issue-1995-12-29•Federal Register final rules — 1995-12-29
Federal Register final rules — 1995-12-29
issue-1995-12-29Federal Register final rules — 1995-12-29Regulation
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. 95-31542 Office of the General Counsel, Requirements Governing the Lobbying of HUD Personnel; Repeal of Section 13 of the Department of Housing and Urban Development Act
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67325-67326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31542]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the General Counsel, Requirements Governing the
Lobbying of HUD Personnel; Repeal of Section 13 of the Department of
Housing and Urban Development Act
24 CFR Part 86
[Docket No. FR-4006-N-01]
AGENCY: Office of the General Counsel, HUD.
ACTION: Notification of status of regulations following repeal of
statutory authority.
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SUMMARY: This document advises the public that the Lobbying Disclosure
Act of 1995 repealed section 13 of the Department of Housing and Urban
Development Act. Section 13 established recordkeeping, reporting, and
registration requirements governing attempts to influence HUD programs.
It also placed limitations on the fees paid to consultants who are
engaged to influence the award or allocation of the Department's
financial assistance. Beginning on January 1, 1996, the public is no
longer required to comply with section 13 and the HUD regulations in 24
CFR part 86 which implement section 13. Among other things, the public
need not submit the annual reports due by January 10, 1996 under
sections 13 (b)(1) and (c)(1). The public should be aware, however,
that the Lobbying Disclosure Act of 1995 may impose new requirements on
those
[[Page 67326]]
seeking to influence the Department's programs.
EFFECTIVE DATE: December 29, 1995.
FOR FURTHER INFORMATION CONTACT: Aaron Santa Anna, Assistant General
Counsel, Ethics Law Division; Office of General Counsel; Room 2158;
U.S. Department of Housing and Urban Development; 451 Seventh Street,
SW; Washington, DC 20410-0500; telephone (202) 708-0836. Hearing or
speech-impaired individuals may call HUD's TDD number (202) 708-0113,
or 1-800-877-8399 (Federal Information Relay Service TDD). (Other than
the ``800'' number, these are not toll-free numbers.)
SUPPLEMENTARY INFORMATION: Section 112 of the Department of Housing and
Urban Development Reform Act of 1989, Pub. L. 101-235, approved
December 15, 1989, added a new section 13 to the Department of Housing
and Urban Development Act, 42 U.S.C. 3531, et seq. Section 13 contained
two principal features. The first established the standards under
which:
--Persons that make expenditures to influence a HUD officer or employee
in the award of financial assistance or the taking of a management
action by the Department must keep records, and report to HUD, on the
expenditures; and
--Persons that are engaged to influence a HUD officer or employee in
the award of financial assistance or the taking of a management action
by the Department must register with HUD, and report to HUD on their
lobbying activities.
The second feature imposed limitations on the fees that may be paid
to consultants who are engaged to influence the award or allocation of
the Department's financial assistance. Section 13 is codified at 24 CFR
part 86.
The Lobbying Disclosure Act of 1995 (Pub. L. 104-65, approved
December 19, 1995) established government-wide lobbying procedures and
requirements. Sections 11(b)(1) and 24(a) of the new law repealed
Section 13, effective January 1, 1996.
The purpose of this document is to advise the public that beginning
on January 1, 1996, the requirements of part 86 do not apply. The
public should take special notice that the expenditure and registrant
reports--due no later than January 10, 1996 under 24 CFR 86.20(c) and
86.25(c)--need not be submitted. Since the Lobbying Disclosure Act of
1995 contains new requirements governing lobbying agencies, including
HUD, the public is advised to become familiar with the provisions of
the new law.
The Department plans to issue a final rule removing part 86 in the
near future.
Other Matters
A. Environmental Impact
This document is categorically excluded from the NEPA requirements
of HUD regulations at 24 CFR 50.20(k), which implement section
102(2)(C) of the National Environmental Policy Act of 1969. The notice
involves internal administrative procedures whose content does not
constitute a developmental decision nor affect the physical condition
of project areas or building sites.
B. Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this document is
procedural only, and does not have potential for significant impact on
family-formation, maintenance, and general well-being, and, thus is not
subject to review under the Order.
C. Executive Order 12612, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this document
is procedural only, and does not have substantial, direct effects on
States, on their political subdivisions, or on their relationship with
the Federal government, or on the distribution of power and
responsibilities among the various levels of government.
List of Subjects in 24 CFR Part 86
Administrative practice and procedure, Lobbying (Government
agencies), Reporting and recordkeeping requirements.
Dated: December 26, 1995.
Nelson A. Diaz,
General Counsel.
[FR Doc. 95-31542 Filed 12-28-95; 8:45 am]
BILLING CODE 4210-01-P
Complete official Federal Register PDF
FR Doc. 95-31526 Disclosure and Amendment of Records Under the Privacy Act
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67327-67328]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31526]
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PENSION BENEFIT GUARANTY CORPORATION
29 CFR Part 2607
RIN 1212-63
Disclosure and Amendment of Records Under the Privacy Act
AGENCY: Pension Benefit Guaranty Corporation.
ACTION: Final rule.
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SUMMARY: The Pension Benefit Guaranty Corporation is amending its
regulations implementing the Privacy Act of 1974, as amended. This rule
amends part 2607 to describe more accurately the exemption applicable
to certain records maintained by the PBGC in view of changes to PBGC's
Privacy Act systems of records and to increase the PBGC's standard
copying fee.
EFFECTIVE DATE: January 29, 1996.
FOR FURTHER INFORMATION CONTACT: D. Bruce Campbell, Attorney, Office of
the General Counsel, Pension Benefit Guaranty Corporation, 1200 K
Street, NW., Washington, DC 20005-4026, 202-326-4123 (202-326-4179 for
TTY and TDD). (These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION: On November 15, 1995, the PBGC published in
the Federal Register (60 FR 57372) a proposed rule amending part 2607
of it regulations implementing the Privacy Act of 1974, as amended
(``Privacy Act'') (5 U.S.C. 552a). The PBGC received no comments during
the comment period and this final rule amends the regulations as
proposed.
The final rule increases the fee the PBGC charges for record copies
furnished to individuals, from $0.10 to $0.15 per page, the same fee as
the PBGC charges for copies furnished to individuals under the Freedom
of Information Act. The amendment increases from $1.00 to $1.50 the
threshold amount under which the agency does not assess a fee.
Because the PBGC is dividing an existing Privacy Act system of
records into two systems of records, PBGC-5 (retitled Personnel Files--
PBGC) and PBGC-12 (Personnel Security Investigation Records--PBGC), the
final rule moves the exemption from certain provisions of the Privacy
Act to PBGC-12.
E.O. 12866 and the Regulatory Flexibility Act
The PBGC has determined that this action is not a ``significant
regulatory action'' under the criteria set forth in Executive Order
12866.
Based on fees assessed in the past, the PBGC estimates that the
copying fee
[[Page 67328]]
increase under the final rule will raise the total amount of fees
assessed annually by less than $1,000. In view of the small increase in
anticipated costs, the PBGC certifies that the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.), does not apply because the rule will not
have a significant economic impact on a substantial number of small
entities.
List of Subjects in 29 CFR Part 2607
Privacy.
For the reasons set forth above, the PBGC is amending 29 CFR Part
2607 as follows:
PART 2607--DISCLOSURE AND AMENDMENT OF RECORDS UNDER THE PRIVACY
ACT
1. The authority citation for Part 2607 continues to read as
follows:
Authority: 5 U.S.C. 552a.
2. Paragraph (a) of Sec. 2607.1 is amended by removing ``which''
and adding, in its place, ``that'' and by adding ``or her'' after
``his'' in the first sentence.
3. In Sec. 2607.2, is amended by adding ``or her'' after ``his''
both times it appears.
4. Sections 2607.3 (a) and (c), 2607.4 (a) and (c), 2607.5(a),
2607.6(c), 2607.7 (b) and (c), and 2607.8 (b) and (c) and the
introductory text of Sec. 2607.9 are amended by adding ``or her'' after
``his'' and after ``him'' each time either ``his'' or ``him'' appears.
5. The second sentence of Sec. 2607.3(b), the second sentence of
Sec. 2607.4(b), and the third sentence of Sec. 2607.6(b) are amended by
removing ``he'' and adding, in its place, ``the disclosure officer''.
6. Paragraph (d) of Sec. 2607.4 is amended by adding ``or she''
after ``he''.
7. Paragraph (b) of Sec. 2607.5 is amended by removing ``his
choosing'' and adding, in its place, ``his or her choosing''; by
removing ``he shall'' and adding, in its place, ``the requestor
shall''; by removing ``he wishes'' and adding, in its place, ``he or
she wishes''; by removing ``accompany him'' and adding, in its place
``accompany him or her''; by removing ``his record'' and adding, in its
place, ``the record''; and by removing ``to him'' and adding, in its
place, ``to him or her''.
8. Paragraph (d) of Sec. 2607.8 is amended by removing ``If an
individual requests'' and adding, in its place, ``To request''; by
removing ``review, he'' and adding, in its place, ``review, an
individual''; and by removing ``Counsel and he'' and adding, in its
place, ``Counsel, who''.
9. Paragraph (a) of Sec. 2607.9 is amended by removing ``$0.10''
and adding, in its place, ``$0.15'' in the first sentence and by
removing ``$1.00'' and adding, in its place, ``$1.50'' in the second
sentence.
10. In Sec. 2607.10, the first paragraph is amended by adding
``Security Investigation'' after ``Personnel'' and by removing ``that
the identity of the source would be held in confidence'' both times it
appears and adding, in its place, ``of confidentiality''; and the
second paragraph is amended by removing ``for employment'' and adding,
in its place, ``and fitness for PBGC employment, access to information,
and security clearances'' and by adding ``the'' before ``PBGC''.
Issued in Washington, DC this 26th day of December 1995.
Martin Slate,
Executive Director, Pension Benefit Guaranty Corporation.
[FR Doc. 95-31526 Filed 12-28-95; 8:45 am]
BILLING CODE 7708-01-P
Complete official Federal Register PDF
FR Doc. 95-31525 Special Local Regulations for Marine Events; New Year's Eve Celebration Fireworks; Norfolk Harbor, Elizabeth River, Norfolk and Portsmouth, VA
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Page 67330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31525]
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DEPARTMENT OF TRANSPORTATION
33 CFR Part 100, 110, and 117
[CGD 05-95-085]
Special Local Regulations for Marine Events; New Year's Eve
Celebration Fireworks; Norfolk Harbor, Elizabeth River, Norfolk and
Portsmouth, VA
AGENCY: Coast Guard, DOT.
ACTION: Notice of implementation.
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SUMMARY: This notice announces that 33 CFR 100.501 is in effect for the
New Year's Eve Celebration Fireworks Display, an annual event held on
December 31, 1995 and January 1, 1996. This regulation is necessary to
control vessel traffic within the immediate vicinity of the event due
to the confined nature of the waterway and the expected congestion at
the time of the event. The regulations restrict general navigation in
the area to provide for the safety of life and property on the
navigable waters during the event.
EFFECTIVE DATES: These regulations are effective from 11 p.m., December
31, 1995 until 1:30 a.m., January 1, 1996. If inclement weather causes
the postponement of the event, the regulations are effective from 6:30
p.m. until 8:30 p.m., on January 1, 1996.
FOR FURTHER INFORMATION CONTACT:
Mr. Stephen Phillips, Chief, Boating Affairs Branch, Boating Safety
Division, Fifth Coast Guard District, 431 Crawford Street, Portsmouth,
Virginia 23704-5004 (804) 398-6204.
SUPPLEMENTARY INFORMATION: .
Drafting Information: The drafters of this notice are QM1
Gregory C. Garrison, project officer, Boating Affairs Branch,
Boating Safety Division, Fifth Coast Guard District, and CDR T.R.
Cahill, project attorney, Fifth Coast Guard District Legal Staff.
Discussion of Rule
On December 31, 1995 and January 1, 1996, Norfolk Festevents, Ltd.
will sponsor a New Year's Eve Celebration. As part of the celebration,
a fireworks display will be launched from barges anchored in the
Elizabeth River off Town Point Park. A large number of spectator
vessels are expected. Therefore, to ensure safety of both participants
and spectators, 33 CFR 100.501 will be in effect for the duration of
the event. Under the provisions of 33 CFR 100.501, a vessel may not
enter the regulated area unless it is registered as a participant with
the event sponsor or it receives permission from the Coast Guard patrol
commander. These restrictions will be in effect for a limited period
and should not result in significant disruption of maritime traffic.
Additionally, 33 CFR 110.72aa and 33 CFR 117.1007(b) will be in
effect while 33 CFR 100.501 is in effect. Section 110.72aa establishes
special anchorages which may be used by spectator craft. Section
117.1007(b) provides that the draw of the Berkley Bridge shall remain
closed from one hour prior to the scheduled event until one hour after
the scheduled event unless the Coast Guard patrol commander allows it
to be opened for passage of commercial traffic.
Dated: December 18, 1995.
W. J. Ecker,
Rear Admiral, U.S. Coast Guard, Commander, Fifth Coast Guard District.
[FR Doc. 95-31525 Filed 12-28-95; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 95-31524 Special Local Regulations for Marine Events; New Year's Eve Fireworks; Delaware River, Philadelphia, PA
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Page 67330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31524]
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DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 100
[CGD 05-95-086]
Special Local Regulations for Marine Events; New Year's Eve
Fireworks; Delaware River, Philadelphia, PA
AGENCY: Coast Guard, DOT.
ACTION: Notice of implementation.
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SUMMARY: This notice implements 33 CFR 100.509 for the New Year's Eve
Fireworks Display. The display will be launched from barges anchored
off Penns Landing, Delaware River, Philadelphia, Pennsylvania on
December 31, 1995. The regulations in 33 CFR 100.509 are needed to
control vessel traffic in the immediate vicinity of the event due to
the confined nature of the waterway and expected spectator craft
congestion during the event. The regulations restrict general
navigation in the area for the safety of life and property on the
navigable waters during the event.
EFFECTIVE DATES: The regulations in 33 CFR 100.509 are effective from
11 p.m., December 31, 1995 until 1:20 a.m., on January 1, 1996.
FOR FURTHER INFORMATION CONTACT:
Mr. Stephen Phillips, Chief, Boating Affairs Branch, Boating Safety
Division, Fifth Coast Guard District, 431 Crawford Street, Portsmouth,
Virginia 23704-5004 (804) 398-6204, or Commander, Coast Guard Group
Philadelphia (215) 271-4825.
Drafting Information: The drafters of this notice are QM1
Gregory C. Garrison, project officer, Boating Affairs Branch,
Boating Safety Division, Fifth Coast Guard District, and CDR T.R.
Cahill, project attorney, Fifth Coast Guard District Legal Staff.
Discussion of Regulation
The Philadelphia Convention and Visitors Bureau submitted an
application to hold a Neighbors in the New Year fireworks display. The
display will be launched from barges anchored off Penns Landing,
Delaware River, Philadelphia, Pennsylvania. Since many spectator
vessels are expected to be in the area to watch the fireworks, the
regulations in 33 CFR 100.509 are being implemented for this event. The
fireworks will be launched from within the regulated area. The waterway
will be closed during the display. Since the closure will not be for an
extended period, commercial traffic should not be severely disrupted.
Dated: December 18, 1995.
W.J. Ecker,
Rear Admiral, U.S. Coast Guard, Commander, Fifth Coast Guard District.
[FR Doc. 95-31524 Filed 12-28-95; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 95-31516 Summer Flounder Fishery
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Page 67339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31516]
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 625
[I.D. 122695B]
Summer Flounder Fishery
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration, (NOAA), Commerce.
ACTION: Notification of commercial quota transfer.
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SUMMARY: NMFS announces that the State of New Jersey is transferring
20,000 lb (9,072 kg) of commercial summer flounder quota to the State
of New York. NMFS adjusted the quotas and announces the revised
commercial quota for each state involved.
EFFECTIVE DATE: December 26, 1995.
FOR FURTHER INFORMATION CONTACT: Lucy Helvenston, 508-281-9347.
SUPPLEMENTARY INFORMATION: Regulations implementing Amendment 2 to the
Fishery Management Plan for the Summer Flounder Fishery (FMP) are found
at 50 CFR part 625. The regulations require annual specification of a
commercial quota that is apportioned among the coastal states from
North Carolina through Maine. The process to set the annual commercial
quota and the percent allocated to each state is described in
Sec. 625.20.
The commercial quota for summer flounder for the 1995 calendar year
was set equal to 14,690,407 lb (6,663,569 kg), and the allocations to
each state were published February 16, 1995 (60 FR 8958). At that time,
New Jersey was allocated a quota of 2,456,969 (1,114,462 kg) and New
York was allocated a quota of 1,123,374 lb (509,554 kg). On August 30,
1995, the State of North Carolina transferred 7,229 lb (3,279 kg) to
the State of New Jersey, and the revised quota for New Jersey was set
equal to 2,464,198 lb (1,117,741 kg) (60 FR 45107). On November 17,
1995, the State of Maryland transferred 50,000 lb of its commercial
quota to the State of New York, and the revised quota for New York was
set equal to 1,173,374 lb (532,233 kg) (60 FR 57685). On December 15,
1995, the State of Maryland made two further transfers to the State of
New York that were published as one notification (60 FR 64349). The
first transfer was for 20,000 lb (9,072 kg), and the second was for
30,000 lb (13,608 kg), and the revised quota for New York was set equal
to 1,223,374 lb (554,913 kg).
The final rule implementing Amendment 5 to the FMP was published
December 17, 1993 (58 FR 65936), and allows two or more states, under
mutual agreement and with the concurrence of the Director, Northeast
Region, NMFS (Regional Director) to transfer or combine summer flounder
commercial quota. The Regional Director is required to consider the
criteria set forth in Sec. 625.20(f)(1), in the evaluation of requests
for quota transfers or combinations.
New Jersey has agreed to transfer 20,000 lb (9,072 kg) of
commercial quota to New York. The Regional Director has determined that
the criteria set forth in Sec. 625.20(f)(1) have been met, and
publishes this notification of quota transfers. The revised quotas for
the calendar year 1995 are: New Jersey, 2,444,198 lb (1,108,670 kg);
and New York, 1,243,374 lb (563,985 kg).
This action does not alter any of the conclusions reached in the
environmental impact statement prepared for Amendment 2 to the FMP
regarding the effects of summer flounder fishing activity on the human
environment. Amendment 2 established procedures for setting an annual
coastwide commercial quota for summer flounder and a formula for
determining commercial quotas for each state. The quota transfer
provision was established by Amendment 5 to the FMP and the
environmental assessment prepared for Amendment 5 found that the action
had no significant impact on the environment. Under section
6.02b.3(b)(I)(aa) of NOAA Administrative Order 216-6, this action is
categorically excluded from the requirement to prepare additional
environmental analyses. This is a routine administrative action that
reallocates commercial quota within the scope of previously published
environmental analyses.
Classification
This action is taken under 50 CFR part 625 and is exempt from
review under E.O. 12866.
Authority: 16 U.S.C. 1801 et seq.
Dated: December 26, 1995.
Gary Matlock,
Program Management Officer, National Marine Fisheries Service.
[FR Doc. 95-31516 Filed 12-26-95; 4:12 pm]
BILLING CODE 3510-22-P
Complete official Federal Register PDF
FR Doc. 95-31515 Removal of U.S. Grade Standards and Other Selected Regulations
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Page 67319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31515]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 51
[Docket No. FV-95-303C]
Removal of U.S. Grade Standards and Other Selected Regulations
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Correction to interim final rule.
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SUMMARY: This document contains a correction to the interim final rule
published on December 4, 1995, (60 FR 62172-62181). The document
concerned removal of U.S. grade standards and other selected
regulations from the Code of Federal Regulations (CFR).
EFFECTIVE DATE: December 4, 1995.
FOR FURTHER INFORMATION CONTACT:
Eric Forman, Deputy Director, Fruit and Vegetable Division, USDA, AMS,
Room 2085-S, P.O. Box 96456, Washington, DC 20090-6456, telephone (202)
690-0262.
SUPPLEMENTARY INFORMATION:
Background
As published, the interim final rule removed most of the voluntary
U.S. grade standards and other selected regulations covering a number
of agricultural commodities (dairy products, tobacco, wool, mohair,
fresh and processed fruits and vegetables, livestock, meats and meat
products, eggs, and poultry and rabbit products). This includes all the
standards except those which are currently in the rulemaking process,
incorporated by reference in marketing orders/agreements appearing at 7
CFR Parts 900 through 999, or those used to implement government price
support. Those grade standard regulations will continue to appear in
the CFR. Standards for Applies (7 CFR 51.300-51.339), Applies for
Processing (7 CFR 51.340-51.354), and Pears for Canning (7 CFR 51.1345-
51.1374) should not have been removed because of requirements under the
Export Apple and Pear Act (7 U.S.C. 581, et seq.).
Correction of Publication
1. Accordingly, in the December 4, 1995, publication, on page 62174
of the SUPPLEMENTARY INFORMATION, in the table titled ``Administered by
the Fresh Products Branch, Fruit and Vegetable Division, 51.300-339,
Subpart--United States Standards for Grades of Apples, 51.340-354,
Subpart--United States Standards for Grades of Apples for Processing,
and 51.1354-1374, Subpart--United States Standards for Pears for
Canning, should not have been included. These three entities should
have appeared in the table on page 62176 as standards that are being
retained.
PART 51--[CORRECTED]
2. On page 62180, in the first column, under part 51, the first 5
lines in amendatory instruction 6 are corrected to read as follows:
6. In part 51, Sec. 51.100, Secs. 51.355 through 51.464,
Secs. 51.495 through 51.556, Secs. 51.810 through 51.869, Secs. 51.925
through 51.986, Secs. 51.1030 through 51.1109, Secs. 51.1375 through
51.1387, * * *
Dated: December 26, 1995.
Kenneth C. Clayton,
Acting Administrator.
[FR Doc. 95-31515 Filed 12-28-95; 8:45 am]
BILLING CODE 3410-02-M
Complete official Federal Register PDF
FR Doc. 95-31514 Organization and Operations of Federal Credit Unions
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Page 67321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31514]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
Organization and Operations of Federal Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Approval of Information Collection Requirements.
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SUMMARY: On June 3, 1994 (60 FR 29066), the National Credit Union
Administration (NCUA) published a final Interpretive Ruling and Policy
Statement 94-1-Chartering and Field of Membership Policy (IRPS 94-1)
and a final amendment updating the rules and regulations on
organizations and operations of Federal Credit Unions. At that time,
Office of Management and Budget approval for IRPS 94-1 was pending and
the preamble to the final rule stated that it would be published in the
Federal Register upon receipt. The information collection requirements
in the final rule have been approved by the Office of Management and
Budget. The control number assigned for this rule is 3133-0015,
approved for use through August 31, 1997.
EFFECTIVE DATE: December 29, 1995.
ADDRESSES: Becky Baker, Secretary of the Board, National Credit Union
Administration Board, 1775 Duke Street, Alexandria, VA 22314-3428.
FOR FURTHER INFORMATION CONTACT: Michael McKenna, Attorney, Office of
General Counsel (703) 518-6540, at the above address.
By the National Credit Union Administration Board on December
22, 1995.
Becky Baker,
Secretary of the Board.
[FR Doc. 95-31514 Filed 12-28-95; 8:45 am]
BILLING CODE 7535-01-M
Complete official Federal Register PDF
FR Doc. 95-31505 Alteration of Class and Type: Vodka
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67326-67327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31505]
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DEPARTMENT OF THE TREASURY
Bureau of Alcohol, Tobacco, and Firearms
27 CFR Part 5
[T.D. ATF-369; Re: T.D. ATF-360, Notice Nos. 782, 780; 91F009P]
RIN 1512-AB22
Alteration of Class and Type: Vodka
AGENCY: Bureau of Alcohol, Tobacco, and Firearms (ATF), Department of
the Treasury.
ACTION: Final rule, Treasury decision.
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SUMMARY: This final rule amends the distilled spirits regulations to
remove the requirement that on and after December 29, 1995, citric acid
may be added to vodka in an amount not to exceed 300 milligrams per
liter (300 ppm) without changing the product's designation as vodka.
This amendment is being made in accordance with a Federal statutory
requirement which, in pertinent part, prohibits the implementation of
T.D. ATF-360 [59 FR 67216, Dec. 29, 1994].
EFFECTIVE DATE: This document is effective on December 29, 1995.
FOR FURTHER INFORMATION CONTACT:
David W. Brokaw, Wine, Beer and Spirits Regulations Branch, (202) 927-
8230.
SUPPLEMENTARY INFORMATION:
Background
Treasury decision ATF-360, amended the distilled spirits
regulations, 27 CFR 5.23(a)(3) to authorize the use of a trace amount
(defined as up to 300 milligrams per liter or 300 ppm) of critic acid
in the production of vodka, without changing its designation as vodka.
This level was intended to ensure that distiller may continue to use
citric acid as a smoothing agent to correct objectionable tastes which
might result from such things as the water used in reducing the proof,
the charcoal used in distillation, or the glass in which packaged. This
level was also intended to protect the integrity of the standard of
identify for vodka, a product, which by definition, may not have any
distinctive character, aroma, taste, or color. The requirements in T.D.
ATF-360 were to be effective on or after December 29, 1995.
Public Law 104-52, 109 Stat. 468, Nov. 19, 1995
Section 528 of Public Law 104-52 states that, ``(n)o part of any
appropriation made available in this Act shall be used to implement
Bureau of Alcohol, Tobacco and Firearms Ruling T.D. ATF-360; Re: Notice
Nos. 782, 780, 91F009P.'' The Conference Report accompanying Public Law
104-52, H.R. Rep. 104-291, Oct. 20, 1995, provides as follows:
``Although conferees agree with the Senate proposal that no part of any
appropriation made available in this Act shall be used to implement the
ATF and Treasury decision ATF-360 (59 FR 67216, 12/29/94), which
limited the amount of citric acid that could be added to vodka to 300
parts per million (PPM), the conferees recognize the complex nature of
the various issues surrounding any standard of identify
[[Page 67327]]
determination with respect to the labeling of vodka. Therefore, the ATF
is directed to conduct a study, in consultation with industry members,
to determine whether a more reasonable industry standard can be
established that better balances the interests of the consumer, the
industry, and the government.''
Accordingly, as a result of Public Law 104-52, ATF is amending 27
CFR Sec. 5.23(a)(3) to remove the 300 ppm citric acid limitation
requirement set by T.D. ATF-360 pending further study. During the
pendency of such study, ATF will continue to allow the use of up to
1,000 ppm of citric acid in distilling vodka without changing its
designation as ``vodka,'' subject to the applicable formula
requirements.
Notice and Public Procedure
Because this final rule implements a specific Federal statutory
requirement prescribed by section 528 of Public Law 104-52, and in view
of the immediate need for guidance to the industry with respect to
compliance with applicable regulations, it is found to be impractical
and contrary to the public interest to issue this rule with notice and
public procedure under 5 U.S.C. 553(b) or subject to the effective date
limitation of 5 U.S.C. 553(d).
Regulatory Flexibility Act
The provisions of the Regulatory Flexibility Act relating to a
final regulatory flexibility analysis (5 U.S.C. 604) are not applicable
to this final rule because the agency was not required to publish a
general notice of proposed rulemaking under 5 U.S.C. 553 or any other
law.
Executive Order 12866
It has been determined that this regulation is not a significant
regulatory action as defined in E.O. 12866 because (1) it will not have
an annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, productivity, competition, jobs,
the environment, public health or safety, or State, local, or tribal
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlement, grants, user fees, or loan
programs, or the rights and obligations of recipients thereof; or (4)
raise novel legal or policy issues arising out of legal mandates, the
President's priorities, or the principles set forth in Executive Order
12866.
Paperwork Reduction Act
The provisions of the Paperwork Reduction Act of 1980, Public Law
96-511, 44 U.S.C. Chapter 35, and its implementing regulations, 5 CFR
Part 1320, do not apply to this final rule because no requirement to
collect information is imposed.
Disclosure
Copies of the notices, the Treasury decision, and all comments are
available for public inspection during normal business hours at: ATF
Reading Room, Room 6300, 650 Massachusetts Avenue NW., Washington, DC.
Drafting Information: The principal author of this document is
David W. Brokaw, Wine, Beer, and Spirits Regulations Branch, Bureau
of Alcohol, Tobacco, and Firearms.
List of Subjects in 27 CFR Part 5
Advertising, Consumer protection, Customs duties and inspection,
Imports, Labeling, Liquors, Packaging and Containers.
Authority and Issuance
27 CFR Part 5--Labeling and Advertising of Distilled Spirits, is
amended as follows:
PART 5--LABELING AND ADVERTISING OF DISTILLED SPIRITS
Paragraph 1. The authority citation for 27 CFR part 5 continues to
read as follows:
Authority: 26 U.S.C. 5301, 7805, 27 U.S.C. 205.
Par. 2 Section 5.23(a)(3)(iii) is revised to read as follows:
Sec. 5.23 Alterations of class and type
(a) Additions. * * *
* * * * *
(3) * * * (iii) any material whatsoever in the case of neutral
spirits or straight whiskey, except that vodka may be treated with
sugar in an amount not to exceed 2 grams per liter and a trace amount
of citric acid.
* * * * *
Par. 3 Section 5.23(c)(2) is removed.
Signed: December 11, 1995.
Daniel R. Black,
Acting Director.
Approved: December 13, 1995.
Dennis M. O'Connell,
Acting Deputy Assistant Secretary (Regulatory, Tariff, & Trade
Enforcement)
[FR Doc. 95-31505 Filed 12-28-95; 8:45 am]
BILLING CODE 4810-31-M
Complete official Federal Register PDF
FR Doc. 95-31489 Rules of Practice Amendments; Correction
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Page 67325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31489]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
16 CFR Parts 1, 2, 3, and 4
Rules of Practice Amendments; Correction
AGENCY: Federal Trade Commission.
ACTION: Correction to final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains a correction to the final regulations,
which were published Friday, July 21, 1995 (60 FR 37746).
EFFECTIVE DATE: July 21, 1995.
FOR FURTHER INFORMATION CONTACT:
Donald S. Clark, Secretary, Federal Trade Commission, Washington, DC
20580, 202-326-2514.
SUPPLEMENTARY INFORMATION:
Background
The Federal Trade Commission amended its Rules of Practice to adapt
them to the Federal Trade Commission Act Amendments of 1994. This
action conformed the Commission's Rules of Practice to certain
statutory changes and provided guidance to the public.
Need for Correction
A correction to the final regulations published on July 21, 1995 is
needed in order to ensure that the Code of Federal Regulations
correctly sets forth the amended version of Section 4.7(f) of the
Commission's Rules of Practice.
Correction of Publication
Therefore, the final rule published on July 21, 1995 (60 FR 37746)
is corrected as follows:
On page 37748, third column, the first sentence of paragraph (f) in
section 4.7 is corrected to read as follows:
Sec. 4.7 Ex parte communications.
* * * * *
(f) The prohibitions of paragraph (b) of this section do not apply
to a communication occasioned by and concerning a nonadjudicative
function of the Commission, including such functions as the initiation,
conduct, or disposition of a separate investigation, the issuance of a
complaint, or the initiation of a rulemaking or other proceeding,
whether or not it involves a party already in an adjudicative
proceeding; preparations for judicial review of a Commission order; a
proceeding outside the scope of Sec. 3.2, including a matter in state
or federal court or before another governmental agency; a
nonadjudicative function of the Commission, including but not limited
to an obligation under Sec. 4.11 or a communication with Congress; or
the disposition of a consent settlement under Sec. 3.25 concerning some
or all of the charges involved in a complaint and executed by some or
all respondents.
Donald S. Clark,
Secretary.
[FR Doc. 95-31489 Filed 12-28-95; 8:45 am]
BILLING CODE 6750-01-M
Complete official Federal Register PDF
FR Doc. 95-31466 Federal Acquisition Regulation; Uruguay Round
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67514-67518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31466]
[[Page 67513]]
_______________________________________________________________________
Part VII
Department of Defense
General Services Administration
National Aeronautics and Space Administration
_______________________________________________________________________
48 CFR Parts 25 and 52
Federal Acquisition Regulation; Uruguay Round; Final Rule
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 /
Rules and Regulations
[[Page 67514]]
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 25 and 52
[FAC 90-36; FAR Case 95-304]
RIN 9000-AG80
Federal Acquisition Regulation; Uruguay Round
AGENCIES: Department of Defense (DOD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council have agreed on an interim rule to amend
the Federal Acquisition Regulation (FAR) to implement the renegotiated
General Agreement on Tariffs and Trade (GATT) Government Procurement
Agreement (1996 Code) (Uruguay Round) which becomes effective January
1, 1996. This regulatory action was not subject to Office of Management
and Budget review under Executive Order 12866, dated September 30,
1993.
DATES: Effective: January 1, 1996. Applicability: This regulation
applies to solicitations issued on or after January 1, 1996. Comments
Due: Comments on the interim rule should be submitted to the FAR
Secretariat at the address shown below on or before February 27, 1996
to be considered in the formulation of a final rule.
ADDRESSES: FAR Secretariat, Room 4037, GS Building, Washington, DC
20405.
FOR FURTHER INFORMATION CONTACT:
Mr. Peter O'Such at (202) 501-1759 in reference to this FAR case. For
general information, contact the FAR Secretariat, Room 4037, GS
Building, Washington, DC 20405 (202) 501-4755. Please cite FAC 90-36,
FAR case 95-304.
SUPPLEMENTARY INFORMATION:
A. Background
This interim rule amends the FAR to implement the renegotiated
General Agreement on Tariffs and Trade (GATT) Government Procurement
Agreement (1996 Code) (Uruguay Round) which becomes effective January
1, 1996. This agreement is implemented in statute by the Uruguay Round
Agreement Act, Public Law 103-465, which amends the Trade Agreements
Act of 1979 (19 U.S.C. 2501-2582).
B. Regulatory Flexibility Act
This interim rule is not expected to have a significant economic
impact on a substantial number of small entities within the meaning of
the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because the rule
does not impose any new requirements on contractors, large or small.
The interim rule primarily changes the list of designated foreign
countries and extends applicability of the Trade Agreements Act to all
agencies for supply and construction contracts over certain dollar
thresholds. However, those contracts which are now subject to the Trade
Agreements Act were already subject to the Memorandum of Understanding
Between the United States of America and the European Community on
Government Procurement. This change should have minimal impact on U.S.
firms. The interim rule will not diminish existing preferences for
small businesses, because purchases under small and small disadvantaged
business preference programs are exempted from the Trade Agreements
Act. An Initial Regulatory Flexibility Analysis has, therefore, not
been performed. Comments from small entities concerning the affected
subpart will be considered in accordance with Section 610 of the Act.
Such comments must be submitted separately and cite FAC 90-36, FAR case
95-304, in correspondence.
C. Paperwork Reduction Act
This interim rule does not impose any new reporting or
recordkeeping requirements which require Office of Management and
Budget (OMB) approval under 44 U.S.C. 3501, et seq. Contractors, which
previously were required to respond to the now deleted provision at
52.225-16, Buy American Act--Supplies under European Community
Agreement Certificate, will now be required to respond to the
comparable provision at 52.225-8, Buy American Act--Trade Agreements--
Balance of Payments Program Certificate (OMB Control No. 9000-0046).
D. Determination to Issue an Interim Rule
A determination has been made under authority of the Secretary of
Defense (DoD), the Administrator of General Services (GSA), and the
Administrator of the National Aeronautics and Space Administration
(NASA) that compelling reasons exist to promulgate this interim rule
without prior opportunity for public comment. This action is necessary
in order to implement the renegotiated General Agreement on Tariffs and
Trade (GATT) Government Procurement Agreement (1996 Code) (Uruguay
Round) which becomes effective January 1, 1996. This agreement is
implemented in statute by the Uruguay Round Agreement Act, Public Law
103-465, which amends the Trade Agreements Act of 1979 (19 U.S.C. 2501-
2582). However, pursuant to Public Law 98-577 and FAR 1.501, public
comments received in response to this interim rule will be considered
in formulating the final rule.
List of Subjects in 48 CFR Parts 25 and 52
Government procurement.
Dated: December 22, 1995.
Edward C. Loeb,
Acting Director, Office of Federal Acquisition Policy.
Federal Acquisition Circular
Number 90-36
Federal Acquisition Circular (FAC) 90-36 is issued under the
authority of the Secretary of Defense, the Administrator of General
Services, and the Administrator for the National Aeronautics and Space
Administration.
Unless otherwise specified, all Federal Acquisition Regulation
(FAR) and other directive material contained in FAC 90-36 is effective
January 1, 1996. This regulation applies to solicitations issued on or
after January 1, 1996.
Dated: December 21, 1995.
Eleanor R. Spector,
Director, Defense Procurement.
Dated: December 22, 1995.
Ida M. Ustad,
Associate Administrator, Office of Acquisition Policy, GSA.
Dated: December 20, 1995.
Deidre Lee,
Associate Administrator for Procurement, NASA.
Therefore, 48 CFR Parts 25 and 52 are amended as set forth below:
1. The authority citation for 48 CFR Parts 25 and 52 continues to
read as follows:
Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 25--FOREIGN ACQUISITION
25.101 [Amended]
2. At 25.101 in the definition of ``Instrumentality'' the phrase
``European Economic Community'' is revised to read ``European Union''.
[[Page 67515]]
3. Section 25.104 is amended by revising paragraph (a) to read as
follows:
25.104 Acquiring civil aircraft and related articles.
(a) The U.S. Trade Representative, on February 19, 1980 (45 FR
12349, February 25, 1980), waived applying the Buy American Act to the
acquisition of civil aircraft and related articles of countries or
instrumentalities that are parties to the Agreement on Civil Aircraft.
The representative acted under the authority of section 303 of the
Trade Agreements Act of 1979 (19 U.S.C. 2513). Countries and
Instrumentalities that are parties to the agreement (as of January 1,
1996) are Canada, the European Union (Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden and the United Kingdom), Japan,
Norway, Romania, and Switzerland. The Office of the U.S. Trade
Representative, Washington, DC 20506, can provide information on
changes to the list of parties to the agreement made since January 1,
1996.
* * * * *
4. Section 25.109 is amended by revising paragraph (d), removing
paragraphs (e) and (f), redesignating paragraph (g) as (e) and revising
the introductory text and newly designated paragraph (e)(2); and
amending newly designated paragraph (e)(1) by removing the word ``or''.
The revised text reads as follows:
25.109 Solicitation provisions and contract clauses.
* * * * *
(d) Except as provided in paragraph (e) of this section, the
contracting officer shall insert the clause at 52.225-3, Buy American
Act--Supplies, in solicitations and contracts for the acquisition of
supplies, or for services involving the furnishing of supplies, for use
within the United States.
(e) Do not use the clause prescribed in paragraph (d) of this
section when--
* * * * *
(2) The acquisition is made under a trade agreement (see subpart
25.4); or
* * * * *
25.202 [Amended]
5. At 25.202(c) the reference to ``25.402(a) (3) and (4)'' is
revised to read ``25.402(a) (1) and (3).
6. At 25.205 paragraph (b) is revised to read as follows:
25.205 Solicitation provision and contract clause.
* * * * *
(b)(1) For construction solicitations and contracts with an
estimated acquisition value of $7,311,000 or more, insert the basic
clause at 52.225-15, Buy American Act--Construction Materials under
Trade Agreements Act and North American Free Trade Agreement.
(2) For construction solicitations and contracts with an estimated
value from $6,500,000 to $7,311,000, insert the clause with its
Alternate I.
7. Section 25.400 is revised to read as follows:
25.400 Scope of subpart.
(a) This subpart provides policies and procedures for acquisitions
subject to the Agreement on Government Procurement, as approved by
Congress in the Trade Agreements Act of 1979 (19 U.S.C. 2501-2582), and
as amended by the Uruguay Round Agreements Act (Pub. L. 103-465), and
other trade agreements including--
(1) Acquisitions from countries designated under the Caribbean
Basin Economic Recovery Act (19 U.S.C. 2701, et seq.);
(2) Acquisitions involving offers of Israeli end products under the
U.S.-Israel Free Trade Area Agreement, as approved by Congress in the
United States-Israel Free Trade Area Implementation Act of 1985 (19
U.S.C. 2112 note);
(3) Acquisitions involving offers of Canadian or Mexican end
products under the North American Free Trade Agreement (NAFTA), as
approved by Congress in the NAFTA Implementation Act (Pub. L. 103-182,
107 Stat. 2057); and
(4) The Agreement on Civil Aircraft (19 U.S.C. 2513).
(b) For application of the trade agreements which are unique to
individual agencies (Department of Defense, National Aeronautics and
Space Administration, Department of Energy (Power Marketing
Administration), Department of the Interior (Bureau of Reclamation) and
Department of Transportation (Federal Aviation Administration), see
agency regulations.
8. Section 25.401 is amended by revising the definitions for
``Canadian end product,'' ``Caribbean Basin country end product''
introductory text and paragraphs (a) and (b), ``Designated country,''
``Designated country end product,'' and ``Mexican end product,'';
definitions for ``European Community (EC) construction material,'' ``EC
country,'' and ``EC end product,'' are removed; and a definition for
``Designated country construction material,'' is added to read as
follows:
25.401 Definitions.
* * * * *
Canadian end product, as used in this subpart, means an article
that (a) is wholly the growth, product, or manufacture of Canada, or
(b) in the case of an article which consists in whole or in part of
materials from another country or instrumentality, has been
substantially transformed in Canada into a new and different article of
commerce with a name, character, or use distinct from that of the
article or articles from which it was transformed. The term refers to a
product offered for purchase under a supply contract, but for purposes
of calculating the value of the end product includes services (except
transportation services) incidental to its supply; provided, that the
value of those incidental services does not exceed that of the product
itself.
* * * * *
Caribbean Basin country end product, as used in this subpart, means
an article that (a) is wholly the growth, product, or manufacture of
the Caribbean Basin country, or (b) in the case of an article which
consists in whole or in part of materials from another country or
instrumentality, has been substantially transformed into a new and
different article of commerce with a name, character, or use distinct
from that of the article or articles from which it was so transformed.
The term refers to a product offered for purchase under a supply
contract, but for purposes of calculating the value of the end product
includes services (except transportation services) incidental to its
supply; provided, that the value of those incidental services does not
exceed that of the product itself. The term excludes products that are
excluded from duty-free treatment for Caribbean countries under 19
U.S.C. 2703(b), which presently are--
* * * * *
Designated country, as used in this subpart, means a country or
instrumentality designated under the Trade Agreements Act of 1979 and
listed below:
Aruba Japan
Austria Lesotho
Bangladesh Liechtenstein
Belgium Luxembourg
Benin Malawi
Bhutan Maldives
Botswana Mali
Burkina Faso Nepal
Burundi Netherlands
Canada Niger
Cape Verde Norway
Central African Republic Portugal
Chad Republic of Korea
Comoros Rwanda
[[Page 67516]]
Denmark Somalia
Finland Spain
France Sudan
Gambia Sweden
Germany Switzerland
Greece Tanzania U.R.
Guinea Uganda
Haiti United Kingdom
Ireland Western Samoa
Israel Yemen
Italy
Designated country construction material, as used in this subpart,
means construction material that (a) is wholly the growth, product, or
manufacture of a designated country, or (b) in the case of a
construction material which consists in whole or in part of materials
from another country or instrumentality, has been substantially
transformed in a designated country into a new and different
construction material distinct from the materials from which it was
transformed.
Designated country end product, as used in this subpart, means an
article that (a) is wholly the growth, product, or manufacture of the
designated country, or (b) in the case of an article which consists in
whole or in part of materials from another country or instrumentality,
has been substantially transformed into a new and different article of
commerce with a name, character, or use distinct from that of the
article or articles from which it was so transformed. The term refers
to a product offered for purchase under a supply contract, but for
purposes of calculating the value of the end product includes services
(except transportation services) incidental to its supply; provided,
that the value of those incidental services does not exceed that of the
product itself.
* * * * *
Mexican end product, as used in this subpart, means an article that
(a) is wholly the growth, product, or manufacture of Mexico, or (b) in
the case of an article which consists in whole or in part of materials
from another country or instrumentality, has been substantially
transformed in Mexico into a new and different article of commerce with
a name, character, or use distinct from that of the article or articles
from which it was transformed. The term refers to a product offered for
purchase under a supply contract, but for purposes of calculating the
value of the end product includes services (except transportation
services) incidental to its supply; provided, that the value of those
incidental services does not exceed that of the product itself.
9. At 25.402 paragraphs (a) (1) through (3) and (c) are revised,
(a)(4) is removed, and (a) (5) and (6) are redesignated as (a) (4) and
(5). The revised text reads as follows:
25.402 Policy.
(a)(1) Executive Order 12260 requires the U.S. Trade Representative
to set the dollar threshold for application of the Trade Agreements
Act. The current threshold is $190,000 for supply and services
contracts and $7,311,000 for construction contracts. The thresholds
will be published in the Federal Register and will be distributed
through agency procedures on an expedited basis. When the value of the
proposed acquisition of an eligible product is estimated to be at or
over the dollar threshold, agencies shall evaluate offers for an
eligible product without regard to the restrictions of the Buy American
Act (see subpart 25.1) or the Balance of Payments Program (see subpart
25.3). When the value of the proposed construction contract is
estimated to be at or over the dollar threshold, agencies shall
evaluate offers of designated country construction materials without
regard to the restrictions of the Buy American Act (see subpart 25.2)
or the Balance of Payments Program (see subpart 25.3). When the value
of the proposed acquisition is estimated to be below the Trade
Agreements Act threshold, the restrictions of the Buy American Act or
the Balance of Payments Program shall be applied to foreign offers,
except as noted in paragraphs (a)(2) and (a)(3) of this section (see
25.105).
(2) As required by Article 15 of the U.S.-Israel Free Trade Area
Agreement, agencies other than the Department of Defense, Department of
Energy, Department of Transportation, the Bureau of Reclamation of the
Department of the Interior, the Federal Housing Finance Board, and the
Office of Thrift Supervision shall evaluate offers of Israeli end
products at or above $50,000 in amount without regard to the
restrictions of the Buy American Act (see subpart 25.1) or the Balance
of Payments Program (see subpart 25.3).
(3) As required by the North American Free Trade Agreement (NAFTA)
Implementation Act (Pub. L. 103-182, 107 Stat. 2057), agencies shall
evaluate offers of the following NAFTA country end products without
regard to the restrictions of the Buy American Act (see subpart 25.1)
or the Balance of Payments Program (see subpart 25.3):
(i) NAFTA country construction materials under construction
contracts with an estimated acquisition value of $6,500,000 or more.
(ii) Canadian end products under supply contracts with an estimated
value above $25,000 and Mexican end products under supply contracts
with an estimated value of $50,000 or more.
* * * * *
(c)(1) There shall be no acquisition of foreign end products
subject to the Trade Agreements Act unless the foreign end products are
eligible products, except as provided in paragraphs (c)(2) and (c)(3)
of this section.
(2) The prohibition in paragraph (c)(1) of this section does not
apply if offers of domestic end products or of eligible products are
either not received or are insufficient to fulfill the requirements.
(3) A waiver may be granted under section 302(b)(2) of the Trade
Agreements Act (19 U.S.C. 2512(b)(2)).
* * * * *
10. Section 25.403 is revised to read as follows:
25.403 Exceptions.
This subpart does not apply to--
(a) Acquisitions below the dollar thresholds in 25.402(a) (1)
through (3), respectively;
(b) Purchases under small or small disadvantaged business
preference programs;
(c)(1) Purchases of arms, ammunition or war materials, or purchases
indispensable for national security or for national defense purposes,
by the Department of Defense, as provided in departmental regulations;
(2) Purchases indispensable for national security or for national
defense purposes, subject to policies established by the U.S. Trade
Representative.
(d) Research and development contracts;
(e) Purchases of items for resale;
(f) Purchases under subpart 8.6, Acquisition from Federal Prison
Industries, Inc., and subpart 8.7, Acquisition from Nonprofit Agencies
Employing People Who Are Blind or Severely Disabled; or
(g) Purchases of products that are excluded from duty-free
treatment for Caribbean countries under 19 U.S.C. 2703 (b); which
presently are--
(1) Textiles and apparel articles that are subject to textile
agreements;
(2) Footwear, handbags, luggage, flat goods, work gloves, and
leather wearing apparel not designated as eligible articles for this
purpose of the Generalized System of Preferences under Title V of the
Trade Act of 1974;
(3) Tuna, prepared or preserved in any manner in airtight
containers;
(4) Petroleum, or any product derived from petroleum; and
(5) Watches and watch parts (including cases, bracelets and
straps),
[[Page 67517]]
of whatever type including, but not limited to, mechanical, quartz
digital or quartz analog, if such watches or watch parts contain any
material that is the product of any country to which the Tariff
Schedule of the United States (TSUS) column two rates of duty apply.
25.406 and 25.407 [Removed]
11. Sections 25.406 and 25.407 are removed and reserved.
12. Section 25.408 is amended by revising the section heading and
paragraphs (a)(2) and (4) to read as follows:
25.408 Solicitation provisions and contract clauses.
(a) * * *
(2) The clause at 52.225-9, Buy American Act--Trade Agreements--
Balance of Payments Program, in solicitations and contracts for
supplies where the contracting officer has determined that the
acquisition is subject to the Trade Agreements Act;
* * * * *
(4) The clause at 52.225-21, Buy American Act--North American Free
Trade Agreement (NAFTA) Implementation Act--Balance of Payments
Program, in solicitations and contracts for supplies where the
contracting officer has determined that the acquisition is not subject
to the Trade Agreements Act but is subject to NAFTA.
* * * * *
13. 25.1000 is amended by adding a new sentence at the end to read
as follows:
25.1000 Scope of subpart.
* * * For thresholds which are unique to individual agencies (e.g.,
Power Marketing Administration of the Department of Energy), see agency
regulations.
14. 25.1001 is revised to read as follows:
25.1001 Definitions.
As used in this subpart--
Sanctioned European Union (EU) construction means construction to
be performed in a sanctioned member state of the EU and the contract is
awarded by a contracting activity located in the United States or its
territories.
Sanctioned EU end product means an article that (a) is wholly the
growth product or manufacture of a sanctioned member state of the EU or
(b) in the case of an article which consists in whole or in part of
materials from another country or instrumentality, has been
substantially transformed into a new and different article of commerce
with a name, character, or use distinct from that from which it was so
transformed in a sanctioned member state of the EU. The term refers to
a product offered for purchase under a supply contract, but for
purposes of calculating the value of the end product includes services
(except transportation services) incidental to its supply; provided,
that the value of these incidental services does not exceed that of the
product itself.
Sanctioned EU services means services to be performed in a
sanctioned member state of the EU when the contract is awarded by a
contracting activity located in the United States or its territories.
Sanctioned member state of the EU means Austria, Belgium, Denmark,
Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Sweden,
and the United Kingdom.
15. 25.1002 is amended by revising paragraphs (a)(1), (2), and (3)
introductory text, removing (a)(3)(i), and redesignating (a)(3)(ii) as
(a)(3)(i) and revising it, and redesignating (a)(3)(iii) as (a)(3)(ii);
paragraph (c)(1) introductory text is amended by replacing ``EC'' with
``EU.'' The revised text reads as follows:
25.1002 Trade sanctions.
(a) * * *
(1) Sanctioned EU end products with an estimated acquisition value
less than $190,000.
(2) Sanctioned EU construction with an estimated acquisition value
less than $7,311,000.
(3) Sanctioned EU services as follows:
(i) Service contracts with an estimated acquisition value less than
$190,000.
* * * * *
16. 25.1003 is revised to read as follows:
25.1003 Contract clauses.
Except as provided in 25.1002(b) and (c)--
(a) Insert the clause at 52.225-18, European Union Sanctions for
End Products, in solicitations and contracts for supplies with an
estimated acquisition value less than $190,000.
(b) Insert the clause at 52.225-19, European Union Sanction for
Services, in solicitations and contracts for--
(1) Services with an estimated acquisition value less than
$190,000; and
(2) All services listed in FAR 25.1002(a)(3)(ii).
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.212-5 [Amended]
17. 52.212-5 is amended by revising the date of the clause to read
``(JAN 1996)''; removing and reserving paragraph (b)(12); and in
(b)(13) and (b)(14) by removing the phrase ``Community Sanctions'' and
inserting ``Union Sanctions'' in its place.
18. 52.225-2 is amended by revising the introductory text, the
clause date, and paragraph (b) to read as follows:
52.225-2 Waiver of Buy American Act for Civil Aircraft and Related
Articles.
As prescribed in 25.109(c), insert the following provision:
Waiver of Buy American Act for Civil Aircraft and Related Articles (Jan
1996)
* * * * *
(b) The U.S. Trade Representative has waived applying the Buy
American Act to the acquisition of civil aircraft and related
articles (as defined in paragraph (a) of this clause) of countries
or instrumentaties that are parties to the Agreement on Trade in
Civil Aircraft. As of January 1, 1996, those countries and
instrumentalities include Canada, the European Union (Austria,
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United
Kingdom), Japan, Norway, Romania, and Switzerland.
* * * * *
19. 52.225-9 is amended as follows:
a. by revising the clause date;
b. in the definition of ``Caribbean Basin country end product,''
which follows paragraph (a), the second sentence is revised, the third
sentence is removed, and the fourth sentence is amended to hyphenate
the word ``duty-free'';
c. in the definition of ``Designated country end product,'' the
second sentence is revised, and the third sentence is removed;
d. the definition ``Eligible product'' is added in alphabetical
order;
e. in the definition of ``NAFTA country end product,'' the second
sentence is revised, and the third sentence is removed; and
f. in paragraph (b) the fifth sentence is revised.
The revised text reads as follows:
52.225-9 Buy American Act--Trade Agreements--Balance of Payments
Program.
* * * * *
Buy American Act--Trade Agreements--Balance of Payments Program (Jan
1996)
(a) * * *
* * * * *
Caribbean Basin country end product, * * * The term refers to a
product offered for purchase under a supply contract, but for
purposes of calculating the value of the end product includes
services (except transportation services) incidental to its
[[Page 67518]]
supply; provided, that the value of those incidental services does not
exceed that of the product itself. * * *
* * * * *
Designated country end product, * * * The term refers to a
product offered for purchase under a supply contract, but for
purposes of calculating the value of the end product includes
services (except transportation services) incidental to its supply;
provided, that the value of those incidental services does not
exceed that of the product itself.
* * * * *
Eligible product, as used in this clause, means a designated,
North American Free Trade Agreement (NAFTA), or Caribbean Basin
country end product.
* * * * *
NAFTA country end product, * * * The term refers to a product
offered for purchase under a supply contract, but for purposes of
calculating the value of the end product includes services (except
transportation services) incidental to its supply; provided, that
the value of those incidental services does not exceed that of the
product itself.
(b) * * * Contractors may not supply a foreign end product for
the line items subject to the Trade Agreements Act unless--
(1) The foreign end product is an eligible product (see FAR
25.401);
(2) The Contracting Officer determines that offers of domestic
end products or of eligible products are either not received or are
insufficient to fulfill the Government's requirements; or
(3) A waiver is granted under section 302 of the Trade
Agreements Act of 1979 (see FAR 25.402(c)).
* * * * *
20. Section 52.225-15 is amended:
a. by revising the section and clause headings;
b. revising ``25.205(b)'' in the introductory text to read
``25.205(b)(1)'';
c. revising the clause date;
d. adding the definition ``Designated country construction
material'' in alphabetical order;
e. removing the definitions ``European Community construction
material'' and ``EC country'';
f. revising paragraph (b);
g. Amending paragraph (c) by replacing ``EC'' with ``designated
country'' and revising ``materialmen'' to read ``material men''; and
h. adding Alternate I.
The revised and added text reads as follows:
52.225-15 Buy American Act--Construction Materials under Trade
Agreements Act and North American Free Trade Agreement.
* * * * *
Buy American Act--Construction Materials under Trade Agreements Act and
North American Free Trade (Jan. 1996)
(a) * * *
Designated country construction material means a construction
material that (a) is wholly the growth, product, or manufacture of a
designated country (as defined at FAR 25.401), or (b) in the case of
a construction material which consists in whole or in part of
materials from another country or instrumentality, has been
substantially transformed in a designated country into a new and
different construction material distinct from the materials from
which it was transformed.
* * * * *
(b) The Buy American Act (41 U.S.C. 10) provides that the
Government give preference to domestic material. In addition, the
Trade Agreements Act and the North American Free Trade Agreement
(NAFTA) provide that designated country and NAFTA construction
materials are exempted from application of the Buy American Act.
Alternate I (Jan 1996). As prescribed in 25.205(b)(2),
substitute the following paragraphs (b) and (c) in place of
paragraphs (b) and (c) of the basic clause:
(b) The Buy American Act (41 U.S.C. 10) provides that the
Government give preference to domestic material. In addition, the
North American Free Trade Agreement (NAFTA) provides that NAFTA
construction materials are exempted from application of the Buy
American Act.
(c) The Contractor agrees that only domestic construction
materials or NAFTA country construction materials will be used by
the Contractor, subcontractors, material men and suppliers in the
performance of this contract, except for other foreign construction
materials, if any, listed in this contract.
52.225-16 and 52.225-17 [Removed]
21. 52.225-16 and 52.225-17 are removed and reserved.
22. 52.225-18 is amended:
a. by revising the section and clause headings;
b. by revising the clause date;
c. in paragraph (a), in the definition ``Sanctioned European
Community (EC) end product'' by revising ``European Community'' to read
``European Union'', revising ``EC'' to read ``EU'' (3 times), revising
the second sentence, and removing the third sentence;
d. in the definition ``Sanctioned member state of the EC'' ``EC''
is revised to read ``EU'';
e. in paragraph (b) by revising ``EC'' to read ``EU''. The revised
text reads as follows:
52.225-18 European Union Sanction for End Products.
* * * * *
European Union Sanction for End Products (Jan 1996)
* * * * *
(a) * * *
* * * * *
Sanctioned European Union (EU) end product * * * The term refers
to a product offered for purchase under a supply contract, but for
purposes of calculating the value of the end product includes
services (except transportation services) incidental to its supply;
provided, that the value of these incidental services does not
exceed that of the product itself.
* * * * *
23. Section 52.225-19 is amended by revising the section and clause
headings, revising the clause date, in paragraph (a) by removing
``Community (EC)'' and inserting in its place ``Union (EU)'', and
revising the term ``EC'' to read ``EU'' in paragraph (b). The revised
headings and date appear below.
52.225-19 European Union Sanction for Services.
* * * * *
European Union Sanction for Services (Jan 1996)
* * * * *
24. 52.225-21 is amended by revising the clause date; in paragraph
(a), in the definition ``NAFTA country end product,'' by revising the
second sentence and removing the third sentence; and by removing
paragraph (d) and redesignating paragraph ``(e)'' as ``(d)''. The
revised text reads as follows:
52.225-21 Buy American Act--North American Free Trade Agreement
Implementation Act--Balance of Payments Program.
* * * * *
Buy American Act--North American Free Trade Agreement Implementation
Act--Balance of Payments Program (Jan 1996)
(a) Definitions. * * *
* * * * *
NAFTA country end product * * * The term refers to a product
offered for purchase under a supply contract, but for purposes of
calculating the value of the end product includes services (except
transportation services) incidental to its supply; provided, that
the value of those incidental services does not exceed that of the
product itself.
* * * * *
[FR Doc. 95-31466 Filed 12-28-95; 8:45 am]
BILLING CODE 6820-EP-M
Complete official Federal Register PDF
FR Doc. 95-31415 Validated Brucellosis-Free States; Georgia
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67319-67321]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31415]
-----------------------------------------------------------------------
[[Page 67320]]
DEPARTMENT OF AGRICULTURE
Animal and Plant Health Inspection Service
9 CFR Part 78
[Docket No. 95-074-1]
Validated Brucellosis-Free States; Georgia
AGENCY: Animal and Plant Health Inspection Service, USDA.
ACTION: Interim rule and request for comments.
-----------------------------------------------------------------------
SUMMARY: We are amending the brucellosis regulations concerning the
interstate movement of swine by adding Georgia to the list of validated
brucellosis-free States. We have determined that Georgia meets the
criteria for classification as a validated brucellosis-free State. This
action relieves certain restrictions on the interstate movement of
breeding swine from Georgia.
DATES: Interim rule effective December 29, 1995. Consideration will be
given only to comments received on or before February 27, 1996.
ADDRESSES: Please send an original and three copies of your comments to
Docket No. 95-074-1, Regulatory Analysis and Development, PPD, APHIS,
suite 3C03, 4700 River Road Unit 118, Riverdale, MD 20737-1238. Please
state that your comments refer to Docket No. 95-074-1. Comments
received may be inspected at USDA, room 1141, South Building, 14th
Street and Independence Avenue SW., Washington, DC, between 8 a.m. and
4:30 p.m., Monday through Friday, except holidays. Persons wishing to
inspect comments are requested to call ahead on (202) 690-2817 to
facilitate entry into the comment reading room.
FOR FURTHER INFORMATION CONTACT: Dr. Arnold Taft, Senior Staff
Veterinarian, National Animal Health Programs, VS, APHIS, suite 3B08,
4700 River Road Unit 43, Riverdale, MD 20737-1231, (301) 734-4916.
SUPPLEMENTARY INFORMATION:
Background
Brucellosis is a contagious disease affecting animals and man,
caused by bacteria of the genus Brucella. The brucellosis regulations,
contained in 9 CFR part 78 (referred to below as the regulations),
prescribe conditions for the interstate movement of cattle, bison, and
swine.
Under the swine brucellosis regulations, States, herds, and
individual animals are classified according to their brucellosis
status. Interstate movement requirements for swine are based upon the
disease status of the individual animal or the herd or State from which
the animal originates.
We are amending Sec. 78.43 of the regulations, which lists
validated brucellosis-free States, to include Georgia. A State may
apply for validated brucellosis-free status when:
(1) Any herd found to have swine brucellosis during the 2-year
qualification period preceding the application has been depopulated.
More than one finding of a swine brucellosis-infected herd during the
qualification period disqualifies the State from validation as
brucellosis-free; and
(2) During the 2-year qualification period, the State has completed
surveillance, annually, by either complete herd testing, market swine
testing, or statistical analysis.
Breeding swine originating from a validated brucellosis-free State
or herd may be moved interstate without having been tested with an
official test for brucellosis within 30 days prior to interstate
movement, which would otherwise be required.
After reviewing its brucellosis program records, we have concluded
that Georgia meets the criteria for classification as a validated
brucellosis-free State. Therefore, we are adding Georgia to the list of
States in Sec. 78.43. This action relieves certain restrictions on the
interstate movement of breeding swine from Georgia.
Immediate Action
The Administrator of the Animal and Plant Health Inspection Service
has determined that there is good cause for publishing this interim
rule without prior opportunity for public comment. Immediate action is
warranted to remove unnecessary restrictions on the interstate movement
of swine from Georgia.
Because prior notice and other public procedures with respect to
this action are impracticable and contrary to the public interest under
these conditions, we find good cause under 5 U.S.C. 553 to make it
effective upon publication in the Federal Register. We will consider
comments that are received within 60 days of publication of this rule
in the Federal Register. After the comment period closes, we will
publish another document in the Federal Register. It will include a
discussion of any comments we receive and any amendments we are making
to the rule as a result of the comments.
Executive Order 12866 and Regulatory Flexibility Act
This rule has been reviewed under Executive Order 12866. For this
action, the Office of Management and Budget has waived its review
process required by Executive Order 12866.
This action removes the requirement that breeding swine be tested
for brucellosis prior to movement interstate from Georgia.
Swine herd producers in Georgia are all small businesses (defined
by the Small Business Administration as having annual gross receipts of
less than $500,000). Currently, these small producers have about 50,000
adult swine tested annually for brucellosis. We are not able to
determine exactly how many of these tests are performed for the purpose
of certifying breeding swine for movement interstate, but we estimate
the number to be very small.
Currently, swine are routinely tested for pseudorabies and swine
brucellosis with the same blood sample at an approximate cost to the
producer of $5 per blood sample. Even though the swine will no longer
have to be tested for swine brucellosis to move interstate as a result
of this change in the regulations, they will still need to be tested
for pseudorabies. Therefore, this change in the regulations will not
create or remove any costs for swine producers in Georgia.
We anticipate, therefore, that this action will have a minimal, if
any, economic impact on swine herd producers in Georgia. The few small
producers that do move breeder swine interstate will still have to pay
for a pseudorabies test for the swine.
Under these circumstances, the Administrator of the Animal and
Plant Health Inspection Service has determined that this action will
not have a significant economic impact on a substantial number of small
entities.
Executive Order 12372
This program/activity is listed in the Catalog of Federal Domestic
Assistance under No. 10.025 and is subject to Executive Order 12372,
which requires intergovernmental consultation with State and local
officials. (See 7 CFR part 3015, subpart V.)
Executive Order 12778
This rule has been reviewed under Executive Order 12778, Civil
Justice Reform. This rule: (1) Preempts all State and local laws and
regulations that are in conflict with this rule; (2) has no retroactive
effect; and (3) does not require administrative proceedings before
parties may file suit in court challenging this rule.
Paperwork Reduction Act
This rule contains no information collection or recordkeeping
[[Page 67321]]
requirements under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.).
List of Subjects in 9 CFR Part 78
Animal diseases, Bison, Cattle, Hogs, Quarantine, Reporting and
recordkeeping requirements, Transportation.
Accordingly, 9 CFR part 78 is amended as follows:
PART 78--BRUCELLOSIS
1. The authority citation for part 78 continues to read as follows:
Authority: 21 U.S.C. 111-114a-1, 114g, 115, 117, 120, 121, 123-
126, 134b, and 134f; 7 CFR 2.22, 2.80, and 371.2(d).
Sec. 78.43 [Amended]
2. Section 78.43 is amended by adding ``Georgia,'' immediately
after ``Delaware,''.
Done in Washington, DC, this 19th day of December 1995.
Terry L. Medley,
Acting Administrator, Animal and Plant Health Inspection Service.
[FR Doc. 95-31415 Filed 12-28-95; 8:45 am]
BILLING CODE 3410-34-P
Complete official Federal Register PDF
FR Doc. 95-31413 Meaning of Terms as Used in This Subchapter; Representation Proceedings; Miscellaneous and General Requirements
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67288-67298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31413]
=======================================================================
-----------------------------------------------------------------------
FEDERAL LABOR RELATIONS AUTHORITY
5 CFR Parts 2421, 2422, and 2429
Meaning of Terms as Used in This Subchapter; Representation
Proceedings; Miscellaneous and General Requirements
AGENCY: Federal Labor Relations Authority.
ACTION: Final rules.
-----------------------------------------------------------------------
SUMMARY: The Federal Labor Relations Authority is amending its
regulations governing representation proceedings and related provisions
of other regulations that define or reference provisions of the
representation regulations. These amendments will streamline the
regulations and make the regulations more flexible in addressing the
representational concerns of agencies, labor organizations, and
individuals.
EFFECTIVE DATE: March 15, 1996.
FOR FURTHER INFORMATION CONTACT: Solly Thomas, Executive Director,
Federal Labor Relations Authority, 607 14th Street, N.W., Washington,
D.C. 20424-0001.
SUPPLEMENTARY INFORMATION:
Transition Rules and Regulations
Part 2422 of the regulations of the Federal Labor Relations
Authority governs representation proceedings. Several terms involved in
representation proceedings and used in Part 2422 are defined in certain
sections of Part 2421 of the regulations of the Federal Labor Relations
Authority. Additionally, there are references in Part 2429 of the
regulations to specific sections in Part 2422. The current definitions
and regulations will continue to govern all representation cases
currently pending before the Federal Labor Relations Authority and
those for which representation petitions are filed before March 15,
1996.
Notice and Opportunity to Comment
The Federal Labor Relations Authority proposed revision to its
regulations regarding the meaning of certain terms used in Subchapter C
(Part 2421) and representation proceedings (Part 2422). The proposed
revision was for the purpose of streamlining the regulations and making
the rules more flexible in addressing the representational concerns of
agencies, labor organizations, and individuals. The proposed rules were
published in the Federal Register for notice and comment on August 4,
1995. Customer views were solicited via a focus group meeting on August
29, 1995, and formal written comments were submitted by both agencies
and labor organizations. All comments have been considered and many
comments have prompted substantive revisions to the proposed rule. Any
such revision is noted in the section-by-section analysis.
Section-by-Section Analysis
The following sectional analysis reflects revisions to the proposed
changes to Part 2421--Meaning of Terms As Used in This Subchapter and
Part 2422--Representation Proceedings. Following this analysis,
conforming amendments to Part 2429--Miscellaneous and General
Requirements are briefly explained.
Part 2421
Section 2421.11
The proposed definition of ``party'' has been narrowed to clarify
that it does not include an individual in those instances referenced in
subsection (b).
Section 2421.18
Final rule is same as proposed rule.
Section 2421.19
The order of reference to agency or activity has been reversed.
Section 2421.20
Final rule is same as proposed rule.
Section 2421.21
The proposed definition has been narrowed to clarify that those
parties ``affected by issues raised'' in a petition include agencies,
activities or labor organizations, but not bargaining units.
Section 2421.22
Final rule is same as proposed rule.
Part 2422
Section 2422.1
The final sentence in proposed subsection (a)(2) has been
redesignated as subsection (3) to clarify that the showing of interest
requirement pertains to all petitions filed under subsection (a). One
commenter questioned whether any purposes for which petitions could
have been filed have been eliminated by the consolidation of the former
separate petitions into a single petition. As noted in the
supplementary information accompanying the proposed rule, all functions
of the former separate petitions are incorporated into the single
petition.
Section 2422.2
Several commenters objected to the fact that, unlike the current
regulations, the proposed regulation did not specify the purposes for
which listed entities may file petitions. For example, under current
practice, labor organizations can file petitions for eligibility for
dues allotment; individuals can file petitions seeking an election to
determine if employees in a unit no longer wish to be represented;
agencies can file petitions based upon good faith doubt as to the
continued appropriateness of a currently recognized labor organization
to represent an existing unit; and, petitions to consolidate existing
units can be filed by an agency, a labor organization, or both may file
jointly. Agreeing with the commenters that the proposed regulation
could lead to confusion, the final regulation has been revised to
clarify which entities have standing to file which representation
petitions. The order of reference to agency or activity has been
reversed.
Section 2422.3
The order of reference to agency or activity in subsections (a)(1)
and (a)(2) has been reversed.
Section 2422.4
The proposed rule offered two options concerning the service of
supporting documentation. Under Option 1, supporting documentation,
with the exception of showings of interest, would be served on all
affected parties. Under Option 2, supporting documentation, with the
exception of showings of interest, challenges to showings of
[[Page 67289]]
interest, challenges to the status of a labor organization, and
objections to elections, would be served. Some commenters favored
option 1, one commenter favored option 2, and one commenter disagreed
with both options, recommending broader service of everything except
challenges to the validity of a showing of interest, which would be
served only upon the specific entities involved in the challenge. In
response to comments concerning options 1 and 2, the final rule adopts
a compromise position as a rule that is in the best interest of both
the parties and the representation process. Under this rule all
documentation, except showings of interest, material that supports
challenges to the validity of the showing of interest, and
documentation which supports election objections, will be served on all
parties affected by issues raised in the filing. A superfluous
introductory phrase which was included in both options of the proposed
regulation has been deleted.
Section 2422.5
Final rule is same as proposed rule.
Section 2422.6
Comments have prompted several modifications to subsection (a) of
the proposed regulation. First, one commenter noted that the phrase
``interested parties'' is vague and could be construed too broadly.
Accordingly, the title of the subsection has been amended to simply
refer to ``parties.'' Second, in response to a comment noting that
parties affected by issues raised in a petition should be provided
notification whether or not the filer identified them as being
affected, and a comment noting that the obligations on the Regional
Director are unclear, a second sentence has been added clarifying the
obligations of the Regional Director vis-a-vis other parties. In
subsection (b)(2) of the final rule, ``(s)'' was added to the word
``unit'' in recognition of the fact that more than one unit may be
affected by issues raised in the petition.
Section 2422.7
In subsection (a) the phrase ``distribute copies of a notice'' has
been inserted for additional clarity between the phrase ``and/or'' and
the word ``in.'' For the same reasons referenced in the preceding
section, the phrase ``interested parties'' has been deleted from the
final rule.
Section 2422.8
One commenter noted that as drafted, the proposed regulation
inferred in subsection (a) that cross-petitions could be filed only for
the purpose of seeking an election. The subsection has been revised to
correct this misimpression. Several commenters objected to subsection
(b) of the proposed regulation permitting intervention and cross
petitions to be filed until the close of the hearing. Recognizing that
such belated filings could be disruptive to the representation process,
the final rule revises the subsection to require, absent a showing of
good cause, that such filings be submitted before the hearing opens.
Also in subsection (b), the phrase ``and/or filed with and submitted
to'' was changed in the final rule to ``and filed with either.'' In
subsection (d), the word ``intervention'' has been deleted from the
title and the phrase ``a party'' has been substituted for the phrase
``an intervenor.'' Lastly, in response to comment, proposed subsection
(e) has been subdivided into two separate subsections. The revised and
final subsection (e) provides the circumstances under which an
employing agency will be considered a party; subsection (f) indicates
the evidence an agency or activity must submit to intervene in a
representation proceeding.
Section 2422.9
Final rule is same as proposed rule.
Section 2422.10
For consistency with other provisions of the rules, the phrase
``submitted to'' is changed in subsection (b) of the final rule to the
phrase ``filed with.'' Subsection (c) of the proposed rule has been
revised to bring it into conformity with the revisions made to section
2422.8(b). As a result, challenges to the validity of a showing of
interest, like requests to intervene and cross- petitions, must, absent
good cause, be filed before the hearing opens.
Section 2422.11
Subsection (b) of the proposed rule has been revised to bring it
into conformity with the revisions made to section 2422.8(b) and
section 2422.10(c). Accordingly, challenges to the status of a labor
organization, like requests to intervene, cross-petitions, and validity
challenges, must, absent good cause, be filed before the hearing opens.
Section 2422.12
The second sentence in subsection (b) has been broadened to clarify
that the certification bar applies during the statutory period of
agency head review referenced in subsection (c). The phrase ``signed
and dated'' or ``has been signed and dated'' in subsections (b),(d),
and (e), has been changed to ``is in effect.'' As proposed, the
regulations conditioned the various bars on the presence of a ``signed
and dated'' agreement and did not take into account that an agreement
can take effect through methods other than execution, e.g., 5 U.S.C.
7114(c)(3). For the same reason, the phrase ``and signed'' has been
deleted from subsection (g). Also in subsection (g) the phrase ``more
than,'' before the phrase ``sixty (60) days,'' has been changed in the
final rule to ``prior to,'' in order to clarify that the referenced 60
day time period does not apply to the duration of the extension.
Subsection (e) has been modified to apply only to situations where the
collective bargaining agreement has a term of more than three (3)
years. The word ``days'' after the number ``(105)'' has also been
deleted from subsection (e). One commenter noted that unlike the prior
regulations, the revised rules do not provide specific guidance
concerning the timeliness of petitions seeking to consolidate
bargaining units. The general guidance concerning timeliness, contained
in various subsections within this section of the final rules, will
apply, as appropriate, in consolidation situations.
Section 2422.13
Final rule is same as proposed rule.
Section 2422.14
One commenter questioned whether the reference in proposed
subsection (a) to ``another petition'' referred to another petition
being filed by the same party or to a petition filed by any other
party. The phrase is intended to refer to the latter, i.e., no
petition, regardless of who filed it, would be considered timely during
the period in question. Also in subsection (a), the phrase ``agency
or'' has been added in the final rule before the word ``activity,'' for
consistency of reference with other parts of the rule. Another
commenter noted the inconsistency between proposed subsections (b) and
(c). In response to this comment, the final rule amends subsection (b)
to treat petitioners seeking an election somewhat like the proposed
rule treated incumbents, i.e., petitions to represent the same unit, or
a subdivision thereof, are prohibited for 6 months if not withdrawn
within the time constraints described in subsection (b). However, the
final rule does not treat withdrawals by petitioners the same as
withdrawals by incumbents. In the former situation, the purpose of the
bar is to discourage an election petitioner's dilatory withdrawal
because such action will inconvenience all concerned. In the latter,
the purpose of
[[Page 67290]]
the bar is to prevent an incumbent from totally avoiding the possible
effect of a bar by withdrawing prior to an election. As a result,
unlike a petitioner seeking an election, an incumbent may not avoid the
effect of an election bar by filing a timely withdrawal. The titles to
subsection (b) and (c) have been abbreviated.
Section 2422.15
One commenter noted that by locating the cooperation requirement as
a subsection in a section addressing the duty to furnish information,
the regulation suggested that providing information was the primary
component of the cooperation obligation. Agreeing with this point, the
title of the section has been broadened and proposed subsection (c) has
been rewritten to specifically articulate the duty of all parties to
cooperate.
Section 2422.16
One commenter suggested that the ``method of election,'' i.e.,
typically mail or manual balloting, be listed as a procedural
determination that the Regional Director could make. This suggestion
has been incorporated into subsection (b) of the final rule. The word
``an'' has been deleted before the word ``Election'' in subsection (b)
of the final rule. In subsection (c)(2) the word ``the'' before the
phrase ``unit appropriateness'' has been omitted from the final rule. A
minor punctuation change has been made in subsection (c) of the final
rule.
Section 2422.17
The title of the section has been expanded to include a reference
to the prehearing conference. One commenter noted that the section's
use of the phrase ``employees and interested parties'' was vague and
could be construed too broadly. Accordingly, subsection (b) has been
revised to refer to ``affected parties.'' It was also noted that the
notice of hearing does not identify issues or establish prehearing
dates; as a result, the final sentence in subsection (b) has been added
to reflect that notice of these matters will be separate. The revisions
to subsection (c) make it consistent with the changes made to final
subsection (b). A commenter noted that the title and body of proposed
subsection (d) were inconsistent. The title and body of subsection (d)
have been revised to indicate that there is no interlocutory appeal of
a Regional Director's decision of whether to hold a hearing.
Section 2422.18
Final rule is same as proposed rule.
Section 2422.19
Subsection (c)(2) of proposed rule has been deleted to bring this
section of the final rule into conformity with revisions made to
section 2422.8(b).
Section 2422.20
In subsection (b) of the final rule the word ``copy'' is changed
for clarification purposes to ``copies,'' and the word ``between'' is
changed to ``between/among.''
Section 2422.21
Subsection (a) of this proposed section offered two options. Option
1 followed current regulations. Option 2 specifically authorized a
Hearing Officer to make recommendations on the record on any issue. All
commenters addressing this section favored option 2. Record
recommendations would advise the parties of the Hearing Officer's views
and could facilitate resolution of questions under consideration.
Moreover, the Hearing Officer's recommendations could be helpful to the
Regional Director in resolving certain issues. As a result, the final
rule incorporates option 2. The final rule includes minor changes,
substituting an ``and'' for a comma and substituting the word
``Duties'' for the word ``Duty'' in the title of subsection (a).
Section 2422.22
Final rule is same as proposed rule.
Section 2422.23
Subsection (a) has been revised to clarify that the Regional
Director will decide whether to conduct or supervise the election and
agencies are obliged to assist as specified. In subsection (b) of the
final rule the word ``distributed'' has been added between the phrases
``and/or'' and ``in a manner,'' for the sake of consistency with a
similar change in Sec. 2422.7(a) of the final rule. In subsection (e),
the word ``procedures,'' which was inadvertently included, has been
deleted, and the word ``with'' has been substituted for the word ``to''
before the phrase ``the Authority.'' The final rule reframes subsection
(h)(2) & (3) in positive terminology to reflect who can, rather than
who cannot, serve as an observer. Subsection (h)(2)(i) has been revised
to incorporate the statutory terminology contained in 5 U.S.C. 7103(a)
(10) & (11). One commenter recommended that proposed subsection (h)(3)
be revised to prevent union officials from acting as observers for
labor organizations. This suggestions has been adopted in part and is
reflected in subsection (h)(3)(ii).
Section 2422.24
In subsection (b) of the final rule, parentheses were placed around
the letter ``s'' in the word ``ballots'' in the phrase ``unresolved
challenged ballots,'' for the sake of consistency with other references
to ballots in the subsection.
Section 2422.25
A minor grammatical change was made in subsection (b) of the final
rule.
Section 2422.26
Subsection (a) has been clarified to reflect that only a party may
file an objection to an election. One commenter objected to the
requirement that objections must be ``received by'' the Regional
Director within 5 days of the furnishing of the tally of ballots and
recommended that the Authority retain the ``postmarked by'' rule. The
final rule adopts the ``received by'' rule as preferable because it
allows the Regional Director to certify election results after a fixed
period if no objections are lodged. The ``postmark'' rule would require
the Regional Director to delay acting for some uncertain period of time
after 5 days have passed in order to provide timely posted objections--
if there are any--an opportunity to arrive. Note that pursuant to 5 CFR
2429.21(a), intermediate Saturdays, Sundays, and Federal legal holidays
are excluded from the 5-day period.
Section 2422.27
The order of subsections (c) and (d) has been reversed for
clarification purposes. One commenter questioned whether the
opportunity for a hearing, provided for under the previous regulations,
would continue. The revised final regulations do not discontinue the
opportunity for a hearing on challenged ballots.
Section 2422.28
Final rule is same as proposed rule.
Section 2422.29
Final rule is same as proposed rule.
Section 2422.30
One commenter noted that as proposed, subsection (c)--in
conjunction with sections 2422.8(b), 2422.10(c), and 2422.11(c)--
extends the time period for filing interventions, cross petitions, and
challenges until after the Regional Director has directed an election
or approved an election agreement. This would be disruptive of the
representation process. Accordingly, the final subsection (c) has been
revised to include directing an election or approving an election
agreement.
[[Page 67291]]
Section 2422.31
Language in the current regulation (5 CFR 2422.17(b)) has been
added to subsection (b) of the final rule. Subsection (c) of the
proposed regulation offered two options for when the Authority would
grant an application for revi ew of a Regional Director's decision.
Option 1 retained the current grounds for review with minor editorial
changes. Option 2 specified that, in addition to satisfying one or more
of those grounds, a party seeking review was obliged to assert and
establish that the Authority's decision would have a substantial impact
on labor-management relations law unless the Authority determines, in
its discretion, that extraordinary circumstances exist to grant review.
Option 1 was the overwhelming preference of those commenting on this
subsection. The final rule adopts a modified version of option 1. An
error in phraseology in subsection (f) has been corrected.
Section 2422.32
An incorrect reference in proposed subsection (a)(2) has been
revised to refer to section 2422.31(e). The ``Revocations'' subsection,
mistakenly identified as subsection (c), has been redesignated as
subsection (b).
Section 2422.33
Final rule is same as proposed rule.
Section 2422.34
Several commenters noted and objected to subsection (a) of the
proposed regulation changing current law by requiring the fulfillment
of representational and bargaining obligations during periods when
there is a ``question concerning representation.'' The commenters are
correct that this subsection is, in some respects, a change from
current law. This revision is intended to allow more flexibility during
such periods through the exercise of bargaining and representational
obligations. As such, the modification of the law enhances both
government efficiency and federal sector labor relations. Proposed
subsection (b) has been amended by adding statutory references which
define the term ``employee'' and provide for which employees may be
included within a unit. The inclusion of this phrase is intended to
clarify that subsection (b) only trumps subsection (a) to the extent
that subsection (b) allows parties to take action based on unit status
of individuals.
Part 2429
Changes to Part 2429 are required as a result of the different
section numbers in the revised Part 2422.
Section 2429.21
In subsection (a), in discussing how time will be computed in
various bar situations, there are two references to sections 2422.3 (c)
and (d). In the revised regulations, the bars to which this section
refers will be located in section 2422.12 (c), (d), (e), and (f). In
subsection (b), the filing of a representation petition is listed as an
exception to the ``postmark date'' rule and reference is made to
section 2422.2. Because the revised regulations have numerous sections
dealing with such filings, the reference is changed to Part 2422.
Section 2429.22
The revised regulations address applications for review of a
Regional Director Decision and Order in section 2422.31. Accordingly,
the reference to section 2422.17 is changed to section 2422.31.
List of Subjects
5 CFR Part 2421
Government employees, Labor-management relations.
5 CFR Part 2422
Administrative practice and procedure, Government employees, Labor
unions.
5 CFR Part 2429
Administrative practice and procedure, Government employees, Labor-
management relations.
For the reasons set forth in the preamble, the Federal Labor
Relations Authority amends Parts 2421, 2422, and 2429 of its
regulations as follows:
PART 2421--MEANING OF TERMS AS USED IN THIS SUBCHAPTER
1. The authority citation for Part 2421 continues to read as
follows:
Authority: 5 U.S.C. 7134.
2. Section 2421.11 is revised to read as follows:
Sec. 2421.11 Party.
Party means:
(a) Any labor organization, employing agency or activity or
individual filing a charge, petition, or request;
(b) Any labor organization or agency or activity
(1) Named as
(i) A charged party in a charge,
(ii) A respondent in a complaint, or
(iii) An employing agency or activity or an incumbent labor
organization in a petition;
(2) Whose intervention in a proceeding has been permitted or
directed by the Authority; or
(3) Who participated as a party
(i) In a matter that was decided by an agency head under 5 U.S.C.
7117, or
(ii) In a matter where the award of an arbitrator was issued; and
(c) The General Counsel, or the General Counsel's designated
representative, in appropriate proceedings.
3. Sections 2421.18 through 2421.22 are added to read as follows:
Sec. 2421.18 Petitioner.
Petitioner means the party filing a petition under Part 2422 of
this Subchapter.
Sec. 2421.19 Eligibility period.
Eligibility period means the payroll period during which an
employee must be in an employment status with an agency or activity in
order to be eligible to vote in a representation election under Part
2422 of this Subchapter.
Sec. 2421.20 Election agreement.
Election agreement means an agreement under Part 2422 of this
Subchapter signed by all the parties, and approved by the Regional
Director, concerning the details and procedures of a representation
election in an appropriate unit.
Sec. 2421.21 Affected by issues raised.
The phrase affected by issues raised, as used in Part 2422, should
be construed broadly to include parties and other labor organizations,
or agencies or activities that have a connection to employees affected
by, or questions presented in, a proceeding.
Sec. 2421.22 Determinative challenged ballots.
Determinative challenged ballots are challenges that are unresolved
prior to the tally and sufficient in number after the tally to affect
the results of the election.
4. Part 2422 is revised to read as follows:
PART 2422--REPRESENTATION PROCEEDINGS
Sec.
2422.1 Purposes of a petition.
2422.2 Standing to file a petition.
2422.3 Contents of a petition.
2422.4 Service requirements.
2422.5 Filing petitions.
2422.6 Notification of filing.
2422.7 Posting notice of filing of a petition.
2422.8 Intervention and cross-petitions.
[[Page 67292]]
2422.9 Adequacy of showing of interest.
2422.10 Validity of showing of interest.
2422.11 Challenge to the status of a labor organization.
2422.12 Timeliness of petitions seeking an election.
2422.13 Resolution of issues raised by a petition.
2422.14 Effect of withdrawal/dismissal.
2422.15 Duty to furnish information and cooperate.
2422.16 Election agreements or directed elections.
2422.17 Notice of hearing and prehearing conference.
2422.18 Hearing Procedures.
2422.19 Motions.
2422.20 Rights of parties at a hearing.
2422.21 Duties and powers of the Hearing Officer.
2422.22 Objections to the conduct of the hearing.
2422.23 Election procedures.
2422.24 Challenged ballots.
2422.25 Tally of ballots.
2422.26 Objections to the election.
2422.27 Determinative challenged ballots and objections.
2422.28 Runoff elections.
2422.29 Inconclusive elections.
2422.30 Regional Director investigations, notices of hearings,
actions and Decisions and Orders.
2422.31 Application for review of a Regional Director Decision and
Order.
2422.32 Certifications and revocations.
2422.33 Relief obtainable under Part 2423.
2422.34 Rights and obligations during the pendency of
representation proceedings.
Authority: 5 U.S.C. 7134.
Sec. 2422.1 Purposes of a petition.
A petition may be filed for the following purposes:
(a) Elections or Eligibility for dues allotment. To request:
(1) (i) An election to determine if employees in an appropriate
unit wish to be represented for the purpose of collective bargaining by
an exclusive representative, and/or
(ii) A determination of eligibility for dues allotment in an
appropriate unit without an exclusive representative; or
(2) an election to determine if employees in a unit no longer wish
to be represented for the purpose of collective bargaining by an
exclusive representative.
(3) Petitions under this subsection must be accompanied by an
appropriate showing of interest.
(b) Clarification or Amendment. To clarify, and/or amend:
(1) A recognition or certification then in effect; and/or
(2) Any other matter relating to representation.
(c) Consolidation. To consolidate two or more units, with or
without an election, in an agency and for which a labor organization is
the exclusive representative.
Sec. 2422.2 Standing to file a petition.
A representation petition may be filed by: an individual; a labor
organization; two or more labor organizations acting as a joint-
petitioner; an individual acting on behalf of any employee(s); an
agency or activity; or a combination of the above: Provided, however,
that
(a) only a labor organization has standing to file a petition
pursuant to section 2422.1(a)(1);
(b) only an individual has standing to file a petition pursuant to
section 2422.1(a)(2); and
(c) only an agency or a labor organization may file a petition
pursuant to section 2422.1(b) or (c).
Sec. 2422.3 Contents of a petition.
(a) What to file. A petition must be filed on a form prescribed by
the Authority and contain the following information:
(1) The name and mailing address for each agency or activity
affected by issues raised in the petition, including street number,
city, state and zip code.
(2) The name, mailing address and work telephone number of the
contact person for each agency or activity affected by issues raised in
the petition.
(3) The name and mailing address for each labor organization
affected by issues raised in the petition, including street number,
city, state and zip code. If a labor organization is affiliated with a
national organization, the local designation and the national
affiliation should both be included. If a labor organization is an
exclusive representative of any of the employees affected by issues
raised in the petition, the date of the recognition or certification
and the date any collective bargaining agreement covering the unit will
expire or when the most recent agreement did expire should be included,
if known.
(4) The name, mailing address and work telephone number of the
contact person for each labor organization affected by issues raised in
the petition.
(5) The name and mailing address for the petitioner, including
street number, city, state and zip code. If a labor organization
petitioner is affiliated with a national organization, the local
designation and the national affiliation should both be included.
(6) A description of the unit(s) affected by issues raised in the
petition. The description should generally indicate the geographic
locations and the classifications of the employees included (or sought
to be included) in, and excluded (or sought to be excluded) from, the
unit.
(7) The approximate number of employees in the unit(s) affected by
issues raised in the petition.
(8) A clear and concise statement of the issues raised by the
petition and the results the petitioner seeks.
(9) A declaration by the person signing the petition, under the
penalties of the Criminal Code (18 U.S.C. 1001), that the contents of
the petition are true and correct to the best of the person's knowledge
and belief.
(10) The signature, title, mailing address and telephone number of
the person filing the petition.
(b) Compliance with 5 U.S.C. 7111(e). A labor organization/
petitioner complies with 5 U.S.C. 7111(e) by submitting to the agency
or activity and to the Department of Labor a roster of its officers and
representatives, a copy of its constitution and bylaws, and a statement
of its objectives. By signing the petition form, the labor
organization/petitioner certifies that it has submitted these documents
to the activity or agency and to the Department of Labor.
(c) Showing of interest supporting a representation petition. When
filing a petition requiring a showing of interest, the petitioner must:
(1) So indicate on the petition form;
(2) Submit with the petition a showing of interest of not less than
thirty percent (30%) of the employees in the unit involved in the
petition; and
(3) Include an alphabetical list of the names constituting the
showing of interest.
(d) Petition seeking dues allotment. When there is no exclusive
representative, a petition seeking certification for dues allotment
shall be accompanied by a showing of membership in the petitioner of
not less than ten percent (10%) of the employees in the unit claimed to
be appropriate. An alphabetical list of names constituting the showing
of membership must be submitted.
Sec. 2422.4 Service requirements.
Every petition, motion, brief, request, challenge, written
objection, or application for review shall be served on all parties
affected by issues raised in the filing. The service shall include all
documentation in support thereof, with the exception of a showing of
interest, evidence supporting challenges to the validity of a showing
of interest, and evidence supporting objections to an election. The
filer must submit a written statement of service to the Regional
Director.
Sec. 2422.5 Filing petitions.
(a) Where to file. Petitions must be filed with the Regional
Director for the
[[Page 67293]]
region in which the unit or employee(s) affected by issues raised in
the petition are located. If the unit(s) or employees are located in
two or more regions of the Authority, the petitions must be filed with
the Regional Director for the region in which the headquarters of the
agency or activity is located.
(b) Number of copies. An original and two (2) copies of the
petition and the accompanying material must be filed with the Regional
Director.
(c) Date of filing. A petition is filed when it is received by the
appropriate Regional Director.
Sec. 2422.6 Notification of filing.
(a) Notification to parties. After a petition is filed, the
Regional Director will notify any labor organization, agency or
activity that the parties have identified as being affected by issues
raised by the petition, that a petition has been filed with the
Regional Director. The Regional Director will also make reasonable
efforts to identify and notify any other party affected by the issues
raised by the petition.
(b) Contents of the notification. The notification will inform the
labor organization, agency or activity of:
(1) The name of the petitioner;
(2) The description of the unit(s) or employees affected by issues
raised in the petition; and,
(3) A statement that all affected parties should advise the
Regional Director in writing of their interest in the issues raised in
the petition.
Sec. 2422.7 Posting notice of filing of a petition.
(a) Posting notice of petition. When appropriate, the Regional
Director, after the filing of a representation petition, will direct
the agency or activity to post copies of a notice to all employees in
places where notices are normally posted for the employees affected by
issues raised in the petition and/or distribute copies of a notice in a
manner by which notices are normally distributed.
(b) Contents of notice. The notice shall advise affected employees
about the petition.
(c) Duration of notice. The notice should be conspicuously posted
for a period of ten (10) days and not be altered, defaced, or covered
by other material.
Sec. 2422.8 Intervention and cross-petitions.
(a) Cross-petitions. A cross-petition is a petition which involves
any employees in a unit covered by a pending representation petition.
Cross-petitions must be filed in accordance with this subpart.
(b) Intervention requests and cross-petitions. A request to
intervene and a cross-petition, accompanied by any necessary showing of
interest, must be submitted in writing and filed with either the
Regional Director or the Hearing Officer before the hearing opens,
unless good cause is shown for granting an extension. If no hearing is
held, a request to intervene and a cross-petition must be filed prior
to action being taken pursuant to Sec. 2422.30.
(c) Labor organization intervention requests. Except for incumbent
intervenors, a labor organization seeking to intervene shall submit a
statement that it has complied with 5 U.S.C. 7111(e) and one of the
following:
(1) A showing of interest of ten percent (10%) or more of the
employees in the unit covered by a petition seeking an election, with
an alphabetical list of the names of the employees constituting the
showing of interest; or
(2) A current or recently expired collective bargaining agreement
covering any of the employees in the unit affected by issues raised in
the petition; or
(3) Evidence that it is or was, prior to a reorganization, the
recognized or certified exclusive representative of any of the
employees affected by issues raised in the petition.
(d) Incumbent. An incumbent exclusive representative, without
regard to the requirements of paragraph (c) of this section, will be
considered a party in any representation proceeding raising issues that
affect employees the incumbent represents, unless it serves the
Regional Director with a written disclaimer of any representation
interest in the claimed unit.
(e) Employing agency. An agency or activity will be considered a
party if any of its employees are affected by issues raised in the
petition.
(f) Agency or activity intervention. An agency or activity seeking
to intervene in any representation proceeding must submit evidence that
one or more employees of the agency or activity may be affected by
issues raised in the petition.
Sec. 2422.9 Adequacy of showing of interest.
(a) Adequacy. Adequacy of a showing of interest refers to the
percentage of employees in the unit involved as required by
Secs. 2422.3 (c) and (d) and 2422.8(c)(1).
(b) Regional Director investigation and Decision and Order. The
Regional Director will conduct such investigation as deemed
appropriate. A Regional Director's determination that the showing of
interest is adequate is final and binding and not subject to collateral
attack at a representation hearing or on appeal to the Authority. If
the Regional Director determines that a showing of interest is
inadequate, the Regional Director will issue a Decision and Order
dismissing the petition, or denying a request for intervention.
Sec. 2422.10 Validity of showing of interest.
(a) Validity. Validity questions are raised by challenges to a
showing of interest on grounds other than adequacy.
(b) Validity challenge. The Regional Director or any party may
challenge the validity of a showing of interest.
(c) When and where validity challenges may be filed. Party
challenges to the validity of a showing of interest must be in writing
and filed with the Regional Director or the Hearing Officer before the
hearing opens, unless good cause is shown for granting an extension. If
no hearing is held, challenges to the validity of a showing of interest
must be filed prior to action being taken pursuant to Sec. 2422.30.
(d) Contents of validity challenges. Challenges to the validity of
a showing of interest must be supported with evidence.
(e) Regional Director investigation and Decision and Order. The
Regional Director will conduct such investigation as deemed
appropriate. The Regional Director's determination that a showing of
interest is valid is final and binding and is not subject to collateral
attack or appeal to the Authority. If the Regional Director finds that
the showing of interest is not valid, the Regional Director will issue
a Decision and Order dismissing the petition or denying the request to
intervene.
Sec. 2422.11 Challenge to the status of a labor organization.
(a) Basis of challenge to labor organization status. The only basis
on which a challenge to the status of a labor organization may be made
is compliance with 5 U.S.C. 7103(a)(4).
(b) Format and time for filing a challenge. Any party filing a
challenge to the status of a labor organization involved in the
processing of a petition must do so in writing to the Regional Director
or the Hearing Officer before the hearing opens, unless good cause is
shown for granting an extension. If no hearing is held, challenges must
be filed prior to action being taken pursuant to Sec. 2422.30.
Sec. 2422.12 Timeliness of petitions seeking an election.
(a) Election bar. Where there is no certified exclusive
representative, a
[[Page 67294]]
petition seeking an election will not be considered timely if filed
within twelve (12) months of a valid election involving the same unit
or a subdivision of the same unit.
(b) Certification bar. Where there is a certified exclusive
representative of employees, a petition seeking an election will not be
considered timely if filed within twelve (12) months after the
certification of the exclusive representative of the employees in an
appropriate unit. If a collective bargaining agreement covering the
claimed unit is pending agency head review under 5 U.S.C. 7114(c) or is
in effect, paragraphs (c), (d), or (e) of this section apply.
(c) Bar during 5 U.S.C. 7114(c) agency head review. A petition
seeking an election will not be considered timely if filed during the
period of agency head review under 5 U.S.C. 7114(c). This bar expires
upon either the passage of thirty (30) days absent agency head action,
or upon the date of any timely agency head action.
(d) Contract bar where the contract is for three (3) years or less.
Where a collective bargaining agreement is in effect covering the
claimed unit and has a term of three (3) years or less from the date it
became effective, a petition seeking an election will be considered
timely if filed not more than one hundred and five (105) and not less
than sixty (60) days prior to the expiration of the agreement.
(e) Contract bar where the contract is for more than three (3)
years. Where a collective bargaining agreement is in effect covering
the claimed unit and has a term of more than three (3) years from the
date it became effective, a petition seeking an election will be
considered timely if filed not more than one hundred and five (105) and
not less than sixty (60) days prior to the expiration of the initial
three (3) year period, and any time after the expiration of the initial
three (3) year period.
(f) Unusual circumstances. A petition seeking an election or a
determination relating to representation matters may be filed at any
time when unusual circumstances exist that substantially affect the
unit or majority representation.
(g) Premature extension. Where a collective bargaining agreement
with a term of three (3) years or less has been extended prior to sixty
(60) days before its expiration date, the extension will not serve as a
basis for dismissal of a petition seeking an election filed in
accordance with this section.
(h) Contract requirements. Collective bargaining agreements,
including agreements that go into effect under 5 U.S.C. 7114(c) and
those that automatically renew without further action by the parties,
do not constitute a bar to a petition seeking an election under this
section unless a clear and unambiguous effective date, renewal date
where applicable, duration, and termination date are ascertainable from
the agreement and relevant accompanying documentation.
Sec. 2422.13 Resolution of issues raised by a petition.
(a) Meetings prior to filing a representation petition. All parties
affected by the representation issues that may be raised in a petition
are encouraged to meet prior to the filing of the petition to discuss
their interests and narrow and resolve the issues. If requested by all
parties a representative of the appropriate Regional Office will
participate in these meetings.
(b) Meetings to narrow and resolve the issues after the petition is
filed. After a petition is filed, the Regional Director may require all
affected parties to meet to narrow and resolve the issues raised in the
petition.
Sec. 2422.14 Effect of withdrawal/dismissal.
(a) Withdrawal/dismissal less than sixty (60) days before contract
expiration. When a petition seeking an election that has been timely
filed is withdrawn by the petitioner or dismissed by the Regional
Director less than sixty (60) days prior to the expiration of an
existing agreement between the incumbent exclusive representative and
the agency or activity or any time after the expiration of the
agreement, another petition seeking an election will not be considered
timely if filed within a ninety (90) day period from either:
(1) The date the withdrawal is approved; or
(2) The date the petition is dismissed by the Regional Director
when no application for review is filed with the Authority; or
(3) The date the Authority rules on an application for review.
Other pending petitions that have been timely filed under this Part
will continue to be processed.
(b) Withdrawal by petitioner. A petitioner who submits a withdrawal
request for a petition seeking an election that is received by the
Regional Director after the notice of hearing issues or after approval
of an election agreement, whichever occurs first, will be barred from
filing another petition seeking an election for the same unit or any
subdivision of the unit for six (6) months from the date of the
approval of the withdrawal by the Regional Director.
(c) Withdrawal by incumbent. When an election is not held because
the incumbent disclaims any representation interest in a unit, a
petition by the incumbent seeking an election involving the same unit
or a subdivision of the same unit will not be considered timely if
filed within six (6) months of cancellation of the election.
Sec. 2422.15 Duty to furnish information and cooperate.
(a) Relevant information. After a petition is filed, all parties
must, upon request of the Regional Director, furnish the Regional
Director and serve all parties affected by issues raised in the
petition with information concerning parties, issues, and agreements
raised in or affected by the petition.
(b) Inclusions and exclusions. After a petition seeking an election
is filed, the Regional Director may direct the agency or activity to
furnish the Regional Director and all parties affected by issues raised
in the petition with a current alphabetized list of employees and job
classifications included in and/or excluded from the existing or
claimed unit affected by issues raised in the petition.
(c) Cooperation. All parties are required to cooperate in every
aspect of the representation process. This obligation includes
cooperating fully with the Regional Director, submitting all required
and requested information, and participating in prehearing conferences
and hearings. The failure to cooperate in the representation process
may result in the Regional Director taking appropriate action,
including dismissal of the petition or denial of intervention.
Sec. 2422.16 Election agreements or directed elections.
(a) Election agreements. Parties are encouraged to enter into
election agreements.
(b) Regional Director directed election. If the parties are unable
to agree on procedural matters, specifically, the eligibility period,
method of election, dates, hours, or locations of the election, the
Regional Director will decide election procedures and issue a Direction
of Election, without prejudice to the rights of a party to file
objections to the procedural conduct of the election.
(c) Opportunity for a hearing. Before directing an election, the
Regional Director shall provide affected parties an opportunity for a
hearing on other than procedural matters, and thereafter may:
(1) Issue a Decision and Order; or
(2) If there are no questions regarding unit appropriateness, issue
a Direction
[[Page 67295]]
of Election without a Decision and Order.
(d) Challenges or objections to a directed election. A Direction of
Election issued under this section will be issued without prejudice to
the right of a party to file a challenge to the eligibility of any
person participating in the election and/or objections to the election.
Sec. 2422.17 Notice of hearing and prehearing conference.
(a) Purpose of notice of a hearing. The Regional Director may issue
a notice of hearing involving any issues raised in the petition.
(b) Contents. The notice of hearing will advise affected parties
about the hearing. The Regional Director will also notify affected
parties of the issues raised in the petition and establish a date for
the prehearing conference.
(c) Prehearing conference. A prehearing conference will be
conducted by the Hearing Officer, either by meeting or teleconference.
All parties must participate in a prehearing conference and be prepared
to fully discuss, narrow and resolve the issues set forth in the
notification of the prehearing conference.
(d) No interlocutory appeal of hearing determination. A Regional
Director's determination of whether to issue a notice of hearing is not
appealable to the Authority.
Sec. 2422.18 Hearing procedures.
(a) Purpose of a hearing. Representation hearings are considered
investigatory and not adversarial. The purpose of the hearing is to
develop a full and complete record of relevant and material facts.
(b) Conduct of hearing. Hearings will be open to the public unless
otherwise ordered by the Hearing Officer. There is no burden of proof,
with the exception of proceedings on objections to elections as
provided for in Sec. 2422.27(b). Formal rules of evidence do not apply.
(c) Hearing officer. Hearings will be conducted by a Hearing
Officer appointed by the Regional Director. Another Hearing Officer may
be substituted for the presiding Hearing Officer at any time.
(d) Transcript. An official reporter will make the official
transcript of the hearing. Copies of the official transcript may be
examined in the appropriate Regional Office during normal working
hours. Requests by parties to purchase copies of the official
transcript should be made to the official hearing reporter.
Sec. 2422.19 Motions.
(a) Purpose of a motion. Subsequent to the issuance of a Notice of
Hearing in a representation proceeding, a party seeking a ruling, an
order, or relief must do so by filing or raising a motion stating the
order or relief sought and the grounds therefor. Challenges and other
filings referenced in other sections of this subpart may, in the
discretion of the Regional Director or Hearing Officer, be treated as a
motion.
(b) Prehearing motions. Prehearing motions must be filed in writing
with the Regional Director. Any response must be filed with the
Regional Director within five (5) days after service of the motion. The
Regional Director may rule on the motion or refer the motion to the
Hearing Officer.
(c) Motions made at the hearing. During the hearing, motions will
be made to the Hearing Officer and may be oral on the record, unless
otherwise required in this subpart to be in writing. Responses may be
oral on the record or in writing, but, absent permission of the Hearing
Officer, must be provided before the hearing closes. When appropriate,
the Hearing Officer will rule on motions made at the hearing or
referred to the Hearing Officer by the Regional Director.
(d) Posthearing motions. Motions made after the hearing closes must
be filed in writing with the Regional Director. Any response to a
posthearing motion must be filed with the Regional Director within five
(5) days after service of the motion.
Sec. 2422.20 Rights of parties at a hearing.
(a) Rights. A party at a hearing will have the right:
(1) To appear in person or by a representative;
(2) To examine and cross-examine witnesses; and
(3) To introduce into the record relevant evidence.
(b) Documentary evidence and stipulations. Parties must submit two
(2) copies of documentary evidence to the Hearing Officer and copies to
all other parties. Stipulations of fact between/among the parties may
be introduced into evidence.
(c) Oral argument. Parties will be entitled to a reasonable period
prior to the close of the hearing for oral argument. Presentation of a
closing oral argument does not preclude a party from filing a brief
under paragraph (d) of this section.
(d) Briefs. A party will be afforded an opportunity to file a brief
with the Regional Director.
(1) An original and two (2) copies of a brief must be filed with
the Regional Director within thirty (30) days from the close of the
hearing.
(2) A written request for an extension of time to file a brief must
be filed with and received by the Regional Director no later than five
(5) days before the date the brief is due.
(3) No reply brief may be filed without permission of the Regional
Director.
Sec. 2422.21 Duties and powers of the Hearing Officer.
(a) Duties of the Hearing Officer. The Hearing Officer will receive
evidence and inquire fully into the relevant and material facts
concerning the matters that are the subject of the hearing, and may
make recommendations on the record to the Regional Director.
(b) Powers of the Hearing Officer. During the period a case is
assigned to a Hearing Officer by the Regional Director and prior to the
close of the hearing, the Hearing Officer may take any action necessary
to schedule, conduct, continue, control, and regulate the hearing,
including ruling on motions when appropriate.
Sec. 2422.22 Objections to the conduct of the hearing.
(a) Objections. Objections are oral or written complaints
concerning the conduct of a hearing.
(b) Exceptions to rulings. There are automatic exceptions to all
adverse rulings.
Sec. 2422.23 Election procedures.
(a) Regional Director conducts or supervises election. The Regional
Director will decide to conduct or supervise the election. In
supervised elections, agencies will perform all acts as specified in
the Election Agreement or Direction of Election.
(b) Notice of election. Prior to the election a notice of election,
prepared by the Regional Director, will be posted by the activity in
places where notices to employees are customarily posted and/or
distributed in a manner by which notices are normally distributed. The
notice of election will contain the details and procedures of the
election, including the appropriate unit, the eligibility period, the
date(s), hour(s) and location(s) of the election, a sample ballot, and
the effect of the vote.
(c) Sample ballot. The reproduction of any document purporting to
be a copy of the official ballot that suggests either directly or
indirectly to employees that the Authority endorses a particular choice
in the election may constitute grounds for setting aside an election if
objections are filed under Sec. 2422.26.
(d) Secret ballot. All elections will be by secret ballot.
(e) Intervenor withdrawal from ballot. When two or more labor
organizations
[[Page 67296]]
are included as choices in an election, an intervening labor
organization may, prior to the approval of an election agreement or
before the direction of an election, file a written request with the
Regional Director to remove its name from the ballot. If the request is
not received prior to the approval of an election agreement or before
the direction of an election, unless the parties and the Regional
Director agree otherwise, the intervening labor organization will
remain on the ballot. The Regional Director's decision on the request
is final and not subject to the filing of an application for review
with the Authority.
(f) Incumbent withdrawal from ballot in an election to decertify an
incumbent representative. When there is no intervening labor
organization, an election to decertify an incumbent exclusive
representative will not be held if the incumbent provides the Regional
Director with a written disclaimer of any representation interest in
the unit. When there is an intervenor, an election will be held if the
intervening labor organization proffers a thirty percent (30%) showing
of interest within the time period established by the Regional
Director.
(g) Petitioner withdraws from ballot in an election. When there is
no intervening labor organization, an election will not be held if the
petitioner provides the Regional Director with a written request to
withdraw the petition. When there is an intervenor, an election will be
held if the intervening labor organization proffers a thirty percent
(30%) showing of interest within the time period established by the
Regional Director.
(h) Observers. All parties are entitled to representation at the
polling location(s) by observers of their own selection subject to the
Regional Director's approval.
(1) Parties desiring to name observers must file in writing with
the Regional Director a request for specifically named observers at
least fifteen (15) days prior to an election. The Regional Director may
grant an extension of time for filing a request for specifically named
observers for good cause where a party requests such an extension or on
the Regional Director's own motion. The request must name and identify
the observers requested.
(2) An agency or activity may use as its observers any employees
who are not eligible to vote in the election, except:
(i) Supervisors or management officials;
(ii) Employees who have any official connection with any of the
labor organizations involved; or
(iii) Non-employees of the Federal government.
(3) A labor organization may use as its observers any employees
eligible to vote in the election, except:
(i) Employees on leave without pay status who are working for the
labor organization involved; or
(ii) Employees who hold an elected office in the union.
(4) Objections to a request for specific observers must be filed
with the Regional Director stating the reasons in support within five
(5) days after service of the request.
(5) The Regional Director's ruling on requests for and objections
to observers is final and binding and is not subject to the filing of
an application for review with the Authority.
Sec. 2422.24 Challenged ballots.
(a) Filing challenges. A party or the Regional Director may, for
good cause, challenge the eligibility of any person to participate in
the election prior to the employee voting.
(b) Challenged ballot procedure. An individual whose eligibility to
vote is in dispute will be given the opportunity to vote a challenged
ballot. If the parties and the Region are unable to resolve the
challenged ballot(s) prior to the tally of ballots, the unresolved
challenged ballot(s) will be impounded and preserved until a
determination can be made, if necessary, by the Regional Director.
Sec. 2422.25 Tally of ballots.
(a) Tallying the ballots. When the election is concluded, the
Regional Director will tally the ballots.
(b) Service of the tally. When the tally is completed, the Regional
Director will serve the tally of ballots on the parties in accordance
with the election agreement or direction of election.
(c) Valid ballots cast. Representation will be determined by the
majority of the valid ballots cast.
Sec. 2422.26 Objections to the election.
(a) Filing objections to the election. Objections to the procedural
conduct of the election or to conduct that may have improperly affected
the results of the election may be filed by any party. Objections must
be filed and received by the Regional Director within five (5) days
after the tally of ballots has been served. Any objections must be
timely regardless of whether the challenged ballots are sufficient in
number to affect the results of the election. The objections must be
supported by clear and concise reasons. An original and two (2) copies
of the objections must be received by the Regional Director.
(b) Supporting evidence. The objecting party must file with the
Regional Director evidence, including signed statements, documents and
other materials supporting the objections within ten (10) days after
the objections are filed.
Sec. 2422.27 Determinative challenged ballots and objections.
(a) Investigation. The Regional Director will investigate
objections and/or determinative challenged ballots that are sufficient
in number to affect the results of the election.
(b) Burden of proof. A party filing objections to the election
bears the burden of proof by a preponderance of the evidence concerning
those objections. However, no party bears the burden of proof on
challenged ballots.
(c) Regional Director Action. After investigation, the Regional
Director will take appropriate action consistent with Sec. 2422.30.
(d) Consolidated hearing on objections and/or determinative
challenged ballots and an unfair labor practice hearing. When
appropriate, and in accordance with Sec. 2422.33, objections and/or
determinative challenged ballots may be consolidated with an unfair
labor practice hearing. Such consolidated hearings will be conducted by
an Administrative Law Judge. Exceptions and related submissions must be
filed with the Authority and the Authority will issue a decision in
accordance with Part 2423 of this chapter, except for the following:
(1) Sections 2423.18 and 2423.19(j) of this Subchapter concerning
the burden of proof and settlement conferences are not applicable;
(2) The Administrative Law Judge may not recommend remedial action
to be taken or notices to be posted as provided by Sec. 2423.26(a) of
this Subchapter; and,
(3) References to ``charge'' and ``complaint'' in Sec. 2423.26(b)
of this chapter will be omitted.
Sec. 2422.28 Runoff elections.
(a) When a runoff may be held. A runoff election is required in an
election involving at least three (3) choices, one of which is ``no
union'' or ``neither,'' when no choice receives a majority of the valid
ballots cast. However, a runoff may not be held until the Regional
Director has ruled on objections to the election and determinative
challenged ballots.
(b) Eligibility. Employees who were eligible to vote in the
original election and who are also eligible on the date of the runoff
election may vote in the runoff election.
[[Page 67297]]
(c) Ballot. The ballot in the runoff election will provide for a
selection between the two choices receiving the largest and second
largest number of votes in the election.
Sec. 2422.29 Inconclusive elections.
(a) Inconclusive elections. An inconclusive election is one where
challenged ballots are not sufficient to affect the outcome of the
election and one of the following occurs:
(1) The ballot provides for at least three (3) choices, one of
which is ``no union'' or ``neither'' and the votes are equally divided;
or
(2) The ballot provides for at least three (3) choices, the choice
receiving the highest number of votes does not receive a majority, and
at least two other choices receive the next highest and same number of
votes; or
(3) When a runoff ballot provides for a choice between two labor
organizations and results in the votes being equally divided; or
(4) When the Regional Director determines that there have been
significant procedural irregularities.
(b) Eligibility to vote in a rerun election. A current payroll
period will be used to determine eligibility to vote in a rerun
election.
(c) Ballot. If the Regional Director determines that the election
is inconclusive, the election will be rerun with all the choices that
appeared on the original ballot.
(d) Number of reruns. There will be only one rerun of an
inconclusive election. If the rerun results in another inconclusive
election, the tally of ballots will indicate a majority of valid
ballots has not been cast for any choice and a certification of results
will be issued. If necessary, a runoff may be held when an original
election is rerun.
Sec. 2422.30 Regional Director investigations, notices of hearings,
actions, and Decisions and Orders.
(a) Regional Director investigation. The Regional Director will
make such investigation of the petition and any other matter as the
Regional Director deems necessary.
(b) Regional Director notice of hearing. The Regional Director will
issue a notice of hearing to inquire into any matter about which a
material issue of fact exists, and any time there is reasonable cause
to believe a question exists regarding unit appropriateness.
(c) Regional Director action and Decision and Order. After
investigation and/or hearing, when a hearing has been ordered, the
Regional Director will resolve the matter in dispute and, when
appropriate, direct an election or approve an election agreement, or
issue a Decision and Order.
(d) Appeal of Regional Director Decision and Order. A party may
file with the Authority an application for review of a Regional
Director Decision and Order.
(e) Contents of the Record. When no hearing has been conducted all
material submitted to and considered by the Regional Director during
the investigation becomes a part of the record. When a hearing has been
conducted, the transcript and all material entered into evidence,
including any posthearing briefs, become a part of the record.
Sec. 2422.31 Application for review of a Regional Director Decision
and Order.
(a) Filing an application for review. A party must file an
application for review with the Authority within sixty (60) days of the
Regional Director's Decision and Order. The sixty (60) day time limit
provided for in 5 U.S.C. 7105(f) may not be extended or waived.
(b) Contents. An application for review must be sufficient to
enable the Authority to rule on the application without recourse to the
record; however, the Authority may, in its discretion, examine the
record in evaluating the application. An application must specify the
matters and rulings to which exception(s) is taken, include a summary
of evidence relating to any issue raised in the application, and make
specific reference to page citations in the transcript if a hearing was
held. An application may not raise any issue or rely on any facts not
timely presented to the Hearing Officer or Regional Director.
(c) Review. The Authority may grant an application for review only
when the application demonstrates that review is warranted on one or
more of the following grounds:
(1) The decision raises an issue for which there is an absence of
precedent;
(2) Established law or policy warrants reconsideration; or,
(3) There is a genuine issue over whether the Regional Director
has:
(i) Failed to apply established law;
(ii) Committed a prejudicial procedural error;
(iii) Committed a clear and prejudicial error concerning a
substantial factual matter.
(d) Opposition. A party may file with the Authority an opposition
to an application for review within ten (10) days after the party is
served with the application. A copy must be served on the Regional
Director and all other parties and a statement of service must be filed
with the Authority.
(e) Regional Director Decision and Order becomes the Authority's
action. A Decision and Order of a Regional Director becomes the action
of the Authority when:
(1) No application for review is filed with the Authority within
sixty (60) days after the date of the Regional Director's Decision and
Order; or
(2) A timely application for review is filed with the Authority and
the Authority does not undertake to grant review of the Regional
Director's Decision and Order within sixty (60) days of the filing of
the application; or
(3) The Authority denies an application for review of the Regional
Director's Decision and Order.
(f) Authority grant of review and stay. The Authority may rule on
the issue(s) in an application for review in its order granting the
application for review. Neither filing nor granting an application for
review shall stay any action ordered by the Regional Director unless
specifically ordered by the Authority.
(g) Briefs if review is granted. If the Authority does not rule on
the issue(s) in the application for review in its order granting
review, the Authority may, in its discretion, afford the parties an
opportunity to file briefs. The briefs will be limited to the issue(s)
referenced in the Authority's order granting review.
Sec. 2422.32 Certifications and revocations.
(a) Certifications. The Regional Director will issue an appropriate
certification when:
(1) After an election, runoff, or rerun,
(i) No objections are filed or challenged ballots are not
determinative, or
(ii) Objections and determinative challenged ballots are decided
and resolved; or
(2) The Regional Director issues a Decision and Order requiring a
certification and the Decision and Order becomes the action of the
Authority under Sec. 2422.31(e) or the Authority otherwise directs the
issuance of a certification.
(b) Revocations. Without prejudice to any rights and obligations
which may exist under the Statute, the Regional Director will revoke a
recognition or certification, as appropriate, and provide a written
statement of reasons when:
(1) An incumbent exclusive representative files, during a
representation proceeding, a disclaimer of any representational
interest in the unit; or
(2) Due to a substantial change in the character and scope of the
unit, the unit is no longer appropriate and an election is not
warranted.
[[Page 67298]]
Sec. 2422.33 Relief obtainable under Part 2423.
Remedial relief that was or could have been obtained as a result of
a motion, objection, or challenge filed or raised under this subpart,
may not be the basis for similar relief if filed or raised as an unfair
labor practice under Part 2423 of this Chapter: Provided, however, that
related matters may be consolidated for hearing as noted in
Sec. 2422.27(d) of this subpart.
Sec. 2422.34 Rights and obligations during the pendency of
representation proceedings.
(a) Existing recognitions, agreements, and obligations under the
Statute. During the pendency of any representation proceeding, parties
are obligated to maintain existing recognitions, adhere to the terms
and conditions of existing collective bargaining agreements, and
fulfill all other representational and bargaining responsibilities
under the Statute.
(b) Unit status of individual employees. Notwithstanding paragraph
(a) of this section and except as otherwise prohibited by law, a party
may take action based on its position regarding the bargaining unit
status of individual employees, pursuant to 5 U.S.C. 7103(a)(2), 7112
(b) and (c): Provided, however, that its actions may be challenged,
reviewed, and remedied where appropriate.
PART 2429--MISCELLANEOUS AND GENERAL REQUIREMENTS
5. The authority citation for Part 2429 continues to read as
follows:
Authority: 5 U.S.C. 7134; Sec. 2429.18 also issued under 28
U.S.C. 2112(a).
6. Section 2429.21 is amended by revising paragraphs (a) and (b) to
read as follows:
Sec. 2429.21 Computation of time for filing papers.
(a) In computing any period of time prescribed by or allowed by
this subchapter, except in agreement bar situations described in
Sec. 2422.12 (c), (d), (e), and (f) of this subchapter, and except as
to the filing of exceptions to an arbitrator's award under Sec. 2425.1
of this subchapter, the day of the act, event, or default from or after
which the designated period of time begins to run shall not be
included. The last day of the period so computed is to be included
unless it is a Saturday, Sunday, or a Federal legal holiday in which
event the period shall run until the end of the next day which is
neither a Saturday, Sunday, or a Federal legal holiday. Provided,
however, in agreement bar situations described in Sec. 2422.12 (c),
(d), (e), and (f), if the 60th day prior to the expiration date of an
agreement falls on Saturday, Sunday, or a Federal legal holiday, a
petition, to be timely, must be filed by the close of business on the
last official workday preceding the 60th day. When the period of time
prescribed or allowed is 7 days or less, intermediate Saturdays,
Sundays, and Federal legal holidays shall be excluded from the
computations.
(b) Except when filing an unfair labor practice charge pursuant to
Sec. 2423.6 of this subchapter, a representation petition pursuant to
Part 2422 of this subchapter, and a request for an extension of time
pursuant to Sec. 2429.23(a) of this part, when this subchapter requires
the filing of any paper with the Authority, the General Counsel, a
Regional Director, or an Administrative Law Judge, the date of filing
shall be determined by the date of mailing indicated by the postmark
date. If no postmark date is evident on the mailing, it shall be
presumed to have been mailed 5 days prior to receipt. If the filing is
by personal delivery, it shall be considered filed on the date it is
received by the Authority or the officer or agent designated to receive
such matter.
7. Section 2429.22 is revised to read as follows:
Sec. 2429.22 Additional time after service by mail.
Except as to the filing of an application for review to a Regional
Director's Decision and Order under Sec. 2422.31 of this subchapter,
whenever a party has the right or is required to do some act pursuant
to this subchapter within a prescribed period after service of a notice
or other paper upon such party, and the notice or paper is served on
such party by mail, five (5) days shall be added to the prescribed
period: Provided, however, That five (5) days shall not be added in any
instance where an extension of time has been granted.
Dated: December 22, 1995.
Solly Thomas,
Executive Director, Federal Labor Relations Authority.
[FR Doc. 95-31413 Filed 12-28-95; 8:45 am]
BILLING CODE 6727-01-P
Complete official Federal Register PDF
FR Doc. 95-31397 National Appeals Division Rules of Procedure
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67298-67319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31397]
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DEPARTMENT OF AGRICULTURE
Office of the Secretary
Farm Service Agency
Natural Resources Conservation Service
Rural Business-Cooperative Service
Rural Housing Service
Rural Utilities Service
7 CFR Parts 1, 11, 12, 400, 614, 620, 623, 631, 632, 634, 663, 701,
702, 752, 780, 781, and 1900
National Appeals Division Rules of Procedure
AGENCY: Office of the Secretary, National Appeals Division, USDA.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: On May 22, 1995 (60 FR 27044), the National Appeals Division
(NAD) in the Office of the Secretary published a proposed rule to
implement Title II, Subtitle H, of the Federal Crop Insurance Reform
and Department of Agriculture Reorganization Act of 1994, Pub. L. 103-
354, 7 U.S.C. 6991 et seq., by setting forth procedures for program
participant appeals of adverse decisions by United States Department of
Agriculture (USDA) agency officials to NAD. The deadline for receipt of
comments was June 21, 1995. On June 28, 1995 (60 FR 32922) the Office
of the Secretary published an extension of the deadline for receipt of
comments until July 6, 1995. From the period May 22 to July 6, 1995,
forty-six timely public comments were received in response to the
proposed rulemaking. Based on these comments, including concerns
regarding the need for an additional comment period on the proposed
rules and the need for a comment period on USDA agency conforming
rules, but mindful of the immediate need for published rules, the
Secretary now issues these rules on an interim final basis. These rules
also include conforming changes to the former appeal rules of USDA
agencies whose adverse decisions are now subject to NAD review.
DATES: Part 11 of this interim rule is effective January 16, 1996. With
the exception of Sec. 11.9, part 11 of this rule is applicable as to
agency adverse decisions and NAD appeals for which hearings have not
been held. Section 11.9 of this interim rule is applicable immediately
as to all pending requests for Director review and is applicable
retroactively to all requests for Director
[[Page 67299]]
review made on or after October 20, 1994.
Amendments made by this interim rule to all other parts of title 7
of the Code of Federal Regulations are effective January 16, 1996 and
are applicable on January 16, 1996 as to any adverse technical
determinations or decisions made by an applicable agency.
Written comments via letter, facsimile, or Internet are invited
from interested individuals and organizations, and must be received on
or before March 28, 1996.
ADDRESSES: Comments should be sent to L. Benjamin Young, Jr., Office of
the General Counsel, Research and Operations Division, AgBox 1415,
United States Department of Agriculture, Washington, DC 20250-1415; fax
number: 202/720-5837; Internet: [email protected].
FOR FURTHER INFORMATION CONTACT: L. Benjamin Young, Jr. at the above
address or 202/720-4076.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been reviewed under E.O. 12866, and it has been
determined that it is not a ``significant regulatory action'' rule
because it will not have an annual effect on the economy of $100
million or more or adversely and materially affect a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities. This rule will not create any serious inconsistencies or
otherwise interfere with actions taken or planned by another agency. It
will not materially alter the budgetary impact of entitlements, grants,
user fees, or loan programs, or the rights and obligations of
recipients thereof, and does not raise novel legal or policy issues
arising out of legal mandates, the President's priorities, or
principles set forth in E.O. 12866.
Regulatory Flexibility Act
USDA certifies that this rule will not have a significant impact on
a substantial number of small entities as defined in the Regulatory
Flexibility Act, Pub. L. 96-534, as amended (5 U.S.C. 601 et seq.).
Paperwork Reduction Act
USDA has determined that the provisions of the Paperwork Reduction
Act, as amended, 44 U.S.C., chapter 35, do not apply to any collections
of information contained in this rule because any such collections of
information are made during the conduct of administrative action taken
by an agency against specific individuals or entities. 5 CFR
1320.4(a)(2).
Background and Purpose
On December 27, 1994 (see 59 FR 66,517), the Secretary of
Agriculture noticed that the NAD was established pursuant to Title II,
Subtitle H of the Federal Crop Insurance Reform and Department of
Agriculture Reorganization Act of 1994, Public Law No. 103-354, 7
U.S.C. 6991 et seq. (``the Act''). NAD was assigned responsibility for
all administrative appeals formerly handled by the National Appeals
Division of the former Agricultural Stabilization and Conservation
Service (ASCS) and by the National Appeals Staff of the former Farmers
Home Administration (FmHA), appeals arising from decisions of the
former Rural Development Administration (RDA) and the former Soil
Conservation Service (SCS), appeals arising from decisions of the
successor agencies to the foregoing agencies established by the
Secretary, appeals arising from decisions of the Commodity Credit
Corporation (CCC) and the Federal Crop Insurance Corporation (FCIC),
and such other administrative appeals arising from decisions of
agencies and offices of USDA as may in the future be assigned by the
Secretary.
This rule sets forth the jurisdiction of the NAD, and the
procedures appellants and agencies must follow upon appeal of adverse
decisions by covered USDA program ``participants'' as defined in detail
in the new 7 CFR part 11. In addition, since the Act changes existing
formal administrative appeals procedures for some agencies while
allowing participants a choice of pursuing informal appeals with an
agency first or appealing directly to NAD, this rule also makes
conforming amendments to the existing appeal procedures of the USDA
agencies whose adverse decisions will be appealable to NAD under the
new 7 CFR part 11.
For the purposes of convenience, this preamble and the changes to
USDA regulations are divided as follows:
----------------------------------------------------------------------------------------------------------------
Item Subject Contact
----------------------------------------------------------------------------------------------------------------
I.................. Authentication of Records.............. B. Young 202/720-4076.
II................. NAD Rules of Procedure................. B. Young 202/720-4076.
III................ Natural Resources Conservation Service S. Penn 202/720-6521.
(NRCS) Appeal Rules.
IV................. Commodity Credit Corporation (CCC), A. Grundeman 202/720-4591.
Federal Crop Insurance Corporation
(FCIC), and Farm Service Agency (FSA)
Appeal Rules.
V.................. Rural Business-Cooperative Service A. Grundeman 202/720-4591.
(RBS), Rural Housing Service (RHS),
and Rural Utilities Service (RUS)
Appeal Rules.
----------------------------------------------------------------------------------------------------------------
I. Authentication of Records
This rule amends the provisions of USDA regulations regarding
authentication of official records to provide that the Director of NAD
may authenticate documents in NAD records for USDA.
II. NAD Rules of Procedure
Forty-six timely comments were received by July 6, 1995 in response
to the requests for comment on the proposed NAD rule. In response to
these comments, a number of changes have been made to the rules;
however, USDA has opted not to publish the revised rules for an
additional comment period. USDA does recognize the need for further
public comment on these rules. USDA therefore is issuing this rule on
an interim final basis for three specific reasons.
First, a tension exists between the desire of Congress and the USDA
to make this a farmer-friendly appeals process and the necessity of
establishing an appeals procedure that comports with due process and
results in determinations that will withstand scrutiny in the Federal
courts. At the same time, it is important that the appeals procedure
allow for ease of administration by NAD in a time of scarce and
decreasing Federal resources. These problems are reflected in
disagreements among the commenters as to how some of the most detailed
procedures should be implemented. These tensions should not be resolved
presumptively in a final rule. Therefore, promulgation of an interim
rule will allow USDA to receive more feedback
[[Page 67300]]
and make adjustments with the aid of experience.
Second, several commenters expressed concern over the fact that
conforming amendments to individual agency appeal rules were not
published with the proposed rule. Additionally, these conforming
amendments will result in more substantive changes to agency rules than
originally were anticipated by USDA at the time the proposed rules were
published. For example, FSA now has decided to combine appeal
procedures for the former ASCS, the former FmHA, and FCIC programs that
it now administers under the Act. These new agency appeal procedures
will set forth how participants may use the ``informal hearings''
option provided in section 275 of the Act.
Third, legislative changes may occur during consideration of the
Farm Bill in 1996 that will necessitate changes to the NAD rules of
procedure. By publishing this as an interim rule, the USDA establishes
a process for current operations while leaving the rulemaking door open
for timely adoption of rules necessary to implement possible
legislative changes.
The following explanation is given for those sections of the
proposed rule that were heavily commented on or appeared to be
misunderstood:
Sec. 11.1 Definitions.
Adverse decision. Two commenters noted problems with the proposed
definition of ``adverse decision'' with respect to such decisions
resulting from a failure of the agency to act. The proposed rule had by
definition provided that an adverse decision results when an agency
failed to act or make a decision within timeframes prescribed by agency
program regulations. The two commenters noted that in some cases
statutes prescribed timeframes and that in others the regulations
prescribed no timeframes. In the latter case, one of the commenters
suggested that USDA use a ``reasonable'' time in the absence of a
prescribed timeframe. The amended definition provides that an adverse
decision results when an agency fails to act within prescribed
statutory or regulatory timeframes, or, in the case where there are no
such timeframes specified, within a reasonable time.
Agency. All former and current agencies of the USDA whose adverse
decisions are covered by this part have been added in response to a
comment noting the lack of parallel treatment between inclusion of old
and new agency names and the need to assist individuals unfamiliar with
the new names.
USDA also has added language to cover certain programs administered
by RUS because, as one commenter correctly noted, they are former
programs of RDA that by definition in the Act are covered by NAD. This
is accomplished by excluding from NAD purview all RUS programs
authorized under the Rural Electrification Act and the Rural Telephone
Bank Act.
Agency record, case record, and hearing record. Seven commenters
had questions regarding the definitions of ``agency record,'' ``case
record,'' and ``hearing record.'' These definitions were carefully
nested within one another in order to construe the language of the Act
in a logical manner.
Section 278(c) of the Act requires that NAD determinations be made
``based on information from the case record, laws applicable to the
matter at issue, and applicable regulations published in the Federal
Register.'' Section 277(a) of the Act, however, also makes reference to
the fact that the Director and the Hearing Officer are to have access
to the ``case record'' of an adverse decision upon initial filing of an
appeal. Section 278(b) also makes reference to the ``case record'' that
the Director must review as well as the record from the hearing.
Clearly, the ``case record'' in the latter two provisions cannot be the
same ``case record'' referred to in section 278(c), or else NAD
determinations would have to be made without reference to the record
developed in the hearing itself.
USDA faced the task of construing these seemingly contradictory
statutory provisions in a complementary manner. This was done by
creating a definitional framework based upon section 271(4) of the Act
that defines ``case record'' to include ``all the materials maintained
by the Secretary related to an adverse decision.'' As in most cases
where the Secretary is named in a statute, ``Secretary'' here is
interpreted to mean not the person of the Secretary but rather the
Secretary and all subordinate officials of USDA to whom the Secretary
has delegated statutory authority. Construed in this manner, ``case
record'' includes any and all materials held by USDA that relate to an
adverse decision at any given moment during the administrative appeal
process. What the term ``case record'' includes when used in the
statute thus changes based upon the level of the appeal process in
which it is used.
For purposes of clarity in the rule, a new term needed to be
created to distinguish the ``case record'' presented by the agency to
the Hearing Officer, the record developed by the Hearing Officer in the
hearing (sec. 278(b)) and eventually forwarded to the Director, and the
``case record'' upon which the determination is based. This is
accomplished in the rule by defining documents furnished by the agency
to the Hearing Officer upon the initial filing of the appeal as the
``agency record'' that by rule is deemed admitted as evidence in the
hearing, by defining evidence presented at the hearing, the transcript
of the hearing itself, and post-hearing submissions as the ``hearing
record,'' and finally by explicitly incorporating both the ``agency
record'' and the ``hearing record'' into the definition of ``case
record'' upon which NAD determinations are made. ``Case record''
construed in this fashion also includes ``the request for review, and
such other arguments or information as may be accepted by the
Director'' (sec. 278(b)) in the Director review phase of NAD appeals
because they would be included as materials maintained by the
Secretary.
Director. Three commenters objected to the proposed rule definition
and other provisions that would allow the Director to delegate the
authority of the Director to subordinate individuals within NAD. The
primary rationale for the objections was that this would mean that
someone without the credentials and qualifications required by the
statute for the Director would be exercising the statutory authority of
the Director.
USDA rejected changing this provision for two reasons. First, even
though the authority for certain actions may be delegated, such actions
are still taken in the name of the Director. The Director, in other
words, still exercises the final authority. Second, given the
anticipated volume of appeals to be filed with NAD, it is not practical
or efficient to require that the Director personally perform all
actions specified for the Director by name in the Act.
Division. One commenter suggested that the proposed rule was in
error in specifying that the Division was established by this part
instead of the Act itself. Section 272(a) of the Act provides that
``[t]he Secretary shall establish'' NAD, not that the NAD ``is
established.'' Therefore, action by the Secretary was required to
establish NAD.
Equitable relief. Two commenters suggested that the proposed rule
definition of equitable relief needed to be better defined. USDA chose
not to define equitable relief further because the meaning of such
relief varies from program to program covered under these rules,
depending on the language of the program statutes. The guiding intent
[[Page 67301]]
behind the drafting of these rules was to ensure that they were written
as broadly and flexibly as possible so that they do not need to be
amended each time an agency amends its substantive program regulations.
Ex parte communication. One commenter suggested this definition
needed to include post-hearing requests for Director review and
requests regarding the appealability of adverse decisions. The
definition here was changed to include an oral or written communication
``to any officer or employee of the Division.'' As explained below,
further changes were made regarding ex parte communications to ensure
that the prohibition on such communications covered all NAD proceedings
and employees.
Implement. Three comments were received suggesting changes to this
definition. In combination with Sec. 11.11 of the rule, USDA feels that
this language reflects the statutory definition and need not be
changed.
Participant. One commenter suggested that, rather than defining
``participant'' by listing programs and statutes under which an
individual may not bring an appeal before NAD, a separate list of non-
appealable decisions should be added to the regulation. This approach
was considered, as was listing the programs from which adverse
decisions could be appealed to NAD, but the statutory language did not
support these approaches. ``Adverse decision'' is defined too broadly
in the statute to limit by regulation. Further, nonappealability of
decisions is limited only to matters of general applicability under
section 272(d) of the Act. Conversely, Congress explicitly gave the
Secretary authority to define ``participant'' (sec. 271(9)) and
therefore the approach reflected in the rule was chosen.
Seven substantive comments were made regarding the definition of
``participant'' in the proposed rule. Two commenters suggested that the
definition should be expanded to include the requirement that, for
certain guaranteed loan programs of the former Farmers Home
Administration (FmHA), both the applicant/borrower and the lender
should be required to appeal jointly. Since any decision to deny a
guaranteed loan would affect both the applicant/borrower and the
lender, USDA agrees that both parties must appeal any such adverse
decision and the rule has been revised to reflect this requirement.
However, only the lender will be able to appeal the denial or reduction
of a final loss payment to that lender.
One commenter expressed concern that the language ``right to
participate in'' did not clearly include an applicant. Therefore, USDA
has added ``who has applied for'' to the definition.
One commenter suggested that the wording of the definition
technically could exclude someone from appealing to NAD if, for
example, they had filed a tort claim against USDA. As a ``participant''
in a tort claim, they would not be included as a ``participant'' for
purposes of a NAD appeal. To clarify that this is not the case, USDA
has amended the introductory phrase before the list of programs to
read: ``The term does not include persons whose claim(s) arise
under:''.
Finally, three comments were received from representatives of
reinsured companies, that is, crop insurance companies whose insurance
contracts with producers are reinsured by the FCIC. The reinsured
companies objected to the language including participants affected by
decisions of reinsured companies in the definition of ``participants.''
As originally proposed, the language would have allowed participants to
appeal reinsured company decisions to NAD.
The reinsured companies objected to this language on several
grounds. First, they noted that while FCIC was included in the
definition of ``agency'' in section 271(1) of the Act, reinsured
companies were not. Thus, the proposed rule attempted to include
private companies as government agencies contrary to the language of
the Act. Second, the reinsured companies argued that promulgation of
this language by USDA in the final rule would breach the terms of the
Standard Reinsurance Agreements between USDA and the reinsured
companies, as well as alter the legal terms of reinsured company
policies with thousands of insureds. Third, the number of policy
decisions made by reinsured companies that would be open to appeal to
NAD under the proposed language would overwhelm NAD with thousands of
appeals. Finally, the reinsured companies argued that the intent of the
Act in including FCIC in the definition of ``agency'' was to provide
appeal rights for participants in crop insurance programs for a narrow
range of decisions still committed to FCIC after crop insurance reform,
i.e., decisions regarding yield and coverage that are based on FCIC
actuarial data or decisions where an individual is found ineligible to
participate in the Federal crop insurance program.
In response to these comments, USDA has dropped decisions of
reinsured companies as decisions that participants may appeal under
this part. The exclusion of disputes between reinsured companies and
FCIC from the definition of participant in the final rule also means
that all disputes between reinsured companies and FCIC likewise are
excluded from the jurisdiction of NAD. Contract disputes between
reinsured companies and FCIC will be appealable to the USDA Board of
Contract Appeals as provided in its rules. Non-contract related
decisions of FCIC that are adverse to reinsured companies may be
settled with the agency or by resort to legal action in a court of
competent jurisdiction.
Additional definitions. Two commenters suggested that a definition
for ``mediation'' be added. The use of mediation or other forms of
alternative dispute resolution (ADR) by program participants is a
matter of choice for the participants themselves. Since the type of
mediation or ADR used by a participant and the agency is not a
jurisdictional issue for purposes of determining whether an appeal is
properly before NAD, NAD has no control over whatever means the
participant and agency employ. Accordingly, USDA has declined to
attempt to define mediation or ADR for purposes of this part.
Sec. 11.2 General statement.
No comments were received in response to this section. USDA has
made two changes to this section upon further review. First, language
has been added to reflect the statutory provision that NAD, although
independent, is subject to the general supervision and policy direction
of the Secretary. Second, a statement has been added to make clear that
exhaustion of the procedures for Hearing Officer review of an adverse
decision under this part is required before a program participant may
seek judicial review of an adverse decision. This additional language
does not deprive participants of their right to seek review under any
judicial exceptions to required exhaustion of administrative
procedures.
Sec. 11.3 Applicability.
Six commenters generally contended that the NAD appeal procedures
should apply to appeals arising after October 13, 1994, and not October
20, 1994 as specified in the proposed rule. The commenters' rationale
for the October 13 date is that the Act was effective as of that date.
One commenter also discussed the legal ability of the Department to
make the rule effective retroactively.
USDA has decided to delete the effective date subsection from this
[[Page 67302]]
section because it inaccurately indicated an intent to make this entire
rule retroactive. Instead, the effective date of this rule is
appropriately set forth in the EFFECTIVE DATE section of this Federal
Register document.
Two additional changes have been made to this section. First,
wetland or highly erodible land determinations have been added to the
list of examples of agency adverse decisions to clarify that these
decisions are included.
Second, a new subsection has been added to address confusion,
reflected in some comments, that exists over the jurisdiction of NAD
over agency programs. NAD Hearing Officers are not administrative law
judges. NAD has no jurisdiction over questions of law or the
appropriateness of agency regulations. It simply decides the factual
matter of whether an agency complied with such laws and regulations in
rendering an adverse decision. The limitation added here makes clear
that NAD may not be used by program participants for the purpose of
challenging the validity of USDA regulations issued pursuant to
statutory authority.
Sec. 11.4 Inapplicability of other laws and regulations.
Section 277 of the Act provides an elaborate appeals scheme for
particular programs of USDA, including provisions for hearings, the
issuance of subpoenas, and even ex parte communications. Section
277(a)(2)(A) of the Act in fact explicitly incorporates the definition
of an ex parte communication from the Administrative Procedure Act
(APA) (5 U.S.C. 551(14)) as if the APA stands outside of, and is not
applicable to, NAD proceedings. In view of this statutory language, and
in the absence of Congressional intent otherwise, USDA has concluded
that the provisions of the APA generally applicable to agency
adjudications (5 U.S.C. 554, 555, 556, 557, & 3105) do not apply to NAD
proceedings. Furthermore, because NAD proceedings are not required to
be conducted under 5 U.S.C. 554, USDA also concludes the Equal Access
to Justice Act, 5 U.S.C. 504, does not apply to NAD proceedings.
Ardestani v. I.N.S., 112 S.Ct. 515, 519 (1991).
Another issue is the applicability of the Federal Rules of Evidence
to NAD proceedings. Congress intended that these proceedings be farmer-
friendly so that farmers would not be required to hire attorneys to use
the NAD appeal process. Therefore, USDA concluded that the Federal
Rules of Evidence should not apply to NAD proceedings.
One commenter suggested USDA also should eliminate any ambiguity
with respect to the applicability of the Federal Rules of Civil
Procedure, which was referred to in one respect in what was
Sec. 11.7(a)(2)(vi) of the proposed rule. The situation with respect to
the Rules of Evidence, however, is unique in that attempts have been
made in NAD hearings to apply the Federal Rules of Evidence as
generally accepted rules of evidence, necessitating an explicit
statement of policy in the rules. The same problems have not arisen
with respect to the Federal Rules of Civil Procedure; therefore, USDA
does not feel that it is necessary to state explicitly that those rules
do not apply.
Sec. 11.5 Informal agency hearings and exhaustion.
This section of the proposed rule drew 29 comments, more than any
other. Some comments suggested that the exhaustion requirement for FSA
county committees was contrary to statute, while others were concerned
because the section did not provide for exhaustion to the FSA state
committee. A number of commenters were confused by the sequence of
events for informal hearings, mediation, and NAD appeals outlined in
this section. Providers of mediation services particularly were
concerned that all appellants be notified of mediation rights, and that
mediation occur at the lowest level of the appeal process. A number of
commenters expressed concern about the inconsistent use of the terms
``informal hearings,'' ``informal appeal,'' and ``informal review.''
With respect to the comments regarding agency notice of adverse
decisions and appeal rights, USDA has determined to handle such notice
outside the parameters of this rule. As a matter of Department policy,
agencies will be expected to notify participants of their appeal rights
and their right to choose mediation or ADR, where available, when they
issue an adverse decision.
In light of the other comments, this section has been revised
significantly. Only the term ``informal review'' will be used
throughout the section. Given this consistent use, USDA finds it
unnecessary to define this term.
Before appealing to NAD, participants may elect to request an
informal review of an adverse decision by the agency. However, in the
case of adverse decisions made by officials under the authority of FSA
county and area committees, participants will be required to undergo
informal review before the county or area committee before appealing
the adverse decision to NAD. After receiving the mandatory informal
review by the county or area committee, the participant then may seek
informal review of that decision by the State committee or appeal
directly to NAD. For purposes of this section, USDA interprets a
decision at each level of agency informal review as a new adverse
decision for purposes of calculating the timeliness of a participant's
appeal to NAD under Sec. 11.6 of the rules.
When a participant requests such mediation, the 30-day period
within which the participant may request a hearing under
Sec. 11.6(b)(1) will stop running until such time as the mediation or
ADR is concluded. Unlike with informal review, however, the conclusion
of mediation is not viewed as a new agency adverse decision. At that
point, the participant will have the balance of the 30-day period to
appeal to NAD, or to seek informal review as outlined above. The 30-day
period will function in effect as a statute of limitations; it will be
up to the agency, not NAD, to raise the jurisdictional issue before NAD
as to the fact that a participant's appeal is untimely.
Treatment of mediation or ADR in this manner means that the
conclusion of mediation or ADR will not be treated as an adverse
decision. Conversely, as indicated above, a decision at each level of
the informal review process will be treated as an adverse decision for
determining when the 30-day period for an appeal to NAD begins to run.
Example
A FSA program participant receives an adverse decision from a
county executive director. He cannot appeal to NAD. He must first
pursue an informal review with the county committee. The county
committee upholds the original adverse decision. Program participant
now has three choices: (1) Within 30 days, choose mediation or ADR;
(2) Within 30 days, appeal to NAD; or (3) Within the lesser of 30
days, or the time period specified in FSA informal review
regulations, request an informal review by the State Committee.
Participant chooses mediation after 10 days. Mediation fails.
Participant has the balance of 20 days (i.e., 30 days minus 10 days)
to appeal to NAD after the conclusion of mediation or he may request
review by the State Committee in accordance with FSA regulations. If
he appeals to NAD, the agency bears the burden of proving
untimeliness of the appeal to NAD, i.e., if the participant took 25
days, 5 days in excess of his remaining 20, to appeal to NAD, the
agency must demonstrate this to NAD. If he requests an informal
review by the State Committee, the participant will have 30 days to
appeal any adverse decision made by the State Committee to NAD.
[[Page 67303]]
Sec. 11.6 Director review of agency determination of appealability and
right of participants to Division hearing.
USDA has revised the format of this section so that it follows the
logical progression from a Director determination of appealability,
where made necessary because of an agency determination that an adverse
decision is not appealable, to the appeal itself.
Section 11.6(a) (Sec. 11.6(b) in the proposed rule) provides the
rules for requesting Director review of the determination of
appealability. Two commenters suggested that the proposed language that
the Director use ``any information he determines necessary'' in making
a determination was too broad. These commenters felt the information to
be considered should be defined, and that the allowance of any
information the Director deemed necessary made the process appear
secretive if the ex parte prohibition did not apply to this stage of
the appeal process.
USDA has revised this subsection to reflect the language of the
statute and not specify anything regarding what information the
Director may or may not use.
Two commenters desired changes in the references to Deputy and
Associate Directors to reflect titles currently used in the NAD
internal structure. USDA has substituted ``subordinate official other
than a Hearing Officer'' in the place of Deputy and Associate Directors
to preserve the flexibility of the Director to organize NAD internally
without reference to regulatorily defined titles. This change also
responds to a comment that requests that the Director be allowed to
delegate this responsibility as far down as possible to accomplish such
a mission efficiently. Hearing Officers were excluded from such
delegation because the delegation of such authority down to Hearing
Officers facially contradicted the statute and could represent a
potential conflict of interest for Hearing Officers who must justify
resource requirements based on the burden of their caseload.
USDA rejected comments suggesting that this delegation is improper
under the statute, or that participants should be given the right to
challenge the credentials of the subordinate reviewing official.
Nothing in the statute requires that the Director personally must
review every request for a determination of appealability that may be
filed. The Director, as in the case of any agency official, remains
ultimately responsible for any decision undertaken by a subordinate.
Therefore, USDA sees no reason why this statute should be read any
differently than any other statute where, absent a specific statutory
prohibition, USDA and other executive branch agencies have allowed for
delegation of decision-making authority by officials whose
qualifications have been set by statute.
With respect to this subsection as proposed, two commenters also
expressed concern that it did not specify the timing for filing an
appeal once the Director reversed an agency determination that an
adverse decision was not appealable. USDA added language in what is now
subsection (b) to specify that the 30 days for appeal of adverse
decisions shall run from the date the participant receives notice of
the adverse decision or receives notice of the Director's determination
that an adverse decision is appealable.
Subsection (b) (Sec. 11.6(c) in the proposed rule) provides rules
for appealing adverse decisions to NAD. In addition to the change noted
above, two additional changes were made to this section. First, seven
commenters suggested that it is inappropriate in any circumstances to
apply a ``should have known'' standard as a deadline for appeals in
cases of agency inaction. They argued that this shifted the burden from
the agency to the participant for policing the agency's failure to
follow its own regulations; one commenter argued that the agency
remained in continuing violation for failure to act within its own
deadlines.
USDA disagrees with these commenters. A failure to act by the
agency at some point becomes ripe for appeal and the statute clearly
also provides that at a point past 30 days from an adverse decision an
appellant loses the right of appeal. USDA finds no intention on the
part of Congress to extend a participant's right of appeal
indefinitely, particularly when agency regulations define a specified
period in which a decision is to be made. However, to add flexibility
to the ``should have known'' standard in the latter situation, USDA has
changed the regulation to require that a participant must request a
hearing within 30 days after the participant ``reasonably'' should have
known that the agency had not acted within the timeframes specified by
program regulations.
The second change made to the proposed rule regarding the request
for a hearing is to require a participant to send a copy of the request
for a hearing to the agency, and allow a participant the option to send
a copy of the adverse decision being appealed to the agency as well. In
either case, failure of the participant to send such copies to the
agency is not jurisdictional and therefore will not be grounds for
dismissal of an appeal.
Agency officials often make many decisions a year with respect to
some individual participants. In such cases, it is not always
immediately apparent which decision a participant has appealed at a
given time. USDA adds this provision to promote efficiency in the
appeals process by encouraging full airings of appeals before the
Hearing Officer. Sending the agency a copy of the decision will
discourage agency requests for Director review because the agency did
not have adequate notice of the appeal or the decision that was being
appealed.
With respect to the language in the proposed Sec. 11.9(c), several
other comments were rejected. Two commenters suggested that, since the
``should have known'' standard is being used, participants should not
be required to exhaust administrative remedies prior to judicial review
when appeals are taken from cases where agencies have failed to act.
The statement added to Sec. 11.2 and discussed above makes clear that
USDA considers exhaustion of an appeal to the Hearing Officer mandatory
prior to seeking judicial review, regardless of the basis for the
appeal.
One commenter suggested that the regulation should state clearly
that a decision becomes final after the 30-day time period for
requesting a hearing is missed and that this timeframe may not be
waived. USDA believes such a provision unnecessary; if a participant
does not request the hearing within 30 days, the participant will not
be allowed to have a hearing. USDA considers the 30-day requirement for
filing an appeal to be jurisdictional in nature; thus, NAD has no
authority under the Act to hear an appeal unless filed within the 30-
day time period as required.
On the other hand, USDA does not view the requirements of section
274 of the Act to be jurisdictional for NAD. That section requires an
agency to provide participants with written notice of the adverse
decision and appeal rights within 10 working days of the adverse
decision. One commenter suggested that the proposed rule be revised to
state that the 30-day timeframe for requesting a hearing does not begin
to run until the participant receives complete appeal rights,
presumably as provided for in section 274. While section 274 of the Act
places a requirement on agencies, it has no bearing on the authority of
NAD to hear an appeal by a participant. To read section 274 literally
as suggested also would mean conversely that a participant achieves no
standing to
[[Page 67304]]
appeal an adverse decision to NAD until the participant receives a
notice of appeal rights. USDA therefore rejects this comment and
instead determines that the time period for requesting an appeal begins
to run on ``the date on which the participant first received notice of
the adverse decision'' as provided in section 276(b) of the Act.
New subsection (c) retains language from the proposed subsection
(a) regarding the requirement for participants to authorize
representation by others in writing to USDA. Eight commenters addressed
both this specific requirement and the requirement in other parts of
this subsection that a participant must ``personally'' request a
Director determination of appealability and an appeal to a Hearing
Officer.
The intention behind this requirement is to ensure that
participants are fully aware of the implications of actions being taken
on their behalf in the appeals process. By requiring that they
personally sign requests for Director review of appealability, requests
for hearing, and requests for Director review of Hearing Officer
determinations (Sec. 11.9(a)), participants will be taking personal
responsibility for such actions when represented by another. Authorized
representatives also will be required to keep participants informed in
order to get their signature authorizing proceeding to each new phase
of a NAD appeal. USDA's concern is to ensure that participants are
giving informed consent to the decisions undertaken in their behalf by
their representatives, and, by requiring execution of a declaration of
representation, that NAD is assured that purported representatives are
who they actually claim to be. While USDA could curb potential abuses
by licensed attorneys by complaints to state bars, USDA has no check on
the actions of representatives who are not attorneys other than through
provisions such as those promulgated here. The burdens imposed on
participants and representatives are light--the language for the
declaration can be obtained from NAD and signed documents can be
submitted by mail or by facsimile transmission.
Finally, four commenters felt that it was inappropriate for an
appellant to state why the adverse decision is wrong because it was too
early in the process to state a position or it may lead some
participants to think that they need an attorney to bring an appeal.
USDA disagrees. The word ``wrong'' was used here precisely to avoid any
requirement that a participant state why a decision was ``erroneous''
or ``did not conform to published law or regulation'' or similar
language. Those latter variations could be interpreted as legalistic,
but USDA believes that at this initial stage the participant at least
can tell NAD what is wrong with the decision that causes one to appeal
it. This initial position is not binding, but rather provides NAD with
a little bit more information that will allow for efficient
administration of appeals. For example, if a participant feels
discriminated against in the administration of a program, a statement
to this effect at this stage may allow NAD to direct that person to the
appropriate forum of USDA for consideration of civil rights complaints.
Sec. 11.7 Ex parte communications.
The proposed rule included a paragraph on ex parte communications
in Sec. 11.7(a) under the section regarding Division hearings. Two
commenters expressed concerns in response to this proposed paragraph,
the proposed definition of ex parte communication, and the proposed
subsection on Director review of agency determinations of
nonappealability, suggesting that the ex parte prohibition should apply
to more than just the hearing phase of the NAD appeal process. One of
these commenters also noted that the ex parte prohibition also should
apply to all employees of the Division.
Initially, USDA drafted the proposed regulation in parallel to the
statute that stated the ex parte prohibition in the section of the Act
on hearings. After reviewing the comments and the statutory language,
and in order to foster a perception of fairness and equal treatment in
the NAD appeals process, USDA has determined to apply the ex parte
prohibition from the point at which the appeal is filed under section
Sec. 11.6(b) through the issuance of a final determination by the
Director under Sec. 11.9.
To do this, a new Sec. 11.7 was created to make clear that the ex
parte prohibition applies to more than just the hearing phase of the
NAD process, and that it applies to any officer or employee of the
Division. However, USDA rejected the comment that suggested that the ex
parte prohibition apply to requests for Director review of
appealability. The Director should be entitled to greater flexibility
in contacting the agency and the USDA Office of the General Counsel to
obtain information useful in making determinations as to whether
particular adverse decisions are matters of general applicability.
Additionally, the ex parte prohibition does not apply to Director
reconsideration under Sec. 11.11 unless the Director decides to grant
the request for reconsideration.
Sec. 11.8 Division hearings.
Proposed Sec. 11.7 has been renumbered Sec. 11.8. The majority of
comments on this section involved the perceived onerous burden on
appellants of virtually requiring verbatim transcripts of hearings, the
allegedly unreasonable time deadlines that could be set more flexibly
by the Hearing Officer, the requirements for sending various notices to
the appellant, the need for allowing good cause exceptions for
absences, the need for actual documents to be submitted to Hearing
Officers to make the hearing more efficient, the need to stress
telephone hearings, the wisdom of continuing current NAD practice of
telephonic pre-hearing conferences, the need to give additional parties
the right to participate in the appeal, the need to reduce or waive the
perceived unreasonable requirement that the requesting party pay for
costs of witness travel and subsistence fees, and the ambiguity of the
use of the word ``personally.''
A number of changes have been made in response to comments and upon
further reflection by USDA. The changes, or rejection of comments, are
described below:
--Proposed Sec. 11.7(a)(1) (now Sec. 11.8(a)(1)) is revised to require
the agency to provide the appellant a copy of the agency record upon
request of the appellant; this requirement is a restatement of that
requirement already included in the proposed rule at Sec. 11.7(b)(1)
that also has been amended as Sec. 11.8(b)(1) in the final rule to
require that such record be furnished to the appellant within 10 days
of agency receipt of request for the record rather than ``promptly'' as
proposed;
--A Hearing Officer will be required to obtain the concurrence of the
Director prior to issuing a subpoena;
--Comments suggesting that an appellant have access to his or her
entire file under this part were rejected, but the definition of
``agency record'' was expanded above;
--The requirement that a request for subpoena be submitted 14 days
ahead of the hearing was retained but a requirement that such a
subpoena must be issued 7 days prior to the hearing was added;
--Parties requesting a subpoena will have to pay only the
``reasonable'' travel and subsistence costs of a witness; USDA rejected
all comments suggesting that the requirement that a party pay for all
witnesses subpoenaed be deleted or that USDA should pay for such
witnesses where the appellant was unable to pay;
[[Page 67305]]
USDA also limited its payment for the costs associated with the
appearance of a USDA employee to such situations where an employee's
role as a witness arises out of his or her performance of official
duties;
--The requirement for submission of certain documents to the Hearing
Officer 28 days prior to the hearing is deleted; instead, the Hearing
Officer may set a ``reasonable'' deadline for submission of such
documents;
--The required pre-hearing submission of documents is limited to those
documents not contained in the agency record that the appellant plans
on introducing at the hearing;
--The amount of time for the Hearing Officer's notice of the date,
time, and place of the hearing is reduced from 21 days to 14 days prior
to the hearing, and the Hearing Officer also may take into account the
convenience of the agency in picking a hearing site;
--A pre-hearing conference will be required and will be conducted by
telephone unless otherwise agreed to by all parties and the Hearing
Officer;
--The notice of the right to obtain the official record shall go to all
parties, and all parties shall have the same participation rights in
the actual hearing;
--The text of the proposed paragraph Sec. 11.7(c)(4)(iii) is deleted
and replaced with new text in Sec. 11.8(c)(5)(iii) that makes a tape
recording by the Division the official record of the proceeding unless
a party requests a verbatim transcript, in which case that party must
furnish a certified copy of the transcript to the Hearing Officer for
the purpose of constituting the official record and must allow other
parties to purchase that transcript from the transcription service;
--The authority of the Hearing Officer to cancel a hearing in the
absence of a party is limited to such cases where the absent party
fails to appear without good cause;
--The ability of the Hearing Officer to add additional evidence to the
record in the absence of a party at a hearing is clarified;
--The section clarifies that a notice of determination must be sent by
the Hearing Officer to the individual participant appealing the adverse
decision, i.e. the ``named'' appellant, as well as the authorized
representative of that person; and
--The Hearing Officer shall send, with the notice of determination, a
copy of the procedures for a request for filing for Director review
under Sec. 11.9.
Sec. 11.9 Director review of determinations of Hearing Officers.
Fifteen commenters submitted comments on this section, which
appeared as Sec. 11.8 in the proposed rule. Some of these comments,
such as those objecting to the use of the word ``personally,'' the
request for the procedures of this section to be sent to the appellant
with the Hearing Officer notice of determination, and the extension of
the ex parte prohibition to Director review, have been handled as
described above.
One comment suggesting that the agency head be allowed to delegate
his or her authority to request Director review was rejected. On this
point, USDA's position is that an agency request for Director review
should only be exercised where the Hearing Officer has issued a
determination that clearly is not supported by a preponderance of the
evidence or is contrary to law. To avoid flooding NAD with agency
requests for review, retaining the agency head, or the person acting in
such capacity, as the only person allowed to request review assures
that only the most meritorious and serious NAD decisions will be
forwarded by an agency for Director review.
A number of comments concerned the perceptions that all parties are
not able to respond to requests for Director review, that the Director
is not addressing all arguments in the rush to meet the statutory
deadlines for issuing determinations, and that no provision is made for
how new evidence introduced at this stage is to be handled. In response
to these concerns, a number of changes were made.
First, a request for Director review shall include specific reasons
why the appellant believes the Hearing Officer's determination is
wrong. Given the limited time period for agency response and the
limited time period for Director review, the appellant should be
required to do something more than simply submit a copy of the Hearing
Officer's determination with a note saying that they appeal. As
explained above, the term ``wrong'' is used specifically to avoid
legalistic connotations. USDA simply asks that appellants express in
their own terms what they find wrong with determinations. However,
agencies here are held to a higher standard in order to assure
efficient use of NAD resources. Agencies in their requests must state
specific reasons why the determination of the Hearing Officer is
erroneous, including citation of statutes or regulations that the
agency believes the determination violates.
Second, USDA has added language requiring that a party seeking
Director review of the Hearing Officer's determination submit a copy of
the request for review simultaneously to all other parties to the
appeal. A new subsection also provides those non-submitting parties 5
days from receipt of the request for Director review to submit written
responses to the request. Added language makes clear that the Director
may consider such responses in reaching a determination. However, if
new evidence is submitted in such a request, new language authorizes
the Director to remand all or a portion of the determination to the
Hearing Officer for consideration of that new evidence. USDA rejected
the comment that such a remanded determination should go back to a new
Hearing Officer. The Hearing Officer making the original determination
has the best knowledge of the case to make an efficient consideration
of new evidence in the absence of some credible evidence of personal
bias.
Third, the deadlines set by the Act for the Director to issue a
final determination or to remand to the Hearing Officer may be
unrealistic at any given time because of caseload or the complexities
of a particular appeal. Although USDA believes the failure to meet
these deadlines does not deprive the Director of jurisdiction to reach
a determination or issue a remand order, it fully intends to follow
such deadlines to the extent possible in order to deliver fairly
considered determinations of the Director that will withstand judicial
review. Hastily rendered determinations that fail to develop an
adequate decision for judicial review do not benefit either USDA or
appellants. Therefore, while USDA has added no provision affirmatively
authorizing the Director to extend the period for issuance of
determinations, USDA recognizes that it may be necessary for the
Director to do so in individual cases in order to facilitate a fair and
equitable resolution of the appeal. Equitable, in this sense, refers to
equal participation in and consideration of parties' submissions in the
Director review process.
Finally, the Director will review the determination of the Hearing
Officer to determine whether the Hearing Officer's determination is
supported by substantial evidence. If any additional information
submitted in the Director review process is used as a basis for the
Director's final determination, the Director shall note the reasons for
use of such new information in the final determination.
With respect to this section, one commenter also suggested that if
a Hearing Officer does not have the power to reverse a denial of
equitable relief (in
[[Page 67306]]
effect, to award equitable relief) then this part should provide a
shortcut past the Hearing Officer to the Director. The position of USDA
is that the statute provides the Director with authority in appropriate
cases to award equitable relief, and that no different procedural steps
are required to implement that authority. However, a record developed
by a Hearing Officer is necessary for the Director to determine whether
such relief is appropriate.
Sec. 11.10 Basis for determinations.
One commenter cited this section (proposed Sec. 11.9) as the
appropriate place for stating that NAD is bound by prior findings of
fact by an agency or NAD with respect to a particular appellant in
another matter. While it is not the intention of USDA to implement NAD
as part of a formal legal system based on large bodies of caselaw, USDA
agrees that a Hearing Officer should not issue a contrary factual
determination regarding the same appellant in a different matter where
that factual determination was directly addressed in the other matter.
Two commenters suggested in essence that the basis of
determinations should be limited to issues raised by the decision of
the agency and that the Hearing Officer or Director may not decide
adversely to the appellant on issues not decided adversely to the
appellant by the agency. USDA finds nothing in the statute to support
anything other than a de novo review of agency decisions by NAD. The
parties or NAD may raise any new issue as long as it conforms to the
facts and law and regulations.
Four commenters expressed concern that the language ``generally
applicable interpretations'' in what is now Sec. 11.10(b) of the rule
would make agency handbooks, manuals, and directives binding in a way
that permits wholesale violations of the Act. These commenters point to
section 278(c) of the Act that the commenters assert was enacted
specifically to prevent agencies from using such materials by reference
only to statutes and ``regulations published in the Federal Register''
as the basis for NAD determinations.
USDA uses this language here to make clear again that NAD is not a
forum for appellants to challenge agency statutes, regulations, or the
generally applicable interpretations of those statutes and regulations.
Some generally applicable interpretations actually may have been
published once as a notice in the Federal Register, others may be based
on caselaw interpreting a particular program provision in a particular
Federal court jurisdiction or state court jurisdiction for programs in
which state law is the applicable law. Still other generally applicable
statements may be based on the previous advice of the Office of the
General Counsel regarding a statute or regulation that constitutes the
official legal position of USDA. In any of these described cases, for
example, NAD could not ignore the generally applicable statements and
base its determinations on legal interpretations that it is not
authorized by the Act to make.
Sec. 11.11 Reconsideration of Hearing Officer or Director
determinations.
Upon further review, USDA has determined that the Director has
limited inherent authority to reconsider final determinations of the
Director even though provisions for such authority have not been
specifically stated in the Act. Therefore, this new section sets forth
standards for reconsideration of a Director's final determination.
Sec. 11.12 Effective date and implementation of final determinations
of the Division.
Several commenters suggested that this section needed more
clarification as to the applicable dates, or, alternatively, that the
Hearing Officer or Director should state what those dates are in the
final determination. USDA finds further amendment of this section
unnecessary at this time, given the variety of programs appealable to
NAD and the responsibility of agencies for implementation of NAD and
program decisions.
It is the position of USDA with respect to implementation, however,
that: (1) Implementation of a NAD decision only requires an agency to
move to the next step of agency consideration of a benefit or
application; (2) in keeping with the language of the Act, the
applicable date of the decision is the date of the decision of the body
from which the NAD appeal is brought; and (3) agencies, in accord with
their regulations, may consider changes in the condition of the
participant in the implementation of any NAD final determination.
Sec. 11.13 Judicial review.
Two commenters suggested that appeals arising from an agency's
failure to act should be excluded from this exhaustion requirement.
USDA finds no support in the Act for such an exception. One commenter
also suggested an amendment to include judicially recognized exceptions
to the administrative exhaustion requirement. Since those exceptions
are part of common law, and are thus changeable and subject to
conflicting judicial interpretation, USDA finds inappropriate the
addition of such exceptions to the regulation.
Sec. 11.14 Filing of appeals and computation of time.
Two commenters expressed concerns that individuals residing in
different time zones would have less time to appeal if Eastern time was
used as a defining time for submission of filings required by this
rule. In response, USDA has changed the deadline to 5:00 p.m. local
time at the office of the Division to which the filing is submitted.
Common practice now is for NAD or the agency, in its notice of appeal
rights, to specify regional NAD offices where documents are to be
submitted. USDA's change in this provision is acknowledgement of that
practice and permits flexibility. However, USDA does not think that
this permits participants on the East Coast to evade the purposes of
this rule by filing documents with West Coast NAD offices in order to
meet the 5:00 p.m. deadline.
III. Natural Resources Conservation Service (NRCS) Appeal Rules
This portion of the interim-final rule sets forth the regulations
for the handling of program participant requests for mediation or
informal hearings of adverse technical determinations and decisions
made by NRCS officials. Specifically, this rule amends part 614 to
implement section 275 of the Act which requires NRCS to afford
participants the opportunity for an informal hearing or mediation
(where available), when requested, before they file an appeal of
adverse decisions with NAD.
These procedures are applicable to requests for mediation or
informal hearings within the following program areas:
(1) Highly erodible land conservation.
(2) Wetland Conservation.
(3) Wetland Technical determinations, including wetland technical
determinations made by NRCS officials not related to a request for USDA
program benefits.
(4) Conservation Reserve Program.
(5) Wetlands Reserve Program.
(6) Great Plains Conservation Program.
(7) Rural Abandoned Mine Program.
(8) Colorado River Basin Salinity Control Program.
(9) Resource Conservation and Development Program.
(10) Emergency Wetland Reserve Program.
(11) Agricultural Water Quality Incentives Program.
(12) Environmental Easement Program.
[[Page 67307]]
(13) Forestry Incentives Program.
(14) Water Bank Program.
(15) Long term cost-sharing agreements under Public Law 83-566 and
Public Law 78-534 watershed projects.
(16) Any other program which subsequently incorporates these
procedures through reference to this part within its program
regulations.
Part 614 as revised establishes two major categories of decisions
made by NRCS officials for which landowners and participants may seek
reconsideration or appeal: 1) those technical determinations of NRCS
officials that may be appealed to NAD after appeal to the FSA county or
area committees established under section 8(b)(5) of the Soil
Conservation and Domestic Allotment Act (16 U.S.C 590h(b)(5)); and 2)
other decisions made by NRCS.
The current regulations in 7 CFR part 614 were published as a final
rule on July 24, 1986, pursuant to Title XII of the Food Security Act
of 1985, P.L. 99-198, 16 U.S.C. 3801 et seq. (Title XII). Those
regulations set forth the procedures under which an owner or operator
could seek reconsideration of, or appeal from, certain decisions made
by NRCS officials regarding eligibility for participation in the
Conservation Reserve Program, as authorized by Subtitle D of Title XII,
or regarding the applicability of the compliance requirements of the
highly erodible land and wetland conservation provisions of subtitles B
and C of title XII, respectively.
The Reorganization Act specified that, until such time as an
adverse decision is referred to the NAD for consideration, FSA county
or area committees established under section 8(b)(5) of the Soil
Conservation and Domestic Allotment Act (16 U.S.C 590h(b)(5)) would
have jurisdiction over any appeal resulting from adverse technical
determinations made under Title XII, including an adverse decision
involving technical determinations made by NRCS. Thus the subject
matter of the current part 614 has been incorporated into subpart B of
the revised part 614 which sets forth the informal appeal process for
appeals of title XII technical determinations made by NRCS to FSA
county committees as required by the Reorganization Act.
Subpart C of the revised part 614 consolidates appeal procedures
for all other existing NRCS programs in part 614. Appeals for the
following additional programs are now also covered by part 614: 7 CFR
Part 623, Emergency Wetland Reserve Program; 7 CFR Part 631, Great
Plains Conservation Program; 7 CFR Part 632, Rural Abandoned Mine
Program; 7 CFR Part 634, Rural Clean Water Program; 7 CFR Part 663,
Wellton-Mohawk Irrigation Improvement Program, and 7 CFR Part 702,
Colorado River Basin Salinity Control Program; 7 CFR Part 701 subpart-
Forestry Incentives Program; and 7 CFR Part 752, Water Bank program.
Subpart A of part 614 includes general provisions applicable to
informal appeals under both subparts B and C.
Appeal provisions for 7 CFR parts 12, 620, 623, 631, 632, 634, 663,
701, 702, and 752 are revised to make reference to part 614 for NRCS
appeal procedures.
IV. Commodity Credit Corporation (CCC), Federal Crop Insurance
Corporation (FCIC), and Farm Service Agency (FSA) Appeal Rules
The interim final rule makes amendments to 7 CFR parts 400 and 780
to maintain and revise the informal appeals process for adverse
decisions of the FSA regarding Federal crop insurance, CCC, and FSA
programs. The procedures for appeals under both parts will be
consolidated in part 780. The revised part 780 sets forth regulations
for requesting informal hearings or mediation in accordance with
section 275 of the Act.
Part 780 includes procedures for the handling of appeals of NRCS
technical determinations to FSA county and area committees.
Part 780 also includes procedures for the mandatory appeal of
certain FSA adverse decisions to such committees as required by 7 CFR
11.5(a) of the NAD rules of procedure.
This rule also amends part 781 to conform the hearing procedures to
that of part 780.
V. Rural Housing Service (RHS), Rural Business-Cooperative Service
(RBS), and Rural Utilities Service (RUS) Appeal Rules
7 CFR part 1900, subpart B currently contains rules for appeals of
decisions of the former Farmers Home Administration (FmHA). Either by
the Act or by delegation of the Secretary, the FmHA programs covered by
part 1900, subpart B were divided among RHS, RBS, and RUS. This rule
amends part 1900, subpart B to set forth rules for requesting informal
appeals or mediation of adverse decisions concerning direct loans, loan
guarantees, and grants under the following programs: RUS Water and
Waste Disposal Facility Loans and Grants Program, RHS Housing and
Community Facilities Loan Programs, and RBS Loan, Grant, and Guarantee
Programs and the Intermediary Relending Program.
List of Subjects
7 CFR Part 1
Administrative practice and procedure, Agriculture, Reporting and
recordkeeping requirements.
7 CFR Part 11
Administrative practice and procedure, Agriculture, Agricultural
commodities, Crop insurance, Ex parte communications, Farmers, Federal
aid programs, Guaranteed loans, Insured loans, Loan programs, Price
support programs, Soil conservation.
7 CFR Part 12
Administrative practice and procedure, Agriculture, Soil
conservation, Wetlands.
7 CFR Part 400
Administrative practice and procedure, Agriculture, Agricultural
commodities, Crop insurance.
7 CFR Part 614
Administrative practice and procedure, Agriculture, Soil
conservation, Wetlands.
7 CFR Part 620
Administrative practice and procedure, Agriculture, Soil
conservation, Wetlands.
7 CFR Part 623
Administrative practice and procedure, Agriculture, Soil
conservation, Wetlands.
7 CFR Part 631
Administrative practice and procedure, Agriculture, Soil
conservation.
7 CFR Part 632
Administrative practice and procedure, Mines, Rural areas, Soil
conservation.
7 CFR Part 634
Administrative practice and procedure, Agriculture, Soil
conservation, Water resources, Water pollution control.
7 CFR Part 663
Administrative practice and procedure, Irrigation, Soil
conservation, Water resources.
7 CFR Part 701
Administrative practice and procedure, Agriculture, Environmental
protection, Forests and forest products, Soil conservation, Wetlands.
[[Page 67308]]
7 CFR Part 702
Administrative practice and procedure, Agriculture, Soil
conservation, Water resources.
7 CFR Part 752
Administrative practice and procedure, Agriculture, Soil
Conservation, Water bank program, Water resources.
7 CFR Part 780
Administrative practice and procedure, Agriculture, Agricultural
commodities, Crop insurance, Ex parte communications, Farmers, Federal
aid programs, Loan programs, Price support programs, Soil conservation,
Wetlands.
7 CFR Part 781
Administrative practice and procedure, Agriculture, Farmers.
7 CFR Part 1900
Administrative practice and procedure, Agriculture, Business,
Community development, Farmers, Federal aid programs, Guaranteed loans,
Housing, Insured loans, Loan programs, Rural areas, Utilities.
For the reasons set out in the preamble, Title 7 of the Code of
Federal Regulations is amended as set forth below:
PART 1--ADMINISTRATIVE REGULATIONS
1. The authority citation for part 1 continues to read as follows:
Authority: 5 U.S.C. 301 and 552. Appendix A also issued under 7
U.S.C. 2244; 31 U.S.C. 9701, and 7 CFR 2.75(a)(6)(xiii).
2. Section 1.20 is revised to read as follows:
Sec. 1.20 Authentication.
When a request is received for an authenticated copy of a document
which the agency determines to make available to the requesting party,
the agency shall cause a correct copy to be prepared and sent to the
Office of the General Counsel which shall certify the same and cause
the seal of the Department to be affixed, except that the Hearing Clerk
in the Office of Administrative Law Judges may authenticate copies of
documents in the records of the Hearing Clerk and that the Director of
the National Appeals Division may authenticate copies of documents in
the records of the National Appeals Division.
PART 11--NATIONAL APPEALS DIVISION RULES OF PROCEDURE
Part 11 is added to read as follows:
PART 11--NATIONAL APPEALS DIVISION RULES OF PROCEDURE
Sec.
11.1 Definitions.
11.2 General statement.
11.3 Applicability.
11.4 Inapplicability of other laws and regulations.
11.5 Informal review of adverse decisions.
11.6 Director review of agency determination of appealability and
right of participants to Division hearing.
11.7 Ex parte communications.
11.8 Division hearings.
11.9 Director review of determinations of Hearing Officers.
11.10 Basis for determinations.
11.11 Reconsideration of Director determinations.
11.12 Effective date and implementation of final determinations of
the Division.
11.13 Judicial review.
11.14 Filing of appeals and computation of time.
Authority: 5 U.S.C. 301; Title II, Subtitle H, Pub. L. 103-354,
108 Stat. 3228 (7 U.S.C. 6991 et seq.); Reorganization Plan No. 2 of
1953 (5 U.S.C. App.).
Sec. 11.1 Definitions.
For purposes of this part:
Adverse decision means an administrative decision made by an
officer, employee, or committee of an agency that is adverse to a
participant. The term includes a denial of equitable relief by an
agency or the failure of an agency to issue a decision or otherwise act
on the request or right of the participant within timeframes specified
by agency program statutes or regulations or within a reasonable time
if timeframes are not specified in such statutes or regulations. The
term does not include a decision over which the Board of Contract
Appeals has jurisdiction.
Agency means:
(1) The Agricultural Stabilization and Conservation Service (ASCS);
(2) The Commodity Credit Corporation (CCC);
(3) The Farm Service Agency (FSA);
(4) The Farmers Home Administration (FmHA);
(5) The Federal Crop Insurance Corporation (FCIC);
(6) The Natural Resources Conservation Service (NRCS);
(7) The Rural Business-Cooperative Service (RBS);
(8) The Rural Development Administration (RDA);
(9) The Rural Housing Service (RHS);
(10) The Rural Utilities Service (RUS) (but not for programs
authorized by the Rural Electrification Act of 1936 and the Rural
Telephone Bank Act, 7 U.S.C. 901 et seq.);
(11) The Soil Conservation Service (SCS);
(12) A State, county, or area committee established under section
8(b)(5) of the Soil Conservation and Domestic Allotment Act (16 U.S.C.
590h(b)(5)); and
(13) Any successor agency to the above-named agencies, and any
other agency or office of the Department which the Secretary may
designate.
Agency record means all the materials maintained by an agency
related to an adverse decision which are submitted to the Division by
an agency for consideration in connection with an appeal under this
part, including all materials prepared or reviewed by the agency during
its consideration and decision-making process, but shall not include
records or information not related to the adverse decision at issue.
All materials contained in the agency record submitted to the Division
shall be deemed admitted as evidence for purposes of a hearing or a
record review under Sec. 11.8.
Agency representative means any person, whether or not an attorney,
who is authorized to represent the agency in an administrative appeal
under this part.
Appeal means a written request by a participant asking for review
by the National Appeals Division of an adverse decision under this
part.
Appellant means any participant who appeals an adverse decision in
accordance with this part. Unless separately set forth in this part,
the term ``appellant'' includes an authorized representative.
Authorized representative means any person, whether or not an
att
FR Doc. 95-31397 National Appeals Division Rules of Procedure
orney, who is authorized in writing by a participant, consistent
with Sec. 11.6(c), to act for the participant in an administrative
appeal under this part. The authorized representative may act on behalf
of the participant except when the provisions of this part require
action by the participant or appellant personally.
Case record means all the materials maintained by the Secretary
related to an adverse decision. The case record includes both the
agency record and the hearing record.
Days means calendar days unless otherwise specified.
Department means the United States Department of Agriculture
(USDA).
Director means the Director of the Division or a designee of the
Director.
Division means the National Appeals Division established by this
part.
Equitable relief means relief which is authorized under section 326
of the Food and Agriculture Act of 1962 (7 U.S.C. 1339a) and other laws
administered by the agency.
[[Page 67309]]
Ex parte communication means an oral or written communication to
any officer or employee of the Division with respect to which
reasonable prior notice to all parties is not given, but it shall not
include requests for status reports, or inquiries on Division
procedure, in reference to any matter or proceeding connected with the
appeal involved.
Hearing, except with respect to Sec. 11.5, means a proceeding
before the Division to afford a participant the opportunity to present
testimony or documentary evidence or both in order to have a previous
determination reversed and to show why an adverse determination was in
error.
Hearing Officer means an individual employed by the Division who
conducts the hearing and determines appeals of adverse decisions by any
agency.
Hearing record means all documents, evidence, and other materials
generated in relation to a hearing under Sec. 11.8.
Implement means the taking of action by an agency of the Department
in order fully and promptly to effectuate a final determination of the
Division.
Participant means any individual or entity who has applied for, or
whose right to participate in or receive, a payment, loan, loan
guarantee, or other benefit in accordance with any program of an agency
to which the regulations in this part apply is affected by a decision
of such agency. With respect to guaranteed loans made by FSA, both the
borrower and the lender jointly must appeal an adverse decision except
that the denial or reduction of a final loss payment to a lender shall
be appealed by the lender only. The term does not include persons whose
claim(s) arise under:
(1) Programs subject to various proceedings provided for in 7 CFR
part 1;
(2) Programs governed by Federal contracting laws and regulations
(appealable under other rules and to other forums, including to the
Department's Board of Contract Appeals under 7 CFR part 24);
(3) The Freedom of Information Act (appealable under 7 CFR part 1,
subpart A);
(4) Suspension and debarment disputes, including, but not limited
to, those falling within the scope of 7 CFR parts 1407 and 3017;
(5) Export programs administered by the Commodity Credit
Corporation;
(6) Disputes between reinsured companies and the Federal Crop
Insurance Corporation;
(7) Tenant grievances or appeals prosecutable under the provisions
of 7 CFR part 1944, subpart L, under the multi-family housing program
carried out by RHS;
(8) Personnel, equal employment opportunity, and other similar
disputes with any agency or office of the Department which arise out of
the employment relationship;
(9) The Federal Tort Claims Act, 28 U.S.C. 2671 et seq., or the
Military Personnel and Civilian Employees Claims Act of 1964, 31 U.S.C.
3721; or
(10) Discrimination complaints prosecutable under the
nondiscrimination regulations at 7 CFR parts 15, 15a, 15b, and 15e.
Record review means an appeal considered by the Hearing Officer in
which the Hearing Officer's determination is based on the agency record
and other information submitted by the appellant and the agency,
including information submitted by affidavit or declaration.
Secretary means the Secretary of Agriculture.
Sec. 11.2 General statement.
(a) This part sets forth procedures for proceedings before the
National Appeals Division within the Department. The Division is an
organization within the Department, subject to the general supervision
of and policy direction by the Secretary, which is independent from all
other agencies and offices of the Department, including Department
officials at the state and local level. The Director of the Division
reports directly to the Secretary of Agriculture. The authority of the
Hearing Officers and the Director of the Division, and the
administrative appeal procedures which must be followed by program
participants who desire to appeal an adverse decision and by the agency
which issued the adverse decision, are included in this part.
(b) Pursuant to section 212(e) of the Federal Crop Insurance Reform
and Department of Agriculture Reorganization Act of 1994, Public Law
103-354 (the Act), 7 U.S.C. 6912(e), program participants shall seek
review of an adverse decision before a Hearing Officer of the Division,
and may seek further review by the Director, under the provisions of
this part prior to seeking judicial review.
Sec. 11.3 Applicability.
(a) Subject matter. The regulations contained in this part are
applicable to adverse decisions made by an agency, including, for
example, those with respect to:
(1) Denial of participation in, or receipt of benefits under, any
program of an agency;
(2) Compliance with program requirements;
(3) The making or amount of payments or other program benefits to a
participant in any program of an agency; and
(4) A determination that a parcel of land is a wetland or highly
erodible land.
(b) Limitation. The procedures contained in this part may not be
used to seek review of statutes or USDA regulations issued under
Federal law.
Sec. 11.4 Inapplicability of other laws and regulations.
The provisions of the Administrative Procedure Act generally
applicable to agency adjudications (5 U.S.C. 554, 555, 556, 557, &
3105) are not applicable to proceedings under this part. The Equal
Access to Justice Act, as amended, 5 U.S.C. 504, does not apply to
these proceedings. The Federal Rules of Evidence, 28 U.S.C. App., shall
not apply to these proceedings.
Sec. 11.5 Informal review of adverse decisions.
(a) Required informal review of FSA adverse decisions. A
participant must seek an informal review of an adverse decision issued
at the field service office level by an officer or employee of FSA, or
by any employee of a county or area committee established under section
8(b)(5) of the Soil Conservation and Domestic Allotment Act, 16 U.S.C.
590h(b)(5), before NAD will accept an appeal of an FSA adverse
decision. Such informal review shall be done by the county or area
committee with responsibility for the adverse decision at issue. The
procedures for requesting such an informal review before FSA are found
in 7 CFR part 780. After receiving a decision upon review by a county
or area committee, a participant may seek further informal review by
the State FSA committee or may appeal directly to NAD under
Sec. 11.6(b).
(b) Optional informal review. With respect to adverse decisions
issued at the State office level of FSA and adverse decisions of all
other agencies, a participant may request an agency informal review of
an adverse decision of that agency prior to appealing to NAD.
Procedures for requesting such an informal review are found at 7 CFR
part 780 (FSA), 7 CFR part 614 (NRCS), 7 CFR part 1900, subpart B
(RUS), 7 CFR part 1900, subpart B (RBS), and 7 CFR part 1900, subpart B
(RHS).
(c) Mediation. A participant also shall have the right to utilize
any available alternative dispute resolution (ADR) or mediation
program, including any mediation program available under title
[[Page 67310]]
V of the Agriculture Credit Act of 1987, 7 U.S.C. 5101 et seq., in
order to attempt to seek resolution of an adverse decision of an agency
prior to a NAD hearing. If a participant:
(1) Requests mediation or ADR prior to filing an appeal with NAD,
the participant stops the running of the 30-day period during which a
participant may appeal to NAD under Sec. 11.6(b)(1), and will have the
balance of days remaining in that period to appeal to NAD once
mediation or ADR has concluded.
(2) Requests mediation or ADR after having filed an appeal to NAD
under Sec. 11.6(b), but before the hearing, the participant will be
deemed to have waived his right to have a hearing within 45 days under
Sec. 11.8(c)(1) but shall have the right to have a hearing within 45
days after conclusion of mediation or ADR.
Sec. 11.6 Director review of agency determination of appealability and
right of participants to Division hearing.
(a) Director review of agency determination of appealability. (1)
Not later than 30 days after the date on which a participant receives a
determination from an agency that an agency decision is not appealable,
the participant must submit a written request to the Director to review
the determination in order to obtain such review by the Director.
(2) The Director shall determine whether the decision is adverse to
the individual participant and thus appealable or is a matter of
general applicability and thus not subject to appeal, and will issue a
final determination notice that upholds or reverses the determination
of the agency. This final determination is not appealable. If the
Director reverses the determination of the agency, the Director will
notify the participant and the agency of that decision and inform the
participant of his or her right to proceed with an appeal.
(3) The Director may delegate his or her authority to conduct a
review under this subsection to any subordinate official of the
Division other than a Hearing Officer. In any case in which such review
is conducted by such a subordinate official, the subordinate official's
determination shall be considered to be the determination of the
Director and shall be final and not appealable.
(b) Appeals of adverse decisions. (1) To obtain a hearing under
Sec. 11.8, a participant personally must request such hearing not later
than 30 days after the date on which the participant first received
notice of the adverse decision or after the date on which the
participant receives notice of the Director's determination that a
decision is appealable. In the case of the failure of an agency to act
on the request or right of a recipient, a participant personally must
request such hearing not later than 30 days after the participant knew
or reasonably should have known that the agency had not acted within
the timeframes specified by agency program regulations, or, where such
regulations specify no timeframes, not later than 30 days after the
participant reasonably should have known of the agency's failure to
act.
(2) A request for a hearing shall be in writing and personally
signed by the participant, and shall include a copy of the adverse
decision to be reviewed, if available, along with a brief statement of
the participant's reasons for believing that the decision, or the
agency's failure to act, was wrong. The participant also shall send a
copy of the request for a hearing to the agency, and may send a copy of
the adverse decision to be reviewed to the agency, but failure to do
either will not constitute grounds for dismissal of the appeal. Instead
of a hearing, the participant may request a record review.
(c) If a participant is represented by an authorized
representative, the authorized representative must file a declaration
with NAD, executed in accordance with 28 U.S.C. 1746, stating that the
participant has duly authorized the declarant in writing to represent
the participant for purposes of a specified adverse decision or
decisions, and attach a copy of the written authorization to the
declaration.
Sec. 11.7 Ex parte communications.
(a)(1) At no time between the filing of an appeal and the issuance
of a final determination under this part shall any officer or employee
of the Division engage in ex parte communications regarding the merits
of the appeal with any person having any interest in the appeal pending
before the Division, including any person in an advocacy or
investigative capacity. This prohibition does not apply to:
(i) Discussions of procedural matters related to an appeal; or
(ii) Discussions of the merits of the appeal where all parties to
the appeal have been given notice and an opportunity to participate.
(2) In the case of a communication described in paragraph
(a)(1)(ii) of this section, a memorandum of any such discussion shall
be included in the hearing record.
(b) No interested person shall make or knowingly cause to be made
to any officer or employee of the Division an ex parte communication
relevant to the merits of the appeal.
(c) If any officer or employee of the Division receives an ex parte
communication in violation of this section, the one who receives the
communication shall place in the hearing record:
(1) All such written communications;
(2) Memoranda stating the substance of all such oral
communications; and
(3) All written responses to such communications, and memoranda
stating the substance of any oral responses thereto.
(d) Upon receipt of a communication knowingly made or knowingly
caused to be made by a party in violation of this section the Hearing
Officer or Director may, to the extent consistent with the interests of
justice and the policy of the underlying program, require the party to
show cause why such party's claim or interest in the appeal should not
be dismissed, denied, disregarded, or otherwise adversely affected on
account of such violation.
Sec. 11.8 Division hearings.
(a) General rules. (1) The Director, the Hearing Officer, and the
appellant shall have access to the agency record of any adverse
decision appealed to the Division for a hearing. Upon request by the
appellant, the agency shall provide the appellant a copy of the agency
record.
(2) The Director and Hearing Officer shall have the authority to
administer oaths and affirmations, and to require, by subpoena, the
attendance of witnesses and the production of evidence. A Hearing
Officer shall obtain the concurrence of the Director prior to issuing a
subpoena.
(i) A subpoena requiring the production of evidence may be
requested and issued at any time while the case is pending before the
Division.
(ii) An appellant or an agency, acting through any appropriate
official, may request the issuance of a subpoena requiring the
attendance of a witness by submitting such a request in writing at
least 14 days before the scheduled date of a hearing. The Director or
Hearing Officer shall issue a subpoena at least 7 days prior to the
scheduled date of a hearing.
(iii) A subpoena shall be issued only if the Director or a Hearing
Officer determines that:
(A) For a subpoena of documents, the appellant or the agency has
established that production of documentary evidence is necessary and is
reasonably calculated to lead to information which would affect the
final determination or
[[Page 67311]]
is necessary to fully present the case before the Division; or
(B) For a subpoena of a witness, the appellant or the agency has
established that either a representative of the Department or a private
individual possesses information that is pertinent and necessary for
disclosure of all relevant facts which could impact the final
determination, that the information cannot be obtained except through
testimony of the person, and that the testimony cannot be obtained
absent issuance of a subpoena.
(iv) The party requesting issuance of a subpoena shall arrange for
service. Service of a subpoena upon a person named therein may be made
by registered or certified mail, or in person. Personal service shall
be made by personal delivery of a copy of the subpoena to the person
named therein by any person who is not a party and who is not less than
18 years of age. Proof of service shall be made by filing with the
Hearing Officer or Director who issued the subpoena a statement of the
date and manner of service and of the names of the persons served,
certified by the person who made the service in person or by return
receipts for certified or registered mail.
(v) A party who requests that a subpoena be issued shall be
responsible for the payment of any reasonable travel and subsistence
costs incurred by the witness in connection with his or her appearance
and any fees of a person who serves the subpoena in person. The
Department shall pay the costs associated with the appearance of a
Department employee whose role as a witness arises out of his or her
performance of official duties, regardless of which party requested the
subpoena. The failure to make payment of such charges on demand may be
deemed by the Hearing Officer or Director as sufficient ground for
striking the testimony of the witness and the evidence the witness has
produced.
(vi) If a person refuses to obey a subpoena, the Director, acting
through the Office of the General Counsel of the Department and the
Department of Justice, may apply to the United States District Court in
the jurisdiction where that person resides to have the subpoena
enforced as provided in the Federal Rules of Civil Procedure (28 U.S.C.
App.).
(3) Testimony required by subpoena pursuant to paragraph (a)(2) of
this section may, at the discretion of the Director or a Hearing
Officer, be presented at the hearing either in person or
telephonically.
(b) Hearing procedures applicable to both record review and
hearings. (1) Upon the filing of an appeal under this part of an
adverse decision by any agency, the agency promptly shall provide the
Division with a copy of the agency record. If requested by the
appellant prior to the hearing, a copy of such agency record shall be
provided to the appellant by the agency within 10 days of receipt of
the request by the agency.
(2) The Director shall assign the appeal to a Hearing Officer and
shall notify the appellant and agency of such assignment. The notice
also shall advise the appellant and the agency of the documents
required to be submitted under paragraph (c)(2) of this section, and
notify the appellant of the option of having a hearing by telephone.
(3) The Hearing Officer will receive evidence into the hearing
record without regard to whether the evidence was known to the agency
officer, employee, or committee making the adverse decision at the time
the adverse decision was made.
(c) Procedures applicable only to hearings. (1) Upon a timely
request for a hearing under Sec. 11.6(b), an appellant has the right to
have a hearing by the Division on any adverse decision within 45 days
after the date of receipt of the request for the hearing by the
Division.
(2) The Hearing Officer shall set a reasonable deadline for
submission of the following documents:
(i) By the appellant:
(A) A short statement of why the decision is wrong;
(B) A copy of any document not in the agency record that the
appellant anticipates introducing at the hearing; and
(C) A list of anticipated witnesses and brief descriptions of the
evidence such witnesses will offer.
(ii) By the agency:
(A) A copy of the adverse decision challenged by the appellant;
(B) A written explanation of the agency's position, including the
regulatory or statutory basis therefor;
(C) A copy of any document not in the agency record that the agency
anticipates introducing at the hearing; and
(D) A list of anticipated witnesses and brief descriptions of the
evidence such witnesses will offer.
(3) Not less than 14 days prior to the hearing, the Division must
provide the appellant, the authorized representative, and the agency a
notice of hearing specifying the date, time, and place of the hearing.
The hearing will be held in the State of residence of the appellant, as
determined by the Hearing Officer, or at a location that is otherwise
convenient to the appellant, the agency, and the Division. The notice
also shall notify all parties of the right to obtain an official record
of the hearing.
(4) Pre-hearing conference. Whenever appropriate, the Hearing
Officer shall hold a pre-hearing conference in order to attempt to
resolve the dispute or to narrow the issues involved. Such pre-hearing
conference shall be held by telephone unless the Hearing Officer and
all parties agree to hold such conference in person.
(5) Conduct of the hearing. (i) A hearing before a Hearing Officer
will be in person unless the appellant agrees to a hearing by
telephone.
(ii) The hearing will be conducted by the Hearing Officer in the
manner determined by the Division most likely to obtain the facts
relevant to the matter or matters at issue. The Hearing Officer will
allow the presentation of evidence at the hearing by any party without
regard to whether the evidence was known to the officer, employee, or
committee of the agency making the adverse decision at the time the
adverse decision was made. The Hearing Officer may confine the
presentation of facts and evidence to pertinent matters and exclude
irrelevant, immaterial, or unduly repetitious evidence, information, or
questions. Any party shall have the opportunity to present oral and
documentary evidence, oral testimony of witnesses, and arguments in
support of the party's position; controvert evidence relied on by any
other party; and question all witnesses. When appropriate, agency
witnesses requested by the appellant will be made available at the
hearing. Any evidence may be received by the Hearing Officer without
regard to whether that evidence could be admitted in judicial
proceedings.
(iii) An official record shall be made of the proceedings of every
hearing. This record will be made by an official tape recording by the
Division. In addition, either party may request that a verbatim
transcript be made of the hearing proceedings and that such transcript
shall be made the official record of the hearing. The party requesting
a verbatim transcript shall pay for the transcription service, shall
provide a certified copy of the transcript to the Hearing Officer free
of charge, and shall allow any other party desiring to purchase a copy
of the transcript to order it from the transcription service.
(6) Absence of parties. (i) If at the time scheduled for the
hearing either the appellant or the agency representative is absent,
and no appearance is made on behalf of such absent party, or no
arrangements have been made for rescheduling the hearing, the Hearing
[[Page 67312]]
Officer has the option to cancel the hearing unless the absent party
has good cause for the failure to appear. If the Hearing Officer elects
to cancel the hearing, the Hearing Officer may:
(A) Treat the appeal as a record review and issue a determination
based on the agency record as submitted by the agency and the hearing
record developed prior to the hearing date;
(B) Accept evidence into the hearing record submitted by any party
present at the hearing, and then issue a determination; or
(C) Dismiss the appeal.
(ii) When a hearing is cancelled due to the absence of a party, the
Hearing Officer will add to the hearing record any additional evidence
submitted by any party present, provide a copy of such evidence to the
absent party or parties, and allow the absent party or parties 10 days
to provide a response to such additional evidence for inclusion in the
hearing record.
(iii) Where an absent party has demonstrated good cause for the
failure to appear, the Hearing Officer shall reschedule the hearing
unless all parties agree to proceed without a hearing.
(7) Post-hearing procedure. The Hearing Officer will leave the
hearing record open after the hearing for 10 days, or for such other
period of time as the Hearing Officer shall establish, to allow the
submission of information by the appellant or the agency, to the extent
necessary to respond to new facts, information, arguments, or evidence
presented or raised at the hearing. Any such new information will be
added by the Hearing Officer to the hearing record and sent to the
other party or parties by the submitter of the information. The Hearing
Officer, in his or her discretion, may permit the other party or
parties to respond to this post-hearing submission.
(d) Interlocutory review. Interlocutory review by the Director of
rulings of a Hearing Officer are not permitted under the procedures of
this part.
(e) Burden of proof. The appellant has the burden of proving that
the adverse decision of the agency was erroneous by a preponderance of
the evidence.
(f) Timing of issuance of determination. The Hearing Officer will
issue a notice of the determination on the appeal to the named
appellant, the authorized representative, and the agency not later than
30 days after a hearing or the closing date of the hearing record in
cases in which the Hearing Officer receives additional evidence from
the agency or appellant after a hearing. In the case of a record
review, the Hearing Officer will issue a notice of determination within
45 days of receipt of the appellant's request for a record review. Upon
the Hearing Officer's request, the Director may establish an earlier or
later deadline. A notice of determination shall be accompanied by a
copy of the procedures for filing a request for Director review under
Sec. 11.9. If the determination is not appealed to the Director for
review under Sec. 11.9, the notice provided by the Hearing Officer
shall be considered to be a notice of a final determination under this
part.
Sec. 11.9 Director review of determinations of Hearing Officers.
(a) Requests for Director review. (1) Not later than 30 days after
the date on which an appellant receives the determination of a Hearing
Officer under Sec. 11.8, the appellant must submit a written request,
signed personally by the named appellant, to the Director to review the
determination in order to be entitled to such review by the Director.
Such request shall include specific reasons why the appellant believes
the determination is wrong.
(2) Not later than 15 business days after the date on which an
agency receives the determination of a Hearing Officer under Sec. 11.8,
the head of the agency may make a written request that the Director
review the determination. Such request shall include specific reasons
why the agency believes the determination is wrong, including citations
of statutes or regulations that the agency believes the determination
violates. Any such request may be made by the head of an agency only,
or by a person acting in such capacity, but not by any subordinate
officer of such agency.
(3) A copy of a request for Director review submitted under this
paragraph (a) shall be provided simultaneously by the submitter to each
party to the appeal.
(b) Notification of parties. The Director promptly shall notify all
parties of receipt of a request for review.
(c) Responses to request for Director review. Other parties to an
appeal may submit written responses to a request for Director review
within 5 business days from the date of receipt of a copy of the
request for review.
(d) Determination of Director. (1) The Director will conduct a
review of the determination of the Hearing Officer using the agency
record, the hearing record, the request for review, any responses
submitted under paragraph (c) of this section, and such other arguments
or information as may be accepted by the Director, in order to
determine whether the decision of the Hearing Officer is supported by
substantial evidence. Based on such review, the Director will issue a
final determination notice that upholds, reverses, or modifies the
determination of the Hearing Officer. The Director's determination upon
review of a Hearing Officer's decision shall be considered to be the
final determination under this part and shall not be appealable.
However, if the Director determines that the hearing record is
inadequate or that new evidence has been submitted, the Director may
remand all or a portion of the determination to the Hearing Officer for
further proceedings to complete the hearing record or, at the option of
the Director, to hold a new hearing.
(2) The Director will complete the review and either issue a final
determination or remand the determination not later than--
(i) 10 business days after receipt of the request for review, in
the case of a request by the head of an agency; or
(ii) 30 business days after receipt of the request for review, in
the case of a request by an appellant.
(3) In any case or any category of cases, the Director may delegate
his or her authority to conduct a review under this section to any
Deputy or Associate Directors of the Division. In any case in which
such review is conducted by a Deputy or Associate Director under
authority delegated by the Director, the Deputy or Associate Director's
determination shall be considered to be the determination of the
Director under this part and shall be final and not appealable.
(e) Equitable relief. In reaching a decision on an appeal, the
Director shall have the authority to grant equitable relief under this
part in the same manner and to the same extent as such authority is
provided an agency under applicable laws and regulations.
Sec. 11.10 Basis for determinations.
(a) In making a determination, the Hearing Officers and the
Director are not bound by previous findings of facts on which the
agency's adverse decision was based.
(b) In making a determination on the appeal, Hearing Officers and
the Director shall ensure that the decision is consistent with the laws
and regulations of the agency, and with the generally applicable
interpretations of such laws and regulations.
(c) All determinations of the Hearing Officers and the Director
must be based on information from the case record, laws applicable to
the matter at issue, and applicable regulations published in the
Federal Register and in effect on the date of the adverse decision or
the date on which the acts that gave rise to the
[[Page 67313]]
adverse decision occurred, whichever date is appropriate under the
applicable agency program laws and regulations.
Sec. 11.11 Reconsideration of Director determinations.
(a) Reconsideration of a determination of the Director may be
requested by the appellant or the agency within 10 days of receipt of
the determination. The Director will not consider any request for
reconsideration that does not contain a detailed statement of a
material error of fact made in the determination, or a detailed
explanation of how the determination is contrary to statute or
regulation, which would justify reversal or modification of the
determination.
(b) The Director shall issue a notice to all parties as to whether
a request for reconsideration meets the criteria in paragraph (a) of
this section. If the request for reconsideration meets such criteria,
the Director shall include a copy of the request for reconsideration in
the notice to the non-requesting parties to the appeal. The non-
requesting parties shall have 5 days from receipt of such notice from
the Director to file a response to the request for reconsideration with
the Director.
(c) The Director shall issue a decision on the request for
reconsideration within 5 days of receipt of responses from the non-
requesting parties. If the Director's decision upon reconsideration
reverses or modifies the final determination of the Director rendered
under Sec. 11.9(d), the Director's decision on reconsideration will
become the final determination of the Director under Sec. 11.9(d) for
purposes of this part.
Sec. 11.12 Effective date and implementation of final determinations
of the Division.
(a) On the return of a case to an agency pursuant to the final
determination of the Division, the head of the agency shall implement
the final determination not later than 30 days after the effective date
of the notice of the final determination.
(b) A final determination will be effective as of the date of
filing of an application, the date of the transaction or event in
question, or the date of the original adverse decision, whichever is
applicable under the applicable agency program statutes or regulations.
Sec. 11.13 Judicial review.
(a) A final determination of the Division shall be reviewable and
enforceable by any United States District Court of competent
jurisdiction in accordance with chapter 7 of title 5, United States
Code.
(b) An appellant may not seek judicial review of any agency adverse
decision appealable under this part without receiving a final
determination from the Division pursuant to the procedures of this
part.
Sec. 11.14 Filing of appeals and computation of time.
(a) An appeal, a request for Director review, or any other document
will be considered ``filed'' when delivered in writing to the Division,
when postmarked, or when a complete facsimile copy is received by the
Division.
(b) Whenever the final date for any requirement of this part falls
on a Saturday, Sunday, Federal holiday, or other day on which the
Division is not open for the transaction of business during normal
working hours, the time for filing will be extended to the close of
business on the next working day.
(c) The time for filing an appeal, a request for Director review,
or any other document expires at 5:00 p.m. local time at the office of
the Division to which the filing is submitted on the last day on which
such filing may be made.
PART 12--HIGHLY ERODIBLE LAND AND WETLAND CONSERVATION
1. The authority citation for part 12 continues to read as follows:
Authority: 16 U.S.C. 3801 et seq.
2. Section 12.12 is revised to read as follows:
Sec. 12.12 Appeals.
Any person who has been or who would be denied program benefits in
accordance with Sec. 12.4 as the result of any determination made in
accordance with the provisions of this part may obtain a review of such
determination in accordance with the administrative appeals procedures
of the agency which rendered such determination. Agency appeal
procedures are contained in the Code of Federal Regulations as follows:
FSA, 7 CFR part 780; NRCS, 7 CFR part 614; RHS, RBS, and RUS, 7 CFR
part 1900, subpart B.
PART 400--GENERAL ADMINISTRATIVE REGULATIONS
1-2. Subpart J is revised to read as follows:
Subpart J--Appeal Procedure--Regulations
Authority: 7 U.S.C. 1506(p).
Sec. 400.90 Applicability.
Persons who are insured or believe they are insured under contracts
of insurance issued under the Federal Crop Insurance Act must obtain
appeal and reconsideration of decisions made under the provisions of
this chapter in accordance with part 780 of this title.
PART 614--APPEAL PROCEDURES
1. Part 614 is revised to read as follows:
PART 614--APPEAL PROCEDURES
Subpart A--General Provisions
Sec.
614.1 Purpose and scope.
614.2 Definitions.
614.3 Applicability.
614.4 Reservation of authority.
614.5 Decisions not subject to appeal.
Subpart B--Appeals of Technical Determinations Related to the
Conservation Title (Title XII) of the Food Security Act of 1985, as
Amended
614.100 Applicability.
614.101 Notice of preliminary technical determinations.
614.102 Mediation of preliminary technical determinations.
614.103 Final determinations.
614.104 Appeals of technical determinations.
Subpart C--Appeals of Decision Related to Conservation Programs (non-
Title XII)
614.200 Applicability.
614.201 Notice of final decisions.
614.202 Time frames for filing requests for informal hearings.
614.203 Mediation of adverse final decisions.
614.204 Appeals of adverse final decisions.
Authority: 5 U.S.C. 301, sections 226 and 275 of Pub. L. 103-354
(7 U.S.C. 6932 and 6995); 16 U.S.C. 3843(a).
Subpart A--General Provisions
Sec. 614.1 Purpose and scope.
This part sets forth the informal procedures under which a
landowner or program participant may appeal adverse technical
determinations or decisions made by officials of the Natural Resources
Conservation Service (NRCS) or its successor agency.
Sec. 614.2 Definitions.
Adverse technical determination or decision includes, in addition
to the definition of adverse decision in 7 CFR part 11, an NRCS
technical determination or decision that affects the legal substantive
status of the land, though it may not necessarily be adverse.
Chief means the Chief of NRCS. For the purposes of this part, the
term ``Chief'' includes an official of NRCS national headquarters
designated by the Chief to act for the Chief in making decisions under
this part.
Conservation district means any district or unit of State or local
government formed under State law or territorial law for the express
purpose of developing and carrying out a local soil and water
conservation program. Such
[[Page 67314]]
district or unit of government may be referred to as a conservation
district, soil conservation district, soil and water conservation
district, natural resource district, land conservation committee, or a
similar name.
County committee means a Farm Service Agency (FSA) county or area
committee established in accordance with section 8(b) of the Soil
Conservation and Domestic Allotment Act (16 U.S.C. 590h(b)).
Decision means a conclusion reached by an NRCS official based on
applicable regulations and program instructions which relates to
eligibility for program benefits, including a technical determination
used as a basis for the decision.
Designated conservationist means the NRCS official, usually the
district conservationist, whom the State Conservationist designates to
be responsible for the program or compliance requirement to which this
part is applicable.
Mediation means a process in which a neutral third party, the
mediator, meets with the disputing parties (e.g., the landowner or
program participant and the agency), facilitates discussions, and works
with the parties to resolve their disputes, narrow areas of
disagreement, and improve communications and relationships. A mediator
has no authority to render a decision or determination.
Preliminary technical determination means the initial written
technical determination provided to a client which will become final
after 30 days unless the client takes action in accordance with
Sec. 614.101 to stay the preliminary technical determination from
becoming final.
State Conservationist means the NRCS official in charge of NRCS
operations within a State, as set forth in part 600 of this chapter.
Technical determination means a conclusion concerning the status
and condition of the natural resources and cultural practices based on
science and best professional judgment of natural resource
professionals concerning the soils, water, air, plants, and animals.
Refer to 7 CFR 11.1 for other definitions applicable to appeals of
adverse technical determinations and decisions covered by this part.
Sec. 614.3 Applicability.
(a) Appeals of adverse technical determinations and adverse
decisions covered by this part are also governed by National Appeals
Division (NAD) regulations at 7 CFR part 11.
(b) Decisions which are subject to this part include any decision
under one or more NRCS programs; and technical determinations or
decisions that affect the status of the land even though they may not
affect the landowner's or program participant's eligibility for USDA
program benefits.
(c) The failure of an official of NRCS to issue a technical
determination or decision is subject to this part.
(d) Complaints involving discrimination in program delivery will be
handled under the existing USDA civil rights rules and regulations.
(e) Appeals on contractual issues that are subject to the
jurisdiction of the Agriculture Board of Contract Appeals are not
appealable under the procedures within this part.
Sec. 614.4 Reservation of authority.
Nothing contained in the regulations of this part shall preclude
the Secretary of Agriculture or the Chief from determining at any time
any question arising under the programs to which the regulations of
this part apply, or from reversing or modifying in writing, with
sufficient reason given therefore, any technical determination or
decision made by an NRCS official.
Sec. 614.5 Decisions not subject to appeal.
The following are examples of decisions which are not appealable:
(a) General program requirements that apply to all participants;
(b) Science-based formulas and criteria;
(c) Procedural decisions relating to administration of the
programs; and
(d) Denials of assistance due to lack of funds or authority.
Subpart B--Appeals of Technical Determinations Related to the
Conservation Title (Title XII) of the Food Security Act of 1985, as
Amended
Sec. 614.100 Applicability.
The provisions of this subpart set forth the procedures under which
a landowner or program participant may seek mediation of a preliminary
technical determination or appeal from technical determinations made by
NRCS officials on or after January 16, 1996 regarding technical
determinations within the following programs:
(1) Highly Erodible Land Conservation;
(2) Wetland Conservation, including wetland technical
determinations made by NRCS officials not related to a request for USDA
program benefits;
(3) Conservation Reserve Program;
(4) Wetlands Reserve Program;
(5) Agricultural Water Quality Incentives Program; and
(6) Environmental Easement Program.
Sec. 614.101 Notice of preliminary technical determinations.
(a) All preliminary technical determinations related to programs
provided for in Sec. 614.100 shall be in writing and shall inform the
landowner or program participant of the following:
(1) The preliminary technical determination will become final after
30 days if the landowner or program participant does not arrange with
the designated conservationist for either or both of the following
options:
(i) A field visit to the site to gather additional information and
to discuss the facts concerning the preliminary technical
determination, together with, at the option of the conservation
district, a district representative; and
(ii) Mediation.
(2) Once the technical determination is final, the landowner or
program participant may appeal the technical determination to the FSA
county or area committee pursuant to 7 CFR part 780. Landowners or
program participants wishing to appeal must exhaust any available
appeal procedures through the FSA county committee prior to appealing
to NAD. Judicial review is available only as specified in 7 CFR part
11.
(b) The document containing the preliminary technical determination
shall be mailed or hand delivered to the landowner or program
participant.
Sec. 614.102 Mediation of preliminary technical determinations.
(a)(1) Any dispute with respect to a preliminary technical
determination related to the programs provided in Sec. 614.100 shall,
at the request of the landowner or program participant, be mediated:
(i) Through certified individuals in those States where a State
mediation program certified by the United States Department of
Agriculture (USDA) has been established. Conservation district
officials in certified State Mediation Program States may become
certified by the State and utilized for mediation, if they choose to
participate.
(ii) In States with no certified mediation program in effect,
through mediation by a qualified representative of a local conservation
district, if a local conservation district chooses to participate. Upon
mutual agreement of the parties, other individuals may serve as
mediators.
(2) Upon receiving a request for mediation, NRCS shall notify other
USDA and Federal agencies, as appropriate.
(b) The parties shall have not more than 30 days to reach an
agreement following a mediation session. The
[[Page 67315]]
mediator shall notify the designated conservationist in writing at the
end of this period whether the parties reached an agreement. Any
agreement reached during, or as a result of, the mediation process
shall conform to the statutory, regulatory, and manual provisions
governing the program.
Sec. 614.103 Final determinations.
(a) Preliminary technical determinations shall become final:
(1) 30 days after receipt by the landowner or program participant
of the notice of a preliminary technical determination issued pursuant
to Sec. 614.101, unless a field visit or mediation is requested;
(2) After the earlier of 30 days after the field visit provided for
under Sec. 614.101(a) or receipt by the landowner or program
participant of a final determination from the designated
conservationist; or
(3) 30 days after a mediation session if a mutual agreement has not
been reached by the parties.
(b) The final technical determination shall set forth the decision,
the basis for the decision, including all factors, technical criteria,
and facts relied upon in making the decision, and shall inform the
landowner or program participant of the procedure for requesting and
pursuing further review.
Sec. 614.104 Appeals of technical determinations.
(a) Technical determinations related to the programs in
Sec. 614.100 may only be appealed, pursuant to the provisions of 7 CFR
part 780, to the FSA county committee with jurisdiction.
(b) In cases where a field visit has not already been completed in
accordance with Sec. 614.101(a), a field visit shall be completed by
the designated conservationist before the FSA county committee
considers the appeal.
(c) If the FSA county committee hearing the appeal requests review
of the technical determination by the applicable State Conservationist
prior to issuing their decision, the State Conservationist may:
(1) Designate an appropriate NRCS official to gather any additional
information necessary for review of the technical determination;
(2) Obtain additional oral and documentary evidence from any party
with personal or expert knowledge about the facts under review; and
(3) Conduct a field visit to review and obtain additional
information and to discuss the facts concerning the technical
determination. The State Conservationist shall provide the applicable
FSA county committee with a written technical determination, including
all factors, technical criteria, and facts relied upon in making the
technical determination.
(d) Any landowner or program participant who is adversely affected
by a decision of the FSA county committee may appeal to NAD in
accordance with 7 CFR part 11.
Subpart C--Appeals of Decisions Related to Conservation Programs (non-
Title XII)
Sec. 614.200 Applicability.
The provisions of this subpart set forth the procedures under which
a landowner or program participant may seek an informal hearing on
adverse decisions made by NRCS officials (exclusive of those decisions
that are appealable to the USDA Board of Contract Appeals) after
January 16, 1996 in the following program areas:
(1) Great Plains Conservation Program;
(2) Rural Abandoned Mine Program;
(3) Emergency Watershed Projects;
(4) Rural Clean Water Program;
(5) Colorado River Basin Salinity Control Program;
(6) Forestry Incentive Program;
(7) Water Bank Program;
(8) Flood Prevention and Watershed Protection Programs;
(9) Any other program which subsequently incorporates these
procedures through reference to this subpart within the program
regulations.
Sec. 614.201 Notice of final decisions.
(a) All final decisions related to programs provided for in
Sec. 614.200 that are made by the designated conservationist shall be
in writing and shall inform the landowner or program participant of
their right to request any or all of the following:
(1) An informal hearing before NRCS;
(2) Mediation; or
(3) A hearing before NAD in accordance with 7 CFR part 11.
(b) The document containing the decision shall be mailed or hand
delivered to the landowner or program participant.
Sec. 614.202 Time frames for filing requests for informal hearings.
(a) A request for an informal hearing before NRCS shall be filed
within 30 days after written notice of the final decision, which is the
subject of the request, is mailed or otherwise made available to the
landowner or program participant. A request for an informal hearing
shall be considered ``filed'' when personally delivered in writing to
the appropriate reviewing authority or when the properly addressed
request, postage paid, is postmarked.
(b) A request for appeal may be accepted and acted upon even though
it is not filed within the time prescribed in paragraph (a) of this
section if, in the judgment of the reviewing authority with whom such
request is filed, the circumstances warrant such action.
Sec. 614.203 Mediation of adverse final decisions.
(a) Any dispute with respect to an adverse final decision related
to the programs provided in Sec. 614.200 shall, at the request of the
landowner or program, be mediated:
(1) Through certified individual in those States where a State
Mediation Program has been established. Conservation district officials
in certified State Mediation Program States may become certified by the
State and utilized for mediation, if they choose to participate.
(2) In States where no certified mediation program is in effect,
through mediation by a qualified representative of a local conservation
district, if a local conservation district chooses to participate. Upon
mutual agreement of the parties, other individuals may serve as
mediators.
(b)(1) The parties shall have not more than 30 days to reach an
agreement following a mediation session. The mediator shall notify the
designated conservationist in writing at the end of this period whether
the parties reached an agreement.
(2) Any agreement reached during, or as a result of, the mediation
process shall conform to the statutory, regulatory, and manual
provisions governing the program.
(3) If the parties fail to reach an agreement within the specified
period, the designated conservationist shall have up to 30 days after
the conclusion of mediation to issue a final decision.
Sec. 614.204 Appeals of adverse final decisions.
(a) Any landowner or program participant, who is adversely affected
by a decision made by a designated conservationist related to the
programs in Sec. 614.200, may appeal the decision to the State
Conservationist in the applicable State for an informal hearing or to
NAD in accordance with 7 CFR part 11.
(b) The State Conservationist may designate a NRCS official to
gather information and conduct the informal hearing before making a
decision.
(c) Any landowner or program participant who is adversely affected
by a decision of the State Conservationist may appeal to NAD in
accordance with 7 CFR part 11.
[[Page 67316]]
PART 620--WETLANDS RESERVE PROGRAM
1. The authority citation for part 620 continues to read as
follows:
Authority: 16 U.S.C. 590a et seq., 3837 et seq.
2. Section 620.17(a) is revised to read as follows:
Sec. 620.17 Appeals.
(a) A person participating in the WRP may obtain review of any
administrative determination concerning eligibility for participation
utilizing the administrative appeal procedures in 7 CFR part 614, 7 CFR
part 780, and 7 CFR part 11, as appropriate.
* * * * *
PART 623--EMERGENCY WETLANDS RESERVE PROGRAM
1. The authority citation for part 623 continues to read as
follows:
Authority: 16 U.S.C. 3837-3837f; Pub. L. 103-75, Chapter 1, 107
Stat. 739, 742.
2. Section 623.20 is revised to read as follows;
Sec. 623.20 Appeals.
A participant in the EWRP may obtain a review of any administrative
determination concerning land eligibility, development of a WRPO, or
any adverse determination under this part in accordance with the
administrative appeal regulations provided in part 614 of this title.
PART 631--GREAT PLAINS CONSERVATION PROGRAM
1. The authority citation for part 631 continues to read as
follows:
Authority: 16 U.S.C. 590p(b).
2. Section 631.13 is revised to read as follows:
Sec. 631.13 Disputes and appeals for matters other than contract
violations.
Applicants or participants may appeal decisions regarding matters
other than contract disputes under this part in accordance with part
614 of this title.
PART 632--RURAL ABANDONED MINE PROGRAM
1. The authority citation for part 632 continues to read as
follows:
Authority: Sec. 406, Pub. L. 95-87; 91 Stat. 460 (30 U.S.C.
1236).
2. Section 632.40 is revised to read as follows:
Sec. 632.40 Appeals.
Land users may appeal decisions under this part in accordance with
part 614 of this title.
PART 634--RURAL CLEAN WATER PROGRAM
1. The authority citation for part 634 continues to read as
follows:
Authority: Sec. 35, Pub. L. 95-217, 91 Stat. 1579 (33 U.S.C.
1288).
2. Section 634.30 is revised to read as follows:
Sec. 634.30 Appeals in USDA administered projects.
The participant in a USDA-administered RCWP project may appeal
decisions of the administering agency in accordance with part 614 of
this title.
PART 663--WELLTON-MOHAWK IRRIGATION IMPROVEMENT PROGRAM
1. The authority citation for part 663 continues to read as
follows:
Authority: Pub. L. 93-320, 88 Stat. 266 (43 U.S.C. 1571 et
seq.); sec. 601, Pub. L. 72-212, 47 Stat. 417 (31 U.S.C. 686).
2. Section 663.17 is revised to read as follows:
Sec. 663.17 Appeals.
A decision under this part may be appealed by a cooperator in
accordance part 614 of this title.
PART 701--CONSERVATION AND ENVIRONMENTAL PROGRAMS
1. The authority citation for part 701 continues to read as
follows:
Authority: 16 U.S.C. 590d, 590g-590o, 590p(a), 590q, 1501-1510,
1606, 2101-2111, 2201-2205; 48 U.S.C. 1469d(c).
2. Section 701.76 is revised to read as follows:
Sec. 701.76 Appeals.
Any person may obtain review of determinations affecting
participation in:
(a) The Forestry Incentive Program, in accordance with part 614 of
this title; and
(b) All other programs within this part, in accordance with part
780 of this title.
PART 702--COLORADO RIVER BASIN SALINITY (CRSC) CONTROL PROGRAM
1. The authority citation for part 702 continues to read as
follows:
Authority: Sec. 201, Pub. L. 93-320, 88 Stat. 271; Sec. 2, Pub.
L. 98-569, 98 Stat. 2933 (43 U.S.C. 1592(c)).
2. Section 702.20 is revised to read as follows:
Sec. 702.20 Appeals.
The participant may obtain a review, in accordance with the
provisions of 7 CFR part 614 and 7 CFR part 11, of any administrative
decision made under the provisions of this part.
PART 752--WATER BANK PROGRAM
1. The authority citation for part 752 continues to read as
follows:
Authority: Secs. 2-12, 84 Stat. 1468-1471, as amended (16 U.S.C.
1301-1311).
2. Section 752.28 is revised to read as follows:
Sec. 752.28 Appeals.
Any person may obtain review of determinations affecting
participation in this program in accordance with part 614 of this
title.
PART 780--APPEAL REGULATIONS
1. Part 780 is revised to read as follows:
PART 780--APPEAL REGULATIONS
Sec.
780.1 Definitions.
780.2 Applicability.
780.3-5 Reserved.
780.6 Mediation.
780.7 Reconsideration and appeals with the county and State
committees and reconsideration with the regional service offices.
780.8 Time limitations for filing requests for reconsideration or
appeal.
780.9 Appeals of NRCS technical determinations.
780.10 Other finality provisions.
780.11 Reservation of authority.
Authority: 5 U.S.C. 301; 15 U.S.C. 714b and 714c; 16 U.S.C.
590h.
Sec. 780.1 Definitions.
For purposes of this part:
1994 Act means the Federal Crop Insurance Reform and Department of
Agriculture Reorganization Act of 1994 (Public Law 103-354).
Agency means FSA and its county and State committees and their
personnel, CCC, NRCS, FCIC, and any other agency or office of the
Department which the Secretary may designate, or any successor agency.
Appeal means a written request by a participant asking the next
level reviewing authority to review a decision.
CCC means the Commodity Credit Corporation, a wholly owned
Government corporation within the U.S. Department of Agriculture.
County committee means an FSA county or area committee established
in accordance with section 8(b) of the Soil Conservation and Domestic
Allotment Act (16 U.S.C. 590h(b)).
[[Page 67317]]
FCIC means the Federal Crop Insurance Corporation, a wholly owned
Government corporation within the U.S. Department of Agriculture.
Final decision means the program decision rendered by the county or
State committee or the FCIC Regional Service Office upon written
request of the participant. A decision that is otherwise final shall
remain final unless the decision is timely appealed to the State
committee or NAD. A decision of FSA or FCIC made by personnel
subordinate to the county committee is considered ``final'' for the
purpose of appeal to NAD only after that decision has been appealed to
the county committee under the provisions of this part.
FSA means the Farm Service Agency.
NAD means the National Appeals Division, established pursuant to
the 1994 Act.
NAD regulations means the National Appeals Division (NAD) rules of
procedure published by the Secretary at 7 CFR part 11 implementing
title II, subtitle H of the 1994 Act.
NRCS means the Natural Resource Conservation Service of the United
States Department of Agriculture, formerly the Soil Conservation
Service.
Reconsideration is a subsequent consideration of a prior decision
by the same reviewing authority.
Regional Service Office means the regional offices established by
FSA and FCIC for the purpose of making determinations for private
insurance companies reinsured by FCIC under the Federal Crop Insurance
Act and for FSA for insurance contracts delivered through county FSA
offices (including underwriting decisions), the applicability of
provisions under chapter IV of 7 CFR, and decisions as to insurability
and rating of acreage.
Reviewing authority means a person or committee assigned the
responsibility of making a decision on the appeal filed by the
participant in accordance with this part.
State committee means an FSA State committee established in
accordance with section 8(b) of the Soil Conservation and Domestic
Allotment Act (16 U.S.C. 590h(b)) including, where appropriate, the
Director of the Caribbean Area FSA office for Puerto Rico and the
Virgin Islands.
Technical determination of NRCS means a decision by NRCS concerning
the status and condition of the natural resources based on science and
on the best professional judgment of natural resource professionals
within NRCS.
Sec. 780.2 Applicability.
(a)(1) Except as provided in other regulations, this part applies
to decisions made under programs and by agencies, as set forth herein:
(i) Decisions in those domestic programs administered by the Farm
Service Agency (FSA), and programs administered by FSA on behalf of the
Commodity Credit Corporation (CCC) through State and county committees,
which are generally set forth in chapters VII and XIV of this title;
(ii) Technical decisions made by the Natural Resources Conservation
Service (NRCS) under title XII of the Food Security Act of 1985, as
amended;
(iii) Decisions made by personnel of the Federal Crop Insurance
Corporation (``FCIC'') or FSA with respect to contracts of insurance
insured by FCIC and the noninsured crop disaster assistance program;
(iv) Decisions made by personnel of FCIC or FSA with respect to
contracts of insurance provided by private insurance carriers and
reinsured by FCIC under the provisions of the Federal Crop Insurance
Act; and
(v) Other programs to which this part is made applicable by
individual program regulations.
(2) For covered programs, this part is applicable to any decision
made by FSA and its State and county committees, CCC, FCIC, the
personnel and agents of FSA, FCIC, or CCC, and by the officials of NRCS
(to the extent provided in Sec. 780.9), except as otherwise may be
provided in individual program requirements or by the Secretary.
(3) This part is not applicable to any decision:
(i) Made by FSA or FCIC with respect to any matter arising under
the terms of the Standard Reinsurance Agreement between FCIC and any
private insurance company reinsured by FCIC under the provisions of the
Federal Crop Insurance Act, as amended; or
(ii) Made by any private insurance company with respect to any
contract of insurance issued to any producer by the private insurance
company and reinsured by FCIC under the provisions of the Federal Crop
Insurance Act, as amended. Those insurance contracts are subject to
dispute resolution through arbitration or mediation in accordance with
the contract terms.
(b) With respect to matters identified in paragraph (a) of this
section, participants may request reconsideration or appeal, under the
provisions of this part, of decisions by an agency made with respect
to:
(1) Denial of participation in a program;
(2) Compliance with program requirements;
(3) Issuance of payments or other program benefits to a participant
in a program;
(4) Making payments or other benefits to an individual or entity
who is not a participant in a program; or
(5) Technical determinations by NRCS.
(c) No reconsideration or appeal may be sought under this part of
any general program provision or program policy, or any statutory or
regulatory requirement that is applicable to all similarly situated
participants.
(d) Mathematical formulas established under a statute or program
regulations, and decisions based solely on the application of those
formulas, are not appealable under this part.
(e) Only a participant may seek reconsideration or appeal under
this part.
Sec. Sec. 780.3-780.5 [Reserved]
Sec. 780.6 Mediation.
Participants have the right to seek mediation involving any
decision appealed under this part in accordance with the provisions of
section 282 of the 1994 Act, if the mediation program of the State
where the participant's farming operation giving rise to the decision
is located has been certified by the Secretary for the program involved
in the agency decision. Any time limitation for review contained in
this part will be stayed pending timely pursuit and completion of the
mediation process.
Sec. 780.7 Reconsideration and appeals with the county and State
committees and reconsideration with the regional service offices.
(a) A participant may appeal a decision of personnel subordinate to
the county committee by filing with the county committee a written
request for appeal that states the basis upon which the participant
relies to show that:
(1) The decision was not proper and not made in accordance with
applicable program policies; or
(2) All material facts were not properly considered in such
decision.
(b) A participant may seek reconsideration of a final decision by a
county committee or the Regional Service Office by filing a written
request for reconsideration with the county committee or the Regional
Service Office that states the basis upon which the participant relies
to show that:
(1) The decision was not proper and not made in accordance with
applicable program regulations; or
(2) All material facts were not properly considered in such
decision.
[[Page 67318]]
(c) A participant may appeal a final decision by a county committee
or the Regional Service Office to the State committee and request an
informal hearing in connection therewith, by filing a written appeal
with the State committee.
(d) A participant may seek reconsideration of a decision by a State
committee, and request an informal hearing in connection therewith, by
filing a written request for reconsideration with the State committee
that states the basis upon which the participant relies to show that:
(1) The decision was not proper and not made in accordance with
applicable program regulations; or
(2) All material facts were not properly considered in such
decision.
(e) Nothing in this part prohibits a participant from filing an
appeal of a final decision of the county committee or the Regional
Service Office with NAD in accordance with the NAD regulations.
(f) This section does not apply to a technical determination by
NRCS. Procedures regarding the appeal of a technical determination by
NRCS are contained in Sec. 780.9.
Sec. 780.8 Time limitations for filing requests for reconsideration or
appeal.
(a) A request for reconsideration or an appeal of a decision shall
be filed within 30 days after written notice of the decision which is
the subject of the request is mailed or otherwise made available to the
participant. A request for reconsideration or appeal shall be
considered to have been ``filed'' when personally delivered in writing
to the appropriate reviewing authority or when the properly addressed
request, postage paid, is postmarked. A decision shall become final and
non-reviewable unless reconsideration is timely sought or the decision
is timely appealed.
(b) A request for reconsideration or appeal may be accepted and
acted upon even though it is not filed within the time prescribed in
paragraph (a) of this section if, in the judgment of the reviewing
authority with whom such request is filed, the circumstances warrant
such action.
Sec. 780.9 Appeals of NRCS technical determinations.
(a) Notwithstanding any other provision of this part, a technical
determination of NRCS issued to a participant pursuant to Title XII of
the Food Security Act of 1985, as amended, including wetland
determinations, may be appealed to a county committee in accordance
with the procedures in this part.
(b) If the county committee hears the appeal and agrees with the
participant's appeal, the county committee shall refer the case with
its findings to the NRCS State Conservationist to review the matter and
review the technical determination. The County or State committee
decision shall incorporate, and be based upon, the NRCS State
Conservationist's technical determination.
Sec. 780.10 Other finality provisions.
The finality provisions contained in section 281 of the 1994 Act
shall be applied to appeals under this part to the extent provided for
in that section of the 1994 Act.
Sec. 780.11 Reservations of authority.
(a) Representatives of FSA, FCIC, and CCC may correct all errors in
entering data on program contracts, loan agreements, and other program
documents and the results of the computations or calculations made
pursuant to the contract or agreement.
(b) Nothing contained in this part shall preclude the Secretary, or
the Administrator of FSA, Executive Vice President of CCC, the Manager
of FCIC, the Chief of NRCS, if applicable, or a designee, from
determining at any time any question arising under the programs within
their respective authority or from reversing or modifying any decision
made by FSA or its county and State committees, FCIC, or CCC.
PART 781--DISCLOSURE OF FOREIGN INVESTMENT IN AGRICULTURAL LAND
1. The authority citation for part 781 continues to read as
follows:
Authority: Sec. 1-10, 92 Stat. 1266 (7 U.S.C. 3501 et seq.).
2. In Sec. 781.5 paragraphs (c), (d) and (e) are removed,
paragraphs (f) through (h) are redesignated as paragraphs (d) through
(f) respectively, and paragraph (b)(3) is revised and a new paragraph
(c) is added to read as follows:
Sec. 781.5 Penalty review procedure.
* * * * *
(b) * * *
(3) A request for a hearing on the proposed penalty may be filed in
accordance with part 780 of this title.
(c) After a final decision is issued pursuant to an appeal under
part 780 of this title, the Administrator or Administrator's designee
shall mail the foreign person a notice of the determination on appeal,
stating whether a report must be filed or amended in compliance with
Sec. 781.3, the amount of the penalty (if any), and the date by which
it must be paid. The foreign person shall file or amend the report as
required by the Administrator. The penalty in the amount stated shall
be paid by check or money order drawn to the Treasurer of the United
States and shall be mailed to the United States Department of
Agriculture, P.O. Box 2415, Washington, DC 20013. The Department is not
responsible for the loss of currency sent through the mails.
* * * * *
PART 1900--GENERAL
1. The authority for part 1900 is revised to read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 7 U.S.C. 6991, et. seq.;
42 U.S.C. 1480; Reorganization Plan No. 2 of 1953 (5 U.S.C. App.).
2-3. Subpart B is revised to read as follows:
Subpart B--Adverse Decisions and Administrative Appeals
1900.51 Definitions.
1900.52 General.
1900.53 Applicability.
1900.54 Effect on assistance pending appeal.
1900.55 Adverse action procedures.
1900.56 Non-appealable decisions.
1900.57 [Reserved].
* * * * *
Sec. 1900.51 Definitions.
Act means the Federal Crop Insurance Reform and Department of
Agriculture Reorganization Act of 1994, Public Law No. 103-354 (7
U.S.C. 6991 et seq.).
Agency means the Rural Utilities Service (RUS), the Rural Housing
Service (RHS), and the Rural Business-Cooperative Development Service
(RBS), or their successor agencies.
Refer to 7 CFR 11.1 for other definitions applicable to appeals of
adverse decisions covered by this subpart.
Sec. 1900.52 General.
This subpart specifies procedures for use by USDA personnel and
program participants to ensure that full and complete consideration is
given to program participants who are affected by an agency adverse
decision.
Sec. 1900.53 Applicability.
(a) Appeals of adverse decisions covered by this subpart will be
governed by 7 CFR part 11.
(b) The provisions of this subpart apply to adverse decisions
concerning direct loans, loan guarantees, and grants under the
following programs: RUS Water and Waste Disposal Facility Loans and
Grants Program; RHS Housing and Community Facilities Loan
[[Page 67319]]
Programs; RBS Loan, Grant, and Guarantee Programs and the Intermediary
Relending Program; and determinations of the Rural Housing Trust 1987-1
Master Servicer.
(c) This subpart does not apply to decisions made by parties
outside an agency even when those decisions are used as a basis for
decisions falling within paragraph (b) of this section, for example:
decisions by state governmental construction standards-setting agencies
(which may determine whether RHS will finance certain houses); Davis-
Bacon wage rates; flood plain determinations; archaeological and
historical areas preservation requirements; and designations of areas
inhabited by endangered species.
Sec. 1900.54 Effect on assistance pending appeal.
(a) Assistance will not be discontinued pending the outcome of an
appeal of a complete or partial adverse decision.
(b) Notwithstanding the provisions of paragraph (a) of this
section, administrative offsets initiated under subpart C of part 1951
will not be stayed pending the outcome of an appeal and any further
review of the decision to initiate the offset.
Sec. 1900.55 Adverse action procedures.
(a) If an applicant, guaranteed lender, a holder, borrower or
grantee is adversely affected by a decision covered by this subpart,
the decision maker will inform the participant of the adverse decision
and whether the adverse decision is appealable. A participant has the
right to request the Director of NAD to review the agency's finding of
nonappealability in accordance with 7 CFR 11.6(a). In cases where the
adverse decision is based on both appealable and nonappealable actions,
the adverse action is not appealable.
(b) A participant affected by an adverse decision of an agency is
entitled under section 275 of the Act to an opportunity for a separate
informal meeting with the agency before commencing an appeal to NAD
under 7 CFR part 11.
(c) Participants also have the right under section 275 of the Act
to seek mediation involving any adverse decision appealable under this
subpart if the mediation program of the State in which the
participant's farming operation giving rise to the decision is located
has been certified by the Secretary for the program involved in the
decision. An agency shall cooperate in such mediation. Any time
limitation for appeal will be stayed pending completion of the
mediation process (7 CFR 11.5(c)).
Sec. 1900.56 Non-appealable decisions.
The following are examples of decisions which are not appealable:
(a) Decisions which do not fall within the scope of this subpart as
set out in Sec. 1900.53.
(b) Decisions that do not meet the definition of an ``adverse
decision'' under 7 CFR part 11.
(c) Decisions involving parties who do not meet the definition of
``participant'' under 7 CFR part 11.
(d) Decisions with subject matters not covered by 7 CFR part 11.
(e) Interest rates as set forth in agency procedures, except for
appeals alleging application of an incorrect interest rate.
(f) The State RECD Director's refusal to request an administrative
waiver provided for in agency program regulations.
(g) Denials of assistance due to lack of funds or authority to
guarantee.
Sec. 1900.57 [Reserved]
Done at Washington, D.C., this 21st day of December, 1995.
Dan Glickman,
Secretary of Agriculture.
[FR Doc. 95-31397 Filed 12-28-95; 8:45 am]
BILLING CODE 3410-01-P
Complete official Federal Register PDF
FR Doc. 95-31392 Prior Labeling Approval System
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67444-67458]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31392]
[[Page 67443]]
_______________________________________________________________________
Part IV
Department of Agriculture
_______________________________________________________________________
Food Safety and Inspection Service
_______________________________________________________________________
9 CFR Part 301, et al.
Meat and Poultry Inspection; Final Rule and Proposed Rules
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 /
Rules and Regulations
[[Page 67444]]
DEPARTMENT OF AGRICULTURE
Food Safety and Inspection Service
9 CFR Parts 306, 317, 320, 327, and 381
[Docket No. 92-012F]
RIN 0583-AB92
Prior Labeling Approval System
AGENCY: Food Safety and Inspection Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Food Safety and Inspection Service (FSIS) is amending the
Federal meat and poultry products inspection regulations by expanding
the types of labeling, authorized for use on meat and poultry products
by official establishments in the United States and foreign
establishments certified under foreign inspection systems, which would
not require submittal to FSIS for approval prior to use. In addition,
FSIS is amending the Federal meat and poultry products inspection
regulations to permit the submission of only sketch labeling, except
for temporary approvals, in those instances where labeling is required
to be submitted for approval and to require retention of certain
labeling records. This final rule eliminates unnecessary duplication in
the labeling approval system, and contributes to President Clinton's
initiatives for greater efficiency in government services, (e.g., it is
consistent with the principles of the National Performance Review to
cut red tape, put customers first, and eliminate what is not needed).
EFFECTIVE DATE: July 1, 1996.
FOR FURTHER INFORMATION CONTACT: Ms. Cheryl Wade, Director, Food
Labeling Division, Regulatory Programs, Food Safety and Inspection
Service, U.S. Department of Agriculture, Washington, DC 20250, Area
Code (202) 254-2590.
SUPPLEMENTARY INFORMATION:
Background
Introduction
The Federal Meat Inspection Act (FMIA) (21 U.S.C. 601 et seq.) and
the Poultry Products Inspection Act (PPIA) (21 U.S.C. 451 et seq.)
direct the Secretary of Agriculture to maintain meat and poultry
inspection programs designed to assure consumers that meat and poultry
products distributed to them (including imports) are safe, wholesome,
not adulterated, and properly marked, labeled, and packaged.
Section 2 of the FMIA (21 U.S.C. 602) and section 2 of the PPIA (21
U.S.C. 451) state that unwholesome, adulterated, or misbranded meat or
meat food products and poultry products are injurious to the public
welfare, destroy markets for wholesome, not adulterated, and properly
marked, labeled, and packaged products, and result in sundry losses to
producers and processors of meat and poultry products, as well as
injury to consumers. Therefore, Congress has granted the Secretary
broad authority to protect consumers' health and welfare. Section 7(d)
of the FMIA (21 U.S.C. 607(d)) states: ``No article subject to this
title shall be sold or offered for sale by any person, firm, or
corporation, in commerce, under any name or other marking or labeling
which is false or misleading, or in any container of a misleading form
or size, but established trade names and other marking and labeling and
containers which are not false or misleading and which are approved by
the Secretary are permitted.'' The PPIA contains similar language in
section 8(c) (21 U.S.C. 457(c)).
Under the latter provisions, the Department has a longstanding
interpretation of the language to mean that the Secretary of
Agriculture or his or her representative has the responsibility to
approve all labels or other labeling to be used on federally inspected
and imported products prior to the distribution of such products from
establishments that distribute such products in interstate or foreign
commerce. Without approved labeling, products may not be sold or
offered for sale or otherwise distributed in commerce. The term
``labeling,'' as defined in section 1(p) of the FMIA and section 4(s)
of the PPIA (21 U.S.C. 601(p) and 453(s), respectively), means all
labels and other written, printed, or graphic matter (1) upon any
article or any of its containers or wrappers, or (2) accompanying such
article.
The aforementioned provisions also apply to establishments that
operate solely within designated States. A State is designated if it
does not have or is not effectively enforcing with respect to
establishments within its jurisdiction at which livestock or poultry
are slaughtered, or their carcasses, or products thereof, are prepared
for use as human food solely for distribution within such State,
requirements at least equal to titles I and IV of the FMIA and
specified sections of the PPIA as applicable. Once a State is
designated, the inspection requirements of the FMIA and PPIA apply to
establishments that slaughter livestock and poultry and/or prepare or
process meat and/or poultry products therefrom, solely for distribution
within the State.
Section 1(m)(8) of the FMIA (21 U.S.C. 601(m)(8)) and section
4(g)(8) of the PPIA (21 U.S.C. 453(g)(8)) provide that any carcass,
part thereof, meat or meat food product or any poultry product is
adulterated ``* * * if any valuable constituent has been in whole or in
part omitted or abstracted therefrom; or if any substance has been
substituted, wholly or in part therefor; or if damage or inferiority
has been concealed in any manner; or if any substance has been added
thereto or mixed or packed therewith so as to increase its bulk or
weight, or reduce its quality or strength, or make it appear better or
of greater value than it is* * * .'' Furthermore, section 1(n)(1) of
the FMIA (21 U.S.C. 601(n)(1)) and section 4(h)(1) of the PPIA (21
U.S.C. 453(h)(1)) prescribe that any carcass, part thereof, meat or
meat food product or poultry product is considered misbranded if its
labeling is false or misleading in any particular.
In order to prevent product adulteration and misbranding, the FMIA
and PPIA further authorize the Secretary to prescribe, whenever he or
she determines such action is necessary for the protection of the
public, (1) the styles and sizes of type to be used with respect to
material required to be incorporated in labeling to avoid false or
misleading labeling, and (2) definitions and standards of identity or
composition for meat and poultry products (section 7(c) of the FMIA, 21
U.S.C. 607(c), and section 8(b) of the PPIA, 21 U.S.C. 457(b)).
Current Regulations
The labeling provisions of the meat and poultry products inspection
regulations specify the required features of meat and poultry product
labels for immediate containers of domestic product (9 CFR part 317 and
9 CFR part 381, subpart N) and for imported product (9 CFR part 327 and
9 CFR part 381, subpart T). These include: (1) The standardized, common
or usual, or descriptive name of the product; (2) an ingredients
statement containing the common or usual name of each ingredient listed
in descending order of predominance; (3) the name and place of business
of the manufacturer, packer, or distributor; (4) an accurate statement
of the net quantity of contents; (5) the inspection legend; and (6)
special handling instructions if product is perishable; i.e., ``Keep
Frozen'' and ``Keep Refrigerated.'' These essential labeling features
must be prominently and informatively displayed on the principal
display panel or the information panel of the product label.
[[Page 67445]]
The regulations contain other provisions to ensure that no
statement, word, picture, design, or device which is false or
misleading in any particular or conveys any false impression or gives
any false indication of origin, identity, or quality, appears in any
marking or other labeling (9 CFR 317.8 and 381.129).
Any marking or labeling which is determined to be false or
misleading within the meaning of the FMIA or the PPIA and the
regulations promulgated thereunder causes the article to which it
relates to be misbranded, and, pursuant to the authority contained in
section 7(e) of the FMIA (21 U.S.C. 607(e)) and section 8(d) of the
PPIA (21 U.S.C. 457(d)), and 9 CFR 335.12 and 381.233 of the Federal
meat and poultry products inspection regulations, the Administrator,
FSIS, may withhold the use of such marking or labeling.
In addition to providing substantive labeling requirements, the
Federal meat and poultry products inspection regulations provide
specific information regarding permitted and nonpermitted uses of
various substances (9 CFR part 318 and part 381, subpart 0). These
provisions prohibit the use of any food additive, color additive,
pesticide chemical, or other added poisonous or deleterious substance,
or any other substance in or on meat and poultry products that would
cause such articles to be adulterated or misbranded within the meaning
of the FMIA and PPIA.
The Federal meat and poultry products inspection regulations also
prescribe definitions and standards of identity or composition for
certain meat and poultry products (9 CFR part 319 and part 381, subpart
P). Standards of composition identify the minimum amount of meat and/or
poultry required in a product's recipe. Standards of identity set
specific product requirements for a product's makeup. These standards
often specify (1) the kind and minimum amount of meat and/or poultry;
(2) the maximum amount of nonmeat ingredients, such as fat or moisture;
and (3) any other ingredients allowed or expected in the final product.
Current Prior Label Approval System
In order to assure that meat and poultry products comply with the
FMIA and PPIA and the regulations promulgated thereunder, FSIS conducts
a prior approval program for labels and other labeling as specified in
9 CFR 317.4, 317.5, 327.14, 327.15, 381.132, 381.134, and 381.205 to be
used on federally inspected meat and poultry products and imported
products. This program is administered by the Food Labeling Division
(FLD), Regulatory Programs, FSIS, in Washington, DC.
To obtain labeling approval, domestic meat and poultry processors
and certified foreign establishments, or their representatives, must
submit final labels and other final labeling, except under certain
conditions. Such foreign establishments are certified by responsible
officials of foreign meat and poultry inspection systems, to the
Department, in accordance with parts 327 and 381, subpart T, of the
Federal meat and poultry products inspection regulations as fully
complying with requirements at least equal to those imposed on domestic
products and establishments. Such foreign establishments are then
eligible to have their meat and poultry products imported into the
United States, unless the Administrator terminates their eligibility to
import products in accordance with parts 327 and 381, subpart T, of the
Federal meat and poultry products inspection regulations.
Meat and poultry processors and certified foreign meat
establishments may submit sketch labeling (a printer's proof or other
version which clearly shows all required labeling features, size,
location, and indication of final color), accompanied by FSIS Form
7234, ``Application for Approval of Labels, Marking or Device,'' to FLD
for review. Certified foreign poultry establishments are required to
submit sketch and finished (final) labels of immediate containers for
review and approval. The labeling application and sketch or final
printed labeling to be used on domestic meat and poultry products and
on imported meat products must be submitted to FLD in triplicate.
Certified foreign poultry establishments must submit two copies of
sketch and four copies of final labeling to FLD. In addition to the
required information, any special claims the processor intends to make
(e.g., quality claims or nutrient content claims) must also be included
on the labeling. The labeling application must contain the processing
procedures (sufficient to support the accuracy of the label) and
handling information, including the following as indicated on the form:
1. Product name;
2. Formulation information;
3. Firm name and address;
4. How the labeling is to be used;
5. Size and type of container; and
6. Size of the principal display panel.
All such information is reviewed by an FSIS label review specialist
who is responsible for assuring that the labeling complies with all
Federal regulations and labeling policies.
In 1983, the Agency promulgated regulations that granted limited
labeling approval authority to the inspector-in-charge (IIC) of
official establishments and established limited types of generically
approved labeling for official establishments (48 FR 11410). This
rulemaking did not establish analogous provisions for certified foreign
establishments. This rulemaking was intended to reduce the number of
labels and other labeling reviewed and processed by FLD, thereby
improving the efficiency of the labeling approval system by expediting
the process for specific types of labeling and reducing the paperwork
burden on official establishments. As a result of these regulations,
the IIC currently has authority to approve the types of labeling
identified in 9 CFR 317.4(e) and 381.132(c), (e.g., labeling for single
ingredient products without additional claims), provided certain
requirements are satisfied. However, under current regulations,
official establishments are not required to submit labeling that comes
within the categories of labeling the IIC can approve to the IIC for
approval, but rather have the option of submitting the labeling to FLD
for approval.
The regulations also specify limited types of labeling that can be
approved generically. The generically approved labeling provisions
allow establishments to make certain modifications to their previously
approved labeling. These modifications can be designed, developed,
printed, and applied to a product without submission for approval to
FSIS, provided the labeling shows all mandatory information in a
sufficiently prominent manner and is not false or misleading in any
particular. Generically approved labeling is labeling which contains
one or more of the modifications identified in 9 CFR 317.5(b) and
381.134(b), (e.g., all features of the labeling are proportionately
enlarged or reduced). Under the current regulations, official
establishments may submit labeling that comes within the generic
approval category, at their option, to FSIS for approval. The IIC is
also currently authorized to approve those types of labeling.
Currently, official establishments may submit sketch labeling to
FLD for approval, but must submit final labeling to FLD for approval,
except for generic or IIC approvals. Even though the IIC has the
authority to approve certain final labeling, many official
establishments continue to submit all final labeling to FLD for
approval.
[[Page 67446]]
During the development of the 1983 rule, FSIS estimated the number
of labels and other labeling reviewed by FLD at approximately 130,000.
During fiscal year 1991, FLD processed approximately 167,500 labels--
87,500 final labels and 60,000 sketch labels were reviewed and
approved, 20,000 labels were reviewed but not approved, and about
43,000 labels were approved by IIC's. No records are maintained on
numbers of temporary approvals, generically approved labels, or
labeling inserts.
The continuing increase in the numbers of labels and other labeling
submitted to FLD and limited Agency resources led to an Agency
assessment of the prior labeling approval system in 1990. In exploring
options for an improved labeling approval system, the Agency decided to
institute a plan to automate the labeling review process and to revise
internal procedures.
Advance Notice of Proposed Rulemaking
On March 25, 1992, FSIS published an Advance Notice of Proposed
Rulemaking (ANPR) (57 FR 10300) on the Agency's prior labeling approval
system. The ANPR presented the following two options for making
additional changes to the current prior labeling approval system: (1)
Revise the current system by significantly reducing the scope of review
through expanding the categories of generically approved labeling and
replacing the current general requirement of FSIS approval of sketch
and final labeling with one for sketch labeling only; and (2) replace
the current system with a system in which all labeling would be
generically approved and used without prior submission to FSIS.
FSIS sought comments on these two options and welcomed comments on
other options. FSIS also sought comments on the role of the IIC with
regard to review or enforcement of labeling, and on whether generic
approval should be provided for labeling that includes geographical,
quality, health, nutrient content, or negative claims, or guarantees.
FSIS received 110 comments in response to the ANPR. After review
and consideration of the comments received on the ANPR, FSIS issued a
proposed rule which is discussed in the following section.
Proposed Rule
On November 23, 1993, FSIS published a proposed rule (58 FR 62014)
to amend the Federal meat and poultry products inspection regulations
by expanding the types of labeling currently authorized for use on meat
and poultry products by official establishments in the United States
and foreign establishments certified under foreign inspection systems
which would be generically approved. The rule was proposed as a first
step in the gradual streamlining and modernization of the labeling
approval system. In the proposal, the Agency sought comments on a long-
term plan to implement an all-generic system.
Under the proposed rule, official establishments and establishments
certified by responsible officials of foreign inspection systems would
be required to submit only sketch labeling in those instances where
labeling was required to be submitted to FLD for approval. FSIS
proposed to limit the types of labeling submitted for review and
approval for domestic and imported products and to revise 9 CFR 317.4,
317.5, 381.132, 381.133, 327.14, 381.205, and 381.206. No final
labeling would be approved by FLD, except temporary labeling approvals.
The proposal defined a sketch label as a printer's proof or equivalent
which clearly shows all labeling features (as set forth in 9 CFR 317.2
and part 381, subpart N), as well as size, location, and indication of
final color and is no larger than 8\1/2\ x 14 inches. The proposed size
requirement was a result of the Agency's efforts to automate the review
process and to use scanning technology to record certain information
from the labeling application. The proposal provided that a parent
company for a corporation need only submit one labeling application for
a product produced in other establishments which were owned by the
corporation. The proposal indicated that this provision for
corporations would reduce the burdens on the industry and the Agency in
submitting and revising such applications without posing any apparent
risk of misbranding. The proposal also provided that once a sketch was
approved, the establishment would have the authority to print a final
copy and use the labeling without any further authorization from the
Agency.
Also, under the proposed rule, establishments would still be
required to assure that the labeling was not false or misleading in any
particular. If an establishment chose to modify an approved sketch, the
establishment would be authorized to use the final labeling if such
labeling complied with the requirements proposed in 9 CFR 317.5,
327.14, 381.133, and 381.205. If the labeling was not in accord with
these proposed provisions, the labeling would be required to be
resubmitted as a sketch for approval by FLD.
FSIS proposed to revise the IIC and generic approval authorities
prescribed in 9 CFR 317.4(e), 317.5, 381.132(c), and 381.134 to
alleviate the burden of labeling approval imposed upon IIC's. The IIC
would retain, however, the authority to approve meat carcass ink brands
and meat food product ink and burning brands. All other provisions of 9
CFR 317.4(e), 317.5, 381.132(c), and 381.134 would be combined to
permit establishments to use final labeling for products in certain
circumstances without the submission of a sketch to FLD and to use
final labeling for products for which a sketch had been approved. FSIS
proposed to add to this authority a few other provisions including the
permitted use of labeling for standardized products prescribed in 9 CFR
parts 319 and 381, subpart P, provided such labeling did not contain
special claims, such as quality claims, nutrient content or health
claims, geographical origin claims, negative claims, and guarantees,
and was not a domestic product labeled with a foreign language.
FSIS proposed to permit official establishments and foreign
establishments certified by officials of foreign inspection systems to
use the following generically approved labeling without the submission
of sketches for approval by FSIS:
1. Labeling for a product which has a standard of identity or
composition as specified in 9 CFR part 319 or part 381, subpart P, and
which does not contain any special claims, such as quality claims,
nutrient content claims, health claims, negative claims, geographical
origin claims, or guarantees, or which is not a domestic product
labeled with a foreign language;
2. Labeling for single-ingredient products (such as beef steak,
lamb chops, chicken legs, or turkey breasts) which does not contain
special claims, such as quality claims, nutrient content claims, health
claims, negative claims, geographical origin claims, or guarantees, or
which is not a domestic product labeled with a foreign language;
3. Labeling for products marked ``For Export Only'' in U.S.
establishments which does not contain any special claims, such as
quality claims, nutrient content claims, health claims, negative
claims, geographical origin claims, or guarantees;
4. Labeling for containers of meat and meat food products and
poultry products sold under contract specifications to Federal
Government agencies, when such product is not offered for sale to the
general public, provided the contract specifications include specific
requirements with
[[Page 67447]]
respect to labeling, and are made available to the IIC;
5. Labeling for shipping containers which contain fully labeled
immediate containers, provided such labeling complies with 9 CFR 316.13
or 381.127.
6. Labeling for products not intended for human food, provided they
comply with 9 CFR part 325 or 9 CFR 381.152(c) and 381.193, and
labeling for poultry heads and feet for export for processing as human
food if they comply with 9 CFR 381.190(b);
7. Inspection legends, which comply with 9 CFR parts 312 and 316
and 9 CFR part 381, subpart M; and
8. Inserts, tags, liners, pasters, and like devices containing
printed or graphic matter and for use on, or to be placed within
containers, and coverings of products, provided such devices contain no
reference to product and bear no misleading feature.
The proposed rule would also permit official establishments and
foreign establishments certified by officials of foreign inspection
systems to use final labeling, without further authorization from FSIS,
that was approved by FSIS, FLD, in sketch form if the final labeling
was prepared without modification or with the following modifications:
1. All features of the labeling are proportionately enlarged or
reduced, provided that all minimum size requirements specified in
applicable regulations are met and the labeling is legible;
2. A substitution of the abbreviation ``lb.'' for ``pound,'' or
``oz.'' for ``ounce,'' or of the word ``pound'' for ``lb.'' or
``ounce'' for ``oz.'';
3. A master or stock label has been approved from which the name
and address of the distributor are omitted and such name and address
are applied before being used (in such case, the words ``prepared for''
or similar statement must be shown together with the blank space
reserved for the insertion of the name and address when such labels are
offered for approval);
4. During holiday seasons, wrappers or other covers bearing floral
or foliage designs or illustrations of rabbits, chicks, fireworks, or
other emblematic holiday designs are used with approved labeling (the
use of such designs will not make necessary the application of labeling
not otherwise required);
5. A change in the language or the arrangement of directions
pertaining to the opening of containers or the serving of the product;
6. The addition, deletion, or amendment of a dated or undated
coupon, a cents-off statement, cooking instructions, packer product
code information, or UPC product code information;
7. Any change in the name or address of the packer, manufacturer or
distributor that appears in the signature line;
8. Any change in the net weight, provided the size of the net
weight statement complies with 9 CFR 317.2 or 381.121;
9. The addition, deletion, or amendment of recipe suggestions for
the product;
10. Any change in punctuation;
11. Newly assigned or revised establishment numbers for a
particular establishment for which use of the labeling has been
approved by the FLD;
12. The addition or deletion of open dating information;
13. A change in the type of packaging material on which the label
is printed;
14. Brand name changes, provided that there are no design changes,
the brand name does not use a term that connotes quality or other
product characteristics, the brand name has no geographic significance,
and the brand name does not affect the name of the product;
15. The deletion of the word ``new'' on new product labeling;
16. The addition, deletion, or amendment of special handling
statements, such as ``Keep Refrigerated'' or ``Keep Frozen,'' provided
that the change is consistent with 9 CFR 317.2(k) or 381.125(a);
17. The addition of safe handling instructions as required by 9 CFR
317.2(l) or 381.125(b).
18. Changes reflecting a change in the quantity of an ingredient
shown in the formula without a change in the order of predominance
shown on the label, provided that the change in quantity of ingredients
complies with any minimum or maximum limits for the use of such
ingredients prescribed in 9 CFR parts 318 and 319, or 9 CFR 381.147 or
9 CFR part 381, subpart P;
19. Changes in the color of the labeling, provided that sufficient
contrast and legibility remain;
20. The addition, deletion, or substitution of the official USDA
grade shield on labels of poultry products;
21. A change in the product vignette, provided the change does not
affect mandatory labeling information or misrepresent the content of
the package; or
22. A change in an establishment number by a corporation or parent
company for an establishment under its ownership.
Section 327.15 of the Federal meat inspection regulations (9 CFR
327.15) requires that all labeling used with outside containers of
foreign meat product must be approved in accordance with 9 CFR part
317. However, 9 CFR 381.206 dealing with shipping containers of
imported poultry products does not include such a provision. FSIS
proposed to clarify 9 CFR 381.206 to indicate that shipping containers
of imported poultry products would be approved in accordance with 9 CFR
part 381, subpart N of the poultry products inspection regulations.
This is merely a clarification of our labeling approval procedures.
FSIS proposed to transfer the responsibility of maintaining updated
generically approved labeling records from the IIC to the official
establishment in the United States and to require establishments
certified by officials of a foreign inspection system to maintain such
records. FSIS also proposed to require establishments to maintain
records of labeling approved by FLD. In order to monitor compliance of
regulatory labeling requirements, FSIS proposed that establishments
maintain records on all labeling used and make such records available
to any authorized USDA official upon request. Each record would consist
of a copy of the labeling and the product formulation and processing
procedure. Under the proposed rule, official establishments would not
have to present to the IIC a copy of the generically approved labeling
prior to its use, as is currently required under 9 CFR 317.5 and
381.134.
Sections 306.5, 327.24, 381.35 and 381.202(d) of the meat and
poultry regulations (9 CFR 306.5, 327.24, 381.35, and 381.202(d))
specify the appeal procedures to be followed for decisions made by
program employees or inspectors. These sections also state that denial
of a labeling application by the IIC or inspector is not a basis for
appeal under these sections. Since the proposed rule would not maintain
the IIC's authority to approve labeling applications, there would no
longer be a need to retain this provision. Therefore, the proposed rule
proposed to remove these provisions from these sections.
FSIS proposed to randomly select samples of generically approved
labeling from official establishments and establishments certified
under a foreign inspection system in order to determine compliance with
labeling requirements. If the Agency found that any such labeling was
false or misleading in any particular, FSIS would initiate the
proceedings set forth in 9 CFR 335.12 and 381.233 for domestic and
imported products.
[[Page 67448]]
Although FSIS did not propose to change the general authority for
temporary labeling approvals currently specified in 9 CFR 317.4(d) and
381.132(b), provisions for temporary approvals were proposed at 9 CFR
317.4(f)(1) and 381.132(f)(1). FSIS proposed that final labeling
deficient in some particular could be granted a temporary approval for
up to 180 days, provided, among other things, that the product was not
misrepresented. FSIS also proposed that such an approval could be
extended under certain circumstances. Temporary labeling approval
requests would continue to be handled the same as sketch labeling
approvals through submission of labeling applications to FLD.
FSIS also proposed to remove the provision set forth in 9 CFR
317.4(b) that required that paper takeoffs of lithographed labels, in
lieu of sections of the metal containers, be submitted to the Agency
for approval. This provision was intended to assist producers of canned
products when submitting final labeling. However, because FLD would no
longer review final labeling, such provision would no longer be needed.
Alternative Option Considered
In developing the proposal, FSIS considered the alternative of
proposing a system where all labeling for domestic and imported
products would be generically approved. Under this alternative, there
would not be any labeling review and approval conducted by program
employees, either at headquarters or in the field. Establishments would
be authorized to design, develop, print, and apply labeling without any
submission to FSIS, provided that the labeling complied with existing
labeling regulations. As with generically approved labeling under the
proposed rule, establishments would be required to maintain records for
all labeling. These records would include a copy of the labeling used
on the product and a record of the product formulation and processing
procedure. In addition, similar to the proposed rule, under this
alternative there would be an enhanced sampling program to assure that
labeling was accurate and not misleading. It was envisioned that this
sampling program would supplement, but not replace, the existing in-
plant inspection task that directs inspectors of official
establishments and analogous personnel of certified foreign
establishments to check a sample of labeling to determine if the
labeling is correct and used as intended.
After reviewing the comments received in response to the proposed
rule (see following discussion), and in light of FSIS' ongoing
reassessment of its labeling policies, FSIS has decided to proceed, at
this time, with the gradual streamlining and modernization of the prior
labeling approval system. Therefore, FSIS will expand the types of
labeling that will be generically approved, as opposed to instituting
at this time a system where all labeling would be generically approved.
FSIS anticipates making further changes after completing the
reassessment of the prior label approval system.
Discussion of Comments
FSIS received 122 comments in response to the proposed rule. The
majority of the comments (88) were submitted by food manufacturers,
while 13 were received from industry trade associations, 12 from food
industry consultants, 5 from consumers, 3 from foreign governments, and
1 from another Federal agency. The following discussion is a summary of
the major issues and comments received.
1. ``Sketch Only'' System of Approval
Many commenters supported the streamlining of the current prior
labeling approval process which would eliminate the need to submit
final labeling for approval, and which, in turn, would eliminate
unnecessary duplication in the labeling approval system. However, a few
commenters opposed a ``sketch only'' system of approval and wanted to
maintain the existing system of approval. These commenters appeared to
be concerned about their lack of understanding of all the existing
labeling regulations and their ability to keep abreast of any future
changes to the regulations. They expressed concern about the possible
extent of their liability if a product were misbranded and severity of
penalties that might occur as a result of an unintentionally misbranded
product entering the marketplace.
FSIS believes that requiring a sketch-only system of approval for
most labeling situations will alleviate unnecessary duplication in the
labeling approval system. Conformance with labeling policies and
regulations will be verified when labeling is submitted as a sketch.
FSIS does not believe it is necessary to reverify conformance of final
labeling in order to prevent mislabeling of products, and, therefore,
will permit final labeling that has been approved in sketch form to be
used without further authorization from FSIS, where the final labeling
is prepared without modification. Final labeling, however, that is
altered from the approved sketch must be resubmitted as a ``sketch'' to
FSIS for approval, unless the changes made to the final labeling
conform with modifications included in the generic approval category.
A few commenters suggested that a numbering system, similar to the
system that is currently used to identify final approved labeling,
should be developed for sketch approvals when the Agency implements a
sketch-only system of approval. FSIS intends to assign formal approval
numbers to approved sketches. The numbering system will be similar to
the system currently used for final approvals. The sketches will be
processed and filed permanently for future reference.
2. Printer's Proof for Sketch Approval
While many commenters supported a sketch-only system of approval,
in many cases, the support was contingent upon the Agency clarifying
its definition for a sketch as a ``printer's proof or equivalent.''
It was not the intent of the Agency to limit sketch submittals
solely to actual ``printer's proofs.'' FSIS believes that the term
``equivalent,'' as used in the proposed definition of ``sketch,''
conveys that methods of sketch preparation, other than an actual
``printer's proof,'' would also be acceptable. Accordingly, FSIS will
accept a printer's proof or equivalent, such as sketches that are hand
drawn or computer generated or other reasonable facsimiles that clearly
represent the final version of the labeling. FSIS has added examples of
what would be considered equivalent to a printer's proof in the final
regulation. FSIS believes it is appropriate to leave in the phrase ``or
equivalent'' in order to provide the needed flexibility to meet the
requirement of submission of a sketch. As FSIS moves to a sketch-only
system of approval, the Agency believes it is necessary to emphasize
the importance of submitting sketches prepared in a manner that clearly
indicates all labeling features, including their size, location, and an
indication of final colors so that final printed labeling will be
accurately and correctly prepared.
3. Final Color Indication on Sketches
A few commenters objected to the need for an indication of final
color on the sketch. However, after reviewing these comments, FSIS
believes that these commenters may have believed that the requirement
of indicating final colors on the sketch meant that FSIS would accept
only color proofs or color sketches.
FSIS is not requiring that a color proof or sketch be submitted.
However, FSIS
[[Page 67449]]
believes it is necessary to continue to require an indication of final
color to ensure that the labeling requirements for proper contrast and
legibility will be met on final printed labeling. In light of the
comments received, FSIS has clarified the final regulations to make it
clear that the requirement of indicating final colors can be met in a
numbers of ways. The requirements of indication of final color may be
met by: Submission of a color sketch, submission of a sketch which
indicates by descriptive language the final colors, or submission with
a sketch of previously approved final labeling that indicates the final
colors.
4. Size Limitations for Sketch Submittals
A few commenters objected to the size limitations for sketch
submittals (i.e., 8\1/2\ x 14 inches) that was proposed in an effort to
accommodate the expected automation and modernization of the labeling
approval process.
Although the Agency continues to move toward a more automated,
modernized approval system, the Agency is not yet at the stage of
development that such restrictions are necessary. Therefore, FSIS will
not limit sketch submittals to the proposed size requirement of no
larger than 8\1/2\ x 14 inches.
5. Temporary Approval
Several commenters requested that temporary labeling approval be
extended beyond 6 months.
FSIS grants and proposed to continue to grant temporary approval
for labeling deemed deficient in some particular for a period of time
not to exceed 6 months, provided that (1) the proposed labeling would
not misrepresent the product, (2) use of the labeling would not present
any potential health, safety, or dietary problems to the consumer, (3)
denial of the request would create undue economic hardship, and (4) an
unfair competitive advantage would not result from granting the
temporary approval.
FSIS continues to believe that changes to labeling that must be
made as a result of these conditions can be accomplished within a 6-
month timeframe. In certain circumstances, the current and proposed
regulations allow temporary approvals to be extended beyond the 6-month
timeframe. Therefore, FSIS has not extended the maximum time granted to
temporary approval requests beyond that which currently exists in the
regulations.
6. Expansion of the Generic Label Approval Category
Commenters concurred with the Agency's proposed expansion of the
generically approved labeling categories to include those categories of
labeling presently approved by the IIC. However, most commenters did
not agree that standardized products should be included in the generic
category. Commenters stated that not all of the existing product
standards provide enough guidance to ensure labeling compliance. In
addition, several commenters stated that few standards are actually
codified in the Federal meat and poultry products inspection
regulations, and that numerous informal standards are contained in the
Standards and Labeling Policy Book.
Although FSIS acknowledges the concerns expressed, FSIS continues
to believe that standardized products should be included in the generic
approval category. Permitting the generic approval of labeling for
these products will not affect the safety of the products. Consumers
will continue to receive the information they need about the products
from the ingredients statement and the Nutrition Facts panel. FSIS'
prior review of these labels does not provide any additional benefits
and requires resources that could be used in overseeing other areas
more directly related to health and safety. In addition, including
standardized products under generic approvals streamlines and makes
more efficient the label review process, without compromising product
safety. Furthermore, this action is consistent with the Agency's focus
on using resources to reduce actual risks to the public as discussed in
its February 3, 1995, HACCP proposal.
FSIS has also determined that standardized products contained in
the Standards and Labeling Policy book should be eligible for generic
approval.
Therefore, FSIS has modified the provison for generic approval of
standardized products in two ways. First, FSIS will grant manufacturers
the flexibility to generically approve labeling for standardized
products found in 9 CFR part 319 or part 381, subpart P, and the
Standards and Labeling Policy Book, provided such labeling does not
contain any special claims or the product is not a domestic product
labeled in a foreign language. Second, FSIS will allow the submission
of sketch labeling for review and approval if manufacturers so desire.
FSIS believes that the above modification will alleviate the concerns
expressed by the commenters.
FSIS is currently reassessing the role of regulatory and policy
standards in promoting meat and poultry products with better
nutritional profiles (e.g., lower in fat and cholesterol). FSIS is also
currently reassessing its labeling regulations. Additionally, an
assessment is planned that will involve public input regarding
modification or elimination of the informal policy standards in the
Standards and Labeling Policy Book.
A few commenters expressed concern that labeling prepared for the
Child Nutrition (CN) Program, conducted by USDA's Food and Nutrition
Service, would not receive adequate review under the proposed approval
system and opposed the inclusion of these product labels in the generic
approval category. FSIS views CN information on the labeling as if it
were a claim. Therefore, CN labeling will not be included in a generic
approval category and will require review and sketch approval by FSIS.
As stated in the proposal, several commenters to the ANPR believed
that the generic approval category could be expanded beyond those
situations specifically identified in the ANPR. In the past, FSIS had
been reluctant to expand the generic approval category further, until
it could be demonstrated that this method of labeling approval would
continue to provide the public with accurate, non-misleading labeling
information. However, these suggestions were brought up again among the
comments to the proposal. The Agency is now convinced that its present
position is unnecessarily restrictive and now agrees that there are
some other labeling categories that should be included in the generic
approval category which would result in little, if any, risk of
misbranding. Also, FSIS believes that the scope of some generic
approval categories should be broadened.
After reviewing the suggestions presented by the commenters, FSIS
agrees that it is appropriate to include additional categories of
labeling under the generic approval category and to broaden the scope
of some of the generic approval categories. Therefore, the following
categories of labeling that will be generically approved have been
either added or broadened in this final rule for the reasons explained
below.
a. Quantitative adjustments to the nutrition labeling information,
except for serving sizes, provided the changes do not affect the
accuracy and consistency of the nutrition labeling information, (e.g.,
revising the fat content from 10 to 7 grams), for labeling that was
previously approved by FLD as sketch labeling.
Meat and poultry companies will periodically need to revise
nutrition information on their labeling as a result of ongoing
nutrition monitoring programs. Several commenters
[[Page 67450]]
recognized that this particular labeling situation was not adequately
addressed by the nutrition labeling regulations and suggested that
quantitative nutrition labeling changes could be included in the
expanded generic approval category.
FSIS never intended to require manufacturers to resubmit labeling
for approval to make quantitative changes to the nutrition labeling
information. Since the manufacturers are responsible for declaring
accurate nutrition information, FSIS believes that quantitative
nutrition information labeling changes will have little impact on the
accuracy of the labeling. Requiring such labeling changes to be
resubmitted through the approval process would undermine the Agency's
efforts to streamline the approval process and reduce the volume of
labeling submitted to FSIS for review. Furthermore, the accuracy of
nutrition labeling will be monitored through the Agency's planned
compliance, audit, and sampling activities. However, FSIS does not
believe that it is appropriate to allow quantitative changes for
serving sizes to be included in the expanded generic approval category.
The need to maintain uniform serving sizes for specific products is
very critical to the overall integrity of the nutrient profile of
products. Thus, quantitative nutrition information labeling changes,
except for serving sizes, may be generically approved for labeling that
was previously approved by FLD as sketch labeling, provided the changes
in no way render the labeling false or misleading in any particular.
b. Labeling for consumer test products not intended for sale.
Historically, products prepared for consumer test purposes have not
presented FSIS with regulatory problems. These products are produced
under controlled conditions and in limited quantities, and are not
broadly distributed in the marketplace. In addition, all of the
product's ingredients must be listed on the labeling and conform with
all regulatory restrictions on their use. FSIS believes that permitting
the generic approval of labeling for consumer test products will allow
processors to more expeditiously develop and produce new, safe,
wholesome products while testing consumer acceptance. Accordingly, FSIS
will allow generic approval of labeling for consumer test products that
will not be sold.
c. Deletion of any claim or other nonmandatory feature or
information on labeling that was previously approved in sketch form,
provided the deletion of the information will not render the labeling
false or misleading in any particular.
Companies often delete claims and other nonmandatory information on
the labeling (e.g., promotional information, cooking instructions, and
recipes) as a part of their overall marketing strategy. Some examples
of these situations are already included in the existing generic
approval category (e.g., deletion of the word ``new'' and modification
of cooking instructions (9 CFR 317.5 and 381.134)). FSIS believes there
is little, if any, risk of misbranding by broadening the generic
approval category to allow the deletion of any claim or other
nonmandatory information, for labeling previously approved in sketch
form.
d. The addition or deletion of a direct translation of the English
language into a foreign language for products marked ``for export
only,'' for labeling previously approved by FLD as sketch labeling.
Traditionally, the responsibility of accurately making a direct
translation of the English language into a foreign language for
products marked ``for export only'' has rested with manufacturers. FSIS
believes that the addition or deletion of a direct translation of the
English language into a foreign language for products marked ``for
export only'' will not compromise the accuracy of the labeling of those
products. Furthermore, FSIS is of the opinion that the inclusion of
such labeling modifications in the generically approved category is
consistent with the intent of this final rule. Thus, FSIS will permit
generic approval of the addition or deletion of a direct translation of
the English language into a foreign language for products marked ``for
export only,'' whose labeling was previously approved in sketch form.
e. The substitution of any unit of measurement with its
abbreviation or the substitution of an abbreviation with its unit of
measurement.
In its proposal, FSIS proposed that the substitution of the
abbreviation ``lb.'' for ``pound,'' or ``oz.'' for ``ounce,'' or the
substitution of the word ``pound'' for ``lb.,'' or ``ounce'' for
``oz.'' on labeling would be generically approved. FSIS now believes,
after reviewing the comments, that broadening the scope of this
category to include the substitution of any unit of measurement with
its abbreviation or the substitution of an abbreviation with its unit
of measurement will not compromise the accuracy of product labeling.
Thus, FSIS will permit the substitution of any unit of measurement with
its abbreviation and substitution of an abbreviation with its unit of
measurement, e.g., ``lb.'' for ``pound'' or ``teaspoon'' for ``tsp.''
f. Wrappers or other covers bearing pictorial designs, emblematic
designs or illustrations, e.g., floral arrangements, illustrations of
animals, fireworks, etc. are used with approved labeling (the use of
such designs will not make necessary the application of labeling not
otherwise required);
FSIS had proposed to allow generic approval during holiday seasons
of wrappers or other coverings bearing floral or foliage designs,
illustrations, or other emblematic holiday designs.
FSIS now believes, after reviewing the comments, that allowing the
generic approval of only holiday designs on wrappers or other covers is
too restrictive. Therefore, FSIS has broadened the scope of this
category to permit the use of any pictorial or emblematic design, or
illustration on wrappers or other covers, provided such design will not
render the labeling to be false or misleading. FSIS is of the opinion
that the inclusion of such labeling modification in the generically
approved category is consistent with the intent of this final rule.
7. Voluntary Approval for Labeling Eligible For Generic Approval
Some of the commenters who expressed support for the expansion of
the generic approval category wanted to retain the option of submitting
labeling to FSIS for review and approval, even when the labeling is
eligible for generic approval.
As previously stated, FSIS is aware that there are some concerns
about the provision to include standardized products within the
generically-approved labeling category. The intent of this rulemaking
is to improve the overall efficiency of the labeling approval process
by limiting the amount of labeling submitted to FSIS for review and
approval, which cannot be achieved if all labeling authorized to be
generically approved were permitted to be submitted for review and
approval. Further, permitting all labeling authorized for generic
approval to be submitted for review and approval would take away from
the limited resources FSIS has at its disposal which it needs to review
those aspects of labeling requirements that involve potential public
health concerns. Nonetheless, FSIS has always provided, and will
continue to provide advice and counsel to the industry and to the
public at-large concerning labeling issues. To make very clear that
FSIS remains committed to providing needed advice in appropriate
circumstances, FSIS has modified the proposed rule to allow
manufacturers to voluntarily submit sketch labeling for standardized
[[Page 67451]]
products for review and approval. Many of these products have complex
compositional and minimum content requirements. FSIS is also providing
this option for standardized products contained in the Standards and
Labeling Policy Book because many of these products also have complex
compositional and minimum content requirements. FSIS has determined
that manufacturers should have the option, at this time, of submitting
sketch labeling for standardized products for review. However, as FSIS
begins a more indepth review of its labeling requirements and
practices, FSIS may propose in a future rulemaking to remove this
voluntary submittal option. This would be consistent with the intent of
this rulemaking, which is to limit the types of labeling submitted for
review so that FSIS resources can be focused on issues that bear
directly on public health and food safety.
8. Generic System of Labeling Approval
Under an all-generic system, establishments would design, develop,
print, and apply labeling without submission to FSIS for review and
approval. A few commenters supported the proposed concept of an all-
generic labeling approval system, citing reductions in costs and
improved efficiency. However, the majority of the commenters opposed an
all-generic system of approval because of concerns with their ability
to fully understand and consistently interpret the existing labeling
policies and regulations, the potential for misbranded product to enter
the marketplace, and concern with penalties for misbranding and product
recalls.
FSIS is currently reassessing the proposed all-generic labeling
system of approval as an alternative option in an effort to streamline
and modernize the label review process.
9. Preemption Concerns
Several commenters expressed concern that the proposal acknowledged
``concurrent jurisdiction'' (i.e., the States and local governments may
exercise concurrent jurisdiction over meat and poultry products that
are outside official establishments for the purpose of preventing
distribution of meat and poultry products that are misbranded or
adulterated under the FMIA or PPIA). The comments indicated that FSIS
should clearly state that the new labeling requirements will have a
preemptive effect on the requirements of the various States and local
governments.
The provisions of the FMIA and PPIA preclude any State or local
jurisdiction from imposing ingredient, marking, or labeling
requirements on products produced in federally inspected establishments
that are different or in addition to Federal requirements. In this
regard, State and local jurisdictions cannot impose different or
additional requirements, regardless of whether the labeling is approved
in sketch form by FSIS or generically approved by FSIS.
10. The IIC's Role Under a Generic Approval System
Many commenters were concerned about the responsibilities of the
IIC with respect to product packaged in generically approved labeling.
Commenters repeatedly stated that the role of the IIC must be clearly
defined for these proposed changes to be implemented efficiently. Most
commenters contended that the IIC's limited knowledge and expertise on
labeling regulations and policies may lead to unwarranted interference
or retention of product. In addition, some commenters stated that
labeling interpretations made by individual inspectors would not
contribute toward uniformity in labeling decisions.
FSIS believes some of the concerns raised by commenters will be
alleviated since the Agency will issue a notice to field personnel that
will clearly describe how to respond to and report label deficiencies.
FSIS is currently conducting a top to bottom review of how the
Agency defines its regulatory roles, allocates resources, and is
organized (60 FR 32127). The IIC's role with regard to monitoring
product formulations and processing procedures will be addressed in
that review but will not change or be diminished as a result of this
regulation. Inspection personnel will continue to observe and monitor
product formulations and processing procedures to assure conformance
with general labeling requirements. If inspection personnel observe
that products are not being manufactured in accordance with their
formulation or believe that a situation may have health or safety
significance, they are to take the appropriate action necessary to
ensure that misbranded and/or adulterated product does not enter
commerce. In addition, inspection personnel are to immediately contact
FLD, through appropriate channels, for technical assistance.
11. Recordkeeping
FSIS proposed that domestic establishments and establishments
certified by officials of a foreign inspection system maintain records
on all labeling used, and make such records available to any authorized
USDA official, upon request. Each record would consist of the product's
labeling, formulation, and processing procedure. Several commenters
requested clarification about the location and content of the required
records.
Manufacturers of meat and poultry products will be required to
maintain records of all labeling used, along with the product's
formulation and processing procedure in accordance with 9 CFR part 320
of the meat inspection regulations for meat products, and in accordance
with 9 CFR part 381, subpart Q of the poultry products inspection
regulations for poultry products. This means that records of the actual
labeling used on a product, along with the product's formulation and
processing procedures must be maintained.
In regard to where the required records must be located, i.e.,
maintained, the final regulations, as did the proposal, require, as
previously stated, the records to be maintained in accordance with 9
CFR part 320 for meat products, and in accordance with 9 CFR part 381,
subpart Q for poultry products. In accordance with section 320.2 of the
meat inspection regulations and section 381.176 of the poultry products
inspection regulations, required records must be maintained by a
person, including a corporation at the place of business where the
business is conducted, except that if a person, including a corporation
conducts business at multiple locations, records may be maintained at
the headquarters office. FSIS does not believe it is necessary to
require all establishments at multiple locations to maintain copies of
the labeling records required by this final rule. However, the IIC will
retain his or her authority to request the labeling records to verify
the accuracy of the labeling of products as it relates to official
business.
Any existing labeling files maintained by inspection personnel at
federally inspected establishments will be returned to plant management
at the time this regulation is implemented.
This final rule will eliminate the requirement that inspection
personnel maintain labeling files. FSIS has determined, after further
examination of the regulations, that the elimination of this
requirement will necessitate changes in other related provisions of the
meat and poultry inspection regulations (9 CFR 317.14, 381.141, and
381.137). FSIS inadvertently omitted these provisions in the proposed
rule but believes such provisions must be amended to avoid confusion
among inspection personnel regarding their
[[Page 67452]]
labeling responsibilities and to make the regulations consistent. The
current provisions in 9 CFR 317.14 and 381.141 require the inspector,
upon notification of an obsolete label, to return the label that is in
the official labeling file to the establishment and to forward the
label transmittal to FLD for further data processing. This procedure
will become unnecessary because the final rule, as did the proposal, no
longer, in general, requires inspection personnel to maintain labeling
files. Thus, FSIS is eliminating 9 CFR 317.14 and 381.141 to relieve
inspection personnel of the responsibility of handling obsolete
labeling records. In addition, the provision in 9 CFR 381.137 states
that no inspector shall authorize the use of any labeling or device
unless he or she has on file evidence that such labeling or device has
been approved in accordance with the appropriate provisions. Because
inspection personnel will no longer maintain labeling files, the IIC's
responsibility for authorizing the use of labeling will not be
required. Thus, FSIS is revising 9 CFR 381.137 to delete the IIC's
responsibility for authorizing the use of approved labeling based on
evidence maintained in official labeling files. FSIS believes that
amending the aforementioned provisions is consistent with the intent of
this final rule.
12. Auditing the Accuracy of Generically Approved Labeling
To monitor compliance with the Federal meat and poultry products
inspection regulations, FSIS proposed to select samples of generically
approved labeling.
In addition to routine compliance and inspection activities, FSIS
will develop and implement a sampling plan for the expanded types of
labeling under the generic approval category. The sampling plan will be
directed from FSIS headquarters in Washington. FSIS inspection
personnel will collect all pertinent labeling records corresponding to
each selected sample. These samples would be collected and forwarded to
FLD for audit. FLD will evaluate the samples to determine if they
comply with labeling regulations and policies.
13. Modernization of the Labeling Review System
All of the commenters responding to this issue of modernizing the
labeling review system were in support of the Agency's efforts. Such
commenters included those who supported sketch only approval, as well
as those who supported generic approval. The commenters stated that an
electronic communications system would be cost effective by eliminating
unnecessary paperwork and taking advantage of new information,
collection, and storage technologies.
FSIS will continue to make incremental improvements in automation
as budget constraints allow. Furthermore, FSIS believes that its
current efforts to automate its labeling review system are consistent
with the President's initiatives for greater efficiency in government
services.
Miscellaneous Changes
The proposal stated that products labeled ``for export only'' in
U.S. establishments that do not contain any special claims would be
permitted to be labeled with generically approved labeling and thus
labeling for such products would not have to be submitted in sketch
form to FSIS for approval. However, after further consideration, FSIS
has concluded that products designated ``for export only'' and destined
to foreign countries should be reviewed and approved under the same
provisions proposed for other products manufactured in U.S.
establishments. FSIS acknowledges its responsibility for ensuring the
accuracy of all labeling of meat and poultry products manufactured in
Federal establishments, regardless of the product's destination. Also,
most countries that receive product from the United States do not have
label review programs. Therefore, these countries depend on FSIS review
and approval as their assurance that imported products are accurately
labeled. Thus, FSIS has decided to withdraw this provision of its
proposal, and to require, as it did prior to its proposal, that
labeling designated ``for export only'' be submitted to FSIS for
approval, except when such labeling comes within the categories of
labeling that will be generically approved. As FSIS reforms its prior
labeling approval system, more of these labels will be considered for
inclusion in the generic approval category. Although FSIS is continuing
to provide labeling review services for these exporters, it will
explore the possibility of charging user fees in the future for such
services.
As stated in the proposal, where sketch labeling is required to be
submitted to FLD for review and approval, a parent company for a
corporation may submit only one labeling application for a product
produced in other establishments, which are owned by the corporation.
FSIS has clarified this matter in the Federal meat and poultry products
regulations.
On August 8, 1994, FSIS published in the Federal Register a final
rule on the placement of nutrition labeling and other mandatory
labeling on meat and poultry products (59 FR 40209). That rule included
a provision identifying as generically approved, final labeling bearing
nutrition labeling information which was approved in sketch form or
other version that clearly shows all required features, size, location,
and identification of final color, by FSIS (9 CFR 317.5(c) and
381.134(c)). This final rule on prior labeling approval, as did the
proposed rule, identifies as generically approved, final labeling,
which would include labeling bearing nutrition information, that was
submitted for approval and approved by FSIS in sketch form. Therefore,
the current provisions in 9 CFR 317.5(c) and 381.134(c) are no longer
needed. Accordingly, FSIS is amending the Federal meat and poultry
products inspection regulations to eliminate 9 CFR 317.5(c) and
381.134(c).
This final rule, as did the proposal, will eliminate the need for
FSIS inspection personnel to maintain labeling records. Consequently,
FLD will no longer need labeling applications to be submitted in
triplicate form. Accordingly, FSIS is clarifying this requirement in
the Federal meat and poultry products inspection regulations 9 CFR
317.4(c) and 381.132(c) to reflect that labeling applications only need
to be submitted in duplicate form.
Effective Date
After careful consideration of the changes necessary to implement
the revised labeling system, FSIS has decided to make this rule
effective 6 months from the date of publication. The Agency believes
that a longer implementation period will alleviate unnecessary delays
in the labeling review process. This longer implementation period will
also minimize burdens related to the transfer of labeling records from
the IIC's to the establishments, inspection personnel and industry
orientation to new procedures, the auditing of generically approved
labels, and various other miscellaneous changes. In addition, the
longer implementation period will allow the Agency time to develop and
issue to its inspection personnel, official guidelines for implementing
this regulation.
Executive Order 12866
The final rule has been reviewed under Executive Order 12866 and
has been determined to be significant. FSIS has assessed the impacts of
its final rule
[[Page 67453]]
that expands the types of labeling, used on meat and poultry products,
that are generically approved; i.e., establishments will be able to use
certain labeling on meat and poultry products without submission of the
labeling to FSIS for approval by the IIC or FLD, in Washington, DC.
This rule eliminates unnecessary duplication in the labeling approval
system.
Benefits of the Final Rule
This regulation will benefit consumers, the meat and poultry
industry, and the Agency. The final rule will reduce market
inefficiencies caused by delays in new product introduction
attributable to the labeling application and review process. Industry
will be able to be more responsive to their consumers. Consumers will
also benefit because new products will be introduced into the
marketplace faster.
This final rule will reduce requirements for the submission of
labeling for review and approval by FSIS. The final rule will
streamline the label submission process from two steps (sketch and
final) to a one step process (sketch only). Also, meat and poultry
manufacturers will be able to make numerous labeling modifications
without submitting certain labels for approval. This streamlined
process will reduce the burden on industry by making the labeling
approval process more convenient and cost-effective. Furthermore, those
establishments that use representatives to present their labels to FLD
for review will also save time and money. These savings will be
realized because fewer labels will be required to be submitted to FLD.
It is estimated that the reduction in the submission of labeling will
save the meat and poultry establishments at least 20,000 hours.
This final rule will result in a savings of approximately $3
million in direct label application costs to the industry. This $3
million was derived by estimating that approximately 82,600 fewer
labels, at a cost of $37 per label, would be submitted to FLD annually
as a result of this final rule. Unknown additional savings will be
realized by the industry, depending on the degree to which industry
uses the generic approval authority for labeling for standardized
products. This $3 million savings estimate differs from the savings
that were attributed to the elimination of labeling application costs
stated in the proposed rule ($5 million) because this final rule
contains provisions for either generic approval or voluntary submission
for review and approval of labeling for standardized products. The
proposed rule contained provisions for mandatory generic approval of
labeling for standardized products. This rule will reduce the paperwork
burdens of industry by eliminating the application process for specific
types of labeling.
Shifting responsibility for maintaining labeling records from the
inspector will enable FSIS to redirect its inspection resources to
areas more directly related to food safety. In addition, this rule is
consistent with FSIS' February 3, 1995, Pathogen Reduction; Hazard
Analysis and Critical Control Point Systems proposal and FSIS' other
regulatory reform initiatives that are intended to focus inspection and
other Agency resources on activities that have a direct bearing on food
safety.
Costs of the Final Rule
This final rule requires that establishments submit only one
labeling application for FSIS approval (sketch labeling) instead of two
applications in those instances where labeling must be approved by
FSIS. This final rule also expands the types of labeling that can be
generically approved. For standardized products, this rule permits the
voluntary submittal of sketch labeling for review, if desired by the
manufacturer.
FSIS estimates that this final rule will result in $3 million
annual savings in direct labeling application costs. The final rule
does require, however, that establishments maintain copies of all
labeling used, along with the product formulations and a description of
the processing procedures used to formulate the product in accordance
with 9 CFR 320.2 and part 381, subpart Q, for all labeling submitted
for review and approval by FSIS, as well as for labeling in the generic
approval category. This requirement should not impose any additional
cost burden on establishments because most establishments already
maintain copies of their labeling.
The labeling records maintained by the establishments must be made
available to Agency officials upon request. FSIS will conduct periodic
sampling of generically approved labeling from the records maintained
by the establishments. This sampling will be conducted to monitor
compliance of generically approved labeling with all labeling
requirements. Activities related to the generic labeling sampling
program will be absorbed into existing Agency resources, and, thus,
will not impose additional Agency costs.
Executive Order 12778
This final rule has been reviewed under Executive Order 12778,
Civil Justice Reform. States and local jurisdictions are preempted
under the FMIA and the PPIA from imposing any marking, labeling,
packaging, or ingredient requirements on federally inspected meat and
poultry products that are in addition to, or different from, those
imposed under the FMIA or PPIA. States and local jurisdictions may,
however, exercise concurrent jurisdiction over meat and poultry
products that are outside official establishments for the purpose of
preventing the distribution of meat and poultry products that are
misbranded or adulterated under the FMIA or PPIA, or, in the case of
imported articles, which are not at such an establishment, after their
entry into the United States. Under the FMIA and PPIA, States that
maintain meat and poultry inspection programs must impose requirements
that are at least equal to those required under the FMIA and PPIA. The
States may, however, impose more stringent requirements on such State
inspected products and establishments.
No retroactive effect will be given to this final rule. The
administrative procedures specified in 9 CFR 306.5 and 381.35 must be
exhausted prior to any judicial challenge of the application of the
provisions of this rule, if the challenge involves any decision of an
inspector relating to inspection services provided under the FMIA or
PPIA. The administrative procedures specified in 9 CFR parts 335 and
381, subpart W, must be exhausted prior to any judicial challenge of
the application of the provision of this rule with respect to labeling
decisions.
Effect on Small Entities
The Administrator, FSIS, has determined that this final rule will
not have a significant economic impact on a substantial number of small
entities. This rule will affect small meat and poultry establishments,
and other small entities involved in various label consulting
activities, including those entities who specialize in obtaining label
approval from FSIS. Most small meat and poultry establishments will
benefit from the provisions in this rule as direct costs involved with
the labeling application and appr
FR Doc. 95-31392 Prior Labeling Approval System
oval process will be reduced. Costs
involved with label design and printing will not change and would be
incurred even without this final rule.
The affect of this final rule on those entities known as label
expediters will depend on the percentage of their business directly
involved with obtaining expedited approvals of product labels. There
are about 13 firms that are involved on a consistent basis with
obtaining label approvals. Eight of these 13 firms provide services
other
[[Page 67454]]
than expedited label approvals. A reduction in the need for this
service is not expected to significantly affect these entities. In
addition, these firms will likely expand existing services not related
to expediting label approvals. Also, certain types of labels will
continue to need approval by the Food Labeling Division before they may
be used. Therefore, firms whose primary service involves obtaining
label approval will be able to continue providing this service.
Any impacts of this final rule on small entities will be mitigated
because the Agency is providing a 6-month period before the final rule
will be effective. Therefore, affected entities will be given time to
adjust their current practices and/or to modify their businesses to
lessen any possible negative affects of the final rule.
Paperwork Requirements
Abstract: This final rule expands the types of generically approved
labeling currently authorized for use by meat and poultry
establishments and certified foreign establishments. (Generically
approved labeling is not required to be submitted to FSIS for review
and approval.) The rule also permits the submission of only sketch
labeling, except for temporary approvals, in those instances where
labeling is required to be submitted for approval. The rule also
requires the retention of certain records at the establishment.
Estimate of Burden: This final rule substantially reduces
``reporting'' requirements for official establishments. FSIS estimates
that label submissions sent to Washington for review and approval will
decrease by about 50 percent. For such submissions, FSIS estimates that
15 minutes will be the response time to prepare the label application
form, submit it, along with the label, to FSIS or to a label expediter
who will deliver the form and label to FSIS, and to file the records
this rule requires establishments to maintain, which is approximately
the same amount of time establishments currently utilize to meet
paperwork requirements. FSIS believes that there will be no change in
the time FSIS estimates, 60 minutes, it takes to design and develop
labels in accordance with the regulations. In total, the burden
associated with label approval submissions will decrease by 22,921
hours.
For generically approved labeling, FSIS estimates the addition of
new generic labeling categories will result in a 50 percent increase of
generically approved labels. Before this final rule, a copy of
generically approved labeling was required to be filed with the
inspector, and FSIS had estimated a 1 minute response time for this
activity. The final rule eliminates this requirement and instead
requires that a copy of the label and supporting information be
maintained at the establishment. FSIS estimates it will take 2 minutes
for the establishment to file this information. Therefore, there will
be an increase in burden hours relating to generically approved labels
by 2,691 hours.
Copies of this information collection assessment can be obtained
from Lee Puricelli, Paperwork Specialist, Food Safety and Inspection
Service, USDA, South Agriculture Building, Room 3812, Washington, DC
20250.
Send comments regarding the need and usefulness of the
requirements, the accuracy of our burden hour estimate, ways to
minimize the burden, including through the use of automated collection
techniques or other forms of information technology, or any other
aspect of this collection of information, to Lee Puricelli, Paperwork
Specialist, see address above.
All responses to this notice will be summarized and included in the
request for OMB approval. All comments will also become a matter of
public record.
List of Subjects
9 CFR Part 306
Appeals, Meat inspection.
9 CFR Part 317
Food labeling, Meat inspection, Reporting and recordkeeping
requirements.
9 CFR Part 320
Reporting and recordkeeping requirements.
9 CFR Part 327
Food labeling, Imports, and Meat inspection.
9 CFR Part 381
Appeals, Food labeling, Imports, Poultry and poultry products,
Reporting and recordkeeping requirements.
For the reasons set forth in the preamble, FSIS is amending 9 CFR
parts 306, 317, 320, 327, and 381 as follows:
PART 306--ASSIGNMENT AND AUTHORITIES OF PROGRAM EMPLOYEES
1. The authority citation for part 306 is revised to read as
follows:
Authority: 21 U.S.C. 601-695; 7 CFR 2.18, 2.53.
2. Section 306.5 is amended by removing the last sentence.
PART 317--LABELING, MARKING DEVICES, AND CONTAINERS
3. The authority citation for part 317 is revised to read as
follows:
Authority: 21 U.S.C. 601-695; 7 CFR 2.18, 2.53.
4. Section 317.4 is revised to read as follows:
Sec. 317.4 Labeling approval.
(a) No final labeling shall be used on any product unless the
sketch labeling of such final labeling has been submitted for approval
to the Food Labeling Division, Regulatory Programs, Food Safety and
Inspection Service, and approved by such division, accompanied by FSIS
form, Application for Approval of Labels, Marking, and Devices, except
for generically approved labeling authorized for use in Sec. 317.5(b).
The management of the official establishment or establishment certified
under a foreign inspection system, in accordance with part 327 of this
subchapter, must maintain a copy of all labeling used, along with the
product formulation and processing procedure, in accordance with part
320 of this subchapter. Such records shall be made available to any
duly authorized representative of the Secretary upon request.
(b) The Food Labeling Division shall permit submission for approval
of only sketch labeling, as defined in Sec. 317.4(d), for all products,
except as provided in Sec. 317.5(b) (2)-(9) and except for temporary
use of final labeling as prescribed in paragraph (f) of this section.
(c) All labeling required to be submitted for approval as set forth
in Sec. 317.4(a) shall be submitted in duplicate to the Food Labeling
Division, Regulatory Programs, Food Safety and Inspection Service, U.S.
Department of Agriculture, Washington, DC 20250. A parent company for a
corporation may submit only one labeling application (in duplicate
form) for a product produced in other establishments that are owned by
the corporation.
(d) ``Sketch'' labeling is a printer's proof or equivalent which
clearly shows all labeling features, size, location, and indication of
final color, as specified in Sec. 317.2. FSIS will accept sketches that
are hand drawn, computer generated or other reasonable facsimiles that
clearly reflect and project the final version of the labeling.
Indication of final color may be met by: submission of a color sketch,
submission of a sketch which indicates by descriptive language the
final colors, or submission with the sketch of previously approved
final labeling that indicates the final colors.
[[Page 67455]]
(e) Inserts, tags, liners, pasters, and like devices containing
printed or graphic matter and for use on, or to be placed within,
containers and coverings of product shall be submitted for approval in
the same manner as provided for labeling in Sec. 317.4(a), except that
such devices which contain no reference to product and bear no
misleading feature shall be used without submission for approval as
prescribed in Sec. 317.5(b)(7).
(f)(1) Consistent with the requirements of this section, temporary
approval for the use of a final label or other final labeling that may
otherwise be deemed deficient in some particular may be granted by the
Food Labeling Division. Temporary approvals may be granted for a period
not to exceed 180 calendar days, under the following conditions:
(i) The proposed labeling would not misrepresent the product;
(ii) The use of the labeling would not present any potential
health, safety, or dietary problems to the consumer;
(iii) Denial of the request would create undue economic hardship;
and
(iv) An unfair competitive advantage would not result from the
granting of the temporary approval.
(2) Extensions of temporary approvals may also be granted by the
Food Labeling Division provided that the applicant demonstrates that
new circumstances, meeting the above criteria, have developed since the
original temporary approval was granted.
(g) The inspector-in-charge shall approve meat carcass ink brands
and meat food product ink and burning brands, which comply with parts
312 and 316 of this subchapter.
5. Section 317.5 is revised to read as follows:
Sec. 317.5 Generically approved labeling.
(a)(1) An official establishment or an establishment certified
under a foreign inspection system, in accordance with part 327 of this
subchapter, is authorized to use generically approved labeling, as
defined in paragraph (b) of this section, without such labeling being
submitted for approval to the Food Safety and Inspection Service in
Washington or the field, provided the labeling is in accordance with
this section and shows all mandatory features in a prominent manner as
required in Sec. 317.2, and is not otherwise false or misleading in any
particular.
(2) The Food Safety and Inspection Service shall select samples of
generically approved labeling from the records maintained by official
establishments and establishments certified under foreign inspection
systems, in accordance with part 327 of this subchapter, as required in
Sec. 317.4, to determine compliance with labeling requirements. Any
finding of false or misleading labeling shall institute the proceedings
prescribed in Sec. 335.12.
(b) Generically approved labeling is labeling which complies with
the following:
(1) Labeling for a product which has a product standard as
specified in part 319 of this subchapter or the Standards and Labeling
Policy Book and which does not contain any special claims, such as
quality claims, nutrient content claims, health claims, negative
claims, geographical origin claims, or guarantees, or which is not a
domestic product labeled in a foreign language;
(2) Labeling for single-ingredient products (such as beef steak or
lamb chops) which does not contain any special claims, such as quality
claims, nutrient content claims, health claims, negative claims,
geographical origin claims, or guarantees, or which is not a domestic
product labeled with a foreign language;
(3) Labeling for containers of products sold under contract
specifications to Federal Government agencies, when such product is not
offered for sale to the general public, provided that the contract
specifications include specific requirements with respect to labeling,
and are made available to the inspector-in-charge;
(4) Labeling for shipping containers which contain fully labeled
immediate containers, provided such labeling complies with Sec. 316.13;
(5) Labeling for products not intended for human food, provided
they comply with part 325 of this subchapter;
(6) Meat inspection legends, which comply with parts 312 and 316 of
this subchapter;
(7) Inserts, tags, liners, pasters, and like devices containing
printed or graphic matter and for use on, or to be placed within
containers, and coverings of products, provided such devices contain no
reference to product and bear no misleading feature;
(8) Labeling for consumer test products not intended for sale; and
(9) Labeling which was previously approved by the Food Labeling
Division as sketch labeling, and the final labeling was prepared
without modification or with the following modifications:
(i) All features of the labeling are proportionately enlarged or
reduced, provided that all minimum size requirements specified in
applicable regulations are met and the labeling is legible;
(ii) The substitution of any unit of measurement with its
abbreviation or the substitution of any abbreviation with its unit of
measurement, e.g., ``lb.'' for ``pound,'' or ``oz.'' for ``ounce,'' or
of the word ``pound'' for ``lb.'' or ``ounce'' for ``oz.'';
(iii) A master or stock label has been approved from which the name
and address of the distributor are omitted and such name and address
are applied before being used (in such case, the words ``prepared for''
or similar statement must be shown together with the blank space
reserved for the insertion of the name and address when such labels are
offered for approval);
(iv) Wrappers or other covers bearing pictorial designs, emblematic
designs or illustrations, e.g., floral arrangements, illustrations of
animals, fireworks, etc. are used with approved labeling (the use of
such designs will not make necessary the application of labeling not
otherwise required);
(v) A change in the language or the arrangement of directions
pertaining to the opening of containers or the serving of the product;
(vi) The addition, deletion, or amendment of a dated or undated
coupon, a cents-off statement, cooking instructions, packer product
code information, or UPC product code information;
(vii) Any change in the name or address of the packer, manufacturer
or distributor that appears in the signature line;
(viii) Any change in the net weight, provided the size of the net
weight statement complies with Sec. 317.2;
(ix) The addition, deletion, or amendment of recipe suggestions for
the product;
(x) Any change in punctuation;
(xi) Newly assigned or revised establishment numbers for a
particular establishment for which use of the labeling has been
approved by the Food Labeling Division, Regulatory Programs;
(xii) The addition or deletion of open dating information;
(xiii) A change in the type of packaging material on which the
label is printed;
(xiv) Brand name changes, provided that there are no design
changes, the brand name does not use a term that connotes quality or
other product characteristics, the brand name has no geographic
significance, and the brand name does not affect the name of the
product;
(xv) The deletion of the word ``new'' on new product labeling;
(xvi) The addition, deletion, or amendment of special handling
[[Page 67456]]
statements, provided that the change is consistent with Sec. 317.2(k);
(xvii) The addition of safe handling instructions as required by
Sec. 317.2(l);
(xviii) Changes reflecting a change in the quantity of an
ingredient shown in the formula without a change in the order of
predominance shown on the label, provided that the change in quantity
of ingredients complies with any minimum or maximum limits for the use
of such ingredients prescribed in parts 318 and 319 of this subchapter;
(xix) Changes in the color of the labeling, provided that
sufficient contrast and legibility remain;
(xx) A change in the product vignette, provided that the change
does not affect mandatory labeling information or misrepresent the
content of the package;
(xxi) A change in the establishment number by a corporation or
parent company for an establishment under its ownership;
(xxii) Changes in nutrition labeling that only involve quantitative
adjustments to the nutrition labeling information, except for serving
sizes, provided the nutrition labeling information maintains its
accuracy and consistency;
(xxiii) Deletion of any claim, and the deletion of non-mandatory
features or non-mandatory information; and
(xxiv) The addition or deletion of a direct translation of the
English language into a foreign language for products marked ``for
export only.''
Sec. 317.4 [Removed and reserved]
6. Section 317.14 is removed and reserved.
PART 320--RECORDS, REGISTRATION, AND REPORTS
7. The authority citation for part 320 is revised to read as
follows:
Authority: 21 U.S.C. 601-695; 7 CFR 2.18, 2.53.
8. Section 320.1 is amended by adding a new paragraph (b)(11) to
read as follows:
Sec. 320.1 Records required to be kept.
* * * * *
(b) * * *
(11) Records of all labeling, along with the product formulation
and processing procedures, as prescribed in Sec. 317.4 and Sec. 317.5.
PART 327--IMPORTED PRODUCTS
9. The authority citation for part 327 is revised to read as
follows:
Authority: 21 U.S.C. 601-695; 7 CFR 2.18, 2.53.
10. Section 327.14(c) is revised to read as follows:
Sec. 327.14 Marking of products and labeling of immediate containers
thereof for importation.
* * * * *
(c) All marks and other labeling for use on or with immediate
containers, as well as private brands on carcasses or parts of
carcasses, shall be approved by the Food Safety and Inspection Service
in accordance with part 317 of this subchapter before products bearing
such marks, labeling, or brands will be entered into the United States.
The marks of inspection of foreign systems embossed on metal containers
or branded on carcasses or parts thereof need not be submitted to the
Food Safety and Inspection Service for approval, and such marks of
inspection put on stencils, box dies, labels, and brands may be used on
such immediate containers as tierces, barrels, drums, boxes, crates,
and large-size fiberboard containers of foreign products without such
marks of inspection being submitted for approval, provided the markings
made by such articles are applicable to the product and are not false
or misleading.
Sec. 327.24 [Amended]
11. Section 327.24 is amended by removing the last sentence.
PART 381--POULTRY PRODUCTS INSPECTION REGULATIONS
12. The authority citation for part 381 is revised to read as
follows:
Authority: 7 U.S.C. 138f; 7 U.S.C. 450, 21 U.S.C. 451-470; 7 CFR
2.18, 2.53.
13. Section 381.35 is amended by revising the last sentence to read
as follows:
Sec. 381.35 Appeal inspections; how made.
* * *. The poultry or poultry products involved in any appeal shall
be identified by U.S. retained tags and segregated in a manner approved
by the inspector pending completion of an appeal inspection.
14. Section 381.132 is revised to read as follows:
Sec. 381.132 Labeling approval.
(a) No final labeling shall be used on any product unless the
sketch labeling of such final labeling has been submitted for approval
to the Food Labeling Division, Regulatory Programs, Food Safety and
Inspection Service, and approved by such division, accompanied by FSIS
Form, Application for Approval of Labels, Marking, and Devices, except
for generically approved labeling authorized for use in Sec. 381.133(b)
(2)-(9). The management of the official establishment or establishment
certified under a foreign inspection system, in accordance with subpart
T of this part, must maintain a copy of all labeling used, along with
the product formulation and processing procedure, in accordance with
subpart Q of this part. Such records shall be made available to any
duly authorized representative of the Secretary upon request.
(b) The Food Labeling Division shall permit submission for approval
of only sketch labeling, as defined in Sec. 381.132(d), for all
products, except as provided in Sec. 381.133(b) (2)-(9) and except for
temporary use of final labeling as prescribed in paragraph (f) of this
section.
(c) All labeling required to be submitted for approval as set forth
in Sec. 381.132(b) shall be submitted in duplicate to the Food Labeling
Division, Regulatory Programs, Food Safety and Inspection Service, U.S.
Department of Agriculture, Washington, DC 20250. A parent company for a
corporation may submit only one labeling application (in duplicate) for
a product produced in other establishments that are owned by the
corporation.
(d) ``Sketch'' labeling is a printer's proof or equivalent which
clearly shows all labeling features, size, location, and indication of
final color, as specified in subpart N of this part. FSIS will accept
sketches that are hand drawn, computer generated or other reasonable
facsimiles that clearly reflect and project the final version of the
labeling. Indication of final color may be met by: submission of a
color sketch, submission of a sketch which indicates by descriptive
language the final colors, or submission with the sketch of previously
approved final labeling that indicates the final colors.
(e) Inserts, tags, liners, pasters, and like devices containing
printed or graphic matter and for use on, or to be placed within,
containers and coverings of product shall be submitted for approval in
the same manner as provided for labeling in Sec. 381.132(a), except
that such devices which contain no reference to product and bear no
misleading feature shall be used without submission for approval as
prescribed in Sec. 381.133(b)(9).
(f)(1) Consistent with the requirements of this section, temporary
approval for the use of a final label or other final labeling that may
otherwise be deemed deficient in some particular may be granted by the
Food Labeling Division. Temporary approvals may be granted for a period
not to exceed 180 calendar days under the following conditions:
(i) The proposed labeling would not misrepresent the product;
[[Page 67457]]
(ii) The use of the labeling would not present any potential
health, safety, or dietary problems to the consumer;
(iii) Denial of the request would create undue economic hardship;
and
(iv) An unfair competitive advantage would not result from the
granting of the temporary approval.
(2) Extensions of temporary approvals may also be granted by the
Food Labeling Division, provided that the applicant demonstrates that
new circumstances, meeting the above criteria, have developed since the
original temporary approval was granted.
15. Section 381.133 is redesignated as Sec. 381.134, and
Sec. 381.134 is redesignated as Sec. 381.133 and revised to read as
follows:
Sec. 381.133 Generically approved labeling.
(a)(1) An official establishment or an establishment certified
under a foreign inspection system, in accordance with subpart T of this
part, is authorized to use generically approved labeling, as defined in
paragraph (b) of this section, without such labeling being submitted
for approval to the Food Safety and Inspection Service in Washington or
the field, provided the labeling is in accord with this section and
shows all mandatory features in a prominent manner as required in
subpart N of this part, and is not otherwise false or misleading in any
particular.
(2) The Food Safety and Inspection Service shall select samples of
generically approved labeling from the records maintained by official
establishments and establishments certified under foreign inspection
systems, in accordance with subpart T of this part, as required in
Sec. 381.132, to determine compliance with labeling requirements. Any
finding of false or misleading labeling shall institute the proceedings
prescribed in Sec. 381.233.
(b) Generically approved labeling is labeling which complies with
the following:
(1) Labeling for a product which has a product standard as
specified in subpart 381 of this subchapter or the Standards and
Labeling Policy Book and which does not contain any special claims,
such as quality claims, nutrient content claims, health claims,
negative claims, geographical origin claims, or guarantees, or which is
not a domestic product labeled in a foreign language;
(2) Labeling for single-ingredient products (such as chicken legs
or turkey breasts) which does not contain any special claims, such as
quality claims, nutrient content claims, health claims, negative
claims, geographical origin claims, or guarantees, or which is not a
domestic product labeled with a foreign language;
(3) Labeling for containers of products sold under contract
specifications to Federal Government agencies, when such product is not
offered for sale to the general public, provided that the contract
specifications include specific requirements with respect to labeling,
and are made available to the inspector-in-charge;
(4) Labeling for shipping containers which contain fully labeled
immediate containers, provided such labeling complies with
Sec. 381.127;
(5) Labeling for products not intended for human food, provided
they comply with Secs. 381.152(c) and 381.193, and labeling for poultry
heads and feet for export for processing as human food if they comply
with Sec. 381.190(b);
(6) Poultry inspection legends, which comply with subpart M of this
part;
(7) Inserts, tags, liners, pasters, and like devices containing
printed or graphic matter and for use on, or to be placed within
containers, and coverings of products, provided such devices contain no
reference to product and bear no misleading feature;
(8) Labeling for consumer test products not intended for sale; and
(9) Labeling which was previously approved by the Food Labeling
Division as sketch labeling, and the final labeling was prepared
without modification or with the following modifications:
(i) All features of the labeling are proportionately enlarged or
reduced, provided that all minimum size requirements specified in
applicable regulations are met and the labeling is legible;
(ii) The substitution of any unit of measurement with its
abbreviation or the substitution of any abbreviation with its unit of
measurement, e.g., ``lb.'' for ``pound,'' or ``oz.'' for ``ounce,'' or
of the word ``pound'' for ``lb.'' or ``ounce'' for ``oz.'';
(iii) A master or stock label has been approved from which the name
and address of the distributor are omitted and such name and address
are applied before being used (in such case, the words ``prepared for''
or similar statement must be shown together with the blank space
reserved for the insertion of the name and address when such labels are
offered for approval);
(iv) Wrappers or other covers bearing pictorial designs, emblematic
designs or illustrations, e.g., floral arrangements, illustrations of
animals, fireworks, etc. are used with approved labeling (the use of
such designs will not make necessary the application of labeling not
otherwise required);
(v) A change in the language or the arrangement of directions
pertaining to the opening of containers or the serving of the product;
(vi) The addition, deletion, or amendment of a dated or undated
coupon, a cents-off statement, cooking instructions, packer product
code information, or UPC product code information;
(vii) Any change in the name or address of the packer, manufacturer
or distributor that appears in the signature line;
(viii) Any change in the net weight, provided that the size of the
net weight statement complies with Sec. 381.121;
(ix) The addition, deletion, or amendment of recipe suggestions for
the product;
(x) Any change in punctuation;
(xi) Newly assigned or revised establishment numbers for a
particular establishment for which use of the labeling has been
approved by the Food Labeling Division, Regulatory Programs;
(xii) The addition or deletion of open dating information;
(xiii) A change in the type of packaging material on which the
label is printed;
(xiv) Brand name changes, provided that there are no design
changes, the brand name does not use a term that connotes quality or
other product characteristics, the brand name has no geographic
significance, and the brand name does not affect the name of the
product;
(xv) The deletion of the word ``new'' on new product labeling;
(xvi) The addition, deletion, or amendment of special handling
statements, provided that the change is consistent with
Sec. 381.125(a);
(xvii) The addition of safe handling instructions as required by
Sec. 381.125(b);
(xviii) Changes reflecting a change in the quantity of an
ingredient shown in the formula without a change in the order of
predominance shown on the label, provided that the change in quantity
of ingredients complies with any minimum or maximum limits for the use
of such ingredients prescribed in Sec. 381.147 and subpart P of this
part;
(xix) Changes in the color of the labeling, provided that
sufficient contrast and legibility remain;
(xx) A change in the product vignette, provided that the change
does not affect mandatory labeling information or misrepresent the
content of the package;
(xxi) The addition, deletion, or substitution of the official USDA
poultry grade shield; (xxii) A change in the establishment number by a
corporation or parent company for an establishment under its ownership;
[[Page 67458]]
(xxiii) Changes in nutrition labeling that only involve
quantitative adjustments to the nutrition labeling information, except
for services sizes, provided the nutrition labeling information
maintains its accuracy and consistency;
(xxiv) Deletion of any claim, and the deletion of non-mandatory
features or non-mandatory information;
(xxv) The addition or deletion of a direct translation of the
English language into a foreign language for products marked ``for
export only''; and
(xxvi) The addition of a descriptive term as required by
Sec. 381.129(b)(6).
16. Section 381.137 is revised to read as follows:
Sec. 381.137 Evidence of labeling and devices approval.
No inspector shall authorize the use of any device bearing any
official inspection legend unless he or she has on file evidence that
such device has been approved in accordance with the provisions of this
subpart.
Sec. 381.141 [Removed and reserved]
17. Section 381.141 is removed and reserved.
18. Section 381.175 is amended by adding a new paragraph (b)(6) to
read as follows:
Sec. 381.175 Records required to be kept.
* * * * *
(b) * * *
(6) Records of all labeling, along with the product formulation and
processing procedures, as prescribed in Secs. 381.132 and 381.133.
19. Section 381.202(d) is amended by removing the last sentence and
by revising the next to the last sentence to read as follows:
Sec. 381.202 Poultry products offered for entry; reporting of findings
to customs; handling of articles refused entry; appeals, how made;
denaturing procedures.
* * * * *
(d) * * *. The poultry or poultry products involved in any appeal
shall be identified by U.S. retained tags and segregated in a manner
approved by the inspector pending completion of an appeal inspection.
* * * * *
20. Section 381.205(c) is revised to read as follows:
Sec. 381.205 Labeling of immediate containers of poultry products
offered for entry.
* * * * *
(c) All marks and other labeling for use on or with immediate
containers shall be approved for use by the Food Safety and Inspection
Service in accordance with Secs. 381.132 and 381.133 before products
bearing such marks and other labeling will be permitted for entry into
the United States.
21. Section 381.206 is amended by adding to the end thereof the
following sentence:
Sec. 381.206 Labeling of shipping containers of poultry products
offered for entry.
* * *. All labeling used with a shipping container of imported
poultry products must be approved in accordance with subpart N of this
part.
Done at Washington, DC, on: December 21, 1995.
Michael R. Taylor,
Acting Under Secretary for Food Safety.
[FR Doc. 95-31392 Filed 12-26-95; 3:36 pm]
BILLING CODE 3410-DM-P
Complete official Federal Register PDF
FR Doc. 95-31382 Career Transition Assistance for Surplus and Displaced Federal Employees
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67281-67286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31382]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 /
Rules and Regulations
[[Page 67281]]
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Part 330
RIN 3206-AH26
Career Transition Assistance for Surplus and Displaced Federal
Employees
AGENCY: Office of Personnel Management.
ACTION: Interim rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Office of Personnel Management is issuing interim
regulations to implement the President's memorandum of September 12,
1995, that requires Federal agencies to develop career transition
assistance programs to help their employees affected by downsizing
obtain other employment. The regulations require agencies to provide
transition assistance services and give hiring priority to surplus and
displaced employees.
DATES: Interim regulations are effective on December 29, 1995. Agencies
will draft and effect their Agency Career Transition Assistance Plan,
including provisions to give selection priority to their surplus and
displaced employees, as soon as possible, but no later than February
29, 1996, unless an extension is requested and approved by OPM. A new
program providing selection priority for displaced employees on an
interagency basis--the Interagency Career Transition Assistance Plan--
will go into effect on February 29, 1996, at which time the operation
of the current OPM Interagency Placement Program will be suspended.
These special plans will operate through September 30, 1999, unless
further extended because of severe downsizing. Written comments will be
considered if received no later than February 27, 1996.
ADDRESSES: Send or deliver written comments to Leonard R. Klein,
Associate Director for Employment, Office of Personnel Management, Room
6F08, 1900 E Street NW., Washington, DC 20415-0001.
FOR FURTHER INFORMATION CONTACT:
Diane Bohling or Ed McHugh, 202-606-0960, FAX 202-606-2329.
SUPPLEMENTARY INFORMATION: On September 12, 1995, the President issued
a memorandum entitled ``Career Transition Assistance for Federal
Employees'' that directs Federal agencies to establish career
transition assistance programs to help their surplus and displaced
workers find other jobs as the Federal Government undergoes downsizing
and restructuring. As set forth in the memorandum, such programs are to
be developed in partnership with labor and management, and follow
guidance and regulations provided by the Office of Personnel Management
(OPM).
OPM is issuing the following regulations which were developed in
cooperation with representatives from the Interagency Advisory Group
and employee unions. These regulations provide the framework for
implementing the President's directive.
The goal of the Presidential directive is to maximize employment
opportunities for displaced workers, both within and outside the
Federal Government. Under these regulations, Federal agencies are
required to draft and effect Agency Career Transition Assistance Plans
as soon as possible, but no later than February 29, 1996 (unless an
extension is requested and approved by OPM) to provide career
transition services to their surplus and displaced employees, and give
special selection priority to these workers. These regulations set
minimum standards for these plans, which can be supplemented at the
agency's discretion.
Agency plans will have three components: (1) Policies to provide
their surplus and displaced employees with career transition services
such as skills assessment, resume preparation, counselling and job
search assistance; (2) policies and procedures for selecting their own
well-qualified surplus or displaced agency employees who apply for
agency vacancies in the local commuting area, before any other
candidate from within or outside the agency; and (3) operation of the
agency's Reemployment Priority List (RPL) under subpart B of 5 CFR 330.
These plans will operate through September 30, 1999, unless further
extended because of severe downsizing. Because the Department of
Defense already has an effective program in operation to provide
selection priority to surplus and displaced employees within the
Department--the Priority Placement Program--the requirement described
in 2 above does not apply to the Department of Defense. The Department
of Defense is subject to the other elements of these regulations, and
the Reemployment Priority List under Subpart B of 5 CFR 330, and its
employees are eligible for the benefits provided by these programs.
Traditionally, the Federal Government has relied on referrals from
centralized inventories as the mechanism to place surplus and displaced
workers in jobs in other agencies. Although the program currently used
to do this, the OPM Interagency Placement Program, is automated and
provides quick and efficient referrals, it has placed very few workers.
An OPM review of the system shows that candidates frequently decline
job offers that come through the referral process or simply do not
respond to job availability inquiries even though they had previously
registered for such assistance. Many other displaced workers simply
fail to register for the program.
Because of the severe downsizing expected over the next few years,
the Presidential memorandum and these implementing regulations take a
new approach to helping surplus and displaced workers find other jobs--
individual employee empowerment. Workers affected by downsizing are
given the tools and resources to seek out other Federal employment and
the right to be hired when they apply and are well-qualified. Many
experts have suggested that the key to successful career transition is
individual initiative. If individual workers have the power to find,
apply, and exercise selection priority for specific vacancies in which
they themselves are interested, it is believed that this would motivate
and reinforce an employee's self interest in finding other employment.
The skills, resources, and initiative that employees develop in this
process can be used equally to find Federal vacancies or jobs in the
private sector. This latter aspect is particularly important since
Federal
[[Page 67282]]
hiring is expected to be very limited in the foreseeable future.
During the expected period of severe downsizing, these regulations
may restrict the flexibility that agencies have to hire candidates.
Current statutory requirements, which include providing hiring
preference to veterans, are not affected by these regulations. The
regulations also do not affect existing collective bargaining
agreements. The parties to such agreements, however, are free to
renegotiate those provisions that may be affected. When current
agreements expire, new agreements must adhere to these regulations.
With the switch to the individual employee empowerment concept
contained in these regulations, the Interagency Placement Program (IPP)
is being suspended. Employees who are enrolled in the IPP at the time
of its suspension (February 29, 1996) will be eligible for the
Interagency Career Transition Assistance Plan (ICTAP), and will be
notified of their rights and benefits under the new program. The new
regulations also provide ICTAP eligibility to several other categories
of employees who were formerly eligible for the Interagency Placement
Program including employees separated because of a compensable injury
whose compensation is subsequently terminated, disability retirees
whose disability annuity has been terminated, certain Military Reserve
and National Guard technicians who become eligible for a special
disability annuity, and employees who were separated because they
declined a transfer of function or directed reassignment to another
commuting area. As a result, former subparts G and H which provided
placement eligibility for these special categories of employees have
been merged into the revised subpart G which is set forth in these
regulations.
OPM will monitor Agency and Interagency Career Transition
Assistance Plans, and will prepare periodic progress reports. OPM will
make every effort to obtain data from agencies through the existing
Central Personnel Data File. To assist agencies and employees in
implementing Career Transition Assistance Plans, OPM's Workforce
Restructuring Office has set up a clearinghouse containing both private
sector and Federal career transition materials (call 202-606-0960 for
additional information) and a special forum on OPM's MAINSTREET
computer-based bulletin board to provide information and handle
inquiries about the new regulations (with modem dial 202-606-4800 and
select the Career Transition forum). OPM also has a cadre of
experienced career transition specialists available for on-site
assistance. Comprehensive information on worldwide Federal job
opportunities is available from OPM by phone (912-757-3000; 912-744-
2299 for TDD) or electronic bulletin board (912-757-3100).
Waiver of Notice of Proposed Rulemaking and Delay in Effective Date
Pursuant to 5 U.S.C. 553(b)(3)(B), I find that good cause exists
for waiving the general notice of proposed rulemaking because it would
be contrary to the public interest to delay access to benefits. Also,
pursuant to 5 U.S.C. 553(d)(3), I find that good cause exists to waive
the delay in the effective date and make this amendment effective in
less than 30 days. The delay in the effective date is being waived to
give effect to the benefits extended by the amended provisions at the
earliest practicable date.
Regulatory Flexibility Act
I certify that this regulation will not have a significant economic
impact on a substantial number of small entities because it affects
only Federal employees.
Executive Order 12866, Regulatory Review
This rule has been reviewed by the Office of Management and Budget
in accordance with Executive Order 12866.
List of Subjects in 5 CFR Part 330
Armed forces reserves, Government employees.
U.S. Office of Personnel Management.
James B. King,
Director.
Accordingly, OPM is amending part 330 of title 5, Code of Federal
Regulations, as follows:
PART 330--RECRUITMENT, SELECTION, AND PLACEMENT (GENERAL)
1. The authority citation for part 330 continues to read as
follows:
Authority: 5 U.S.C. 1302, 3301, 3302; E.O. 10577, 3 CFR 1954-58
Comp., p. 218; Sec. 330.102 also issued under 5 U.S.C. 3327; subpart
B also issued under 5 U.S.C. 3315 and 8151; Sec. 330.401 also issued
under 5 U.S.C. 3310; subpart H also issued under 5 U.S.C. 8337(h)
and 8457(b); subpart I also issued under sec. 4432 of Pub. Law 102-
484.
2. Section 330.301 is revised to read as follows:
Sec. 330.301 Coverage.
(a) This subpart covers the Interagency Placement Program for
employees who will be displaced or who have been separated from their
Federal jobs as a result of agency work force reductions, compensable
on-the-job injury, discontinued service retirement, or disability
retirement. Agencies have the primary responsibility for providing
placement assistance to their surplus and displaced employees, and for
administering career transition assistance programs. OPM supplements
these agency efforts by administering the Interagency Placement Program
which gives surplus or displaced employees priority referral to
positions in other agencies.
(b) The applicability of this subpart is suspended from February
29, 1996 through September 30, 1999. In the interim, placement
assistance will be provided in accordance with subparts B, F, and G of
this part. OPM may extend this date if it determines that the Federal
Government is still experiencing an emergency downsizing situation.
3. Subpart F is redesignated as subpart J and a new subpart F is
added to read as follows:
Subpart F--Agency Career Transition Assistance Plans (CTAP) for
Local Surplus and Displaced Employees
Sec.
330.601 Purpose.
330.602 Agency plans.
330.603 Duration.
330.604 Definitions.
330.605 Eligibility.
330.606 Order of selection for filing vacancies from within the
agency.
330.607 Agency notification responsibilities.
330.608 Application and selection.
330.609 Qualification reviews.
330.610 Reporting.
330.611 Oversight.
Authority: Presidential memorandum dated September 12, 1995,
entitled ``Career Transition Assistance for Federal Employees''.
Sec. 330.601 Purpose.
(a) This subpart implements the President's memorandum of September
12, 1995, to establish agency career transition assistance plans for
Federal employees during a period of severe Federal downsizing. It is
the policy of the United States Government to provide services to help
surplus and displaced Federal employees take charge of their own
careers and find other job offers, either within the Federal Government
or in the private sector.
(b) The regulations in this subpart set forth minimum criteria for
agency career transition assistance plans. Consistent with the
regulations, agencies may supplement these provisions to expand
[[Page 67283]]
career transition opportunities to their surplus and displaced workers
at their discretion.
(c) Sections 330.602(a)(2) and 330.604 through 330.609 do not apply
to the Department of Defense Priority Placement Program.
(d) The provisions in this subpart do not alter any existing
negotiated agreements in effect as of December 29, 1995. New agreements
will be subject to the provisions set forth in this part.
Sec. 330.602 Agency plans.
(a) Each agency will establish a career transition assistance plan
(CTAP) to actively assist its surplus and displaced employees make
effective transitions to other employment. Agencies will draft and
effect their plans by February 29, 1996, unless an extension is
requested and approved by OPM. A copy of the draft plan and any
additional modified plans will be sent to OPM as approved by the
agency/department head or deputy or undersecretary. An agency plan will
include:
(1) Policies to provide career transition services to all surplus
and displaced agency employees, including those in the excepted service
and Senior Executive Service, which address the following:
(i) Types of career transition services to be provided by the
agency;
(ii) Use of excused absence for employees to use the services and
facilities;
(iii) Employee use of services or facilities after separation;
(iv) Training to be provided to employees, managers, supervisors,
and union representatives on the use of services;
(v) Retraining to be provided to employees;
(vi) Access to services by employees, including those in field
offices and remote sites and those with disabilities;
(vii) Availability of resource information on other forms of
Federal, state, and local assistance which are available to support
career transition for employees with disabilities; and
(viii) Role of employee assistance programs in providing services;
(2) Policies to provide special selection priority to well-
qualified surplus or displaced agency employees who apply for agency
vacancies in the local commuting area, before selecting any other
candidate from either within or outside the agency, and agency
procedures for reviewing qualification issues;
(3) Operation of the agency's Reemployment Priority-List under
subpart B of 5 CFR part 330.
(b) To the extent practicable, agency CTAPs shall be developed in
partnership with management and employees' union representatives.
Sec. 330.603 Duration.
This subpart will expire on September 30, 1999, unless the Office
of Personnel Management extends the program based on its determination
that the Federal Government is still experiencing an emergency
downsizing situation.
Sec. 330.604 Definitions.
For purposes of this subpart:
(a) Agency means an Executive Department, a Government corporation,
and an independent establishment as cited in 5 U.S.C. 105.
(b) Displaced employee means a current agency employee serving
under an appointment in the competitive service, in tenure group I or
II, who has received a specific reduction in force (RIF) separation
notice.
(c) Eligible employee means a surplus or displaced employee who
meets the conditions set forth in Sec. 330.605(a).
(d) Local commuting area means the geographic area that usually
constitutes one area for employment purposes as determined by the
agency. It includes any population center (or two or more neighboring
ones) and the surrounding localities in which people live and can
reasonably be expected to travel back and forth daily to their usual
employment.
(e) Special selection priority means the priority that eligible
employees have for selection to vacancies over any other candidate.
(f) Surplus employee means a current agency employee serving under
an appointment in the competitive service, in tenure group I or II, who
has received a Certification of Expected Separation or other
certification issued by the agency which identifies the employee as
being in a surplus organization or occupation.
(g) Vacancy means a competitive service position lasting 90 days or
more, including extensions, which the agency is filling, regardless of
whether the agency issues a specific vacancy announcement.
(h) Well-qualified employee means an eligible employee who
satisfies the criteria in either paragraphs (h)(1) or (h)(2) of this
section as determined and consistently applied by the agency:
(1)(i) Meets the qualification standard and eligibility
requirements for the position, including any medical qualifications,
and minimum educational and experience requirements;
(ii) Meets all selective factors where applicable. Meets
appropriate quality rating factor levels as determined by the agency.
Selective and quality ranking factors cannot be so restrictive that
they run counter to the goal of placing displaced employees. In the
absence of selective and quality ranking factors, selecting officials
will document the job-related reason(s) the eligible employee is or is
not considered to be well qualified;
(iii) Is physically qualified, with reasonable accommodation where
appropriate, to perform the essential duties of the position;
(iv) Meets any special qualifying condition(s) that OPM has
approved for the position; and
(v) Is able to satisfactorily perform the duties of the position
upon entry; or
(2) Is rated by the agency to be above minimally qualified
candidates in accordance with the agency's specific selection process.
Sec. 330.605 Eligibility.
(a) To be eligible for the special selection priority, an
individual must meet all of the following conditions:
(1) Is a surplus or displaced employee as defined in
Sec. 330.604(b) and (f);
(2) Has a current performance rating of record of at least fully
successful or equivalent;
(3) Applies for a vacancy that is at or below the grade level from
which the employee may be or is being separated, that does not have a
greater promotion potential than the position from which the employee
may be or is being separated;
(4) Occupies a position in the same local commuting area of the
vacancy;
(5) Files an application for a specific vacancy within the
timeframes established by the agency; and
(6) Is determined by the agency to be well-qualified for the
specific vacancy.
(b) Eligibility for special selection priority begins on the date
the agency issues the RIF separation notice, Certification of Expected
Separation, or other certification identifying the employee as being in
a surplus organization or occupation, whichever is earliest.
(c) Eligibility expires on the earliest of:
(1) The RIF separation date;
(2) Cancellation of the RIF separation notice, Certification of
Expected Separation, or other certification identifying the employee as
surplus; or
(3) When an eligible employee receives a career, career-
conditional, or excepted appointment without time limit in any agency.
Sec. 330.606 Order of selection for filling vacancies from within the
agency.
(a) Except as provided in paragraph (b) of this section, when
filling a vacancy, an agency must select an
[[Page 67284]]
employee eligible under its Career Transition Assistance Plan before
selecting any other candidate from within or outside the agency, unless
doing so would cause another employee to be separated by reduction in
force.
(b) The following actions are not covered under this subpart:
(1) Placement of an agency employee through reassignment, change to
lower grade, or promotion, when no employees eligible under this
subpart apply;
(2) Reemployment of a former agency employee exercising regulatory
or statutory reemployment rights;
(3) Position changes resulting from reclassification actions;
(4) Temporary appointments of under 90 days (including extensions);
(5) Exchange of positions between or among agency employees, when
the actions involve no increase in grade or promotion potential;
(6) Conversion of an employee on an excepted appointment which
confers eligibility for noncompetitive conversion into the competitive
service;
(7) Placement activities under part 351 of this chapter;
(8) Placement of an employee into a new position as a result of a
reorganization, when the former position ceases to exist, and no actual
vacancy results;
(9) Placements made under the Intergovernmental Personnel Act (IPA)
as provided in part 334 of this chapter where they are for critical
situations where the failure to make the assignment would substantially
harm Federal interests, such as providing training for State takeover
of a Federal program;
(10) The filling of a position through an excepted appointment;
(11) Details;
(12) Time-limited promotions of under 90 days;
(13) Noncompetitive movement of surplus or displaced employees;
(14) Movement of excepted service employees within an agency;
(15) A placement under 5 U.S.C. 8337 or 8451 to allow continued
employment of an employee who has become unable to provide useful and
efficient service in his or her current position because of a medical
condition;
(16) A placement that is a ``reasonable offer'' as defined in 5
U.S.C. 8336(d) AND 8414(b);
(17) Career ladder promotions; and
(18) Recall of seasonal employees from nonpay status.
Sec. 330.607 Agency notification responsibilities.
(a) At the time it issues a specific RIF separation notice,
Certification of Expected Separation, or other certification that
identifies an employee as being likely to be separated by RIF, an
agency must give each of its eligible employees information about the
special selection priority available to them under the agency's Career
Transition Assistance Plan.
(b) Agencies must take reasonable steps to ensure eligible
employees are notified of all vacancies the agency is filling and what
is required for them to be determined as well-qualified for the
vacancies.
Sec. 330.608 Application and selection.
(a) Application. (1) To receive this special selection priority, an
eligible employee must apply for a specific agency vacancy in the same
local commuting area as the position the employee occupies within the
prescribed time frames, attach the appropriate proof of eligibility as
described in paragraph (a)(2) of the section, and be determined well-
qualified by the agency for the specific vacancy.
(2) Proof of eligibility. Employees may submit the following as
proof of eligibility for the special selection priority:
(i) RIF separation notice;
(ii) Certification of Expected Separation; or
(iii) Other agency certification identifying the employee as being
in a surplus organization or occupation.
(b) Selection. An agency may decide the specific order of selection
of its eligible employees within the provisions set forth in
Sec. 330.606(a) (e.g., the agency may decide to select displaced
employees before surplus employees or may select surplus and/or
displaced employees from within a particular component of the agency
before selecting surplus and/or displaced employees from another
component of the agency).
(c) An agency cannot select any other candidates from within or
outside the agency if eligible agency employees are available for the
vacancy or vacancies.
(d) If two or more eligible employees apply for a vacancy and are
determined to be well-qualified, any of these eligible employees may be
selected.
(e) If no eligible employees apply or none is deemed well-
qualified, the agency may select another agency employee without regard
to this subpart.
Sec. 330.609 Qualification reviews.
Agencies will ensure that a documented review is conducted when-
ever an otherwise eligible employee is determined to be not well-
qualified.
Sec. 330.610 Reporting.
(a) Each agency shall submit an annual report covering each fiscal
year activity under this subpart to OPM no later than December 31 of
each year, beginning December 31, 1996.
(b) Each report will include the following:
(1) Number of employees identified by the agency as surplus and
displaced during that fiscal year;
(2) Number of selections of eligible employees under the agency
CTAP, or in the case of the Department of Defense, under its Priority
Placement Program; and
(3) The name, title, and telephone number of the agency official
responsible for the report.
(c) Reports should be addressed to: U.S. Office of Personnel
Management, Workforce Restructuring Office, Employment Service, Room
6504, Washington, DC 20415.
Sec. 330.611 Oversight.
OPM provides advice and assistance to agencies in implementing
their Career Transition Assistance Programs. OPM is also responsible
for oversight of agency CTAPs and may conduct reviews of the plans at
any time.
4. Subpart H is removed and reserved and subpart G is revised to
read as follows:
Subpart G--Interagency Career Transition Assistance Plan for Displaced
Employees
Sec.
330.701 Purpose
330.702 Duration.
330.703 Definitions.
330.704 Eligibility.
330.705 Order of selection in filling vacancies from outside the
agency's workforce.
330.706 Agency notification requirements.
330.707 Application and selection.
330.708 Qualification reviews.
330.709 Reporting.
330.710 Oversight.
Authority: Presidential memorandum dated September 12, 1995,
entitled ``Career Transition Assistance for Federal Employees''.
Subpart G--Interagency Career Transition Assistance Plan for Displaced
Employees
Sec. 330.701 Purpose.
(a) This subpart implements the President's memorandum of September
12, 1995, to establish a special interagency career transition
assistance program for Federal employees during a period of severe
Federal downsizing.
(b) This subpart is effective February 29, 1996.
(c) Nothing in this subpart negates an agency's responsibilities
for reemploying displaced employees as defined in Sec. 330.703(b).
[[Page 67285]]
(d) The provisions of the Reemployment Priority List (RPL) set
forth in subpart B of this part will remain in effect during the period
of severe Federal downsizing. When an agency considers candidates from
outside the agency for vacancies, registrants in an agency's RPL have
priority for selection over employees eligible under this subpart in
accordance with Sec. 330.705.
Sec. 330.702 Duration.
This subpart will expire on September 30, 1999, unless the Office
of Personnel Management extends the program based on its determination
that the Federal Government is still experiencing an emergency
downsizing situation.
Sec. 330.703 Definitions.
For the purposes of this subpart:
(a) Agency has the meaning given in Sec. 330.604(a).
(b) Displaced employee means:
(1) A current or former career or career-conditional competitive
service employee, in tenure group I or II, who has received a specific
RIF separation notice;
(2) A former career or career-conditional employee who was
separated because of a compensable injury as provided under the
provisions of subchapter I of chapter 81 of title 5, United States
Code, whose compensation has been terminated and whose former agency is
unable to place the individual as required by part 353;
(3) A former career or career-conditional competitive service
employee, in tenure group I or II, who retired with a disability under
sections 8337 or 8451 of title 5, United States Code, whose disability
annuity has been or is being terminated;
(4) A former career or career-conditional competitive service
employee, in tenure group I or II, in receipt of a RIF separation
notice who retired on the effective date of the reduction in force or
under the discontinued service retirement option;
(5) A former career or career-conditional competitive service
employee, in tenure group I or II, who is separated because he/she
declined a transfer of function or directed reassignment to another
commuting area; and
(6) A former Military Reserve Technician or National Guard
Technician who is receiving a special disability retirement annuity
from OPM under section 8337(h) or 8456 of title 5, United States Code.
(c) Eligible employee means a displaced employee who meets the
conditions set forth in Sec. 330.704(a).
(d) Local commuting area has the meaning given in Sec. 330.604(d)
of subpart F.
(e) Special selection priority has the meaning given in
Sec. 330.604(e) of subpart F.
(f) Vacancy has the meaning given in Sec. 330.604(g) of subpart F.
(g) Well-qualified employee has the meaning given in
Sec. 330.604(h) of subpart F.
Sec. 330.704 Eligibility.
(a) To be eligible for the special selection priority, an
individual must meet all of the following conditions:
(1) Is a displaced employee as defined in Sec. 330.703(b).
(2) Has a current (or a last) performance rating of record of at
least fully successful or equivalent (except for those eligible under
Sec. 330.703 (b)(2), (b)(3), and (b)(6));
(3) Applies for a vacancy at or below the grade level from which
the employee has been or is being separated, that does not have a
greater promotion potential than the position from which the employee
has been or is being separated;
(4) Occupies or was displaced from a position in the same local
commuting area of the vacancy;
(5) Files an application for a specific vacancy within the
timeframes established by the agency; and
(6) Is determined by the agency to be well-qualified for the
specific position.
(b) Eligibility for special selection priority begins:
(1) On the date the agency issues the RIF separation notice;
(2) On the date an agency certifies that it can not place an
employee eligible under Sec. 330.703(b)(2);
(3) On the date an employee eligible under Sec. 330.703(b)(3) is
notified that his or her disability annuity has been or is being
terminated;
(4) On the date an employee under Sec. 330.703(b)(5) declines the
transfer of function or reassignment outside the commuting area; or
(5) On the date the National Guard Bureau or Military Department
certifies that an employee under Sec. 330.703(b)(6) has retired under 5
U.S.C. 8337(h) or 8456.
(c) Eligibility expires:
(1) 1 year after separation, except for those employees separated
on or after September 12, 1995, and prior to February 29, 1996. For
these employees, eligibility expires February 28, 1997;
(2) February 28, 1997, for those candidates who were registered in
OPM's Interagency Placement Program (IPP) on or before February 15,
1996 and received a letter from OPM informing them of the demise of the
IPP;
(3) 1 year after an agency certifies that an individual under
Sec. 330.703(b)(2) cannot be placed;
(4) 1 year after an individual under Sec. 330.703(b)(3) receives
notification that his/her disability annuity has been or will be
terminated;
(5) When the employee receives a career, career-conditional, or
excepted appointment without time limit in any agency;
(6) When the employee no longer meets the eligibility requirements
set forth in paragraph (a) of this section (e.g., the employee is no
longer being separated by RIF or separates by resignation or non-
discontinued service retirement prior to the RIF effective date); or
(7) With a specific agency, upon declination of an official offer
to the employee by that agency.
Sec. 330.705 Order of selection in filling vacancies from outside the
agency's workforce.
(a) Except as provided in paragraph (c) of this section, when
filling a vacancy from outside the agency's workforce an agency must
select:
(1) Current or former agency employees eligible under the agency's
Reemployment Priority List described in subpart B, then;
(2) At the agency's option, any other former employee displaced
from the agency (under appropriate selection procedures), then;
(3) Current or former Federal employees displaced from other
agencies eligible under this subpart; and then
(4) Any other candidate (under appropriate selection procedures)
(optional).
(b) The following actions are subject to this order of selection
and are covered under this subpart:
(1) Competitive appointments (e.g., from registers and direct-
hire);
(2) Noncompetitive appointments (e.g., the types listed in part
315, subpart F, of this chapter);
(3) Movement between agencies (e.g., transfer), except as provided
for in paragraph (b)(9) of this section or part 351 of this chapter;
(4) Reinstatements (except as provided for in paragraph (a)(2) of
this section); and
(5) Time-limited appointments of 90 days or more to the competitive
service.
(c) The following actions are not covered under this subpart:
(1) Selections from an agency's internal Career Transition
Assistance Plan or Reemployment Priority List as described in subparts
F and B of this part respectively or any other internal
[[Page 67286]]
agency movement of current agency employees;
(2) Appointments of 10 point veterans;
(3) Reemployment of former agency employees who have regulatory or
statutory reemployment rights;
(4) Temporary appointments of under 90 days (including extensions);
(5) An action taken under part 351 of this chapter;
(6) The filling of a position by an excepted appointment;
(7) Conversions of employees on excepted appointments that confer
eligibility for noncompetitive conversion into the competitive service;
and
(8) Noncompetitive movement of displaced employees between agencies
or employees moved as a result of reorganization or transfer of
function.
(9) Placement of injured workers receiving workers' compensation
benefits.
Sec. 330.706 Agency notification requirements.
(a) At the time it issues specific RIF separation notices, an
agency must give its employees information about their eligibility for
the special interagency selection priority.
(b) Agencies are required to report all vacancies to OPM when
accepting applications from outside the agency (including applications
for temporary positions lasting 90 or more days).
(c) In addition, agencies shall provide OPM an electronic file of
complete vacancy announcements or recruiting bulletins for all
positions reported.
(d) Content. Notice to OPM of job announcements must include the
position title, tenure, location, pay plan and grade (or pay rate) of
the vacant position; application deadline; and other information
specified by OPM. In addition, agencies are required to provide OPM
with an electronic file of the complete vacancy announcement or
recruiting bulletin, which must include the qualifications required,
equal opportunity provisions and, when applicable, veterans' preference
provisions.
Sec. 330.707 Application and selection.
(a) Application. (1) To receive this special selection priority,
eligible employees must apply directly to agencies for specific
vacancies in the local commuting area within the prescribed time
frames, attach the appropriate proof of eligibility as described in
paragraph (a)(2) of this section, and be determined well-qualified by
the agency for the specific position.
(2) Proof of eligibility. Employees may submit the following as
proof of eligibility for the special selection priority:
(i) RIF separation notice;
(ii) Documentation showing that they were separated as a result of
declining a transfer of function or directed reassignment to another
commuting area;
(iii) Official certification from an agency stating that its agency
cannot place an individual whose injury compensation has been or is
being terminated;
(iv) Official notification from OPM that an individual's disability
annuity has been or is being terminated; or
(v) Official notification from the Military Department or National
Guard Bureau that the employee has retired under 5 U.S.C. 8337(h) or
8456.
(b) Selection. In making selections, an agency will adhere to the
overall order of selection set forth in Sec. 330.705. In addition, the
following apply:
(1) An agency cannot select another candidate from outside the
agency if eligible employees are available for the vacancy or
vacancies.
(2) If two or more eligible employees apply for a vacancy and are
determined to be well-qualified, any of these eligible employees may be
selected.
(3) If no eligible employees apply or none is deemed well-
qualified, the agency may select another candidate without regard to
this subpart. (This flexibility does not apply to selections made from
the agency's Reemployment Priority List as described in subpart B of
this part.)
(c) An agency may select a candidate from its Career Transition
Assistance Plan or Reemployment Priority List, as described in subparts
F and B of this part respectively, or another current agency employee
(if no eligible employees are available through its CTAP or RPL) at any
time.
Sec. 330.708 Qualification reviews.
Agencies will ensure that a documented review is conducted whenever
otherwise eligible employees are found to be not well-qualified.
Sec. 330.709 Reporting.
(a) Each agency shall submit an annual report covering each fiscal
year activity under this subpart to OPM no later than December 31 of
each year, beginning December 31, 1996.
(b) Each report will include data specified in Sec. 330.610 of
subpart F, and will also include information on:
(1) The number of eligible employees determined to be not well-
qualified;
(2) The number of selections of eligible employees from other
Federal agencies;
(3) The number of selections of other employees from other Federal
agencies who are not displaced; and
(4) The number of selections from outside the Federal Government.
Sec. 330.710 Oversight.
OPM is responsible for oversight of the Interagency Career
Transition Assistance Plan for Local Displaced Employees and may
conduct reviews of agency activity at any time.
[FR Doc. 95-31382 Filed 12-28-95; 8:45 am]
BILLING CODE 6325-01-M
Complete official Federal Register PDF
FR Doc. 95-31381 Format Changes in Compensation Regulations
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67286-67288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31381]
-----------------------------------------------------------------------
OFFICE OF PERSONNEL MANAGEMENT
5 CFR Parts 531, 550, 551, 610, and 630
RIN 3206-AH23
Format Changes in Compensation Regulations
AGENCY: Office of Personnel Management.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Office of Personnel Management (OPM) is issuing final
regulations to revise the format of certain regulatory provisions in
title 5, Code of Federal Regulations, relating to Federal employees'
compensation so that all definitions of terms are listed in
alphabetical order, consistent with the format preferred by the Office
of the Federal Register.
EFFECTIVE DATE: December 29, 1995.
FOR FURTHER INFORMATION CONTACT:
Mary Ann Ashford, (202) 606-2858 or FAX: (202) 606-0824.
SUPPLEMENTARY INFORMATION: Most of OPM's compensation regulations list
definitional terms in alphabetical order without any letter or number
designation, consistent with the format preferred by the Office of the
Federal Register. However, in several sections of the regulations,
letter or number designations continue to be used, and the definitions
are not necessarily listed in alphabetical order. This format can make
it difficult for the reader to readily locate a particular definition.
OPM is revising these definitions so that all such listings are
organized in alphabetical order without letter or number designations.
With this change, all sections listing compensation definitions will
have a consistent format, and it will be easier for users of the
regulations to locate information. The regulations also include
revisions in certain cross references made necessary because of the
deletion of the former paragraph designations.
[[Page 67287]]
Because the changes do not involve rulemaking, the changes are
final and become effective immediately.
Regulatory Flexibility Act
I certify that these regulations will not have a significant
economic impact on a substantial number of small entities because they
apply only to Federal agencies and employees.
List of Subjects in 5 CFR Parts 531, 550, 551, 610, and 630
Administrative practice and procedure, Claims, Government
employees, Law enforcement officers, Holidays, and Wages.
Office of Personnel Management.
Lorraine A. Green,
Deputy Director.
Accordingly, OPM is amending parts 531, 550, 551, 610, and 630 of
title 5 of the Code of Federal Regulations as follows:
PART 531--PAY UNDER THE GENERAL SCHEDULE
1. The authority citation for part 531 is revised to read as
follows:
Authority: 5 U.S.C. 5115, 5307, and 5338; sec. 4 of Pub. L. 103-
89, 107 Stat. 981; and E.O. 12748, 56 FR 4521, 3 CFR, 1991 Comp., p.
316;
Subpart A also issued under 5 U.S.C. 5304, 5305, and 5553;
section 302 of the Federal Employees Pay Comparability Act of 1990
(FEPCA), Pub. L. 101-509, 104 Stat. 1462; and E.O. 12786, 56 FR
67453, 3 CFR, 1991 Comp., p. 376;
Subpart B also issued under 5 U.S.C. 5303(g), 5333, 5334(a), and
7701(b)(2);
Subpart C also issued under 5 U.S.C. 5304, 5305, and 5553;
sections 302 and 404 of FEPCA, Pub. L. 101-509, 104 Stat. 1462 and
1466; and section 3(7) of Pub. L. 102-378, 106 Stat. 1356;
Subpart D also issued under 5 U.S.C. 5335(g) and 7701(b)(2);
Subpart E also issued under 5 U.S.C. 5336;
Subpart F also issued under 5 U.S.C. 5304, 5305(g)(1), and 5553;
and E.O. 12883, 58 FR 63281, 3 CFR, 1993 Comp., p. 682.
PART 550--PAY ADMINISTRATION (GENERAL)
Subpart A--Premium Pay
2. The authority citation for subpart A of part 550 is revised to
read as follows:
Authority: 5 U.S.C. 5304 note, 5305 note, 5541(2)(iv), 5548, and
6101(c); E.O. 12748, 3 CFR, 1991 Comp., p. 316.
Subpart E--Pay From More Than One Position
3. The authority citation for subpart E of part 550 continues to
read as follows:
Authority: 5 U.S.C. 5533.
Subpart F--Reduction-in-Retired-Pay Provision of the Dual Pay
Statute
4. The authority citation for subpart F of part 550 continues to
read as follows:
Authority: 5 U.S.C. 5532.
PART 551--PAY ADMINISTRATION UNDER THE FAIR LABOR STANDARDS ACT
5. The authority citation for part 551 continues to read as
follows:
Authority: 5 U.S.C. 5542(c); Sec. 4(f) of the Fair Labor
Standards Act of 1938, as amended by Pub. L. 93-259, 88 Stat. 55 (29
U.S.C. 204f).
PART 610--HOURS OF DUTY
Subpart A--Weekly and Daily Scheduling of Work
6. The authority citation for subpart A of part 610 continues to
read as follows:
Authority: 5 U.S.C. 6101; sec. 1(1) of E.O. 11228, 3 CFR, 1964-
1965 Comp., p. 317.
Subpart B--Holidays
7. The authority citation for subpart B of part 610 continues to
read as follows:
Authority: 5 U.S.C. 6101; sec. 1(1) of E.O. 11228, 3 CFR, 1964-
1965 Comp., p. 317.
Subpart C--Administrative Dismissals of Daily, Hourly, and
Piecework Employees
8. The authority citation for subpart C of part 610 continues to
read as follows:
Authority: 5 U.S.C. 6104; E.O. 10552, 3 CFR, 1954-1958 Comp., p.
201.
PART 630--ABSENCE AND LEAVE
9. The authority citation for part 630 is revised to read as
follows:
Authority: 5 U.S.C. 6311; Sec. 630.301 also issued under Pub. L.
103-356, 108 Stat. 3410; Sec. 630.303 also issued under 5 U.S.C.
6133(a); Sec. Sec. 630.306 and 630.308 also issued under 5 U.S.C.
6403(d)(3), Pub. L. 102-484, 106 Stat. 2722, and Pub. L. 103-337,
108 Stat. 2663; subpart D also issued under Pub. L. 103-329, 108
Stat. 2423; Sec. 630.501 and subpart F also issued under E.O. 11228,
30 FR 7739, 3 CFR, 1974 Comp., p. 163; subpart G also issued under 5
U.S.C. 6305; subpart H also issued under 5 U.S.C. 6326; subpart I
also issued under 5 U.S.C. 6332, Pub. L. 100-566, 102 Stat. 2834,
and Pub. L. 103-103, 107 Stat. 1022; subpart J also issued under 5
U.S.C. 6362, Pub. L. 100-566, and Pub. L. 103-103; subpart K also
issued under Pub. L. 102-25, 105 Stat. 92; and subpart L also issued
under 5 U.S.C. 6387 and Pub. L. 103-3, 107 Stat. 23.
10. In Secs. 531.202, 550.103, 550.502, 550.602, 551.102, 610.102,
610.303, 630.201, 630.601, 630.702 and 630.803 Remove designation from
each definition and alphabetize. Secs. 550.103, 550.171, 550.181,
550.185, 551.102, 551.103, 551.207, 610.202, 630.1202, 630.1211
[Amended].
11. In the list below, for each section indicated in the left
column, remove the current reference and add the appropriate new
reference, as indicated.
----------------------------------------------------------------------------------------------------------------
Sections Remove Add
----------------------------------------------------------------------------------------------------------------
550.103, definition of ``Law ``paragraph (t)(1), (2), or (3)'' ``Paragraph (1), (2), or (3)''.
enforcement Officer''
550.103, definition of ``Criminal ``paragraph (t) of this section'' ``this section''.
investigator''
550.171 550.103(o) 550.103.
550.181 550.103(u) 550.103.
550.185(a) 550.103(j) 550.103.
551.102, definition of ``Trainee'' ``paragraph (d) of this section'' ``this section''.
551.102, definition of ``Volunteer'' ``paragraph (d) of this section'' ``this section''.
551.103(b)(2) 551.102(f) 551.102.
551.103(b)(3) 551.102(g) 551.102.
551.207(b) 551.102(h) 551.102.
610.202(a) 610.102(c) 610.102
630.1202:
Accrued leave 630.201(b)(1) 630.201.
Accumulated leave 630.201(b)(2) 630.201.
Administrative workweek 610.102(a) 610.102.
Regularly scheduled 610.102(g) 610.102.
[[Page 67288]]
Regulatory scheduled 610.102(b) 610.102.
administrative workweek
Tour of duty 610.102(h) 610.102.
630.1211(b)(1) 550.103(j) 550.103.
----------------------------------------------------------------------------------------------------------------
[FR Doc. 95-31381 Filed 12-28-95; 8:45 am]
BILLING CODE 6325-01-M
Complete official Federal Register PDF
FR Doc. 95-31374 Safety Zone Regulations: New Years Eve Fireworks: Delaware River, Philadelphia, PA
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67330-67332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31374]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
33 CFR Part 165
[COTP Philadelphia, PA 95-087]
RIN 2115-AA97
Safety Zone Regulations: New Years Eve Fireworks: Delaware River,
Philadelphia, PA
AGENCY: Coast Guard, DOT.
ACTION: Temporary final rule.
-----------------------------------------------------------------------
[[Page 67331]]
SUMMARY: The Coast Guard is establishing a temporary moving safety zone
on the Delaware River between the Commodore Barry Bridge and Penn's
Landing, Philadelphia, Pennsylvania during the transit of the Tug
PURPLE HAYS with fireworks barges on December 31, 1995. This safety
zone is needed to protect vessels, the port community and the
environment from potential safety and environmental hazards associated
with the transit of the Tug PURPLE HAYS with barges loaded with
explosives. Entry into this zone is prohibited without permission from
the Captain of the Port.
EFFECTIVE DATE: This rule is effective from 4 p.m. to 11 p.m., December
31, 1995.
FOR FURTHER INFORMATION CONTACT:
LTJG S.J. Kelly, Project Officer at the Captain of the Port,
Philadelphia, (215) 271-4909.
SUPPLEMENTARY INFORMATION: In accordance with 5 U.S.C. 553, a notice of
proposed rulemaking (NPRM) was not published for this regulation and
good cause exists for making it effective in less than 30 days after
Federal Register publication. The Coast Guard was informed by the
owner/operator of the Tug PURPLE HAYS on December 6, 1995 of the
intended transit of the Tug PURPLE HAYS along the Delaware River
between the Commodore Barry Bridge and Penn's Landing, Philadelphia,
Pennsylvania. Publishing a NPRM and delaying the effective date would
be contrary to the public interest, since immediate action is needed to
protect the environment and vessel traffic against potential hazards
associated with the transit of the Tug PURPLE HAYS and barges while
loaded with fireworks.
Drafting Information: The drafters of this regulation are LTJG
S.J. Kelly, project officer for the Captain of the Port,
Philadelphia, and CDR. T.R. Cahill, Project Attorney, Fifth Coast
Guard District Legal Staff.
Discussion of the Regulation: The circumstances requiring the
regulation arise from the potential hazards associated with the
transportation of fireworks on a barge in heavily trafficked areas
of the Delaware River. The safety zone includes a specified area
around the Tug PURPLE HAYS barges loaded with explosives while
underway on the Delaware River between the Commodore Barry Bridge
and Penn's Landing and while moored at Hay's Tug and Launch,
Chester, PA. Performance Pyrotechnic Associates, Inc. submitted an
application for a marine event to MSO/Group Philadelphia dated
November 20, 1995, requesting permission to hold a fireworks display
in conjunction with the New Years Eve Celebration. However, the
Coast Guard was not notified of the exact circumstances surrounding
the transport of explosive until December 10, 1995. This temporary
safety zone is being established with transit of the barges.
Additionally, as announced in a separate notice to be published in
the Federal Register, special local regulations in 33 CFR 100.509
will be in effect during the fireworks display.
Regulatory Evaluation: This regulation is not a significant
regulatory action under section 3(f) of Executive Order 12866 and does
not require an assessment of potential costs and benefits under section
6(a)(3) of that order. It has been exempted from review by the Office
of Management and Budget under that order. It is not significant under
the regulatory policies and procedures of the Department of
Transportation (DOT) (44 FR 11040; February 26, 1979). The Coast Guard
expects the economic impact of this proposal to be so minimal that a
full Regulatory Evaluation under paragraph 10e of the regulatory
policies and procedures of DOT is unnecessary.
Environment: The Coast Guard considered the environmental impact of
this proposal and concluded that under section 2.B.2.e (34). of
Commandant Instruction M16475.1B (as revised by 59 FR 38654; July 29,
1994), this rule is categorically excluded from further environmental
documentation.
Collection of Information: This proposal contains no collection of
information requirements under the Paperwork Reduction Act (44 U.S.C.
3501 et seq.).
Federalism Assessment: This action has been analyzed in accordance
with the principles and criteria contained in Executive Order 12612,
and it has been determined that it does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment.
List of Subjects in 33 CFR Part 165
Harbors, Marine safety, Navigation (water), Security measures,
Vessels, Waterways.
Regulation
In consideration of the foregoing, Subpart C of Part 165 of Title
33, Code of Federal Regulations, is amended as follows:
1. The authority citation for Part 165 continues to read as
follows:
Authority: 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1(g),
6.04-1, 6.04-6, and 160.5; 49 CFR 1.46.
2. A new Sec. 165.T05-087 is added to read as follows:
Sec. 165.T05-087 Safety Zone: Delaware River, between Commodore Barry
Bridge and Penn's Landing, Philadelphia, PA.
(a) Location. A safety zone is established for:
(1) All waters within an area which extends 500 yards on either
side and 1000 yards ahead and astern of the Tug PURPLE HAYS and barges
loaded with class 1.3 and 1.4 explosives while underway in the Delaware
River, between the Commodore Barry Bridge and Penn's Landing,
Philadelphia, PA.
(2) All waters within a 200 yard radius of the Tug PURPLE HAYS and
barges loaded with class 1.3 and 1.4 explosives while moored at Hay's
Tug and Launch in Chester, PA.
(b) Effective Date. This section is effective from 4 p.m. to 11
p.m. December 31, 1995. If the conditions requiring a safety zone
terminate at an earlier date, the Captain of the Port, Philadelphia,
may advise mariners by Broadcast Notice to Mariners that the safety
zone will not be enforced.
(c) Regulations: The following regulations shall apply within the
safety zone.
(1) No person or vessel may enter the safety zone without
permission of the Captain of the Port or his designated representative.
(2) As a condition of entry into the safety zone, the COTP or his
designated representative may order that each vessel:
(i) Maintain a continuous radio guard on channels 13 and 16 VHF-FM
while underway;
(ii) Not overtake the Tug PURPLE HAYS while underway on the
Delaware River;
(iii) Operate at a minimum no wake speed sufficient to maintain
steerage while Tug PURPLE HAYS is moored at Hay's Tug and Launch,
Chester, PA;
(iv) Proceed as directed or stop the vessel immediately when
directed to do so by the Captain of the Port or by his designated
representative.
(d) Designated COTP Representative: The designated representative
of the Captain of the Port is any Coast Guard commissioned, warrant, or
petty officer who has been authorized by the Captain of the Port,
Philadelphia, Pennsylvania to act on his behalf. The designated
representative enforcing the safety zone may be contacted on VHF
channels 13 & 16. The Captain of the Port of Philadelphia and the
Command Duty Officer at the Marine Safety Office, Philadelphia, may be
contacted at telephone number (215) 271-4940.
[[Page 67332]]
Dated: December 15, 1995.
John E. Veentjer,
Captain U.S. Coast Guard, Captain of the Port, Philadelphia, PA.
[FR Doc. 95-31374 Filed 12-28-95; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 95-31351 Airworthiness Directives; The New Piper Aircraft, Inc. (Formerly Piper Aircraft Corporation) PA28 and PA32 Series Airplanes
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67321-67325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31351]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 94-CE-28-AD; Amendment 39-9472; AD 95-26-13]
Airworthiness Directives; The New Piper Aircraft, Inc. (Formerly
Piper Aircraft Corporation) PA28 and PA32 Series Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment supersedes Airworthiness Directive (AD) 76-25-
06, which currently requires replacing oil cooler hoses on The New
Piper Aircraft, Inc. (Piper) Model PA28-140 airplanes, and inspecting
for a minimum clearance between the oil cooler hose assemblies and the
front exhaust stacks and adjusting if proper clearance is not obtained.
This action maintains the clearance inspection and oil cooler hose
replacements, requires this inspection and these replacements to be
repetitive, and extends the applicability to include PA32 series and
other PA28 series airplanes. It also provides the option of installing
approved TSO-C53a, Type D oil cooler hose assemblies as terminating
action for the repetitive inspection requirement. Numerous incidents/
accidents caused by oil cooler hose rupture or failure on the affected
airplanes prompted this action. The actions specified by this AD are
intended to prevent these oil cooler hoses from failing or rupturing,
which could result in engine stoppage and subsequent loss of control of
the airplane.
EFFECTIVE DATE: February 5, 1996.
ADDRESSES: Information that relates to this AD may be examined at the
Federal Aviation Administration (FAA), Central Region, Office of the
Assistant Chief Counsel, Attention: Rules Docket 94-CE-28-AD, Room
1558, 601 E. 12th Street, Kansas City, Missouri 64106.
FOR FURTHER INFORMATION CONTACT: Ms. Juanita Craft-Lloyd, Aerospace
Engineer, FAA, Atlanta Aircraft Certification Office, Campus Building,
1701 Columbia Avenue, suite 2-160, College Park, Georgia 30337-2748;
telephone (404) 305-7373; facsimile (404) 305-7348.
SUPPLEMENTARY INFORMATION: A proposal to amend part 39 of the Federal
Aviation Regulations (14 CFR part 39) to include an AD that would apply
to Piper Model PA28-140 airplanes was published in the Federal Register
on March 8, 1995 (60 FR 12714). The action proposed to supersede AD 76-
25-06, Amendment 39-2788, with a new AD that would retain the clearance
inspection and oil cooler hose replacement for the Piper Model PA28-140
airplanes, and make the inspection and replacement repetitive for these
airplanes as well as other PA28 series and the PA32 series airplanes.
It would also provide the option of installing approved TSO-C53a, Type
D oil cooler hose assemblies as terminating action for the repetitive
inspection requirement.
Interested persons have been afforded an opportunity to participate
in the making of this amendment. Due consideration has been given to
the comments received.
One commenter states that the proposal should take into account
that the affected airplanes could have oil cooler hose assemblies
installed other than those manufactured from Piper. The FAA concurs and
has changed the AD to reflect that the AD applies to airplanes with oil
cooler hose assemblies that do not meet TSO-C53a, Type D requirements.
This same commenter points out that paragraph (b)(2) of the
proposed AD contains the words ``oil cooler assembly'' when it should
contain the words ``oil cooler hose assembly''. The FAA concurs and has
changed paragraph (b)(2) of the AD to reflect the above-referenced
language.
This commenter also believes that the cost of the oil cooler hoses
is too low and that the FAA did not take into account that each
airplane has two oil cooler hoses installed. The commenter states that
the price of an oil cooler hose is between $122 and $279, and the FAA
estimates $110. The FAA will change the economic paragraph of the final
rule to incorporate the upper end of the price range for oil cooler
hoses of $279 per hose with two oil cooler hoses per airplane ($558 per
airplane for parts).
A commenter proposes that the FAA clarify whether the date used to
determine the eight-year replacement
[[Page 67322]]
interval is the installation date, rubber cure date, or the pressure
test date. The FAA will specify in the AD that the date used to
determine the eight-year replacement interval is the installation date.
One commenter believes that the FAA should withdraw the notice of
proposed rulemaking (NPRM) because a pilot can inspect these oil cooler
hoses and, therefore, the action does not warrant the expense and
record keeping required by AD action. Another commenter does not
request that the AD be withdrawn, but requests that the FAA include the
provision of allowing the pilot to inspect the oil cooler hoses. The
FAA does not concur with either of these comments. Sections 43.3(g) and
43.7(f) of the Federal Aviation Regulations (14 CFR 43.3 and 14 CFR
43.7) contain the provision to allow a pilot to perform preventive
maintenance and return the airplane to service. Part 43, Appendix A of
the Federal Aviation Regulations (14 CFR, part 43, Appendix A) outlines
what is considered preventive maintenance. Inspections of oil cooler
hose assemblies are not authorized as preventive maintenance actions as
detailed in the above-referenced portion of the regulations. The AD is
unchanged as a result of these comments.
A commenter believes the NPRM should be withdrawn because the 20
reported incidents over a 19-year period with no damage reported do not
justify repetitive 100-hour time-in-service (TIS) inspections and 8-
year (or 1,000 hours TIS) repetitive oil cooler hose assembly
replacements. The FAA does not concur. The FAA has received 26
incident/accident occurrences relating to oil cooler hose failure since
1985. In addition, 24 service difficulty reports (SDR) have been filed
on this subject since 1987. The FAA has determined that oil cooler
hoses that fail or rupture could result in engine stoppage and
subsequent loss of control of the airplane. The AD is unchanged as a
result of this comment.
Another commenter requests that the FAA withdraw the NPRM because
the actions are the same as what is listed in the Piper service
manuals. The commenter quotes the following from the FAA Airworthiness
Directive Manual, FAA-AIR-M-8040.1:
An AD should not be issued to assure the use of normal
maintenance practices on a product where individual cases of
improper maintenance or lack of maintenance have contributed to an
unsafe condition. Corrective action in those instances should be
taken through normal Flight Standards maintenance communication
channels, such as General Alerts, Maintenance Bulletins, and
Notices.
The FAA does not consider inspecting oil cooler hoses on the affected
Piper PA28 and PA32 series airplanes a general maintenance action. The
close proximity of the oil cooler hose assemblies to the exhaust stack
causes the oil cooler hoses to rupture instead of developing leaks over
time. A general maintenance action on oil cooler hoses would be to
check for leaks; however, the service history of the affected airplanes
is indicating ruptured oil cooler hoses. For this reason, the FAA has
determined that the close proximity of the oil cooler hose assemblies
to the exhaust stack require special inspections for the oil cooler
hoses through AD action to prevent these hoses from failing or
rupturing. The AD is unchanged as a result of this comment.
One other commenter (an owner of a Piper Model PA28R-201T airplane)
recommends that the NPRM be withdrawn because no corrosion was found on
this commenter's airplane oil cooler hoses when the tanks were removed
and the hoses replaced. In addition, this owner operates the airplane
away from seashores in a dry climate. For these reasons, this commenter
believes the NPRM should be withdrawn. The FAA does not concur. AD's
are issued based on a known ``unsafe condition that could exist or
develop on airplanes of the same type design.'' In this instance, the
owner operates a Piper Model PA28R-201T airplane, which is not affected
by this AD because this particular model does not have external oil
cooler hose assemblies. The AD is unchanged as a result of this
comment.
One commenter feels that the FAA is inferring that Piper airplane
operators are less competent than other operators by only writing the
AD against certain Piper PA28 and PA32 series airplanes. The commenter
states that every reciprocating engine-powered aircraft has oil lines
and hoses and that the AD should be written against all such aircraft.
The FAA does not concur. As stated in the NPRM, ``other airplane models
have shown a history of oil cooler hose problems; however, most of
these have been attributed to leaking oil cooler hoses instead of
ruptured hoses or broken hoses as are detailed in the incident/accident
reports of the affected PA28 and PA32 series airplanes. The close
proximity of the oil cooler hose assemblies to the exhaust stacks in
some of the affected airplanes contributes to the hazardous nature of
these oil cooler hose failures.'' The AD is unchanged as a result of
this comment.
A commenter states that Type D oil cooler hoses are less flexible
than other hoses and, therefore, cannot always be interchanged. This
commenter further explains that this less-flexible hose could kink
during oil cooler hose installation or during flight because of in-
service vibration. This could prevent oil passage and result in engine
stoppage. The FAA concurs that these Type D oil cooler hoses are less
flexible and could kink. The FAA is changing the AD to require a
minimum bend radius of 6.5 inches on oil cooler hose assemblies
incorporating 0.75-inch outer diameter hoses.
Another commenter requests that the FAA either delete the
repetitive replacement requirement or have the replacement intervals
coincide with every 10th annual inspection. The FAA does not concur.
The close proximity of the oil cooler hose assemblies to the exhaust
stacks causes the heat from the exhaust stacks to affect the life of
the hoses. This also causes the hoses to rupture instead of leak. With
this in mind, the FAA believes that repetitively inspecting the oil
cooler hoses every 100 hours TIS and replacing all hoses every 8 years
will accomplish the intent of eliminating the unsafe condition
addressed in this action. The AD is unchanged as a result of this
comment.
After careful review of all available information related to the
subject presented above, the FAA has determined that air safety and the
public interest require the adoption of the rule as proposed except for
the wording change to limit the applicability to oil cooler hose
assemblies that do not meet TSO-C53a, Type D requirements; the
rewording of ``oil cooler assembly'' to ``oil cooler hose assembly'' in
paragraph (b)(2) of the AD; the change in the economic paragraph to
reflect more accurate oil cooler hose price information; the
clarification that the replacement interval is based on the
installation date; the addition of requiring a minimum bend radius of
6.5 inches on oil cooler hose assemblies requiring a 0.75-inch outer
diameter hose; and minor editorial corrections. The FAA has determined
that the minor addition, changes, corrections, and clarification will
not change the meaning of the AD and will not add any additional burden
upon the public than was already proposed.
The replacement compliance time for this AD is presented in both
hours TIS and calendar time with the prevalent compliance time being
that which occurs first. Deterioration or failure of the oil cooler
hose assemblies could
[[Page 67323]]
occur as a result of normal flight operation or as a result of time.
Therefore, the FAA has determined that this dual replacement compliance
time is needed to assure that the oil cooler hose assemblies are
replaced before they deteriorate and rupture or fail.
The FAA estimates that 25,000 airplanes in the U.S. registry will
be affected by this AD, that it will take approximately 2 workhours (1
workhour per inspection and 1 workhour per replacement) per airplane to
accomplish the required action, and that the average labor rate is
approximately $60 an hour. Parts cost approximately $558 per airplane
($279 per oil cooler hose with two hoses per airplane). Based on these
figures, the total cost impact of the AD on U.S. operators is estimated
to be $16,950,000 or $678 per airplane. This figure does not take into
the account the cost of repetitive inspections or repetitive
replacements. The FAA has no way of determining the number of
repetitive inspections or replacements each owner/operator would incur
over the life of the airplane.
The regulations adopted herein will not have substantial direct
effects on the States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) 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 final 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.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends 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 USC 106(g), 40101, 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by removing Airworthiness Directive
(AD) 76-25-06, Amendment 39-2788, and by adding a new AD to read as
follows:
95-26-13 The New Piper Aircraft, Inc.: Amendment 39-9472; Docket No.
94-CE-28-AD; Supersedes AD 76-25-06, Amendment 39-2788.
Applicability: The following airplane models (all serial
numbers), certificated in any category, that are equipped with oil
cooler hose assemblies that do not meet TSO-C53a, Type D
requirements:
PA28-140
PA28-180
PA28R-201
PA28-235
PA32S-300
PA32R-301(SP)
PA32-301T
PA28-150
PA28S-180
PA28-151
PA28-236
PA32-301
PA32R-301(HP)
PA28-160
PA28R-180
PA28-161
PA32-260
PA32R-300
PA32RT-300T
PA28S-160
PA28R-200
PA28-181
PA32-300
PA32RT-300
PA32R-301T
Note 1: This AD applies to each airplane 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 airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
alternative method of compliance in accordance with paragraph (f) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it.
Compliance: Required as indicated in the body of this AD, unless
already accomplished.
To prevent oil cooler hoses from failing or rupturing, which
could result in engine stoppage and subsequent loss of control of
the airplane, accomplish the following:
(a) Within the next 100 hours time-in-service (TIS) after the
effective date of this AD, and thereafter at intervals not to exceed
100 hours TIS, inspect the oil cooler hoses to ensure that the hoses
meet the criteria presented in the paragraphs below.
(1) For airplanes that have any oil cooler hose assembly mounted
at the front or back of the airplane, or both, the fire sleeve of
the hose should not be soaked with oil or have a brownish or whitish
color, and there should be no evidence of deterioration as a result
of heat, brittleness, or oil seepage. Prior to further flight,
replace any hose that is soaked with oil, has a brownish or whitish
color, or has evidence of deterioration.
(2) On airplanes that have any oil cooler hose assembly mounted
in the front of the airplane, ensure that the following exists, and,
prior to further flight, adjust accordingly:
(i) The hose passes underneath and behind the electrical ground
cable and in front of the lower of the two engine mount struts when
the hose is routed to the rear of the engine; and
(ii) The hose is tied to the engine mount strut and a clearance
of at least 2 inches exists between the oil hose and exhaust stack.
Note 2: Figure 1 of this AD relates to the conditions specified
in paragraphs (a)(2)(i) and (a)(2)(ii) of this AD.
BILLING CODE 4910-13-U
[[Page 67324]]
[GRAPHIC][TIFF OMITTED]TR29DE95.010
BILLING CODE 4910-13-C
[[Page 67325]]
(b) Upon the accumulation of 8 years or 1,000 hours TIS after
installation of each oil cooler assembly, whichever occurs first,
and thereafter every 8 years or 1,000 hours TIS (whichever occurs
first), accomplish one of the following:
(1) Replace each oil cooler hose assembly with a part number
specified in the APPLICABILITY section of this AD, and reinspect in
accordance with paragraph (a) of this AD at intervals not to exceed
100 hours TIS; or
(2) Replace each oil cooler hose assembly with an approved TSO-
C53a, Type D, hose assembly ensuring that there is a minimum of 2
inches between the oil cooler hoses and exhaust stacks (as
applicable) upon installation. Ensure that there is a minimum bend
radius of 6.5 inches on oil cooler assemblies incorporating 0.75-
inch outer diameter hoses.
(c) The replacement specified in paragraph (b)(2) of this AD may
be accomplished at any time prior to the 8-year or 1,000-hour
compliance time as terminating action for the 100-hour TIS
repetitive inspection requirement of this AD.
(d) After adjusting or installing oil cooler hoses, prior to
further flight, run the engine for 5 minutes to ensure that there
are no oil leaks and that the 2-inch clearance is maintained (as
applicable) when the engine is warm. Prior to further flight,
replace any leaking oil cooler hoses and adjust the clearance
accordingly.
Note 3: Although not required by this AD, the FAA recommends
that an oil cooler hose flexibility test be accomplished at each
100-hour TIS inspection interval. Oil cooler hose flexibility may be
determined by gently lifting the hose in several places from the
bottom of its downward arc to the oil cooler. If the oil cooler hose
moves slightly either from side-to-side or upward with the hand at
the center of an even arc, then some flexibility remains. If the oil
cooler hose appears hardened or inflexible, replacement is
recommended.
(e) 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 airplane to a location where
the requirements of this AD can be accomplished.
(f) An alternative method of compliance or adjustment of the
initial or repetitive compliance times that provides an equivalent
level of safety may be approved by the Manager, Atlanta Aircraft
Certification Office (ACO), Campus Building, 1701 Columbia Avenue,
suite 2-160, College Park, Georgia 30337-2748. The request shall be
forwarded through an appropriate FAA Maintenance Inspector, who may
add comments and then send it to the Manager, Atlanta ACO.
Note 4: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Atlanta ACO.
Note 5: Alternative methods of compliance approved in accordance
with AD 76-25-06 (superseded by this action) are not considered
approved as alternative methods of compliance with this AD.
(g) Figure 1 of this AD may be obtained from the Atlanta ACO at
the address specified in paragraph (f) of this AD. This document or
any other information that relates to this AD may be inspected at
the FAA, Central Region, Office of the Assistant Chief Counsel, Room
1558, 601 E. 12th Street, Kansas City, Missouri.
(h) This amendment (39-9472) supersedes AD 76-25-06, Amendment
39-2788.
(i) This amendment (39-9472) becomes effective on February 5,
1996.
Issued in Kansas City, Missouri, on December 19, 1995.
Dwight A. Young,
Acting Manager, Small Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 95-31351 Filed 12-28-95; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 95-31346 Commercial Activities Program Procedures
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67328-67330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31346]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Office of the Secretary
32 CFR Part 169a
[DoD Instruction 4100.33]
Commercial Activities Program Procedures
AGENCY: Office of the Secretary of Defense, DoD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This part removes the requirement to place every DoD employee
in a comparable position prior to converting a function with 10 full
time equivalents or less to contract, sets maximum study times for cost
comparisons, removes the requirement to make congressional reports only
when Congress is in session, and makes minor administrative
corrections. it also establishes procedures and criteria for use by DoD
Components to determine whether DoD commercial activities should be
performed by DoD personnel in-house or by contract with commercial
sources.
EFFECTIVE DATE: June 12, 1995.
FOR FURTHER INFORMATION CONTACT:
Earl DeHart, Program Manager, 400 Army/Navy Drive, Suite 206,
Arlington, Virginia 22202-2884.
SUPPLEMENTARY INFORMATION: On January 4, 1995, the Department of
Defense published a proposed amendment to 32 CFR part 169a in the
Federal Register (60 FR 417) bringing DoD guidance on commercial
activities up-to-date. No comments were received from the private
sector. Some changes were recommended by DoD Components and most were
incorporated. It has been certified that this final rule is not a
significant regulatory action. The rule does not:
(1) Have an annual effect on the economy of $100 million or more
adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities; planned by another agency;
(2) Create a serious inconsistency or otherwise interfere with an
action taken or
(3) Materially alter the budgetary impact of entitlements grants,
user fees, or loan programs or the rights and obligations of recipients
thereof; or
(4) Raise novel legal or policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
Executive Order 12866. Further, it has been certified that this rule is
not subject to the Regulatory Flexibility Act (5 U.S.C. 601) because
the Services and Department agencies administering the rule will show a
reduction in administrative costs and other burdens resulting from the
simplification and clarification of direct conversion policies when
this proposed rule is issued as a final rule. Finally, it has been
certified that this proposed rule does not impose any additional
reporting or record keeping requirements prohibited under the Paperwork
Reduction Act of 1980.
List of Subjects in 32 CFR Part 169a
Armed forces, Government procurement.
Accordingly, 32 CFR Part 169a is amended as follows:
PART 169A--COMMERCIAL ACTIVITIES PROGRAM PROCEDURES
1. The authority citation for Part 169a continues to read as
follows:
Authority: 5 U.S.C. 301 and 552.
2. Subpart B--Procedures is amended by adding a Sec. 169a.19 to
read as follows:
Subpart B--Procedures--[Amended]
Sec. 169a.19 Study limits.
No DoD funds shall be available to perform any cost study pursuant
to the provisions of OMB Circular A-76 if the study being performed
exceeds a period of 24 months after initiation of such study with
respect to a single function activity or 48 months after initiation of
such study for a multi-function activity.
3. Section 169a.21 is amended in paragraph (a) by removing ``DD-P&L
[[Page 67329]]
1540'' and adding in its place ``DD-A&T(A) 1540'', paragraph (b) by
removing ``DD-P&L 1542'' and adding in its place ``DD-A&T(Q) 1542'',
paragraph (c)(3) and the first sentence in paragraph (c)(5) by removing
``when in session'', paragraph (c)(3) by removing ``ASD(P&L)'' adding
in its place ``ASD(ES)''; by revising paragraph (c) introductory text;
and by adding a sentence at the end of paragraph (c)(2) to read as
follows:
Sec. 169a.21 Reporting requirements.
* * * * *
(c) Congressional Data Reports on CA (Report Control Symbol DD-
A&T(A&AR) 1949) and Reports on savings on Costs from Increased Use of
DoD Civilian Personnel (Report Control Symbol DD-A&T(AR) 1950). To
insure consistent application of the requirements stated in 10 U.S.C.
2461 and 2463, the following guidance is provided:
(2) * * * 10 U.S.C. 2463 applies to conversions from contract to
in-house involving 50 or more contractor employees.
* * * * *
4. Appendix B to Part 169a is amended by revising sections A.1. and
A.2., by removing section A.3. and redesignating sections A.4. and A.5.
as A.3. and A.4., respectively, and in newly redesignated A.4. is by
removing the word ``or'' the second time it appears and adding in its
place ``of.''
Appendix B to Part 169a--[Amended]
Appendix B to Part 169a--Commercial Activities Inventory Report and
Five-Year Review Schedule
* * * * *
A. * * *
1. Forward your inventory report before January 1 to the Director,
Installations Management, 400 Army Navy Drive, Room 206, Arlington, VA
22202-2884. Use Report Control Symbol ``DD-A&T(A) 1540'' as your
authority to collect this data.
2. Transmit by use of floppy diskette. Data files must be in
American Standard Code Information Interchange text file format on a
MicroSoft-Disk Operating System formatted 3.5 inch floppy diskette.
Provide submissions in the Defense Utility Energy Reporting System
format as specified below.
* * * * *
5. Appendix C to Part 169a is amended in sections C.6. and
C.7.a.(4) by removing ``room 3E787'' and adding in its place ``room
3E813''; section C.8. removing ``Public Law 102-172'' and adding in its
place ``Public Law 103-139''; by revising section B.4. adding section
B.5. and a heading to section C.8. to read as follows:
Appendix C to Part 169a--[Amended]
Appendix C to Part 169a--Simplified Cost Comparison and Direct
Conversion of CAs
* * * * *
B. * * *
4. The installation commander should attempt to place or retrain
displaced DoD civilian employees by
a. Placing or retraining employees in available permanent vacant
positions, or
b. Assigning displaced employees to valid temporary or over-hire
positions in similar activities for gainful employment until permanent
vacancies are available. The type of employee appointment (e.g.,
career, career-conditional, etc., or change from competitive to
excepted service or vice versa) must not change, or
c. Where no vacancies exist or are projected, offer employees
retraining opportunities under the Job Training Partnership Act or
similar retraining programs for transitioning into the private sector.
5. The function to be directly converted does not include any DoD
civilian positions that were as a result of DoD Component streamlining
plans and/or were removed with buyout offers that satisfied Section 5
of the Federal Workforce Restructuring Act requirements.
C. * * *
8. Most Efficient and Cost-Effective Analysis for Contractor
Performance of an Activity (Report Control Symbol DD-A&T(AR) 1951.* * *
6. Appendix D to Part 169a is amended by revising the second
paragraph of the introductory text, by revising DoD Component code
``Y'' under the heading CAMIS ENTRY AND UPDATE INSTRUCTIONS, Part I,
Section One, item [3] and by adding two new entries at the end of that
item [3]; by revising items [4] and [5] under the heading CAMIS ENTRY
AND UPDATE INSTRUCTIONS, Part I, Section One; by revising DoD Component
code ``Y'' under the heading CAMIS ENTRY AND UPDATE INSTRUCTIONS, Part
II, Section One, item [3] and by adding two new entries at the end of
that item [3]; and by revising items [4] and [5] under the heading
CAMIS ENTRY AND UPDATE INSTRUCTIONS, Part II, Section One, to read us
follows:
Appendix D to Part 169a--[Amended]
Appendix D to Part 169a--Commercial Activities Management Information
System (CAMIS)
* * * * *
On approval of a full cost comparison, a simplified cost
comparison, or a direct conversion CA, the DoD Component shall create
the initial entry using the data elements in part I for full cost
comparisons and data elements in part II for all other conversions.
Within 30 days of the end of each quarter the DoD Component shall
submit a floppy diskette. Data files must be in American Standard Code
Information Interchange text file format on a MicroSoft-Disk Operating
System formatted 3.5 inch floppy diskette. Provide submissions in the
Defense Utility Energy Reporting System format. The data shall be
submitted in the Director, Installations Management (D,IM), 400 Army
Navy Drive, Room 206, Arlington, VA 22202-2884 at least 60 days prior
to the end of the quarter. The D,IM shall use the automated data to
update the CAMIS. If the DoD Component is unable to provide data in an
automated format, the D,IM shall provide quarterly printouts of cost
comparison records (CCR) and conversion and/or comparison records
(DCSCCR) that may be annotated and returned within 30 days of the end
of each quarter to the D,IM. The D,IM then shall use the annotated
printouts to update the CAMIS.
* * * * *
CAMIS Entry and Update Instructions
Part I * * *
Section One * * *
[3] * * *
Y--On Site Inspection Agency (OSIA)
2--* * *
3--* * *
4--Defense Technical Information Center (DTIC)
5--U.S. Army Corps of Engineers (USACE) Civil Works
[4] Command code. The code established by the DoD Component
headquarters to identify the command responsible for operating the
commercial activity undergoing cost comparison.
[5] Installation code. The code established by the DoD Component
headquarters to identify the installation where the CA(s) under cost
comparison is and/or are located physically. Two or more codes (for
cost comparison packages encompassing more than one installation)
should be separated by commas.
* * * * *
CAMIS Entry and Update Instructions
Part II * * *
Section One * * *
[3] * * *
Y--On Site Inspection Agency (OSIA)
[[Page 67330]]
2--* * *
3--* * *
4--Defense Technical Information Center (DTIC)
5--U.S. Army Corps of Engineers (USACE) Civil Works
[4] Command code. The code established by the DoD Component
headquarters to identify the command responsible for operating the
commercial activity undergoing cost comparison.
[5] Installation code. The code established by the DoD Component
headquarters to identify the installation where the CA(s) under cost
comparison is and/or are located physically. Two or more codes (for
cost comparison packages encompassing more than one installation)
should be separated by commas.
* * * * *
Dated: December 21, 1995.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 95-31346 Filed 12-28-95; 8:45 am]
BILLING CODE 5000-04-M
Complete official Federal Register PDF
FR Doc. 95-31227 Loan Policies and Security Documents for Electric Borrowers
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67396-67421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31227]
[[Page 67395]]
_______________________________________________________________________
Part II
Department of Agriculture
_______________________________________________________________________
Rural Utilities Service
_______________________________________________________________________
7 CFR Part 1710, et al.
Loan Policies and Security Documents for Electric Borrowers; Final Rule
Federal Register / Vol. 60, No. 250 / Friday, December 29, 1995 /
Rules and Regulations
[[Page 67396]]
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1710, 1717 and 1718
RIN 0572-AB06
Loan Policies and Security Documents for Electric Borrowers
AGENCY: Rural Utilities Service.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Rural Utilities Service (RUS) hereby establishes new
policies and requirements for loan contracts ordinarily required for
loans made to electric distribution borrowers. The rule updates and
clarifies the framework for loan contract provisions, conforms loan
contract provisions with the new form of mortgage recently approved,
and provides greater flexibility in addressing the financial needs of
individual borrowers and the credit risks involved with individual
lending situations. Conforming amendments to RUS lien accommodation
requirements and to regulations regarding 110 percent borrowers, and
changes to RUS operational controls, are also set forth.
EFFECTIVE DATE: This rule is effective January 29, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. Alex M. Cockey, Jr., Deputy
Assistant Administrator--Electric, U.S. Department of Agriculture,
Rural Utilities Service, room 4037-S, Ag Box 1560, 14th Street &
Independence Avenue, SW., Washington, DC 20250-1500. Telephone: 202-
720-9547.
SUPPLEMENTARY INFORMATION: This rule has been determined to be not
significant for the purposes of Executive Order 12866, and therefore
has not been reviewed by the Office of Management and Budget (OMB). The
Administrator of RUS has determined that the Regulatory Flexibility Act
(5 U.S.C. 601 et seq.) does not apply to this rule. The Administrator
of RUS has determined that this 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. This rule is excluded from the scope of Executive Order
12372, Intergovernmental Consultation, which may require consultation
with State and local officials. A Notice of Final Rule titled
Department Programs and Activities Excluded from Executive Order 12372
(50 FR 47034) exempts RUS electric loans and loan guarantees from
coverage under this Order. This rule has been reviewed under Executive
Order 12778, Civil Justice Reform. This rule: (1) Will not preempt any
State or local laws, regulations, or policies, unless they present an
irreconcilable conflict with this rule; (2) Will not have any
retroactive effect; and (3) Will not require administrative proceedings
before any parties may file suit challenging the provisions of this
rule.
The program described by this 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, DC 20402-9325.
Information Collection and Recordkeeping Requirements
The recordkeeping and reporting burdens contained in this 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 numbers 0572-0032 and 0572-0103.
Send questions or comments regarding these burdens or any other
aspect of these collections of information, including suggestions for
reducing the burden, to F. Lamont Heppe, Jr., Deputy Director, Program
Support Staff, Rural Utilities Service, Ag Box 1522, Washington, DC
20250-1500.
Background
On September 29, 1994, at 59 FR 49594, the Rural Utilities Service
(RUS) published a proposed rule, 7 CFR part 1718 Loan Security
Documents for Electric Borrowers, Subpart B Mortgage for Distribution
Borrowers, which proposed the agency's policies and requirements for
mortgages used to secure direct and guaranteed loans made to electric
distribution borrowers. The final rule for the mortgage was published
in the Federal Register on July 18, 1995 at 60 FR 36882. On that same
day, at 60 FR 36904, RUS published a proposed rule on a model form of a
new loan contract for distribution borrowers, 7 CFR part 1718 Loan
Security Documents for Electric Borrowers, Subpart C Loan Contracts
with Distribution Borrowers. The proposed rule also included proposed
amendments to 7 CFR part 1710 and 7 CFR part 1717 Subpart R, to ensure
consistency between these regulations and the new mortgage and proposed
loan contract. It was also proposed that a new Subpart M Operational
Controls be added to 7 CFR part 1717, which would cut back the reach of
certain operational controls contained in existing mortgages and loan
contracts.
A total of 29 separate comments, representing 33 different
organizations, were received on the proposed new loan contract for
distribution borrowers and the associated proposed regulations.
Comments were received from the National Rural Electric Cooperative
Association (NRECA), CoBank, 3 state-wide and one multi-state borrower
association, 17 distribution borrowers, and 10 generation and
transmission borrowers (G&Ts). The individual distribution borrowers
that commented were concentrated in the plains and Rocky Mountain
states, with 8 in North Dakota, 3 in Colorado, 2 in Wyoming, and one
each in South Dakota, Montana, Minnesota, and Iowa.
Operational Controls
Comments by the NRECA and one state-wide association focused
primarily on the extent of operational controls retained in the loan
contract and the general approach taken in the loan contract and 7 CFR
part 1717 subpart M for defining RUS' rights with respect to
operational controls. In the proposed loan contract some operational
controls were stated in specific terms while others were stated in
broad terms, with the agency relying on 7 CFR part 1717 subpart M and
other regulations to define the controls in more specific terms and to
narrow their reach.
NRECA and the one state-wide association recommended that (a)
further cuts be made in operational controls, (b) all operational
controls be stated in appropriately narrow and specific terms in the
loan contract itself, rather than relying on regulations to further
define and limit the controls, and (c) criteria be developed to exempt
``creditworthy'' borrowers from most of the remaining operational
controls. Relatively few comments on operational controls were received
from other commenters. Several commenters indicated their support
either for individual changes in operational controls proposed by RUS
or for the proposed changes in general, as well as for changes that
have been made in RUS regulations over the past several years.
RUS agrees that further cuts can be made in operational controls
and that some operational controls can and should be stated in more
specific, narrower terms in the loan contract itself. Such changes have
been made wherever possible in the final model loan contract. They are
as follows:
Section 5.15 of the proposed loan contract requiring the
borrower to acquire and construct the electric system in conformance
with RUS
[[Page 67397]]
regulations has been eliminated. RUS' more specific oversight interests
regarding extensions and additions and construction standards are
retained in other sections.
Section 6.3 of the proposed loan contract granting RUS
general approval rights over borrower expenditures for legal,
engineering, and supervisory services has been eliminated. Certain
limited approval rights, such as approval of contracts for engineering
services when the construction is financed by RUS, have been retained.
Section 6.7 of the proposed loan contract granting RUS
general approval rights over the acquisition, construction, or
procurement of generating facilities and existing facilities and
systems has been eliminated. Limited approval authority with respect to
such facilities and systems has been retained in section 6.2.
Section 9.14 of the proposed loan contract authorizing RUS
to appoint construction supervisors if construction does not proceed in
accordance with the loan documents has been eliminated. RUS approval
authority over general managers in cases of default has been retained.
Paragraph (m) of section 4.1 of the proposed loan contract
requiring compliance with RUS regulations as one of the conditions for
the borrower to receive loan advances has been revised to require
compliance with the loan contract and mortgage.
Section 5.9 of the proposed loan contract on area coverage
has been revised by eliminating the reference to ``to the extent
required by RUS'' and in its place specifically stating the borrower's
obligations and discretion with regard to contributions in aid of
construction. These requirements are the same as those in existing 7
CFR part 1710.103(b).
Section 5.14 of the proposed loan contract has been
revised to eliminate the requirement that borrowers use construction
plans and specifications in conformance with RUS regulations for
projects funded from non-RUS sources. Thus, while distribution
borrowers will continue to be required to follow RUS design and
construction standards and the list of accepted materials regardless of
the source of funding, plans and specifications for construction not
financed by an RUS loan or loan guarantee will not be subject to agency
review and approval.
Section 5.16 of the proposed loan contract has been
revised to limit to only those projects financed by RUS the requirement
that borrowers use forms of contracts promulgated by RUS for
construction, procurement, and engineering and architectural services.
Section 5.17 of the proposed loan contract has been
revised to limit to only those projects financed by RUS the requirement
that borrowers follow RUS contract bidding requirements.
Section 6.2 of the proposed loan contract has been revised
to limit RUS' authority to approve electric system extensions and
additions to extensions and additions financed by RUS, and only 3
categories of extensions and additions funded from other sources:
generating facilities, existing facilities and systems in service, and
projects to serve a customer whose annual kWh purchases or maximum
annual kW demand in the foreseeable future is projected to exceed 25
percent of the borrower's total kWh sales or maximum kW demand in the
year immediately preceding the acquisition or start of construction of
facilities. In addition, significance thresholds have been added to the
first two categories, such that RUS approval will not be required if
the generating and related facilities do not exceed the lesser of 5
megawatts or 30 percent of the borrower's equity, and if the existing
facilities and systems in service do not exceed 10 percent of the
borrower's net utility plant.
Section 6.5(a) of the proposed loan contract has been
revised to limit to projects financed by RUS the requirement that
contracts for construction, procurement, and engineering and
architectural services be subject to RUS approval.
As to the recommendation that a set of criteria be developed and
included in the loan contract to exempt ``creditworthy'' borrowers from
most remaining operational controls, further analysis and experience is
needed before a reasoned decision can be made. RUS believes it would be
very difficult to develop a set of criteria that would be appropriate
for all borrowers and for all or most operational controls. Such an
approach also raises significant issues regarding the flexibility that
would be available to tailor individual loan contracts to deal with
individual lending circumstances and specific credit risks. RUS
believes it is only prudent to gain some actual experience with the new
loan contract and mortgage before deciding whether such a significant
step is warranted.
The changes to the proposed loan contract cited above go a long way
toward further reducing RUS oversight over operational decisions. Those
changes are in addition to the reductions in operational controls in
the new distribution mortgage, the new loan contract as proposed and
now codified, and various regulations published by RUS over the past
few years. Following are some examples of these reforms in operational
oversight, which in most cases apply not just to borrowers that execute
the new loan documents but also, pursuant to 7 CFR part 1717 subpart M,
to borrowers under the existing ``old'' loan documents:
Article II of the new distribution mortgage authorizes
borrowers to issue additional secured debt and to refinance secured
debt without mortgagee approval if certain objective tests are met.
The new loan contract and 7 CFR 1717.604 limit RUS
approval authority over borrowers' long-range engineering plans and
construction work plans to construction financed by RUS.
The new loan contract and 7 CFR 1717.608 limit RUS
approval rights over power supply contracts, interconnection
agreements, wheeling agreements, and pooling agreements to contracts
and agreements having a term of more than 2 years. Moreover, RUS
authority to approve system management and maintenance contracts is
limited to contracts covering all or substantially all of the
borrower's electric system.
The new loan contract and 7 CFR 1717.609 eliminate RUS
approval over general managers except for borrowers in default.
The new loan contract and 7 CFR 1717.612 eliminate RUS
approval authority over the bank used by the borrower, and require only
that RUS loan funds be deposited in a bank insured by the Federal
Deposit Insurance Corporation or other Federal agency acceptable to
RUS.
The new distribution mortgage and 7 CFR 1717.610 eliminate
RUS approval over compensation of board members.
Section 3.10 of the new distribution mortgage and 7 CFR
1717.615 authorize borrowers to merge or consolidate without mortgagee
approval if certain objective tests are met.
Section 3.11 of the new distribution mortgage and 7 CFR
1717.616 give borrowers greater latitude to sell, lease, or transfer
mortgaged property without mortgagee approval.
The new loan contract and 7 CFR 1717.617 reduce from 40
percent to 30 percent the level of equity a borrower must have before
being subject to RUS approval of cash distributions.
Subpart R of 7 CFR 1717 provides borrowers advance
approval of lien accommodations if certain objective tests are met.
Subpart N of 7 CFR 1717 totally exempts borrowers from RUS
approval of their investments, loans and guarantees if certain
objective tests are
[[Page 67398]]
met. Some 84 percent of distribution borrowers currently qualify for
the exemption.
7 CFR 1717.613 exempts borrowers from obtaining RUS
approval of purchases of data processing and system control equipment
if the equipment is not financed by RUS.
The new loan contract and 7 CFR 1717.614 reduce from 90
days to 30 days the prior notice to RUS required for prospective
changes in the borrower's general rate structure, and require such
notice only when specifically requested in writing by RUS.
Recently published 7 CFR part 1726 carries out several
reforms in RUS oversight of electric system construction policies and
procedures relating to construction financed by RUS. For example:
--The requirement that RUS approve construction subcontracts was
eliminated.
--The dollar thresholds for determining when competitive bidding must
be used generally were raised.
--The dollar thresholds for determining when RUS approval of a contract
is required were raised.
--The requirement that RUS approve contracts for headquarters
facilities was eliminated.
--The requirement that RUS approve amendments to construction contracts
was eliminated in certain cases.
--The number of forms that must be submitted to RUS for closing out
construction contracts was reduced.
It was also recommended that the exemptions and waivers of controls
set forth in 7 CFR part 1717 Subpart M be removed entirely and
transferred to the new loan contract. Subpart M has been retained since
it provides exemptions and waivers of controls contained in existing
loan contracts and mortgages. If it were removed, only borrowers that
execute the new loan contract and new mortgage would have the benefit
of these changes.
As noted above, the narrower forms of RUS' approval rights and
operational controls proposed in Subpart M have been adopted in the
final loan contract. Furthermore, several additional provisions of the
new mortgage and loan contract providing borrowers with greater
latitude that were not included in proposed Subpart M have been
included in final Subpart M and will be available to borrowers with the
``old'' forms of loan documents. For example, Sec. 1717.615 will allow
borrowers under the old loan documents to consolidate and merge without
RUS approval under the same conditions as in section 3.10 of the new
mortgage. Similarly, Sec. 1717.616 will allow borrowers under the old
loan documents to sell, lease or transfer capital assets without RUS
approval under the same conditions as in section 3.11 of the new
mortgage, if, in addition to their standard TIER and DSC requirements,
they meet the Operating TIER and Operating DSC requirements of section
5.4 of the new loan contract. Also, Sec. 1717.617 will allow borrowers
under the old loan documents to pay cash distributions without RUS
approval if their equity after the distribution is at least 30 percent
and if the same conditions as under section 6.8 of the new loan
contract are met.
Effect of Subsequent Rulemaking on Loan Contract Provisions
Related to the concerns expressed about those RUS approval rights
and controls expressed in the loan contract in broad terms, several
commenters also objected to loan contract terms being subject to
amendment and modification by subsequent rulemaking, as proposed in 7
CFR 1718.100(d), even though such changes could not exceed the
authority granted to RUS in the loan contract. As indicated above, many
of the RUS approval rights and controls have been revised to limit them
more precisely to the specific measures deemed necessary by RUS for
loan security. In some cases (e.g., limitations on borrower investments
and use of standard contract forms for RUS financed construction) this
was not possible or only partly possible, and therefore these
provisions remain subject to RUS rulemaking. To avoid any
misunderstanding about the reach of Sec. 1718.100(d), the section has
been revised to clearly indicate that only those provisions of the loan
contract that defer to RUS regulations or to the discretion of the
Administrator or RUS, are subject to the interpretations and
modifications of subsequent rulemaking, not to exceed the authority
granted to the Administrator or RUS in the loan contract provision.
Applicability of Subpart M
Proposed Sec. 1717.601 indicated that Subpart M would be applicable
to all loan documents regardless of whether the loan documents were
executed before or after the effective date of the rule. At the time
the proposed loan contract was published, several operational controls
in the loan contract were expressed in broad terms, while proposed
Subpart M cut back the reach of those controls. As indicated above, the
loan contract has been revised so that the reach of the controls in the
loan contract is the same as those in Subpart M. Thus, Subpart M in its
final form affects only ``old'' loan documents with operational
controls whose reach is broader than the corresponding provisions in
Subpart M. Section 1717.601 has therefore been revised to indicate that
the approvals and exceptions to controls contained in Subpart M apply
only to loan documents dated prior to the effective date of Subpart M.
Operating TIER and DSC
The proposed rule proposed that an Operating Times Interest Earned
Ratio (Operating TIER) and Operating Debt Service Coverage ratio
(Operating DSC), both set at a minimum of 1.1, be added to standard
TIER and standard DSC as part of the rate covenant.
NRECA did not comment on the concept or formulation of Operating
TIER and Operating DSC, but recommended that the minimum level be set a
1.0. Several G&Ts and their members, concentrated in the plains and
Rocky Mountain states, raised questions about the formulation or
definition of the ratios, and in some cases about the level as well.
One multi-state borrower association indicated support both for the
formulation of the ratios and the 1.1 level.
One of the primary criticisms of the formulation of the ratios was
the belief that the core business of the borrower, as reflected in the
operating coverage ratios, ought to be defined to include cash received
by distribution borrowers during the year from their G&T suppliers and
secured lenders for patronage capital retirements. Many of these
commenters also recommended inclusion of cash received from interest
bearing accounts, and in some cases, from other borrower investments.
RUS agrees that cash received from the retirement of patronage
capital by G&T suppliers and lenders does relate to a borrower's core
utility business. The fact that a G&T or lender is capable of making
such payments in cash also reflects to a substantial degree the current
economic and financial performance of the G&T and lender, unlike
patronage capital allocations, whose current and future value may be
uncertain.
Cash received from interest income or other investments, on the
other hand, may not bear much relationship to the current performance
of the borrower's core utility business. At best, it may reflect only
past performance which enabled the borrower to make the investments in
the first place. Such income also reflects the up and down cycles of
debt and equity markets and
[[Page 67399]]
does not reflect the current ability of the core utility business to
meet expenses and generate a small margin. Such investments can provide
needed capital to meet unexpected and unforeseeable costs arising from
storm damage, litigation over service territory, and other
unforeseeable events, but once used for these purposes it is not
available to meet the expenses of the core utility business, and it
should not be relied upon for that purpose in any event.
Based on these considerations, Operating TIER and Operating DSC
have been modified to include with operating margins cash received from
a borrower's G&T and creditors for patronage capital retirements. With
such cash receipts included with operating margins, recent experience
indicates that very few if any borrowers will have difficulty in
meeting Operating TIER and Operating DSC set at the minimum level of
1.1. Even without including such cash receipts with operating margins,
only 18 borrowers in 1993 and only 13 borrowers in 1994 that met the
standard TIER and standard DSC requirements failed to meet an Operating
TIER and Operating DSC of 1.1, based on the average of the best 2 out
of 3 years. Data for a small sample of borrowers that might have some
problems in meeting the operating ratios without including cash
received from G&T suppliers and creditors indicate that including such
cash will substantially improve their results. Moreover, Sec. 1710.114
gives the Administrator the authority to set coverage ratios below the
normal levels if he or she determines that the lower ratios are
required to ensure the repayment of, and/or reasonable security for,
RUS loans.
Several borrowers argued that the rate covenant should be placed in
the mortgage rather than the loan contract, while several others and a
multi-state borrower association argued that it was appropriate to
place it in the loan contract. RUS had included the rate covenant in
the proposed mortgage, but shifted it to the loan contract based on the
recommendations of several public commenters and the difficulty of
reaching agreement among the principal lenders to rural electric
systems over exactly how the coverage ratios should be structured. The
rate covenant has been retained in the loan contract.
Finally, a technical amendment has been made to the definitions of
TIER and DSC contained in the model mortgage for distribution
borrowers, to eliminate inconsistencies between those two terms as
defined in the mortgage, and to achieve greater consistency among the
definitions of TIER, DSC, OTIER, and ODSC as those terms are defined in
the mortgage, the loan contract, and in Sec. 1710.2. ``Taxes paid, if
any, based upon income'' has been eliminated from the numerator of TIER
in the mortgage. This term was not included in the numerator of DSC in
the mortgage, nor was it included in the numerators of either TIER or
DSC as defined in Sec. 1710.2 or in the numerators of either OTIER or
ODSC in the proposed loan contract.
The definition of DSC contained in the mortgage has been amended by
eliminating the phrase starting with ``provided, however,'' which
related to the calculation of principal and interest required to be
paid on long-term debt in the event any debt is refinanced. A similar
provision was not included in the definition of TIER in the mortgage,
with respect to calculating interest required to be paid in the event
any long-term debt is refinanced. Nor was such a provision included in
the definitions of DSC, TIER, ODSC or OTIER in Sec. 1710.2 or in the
definitions of OTIER and ODSC in the proposed loan contract. Properly
calculating the coverage ratios under the existing mortgage when some
debt has been refinanced during the year has not been a problem, and
RUS does not believe the deleted provision is needed.
Use of Standard Contract Forms
One commenter noted that proposed 7 CFR 1717.606 provides that
borrowers are required to use RUS-promulgated forms of contracts for
construction and for engineering and architectural services only if the
construction is financed by RUS, but that 7 CFR part 1726 sets dollar
limits below which RUS-promulgated forms need not be used. The
commenter wondered whether Sec. 1717.606 is intended to override the
flexibility provided by the dollar thresholds in part 1726. It is not,
and Sec. 1717.606 has been revised to make that clear.
Limitations on Issuing Additional Secured Indebtedness
A commenter questioned whether the first condition in section 6.14
of the proposed loan contract on issuing additional secured debt
without RUS approval should read ``the Maturity of the Loan'' or ``the
weighted average life of the loan'' shall not exceed the weighted
average of the expected remaining useful lives of the assets being
financed. RUS agrees that it should read ``weighted average life of the
loan'', and has made the change.
Also in section 6.14 of the proposed loan contract, a technical
error was made in conforming the contract to the formatting style of
the Federal Register. This has been corrected.
System of Accounts and Outside Accountants
NRECA recommended that RUS eliminate its system of accounts and
rely exclusively on the Federal Energy Regulatory Commission's (FERC)
system of accounts. Aspects of this question were addressed in
developing the new distribution mortgage. It was concluded that so long
as there were any outstanding notes held by the government, accounting
standards would be based on the RUS system of accounts. This system is
exactly the same as the FERC system of accounts, except for a small
number of accounts needed to account for RUS loan funds and activities
specific to the cooperative form of organization. RUS believes it is
essential that borrowers' financial statements be consistent from year
to year and from borrower to borrower, and conform to a consistent
interpretation of accounting requirements. This is necessary to meet
the agency's accountability to the President and Congress for the
public funds lent to borrowers.
It has been suggested that relying exclusively on FERC's system of
accounts will somehow eliminate the need to obtain accounting
interpretations or insulate borrowers from changes in accounting
requirements and interpretations promulgated by the Financial
Accounting Standards Board. This, of course, is not true, since such
interpretations and changes in requirements would continue regardless
of the system of accounts followed.
NRECA also recommended that RUS rely exclusively on outside
accountants, apparently meaning that RUS rely in particular on outside
accountants to do audits of RUS loan fund accounts. RUS believes that
it is important to retain agency accountants to oversee the system of
accounts, render timely responses to borrowers' accounting questions,
and to continue to audit RUS loan fund accounts. Based on discussions
with individual borrowers, NRECA, and other borrower organizations, RUS
is proceeding with certain changes in our oversight of the system of
accounts to respond to problems and concerns that have been raised, and
to provide more timely responses to borrower inquiries.
Immaterial Violations of Requirements
Several commenters argued that borrowers should not be held to an
absolute standard in meeting certain requirements, since it would be
very
[[Page 67400]]
difficult for borrowers to ensure that there will be no minor
violations of requirements which have no material adverse effect on the
interests of RUS. RUS agrees that minor violations of certain
requirements, which in the agency's judgment will have no material
adverse effect on the agency's interests, should not represent a
default. This has been reflected in changes made to proposed sections
5.2(b), 5.6, 5.10, and 6.15.
Borrowers Exempt From Certain Controls Under Section 306E of the Act
Section 306E of the Rural Electrification Act directed RUS to issue
interim final regulations to minimize approval rights and restrictions
imposed on the operations of electric borrowers whose net worth exceeds
110 percent of the outstanding loans made or guaranteed by RUS, and to
offer without delay to share the government's lien on the borrower's
system or subordinate its lien on the property financed by a private
lender. In issuing the regulations, RUS is authorized to establish
requirements, guided by the practices of private lenders with respect
to similar credit risks, to ensure that the security, including loan
repayment, of the government's loans will remain reasonably adequate.
RUS issued the interim final regulations on January 28, 1994 at 59
FR 3982. Comments on the regulations were received from NRECA, the
National Rural Utilities Cooperative Finance Corporation, and 6
borrowers. In general, the comments argued for greater relaxation of
operational controls than in the interim final rule.
When the proposed loan contract and final new mortgage for
distribution borrowers was published in July of this year, RUS
indicated that comments on these documents as well as on the interim
final rule would be considered in making revisions to the interim final
rule relating to so-called 110 percent borrowers. As indicated above,
the new loan contract has been substantially revised to reduce the
number and breadth of operational controls. These controls are intended
to apply to a fairly broad spectrum of credit risks, and as such RUS
believes they reflect the types of controls that some private lenders
would require for a similar spectrum of credit risks.
The provisions of the new mortgage and new loan contract, and 7 CFR
part 1717 subpart M, in many cases provide greater latitude to
borrowers than established originally in 7 CFR 1710.7 for 110 percent
borrowers. Therefore, =1710.7 has been revised to reflect the greater
latitude provided by the new loan documents and Subpart M.
In assessing credit risks, private lenders look at a large number
of factors relating to the size and quality of the financial assets of
a borrower; the borrower's new worth and debt position; current and
past financial performance; the strength and stability of the
borrower's markets and the borrower's position in those markets; market
diversity, concentrations, and growth or decline; the borrower's cost
competitiveness and investment in new technologies and system
modernization; commitments to research and development and innovation;
experience and structure of management; internal cost and financial
controls; and a number of other factors. When considering the adequacy
of net worth, most private lenders look at the quality of the
borrower's assets and the ratio of net worth to total debt, rather than
only the long-term debt owed to the lender. It is RUS' judgment that
the fact that a borrower has net worth equal to 110 percent of only the
government's outstanding long-term loans does not justify further
relaxation of operational controls over and above those provided in the
new loan documents and regulations based on prudent private lending
practices for a similar spectrum of credit risks. RUS is willing to
consider, on a case by case basis, alternative loan document provisions
for the better quality credits.
List of Subjects
7 CFR Part 1710
Electric power, Electric utilities, Loan programs--energy, Rural
areas.
7 CFR Part 1717
Administrative practice and procedure, Electric power, Electric
utilities, Intergovernmental relations, Investments, Lien
accommodation, Lien subordination, Loan programs--energy, Operational
controls, Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 1718
Administrative practice and procedure, Electric power, Electric
utilities, Loan programs--energy, Loan security documents, Reporting
and recordkeeping requirements, Rural areas.
For the reasons explained in the preamble and under the authority
of 7 U.S.C. 901 et seq., RUS amends 7 CFR Chapter XVII as follows:
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. 901-950b; Public Law 99-591, 100 Stat, 3341-
16; Public Law 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).
2. Section 1710.2 is amended in paragraph (a) by revising the
definition for ``Tier'' and by adding the new definitions in
alphabetical order to read as follows:
Sec. 1710.2 Definitions and rules of construction.
(a) Definitions. * * *
* * * * *
DSC means Debt Service Coverage of the borrower calculated as:
[GRAPHIC][TIFF OMITTED]TR29DE95.000
Where:
All amounts are for the same calendar year and are based on the
RUS system of accounts and RUS Forms 7 and 12. References to line
numbers in the RUS Forms 7 and 12 refer to the June 1994 version of
RUS Form 7 and the December 1993 version of RUS Form 12, and will
apply to corresponding information in future versions of the forms;
A=Depreciation and Amortization Expense of the borrower, which
equals Part A, Line 12 of RUS Form 7 (distribution borrowers) or
Section A, Line 20 of RUS Form 12a (power supply borrowers);
B=Interest expense on total long-term debt of the borrower,
which equals Part A, Line 15 of RUS Form 7 or Section A, Line 22 of
RUS Form 12a, except that interest expense shall be increased by \1/
3\ of the amount, if any, by which restricted rentals of the
borrower (Part M, Line 3 of RUS Form 7 or Section K, Line 4 of RUS
Form 12h) exceed 2 percent of the borrower's equity (RUS Form 7,
Part C, Line 36 [Total Margins & Equities] less Line 26 [Regulatory
Assets] or RUS Form 12a, Section B, Line 38 [Total Margins &
Equities] less Line 28 [Regulatory Assets]);
C=Patronage Capital or Margins of the borrower, which equals
Part A, Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a;
and
D=Debt Service Billed (RUS + other), which equals the sum of all
payments of principal and interest required to be made on account of
total long-term debt of the borrower during the calendar year, plus
\1/3\ of the amount, if any, by which restricted rentals of the
borrower (Part M, Line 3 of RUS Form 7 or Section K, Line 4 of RUS
Form 12h) exceed 2 percent of the borrower's equity (RUS Form 7,
Part C, Line 36 [Total Margins & Equities] less Line 26 [Regulatory
Assets] or RUS Form 12a, Section B, Line 38 [Total Margins &
Equities] less Line 28 [Regulatory Assets]);
* * * * *
Electric system means all of the borrower's interests in all
electric
[[Page 67401]]
production, transmission, distribution, conservation, load management,
general plant and other related facilities, equipment or property and
in any mine, well, pipeline, plant, structure or other facility for the
development, production, manufacture, storage, fabrication or
processing of fossil, nuclear, or other fuel or in any facility or
rights with respect to the supply of water, in each case for use, in
whole or in major part, in any of the borrower's generating plants,
including any interest or participation of the borrower in any such
facilities or any rights to the output or capacity thereof, together
with all lands, easements, rights-of-way, other works, property,
structures, contract rights and other tangible and intangible assets of
the borrower in each case used or useful in such electric system.
* * * * *
ODSC means Operating Debt Service Coverage of the electric system
calculated as:
[GRAPHIC][TIFF OMITTED]TR29DE95.001
Where:
All amounts are for the same calendar year and are based on the
RUS system of accounts and RUS Form 7. References to line numbers in
the RUS Form 7 refer to the June 1994 version of the form, and will
apply to corresponding information in future versions of the form;
A=Depreciation and Amortization Expense of the electric system,
which usually equals Part A, Line 12 of RUS Form 7;
B=Interest expense on total long-term debt of the electric
system, which usually equals Part A, Line 15 of RUS Form 7, except
that such interest expense shall be increased by \1/3\ of the
amount, if any, by which restricted rentals of the electric system
(usually Part M, Line 3 of RUS Form 7) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets]);
C=Patronage Capital & Operating Margins of the electric system,
which usually equals Part A, Line 20 of RUS Form 7, plus cash
received from the retirement of patronage capital by suppliers of
electric power and by lenders for credit extended for the Electric
System; and
D=Debt Service Billed (RUS + other), which equals the sum of all
payments of principal and interest required to be made on account of
total long-term debt of the electric system during the calendar
year, plus \1/3\ of the amount, if any, by which restricted rentals
of the Electric System (usually Part M, Line 3 of RUS Form 7) exceed
2 percent of the borrower's equity (RUS Form 7, Part C, Line 36
[Total Margins & Equities] less Line 26 [Regulatory Assets]).
* * * * *
OTIER means Operating Times Interest Earned Ratio of the electric
system calculated as:
[GRAPHIC][TIFF OMITTED]TR29DE95.002
Where:
All amounts are for the same calendar year and are based on the
RUS system of accounts and RUS Form 7. References to line numbers in
the RUS Form 7 refer to the June 1994 version of the form, and will
apply to corresponding information in future versions of the form;
A=Interest expense on total long-term debt of the electric
system, which usually equals Part A, Line 15 of RUS Form 7, except
that such interest expense shall be increased by \1/3\ of the
amount, if any, by which restricted rentals of the electric system
(usually Part M, Line 3 of RUS Form 7) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets]); and
B=Patronage Capital & Operating Margins of the electric system,
which usually equals Part A, Line 20 of RUS Form 7, plus cash
received from the retirement of patronage capital by suppliers of
electric power and by lenders for credit extended for the Electric
System.
* * * * *
TIER means Times Interest Earned Ratio of the borrower calculated
as:
[GRAPHIC][TIFF OMITTED]TR29DE95.003
Where:
All amounts are for the same calendar year and are based on the
RUS system of accounts and RUS Forms 7 and 12. References to line
numbers in the RUS Forms 7 and 12 refer to the June 1994 version of
RUS Form 7 and the December 1993 version of RUS Form 12, and will
apply to corresponding information in future versions of the forms;
A=Interest expense on total long-term debt of the borrower,
which equals Part A, Line 15 of RUS Form 7 or Section A, Line 22 of
RUS Form 12a, except that interest expense shall be increased by \1/
3\ of the amount, if any, by which restricted rentals of the
borrower (Part M, Line 3 of RUS Form 7 or Section K, Line 4 of RUS
Form 12h) exceed 2 percent of the borrower's equity (RUS Form 7,
Part C, Line 36 [Total Margins & Equities] less Line 26 [Regulatory
Assets] or RUS Form 12a, Section B, Line 38 [Total Margins &
Equities] less Line 28 [Regulatory Assets]); and
B=Patronage Capital or Margins of the borrower, which equals
Part A, Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a.
* * * * *
3. Section 1710.7 is revised as follows:
Sec. 1710.7 Exemptions of RUS operational controls under section 306E
of the RE Act.
(a) General policy. (1) Section 306E of the RE Act directs the
Administrator to issue interim final regulations to minimize approval
rights, requirements, restrictions, and prohibitions imposed on the
operations of electric borrowers whose net worth exceeds 110 percent of
the outstanding loans made or guaranteed to the borrower by RUS. The
section also directs the Administrator, when requested by a private
lender providing financing for capital investments by such borrowers,
to offer, without delay, to share the government's lien on the
borrowers' systems or subordinate the government's lien on the property
financed by the private lender.
(2) In issuing the regulations, the Administrator is authorized to
establish requirements, guided by the practices of private lenders with
respect to similar credit risks, to ensure that the security, including
the assurance of repayment, for loans made or guaranteed by RUS will
remain reasonably adequate. If the regulations are not issued within
180 days of enactment of section 306E, the Administrator may not, until
the regulations are issued, require prior approval of, or establish any
requirement, restriction, or prohibition, with respect to the
operations of any electric borrower that meets the 110 percent ratio.
(3) Nothing in section 306E limits the authority of the
Administrator to establish terms and conditions on the use of funds
from loans made or guaranteed by RUS, to establish loan feasibility
criteria and other requirements for the approval of RUS loans or loan
guarantees, such as those set forth in this part, or to take any other
action specifically authorized by law.
(4) This section addresses the application of section 306E of the
RE Act to RUS operational controls and other requirements that apply in
general to RUS borrowers. The application of section 306E to lien
accommodations and subordinations is set forth in 7 CFR 1717.860 and
1717.904.
(5) The exemptions granted by this section, 7 CFR 1717.860, and 7
CFR 1717.904 apply only to RUS controls and approval rights. They do
not affect the controls and approval rights of other co-mortgagees
under the RUS mortgage.
(6) For purposes of this section, the terms ``default,'' ``financed
or funded by RUS,'' ``interchange agreement,'' ``interconnection
agreement,'' ``loan documents,'' ``pooling agreement,'' ``power supply
contract,'' and ``wheeling agreement'' have the meanings as set forth
in 7 CFR 1717.602.
(b) Determination of ratio. The following principles and procedures
will apply to the calculation of net worth as a ratio, expressed as a
percent, to the outstanding balance of all loans made or guaranteed to
the borrower by RUS, hereinafter called the borrower's ``net worth to
RUS debt ratio'', or simply ``the ratio'':
[[Page 67402]]
(1) For purposes of determining whether a borrower is exempt from
approvals, requirements, restrictions, or prohibitions imposed by RUS
with respect to borrower operations, i.e., ``operational controls,''
the ratio normally will be based on data as of December 31. Net worth
will be based on the year-end financial and statistical reports
submitted by borrowers to RUS, and outstanding loans made or guaranteed
by RUS will be based on RUS's records. The financial and statistical
reports (Form 7 for distribution borrowers and Form 12a for power
supply borrowers) are subject to RUS review and revision, and they must
comply with RUS's system of accounts and accounting principles set
forth in 7 CFR part 1767. Since sinking fund depreciation is not
approved under 7 CFR part 1767, net worth for borrowers using sinking
fund depreciation will be calculated as if the borrower had been using
straight line depreciation;
(2) Net worth will be calculated by taking total margins and
equities (from Part C of RUS Form 7 for distribution borrowers, or
Section B of RUS Form 12a for power supply borrowers) and subtracting
assets properly recordable in account 182.2, Unrecovered Plant and
Regulatory Study Costs, and account 182.3, Other Regulatory Assets, as
defined in 7 CFR part 1767; and
(3) By no later than May 1 of each year, RUS will notify each
borrower in writing of its ratio as of December 31 of the preceding
year. If a borrower's net worth to RUS debt ratio exceeds 110 percent
based on the year-end data, the borrower will be exempt from the
operational controls exempted under paragraph (c) of this section until
subsequently notified in writing by RUS that it is no longer exempt.
(c) Borrower operations exempted from RUS controls. Borrowers who
are notified by RUS in writing that their net worth to RUS debt ratio
exceeds 110 percent are exempted from the operational controls of the
RUS mortgage and loan contract listed in this paragraph. These
controls, which are implemented through RUS regulations and other
documents, are as follows:
(1) RUS approval of extensions and additions. RUS approval of
extensions and additions to borrowers' electric systems, except for the
following:
(i) Extensions and additions financed by RUS;
(ii) Construction, procurement, or leasing of generating
facilities, regardless of the source of funding, if the combined
capacity of the facilities to be built, procured, or leased, including
any future facilities included in the planned project, will exceed 25
megawatts in the case of power supply borrowers, or the lesser of 5
megawatts or 30 percent of the borrower's equity in the case of
distribution borrowers;
(iii) Acquisition or leasing of existing electric facilities or
systems in service, regardless of the source of funding, whose purchase
price, or capitalized value in the case of a lease, exceeds 10 percent
of the borrower's net utility plant; and
(iv) Construction, procurement, or leasing of electric facilities,
regardless of the source of funding, to serve a customer whose annual
kWh purchases or maximum annual kW demand in the foreseeable future is
projected to exceed 25 percent of the borrower's total kWh sales or
maximum kW demand in the year immediately preceding the acquisition or
start of construction;
(2) Long-range engineering plans and construction work plans. RUS
approval of long-range engineering plans and CWPs if the borrower does
not intend to seek RUS financing for any of the facilities, equipment
or other purposes included in those plans. However, if requested by
RUS, a borrower must provide an informational copy of such plans to
RUS;
(3) Plans and specifications. RUS approval of plans and
specifications for construction not financed by RUS;
(4) Standard forms of construction contracts, and engineering and
architectural services contracts. RUS requirements to use standard
forms of contracts for construction, procurement, engineering services,
and architectural services, if the construction, procurement or
services are not financed by RUS. To be eligible for this waiver the
contracts used must not contain any provisions that prohibit or
restrict the assignment of the contracts to the government upon the
exercise by RUS of its remedies under security instruments securing
loans made or guaranteed by RUS;
(5) Contract bidding requirements. RUS requirements regarding the
competitive bidding of construction contracts, if the construction is
not financed by RUS;
(6) RUS approval of contracts. (i) Construction contracts and
architectural and engineering contracts. RUS approval of contracts for
construction and procurement and for architectural and engineering
services, if such construction, procurement or services are not
financed by RUS.
(ii) Large retail power contracts. RUS approval of contracts to
sell electric power to retail customers except when the contract is for
longer than 2 years and the kWh sales or kW demand for any year covered
by the contract exceeds 25 percent of the borrower's total kWh sales or
maximum kW demand for the year immediately preceding execution of the
contract. This exemption applies regardless of the source of funding of
any plant extensions, additions or improvements that may be involved in
connection with the contract.
(iii) Power supply arrangements. (A) RUS approval of power supply
contracts (including but not limited to economy energy sales and
emergency power and energy sales), interconnection agreements,
interchange agreements, wheeling agreements, pooling agreements, and
any other similar power supply arrangements subject to approval by RUS,
if they have a term of 2 years or less. Amendments to said power supply
arrangements are also exempted from RUS approval provided that the
amendment does not extend the term of the arrangement for more than 2
years beyond the date of the amendment.
(B) Any amendment to a schedule or exhibit contained in any power
supply arrangement subject to RUS approval that merely has the effect
of either altering a list of interconnection or delivery points or
changing the value of a variable term (but not the formula itself)
contained in a formulary rate or charge.
(C) The exemptions under this paragraph (c)(6)(iii) apply
regardless of whether the borrower is a seller or purchaser of the
services furnished by the contracts or arrangements, and regardless of
whether or not a Federal power marketing agency is a party to any of
them.
(iv) System management and maintenance contracts. RUS approval of
contracts for the management and operation of a borrower's electric
system or for the maintenance of the electric system, if such contracts
do not cover all or substantially all of the electric system.
(v) Other contracts. [Reserved];
(7) RUS approval of general manager. RUS approval of the selection
of a borrower's manager and employment contract, provided that the
borrower is not in default under its loan documents or any other
agreement with RUS. Nothing herein shall limit the right of RUS under
the loan documents to request termination of the employment of a
manager in the event of a default by the borrower;
(8) Board of directors. RUS approval of compensation of a
borrower's board of directors;
(9) Certain expenditures. (i) RUS approval of expenditures for
legal, accounting, and supervisory services by
[[Page 67403]]
a borrower. However, while expenditures for accounting do not require
RUS approval, the selection of a certified public accountant by the
borrower to prepare audited reports required by RUS remains subject to
RUS approval.
(ii) RUS approval of expenditures for engineering services by a
borrower, if such engineering services will not be financed by RUS;
(10) Banks. RUS approval of banks or other depositories used by a
borrower. However, without the prior written approval of RUS, a
borrower shall not deposit funds from loans made or guaranteed by RUS
in any bank or other depository that is not insured by the Federal
Deposit Insurance Corporation or other Federal agency acceptable to
RUS, or in any account not so insured.
(11) Certain equipment. RUS approval of the purchase of data
processing equipment and system control equipment by a borrower, if the
equipment is not financed by RUS;
(12) Notification of rate changes. Requirement that distribution
borrowers notify RUS in writing of proposed changes in electric rates
90 days prior to the effective date of such rates. Instead, the
required notification period shall be 30 days, and such notification
shall be required only if requested by RUS;
(13) Consolidations and mergers. RUS approval of mergers and
consolidations, and conveyances or transfers of the mortgaged property
substantially as an entirety, if the following conditions are met:
(i) Such consolidation, merger, conveyance or transfer shall be on
such terms as shall fully preserve the lien and security of the
mortgage and the rights and powers of the mortgagees;
(ii) The entity formed by such consolidation or with which the
borrower is merged or the corporation which acquires by conveyance or
transfer the mortgaged property substantially as an entirety shall
execute and deliver to the mortgagees a mortgage supplemental in
recordable form and containing an assumption by such successor entity
of the due and punctual payment of the principal of and interest on all
of the outstanding notes and the performance and observance of every
covenant and condition of the mortgage;
(iii) Immediately after giving effect to such transaction, no
default under the mortgage shall have occurred and be continuing;
(iv) The borrower shall have delivered to the mortgagees a
certificate of its general manager or other officer, in form and
substance satisfactory to each of the mortgagees, which shall state
that such consolidation, merger, conveyance or transfer and such
supplemental mortgage comply with this section and that all conditions
precedent herein provided for relating to such transaction have been
complied with;
(v) The borrower shall have delivered to the mortgagees an opinion
of counsel in form and substance satisfactory to each of the
mortgagees; and
(vi) The entity formed by such consolidation or with which the
borrower is merged or the corporation which acquires by conveyance or
transfer the mortgaged property substantially as an entirety shall be
an entity:
(A) Having equity equal to at least 27% of its total assets on a
pro forma basis after giving effect to such transaction;
(B) Having a pro forma TIER of not less than 1.50 and a pro forma
DSC of not less than 1.25 for each of the two preceding calendar years;
and
(C) Having net utility plant equal to or greater than 1.0 times its
total long-term debt on a pro forma basis;
(14) Sale, lease, or transfer of capital assets. RUS approval for a
distribution borrower to sell, lease, or transfer capital assets, if
the following conditions are met:
(i) The borrower is not in default;
(ii) In the most recent year for which data are available, the
borrower achieved a TIER of at least 1.5, DSC of at least 1.25, OTIER
of at least 1.1, and ODSC of at least 1.1, in each case based on the
average or the best 2 out of the 3 most recent years;
(iii) The sale, lease, or transfer of assets will not reduce the
borrower's existing or future requirements for energy or capacity being
furnished to the borrower under any wholesale power contract which has
been pledged as security to the government;
(iv) Fair market value is obtained for the assets;
(v) The aggregate value of assets sold, leased, or transferred in
any 12-month period is less than 10 percent of the borrower's net
utility plant prior to the transaction;
(vi) The proceeds of such sale, lease, or transfer, less ordinary
and reasonable expenses incident to such transaction, are immediately:
(A) Applied as a prepayment of all notes secured under the mortgage
equally and ratably;
(B) In the case of dispositions of equipment, materials or scrap,
applied to the purchase of other property useful in the borrower's
utility business; or
(C) Applied to the acquisition of construction of utility plant;
and
(vii) If the borrower has an RUS-approved wholesale power contract
with a power supply borrower (seller), the circumstances of the sale,
lease or transfer of capital assets conform with the conditions in such
contract under which the seller may not withhold its consent to the
sale, lease or transfer;
(15) Limitations on distributions. RUS approval for a borrower to
declare or pay dividends, pay or determine to pay patronage refunds,
retire patronage capital, or make any other cash distributions, if the
following conditions are met:
(i) After giving effect to the distribution, the borrower's equity
will be greater than or equal to 30 percent of its total assets;
(ii) The borrower is current on all payments due on all notes
secured under the mortgage;
(iii) The borrower is not otherwise in default under its loan
documents; and
(iv) After giving effect to the distribution, the borrower's
current and accrued assets will be not less than its current and
accrued liabilities.
(d) RUS requirements and operational controls not exempted. All
requirements and operational controls contained in the RUS mortgage and
loan contract, or otherwise imposed on borrowers pursuant to statute or
regulation, that are not specifically listed in paragraph (c) of this
section are not exempted and shall continue to apply according to their
terms. Examples of such requirements and controls not exempted are
listed in this paragraph for the convenience of the public. This list
is not exhaustive, and the absence of a requirement or control from
this list in no way means that the requirement or control has been
exempted:
(1) Requirements and operational controls contained in the RUS
mortgage or loan contract that are necessary to ensure that the
security for loans made or guaranteed by RUS is reasonably adequate and
that the loans will be repaid, or to accomplish other fundamental
purposes of the RE Act. Some of these also represent terms and
conditions with respect to the use by borrowers of the proceeds of
loans made or guaranteed by RUS. Together, these controls include, but
are not limited to, the following:
(i) Area coverage requirements set forth in the loan contract and
in Sec. 1710.103;
(ii) Requirement that certain borrowers maintain, on an ongoing
basis, a power requirements study and a power requirements study work
plan, as set forth in Secs. 1710.201 and 1710.202;
(iii) Requirement that borrowers follow RUS construction standards
and use RUS accepted materials, as set forth
[[Page 67404]]
in Sec. 1710.41, Sec. 1710.45, and 7 CFR part 1728;
(iv) Requirement that borrowers maintain, on an ongoing basis, a
long-range engineering plan and a construction work plan, as set forth
in Sec. 1710.250(b);
(v) Requirement that borrowers set rates for electric service
sufficient to maintain certain coverage ratios, as set forth in
Sec. 1710.114;
(vi) Certain RUS approvals of retirements of capital credits in
excess of amounts specifically authorized in the mortgage;
(vii) RUS approval of borrower investments, loans, guarantees, and
other obligations under 7 CFR part 1717, subpart N;
(viii) RUS requirements on accounting, auditing, irregularities,
financial reporting, and access to books and records;
(ix) Requirement that borrowers record the mortgage and mortgage
amendments;
(x) Requirement that the mortgagor maintain and preserve the
priority lien of the mortgage and defend title to the mortgaged
property;
(xi) Requirements on maintenance and repair of the mortgaged
property;
(xii) Requirements on insurance of the mortgaged property; and
(xiii) Certain RUS approvals of borrower mergers and
consolidations; and
(2) Requirements imposed on borrowers pursuant to statute or
regulation and not specifically exempted by paragraph (c) of this
section. See, for example, Secs. 1710.122 through 1710.127.
(e) Rescission of exemptions if borrower defaults. If a borrower is
in default with respect to any requirement of its mortgage, loan
contract with RUS, or any other agreement with RUS that has not been
exempted pursuant to paragraph (c) of this section or other RUS
regulations, upon written notice to the borrower RUS may rescind all or
any part of the exemptions granted pursuant to paragraph (c) of this
section or other RUS regulations. The reinstated requirements and
controls will remain in effect until RUS determines that they are no
longer needed to help ensure that the security, including the assurance
of repayment, for loans made or guaranteed by RUS will remain
reasonably adequate.
(f) Reinstated controls. If RUS controls are reinstated because the
borrower defaults or its net worth falls below 110 percent of RUS debt,
such controls and approval rights will apply to all applicable
subsequent actions of the borrower, including without limitation the
amendment of contracts that the borrower entered into while eligible
for an exemption under this section.
Sec. 1710.103 [Amended]
4. Section 1710.103 is amended by removing in paragraph (b) the
sentence ``The loan contract shall contain provisions to this
effect.''.
5. Section 1710.114 is revised to read as follows:
Sec. 1710.114 TIER, DSC, OTIER and ODSC requirements.
(a) General. Requirements for coverage ratios are set forth in the
borrower's mortgage, loan contract, or other contractual agreements
with RUS. The requirements set forth in this section apply to borrowers
that receive a loan approved by RUS on or after February 10, 1992.
Nothing in this section, however, shall reduce the coverage ratio
requirements of a borrower that has contractually agreed with RUS to a
higher requirement.
(b) Coverage ratios. (1) Distribution borrowers. The minimum
coverage ratios required of distribution borrowers, whether applied on
an annual or average basis, are a TIER of 1.50, DSC of 1.25, OTIER of
1.1, and ODSC of 1.1. OTIER and ODSC shall apply to distribution
borrowers that receive a loan approved by RUS on or after January 29,
1996.
(2) The minimum coverage ratios required of power supply borrowers,
whether applied on an annual or average basis, are a TIER of 1.05 and
DSC of 1.00.
(3) When new loan contracts are executed, the Administrator may,
case by case, increase the coverage ratios of distribution and power
supply borrowers above the levels cited in paragraphs (b)(1) and
(b)(2), respectively, of this section if the Administrator determines
that the higher ratios are required to ensure reasonable security for
and/or the repayment of loans made or guaranteed by RUS. Also, the
Administrator may, case by case, reduce said coverage ratios if the
Administrator determines that the lower ratios are required to ensure
reasonable security for and/or the repayment of loans made or
guaranteed by RUS.
(4) If a distribution borrower has in service or under construction
a substantial amount of generation and associated transmission plant
financed at a cost of capital substantially higher than the cost of
funds under section 305 of the RE Act, then the Administrator may
establish, in his or her sole discretion, blended levels for TIER, DSC,
OTIER, and ODSC based on the respective shares of total utility plant
represented by said generation and associated transmission plant and by
distribution and other transmission plant.
(c) Requirements for loan feasibility. To be eligible for a loan,
borrowers must demonstrate to RUS that they will, on a pro forma basis,
earn the coverage ratios required by paragraph (b) of this section in
each of the years included in the borrower's long-range financial
forecast prepared in support of its loan application, as set forth in
subpart G of this part.
(d) Requirements for maintenance of coverage ratios. (1)
Prospective requirement. Borrowers must design and implement rates for
utility service to provide sufficient revenue (along with other revenue
available to the borrower in the case of TIER and DSC) to pay all fixed
and variable expenses, to provide and maintain reasonable working
capital and to maintain on an annual basis the coverage ratios required
by paragraph (b) of this section. Rates must be designed and
implemented to produce at least enough revenue to meet the requirements
of this paragraph under the assumption that average weather conditions
in the borrower's service territory will prevail in the future,
including average system damage and outages due to weather and the
related costs. Failure to design and implement rates pursuant to the
requirements of this paragraph shall be an event of default upon notice
provided in accordance with the terms of the borrower's mortgage or
loan contract.
(2) Retrospective requirement. The average coverage ratios achieved
by a borrower in the 2 best years out of the 3 most recent calendar
years must meet the levels required by paragraph (b) of this section.
If a borrower fails to achieve these average levels, it must promptly
notify RUS in writing. Within 30 days of such notification or of the
borrower being notified in writing by RUS, whichever is earlier, the
borrower, in consultation with RUS, must provide a written plan
satisfactory to RUS setting forth the actions that will be taken to
achieve the required coverage ratios on a timely basis. Failure to
develop and implement a plan satisfactory to RUS shall be an event of
default upon notice provided in accordance with the terms of the
borrower's mortgage or loan contract.
(3) Fixed and variable expenses, as used in this section, include
but are not limited to: all taxes, depreciation, maintenance expenses,
and the cost of electric power and energy and other operating expenses
of the electric
[[Page 67405]]
system, including all obligations under the wholesale power contract,
all lease payments when due, and all principal and interest payments on
outstanding indebtedness when due.
(e) Requirements for advance of funds. (1) If a borrower applying
for a loan has failed to achieve the coverage ratios required by
paragraph (b) of this section during the latest 12 month period
immediately preceding approval of the loan, or if any of the borrower's
average coverage ratios for the 2 best years out of the most recent 3
calendar years were below the levels required in paragraph (b) of this
section, RUS may withhold the advance of loan funds until the borrower
has adopted an annual financial plan and operating budget satisfactory
to RUS and taken such other action as RUS may require to demonstrate
that the required coverage ratios will be maintained in the future and
that the loan will be repaid with interest within the time agreed. Such
other action may include, for example, increasing system operating
efficiency and reducing costs or adopting a rate design that will
achieve the required coverage ratios, and either placing such rates
into effect or taking action to obtain regulatory authority approval of
such rates. If failure to achieve the coverage ratios is due to unusual
events beyond the control of the borrower, such as unusual weather,
system outage due to a storm or regulatory delay in approving rate
increases, then the Administrator may waive the requirement that the
borrower take the remedial actions set forth in this paragraph,
provided that such waiver will not threaten loan feasibility.
(2) With respect to any outstanding loan approved by RUS on or
after February 10, 1992, if, based on actual or projected financial
performance of the borrower, RUS determines that the borrower may not
achieve its required coverage ratios in the current or future years,
RUS may withhold the advance of loan funds until the borrower has taken
remedial action satisfactory to RUS.
6. Section 1710.250 is amended by revising paragraphs (b) and (e)
and adding a new paragraph (k) to read as follows:
Sec. 1710.250 General.
* * * * *
(b) Generally, all borrowers are required to maintain up-to-date
long range engineering plans approved by their boards of directors.
Current CWPs approved by the borrower's board must also be developed
and maintained for distribution and transmission facilities and for
improvements and replacements of generation facilities. All such
distribution, transmission or generation facilities must be included in
the respective CWPs regardless of the source of financing.
* * * * *
(e) Applications for a loan or loan guarantee from RUS (new loans
or budget reclassifications) must be supported by a current CWP
approved by both the borrower's board of directors and RUS. RUS
approval of these plans relates only to the facilities, equipment, and
other purposes to be financed by RUS, and means that the plans provide
an adequate basis from a planning and engineering standpoint to support
RUS financing. RUS approval of the plans does not mean that RUS
approves of the facilities, equipment, or other purposes for which the
borrower is not seeking RUS financing. If RUS disagrees with a
borrower's estimate of the cost of one or more facilities for which RUS
financing is sought, RUS may adjust the estimate after consulting with
the borrower and explaining the reasons for the adjustment.
* * * * *
(k) Upon written request from a borrower, RUS may waive in writing
certain requirements with respect to long-range engineering plans and
CWPs if RUS determines that such requirements impose a substantial
burden on the borrower and that waiving the requirements will not
significantly affect the accomplishment of the objectives of this
subpart. For example, if a borrower's load is forecast to remain
constant or decline during the planning period, RUS may waive those
portions of the plans that relate to load growth.
Sec. 1710.251 [Amended]
7. Section 1710.251 is amended by removing the words ``and RUS''
from the first sentence of paragraph (a).
Sec. 1710.252 [Amended]
8. Section 1710.252 is amended by removing the words ``and RUS''
from the first sentence of paragraph (a).
PART 1717--POST-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND
GUARANTEED ELECTRIC LOANS
9. The authority citation for part 1717 continues to read as
follows:
Authority: 7 U.S.C. 901-950b; Pub. L. 103-354, 108 Stat. 3178 (7
U.S.C. 6941 et seq.), unless otherwise noted.
10. Subpart M is added to part 1717 to read as follows:
Subpart M--Operational Controls
Sec.
1717.600 General.
1717.601 Applicability.
1717.602 Definitions.
1717.603 RUS approval of extensions and additions.
1717.604 Long-range engineering plans and construction work plans.
1717.605 Design standards, plans and specifications, construction
standards, and RUS accepted materials.
1717.606 Standard forms of construction contracts, and engineering
and architectural services contracts.
1717.607 Contract bidding requirements.
1717.608 RUS approval of contracts.
1717.609 RUS approval of general manager.
1717.610 RUS approval of compensation of the board of directors.
1717.611 RUS approval of expenditures for legal, accounting,
engineering, and supervisory services.
1717.612 RUS approval of borrower's bank or other depository.
1717.613 RUS approval of data processing and system control
equipment.
1717.614 Notification of rate changes.
1717.615 Consolidations and mergers.
1717.616 Sale, lease, or transfer of capital assets.
1717.617 Limitations on distributions.
Subpart M--Operational Controls
Sec. 1717.600 General.
(a) General. The loan contract and mortgage between the Rural
Utilities Service (RUS) and electric borrowers imposes certain
restrictions and controls on the borrowers and gives RUS (and other co-
mortgagees in the case of the mortgage) the right to approve or
disapprove certain actions contemplated by the borrowers. Certain of
these controls and approval rights are referred to informally as
``operational controls'' because they pertain to decisions or actions
with respect to the operation of the borrowers' electric systems. The
approval authority granted to RUS by the loan contract or mortgage
regarding each decision or action subject to controls is often stated
in broad, unlimited terms. This subpart lists the main operational
controls affecting borrowers and establishes for each area of control
the circumstances under which RUS approval of a decision or action by a
borrower is either required or not required. In some cases, only the
general principles or general circumstances pertaining to RUS approval
or control are presented in this subpart, while the details regarding
the circumstances and requirements of RUS approval or control are set
forth in other RUS regulations. Since this subpart addresses only the
main operational controls, failure to address a control or approval
right in this subpart in no way
[[Page 67406]]
invalidates such controls or rights established b
FR Doc. 95-31227 Loan Policies and Security Documents for Electric Borrowers
y the loan contract,
mortgage, other agreements between a borrower and RUS, and RUS
regulations.
(b) Case by case amendments. Upon written notice to a borrower, RUS
may amend or annul the approvals and exceptions to controls set forth
in this subpart or other RUS regulations if the borrower is in
violation of any provision of its loan documents or any other agreement
with RUS, or if RUS determines that loan security and/or repayment is
threatened. Such amendment or annulment will apply to decisions and
actions of the borrower after said written notice has been provided by
RUS.
(c) Generic notices. By written notice to all borrowers or a group
of borrowers, RUS may grant or waive approval of decisions and actions
by the borrowers that are controlled under the loan documents and RUS
regulations. RUS may also by written notice withdraw or cut back its
grant or waiver of approval of said decisions and actions made by
previous written notice, but may not by such notice extend its
authority to approve decisions and actions by borrowers beyond the
authority granted by the loan documents and RUS regulations.
Sec. 1717.601 Applicability.
(a) The approvals and exceptions to controls conveyed by this
subpart apply only to controls and approval rights normally included in
RUS loan documents dated prior to January 29, 1996. They do not apply
to special controls and approval requirements included in loan
documents or other agreements executed between a borrower and RUS that
relate to individual problems or circumstances specific to an
individual borrower.
(b) The approvals and exceptions to controls granted by RUS in this
subpart shall not in any way affect the rights of other co-mortgagees
under the mortgage or their loan contracts.
Sec. 1717.602 Definitions.
Terms used in this subpart that are not defined in this section
have the meanings set forth in 7 CFR part 1710. In addition, for the
purposes of this subpart:
Default means an event of default as defined in the borrower's loan
documents or other agreement with RUS, and furthermore includes any
event that has occurred and is continuing which, with notice or lapse
of time and notice, would become an event of default.
Equity means the borrower's total margins and equities computed
pursuant to RUS accounting requirements but excluding any regulatory
created assets.
Financed or funded by RUS means financed or funded wholly or in
part by a loan made or guaranteed by RUS, including concurrent
supplemental loans required by 7 CFR 1710.110, loans to reimburse funds
already expended by the borrower, and loans to replace interim
financing.
Interchange agreement means a contractual arrangement that can
include a variety of services utilities provide each other to increase
reliability and efficiency, and to avoid duplicating expenses. Some
examples are: transmission service (the use of transmission lines to
move power and energy from one area to another); emergency service (an
agreement by one utility to furnish another with power and energy to
protect it in times of emergency, such as power plant outages); reserve
sharing (contributions to a common pool of generating plant reserves so
that each individual utility's reserves can be reduced); and economic
exchanges (swapping power and energy from different plants to avoid
running the most expensive units).
Interconnection agreement means a contract governing the terms for
establishing or using one or more electrical connections between two or
more electric systems permitting a flow of power and energy among the
systems.
Loan documents means the mortgage (or other security instrument
acceptable to RUS), the loan contract, and the promissory note entered
into between the borrower and RUS.
Net utility plant means the amount constituting the total utility
plant of the borrower, less depreciation, computed in accordance with
RUS accounting requirements.
Pooling agreement means a contract among two or more interconnected
electric systems to operate on a coordinated basis to achieve economies
and/or enhance reliability in supplying their respective loads.
Power supply contract means any contract entered into by a borrower
for the sale or purchase, at wholesale, of electric energy.
Regulatory created assets means the sum of any amounts properly
recordable as unrecovered plant and regulatory study costs or as other
regulatory assets, computed pursuant to RUS accounting requirements.
RUS accounting requirements means the system of accounts prescribed
for electric borrowers by RUS regulations as such RUS accounting
requirements exist at the date of applicability thereof.
RUS regulations mean regulations of general applicability published
by RUS from time to time as they exist at the date of applicability
thereof, and shall also include any regulations of other federal
entities which RUS is required by law to implement.
Total assets means an amount constituting the total assets of the
borrower as computed pursuant to RUS accounting requirements, but
excluding any regulatory created assets.
Wheeling agreement means a contract providing for the use of the
electric transmission facilities of one electric utility to transmit
power and energy of another electric utility or other entity to a third
party. Such transmission may be accomplished directly or by
displacement.
Sec. 1717.603 RUS approval of extensions and additions.
(a) Distribution borrowers. Prior written approval by RUS is
required for a distribution borrower to extend or add to its electric
system if the extension or addition will be financed by RUS. For
extensions and additions that will not be financed by RUS, approval is
hereby given to distribution borrowers to make such extensions and
additions to their electric systems, including the use of (or
commitment to use) general funds of the borrower, except for the
following:
(1) Construction, procurement, or leasing of generating facilities
if the combined capacity of the facilities to be built, procured, or
leased, including any future facilities included in the planned
project, will exceed the lesser of 5 megawatts or 30 percent of the
borrower's equity;
(2) Acquisition or leasing of existing electric facilities or
systems in service whose purchase price, or capitalized value in the
case of a lease, exceeds 10 percent of the borrower's net utility
plant; and
(3) Construction, procurement, or leasing of electric facilities to
serve a customer whose annual kWh purchases or maximum annual kW demand
in the foreseeable future is projected to exceed 25 percent of the
borrower's total kWh sales or maximum kW demand in the year immediately
preceding the acquisition or start of construction.
(b) Power supply borrowers. Prior written approval by RUS is
required for a power supply borrower to extend or add to its electric
system if the extension or addition will be financed by RUS.
Requirements for RUS approval of extensions and additions that will not
be financed by RUS are set forth in other RUS regulations.
[[Page 67407]]
(c) Additional details. Additional details relating to RUS approval
of extensions and additions of a borrower's electric system financed by
RUS are set forth in other RUS regulations, e.g., in 7 CFR parts 1710
and 1726.
Sec. 1717.604 Long-range engineering plans and construction work
plans.
(a) All borrowers are required to maintain up-to-date long-range
engineering plans and construction work plans (CWPs) in form and
substance as set forth in 7 CFR part 1710, subpart F.
(b) Applications for financing from RUS must be supported by a
long-range engineering plan and CWP approved by RUS.
(c) RUS approval is not required for long-range engineering plans
and CWPs if the borrower does not intend to seek RUS financing for any
of the facilities, equipment or other purposes included in those plans.
However, if requested by RUS, a borrower must provide an informational
copy of such plans to RUS.
Sec. 1717.605 Design standards, plans and specifications, construction
standards, and RUS accepted materials.
All borrowers, regardless of the source of funding, are required to
comply with applicable RUS requirements with respect to system design,
construction standards, and the use of RUS accepted materials.
Borrowers must comply with applicable RUS requirements with respect to
plans and specifications only if the construction or procurement will
be financed by RUS. These requirements are set forth in other RUS
regulations, especially in 7 CFR parts 1724 and 1728.
Sec. 1717.606 Standard forms of construction contracts, and
engineering and architectural services contracts.
All borrowers are encouraged to use the standard forms of contracts
promulgated by RUS for construction, materials, equipment, engineering
services, and architectural services, regardless of the source of
funding for such construction and services. Borrowers are required to
use these standard forms of contracts only if the construction,
procurement or services are financed by RUS, and only to the extent
required by RUS regulations. RUS requirements with respect to such
standard forms of contract are set forth in 7 CFR part 1724 for
architectural and engineering services, and in 7 CFR part 1726 for
construction, materials, and equipment.
Sec. 1717.607 Contract bidding requirements.
Borrowers must follow RUS requirements regarding bidding for
contracts for construction, materials, and equipment only if financing
of the construction or procurement will be provided by RUS. These
requirements are set forth in 7 CFR part 1726.
Sec. 1717.608 RUS approval of contracts.
(a) Construction contracts and architectural and engineering
contracts. RUS approval of contracts for construction and procurement
and for architectural and engineering services is required only when
such construction, procurement or services are financed by RUS.
Detailed requirements regarding RUS approval of such contracts are set
forth in 7 CFR part 1724 for architectural and engineering services,
and in 7 CFR part 1726 for construction and procurement.
(b) Large retail power contracts. RUS approval of contracts to sell
electric power to retail customers is required only if the contract is
for longer than 2 years and the kWh sales or kW demand for any year
covered by the contract exceeds 25 percent of the borrower's total kWh
sales or maximum kW demand for the year immediately preceding execution
of the contract. This requirement applies regardless of the source of
funding of any plant extensions, additions or improvements that may be
involved in connection with the contract.
(c) Power supply arrangements. (1) Power supply contracts
(including but not limited to economy energy sales and emergency power
and energy sales), interconnection agreements, interchange agreements,
wheeling agreements, pooling agreements, and any other similar power
supply arrangements subject to approval by RUS are deemed approved if
they have a term of 2 years or less. Amendments to said power supply
arrangements are also deemed approved provided that the amendment does
not extend the term of the arrangement for more than 2 years beyond the
date of the amendment.
(2) Any amendment to a schedule or exhibit contained in any power
supply arrangement subject to RUS approval, which merely has the effect
of either altering a list of interconnection or delivery points or
changing the value of a variable term (but not the formula itself)
contained in a formulary rate or charge is deemed approved.
(3) The provisions of this paragraph (c) apply regardless of
whether the borrower is a seller or purchaser of the services furnished
by the contracts or arrangements, and regardless of whether or not a
Federal power marketing agency is a party to any of them.
(d) System management and maintenance contracts. RUS approval of
contracts for the management and operation of a borrower's electric
system or for the maintenance of the electric system is required only
if such contracts cover all or substantially all of the electric
system.
(e) Other contracts. [Reserved]
Sec. 1717.609 RUS approval of general manager.
(a) If a borrower's mortgage or loan contract grants RUS the
unconditioned right to approve the employment and/or the employment
contract of the general manager of the borrower's system, such approval
is hereby granted provided that the borrower is in compliance with all
provisions of its loan documents and any other agreements with RUS.
(b) If a borrower is in default with respect to any provision of
its loan documents or any other agreement with RUS:
(1) Such borrower, if directed in writing by RUS, shall replace its
general manager within 30 days after the date of such written notice;
and
(2) Such borrower shall not hire a general manager without prior
written approval by RUS.
Sec. 1717.610 RUS approval of compensation of the board of directors.
If a borrower's mortgage or loan contract requires the borrower to
obtain approval from RUS for compensation provided to members of the
borrower's board of directors, such requirement is hereby waived.
Sec. 1717.611 RUS approval of expenditures for legal, accounting,
engineering, and supervisory services.
(a) If a borrower's mortgage or loan contract requires the borrower
to obtain approval from RUS before incurring expenses for legal,
accounting, supervisory (other than for the management and operation of
the borrower's electric system, see Sec. 1717.608(d)), or other similar
services, such approval is hereby granted. However, while expenditures
for accounting do not require RUS approval, the selection of a
certified public accountant by the borrower to prepare audited reports
required by RUS remains subject to RUS approval.
(b) If a borrower's mortgage or loan contract requires the borrower
to obtain approval from RUS before incurring expenses for engineering
services, such approval is hereby granted if such services will not be
financed by RUS. Approval requirements with respect to
[[Page 67408]]
engineering services financed by RUS are set forth in other RUS
regulations.
Sec. 1717.612 RUS approval of borrower's bank or other depository.
If a borrower's mortgage or loan contract gives RUS the authority
to approve the bank or other depositories used by the borrower, such
approval is hereby granted. However, without the prior written approval
of RUS, a borrower shall not deposit funds from loans made or
guaranteed by RUS in any bank or other depository that is not insured
by the Federal Deposit Insurance Corporation or other Federal agency
acceptable to RUS, or in any account not so insured.
Sec. 1717.613 RUS approval of data processing and system control
equipment.
If a borrower's mortgage or loan contract requires the borrower to
obtain approval from RUS before purchasing data processing equipment or
system control equipment, such approval is hereby granted if the
equipment will not be financed by RUS.
Sec. 1717.614 Notification of rate changes.
If a distribution borrower is required by its loan documents to
notify RUS in writing of proposed changes in electric rates more than
30 days prior to the effective date of such rates, the required
notification period shall be 30 days. Moreover, such notification shall
be required only upon the request of RUS.
Sec. 1717.615 Consolidations and mergers.
A distribution or power supply borrower may without the prior
approval of RUS, consolidate or merge with any other corporation or
convey or transfer the mortgaged property substantially as an entirety
if the following conditions are met:
(a) Such consolidation, merger, conveyance or transfer shall be on
such terms as shall fully preserve the lien and security of the RUS
mortgage and the rights and powers of the mortgagees;
(b) The entity formed by such consolidation or with which the
borrower is merged or the corporation which acquires by conveyance or
transfer the mortgaged property substantially as an entirety shall
execute and deliver to the mortgagees a mortgage supplemental in
recordable form and containing an assumption by such successor entity
of the due and punctual payment of the principal of and interest on all
of the outstanding notes and the performance and observance of every
covenant and condition of the mortgage;
(c) Immediately after giving effect to such transaction, no default
under the mortgage shall have occurred and be continuing;
(d) The borrower shall have delivered to the mortgagees a
certificate of its general manager or other officer, in form and
substance satisfactory to each of the mortgagees, which shall state
that such consolidation, merger, conveyance or transfer and such
supplemental mortgage comply with this section and that all conditions
precedent herein provided for relating to such transaction have been
complied with;
(e) The borrower shall have delivered to the mortgagees an opinion
of counsel in form and substance satisfactory to each of the
mortgagees; and
(f) The entity formed by such consolidation or with which the
borrower is merged or the corporation which acquires by conveyance or
transfer the mortgaged property substantially as an entirety shall be
an entity having:
(1) Equity equal to at least 27% of its total assets on a pro forma
basis after giving effect to such transaction;
(2) A pro forma TIER of not less than 1.50 and a pro forma DSC of
not less than 1.25 for each of the two preceding calendar years; and
(3) Net utility plant equal to or greater than 1.0 times its total
long-term debt on a pro forma basis.
Sec. 1717.616 Sale, lease, or transfer of capital assets.
A distribution borrower may without the prior approval of RUS sell,
lease, or transfer any capital asset if the following conditions are
met:
(a) The borrower is not in default;
(b) In the most recent year for which data are available, the
borrower achieved a TIER of at least 1.5, DSC of at least 1.25, OTIER
of at least 1.1, and ODSC of at least 1.1, in each case based on the
average or the best 2 out of the 3 most recent years;
(c) The sale, lease, or transfer of assets will not reduce the
borrower's existing or future requirements for energy or capacity being
furnished to the borrower under any wholesale power contract which has
been pledged as security to the government;
(d) Fair market value is obtained for the assets;
(e) The aggregate value of assets sold, leased, or transferred in
any 12-month period is less than 10 percent of the borrower's net
utility plant prior to the transaction;
(f) The proceeds of such sale, lease, or transfer, less ordinary
and reasonable expenses incident to such transaction, are immediately:
(1) Applied as a prepayment of all notes secured under the mortgage
equally and ratably;
(2) In the case of dispositions of equipment, materials or scrap,
applied to the purchase of other property useful in the borrower's
utility business; or
(3) Applied to the acquisition of construction of utility plant.
Sec. 1717.617 Limitations on distributions.
If a distribution or power supply borrower is required by its loan
documents to obtain prior approval from RUS before declaring or paying
any dividends, paying or determining to pay any patronage refunds, or
retiring any patronage capital, or making any other cash distributions,
such approval is hereby given if the following conditions are met:
(a) After giving effect to the distribution, the borrower's equity
will be greater than or equal to 30 percent of its total assets;
(b) The borrower is current on all payments due on all notes
secured under the mortgage;
(c) The borrower is not otherwise in default under its loan
documents; and
(d) After giving effect to the distribution, the borrower's current
and accrued assets will be not less than its current and accrued
liabilities.
11. Section 1717.850 is amended by revising paragraphs (a), (b),
(f), (g)(1)(ii), (h)(2), and (m) to read as follows:
Sec. 1717.850 General.
(a) Scope and applicability. (1) This subpart R establishes
policies and procedures for the accommodation, subordination or release
of the Government's lien on borrower assets, including approvals of
supporting documents and related loan security documents, in connection
with 100 percent private sector financing of facilities and other
purposes. Policies and procedures regarding lien accommodations for
concurrent supplemental financing required in connection with an RUS
insured loan are set forth in subpart S of this part.
(2) This subpart and subpart S of this part apply only to debt to
be secured under the mortgage, the issuance of which is subject to the
approval of the Rural Utilities Service (RUS) by the terms of the
borrower's mortgage with respect to the issuance of additional debt or
the refinancing or refunding of debt. If RUS approval is not required
under such terms of the mortgage itself, a lien accommodation is not
required. If the loan contract or other agreement between the borrower
and RUS requires RUS approval with respect to the issuance of debt or
making additions to or extensions of the borrower's system, such
required approvals do not by
[[Page 67409]]
themselves result in the need for a lien accommodation.
(b) Overall policy. (1) Consistent with prudent lending practices,
the maintenance of adequate security for RUS's loans, and the
objectives of the Rural Electrification Act (RE Act), it is the policy
of RUS to provide effective and timely assistance to borrowers in
obtaining financing from other lenders by sharing RUS's lien on a
borrower's assets in order to finance electric facilities, equipment
and systems, and certain other types of community infrastructure. In
certain circumstances, RUS may facilitate the financing of such assets
by subordinating its lien on specific assets financed by other lenders.
(2) It is also the policy of RUS to provide effective and timely
assistance to borrowers in promoting rural development by subordinating
RUS's lien for financially sound rural development investments under
the conditions set forth in Sec. 1717.858.
* * * * *
(f) Safety and performance standards. (1) To be eligible for a lien
accommodation or subordination from RUS, a borrower must comply with
RUS standards regarding facility and system planning and design,
construction, procurement, and the use of materials accepted by RUS, as
required by the borrower's mortgage, loan contract, or other agreement
with RUS, and as further specified in RUS regulations.
(2) RUS ``Buy American'' requirements shall not apply.
(g) * * *
(1) * * *
(ii) Obtain a certification from a registered professional
engineer, for each year during which funds from the separate subaccount
are utilized by the borrower, that all materials and equipment
purchased and facilities constructed during the year from said funds
comply with RUS safety and performance standards, as required by
paragraph (f) of this section, and are included in an CWP or CWP
amendment approved by the borrower's board of directors;
* * * * *
(h) * * *
(2) To the extent that provisions in a borrower's loan contract or
mortgage in favor of RUS may be inconsistent with paragraphs (g)(1) and
(h)(1) of this section, paragraphs (g)(1) and (h)(1) of this section
are intended to constitute an approval or waiver under the terms of
such instruments, and in any regulations implementing such instruments,
with respect to facilities financed with debt obtained entirely from
non-RUS sources without an RUS guarantee.
* * * * *
(m) Waiver authority. Consistent with the RE Act and other
applicable laws, any requirement, condition, or restriction imposed by
this subpart, or subpart S of this part, on a borrower, private lender,
or application for a lien accommodation or subordination may be waived
or reduced by the Administrator, if the Administrator determines that
said action is in the Government's financial interest with respect to
ensuring repayment and reasonably adequate security for loans made or
guaranteed by RUS.
* * * * *
12. Section 1717.851 is amended by removing the definitions for
``ODSC'' and ``OTIER'' and by adding the following definitions in
alphabetical order to read as follows:
Sec. 1717.851 Definitions.
* * * * *
Natural gas distribution system means any system of community
infrastructure whose primary function is the distribution of natural
gas and whose services are available by design to all or a substantial
portion of the members of the community.
* * * * *
Solid waste disposal system means any system of community
infrastructure whose primary function is the collection and/or disposal
of solid waste and whose services are available by design to all or a
substantial portion of the members of the community.
Telecommunication and other electronic communication system means
any system of community infrastructure whose primary function is the
provision of telecommunication or other electronic communication
services and whose services are available by design to all or a
substantial portion of the members of the community.
* * * * *
Water and waste disposal system means any system of community
infrastructure whose primary function is the supplying of water and/or
the collection and treatment of waste water and whose services are
available by design to all or a substantial portion of the members of
the community.
* * * * *
13. In Sec. 1717.852, paragraphs (a)(1) introductory text and
(a)(1)(ii) are amended by adding the words ``and/or steam'' before the
word ``power'', paragraphs (a)(3) through (a)(7) and paragraph (b) are
revised, and paragraph (a)(8) is added to read as follows:
Sec. 1717.852 Financing purposes.
(a) * * *
(3) The following types of community infrastructure substantially
located within the electric service territory of the borrower: water
and waste disposal systems, solid waste disposal systems,
telecommunication and other electronic communications systems, and
natural gas distribution systems;
(4) Front-end costs, when and as the borrower has obtained a
binding commitment from the non-RUS lender for the financing required
to complete the procurement or construction of the facilities;
(5) Transaction costs included as part of the cost of financing
assets or refinancing existing debt, provided, however, that the amount
of transaction costs eligible for lien accommodation or subordination
normally shall not exceed 5 percent of the principal amount of
financing or refinancing provided, net of all transaction costs;
(6) The refinancing of existing debt secured under the mortgage;
(7) Interest during construction of generation and transmission
facilities if approved by RUS, case by case, depending on the financial
condition of the borrower, the terms of the financing, the nature of
the construction, the treatment of these costs by regulatory
authorities having jurisdiction, and such other factors deemed
appropriate by RUS; and
(8) Lien subordinations for certain rural development investments,
as provided in Sec. 1717.858.
(b) Purposes ineligible. The following financing purposes are not
eligible for a lien accommodation or subordination from RUS:
(1) Working capital, including operating funds, unless in the
judgment of RUS the working capital is required to ensure the repayment
of RUS loans and/or other loans secured under the mortgage;
(2) Facilities, equipment, appliances, or wiring located inside the
premises of the consumer, except:
(i) Certain load-management equipment (see 7 CFR 1710.251(c));
(ii) Renewable energy systems and RUS-approved programs of demand
side management and energy conservation; and
(iii) As determined by RUS on a case by case basis, facilities
included as part of certain cogeneration projects to furnish electric
and/or steam power to end-user customers of the borrower;
(3) Investments in a lender required of the borrower as a condition
for obtaining financing; and
(4) Debt incurred by a distribution or power supply borrower to
finance
[[Page 67410]]
facilities, equipment or other assets that are not part of the
borrower's electric system or one of the four community infrastructure
systems cited in paragraph (a)(3) of this section, except for certain
rural development investments eligible for a lien subordination under
Sec. 1717.858.
* * * * *
14. Section 1717.854 is amended by revising the section heading and
paragraphs (a), (b), (c)(1) and (c)(2), removing paragraph (c)(7),
redesignating paragraphs (c)(3) through (c)(6) as paragraphs (c)(4)
through (c)(7), adding a new paragraph (c)(3), adding ``and'' at the
end of newly designated paragraph (c)(6)(vi) and removing ``;and'' at
the end of newly designated paragraph (c)(7) and adding a period in its
place to read as follows:
Sec. 1717.854 Advance approval--100 percent private financing of
distribution, subtransmission and headquarters facilities, and certain
other community infrastructure.
(a) Policy. Requests for a lien accommodation or subordination from
distribution borrowers for 100 percent private financing of
distribution, subtransmission and headquarters facilities, and for
community infrastructure listed in Sec. 1717.852(a)(3), qualify for
advance approval by RUS if they meet the conditions of this section and
all other applicable provisions of this subpart. Advance approval means
RUS will approve these requests once RUS is satisfied that the
conditions of this section and all other applicable provisions of this
subpart have been met.
(b) Eligible purposes. Lien accommodations or subordinations for
the financing of distribution, subtransmission, and headquarters
facilities and community infrastructure listed in Sec. 1717.852(a)(3)
are eligible for advance approval, except those that involve the
purchase of existing facilities and associated service territory.
(c) * * *
(1) The borrower has achieved a TIER of at least 1.5 and a DSC of
at least 1.25 for each of 2 calendar years immediately preceding, or
any 2 consecutive 12 month periods ending within 180 days immediately
preceding, the issuance of the debt;
(2) The ratio of the borrower's equity, less deferred expenses, to
total assets, less deferred expenses, is not less than 27 percent,
after adding the principal amount of the proposed loan to the total
assets of the borrower;
(3) The borrower's net utility plant as a ratio to its total
outstanding long-term debt is not less than 1.0, after adding the
principal amount of the proposed loan to the existing outstanding long-
term debt of the borrower;
* * * * *
15. Section 1717.855 is amended by revising the section heading and
paragraph (a) to read as follows:
Sec. 1717.855 Application contents: Advance approval--100 percent
private financing of distribution, subtransmission and headquarters
facilities, and certain other community infrastructure.
* * * * *
(a) A certification by an authorized official of the borrower that
the borrower and, as applicable, the loan are in compliance with all
conditions set forth in Sec. 1717.854(c) and all applicable provisions
of Secs. 1717.852 and 1717.853;
* * * * *
16. Section 1717.856 is amended by revising the section heading,
the introductory text, the introductory text of paragraph (a), and
paragraph (c)(3) to read as follows:
Sec. 1717.856 Application contents: Normal review--100 percent private
financing.
Applications for a lien accommodation or subordination for 100
percent private financing for eligible purposes that do not meet the
requirements of Sec. 1717.854 must include the following information
and documents:
(a) A certification by an authorized official of the borrower that:
* * * * *
(c) * * *
(3) The borrower has achieved the TIER and DSC and any other
coverage ratios required by its mortgage or loan contract in each of
the two most recent calendar years; and
* * * * *
Sec. 1717.857 [Amended]
17. Section 1717.857 is amended by removing paragraph (a)(5), by
adding ``and'' at the end of paragraph (a)(3), and by removing ``;and''
at the end of paragraph (a)(4)(ii) and adding a period in its place.
Sec. 1717.860 [Amended]
18. Section 1717.860 is amended by redesignating paragraph (f) as
paragraph (e).
PART 1718--LOAN SECURITY DOCUMENTS FOR ELECTRIC BORROWERS
19. The authority citation for part 1718 continues to read as
follows:
Authority: 7 U.S.C. 901-950b; Pub. L. 103-354, 108 Stat. 3178 (7
U.S.C. 6941 et seq.).
20. Section 1.01 of Appendix A to Subpart B of part 1718 is amended
by revising the definitions for ``Debt Service Coverage Ratio (``DSC'')
``and'' Times Interest Earned Ratio (``TIER'')'' to read as follows:
Appendix A to Subpart B of Part 1718--Model Form of Mortgage for
Electric Distribution Borrowers
* * * * *
Section 1.01 Definitions. * * *
* * * * *
Debt Service Coverage Ratio (``DSC'') shall mean the ratio
determined as follows: for each calendar year add (i) Patronage
Capital or Margins of the Mortgagor, (ii) Interest Expense on Total
Long Term Debt of the Mortgagor (as computed in accordance with the
principles set forth in the definition of TIER) and (iii)
Depreciation and Amortization Expense of the Mortgagor, and divide
the total so obtained by an amount equal to the sum of all payments
of principal and interest required to be made on account of Total
Long-Term Debt during such calendar year increasing said sum by any
addition to interest expense on account of Restricted Rentals as
computed with respect to the Times Interest Earned Ratio herein.
* * * * *
Times Interest Earned Ratio (``TIER'') shall mean the ratio
determined as follows: for each calendar year: add (i) patronage
capital or margins of the Mortgagor and (ii) Interest Expense on
Total Long-Term Debt of the Mortgagor and divide the total so
obtained by Interest Expense on Total Long-Term Debt of the
Mortgagor, provided, however, that in computing Interest Expense on
Total Long-Term Debt, there shall be added, to the extent not
otherwise included, an amount equal to 33-1/3% of the excess of
Restricted Rentals paid by the Mortgagor over 2% of the Mortgagor's
Equity.
* * * * *
21. Subpart C is added to part 1718 to read as follows:
Subpart C--Loan Contracts With Distribution Borrowers
Sec.
1718.100 General.
1718.101 Applicability.
1718.102 Definitions.
1718.103 Loan contract provisions.
1718.104 Availability of model loan contract.
Appendix A to Subpart C of Part 1718--Model Form of Loan Contract for
Electric Distribution Borrowers
Subpart C--Loan Contracts With Distribution Borrowers
Sec. 1718.100 General.
(a) Purpose. The purpose of this subpart is to set forth the
policies, requirements, and procedures governing loan contracts entered
into between the Rural Utilities Service (RUS) and
[[Page 67411]]
distribution borrowers or, in some cases, other electric borrowers.
(b) Flexibility for individual circumstances. The intent of this
subpart is to provide the flexibility to address the different needs
and different credit risks of individual borrowers, and other special
circumstances of individual lending situations. The model loan contract
contained in Appendix A of this subpart provides an example of what a
loan contract with an ``average'' or ``typical'' distribution borrower
may look like under ``average'' or ``typical'' circumstances. Depending
on the credit risks and other circumstances of individual loans, RUS
may execute loan contracts with provisions that are substantially
different than those set forth in the model. RUS may develop
alternative model loan contract provisions. If it does, such provisions
will be made available to the public.
(c) Resolution of any differences in contractual provisions. If any
provision of the loan contract appears to be in conflict with
provisions of the mortgage, the loan contract shall have precedence
with respect to the contractual relationship between the borrower and
RUS with respect to such provision. If either document is silent on a
matter addressed in the other document, the other document shall have
precedence with respect to the contractual relationship between the
borrower and RUS with respect to such matter.
(d) Certain loan contract provisions subject to subsequent
rulemaking. If a loan contract provision imposes an obligation or
limitation on the borrower whose interpretation or specification is
subject to RUS regulations or the discretion of the Administrator or
RUS, such interpretation or specification shall be subject to
subsequent rulemaking. Such interpretation or specification of the
borrower's obligations or limitations may not exceed the authority
granted to the Administrator or RUS in the loan contract provision.
Sec. 1718.101 Applicability.
(a) Distribution borrowers. The provisions of this subpart apply to
all distribution borrowers that obtain a loan or loan guarantee from
RUS approved on or after January 29, 1996. Distribution borrowers that
obtain a lien accommodation or any other form of financial assistance
from RUS after January 29, 1996, may be required to execute a new loan
contract and new mortgage. Moreover, any distribution borrower may
submit a request to RUS that a new loan contract and new mortgage be
executed. Within the constraints of time and staff resources, RUS will
attempt to honor such requests. Borrowers must first obtain the
concurrence of any other mortgagees on their existing mortgage before a
new mortgage can be executed.
(b) Other borrowers. Borrowers other than distribution borrowers
may also submit requests for execution of a new loan contract pursuant
to this subpart and a new mortgage pursuant to subpart B of this part.
RUS may approve such requests if it determines that such approval is in
the government's financial interest. If other mortgagees are on the
borrower's existing mortgage, their concurrence would be required
before a new mortgage could be executed.
Sec. 1718.102 Definitions.
For the purposes of this subpart:
Borrower means any organization that has an outstanding loan made
or guaranteed by the Rural Utilities Service (RUS) or its predecessor,
the Rural Electrification Administration, for rural electrification, or
that is seeking such financing.
Distribution borrower means a borrower that sells or intends to
sell electric power and energy at retail in rural areas, the latter
being defined in 7 CFR 1710.2.
Loan documents means the mortgage (or other security instrument
acceptable to RUS), the loan contract, and the promissory note entered
into between the borrower and RUS.
Sec. 1718.103 Loan contract provisions.
Loan contracts executed pursuant to this subpart shall contain such
provisions as RUS determines are appropriate to further the purposes of
the RE Act and to ensure that the security for the loan will be
reasonably adequate and that the loan will be repaid according to the
terms of the promissory note. Such loan contracts will contain
provisions addressing, but not necessarily limited to, the following
matters:
(a) Description of the purpose of the loan;
(b) Specification of the interest to be charged on the loan,
including the method for determining the interest rate if it is not
fixed for the entire term of the loan;
(c) Specification of the method for repaying the loan principal,
including the final maturity of the loan;
(d) The conditions under which the loan may be prepaid before its
maturity date, including but not limited to requirements regarding the
prepayment of loans made concurrently by RUS and another secured
lender;
(e) The method for making scheduled payments on the loan;
(f) Accounting principles and system of accounts, and RUS authority
to approve the accountant used by the borrower;
(g) The method and time period for advancing loan funds and the
conditions precedent to the advance of funds;
(h) Representations and warranties by the borrower as a condition
of obtaining the loan, including but not limited to: the legal
authority of the borrower to enter into the loan contract and operate
its system; that the loan documents will be a legal, valid and binding
obligation of the borrower enforceable according to their terms;
compliance of the borrower in all material respects with all federal,
state, and local laws, regulations, codes, and orders; existence of any
pending or threatened legal actions that could have a material adverse
effect on the borrower's ability to perform its obligations under the
loan documents; the accuracy and completeness of all information
provided by the borrower in the loan application and with respect to
the loan contract, and the existence of any material adverse change
since the information was provided; and the existence of any material
defaults under other agreements of the borrower;
(i) Representations, warranties, and covenants with respect to
environmental matters;
(j) Reports and notices required to be submitted to RUS, including
but not limited to: annual financial statements; notice of defaults;
notice of litigation; notice of orders or other directives received by
the borrower from regulatory authorities; notice of any matter that has
resulted in or may result in a material adverse change in the condition
or operations of the borrower; and such other information regarding the
condition or operations of the borrower as RUS may reasonably require;
(k) Annual written certification that the borrower is in compliance
with its loan contract, note, mortgage, and any other agreement with
RUS, or if there has been a default in the fulfillment of any
obligation under said agreements, specifying each such default and the
nature and status thereof;
(l) Requirement that the borrower design and implement rates for
utility services to meet certain minimum coverage of interest expense
and/or debt service obligations;
(m) Requirement that the borrower maintain and preserve its
mortgaged property in compliance with prudent utility practice and all
applicable laws, which may include certain specific actions and
certifications set forth in the borrower's loan contract or mortgage;
[[Page 67412]]
(n) Requirement that the borrower plan, design and construct its
electric system according to standards and other requirements
established by RUS, and if directed by the Administrator, that the
borrower follow RUS planning, design and construction standards and
requirements for other utility systems constructed by the borrower;
(o) Limitations on extensions and additions to the borrower's
electric system without approval by RUS;
(p) Limitations on contracts and contract amendments that the
borrower may enter into without approval by RUS;
(q) Limitations of the transfer of mortgaged property by the
borrower;
(r) Limitations on dividends, patronage refunds, and cash
distributions paid by the borrower;
(s) Limitations on investments, loans, and guarantees made by the
borrower;
(t) Authority of RUS to approve a new general manager and to
require that an existing general manager be replaced if the borrower is
in default under its mortgage, loan contract, or any other agreements
with RUS;
(u) Description of events of default under the loan contract and
the remedies available to RUS;
(v) Applicability of state and federal laws;
(w) Severability of the individual provisions of the loan
documents;
(x) Matters relating to the assignment of the loan contract;
(y) Requirements relating to federal laws and regulations,
including but not limited to the following matters: area coverage for
electric service; civil rights and equal employment opportunity; access
to buildings and other matters relating to the handicapped; design and
construction standards relating to earthquakes; the National
Environmental Policy Act of 1969 and other environmental laws and
regulations; flood hazard insurance; debarment and suspension from
federal assistance programs; and delinquency on federal debt; and
(z) Special requirements applicable to individual loans, and such
other provisions as RUS may require to ensure loan repayment and
reasonably adequate loan security.
Sec. 1718.104 Availability of model loan contract.
Single copies of the model loan contract (RUS Informational
Publication 1718 C) are available from the Rural Utilities Service,
United States Department of Agriculture, Washington, DC 20250-1533.
This document may be reproduced.
Appendix A to Subpart C of Part 1718--Model Form of Loan Contract for
Electric Distribution Borrowers
LOAN CONTRACT
TABLE OF CONTENTS
RECITALS
ARTICLE I--DEFINITIONS
ARTICLE II--REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties.
ARTICLE III--LOAN
Section 3.1. Advances.
Section 3.2. Interest Rate and Payment.
Section 3.3. Prepayment.
ARTICLE IV--CONDITIONS OF LENDING
Section 4.1. General Conditions.
Section 4.2. Special Conditions.
ARTICLE V--AFFIRMATIVE COVENANTS
Section 5.1. Generally.
Section 5.2. Annual Certificates.
Section 5.3. Simultaneous Prepayment of Contemporaneous Loans.
Section 5.4. Rates to Provide Revenue Sufficient to Meet
Coverage Ratios Requirements.
Section 5.5. Depreciation Rates.
Section 5.6. Property Maintenance.
Section 5.7. Financial Books.
Section 5.8. Rights of Inspection.
Section 5.9. Area Coverage.
Section 5.10. Real Property Acquisition.
Section 5.11. ``Buy American'' Requirements.
Section 5.12. Power Requirements Studies.
Section 5.13. Long Range Engineering Plans and Construction Work
Plans.
Section 5.14. Design Standards, Construction Standards, and List
of Materials.
Section 5.15. Plans and Specifications.
Section 5.16. Standard Forms of Construction Contracts, and
Engineering and Architectural Services Contracts.
Section 5.17. Contract Bidding Requirements.
Section 5.18. Nondiscrimination.
Section 5.19. Financial Reports.
Section 5.20. Miscellaneous Reports and Notices.
Section 5.21 Special Construction Account.
Section 5.22. Additional Affirmative Covenants.
ARTICLE VI--NEGATIVE COVENANTS
Section 6.1. General.
Section 6.2. Limitations on System Extensions and Additions.
Section 6.3. Limitations on Changing Principal Place of
Business.
Section 6.4. Limitations on Employment and Retention of Manager.
Section 6.5. Limitations on Certain Types of Contracts.
Section 6.6. Limitations on Mergers and Sale, Lease or Transfer
of Capital Assets.
Section 6.7. Limitations on Using non FDIC-insured Depositories.
Section 6.8. Limitation on Distributions.
Section 6.9. Limitations on Loans, Investments and Other
Obligations.
Section 6.10. Depreciation Rates.
Section 6.11. Historic Preservation.
Section 6.12. Rate Reductions.
Section 6.13. Limitations on Additional Indebtedness.
Section 6.14. Limitations on Issuing Additional Indebtedness
Secured Under the Mortgage.
Section 6.15. Impairment of Contracts Pledged to RUS.
Section 6.16. Additional Negative Covenants.
ARTICLE VII--DEFAULT
Section 7.1. Events of Default.
ARTICLE VIII--REMEDIES
Section 8.1. Generally.
Section 8.2. Suspension of Advances.
ARTICLE IX--MISCELLANEOUS
Section 9.1. Notices.
Section 9.2. Expenses.
Section 9.3. Late Payments.
Section 9.4. Filing Fees.
Section 9.5. No Waiver.
Section 9.6. Governing Law.
Section 9.7. Holiday Payments.
Section 9.8. Rescission.
Section 9.9. Successors and Assigns.
Section 9.10. Complete Agreement; Amendments.
Section 9.11. Headings.
Section 9.12. Severability.
Section 9.13. Right of Setoff.
Section 9.14. Schedules and Exhibits.
Section 9.15. Prior Loan Documents.
Section 9.16. Authority of Representatives of RUS.
Section 9.17. Term.
SCHEDULE 1
SCHEDULE 2--Existing Liens
SCHEDULE 3--Additional Contracts
EXHIBIT A--Form of Promissory Note
EXHIBIT B--Equal Opportunity Contract Provisions
EXHIBIT C-1--Manager's Certificate Required Under Loan Contract
Section 6.14 for Additional Notes
Exhibit C-2--Manager's Certificate Required Under Loan Contract
Section 6.14 for Refinancing Notes
Loan Contract
AGREEMENT, dated ____________________, 199____, between
____________________ (``Borrower''), a corporation organized and
existing under the laws of the State of ____________________ (the
``State'') and the UNITED STATES OF AMERICA acting by and through
the Administrator of the Rural Utilities Service (``RUS'').
Recitals
The Borrower has applied to RUS for a loan for the purpose(s)
set forth in Schedule 1 hereto.
RUS is willing to make such a loan to the Borrower pursuant to
the Rural Electrification Act of 1936, as amended, on the terms and
conditions stated herein.
THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree and
bind themselves as follows:
Article I--Definitions
Capitalized terms that are not defined herein shall have the
meanings as set forth in the Mortgage. The terms defined herein
include the plural as well as the singular and the singular as well
as the plural.
``Act'' shall mean the Rural Electrification Act of 1936, as
amended.
[[Page 67413]]
``Advance'' or ``Advances'' shall mean advances by RUS to
Borrower pursuant to the terms and conditions of this Agreement.
``Agreement'' shall mean this Loan Contract together with all
schedules and exhibits and also any subsequent supplements or
amendments.
``Business Day'' shall mean any day that RUS is open for
business.
``Contemporaneous Loan'' shall mean any loan which the Borrower
has used to satisfy RUS Regulations or loan conditions requiring
that supplemental financing be obtained in order to obtain a loan
from RUS. Any loan used to refinance or refund a Contemporaneous
Loan is also considered to be a Contemporaneous Loan.
``Coverage Ratios'' shall mean, collectively, the following
financial ratios: (i) TIER of 1.5; (ii) Operating TIER of 1.1; (iii)
DSC of 1.25; and Operating DSC of 1.1.
``Debt Service Coverage Ratio'' (``DSC'') shall have the meaning
provided in the Mortgage.
``Distributions'' shall mean for the Borrower to, in any
calendar year, declare or pay any dividends, or pay or determine to
pay any patronage refunds, or retire any patronage capital or make
any other Cash Distributions, to its members, stockholders or
consumers; provided, however, that for the purposes of this
Agreement a ``Cash Distribution'' shall be deemed to include any
general cancellation or abatement of charges for electric energy or
services furnished by the Borrower, but not the repayment of a
membership fee upon termination of a membership or the rebate of an
abatement of wholesale power costs previously incurred pursuant to
an order of a state regulatory authority or a wholesale power cost
adjustment clause or similar power pricing agreement between the
Borrower and a power supplier.
``Electric System'' shall have the meaning as defined in the
Mortgage.
``Equity'' shall mean the Borrower's total margins and equities
computed pursuant to RUS Accounting Requirements but excluding any
Regulatory Created Assets.
``Event of Default'' shall have the meaning as defined in
Section [7.1].
``Independent'' when used with respect to any specified person
or entity means such a person or entity who (1) is in fact
independent, (2) does not have any direct financial interest or any
material indirect financial interest in the Borrower or in any
affiliate of the Borrower and (3) is not connected with the Borrower
as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
``Interest Expense'' shall mean the interest expense of the
Borrower computed pursuant to RUS Accounting Requirements.
``Loan'' shall mean the loan described in Article III which is
being made pursuant to the RUS Commitment in furtherance of the
objectives of the Act.
``Loan Documents'' shall mean, collectively, this Agreement, the
Mortgage and the Note.
``Long-Term Debt'' shall mean the total of all amounts included
in the long-term debt of the Borrower pursuant to RUS Accounting
Requirements.
``Maturity Date'' shall have the meaning as defined in the Note.
``Monthly Payment Date'' shall have the meaning as defined in
the Note.
``Mortgage'' shall have the meaning as described in Schedule 1
hereto.
``Mortgaged Property'' shall have the meaning as defined in the
Mortgage.
``Net Utility Plant'' shall mean the amount constituting the
Total Utility Plant of the Borrower, less depreciation, computed in
accordance with RUS Accounting Requirements.
``Note'' shall mean a promissory note executed by the Borrower
in the form of exhibit A hereto, and any note executed and delivered
to RUS to refund, or in substitution for such a note.
``Operating DSC'' or ``ODSC'' shall mean Operating Debt Service
Coverage calculated as:
[GRAPHIC][TIFF OMITTED]TR29DE95.004
Where:
All amounts are for the same calendar year and are computed
pursuant to RUS Accounting Requirements and RUS form 7;
A=Depreciation and Amortization Expense of the Electric System;
B=Interest Expense on Total Long-Term Debt of the Electric
System, except that such Interest Expense shall be increased by \1/
3\ of the amount, if any, by which the Restricted Rentals of the
Electric System exceed 2 percent of the Mortgagor's Equity;
C=Patronage capital & operating margins of the Electric System,
(which equals operating revenue and patronage capital of Electric
System operations, less total cost of electric service, including
Interest Expense on Total Long-Term Debt of the Electric System)
plus cash received from the retirement of patronage capital by
suppliers of electric power and by lenders for credit extended for
the Electric System; and
D=Debt service billed which equals the sum of all payments of
principal and interest required to be made on account of Total Long-
Term Debt of the Electric System during the calendar year, plus \1/
3\ of the amount, if any, by which Restricted Rentals of the
Electric System exceed 2 percent of the Mortgagor's Equity.
``Operating TIER'' or ``OTIER'' shall mean Operating Times
Interest Earned Ratio calculated as:
[GRAPHIC][TIFF OMITTED]TR29DE95.005
Where:
All amounts are for the same calendar year and are computed
pursuant to RUS Accounting Requirements and RUS form 7;
A=Interest Expense on Total Long-Term Debt of the Electric
System, except that such Interest Expense shall be increased by 1/3
of the amount, if any, by which Restricted Rentals of the Electric
System exceed 2 percent of the Mortgagor's Equity; and
B=Patronage capital & operating margins of the Electric System,
(which equals operating revenue and patronage capital of Electric
System operations, less total cost of electric service, including
Interest Expense on Total Long-Term Debt of the Electric System)
plus cash received from the retirement of patronage capital by
suppliers of electric power and by lenders for credit extended for
the Electric System.
``Payment Notice'' shall mean a notice furnished by RUS to
Borrower that indicates the precise amount of each payment of
principal and interest and the total amount of each payment.
``Permitted Debt'' shall have the meaning as defined in section
[6.13].
``Prior Loan Contracts'' shall have the meaning as defined in
section 9.15.
``Regulatory Created Assets'' shall mean the sum of any amounts
properly recordable as unrecovered plant and regulatory study costs
or as other regulatory assets, computed pursuant to RUS Accounting
Requirements.
``RUS Accounting Requirements'' shall mean any system of
accounts prescribed by RUS Regulations as such RUS Accounting
Requirements exist at the date of applicability thereof.
``RUS Commitment'' shall have the meaning as defined in schedule
1 hereto.
``RUS Regulations'' shall mean regulations of general
applicability published by RUS from time to time as they exist at
the date of applicability thereof, and shall also include any
regulations of other Federal entities which RUS is required by law
to implement.
``Special Construction Account'' shall have the meaning as
defined in section 5.21.
``Subsidiary'' shall mean a corporation that is a subsidiary of
the Borrower and subject to the Borrower's control, as defined by
RUS Accounting Requirements.
``Termination Date'' shall have the meaning as defined in the
Note.
``Times Interest Earned Ratio'' (``TIER'') shall have the
meaning provided in the Mortgage.
``Total Assets'' shall mean an amount constituting the total
assets of the Borrower as computed pursuant to RUS Accounting
Requirements, but excluding any Regulatory Created Assets.
``Total Utility Plant'' shall mean the amount constituting the
total utility plant of the Borrower computed in accordance with RUS
Accounting Requirements.
``Utility System'' shall have the meaning as defined in the
Mortgage.
Article II--Representations and Warranties
Section 2.1. Representations and Warranties.
To induce RUS to make the Loan, and recognizing that RUS is
relying hereon, the Borrower represents and warrants as follows:
(a) Organization; Power, Etc. The Borrower: (i) is duly
organized, validly existing, and in good standing under the laws of
its state of incorporation; (ii) is duly qualified to do business
and is in good standing in each jurisdiction in which the
transaction of its business makes such qualification necessary;
(iii) has all requisite corporate and legal power to own and operate
its assets and to carry on its business and to enter into and
perform the Loan Documents; (iv) has duly and lawfully obtained and
maintained all licenses, certificates, permits, authorizations,
approvals, and the like which are material to the conduct of its
business or which may be
[[Page 67414]]
otherwise required by law; and (v) is eligible to borrow from RUS.
(b) Authority. The execution, delivery and performance by the
Borrower of this Agreement and the other Loan Documents and the
performance of the transactions contemplated thereby have been duly
authorized by all necessary corporate action and shall not violate
any provision of law or of the Articles of Incorporation or By-Laws
of the Borrower or result in a breach of, or constitute a default
under, any agreement, indenture or other instrument to which the
Borrower is a party or by which it may be bound.
(c) Consents. No consent, permission, authorization, order, or
license of any governmental authority is necessary in connection
with the execution, delivery, performance, or enforcement of the
Loan Documents, except (i) such as have been obtained and are in
full force and effect and (ii) such as have been disclosed on
Schedule 1 hereto.
(d) Binding Agreement. Each of the Loan Documents is, or when
executed and delivered shall be, the legal, valid, and binding
obligation of the Borrower, enforceable in accordance with its
terms, subject only to limitations on enforceability imposed by
applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally.
(e) Compliance With Laws. The Borrower is in compliance in all
material respects with all federal, state, and local laws, rules,
regulations, ordinances, codes, and orders (collectively, ``Laws''),
the failure to comply with which could have a material adverse
effect on the condition, financial or otherwise, operations,
properties, or business of the Borrower, or on the ability of the
Borrower to perform its obligations under the Loan Documents, except
as the Borrower has disclosed on Schedule 1 attached hereto.
(f) Litigation. There are no pending legal, arbitration, or
governmental actions or proceedings to which the Borrower is a party
or to which any of its property is subject which, if adversely
determined, could have a material adverse effect on the condition,
financial or otherwise, operations, properties, profits or business
of the Borrower, or on the ability of the Borrower to perform its
obligations under the Loan Documents, and to the best of the
Borrower's knowledge, no such actions or proceedings are threatened
or contemplated, except as the Borrower has disclosed to RUS in
writing.
(g) Title to Property. As to property which is presently
included in the description of Mortgaged Property, the Borrower
holds good and marketable title to all of its real property and owns
all of its personal property free and clear of any Lien except the
Liens specifically identified on Schedule 2 attached hereto (the
``Existing Liens''), and Permitted Encumbrances or Liens permitted
under the Mortgage.
(h) Financial Statements; No Material Adverse Change; Etc. All
financial statements submitted to RUS in connection with the
application for the Loan or in connection with this Agreement fairly
and fully present the financial condition of the Borrower and the
results of the Borrower's operations for the periods covered thereby
and are prepared in accordance with RUS Accounting Requirements
consistently applied. Since the dates thereof, there has been no
material adverse change in the financial condition or operations of
the Borrower. All budgets, projections, feasibility studies, and
other documentation submitted by the Borrower to RUS are based upon
assumptions that are reasonable and realistic, and as of the date
hereof, no fact has come to light, and no event or transaction has
occurred, which would cause any assumption made therein not to be
reasonable or realistic.
(i) Principal Place of Business; Records. The principal place of
business and chief executive office of the Borrower is at the
address of the Borrower shown on Schedule 1 attached hereto.
(j) Location of Properties. All property owned by the Borrower
is located in the counties identified in Schedule 1 hereto.
(k) Subsidiaries. The Borrower has no subsidiary, except as the
Borrower has disclosed to RUS in writing.
(l) Defaults Under Other Agreements. The Borrower is not in
default under any agreement or instrument to which it is a party or
under which any of its properties are subject that is material to
its financial condition, operations, properties, profits, or
business.
(m) Survival. All representations and warranties made by the
Borrower herein or made in any certificate delivered pursuant hereto
shall survive the making of the Advances and the execution and
delivery to RUS of the Note.
Article III--Loan
Section 3.1. Advances
RUS agrees to make, and the Borrower agrees to request, on the
terms and conditions of this Agreement, Advances from time to time
in an aggregate principal amount not to exceed the RUS Commitment.
On the Termination Date, RUS may stop advancing funds and limit the
RUS Commitment to the amount advanced prior to such date. The
obligation of the Borrower to repay the Advances shall be evidenced
by the Note in the principal amount of the unpaid principal amount
of the Advances from time to time outstanding. The Borrower shall
give RUS written notice of the date on which each Advance is to be
made.
Section 3.2. Interest Rate and Payment
The Note shall be payable and bear interest as follows:
(a) Payments and Amortization. Principal shall be amortized in
accordance with the method stated in Schedule 1 hereto and more
fully described in the form of Note attached hereto as Exhibit A.
(b) Application of Payments. All payments which the Borrower
sends to RUS on any outstanding obligation owed to RUS shall be
applied in the manner provided in the Borrower's loan documents to
which such payments relate and in a manner consistent with RUS
policies, practices, and procedures for obligations that have been
similarly classified by RUS.
(c) Electronic Funds Transfer. Except as otherwise prescribed by
RUS, the Borrower shall make all payments on the Note utilizing
electronic funds transfer procedures as specified by RUS.
(d) Fixed or Variable Rate. The Note shall bear interest at
either a fixed or variable rate in accordance with the method stated
in Schedule 1 hereto and as more particularly described in the form
of Note attached hereto as Exhibit A.
Section 3.3. Prepayment
The Borrower has no right to prepay the Note in whole or in part
except such rights, if any, as are expressly provided for in the
Note. However, prepayment of the Note (and any penalties) shall be
mandatory under Section [5.3] hereof if the Borrower has used a
Contemporaneous Loan in order to qualify for the RUS Commitment, and
later prepays the Contemporaneous Loan.
Article IV--Conditions of Lending
Section 4.1. General Conditions
The obligation of RUS to make any Advance hereunder is subject
to satisfaction of each of the following conditions precedent on or
before the date of such Advance:
(a) Legal Matters. All legal matters incident to the
consummation of the transactions hereby contemplated shall be
satisfactory to counsel for RUS.
(b) Loan Documents. That RUS receive duly executed originals of
this Agreement and the other Loan Documents.
(c) Authorization. That RUS receive evidence satisfactory to it
that all corporate documents and proceedings of the Borrower
necessary for duly authorizing the execution, delivery and
performance of the Loan Documents have been obtained and are in full
force and effect.
(d) Approvals. That RUS receive evidence satisfactory to it that
all consents and approvals (including without limitation the
consents referred to in Section [2.1(c)] of this Agreement) which
are necessary for, or required as a condition of, the validity and
enforceability of each of the Loan Documents have been obtained and
are in full force and effect.
(e) Event of Default. That no Event of Default specified in
Article VII and no event which, with the lapse of time or the notice
and lapse of time specified in Article VII would become such an
Event of Default, shall have occurred and be continuing, or shall
have occurred after giving effect to the Advance on the books of the
Borrower.
(f) Continuing Representations and Warranties. That the
representations and warranties of the Borrower contained in this
Agreement be true and correct on and as of the date of such Advance
as though made on and as of such date.
(g) Opinion of Counsel. That RUS receive an opinion of counsel
for the Borrower (who shall be acceptable to RUS) in form and
content acceptable to RUS.
(h) Mortgage Filing. The Mortgage shall have been duly recorded
as a mortgage on real property, including after-acquired real
property, and duly filed, recorded or indexed as a security interest
in personal property, including after acquired personal property,
wherever RUS shall have requested, all in accordance with applicable
law, and the
[[Page 67415]]
Borrower shall have caused satisfactory evidence thereof to be
furnished to RUS.
(i) Wholesale Power Contract. That the Borrower shall not be in
default under the terms of, or contesting the validity of, any
contract for sales for resale that has been pledged by any entity to
RUS as security for the repayment of any loan made or guaranteed by
RUS under the Act.
(j) Material Adverse Change. That there has occurred no material
adverse change in the business or condition, financial or otherwise,
of the Borrower and nothing has occurred which in the opinion of RUS
materially and adversely affects the Borrower's ability to meet its
obligations hereunder.
(k) Requisitions. That the Borrower shall requisition all
Advances by submitting its requisition to RUS in form and substance
satisfactory to RUS. Requisitions shall be made only for the
purpose(s) set forth herein. The Borrower agrees to apply the
proceeds of the Advances in accordance with its loan application
with such modifications as may be mutually agreed.
(l) Flood Insurance. That for any Advance used in whole or in
part to finance the construction or acquisition of any building in
any area identified by the Secretary of Housing and Urban
Development pursuant to the Flood Disaster Protection Act of 1973
(the ``Flood Insurance Act'') or any rules, regulations or orders
issued to implement the Flood Insurance Act (``Rules'') as any area
having special flood hazards, or to finance any facilities or
materials to be located in any such building, or in any building
owned or occupied by the Borrower and located in such a flood hazard
area, the Borrower has submitted evidence, in form and substance
satisfactory to RUS, or RUS has otherwise determined, that (i) the
community in which such area is located is then participating in the
national flood insurance program, as required by the Flood Insurance
Act and any Rules, and (ii) the Borrower has obtained flood
insurance coverage with respect to such building and contents as may
then be required pursuant to the Flood Insurance Act and any Rules.
(m) Compliance With Loan Contract and Mortgage. That the
Borrower is in material compliance with all provisions of this
Agreement and the Mortgage.
Section 4.2. Special Conditions
The obligation of RUS to make any Advance hereunder is also
subject to satisfaction, on or before the date of such Advance, of
each of the special conditions, if any, listed in Schedule 1 hereto.
Article V--Affirmative Covenants
Section 5.1. Generally
Unless otherwise agreed to in writing by RUS, while this
Agreement is in effect, whether or not any Advance is outstanding,
the Borrower agrees to duly observe each of the affirmative
covenants contained in this Article:
Section 5.2. Annual Certificates
(a) Performance Under Loan Documents. The Borrower shall duly
observe and perform all of its obligations under each of the Loan
Documents.
(b) Annual Certification. Within ninety (90) days after the
close of each calendar year, commencing with the year following the
year in which the initial Advance hereunder shall have been made,
the Borrower shall deliver to RUS a written statement signed by its
General Manager, stating that during such year the Borrower has
fulfilled all of its obligations under the Loan Documents throughout
such year in all material respects or, if there has been a default
in the fulfillment of any such obligations, specifying each such
default known to said person and the nature and status thereof.
Section 5.3. Simultaneous Prepayment of Contemporaneous Loans
If the Borrower shall at any time prepay in whole or in part the
Contemporaneous Loan described on Schedule 1, the Borrower shall
prepay the RUS Note correspondingly in order to maintain the ratio
that the Contemporaneous Loan bears to the RUS Commitment. If the
RUS Note calls for a prepayment penalty or premium, such amount
shall be paid but shall not be used in computing the amount needed
to be paid to RUS under this section to maintain such ratio. In the
case of Contemporaneous Loans and RUS Notes existing prior to the
date of this Agreement under previous agreements, prepayments shall
be treated as if governed by this section. Provided, however, in all
cases prepayments associated with refinancing or refunding a
Contemporaneous Loan pursuant to Article II of the Mortgage are not
considered to be prepayments for purposes of this Agreement if they
satisfy each of the following requirements:
(a) Principal. The principal amount of such refinancing or
refunding loan is not less than the amount of loan principal being
refinanced; and
(b) Weighted Average Life. The weighted average life of the
refinancing or refunding loan is materially equal to the weighted
average remaining life of the loan being refinanced.
Section 5.4 Rates to Provide Revenue Sufficient to Meet Coverage
Ratios Requirements
(a) Prospective Requirement. The Borrower shall design and
implement rates for utility service furnished by it to provide
sufficient revenue (along with other revenue available to the
Borrower in the case of TIER and DSC) (i) to pay all fixed and
variable expenses when and as due, (ii) to provide and maintain
reasonable working capital, and (iii) to maintain, on an annual
basis, the Coverage Ratios. In designing and implementing rates
under this paragraph, such rates should be capable of producing at
least enough revenue to meet the requirements of this paragraph
under the assumption that average weather conditions in the
Borrower's service territory shall prevail in the future, including
average Utility System damage and outages due to weather and the
related costs.
(b) Retrospective Requirement. The average Coverage Ratios
achieved by the Borrower in the 2 best years out of the 3 most
recent calendar years must be not less than any of the following:
TIER=1.5
DSC=1.25
OTIER=1.1
ODSC=1.1
(c) Prospective Notice of Change in Rates. The Borrower shall
give thirty (30) days prior written notice of any proposed change in
its general rate structure to RUS if RUS has requested in writing
that it be notified in advance of such changes.
(d) Routine Reporting of Coverage Ratios. Promptly following the
end of each calendar year, the Borrower shall report, in writing, to
RUS the TIER, Operating TIER, DSC and Operating DSC levels which
were achieved during that calendar year.
(e) Reporting Non-achievement of Retrospective Requirement. If
the Borrower fails to achieve the average levels required by
paragraph (b) of this section, it must promptly notify RUS in
writing to that effect.
(f) C
FR Doc. 95-31227 Loan Policies and Security Documents for Electric Borrowers
orrective Plans. Within 30 days of sending a notice to RUS
under paragraph (e) of this section, or of being notified by RUS,
whichever is earlier, the Borrower in consultation with RUS, shall
provide a written plan satisfactory to RUS setting forth the actions
that shall be taken to achieve the required Coverage Ratios on a
timely basis.
(g) Noncompliance. Failure to design and implement rates
pursuant to paragraph (a) of this section and failure to develop and
implement the plan called for in paragraph (f) of this section shall
constitute an Event of Default under this Agreement in the event
that REA so notifies the Borrower to that effect under section
[7.1(d)] of this Agreement.
Section 5.5. Depreciation Rates
The Borrower shall adopt as its depreciation rates only those which
have been previously approved for the Borrower by RUS.
Section 5.6. Property Maintenance
The Borrower shall maintain and preserve its Utility System in
compliance in all material respects with the provisions of the
Mortgage, RUS Regulations and all applicable laws.
Section 5.7. Financial Books
The Borrower shall at all times keep, and safely preserve, proper
books, records and accounts in which full and true entries shall be
made of all of the dealings, business and affairs of the Borrower and
its Subsidiaries, in accordance with any applicable RUS Accounting
Requirements.
Section 5.8. Rights of Inspection
The Borrower shall afford RUS, through its representatives,
reasonable opportunity, at all times during business hours and upon
prior notice, to have access to and the right to inspect the Utility
System, any other property encumbered by the Mortgage, and any or all
books, records, accounts, invoices, contracts, leases, payrolls,
canceled checks, statements and other documents and papers of every
kind belonging to or in the possession of the Borrower or in
[[Page 67416]]
anyway pertaining to its property or business, including its
Subsidiaries, if any, and to make copies or extracts therefrom.
Section 5.9. Area Coverage
(a) The Borrower shall make diligent effort to extend electric
service to all unserved persons within the service area of the Borrower
who (i) desire such service and (ii) meet all reasonable requirements
established by the Borrower as a condition of such service.
(b) If economically feasible and reasonable considering the cost of
providing such service and/or the effects on consumers' rates, such
service shall be provided, to the maximum extent practicable, at the
rates and minimum charges established in the Borrower's rate schedules,
without the payment of such persons, other than seasonal or temporary
consumers, of a contribution in aid of construction. A seasonal
consumer is one that demands electric service only during certain
seasons of the year. A temporary consumer is a seasonal or year-round
consumer that demands electric service over a period of less than five
years.
(c) The Borrower may assess contributions in aid of construction
provided such assessments are consistent with this section.
Section 5.10. Real Property Acquisition
In acquiring real property, the Borrower shall comply in all
material respects with the provisions of the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970 (the
``Uniform Act''), as amended by the Uniform Relocation Act Amendments
of 1987, and 49 CFR part 24, referenced by 7 CFR part 21, to the extent
the Uniform Act is applicable to such acquisition.
Section 5.11. ``Buy American'' Requirements
The Borrower shall use or cause to be used in connection with the
expenditures of funds advanced on account of the Loan only such
unmanufactured articles, materials, and supplies as have been mined or
produced in the United States or any eligible country, and only such
manufactured articles, materials, and supplies as have been
manufactured in the United States or any eligible country substantially
all from articles, materials, and supplies mined, produced or
manufactured, as the case may be, in the United States or any eligible
country, except to the extent RUS shall determine that such use shall
be impracticable or that the cost thereof shall be unreasonable. For
purposes of this section, an ``eligible country'' is any country that
applies with respect to the United States an agreement ensuring
reciprocal access for United States products and services and United
States suppliers to the markets of that country, as determined by the
United States Trade Representative.
Section 5.12. Power Requirements Studies
The Borrower shall prepare and use power requirements studies of
its electric loads and future energy and capacity requirements in
conformance with RUS Regulations.
Section 5.13. Long Range Engineering Plans and Construction Work
Plans
The Borrower shall develop, maintain and use up-to-date long-range
engineering plans and construction work plans in conformance with RUS
Regulations.
Section 5.14. Design Standards, Construction Standards, and List of
Materials
The Borrower shall use design standards, construction standards,
and lists of acceptable materials in conformance with RUS Regulations.
Section 5.15. Plans and Specifications
The Borrower shall submit plans and specifications for construction
to RUS for review and approval, in conformance with RUS Regulations, if
the construction will be financed in whole or in part by a loan made or
guaranteed by RUS.
Section 5.16. Standard Forms of Construction Contracts, and
Engineering and Architectural Services Contracts
The Borrower shall use the standard forms of contracts
promulgated by RUS for construction, procurement, engineering
services and architectural services in conformance with RUS
Regulations, if the construction, procurement, or services are being
financed in whole or in part by a loan being made or guaranteed by
RUS.
Section 5.17. Contract Bidding Requirements
The Borrower shall follow RUS contract bidding procedures in
conformance with RUS Regulations when contracting for construction
or procurement financed in whole or in part by a loan made or
guaranteed by RUS.
Section 5.18. Nondiscrimination
(a) Equal Opportunity Provisions in Construction Contracts. The
Borrower shall incorporate or cause to be incorporated into any
construction contract, as defined in Executive Order 11246 of
September 24, 1965 and implementing regulations, which is paid for
in whole or in part with funds obtained from RUS or borrowed on the
credit of the United States pursuant to a grant, contract, loan,
insurance or guarantee, or undertaken pursuant to any RUS program
involving such grant, contract, loan, insurance or guarantee, the
equal opportunity provisions set forth in Exhibit B hereto entitled
Equal Opportunity Contract Provisions.
(b) Equal Opportunity Contract Provisions Also Bind the
Borrower. The Borrower further agrees that it shall be bound by such
equal opportunity clause in any federally assisted construction work
which it performs itself other than through the permanent work force
directly employed by an agency of government.
(c) Sanctions and Penalties. The Borrower agrees that it shall
cooperate actively with RUS and the Secretary of Labor in obtaining
the compliance of contractors and subcontractors with the equal
opportunity clause and the rules, regulations and relevant orders of
the Secretary of Labor, that it shall furnish RUS and the Secretary
of Labor such information as they may require for the supervision of
such compliance, and that it shall otherwise assist the
administering agency in the discharge of RUS's primary
responsibility for securing compliance. The Borrower further agrees
that it shall refrain from entering into any contract or contract
modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for,
Government contracts and federally assisted construction contracts
pursuant to Part II, Subpart D of Executive Order 11246 and shall
carry out such sanctions and penalties for violation of the equal
opportunity clause as may be imposed upon contractors and
subcontractors by RUS or the Secretary of Labor pursuant to Part II,
Subpart D of Executive Order 11246. In addition, the Borrower agrees
that if it fails or refuses to comply with these undertakings RUS
may cancel, terminate or suspend in whole or in part this contract,
may refrain from extending any further assistance under any of its
programs subject to Executive Order 11246 until satisfactory
assurance of future compliance has been received from such Borrower,
or may refer the case to the Department of Justice for appropriate
legal proceedings.
Section 5.19. Financial Reports
The Borrower shall cause to be prepared and furnished to RUS a
full and complete annual report of its financial condition and of
its operations in form and substance satisfactory to RUS, audited
and certified by Independent certified public accountants
satisfactory to RUS and accompanied by a report of such audit in
form and substance satisfactory to RUS. The Borrower shall also
furnish to RUS from time to time such other reports concerning the
financial condition or operations of the Borrower, including its
Subsidiaries, as RUS may reasonably request or RUS Regulations
require.
Section 5.20. Miscellaneous Reports and Notices
The Borrower shall furnish to RUS:
(a) Notice of Default. Promptly after becoming aware thereof,
notice of: (i) the occurrence of any default; and (ii) the receipt
of any notice given pursuant to the Mortgage with respect to the
occurrence of any event which with the giving of notice or the
passage of time, or both, could become an ``Event of Default'' under
the Mortgage.
(b) Notice of Non-Environmental Litigation. Promptly after the
commencement thereof,
[[Page 67417]]
notice of the commencement of all actions, suits or proceedings before
any court, arbitrator, or governmental department, commission,
board, bureau, agency, or instrumentality affecting the Borrower
which, if adversely determined, could have a material adverse effect
on the condition, financial or otherwise, operations, properties or
business of the Borrower, or on the ability of the Borrower to
perform its obligations under the Loan Documents.
(c) Notice of Environmental Litigation. Without limiting the
provisions of Section [5.20(b)] above, promptly after receipt
thereof, notice of the receipt of all pleadings, orders, complaints,
indictments, or other communications alleging a condition that may
require the Borrower to undertake or to contribute to a cleanup or
other response under laws relating to environmental protection, or
which seek penalties, damages, injunctive relief, or criminal
sanctions related to alleged violations of such laws, or which claim
personal injury or property damage to any person as a result of
environmental factors or conditions for which the Borrower is not
fully covered by insurance, or which, if adversely determined, could
have a material adverse effect on the condition, financial or
otherwise, operations, properties or business of the Borrower, or on
the ability of the Borrower to perform its obligations under the
Loan Documents.
(d) Notice of Change of Place of Business. Promptly in writing,
notice of any change in location of its principal place of business
or the office where its records concerning accounts and contract
rights are kept.
(e) Regulatory and Other Notices. Promptly after receipt
thereof, copies of any notices or other communications received from
any governmental authority with respect to any matter or proceeding
which could have a material adverse effect on the condition,
financial or otherwise, operations, properties, or business of the
Borrower, or on the ability of the Borrower to perform its
obligations under the Loan Documents.
(f) Material Adverse Change. Promptly, notice of any matter
which has resulted or may result in a material adverse change in the
condition, financial or otherwise, operations, properties, or
business of the Borrower, or the ability of the Borrower to perform
its obligations under the Loan Documents.
(g) Other Information. Such other information regarding the
condition, financial or otherwise, or operations of the Borrower as
RUS may, from time to time, reasonably request.
Section 5.21. Special Construction Account
The Borrower shall hold all moneys advanced to it by RUS
hereunder in trust for RUS and shall deposit such moneys promptly
after the receipt thereof in a bank or banks which meet the
requirements of Section [6.7] of this Agreement. Any account
(hereinafter called ``Special Construction Account'') in which any
such moneys shall be deposited shall be insured by the Federal
Deposit Insurance Corporation or other federal agency acceptable to
RUS and shall be designated by the corporate name of the Borrower
followed by the words ``Trustee, Special Construction Account.''
Moneys in any Special Construction Account shall be used solely for
the construction and operation of the Utility System and may be
withdrawn only upon checks, drafts, or orders signed on behalf of
the Borrower and countersigned by an executive officer thereof.
Section 5.22. Additional Affirmative Covenants
The Borrower also agrees to comply with any additional
affirmative covenant(s) identified in Schedule 1 hereto.
Article VI--Negative Covenants
Section 6.1. General
Unless otherwise agreed to in writing by RUS, while this
Agreement is in effect, whether or not any Advance is outstanding
hereunder, the Borrower shall duly observe each of the negative
covenants set forth in this Article.
Section 6.2. Limitations on System Extensions and Additions
(a) The Borrower shall not extend or add to its Electric System
either by construction or acquisition without the prior written
approval of RUS if the construction or acquisition is financed or
will be financed, in whole or in part, by a RUS loan or loan
guarantee.
(b) The Borrower shall not extend or add to its Electric System
with funds from other sources without prior written approval of RUS
in the case of:
(1) Generating facilities if the combined capacity of the
facilities to be built, procured, or leased, including any future
facilities included in the planned project, will exceed the lesser
of 5 Megawatts or 30 percent of the Borrower's Equity;
(2) Existing electric facilities or systems in service whose
purchase price, or capitalized value in the case of a lease, exceeds
ten percent of the Borrower's Net Utility Plant; and
(3) Any project to serve a customer whose annual Kwh purchases
or maximum annual Kw demand is projected to exceed 25 percent of the
Borrower's total Kwh sales or maximum Kw demand in the year
immediately preceding the acquisition or start of construction of
facilities.
Section 6.3. Limitations on Changing Principal Place of Business
The Borrower shall not change its principal place of business or
keep property in a county not shown on a schedule to the Mortgage if
the change would cause the lien in favor of RUS to become
unperfected or fail to become perfected, as the case may be, unless,
prior thereto, the Borrower shall have taken all steps required by
law in order to assure that the lien in favor of RUS remains or
becomes perfected, as the case may be, and, in either event, such
lien has the priority accorded by the Mortgage.
Section 6.4. Limitations on Employment and Retention of Manager
At any time any Event of Default, or any occurrence which with
the passage of time or giving of notice would be an Event of
Default, occurs and is continuing the Borrower shall not employ any
general manager of the Utility System or the Electric System or any
person exercising comparable authority to such a manager unless such
employment shall first have been approved by RUS. If any Event of
Default, or any occurrence which with the passage of time or giving
of notice would be an Event of Default, occurs and is continuing and
RUS requests the Borrower to terminate the employment of any such
manager or person exercising comparable authority, or RUS requests
the Borrower to terminate any contract for operating the Utility
System or the Electric System, the Borrower shall do so within
thirty (30) days after the date of such notice. All contracts in
respect of the employment of any such manager or person exercising
comparable authority, or for the operation of the Utility System or
the Electric System, shall contain provisions to permit compliance
with the foregoing covenants.
Section 6.5. Limitations on Certain Types of Contracts
Without the prior approval of RUS in writing, the Borrower shall
not enter into any of the following contracts:
(a) Construction Contracts. Any contract for construction or
procurement or for architectural and engineering services in
connection with its Electric System if the project is financed or
will be financed, in whole or in part, by a RUS loan or loan
guarantee;
(b) Large retail power contracts. Any contract to sell electric
power and energy for periods exceeding two (2) years if the kWh
sales or kW demand for any year covered by such contract shall
exceed 25 percent of the Borrower's total kWh sales or maximum kW
demand for the year immediately preceding the execution of such
contract;
(c) Wholesale power contracts. Any contract to sell electric
power or energy for resale and any contract to purchase electric
power or energy that, in either case, has a term exceeding two (2)
years;
(d) Power supply arrangements. Any interconnection agreement,
interchange agreement, wheeling agreement, pooling agreement or
similar power supply arrangement that has a term exceeding two (2)
years;
(e) System management and maintenance contracts. Any contract
for the management and operation of all or substantially all of its
Electric System; or
(f) Other contracts. Any contracts of the type described on
Schedule 3.
Section 6.6. Limitations on Mergers and Sale, Lease or Transfer of
Capital Assets
(a) The Borrower shall not consolidate with, or merge, or sell
all or substantially all of its business or assets, to another
entity or person except to the extent it is permitted to do so under
the Mortgage. The exception contained in this paragraph (a) is
subject to the additional limitation set forth in paragraph (b) of
this section.
(b) The Borrower shall not, without the written approval of the
Administrator, voluntarily or involuntarily sell, convey or dispose
of any portion of its business or assets (including, without
limitation, any
[[Page 67418]]
portion of its franchise or service territory) to another entity or
person if such sale, conveyance or disposition could reasonably be
expected to reduce the Borrower's existing or future requirements
for energy or capacity being furnished to the Borrower under any
wholesale power contract which has been pledged as security to RUS.
Section 6.7. Limitations on Using non-FDIC Insured Depositories
Without the prior written approval of RUS, the Borrower shall
not place the proceeds of the Loan or any loan which has been made
or guaranteed by RUS in the custody of any bank or other depository
that is not insured by the Federal Deposit Insurance Corporation or
other federal agency acceptable to RUS.
Section 6.8. Limitation on Distributions
Without the prior written approval of RUS, the Borrower shall
not in any calendar year make any Distributions (exclusive of any
Distributions to the estates of deceased natural patrons) to its
members, stockholders or consumers except as follows:
(a) Equity above 30%. If, after giving effect to any such
Distribution, the Equity of the Borrower shall be greater than or
equal to 30% of its Total Assets; or
(b) Equity above 20%. If, after giving effect to any such
Distribution, the aggregate of all Distributions made during the
calendar year when added to such Distribution shall be less than or
equal to 25% of the prior year's margins.
Provided however, that in no event shall the Borrower make any
Distributions if there is unpaid when due any installment of
principal of (premium, if any) or interest on its Notes, if the
Borrower is otherwise in default hereunder or if, after giving
effect to any such Distribution, the Borrower's current and accrued
assets would be less than its current and accrued liabilities.
Section 6.9. Limitations on Loans, Investments and Other
Obligations
The Borrower shall not make any loan or advance to, or make any
investment in, or purchase or make any commitment to purchase any
stock, bonds, notes or other securities of, or guaranty, assume or
otherwise become obligated or liable with respect to the obligations
of, any other person, firm or corporation, except as permitted by
the Act and RUS Regulations.
Section 6.10. Depreciation Rates
The Borrower shall not file with or submit for approval of
regulatory bodies any proposed depreciation rates which are
inconsistent with RUS Regulations.
Section 6.11. Historic Preservation
The Borrower shall not, without approval in writing by RUS, use
any Advance to construct any facilities which shall involve any
district, site, building, structure or object which is included in,
or eligible for inclusion in, the National Register of Historic
Places maintained by the Secretary of the Interior pursuant to the
Historic Sites Act of 1935 and the National Historic Preservation
Act of 1966.
Section 6.12. Rate Reductions
Without the prior written approval of RUS, the Borrower shall
not decrease its rates if it has failed to achieve all of the
Coverage Ratios for the calendar year prior to such reduction.
Section 6.13. Limitations on Additional Indebtedness
Except as expressly permitted by Article II of the Mortgage and
subject to the further limitations expressed in the next section,
the Borrower shall not incur, assume, guarantee or otherwise become
liable in respect of any debt for borrowed money and Restricted
Rentals (including Subordinated Indebtedness) other than the
following: (``Permitted Debt'')
(a) Additional Notes issued in compliance with Article II of the
Mortgage;
(b) Purchase money indebtedness in non-Utility System property,
in an amount not exceeding 10% of Net Utility Plant;
(c) Restricted Rentals in an amount not to exceed 5% of Equity
during any 12 consecutive calendar month period;
(d) Unsecured lease obligations incurred in the ordinary course
of business except Restricted Rentals;
(e) Unsecured indebtedness for borrowed money, except when the
aggregate amount of such indebtedness exceeds 15% of Net Utility
Plant and after giving effect to such unsecured indebtedness the
Borrower's Equity is less than 30% of its Total Assets;
(f) Debt represented by dividends declared but not paid; and
(g) Subordinated Indebtedness approved by RUS.
PROVIDED, However, that the Borrower may incur Permitted Debt
without the consent of RUS only so long as there exists no Event of
Default hereunder and there has been no continuing occurrence which
with the passage of time and giving of notice could become an Event
of Default hereunder.
PROVIDED, FURTHER, by executing this Agreement any consent of
RUS that the Borrower would otherwise be required to obtain under
this Section is hereby deemed to be given or waived by RUS by
operation of law to the extent, but only to the extent, that to
impose such a requirement of RUS consent would clearly violate
federal laws or RUS Regulations.
Section 6.14. Limitations on Issuing Additional Indebtedness
Secured Under the Mortgage
(a) The Borrower shall not issue any Additional Notes under the
Mortgage to finance Eligible Property Additions without the prior
written consent of RUS unless the following additional requirements
are met in addition to the requirements set forth in the Mortgage
for issuing Additional Notes:
(1) The weighted average life of the loan evidenced by such
Notes does not exceed the weighted average of the expected remaining
useful lives of the assets being financed;
(2) The principal of the loan evidenced by such Notes is
amortized at a rate that shall yield a weighted average life that is
not greater than the weighted average life that would result from
level payments of principal and interest; and
(3) The principal of the loan being evidenced by such Notes has
a maturity of not less than 5 years.
(b) The Borrower shall not issue any Additional Notes under the
Mortgage to refund or refinance Notes without the prior written
consent of RUS unless, in addition to the requirements set forth in
the Mortgage for issuing Refunding or Refinancing Notes, the
weighted average life of any such Refunding or Refinancing Notes is
not greater than the weighted average remaining life of the Notes
being refinanced.
(c) Any request for consent from RUS under this section, shall
be accompanied by a certificate of the Borrower's manager
substantially in the form attached to this Agreement as Exhibit C-1
in the case of Notes being issued under Section [2.01] of the
Mortgage and C-2 in the case of Notes being issued under Section
[2.02] of the Mortgage.
Section 6.15. Impairment of Contracts Pledged to RUS
The Borrower shall not materially breach any obligation to be
paid or performed by the Borrower on any contract, or take any
action which is likely to materially impair the value of any
contract, which has been pledged as security to RUS by the Borrower
or any other entity.
Section 6.16. Additional Negative Covenants
The Borrower also agrees to comply with any additional negative
covenant(s) identified in Schedule 1 hereto.
Article VII--Default
Section 7.1. Events of Default
The following shall be Events of Default under this Agreement:
(a) Representations and Warranties. Any representation or
warranty made by the Borrower in Article II hereof or any
certificate furnished to RUS hereunder or under the Mortgage shall
prove to have been incorrect in any material respect at the time
made and shall at the time in question be untrue or incorrect in any
material respect and remain uncured;
(b) Payment. Default shall be made in the payment of or on
account of interest on or principal of the Note when and as the same
shall be due and payable, whether by acceleration or otherwise,
which shall remain unsatisfied for five (5) Business Days;
(c) Borrowing Under the Mortgage in Violation of the Loan
Contract. Default by the Borrower in the observance or performance
of any covenant or agreement contained in Section 6.14 of this
Agreement.
(d) Other Covenants. Default by the Borrower in the observance
or performance of any other covenant or agreement contained in any
of the Loan Documents, which shall remain unremedied for 30 calendar
days after written notice thereof shall have been given to the
Borrower by RUS;
(e) Corporate Existence. The Borrower shall forfeit or otherwise
be deprived of its corporate charter, franchises, permits,
easements, consents or licenses required to carry on any material
portion of its business;
(f) Other Obligations. Default by the Borrower in the payment of
any obligation,
[[Page 67419]]
whether direct or contingent, for borrowed money or in the performance
or observance of the terms of any instrument pursuant to which such
obligation was created or securing such obligation;
(g) Bankruptcy. A court having jurisdiction in the premises
shall enter a decree or order for relief in respect of the Borrower
in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official, or ordering the winding up or liquidation of its
affairs, and such decree or order shall remain unstayed and in
effect for a period of ninety (90) consecutive days or the Borrower
shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or under
any such law, or consent to the appointment or taking possession by
a receiver, liquidator, assignee, custodian or trustee, of a
substantial part of its property, or make any general assignment for
the benefit of creditors; and
(h) Dissolution or Liquidation. Other than as provided in the
immediately preceding subsection, the dissolution or liquidation of
the Borrower, or failure by the Borrower promptly to forestall or
remove any execution, garnishment or attachment of such consequence
as shall impair its ability to continue its business or fulfill its
obligations and such execution, garnishment or attachment shall not
be vacated within 30 days. The term ``dissolution or liquidation of
the Borrower'', as used in this subsection, shall not be construed
to include the cessation of the corporate existence of the Borrower
resulting either from a merger or consolidation of the Borrower into
or with another corporation following a transfer of all or
substantially all its assets as an entirety, under the conditions
permitting such actions.
Article VIII--Remedies
Section 8.1. Generally
Upon the occurrence of an Event of Default, then RUS may pursue
all rights and remedies available to RUS that are contemplated by
this Agreement or the Mortgage in the manner, upon the conditions,
and with the effect provided in this Agreement or the Mortgage,
including, but not limited to, a suit for specific performance,
injunctive relief or damages. Nothing herein shall limit the right
of RUS to pursue all rights and remedies available to a creditor
following the occurrence of an Event of Default listed in Article
VII hereof. Each right, power and remedy of RUS shall be cumulative
and concurrent, and recourse to one or more rights or remedies shall
not constitute a waiver of any other right, power or remedy.
Section 8.2. Suspension of Advances
In addition to the rights, powers and remedies referred to in
the immediately preceding section, RUS may, in its absolute
discretion, suspend making Advances hereunder if (i) any Event of
Default, or any occurrence which with the passage of time or giving
of notice would be an Event of Default, occurs and is continuing;
(ii) there has occurred a change in the business or condition,
financial or otherwise, of the Borrower which in the opinion of RUS
materially and adversely affects the Borrower's ability to meet its
obligations under the Loan Documents, or (iii) RUS is authorized to
do so under RUS Regulations.
Article IX--Miscellaneous
Section 9.1. Notices
All notices, requests and other communications provided for
herein including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement shall be given
or made in writing (including, without limitation, by telecopy) and
delivered to the intended recipient at the ``Address for Notices''
specified below; or, as to any party, at such other address as shall
be designated by such party in a notice to each other party. Except
as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as provided
for herein. The Address for Notices of the respective parties are as
follows:
Rural Utilities Service, United States Department of Agriculture,
Washington, DC 20250-1500
Fax: (202) xxx-xxxx
Attention: [Administrator]
The Borrower:
The address set forth in Schedule 1 hereto
Section 9.2. Expenses
To the extent allowed by law, the Borrower shall pay all costs
and expenses of RUS, including reasonable fees of counsel, incurred
in connection with the enforcement of the Loan Documents or with the
preparation for such enforcement if RUS has reasonable grounds to
believe that such enforcement may be necessary.
Section 9.3. Late Payments
If payment of any amount due hereunder is not received at the
United States Treasury in Washington, DC, or such other location as
RUS may designate to the Borrower within five (5) Business Days
after the due date thereof or such other time period as RUS may
prescribe from time to time in its policies of general application
in connection with any late payment charge (such unpaid amount being
herein called the ``delinquent amount'', and the period beginning
after such due date until payment of the delinquent amount being
herein called the ``late-payment period''), the Borrower shall pay
to RUS, in addition to all other amounts due under the terms of the
Note, the Mortgage and this Agreement, any late-payment charge as
may be fixed by RUS Regulations from time to time on the delinquent
amount for the late-payment period.
Section 9.4. Filing Fees
To the extent permitted by law, the Borrower agrees to pay all
expenses of RUS (including the fees and expenses of its counsel) in
connection with the filing or recordation of all financing
statements and instruments as may be required by RUS in connection
with this Agreement, including, without limitation, all documentary
stamps, recordation and transfer taxes and other costs and taxes
incident to recordation of any document or instrument in connection
herewith. Borrower agrees to save harmless and indemnify RUS from
and against any liability resulting from the failure to pay any
required documentary stamps, recordation and transfer taxes,
recording costs, or any other expenses incurred by RUS in connection
with this Agreement. The provisions of this subsection shall survive
the execution and delivery of this Agreement and the payment of all
other amounts due hereunder or due on the Note.
Section 9.5. No Waiver
No failure on the part of RUS to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof
nor shall any single or partial exercise by RUS of any right
hereunder preclude any other or further exercise thereof or the
exercise of any other right.
Section 9.6. Governing Law
EXCEPT TO THE EXTENT GOVERNED BY APPLICABLE FEDERAL LAW, THE
LOAN DOCUMENTS SHALL BE DEEMED TO BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE [IN WHICH THE BORROWER IS
INCORPORATED].
Section 9.7. Holiday Payments
If any payment to be made by the Borrower hereunder shall become
due on a day which is not a Business Day, such payment shall be made
on the next succeeding Business Day and such extension of time shall
be included in computing any interest in respect of such payment.
Section 9.8. Rescission
The Borrower may elect not to borrow the RUS Commitment in which
event RUS shall release the Borrower from its obligations hereunder,
provided the Borrower complies with such terms and conditions as RUS
may impose for such release and provided also that if the Borrower
has any remaining obligations to RUS for loans made or guaranteed by
RUS under any Prior Loan Contracts, RUS may, under Section [9.15] of
this Loan Contract, withhold such release until all such obligations
have been satisfied and discharged.
Section 9.9. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of
the Borrower and RUS and their respective successors and assigns,
except that the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of RUS.
Section 9.10. Complete Agreement; Amendments
Subject to RUS Regulations, this Agreement and the other Loan
Documents are intended by the parties to be a complete and final
expression of their agreement. However, RUS reserves the right to
waive its rights to compliance with any provision of this Agreement
and the other Loan
[[Page 67420]]
Documents. No amendment, modification, or waiver of any provision
hereof or thereof, and no consent to any departure of the Borrower
herefrom or therefrom, shall be effective unless approved in writing
by RUS in the form of either a RUS Regulation or other writing
signed by or on behalf of RUS, and then such waiver or consent shall
be effective only in the specific instance and for the specific
purpose for which given.
Section 9.11. Headings
The headings and sub-headings contained in the titling of this
Agreement are intended to be used for convenience only and do not
constitute part of this Agreement.
Section 9.12. Severability
If any term, provision or condition, or any part thereof, of
this Agreement or the Mortgage shall for any reason be found or held
invalid or unenforceable by any governmental agency or court of
competent jurisdiction, such invalidity or unenforceability shall
not affect the remainder of such term, provision or condition nor
any other term, provision or condition, and this Agreement, the
Note, and the Mortgage shall survive and be construed as if such
invalid or unenforceable term, provision or condition had not been
contained therein.
Section 9.13. Right of Setoff
Upon the occurrence and during the continuance of any Event of
Default, RUS is hereby authorized at any time and from time to time,
without prior notice to the Borrower, to exercise rights of setoff
or recoupment and apply any and all amounts held or hereafter held,
by RUS or owed to the Borrower or for the credit or account of the
Borrower against any and all of the obligations of the Borrower now
or hereafter existing hereunder or under the Note. RUS agrees to
notify the Borrower promptly after any such setoff or recoupment and
the application thereof, provided that the failure to give such
notice shall not affect the validity of such setoff, recoupment or
application. The rights of RUS under this section are in addition to
any other rights and remedies (including other rights of setoff or
recoupment) which RUS may have. Borrower waives all rights of
setoff, deduction, recoupment or counterclaim.
Section 9.14. Schedules and Exhibits
Each Schedule and Exhibit attached hereto and referred to herein
is each an integral part of this Agreement.
Section 9.15. Prior Loan Contracts
It is understood and agreed that with respect to all loan
agreements previously entered into by and between RUS and the
Borrower (hereinafter being referred to as ``Prior Loan Contracts'')
the Borrower shall be required, after the date hereof, to meet
affirmative and negative covenants as set forth in this Agreement
rather than those set forth in the Prior Loan Contracts. In
addition, any remaining obligation of RUS to make additional
advances on promissory notes of the Borrower that have been
previously delivered to RUS under Prior Loan Contracts shall, after
the date hereof, be subject to the conditions set forth in this
Agreement. In the event of any conflict between any provision set
forth in a Prior Loan Contract and any provision in this Agreement,
the requirements as set forth in this Agreement shall apply. Nothing
in this section shall, however, eliminate or modify any special
condition, special affirmative covenant or special negative
covenant, if any, unless specifically agreed to in writing by RUS.
Section 9.16. Authority of Representatives of RUS
In the case of any consent, approval or waiver from RUS that is
required under this Agreement or any other Loan Document, such
consent, approval or waiver must be in writing and signed by an
authorized RUS representative to be effective. As used in this
section, ``authorized RUS representative'' means the Administrator
of RUS, and also means a person to whom the Administrator has
officially delegated specific or general authority to take the
action in question.
Section 9.17. Term
This Agreement shall remain in effect until one of the following
two events has occurred:
(a) The Borrower and RUS replace this Agreement with another
written agreement; or
(b) All of the Borrower's obligations under the prior loan
contracts and this Agreement have been discharged and paid.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
----------------------------------------------------------------------
(Name of Borrower)
(SEAL)
By---------------------------------------------------------------------
President
Attest:----------------------------------------------------------------
Secretary
RURAL UTILITIES SERVICE
By---------------------------------------------------------------------
Administrator
Schedule 1
[citations subject to change]
1. The purpose of this loan is ____________________ and such
other purposes that RUS may agree to in writing in order to carry
out the purposes of the Rural Electrification Act.
2. The Mortgage shall mean the Restated Mortgage and Security
Agreement, dated as of ____________________, between the Borrower
and RUS, as it may have been or shall be supplemented, amended,
consolidated, or restated from time to time.
3. The governmental authority referred to in Section [2.1(c)] is
____________________.
4. The exception being taken to the representations in Section
[2.1(e)] concerning material compliance with laws is as follows:
____________________.
5. The litigation referred to in Section [2.1(f)] is described
as follows: ____________________.
6. The date of the Borrower's financial information referred to
in Section [2.1(h)] is ____________________.
7. The principal place of business of the Borrower referred to
in Section [2.1(i)] is ____________________.
8. All of the property of the Borrower is located in the
counties of ____________________.
9. The subsidiary (or subsidiaries) referred to in Section
[2.1(k)] is (are): ____________________.
10. The Contemporaneous Loan referred to in Section [5.3] is
described as follows: ____________________.
Lender:----------------------------------------------------------------
Amount:----------------------------------------------------------------
Year of Final Maturity:------------------------------------------------
11. The RUS Commitment referred to in the definitions means a
loan in the principal amount of $________________ which is being
made by RUS to the Borrower at the ______ Hardship Rate ______
Municipal Rate (CHECK ONE) pursuant to the Rural Electrification Act
and RUS Regulations.
12. Amortization of Advance shall be based upon the method
indicated below:
______ level principal
______ level debt service
______ other
13. The SPECIAL condition(s) referred to in Section [4.2] is
(are): ____________________.
14. The additional AFFIRMATIVE covenant(s) referred to in Section
[5.22] is (are) as follows: ________________. 15. The additional
NEGATIVE covenant(s) referred to in Section [6.16] is (are) as follows:
____________________.
16. The address of the Borrower referred to in Section [9.1]. is
____________________.
Schedule 2--Existing Liens
The Existing Liens referred to in Section [2.1(g)] are as
follows:
[INSERT DESCRIPTION OF EXISTING LIENS, IF ANY, HERE]
Schedule 3--Additional Contracts
The additional contracts referred to in Section [6.5(f)] are
described as follows:
[INSERT LIST OF ANY ADDITIONAL CONTRACTS HERE]
Exhibit A--Form of Promissory Note
[INSERT EITHER MUNICIPAL or HARDSHIP RATE PROMISSORY NOTE FORM HERE]
Exhibit B--Equal Opportunity Contract Provisions
During the performance of this contract, the contractor agrees
as follows:
(a) The contractor shall not discriminate against any employee
or applicant for employment because of race, color, religion, sex or
national origin. The contractor shall take affirmative action to
ensure that applicants are employed, and that employees are treated
during employment without regard to their race, color, religion, sex
or national origin. Such action shall include, but not be limited to
the following: employment, upgrading, demotion or transfer,
recruitment or recruitment advertising; layoff or termination; rates
of pay or other forms of compensation; and selection for training,
including
[[Page 67421]]
apprenticeship. The contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be
provided setting forth the provisions of this nondiscrimination
clause.
(b) The contractor shall, in all solicitations or advertisements
for employees placed by or on behalf of the contractor, state that
all qualified applicants shall receive consideration for employment
without regard to race, color, religion, sex or national origin.
(c) The contractor shall send to each labor union or
representative of workers with which he has a collective bargaining
agreement or other contract or understanding, a notice to be
provided advising the said labor union or workers' representative of
the contractor's commitments under this section, and shall post
copies of the notice in conspicuous places available to employees
and applicants for employment.
(d) The contractor shall comply with all provisions of Executive
Order 11246 of September 24, 1965, and of the rules, regulations and
relevant orders of the Secretary of Labor.
(e) The contractor shall furnish all information and reports
required by Executive Order 11246 of September 24, 1965, and by the
rules, regulations and orders of the Secretary of Labor, or pursuant
thereto, and shall permit access to his books, records and accounts
by the administering agency and the Secretary of Labor for purposes
of investigation to ascertain compliances with such rules,
regulations and orders.
(f) In the event of the contractor's noncompliance with the non-
discrimination clauses of this contract or with any of the said
rules, regulations or orders, this contract may be cancelled,
terminated or suspended in whole or in part and the contractor may
be declared ineligible for further Government contracts or federally
assisted construction contracts in accordance with procedures
authorized in Executive Order 11246 of September 24, 1965, and such
other sanctions may be imposed and remedies invoked as provided in
said Executive Order or by rule, regulation or order of the
Secretary of Labor, or as otherwise provided by law.
(g) The contractor shall include the provisions of paragraphs
(a) through (g) in every subcontract or purchase order unless
exempted by rules, regulations or orders of the Secretary of Labor
issued pursuant to section 204 of Executive Order 11246, dated
September 24, 1965, so that such provisions shall be binding upon
each subcontractor or vendor. The contractor shall take such action
with respect to any subcontract or purchase order as the
administering agency may direct as a means of enforcing such
provisions, including sanctions for noncompliance: Provided,
however, that in the event a contractor becomes involved in, or is
threatened with, litigation with a subcontractor or vendor as a
result of such direction by the agency, the contractor may request
the United States to enter into such litigation to protect the
interests of the United States.
Exhibit C-1--Manager's Certificate Required Under Loan Contract Section
6.14 for Additional Notes
On behalf on ____________________ [Name of Borrower]
____________________ I hereby certify that the Additional Note or
Notes to be issued under Section [2.01] of the Mortgage on or about
____________________ [Date Note or Notes are to be Signed]
____________________ meet all of the requirements of Section [6.14]
of the Loan Contract, namely:
(a) The weighted average life of the loan evidenced by such
Notes (________ years) does not exceed the weighted average of the
expected remaining useful lives of the assets being financed
(________ years) as evidenced by the attached calculation of said
weighted average lives.
(b) The principal of the loan evidenced by such Notes shall
either be [check one and provide evidence in the second case]:
______ (1) repaid based on level payments of principal and
interest throughout the life of the loan, or
______ (2) amortized at a rate that shall yield a weighted
average life that is not greater than the weighted average life that
would result from level payments of principal and interest
throughout the life of the loan as evidenced by the attached
analysis of said weighted average lives.
(c) The principal of the loan evidenced by such Notes has a
maturity of not less than 5 years.
[Signed]---------------------------------------------------------------
[Dated]----------------------------------------------------------------
[Name]-----------------------------------------------------------------
[Title]----------------------------------------------------------------
[Name and Address of Borrower]-----------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Exhibit C-2--Manager's Certificate Required Under Loan Contract Section
6.14 for Refinancing Notes
On behalf on ____________________ [Name of Borrower]
____________________ I hereby certify that the Additional Note or
Notes to be issued under Section [2.02] of the Mortgage on or about
____________________ [Date Note or Notes are to be Signed]
____________________ meet the requirement of Section [6.14] of the
Loan Contract that the weighted average life of such Notes is not
greater than the weighted average remaining life of the Notes being
refinanced, as evidenced by the attached calculation of said
weighted average lives.
[Signed]---------------------------------------------------------------
[Dated]----------------------------------------------------------------
[Name]-----------------------------------------------------------------
[Title]----------------------------------------------------------------
[Name and Address of Borrower]-----------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Dated: December 18, 1995.
Jill Long Thompson,
Under Secretary, Rural Economic and Community Development.
[FR Doc. 95-31227 Filed 12-28-95; 8:45 am]
BILLING CODE 3410-15-P
Complete official Federal Register PDF
FR Doc. 95-31099 Market Entry and Regulation of Foreign-affiliated Entities
[Federal Register Volume 60, Number 250 (Friday, December 29, 1995)]
[Rules and Regulations]
[Pages 67332-67339]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-31099]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 63
[IB Docket No. 95-22, FCC 95-475]
Market Entry and Regulation of Foreign-affiliated Entities
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This Report and Order contains information collections subject
to the Paperwork Reduction Act of 1995 (PRA). It has been submitted to
the Office of Management and Budget (OMB) for review under section
3507(d) of the PRA, OMB, the general public, and other Federal agencies
are invited to comment on the information collections contained in this
proceeding
On November 28, 1995, the Federal Communications Commission adopted
a Report and Order in response to a Notice of Proposed Rulemaking which
the Commission adopted on February 7, 1995, that establishes a market
entry standard for foreign carriers seeking to provide basic
international telecommunications services under section 214 of the
Communications Act of 1934, a amended (``the Act''). The Report and
Order also establishes a standard by which the Commission will review
whether it is in the public interest to permit foreign investment in
licensees of common carrier radio facilities in excess of the
benchmarks contained in section 310(b)(4) of the Act. The Report and
Order was adopted. The Report and Order makes additional changes to the
Commission's regulations of international common carriers.
In reviewing applicants for international section 214 authority
filed by a foreign carrier or its U.S. affiliate (collectively
``foreign carrier''), the Commission will examine, as an important part
of its public interest analysis, whether competitive opportunities
exist for U.S. carriers in destination markets in which the foreign
carrier has market power. The Commission will apply a similar analysis
in reviewing indirect foreign investment in licensees of common carrier
radio facilities under section 310(b)(4), but it will limit its review
to the ``home market'' of the foreign investor. In addition to
considering effective competitive opportunities, the Commission will
examine additional public interest factors that might weigh in favor
of, or against, approving the foreign carrier's international section
214 application, or permitting the indirect foreign investment in a
common carrier radio licensee to exceed the section 310(b)(4)
benchmark.
In taking this action, the Commission's primary goal is to advance
the public interest by promoting effective competition in the U.S.
telecommunications services market, particularly the market for
international services. The action also reaffirms the Commission's
goals to prevent anticompetitive conduct in the provisions of
international services or facilities, and to encourage foreign
governments to open their communications markets.
EFFECTIVE DATE: The rules adopted in this Report and Order will become
effective January 29, 1996. However, if OMB has not approved the
information collections contained in these rules by this date, the
Commission will publish a document to delay the effective date of these
rules.
Written comments by the public on the information collections are
due January 10, 1996.
ADDRESSES: Submit all comments concerning the Paperwork Reduction Act
to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M
Street, NW., Washington, DC 20554, or via the Internet to [email protected]
gov, and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725-17th
Street, NW., Washington, DC 20503 or via the Internet to fain_
[email protected].
FOR FURTHER INFORMATION CONTACT: For additional information concerning
the information collections contained in this Report and Order contact
Dorothy Conway at 202-418-0217, or via the Internet as [email protected].
For further information on the Report and Order contact: Susan
O'Connell, Attorney, International Bureau, (202) 418-1484, Ken
Schagrin, Attorney, International Bureau, (202) 418-1407, or Robert
McDonald, Attorney, International Bureau, (202) 418-1467.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order adopted on November 28, 1995, and released November 30, 1995
(FCC 95-475). The full text of this Report and Order is available for
inspection and copying during normal hours in the FCC Reference Center
(Room 239), 1919 M St., NW., Washington, DC. The complete text also may
be purchased from the Commission's Copy contractor, International
Transcription Service, Inc., (202) 857-3800, 2100 M Street, NW., Suite
140, Washington, DC 20037
Paperwork Reduction Act
The Commission, as part of its continuing effort to reduce
paperwork burdens, invites the general public and the Office of
Management and Budget (OMB) to comment on the information collections
contained in this Report and Order. Comments should address: (a)
Whether the collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.
This Report and Order contains information collection requirements.
Written comments by the public on the information collections are due
January 10, 1996. Written comments must be submitted by OMB on the
information collections on or before January 15, 1996.
OMB Approval Number: New Collection.
Title: Market Entry and Regulation of Foreign-affiliated Carriers.
Type of Review: New collection.
Respondents: Business or other for-profit.
Number of Respondents: 431 per year.
Estimated Time Per Response: 9.5 hours.
Total Annual Burden: 4127 hours.
Needs and Uses: The collections of information for which approval
is here sought are contained in amendments to part 63 and in the Report
and Order adopting such amendments. These information collections are
authorized and necessary for the Commission to carry out its statutory
mandate, pursuant to sections 4, 214, 219, 303(r) and 403 of the
Communications Act, 47 U.S.C. 154, 214, 219, 303(r) and 403.
The information collections contained in amendments to Secs. 63.01
(r) and (s) and 63.11 and 63.17(b)(4) of the Commission's rules are
necessary to determine whether, and under what conditions, the public
interest, convenience, and necessity will be served by authorizing
particular foreign carriers, or their U.S. affiliates, to provide
international common carrier services between the United States and
countries where these foreign carriers have market power, i.e., the
ability to
[[Page 67333]]
discriminate against unaffiliated U.S. carriers through control of
``bottleneck services or facilities'' on the foreign end of a U.S.
international route. ``Bottleneck services or facilities'' are those
that are necessary to terminate U.S. international traffic.
Second, the information collections contained in amendments to
Sec. 63.10 of the Commission's rules are necessary for the Commission
to maintain effective oversight of U.S. carriers that are affiliated
with, or involved in certain co-marketing or similar arrangements with,
foreign carriers that have market power.
Third, the information collections contained in amendments to
Sec. 63.01(k) of the Commission's rules are necessary to protect the
U.S. public interest in cost-based international telecommunications
services.
Fourth, the information collections under section 310(b)(4) of the
Act are necessary to determine, under that section, whether a greater
than 25 percent indirect foreign ownership interest in a U.S. common
carrier radio licensee would be inconsistent with the public interest.
The Order adopts a requirement that section 214 applicants amend
their pending applications to the extent they are inconsistent with the
new rules. Applications pending as of the effective date of the new
rules must be amended within thirty days of the effective date of the
new rules. This information will be used to process pending
applications under the Commission's public interest standard enunciated
in the Order.
The information will be used by the Commission staff in carrying
out its duties under the Communications Act. Common carrier applicants
providing or seeking to provide international service under part 63 of
the Commission's rules must comply with our rules.
Summary of Report and Order
In response to the Notice of Proposed Rulemaking (60 FR 11644
(March 2, 1995)), the Commission adopted a decision to further the goal
of promoting effective competition in the U.S. telecommunications
market, particularly the market for international services. In order to
promote effective competition in this market, the Commission's new
rules are designed to prevent anticompetitive conduct in the provision
of international services or facilities, and to encourage foreign
governments to open their communications markets.
With this Report and Order, the Commission adopts standards for
regulating the entry of foreign carriers into the United States market
for international telecommunications services. This Report and Order
explicitly sets forth the entry criteria necessary to promote effective
competition in the U.S. market for these services, including global,
seamless network services. As an important part of the Commission's
overall public interest analysis under Section 214 of the
Communications Act, it will examine whether effective competitive
opportunities exist for U.S. carriers in the destination markets of
foreign carriers seeking to enter the U.S. international services
market either directly or through an affiliation with a new or existing
U.S. carrier.
Similarly, in deciding whether it is in the public interest to
permit indirect foreign investment in licensees of common carrier
wireless facilities in excess of the benchmarks contained in section
310(b)(4) of the Act, the Commission will examine whether foreign
markets offer effective competitive opportunities to U.S. entities.
This approach is fully consistent not only with the Commission's
existing jurisdiction under section 310, but also with
telecommunications bills currently pending in Congress which would
specifically incorporate an effective competitive opportunities
analysis as part of a section 310(b)(4) determination.
The New Entry Standard
The Commission's effective competitive opportunities analysis under
section 214 of the Act will focus first on whether U.S. carriers have
the legal right to provide international basic services in the
destination markets where the foreign applicant has market power. If
there are no legal barriers to entry, the Commission also will consider
the practical ability for U.S. carriers to compete in those markets.
The Commission considers several factors essential to viable
competition. These factors include: First, whether there are reasonable
and nondiscriminatory terms and conditions for interconnection to a
foreign carrier's facilities; second, whether there are competitive
safeguards to protect against anticompetitive conduct; and third,
whether there is an effective regulatory framework to implement and
enforce these conditions and safeguards. The Commission will apply the
effective competitive opportunities analysis to foreign carriers
seeking to provide facilities-based or resale service in the United
States. The public interest analysis under section 214 also will
continue to consider additional public interest factors, including the
general significance of the proposed entry to the promotion of
competition in the U.S. communications services market, the presence of
cost-based accounting rates, as well as national security, law
enforcement issues, foreign policy, or trade concerns raised by the
Executive Branch.
The analysis under section 310 is similar to that under section
214, but with some important distinctions. Most notably, the
Commission's determination will focus on the foreign investor's ``home
market'', and will be applied to the specific service in which the
foreign entity seeks to invest in the United States, e.g., cellular
service. If the services in the U.S. and home markets are not precisely
matched, the Commission will use the most closely substitutable
wireless service in the home market, as determined from the consumer's
perspective. The Commission also will examine additional public
interest factors that might weigh in favor of, or against, allowing a
foreign investor to exceed the 25 percent benchmark contained in
section 310(b)(4). In determining a foreign investor's ``home market'',
the Commission will identify (1) the country of its incorporation,
organization, or charter; (2) the nationality of all investment
principals, officers, and directors; (3) the country in which its world
headquarters is located; (4) the country in which the majority of its
tangible property, including production, transmission, billing,
information, and control facilities, is located; and (5) the country
from which it derives the greatest sales and revenues from its
operations. If all five of these factors indicate that the same country
should be considered to be the entity's home market, it will be
presumed to be so, subject only to rebuttal based on clear and
convincing evidence to the contrary. If these five factors yield
inconsistent results, however, the Commission will balance them, as
well as any other information that is particularly relevant to the
case, to determine the appropriate home market under the totality of
the circumstances.
Affiliation
For purposes of implementing this entry standard, the Commission
adopts a new definition of ``affiliation''. It now defines affiliation
as an ownership interest of greater than 25 percent, or a controlling
interest at any level, in a U.S. carrier by a foreign carrier. The
Commission also will apply its effective competitive opportunities
analysis to foreign carrier investments of 25 percent or less if the
investment presents a significant potential impact on competition in
the U.S. market for
[[Page 67334]]
international telecommunications services. In addition, the Commission
will aggregate investments of two or more foreign carriers where they
are likely to act in concert and the combined interests either exceed
25 percent or constitute a controlling interest.
This definition of affiliation will apply both for purposes of
determining when to apply the effective competitive opportunities
analysis and of determining the regulatory status of all affiliated
carriers, including U.S.-based carriers that have a greater than 25
percent investment, or a controlling interest, in a foreign carrier.
The Commission also is adopting a prior notification and approval
requirement to determine whether a particular investment in a U.S.
carrier by a foreign carrier constitutes an affiliation with that
foreign carrier, and to determine whether the investment serves the
public interest, convenience and necessity. A U.S. international
carrier is required to notify the Commission 60 days prior to
acquisition by a foreign carrier of a 10 percent or greater interest in
that U.S. carrier.
Amendment of Pending Applications
The Report and Order adopts a requirement that section 214
applicants amend their pending applications to the extent they are
inconsistent with the new rules. The Report and Order requires that
applications pending as of the effective date of the new rules be
amended within thirty days of the effective date of the new rules.
Dominant Carrier and Other Operating Safeguards
This Report and Order also modifies the safeguards that apply to
foreign-affiliated carriers regulated as dominant under Sec. 63.10 of
the Commission's rules, 47 CFR 63.10, as amended in the Report and
Order. The modified dominant carrier safeguards also will apply to U.S.
carriers on particular routes where they are engaged in a co-marketing
or other arrangement with a dominant foreign carrier, and such
arrangement presents a substantial risk of anticompetitive effects in
the U.S. market for international telecommunications services.
The Commission has modified these safeguards to reduce regulatory
burdens while maintaining effective oversight over foreign-affiliated
or allied carriers. It allows dominant, foreign-affiliated or allied
carriers to file tariffs on 14 days notice instead of the previous 45
days and relieves those carriers of the burden of filing cost support
information. It also requires that a dominant, foreign-affiliated or
allied carrier maintain complete records of the provisioning and
maintenance of service and facilities it procures from its foreign
carrier affiliate or ally. The Order maintains the existing requirement
that a dominant foreign-affiliated carrier (and, under the new rules, a
dominant, allied carrier) receive specific section 214 authorization
before adding or removing circuits on routes where it is regulated as
dominant, and file quarterly traffic and revenue reports.
The Order also conforms the Commission's ``no special concessions''
prohibition and ``no exclusive arrangements'' condition that have
regularly been placed in section 214 authorizations and applies a ``no
special concessions'' prohibition to all U.S. international carriers.
This means that no U.S. carrier is allowed to accept a special
concession directly or indirectly from any foreign carrier with respect
to traffic or revenue flows between the United States and any foreign
country for which the U.S. carrier is authorized to provide service.
Additional Matters
The Order additionally adopts new rules relating to the provision
of international switched basic service via facilities-based and resold
private lines. These rules apply to all U.S. carriers, both those that
are affiliated and unaffiliated with a foreign carrier. And, it adopts
a modified definition of a U.S. international facilities-based carrier.
Final Regulatory Flexibility Act Analysis
Pursuant to section 603 of Title 5, United States Code, 5 U.S.C.
603, an initial Regulatory Flexibility Analysis was incorporated in the
Notice of Proposed Rulemaking in CC Docket No. 95-22. Written comments
on the proposals in the Notice, including the Regulatory Flexibility
Analysis, were requested.
A. Need and Purpose of this Action
This rulemaking proceeding establishes an effective competitive
opportunities analysis as an important public interest factor in the
Commission's overall public interest analysis of applications filed by
foreign carriers to enter the U.S. international telecommunications
market pursuant to section 214 of the Communications Act. It also
adopts a similar analysis for determining whether the public interest
would be disserved by permitting indirect foreign investment in common
carrier licensees in excess of the benchmarks contained in section
310(b)(4) of the Act. In addition, this proceeding modifies existing
rules and policies relating to the definition of a U.S. international
facilities-based carrier, the regulation of certain dominant carriers
in the provision of international service, and other rules governing
the provision of switched services over international private lines.
B. Issues Raised by the Public Comments in Response to the Regulatory
Flexibility Analysis
There were no comments submitted in response to the Regulatory
Flexibility Analysis. The Notice of Proposed Rulemaking offered a
number of alternatives for each issue raised. The Commission responded
to commenters' concerns and significantly altered the proposed market
entry standard. The new approach under section 214 is designed to focus
on foreign carrier entry that poses a substantial risk of
anticompetitive effects in the provision of international services. In
addition, the Commission is adopting a standard that is clear and
administratively feasible.
C. Significant Alternatives Considered
The Commission has attempted to balance all the commenters'
concerns with our public interest mandate under the Act in order to
adopt a clear and administratively feasible approach to market entry by
foreign carriers. Instead of examining whether effective competitive
opportunities exist for U.S. carriers in every primary market where a
foreign carrier operates, regardless of whether the foreign carrier
seeks to serve such market, the Commission will focus its analysis
under section 214 only on destination countries where the foreign
carrier holds market power. Our route-by-route approach reduces the
regulatory burden on all U.S. carriers seeking an affiliation with a
foreign carrier. The Commission has not adopted the suggestion of some
parties to exempt small U.S. carriers from the market entry rules.
Whether a dominant foreign carrier makes a significant investment in a
small U.S. carrier or a large one, there is a substantial risk of
anticompetitive effects. Therefore, the Commission declines to exempt
small U.S. carriers from these rules.
The Commission proposed to modify its standard for determining when
a U.S. carrier is affiliated with a foreign carrier for purposes of
both the market entry analysis and post-entry regulation. The
Commission considered investment levels ranging from greater than ten
percent to controlling interests at any level. It also considered
adopting an affiliation standard based on: The dollar amount of the
investment; the percentage of the investment; or the
[[Page 67335]]
amount of traffic carried by the U.S. carrier in correspondence with
the foreign carrier. The Commission additionally considered adopting a
reciprocal affiliation standard. Based on the record, the Commission
has modified its definition of affiliation and will now consider
affiliated any U.S. carrier with either: (1) A greater than 25 percent
interest (or a controlling interest at any level) held by a foreign
carrier; or (2) a greater than 25 percent interest in, or control of, a
foreign carrier.
The Commission will apply its effective competitive opportunities
analysis to the first category of affiliated U.S. carriers on routes
where the affiliated foreign carrier has market powers in the
destination country. It will apply its dominant carrier safeguards to
all affiliated U.S. carriers on routes where the affiliated foreign
carrier has market power. These safeguards will also now apply to U.S.
carriers on routes for which they have formed a non-exclusive co-
marketing arrangement or other joint venture with a dominant foreign
carrier, where such arrangements present a substantial risk of
anticompetitive effects.
The Commission has eliminated the requirement that dominant,
foreign-affiliated carriers file cost support with their tariffs. This
will reduce burdensome filing requirements. The Commission also adopts
its proposed 14-day notice period (currently 45 days) for the filing of
international service tariffs by dominant, foreign-affiliated carriers.
The Commission adopts a new recordkeeping requirement that a dominant,
foreign-affiliated carrier maintain complete records of the
provisioning and maintenance of network facilities and services it
procures from its foreign affiliate or ally. The Commission found that
although this requirement is a minor burden, its benefit in preventing
anticompetitive conduct outweighs such a burden. The Commission adopts
new rules related to the provision of switched services using
international private lines. These rules will enhance opportunities for
U.S. carriers to serve U.S. consumers more efficiently. The Commission
also adopts a definition of ``U.S. international facilities-based
carrier'' that may facilitate the ability of smaller U.S. carriers to
obtain operating agreements.
Ordering clauses
Accordingly, it is ordered that the policies, rules, and
requirements adopted herein, except those needing OMB approval, will
become effective January 29, 1996.
Matters subject to OMB approval, pursuant to the Paperwork
Reduction Act of 1995, Public Law 104-13, will become effective upon
such approval.
This action is taken pursuant to sections 4, 214, 219, 303(r) and
403 of the Communications Act of 1934, as amended, 47 U.S.C. 154, 214,
219, 303(r) and 403.
It is further ordered That this proceeding is hereby terminated.
List of Subjects in 47 CFR Part 63
Communications common carriers, Reporting and recordkeeping
requirements, Telegraph, Telephone.
Federal Communications Commission,
LaVera Marshall,
Acting Secretary.
Final Rules
Part 63 of Title 47 of the Code of Federal Regulations is amended
as follows:
PART 63--EXTENSION OF LINES AND DISCONTINUANCE, REDUCTION, OUTAGE
AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND GRANTS OF
RECOGNIZED PRIVATE OPERATING AGENCY STATUS
1.The authority citation for part 63 continues to read as follows:
Authority: Secs. 1, 4(i), 4(j), 201-205, 218, and 403 of the
Communications Act of 1934, as amended, and sec. 613 of the Cable
Communications Policy Act of 1984, 47 U.S.C. secs. 151, 154(i),
15(j), 201-205, 218, 403, and 533 unless otherwise noted.
2. Section 63.01 is amended by revising paragraphs (k)(5) and (r),
redesignating paragraph (k)(6) as paragraph (k)(7), and adding new
paragraphs (k)(6), (s) and Notes 1 through 4 to paragraph (r) to read
as follows:
Sec. 63.01 Contents of applications.
* * * * *
(k) * * *
(5) The procedures set forth in this section are subject to
Commission policies on resale of international private lines in CC
Docket No. 90-337 as amended in IB Docket No. 95-22. If proposed
facilities are to be acquired through the resale of private lines for
the purpose of providing international switched basic services,
applicant shall demonstrate for each country to which it seeks to
provide such services that the country affords resale opportunities
equivalent to those available under U.S. law. In this regard, applicant
shall:
(i) State whether the Commission has previously determined that
equivalent resale opportunities exist between the United States and the
subject country; or
(ii) Include other evidence demonstrating that equivalent resale
opportunities exist between the United States and the subject country,
including any relevant bilateral agreements between the administrations
involved. Parties must demonstrate that the foreign country at the
other end of the private line provides U.S. carriers with:
(A) The legal right to resell international private lines,
interconnected at both ends, for the provision of switched services;
(B) Nondiscriminatory charges, terms and conditions for
interconnection to foreign domestic carrier facilities for termination
and origination of international services, with adequate means of
enforcement;
(C) Competitive safeguards to protect against anticompetitive and
discriminatory practices affecting private line resale; and
(D) Fair and transparent regulatory procedures, including
separation between the regulator and operator of international
facilities-based services.
(6) Except as otherwise provided in this paragraph, any carrier
authorized under this part to acquire and operate international private
line facilities other than through resale shall, for each country for
which it seeks to provide switched basic service over its authorized
private lines facilities, request such authority by formal application.
Such application shall be accompanied by a demonstration that that
country affords resale opportunities equivalent to those available
under U.S. law. In this regard, applicant shall include the information
required by paragraph (k)(5) of this section.
(i) No formal application is required under this paragraph in
circumstances where the carrier's previously authorized private line
facility is interconnected to the public switched network only on one
end--either the U.S. or the foreign end--and where the carrier is not
operating the facility in correspondence with a carrier that directly
or indirectly owns the private line facility in the foreign country at
the other end of the private line.
* * * * *
(r) A certification as to whether or not the applicant is, or has
an affiliation with, a foreign carrier.
(1) The certification shall state with specificity each foreign
country in which the applicant is, or has an affiliation with, a
foreign carrier. For purposes of this certification:
(i) Affiliation is defined to include;
(A) A greater than 25% ownership of capital stock, or controlling
interest at
[[Page 67336]]
any level, by the applicant, or by any entity that directly or
indirectly controls or is controlled by it, or that is under direct or
indirect common control with it, in a foreign carrier or in any entity
that directly or indirectly controls a foreign carrier; or
(B) A greater than 25% ownership of capital stock, or controlling
interest at any level, in the applicant by a foreign carrier, or by any
entity that directly or indirectly controls or is controlled by a
foreign carrier, or that is under direct or indirect common control
with a foreign carrier; or by two or more foreign carriers investing in
the applicant in the same manner in circumstances where the foreign
carriers are parties to, or the beneficiaries of, a contractual
relation (e.g., a joint venture or market alliance) affecting the
provision or marketing of basic international telecommunications
services in the United States. A U.S. carrier also will be considered
to be affiliated with a foreign carrier where the foreign carrier
controls, is controlled by, or is under common control with a second
foreign carrier already found to be affiliated with that U.S. carrier
under this section.
(ii) Foreign carrier is defined as any entity that is authorized
within a foreign country to engage in the provision of international
telecommunications services offered to the public in that country
within the meaning of the International Telecommunication Regulations,
see Final Acts of the World Administrative Telegraph and Telephone
Conference, Melbourne, 1988 (WATTC-88), Art 1.
(2) In support of the required certification, each applicant shall
also provide the name, address, citizenship and principal businesses of
its 10 percent or greater direct and indirect shareholders or other
equity holders and identify any interlocking directorates.
(3) Each applicant that proposes to acquire facilities through the
resale of the international switched or private line services of
another U.S. carrier shall additionally certify as to whether or not
the applicant has an affiliation with the U.S. carrier(s) whose
facilities-based service(s) the applicant proposes to resell (either
directly or indirectly through the resale of another reseller's
service). For purposes of this paragraph, affiliation is defined as in
paragraph (r)(1)(i) of this section, except that the phrase ``U.S.
facilities-based international carrier'' shall be substituted for the
phrase ``foreign carrier.''
(4) Each applicant that certifies under this section that it has an
affiliation with a foreign carrier and that proposes to acquire
facilities through the resale of the international private line
services of another U.S. carrier shall additionally certify as to
whether or not the affiliated foreign carrier owns or controls
telecommunications facilities in the particular country(ies) to which
the applicant proposes to provide service (i.e., the destination
country(ies)). For purposes of this paragraph, telecommunication
facilities are defined as the underlying telecommunications transport
means, including intercity and local access facilities, used by a
foreign carrier to provide international telecommunications services
offered to the public.
(5) Each applicant and carrier authorized to provide international
communications service under this part is responsible for the
continuing accuracy of the certifications required by paragraphs (r)(3)
and (4) of this section. Whenever the substance of any such
certification is no longer accurate, the applicant/carrier shall as
promptly as possible and in any event within 30 days file with the
Secretary in duplicate a corrected certification referencing the FCC
File No. under which the original certification was provided. This
information may be used by the Commission to determine whether a change
in regulatory status may be warranted under Sec. 63.10.
(6) Each applicant that certifies that it is, or that it has an
affiliation, a foreign carrier, as defined in paragraphs (r)(1)(i)(B)
and (r)(1)(ii) of this section, in a named foreign country and that
desires to operate as a U.S. facilities-based international carrier to
that country from the United States shall provide information in its
application filed under this part to demonstrate that either:
(i) The named foreign country (i.e., the destination foreign
country) provides effective competitive opportunities to U.S. carriers
to compete in that country's international facilities-based market; or
(ii) Its affiliated foreign carrier does not have the ability to
discriminate against unaffiliated U.S. international carriers through
control of bottleneck services or facilities in the destination
country.
(A) The demonstration specified by paragraph (r)(6)(i) of this
section should address the following factors:
(1) The legal, or de jure, ability of U.S. carriers to enter the
foreign market and provide facilities-based international services, in
particular, international message telephone service (IMTS);
(2) Whether there exist reasonable and nondiscriminatory charges,
terms and conditions for interconnection to a foreign carrier's
domestic facilities for termination and origination of international
services;
(3) Whether competitive safeguards exist in the foreign country to
protect against anticompetitive practices, including safeguards such
as:
(i) Existence of cost-allocation rules in the foreign country to
prevent cross-subsidization;
(ii) Timely and nondiscriminatory disclosure of technical
information needed to use, or interconnect with, carriers' facilities;
(iii) Protection of carrier and customer proprietary information;
and
(4) Whether there is an effective regulatory framework in the
foreign country to develop, implement and enforce legal requirements,
interconnection arrangements and other safeguards; and
(5) Any other factors the applicant deems relevant to its
demonstration.
(B) The demonstration specified in paragraph (r)(6)(ii) of this
section should include the same information requested by paragraph
(r)(8) of this section.
(7) Each applicant that certifies that it is, or that it has an
affiliation with, a foreign carrier, as defined in paragraphs
(r)(1)(i)(B) and (r)(1)(ii) of this section, in a named foreign country
and that desires to resell the international switched or non-
interconnected private line services, respectively, of another U.S.
carrier for the purpose of providing international communications
services to the name foreign country from the United States shall
provide information in its application filed under this part to
demonstrate that either.
(i) The named foreign country (i.e., the destination foreign
country) provides effective competitive opportunities to U.S. carriers
to resell international switched or noninterconnect private line
services, respectively; or
(ii) Its affiliated foreign carrier does not have the ability to
discriminate against unaffiliated U.S. international carriers through
control of bottleneck services or facilities in the destination
country.
(A) The demonstration specified by paragraph (r)(7)(i) of this
section should address the following factors:
(1) The legal, or de jure, ability of U.S. carriers to enter the
foreign market and provide resold international switched services (for
switched resale applications) or non-interconnected private line
services (for non-interconnected private line resale applications;
(2) Whether there exist reasonable and nondiscriminatory charges,
terms and conditions for the provision of the relevant resale service;
[[Page 67337]]
(3) Whether competitive safeguards exist in the foreign country to
protect against anticompetitive practices, including safeguards such
as:
(i) Existence of cost-allocation rules in the foreign country to
prevent cross-subsidization;
(ii) Timely and nondiscriminatory disclosure of technical
information needed to use, or interconnect with, carriers' facilities;
(iii) Protection of carrier and customer proprietary information;
and
(4) Whether there is an effective regulatory framework in the
foreign country to develop, implement and enforce legal requirements,
interconnection arrangements and other safeguards; and
(5) Any other factors the applicant deems relevant to its
demonstration.
(B) The demonstration specified in paragraph (r)(7)(ii) of this
section should include the same information requested by paragraph
(r)(8) of this section.
(8) Each applicant that certifies that it has an affiliation with a
foreign carrier in a named foreign country and that desires to be
regulated as non-dominant for the provision of international
communications service to that country may provide information in its
application filed under this part to demonstrate that its affiliated
foreign carrier does not have the ability to discriminate against
unaffiliated U.S. international carriers through control of bottleneck
services or facilities in the named foreign country. See Sec. 63.10,
Regulatory Classification of U.S. International Carriers.
(i) Such a demonstration should address the factors that relate to
the scope or degree of the foreign affiliate's bottleneck control, such
as:
(A) The monopoly, oligopoly or duopoly status of the destination
country; and
(B) Whether the foreign affiliate has the potential to discriminate
against unaffiliated U.S. international carriers through such means as
preferential operating agreements, preferential routing of traffic,
exclusive or more favorable transiting agreements, or preferential
domestic access and interconnection arrangements.
(ii) Such a demonstration may also address other factors the
applicant deems relevant to its demonstration, such as the
effectiveness of public regulation in the destination country.
(s) Each applicant shall certify that the applicant has not agreed
to accept special concessions directly or indirectly from any foreign
carrier or administration with respect to traffic or revenue flows
between the U.S. and any foreign country which the applicant may serve
under the authority granted under this part and will not enter into
such agreements in the future.
(1) For purposes of this paragraph, and of Secs. 63.11(c)(2)(iii),
63.13(a)(4), and 63.14, special concession is defined as any
arrangement that affects traffic or revenue flows to or from the U.S.
that is offered exclusively by a foreign carrier or administration to a
particular U.S. international carrier and not also to similarly
situated U.S. international carriers authorized to serve a particular
route.
(2) The special concessions certification required by this
paragraph and by Secs. 63.11(c)(2)(iii) and 63.13(a)(4) shall be viewed
as an ongoing representation to the Commission, and applicants/carriers
shall immediately inform the Commission if at any time the
representations in their certifications are no longer true. Failure to
so inform the Commission will be deemed a material misrepresentation to
the Commission.
Note 1 to paragraph (r): The word ``control'' as used herein is
not limited to majority stock ownership, but includes actual working
control in whatever manner exercised.
Note 2 to paragraph (r): The term ``U.S. facilities-based
international carrier'' means one that holds an ownership,
indefeasible-right-of-user, or leasehold interest in bare capacity
in an international facility, regardless of whether the underlying
facility is a common or noncommon carrier submarine cable, or an
INTELSAT or separate satellite system.
Note 3 to paragraph (r): The assessment of ``capital stock''
ownership will be made under the standards developed in Commission
case law for determining such ownership. See, e.g., Fox Television
Stations, Inc., 10 FCC Rcd 8452 (1995). ``Capital stock'' includes
all forms of equity ownership, including partnership interests.
Note 4 to paragraph (r): In applying the provisions of this
section, ownership and other interests in U.S. and foreign carriers
will be attributed to their holders and deemed cognizable pursuant
to the following criteria: Attribution of ownership interests in a
carrier that are held indirectly by any party through one or more
intervening corporations will be determined by successive
multiplication of the ownership percentages for each link in the
vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, except that wherever the
ownership percentage for any link in the chain exceeds 50%, it shall
not be included for purposes of this multiplication. (For example,
if A owns 30% of company X, which owns 60% of company Y, which owns
26% of ``carrier,'' then X's interest in ``carrier'' would be 26%
(the same as Y's interest because X's interest in Y exceeds 50%),
and A's interest in ``carrier'' would be 7.8% (0.30 x 0.26). Under
the 25% attribution benchmark, X's interest in ``carrier'' would be
cognizable, while A's interest would not be cognizable.)
3. Section 63.10 is amended by revising paragraphs (a)(1) through
(a)(3), and adding paragraph (c) to read as follows:
Sec. 63.10 Regulatory classification of U.S. international carriers.
(a) * * *
(1) A U.S. carrier that has no affiliation with, and that itself is
not, a foreign carrier in a particular country to which it provides
service (i.e., a destination country) will presumptively be considered
non-dominant for the provision of international communications services
on that route;
(2) A U.S. carrier that is, or that has or acquires an affiliation
with a foreign carrier that is a monopoly in a destination country will
presumptively be classified as dominant for the provision of
international communications services on that route; and
(3) A U.S. carrier that is, or that has or acquires an affiliation
with a foreign carrier that is not a monopoly in a destination country
and that seeks to be regulated as non-dominant on that route bears the
burden of submitting information to the Commission sufficient to
demonstrate that its foreign affiliate lacks the ability to
discriminate against unaffiliated U.S. carriers through control of
bottleneck services or facilities in the destination country. Such a
demonstration should address the factors that relate to the scope or
degree of the foreign affiliate's bottleneck control, including those
listed in Sec. 63.01(r)(8).
* * * * *
(c) Any carrier classified as dominant for the provision of
particular services on particular routes under this section shall
comply with the following requirements in its provision of such
services on each such route:
(1) File international service tariffs on 14-days notice without
cost support;
(2) Maintain complete records of the provisioning and maintenance
of basic network facilities and services procured from its foreign
carrier affiliate or from an allied foreign carrier, including, but not
limited to, those it procures on behalf of customers of any joint
venture for the provision of U.S. basic or enhanced services in which
the U.S. and foreign carrier participate, which information shall be
made available to the Commission upon request;
(3) Obtain Commission approval pursuant to Sec. 63.01 before adding
or discontinuing circuits; and
(4) File quarterly reports of revenue, number of messages, and
number of
[[Page 67338]]
minutes of both originating and terminating traffic within 90 days from
the end of each calendar quarter.
4. Section 63.11 is revised to read as follows:
Sec. 63.11 Notification by and prior approval for U.S. international
carriers that have or propose to acquire ten percent investments by,
and/or an affiliation with, a foreign carrier.
(a) Any carrier authorized to provide international communications
service under this part that, as of the effective date of this rule as
amended in IB Docket No. 95-22, is, or has an affiliation with, a
foreign carrier within the meaning of Sec. 63.01(r)(1)(i)(A) or
(r)(1)(i)(B), or that as of such date knows of an existing ten percent
or greater interest, whether direct or indirect, in the capital stock
of the authorized carrier by a foreign carrier, or that after the
effective date of this rule becomes affiliated with a foreign carrier
within the meaning of Sec. 63.01(r)(1)(i)(A), shall notify the
Commission within thirty days of the effective date of this rule or
within thirty days of the acquisition of the affiliation, whichever
occurs later. For purposes of this section, ``foreign carrier'' is
defined as set forth in Sec. 63.01(r)(1)(ii).
(1) The notification shall certify to the information specified in
paragraph (c) of this section.
(2) Any carrier that has previously notified the Commission of an
affiliation with a foreign carrier, as defined by Sec. 63.01(r)(1)
immediately prior to the rule's amendment in IB Docket No. 95-22, need
not notify the Commission again of the same affiliation.
(b) Any carrier authorized to provide international communications
service under this part that knows of a planned investment by a foreign
carrier of a ten percent or greater interest, whether direct or
indirect, in the capital stock of the authorized carrier shall notify
the Commission within sixty days prior to the acquisition of such
interest. The notification shall certify to the information specified
in paragraph (c) of this section.
(c) The notification required under paragraphs (a) and (b) of this
section shall contain a list of all affiliated foreign carriers and
shall state individually the country or countries in which the foreign
carriers named in paragraphs (a) and (b) of this section are authorized
to provide telecommunications services offered to the public. It shall
additionally specify which, if any, of these countries the U.S. carrier
is authorized to serve under this part; what services it is authorized
to provide to each such country; and the FCC File No. under which each
such authorization was granted.
(1) The carrier should also specify, where applicable, those
countries named in paragraph (c) for which it provides a specified
international communications service solely through the resale of the
international switched or private line services of U.S. facilities-
based carriers with which the resale carrier does not have an
affiliation. Such an affiliation is defined as in Sec. 63.01(r)(1)(i),
except that the phrase ``U.S. facilities-based international carrier''
shall be substituted for the phrase ``foreign carrier.''
(2) The carrier shall also submit with its notification:
(i) The ownership information as required to be submitted pursuant
to Sec. 63.01(r)(2);
(ii) Where the carrier is authorized as a private line reseller on
a particular route for which it has an affiliation with a foreign
carrier, as defined in Sec. 63.01(r)(1)(i), a certification as required
to be submitted pursuant to Sec. 63.01(r)(4); and
(iii) A ``special concessions'' certification as required to be
submitted pursuant to Sec. 63.01(s).
(3) The carrier is responsible for the continuing accuracy of the
certifications provided under this section. Whenever the substance of
any certification provided under this section is no longer accurate,
the carrier shall as promptly as possible, and in any event within 30
days, file with the Secretary in duplicate a corrected certification
referencing the FCC File No. under which the original certification was
provided, except that the carrier shall immediately inform the
Commission if at any time the representations in the ``special
concessions'' certification provided under paragraph (c)(2)(iii) of
this section are no longer true. See Sec. 63.01(s)(2). This information
may be used by the Commission to determine whether a change in
regulatory status may be warranted under Sec. 63.10.
(d) Unless the carrier notifying the Commission of a foreign
carrier affiliation under paragraph (a) of this section qualifies for
the presumption of non-dominant regulation pursuant to
Sec. 63.10(a)(4), it should submit the information specified in
Sec. 63.01(r)(8) to retain its non-dominant status on any affiliated
route.
(e) The Commission will issue public notice of the submissions made
under this section for 14 days.
(1) In the case of a notification filed under paragraph (a) of this
section, the Commission, if it deems it necessary, will by written
order at any time before or after the submission of public comments
impose dominant carrier regulation on the carrier for the affiliated
routes based on the provisions of Sec. 63.10.
(2) In the case of a planned investment by a foreign carrier of a
ten percent or greater interest, whether direct or indirect, in the
capital stock of the authorized carrier, the Commission will, unless it
notifies the carrier in writing within 30 days of issuance of the
public notice that the investment raises a substantial and material
question of fact as to whether the investment serves the public
interest, convenience and necessity, presume the investment to be in
the public interest. If notified that the acquisition raises a
substantial and material question, then the carrier shall not
consummate the planned investment until it has filed an application
under Sec. 63.01 and submitted the information specified under
paragraphs (r) (6) or (7), as applicable, and (8) of that section, and
the Commission has approved the application by formal written order.
5. Section 63.12 is amended by revising paragraph (c)(1) to read as
follows:
Sec. 63.12 Streamlined processing of certain international resale
applications.
* * * * *
(c) * * *
(1) The applicant has an affiliation within the meaning of
Sec. 63.01(r)(3), with the U.S. facilities-based carrier whose
international switched or private line services the applicant seeks
authority to resell (either directly or indirectly through the resale
of another reseller's services); or
* * * * *
6. Section 63.13 is amended by revising the last sentences of
paragraphs (a)(3) and (a)(5), and by revising paragraph (a)(4) to read
as follows:
Sec. 63.13 Streamlined procedures for modifying regulatory
classification of U.S. international carriers from dominant to
nondominant.
(a) * * *
(3) * * * For purposes of paragraph (a)(3), ``telecommunications
facilities'' are defined as in Sec. 63.01(r)(4).
(4) Any carrier filing a certified list pursuant to paragraph
(a)(2) of this section must also provide the ``special concessions''
certification as required to be submitted pursuant to Sec. 63.01(r)(3).
(5) * * * See Sec. 63.01(s)(2).
7. Section 63.14 is revised to read as follows:
Sec. 63.14 Prohibition on agreeing to accept special concessions.
Any carrier authorized to provide international communications
service
[[Page 67339]]
under this part shall be prohibited from agreeing to accept special
concessions directly or indirectly from any foreign carrier or
administration with respect to traffic or revenue flows between the
United States and any foreign country served under the authority of
this part and from agreeing to enter into such agreements in the
future. For purpose of this section, foreign carrier is defined as in
Sec. 63.01(r)(1)(ii); and special concession is defined as in
Sec. 63.01(s).
8. A new Sec. 63.17 is added to read as follows:
Sec. 63.17 Special Provisions For U.S. International Common Carriers.
(a) Unless otherwise prohibited by the terms of its Section 214
certificate, a U.S. common carrier authorized under this part to
provide international private line service, whether as a reseller or
facilities-based carrier, may interconnect its authorized private lines
to the public switched network on behalf of an end user customer for
the end user customer's own use.
(b) Except as provided in paragraph (b)(5) of this section, a U.S.
common carrier, whether a reseller or facilities-based, may engage in
``switched hubbing'' to countries not found to offer equivalent resale
opportunities under Sec. 63.01(k) (5) and (6) under the following
conditions:
(1) U.S.-outbound switched traffic shall be routed over the
carrier's authorized U.S. international private lines to an equivalent
country, and then forwarded to a third, nonequivalent country only by
taking at published rates and reselling the International Message
Telephone Service (IMTS) of a carrier in the equivalent country;
(2) U.S.-inbound switched traffic shall be carried to an equivalent
country as part of the IMTS traffic flow from a non-equivalent third
country and then terminated in the United States over U.S.
international private lines from the equivalent hub country;
(3) U.S. common carriers that route U.S.-outbound traffic via
switched hubbing through an equivalent country shall tariff their
service on a ``through'' basis from the United States to the ultimate
foreign destination.
(4) No U.S. common carrier may engage in switched hubbing under
this section to a country for which it has an affiliation with a
foreign carrier unless and until it receives specific authority to do
so under Sec. 63.01. For purposes of this paragraph, ``affiliation''
and ``foreign carrier'' are defined as set forth in Sec. 63.01(r)(1)
(i)(B) and (ii), respectively.
[FR Doc. 95-31099 Filed 12-28-95; 8:45 am]
BILLING CODE 6712-01-M
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