economic activity in any eligible area.
Two additional definitions have been added. An ``area of severe
economic distress'', is defined as any census tract that has a poverty
rate of at least 50% A new category of firm, identified as an
``eligible business'', has also been established. An eligible business
is a business, regardless of size, that meets any one of the three
``significant'' tests in an area of severe economic distress. These
provisions recognize the goal of encouraging business activity in areas
of very high poverty. The 50% poverty rate was chosen to set a higher
standard for relaxed eligibility requirements for such businesses,
because the benefit of relaxed qualification standards is appropriate
only in areas of substantial deprivation. Initiating and sustaining
private activity in areas of severe distress is essential to the
economic recovery of those areas and it is felt that only through
special consideration could such areas receive the benefits intended by
this program.
Two separate processes have been established for firms to qualify
for preferences. One process will enable business to qualify by self-
certifying that they will meet prospective eligibility criteria. Such
firms will be subjected to detailed reporting and audit requirements,
and will be required to pay preference recoupment should they not meet
the required levels of performance. In addition, the definitions were
modified to measure the overall contribution of the business to
economic activity in eligible areas, rather than tying such measures to
a particular contract. Public comment is particularly requested on this
change in measurement standard.
A second process was added to allow businesses to seek pre-
qualification of eligibility to receive incentives under this program.
For this new process the definitions are written to measure the
businesses impact in eligible areas during the previous six months.
This process was established to accommodate situations, such as
provision of supplies and other manufactured items, where the product
being sold was already in inventory, and sealed bid awards, where
detailed reporting and post performance audits are not the norm.
Finally, the definitions pertaining to ``significant physical
presence'' were revised to measure the number of employees working in
eligible areas. It was decided that the original definition, which
merely measured the percentage of physical plant in eligible areas,
created too large a loophole in situations where firms might have large
amounts of land devoted to such things as warehouses, storage and
garages, where very little time was spent by employees.
III. Eligibility Processes
The processes under which businesses will establish their
eligibility have been added. Firms seeking to self-certify will have to
prepare plans setting forth how they plan to attain the necessary
economic activity in eligible areas. The Department of Commerce, on its
own initiative, or in response to challenges, will rule on the
achievability of these plans. Firms seeking pre-qualification will
submit the information required for the Department to decide on their
request for pre-qualification.
IV. Challenges
An outline of the procedures the Department proposes to utilize to
handle challenges is now set forth. Comments on its appropriateness,
and any alternative mechanism are solicited.
V. Applicability
The simplified acquisition threshold (currently $100,000) has been
retained. Any adjustment below this amount would create an
administrative burden on agencies that would greatly outweigh the
potential benefits of the program. No sound reason was perceived for
raising the threshold for applicability.
VI. Incentive Structure
The comments regarding elimination of cumulative incentives have
not been accepted. The Order requires that the incentives of this
program be applied in addition to any incentives available under
already existing programs. This provision was included to comply with
the Administration's policy thrust that the Empowerment Contracting
Program is to be used by all types of qualifying businesses in
distressed areas, and not to negatively impact existing preference
programs. Adding this Program and not allowing accumulation with other
preferences would have a negative impact on businesses eligible for
other preferences. A price preference of up to 10% or an evaluation
preference of up to 15% will be available. The incentive provisions
have been modified to accommodate the use of non-numeric selection
procedures.
VII. Phased Implementation
In response to several comments, the length of the first phase has
been revised from 6 months to 18 months. This longer period for phase
one will allow for accumulation of a larger base of data regarding the
effectiveness of the Program. Review of phase one will begin after 12
months. Eleven two digit Standard Industrial Code (SIC) major group
identifiers have been selected for inclusion in phase one. These SIC
codes were selected because they represent areas of business which are
likely to have viability in eligible areas. Several were suggested by
commentors. They represent a sufficiently broad base of activity that
will facilitate matching the needs of a wide range of Federal
[[Page 27558]]
agencies with potential sources in eligible areas.
The goal of the first phase is to see if the Program is most
effective luring current government contractors to distressed areas,
luring businesses in growth industries to distressed areas, or
encouraging sales for businesses located in distressed areas. Using a
broad array of contracts in various industries over an 18 month period,
will provide information to refine and expand the program.
D. Classification
It has been determined that these proposed guidelines are
significant for purposes of Executive Order 12866 dated September 30,
1993. This is a major rule under 5 U.S.C. 804. Because these proposed
guidelines relate to a matter of public property, loans, grants,
benefits, or contracts, they are exempted from all the procedural
requirements of the Administrative Procedure Act (5 U.S.C. 553).
Because notice and comment are not required by 5 U.S.C. 553 or any
other law, a Regulatory Flexibility Analysis is not required and was
not done for purpose of the Regulatory Flexibility Act. However, an
Initial Regulatory Flexibility Analysis (IRFA) was prepared in
connection with the proposed FAR amendments and may be obtained from
the FAR Secretariat.
Notwithstanding any other provision of law, no person is required
to respond to, nor shall a person be subject to, a penalty for failure
to comply with a collection of information subject to the requirements
of the Paperwork Reduction Act unless that collection of information
displays a currently valid control number. This rule contains
collection-of-information requirements subject to the Paperwork
Reduction Act. A request for approval of the paperwork burdens has been
submitted to the Office of Management and Budget. These relate to the
pre-qualification process, the self-certification process and the
challenge procedures. These requirements are estimated to take,
respectively, eight, two, and one hours, including the time to gather
records, make copies, and mail documents to the Department of Commerce.
Public comment is sought regarding: Whether this proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information has
practical utility; the accuracy of the burden estimate; ways to enhance
the quality, utility, and clarity of the information to be collected;
and ways to minimize the burden of the collection of information,
including through the use of automated collection techniques or other
forms of information technology. Comments on the collection of
information burden may be sent to Joseph Levine, Room 5896, U.S.
Department of Commerce, Washington DC 20230, and to the Office of
Information and Regulatory Affairs, Office of Management and Budget,
Washington DC 20503.
List of Subjects in 15 CFR Part 3
Business and industry, Government procurement.
Therefore, it is proposed that a new 15 CFR part 3 be added to read
as follows:
PART 3--EMPOWERMENT CONTRACTING
Sec.
3.01 Purpose.
3.02 Definitions.
3.03 Eligible areas.
3.04 Self-certification of eligibility.
3.05 Pre-qualification for eligibility.
3.06 Challenges--self-certification.
3.07 Challenges--pre-qualification.
3.08 Applicability.
3.09 Incentive structure.
3.10 Monitoring and evaluation.
3.11 Phased implementation of the Program.
Authority: Executive Order 13005 (61 FR 26069, May 24, 1996).
Sec. 3.01 Purpose.
The purpose of this part is to set forth the policies and
procedures applicable to the Empowerment Contracting Program
established by Executive Order 13005.
Sec. 3.02 Definitions.
(a) General.
(1) Agency means any authority of the United States that is an
``agency'' under 44 U.S.C. 3502(1), other than those considered
independent regulatory agencies as defined in 44 U.S.C. 3502(10).
(2) Area of general economic distress means, for all urban and
rural communities, any census tract that has a poverty rate of at least
20 percent or any designated Federal Empowerment Zone, Supplemental
Empowerment Zone, Enhanced Enterprise Community, or Enterprise
Community. Area of general economic distress also means any rural area
or Indian reservation that currently meet the criteria for designation
as a redevelopment area under section 401(a) of the Public Works and
Economic Development Act of 1965, as amended (42 U.S.C. 3161(a)), as
set forth at 13 CFR 301.2 (loss of population); 13 CFR 301.4 (Indian
Lands) and 13 CFR 301.7 (special impact areas).
(3) Area of severe economic distress means any census tract that
has a poverty rate of at least 50 percent.
(4) Business means the legal entity responsible for performance of
the contract for which a preference is sought.
(5) Qualified small business means a small for-profit or not-for-
profit trade or business that:
(i) Employs a significant number of residents from areas of general
economic distress;
(ii) Has a significant physical presence in areas of general
economic distress; or
(iii) Has a direct impact on generating significant economic
activity in areas of general economic distress.
(6) Qualified large business means a large for-profit or not-for-
profit trade or business that:
(i) Employs a significant number of residents from areas of general
economic distress; and
(ii)(A) Either has a significant physical presence in areas of
general economic distress or
(B) Has a direct impact on generating significant economic activity
in areas of general economic distress.
(7) Qualified eligible business means any business that meets one
of the following criteria:
(i) Employs a significant number of residents from areas of severe
economic distress;
(ii) Has a significant physical presence in areas of severe
economic distress; or
(iii) Has a direct impact on generating significant economic
activity in areas of severe economic distress. (See Secs. 3.04(b)(4)
and 3.05(b)(4) for qualification procedures.)
(8) Small Business is defined by the definitions and procedures set
forth by the Small Business Administration for determining size
eligibility for government procurements. (13 CFR 121.901-911).
(9) Small not-for-profit businesses--Notwithstanding 13 CFR 121.403
(the SBA regulation that defines ``business or concern'' to mean for-
profit entities) size determinations for not-for-profits entities will
follow the same procedures as those of for-profit entities, i.e., the
Standard Industrial Code (SIC) of the procurement will govern.
(10) Large business means any business that is not a small
business.
(b) Definitions applicable to Pre-Qualification. The following
definitions apply to businesses seeking pre-qualification based on
their current operations:
(1) Employs a significant number of residents from the area. This
means a
[[Page 27559]]
business which, during the six months preceding the date of its request
for pre-qualification, has expended at least 25 percent of its total
labor costs in wages and benefits to residents from areas of general
economic distress.
(2) Has a significant physical presence in the area. This means a
business with physical plant(s) in areas of general economic distress
where, for the six months preceding the date of its request, at least
25 percent of the employees of the business perform their job.
Employees will be considered to perform their job at the location where
they spend the most time working, so long as it is at least 6 hours per
work week.
(3) Has a direct impact on generating significant economic activity
in the area. This means a business which.
(i) During the six months preceding the date of its request for
pre-qualification, has expended at least 50 percent of its total labor
costs in wages and benefits to residents from areas of general economic
distress; or
(ii) During the six months prior to submitting its request for pre-
qualification, has incurred at least 25 percent of its expenses on
goods, materials, and services from firms located in areas of general
economic distress.
(c) Definitions for Self-Certification. The following definitions
apply to businesses which seek to self-certify their eligibility based
on future operations:
(1) Employs a significant number of residents from the area. This
means a business which, during the period of performance of the
contract, will expend at least 25 percent of its total labor costs in
wages and benefits to residents from areas of general economic
distress.
(2) Has a significant physical presence in the area. This means a
business with physical plant(s) in areas of general economic distress
where, during the period of performance of the contract, at least 25
percent of the employees of the business will perform their job.
Employees will be considered to perform their job at the location where
they spend the most time working, so long as it is at least 6 hours per
work week.
(3) Has a direct impact on generating significant economic activity
in the area. This means a business which:
(i) During the period of performance of the contract, will expend
at least 50 percent of its total labor costs in wages and benefits to
residents from areas of general economic distress; or
(ii) During the period of performance of the contract, will incur
at least 25 percent of its expenses on goods, materials, and services
from firms located in areas of general economic distress.
Sec. 3.03 Eligible areas.
The Department of Commerce will maintain the official listing of
eligible areas, based on the 1990 decennial Census of Population data.
The listing shall contain the Census tract and block numbering for all
eligible areas. This listing will be available on the internet at
[email protected].
Sec. 3.04 Self-Certification of Eligibility.
(a) When responding to solicitations, businesses may ``self-
certify'' their qualifications at the time of submission of their
proposal/bid, pursuant to the definitions set forth in Sec. 3.02(c) of
this part.
(b) At the time they self-certify their eligibility, businesses
will be expected to have prepared a short description of their plan for
achieving the requirements of this program. The description, which will
be kept in their files, should contain sufficient detail to enable the
Department to reach an informed judgment of the likelihood of the
plan's success.
(1) For Secs. 3.02(c)(1) and (c)(3)(i) the description should also
identify the areas of general economic distress where employees will be
recruited, the types of positions they will occupy, and evidence that
those types of employees are available in sufficient quantity from
those areas;
(2) For Sec. 3.02(c)(2) the description should identify the areas
of general economic distress where the physical plant(s) likely will we
located, the types of plant that are required, evidence that such
plants(s) are available, and the types and numbers of individuals who
will be employed there;
(3) For Sec. 3.02(c)(3)(ii) the description should identify the
types of goods and services that likely would be purchased, and likely
sources of those goods and services located in areas of general
economic distress.
(4) For qualification under the definition of Sec. 3.02(a)(7) as a
``qualified eligible business'', the information called for in
paragraphs (b)(1)-(3) of this section should be supplied, substituting
data for areas of severe economic distress for areas of general
economic distress.
(c) The Department will conduct random reviews of the self-
certifications submitted by businesses to verify their eligibility.
(d) If there is reason to believe that a business has submitted
false information, withheld relevant information, or otherwise violated
federal law, the matter will be promptly referred to the Department's
Inspector General for investigation.
Sec. 3.05 Pre-Qualification for Eligibility.
(a) Upon request, the Department will issue certificates that
businesses have met the pre-qualification requirement(s) set forth in
Sec. 3.026(b) of this part. Such requests shall be submitted to the
Office of Empowerment Contracting, Rm xxxx, U.S. Department of
Commerce, Washington, DC 20230.
(b) In addition to having available the full details of the
documentation needed to establish their eligibility, businesses shall
submit the following with their request:
(1) For qualification under Sec. 3.02(b)(1), a summary of the
number of employees of the firm, the number of employees living in
areas of general economic distress, the wages and benefits paid to each
group in the last six months, and a list of eligible areas in which
employees live;
(2) For qualification under Sec. 3.02(b)(2), the addresses of each
of the businesses plants, indicating which are in areas of general
economic distress, a brief description of the activities conducted at
each site, and the number of employees who perform their job at each
site;
(3)(i) For qualification under Sec. 3.02(b)(3)(i), business should
submit the same information as called for under Sec. 3.05(b)(1) of this
part;
(ii) For qualification under Sec. 3.02(b)(3)(ii), the names and
addresses of all firms located in areas of general economic distress
from which the business has purchased goods, materials or services in
the past six months, the dollar total of such purchases, and the dollar
total of all goods, materials and services purchased by the business in
the past six months.
(4) For qualification under the definition of Sec. 3.02(a)(7) as a
``qualified eligible business'', the information called for in
paragraphs (b)(1)-(3) of this section should be supplied, substituting
data for areas of severe economic distress for areas of general
economic distress.
(c) Businesses may submit requests for pre-qualification under,
one, several or all of the above. If it is determined that they meet
the requirements for Sec. 3.02(b)(1) and either Sec. 3.02(b)(2),
(b)(3)(ii); or they meet one of the alternative tests to be a qualified
eligible business, the Department will issue a certificate of
eligibility. If a business meets one or more of the requirements of
Sec. 3.02(b) but does not meet all the requirements to be a qualified
large
[[Page 27560]]
business or qualified eligible business, the Department will certify as
to its pre-qualification under the requirements(s) it has met. This
last certification will qualify them for participation in the program
if they are a small business in the context of a particular
procurement.
(d) Businesses receiving such certificates of pre-qualification may
submit copies thereof in lieu of the self-certification of eligibility,
when responding to solicitations.
(e) Any business may seek pre-qualification, however, it is likely
that solicitations will have limitations on subcontracting or similar
requirements that could affect their eligibility to receive an award.
(f) Determinations as to whether a firm is a small business will be
made in the context of each particular solicitation, based on SBA
procedures and the four digit SIC code applicable to that solicitation
(g) Pre-qualification certificates will be effective for one year
from their date of issue.
(h) businesses shall notify the Department of Commerce of material
changes that would affect their eligibility status (e.g. plant closing
or major scale backs that would significantly alter their employment
data or location).
(i) Upon receipt of a request, the Department will publish notice
in the Federal Register seeking public comment. The notice will include
the name of the requesting business, the definition(s) for which it
seeks to pre-qualify, and the principal eligible areas from which
employees are employed, in which plant are located, and/or goods and
services have been obtained.
(j) After preliminary review of a request the Department will
request such additional information as it believes necessary and/or
conduct a site visit. The Department will issue or deny a request
within 30 business days of receipt, or provide the business with the
reason for delay and an expected decision date.
(k) Appeals of denials of requests for pre-qualification must be
submitted, in writing within 30 working days of the date of the denial.
The appeal should be addressed to Office of xxxx and explain why the
decision was in error. The appellant will be notified, in writing, of
the Department's final decision, which will also be entered into the
Empowerment Contracting Database.
(l) If there is reason to believe that a business has submitted
false information, withheld relevant information, or otherwise violated
federal law, the matter will be promptly referred to the Department's
Inspector General for investigation.
Sec. 3.06 Challenges--Self-Certification.
(a) An offeror may protest a concern's self-certification by filing
a protest with the contracting officer in accordance with the procuring
agency's protest procedures.
(b) The contracting officer or the Department of Commerce may
protest a concern's self-certification at any time. The Department of
Commerce protests a concern's self-certification by filing directly
with its Office of EC and notifying the contracting officer.
(c) Upon receipt of a timely protest, the contracting officer shall
withhold award and forward the protest to the Department of Commerce
Office of EC, 14th and Constitution Ave. NW, Washington, DC. 20230. The
contracting officer shall send to the Department of Commerce--
(1) The protest;
(2) The date the protest was received and a determination of
timeliness;
(3) A copy of the protested concern's submittals regarding self-
certification; and
(4) The date of bid opening or date on which notification of the
apparently successful offeror was sent to unsuccessful offerors.
(d) When the contracting officer makes a written determination that
award must be made to protect the public interest, award shall be made
notwithstanding the protest.
(e) Upon receipt of notification that a challenge has been filed,
the apparently successful offeror shall, by 5 p.m. of the business day
following the date of receipt of the notice, submit to the Office of
EC, rm xxxx U.S. Department of Commerce, Washington DC 20230, fax no.
(202) 482-xxxx., a copy of its description called for in Sec. 3.04(b).
If the description is not received in a timely manner the challenge
will be upheld.
(f) The Department will review the description, request any
additional information it may require, and conduct on site verification
if it is considered advisable, and allow the apparently successful
offeror to submit such information as it may desire to refute the
challenge. Based on this data the Department will determine whether the
business is likely to achieve the performance required to qualify.
(g) The Department of Commerce, Office of EC, will determine the
qualification status of the challenged offeror and notify the
contracting officer, the challenged offeror, and the protestor. Award
may be made on the basis of that determination. The determination is
final for purposes of the instant acquisition, unless--
(1) It is appealed; and
(2) The contracting officer receives the Department of Commerce's
decision on the appeal before award.
(h) If the contracting officer does not receive a Department of
Commerce determination within 15 business days after the Department of
Commerce's receipt of the protest, the contracting officer shall
presume that the challenged offeror's self-certification is valid.
(i) A Department of Commerce determination may be appealed by the
interested party whose protest has been denied; the concern whose
status was protested; or the contracting officer. The appeal must be
filed with the Department of Commerce's Office of EC within five
business days after receipt of the determination. The appeal should
contain significant evidence beyond that submitted previously.
(j) Following receipt of the appeal the Department will notify the
other side (challenger or apparently successful offeror). Every effort
will be made to issue a final decision prior to award of the contract
in question.
(k) Both parties and the contracting officer will be notified, in
writing, of the Department's final determination, which will be entered
into the Empowerment Contracting Database.
Sec. 3.07 Challenges--Pre-Qualification.
(a) The Department reserves the right to revoke certificates of
pre-qualification if it determines that there are material changes in a
businesses eligibility status. Accordingly, anyone who has information
that might indicate such a change in status is encouraged to submit it,
in writing, to the Office of EC, rm. xxxx. U.S. Department of Commerce,
at any time. In addition, an offeror may protest a concern's pre-
qualification by filing a protest with the contracting officer in
accordance with the procuring agency's protest procedures. The
contracting officer or the Department of Commerce may protest a
concern's pre-qualified status at any time. The Department of Commerce
protests a concern's pre-qualification by filing directly with its
Office of EC and notifying the contracting officer.
(b) Upon receipt of a timely protest, or other adverse information,
the Department will decide whether it merits further investigation. If
further action is justified the Department will request the pre-
qualified firm to submit a response to the adverse information and
conduct such other inquiry as it deems appropriate to ascertain whether
there has been a material change in
[[Page 27561]]
circumstances that would justify revoking the pre-qualification.
(c) For protests concerning particular awards, the provisions of
paragraphs (c), (d), (g), (h), (i), (j) and (k) of Sec. 3.06 of this
part shall apply.
(d) For challenges not covered by paragraph (c) of this section,
the Department of Commerce, Office of EC, will notify the challenged
business and the challenger, of its decision.
(e) Decisions to revoke pre-qualifications will become effective
upon issuance and entered into the Empowerment Contracting Database.
(f) Appeals of decisions covered by paragraph (d) of this section,
must be submitted, in writing within 30 working days of the date of the
decision. The appeal should be addressed to Office of EC and explain
why the decision was in error. The appellant will be notified, in
writing, of the Department's final decision, which will be also be
entered into the Empowerment Contracting Database.
(g) If there is reason in believe that a business has submitted
false information, withheld relevant information, or otherwise violated
federal law, the matter will be promptly referred to the Department's
Inspector General for investigation.
Sec. 3.08 Applicability.
Subject to the provisions contained in Sec. 3.11, these guidelines
shall apply to unrestricted competitions for contracts exceeding the
simplified acquisition threshold, other than those where performance
will not take place in the United States.
Sec. 3.09 Incentive Structure.
(a) Incentives, in the form of price or non-price, shall be
available in contracts subject to these guidelines. While applying
these incentives, the Contracting Officer/Source Selection Official
shall have the discretion to determine the size and type of incentive
to apply to any particular procurement.
(b) Preferences in the form of incentives shall represent a price
preference of up to 10 percent or an evaluation credit of up to 15
percent. For procurements in which source selection will be made on a
non-numerical basis, the Contracting Officer/Source Selection Official
shall ensure that the incentive selected will be given sufficient
weight to be meaningful.
(c) Any preference a business receives under these guidelines shall
be added to the preferences it may receive pursuant to other statutory
or regulatory programs.
Sec. 3.10 Montitoring and Evaluation.
Subject to the provisions of the ``Phased Implementation of the
Program'' section of these guidelines, the Commerce Department, in
conjunction with procuring agencies, shall monitor the process as
follows:
(a) Monitoring the Federal Procurement process. We would expect
that the benefit to the federal procurement system would begin to be
realized during the latter years of phase two of the program. To assist
in monitoring and evaluating the efficiency of this new program,
agencies awarding contracts to qualified businesses shall provide the
following information to the Department of Commerce:
(1) The number and dollar amount of solicitations in which an
empowerment contracting preference was offered. This information will
be broken down by SIC Major Group and by the use of the price
evaluation preference and non-price evaluation factor;
(2) The contract numbers, dollar amounts, names of awardees, and
price premiums paid (if identifiable) for awards made as a result of an
empowerment preference. This information will be broken down by SIC
Major Group;
(3) Comments on the advantages and disadvantages of the Empowerment
Contracting Program, including comments on whether the program had any
impact on the quality of supplies and services procured through its
use.
(b) Monitoring the impact on business development. Evaluation
criteria shall be established on national goals and objectives. A
sample of businesses receiving contracts under the program would be
examined with the following issues being addressed:
(1) Did the business locate or remain in a particular place so that
it would be eligible for preferences under these guidelines?
(2) Did the business hire new workers or provide additional
benefits to existing workers from eligible areas so that it would be
eligible for preferences under these guidelines?
(3) Did the business purchase additional goods and services from
firms located in eligible areas so that it would be eligible for
preferences under these guidelines?
(4) Did the business propose to hire more workers in eligible areas
as a result of bidding or proposing under the subject contract?
(5) Is this contract new work that the business would not have
received but for this program?
(c)(1) Monitoring the impact on distressed communities. In order to
examine impacts of the program on distressed communities, outcomes
should be measured in the context of local conditions and community
priorities, as well as broad national goals. The local vision for a
community's transformation should provide the principal criteria for
measuring local outcomes. The monitoring and evaluation process should
have both an initial and a longer term phase. The principal objectives
of the initial phase would be to:
(i) Establish baseline measurements of demographics, economic
indicators, physical infrastructure conditions and needs, and social
conditions;
(ii) Identify local outcome measures and common national measures
toward which long-term evaluation will be directed, including
employment, crime, education, and poverty; and
(iii) Develop a strategy and mechanism for evaluating progress
toward local and national goals over time.
(2) The longer-term evaluation should have the capacity to answer
fundamental questions about the efficacy of targeted Federal
contracting, specifically its ability to revitalize distressed
communities and to improve the social and economic well-being of
residents. This phase will examine such questions as:
(i) To what extent does the program create or improve the quality
of jobs and economic opportunities in the distressed area?
(ii) To what extent does the program result in new businesses
locating in the community or increased rates of business retention in
the community?
(iii) To what extent does the program affect areas outside the
distressed community by either connecting residents with opportunities
in the larger community or by increasing growth in the larger areas?
(iv) How have the changes in these communities affected the
jurisdictions in which they are located?
(v) How have areas (and residents) adjacent to the distressed
communities been affected?
(vi) At what cost have these outcomes been achieved? The evaluation
must ultimately provide an empirical basis for assessing program costs
relative to benefits.
(vii) How effectively does the program interact with other
government programs designed to promote the development of economically
distressed communities?
(d) In monitoring the program, the Department of Commerce may
request additional information to the extent that it deems appropriate.
[[Page 27562]]
Sec. 3.11 Phased Implementation of the Program.
(a) First phase--eighteen month period. The guidelines will apply
initially, during a first phase of eighteen months' duration, only to
contracts involving industries whose two digit Standard Industrial
Classification (``SIC'') Code major group identifiers are listed below.
Each agency will establish procedures to ensure that the Empowerment
Contracting program is applied to approximately 25 percent of the
dollar value of its eligible procurements in these SIC codes, and will
inform the Department of Commerce as to how it will ensure that this is
done.
(b) At the end of the first year of the program, the Department of
Commerce, in coordination with the agencies listed in Executive Order
13005, will evaluate the program and develop any necessary changes to
improve performance. The revised procedures will become effective in
the second phase.
(c) The two digit SIC code major group identifiers to which the
first phase will apply are:
15--Construction
20--Food and Kindred Products
23--Apparel and Other Textile Products
25--Furniture and Fixtures
27--Printing and Publishing
30--Rubber and Miscellaneous
34--Fabricated Metal Products
42--Trucking and Warehousing
51--Wholesale Trade and Durable Goods
73--Business Services
87--Management Consulting Services
(d) Second phase--further implementation. Further implementation of
the order will be instituted in the second phase of the program, which
will begin after the first phase of the program has ended, and will
extend for a period of 5 years. If the evaluation of phase one so
justifies, the second phase of the program will applied to a larger
number of contracts within selected two digit SIC Code industries
involved in competitive Federal procurements, consistent with efficient
administration of the program and the development of new sources of
supplies and services. Industries included in the second phase will be
identified in advance of being included. The efficacy of the program
will be monitored and evaluated during the second phase, subject to the
criteria set forth in the ``Monitoring and Evaluation'' section of
these guidelines. At the end of this five-year period, the Department
of Commerce in consultation with the agencies designated in the
Executive Order will ascertain whether the program is meeting its
goals. Specifically, it will be determined whether the program
stimulated economic activity (through, among other things, job creation
or new business investment) in areas of general economic distress and
benefited the federal procurement system. If the program meets these
objectives, it will be expanded to other selected industries for
similar implementation and evaluation.
William M. Daley,
Secretary of Commerce.
[FR Doc. 97-13182 Filed 5-19-97; 8:45 am]
BILLING CODE 3510-17-M
Complete official Federal Register PDF
FR Doc. 97-13166 Regulations Implementing the Federal Coal Mine Health and Safety Act of 1969, as Amended; Notice of Public Hearings
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27562-27563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13166]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employment Standards Administration
20 CFR Parts 718, 722, 725, 726 and 727
RIN 1215-AA99
Regulations Implementing the Federal Coal Mine Health and Safety
Act of 1969, as Amended; Notice of Public Hearings
AGENCY: Employment Standards Administration, Labor.
ACTION: Proposed rule; Notice of Public Hearings.
-----------------------------------------------------------------------
SUMMARY: The Employment Standards Administration (ESA) will hold public
hearings on its proposed regulations implementing the Black Lung
Benefits Act. The proposed regulations reflect the program's
suggestions for change in the processing and adjudication of individual
claims for black lung benefits. The proposal also revises the criteria
governing the responsibility of coal mine operators to secure the
payment of benefits to their employees and reflects many decisions
issued by the Benefits Review Board and U.S. courts of appeals over the
past thirteen years. ESA proposed these regulations with the goal of
improving services, streamlining the adjudication process and updating
the regulations' content. The purpose of the hearing is to receive
comments on the proposed changes.
DATES: A hearing will be held on Thursday, June 19, 1997, in
Charleston, West Virginia, from 9 a.m. to 5 p.m. A second hearing will
be held in Washington, DC with the procedures, date and time to be
announced in a later notice. Requests to make oral presentations for
the record at the first hearing should be received by Friday, June 13,
1997. Any unallotted time at the end of the hearing will be made
available to persons present and wishing to speak who have not made
timely requests.
ADDRESSES: The first hearing will be held at the Charleston Civic
Center, 2nd Floor, 200 Civic Center Drive, Charleston, West Virginia
25301. Requests to make oral presentations should be sent to James L.
DeMarce, Director, Division of Coal Mine Workers' Compensation, Room C-
3520, Frances Perkins Building, 2000 Constitution Avenue, NW.,
Washington, DC 20210, FAX Number 202-219-8568.
FOR FURTHER INFORMATION CONTACT:
James L. DeMarce, Director, Division of Coal Mine Workers'
Compensation, (202) 219-6692.
SUPPLEMENTARY INFORMATION: On January 22, 1997, ESA published a
proposed rule (62 FR 3338-3435) intended to amend and revise the
regulations implementing the Black Lung Benefits Act, subchapter IV of
the Federal Coal Mine Health and Safety Act of 1969, as amended. The
comment period originally closed on March 24, 1997, but was extended
through May 23, 1997 by subsequent notice (62 FR 8201 (Feb. 24, 1997)).
The comment period was extended once again through August 21, 1997.
The Department has received requests for public hearings from the
United Mine Workers of America, the National Black Lung Association and
the National Mining Association. These organizations represent both
individuals and companies with a strong interest in the proposed
regulations. The Department deems it desirable to provide the
interested community with the opportunity to make oral comment on the
proposed regulations.
The first hearing will be conducted in an informal manner by an ESA
official. The formal rules of evidence will not apply. The Department
may ask questions of expert or technical witnesses. The order of
appearance of persons making presentations will be determined by the
Agency. The presiding official may exercise discretion in excluding
irrelevant or unduly repetitious material and in ensuring the orderly
progress of the hearing. The hearing will provide the opportunity for
members of the public to make oral presentations. At the discretion of
the presiding official, speakers may be limited to a maximum of 20
minutes for their presentations. Individuals with disabilities, who
need special accommodations, should contact James L. DeMarce by Friday,
June 13, at the address indicated in this notice.
Verbatim transcripts of the proceedings will be prepared and made a
part of the rulemaking record. ESA will also accept additional written
comments and other appropriate data
[[Page 27563]]
from any interested party, including those not presenting oral
statements, until expiration of the comment period on August 21, 1997.
Written comments and data submitted by ESA will be included in the
rulemaking record.
Signed at Washington, DC, this 15th day of May, 1997.
Gene Karp,
Deputy Assistant Secretary for Employment Standards.
[FR Doc. 97-13166 Filed 5-19-97; 8:45 am]
BILLING CODE 4510-27-M
Complete official Federal Register PDF
FR Doc. 97-13147 Narrowband Personal Communications Services
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27563-27578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13147]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24
[GEN Docket No. 90-314; ET Docket No. 92-100; PP Docket No. 93-253; FCC
97-140]
Narrowband Personal Communications Services
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This FNPRM addresses eligibility and service area issues for
the narrowband Personal Communications Services (narrowband PCS)
channels and response channels, proposes changes to the Commission's
build-out requirements, proposes a partitioning and disaggregation
scheme, and proposes modifications to certain provisions of narrowband
competitive
[[Page 27564]]
bidding rules. The Commission believes that these proposed changes will
serve the public interest, promote competition in the wireless services
market, allow incumbents to expand their systems, increase buildout
flexibility and simplify licensing and competitive bidding procedures.
DATES: Comments are to be filed on or before June 18, 1997; reply
comments are to be filed on or before July 7, 1997.
FOR FURTHER INFORMATION CONTACT: Alice Elder or Mark Bollinger at (202)
418-0660 (Wireless Telecommunications Bureau/Auctions Division) or
David Furth or Rhonda Lien at (202) 418-0620 (Wireless
Telecommunications Bureau/Commercial Wireless Division).
SUPPLEMENTARY INFORMATION: This is a summary of the FNPRM in GEN Docket
No. 90-314, ET Docket No. 92-100 and PP Docket 93-253, adopted April
17, 1997 and released April 23, 1997. The complete text of the FNPRM is
available for inspection and copying during normal business hours in
the FCC Reference Center (Room 239), 1919 M Street, NW, Washington DC
and also may be purchased from the Commission's copy contractor,
International Transcription Services (202) 857-3800, 2100 M Street, NW,
Suite 140, Washington, DC 20037.
Synopsis of the Notice of Proposed Rule Making
Further Notice of Proposed Rule Making
I. Discussion
A. Background
1. In the narrowband PCS First Report and Order, 58 FR 42681
(August 11, 1993), the Commission provided for operation of new,
narrowband PCS in the 900 megahertz (MHz) band. The Commission broadly
defined PCS as mobile and fixed communications offerings that serve
individuals and businesses, and can be integrated with a variety of
competing networks. In the First Report and Order, the Commission
therefore declined to adopt a restrictive definition of narrowband PCS,
such as limiting this category of PCS to advanced messaging and paging
services. The Commission also adopted a spectrum allocation and
channelization plan, licensing rules, and technical standards for
narrowband PCS. Consistent with section 309(j) of the Communications
Act of 1934, as amended, the Commission has determined that PCS is
subject to competitive bidding in the case of mutually exclusive
applications.
2. In the Competitive Bidding Second Report and Order, 59 FR 22980
(May 4, 1994) the Commission adopted general competitive bidding rules
for auctionable services. In the Competitive Bidding Third Report and
Order, 59 FR 26741 (May 24, 1994), the Commission established
competitive bidding rules specifically for narrowband PCS. On
reconsideration of that Order, the Commission revised certain auction
processing rules, expanded special provisions for designated entities
in future narrowband auctions, and sought comment on additional
designated entity provisions for the upcoming narrowband PCS auction.
Of the three MHz of spectrum allocated for narrowband PCS, two one-MHz
blocks are currently divided into specific channels for immediate
licensing. The remaining one MHz of narrowband PCS spectrum currently
is reserved to accommodate future development of narrowband PCS.
3. The Commission thus far has conducted two auctions for
narrowband PCS licenses. As a result of these two auctions, ten
nationwide narrowband PCS licenses and six regional narrowband PCS
licenses in five different regions (totalling 30 regional licenses)
have been issued. Auctions have not yet been conducted for the
narrowband PCS spectrum currently designated for licensing in 51 Major
Trading Areas (MTAs) and 493 Basic Trading Areas (BTAs). In addition,
the 204 MTA licenses and 1,968 BTA licenses designated as unpaired
response channels also have not been auctioned.
B. Service Rules
4. The Commission believes that the channelization plan for
narrowband PCS provides a flexible framework that will foster its goals
of universality, speed of deployment, diversity of services, and
competitive delivery. In the narrowband PCS First Report and Order, 58
FR 42681 (August 11, 1993), the Commission found that a mix of paired,
unpaired, and varying bandwidths would provide the most flexible
solution for meeting the stated needs of narrowband PCS providers. The
Commission determined that while there appears to be interest in
providing narrowband PCS services across a wide range of local,
regional, and nationwide licensed service areas, the bulk of demand is
for large regional or nationwide licensed service areas.
5. Thus, the Commission set aside the majority of narrowband PCS
spectrum for nationwide and MTA-based licensing. In addition, the
Commission recognized that a variety of narrowband PCS services could
be offered on a local level. As a result, the Commission's initial
channelization plan for narrowband PCS consisted of 26 channels
allocated as follows: 11 channels for nationwide use, 13 channels for
use on an MTA basis, and two channels for use on a BTA basis. The
Commission also set aside eight unpaired channels with BTA service
areas for use by existing 900 MHz paging licensees as acknowledgement
or response channels.
6. In the narrowband PCS Memorandum Opinion & Order, 59 FR 37163
(July 21, 1994), the Commission modified its initial channelization
plan in two respects. First, the Commission determined that while
regional service areas based on MTAs contain sufficient population and
geographic area to support economically viable PCS services, a
continued need existed for an additional category of licenses with a
service area smaller than a nationwide area, but larger than an
individual MTA. Therefore, the Commission designated six paired
channels for licensing in five large regions to better reflect the
technologies and business plans of the licensees desiring to implement
large regional narrowband PCS systems. Second, the Commission
determined that licensing some of the eight unpaired channels for use
by existing 900 MHz paging licenses on an MTA basis would make it
easier for operators of local and regional paging systems to upgrade
and coordinate their operations. Thus, four of the paging response
channels are currently licensed using MTA service areas and four using
BTA service areas.
7. In the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM, 59 FR 44058 (August 26, 1994), the Commission proposed to
redesignate channels 25 and 26, which currently are licensed on a BTA
basis, as regional licenses with the same service areas described in
Sec. 24.102 of the Commission's rules. See 47 CFR 24.102. The proposed
redesignation of channels 25 and 26 was an outgrowth of the
Commission's concern that designated entities interested in narrowband
PCS licenses may desire service areas larger than MTAs and BTAs. In
this connection, the Commission recognized that over half of the
bidders who participated in the nationwide auction would have qualified
for an entrepreneurs' block license if it had been available. Thus, the
Commission sought comment on whether it should redesignate some or all
of the channels licensed on a BTA basis, including the response
channels licensed on a BTA basis, to be licensed on an MTA basis,
[[Page 27565]]
or take other means to achieve larger license areas. The Commission
also permitted MTA and BTA service areas to be aggregated up to and
including nationwide coverage.
8. The Commission believes the record provides support for
reconfiguring the service area size of the remaining narrowband PCS
channels. First, the Commission shares the concern of commenters that
the BTA service areas in particular are too small to provide a viable
narrowband service. The Commission's experience with similar services
suggests that larger licensing areas may be more suitable to the actual
configuration of narrowband systems. For example, the Commission
recently adopted MTA-based licensing for the 929 MHz and 931 MHz paging
bands, which are likely to be directly competitive with narrowband PCS.
The Commission also believes that narrowband PCS could be licensed
using larger areas without compromising the goal of ensuring entry for
small businesses. An illustrative comparison is provided by the 900 MHz
Specialized Mobile Radio (SMR) auction, which was MTA-based, in which
60 out of 80 high bidders are small businesses.
9. There may also be additional demand to provide narrowband PCS on
a regional or nationwide basis. In the PCS First Report and Order, the
Commission agreed with commenting parties that regional and nationwide
service areas in narrowband PCS would provide economies of scale and
should alleviate some of the problems licensees have experienced when
they have tried to aggregate smaller license areas. In the previous
narrowband PCS auctions, a number of bidders for the regional licenses
aggregated their licenses into nationwide service, and several
nationwide licenses were aggregated by a single licensee. Moreover, the
large number of regional and nationwide paging systems in the 929 and
931 MHz paging bands suggests that the market for this level of
coverage is dynamic and competitive.
10. Based on these factors, the Commission believes that its prior
proposal for reconfiguring the service areas of the remaining
narrowband PCS channels should be expanded by eliminating all BTA
licensing and instead using a combination of MTAs, regional licensing
areas, and nationwide licensing. The Commission agrees with those
commenters who argue that reallocating some of the response channels
for use in larger service areas will facilitate the upgrade of existing
paging networks. Specifically, the Commission proposes to (1)
redesignate the two remaining 50 kHz paired channels as nationwide
channels; (2) establish one nationwide, three regional, and one MTA-
based channel pairs from the five 50/12.5 kHz channel pairs; and (3)
convert the four BTA-based 12.5 kHz unpaired response channels to
regional channels. By designating these larger service areas, the
Commission seeks to give companies, including designated entities, the
opportunity to establish a viable narrowband service and to provide
regional and nationwide service if circumstances warrant. The
Commission requests comment on this proposal and on any possible
alternative service area combinations. In particular, commenters should
comment on the effect of licensing in larger areas on opportunities for
entry and competition by small businesses. The Commission also seeks
comment on whether local participation in narrowband PCS by smaller
businesses could occur through partitioning or disaggregation
arrangements with MTA-based, regional, and nationwide PCS licensees,
thus affording more opportunities to serve smaller areas.
11. The Commission also seeks comment on what effect increasing the
service area size of as-yet unlicensed channels will have on existing
narrowband PCS licenses. Although some commenters argue that using
larger areas would devalue their licenses, the Commission notes that
they were licensed over two years ago, which would appear to reduce the
impact of subsequent licensing. In addition, as noted above, numerous
paging licensees have established nationwide and regional systems that
already provide competition for narrowband PCS. Finally, the Commission
notes that the goal of its spectrum policy is not to preserve the value
of the licenses that auction winners acquire, but to promote
competition and service in the public interest. The Commission
therefore seeks comment on whether its proposals are equitable to
existing licensees, and whether they would assist new entrants in
offering services to the public in a more efficient manner.
C. Allocation of Reserve Spectrum
12. In the PCS First Report and Order, the Commission allocated
three MHz for narrowband PCS. Specifically, the narrowband PCS spectrum
was allocated into three one-MHz bands, with two MHz of this spectrum
divided into specific channels and available for immediate licensing.
At that time, the Commission determined that the service proposals for
narrowband PCS did not require use of the entire narrowband PCS
spectrum allocation. The Commission retained the flexibility to
channelize and license the remaining one MHz of spectrum for expanded
narrowband PCS licensing opportunities as the service developed.
Subsequently, several commenters to the Competitive Bidding Third
Memorandum Opinion and Order, 59 FR 44058 (August 26, 1994), raised the
issue of the reserve narrowband PCS spectrum and requested that the
Commission immediately channelize and license it.
13. The Commission believes that channelizing and licensing the
reserve narrowband PCS spectrum will serve the public interest by
facilitating competition, opening the market to new entrants, and
allowing existing narrowband PCS licensees to expand their systems
through access to additional spectrum. Therefore, the Commission
tentatively concludes that the one MHz of spectrum that it reserved in
the PCS First Report and Order should now be channelized and licensed.
The Commission seeks comment on this tentative conclusion. The
Commission also seeks comment on whether the reserve narrowband PCS
spectrum should be channelized for additional narrowband PCS paired-
channel use, or whether a greater need exists for narrowband PCS
unpaired channels. The Commission also seeks comment on the way in
which it should allocate this spectrum. For example, the Commission
could authorize three licenses: two 300-kHz licenses and one 400-kHz
license. The Commission requests comment on whether another allocation
would be preferable.
14. Additionally, the Commission requests comment on the narrowband
PCS aggregation limit and whether it should be modified in light of
this proposal. Narrowband PCS is not subject to the commercial mobile
radio service (CMRS) spectrum cap. However, a single licensee is only
permitted to hold licenses for up to three 50 kHz channels, either
paired or unpaired. This limit is based on the total narrowband PCS
spectrum held by a licensee through nationwide, regional and local
licenses at any geographic point. In light of the Commission's proposal
to open and license the narrowband PCS reserve spectrum, the Commission
seeks comment on whether these aggregation limits on narrowband PCS
spectrum are sufficient, or whether it needs to modify, increase or
eliminate such aggregation limits.
D. Construction and Coverage Requirements
15. When designing competitive bidding systems, section 309(j)(3)
of the
[[Page 27566]]
Communications Act states, in part, that ``the Commission shall include
safeguards to protect the public interest in the use of the spectrum. .
. .'' 47 CFR 309(j)(3). In addition, section 309(j)(4)(B) states that
the Commission shall include performance requirements, such as
appropriate deadlines and penalties for performance failures, to ensure
prompt delivery of service to rural areas, to prevent stockpiling or
warehousing of spectrum by licensees or permittees, and to promote
investment in and rapid deployment of new technologies and services. 47
U.S.C. 309(j)(3).
16. Pursuant to section 309(j), the Commission has previously
adopted performance requirements in the form of minimum coverage
requirements for narrowband PCS. 47 U.S.C. 24.103. Specifically,
nationwide narrowband PCS licensees must provide coverage to a
composite area of 750,000 square kilometers or serve 37.5 percent of
the U.S. population within five years of their license grants, and must
provide coverage to a composite area of 1,500,000 square kilometers or
serve 75 percent of the U.S. population within ten years of license
grant. Regional licensees must cover 150,000 square kilometers or serve
37.5 percent of the population in their licensing areas within five
years, and must cover 300,000 square kilometers or serve 75 percent of
the regional population within ten years. MTA licensees must cover
75,000 square kilometers or serve 25 percent of the MTA population in
five years, and must cover 150,000 square kilometers or serve 75
percent of the MTA population in ten years. 47 CFR 24.103.
17. Since the Commission adopted these coverage requirements for
narrowband PCS in 1994, it has moved towards a more flexible approach
to coverage requirements in other services. For example, in the paging
rulemaking, the Commission provided that paging licensees can either
meet population coverage benchmarks (one-third of licensing area
population within three years of the license grant, and two-thirds of
the population within five years) or may meet their performance
requirement by demonstrating that they are providing ``substantial
service'' in the licensing area within five years of the license grant.
Substantial service is defined as ``service that is sound, favorable,
and substantially above a level of mediocre service, which would barely
warrant renewal.'' In the Wireless Communications Service (WCS), the
Commission concluded that the unique circumstances in that case,
including an aggressive deadline for auctions and exceedingly strict
technical requirements necessary to prevent interference, necessitated
still more flexible performance requirements. WCS licensees are thus
required to provide substantial service to their service areas within
ten years. Report and Order, 62 FR 9636 (March 3, 1997). The
substantial service standard may be met in WCS by providing coverage to
20 percent of the population where mobile service is provided, or four
permanent links per one million people in its licensed service area, or
by an alternative demonstration of substantial service by the licensee.
18. In light of these developments in other services, the
Commission believes it should revisit the narrowband PCS coverage
requirements to ensure that they continue to be justified. The
Commission believes it is appropriate at a minimum to treat narrowband
PCS and paging similarly in this respect: narrowband PCS licensees
operate on adjacent bands to the 900 MHz paging licensees, and the
Commission has previously observed the close, potentially competitive
relationship between the two services. The Commission proposes to
conform its narrowband PCS rules to its paging rules by allowing
narrowband PCS licensees to meet their performance requirements through
a demonstration of substantial service as an alternative to meeting the
coverage requirements provided under the existing rules. The Commission
seeks comment on this proposal and whether an alternative coverage
standard based on geographic areas remains necessary if it adopts a
``substantial service'' alternative as proposed above.
19. The Commission also seeks comment on whether, in addition to
adopting a substantial service option, it should modify its existing
narrowband PCS coverage benchmarks. One option would be to conform
these requirements to newly adopted requirements for geographic area
paging. For example, the initial population coverage benchmark for
narrowband PCS MTA licensees is 25 percent at five years, while the
benchmark for MTA-based paging is two-thirds coverage at five years.
This may reflect differences in technology in the two services or that
paging channels already are substantially built out by incumbents,
whereas narrowband PCS licensees are only beginning their buildout
process. At ten years, MTA-based narrowband PCS licensees must achieve
75 percent population coverage or cover 150,000 square kilometers,
whereas paging licensees are not subject to any further coverage
benchmark after five years. The Commission seeks comment on whether the
existing benchmarks for MTA-based narrowband PCS licensees are
appropriate compared to its paging requirements. Commenters should also
discuss applicable coverage requirements for regional and nationwide
narrowband PCS licensees.
20. The Commission also seeks comment on whether it should
eliminate all coverage requirements for narrowband PCS. As wireless
competition evolves, narrowband PCS is likely to face significant
competition not only from other narrowband CMRS providers, including
paging and 220 MHz licensees, but also from broadband CMRS providers
who have the ability to use a portion of their spectrum to offer
``narrowband'' services such as paging and messaging. Commenters should
address whether market forces alone will provide sufficient incentives
for narrowband PCS licensees to construct facilities and provide
valuable new services to the public. In this regard, the Commission
notes that build-out requirements may encourage the provision of
service to areas that would not necessarily receive service
expeditiously solely through the operation of market forces. In
addition, build-out requirements may also prevent stockpiling or
warehousing of spectrum by allowing licenses to be recovered and made
available to entities more willing and able to provide service
expeditiously. On the other hand, simply requiring construction by
itself does not ensure that licenses are put to use in an efficient and
pro-competitive manner. Moreover, construction requirements alone may
not be effective to ensure the provision of service to rural areas,
because they can have the unintended consequence of causing licensees
to build first in urban areas where the mandatory benchmarks could be
met most cheaply, and thus may actually slow the development of service
to rural areas.
21. The Commission is obligated under section 309(j) of the
Communications Act to take sufficient measures to ``ensure prompt
delivery of service to rural areas.'' 47 U.S.C. 309(j)(4)(B). Because
narrowband PCS has already been licensed on a nationwide and regional
basis, and other competing services such as paging are widely available
throughout the U.S, including rural areas, imposing coverage
requirements with the specific intent of promoting rural service may be
unnecessary. In addition, the Commission's decisions relating to
partitioning and disaggregation in narrowband PCS should increase the
potential for service to rural or
[[Page 27567]]
underserved areas. The Commission seeks comment on the potential impact
of eliminating coverage benchmarks on service to rural or underserved
areas. Commenters should address whether the auction and service rules
that the Commission is adopting and proposing here constitute effective
safeguards and performance requirements for narrowband PCS licensing.
E. Auction Design
22. The Competitive Bidding Third Report and Order, 59 FR 26741
(May 24, 1994), established simultaneous multiple round auctions as the
methodology for awarding narrowband PCS licenses. In light of the
experience gained from the nationwide narrowband PCS auction, the
Commission later revised or clarified provisions governing minimum
opening bids, activity rules, pre-auction procedures, the release of
bidder information, and collusion. The Commission generally reaffirms
the auction methodology adopted for narrowband PCS, but seeks comment
on whether modifications should be made to the overall auction design
adopted for narrowband PCS. Additionally, having now completed thirteen
auctions under the competitive bidding authority granted by Congress
and recently having initiated a rule making to revise our general
auction rules, in this FNPRM the Commission revisits certain provisions
governing the general bidding procedures for narrowband PCS that it
believes require revision.
1. Activity Rules
23. In order to ensure that simultaneous multiple round auctions
close within a reasonable period of time and to increase the
information conveyed by bid prices during the auction, it is necessary
to impose an activity rule to prevent bidders from waiting until the
end of the auction before participating. The Commission determined in
the Competitive Bidding Third Report & Order, 59 FR 44058 (August 26,
1994) that the Milgrom-Wilson activity rule would be used in
conjunction with a simultaneous stopping rule to award narrowband PCS
licenses.
24. The Commission determined in the Competitive Bidding Third
Report and Order that a waiver procedure would apply, whereby bidders
would be permitted five automatic waivers from the activity rule during
the course of an auction. In the Competitive Bidding Third Memorandum
Opinion & Order/FNPRM, the Commission modified the waiver procedure for
the narrowband PCS auctions and allowed one automatic waiver during
each stage of an auction, or one automatic waiver during a number of
bidding rounds specified by Public Notice. The Commission noted that
while proactive waivers would keep the bidding open, under no
circumstances would an automatic waiver prevent an auction from
closing.
25. With respect to broadband PCS auctions, the Commission
initially determined that only proactive waivers, and not automatic
waivers, would keep an auction open. In that context, however, the
Commission later modified the rule by retaining the discretion to keep
an auction open even if no new acceptable bids and no proactive waivers
are submitted in a single round. The Commission observed that this
would facilitate the rapid completion of the auction by permitting the
Commission to use larger bid increments, thereby speeding the auction
pace without risking a premature auction close.
26. The Commission proposes for narrowband PCS that it retain the
same discretion as it has in the broadband PCS auctions to keep an
auction open even if no new acceptable bids and no proactive waivers
are submitted in a single round. The Commission tentatively concludes
that this provision will allow the completion of the narrowband PCS
auction in a timely and efficient manner. The Commission seeks comment
on whether this modification of its activity and stopping rules is
appropriate.
2. License Grouping
27. In the Competitive Bidding Third Report and Order, the
Commission determined that choosing which licenses to auction
simultaneously requires a judgment about the degree of interdependence
of the licenses, i.e., the extent to which the amount the bidders are
willing to pay for one license depends on the price of another. The
Commission auctioned the nationwide narrowband PCS licenses in a
simultaneous multiple round auction. The Commission then auctioned the
five regional blocks for a total of 30 licenses together in one
simultaneous multiple round auction. The Commission decided to conduct
a third simultaneous multiple round auction for all of the 50/50 kHz
paired, 50/12.5 kHz paired, and the 50 kHz unpaired MTA licenses for a
total of 357 licenses and, after the MTA licenses are auctioned, to
conduct another simultaneous multiple round auction for the 50/12.5 kHz
paired BTA licenses for a total of 986 licenses.
28. In light of the channel reallocation the Commission adopts
herein, it tentatively concludes that it will conduct one auction for
the remaining narrowband PCS spectrum that has been allocated. The
Commission reserves the right, however, to auction each category, i.e.,
nationwide, regional, MTA of the channels adopted separately. As a
result of its proposal, the Commission considers the issue raised by
commenters that BTAs should be auctioned before MTAs to be moot. The
Commission seeks comment on this proposal. The Commission also seeks
comment on whether it should auction certain categories together if it
decides to conduct more than one auction for the remaining narrowband
PCS spectrum, e.g., nationwide and regional.
3. Auction Design for Response Channels
29. There are 204 MTA 12.5 kHz unpaired response channel licenses
and 1,968 BTA 12.5 kHz unpaired response channel licenses. In the
Competitive Bidding Third Report and Order, the Commission decided to
auction the 12.5 kHz unpaired MTA and BTA response channel licenses in
a single round sealed bid auction because it determined the value of
the licenses to be low relative to the cost of conducting more complex
auctions. Moreover, because only incumbent paging licensees are
eligible to bid on these licenses, it believed that sealed bid auctions
would help to reduce the chances of collusion among the limited number
of bidders. However, petitioners convinced the Commission that paging
response channel licenses may have more interdependency and higher
value than was apparent at the time of its decision in the Competitive
Bidding Third Report and Order. In addition, the Commission stated in
the Competitive Bidding Third Memorandum Opinion & Order/FNPRM that the
nationwide narrowband auction demonstrated simultaneous multiple round
auctions are easier and less expensive to implement than anticipated.
Thus, the Commission deferred its decision regarding auction design for
the paging response channels.
30. The Commission proposes to auction the paging response channels
in one simultaneous multiple round auction, but reserves the option of
auctioning these channels with the remaining narrowband PCS licenses.
The Commission now has the experience necessary to conduct a large
simultaneous multiple round auction in an administratively efficient
manner. In addition, in balancing the advantages of simultaneous
multiple round bidding with the greater complexity that this method
entails, the Commission believes that it is the most appropriate
[[Page 27568]]
auction methodology for these auctions, because of the high value of
most narrowband PCS licenses and the significant interdependence
between spectrum blocks and geographic regions. The Commission seeks
comment on this proposal.
4. Auction Design for Reserved Spectrum
31. The Commission seeks comment on the manner in which it should
auction the one MHz of reserved spectrum. Specifically, the Commission
seeks comment on whether it should use its current narrowband PCS
rules, as set forth in part 24 of its rules or whether other rules
should be adopted to auction this spectrum. In addition, the Commission
seeks comment on whether or not it should auction the reserve spectrum
in conjunction with other narrowband spectrum. The Commission
additionally seeks comment on whether there should be any special
provisions for small businesses, and if so, whether to adopt the small
business size definition and the special provisions proposed herein.
F. Treatment of Designated Entities
1. Overview of Adarand Constructors, Inc. v. Pena
32. The Commission has employed in its narrowband PCS auction rules
a wide range of special provisions and eligibility criteria designed to
meet the statutory objectives of providing opportunities to small
businesses, rural telephone companies, and businesses owned by members
of minority groups and women, collectively known as ``designated
entities.'' Notably, the special provisions adopted for designated
entities in the two narrowband PCS auctions completed thus far produced
varied results. In the nationwide narrowband PCS auction, the
Commission provided a 25 percent bidding credit for businesses owned by
members of minority groups and/or women. No designated entities won
licenses in this auction. Although other factors could have caused this
result, the bidding credit of 25 percent proved insufficient to assist
designated entities in obtaining nationwide narrowband PCS licenses
when no other provisions were provided. The Commission considered the
results of the nationwide narrowband auction when contemplating the
provisions that would govern the regional narrowband PCS auction and
raised the bidding credit to 40 percent for businesses owned by members
of minority groups and/or women. In addition, the Commission
implemented an installment payment plan for businesses owned by members
of minority groups and women. Designated entities were more successful
in the regional narrowband PCS auction, winning all of the licenses for
which a bidding credit was provided for designated entities. In total,
designated entities won 11 of the 30 licenses offered in the regional
narrowband auction. Specifically, four of the nine winners in the
entire auction were designated entities that qualified as small
businesses owned by members of minority groups and/or women.
33. At the time the Commission's narrowband PCS rules were adopted,
an intermediate scrutiny standard of review was applied to federal
race- and gender-based programs. In Adarand Constructors v. Pena, 115
S. Ct. at 2113, the Supreme Court held that all racial classifications,
whether imposed at the federal, state or local government level, must
be analyzed by a reviewing court under a strict scrutiny standard of
review. This standard requires such classifications to be narrowly
tailored to further a compelling governmental interest. In VMI, United
States v. Commonwealth of Virginia, ____ U.S. __, 116 S.Ct. 2264
(1996), the Supreme Court reviewed a state program containing gender
classification and held it was unconstitutional under an intermediate
scrutiny standard of review. This standard requires that ``[p]arties
who seek to defend gender-based government action must demonstrate an
`exceedingly persuasive justification' for that action.'' Under this
test, the government must show ``at least that the [challenged]
classification serves `important governmental objectives and that the
discriminatory means employed' are `substantially related to the
achievement of those objectives.' '' VMI, 116 S. Ct. at 2274. While the
Supreme Court has not directly addressed constitutional challenges to
federal gender-based programs since Adarand and VMI, the Commission's
review of the relevant broad language in VMI indicates that the Court
does not differentiate between federal and state official actions in
its equal protection analysis. Similarly, the Adarand decision
definitively eliminated any distinction between federal and state race-
based programs in setting its strict scrutiny standard of judicial
review. Therefore, the Commission concludes that any gender-based
preference maintained in the narrowband PCS auction rules would need to
meet the VMI intermediate scrutiny standard of review.
34. The Adarand decision potentially affects three race- and
gender-based measures in the Commission's narrowband PCS auction rules
and proposals. First, the Commission's attribution rules enable an
applicant in which women or minorities hold 50.1 percent of the equity
while another investor holds 49.9 percent of the equity to obtain
special status as businesses owned by minorities or women. Second,
businesses owned by minorities or women and small businesses owned by
minorities or women receive larger bidding credits than other
designated entities. Finally, the Competitive Bidding Third Memorandum
Opinion & Order/FNPRM proposes that small businesses owned by
minorities or women receive the most favorable installment payment
options available. The purpose of these provisions was to address the
lack of access to capital problem that the Commission's record showed
women and minorities face.
35. The Commission tentatively concludes that the present record in
support of its race-based narrowband PCS rules lack sufficient
evidentiary support to withstand strict scrutiny. The Commission seeks
comment on its tentative conclusion and whether its provisions promote
a compelling governmental interest and, more particularly, whether
compensating for discrimination in lending practices and in practices
in the communications industry constitutes such an interest. The
Commission also asks interested parties to comment on nonremedial
objectives that could be furthered by the minority-based provisions of
its rules and whether they could be considered compelling governmental
interests, such as increased diversity in ownership and employment in
the communications industry or increased industry competition. In
commenting, the Commission asks parties to submit statistical data,
personal accounts, studies, or any other data relevant to the entry of
specific racial groups into the field of telecommunications. Examples
of relevant evidence could include discrimination against minorities
trying to obtain FCC licenses; discrimination against minorities
seeking positions of ownership or employment in communications or
related businesses; discrimination against minorities attempting to
obtain capital to start up a telecommunications enterprise, including
terms and conditions; and discrimination against minorities operating
telecommunications businesses, including treatment by vendors and
suppliers.
36. With respect to the Commission's gender-based provisions, the
Commission seeks comment on whether there are remedial or nonremedial
goals that would satisfy the ``important
[[Page 27569]]
governmental objective'' requirement of the intermediate scrutiny
standard. Are the Commission's gender-based rules ``substantially
related'' to the achievement of such objectives? Just as the Commission
requested above, in addressing evidence to support the narrowband race-
based provisions, it asks parties to submit statistical data, personal
accounts, studies, or any other data relevant to the entry of women
into the field of telecommunications. The Commission is also interested
in supplementing the current record to support race- and gender-based
provisions in its other rules. In this regard, the Commission initiated
a comprehensive rule making proceeding to explore market barriers to
women-and minority-owned businesses, as well as small businesses,
pursuant to section 257 of the Communications Act. The record created
in response to this FNPRM will also be incorporated into that docket.
37. Based on the Commission's tentative conclusions, it proposes to
offer only race- and gender-neutral provisions for narrowband PCS. The
Commission proposes that bidding credits and installment payments
should be made available to small businesses--including those owned by
minorities and women.
2. Eligibility for Bidding Credits and Installment Payments
a. Small Business Definition
38. In the Competitive Bidding Second Memorandum Opinion & Order,
59 FR 44272 (August 26, 1994), the Commission stated that it would
define eligibility requirements for small businesses on a service-
specific basis, taking into account the capital requirements and other
characteristics of each particular service. In the recently adopted
Part One NPRM, 62 FR 13540 (March 21, 1997), it proposed to continue
this practice. Once small business eligibility requirements are
defined, however, the Commission proposed in the Part One NPRM to adopt
uniform schedules of bidding credits and installment payments that
would determine the level of benefits provided to small businesses. For
the regional narrowband PCS and broadband PCS auctions, the Commission
believed that build-out and operational costs would be high and adopted
a small business threshold of $40 million. More recently, the
Commission have adopted a ``tiered'' approach for determining small
business eligibility. For instance, for the 900 MHz Specialized Mobile
Radio (SMR) service it adopted a two-tiered system for determining
eligibility for bidding credits, reduced down payments, and installment
payment plans.
39. The Commission proposes to limit eligibility for bidding
credits and installment payments to small businesses. The Commission
proposes a ``two-tiered'' approach in defining small businesses, based
on a $40 million and $15 million definition. Currently, it has a $40
million small business definition. Businesses with gross revenues of
not more than $40 million may have significantly greater difficulty in
obtaining capital than larger enterprises. At the same time, a company
with $40 million in revenue is sufficiently large that it could survive
in a competitive wireless communications market. The Commission
believes that ``small businesses,'' as defined by the Commission's
proposal, will be at a disadvantage in competing against large
companies. Accordingly, the Commission proposes to enhance special
provisions for small businesses by creating an additional category,
very small business entities, with a $15 million threshold.
40. The Commission seeks comment on these proposals. Specifically,
are $40 million and $15 million appropriate thresholds? Are such tiers
necessary to ensure that small businesses, including those owned by
minorities and women, have the opportunity to participate in providing
service on an MTA, regional, and nationwide basis? Should the
thresholds be higher or lower, based on the types of companies that are
likely to benefit from the special provisions proposed below? Also,
should different definitions of small businesses be used for different
channel blocks? For example, should the threshold for nationwide
licenses be higher than the threshold for regional licenses?
b. Attribution
41. To ensure that only bona fide small businesses avail themselves
of the special provisions provided to them, the narrowband PCS rules
requires the Commission to consider the gross revenues of the
applicant, its affiliates, and all ``attributable'' investors in the
applicant on a cumulative basis. The attribution rules established for
narrowband PCS count the gross revenues of all investors in, and
affiliates of, an applicant on a cumulative, fully-diluted basis for
purposes of determining whether the $40 million gross revenue threshold
for small businesses has been exceeded. In addition, an applicant will
not qualify as a small business if any one attributable investor in, or
affiliate of, the entity has $40 million or more in personal net worth.
There are two exceptions, however. First, applicants that meet the
definition of a small business may form consortia of small businesses
that, on an aggregate basis, exceed the gross revenue cap. Second, if
the applicant forms a ``control group,'' the gross revenues, personal
net worth, and affiliations of any investor in the applicant are not
considered so long as the investor holds 25 percent or less of the
applicant's passive equity, is not a member of the applicant's control
group, and the control group holds at least 25 percent of the
applicant's equity.
42. The Commission also established in the Competitive Bidding
Third Memorandum Opinion & Order/FNPRM a relaxed attribution standard
for women- and minority-owned businesses. Under this standard, the
gross revenues or net worth of any single investor in a minority- or
woman-owned small business applicant that is not a member of the
applicant's control group is not attributable unless it holds more than
49.9 percent of the passive equity of the applicant. The control group
must (1) own at least 50.1 percent of the applicant's equity, (2)
retain control and hold at least 50.1 percent of the voting stock, and
(3) consist entirely of minorities and/or women or entities 100 percent
owned and controlled by minorities and/or women. The gross revenues and
net worth of each member of the control group and each member's
affiliates are counted toward the gross revenue threshold or the
individual $40 million individual net worth limitation, regardless of
the size of the member's total interest in the applicant. These
provisions were intended to address the special problems of women and
minorities in obtaining financing due, in part, to discriminatory
lending practices by private financial institutions.
43. The Commission proposes replacing the ``control group''
structure established for narrowband PCS in the Competitive Bidding
Third Memorandum Opinion and Order with simpler structural and control
requirements. In determining whether an applicant qualifies as a small
business in the narrowband PCS auction, the Commission will consider
the gross revenues of the small business applicant, its affiliates, and
certain investors in the applicant. Specifically, for purposes of
determining small business status, the Commission will attribute the
gross revenues of all controlling principals in the small business
applicant as well as the gross revenues of affiliates of the applicant.
The Commission also chooses not to
[[Page 27570]]
impose specific equity requirements on the controlling principals that
meet its small business definition.
44. The Commission will still require, however, that in order for
an applicant to qualify as a small business, qualifying small business
principals must maintain ``control'' of the applicant. The term
``control'' would include both de facto and de jure control of the
applicant. For this purpose, the Commission would borrow from certain
Small Business Administration (SBA) rules that are used to determine
when a firm should be deemed an affiliate of a small business.
Typically, de jure control is evidenced by ownership of 50.1 percent of
an entity's voting stock. De facto control is determined on a case-by-
case basis. An entity must demonstrate at least the following indicia
of control to establish that it retains de facto control of the
applicant: (1) The entity constitutes or appoints more than 50 percent
of the board of directors or partnership management committee; (2) the
entity has authority to appoint, promote, demote and fire senior
executives that control the day-to-day activities of the licensees; and
(3) the entity plays an integral role in all major management
decisions. While the Commission is not imposing specific equity
requirements on the small business principals, the absence of
significant equity could raise questions about whether the applicant
qualifies as a bona fide small business. The existence of special small
business provisions requires the Commission to adopt the provisions set
forth herein in order to prevent their improper use. Accordingly, the
Commission seeks comment on whether it should count the gross revenues
and assets only of controlling principals in the applicant to determine
small business eligibility. The Commission also seeks comment on
whether there is a more appropriate attribution standard for
determining size.
45. The Commission also proposes to eliminate the $40 million
individual net worth limitation currently applicable in the
Commission's narrowband PCS rules. The Commission eliminated the
personal net worth limits for broadband PCS. In that context, the
Commission determined that the obstacles faced by minorities and
minority-controlled businesses in raising capital are not necessarily
confined to minorities with limited personal net worth. Rather than
eliminating the personal net worth limits for minorities only, however,
it eliminated the requirement for all applicants because such limits
are difficult to apply and enforce. The Commission seeks comment on
whether the individual net worth limitation should be eliminated for
narrowband PCS.
3. Bidding Credits
46. Bidding credits allow eligible designated entities to receive a
payment discount for their winning bid in an auction. In the
Competitive Bidding Third Report and Order, the Commission determined
that women and minorities would receive a 25 percent bidding credit for
three nationwide channels, two regional channels, three MTA channels,
and one BTA channel. After considering the outcome of the nationwide
narrowband auction in which no designated entities won licenses, the
Commission increased the bidding credit on the designated regional
licenses from 25 percent to 40 percent In addition, the Commission
proposed in the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM to provide bidding credits in the proposed entrepreneurs' blocks
that would give small businesses a 10 percent bidding credit, women and
minority-owned businesses a 15 percent credit, and small businesses
owned by women and minorities an aggregate credit of 25 percent.
47. Taking into account the recent Adarand decision and the
Commission's decision to redesignate the remaining narrowband channel
blocks into larger license areas, the Commission proposes to eliminate
the bidding credit scheme adopted in the Competitive Bidding Third
Report and Order and subsequently modified in the Competitive Bidding
Third Memorandum Opinion & Order/FNPRM. The Commission proposes instead
to extend a bidding credit to all small businesses on a ``tiered''
basis consistent with its proposal in the Part One NPRM. The Commission
proposes that small businesses with gross revenues of not more than $15
million for the preceding three years be entitled to a 15 percent
credit and small businesses with gross revenues of not more than $40
million for the preceding three years be entitled to a 10 percent
bidding credit. Bidding credits for small businesses will not be
cumulative. Thus, a $15 million small business will be eligible for
only a 15 percent credit, not a 25 percent credit.
48. The Commission recognizes that this proposal would enhance the
competitiveness of small businesses, which will receive a bidding
credit that they did not receive previously. The Commission tentatively
concludes, however, that extending the bidding credit to small
businesses will achieve the objectives of Congress by providing small
businesses, including women-owned and minority-owned small businesses,
a meaningful opportunity to obtain licenses in the narrowband PCS
auction. The Commission tentatively concludes that the redesignation of
channel blocks into larger geographic license areas would increase the
value of the licenses by allowing larger firms to bid on licenses that
will enable wide-area service. As a result, the Commission believes
that small businesses would require additional bidding enhancements in
order to participate in the auction.
49. The Commission further recognizes that this bidding credit
would be less than the bidding credit previously made available to
minority-and women-owned businesses in the Competitive Bidding Third
Report and Order and the Competitive Bidding Third Memorandum Opinion &
Order/FNPRM i.e., 25 percent for selected nationwide and 40 percent for
selected regional licenses. However, the Commission believes that a
lower bidding credit, combined with the installment payments will
provide sufficient opportunities for small businesses to compete for
the licenses. Furthermore, tiered bidding credits are narrowly tailored
to the varying abilities of businesses to access capital. Thus, the
Commission believes that tiering will account for the fact that smaller
businesses, which often include businesses owned by minorities and
women, have more difficulty accessing capital and thus need a more
substantial bidding credit.
4. Payment Matters
50. The current narrowband PCS rules provide installment payments
for small businesses and businesses owned by members of minority groups
and/or women bidding for any of the BTA, MTA, or regional narrowband
PCS licenses. The terms and conditions of the installment payments
follow those set forth in the Commission's general Part 1 rules,
entitling eligible licensees to pay their winning bid amount in
installments over the term of the license, with interest charges to be
fixed at the time of licensing at a rate equal to the rate for ten-year
U.S. Treasury obligations. Qualified licensees would make interest-only
payments during the first two years of the license term.
51. In light of the Adarand decision, for other services the
Commission has adopted a ``tiered'' approach to implementing
installment payment plans, which is based solely on the financial
status of licensees. Most recently, in the Broadband PCS Report and
Order, the Commission adopted a
[[Page 27571]]
tiered installment plan for the D, E, and F block broadband PCS
licenses, but limited the interest payment period to two years. 61 FR
33859 (July 1, 1996). In the earlier 900 MHz Second Order on
Reconsideration/Seventh Report and Order, 60 FR 48913 (September 21,
1995), the Commission adopted a tiered installment payment plan for 900
MHz SMR licensees.
52. The Commission tentatively concludes that quarterly installment
payments are appropriate for small businesses acquiring licenses for
narrowband PCS. Installment payments will provide financial assistance
to all small businesses. By allowing payment in installments, the
government is in effect extending credit to licensees, thus reducing
the amount of private financing needed prior to the auction. Such
government financing will promote participation by small businesses
that, because of their size and lack of access to capital, need such
incentives to participate in new spectrum opportunities such as
narrowband PCS.
53. The installment payment plan the Commission proposes today is
consistent with the plans set out in the proposed schedule in the Part
One NPRM. Small businesses with gross revenues that are not more than
$40 million for the preceding three years would be required to pay
interest only for the first two years of the license term at the
Treasury note rate plus 2.5 percent. Very small businesses with gross
revenues that are not more than $15 million for the preceding three
years would be able to make interest-only payments for two years at the
Treasury note rate without the additional 1.5 percent. In both cases,
i.e., small businesses with gross revenues of not more than $40 million
and not more than $15 million, payment of principal and interest will
be amortized over the remaining eight years of the license term and be
payable in equal, quarterly payments. Timely payment of all quarterly
installments would be a condition of the license grant, and failure to
make such timely payment could ultimately be grounds for revocation of
the license. The Commission seeks comment on this proposal. The
Commission also seeks comment on alternative installment payment plans.
54. Consistent with its recent proposal in the Part One NPRM, the
Commission seeks comment on whether it should adopt a late payment fee
on any installment payment that is overdue. Payments would be applied
in the following order: late charges, interest charges, principal
payments. Thus, a licensee who makes payment after the due date but
does make payment sufficient to pay the late fee, interest, and
principal (only if principal is due), will be deemed to have failed to
make full payment and will be subject to license cancellation pursuant
to the Commission's rules. The Commission tentatively concludes that
such a late payment provision is necessary to ensure that licensees
have an adequate financial incentive to make installment payments on
time. It notes that licensees would continue to have 90 days before a
payment is deemed delinquent but a late payment fee would be assessed
during this period. It also notes that in the Part One NPRM it proposed
that where a winning bidder misses the second down payment deadline and
fails to remit the required payment (plus the applicable late fee) by
the end of the late payment period, it would be declared in default and
subject to applicable default payments. The Commission seeks comment on
the applicability of this proposal within the context of narrowband
PCS.
55. Under Sec. 1.2110(e)(4)(ii) of the Commission's rules, interest
that accrues during a grace period will be amortized over the remaining
term of the license. Amortizing interest in this way has the effect of
changing the amount of all future payments and requiring the
Commission, or its designee, to generate a new payment schedule for the
license. Changing the amount of the installment payment has, in turn,
created uncertainty about the interest schedule, and increased the
administrative burden by requiring formulation of a new amortization
schedule. In order to avoid potential problems associated with changing
the amount of installment payments and consistent with its proposal in
the Part One NPRM, the Commission proposes to require all current
licensees who avail themselves of the grace period to pay all fees, all
interest accrued during the grace period, and the appropriate scheduled
payment with the first payment made following the conclusion of the
grace period. The Commission seeks comment on this proposal.
5. Unjust Enrichment, Holding Period and Transfer Restrictions
56. Under current rules for narrowband PCS, licensees that receive
bidding credits and installment payments, and choose to transfer their
licenses to entities not eligible for these benefits, are subject to
certain restrictions. Entities seeking to transfer a license acquired
through a bidding credit are required to repay the amount of the
bidding credit on a graduated basis until six years after the license
grant. Similarly, if a small business making installment payments seeks
to transfer a license to a non-small business entity during the term of
the license, it must pay the remaining principal balance as a condition
of the license transfer. The ineligible transferee would not have the
benefit of installment payments.
57. The Commission later sought comment on revising these
provisions in the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM. With regard to bidding credits, the Commission proposed that if,
within the original 10 year term, a licensee applies to assign or
transfer control of a license to an entity that is not eligible for as
high a level of bidding credit, then the assignor would be required to
pay to the U.S. Treasury the difference between the bidding credit
obtained by the assignor and the bidding credit for which the acquiring
party would qualify as a condition of transfer. Similarly, a sale to an
entity that would not qualify for bidding credits would entail full
repayment of the original bidding credit as a condition of transfer.
With regard to installment payments, the Commission proposed to retain
the unjust enrichment provisions adopted in the Competitive Bidding
Third Report and Order and clarified these provisions, noting that if
an entity seeks to assign or transfer control of a license to an entity
that does not qualify for as favorable an installment payment plan, the
installment payment plan for which the acquiring entity qualifies would
become effective immediately upon transfer. Thus, a higher interest
rate and earlier payment of principal may begin to be applied.
58. In the Competitive Bidding Third Memorandum Opinion & Order/
FNPRM, the Commission also proposed that entrepreneurs' block licensees
be prohibited from voluntarily assigning or transferring control of
their licenses for a period of three years from the date of grant. The
Commission asked commenters whether, for the next two to seven years of
the license term, it should permit the licensee to assign or transfer
control of its authorization only to an entity that satisfies the
entrepreneurs' blocks entry criteria. During this limited transfer
period, licensees would continue to be bound by the financial
eligibility requirements, and a transferee or assignee who receives an
entrepreneurs' block license during this period would remain subject to
the transfer restrictions for the balance of the holding period. The
Commission recognized that in order to provide significant
opportunities for
[[Page 27572]]
entrepreneurs and small businesses, applicants require flexibility. The
Commission was concerned, however, that such flexibility would
undermine the more fundamental objective to ensure that designated
entities retain de facto and de jure control of their companies. Thus,
the Commission proposed a holding and limited transfer period to
address this concern.
59. The Commission now seeks further comment on the applicability
of unjust enrichment, assignment, and transfer restrictions to the
Commission's proposed narrowband PCS rules, as they apply to designated
entities. The Commission tentatively concludes that the unjust
enrichment provisions already applicable to narrowband PCS will ensure
that large businesses do not become the unintended beneficiaries of
provisions intended to benefit small firms. The Commission thus
proposes unjust enrichment restrictions as applied to bidding credits
and installment payments, similar to the existing restrictions for
narrowband PCS. Specifically, the Commission proposes that if a small
business that has received bidding credits or is making installment
payments seeks to transfer a license to a non-small business entity
during the term of the license, it will be required to reimburse the
government for the amount of the bidding credit plus interest or the
remaining principal balance on the license, respectively, as a
condition of the license transfer. The Commission seeks comment on this
proposal. The Commission also seeks comment on whether it should
eliminate the service-specific unjust enrichment rule for narrowband
PCS in favor of the rule proposed in the Part One NPRM, which conforms
to the broadband PCS unjust enrichment rules. Furthermore, in light of
the Commission's decision not to establish an entrepreneurs' block for
narrowband PCS, the Commission tentatively concludes that it is not
necessary to propose holding and transfer restrictions for the
licenses. The Commission seeks comment on this tentative conclusion.
6. Partitioning
60. The Commission recently adopted a detailed framework for
revising the geographic partitioning and spectrum disaggregation rules
for broadband PCS. In particular, it modified the rules to (1) allow
broadband PCS licensees in the non-entrepreneurs' blocks to partition
any portion of their license area or disaggregate any portion of their
spectrum post-auction to entities that are eligible to be a broadband
licensee, (2) allow entrepreneurs' block licensees to partition and/or
disaggregate during the first five years of the license term any
portion of their licensed geographic area and/or spectrum post-auction
to entities that qualify as ``entrepreneurs'' and are eligible to be
broadband PCS licensees, (3) establish license term provisions that
permit partitioned license holders (partitionees) to hold partitioned
licenses for the duration of the original ten year license term, and
(4) establish flexible construction requirements to ensure expedient
access to broadband PCS service in partitioned areas. The Commission
concluded that these rules would facilitate the efficient use of the
broadband PCS spectrum, increase competition, and expedite the
provision of broadband PCS service to areas that may not otherwise
receive broadband PCS or other wireless services in the near term.
61. In light of the Commission's decision to redesignate narrowband
PCS MTA and BTA channel blocks to create larger service areas, it
believes that a partitioning proposal for narrowband PCS is warranted.
The Commission proposes a geographic partitioning scheme similar to
that adopted for broadband PCS. Under this proposal, anyone eligible to
be a narrowband PCS licensee, i.e., ``qualifying entity,'' would be
allowed to acquire a partitioned license. This more liberal
partitioning policy would allow spectrum to be used more efficiently,
speed service to underserved areas, and increase competition. The
Commission seeks comment on this proposal. Specifically, the Commission
seeks comment on whether a partitioning scheme should be available to
all qualifying entities, or limited to rural telephone companies as in
the initial broadband PCS rules.
62. The Commission proposes to allow all narrowband PCS licensees
to partition at any time to any entity eligible for an narrowband PCS
license. It notes that small businesses and others may face certain
barriers to entry into the provision of spectrum-based services which,
it believes, may be addressed by changes in the partitioning rules. The
Commission tentatively concludes that providing narrowband PCS
licensees with the flexibility to partition their geographic service
areas would create smaller areas that could be licensed to small
businesses, including those entities which previously may not have had
the resources to participate successfully in spectrum auctions. The
Commission also tentatively concludes that partitioning may provide a
funding source that would enable licensees to construct their systems
and provide the latest in technological enhancements to the public. The
Commission seeks comment on these tentative conclusions. In particular,
commenters are invited to address whether the partitioning scheme will
help eliminate market entry barriers for small businesses pursuant to
section 257 of the Communications Act.
63. The Commission further proposes that a partitionee be
authorized to hold its license for the remainder of the original ten-
year license term. It tentatively concludes that this term is
appropriate because a licensee, through partitioning, should not be
able to confer greater rights than it was awarded under the terms of
its license grant. The Commission solicits comment on this proposal.
64. It seeks comment on what should be the respective obligations
of the participants in a partitioning arrangement. First, with respect
to scope of narrowband PCS partitioned areas, the Commission
tentatively concludes that a flexible approach, similar to the one it
adopted for broadband PCS, is appropriate for narrowband PCS licenses.
Therefore, the Commission proposes to permit partitioning of narrowband
PCS licenses based on any geographic area defined by the parties to a
partitioning arrangement. The Commission seeks comment on this
proposal, and in particular on whether this proposal is consistent with
its licensing of narrowband PCS spectrum, and whether there are any
technical or other issues unique to narrowband PCS that might impede
the adoption of a flexible approach to defining partitioned license
areas.
65. Second, with respect to construction requirements, the
Commission seeks comment as to which party should be held responsible
for satisfying outstanding construction requirements. In this FNPRM,
the Commission has proposed construction requirements for geographic
narrowband PCS licensees at the five-year and ten-year benchmarks,
including a ``substantial service'' benchmark. In the Partitioning and
Disaggregation Report and Order, the Commission adopted two
construction options for partitioning broadband PCS licensees which
give the parties the flexibility to choose how to apportion the
responsibility to build out the partitioned license areas. The
Commission tentatively concludes that a similar approach is appropriate
for the narrowband PCS context. Thus, it proposes two options for
meeting the applicable narrowband PCS construction requirements in a
partitioning arrangement: (1) The partitionee can certify that it will
satisfy the same construction requirements as
[[Page 27573]]
the original licensee with the partitionee meeting the requirements in
its partitioned area and the partitioner being responsible for
satisfying the requirements in the area it has retained; or (2) the
original licensee can certify that it has already met or will meet its
five-year construction requirement and that it will meet the 10-year
requirement for the entire market involved. The Commission also
proposes to require that the parties to such partitioning arrangements
file supporting documentation showing compliance with the applicable
construction requirements. The Commission seeks comment on these
proposals. It also seeks comment on whether, and if so, how the option
of partitioning could be extended to incumbent narrowband PCS licensees
as well.
66. Consistent with the rules for broadband PCS, the Commission
proposes to establish separate installment payment and default
obligations for the small business licensees and partitionees. When a
licensee paying its winning bid through installment payments partitions
to a party that would qualify for installment payments, the partitionee
will be permitted to make installment payments of its pro rata portion
of the remaining government obligation. The payments will be based on
the ratio of the population of the partitioned area to the population
of the entire license area calculated on the latest available census
data. Partitionees that do not qualify for installment payments will be
required to pay their entire pro rata share with 30 days of the Public
Notice conditionally granting the partitioning transaction. The
Commission requests comment on its proposals.
67. The Commission also proposes that in cases where a licensee
that has qualified as a small business has received a bidding credit
partitions a portion of its licenses to an entity that would not meet
the eligibility standards for a bidding credit, it will require that
the licensee reimburse the government for the amount of the bidding
credit calculated on a proportional basis based on the ratio of the
population. If a small business licensee that received a bidding credit
partitions to an entity that would qualify for a lower bidding credit,
the Commission will require that the licensee reimburse the government
for the difference between the amount of the bidding credit obtained by
the licensee and the bidding credit for which the partitionee is
eligible calculated on a proportional basis based upon the ratio of
population of the partitioned area. The Commission requests comment on
its proposal.
68. It also seeks comment on the type of unjust enrichment
requirements that should be placed as a condition for approval of an
application for a partial transfer of a license owned by a qualified
small business to a non-small business entity. The Commission
tentatively concludes that these unjust enrichment provisions would
include accelerated payment of bidding credits, unpaid principal, and
accrued unpaid interest, and would be applied on a proportional basis.
The Commission seeks comment on how such unjust enrichment amounts
should be calculated, especially in light of the difficulty of devising
a methodology or formula that will differentiate the relative market
value of the opportunities to provide service to various partitioned
areas within a geographic or market area. The Commission seeks comment
on whether it should consider the price paid by the partitionee in
determining the percentage of the outstanding principle balance to be
repaid.
7. Disaggregation
69. The Commission seeks comment on the feasibility of spectrum
disaggregation for narrowband PCS. Commenters should provide technical
justifications and other relevant support in responding to this issue.
Commenters should address whether minimum disaggregation standards are
necessary for narrowband PCS services. Commenters should also address
whether the Commission should permit nationwide licensees to
disaggregate spectrum.
70. The Commission also seeks comment on what the respective
obligations of the participants in a disaggregation transfer should be,
and whether each party should be required to guarantee a proportionate
amount of the disaggregator's original auctions-related obligation in
the event of default or bankruptcy by any of the parties to the
disaggregation transfer. The Commission seeks comment on whether the
disaggregator (the original licensee) should have a continuing
obligation with respect to the entire initial license. Alternatively,
should the parties have available a choice of options, ranging from an
accelerated payment based on purchase price to a guarantee for a larger
payment by one party in the event another party defaults? Parties are
invited to comment on whether the disaggregating parties should be able
to determine which party has a continuing obligation with respect to
the original license area.
71. The Commission proposes to allow all small business licensees
to disaggregate to similarly qualifying parties as well as parties not
eligible for small business provisions. It tentatively concludes that
if it permits a qualified small business licensee to disaggregate to a
non-small business entity, the disaggregating licensee should be
required to repay any benefits it received from the small business
special provisions on a proportional basis. This would include
accelerated payment of bidding credits, unpaid principal, and accrued
unpaid interest. The Commission seeks comment on how such repayment
amounts should be calculated. It also seeks comment on whether it
should consider the price paid by the disaggregatee in determining the
percentage of the outstanding principal balance to be repaid.
72. The Commission tentatively concludes that if it permits a small
business licensee to disaggregate to another qualified small business
that would not qualify for the same level of bidding credit as the
disaggregating licensee, the disaggregating licensee should be required
to repay a portion of the benefit it received. It seeks comment on how
that amount should be calculated. Finally, the Commission seeks comment
on what provisions, if any, it should adopt to address the situation of
a small business licensee's disaggregation followed by default in
payment of a winning bid at auction.
G. Ownership Disclosure Requirements
73. The rules for narrowband PCS currently requ
FR Doc. 97-13147 Narrowband Personal Communications Services
ire applicants to
disclose on their short-form applications, FCC Form 175, and long-form
applications, FCC Form 600, certain ownership information. Section
24.413(a) of the Commission's rules provides that parties filing the
short-form application to participate in the narrowband PCS auction and
auction winners filing the long-form application shall include in an
exhibit, inter alia, (1) a list of its subsidiaries, if any, (2) a list
of its affiliates, if any, and (3) in the case of partnerships, the
name and address of each partner, each partner's citizenship and the
share or interest participation in the partnership, and a signed and
dated copy of the partnership agreement. 47 CFR Sec. 24.413(a).
74. The broadband PCS rules similarly contained ownership
disclosure requirements for both the short-form and long-form
applications. The Commission waived the five percent ownership
disclosure requirements, however, for the broadband PCS A, B, and C
block auctions. 61 FR 25808 (May 23, 1996). In that context, the
Commission reasoned that requiring applicants to list
[[Page 27574]]
all businesses in which each attributable stockholder owns at least 5
percent would necessitate reporting of interests in firms with no
relation to the services for which licenses are being auctioned, and
for many companies, particularly investment firms with diverse
holdings, might be extremely burdensome. The Commission therefore
waived Secs. 24.813(a)(1) and 24.813(a)(2) of the rules. Disclosure of
direct, attributable ownership interests in other commercial mobile
radio service licensees or applicants, however, is still required under
Sec. 20.6 of the Commission's rules. Similarly, the Commission waived
the requirement that partnerships submit a signed and dated copy of
partnership agreements with the short-form application. In waiving this
requirement, it noted that partnership agreements often discuss
strategic business objectives and financial and business obligations,
including bidding strategies, which might be highly sensitive.
75. The Commission proposes to modify the ownership disclosure
requirements for narrowband PCS as the Commission modified those
requirements for broadband PCS through waiver. The Commission
tentatively concludes that relaxing the disclosure requirements in this
regard serves the public interest by reducing the administrative
burdens associated with the auction process. The Commission seeks
comment on this proposal. Furthermore, the Commission seeks comment on
whether a separate schedule to the FCC Form 175 should be designed,
which would formalize the ownership disclosure requirements for the
short-form application that are presently reported in separate exhibits
to the FCC Form 175.
H. Construction Prior To Grant of Licenses for Narrowband and Broadband
PCS
76. In the Third Report and Order, 59 FR 26741 (August 24, 1994),
the Commission determined that all commercial mobile radio service
applicants should be subject to the same rules governing the
construction of facilities prior to grant of pending applications. The
Commission later clarified that such rules would extend to successful
broadband PCS bidders that had filed a long-form application. Thus, 35
days after the date of the Public Notice announcing the Form 600
applications accepted for filing, PCS applicants listed therein may, at
their own risk, commence construction of facilities, provided that (1)
no petitions to deny the application have been filed, (2) the
application does not contain a request for a rule waiver; (3) the
applicant complies fully with the antenna structure provisions of 47
CFR 24.416, 24.816, including FAA notification and Commission filing
requirements; (4) the application indicates that the facilities for
which construction is commenced would not have a significant
environmental effect (see 47 CFR 24.413(f), 24.813(f)); and (5)
international coordination of the facility for which construction is
commenced is not required.
77. The Commission proposes to modify its pre-licensing
construction requirements for both broadband and narrowband PCS in
order to expedite service to the public. Specifically, the Commission
proposes that long-form applicants may begin construction of facilities
at their own risk regardless of whether petitions to deny have been
filed. In adopting pre-grant construction rules for CMRS applicants in
general, the Commission favored a more liberal approach, urged by the
industry's comments that granting applicants authority to engage in
pre-grant construction could advance the date on which the public
receives service. The Commission continues to believe that liberal pre-
grant construction rules could speed the deployment of services to the
public. The Commission also believes that applicants that begin
construction pursuant to these provisions before receiving a final
license grant do so at their own risk and, thus, they assume the risk
that their licenses may not be granted as a result of pending petitions
to deny. The Commission proposes to retain the remaining restrictions,
however, in light of the specific public interest considerations they
promote. The Commission seeks comment on these tentative conclusions
and proposals.
II. Conclusion
78. The Commission believes that the proposals set forth for
narrowband PCS in this FNPRM will promote the public policy goals set
forth by Congress.
III. Procedural Matters
A. Regulatory Flexibility Act
79. With respect to this FNPRM, as required by section 603 of the
Regulatory Flexibility Act, the Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA) of the expected impact on small
entities of the proposals suggested in this document. Written public
comments are requested on the IRFA. These comments must be filed in
accordance with the same filing deadlines as comments on the rest of
the FNPRM but they must have a separate and distinct heading
designating them as responses to the Initial Regulatory Flexibility
Analysis. The Secretary shall send a copy of this FNPRM, including the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration in accordance with
paragraph 603(a) of the Regulatory Flexibility Act. Pub. L. 96-354, 94
Stat. 1164, 5 U.S.C. 601 et seq. (1981).
80. Reason for Action: This FNPRM was initiated to secure comment
on proposals for revising rules for narrowband PCS. Such changes to the
rules for the narrowband PCS service would promote efficient licensing
and enhance the service's competitive potential in the Commercial
Mobile Radio Service marketplace. The adopted and proposed rules are
based on the competitive bidding authority of section 309(j) of the
Communications Act of 1934, as amended, 47 U.S.C. 309(j), which
authorized the Commission to use auctions to select among mutually
exclusive initial applications in certain services, including
narrowband Personal Communications Services (PCS).
81. Objectives of this Action: The Omnibus Budget Reconciliation
Act of 1993 (Budget Act), Pub. L. 103-66, Title VI, section 6002, and
the subsequent Commission actions to implement it are intended to
establish a system of competitive bidding for choosing among certain
applications for initial licenses, and to carry out statutory mandates
that certain designated entities, including small businesses, are
afforded an opportunity to participate in the competitive bidding
process and in the provision of narrowband PCS services.
82. Legal Basis: The proposed action is authorized under the Budget
Act and in sections 4(i), 303(r), and 309(j) of the Communications Act
of 1934, as amended, 47 U.S.C. 154(i), 303(r) and 309(j).
83. Reporting, Recordkeeping, and Other Compliance Requirements:
The proposals under consideration in this FNPRM include the possibility
of new reporting and recordkeeping requirements for a number of small
business entities, as follows. The Commission requests comment on these
proposals.
a. Service Area Reallocation. The Commission proposes revising its
current channelization plan to ensure that it provides sufficient
opportunities for all interested parties, including small businesses,
to establish a viable narrowband PCS system. The Commission is
concerned that such opportunities may not be meaningful if a single
Basic Trading Area (BTA) is not
[[Page 27575]]
a sufficiently large service area for implementation of narrowband PCS.
The Commission has previously stated that the larger Major Trading Area
licenses (MTAs) will provide for more reasonable and homogeneous
license areas for the provision of PCS. In addition, the Commission
reiterates that local participation in narrowband PCS could occur
through franchising or partitioning arrangements with nationwide and
regional PCS licensees, thus affording more opportunities to serve
smaller areas. As a result, the Commission tentatively concludes that
it will redesignate certain narrowband PCS frequencies for larger
service areas and will thus provide additional opportunities for
designated entities, including small businesses. The Commission
proposes that the remaining narrowband PCS channel blocks will be
redesignated as follows: (1) redesignate the two remaining 50 kHz
paired channels as nationwide channels; (2) establish one nationwide,
three regional, and one MTA-based channel pairs from the five 50/12.5
kHz channel pairs; and (3) convert the four BTA-based 12.5 kHz unpaired
response channels to regional channels. The Commission does not
anticipate any additional reporting or recordkeeping requirements from
this proposal.
b. Response Channel Redesignation. The Commission tentatively
concludes that the paging response channels should be reallocated for
use in larger service areas. The Commission agrees with commenters who
argue that reallocating some of the response channels for use in larger
service areas will facilitate the upgrade of existing paging networks
and enhance narrowband PCS systems. The Commission therefore proposes
to redesignate the four 12.5 kHz unpaired response channels currently
licensed as BTA channel blocks as regional channel blocks, and retain
the four MTA paging response channels. Additionally, the Commission
does not redesignate response channels to an entrepreneurs' block.
Instead, as discussed in the FNPRM, the Commission proposes to open
eligibility for these channels to all applicants, not just incumbent
paging licensees. The Commission does not anticipate any additional
reporting or recordkeeping requirements from this proposal.
c. Construction Requirements. The proposals in the FNPRM include
the possibility of imposing reporting and recordkeeping requirements
for new narrowband PCS licensees to establish compliance with the
coverage requirements, if such requirements are adopted.
d. Geographic Partitioning and Spectrum Disaggregation. The
proposals in the FNPRM include the possibility of imposing reporting
and recordkeeping requirements for small businesses seeking licenses
through the proposed partitioning and disaggregation rules. The
information requirements would be used to determine whether the
licensee is a qualifying entity to obtain partitioned or disaggregated
spectrum. This information will be a one-time filing by any applicant
requesting such a license. The information will be submitted on the FCC
Forms 490 (or 430 and/or 600 filed as one package under cover of the
Form 490) which are currently in use and have already received OMB
clearance. The Commission estimates that the average burden on the
applicant is three hours for the information necessary to complete
these forms. The Commission estimates that 75 percent of the
respondents, which may include small businesses, will contract out the
burden of responding. The Commission estimates that it will take
approximately 30 minutes to coordinate information with those
contractors. The remaining 25 percent of respondents, which may include
small businesses, are estimated to employ in-house staff to provide the
information. Applicants, including small businesses, filing the package
under cover of FCC Form 490 electronically will incur a $2.30 per
minute on-line charge. On-line time would amount to no more than 30
minutes. The Commission estimates that 75 percent of the applicants may
file electronically. The Commission estimates that applicants
contracting out the information would use an attorney or engineer, with
an average cost of $200 per hour, to prepare the information.
e. Construction Prior to Grant of Licenses for Narrowband and
Broadband PCS. The proposals in the FNPRM include the possibility of
changing existing Commission pre-licensing construction requirements
for narrowband PCS. The proposal in the FNPRM would allow long-form
applicants to begin construction of facilities at their own risk,
regardless of whether any petitions to deny have been filed. The
Commission does not anticipate any additional reporting or
recordkeeping requirements from this proposal.
f. Small Business Definition. The FNPRM proposes a two-tiered
definition to define small businesses: (1) A small business is a
business with average gross revenues for each of the preceding three
years that do not exceed $40 million, and (2) a very small business is
one which has less than an average of $15 million in gross revenues in
each of the last three years. Qualifying entities will be eligible for
bidding credits and installment plans. In order to qualify as small
business under either tier, an entity must demonstrate that its gross
revenues fall within the proposed thresholds. The information will be
submitted on the FCC Form 600, which is currently in use and which has
received OMB clearance. Such entities will also need to maintain
supporting documentation at their principal place of business.
g. Ownership Disclosure Requirements. The proposals in the FNPRM
include the possibility of changing the ownership disclosure
requirements for all applicants. The information requirements would be
used to determine whether the licensee is a qualifying entity under the
Commission's ownership rules. The proposals include relaxing the
disclosure requirements, such as the required submittal of partnership
agreements, which would reduce the administrative burdens associated
with the auction process. The Commission also seeks comment on whether
a separate schedule to FCC Form 175 should be designated, which would
formalize the disclosure requirements to the current FCC Form 175. The
proposal in the FNPRM would decrease the amount of information that a
narrowband PCS applicant would be required to file. This information
will be a one-time filing by any applicant requesting such a license.
The information will be submitted on the FCC Forms 600 and FCC Form
175, which are currently in use and have already received OMB
clearance.
84. Federal Rules Which Overlap, Duplicate or Conflict With These
Rules: None.
85. Description, Potential Impact, and Number of Small Entities
Involved: The FNPRM would establish certain narrowband PCS spectrum
blocks for bidding by smaller entities as well as larger entities, and
would provide installment payments and bidding credits to certain
eligible entities bidding within those blocks. The Commission is
required to estimate in its Final Regulatory Flexibility Analysis the
number of small entities to which a rule will apply, provide a
description of such entities, and assess the impact of the rule on such
entities. To assist the Commission in this analysis, commenters are
requested to provide information regarding how many total entities,
existing and potential, would be affected by the proposed rules in the
FNPRM. In particular, the Commission
[[Page 27576]]
seeks estimates of how many such entities will be considered small
businesses.
86. Geographic Partitioning and Spectrum Disaggregation. The
partitioning and disaggregation rule changes proposed in this
proceeding will affect all small businesses which avail themselves of
these rule changes, including small businesses currently holding
narrowband PCS licenses who choose to partition and/or disaggregate and
small businesses who may acquire licenses through partitioning and/or
disaggregation.
87. The Commission is required to estimate in its Final Regulatory
Flexibility Analysis the number of small entities to which a rule will
apply, provide a description of such entities, and assess the impact of
the rule on such entities. To assist the Commission in this analysis,
commenters are requested to provide information regarding how many
total entities, existing and potential, would be affected by the
proposed rules in the FNPRM. In particular, the Commission seeks
estimates of how many such entities will be considered small
businesses. The Commission is utilizing the SBA definition applicable
to radiotelephone companies, i.e., an entity employing less than 1,500
persons. 13 CFR 121.201, Standard Industrial Classification Code 4812.
The Commission seeks comment on whether this definition is appropriate
for narrowband PCS licensees in this context. Additionally, the
Commission requests each commenter to identify whether it is a small
business under this definition. If a commenter is a subsidiary of
another entity, this information should be provided for both the
subsidiary and the parent corporation or entity.
88. The Commission estimates that the approximately 30 current
regional narrowband PCS licensees and 11 nationwide narrowband PCS
licensees could take the opportunity to partition and/or disaggregate a
license or obtain an additional license through partitioning or
disaggregation. New entrants could obtain narrowband PCS licenses
through the competitive bidding procedure, and take the opportunity to
partition and/or disaggregate a license or obtain an additional license
through partitioning or disaggregation. Additionally, entities that are
neither incumbent licensees nor geographic area licensees could enter
the market by obtaining a narrowband PCS license through partitioning
or disaggregation. The Commission cannot estimate how many licensees or
potential licensees could take the opportunity to partition and/or
disaggregate a license or obtain a license through partitioning and/or
disaggregation, because it has not yet determined the size or number of
narrowband PCS licenses that will be granted in the future. Given the
fact that nearly all radiotelephone companies have fewer than 1,000
employees, and that no reliable estimate of the number of future
narrowband PCS licensees can be made, the Commission assumes for
purposes of this IRFA that all of the licenses will be awarded to small
businesses. It is possible that a significant number of the potential
licensees who could take the opportunity to partition and/or
disaggregate a license or who could obtain a license through
partitioning and/or disaggregation will be small businesses.
89. Any Significant Alternatives Minimizing the Impact on Small
Entities Consistent with the Stated Objectives: In the FNPRM, the
Commission seeks comment on whether coverage requirements should be
imposed for all narrowband PCS licensees. Any significant alternatives
presented in the comments will be considered. Coverage requirements for
narrowband PCS licensees, if adopted, would probably not affect small
businesses.
90. With respect to partitioning, the Commission tentatively
concludes that unjust enrichment provisions should apply when a
licensee has benefitted from the small business provisions in the
auction rules and partitions a portion of the geographic license area
to another entity that would not qualify for such benefits. The
alternative to applying the unjust enrichment provisions would be to
allow an entity who had benefitted from the special bidding provisions
for small businesses to become unjustly enriched by partitioning a
portion of their license area to parties that do not qualify for such
benefits. The Commission also seeks comment on whether spectrum
disaggregation would be feasible for narrowband PCS, and how much
spectrum a narrowband PCS licensee should be permitted to disaggregate.
91. The FNPRM proposes certain provisions for smaller entities
designed to ensure that such entities have the opportunity to
participate in the competitive bidding process and in the provision of
narrowband PCS services. Any significant alternatives presented in the
comments will be considered.
B. Paperwork Reduction Act
92. As required by the Regulatory Flexibility Act, see 3 U.S.C.
603, the Commission has prepared an Initial Regulatory Flexibility
Analysis (IRFA) of the expected impact on small entities of the
policies and rules proposed and adopted in the FNPRM section of this
Report and Order and FNPRM. Written public comments are requested on
the IRFA and must be filed by the deadlines for comments on the Report
and Order and FNPRM.
C. Federal Rules Which Overlap, Duplicate or Conflict With These Rules
None.
D. Description, Potential Impact, and Number of Small Entities Involved
93. The FNPRM would establish certain narrowband PCS spectrum
blocks for bidding by smaller entities as well as larger entities, and
would provide installment payments and bidding credits to certain
eligible entities bidding within those blocks. The Commission is
required to estimate in its Final Regulatory Flexibility Analysis the
number of small entities to which a rule will apply, provide a
description of such entities, and assess the impact of the rule on such
entities. To assist the Commission in this analysis, commenters are
requested to provide information regarding how many total entities,
existing and potential, would be affected by the proposed rules in the
FNPRM. In particular, the Commission seeks estimates of how many such
entities will be considered small businesses.
94. Geographic Partitioning and Spectrum Disaggregation. The
partitioning and disaggregation rule changes proposed in this
proceeding will affect all small businesses which avail themselves of
these rule changes, including small businesses currently holding
narrowband PCS licenses who choose to partition and/or disaggregate and
small businesses who may acquire licenses through partitioning and/or
disaggregation.
95. The Commission is required to estimate in its Final Regulatory
Flexibility Analysis the number of small entities to which a rule will
apply, provide a description of such entities, and assess the impact of
the rule on such entities. To assist the Commission in this analysis,
commenters are requested to provide information regarding how many
total entities, existing and potential, would be affected by the
proposed rules in the FNPRM. In particular, the Commission seeks
estimates of how many such entities will be considered small
businesses. The Commission is utilizing the Small Business
Administration definition applicable to radiotelephone companies, i.e.,
an entity employing less
[[Page 27577]]
than 1,500 persons. The Commission seeks comment on whether this
definition is appropriate for narrowband PCS licensees in this context.
Additionally, the Commission requests each commenter to identify
whether it is a small business under this definition. If a commenter is
a subsidiary of another entity, this information should be provided for
both the subsidiary and the parent corporation or entity.
96. The Commission estimates that the approximately 30 current
regional narrowband PCS licensees and 11 nationwide narrowband PCS
licensees could take the opportunity to partition and/or disaggregate a
license or obtain an additional license through partitioning or
disaggregation. New entrants could obtain narrowband PCS licenses
through the competitive bidding procedure, and take the opportunity to
partition and/or disaggregate a license or obtain an additional license
through partitioning or disaggregation. Additionally, entities that are
neither incumbent licensees nor geographic area licensees could enter
the market by obtaining a narrowband PCS license through partitioning
or disaggregation. The Commission cannot estimate how many licensees or
potential licensees could take the opportunity to partition and/or
disaggregate a license or obtain a license through partitioning and/or
disaggregation, because it has not yet determined the size or number of
narrowband PCS licenses that will be granted in the future. Given the
fact that nearly all radiotelephone companies have fewer than 1,000
employees, and that no reliable estimate of the number of future
narrowband PCS licensees can be made, the Commission assumes for
purposes of this IRFA that all of the licenses will be awarded to small
businesses. It is possible that a significant number of the potential
licensees who could take the opportunity to partition and/or
disaggregate a license or who could obtain a license through
partitioning and/or disaggregation will be small businesses.
E. Any Significant Alternatives Minimizing the Impact on Small Entities
Consistent With the Stated Objectives
97. In the FNPRM the Commission seeks comment on whether coverage
requirements should be imposed for all narrowband PCS licensees. Any
significant alternatives presented in the comments will be considered.
Coverage requirements for narrowband PCS licensees, if adopted, would
probably not affect small businesses.
98. With respect to partitioning, the Commission tentatively
concludes that unjust enrichment provisions should apply when a
licensee has benefitted from the small business provisions in the
auction rules and partitions a portion of the geographic license area
to another entity that would not qualify for such benefits. The
alternative to applying the unjust enrichment provisions would be to
allow an entity who had benefitted from the special bidding provisions
for small businesses to become unjustly enriched by partitioning a
portion of their license area to parties that do not qualify for such
benefits. The Commission also seeks comment on whether spectrum
disaggregation would be feasible for narrowband PCS, and how much
spectrum a narrowband PCS licensee should be permitted to disaggregate.
99. The FNPRM proposes certain provisions for smaller entities
designed to ensure that such entities have the opportunity to
participate in the competitive bidding process and in the provision of
narrowband PCS services. Any significant alternatives presented in the
comments will be considered.
100. IRFA Comments: The Commission requests written public comment
on the foregoing Initial Regulatory Flexibility Analysis. Comments must
have a separate and distinct heading designating them as responses to
the IRFA and must be filed by the deadlines provided in paragraph 109
of this FNPRM.
101. Dates. Written comments by the public on the proposed
information collections are due on or before June 18, 1997 and reply
comments are due on or before July 7, 1997. Written comments must be
submitted by the Office of Management and Budget (OMB) on the proposed
information collection on or before June 18, 1997 and reply comments
are due on or before July 7, 1997.
102. Addresses: In addition to filing comments with the Secretary,
a copy of any comments on the information collections contained herein
should be submitted to Dorothy Conway, Federal Communications
Commission, Room 234, 1919 M Street NW, Washington DC 20554, or via the
Internet to [email protected], and to Timothy Fain, OMB Desk Officer,
10236 NEOB, 725 17th Street NW, Washington, DC 20503 or via the
Internet to [email protected].
103. Further Information: For additional information concerning the
information collections contained in the NPRM, contact Dorothy Conway
at (202) 418-0217, or via the Internet at [email protected].
104. Supplementary Information:
Title: Amendment of the Commission's Rules to Establish New
Personal Communications Services, Narrowband PCS, implementation of
section 309(j) of the Communications Act--Competitive Bidding,
Narrowband PCS, FNPRM.
OMB Number: 3060-0604.
Form Number: FCC Forms 175 and 600.
Type of Review: Revision of existing collection.
Respondents:
Affected public: Individuals, State or local governments,
Businesses or other for-profit, Small businesses or organizations.
Number of respondents: 6,136.
Estimated time per response: 6 hours.
Total annual burden: 16,000.5 hours.
Needs and uses: The auction rules require narrowband PCS applicants
to submit (1) information to qualify for small businesses, (2)
ownership information, (3) proof of compliance with coverage
requirements and (4) eligibility to participate in partitioning and
disaggregation. The information needed to qualify as a small business
and the ownership information will be submitted as attachments to FCC
Form 600. Coverage requirements will be submitted in letter form during
designated benchmarks during the license term. The information for
partitioning and disaggregation will be covered under a generic
clearance which has been submitted to OMB for approval. Collection of
information is required so that the Commission can determine whether
narrowband PCS applicants are legally, technically and financially
qualified to be licensed and whether applicants are entitled to receive
certain benefits. The information will also be used to ensure that
licensees who acquire their licenses through competitive bidding are
not unjustly enriched by premature transfer of their licenses. Without
the information, the Commission could not determine whether to issue
the licenses to the applicants that provide telecommunication services
to the public. The information is used by Commission staff in carrying
out its duties under the Communications Act. This is a revision of a
previously approved collection. If no changes are made to these
collections in the Report and Order, a correction worksheet will be
submitted at that time.
F. Ex Parte Rules--Non-Restricted Proceeding
105. This is a non-restricted notice proceeding. Ex parte
presentations are permitted except during the Sunshine Agenda period,
provided they are
[[Page 27578]]
disclosed as provided in the Commission's rules. See generally 47 CFR
1.1202, 1.1203, and 1.1206(a).
G. Comment Dates
106. Pursuant to applicable procedures set forth in Secs. 1.415 and
1.419 of the Commission's rules, 47 CFR 1.415 and 1.419, interested
parties may file comments on or before June 18, 1997, and reply
comments on or before July 7, 1997. To file formally in this
proceeding, you must file an original and four copies of all comments,
reply comments, and supporting comments. If you want each Commissioner
to receive a personal copy of your comments, you must file an original
plus nine copies. You should send comments and reply comments to the
Office of the Secretary, Federal Communications Commission, Washington,
DC 20554. Comments and reply comments will be available for public
inspection during regular business hours in the FCC Reference Center of
the Federal Communications Commission, Room 239, 1919 M Street, NW,
Washington, DC 20554.
H. Ordering Clauses
107. Authority for issuance of this FNPRM is contained in sections
4(i), 303(r) and 309(j) of the Communications Act of 1934, as amended,
47 U.S.C. 154(i), 303(r) and 309(j).
List of Subjects in 47 CFR Part 24
Communications common carriers, Radio, Reporting and recordkeeping
requirements.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-13147 Filed 5-19-97; 8:45 am]
BILLING CODE 6712-01-P
Complete official Federal Register PDF
FR Doc. 97-13129 Long-Range Financial Forecasts of Electric Borrowers
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27546-27547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13129]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1710
RIN 0572-AA89
Long-Range Financial Forecasts of Electric Borrowers
AGENCY: Rural Utilities Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Rural Utilities Service (RUS) proposes to amend its policy
on long-range financial forecasts of electric borrowers. RUS requires
that applicants for loans, loan guarantees, lien accommodations, and
certain general fund approvals, submit, as part of their application, a
long-range financial forecast. RUS loans are generally amortized over a
period of 35 years, and the long-range financial forecast provides RUS
information necessary to determine that the loans are feasible. This
amended provision will eliminate some of the items in the present
forecasting regulation that are no longer considered necessary to be
included in borrower's forecast. Eliminated items include the
sensitivity study for all forecasts, and a commercially available
credit report for applicants seeking a loan or loan guarantee. The
proposed regulation provides that RUS may request a sensitivity study
on a case-by-case basis.
DATES: Written comments must be received by RUS or carry a postmark or
equivalent by July 21, 1997.
ADDRESSES: Written comments should be addressed to William E. Davis,
Program Advisor, Electric Program, Rural Utilities Service, U.S.
Department of Agriculture, 1400 Independence Ave., SW., Washington, DC
20250-1569. RUS requires a signed original and three copies of all
comments (7 CFR 1700.30(e)). Comments will be available for public
inspection during regular business hours (7 CFR 1.27(b)).
FOR FURTHER INFORMATION CONTACT: William E. Davis, Program Advisor,
Electric Program, Rural Utilities Service, U.S. Department of
Agriculture, 1400 Independence Ave., SW., Washington, D.C. 20250-1569,
telephone number: (202) 720-0738, E-mail: [email protected].
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been determined to be not significant for
purposes of Executive Order 12866 and therefore has not been reviewed
by OMB.
Executive Order 12778
This proposed rule has been reviewed in accordance with Executive
Order 12778, Civil Justice Reform. RUS has determined that this
proposed rule meets the applicable standards provided in Section 3 of
the Executive Order.
Regulatory Flexibility Act Certification
The Administrator of RUS has determined the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) definition of the rule does not include
rules relating to the RUS electric program, and, therefore, the
Regulatory Flexibility Act does not apply to this proposed rule.
Information Collection and Recordkeeping Requirements
The reporting and recordkeeping requirements contained in the
proposed rule were approved by the Office of Management and Budget
(OMB) pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35, as amended) under control number 0572-0032.
Send questions or comments regarding this burden or any other
aspect of these collections of information, including suggestions for
reducing the burden to William E. Davis, Program Advisor, Electric
Program, Rural Utilities Service, 1400 Independence Ave., SW.,
Washington, D.C. 20250-1569.
National Environmental Policy Act Certification
RUS has determined that this proposed rule will not significantly
affect the quality of the human environment as defined by the National
Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). Therefore,
this action does not require an environmental impact statement or
assessment.
Catalog of Federal Domestic Assistance
The program described by this proposed rule is listed in the
Catalog of Federal Domestic Assistance Programs under number 10.850
Rural Electrification Loans and Loan Guarantees. This catalog is
available on a subscription basis from the Superintendent of Documents,
the United States Government Printing Office, Washington, D.C. 20402-
9325, telephone number (202)783-3238.
[[Page 27547]]
Executive Order 12372
This proposed rule is excluded from the scope of Executive Order
12372, Intergovernmental Consultation. A Notice of Final Rule entitled
Department Programs and Activities Excluded from Executive Order 12372
(50 FR 47034) exempts RUS loans and loan guarantees to governmental and
nongovernmental entities from coverage under this order.
National Performance Review
This regulatory action is being taken as part of the
National Performance Review program to eliminate unnecessary
regulations and improve those that remain in force.
Background
Rural Utilities Services,(RUS), makes loans, loan guarantees, and
lien accommodations to provide electric service to new consumers, and
to improve the quality and quantity of electric service to existing
consumers in rural areas, as authorized by the Rural Electrification
Act of 1936, as amended, 7 U.S.C. 901 et seq. (RE Act). According to
the terms of the RE Act and RUS regulations, RUS may make a loan only
if the Administrator of RUS determines that the security thereof is
reasonably adequate and such loan will be repaid within the time
agreed.
Regulations establishing the requirement that borrowers submit a
long-range financial forecast as part of a loan application are set
forth at 7 CFR part 1710, subpart G. On October 19, 1993, at 58 FR
53835, Rural Electrification Administration (REA), predecessor to RUS,
published a rule, 7 CFR part 1717, subparts R and S, setting forth
policies for lien accommodations and subordination. Under this
regulation, RUS requires borrowers to submit a long-range financial
forecast as part of certain applications for a lien accommodation or
subordination. The proposed regulation will affect these requirements
by changing how the long-range financial forecast is prepared.
List of Subjects in 1 CFR Part 1710
Electric power, Electric utilities, Loan programs-energy, Rural
areas.
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO
INSURED AND GUARANTEED ELECTRIC LOANS
1. The authority citation for part 1710 continues to read as
follows:
Authority: 7 U.S.C. 901-905b; Public Law 99-591, 100 Stat. 3341-
16; Public Law 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.)
2. Section 1710.300 is amended by revising paragraph (d)(5) to read
as follows:
Sec. 1710.300 General.
* * * * *
(d) * * *
(5) A sensitivity analysis may be required by RUS on a case-by-case
basis. When RUS determines that a sensitivity analysis is necessary for
Distribution Borrowers, the variables to be tested will be determined
by the General Field Representative in consultation with the Borrower
and the Regional Office. The Regional Office will consult with the
Power Supply Division in the case of generation projects for
Distribution Borrowers. For Power Supply Borrowers, the variables to be
tested will be determined by the borrower and the Power Supply
Division.
* * * * *
3. Paragraph (f) of section 1710.300 is removed.
4. Section 1710.302 is amended by revising paragraphs (b), (d)(1),
and (d)(5), to read as follows:
Sec. 1710.302 Financial forecasts--power supply borrowers.
* * * * *
(b) The financial forecast shall cover a period of 10 years. RUS
may request projections for a longer period of time if deemed
necessary.
* * * * *
(d) * * *
(1) Identify all plans for generation and transmission capital
additions and system operating expenses on a year-by-year basis,
beginning with the present and running for 10 years, unless a longer
period of time has been requested by RUS.
* * * * *
(5) Include sensitivity analysis if required by RUS pursuant to
Sec. 1710.300(d)(5).
* * * * *
Dated: May 9, 1997.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 97-13129 Filed 5-19-97; 8:45 am]
BILLING CODE 3410-15-P
Complete official Federal Register PDF
FR Doc. 97-13125 Intangibles Under Sections 1060 and 338; Hearing Cancellation
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Page 27563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13125]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-252665-96]
RIN 1545-AU82
Intangibles Under Sections 1060 and 338; Hearing Cancellation
AGENCY: Internal Revenue Service, Treasury.
ACTION: Cancellation of notice of public hearing on proposed
regulations.
-----------------------------------------------------------------------
SUMMARY: This document provides notice of cancellation of a public
hearing on proposed regulations relating to purchase price allocations
in taxable asset acquisitions and deemed asset purchases.
DATES: The public hearing originally scheduled for Thursday, May 22,
1997, beginning at 10:00 a.m. is cancelled.
FOR FURTHER INFORMATION CONTACT: Mike Slaughter of the Regulations
Unit, Assistant Chief Counsel (Corporate), 202) 622-7190, (not a toll-
free number).
SUPPLEMENTARY INFORMATION: The subject of the public hearing is
proposed regulations under sections 1060 and 338 of the Internal
Revenue Code. A notice of proposed rulemaking by cross-reference to
temporary regulations and notice of public hearing appearing in the
Federal Register on Thursday, January 16, 1997 (62 FR 2335), announced
that the public hearing on proposed regulations under sections 1060 and
338 of the Internal Revenue Code would be held on Thursday, May 22,
1997, beginning at 10:00 a.m., in the Commissioner's Conference Room,
Room 3313, Internal Revenue Building, 1111 Constitution Avenue, NW.
Washington, D.C.
The public hearing scheduled for Thursday, May 22, 1997 is
cancelled.
Cynthia E. Grigsby,
Chief, Regulations Unit, Assistant Chief Counsel (Corporate).
[FR Doc. 97-13125 Filed 5-19-97; 8:45 am]
BILLING CODE 4830-01-U
Complete official Federal Register PDF
FR Doc. 97-13083 Airworthiness Directives; Bell Helicopter Textron, Inc. Model 47B, 47B-3, 47D, 47D-1, 47G, 47G-2, 47G-2A, 47G-2A-1, 47G-3, 47G-3B, 47G-3B-1, 47G-3B-2, 47G-3B-2A, 47G-4, 47G-4A, 47G-5, 47G-5A, 47H-1, 47J, 47J-2, 47J-2A, and 47K Helicopters
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27554-27556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13083]
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DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 96-SW-28-AD]
Airworthiness Directives; Bell Helicopter Textron, Inc. Model
47B, 47B-3, 47D, 47D-1, 47G, 47G-2, 47G-2A, 47G-2A-1, 47G-3, 47G-3B,
47G-3B-1, 47G-3B-2, 47G-3B-2A, 47G-4, 47G-4A, 47G-5, 47G-5A, 47H-1,
47J, 47J-2, 47J-2A, and 47K Helicopters
AGENCY: Federal Aviation Administration, DOT.
ACTION: Notice of proposed rulemaking (NPRM).
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SUMMARY:This document proposes the adoption of a new airworthiness
directive (AD) that is applicable to Bell Helicopter Textron, Inc.
(BHTI) Model 47B, 47B-3, 47D, 47D-1, 47G, 47G-2, 47G-2A, 47G-2A-1, 47G-
3, 47G-3B, 47G-3B-1, 47G-3B-2, 47G-3B-2A, 47G-4, 47G-4A, 47G-5, 47G-5A,
47H-1, 47J, 47J-2, 47J-2A, and 47K helicopters. This proposal would
require installing a safety washer kit designed to preclude separation
of the stabilizer bar damper link (damper link) if the damper link rod
end bushing (bushing) loosens and exits the damper link rod end. This
proposal is prompted by two reported incidences in which the bushings
loosened and exited the damper link rod ends, allowing the damper link
to slide over the retention bolt and separate from the stabilizer bar
(in the first incident), and from the hydraulic damper (in the second
incident). The actions specified by the proposed AD are intended to
prevent failure of the stabilizer bar damper link assembly, which can
result in degraded control response and subsequent loss of control of
the helicopter.
DATES: Comments must be received by July 21,1997.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Office of the Assistant Chief Counsel, Attention:
Rules Docket No. 96-SW-28-AD, 2601 Meacham Blvd., Room 663, Fort Worth,
Texas 76137. Comments may be inspected at this location between 9:00
a.m. and 3:00 p.m., Monday through Friday, except Federal holidays.
The service information referenced in the proposed rule may be
obtained from Bell Helicopter Textron, Inc., P.O. Box 482, Fort Worth,
Texas 76101. This information may be examined at the FAA, Office of the
Assistant Chief Counsel, 2601 Meacham Blvd., Room 663, Fort Worth,
Texas.
FOR FURTHER INFORMATION CONTACT: Mr. Jurgen E. Priester, Aerospace
Engineer, Rotorcraft Certification Office, Rotorcraft Directorate, FAA
2601 Meacham Blvd., Fort Worth, Texas 76137; telephone (817) 222-5159,
fax (817) 222-5960.
SUPPLEMENTARY INFORMATION:
Comments Invited
Interested persons are invited to participate in the making of the
proposed rule by submitting such written data, views, or arguments as
they may desire. Communications should identify the Rules Docket number
and be submitted in triplicate to the address specified above. All
communications received on or before the closing date for comments,
specified above, will be considered before taking action on the
proposed rule. The proposals contained in this notice may be changed in
light of the comments received.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the proposed rule. All
comments submitted will be available, both before and after the closing
date for comments, in the Rules Docket for examination by interested
persons. A report summarizing each FAA-public contact
[[Page 27555]]
concerned with the substance of this proposal will be filed in the
Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this notice must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket No. 96-SW-28-AD.'' The postcard will be date stamped and
returned to the commenter.
Availability of NPRMs
Any person may obtain a copy of this NPRM by submitting a request
to the FAA, Office of the Assistant Chief Counsel, Attention: Rules
Docket No. 96-SW-28-AD, 2601 Meacham Blvd., Room 663, Fort Worth, Texas
76137.
Discussion
This document proposes the adoption of a new AD that is applicable
to BHTI Model 47B, 47B-3, 47D, 47D-1, 47G, 47G-2, 47G-2A, 47G-2A-1,
47G-3, 47G-3B, 47G-3B-1, 47G-3B-2, 47G-3B-2A, 47G-4, 47G-4A, 47G-5,
47G-5A, 47H-1, 47J, 47J-2, 47J-2A, and 47K helicopters. This proposal
would require installing a safety washer kit designed to preclude
separation of the damper link if the bushing loosens and exits the
damper link rod end. This proposal is prompted by two reported
incidences in which the bushings loosened and exited the damper link
rod ends, allowing the damper link to slide over the retention bolt and
separate from the stabilizer bar (in the first incident), and from the
hydraulic damper (in the second incident). In the first incident, an
inspection revealed that the rod end bearing had not been lubricated
for an extended period of time prior to failure. In the second
incident, a pilot safely landed the aircraft after reporting degraded
control response. A post-flight inspection revealed that one damper
link had separated from the hydraulic damper. A later inspection
indicated that the bushing had not been properly roll-staked by the
damper manufacturer. Therefore, one of the occurrences is attributed to
a quality control problem with the damper link manufacturer. This
condition, if not corrected, could result in failure of the stabilizer
bar damper link assembly, which can result in degraded control response
and subsequent loss of control of the helicopter.
The FAA has reviewed BHTI Alert Service Bulletin (ASB) No. 47-96-
22, dated August 16, 1996, which describes procedures for removing and
marking the stabilizer and damper link assemblies, installing a safety
washer kit, part number (P/N) CA-047-96-022-1, applying a corrosion
preventive compound, and reinstalling the stabilizer bar damper link
assemblies. The ASB states that these actions are to be accomplished at
the next 100-hour inspection, or no later than December 31, 1996. The
FAA has determined that the compliance time should be within the next
100 hours time-in-service (TIS) or no later than 120 calendar days
after the effective date of the AD, whichever occurs first.
Since an unsafe condition has been identified that is likely to
exist or develop on other BHTI Model 47B, 47B-3, 47D, 47D-1, 47G, 47G-
2, 47G-2A, 47G-2A-1, 47G-3, 47G-3B, 47G-3B-1, 47G-3B-2, 47G-3B-2A, 47G-
4, 47G-4A, 47G-5, 47G-5A, 47H-1, 47J, 47J-2, 47J-2A, and 47K
helicopters of the same type design, the proposed AD would require,
within the next 100 hours TIS or within the next 120 calendar days
after the effective date of the proposed AD, whichever occurs first,
removing and marking the stabilizer and damper link assemblies,
installing a safety washer kit, P/N CA-047-96-022-1, applying a
corrosion preventive compound, and reinstalling the stabilizer and
damper link assemblies. The actions would be required to be
accomplished in accordance with the service bulletin described
previously.
The FAA estimates that 1,868 helicopters of U.S. registry would be
affected by this proposed AD, that it would take 1 work hour per
helicopter to accomplish the proposed actions, and that the average
labor rate is $60 per work hour. Required parts would cost
approximately $188 per helicopter. Based on these figures, the total
cost impact of the proposed AD on U.S. operators is estimated to be
$463,264.
The regulations proposed herein would 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
proposal would not have sufficient federalism implications to warrant
the preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this proposed
regulation (1) Is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under the DOT
Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
and (3) if promulgated, 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. A copy of the draft
regulatory evaluation prepared for this action is contained in the
Rules Docket. A copy of it may be obtained by contacting the Rules
Docket at the location provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
The Proposed Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration proposes to amend
part 39 of the Federal Aviation Regulations (14 CFR part 39) as
follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 U.S.C. 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding a new airworthiness directive
to read as follows:
Bell Helicopter Textron, Inc.: Docket No. 96-SW-28-AD.
Applicability: Model 47B, 47B-3, 47D, 47D-1, 47G, 47G-2, 47G-2A,
47G-2A-1, 47G-3, 47G-3B, 47G-3B-1, 47G-3B-2, 47G-3B-2A, 47G-4, 47G-
4A, 47G-5, 47G-5A, 47H-1, 47J, 47J-2, 47J-2A, and 47K helicopters,
certificated in any category.
Note 1: This AD applies to each helicopter identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For helicopters that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (b) to request approval from the FAA. This
approval may address either no action, if the current configuration
eliminates the unsafe condition, or different actions necessary to
address the unsafe condition described in this AD. Such a request
should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any helicopter from the applicability of this AD.
Compliance: Required within the next 100 hours time-in-service
or within the next 120 calendar days after the effective date of
this AD, whichever occurs first, unless accomplished previously.
To prevent failure of the stabilizer bar damper link assembly,
which can result in degraded control response and subsequent loss of
control of the helicopter, accomplish the following:
(a) Remove the stabilizer bar damper link assemblies from the
helicopter, install a
[[Page 27556]]
safety washer kit, part number (P/N) CA-047-96-022-1, and reinstall
the stabilizer bar damper link assemblies onto the helicopter in
accordance with the Accomplishment Instructions contained in Bell
Helicopter Textron, Inc. Alert Service Bulletin No. 47-96-22, dated
August 16, 1996.
(b) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Rotorcraft Certification Office,
Rotorcraft Directorate, FAA. Operators shall submit their requests
through an FAA Principal Maintenance Inspector, who may concur or
comment and then send it to the Manager, Rotorcraft Certification
Office.
Note 2: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Rotorcraft Certification Office.
(c) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the helicopter to a location where
the requirements of this AD can be accomplished.
Issued in Fort Worth, Texas, on May 9, 1997.
Eric Bries,
Acting Manager, Rotorcraft Directorate, Aircraft Certification Service.
[FR Doc. 97-13083 Filed 5-19-97; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 97-13028 Collection of Checks and Other Items by Federal Reserve Banks and Funds Transfers Through Fedwire
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27547-27554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13028]
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FEDERAL RESERVE SYSTEM
12 CFR Part 210
[Regulation J; Docket No. R-0972]
Collection of Checks and Other Items by Federal Reserve Banks and
Funds Transfers Through Fedwire
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
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SUMMARY: Effective January 1, 1998, the Reserve Banks will begin to
implement a policy under which each depository institution may maintain
only a single funds account with the Federal Reserve. A single account
will establish a single debtor-creditor relationship between each
institution and a Federal Reserve Bank and will make account management
more efficient for banks with interstate branches. The Board is
proposing amendments to subpart A of Regulation J to conform the
Federal Reserve check collection rules to the single account structure.
DATES: Comments must be submitted on or before July 21, 1997.
ADDRESSES: Comments, which should refer to Docket No. R-0972, may be
mailed to Mr. William W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, N.W.,
Washington, D.C. 20551. Comments addressed to Mr. Wiles also may be
delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m. and
to the security control room outside of those hours. Both the mail room
and the security control room are accessible from the courtyard
entrance on 20th Street between Constitution Avenue and C Street, N.W.
Comments may be inspected in Room MP-500 between 9:00 a.m. and 5:00
p.m. weekdays, except as provided in Sec. 261.8 of the Board's Rules
Regarding Availability of Information, 12 CFR 261.8.
FOR FURTHER INFORMATION CONTACT: Oliver Ireland, Associate General
Counsel, (202/452-3625), Stephanie Martin, Senior Attorney (202/452-
3198), or Heatherun Allison, Attorney (202/452-3565), Legal Division.
For the hearing impaired only, contact Diane Jenkins,
Telecommunications Device for the Deaf (TDD) (202/452-3544), Board of
Governors of the Federal Reserve System, 20th and C Streets, N.W.,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION:
Overview
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (Pub. L. 103-328) made significant changes to various banking laws
to authorize and facilitate interstate banking. Consequently, the
number of depository institutions that operate branches in more than
one Federal Reserve District is expected to increase. On January 1,
1998, the Federal Reserve Banks will begin to implement a new account
structure that will provide a single Federal Reserve account for each
[[Page 27548]]
institution.1 A primary objective of the single account
structure is to establish a single debtor-creditor relationship between
each chartered entity and the Federal Reserve. A single debtor-creditor
relationship is the most effective means for Reserve Banks to manage
their affairs with a depository institution. A single account structure
also may allow depository institutions to manage their overall position
with the Reserve Banks more efficiently.
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\1\ A foreign bank's U.S. branches and agencies and an Edge or
agreement corporation's offices will not be required to adopt a
single account structure.
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The Board has already requested comment on amendments to
Regulations D and I (Reserve Requirements of Depository Institutions
and Issue and Cancellation of Capital Stock of Federal Reserve Banks,
respectively) to define the location of a depository institution for
purposes of reserve accounts and Federal Reserve membership (62 FR
11117, March 11, 1997). The Board is now proposing amendments to
subpart A of Regulation J, governing the collection of checks and other
items by Federal Reserve Banks, to conform the Federal Reserve check
collection rules to the single account structure. The Board does not
believe it is necessary to amend subpart B of Regulation J, which
governs funds transfers through Fedwire, to accommodate the single
account structure. The Reserve Banks will, however, issue revised
operating circulars governing collection of cash items, Fedwire funds
transfers, and other Reserve Bank services to reflect the new account
structure.
Under the proposed Regulation J amendments, all of an institution's
check collection transactions through the Federal Reserve Banks would
be reflected in a single account held at that institution's
``Administrative Reserve Bank'' (or in a correspondent's account at a
Reserve Bank). The proposed amendments to Regulation D provide a means
to determine the location of an institution's reserve
account.2 Proposed Regulation J would provide that the
account location of an institution that sends items to a Reserve Bank
for collection (and the identity of its Administrative Reserve Bank)
would be determined in accordance with the provisions of Regulation D,
even if the institution is not otherwise subject to that regulation.
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\2\ The proposed Regulation D provision would provide that a
depository institution is considered to be located in the Federal
Reserve District specified in the institution's charter or
organizing certificate, or, if no such location is specified, the
location of its head office. If that location, in the Board's
judgment, is ambiguous or would impede the ability of the Board or
the Federal Reserve Banks to perform their functions under the
Federal Reserve Act, the Board could make exceptions to the general
rule for a particular institution after considering certain
criteria.
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Under the proposed amendments, an institution generally would be
permitted to send an item to any Reserve Bank for collection, but the
item will be deemed to have been sent first to that institution's
Administrative Reserve Bank. The proposed amendments would designate
the parties that are deemed to handle the item and the order in which
they are deemed to have handled it. (Although the Administrative
Reserve Bank would be deemed to handle the check, it would not be
considered to have ``received'' the check as that term is used in
subpart A of Regulation J if the check is initially sent to another
Reserve Bank.) The amendments would require a paying bank to settle for
an item with its Administrative Reserve Bank (regardless of whether the
institution received the item from its Administrative Reserve Bank) and
would specify the time and manner in which the paying bank is to make
settlement. The proposed amendments also would make changes in the
rules governing the handling of and settlement for returned checks
parallel to those proposed for cash items.
Section-by-Section Analysis
Section 210.2 Definitions
The Board proposes to add two new definitions to Regulation J.
Under the new account structure, all of an institution's transactions
will be reflected in a single account held at the institution's
Administrative Reserve Bank. The Board is proposing to add a definition
of ``account'' to mean an account with reserve or clearing balances
held on the books of a Federal Reserve Bank. If a depository
institution desires, the Reserve Banks will also keep informational
records, or subaccounts, of certain subsets of transactions that affect
an account (such as the transactions performed by a branch of a bank
that may be in another district from the Administrative Reserve Bank).
The Board proposes to define ``Administrative Reserve Bank'' as the
Reserve Bank in whose District the entity in question is located. An
entity's location would be determined in the same way as location is
determined for purposes of reserve accounts under the Board's
Regulation D. (See footnote 2.)
The Board also proposes to amend the definition of ``bank'' to
conform to the Uniform Commercial Code (Secs. 4-105 and 4-107).
Finally, the Board proposes to amend the definition of ``cash item'' to
provide that, under the new single-account system, the Reserve Bank
that initially receives an item for deposit, rather than the Reserve
Bank in whose District the item is payable, is the Reserve Bank that
decides whether to accept the item as a cash item.
Section 210.3(a) General Provisions
This paragraph provides that the Reserve Banks may issue operating
circulars governing the details of their check collection services and
related matters. The Board proposes to specify that the operating
circulars may allow an Administrative Reserve Bank to give instructions
to other Reserve Banks, such as instructions regarding the handling of
items that would affect an account on its books.
Section 210.4 Sending Items to Reserve Banks
The Board proposes to amend this section to provide that a sender
(other than a Reserve Bank sender) may send an item to any Reserve Bank
for collection, regardless of where the sender or the paying bank is
located. This amendment would provide flexibility for depository
institutions, foster competition among Reserve Banks, and promote
faster collection of checks. For example, a bank with its head office
in Richmond would likely have its account at the Federal Reserve Bank
of Richmond. An Iowa branch of that bank may wish to send its checks to
the Federal Reserve Bank of Chicago or the Federal Reserve Bank of
Kansas City, or both, all of which would be permissible under the
proposed rule. The sender's Administrative Reserve Bank (the Federal
Reserve Bank of Richmond in this example), however, may override this
rule and require the sender to send the item to a particular Reserve
Bank. For example, if a bank is in financial difficulty, the
Administrative Reserve Bank may want to require the bank to deposit all
of its items directly with a particular Reserve Bank in order to retain
closer control over the bank's account.
Section 13(1) of the Federal Reserve Act (FRA) 3
authorizes a Reserve Bank to accept deposits of checks and other items
from its member banks or from other depository institutions and to
accept from other Reserve Banks checks and other items payable within
its District. Under the Board's proposal, if a sender sends a check to
a Reserve Bank other than its Administrative Reserve Bank or the
Reserve Bank in whose District the check is payable, the receiving
Reserve Bank would be
[[Page 27549]]
deemed to be acting as agent of the Administrative Reserve Bank.
Proposed Regulation J would require, however, that such a receiving
Reserve Bank take on additional rights, duties, and liabilities in its
own name that it would not necessarily have as a common law agent of
the Administrative Reserve Bank. For example, the receiving Reserve
Bank would be considered an indorser on the check and would make
warranties on the check under Sec. 210.6, Regulation CC, and the
Uniform Commercial Code in its own name. The Board believes that
requiring such a receiving Reserve Bank to take on these rights,
duties, and liabilities is necessary to preserve a clear chain of
warranties and other claims in the check collection and return system.
Currently, in those limited situations where a Reserve Bank accepts
deposits from institutions other than those located in its District, it
does so under a special agency agreement with the institution's home
Reserve Bank. Rather than perpetuating these special agreements, the
Board proposes to amend Regulation J to establish the terms under which
the receiving Reserve Bank would handle items on behalf of an
Administrative Reserve Bank.
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\3\ 12 U.S.C. 360.
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Specifically, the proposed amendments to Sec. 210.4 would designate
the parties that are deemed to handle an item and the order in which
they are deemed to have handled the item. These amendments would
establish the chain of indorsements on an item under Regulation J,
Regulation CC, and the Uniform Commercial Code, as well as the order in
which the parties are agents or subagents of the owner of an item, as
provided in Sec. 210.6(a). As noted above, the proposal provides that
the sender is deemed to send the item to its Administrative Reserve
Bank, regardless of whether that Reserve Bank actually receives the
item first. The Administrative Reserve Bank is deemed to send the item
to the Reserve Bank that actually receives the item from the sender (if
different from the Administrative Reserve Bank). Any subsequent Reserve
Bank that receives the item from another Reserve Bank is deemed to
handle the item in turn.
In the example from the previous paragraph, where an Iowa branch of
a Richmond bank sends a check to the Chicago Reserve Bank for
collection, the check would be deemed handled in the following order:
the initial sender, the Richmond Reserve Bank (the Administrative
Reserve Bank), and the Chicago Reserve Bank (the first Reserve Bank to
receive the item). If the check in this example were drawn on a banking
office in New York, the Chicago Reserve Bank would send the check to
the Federal Reserve Bank of New York, in which case the New York
Reserve Bank would be the last Reserve Bank to handle the check and
would present the check to the paying bank. No other Reserve Bank would
handle or would be deemed to handle the item. In the example, if the
paying bank's Administrative Reserve Bank is the Federal Reserve Bank
of Boston (which might be the case if the check is payable by a New
York office of a bank headquartered in Boston), the Boston Reserve Bank
is not a party to the check, even though settlement for the check will
ultimately take place by a debit to an account on the Boston Reserve
Bank's books. (See Table 1.)
Table 1
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This table illustrates the following example:
A Richmond-based bank has its account at the Federal Reserve Bank of
Richmond (Richmond Fed), its Administrative Reserve Bank. An Iowa
branch of the bank sends a check to the Federal Reserve Bank of Chicago
(Chicago Fed) for collection. The check is payable by a New York office
of a Boston-based bank, which has an account at the Federal Reserve
Bank of Boston (Boston Fed). The Chicago Fed sends the check to the
Federal Reserve Bank of New York (NY Fed), which presents the check to
the New York office of the paying bank.
Path of physical check
Initial sender Chicago Fed NY Fed Paying
Bank
Parties deemed to have handled the check (Chain of indorsements)
Initial sender Richmond Fed Chicago Fed NY
Fed Paying Bank
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Section 210.5 Sender's Agreement; Recovery by Reserve Bank
Paragraph (a) of Sec. 210.5 sets forth the terms and warranties to
which a sender agrees when it sends an item to a Reserve Bank. The
Board is proposing to amend this paragraph to conform with the
provisions of Sec. 210.4. Specifically, a sender would authorize its
Administrative Reserve Bank, as well as any other Reserve Bank to which
the item is sent, to handle an item and would authorize the Reserve
Banks to make the appropriate accounting entries in settlement for the
item. The Board proposes to make minor amendments to paragraph (c) (and
parallel amendments to Sec. 210.12(f)), which would simplify the
provisions describing how settlements occur between Reserve Banks. The
Board also proposes to redesignate the paragraph numbers in paragraph
(c).
Paragraph (d) of Sec. 210.5 requires a sender to grant a security
interest in all its assets held by a Reserve Bank to secure any of its
obligations related to items collected through the Reserve Banks. The
Board proposes to amend this section to provide that the security
interest is granted to the sender's Administrative Reserve Bank.
Section 210.6 Status, Warranties, and Liability of Reserve Bank
Paragraph (a) of this section provides that Reserve Banks act as
agents or subagents of the owner of an item. The Board proposes to
modify the reference to a Reserve Bank in the first sentence with the
phrase ``that handles an item'' to clarify that this paragraph refers
to the Reserve Banks that are identified in proposed Sec. 210.4. The
current language provides that the agency terminates when a Reserve
Bank receives final payment for the item and makes the proceeds
available for use by the sender. The Board proposes to amend this
provision by stating that the agency status will not end unless the
time for commencing all actions against the Reserve Bank has expired.
This amendment would ensure that the agency and subagency relationships
between Reserve Banks regarding a particular item, as set forth in
proposed Sec. 210.4, will continue until the statute of limitations has
run on claims regarding any dispute concerning the item. The Board also
proposes to reorganize the numbering in paragraphs (a) and (b) of this
section.
Section 210.7 Presenting Items for Payment
This section provides rules regarding the presentment of items for
payment. The Board proposes to make minor changes to paragraphs (c) and
(d). Rather than referring to an item that is
[[Page 27550]]
``payable'' in a certain Federal Reserve District, the Board proposes
to refer to items that may be ``sent to the paying bank or nonbank
payor'' in a certain Federal Reserve District. The Board believes the
proposed language is more precise that the current provision.
Section 210.8 Presenting Noncash Items for Acceptance
Similar to the proposed changes to Sec. 210.7, the Board is
proposing to replace the term ``payable elsewhere'' with the term ``may
be presented elsewhere.'' The Board also proposes to reorganize the
paragraph numbering in this section.
Section 210.9 Settlement and Payment
This section sets forth the time and manner by which a paying bank
must settle for items it receives from a Reserve Bank. The Board
proposes to add a new paragraph (a) (and to redesignate the following
paragraphs accordingly) to provide that a paying bank must settle for
an item with its Administrative Reserve Bank, whether or not the paying
bank actually receives the item from that Reserve Bank. By settling
with its Administrative Reserve Bank, the paying bank would meet any
settlement obligation it may have under Regulation CC and the Uniform
Commercial Code. For example, the Uniform Commercial Code (Secs. 4-301
and 4-302) requires a paying bank to settle with the presenting bank by
midnight on the day of presentment if it wants to preserve its right to
return the check by its midnight deadline on its next banking day. By
settling with its Administrative Reserve Bank, a paying bank would
satisfy this obligation to a presenting Reserve Bank.
The new paragraph (a) would also provide that a paying bank may
settle through a correspondent account, with the agreement of its
Administrative Reserve Bank, the Reserve Bank (if different) that holds
the correspondent's account, and the correspondent. The paying bank
would remain responsible for settlement if for some reason settlement
does not occur through the correspondent account. The Board proposes to
make a conforming change to paragraph (c) (as redesignated) related to
payment for noncash items.
Currently, Regulation J requires the paying bank to settle so that
funds are available to the presenting Reserve Bank by the close of
Fedwire on the day of presentment. The Board proposes: (1) amendments
to paragraph (b) (as redesignated) of Sec. 210.9 to clarify that
settlement funds must be made available to the paying bank's
Administrative Reserve Bank, rather than the presenting Reserve Bank;
(2) to change the references to a Reserve Bank's operating circular to
include all of the Reserve Banks' operating circulars, as those
circulars will be uniform as of January 1, 1998; (3) to clarify
paragraph (b)(3) to refer to days the paying bank is closed voluntarily
``so that it does not receive a cash item'' (the provisions of this
paragraph would not apply if the paying bank's head office were closed
for business but a branch still received presentment of cash items from
the Reserve Banks); (4) to replace references to ``one hour after the
scheduled opening of Fedwire'' with ``9:30 a.m. Eastern Time'' so that
this time will remain unchanged when the Fedwire opening hour is moved
to 12:30 a.m. in December 1997; (5) to add paragraph headings
throughout paragraph (b); and (6) to make conforming changes to cross-
references throughout Sec. 210.9 in light of the paragraph
redesignations.
Section 210.10 Time Schedule and Availability of Credits for Cash
Items and Returned Checks
This paragraph provides that a Reserve Bank shall make proceeds
available for cash items and returned checks according to its published
time schedules. The proposed amendments to this section would clarify
that the Reserve Bank that holds the settlement account will make
credit available according to the time schedule of the Reserve Bank
that first receives the cash item (or returned check) from the sender
(or the paying or returning bank). The Board also proposes a conforming
amendment to Sec. 210.11(b) regarding credit for noncash items.
Section 210.12 Return of Cash Items and Handling of Returned Checks
This section sets forth the rules governing handling of and
settlement for returned checks. The rules for returned checks are
generally parallel to the rules for cash items, and the Board is
proposing amendments that are parallel to the amendments for cash items
discussed above. Under the proposal, a paying bank or returning bank
may send a returned check to any Reserve Bank, unless its
Administrative Reserve Bank directs it to send the returned check to a
specific Reserve Bank. As with cash items, the paying or returning
bank's Administrative Reserve Bank would be deemed to have handled the
item first, prior to the Reserve Bank that actually received the item,
for purposes of determining the relationships, rights, and liabilities
of the parties (see discussion of Sec. 210.4). Also similar to cash
items, a paying or returning bank would authorize the handling of a
returned check by its Administrative Reserve Bank, as well as by any
other Reserve Bank to which a returned check is sent, and would
authorize the Reserve Banks to make the appropriate accounting entries
in settlement for the returned check (see discussion of Sec. 210.5). A
subsequent returning bank or depositary bank would be required to
settle for a returned check with its Administrative Reserve Bank,
whether or not the bank actually receives the returned check from that
Reserve Bank. By settling with its Administrative Reserve Bank, the
subsequent returning bank or depositary bank would meet its settlement
obligations under Regulation CC and the Uniform Commercial Code (see
discussion of Sec. 210.9(a)). Finally, a paying or returning bank would
grant a security interest in all its assets held by its Administrative
Reserve Bank to secure any of its obligations related to returned
checks it sends to a Reserve Bank (see discussion of Sec. 210.5(d)).
Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires an
agency to publish an initial regulatory flexibility analysis with any
notice of proposed rulemaking. Two of the requirements of an initial
regulatory flexibility analysis (5 U.S.C. 603(b)), a description of the
reasons why action by the agency is being considered and a statement of
the objectives of, and legal basis for, the proposed rule, are
contained in the supplementary material above. The proposed rule
requires no additional reporting or recordkeeping requirements and does
not overlap with other federal rules. Regulation J bears a close
relationship with the Board's Regulation CC (12 CFR part 229), and that
relationship is explained in the supplementary information above as
well as in the provisions of the two regulations.
Another requirement for the initial regulatory flexibility analysis
is a description of and, where feasible, an estimate of the number of
small entities to which the proposed rule will apply. The proposal will
apply to all institutions, regardless of size, that send checks,
returned checks, or other items to a Reserve Bank or receive items from
a Reserve Bank. In 1996, subsidiaries of the 100 largest bank holding
companies deposited approximately 46 percent of the Federal Reserve
Banks' check volume, and all other banks deposited 54 percent. The
Reserve Banks presented approximately 31 percent of their check volume
to subsidiaries of the 100 largest bank holding companies,
[[Page 27551]]
and 69 percent to all other banks. The proposed rule sets out the terms
under which the Reserve Banks handle items and do not impose
significant burdens on small institutions.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposed rule
under the authority delegated to the Board by the Office of Management
and Budget. No collections of information pursuant to the Paperwork
Reduction Act are contained in the proposed rule.
List of Subjects in 12 CFR Part 210
Banks, banking, Federal Reserve System.
For the reasons set out in the preamble, the Board proposes to
amend part 210 of chapter II of title 12 of the Code of Federal
Regulations as set forth below:
PART 210--COLLECTION OF CHECKS AND OTHER ITEMS BY FEDERAL RESERVE
BANKS AND FUNDS TRANSFERS THROUGH FEDWIRE (REGULATION J)
1. The authority citation for part 210 continues to read as
follows:
Authority: 12 U.S.C. 248(i), (j), and (o), 342, 360, 464, and
4001-4010.
2. Section 210.2 is amended by redesignating paragraph (a) and
paragraphs (b) through (p) as paragraph (b) and paragraphs (d) through
(r), respectively; adding new paragraphs (a) and (c); and revising
newly redesignated paragraphs (d), (g) introductory text, and (g)(2) to
read as follows:
Sec. 210.2 Definitions.
* * * * *
(a) Account means an account with reserve or clearing balances on
the books of a Federal Reserve Bank. A subaccount is an informational
record of a subset of transactions that affect an account and is not a
separate account.
* * * * *
(c) Administrative Reserve Bank with respect to an entity means the
Reserve Bank in whose District the entity is located, as determined
under the procedure described in Sec. 204.3(b)(2) of this chapter
(Regulation D), even if the entity is not otherwise subject to that
section.
* * * * *
(d) Bank means any person engaged in the business of banking. A
branch or separate office of a bank is a separate bank to the extent
provided in the Uniform Commercial Code.
* * * * *
(g) Cash item means--
* * * * *
(2) Any other item payable on demand and collectible at par that
the Reserve Bank that receives the item is willing to accept as a cash
item. Cash item does not include a returned check.
* * * * *
3. In Sec. 210.3, the last sentence of paragraph (a) is revised to
read as follows:
Sec. 210.3 General provisions.
(a) General. * * * The circulars may, among other things, classify
cash items and noncash items, require separate sorts and letters,
provide different closing times for the receipt of different classes or
types of items, provide for instructions by an Administrative Reserve
Bank to other Reserve Banks, set forth terms of services, and establish
procedures for adjustments on a Reserve Bank's books, including
amounts, waiver of expenses, and payment of interest by as-of
adjustment.
* * * * *
4. Section 210.4 is revised to read as follows:
Sec. 210.4 Sending items to Reserve Banks.
(a) Sending of items. A sender, other than a Reserve Bank, may send
any item to any Reserve Bank, whether or not the item is payable within
the Reserve Bank's District, unless the sender's Administrative Reserve
Bank directs the sender to send the item to a specific Reserve Bank.
(b) Handling of items. (1) The following parties, in the following
order, are deemed to have handled an item that is sent to a Reserve
Bank for collection--
(i) The initial sender;
(ii) The initial sender's Administrative Reserve Bank;
(iii) The Reserve Bank that receives the item from the initial
sender (if different from the initial sender's Administrative Reserve
Bank); and
(iv) Another Reserve Bank, if any, that receives the item from a
Reserve Bank.
(2) A Reserve Bank that is not described in paragraph (b)(1) of
this section is not a party that handles an item and is not a
collecting bank with respect to an item.
(3) The identity and order of the parties under paragraph (b)(1) of
this section determine the relationships and the rights and liabilities
of the parties under this subpart, part 229 of this chapter (Regulation
CC), and the Uniform Commercial Code. An initial sender's
Administrative Reserve Bank that is deemed to handle an item is also
deemed to be a sender with respect to that item. The Reserve Banks that
are deemed to handle an item are deemed to be agents or subagents of
the owner of the item, as provided in Sec. 210.6(a) of this subpart.
(c) Checks received at par. The Reserve Banks shall receive cash
items and other checks at par.
5. In Sec. 210.5, paragraphs (a)(1) and (c) and the first sentence
of paragraph (d) are revised to read as follows:
Sec. 210.5 Sender's agreement; recovery by Reserve Bank.
(a) * * *
(1) Authorizes the sender's Administrative Reserve Bank and any
other Reserve Bank or collecting bank to which the item is sent to
handle the item (and authorizes any Reserve Bank that handles
settlement for the item to make accounting entries), subject to this
subpart and to the Reserve Banks' operating circulars, and warrants its
authority to give this authorization;
* * * * *
(c) Methods of recovery. (1) The Reserve Bank may recover the
amount stated in paragraph (b) of this section by charging any account
on its books that is maintained or used by the sender (or by charging a
Reserve Bank sender), if--
(i) The Reserve Bank made seasonable written demand on the sender
to assume defense of the action or proceeding; and
(ii) The sender has not made any other arrangement for payment that
is acceptable to the Reserve Bank.
(2) The Reserve Bank is not responsible for defending the action or
proceeding before using this method of recovery. A Reserve Bank that
has been charged under this paragraph (c) may recover from its sender
in the manner and under the circumstances set forth in this paragraph
(c). A Reserve Bank's failure to avail itself of the remedy provided in
this paragraph (c) does not prejudice its enforcement in any other
manner of the indemnity agreement referred to in paragraph (a)(3) of
this section.
(d) Security interest. When a sender sends an item to a Reserve
Bank, the sender and any prior collecting bank grant to the sender's
Administrative Reserve Bank a security interest in all of their
respective assets in the possession of, or held for the account of, any
Reserve Bank to secure their respective obligations due or to become
due to the Administrative Reserve Bank under this subpart or subpart C
of part 229 of this chapter (Regulation CC). * * *
6. In Sec. 210.6, paragraphs (a)(1) and (b) are revised to read as
follows:
[[Page 27552]]
Sec. 210.6 Status, warranties, and liability of Reserve Bank.
(a)(1) Status and Liability. A Reserve Bank that handles an item
shall act as agent or subagent of the owner with respect to the item.
This agency terminates when a Reserve Bank receives final payment for
the item in actually and finally collected funds, a Reserve Bank makes
the proceeds available for use by the sender, and the time for
commencing all actions against the Reserve Bank has expired. A Reserve
Bank shall not have or assume any liability with respect to an item or
its proceeds except--
(i) For the Reserve Bank's own lack of good faith or failure to
exercise ordinary care;
(ii) As provided in paragraph (b) of this section; and
(iii) As provided in subpart C of part 229 (Regulation CC) of this
chapter.
* * * * *
(b) Warranties and liability. (1) By presenting or sending an item,
a Reserve Bank warrants to a subsequent collecting bank and to the
paying bank and any other payor--
(i) That the Reserve Bank is a person entitled to enforce the item
(or is authorized to obtain payment of the item on behalf of a person
who is either entitled to enforce the item or authorized to obtain
payment on behalf of a person entitled to enforce the item); and
(ii) That the item has not been altered.
(2) The Reserve Bank also makes the warranties set forth in
Sec. 229.34(c) of this chapter, subject to the terms of part 229 of
this chapter (Regulation CC). The Reserve Bank shall not have or assume
any other liability to the paying bank or other payor, except for the
Reserve Bank's own lack of good faith or failure to exercise ordinary
care.
* * * * *
7. In Sec. 210.7, paragraph (c) introductory text and paragraph (d)
are revised to read as follows:
Sec. 210.7 Presenting items for payment.
* * * * *
(c) Presenting or sending direct. A Reserve Bank or subsequent
collecting bank may, with respect to an item that may be sent to the
paying bank or nonbank payor in the Reserve Bank's District--
* * * * *
(d) Item sent to another district. A Reserve Bank receiving an item
that may be sent to a paying bank or nonbank payor in another District
ordinarily sends the item to the Reserve Bank of the other District,
but with the agreement of the other Reserve Bank, may present or send
the item as if it were sent to a paying bank or nonbank payor in its
own District.
8. Section 210.8 is revised to read as follows:
Sec. 210.8 Presenting noncash items for acceptance.
(a) A Reserve Bank or a subsequent collecting bank may, if
instructed by the sender, present a noncash item for acceptance in any
manner authorized by law if--
(1) The item provides that it must be presented for acceptance;
(2) The item may be presented elsewhere than at the residence or
place of business of the payor; or
(3) The date of payment of the item depends on presentment for
acceptance.
(b) Documents accompanying a noncash item shall not be delivered to
the payor upon acceptance of the item unless the sender specifically
authorizes delivery. A Reserve Bank shall not have or assume any other
obligation to present or to send for presentment for acceptance any
noncash item.
9. Section 210.9 is amended by redesignating paragraphs (a) through
(e) as paragraphs (b) through (f); adding a new paragraph (a); revising
newly redesignated paragraphs (b) and (c); and in newly redesignated
paragraph (f) removing the references ``paragraphs (a), (b), and (c)''
and adding in their place ``paragraphs (b), (c), and (d)''.
Sec. 210.9 Settlement and payment.
(a) Settlement through Administrative Reserve Bank. A paying bank
shall settle for an item under this subpart with its Administrative
Reserve Bank, whether or not the paying bank received the item from
that Reserve Bank. A paying bank's settlement with its Administrative
Reserve Bank is deemed to be settlement with the Reserve Bank from
which the paying bank received the item. A paying bank may settle for
an item using any account on a Reserve Bank's books by agreement with
its Administrative Reserve Bank, any other Reserve Bank holding the
settlement account, and the account-holder. The paying bank remains
responsible for settlement if the Reserve Bank holding the settlement
account does not, for any reason, obtain settlement in that account.
(b) Cash items--(1) Settlement obligation. On the day a paying bank
receives 2 a cash item from a Reserve Bank, it shall settle
for the item such that the proceeds of the settlement are available to
its Administrative Reserve Bank by the close of Fedwire on that day, or
it shall return the item by the later of the close of its banking day
or the close of Fedwire. If the paying bank fails to settle for or
return a cash item in accordance with this paragraph (b)(1), it is
accountable for the amount of the item as of the close of its banking
day or the close of Fedwire on the day it receives the item, whichever
is earlier.
---------------------------------------------------------------------------
\2\ A paying bank is deemed to receive a cash item on its next
banking day if it receives the item--
(1) On a day other than a banking day for it; or
(2) On a banking day for it, but after a ``cut-off hour''
established by it in accordance with state law.
---------------------------------------------------------------------------
(2) Time of settlement. (i) On the day a paying bank receives a
cash item from a Reserve Bank, it shall settle for the item so that the
proceeds of the settlement are available to its Administrative Reserve
Bank, or return the item, by the latest of--
(A) The next clock hour that is at least one hour after the paying
bank receives the item;
(B) 9:30 a.m. Eastern Time; or
(C) Such later time as provided in the Reserve Banks' operating
circulars.
(ii) If the paying bank fails to settle for or return a cash item
in accordance with paragraph (b)(2)(i) of this section, it shall be
subject to any applicable overdraft charges. Settlement under paragraph
(b)(2)(i) of this section satisfies the settlement requirements of
paragraph (b)(1) of this section.
(3) Paying bank closes voluntarily. (i) If a paying bank closes
voluntarily so that it does not receive a cash item on a day that is a
banking day for a Reserve Bank, and the Reserve Bank makes the cash
item available to the paying bank on that day, the paying bank shall
either--
(A) On that day, settle for the item so that the proceeds of the
settlement are available to its Administrative Reserve Bank, or return
the item, by the latest of the next clock hour that is at least one
hour after it ordinarily would have received the item, 9:30 a.m.
Eastern Time, or such later time as provided in the Reserve Banks'
operating circulars; or
(B) On the next day that is a banking day for both the paying bank
and the Reserve Bank, settle for the item so that the proceeds of the
settlement are available to its Administrative Reserve Bank by 9:30
a.m. Eastern Time on that day or such later time as provided in the
Reserve Banks' operating circulars and compensate the Reserve Bank for
the value of the float associated with the item in accordance with
procedures provided in the Reserve Bank's operating circular.
(ii) If a paying bank closes voluntarily so that it does not
receive a cash item on a day that is a banking day for a Reserve Bank,
and the Reserve Bank makes the cash item available to the
[[Page 27553]]
paying bank on that day, the paying bank is not considered to have
received the item until its next banking day, but it shall be subject
to any applicable overdraft charges if it fails to settle for or return
the item in accordance with paragraph (b)(3)(i) of this section. The
settlement requirements of paragraphs (b)(1) and (b)(2) of this section
do not apply to a paying bank that settles in accordance with paragraph
(b)(3)(i) of this section.
(4) Reserve Bank closed. (i) If a paying bank receives a cash item
from a Reserve Bank on a banking day that is not a banking day for the
Reserve Bank, the paying bank shall--
(A) Settle for the item so that the proceeds of the settlement are
available to its Administrative Reserve Bank by the close of Fedwire on
the Reserve Bank's next banking day, or return the item by midnight of
the day it receives the item (if the paying bank fails to settle for or
return a cash item in accordance with this paragraph (b)(4)(i)(A), it
shall become accountable for the amount of the item as of the close of
the its banking day on the day it receives the item); and
(B) Settle for the item so that the proceeds of the settlement are
available to its Administrative Reserve Bank by 9:30 a.m. Eastern Time
on the Reserve Bank's next banking day or such later time as provided
in the Reserve Bank's operating circular, or return the item by
midnight of the day it receives the item. If the paying bank fails to
settle for or return a cash item in accordance with this paragraph
(b)(4)(i)(B), it shall be subject to any applicable overdraft charges.
Settlement under this paragraph (b)(4)(i)(B) satisfies the settlement
requirements of paragraph (b)(4)(i)(A) of this section.
(ii) The settlement requirements of paragraphs (b)(1) and (b)(2) of
this section do not apply to a paying bank that settles in accordance
with paragraph (b)(4)(i) of this section.
(5) Manner of settlement. Settlement with a Reserve Bank under
paragraphs (b) (1) through (4) of this section shall be made by debit
to an account on the Reserve Bank's books, cash, or other form of
settlement to which the Reserve Bank agrees, except that the Reserve
Bank may, in its discretion, obtain settlement by charging the paying
bank's account. A paying bank may not set off against the amount of a
settlement under this section the amount of a claim with respect to
another cash item, cash letter, or other claim under Sec. 229.34(c) of
this chapter (Regulation CC) or other law.
(6) Notice in lieu of return. If a cash item is unavailable for
return, the paying bank may send a notice in lieu of return as provided
in Sec. 229.30(f) of this chapter (Regulation CC).
(c) Noncash items. A Reserve Bank may require the paying or
collecting bank to which it has presented or sent a noncash item to pay
for the item in cash, but the Reserve Bank may permit payment by a
debit to an account maintained or used by the paying or collecting bank
on a Reserve Bank's books or by any of the following that is in a form
acceptable to the collecting Reserve Bank: bank draft, transfer of
funds or bank credit, or any other form of payment authorized by State
law.
* * * * *
10. Section 210.10 is revised to read as follows:
Sec. 210.10 Time schedule and availability of credits for cash items
and returned checks.
(a) Each Reserve Bank shall include in its operating circulars a
time schedule for each of its offices indicating when the amount of any
cash item or returned check received by it is counted as reserves for
purposes of part 204 of this chapter (Regulation D) and becomes
available for use by the sender or paying or returning bank. The
Reserve Bank that holds the settlement account shall give either
immediate or deferred credit to a sender, a paying bank, or a returning
bank (other than a foreign correspondent) in accordance with the time
schedule of the receiving Reserve Bank. A Reserve Bank ordinarily gives
credit to a foreign correspondent only when the Reserve Bank receives
payment of the item in actually and finally collected funds, but, in
its discretion, a Reserve Bank may give immediate or deferred credit in
accordance with its time schedule.
(b) Notwithstanding its time schedule, a Reserve Bank may refuse at
any time to permit the use of credit given by it for any cash item or
returned check, and may defer availability after credit is received by
the Reserve Bank for a period of time that is reasonable under the
circumstances.
11. In Sec. 210.11, the last sentence of paragraph (b) is revised
to read as follows:
Sec. 210.11 Availability of proceeds of noncash items; time schedule.
* * * * *
(b) * * * A Reserve Bank may, however, refuse at any time to permit
the use of credit given by it for a noncash item for which the Reserve
Bank has not yet received payment in actually and finally collected
funds.
* * * * *
12. Section 210.12 is amended by revising paragraphs (a), (b), and
(c)(1), the first sentence of paragraph (d), paragraphs (f) and (h),
and the first sentence of paragraph (i); and by removing the last
sentence of paragraph (g), to read as follows:
Sec. 210.12 Return of cash items and handling of returned checks.
(a) Return of items--(1) Return of cash items handled by Reserve
Banks. A paying bank that receives a cash item from a Reserve Bank,
other than for immediate payment over the counter, and that settles for
the item as provided in Sec. 210.9(b) of this subpart, may, before it
has finally paid the item, return the item to any Reserve Bank (unless
its Administrative Reserve Bank directs it to return the item to a
specific Reserve Bank) in accordance with subpart C of part 229 of this
chapter (Regulation CC), the Uniform Commercial Code, and the Reserve
Banks' operating circulars. A paying bank that receives a cash item
from a Reserve Bank also may return the item prior to settlement, in
accordance with Sec. 210.9(b) of this subpart and the Reserve Banks'
operating circulars. The rules or practices of a clearinghouse through
which the item was presented, or a special collection agreement under
which the item was presented, may not extend these return times, but
may provide for a shorter return time.
(2) Return of checks not handled by Reserve Banks. A paying bank
that receives a check as defined in Sec. 229.2(k) of this chapter
(Regulation CC), other than from a Reserve Bank, and that determines
not to pay the check, may send the returned check to any Reserve Bank
(unless its Administrative Reserve Bank directs it to send the returned
check to a specific Reserve Bank) in accordance with subpart C of part
229 of this chapter (Regulation CC), the Uniform Commercial Code, and
the Reserve Banks' operating circulars. A returning bank may send a
returned check to any Reserve Bank (unless its Administrative Reserve
Bank directs it to send the returned check to a specific Reserve Bank)
in accordance with subpart C of part 229 of this chapter (Regulation
CC), the Uniform Commercial Code, and the Reserve Banks' operating
circulars.
(b) Handling of returned checks. (1) The following parties, in the
following order, are deemed to have handled a returned check sent to a
Reserve Bank under paragraph (a) of this section--
(i) The paying or returning bank;
(ii) The paying bank's or returning bank's Administrative Reserve
Bank;
(iii) The Reserve Bank that receives the returned check from the
paying or returning bank (if different from the
[[Page 27554]]
paying bank's or returning bank's Administrative Reserve Bank); and
(iv) Another Reserve Bank, if any, that receives the returned check
from a Reserve Bank.
(2) A Reserve Bank that is not described in paragraph (b)(1) of
this section is not a party that handles a returned check and is not a
returning bank with respect to a returned check.
(3) The identity and order of the parties under paragraph (b)(1) of
this section determine the relationships and the rights and liabilities
of the parties under this subpart, part 229 of this chapter (Regulation
CC), and the Uniform Commercial Code.
(c) Paying bank's and returning bank's agreement. * * *
(1) Authorizes the paying or returning bank's Administrative
Reserve Bank, and any other Reserve Bank or returning bank to which the
returned check is sent, to handle the returned check (and authorizes
any Reserve Bank that handles settlement for the returned check to make
accounting entries) subject to this subpart and to the Reserve Banks'
operating circulars;
* * * * *
(d) Warranties by Reserve Bank. By handling a returned check under
this subpart, a Reserve Bank makes the returning bank warranties as set
forth in Sec. 229.34 of this chapter, subject to the terms of part 229
of this chapter (Regulation CC). * * *
* * * * *
(f) Methods of recovery. (1) The Reserve Bank may recover the
amount stated in paragraph (d) of this section by charging any account
on its books that is maintained or used by the paying or returning bank
(or by charging another returning Reserve Bank), if--
(i) The Reserve Bank made seasonable written demand on the paying
or returning bank to assume defense of the action or proceeding; and
(ii) The paying or returning bank has not made any other
arrangement for payment that is acceptable to the Reserve Bank.
(2) The Reserve Bank is not responsible for defending the action or
proceeding before using this method of recovery. A Reserve Bank that
has been charged under this paragraph may recover from the paying or
returning bank in the manner and under the circumstances set forth in
this paragraph. A Reserve Bank's failure to avail itself of the remedy
provided in this paragraph does not prejudice its enforcement in any
other manner of the indemnity agreement referred to in paragraph (c)(3)
of this section.
* * * * *
(h) Settlement. A subsequent returning bank or depositary bank
shall settle with its Administrative Reserve Bank for returned checks
in the same manner and by the same time as for cash items presented for
payment under this subpart. Settlement with its Administrative Reserve
Bank is deemed to be settlement with the Reserve Bank from which the
returning bank or depositary bank received the item.
(i) Security interest. When a paying or returning bank sends a
returned check to a Reserve Bank, the paying bank, returning bank, and
any prior returning bank grant to the paying bank's or returning bank's
Administrative Reserve Bank a security interest in all of their
respective assets in the possession of, or held for the account of, any
Reserve Bank, to secure their respective obligations due or to become
due to the Administrative Reserve Bank under this subpart or subpart C
of part 229 of this chapter (Regulation CC). * * *
By order of the Board of Governors of the Federal Reserve
System, May 14, 1997.
William W. Wiles,
Secretary of the Board.
[FR Doc. 97-13028 Filed 5-19-97; 8:45 am]
BILLING CODE 6210-01-P
Complete official Federal Register PDF
FR Doc. 97-13000 Milk in the Carolina and Certain Other Marketing Areas; Partial Final Decision
[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Proposed Rules]
[Pages 27525-27546]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13000]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 62, No. 97 / Tuesday, May 20, 1997 / Proposed
Rules
[[Page 27525]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Parts 1005, 1007, 1011, and 1046
[Docket No. AO-388-A9, et al.; DA-96-08]
Milk in the Carolina and Certain Other Marketing Areas; Partial
Final Decision
------------------------------------------------------------------------
7 CFR
part Marketing area Docket No.
------------------------------------------------------------------------
1005... Carolina...................... AO-388-A9
1007... Southeast..................... AO-366-A38
1011... Tennessee Valley.............. AO-251-A40
1046... Louisville-Lexington- AO-123-A67
Evansville.
------------------------------------------------------------------------
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This final decision would modify interim amendments which
established transportation credit provisions in 4 Federal milk orders
in the Southeastern United States. The interim amendments were based
upon proposals that were considered at a public hearing held in
Charlotte, North Carolina. The proposed modifications to the interim
amendments are based upon additional testimony heard at a reopened
hearing held in Atlanta, Georgia. The major modifications would
increase the maximum assessment by one cent or less in two of the
orders to pay for transportation costs and eliminate the reduction of
blend prices to producers to pay for transportation costs. The
amendments adopted in this decision will become effective if approved
by the producers in the affected markets.
FOR FURTHER INFORMATION CONTACT: Nicholas Memoli, Marketing Specialist,
USDA/AMS/Dairy Division, Order Formulation Branch, Room 2971, South
Building, P. O. Box 96456, Washington, DC 20090-6456 (Tel:202/690-1932;
E-mail:[email protected]).
SUPPLEMENTARY INFORMATION: This administrative action is governed by
the provisions of Sections 556 and 557 of Title 5 of the United States
Code and, therefore, is excluded from the requirements of Executive
Order 12866.
This final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is not intended to have a retroactive
effect, and it will not preempt any state or local laws, regulations,
or policies, unless they present an irreconcilable conflict with the
rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), 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 the law and request a modification of an order or to be
exempted from the order. A handler is afforded the opportunity for a
hearing on the petition. After a 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
its principal place of business, has jurisdiction in equity to review
the Secretary's ruling on the petition, provided a bill in equity is
filed not later than 20 days after the date of the entry of the ruling.
Small Business Consideration
In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.), the Agricultural Marketing Service has considered the economic
impact of this action on small entities and has certified that this
proposed rule will not have a significant economic impact on a
substantial number of small entities. No new entities will be regulated
as a result of the proposed rules, and any changes experienced by
handlers will be of a minor nature.
For the purpose of the Regulatory Flexibility Act, a dairy farm is
considered a ``small business'' if it has an annual gross revenue of
less than $500,000, and a dairy products manufacturer is a ``small
business'' if it has fewer than 500 employees. For the purposes of
determining which dairy farms are ``small businesses,'' the $500,000
per year criterion was used to establish a production guideline of
326,000 pounds per month. Although this guideline does not factor in
additional monies that may be received by dairy producers, it should be
an inclusive standard for most ``small'' dairy farmers. For purposes of
determining a handler's size, if the plant is part of a larger company
operating multiple plants that collectively exceed the 500-employee
limit, the plant will be considered a large business even if the local
plant has fewer than 500 employees.
The milk of approximately 8,600 producers is pooled on the
Carolina, Southeast, Tennessee Valley and Louisville-Lexington-
Evansville milk orders. Of these producers, 95 percent produce below
the 326,000-pound production guideline and are considered to be small
businesses.
There are 43 handlers operating pool plants under the four orders.
Of these handlers, 22 have fewer than 500 employees and qualify as
small businesses.
The proposed rules amending the transportation credit provisions
will promote orderly marketing of milk by producers and regulated
handlers operating within the 4 marketing areas. This decision
eliminates the provision which provides for the transfer of funds from
the producer-settlement fund to the transportation credit balancing
fund when the latter is insufficient to cover the amount of credits to
be distributed to handlers for a given month. Thus, the possibility of
a reduction of uniform prices to producers resulting from
transportation credits will no longer exist.
This decision also modestly increases the handler assessment from 6
cents to 6.5 cents per hundredweight of Class I producer milk in the
Carolina market and to 7 cents per hundredweight in the Southeast
market, but maintains the current 6-cent assessment in the Tennessee
Valley and Louisville-Lexington-Evansville markets. A 6-cent per
hundredweight assessment translates to approximately one-half cent per
gallon of milk. The one-half to one-cent assessment increase in Federal
Orders 1005 and 1007 may negatively impact some small businesses, as
any price increase would, but it may also positively impact other small
businesses by providing more funds for transportation credits.
At present, all handlers regulated under the 4 milk orders involved
in this
[[Page 27526]]
proceeding file a monthly report of receipts and utilization with the
market administrator. The proposed amendments will not significantly
add to the amount of information required to be reported by those
handlers requesting transportation credits. The estimated time to
collect, aggregate, and report this information will vary directly with
the amount of milk for which credits are requested, but should not be
significant.
Prior Documents in This Proceeding
Notice of Hearing: Issued May 1, 1996; published May 3, 1996 (61 FR
19861).
Tentative Partial Final Decision: Issued July 12, 1996; published
July 18, 1996 (61 FR 37628).
Interim Amendment of Orders: Issued August 2, 1996; published
August 9, 1996 (61 FR 41488).
Extension of Time for Filing Comments: Issued August 16, 1996;
published August 23, 1996 (61 FR 43474).
Extension of Time for Filing Comments: Issued October 18, 1996;
published October 25, 1996 (61 FR 55229).
Notice of Reopened Hearing: Issued November 19, 1996; published
November 25, 1996 (61 FR 59843).
Preliminary Statement
A public hearing was held to consider proposed amendments to the
marketing agreements and the orders regulating the handling of milk in
the aforesaid marketing areas. The hearing was held pursuant to the
provisions of the Agricultural Marketing Agreement Act of 1937, as
amended (7 U.S.C. 601-674), and the applicable rules of practice (7 CFR
Part 900), in Charlotte, North Carolina, on May 15-16, 1996, and in
Atlanta, Georgia, on December 17-18, 1996. Notice of the May hearing
was issued on May 1, 1996, and published May 3, 1996 (61 FR 19861).
An interim order amending the orders was issued on August 2, 1996,
and published on August 9, 1996 (61 FR 41488). The interim amendments
became effective on August 10, 1996.
Following 3 months' experience with the interim amendments, the
industry requested, and the Department agreed, to reopen the hearing to
receive additional evidence concerning their impact. This hearing was
held in Atlanta, Georgia, on December 17-18, 1996, following a notice
of such reopened hearing that was issued on November 19, 1996, and
published on November 25, 1996 (61 FR 59843).
Interested parties were given until January 24, 1997, to file post-
hearing briefs on proposals following the reopened hearing.
The material issues on the record of the hearing relate to:
1. Transportation credits for supplemental bulk milk received for
Class I use.
2. Deductions from the minimum uniform price to producers.
3. Whether emergency marketing conditions in the 4 regulated
marketing areas warrant the omission of a recommended decision with
respect to Issue No. 1 and the opportunity to file written exceptions
thereto.
4. The definition of producer.
This partial final decision only deals with Issue 1. Issue 3 was
discussed in the tentative partial final decision that was issued July
12, 1996, and is now moot. Issues 2 and 4 will be handled through
normal rulemaking procedures in a forthcoming recommended decision.
Summary of Changes to the Interim Amendments
This final decision differs from the tentative decision in several
respects. The key changes in the order amendments are as follows:
1. The provision providing for a transfer of funds from the
producer-settlement fund to the transportation credit balancing fund
when the latter fund has an insufficient balance to pay for the month's
transportation credits has been removed. Instead, the available balance
in the transportation credit balancing fund each month will be prorated
to handlers applying for transportation credits for that month. See
Sec. 100X.82(a).
2. The assessment for the transportation credit balancing fund has
been raised from 6 cents to 6.5 cents per hundredweight for the
Carolina order and to 7 cents per hundredweight for the Southeast
order. See Secs. 1005.81(a) and 1007.81(a).
3. The per mile rate for computing the transportation credit has
been reduced from 0.37 cent to 0.35 cent per hundredweight of milk. See
Sec. 100X.82(d)(2)(ii) and (d)(3)(iv).
4. A net shipment provision has been added to each of the 4 orders.
This provision reduces the pounds of milk eligible for a transportation
credit at a pool plant by the amount of milk transferred from that pool
plant to a nonpool plant on the same calendar day the supplemental milk
was received. See Sec. 100X.82(d)(1).
5. The computation of the transportation credit for producer milk
has been changed to more closely match the way the transportation
credit is computed for milk that is transferred from an other order
plant. In particular, if the farm ``origination point'' is within
another Federal order's marketing area, the Class I price at the
origination point shall be the price that would apply at that location
under the provisions of the order covering that area. See
Sec. 100X.82(d)(3)(v). In addition, in computing the credit for farm-
to-plant milk there is a deduction of 85 miles from the distance
between the farm origination point and the receiving plant. See
Sec. 100X.82(d)(3)(iii). Finally, the proportion of producer milk that
is eligible for the transportation credit has been changed to more
closely reflect the proportion of other order plant milk that would
receive the credit. See Sec. 100X.82(c)(2)(i).
6. The restricted area from which producer milk would be considered
ineligible to receive a transportation credit has been revised to
include six Kentucky counties--Allen, Barren, Metcalfe, Monroe,
Simpson, and Warren--in addition to the specified marketing areas of
Federal Orders 1005, 1007, 1011, or 1046. See Sec. 100X.82(c)(2)(iii).
7. The months during which the market administrator may extend
transportation credits have been changed from January through June to
January and June. See Sec. 100X.82(b).
8. The limitation on the amount of milk that may be delivered as
producer milk without being disqualified for transportation credits has
been changed from 32 days of production to 50 percent of the dairy
farmer's total production during not more than 2 months of January
through June when the dairy farmer was a producer. See
Sec. 100X.82(c)(2)(ii).
Findings and Conclusions
The following findings and conclusions on the material issues are
based on evidence presented at the hearing and the record thereof:
1. Transportation Credits for Supplemental Bulk Milk Received for
Class I Use. The tentative decision issued on July 12, 1996, concluded
that Federal Milk Orders 1005, 1007, 1011, and 1046 (hereinafter
referred to as ``the 4 orders'') should be amended to provide
transportation credits for supplemental bulk milk that is transferred
from an other order plant to a pool plant and for supplemental bulk
milk imported directly from producers' farms during the months of July
through December. Additionally, the decision concluded that a handler
assessment on the total pounds of Class I producer milk should be added
to each order to fund the transportation credits.
[[Page 27527]]
This final decision reaffirms the conclusions of the earlier
decision, but also recommends changes to that decision based upon the
testimony of the reopened hearing. This decision consists of four
parts. Part 1 is a brief summary of the testimony and briefs resulting
from the initial hearing; part 2 is a summary of the interim amendments
that were adopted in the July 12, 1996, tentative decision; part 3 is a
summary of the testimony and briefs resulting from the reopened
hearing; and part 4 explains why the interim amendments should be
modified.
A Brief Summary of Testimony and Briefs Resulting From the May 15-16,
1996 Hearing
A transportation credit for bulk milk received from an other order
plant for Class I use was proposed by Mid-America Dairymen, Inc. (Mid-
Am), a cooperative association that represents approximately 50 percent
of the producers in Orders 5, 7, and 11, and nearly one-third of the
producers in Order 46. According to Mid-Am, the Southeast States are
chronically short of milk for fluid use at certain times of the year,
namely the late summer and fall months. Mid-Am stated that the costs of
supplying handlers with an adequate supply of fluid milk fall
disproportionately on cooperative associations serving these markets.
Arguing that the Agricultural Marketing Agreement Act provides for
``marketwide service payments'' to provide for greater equity between
producers and handlers supplying a market with supplemental milk, Mid-
Am testified that the Secretary should immediately amend the 4 orders
to incorporate transportation credits into the 4 orders on milk that is
transferred from other order plants.
Carolina Virginia Milk Producers Association (CVMPA), a cooperative
association with producers supplying plants regulated under all 4
orders, stated that the Mid-Am proposal should be expanded to also
include supplemental milk received directly from producers' farms.
CVMPA noted that it imported far more supplemental milk directly from
producers' farms than from other order plants during the months of July
through December 1995.
The proposal to include supplemental milk shipped directly from
producers' farms was endorsed by both handlers and other cooperative
associations. Receiving milk in this manner, it was argued, would
encourage hauling efficiencies, improve milk quality, eliminate pump-
over expenses, and reduce product loss due to handling.
Fleming Dairy, a handler operating in Tennessee and Louisiana,
supported the transportation credit concept, but argued for a shorter
transportation credit period than was proposed by Mid-Am. Fleming
stated that extension of the transportation credit period should be
removed from the proposal.
Several witnesses suggested that the rate of 0.39 cent per mile
that was proposed by Mid-Am for computing a transportation credit was
too high. Testimony was also given regarding the necessity of
restricting transportation credits on bulk milk transfers between the 4
orders.
Several proprietary handlers testified in opposition to the
proposed transportation credits by arguing that the assessments would
create competitive disadvantages among handlers. The record indicated
that several handlers feared that marketing practices, such as stair-
stepping milk from one market to another, would result in false
shortages in the shipping market and, thus, that the cost of obtaining
additional milk supplies would not be shared equitably among handlers.
Briefs filed by various handlers reiterated their reservations
regarding transportation credits. It was maintained that the milk
shortage situation in the Southeast should be dealt with through means
outside of the order system, such as over-order premiums. Issues such
as Class III-A pricing and stair-stepping of milk were addressed as
concerns which could jeopardize the true intent of transportation
credits to compensate handlers for costs incurred in obtaining
supplemental supplies of milk for fluid use.
While acknowledging that sufficient testimony and record evidence
was offered in support of transportation credits, additional briefs
submitted by interested parties cautioned the Department against
potential abuse. Offsetting milk shipments into and out of the
marketing areas, establishing historical milk movements, and limiting
the amount of credits available (e.g. deducting the first 100 miles)
were all addressed as areas of concern.
One handler opposed the incorporation of transportation credits in
total, claiming that such credits were money-shifting schemes proposed
by those who have made no efforts to develop business relationships to
ensure a steady supply of milk. The brief of another handler suggested
limiting assessments to Class I sales made within the 4 marketing
areas.
Several of the post-hearing briefs argued that supplemental
producer milk, as well as plant-to-plant milk, should be eligible for
credits. CVMPA offered a definition of ``supplemental milk'' as the
milk of dairy farmers which is only pooled during the months of short
production. Suggestions for supplemental producer ineligibility were
offered to distinguish such producers from those normally associated
with subject markets. Recommendations on how to determine an
origination point for producer milk were also proposed, including
taking into consideration differences in Class I prices at the
receiving plant and the origination point.
In its post-hearing brief, Mid-Am emphasized that cooperatives were
bearing a disproportionate burden in supplying these markets with
supplemental milk. It argued that the cost associated with such milk
cannot be passed along to their customers and that absorbing this cost
placed their member producers at a competitive disadvantage relative to
non-member producers who do not share in this cost. Mid-Am also pointed
out that the incorporation of transportation credits would conform with
past agency decisions and would facilitate securing adequate supplies
of milk to meet the markets' fluid needs. It indicated that its
proposal should be expanded to provide transportation credits for
producer milk as well as plant milk.
Interim Amendments Effective August 10, 1996
Following the May hearing, interim amendments providing for
transportation credits became effective for the 4 orders on August 10,
1996. The amendments provided transportation credits to pool plant
operators and cooperative associations for Class I bulk milk received
from an other order plant and for milk received directly from
producers' farms and used in Class I.
Handlers and cooperative associations are required to report to the
market administrator receipts of bulk milk from other order plants and
receipts of producer milk, including the identity of individual
producers, for which transportation credits are requested pursuant to
Section 30 of the orders.
For plant milk, the credit is limited to milk that is allocated to
Class I. It is computed at a rate equal to 0.37 cent per mile per cwt.
based on the distance from the transferor plant to the transferee
plant. The resulting number is reduced to the extent that the Class I
price at the receiving plant exceeds the Class I price at the shipping
plant to arrive at the transportation credit for that load of milk.
In the case of milk received directly from producers' farms, the
origination
[[Page 27528]]
point of a bulk tank truck containing more than one producer's milk is
either the city closest to the farm from which the last farm pickup was
made or the location specified on a certified weight receipt obtained
at an independently-operated truck stop after the last farm pickup has
been made. The credit is computed by multiplying 0.37 cent times the
number of miles between the origination point and the location of the
plant receiving the milk, less any positive difference in the Class I
prices at the two points under the order receiving the milk.
Transportation credits are limited to the months of July through
December; however, an extension may be requested for any of the months
of January through June. During the months of January through June, the
market administrator has the authority to expand the transportation
credit period if market conditions indicate that producer milk for
Class I use will be in short supply and the marketwide Class I
utilization is likely to exceed 80 percent. Such a request must be made
in writing at least 15 days prior to the beginning of the month for
which it is to be effective and requires the market administrator to
issue a decision on the request by the first day of the month for which
it is to be effective.
Pursuant to the interim amendments, the credits are limited to
transfers from other order plants that are not regulated under Orders
5, 7, 11, or 46. This provision was added in response to concerns
expressed at the hearing that handlers in one of these 4 markets could
be required to pay for transporting milk into another of these markets
in the absence of any such restriction.
Certain location restrictions are also provided for supplemental
producer milk. Transportation credits do not apply to the milk of any
producer whose farm is located within any of the 4 marketing areas. In
addition, the farm must be at least 85 miles away from the plant to
which the milk is delivered.
In order to receive credits on producer milk, the producer cannot
be normally associated with the market in which the credit is
requested. A producer's milk is eligible to receive such credits as
long as the dairy farmer was not a producer under the order during more
than 2 of the immediately preceding months of January through June and
not more than 32 days' production of such farmer was received as
producer milk on the market.
The interim amendments adopted a transportation credit balancing
fund, as well as a 6-cent per hundredweight (or lesser amount) monthly
assessment on Class I producer milk to provide revenue for the fund.
The higher of the hauling credits distributed in the immediately
preceding 6 months or in the preceding July-December period is used to
determine the current month's assessment level. The market
administrator is authorized to maintain the transportation credit
balancing fund, deposit assessments into it, and distribute
transportation credits from it. Payments due from a handler are offset
against payments due to a handler. The assessment for the
transportation credit balancing fund is announced on the 5th day of the
month preceding the month to which it applies.
In the event that the transportation credit balancing fund is
insufficient to cover the cost of the transportation credits to be
distributed, the difference is deducted from the producer-settlement
fund.
Testimony and Briefs Resulting From the Reopened Hearing
At the reopened hearing, Mid-Am testified that it supports the
continuation of transportation credits in the 4 orders, but that
certain modifications should be made to fine-tune the provisions. Mid-
Am testified that changes should be made in the provisions applicable
to producer milk, but that no changes were needed with respect to the
provisions applicable to other order plant transfers.
Mid-Am testified that: (a) the credits applicable to a load of
producer milk should be comparable to those applicable to milk received
from an other order plant; (b) the mileage for computing credits should
be reduced by 85 miles from the origination point to the receiving
plant; (c) the transportation credit computation on producer milk
should reflect the difference between the shipping order's Class I
price at the origination point and the receiving order's Class I price
at the receiving plant; and (d) the geographic area from which
producers would be ineligible to receive credits on their milk should
be further expanded and clarified, including basing points found on the
edges of the marketing areas. In addition, Mid-Am proposed a revision
to Section 78, Charges on Overdue Accounts, in the Carolina, Southeast,
and Louisville-Lexington-Evansville orders to include payments of
transportation credit assessments due pursuant to Section 81 of the
orders.
Carolina-Virginia Milk Producers Association (CVMPA), a cooperative
association with producers supplying plants regulated under all 4
orders, testified in support of Mid-Am's proposal to modify the
transportation credits. CVMPA testified that, like Mid-Am, it believes
that the interim amendments are in need of some fine-tuning so that the
credits available on producer milk are comparable to those available on
plant milk. Also, CVMPA said that Mid-Am's proposed changes will reduce
the total amount of credits available on producer milk, thereby
lessening the probability that the value of the credits distributed
will exceed available funds.
Associated Milk Producers, Inc. (AMPI), a cooperative association
representing producers in the South and Southwest which also operates
manufacturing facilities in various states, testified in support of the
basic concept proposed by Mid-Am and CVMPA, but stated that certain
modifications to such proposals should be considered. AMPI testified
that it supports the proposal regarding the equalization of
transportation credits granted to producer milk imports and plant milk
shipments, but opposes the institution of basing points and the 85-mile
exclusion rule to establish producer milk ineligibility for
transportation credits. AMPI argued that the ineligibility requirement
would cause the uneconomical movement of milk because supplemental
supply sources in relatively close areas, such as eastern Texas, would
be passed over since supplemental producer milk from that area would
not receive any transportation credits. AMPI testified that it does not
oppose other aspects of Mid-Am's proposed modifications, such as
deducting the first 85 miles from the hauling distance to compute the
transportation credit value and having the credit cover only that
portion of a producer's load that is allocated to Class I.
AMPI also suggested including a net shipment provision as it
pertains to transportation credits on a daily or monthly basis. AMPI
argued that transportation credits should not be available on milk
received by a plant when on the same day the same milk may be diverted
or transferred to other order plants. While being unaware of any such
abuse currently, AMPI said that inclusion of such a provision would
prevent the encouragement of future abuse.
AMPI also testified that the transportation credits, as currently
structured, have created disorderly marketing conditions by
establishing an incentive for handlers to solicit producers away from
cooperatives during the transportation credit period. Although AMPI
contended that it had not lost producer membership, AMPI testified that
other cooperatives had lost some membership.
[[Page 27529]]
Testimony was also offered by a spokesman on behalf of Piedmont
Milk Sales, an organization that markets the milk of 277 dairy farmers
to handlers in the Southeast. Piedmont testified that the provision
which permits funds to be transferred from the producer-settlement fund
to the transportation credit balancing fund when the latter fund has an
insufficient balance to pay the month's transportation credits has been
detrimental to dairy farmers in the Southeast. Piedmont testified that
the loss of income to producers reflected in their reduced blend prices
is contrary to the economic philosophy relied on in half a century of
Federal order and price support administration.
Piedmont pointed out that the May 1996 hearing record indicated
that the impact on the blend price would be less significant than has
actually occurred, suggesting, perhaps, that abuse of the
transportation credits has occurred and will continue to occur in the
absence of any modification of the provision. In order to curtail
abuse, Piedmont suggested that transportation credits be prorated on
the basis of available funds collected from handlers and deposited into
the transportation credit balancing fund.
Piedmont also called for the restriction of credits on producer
milk by including a provision which would eliminate credits on milk
shipped directly from distant farms unless such milk was diverted
between markets; it should then be treated as if it were plant milk. In
essence, Piedmont argued for the tightening of the transportation
credit provisions to prevent the uneconomic movement of milk from
sources as far as California. The rate of 0.37 cent/mile also was
criticized as being too high; however, no specific alternative rate was
offered.
Piedmont supported a net shipment provision which would reduce the
amount of transportation credits obtained by a handler if that handler
shipped milk to a plant not regulated under any of the 4 orders. While
conceding that some transfers and diversions were justified and did not
constitute abuse, Piedmont contended that it is the responsibility of
the handler to demonstrate that supplemental milk actually moved into
such order(s) if a credit is requested.
In response to questions regarding the computation of the credits
for the various orders, Piedmont stated that currently under the
interim amendments the procedure used to compute such credits is not
identical for each of the orders with respect to location adjustments.
In order to promote greater equity, Piedmont suggested that the
procedures used in Orders 11 and 46 for such computation should be used
for all 4 orders.
Several Southeastern dairy farmers testified at the reopened
hearing to oppose and voice their concerns over the reduction in blend
prices resulting from the implementation of the transportation credits.
One dairy farmer stated that he does not understand why Class I
utilization rates have dropped in his marketing area in recent months,
while, at the same time, supplemental milk is being imported and is
eligible for transportation credits. Many of the farmer witnesses
complained that by deducting the difference between the amount of
credits to be paid out and the amount of funds available to cover these
credits from the producer-settlement fund, dairy farmers are penalized
and handlers are provided an incentive to continue to bring in milk
whether it is needed or not.
One dairy farmer stated that the importation of supplemental milk
would contribute to the demise of the dairy industry in the South. He
contended that hauling in supplemental milk does not benefit local
suppliers of feed or fertilizer and will eventually harm the
Southeastern economy. He also expressed concern about price uncertainty
which, he said, is exacerbated as a result of the transportation
credits. One dairy farmer maintained that producers already have to
contend with a number of variable factors affecting their blend price
(including the weather and drought) and should not be subject to any
additional uncertainties which may further reduce their blend price. He
stated that once the blend price is reduced, the dairy farmer has no
way to recoup the loss and cannot pass that cost along to anybody else.
Another dairy farmer testified that it is unfair and illogical to
reduce the blend price in the Southeast to bring in supplemental milk
when milk is also moving out of the area. He stated that he welcomes
competition from dairy farmers outside the Southeast area, but that
Southeast dairy farmers should not be responsible in any way for
hauling their distant competitors' milk into the area. He said that, in
essence, this has occurred with the implementation of the
transportation credit provisions.
Kraft, Inc. (Kraft), which operates manufacturing plants in several
states, testified that it is generally not opposed to ``cautious and
conservative use of transportation credits where necessary to assure
that milk required for Class I use is equitably and adequately
supplied.'' Kraft contended that the transportation credit provisions
adopted in the interim amendments appear to provide a financial
incentive to acquire distant supplemental producer milk rather than
plant milk by absorbing some of the hauling charges that would normally
be paid by the supplying producer. Kraft testified that the credits
should be continued, but that there should be an equalization of
incentives and/or disincentives with respect to plant milk versus
producer milk.
Kraft also testified that if a net shipment provision is to be
incorporated into the transportation credit program, it should only
include milk which has been transferred or diverted for Class I use to
another handler.
Milk Marketing, Inc. (MMI), speaking on behalf of its member
producers whose milk is pooled under Order 46, testified that it
supports Mid-Am's and CVMPA's proposal to modify the interim
amendments. MMI contended that such proposed modifications are needed
to resolve issues of equity involving producer milk and plant milk. In
addition, MMI stated that it firmly believes that producer milk
normally associated with the market should continue to be ineligible to
receive transportation credits.
Fleming Dairy, which operates pool distributing plants in
Nashville, Tennessee, and Baker, Louisiana, testified that it opposes
any increase of the current 6-cent assessment rate that is charged to
handlers regulated under the 4 orders. Fleming also addressed the issue
of net hauling provisions by stating that this is an area which needs
to be examined more thoroughly.
When asked about funds taken from the producer-settlement fund to
supplement the transportation credit balancing fund, Fleming testified
that Mid-Am's and CVMPA's proposals to reduce the amount of credits
given out will most likely result in a situation where a 6-cent
assessment will be enough to cover the value of the credits. Fleming
testified, however, that transportation credits primarily benefit dairy
farmers and, for this reason, it is appropriate to have all producers
supplement the funds available for credits by a reduction in the blend
price. In conclusion, Fleming testified that without transportation
credits, it would have had less money available within the company to
pay premiums to independent dairy farmers. Thus, according to Fleming
Dairy, dairy farmers have benefited from the incorporation of
transportation credits.
A witness representing Dairy Fresh Corp. and Barber Pure Milk Co.,
two handlers operating pool plants regulated under Order 7, also
supported
[[Page 27530]]
transportation credits as a concept, but opposed increasing the handler
assessment rate from 6 to 7 cents. Addressing the issue of the credit
rate, and in response to a question asked earlier at the hearing, the
witness stated that the 0.37 cent/mile rate should not be decreased as
the distance hauled increases. He argued that this would not be
appropriate because at times it is necessary to seek distant sources of
available milk supplies. Finally, the witness testified that Mid-Am's
proposal involving the 85-mile ineligibility requirement would
discourage handlers from obtaining milk directly from producers' farms
and thereby discourage greater efficiency and better quality milk.
Post-hearing briefs were filed by various interested parties. While
changes to the current transportation credit provisions have been
recommended throughout such briefs, the concept of transportation
credits was not opposed by any of the submitting parties, with the
exception of one handler recommending that the credits be eliminated
from Order 11.
In its brief, Southern Belle, a handler regulated under Order 11,
opposes any assessment on Class I producer milk for transportation
credits in Order 11, reiterating its position following the initial
hearing. Southern Belle restated the argument that many of its
competitors are pooled under an order which does not require such
assessment; therefore, the assessment places Southern Belle at a
competitive disadvantage. Furthermore, such brief stated the current 6-
cent assessment negatively impacts the Southern Belle's sales of
bottled milk.
A brief submitted by Kraft Foods, Inc., stated that Kraft does not
oppose transportation credits, but suggested that these provisions
should be modified to equalize the costs of supplying fluid milk
supplies to the Southeast. The brief stated that Kraft is at a
disadvantage in procuring milk for Class II use because credits are
available to those handlers with fluid milk plants which compete with
Kraft in their ancillary Class II operations. Kraft also expressed
concern over a net shipments provision and urged the Department to be
cautious in its adoption of any such provision by having shipment
limitations apply only when Class I milk (eligible for a transportation
credit) received in any of the markets has replaced Class I milk
(ineligible for a transportation credit) shipped out of the same market
if the receiving plant is not within the 4-market area. Kraft's brief
also reiterated its recommendation that the incentive and disincentives
regarding transportation credits on supplemental plant milk versus
supplemental producer milk should be equalized.
In its brief, Fleming Companies strongly supported the continuation
of transportation credits, but stated that a few minor adjustments may
be necessary. Fleming also restated its position that it opposes any
increase in the handler assessment rate. Additionally, the brief stated
that it is not inequitable for producers to share in the cost of the
transportation credits since such cost provides services of marketwide
benefit. As long as the contribution of handlers through assessments
exceeds the amount of contribution by producers, then, according to
Fleming, no increase in the assessment rate is justified.
Piedmont Milk Sales also submitted a post-hearing brief on behalf
of the 277 dairy farmers who ship through Piedmont and regulated
handlers, Land O'Sun, Inc., Hunter Farms, and Milkco, Inc. In its
brief, Piedmont conceded that transportation credits are needed in the
Southeast; however, Piedmont also recommended that certain changes are
necessary regarding transportation credits in order to curtail abuse or
potential abuse. According to Piedmont, several areas need to be
modified, including: (1) Producer milk eligibility, (2) the January
through June extension period for transportation credits, (3) the
deduction of funds from the producer-settlement fund resulting in blend
price reductions, and (4) the inclusion of a net shipment provision.
Piedmont suggests that credits have been given on milk which was
imported for Class I use into the 4-market area, while at the same time
milk was being shipped out of this area into Florida. Handlers and
producers, it was stated, paid to bring in replacement milk from as far
away as California when the milk could have been obtained from closer
sources. Piedmont argued that the current transportation credits create
an incentive to acquire milk on the basis of the generosity of the
credits as opposed to the most efficient movement of milk.
Piedmont's brief also suggested that the market administrator's
responsibility should be expanded to monitor transportation credit
requests to determine whether milk that was imported was actually
supplemental milk. The brief explains that the market administrator
should be required to verify that the credits due a handler do not
exceed the actual costs of hauling. In addition, Piedmont reiterated
its request for a net shipment provision to ensure that shipments from
these 4 markets to other order plants are not occurring simultaneously
with the importation of supplemental milk to replace these exports.
In its brief, Piedmont also strongly opposed any reduction in the
blend price of producers. A recommendation to prorate the available
funds to be paid out to handlers was supported.
According to Piedmont, if the Department does not eliminate
producer milk from being eligible for transportation credits, certain
restrictions should be placed on it. While supporting the proposed
amendment to assign producer milk to Class I in the same manner as
transferred milk, Piedmont opposes the other proposed changes involving
producer milk. Piedmont stated in its brief that when computing the
transportation credit, such credit should be reduced by 125 miles and
that it should also be reduced by an increment of 5% for each 100 miles
over 250 miles. In addition, Piedmont supports a reduction in the
credit rate of 0.37 cent per mile per hundredweight that is used in the
calculation of the credits. The rate decided upon should ensure that
handlers have an economic incentive to reduce the cost of transporting
milk.
A brief submitted by CVMPA supports a continuation of
transportation credits for the 4 markets, but also recommended that
certain modifications be adopted to the current provisions. In its
brief, CVMPA stated that the marketing situation which prompted the
need for transportation credits in the Southeast has not changed, and
any return to the pre-transportation credit situation would result in
disorderly marketing and irreparable harm to producers in certain
groups.
CVMPA stated that the credits available on supplemental producer
milk should be comparable to credits available on other order plant
milk. It suggests that one way of accomplishing this is to use the same
marketwide Class I utilization percentage to determine the proportion
of transferred milk and producer milk that is eligible for the credit.
A second change supported by CVMPA involves the adjustment of the
credit by the difference between the shipping point Class I price and
the receiving plant Class I price whether it is a producer load or an
other order plant transferred load. This will further equate the amount
of credits available on supplemental producer milk versus supplemental
plant milk.
In its brief, CVMPA restated its support of the reduction of the
first 85 miles in computing the transportation credit. Such a
reduction, CVMPA argued, would serve as a proxy for the
[[Page 27531]]
normal distance milk moves from farm to plant. This reduction is
appropriate, according to CVMPA, because the producer should be
responsible for the cost of farm-to-market hauling. This modification,
it adds, will further equate credits on producer milk and plant milk.
CVMPA's brief supports the proposal to have a producer's milk
ineligible for credits if the producer's farm is located within 85
miles of the plant receiving the milk, is within the 4 marketing areas,
is within 85 miles of certain cities on the periphery of the 4-market
area, or is located within certain states in the southeastern United
States. CVMPA argued that expansion of the geographic area would tend
to curtail the incentive to move milk uneconomically. CVMPA also
refuted certain arguments brought up during the reopened hearing which
maintained that such an expansion would result in the procurement of
milk from further distances so that credits could be earned. This,
CVMPA argued, is false logic.
Regarding the assessment rates, CVMPA argued in its brief that
assessments should be raised to a level high enough to ensure that
there will be no insufficiencies in the transportation credit balancing
fund. No justification exists for reducing the blend price to
producers, according to CVMPA; therefore, no deductions should be made
from the producer-settlement fund. CVMPA's brief also stated that any
other alternative, such as over-order pricing, will result in inequity
or uncertainty.
Finally, CVMPA opposed the installation of a net shipment provision
for reducing transportation credits received by a plant that also ships
out Class II or Class III milk during the same month that
transportation credits are received by such plant. In its brief, CVMPA
argued that seasonal, monthly, and weekly balancing of customer needs
is very important to a cooperative association such as itself. While
some operators of supply plants have the ability to reshuffle supplies
through the week and weekend to help with weekly balancing,
cooperatives which do not have manufacturing plants lack such
opportunity. According to CVMPA, it is untenable to reduce
transportation credits on supplemental milk simply because a
cooperative is balancing the daily and weekly need of distributing
plants by diverting producer milk.
Mid-Am also submitted a post-hearing brief in support of the
continuation of transportation credits under the 4 orders, but with the
modifications summarized earlier. Mid-Am reiterated its support for a
modification of the interim provisions that would ensure that credits
given on producer milk are comparable to credits given on plant milk.
Mid-Am pointed out in its brief that if the proposed modifications
to the interim amendments concerning credits on producer milk are
adopted, the amount of credits paid out will be significantly reduced;
therefore, for Orders 5, 11, and 46, the current assessment rate of 6
cents per hundredweight should be sufficient to cover the costs of
credits due. However, Mid-Am stated that in order to prevent funds from
being deducted from the producer-settlement fund, an increase of the
assessment to 7 cents in Order 7 would be necessary. Mid-Am also
reiterated its opposition to the adoption of a net shipment provision
for reducing transportation credits. According to Mid-Am, no
justification exists for the incorporation of such a provision. Milk
Marketing Inc. also submitted a brief in support of the continuation of
transportation credits.
MMI stated that it fully supports the positions of CVMPA and Mid-Am
with respect to the modification of the interim amendments. According
to MMI, the proposed modifications will result in the transportation
credit provisions being administered in a more equitable and uniform
manner.
A brief filed by AMPI also supported modifications of the current
transportation credit provisions so that the credits available on
producer milk are more comparable to the credits available on other
order plant milk. According to AMPI, such modifications would result in
the elimination of the transportation credit advantage of producer milk
over plant milk which causes disorderly procurement activities by
various handlers.
In its brief, AMPI opposes the modification proposed by Mid-AM and
CVMPA that would render ineligible for credits that milk shipped from
producers' farms located outside the 4 marketing areas, but within 85
miles of certain basing points. AMPI argues that such a restriction
would result in the uneconomical movement of milk, thereby creating
additional transportation costs in the Southeast.
AMPI's brief also recommends the inclusion of a net shipment
provision to guard against abuse of the transportation credits by
various handlers. AMPI's brief stated that it is unreasonable to base
such a net shipment provision on monthly transfers and diversions; it
suggested that netting shipments that occur within the same 24-hour
period would be more appropriate.
Barber Pure Milk Company and Dairy Fresh Corporation also submitted
a post-hearing brief opposing certain modifications of the current
transportation credit provisions. Barber and Dairy Fresh stated that
they are concerned over issues of inequity which may result from any
changes to the current provisions.
In their brief, Barber and Dairy Fresh oppose any proposal to have
credits on supplemental producer milk be contingent upon the lower of
the marketwide Class I utilization or the Class I utilization of the
receiving plant. By making the credits on producer milk and plant milk
comparable, they argue, other inequities would be created.
Additionally, they note that the proposed modifications, including the
proposal to subtract 85 miles from the total farm-to-plant mileage,
would encourage the importation of other order plant milk rather than
producer milk, which is more efficient.
According to Barber and Dairy Fresh, the interim orders should
remain as they are with respect to adjustments involving Class I prices
applicable at the origination point and the receiving plant. Any
modification to the current computation would not have sufficient
justification, according to the commentors. Any change to the
geographic area from which producers' milk is ineligible to receive
credits was opposed by Barber and Dairy Fresh because restrictions
would be placed on producer milk which would not apply to milk from
other order plants.
In their brief, Barber and Dairy Fresh also opposed decreasing the
amount of credits available as the distance increases. This, it was
argued, would force the uneconomical movement of milk. Any increase in
the assessment rate was opposed by the commentors also. They maintain
that producers also must share some responsibility for supplying the
Class I milk needs of the markets. Finally, Barber and Dairy Fresh
suggest that a net shipment provision be incorporated in the orders to
prevent milk from being brought into one order for the transportation
credit, while simultaneously milk is being shipped by the same handler
to another market. According to the commentors, the Florida markets are
benefiting from the transportation credit provisions at the expense of
the 4 southeastern markets.
Gold Star Dairy also submitted a post-hearing brief opposing any
assessments on Class I prices in order to fund transportation credits
under Order 7 and maintains its position as stated in its brief
following the May 1996 hearing. Gold Star Dairy also opposes any
modifications of the orders regarding
[[Page 27532]]
the interim amendments claiming that proper notice had not been given.
Select Milk Producers, Inc., submitted a brief in support of the
continuation of transportation credits without modification. In
addition to reiterating its position from an earlier brief submitted
after the May 1996 hearing, Select stated that proposals to limit
transportation credits based on distance would result in an inequitable
situation by placing the burden of transporting milk from further
distances on cooperatives servicing the southeast markets.
Additionally, Select maintained that the small reduction in producer
pay prices resulting from the credits will end once the funds in the
transportation credit balancing funds are built up; therefore, these
past reductions do not justify changing the current provisions. Select
also argued that proper notice had not been given to interested parties
prior to the reopened hearing.
A brief was also filed by a producer from Tennessee who expressed
concern that transportation credits place southeastern producers at a
competitive disadvantage. In his brief, he also questioned why
southeast producers have been paying to have distant milk hauled into
their markets.
Conclusion
Testimony and exhibits introduced at both sessions of the hearing
indicate that the Southeastern United States has a chronic shortage of
milk for fluid use in the summer and fall months, which often extends
into the winter months. This shortage has been worsening over time as
milk production has declined and population has increased. This trend
is likely to continue, exacerbating the problem of obtaining a
sufficient supply of milk for fluid use in an orderly and equitable
manner.
Under the arrangements that existed in these markets prior to the
adoption of the interim amendments, the costs of obtaining an
increasing supply of supplemental milk were not being borne equally by
all handlers and producers in each of the 4 orders. The record
indicates that disorderly marketing conditions existed because of the
significantly different costs that were incurred by handlers who
provide the additional service versus those who do not. It also
indicates that the disproportionate sharing of costs was jeopardizing
the delivery of adequate supplies of milk for fluid use. Thus, based
upon the record of the first session of the hearing in these matters,
interim amendments were adopted to restore stability and order in
providing adequate supplies of milk for fluid use. The reasons for
adopting the interim amendments were thoroughly explained in the
tentative decision and the provisions that were adopted have been
summarized above. Therefore, the discussion that follows will not
reiterate the reasons for adopting the interim amendments, but instead
will focus on the reasons for changing them based upon the new
information presented at the December hearing.
The interim amendments provided for transportation credits during
the months of July through December and included all of the months of
January through June in a ``discretionary transportation credit
period.'' Under those provisions, a handler may request that
transportation credits be extended to any of the months of January
through June by filing such a request with the market administrator 15
days prior to the beginning of the month for which the request is made.
After providing notice of such a request to interested parties and
conducting an independent study of the situation, the market
administrator has the ultimate authority to grant or deny the request
but must notify handlers of the decision by the first day of the month.
The complete procedure to be followed is described in Sec. 100X.82(b)
of the order language.
This final decision changes the discretionary period from the
months of January through June to January and June only. Outside of the
July through December period, January and June are likely to be the
months when these markets are most in need of supplemental milk for
fluid use. Class I utilization generally begins to drop in February and
milk supplies are usually adequate for fluid use until June.
The reasons for changing these discretionary months are twofold.
First, including all of the months of January through June in the
discretionary period could result in a situation where transportation
credits are provided on nearly a year-round basis. Were this to happen,
it would destroy the concept of a supplemental producer because a dairy
farmer conceivably could be shipping milk to one of these markets on a
year-round basis. Moreover, under the provisions provided in this
decision, if a dairy farmer were to supply milk for more than 2 months
of the January through June period, the producer's milk would be
ineligible for transportation credits beginning in July. Hence, these
provisions would be in conflict with each other. A second reason for
restricting the discretionary period to January and June is to give the
transportation credit balancing fund a chance to build up so that funds
will be available when the markets are most in need of supplemental
milk starting in July.
The interim amendments provided for a transfer of funds from the
producer-settlement fund to the transportation credit balancing fund
when the latter fund had an insufficient balance to pay the month's
transportation credits. When this provision was adopted, it was assumed
that it would only be needed for the first year that these provisions
were in effect and that, thereafter, the transportation credit
balancing fund would maintain a sufficient balance to preclude such a
transfer of funds. Experience has indicated otherwise, particularly
with respect to the Southeast and Carolina markets. Data introduced by
the market administrators' offices show that all 4 orders had an
insufficient balance in the transportation credit balancing fund during
every month that transportation credits have been in effect, with the
exception of Order 46 in November 1996. The data also show that the
transfer of funds from the producer-settlement fund to the
transportation credit balancing fund reduced blend prices to producers
by varying amounts during the 4-month period of August through November
1996, ranging from 1 cent for Order 46 to as much as 21 cents in
October for Order 7.
To cope with the milk shortage of the past year, action had to be
taken to provide handlers with adequate milk supplies to meet their
fluid needs as equitably as possible. Since the transportation credit
provisions did not become effective until August 10, 1996, there was no
opportunity to accumulate funds with which to pay all of the
transportation credits. Therefore, as a short-term measure, provision
was made for taking funds from the producer-settlement fund. The logic
behind this provision was that if transportation credits could not be
paid fully from funds collected from handlers, the next best
alternative was to have all of a market's producers contribute to
making up the difference; otherwise, certain producers (i.e., members
of cooperative associations) would bear a disproportionate share of the
cost of bringing in supplemental milk.
Based on the experience with transportation credits during the past
4 months, it can be concluded with some certainty that, under present
conditions, the transportation credit balancing fund of Orders 5 and 7
would contain insufficient funds to pay for all of the transportation
credits that are likely to be accrued during the months of July through
December 1997 and that, based upon the current 6-cent assessment rate,
funds would have to be transferred from
[[Page 27533]]
the producer-settlement fund to the transportation credit balancing
fund by fall 1997 if these provisions remain unchanged.
We agree with the proponents of transportation credits that the
cost of bringing supplemental milk to a market generally should be
shared among all of a market's handlers. However, from the data for the
last 4 months, it can now be concluded with reasonable certainty that
to fully cover handlers' costs for the Southeast and Carolina markets
under the present provisions, the assessment rate would have to be
raised significantly. A better approach, we believe, is to address the
revenue problem from both ends: slightly increase revenue, but more
significantly reduce payouts. This would ensure that only necessary
imports are made, and would encourage the most cost effective methods
of procurement. At the same time, it would provide handlers with
significant, if not total, recoupment of costs.
In particular, based upon the record of this hearing and the
experience with transportation credits during the months of August
through November 1996, several changes should be made to the
transportation credit provisions to correct certain problems that have
become evident.
First, the transfer of funds from the producer-settlement fund to
the transportation credit balancing fund should be eliminated. This
temporary measure is no longer needed. Transportation credits should be
paid out each month to the extent possible from the available funds in
the transportation credit balancing fund. If the credits exceed the
balance in the transportation credit balancing fund, the available
funds should be prorated to handlers based upon the transportation
credits that are due to each handler.
Second, the per mile transportation credit rate should be reduced
to 0.35 cent per hundredweight per mile from the present level of 0.37
cent. This reduction is consistent with the testimony of several
witnesses who warned during the course of the hearings that it is
better to under-compensate handlers for supplemental milk costs rather
than overcompensate them. In this way, handlers will only import milk
that is truly needed because their costs may not be fully covered. This
argument makes sense and, in view of the need to conserve funds, this
suggestion should be adopted.
Third, the proposal by Mid-Am to exclude 85 miles from the mileage
when computing credits for supplemental producer milk should be
adopted. Mid-Am is correct in arguing that producers should be expected
to bear their normal farm to plant hauling cost, and the 85-mile figure
proposed appears to be a reasonable approximation of the distance used
in computing such cost. This modification will also help significantly
to reduce transportation credits.
Fourth, certain changes should be made in the proportion of
supplemental producer milk eligible for transportation credits and in
the formula for computing those credits. These changes are explained
below.
Finally, the maximum assessment for the transportation credit
balancing fund should be increased slightly for Orders 5 and 7. It is
likely that, even with the changes adopted above and others yet-to-be
discussed, there will be a shortfall in funds to pay for all of the
projected transportation credits if production patterns continue as
they have for the past 3 years. A modest rate increase will help narrow
this gap. Therefore, the maximum assessment rate for Order 5 should be
increased to 6.5 cents per hundredweight of Class I producer milk and
the rate for Order 7 should be increased to 7 cents per hundredweight.
The rate should remain at 6 cents per hundredweight for Orders 11 and
46, however.
This modest increase in the assessment rates for Orders 5 and 7
will help to avoid having to prorate available funds to handlers in
these markets. It should be kept in mind that this rate is the maximum
rate that can be charged. If production increases and/or supplemental
milk imports decrease and less money is needed for the transportation
credit balancing fund, these changes will trigger an automatic
reduction in this assessment.
The current 6-cent assessment for Orders 11 and 46 is likely to
meet all of the anticipated transportation credits for 1997. In fact,
by the first half of 1998 it may be possible to maintain a sufficient
balance in the transportation credit balancing fund with a rate below 6
cents per hundredweight for these 2 markets.
In conjunction with the limit on the disbursement of transportation
credits, as explained above, a new procedure should be implemented for
receiving the required information, computing the credits to be
disbursed, and making final settlement for appropriate adjustments.
Experience with the transportation credit provisions during the
months of August through December 1996 has demonstrated a handler/
cooperative association problem in getting complete and accurate
transportation credit documents to the market administrator by the 7th
day of the month, when such information must be received for purposes
of computing the uniform price. Because of difficulties in obtaining
timely information, the market administrators have accepted late
submissions of supplementary information.
Now that the possibility exists that transportation credits may
have to be disbursed on a prorata basis, fixing the time for the final
submission of requests and for final payment based upon such requests
is even more of a necessity. If the submission of supplemental
information were left open-ended, the procedure for prorating credits
could get hopelessly complicated with endless recalculations based on
tardy information. Therefore, the procedure should be clear,
reasonable, and unalterable once in place.
When the market administrator receives handlers' reports of
receipts and utilization by the 7th day of the month, the market
administrator will determine whether there are sufficient funds in the
transportation credit balancing fund to cover the requests for
transportation credits. If there is not a sufficient balance, the
market administrator will compute a preliminary proration percentage by
dividing the balance in the fund by the total amount of transportation
credits requested. The prorated credits so computed will be disbursed
along with any payments from the producer-settlement fund on or before
the 13th day of the month with respect to Orders 5, 7, and 11 (16th day
of the month in the case of Order 46).
Handlers will be given the opportunity to correct and file complete
documentation of their initial transportation credit requests for the
preceding month by filing updated information with the market
administrator by the 20th day of the month. After such date, the market
administrator will conduct a preliminary audit of the requests and will
then compute a final proration percentage based upon the revised
numbers. Handlers then will be notified of any additional credits due
them or of any payments due from them and such payments will be
completed the following month when payments are next due.
At the May 1996 hearing, Mid-Am proposed permitting transportation
credits for bulk transfers of milk for Class I use from any other order
plants. The interim amendments restricted such transfers to plants
regulated under Federal orders other than Orders 5, 7, 11, and 46. The
reason for excluding plants under these 4 orders from transportation
credits was to avoid
[[Page 27534]]
potential abuses from undue movements of milk among the orders to take
advantage of transportation credits. In particular, handlers were
concerned that milk could be stair-stepped from Order 46 to Order 7,
for example, thereby creating a shortage of milk in Order 46. Order 46
handlers then would have to import replacement milk, and their
assessments for transportation credits would be used to cover
transportation costs for such replacement milk when, some argued, Order
7 handlers should have borne the full cost of importing milk from the
ultimate source. At the reopened hearing, there were no problems
mentioned in connection with the provisions applicable to plant
transfers, except for concern that milk could be moved or stair-stepped
among orders to obtain credits. As a result, the provisions that
prohibit credits to receipts of transferred milk among the four orders
should remain unchanged in the final amendments.
Currently, producer milk is eligible to receive transportation
credits as discussed above. At the reopened hearing, there was no
testimony suggesting that transportation credits be eliminated for
producer milk. In fact, the available data shows that during the months
of August through November 1996 far more supplemental milk was received
directly from producers' farms than from other order plants. Several
suggestions were made concerning how to compute such credits in a more
equitable and efficient manner. Since most of these suggestions have
merit, modifications to the interim amendments involving producer milk
are provided.
The thrust of the testimony was that the present method for
computing transportation credits for producer milk resulted in an
overly generous credit as compared to the method used for plant milk
and, therefore, provided an artificial incentive to receive producer
milk directly from farms rather than milk transferred from an other
order plant. The testimony, as summarized earlier, was quite
convincing, with the exception of Mid-Am's proposal to exclude the milk
of a producer who is within 85 miles of the perimeter of any of the 4
marketing areas from transportation credit eligibility. Such proposal
should not be adopted.
In the interim amendments, producer milk was not eligible for a
transportation credit if the producer's farm was located within one of
the 4 marketing areas or if the farm was within 85 miles of the plant
to which milk from the farm was delivered. The tentative decision
concluded that it was ``reasonable to conclude that the markets''
regular producers are located reasonably close to the plants receiving
their milk. Thus, such producers' farms are likely to be within the
geographic marketing areas defined in each order.''
At the reopened hearing, Mid-Am proposed expanding this restriction
to include producers whose farms are: (a) Within the States of Florida,
Georgia, Alabama, Louisiana, Mississippi, Arkansas, Tennessee, South
Carolina, North Carolina, or Kentucky; or (b) within 85 miles of the
City Hall in the nearer of Lake Charles or Shreveport, Louisiana;
Little Rock, Arkansas; Evansville, Indiana; Fulton, Louisville, or
Lexington, Kentucky; Bristol, Tennessee; or Reidsville, or Roanoke
Rapids, North Carolina.
Mid-Am's 10-state exclusion area would randomly exclude many
counties in Arkansas and Kentucky that are outside of any of the 4
marketing areas and should not be adopted. It would be difficult to
justify the exclusion of a county from transportation credits simply
because of its location within a particular state. For example, under
the Mid-Am proposal, many counties in northwest Arkansas and northeast
Kentucky would be excluded from transportation credits. These counties
may or may not be part of the regular supply for the 4 markets. By
randomly excluding all territory within a state, certain counties
outside of the 4 marketing areas may be unfairly excluded. The
exclusion of territory from transportation credits should be based upon
whether that territory is a regular source of supply for the markets
involved in this proceeding. It must be noted, however, that simply
because a county is within one of the 4 marketing areas does not
necessarily make it a regular source of supply for these 4 markets. By
the same token, simply because a county is just outside these marketing
areas does not mean it is not a regular source of supply either.
However, it is reasonable and appropriate to use such marketing area
boundaries to define the exclusionary area since it is apparent that
most of the producers located within these areas supply plants
regulated under these orders. Furthermore, other performance measures
are used to distinguish between producers who are or who are not
regular suppliers of these markets. Thus, the exclusionary area need
not be overly restrictive as proposed by Mid-Am.
The interim amendments excluded the area within the 4 marketing
areas from transportation credits. However, the use of the marketing
area definition failed to exclude several unregulated counties within
the State of Kentucky where producers are located and who could qualify
for transportation credits. These counties are completely encircled by
the Order 7 and Order 46 marketing areas and are an integral part of
the milk supply for those 2 markets. There can be no doubt that these
counties-- Allen, Barren, Metcalfe, Monroe, Simpson, and Warren--
clearly should be part of the area excluded from transportation credits
because the surrounding markets are clearly the regular outlets for
this milk. Accordingly, the order language should be modified to
include these 6 counties in Sec. 100X.82(c)(2)(iii).
The proposal of Mid-Am to exclude the territory within 85 miles of
the cities mentioned above should not be adopted. This proposal would
exclude many producers who are located in counties adjacent to the 4
marketing areas. These producers may, for the most part, be regular
suppliers of other markets. For example, there may be dairy farmers in
East Texas who are within 85 miles of Lake Charles or Shreveport,
Louisiana, from whose farms milk is delivered on a supplemental basis
to other plants within the Southeast market that may be hundreds of
miles away. It would make no sense to exclude these farms from
transportation credits and thereby force cooperative associations and
plant operators to bring in s
FR Doc. 97-13000 Milk in the Carolina and Certain Other Marketing Areas; Partial Final Decision
upplemental milk from even farther
distances when this closer milk is available.
Not all of the pool distributing plants regulated under these
orders are located within the 10-state area specified above. For
example, a pool distributing plant regulated under Order 5 is located
in Lynchburg, Virginia. The interim amendments dealt with this problem
by specifying that a farm had to be more than 85 miles from the plant
to be eligible for a transportation credit. This provision was based
upon a suggestion made by MMI at the May 1996 hearing restricting
supplemental producers to those who are more than 85 miles from
Louisville or Lexington, Kentucky, or Evansville, Indiana.
As explained above, the amendments provided in this decision would
subtract 85 miles from the transportation credit computation for
producer milk. In view of this adjustment, it is no longer necessary to
specify that a producer must be more than 85 miles from the plant
because a transportation credit would not be given for that distance
anyway. In effect, the origination point for producer milk has to be at
least 85 miles from the plant of receipt before milk from that point
would receive a transportation credit. Thus, the language now contained
in Sec. 100X.82(c)(2)(ii) of the interim
[[Page 27535]]
amendments referring to 85 miles has not been carried forward to the
comparable revised paragraph, Sec. 100X.82(c)(2)(iii), of the attached
final amendments.
Mid-Am also proposed certain changes to the way transportation
credits are computed for producer milk. As provided in the interim
amendments, all producer milk classified as Class I milk is eligible
for the credit. At present, the proportion of such milk that receives a
Class I classification is approximately equal to the utilization of the
plant receiving the milk. Receipts of transferred milk from other order
plants, on the other hand, are allocated to Class I based upon the
lower of the receiving handler's Class I utilization or the marketwide
Class I utilization. This difference in classifying supplemental milk,
according to Mid-Am, has provided an incentive for a high Class I
utilization handler to receive supplemental producer milk rather than
supplemental milk transferred from an other order plant in order to
receive credits on a greater proportion of the supplemental milk.
To correct this bias, Mid-Am proposed that supplemental milk from
producers should be assigned to Class I in the same proportion as other
order supplemental milk to determine the proportion of such milk that
is eligible for the transportation credit. This modification should be
adopted. Supplemental producer milk should be assigned to Class I, for
transportation credit purposes, by adding a paragraph--(c)(2)(i)--to
Section 82 (``Payments from the transportation credit balancing
fund''). This new paragraph states that the quantity of producer milk
that is eligible for the transportation credit shall be determined by
multiplying the total pounds of supplemental producer milk received at
the plant by the lower of the marketwide Class I utilization of all
handlers for the month or the Class I utilization of the pool plant
operator receiving the milk after all of the handler's receipts have
been allocated to classes of utilization in Section 44 of the
respective order.
Another change that should be made to the transportation credit for
producer milk has to do with the way the gross credit is adjusted by
the difference in Class I price at the receiving plant and the
origination point for the load of milk. At the present time, even
though a farm and an other order plant may be identically located in
another order's marketing area, there may be a difference in the
transportation credit that would apply to milk coming from those
identically-located points under the provisions of Orders 5, 11, and
46. The Class I price, adjusted for location, under Orders 5, 11, and
46, applicable to a plant in the marketing area of some other order is
not necessarily the same as the Class I price, adjusted for location,
applicable to that plant pursuant to the provisions of that other
order. For example, the Class I price to any plant under the Eastern
Ohio-Western Pennsylvania order is $2.00 plus the basic formula price
under the provisions of the Eastern Ohio-Western Pennsylvania order,
but the Class I price that would apply to a plant located in the
Eastern Ohio-Western Pennsylvania marketing area under the provisions
of the Carolina order would be based upon mileage from specified basing
points in North Carolina; it could be greater or less than $2.00 plus
the basic formula price. Under the Southeast order, by contrast, the
Class I price applicable to a plant that is located in the marketing
area of some other order is the Class I price that would apply to that
plant under the provisions of the order covering that marketing area.
Therefore, under the Southeast order the transportation credit for a
plant or farm identically located in another Federal order marketing
area is the same, but for Orders 5, 11, and 46 it may not be.
In computing transportation credits for plant milk, the gross
credit (i.e., the mileage times 0.35 cent) is adjusted by subtracting
the Class I price applicable to the plant under the other order from
the Class I price applicable to the plant receiving the milk. For
producer milk, however, the gross credit is adjusted by subtracting
this order's Class I price at the origination point from this order's
Class I price at the receiving plant. As a result, there could be a
difference in the transportation credit applicable to plant milk versus
producer milk, even though the plant and farm are adjacent to each
other.
This can and should be corrected for plants and farms located in
Federal order marketing areas by changing the way the credit is
computed for producer milk. The adjustment to the gross credit for
producer milk should be computed as if the origination point for the
producer milk were a plant location. Specifically, if the origination
point is in another order's marketing area, the other order Class I
price applicable at the origination point should be subtracted from the
receiving order's Class I price at the receiving plant. This change is
provided in Sec. 100X.82(d)(3)(v) of the order language.
A complication arises in the case of an origination point that is
not located within any Federal order marketing area. While the other
order Class I price that would apply to an other order plant that is
located in unregulated territory is known, the same cannot be said for
a farm location (i.e., an origination point for a load of supplemental
producer milk). In view of this uncertainty, the most reasonable
treatment for such milk is to price it under the provisions of the
order receiving the milk. For example, if an Order 5 plant in Raleigh,
North Carolina, received supplemental producer milk from a farm in an
unregulated county in central Pennsylvania, the gross transportation
credit for that load of milk would be adjusted by subtracting from the
credit the difference between the Order 5 Class I price at the
Pennsylvania origination point and the Order 5 Class I price at
Raleigh.
Another issue, not addressed at the hearing, must be discussed. It
is possible that milk may be transferred from an other order plant that
is located in one Federal order marketing area but is regulated under a
different order. For example, a plant may be located in the Eastern
Ohio-Western Pennsylvania marketing area but may be regulated under the
Ohio Valley order. In such a case, a question may arise concerning
which order's Class I price to use in computing the transportation
credit. In this situation, the market administrator should use the
Class I price that applies at that plant under the order in which the
plant is regulated. Thus, in the example given, the Class I price at
the plant would be the applicable Class I price under the Ohio Valley
order. This treatment will ensure that the transportation credit
properly reflects the difference in the Class I prices applicable to
the shipping handler and the receiving handler.
In addition to considering the geographic location of a dairy farm
for the purpose of determining whether milk from that farm is
supplemental to a market's needs, attention should be focused on
whether milk from that farm is regularly associated with the market or
is shipped to the market as needed.
Since the need for supplemental milk generally drops off sharply
after the month of December or January in all of these markets and does
not reappear, usually, until the month of July, it is reasonable to
conclude that the milk of a producer who is located outside of the
exclusionary areas (the 4 subject marketing areas or the 6 Kentucky
counties mentioned above) generally would not be needed during the
months of January through June, but might be needed starting in July.
It is also logical that the milk of a supplemental producer would not
be needed each day but perhaps once or twice a week.
[[Page 27536]]
Accordingly, if a dairy farmer was a regular supplier of the market
during January through June--i.e., a ``producer'' on the market for
more than 2 of those months--the milk of such a dairy farmer should not
be considered supplemental milk during the following months of July
through December.
It would be unduly restrictive to disqualify a dairy farmer for
shipping a limited amount of milk during one or two months of the
January through June period, however, because even the months of
January and June can be short months in the Southeast, and, in fact,
these 2 months can be included in the transportation credit period.
Therefore, the provision should be flexible enough to accommodate some
shipments to the market during the January through June period.
Specifically, a dairy farmer should not lose status as a supplemental
producer if milk is shipped to a market for not more than 2 months of
the January through June period. However, shipments during this period
should be of a limited duration. Therefore, not more than 50 percent of
the dairy farmer's production may be received as producer milk, in
aggregate, during the 2 months of the January through June period in
which the dairy farmer was a producer on the market. In addition, if
January and/or June are months in which transportation credits are
extended, those months should not be included in the 2-month limit for
a supplemental producer. The transportation credits would not be
extended to January or June if milk were not needed during those
months, and it would be counterproductive to penalize a producer for
responding to that need. Therefore, if January and June are part of the
transportation credit period, a dairy farmer may be a producer during
those months and, in addition, may be a producer during 2 of the months
of February through May provided that the dairy farmer's producer milk
during those additional 2 months did not exceed the 50 percent limit.
The interim amendments provided that 32 days' production of a dairy
farmer could be delivered during January through June before the dairy
farmer would lose status as a supplemental producer. This has been
changed to ``50 percent of the dairy farmer's production'' to simplify
reporting and administration of this provision.
The provisions in the interim amendments prescribing the
determination of an origination point for a load of supplemental
producer milk are continued in this final decision. No problems were
noted with this provision and no suggestions were made for changing it
at the reopened hearing or in the post-hearing briefs. The 2
alternatives provided for determining a supplemental producer milk
origination point are contained in Sec. 100X.82(d)(3)(i).
As noted earlier, there was a great deal of concern expressed at
both sessions of the hearing about ``stair-stepping'' milk from one
market to another. Suggestions were made at both sessions of the
hearing to adopt a net shipment provision to offset transfers from a
pool plant to other order plants against supplemental milk brought into
the pool plant within a specified period of time.
This issue can be quite complex, particularly in large markets,
such as the Southeast market. It may very well make economic sense to
ship surplus milk from one part of a market (for example, southern
Louisiana in the Order 7 marketing area) to another market that is
short of milk (for example, the Florida markets) at the same time that
bulk milk is imported for a handler in another part of the Order 7
marketing area (for example, a handler in Nashville). Also, it is
entirely possible that milk may be needed at the beginning of a month,
while by the end of the month milk must be exported out of the market
for surplus disposal. Finally, since fluid milk processors have
different bottling needs, extra milk may be needed on certain days but
not on other days within the same week.
In response to concerns expressed at both sessions of the hearing,
the 4 orders should contain a net shipment provision to prevent the
type of abuses feared by proponents of such a provision. However, in
view of the varying circumstances surrounding the fluid needs of these
markets, the provision should be flexible enough to accommodate these
varying needs. To be effective, the net shipment provision should apply
to all supplemental milk received, either by transfer or directly from
producers' farms as producer milk.
In applying the net shipment provision, bulk transfers to nonpool
plants that were made on the same day that supplemental milk was
received at a pool plant should be subtracted from the total receipts
of supplemental milk for which the pool plant operator or cooperative
association is requesting a credit. In reducing the supplemental milk
eligible for the credit pursuant to this net shipment provision, the
market administrator should first subtract the loads of milk that were
most distant from the plant and then continue in sequence with less
distant loads. This procedure, which is described in Sec. 100X.82(d)(1)
of the orders, will minimize the depletion of funds from the
transportation credit balancing fund resulting from unwarranted
receipts of supplemental milk.
The net shipment provision will require accurate accounting and
reporting on the part of handlers. Specifically, each pool plant
operator applying for transportation credits will be required to
maintain accurate accounting records of daily transfers of bulk milk
from the plant to nonpool plants. This is provided in
Sec. 100X.30(a)(7) of the order language for Orders 5, 7, and 46, and
Sec. 100X.30(a)(8) for Order 11.
Although specific proposals were made to net outgoing shipments
from incoming shipments within a 24-hour period, this suggestion could
prove to be tedious for handlers, as well as for the market
administrator. Therefore, the attached amendments provide for netting
based on receipts and shipments occurring the same calendar day.
The diversion of producer milk to a nonpool plant was not addressed
at great length at either session of the hearing, although AMPI did
state in its brief that diversions to nonpool plants should also be
included in a net shipment provision.
It is certainly a fact that milk is diverted from pool plants in
these 4 markets to nonpool plants for Class II and Class III use. Each
pool plant operator has a regular supply of producer milk for its Class
I needs and that milk should be utilized to the full extent before
importing supplemental milk. While diversions could have been
incorporated into the net shipment provision, as suggested by AMPI,
there would be numerous obstacles to overcome in doing so. Therefore,
we concluded, on balance, that any possible benefit of including
diverted milk would be outweighed by the problems caused by such a
complicated provision.
To illustrate one type of problem, for example, not all
supplemental milk may be needed at a pool plant every day; some days it
may be diverted to a nonpool plant close to the farm where produced and
hundreds of miles away from the pool plant where it is received on a
supplemental basis some of the time. If diversions were included in the
net shipment provision, the milk that is not needed--i.e., it is
diverted to a nonpool plant--would have to be subtracted from the
supplemental milk that was needed that day, which could result in the
handler getting no transportation credit for supplemental milk received
on that day. While a provision undoubtedly could be written to
distinguish ``regular'' or ``close-in'' producer milk that is diverted
from
[[Page 27537]]
``supplemental'' or ``distant'' producer milk in an attempt to overcome
these problems, it would likely be a very cumbersome provision. If, at
some point, it becomes obvious that handlers are diverting local milk
for manufacturing use while importing supplemental milk for Class I use
within the same 24-hour period, appropriate action should be taken to
stop this abuse of the transportation credit provisions. In the
meantime, however, handlers should be given as much freedom as possible
to move milk according to their needs.
At the reopened hearing, Mid-Am proposed an amendment to that
section of the orders dealing with overdue accounts. Specifically, it
proposed adding overdue payments to the transportation credit balancing
fund in the list of late payments to which a late payment charge would
apply.
This proposal should be adopted. Although handler compliance with
the transportation credit balancing fund assessment has been excellent
thus far, it is possible that late payments may occur in the future.
Were this to happen, one handler could gain an advantage over competing
handlers by using money that should have been paid to the market
administrator. To discourage this from happening, and to rectify the
situation when it does happen, a late payment charge should apply to
delinquent payments to the transportation credit balancing fund.
A conforming change should be made in Order 46 with respect to the
payment of assessments for the transportation credit balancing fund and
the payment of transportation credits to handlers. In the interim
amendments, assessments for the transportation credit balancing fund
were uniformly due on the 13th day of the month for all 4 orders and,
similarly, payment of transportation credits to handlers was uniformly
set at the 12th day of the month for all 4 orders. However, Order 46
differs from the other 3 orders with respect to payments to and from
the producer-settlement fund. Under Order 46, payments to the producer-
settlement fund are due on the 15th day of the month and payments from
the producer-settlement fund are due on the 16th day of the month. For
the other 3 orders, however, payments into the producer-settlement fund
must be made by the 12th day of the month and payments out of the
producer-settlement fund must be made by the 13th day of the month. To
facilitate the payments of transportation credit assessments and
payouts under Order 46, the dates in Secs. 1046.81(a) and 1046.82(a)
should be changed from the 12th and 13th, respectively, to the 15th and
16th, respectively, to coincide with payments in and out of the
producer-settlement fund for that order.
A conforming change also should be made in Sec. 100X.81 with
respect to how the assessment for the transportation credit balancing
fund is to be determined. In the interim amendments, the standard used
for determining how much the handler assessment would be each month was
based upon the credits disbursed during the preceding July through
December period or during the immediately preceding 6-month period.
This paragraph was worded that way because transportation credits
theoretically could have been in effect every month of the year.
However, as modified in this final decision, transportation credits can
only be effective during the months of June through January and the
months of June and January are subject to a finding by the market
administrator that supplemental milk is needed for fluid use.
In view of the change in months for which transportation credits
may be effective, it is also appropriate to change the benchmark for
determining the level of such assessments. Specifically,
Sec. 100X.81(a) should be modified to read ``the total transportation
credits disbursed during the prior June-January period.'' However, in
the event that the funds disbursed are prorated based on the available
funds, the assessment should be based upon the total amount of credits
that would have been disbursed as determined by the market
administrator. Although the yardstick for the balance in the fund can
now be raised to 8 months instead of 6, this change is necessary to
maintain a balance in the transportation credit balancing fund that is
sufficient to cover the transportation credits to be disbursed in the
following short production period. In other words, if the months of
January and/or June were included in the prior transportation credit
period, the amount of credits given during these months should also be
included in the calculation of the assessment rates for the 4 orders.
Section 100X.77, adjustment of accounts, of the Carolina, Tennessee
Valley, and Louisville-Lexington-Evansville orders should also be
amended to conform with the changes adopted above. Presently, the
orders lack any instruction pertaining to the adjustment of accounts in
the event that an error has been made either involving payments into
the transportation credit balancing fund by handlers or payments to
handlers by the market administrator from such fund. Therefore, it is
necessary to include such language in section 100X.77 of these 3 orders
to avoid any ambiguity concerning these matters. In particular,
transportation credit balancing fund adjustments should be handled in
the same manner as adjustments to the producer-settlement fund, except
that additional transportation credits due handlers should be made as
soon as transportation credit funds become available and not
necessarily within 15 days of the time that this adjustment is
discovered. A similar conforming change is not necessary for the
Southeast order because the language contained in Sec. 1007.77 of that
order is general enough to accommodate adjustments related to the
transportation credit balancing fund.
Rulings on Proposed Findings and Conclusions
Briefs and proposed findings and conclusions were filed on behalf
of certain interested parties. These briefs, proposed findings and
conclusions and the evidence in the record were considered in making
the findings and conclusions set forth above. To the extent that the
suggested findings and conclusions filed by interested parties are
inconsistent with the findings and conclusions set forth herein, the
requests to make such findings or reach such conclusions are denied for
the reasons previously stated in this decision.
General Findings
The findings and determinations hereinafter set forth supplement
those that were made when the aforesaid orders were first issued and
when they were amended. The previous findings and determinations are
hereby ratified and confirmed, except where they may conflict with
those set forth herein.
(a) The tentative marketing agreements and the orders, as hereby
proposed to be amended, and all of the terms and conditions thereof,
will tend to effectuate the declared policy of the Act;
(b) The parity prices of milk as determined pursuant to section 2
of the Act are not reasonable in view of the price of feeds, available
supplies of feeds, and other economic conditions which affect market
supply and demand for milk in the marketing areas, and the minimum
prices specified in the tentative marketing agreements and the orders,
as hereby proposed to be amended, are such prices as will reflect the
aforesaid factors, ensure a sufficient quantity of pure and wholesome
milk, and be in the public interest;
(c) The tentative marketing agreements and the orders, as hereby
[[Page 27538]]
proposed to be amended, will regulate the handling of milk in the same
manner as, and will be applicable only to persons in the respective
classes of industrial and commercial activity specified in, marketing
agreements upon which a hearing has been held; and
(d) All milk and milk products handled by handlers, as defined in
the tentative marketing agreements and the orders as hereby proposed to
be amended, are in the current of interstate commerce or directly
burden, obstruct, or affect interstate commerce in milk or its
products.
Marketing Agreement and Order
Annexed hereto and made a part hereof is an Order amending the
orders regulating the handling of milk in the Carolina, Southeast,
Tennessee Valley, and Louisville-Lexington-Evansville marketing areas,
which has been decided upon as the detailed and appropriate means of
effectuating the foregoing conclusions. A marketing agreement that
reflects the attached order verbatim is available upon request from the
market administrator.
It is hereby ordered that this entire decision and the order
amending the orders be published in the Federal Register.
Determination of Producer Approval and Representative Period
February 1997 is hereby determined to be the representative period
for the purpose of ascertaining whether the issuance of the orders, as
amended and as hereby proposed to be amended, regulating the handling
of milk in the aforesaid marketing areas is approved or favored by
producers, as defined under the terms of the individual orders (as
amended and as hereby proposed to be amended), who during such
representative period were engaged in the production of milk for sale
within the aforesaid marketing areas.
It is hereby directed that a referendum be conducted to ascertain
producer approval in the Louisville-Lexington-Evansville marketing
area. The referendum must be conducted and completed on or before the
30th day from the date that this decision is issued in accordance with
the procedure for the conduct of referenda (7 CFR 900.300-311), to
determine whether the issuance of the attached order as amended, and as
hereby proposed to be amended, regulating the handling of milk in the
Louisville-Lexington-Evansville marketing area is approved or favored
by producers, as defined under the terms of the order, as amended and
as hereby proposed to be amended, who during such representative period
were engaged in the production of milk for sale within the marketing
area.
The agent of the Secretary to conduct such referendum is hereby
designated to be Arnold M. Stallings.
List of Subjects in 7 CFR Parts 1005, 1007, 1011, and 1046
Milk marketing orders.
Dated: May 12, 1997.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
Order Amending the Orders Regulating the Handling of Milk in the
Carolina, Southeast, Tennessee Valley, and Louisville-Lexington-
Evansville Marketing Areas
This order shall not become effective unless and until the
requirements of Sec. 900.14 of the rules of practice and procedure
governing proceedings to formulate marketing agreements and marketing
orders have been met.
Findings and Determinations
The findings and determinations hereinafter set forth supplement
those that were made when the orders were first issued and when they
were amended. The previous findings and determinations are hereby
ratified and confirmed, except where they may conflict with those set
forth herein.
(a) Findings. A public hearing was held upon certain proposed
amendments to the tentative marketing agreements and to the orders
regulating the handling of milk in the aforesaid marketing areas. The
hearing was held pursuant to the provisions of the Agricultural
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), and the
applicable rules of practice and procedure (7 CFR Part 900).
Upon the basis of the evidence introduced at such hearing and the
record thereof, it is found that:
(1) The said orders as hereby amended, and all of the terms and
conditions thereof, will tend to effectuate the declared policy of the
Act;
(2) The parity prices of milk, as determined pursuant to section 2
of the Act, are not reasonable in view of the price of feeds, available
supplies of feeds, and other economic conditions which affect market
supply and demand for milk in the aforesaid marketing areas. The
minimum prices specified in the orders as hereby amended are such
prices as will reflect the aforesaid factors, ensure a sufficient
quantity of pure and wholesome milk, and be in the public interest;
(3) The said orders, as hereby amended, regulate the handling of
milk in the same manner as, and are applicable only to persons in the
respective classes of industrial or commercial activity specified in,
marketing agreements upon which a hearing has been held; and
(4) All milk and milk products handled by handlers, as defined in
the order as hereby amended, are in the current of interstate commerce
or directly burden, obstruct, or affect interstate commerce in milk or
its products.
Order Relative to Handling
It is therefore Ordered, that on and after the effective date
hereof, the handling of milk in each of the specified orders' marketing
areas shall be in conformity to and in compliance with the terms and
conditions of each of the orders, as amended, and as hereby amended.
Accordingly, the interim rule amending 7 CFR Parts 1005, 1007,
1011, and 1046, which was published at 61 FR 41488 on August 9, 1996,
is adopted as a proposed rule with the following changes:
1. The authority citation for 7 CFR parts 1005, 1007, 1011, and
1046 continues to read as follows:
Authority: 7 U.S.C. 601-674.
PART 1005--MILK IN THE CAROLINA MARKETING AREA
Sec. 1005.30 [Amended]
2. In Sec. 1005.30, paragraphs (a)(7) and (a)(8) are redesignated,
respectively, as paragraphs (a)(8) and (a)(9), new paragraph (a)(7) is
added, and paragraphs (a)(5), (a)(6), and (c)(3) are revised to read as
follows:
Sec. 1005.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1007, 1011, and 1046, for which a
transportation credit is requested pursuant to Sec. 1005.82, including
the date that such milk was received;
(6) Receipts of producer milk described in Sec. 1005.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to that paragraph and
the date that such milk was received;
(7) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
* * * * *
[[Page 27539]]
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1005.82, all of the
information required in paragraphs (a)(5), (a)(6), and (a)(7) of this
section.
* * * * *
Sec. 1005.32 [Amended]
3. In Sec. 1005.32, a new paragraph (a) is added to read as
follows:
Sec. 1005.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1005.9(a), (b), and (c) shall report to the
market administrator any adjustments to transportation credit requests
as reported pursuant to Sec. 1005.30(a)(5), (6), and (7).
* * * * *
Sec. 1005.61 [Amended]
4. In Sec. 1005.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1005.77 [Amended]
5. Sec. 1005.77 is revised to read as follows:
Sec. 1005.77 Adjustment of accounts.
(a) Whenever verification by the market administrator of payments
by any handler discloses errors made in payments to the producer-
settlement fund pursuant to Sec. 1005.71 or to the transportation
credit balancing fund pursuant to Sec. 1005.81, the market
administrator shall promptly bill such handler for any unpaid amount
and such handler shall, within 15 days, make payment to the market
administrator of the amount so billed. Whenever verification discloses
that payment is due from the market administrator to any handler
pursuant to Sec. 1005.72 or Sec. 1005.82, the market administrator
shall make payment to such handler within 15 days or, in the case of
the transportation credit balancing fund, as soon as funds become
available. If a handler is due additional payment for a month in which
payments to handlers were prorated pursuant to Sec. 1005.82(a), the
additional payment pursuant to this section shall be multiplied by the
final proration percentage computed in Sec. 1005.82(a)(2).
(b) Whenever verification by the market administrator of the
payment by a handler to any producer or cooperative association for
milk received by such handler discloses payment of less than is
required by Sec. 1005.73, the handler shall pay such balance due such
producer or cooperative association not later than the time of making
payment to producers or cooperative associations next following such
disclosure.
Sec. 1005.78 [Amended]
6. In the introductory text of Sec. 1005.78, the number
``1005.81,'' is added following the number ``1005.77,''.
Sec. 1005.81 [Amended]
7. In Sec. 1005.81, paragraph (c) is removed and paragraphs (a) and
(b) are revised to read as follows:
Sec. 1005.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month, each
handler operating a pool plant and each handler specified in
Sec. 1005.9(b) and (c) shall pay to the market administrator a
transportation credit balancing fund assessment determined by
multiplying the pounds of Class I producer milk assigned pursuant to
Sec. 1005.44 by $0.065 per hundredweight or such lesser amount as the
market administrator deems necessary to maintain a balance in the fund
equal to the total transportation credits disbursed during the prior
June-January period. In the event that during any month of the June-
January period the fund balance is insufficient to cover the amount of
credits that are due, the assessment should be based upon the amount of
credits that would have been disbursed had the fund balance been
sufficient.
(b) The market administrator shall announce publicly on or before
the 5th day of the month the assessment pursuant to paragraph (a) of
this section for the following month.
Sec. 1005.82 [Amended]
8. Sec. 1005.82 is revised to read as follows:
Sec. 1005.82 Payments from the transportation credit balancing fund.
(a) Payments from the transportation credit balancing fund to
handlers and cooperative associations requesting transportation credits
shall be made as follows:
(1) On or before the 13th day after the end of each of the months
of July through December and any other month in which transportation
credits are in effect pursuant to paragraph (b) of this section, the
market administrator shall pay to each handler that received, and
reported pursuant to Sec. 1005.30(a)(5), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1005.30(a)(6), milk
directly from producers' farms as specified in paragraph (c)(2) of this
section, a preliminary amount determined pursuant to paragraph (d) of
this section to the extent that funds are available in the
transportation credit balancing fund. If an insufficient balance exists
to pay all of the credits computed pursuant to this section, the market
administrator shall distribute the balance available in the
transportation credit balancing fund by reducing payments prorata using
the percentage derived by dividing the balance in the fund by the total
credits that are due for the month. The amount of credits resulting
from this initial proration shall be subject to audit adjustment
pursuant to paragraph (a)(2) of this section;
(2) The market administrator shall accept adjusted requests for
transportation credits on or before the 20th day of the month following
the month for which such credits were requested pursuant to
Sec. 1005.32(a). After such date, a preliminary audit will be conducted
by the market administrator, who will recalculate any necessary
proration of transportation credit payments for the preceding month
pursuant to paragraph (a) of this section. Handlers will be promptly
notified of an overpayment of credits based upon this final computation
and remedial payments to or from the transportation credit balancing
fund will be made on or before the next payment date for the following
month;
(3) Transportation credits paid pursuant to paragraph (a)(1) and
(2) of this section shall be subject to final verification by the
market administrator pursuant to Sec. 1005.77. Adjusted payments to or
from the transportation credit balancing fund will remain subject to
the final proration established pursuant to paragraph (a)(2) of this
section; and
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1005.30(c)(3) prior to the date payment is due, the
transportation credits for such milk computed pursuant to this section
shall be made to such cooperative association rather than to the
operator of the pool plant at which the milk was received.
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the months of January and June if a written request to do so
is received 15 days prior to the beginning of the month for
[[Page 27540]]
which the request is made and, after conducting an independent
investigation, finds that such extension is necessary to assure the
market of an adequate supply of milk for fluid use. Before making such
a finding, the market administrator shall notify the Director of the
Dairy Division and all handlers in the market that an extension is
being considered and invite written data, views, and arguments. Any
decision to extend the transportation credit period must be issued in
writing prior to the first day of the month for which the extension is
to be effective.
(c) Transportation credits shall apply to the following milk:
(1) Bulk milk received from a plant regulated under another Federal
order, except Federal Orders 1007, 1011, and 1046, and allocated to
Class I milk pursuant to Sec. 1005.44(a)(12); and
(2) Bulk milk received directly from the farms of dairy farmers at
pool distributing plants subject to the following conditions:
(i) The quantity of such milk that shall be eligible for the
transportation credit shall be determined by multiplying the total
pounds of milk received from producers meeting the conditions of this
paragraph by the lower of:
(A) The marketwide estimated Class I utilization of all handlers
for the month pursuant to Sec. 1005.45(a); or
(B) The Class I utilization of all producer milk of the pool plant
operator receiving the milk after the computations described in
Sec. 1005.44;
(ii) The dairy farmer was not a ``producer'' under this order
during more than 2 of the immediately preceding months of January
through June and not more than 50 percent of the production of the
dairy farmer during those 2 months, in aggregate, was received as
producer milk under this order during those 2 months. However, if
January and/or June are months in which transportation credits are
disbursed pursuant to paragraph (a) of this section, these months shall
not be included in the 2-month limit provided in this paragraph; and
(iii) The farm on which the milk was produced is not located within
the specified marketing area of this order or the marketing areas of
Federal Orders 1007, 1011, or 1046, or within the Kentucky counties of
Allen, Barren, Metcalfe, Monroe, Simpson, and Warren.
(d) Transportation credits shall be computed as follows:
(1) The market administrator shall subtract from the pounds of milk
described in paragraphs (c)(1) and (2) of this section the pounds of
bulk milk transferred from the pool plant receiving the supplemental
milk if milk was transferred to a nonpool plant on the same calendar
day that the supplemental milk was received. For this purpose, the
transferred milk shall be subtracted from the most distant load of
supplemental milk received, and then in sequence with the next most
distant load until all of the transfers have been offset;
(2) With respect to the pounds of milk described in paragraph
(c)(1) of this section that remain after the computations described in
paragraph (d)(1) of this section, the market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the shipping plant and the receiving plant;
(ii) Multiply the number of miles so determined by 0.35 cent;
(iii) Subtract the other order's Class I price applicable at the
shipping plant's location from the Class I price applicable at the
receiving plant as specified in Sec. 1005.53;
(iv) Subtract any positive difference computed in paragraph
(d)(2)(iii) of this section from the amount computed in paragraph
(d)(2)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(2)(iv) of this
section by the hundredweight of milk described in paragraph (d)(2) of
this section.
(3) For the remaining milk described in paragraph (c)(2) of this
section after computations described in paragraph (d)(1) of this
section, the market administrator shall:
(i) Determine an origination point for each load of milk by
locating the nearest city to the last producer's farm from which milk
was picked up for delivery to the receiving pool plant. Alternatively,
the milk hauler that is transporting the milk of producers described in
paragraph (c)(2) of this section may establish an origination point
following the last farm pickup by stopping at the nearest
independently-operated truck stop with a certified truck scale and
obtaining a weight certificate indicating the weight of the truck and
its contents, the date and time of weighing, and the location of the
truck stop;
(ii) Determine the shortest hard-surface highway distance between
the receiving pool plant and the truck stop or city, as the case may
be;
(iii) Subtract 85 miles from the mileage so determined;
(iv) Multiply the remaining miles so computed by 0.35 cent;
(v) If the origination point determined pursuant to paragraph
(d)(3)(i) of this section is in a Federal order marketing area,
subtract the Class I price applicable at the origination point pursuant
to the provisions of such other order (as if the origination point were
a plant location) from the Class I price applicable at the distributing
plant receiving the milk. If the origination point is not in any
Federal order marketing area, determine the Class I price at the
origination point based upon the provisions of this order and subtract
this price from the Class I price applicable at the distributing plant
receiving the milk;
(vi) Subtract any positive difference computed in paragraph
(d)(3)(v) of this section from the amount computed in paragraph
(d)(3)(iv) of this section; and
(vii) Multiply the remainder computed in paragraph (d)(3)(vi) by
the hundredweight of milk described in paragraph (d)(3) of this
section.
PART 1007--MILK IN THE SOUTHEAST MARKETING AREA
Sec. 1007.30 [Amended]
9. In Sec. 1007.30, paragraphs (a)(7) and (a)(8) are redesignated,
respectively, as paragraphs (a)(8) and (a)(9), new paragraph (a)(7) is
added, and paragraphs (a)(5), (a)(6), and (c)(3) are revised to read as
follows:
Sec. 1007.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1011, and 1046, for which a
transportation credit is requested pursuant to Sec. 1007.82, including
the date that such milk was received;
(6) Receipts of producer milk described in Sec. 1007.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to that paragraph and
the date that such milk was received;
(7) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1007.82, all of the
information required in paragraphs (a)(5), (a)(6), and (a)(7) of this
section.
* * * * *
Sec. 1007.32 [Amended]
10. In Sec. 1007.32, a new paragraph (a) is added to read as
follows:
[[Page 27541]]
Sec. 1007.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1007.9 (a), (b), and (c) shall report to the
market administrator any adjustments to transportation credit requests
as reported pursuant to Sec. 1007.30 (a)(5), (6), and (7).
* * * * *
Sec. 1007.61 [Amended]
11. In Sec. 1007.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1007.78 [Amended]
12. In the introductory text of Sec. 1007.78, the number
``1007.81,'' is added following the number ``1007.78,''.
Sec. 1007.81 [Amended]
13. In Sec. 1007.81, paragraph (c) is removed and paragraphs (a)
and (b) are revised to read as follows:
Sec. 1007.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month, each
handler operating a pool plant and each handler specified in
Sec. 1007.9 (b) and (c) shall pay to the market administrator a
transportation credit balancing fund assessment determined by
multiplying the pounds of Class I producer milk assigned pursuant to
Sec. 1007.44 by $0.07 per hundredweight or such lesser amount as the
market administrator deems necessary to maintain a balance in the fund
equal to the total transportation credits disbursed during the prior
June-January period. In the event that during any month of the June-
January period the fund balance is insufficient to cover the amount of
credits that are due, the assessment should be based upon the amount of
credits that would have been disbursed had the fund balance been
sufficient.
(b) The market administrator shall announce publicly on or before
the 5th day of the month the assessment pursuant to paragraph (a) of
this section for the following month.
Sec. 1007.82 [Amended]
14. Sec. 1007.82 is revised to read as follows:
Sec. 1007.82 Payments from the transportation credit balancing fund.
(a) Payments from the transportation credit balancing fund to
handlers and cooperative associations requesting transportation credits
shall be made as follows:
(1) On or before the 13th day after the end of each of the months
of July through December and any other month in which transportation
credits are in effect pursuant to paragraph (b) of this section, the
market administrator shall pay to each handler that received, and
reported pursuant to Sec. 1007.30(a)(5), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1007.30(a)(6), milk
directly from producers' farms as specified in paragraph (c)(2) of this
section, a preliminary amount determined pursuant to paragraph (d) of
this section to the extent that funds are available in the
transportation credit balancing fund. If an insufficient balance exists
to pay all of the credits computed pursuant to this section, the market
administrator shall distribute the balance available in the
transportation credit balancing fund by reducing payments prorata using
the percentage derived by dividing the balance in the fund by the total
credits that are due for the month. The amount of credits resulting
from this initial proration shall be subject to audit adjustment
pursuant to paragraph (a)(2) of this section;
(2) The market administrator shall accept adjusted requests for
transportation credits on or before the 20th day of the month following
the month for which such credits were requested pursuant to
Sec. 1007.32(a). After such date, a preliminary audit will be conducted
by the market administrator, who will recalculate any necessary
proration of transportation credit payments for the preceding month
pursuant to paragraph (a) of this section. Handlers will be promptly
notified of any payment adjustments based upon this final computation
and remedial payments to or from the transportation credit balancing
fund will be made on or before the next payment date for the following
month;
(3) Transportation credits paid pursuant to paragraph (a)(1) and
(2) of this section shall be subject to final verification by the
market administrator pursuant to Sec. 1007.77. Adjusted payments to or
from the transportation credit balancing fund will remain subject to
the final proration established pursuant to paragraph (a)(2) of this
section; and
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1007.30(c)(3) prior to the date payment is due, the
transportation credits for such milk computed pursuant to this section
shall be made to such cooperative association rather than to the
operator of the pool plant at which the milk was received.
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the months of January and June if a written request to do so
is received 15 days prior to the beginning of the month for which the
request is made and, after conducting an independent investigation,
finds that such extension is necessary to assure the market of an
adequate supply of milk for fluid use. Before making such a finding,
the market administrator shall notify the Director of the Dairy
Division and all handlers in the market that an extension is being
considered and invite written data, views, and arguments. Any decision
to extend the transportation credit period must be issued in writing
prior to the first day of the month for which the extension is to be
effective.
(c) Transportation credits shall apply to the following milk:
(1) Bulk milk received from a plant regulated under another Federal
order, except Federal Orders 1005, 1011, and 1046, allocated to Class I
milk pursuant to Sec. 1007.44(a)(12); and
(2) Bulk milk received directly from the farms of dairy farmers at
pool distributing plants subject to the following conditions:
(i) The quantity of such milk that shall be eligible for the
transportation credit shall be determined by multiplying the total
pounds of milk received from producers meeting the conditions of this
paragraph by the lower of:
(A) The marketwide estimated Class I utilization of all handlers
for the month pursuant to Sec. 1007.45(a); or
(B) The Class I utilization of all producer milk of the pool plant
operator receiving the milk after the computations described in
Sec. 1007.44;
(ii) The dairy farmer was not a ``producer'' under this order
during more than 2 of the immediately preceding months of January
through June and not more than 50 percent of the production of the
dairy farmer during those 2 months, in aggregate, was received as
producer milk under this order during those 2 months. However, if
January and/or June are months in which transportation credits are
disbursed pursuant to paragraph (a) of this section, these months shall
not be included in the 2-month limit provided in this paragraph; and
(iii) The farm on which the milk was produced is not located within
the specified marketing area of this order or the marketing areas of
Federal Orders 1005, 1011, or 1046, or within the
[[Page 27542]]
Kentucky counties of Allen, Barren, Metcalfe, Monroe, Simpson, and
Warren.
(d) Transportation credits shall be computed as follows:
(1) The market administrator shall subtract from the pounds of milk
described in paragraphs (c)(1) and (2) of this section the pounds of
bulk milk transferred from the pool plant receiving the supplemental
milk if milk was transferred to a nonpool plant on the same calendar
day that the supplemental milk was received. For this purpose, the
transferred milk shall be subtracted from the most distant load of
supplemental milk received, and then in sequence with the next most
distant load until all of the transfers have been offset;
(2) With respect to the pounds of milk described in paragraph
(c)(1) of this section that remain after the computations described in
paragraph (d)(1) of this section, the market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the shipping plant and the receiving plant;
(ii) Multiply the number of miles so determined by 0.35 cent;
(iii) Subtract the other order's Class I price applicable at the
shipping plant's location from the Class I price applicable at the
receiving plant as specified in Sec. 1007.52;
(iv) Subtract any positive difference computed in paragraph
(d)(2)(iii) of this section from the amount computed in paragraph
(d)(2)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(2)(iv) of this
section by the hundredweight of milk described in paragraph (d)(2) of
this section.
(3) For the remaining milk described in paragraph (c)(2) of this
section after computations described in paragraph (d)(1) of this
section, the market administrator shall:
(i) Determine an origination point for each load of milk by
locating the nearest city to the last producer's farm from which milk
was picked up for delivery to the receiving pool plant. Alternatively,
the milk hauler that is transporting the milk of producers described in
paragraph (c)(2) of this section may establish an origination point
following the last farm pickup by stopping at the nearest
independently-operated truck stop with a certified truck scale and
obtaining a weight certificate indicating the weight of the truck and
its contents, the date and time of weighing, and the location of the
truck stop;
(ii) Determine the shortest hard-surface highway distance between
the receiving pool plant and the truck stop or city, as the case may
be;
(iii) Subtract 85 miles from the mileage so determined;
(iv) Multiply the remaining miles so computed by 0.35 cent;
(v) If the origination point determined pursuant to paragraph
(d)(3)(i) of this section is in a Federal order marketing area,
subtract the Class I price applicable at the origination point pursuant
to the provisions of such other order (as if the origination point were
a plant location) from the Class I price applicable at the distributing
plant receiving the milk. If the origination point is not in any
Federal order marketing area, determine the Class I price at the
origination point based upon the provisions of this order and subtract
this price from the Class I price applicable at the distributing plant
receiving the milk;
(vi) Subtract any positive difference computed in paragraph
(d)(3)(v) of this section from the amount computed in paragraph
(d)(3)(iv) of this section; and
(vii) Multiply the remainder computed in paragraph (d)(3)(vi) by
the hundredweight of milk described in paragraph (d)(3) of this
section.
PART 1011--MILK IN THE TENNESSEE VALLEY MARKETING AREA
Sec. 1011.30 [Amended]
15. In Sec. 1011.30, paragraphs (a)(8) and (a)(9) are redesignated,
respectively, as paragraphs (a)(9) and (a)(10), new paragraph (a)(8) is
added, and paragraphs (a)(6), (a)(7), and (c)(3) are revised to read as
follows:
Sec. 1011.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(6) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1007, and 1046, for which a
transportation credit is requested pursuant to Sec. 1011.82, including
the date that such milk was received;
(7) Receipts of producer milk described in Sec. 1011.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to that paragraph and
the date that such milk was received;
(8) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1011.82, all of the
information required in paragraphs (a)(6), (a)(7) and (a)(8) of this
section.
* * * * *
Sec. 1011.32 [Amended]
16. In Sec. 1011.32, a new paragraph (a) is added to read as
follows:
Sec. 1011.32 Other reports.
(a) On or before the 20th day after the end of each month, each
handler described in Sec. 1011.9(a), (b), and (c) shall report to the
market administrator any adjustments to transportation credit requests
as reported pursuant to Sec. 1011.30(a)(6), (7), and (8).
* * * * *
Sec. 1011.61 [Amended]
17. In Sec. 1011.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1011.77 [Amended]
18. Sec. 1011.77 is revised to read as follows:
Sec. 1011.77 Adjustment of accounts.
(a) Whenever verification by the market administrator of payments
by any handler discloses errors made in payments to the producer-
settlement fund pursuant to Sec. 1011.71 or to the transportation
credit balancing fund pursuant to Sec. 1011.81, the market
administrator shall promptly bill such handler for any unpaid amount
and such handler shall, within 15 days, make payment to the market
administrator of the amount so billed. Whenever verification discloses
that payment is due from the market administrator to any handler
pursuant to Sec. 1011.72 or Sec. 1011.82, the market administrator
shall make payment to such handler within 15 days or, in the case of
the transportation credit balancing fund, as soon as funds become
available. If a handler is due additional payment for a month in which
payments to handlers were prorated pursuant to Sec. 1011.82(a), the
additional payment pursuant to this section shall be multiplied by the
final proration percentage computed in Sec. 1011.82(a)(2).
(b) Whenever verification by the market administrator of the
payment by a handler to any producer or cooperative association for
milk received by such handler discloses payment of less than is
required by Sec. 1011.73, the handler shall pay such balance due such
producer or cooperative association not later than the time of making
payment to
[[Page 27543]]
producers or cooperative associations next following such disclosure.
Sec. 1011.81 [Amended]
19. In Sec. 1011.81, paragraph (c) is removed and paragraphs (a)
and (b) are revised to read as follows:
Sec. 1011.81 Payments to the transportation credit balancing fund.
(a) On or before the 12th day after the end of the month, each
handler operating a pool plant and each handler specified in
Sec. 1011.9(b) and (c) shall pay to the market administrator a
transportation credit balancing fund assessment determined by
multiplying the pounds of Class I producer milk assigned pursuant to
Sec. 1011.44 by $0.06 per hundredweight or such lesser amount as the
market administrator deems necessary to maintain a balance in the fund
equal to the total transportation credits disbursed during the prior
June-January period. In the event that during any month of the June-
January period the fund balance is insufficient to cover the amount of
credits that are due, the assessment should be based upon the amount of
credits that would have been disbursed had the fund balance been
sufficient.
(b) The market administrator shall announce publicly on or before
the 5th day of the month the assessment pursuant to paragraph (a) of
this section for the following month.
Sec. 1011.82 [Amended]
20. Sec. 1011.82 is revised to read as follows:
Sec. 1011.82 Payments from the transportation credit balancing fund.
(a) Payments from the transportation credit balancing fund to
handlers and cooperative associations requesting transportation credits
shall be made as follows:
(1) On or before the 13th day after the end of each of the months
of July through December and any other month in which transportation
credits are in effect pursuant to paragraph (b) of this section, the
market administrator shall pay to each handler that received, and
reported pursuant to Sec. 1011.30(a)(6), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1011.30(a)(7), milk
directly from producers' farms as specified in paragraph (c)(2) of this
section, a preliminary amount determined pursuant to paragraph (d) of
this section to the extent that funds are available in the
transportation credit balancing fund. If an insufficient balance exists
to pay all of the credits computed pursuant to this section, the market
administrator shall distribute the balance available in the
transportation credit balancing fund by reducing payments prorata using
the percentage derived by dividing the balance in the fund by the total
credits that are due for the month. The amount of credits resulting
from this initial proration shall be subject to audit adjustment
pursuant to paragraph (a)(2) of this section;
(2) The market administrator shall accept adjusted requests for
transportation credits on or before the 20th day of the month following
the month for which such credits were requested pursuant to
Sec. 1011.32(a). After such date, a preliminary audit will be conducted
by the market administrator, who will recalculate any necessary
proration of transportation credit payments for the preceding month
pursuant to paragraph (a) of this section. Handlers will be promptly
notified of an overpayment of credits based upon this final computation
and remedial payments to or from the transportation credit balancing
fund will be made on or before the next payment date for the following
month;
(3) Transportation credits paid pursuant to paragraph (a)(1) and
(2) of this section shall be subject to final verification by the
market administrator pursuant to Sec. 1011.77. Adjusted payments to or
from the transportation credit balancing fund will remain subject to
the final proration established pursuant to paragraph (a)(2) of this
section; and
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1011.30(c)(3) prior to the date payment is due, the
transportation credits for such milk computed pursuant to this section
shall be made to such cooperative association rather than to the
operator of the pool plant at which the milk was received.
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the months of January and June if a written request to do so
is received 15 days prior to the beginning of the month for which the
request is made and, after conducting an independent investigation,
finds that such extension is necessary to assure the market of an
adequate supply of milk for fluid use. Before making such a finding,
the market administrator shall notify the Director of the Dairy
Division and all handlers in the market that an extension is being
considered and invite written data, views, and arguments. Any decision
to extend the transportation credit period must be issued in writing
prior to the first day of the month for which the extension is to be
effective.
(c) Transportation credits shall apply to the following milk:
(1) Bulk milk received from a plant regulated under another Federal
order, except Federal Orders 1005, 1007, and 1046, and allocated to
Class I milk pursuant to Sec. 1011.44(a)(12); and
(2) Bulk milk received directly from the farms of dairy farmers at
pool distributing plants subject to the following conditions:
(i) The quantity of such milk that shall be eligible for the
transportation credit shall be determined by multiplying the total
pounds of milk received from producers meeting the conditions of this
paragraph by the lower of:
(A) The marketwide estimated Class I utilization of all handlers
for the month pursuant to Sec. 1011.45(a); or
(B) The Class I utilization of all producer milk of the pool plant
operator receiving the milk after the computations described in
Sec. 1011.44;
(ii) The dairy farmer was not a ``producer'' under this order
during more than 2 of the immediately preceding months of January
through June and not more than 50 percent of the production of the
dairy farmer during those 2 months, in aggregate, was received as
producer milk under this order during those 2 months. However, if
January and/or June are months in which transportation credits are
disbursed pursuant to paragraph (a) of this section, these months shall
not be included in the 2-month limit provided in this paragraph; and
(iii) The farm on which the milk was produced is not located within
the specified marketing area of this order or the marketing areas of
Federal Orders 1005, 1007, or 1046, or within the Kentucky counties of
Allen, Barren, Metcalfe, Monroe, Simpson, and Warren.
(d) Transportation credits shall be computed as follows:
(1) The market administrator shall subtract from the pounds of milk
described in paragraphs (c) (1) and (2) of this section the pounds of
bulk milk transferred from the pool plant receiving the supplemental
milk if milk was transferred to a nonpool plant on the same calendar
day that the supplemental milk was received. For this purpose, the
transferred milk shall be subtracted from the most distant load of
supplemental milk received, and then in sequence with the next most
distant
[[Page 27544]]
load until all of the transfers have been offset;
(2) With respect to the pounds of milk described in paragraph
(c)(1) of this section that remain after the computations described in
paragraph (d)(1) of this section, the market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the shipping plant and the receiving plant;
(ii) Multiply the number of miles so determined by 0.35 cent;
(iii) Subtract the other order's Class I price applicable at the
shipping plant's location from the Class I price applicable at the
receiving plant as specified in Sec. 1011.52;
(iv) Subtract any positive difference computed in paragraph
(d)(2)(iii) of this section from the amount computed in paragraph
(d)(2)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(2)(iv) of this
section by the hundredweight of milk described in paragraph (d)(2) of
this section.
(3) For milk described in paragraph (c)(2) of this section, the
market administrator shall:
(i) Determine an origination point for each load of milk by
locating the nearest city to the last producer's farm from which milk
was picked up for delivery to the receiving pool plant. Alternatively,
the milk hauler that is transporting the milk of producers described in
paragraph (c)(2) of this section may establish an origination point
following the last farm pickup by stopping at the nearest
independently-operated truck stop with a certified truck scale and
obtaining a weight certificate indicating the weight of the truck and
its contents, the date and time of weighing, and the location of the
truck stop;
(ii) Determine the shortest hard-surface highway distance between
the receiving pool plant and the truck stop or city, as the case may
be;
(iii) Subtract 85 miles from the mileage so determined;
(iv) Multiply the remaining miles so computed by 0.35 cent;
(v) If the origination point determined pursuant to paragraph
(d)(3)(i) of this section is in a Federal order marketing area,
subtract the Class I price applicable at the origination point pursuant
to the provisions of such other order (as if the origination point were
a plant location) from the Class I price applicable at the distributing
plant receiving the milk. If the origination point is not in any
Federal order marketing area, determine the Class I price at the
origination point based upon the provisions of this order and subtract
this price from the Class I price applicable at the distributing plant
receiving the milk;
(vi) Subtract any positive difference computed in paragraph
(d)(3)(v) of this section from the amount computed in paragraph
(d)(3)(iv) of this section; and
(vii) Multiply the remainder computed in paragraph (d)(3)(vi) by
the hundredweight of milk described in paragraph (d)(3) of this
section.
PART 1046--MILK IN THE LOUISVILLE-LEXINGTON-EVANSVILLE MARKETING
AREA
Sec. 1046.30 [Amended]
21. In Sec. 1046.30, paragraphs (a)(7) and (a)(8) are redesignated,
respectively, as paragraphs (a)(8) and (a)(9), new paragraph (a)(7) is
added, and paragraphs (a)(5), (a)(6), and (c)(3) are revised to read as
follows:
Sec. 1046.30 Reports of receipts and utilization.
* * * * *
(a) * * *
(5) Receipts of bulk milk from a plant regulated under another
Federal order, except Federal Orders 1005, 1007, and 1011, for which a
transportation credit is requested pursuant to Sec. 1046.82, including
the date that such milk was received;
(6) Receipts of producer milk described in Sec. 1046.82(c)(2),
including the identity of the individual producers whose milk is
eligible for the transportation credit pursuant to that paragraph and
the date that such milk was received;
(7) For handlers submitting transportation credit requests,
transfers of bulk milk to nonpool plants, including the dates that such
milk was transferred;
* * * * *
(c) * * *
(3) With respect to milk for which a cooperative association is
requesting a transportation credit pursuant to Sec. 1046.82, all of the
information required in paragraphs (a)(5), (a)(6), and (a)(7) of this
section.
* * * * *
Sec. 1046.32 [Amended]
22. In Sec. 1046.32, paragraph (c) is redesignated as paragraph (d)
and a new paragraph (c) is added to read as follows:
Sec. 1046.32 Other reports.
* * * * *
(c) On or before the 20th day after the end of each month, each
handler described in Sec. 1046.9(a), (b), and (c) shall report to the
market administrator any adjustments to transportation credit requests
as reported pursuant to Sec. 1046.30(a)(5), (6), and (7).
* * * * *
Sec. 1046.61 [Amended]
23. In Sec. 1046.61, paragraph (a)(4) is removed and paragraphs
(a)(5) and (a)(6) are redesignated as paragraphs (a)(4) and (a)(5),
respectively.
Sec. 1046.77 [Amended]
24. Sec. 1046.77 is revised to read as follows:
Sec. 1046.77 Adjustment of accounts.
(a) Whenever verification by the market administrator of payments
by any handler discloses errors made in payments to the producer-
settlement fund pursuant to Sec. 1046.71 or to the transportation
credit balancing fund pursuant to Sec. 1046.81, the market
administrator shall promptly bill such handler for any unpaid amount
and such handler shall, within 15 days, make payment to the market
administrator of the amount so billed. Whenever verification discloses
that payment is due from the market administrator to any handler
pursuant to Sec. 1046.72 or Sec. 1046.82, the market administrator
shall make payment to such handler within 15 days or, in the case of
the transportation credit balancing fund, as soon as funds become
available. If a handler is due additional payment for a month in which
payments to handlers were prorated pursuant to Sec. 1046.82(a), the
additional payment pursuant to this section shall be multiplied by the
final proration percentage computed in Sec. 1046.82(a)(2).
(b) Whenever verification by the market administrator of the
payment by a handler to any producer or cooperative association for
milk received by such handler discloses payment of less than is
required by Sec. 1046.73, the handler shall pay such balance due such
producer or cooperative association not later than the time of making
payment to producers or cooperative associations next following such
disclosure.
Sec. 1046.78 [Amended]
25. In the introductory text of Sec. 1046.78, the number
``1046.81,'' is added following the number ``1046.77,''.
Sec. 1046.81 [Amended]
26. In Sec. 1046.81, paragraph (c) is removed and paragraphs (a)
and (b) are revised to read as follows:
Sec. 1046.81 Payments to the transportation credit balancing fund.
(a) On or before the 15th day after the end of the month, each
handler
[[Page 27545]]
operating a pool plant and each handler specified in Sec. 1046.9(b) and
(c) shall pay to the market administrator a transportation credit
balancing fund assessment determined by multiplying the pounds of Class
I producer milk assigned pursuant to Sec. 1046.44 by $0.06 per
hundredweight or such lesser amount as the market administrator deems
necessary to maintain a balance in the fund equal to the total
transportation credits disbursed during the prior June-January period.
In the event that during any month of the June-January period the fund
balance is insufficient to cover the amount of credits that are due,
the assessment should be based upon the amount of credits that would
have been disbursed had the fund balance been sufficient.
(b) The market administrator shall announce publicly on or before
the 5th day of the month the assessment pursuant to paragraph (a) of
this section for the following month.
Sec. 1046.82 [Amended]
27. Sec. 1046.82 is revised to read as follows:
Sec. 1046.82 Payments from the transportation credit balancing fund.
(a) Payments from the transportation credit balancing fund to
handlers and cooperative associations requesting transportation credits
shall be made as follows:
(1) On or before the 16th day after the end of each of the months
of July through December and any other month in which transportation
credits are in effect pursuant to paragraph (b) of this section, the
market administrator shall pay to each handler that received, and
reported pursuant to Sec. 1046.30(a)(5), bulk milk transferred from an
other order plant as described in paragraph (c)(1) of this section or
that received, and reported pursuant to Sec. 1046.30(a)(6), milk
directly from producers' farms as specified in paragraph (c)(2) of this
section, a preliminary amount determined pursuant to paragraph (d) of
this section to the extent that funds are available in the
transportation credit balancing fund. If an insufficient balance exists
to pay all of the credits computed pursuant to this section, the market
administrator shall distribute the balance available in the
transportation credit balancing fund by reducing payments prorata using
the percentage derived by dividing the balance in the fund by the total
credits that are due for the month. The amount of credits resulting
from this initial proration shall be subject to audit adjustment
pursuant to paragraph (a)(2) of this section;
(2) The market administrator shall accept adjusted requests for
transportation credits on or before the 20th day of the month following
the month for which such credits were requested pursuant to
Sec. 1046.32(c). After such date, a preliminary audit will be conducted
by the market administrator, who will recalculate any necessary
proration of transportation credit payments for the preceding month
pursuant to paragraph (a) of this section. Handlers will be promptly
notified of an overpayment of credits based upon this final computation
and remedial payments to or from the transportation credit balancing
fund will be made on or before the next payment date for the following
month;
(3) Transportation credits paid pursuant to paragraph (a) (1) and
(2) of this section shall be subject to final verification by the
market administrator pursuant to Sec. 1046.77. Adjusted payments to or
from the transportation credit balancing fund will remain subject to
the final proration established pursuant to paragraph (a)(2) of this
section; and
(4) In the event that a qualified cooperative association is the
responsible party for whose account such milk is received and written
documentation of this fact is provided to the market administrator
pursuant to Sec. 1046.30(c)(3) prior to the date payment is due, the
transportation credits for such milk computed pursuant to this section
shall be made to such cooperative association by the pool plant
operator pursuant to Sec. 1046.73(f)(2).
(b) The market administrator may extend the period during which
transportation credits are in effect (i.e., the transportation credit
period) to the months of January and June if a written request to do so
is received 15 days prior to the beginning of the month for which the
request is made and, after conducting an independent investigation,
finds that such extension is necessary to assure the market of an
adequate supply of milk for fluid use. Before making such a finding,
the market administrator shall notify the Director of the Dairy
Division and all handlers in the market that an extension is being
considered and invite written data, views, and arguments. Any decision
to extend the transportation credit period must be issued in writing
prior to the first day of the month for which the extension is to be
effective.
(c) Transportation credits shall apply to the following milk:
(1) Bulk milk received from a plant regulated under another Federal
order, except Federal Orders 1005, 1007, and 1011, and allocated to
Class I milk pursuant to Sec. 1046.44(a)(12); and
(2) Bulk milk received directly from the farms of dairy farmers at
pool distributing plants subject to the following conditions:
(i) The quantity of such milk that shall be eligible for the
transportation credit shall be determined by multiplying the total
pounds of milk received from producers meeting the conditions of this
paragraph by the lower of:
(A) The marketwide estimated Class I utilization of all handlers
for the month pursuant to Sec. 1046.45(a); or
(B) The Class I utilization of all producer milk of the pool plant
operator receiving the milk after the computations described in
Sec. 1046.44;
(ii) The dairy farmer was not a ``producer'' under this order
during more than 2 of the immediately preceding months of January
through June and not more than 50 percent of the production of the
dairy farmer during those 2 months, in aggregate, was received as
producer milk under this order during those 2 months. However, if
January and/or June are months in which transportation credits are
disbursed pursuant to paragraph (a) of this section, these months shall
not be included in the 2-month limit provided in this paragraph; and
(iii) The farm on which the milk was produced is not located within
the specified marketing area of this order or the marketing areas of
Federal Orders 1005, 1007, or 1011, or within the Kentucky counties of
Allen, Barren, Metcalfe, Monroe, Simpson, and Warren.
(d) Transportation credits shall be computed as follows:
(1) The market administrator shall subtract from the pounds of milk
described in paragraphs (c) (1) and (2) of this section the pounds of
bulk milk transferred from the pool plant receiving the supplemental
milk if milk was transferred to a nonpool plant on the same calendar
day that the supplemental milk was received. For this purpose, the
transferred milk shall be subtracted from the most distant load of
supplemental milk received, and then in sequence with the next most
distant load until all of the transfers have been offset;
(2) With respect to the pounds of milk described in paragraph
(c)(1) of this section that remain after the computations described in
paragraph (d)(1) of this section, the market administrator shall:
(i) Determine the shortest hard-surface highway distance between
the shipping plant and the receiving plant;
[[Page 27546]]
(ii) Multiply the number of miles so determined by 0.35 cent;
(iii) Subtract the other order's Class I price applicable at the
shipping plant's location from the Class I price applicable at the
receiving plant as specified in Sec. 1046.52;
(iv) Subtract any positive difference computed in paragraph
(d)(2)(iii) of this section from the amount computed in paragraph
(d)(2)(ii) of this section; and
(v) Multiply the remainder computed in paragraph (d)(2)(iv) of this
section by the hundredweight of milk described in paragraph (d)(2) of
this section.
(3) For milk described in paragraph (c)(2) of this section, the
market administrator shall:
(i) Determine an origination point for each load of milk by
locating the nearest city to the last producer's farm from which milk
was picked up for delivery to the receiving pool plant. Alternatively,
the milk hauler that is transporting the milk of producers described in
paragraph (c)(2) of this section may establish an origination point
following the last farm pickup by stopping at the nearest
independently-operated truck stop with a certified truck scale and
obtaining a weight certificate indicating the weight of the truck and
its contents, the date and time of weighing, and the location of the
truck stop;
(ii) Determine the shortest hard-surface highway distance between
the receiving pool plant and the truck stop or city, as the case may
be;
(iii) Subtract 85 miles from the mileage so determined;
(iv) Multiply the remaining miles so computed by 0.35 cent;
(v) If the origination point determined pursuant to paragraph
(d)(3)(i) of this section is in a Federal order marketing area,
subtract the Class I price applicable at the origination point pursuant
to the provisions of such other order (as if the origination point were
a plant location) from the Class I price applicable at the distributing
plant receiving the milk. If the origination point is not in any
Federal order marketing area, determine the Class I price at the
origination point based upon the provisions of this order and subtract
this price from the Class I price applicable at the distributing plant
receiving the milk;
(vi) Subtract any positive difference computed in paragraph
(d)(3)(v) of this section from the amount computed in paragraph
(d)(3)(iv) of this section; and
(vii) Multiply the remainder computed in paragraph (d)(3)(vi) by
the hundredweight of milk described in paragraph (d)(3) of this
section.
[FR Doc. 97-13000 Filed 5-19-97; 8:45 am]
BILLING CODE 3410-02-P
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